e8vkza
Table of Contents

 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 2, 2006
TRIZEC PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
         
Delaware   001-16765   33-0387846
(State or other jurisdiction   (Commission   (I.R.S. Employer
of incorporation)   File Number)   Identification Number)
     
10 S. Riverside Plaza, Suite 1100, Chicago, IL   60606
(Address of principal executive offices)   (Zip Code)
Registrant’s telephone number, including area code:
(312) 798-6000
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 

TABLE OF CONTENTS

Item 2.01. Completion of Acquisition or Disposition of Assets
Item 9.01. Financial Statements and Exhibits
SIGNATURE
EXHIBIT INDEX
Consent of Independent Accountants

Table of Contents

Item 2.01. Completion of Acquisition or Disposition of Assets.
     As previously reported on a Current Report on Form 8-K dated May 2, 2006 (the “Original 8-K”) and filed with the Securities and Exchange Commission (the “SEC”) on May 4, 2006, on May 2, 2006, Trizec Properties, Inc. (the “Corporation”) announced the completion on such date of the acquisition of a portfolio of the following 13 properties, totaling approximately 4.0 million square feet, and several undeveloped land parcels (the “Arden Portfolio”), from Arden Realty, Inc. (“Arden”) and certain of its subsidiaries (the “Acquisition”) for an aggregate consideration of approximately $1.63 billion. The Arden Portfolio is comprised of the following properties, all of which are primarily concentrated in West Los Angeles and San Diego:
  •   257,000 square foot office building located in the complex known as the Howard Hughes Center at 6060 Center Drive in Los Angeles;
 
  •   288,000 square foot office building located in the Howard Hughes Center at 6080 Center Drive in Los Angeles;
 
  •   286,000 square foot office building located in the Howard Hughes Center at 6100 Center Drive in Los Angeles;
 
  •   103,000 square foot office building located in the Howard Hughes Center at 6601 Center Drive in Los Angeles;
 
  •   318,000 square foot office building known as the Howard Hughes Tower located in the Howard Hughes Center at 6701 Center Drive in Los Angeles;
 
  •   37,000 square foot building known as the Spectrum Center located in Howard Hughes Center at 6701 Park Terrace in Los Angeles;
 
  •   313,000 square foot office building known as the Westwood Center, located at 1100 Glendon Avenue in Los Angeles;
 
  •   161,000 square foot office building, located at 9665 Wilshire Boulevard in Beverly Hills;
 
  •   409,000 square foot office building, located at 5670 Wilshire Boulevard in Los Angeles;
 
  •   471,000 square foot office building known as the World Savings Center, located at 11603 Wilshire Boulevard in Los Angeles;
 
  •   599,000 square foot, four-building office complex known as the Sorrento Towers, located at 5355 and 5375 Mira Sorrento Place in San Diego;
 
  •   566,000 square foot office building located at 701 B Street in San Diego;
 
  •   170,000 square foot office building, located at 707 Broadway in San Diego; and
 
  •   certain undeveloped parcels of land located in Los Angeles, which can accommodate the development of up to 490,000 square feet of office space and 600 residential units.
     The Corporation acquired the Arden Portfolio in a simultaneous two-step transaction by first acquiring all of the equity interests in a limited liability company that owns the office building located at 5670 Wilshire Boulevard and substantially all of the equity interests in a second limited liability company that owns the Spectrum Center, followed by the acquisition of fee or ground lease interests in the 11 remaining properties, certain undeveloped parcels of land and the remaining equity interests in the second limited liability company. The Acquisition occurred (a) pursuant to the previously disclosed Purchase and Sale Agreement, dated December 19, 2005, as amended by that First Amendment dated December 21, 2005 (collectively, the “Purchase Agreement”), by and between Trizec Holdings Operating LLC, the entity through which the Corporation owns substantially all of its assets and conducts substantially all of its business and of which it is the managing member (the “Trizec OP”), and General Electric Capital Corporation (“GECC”), and (b) in conjunction with the completion of the merger of Arden and its operating partnership, Arden Realty Limited Partnership (“Arden OP”), with various subsidiaries of GECC on May 2, 2006 pursuant to the previously disclosed Agreement and Plan of Merger, dated as of December 21, 2005 (the “Merger Agreement”), as amended, by and among the Corporation, Trizec OP, Arden, Arden OP, GECC and certain of GECC’s subsidiaries.

