TRIZEC PROPERTIES INC - 10-Q Quarterly Report

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [ X ] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [ X ]

As of November 7, 2003, 150,938,154 shares of common stock, par value $0.01 per share, were issued and outstanding.


	Page

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
Item 3. Quantitative and Qualitative Disclosures about Market Risk		51
Item 4. Controls and Procedures		51
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		53
Item 2. Changes in Securities and Use of Proceeds		53
Item 3. Defaults Upon Senior Securities		53
Item 4. Submission of Matters to a Vote of Security Holders		53
Item 5. Other Information		54
Item 6. Exhibits and Reports on Form 8-K		54

This Form 10-Q, including the discussion in “Part I — Financial Information — Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements relating to our business and financial outlook, which are based on our current expectations, estimates, forecasts and projections. These statements are not guarantees of future performance and involve risks, uncertainties, estimates and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from those expressed in these forward-looking statements. You should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any such statement to reflect new information, the occurrence of future events or circumstances or otherwise. A number of important factors could cause actual results to differ materially from those indicated by the forward-looking statements. Such factors include those set forth in more detail in the Risk Factors section in our Form 10-K for the year ended December 31, 2002, in our Forms 10-Q for the quarters ended March 31, 2003 and June 30, 2003 and in our Post-Effective Amendment No. 1 to Form S-11 on Form S-3 (Registration No. 333-84878) filed with the U.S. Securities and Exchange Commission.


		September 30			December 31
$ thousands, except share and per share amounts		2003			2002

Assets
Real estate		$	5,153,043		$	5,389,013
	Less: accumulated depreciation		(643,828	)		(565,350	)

Real estate, net			4,509,215			4,823,663
Cash and cash equivalents			112,679			62,253
Escrows and restricted cash			38,621			46,798
Investment in unconsolidated real estate joint ventures			241,246			220,583
Investment in Sears Tower			—			23,600
Office tenant receivables, net			15,558			26,536
Other receivables, net			14,412			20,499
Deferred rent receivables, net			145,953			131,395
Deferred charges, net			125,200			141,407
Prepaid expenses and other assets			93,141			82,525

Total Assets		$	5,296,025		$	5,579,259

Liabilities and Stockholders’ Equity
Liabilities
Mortgage debt and other loans		$	3,064,420		$	3,345,238
Trade, construction and tenant improvements payables			42,019			53,816
Accrued interest expense			11,674			12,931
Accrued operating expenses and property taxes			83,225			92,901
Other accrued liabilities			87,218			83,419
Dividends payable			32,614			—
Taxes payable			60,979			109,949

Total Liabilities			3,382,149			3,698,254

Commitments and Contingencies
Minority Interest			3,316			2,540

Redeemable Stock			200			200

Stockholders’ Equity
Common Stock, 500,000,000 shares authorized at September 30, 2003 and December 31, 2002, $0.01 par value, 150,556,040 and 150,033,310 issued and 150,538,029 and 150,029,664 outstanding at September 30, 2003 and December 31, 2002, respectively			1,505			1,500
Additional paid in capital			2,187,616			2,181,958
Accumulated deficit			(248,096	)		(285,482	)
Treasury stock, at cost, 18,011 and 3,646 shares at September 30, 2003 and December 31, 2002, respectively			(237	)		(40	)
Unearned compensation			(4,111	)		(3,593	)
Accumulated other comprehensive loss			(26,317	)		(16,078	)

Total Stockholders’ Equity			1,910,360			1,878,265

Total Liabilities and Stockholders’ Equity		$	5,296,025		$	5,579,259


		For the three months ended						For the nine months ended
		September 30						September 30
$ thousands, except share and
per share amounts		2003			2002			2003			2002

Revenues
	Rentals	$	164,368		$	174,193		$	497,581		$	510,827
	Recoveries from tenants		27,426			30,862			84,594			85,684
	Parking and other		23,787			26,228			70,977			77,183
	Fee income		3,805			2,043			8,597			7,031
	Interest and other		2,180			1,533			4,836			6,262

Total Revenues			221,566			234,859			666,585			686,987

Expenses
	Operating		78,362			82,826			232,447			227,636
	Property taxes		24,641			25,122			74,613			73,410
	General and administrative		9,884			13,932			28,505			32,616
	Interest		45,996			47,819			137,225			138,822
	Depreciation and amortization		45,167			41,937			135,633			117,926
	Stock option grant expense		306			2,779			840			4,781
	Gain on early debt retirement		—			—			(3,363	)		—
	Provision for loss on real estate		—			199,455			—			199,455
	Loss on and provision for loss on investment		15,303			48,292			15,303			48,292
	Gain on lawsuit settlement		(26,709	)		—			(26,709	)		—