2

Table of Contents

     The Corporation financed the Acquisition through a combination of a draw of the entire $1.3 billion available for borrowing under a term loan, a draw of approximately $140.0 million under its existing unsecured credit facility, available cash, the assumption of an approximately $58.5 million outstanding mortgage loan encumbering one of the properties, and the issuance by Trizec OP of approximately 2.5 million common units of its limited liability company membership interests, valued at approximately $61.4 million, to certain eligible limited partners of Arden OP. These common units become redeemable for cash or, at our election, shares of our common stock beginning one year from their issuance under the terms of Trizec OP’s limited liability company operating agreement. In addition, holders of these common units are entitled to certain registration rights pursuant to an agreement the Corporation entered into with such holders.
     Material factors considered in assessing the Acquisition included the opportunity to strengthen the Corporation’s presence in the metropolitan Los Angeles area, historical and prospective financial performance of the Arden Portfolio, local and regional demographics, competition, the nature of the tenants and terms of leases in place, opportunities for alternative and new tenancies, historical and expected cash flows, occupancy rates, current operating costs of the Arden Portfolio and anticipated changes therein under the Corporation’s ownership, the physical condition of the Arden Portfolio and the anticipated effect on the Corporation’s financial results.
     The Corporation is hereby amending the Original 8-K with this Current Report on Form 8-K/A to include the historical financial statements of the Arden Portfolio as required by Rule 3-14 of Regulation S-X under the Securities Act of 1933, as amended (“Regulation S-X”), and certain pro forma financial statements of the Corporation to reflect the Acquisition as required by Article 11 of Regulation S-X. The historical financial statements of the Arden Portfolio that are included in this Current Report on Form 8-K/A have been prepared in accordance with Rule 3-14 of Regulation S-X and include the audited financial statements of the Arden Portfolio only for the most recent fiscal year as the Corporation acquired the Arden Portfolio from an unrelated party. The Corporation, after reasonable inquiry, is not aware of any material factors relating to the Arden Portfolio not otherwise disclosed that would cause the reported financial information not to be necessarily indicative of future operating results.
     Copies of the Purchase Agreement and the Merger Agreement have been previously filed as Exhibits 2.1 and 2.2, respectively, to the Corporation’s Current Report on Form 8-K dated December 19, 2005 and filed with the SEC on December 22, 2005.
Item 9.01. Financial Statements and Exhibits.
  (a)   Financial Statements of Businesses Acquired:
 
      Report of Independent Auditors
 
      Combined Historical Summary of Gross Income and Direct Operating Expenses For the Year Ended December 31, 2005 and the Three Months Ended March 31, 2006 (unaudited)
 
      Notes to the Combined Historical Summary of Gross Income and Direct Operating Expenses
 
  (b)   Pro Forma Financial Information (Unaudited):
 
      Pro Forma Consolidated Balance Sheet as of March 31, 2006
 
      Pro Forma Consolidated Statement of Operations for the Three Months Ended March 31, 2006
 
      Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2005
 
  (c)   Not applicable
 
  (d)   Exhibits

3

Table of Contents

     
Exhibit Number   Description
 
    
23.1
  Consent of Independent Accountants

4

Table of Contents

Report of Independent Auditors
To the Board of Directors and Stockholders of
Trizec Properties, Inc.
We have audited the accompanying Combined Historical Summary of Gross Income and Direct Operating Expenses of the thirteen properties acquired by Trizec Properties, Inc. (the “Corporation”) from Arden Realty, Inc. and certain of its subsidiaries (collectively, the “Properties”) for the year ended December 31, 2005 (the “Statement”). This Statement is the responsibility of the Corporation’s management. Our responsibility is to express an opinion on the Statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Statement. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Statement. We believe that our audit provides a reasonable basis for our opinion.
The accompanying Statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the current Report on Form 8-K/A of the Corporation) as described in Note 1 and is not intended to be a complete presentation of the Properties’ revenues and expenses.
In our opinion, the Combined Historical Summary of Gross Income and Direct Operating Expenses referred to above presents fairly, in all material respects, the combined gross income and direct operating expenses described in Note 1 of the Properties for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.
PricewaterhouseCoopers LLP
Chicago, Illinois
June 16, 2006

5

Table of Contents

Combined Historical Summary of Gross
Income and Direct Operating Expenses — Properties Acquired from Arden Realty, Inc.
For the Year Ended December 31, 2005 and the
Three Months Ended March 31, 2006 (unaudited)
 
                 
            Three Months  
            Ended  
    Year Ended     March 31, 2006  
$ in thousands   December 31, 2005     (unaudited)  
Gross Income
                
Rentals
   $ 106,456     $ 27,055  
Recoveries from tenants
     4,814       1,950  
Parking and other
     20,495       5,476  
 
            
Total Gross Income
     131,765       34,481  
 
            
 
Direct Operating Expenses
                
Operating
     34,001       8,767  
Property taxes
     10,857       2,430  
 
            
Total Direct Operating Expenses
     44,858       11,197  
 
            
 
Gross Income in Excess of Direct Operating Expenses
   $ 86,907     $ 23,284  
 
            
See accompanying notes to the historical statements.

6

Table of Contents

Notes to the Combined Historical Summary of Gross
Income and Direct Operating Expenses — Properties Acquired from Arden Realty, Inc.
For the Year Ended December 31, 2005 and the
Three Months Ended March 31, 2006 (unaudited) ($ in thousands)
 
1.   Basis of Presentation and Summary of Significant Accounting Policies
 
    On May 2, 2006, Trizec Properties, Inc. (the “Corporation”) acquired an office portfolio comprising 13 properties containing approximately 4.0 million rentable square feet (unaudited) (collectively, the “Properties”) and several undeveloped land parcels located in Southern California from Arden Realty, Inc. and certain of its subsidiaries. The Combined Historical Summary of Gross Income and Direct Operating Expenses (the “Statements”) present the combined gross income and direct operating expenses of the Properties for the year ended December 31, 2005 and the three months ended March 31, 2006 (unaudited).
 
    The accompanying Statements have been prepared on the accrual basis of accounting. The Statements have been prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in a current report on Form 8-K of the Corporation. The Statements are not intended to be a complete presentation of the revenues and expenses of the Properties for the year ended December 31, 2005 and the three month period ended March 31, 2006, as certain expenses, primarily depreciation and amortization expense, interest expense, and other costs not directly related to the future operations of the Properties have been excluded.
 
    Revenue Recognition
 
    Tenant leases are accounted for as operating leases. Rental income is recognized on a straight-line basis over the terms of the respective leases. Recoveries from tenants consists of recoveries of certain operating expenses and property taxes. Recoveries of certain operating expenses and property taxes are recognized as revenue in the period the applicable costs are incurred.
 
    Operating Expenses
 
    Operating expenses include the direct and certain general expenses of operating the Properties and include maintenance, repairs, cleaning, HVAC, ground lease and security costs that are expected to continue in the ongoing operation of the Properties. Expenditures for maintenance and repairs are charged to operations as incurred.
 
    Estimates
 
    The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions of the reported amounts of gross income and direct operating expenses during the reporting periods. Actual results may differ from those estimates used in the preparation of the financial statements.

7

Table of Contents

Notes to the Combined Historical Summary of Gross
Income and Direct Operating Expenses — Properties Acquired from Arden Realty, Inc.
For the Year Ended December 31, 2005 and the
Three Months Ended March 31, 2006 (unaudited) ($ in thousands)
 
2.   Leases
 
    The minimum future rentals from tenant leases based on noncancelable operating leases held as of December 31, 2005 are as follows:
         
Years ending December 31,        
2006
   $ 100,381  
2007
     89,496  
2008
     75,583  
2009
     62,533  
2010
     50,433  
Thereafter
     116,434  
 
      
 
   $ 494,860  
 
      
3.   Contractual Obligations
 
    Three of the properties acquired are subject to ground leases. The minimum future contractual obligations under these ground leases as of December 31, 2005 are as follows:
         
Years ending December 31,        
2006
   $ 968  
2007
     997  
2008
     997  
2009
     997  
2010
     997  
Thereafter
     95,174  
 
      
 
   $ 100,130  
 
      
4.   Combined Historical Summary of Gross Income and Direct Operating Expenses for the Three Months Ended March 31, 2006
 
    The Combined Historical Summary of Gross Income and Direct Operating Expenses for the three months ended March 31, 2006 is unaudited. In the opinion of management, all significant adjustments necessary for a fair presentation of the statement for the interim period have been included. The combined results of operations for the interim period are not necessarily indicative of the combined results of operations to be expected for a full year for the operation of the Properties.