Total Expenses			192,950			462,162			594,494			842,938

Income (Loss) before Income Taxes, Minority Interest, Income (Loss) from Unconsolidated Real Estate Joint Ventures, Recovery on Insurance Claims, Discontinued Operations and Gain on Disposition of Real Estate			28,616			(227,303	)		72,091			(155,951	)
Benefit (Provision) for income and other corporate taxes, net			10,692			(1,334	)		7,786			(4,100	)
Minority interest			(240	)		1,514			(776	)		1,190
Income (Loss) from unconsolidated real estate joint ventures			4,359			(35,182	)		17,974			(28,517	)
Recovery on insurance claims			8			3,240			7,492			3,240

Income (Loss) from Continuing Operations			43,435			(259,065	)		104,567			(184,138	)
Discontinued Operations
	Income from discontinued operations		1,281			1,197			5,026			5,013
	Gain on disposition of discontinued real estate, net, and provision for loss on discontinued real estate		16,610			3,290			10,544			3,168

Income (Loss) Before Gain on Disposition of Real Estate			61,326			(254,578	)		120,137			(175,957	)
Gain on disposition of real estate			—			314			11,351			4,252

Net Income (Loss)			61,326			(254,264	)		131,488			(171,705	)

Special voting and Class F convertible stockholders’ dividends			(2,504	)		(281	)		(3,917	)		(585	)

Net Income (Loss) Available to Common Stockholders		$	58,822		$	(254,545	)	$	127,571		$	(172,290	)


		For the three months ended September 30					For the nine months ended September 30
	$ thousands, except share and
	per share amounts	2003		2002			2003		2002

									Pro forma

Earnings per common share
Net Income (Loss) Available to Common Stockholders per Weighted Average Common Share Outstanding:
	Basic	$	0.39	$	(1.70	)	$	0.85	$	(1.15	)
	Diluted	$	0.39	$	(1.70	)	$	0.85	$	(1.15	)
Weighted average shares outstanding
	Basic		149,933,043		149,535,079			149,834,920		149,409,521
	Diluted		150,521,687		149,535,079			150,058,224		149,409,521


			For the three months ended						For the nine months ended
			September 30						September 30

$ thousands			2003			2002			2003			2002

Net income (loss)			$	61,326		$	(254,264	)	$	131,488		$	(171,705	)

Other comprehensive income (loss):
	Unrealized gains (losses) on investments in securities:
		Unrealized foreign currency exchange gains (losses) arising during the period		8			(191	)		171			(129	)
		Unrealized holding losses arising during the period		—			(19,980	)		—			(23,132	)
	Unrealized foreign currency exchange (loss) gain on foreign operations			(172	)		(676	)		1,903			704
	Unrealized derivative gains (losses):
		Effective portion of interest rate contracts		6,801			(10,456	)		(8,876	)		(15,585	)
	Settlement of forward rate contract			—			—			(3,437	)		—

Total other comprehensive income (loss)				6,637			(31,303	)		(10,239	)		(38,142	)

Net comprehensive income (loss)			$	67,963		$	(285,567	)	$	121,249		$	(209,847	)


		For the nine months ended
		September 30

$ thousands		2003			2002

Cash Flows from Operating Activities
Net income (loss)		$	131,488		$	(171,705	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	(Income) loss from unconsolidated real estate joint ventures		(17,974	)		28,517
	Distributions from unconsolidated real estate joint ventures		17,974			—
	Depreciation and amortization expense (including discontinued operations)		138,329			126,279
	Amortization of financing costs		6,887			6,156
	(Gain) Loss on disposition of real estate (including discontinued operations)		(21,895	)		192,035
	Early debt retirement		(3,363	)		—
	Gain on lawsuit settlement		(26,709	)		—
	Minority interest		776			(1,190	)
	Deferred compensation		2,526			3,041
	Compensation charge from net settlement of Warrants		2,080			—
	Stock option grant expense		840			4,781
	Loss on and provision for loss on investments		15,303			48,292
Changes in assets and liabilities:
	Escrows and restricted cash		8,177			(25,684	)
	Office tenant receivables		10,978			8,685
	Other receivables		5,775			(4,145	)
	Deferred rent receivables


[ X ]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended September 30, 2003
		or
[ ]		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from __________ to __________.


Delaware		33-0387846

(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

233 South Wacker Drive
Chicago, IL		60606

(Address of principal executive offices)		(Zip Code)

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents


PART I — FINANCIAL STATEMENTS
	Item 1. Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II – OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 2. Changes in Securities and Use of Proceeds
	Item 3. Defaults Upon Senior Securities
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
EX-31.1 SECTION 302 CERTIFICATION OF THE PRES/CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE VP/CFO
EX-32 SECTION 1350 CERTIFICATIONS