8

Table of Contents

TRIZEC PROPERTIES, INC.   Pro Forma Financial Information (unaudited)
 
Background
On May 2, 2006, Trizec Properties, Inc. (the “Corporation”) announced the completion on such date of the acquisition of a portfolio of the following 13 properties, totaling approximately 4.0 million square feet, and several undeveloped land parcels (the “Arden Portfolio”), from Arden Realty, Inc. (“Arden”) and certain of its subsidiaries (the “Acquisition”) for an aggregate consideration of approximately $1.63 billion. The Arden Portfolio is comprised of the following properties, all of which are primarily concentrated in West Los Angeles and San Diego:
  •   257,000 square foot office building located in the complex known as the Howard Hughes Center at 6060 Center Drive in Los Angeles;
 
  •   288,000 square foot office building located in the Howard Hughes Center at 6080 Center Drive in Los Angeles;
 
  •   286,000 square foot office building located in the Howard Hughes Center at 6100 Center Drive in Los Angeles;
 
  •   103,000 square foot office building located in the Howard Hughes Center at 6601 Center Drive in Los Angeles;
 
  •   318,000 square foot office building known as the Howard Hughes Tower located in the Howard Hughes Center at 6701 Center Drive in Los Angeles;
 
  •   37,000 square foot building known as the Spectrum Center located in Howard Hughes Center at 6701 Park Terrace in Los Angeles;
 
  •   313,000 square foot office building known as the Westwood Center, located at 1100 Glendon Avenue in Los Angeles;
 
  •   161,000 square foot office building, located at 9665 Wilshire Boulevard in Beverly Hills;
 
  •   409,000 square foot office building, located at 5670 Wilshire Boulevard in Los Angeles;
 
  •   471,000 square foot office building known as the World Savings Center, located at 11603 Wilshire Boulevard in Los Angeles;
 
  •   599,000 square foot, four-building office complex known as the Sorrento Towers, located at 5355 and 5375 Mira Sorrento Place in San Diego;
 
  •   566,000 square foot office building located at 701 B Street in San Diego;
 
  •   170,000 square foot office building, located at 707 Broadway in San Diego; and
 
  •   certain undeveloped parcels of land located in Los Angeles, which can accommodate the development of up to 490,000 square feet of office space and 600 residential units.
The Corporation acquired the Arden Portfolio in a simultaneous two-step transaction by first acquiring all of the equity interests in a limited liability company that owns the office building located at 5670 Wilshire Boulevard and substantially all of the equity interests in a second limited liability company that owns the Spectrum Center, followed by the acquisition of fee or ground lease interests in the 11 remaining properties, certain undeveloped parcels of land and the remaining equity interests in the second limited liability company. The Acquisition occurred (a) pursuant to the previously disclosed Purchase and Sale Agreement, dated December 19, 2005, as amended by that First Amendment dated December 21, 2005 (collectively, the “Purchase Agreement”), by and between Trizec Holdings Operating LLC, the entity through which the Corporation owns substantially all of its assets and conducts substantially all of its business and of which it is the managing member (the “Trizec OP”), and General Electric Capital Corporation (“GECC”), and (b) in conjunction with the completion of the merger of Arden and its operating partnership, Arden Realty Limited Partnership (“Arden OP”), with various subsidiaries of GECC on May 2, 2006 pursuant to the previously disclosed Agreement and Plan of Merger, dated as of December 21, 2005 (the “Merger Agreement”), as amended, by and among the Corporation, Trizec OP, Arden, Arden OP, GECC and certain of GECC’s subsidiaries.

9

Table of Contents

TRIZEC PROPERTIES, INC.   Pro Forma Financial Information (unaudited)
 
The Corporation financed the Acquisition through a combination of a draw of the entire $1.3 billion available for borrowing under a term loan, a draw of approximately $140.0 million under its existing unsecured credit facility, available cash, the assumption of an approximately $58.5 million outstanding mortgage loan encumbering one of the properties, and the issuance by Trizec OP of approximately 2.5 million common units of its limited liability company membership interests, valued at approximately $61.4 million, to certain eligible limited partners of Arden OP. These common units become redeemable for cash or, at our election, shares of our common stock beginning one year from their issuance under the terms of Trizec OP’s limited liability company operating agreement. In addition, holders of these common units are entitled to certain registration rights pursuant to an agreement the Corporation entered into with such holders.
The accompanying unaudited pro forma consolidated balance sheet as of March 31, 2006 has been prepared to reflect the effect of the acquisition of the Arden Portfolio as if such transaction had occurred on March 31, 2006.
The accompanying unaudited pro forma consolidated statement of operations for the three months ended March 31, 2006 and the year ended December 31, 2005 have been prepared as if the Arden Portfolio had been acquired on January 1, 2005.
The unaudited pro forma information is not necessarily indicative of the Corporation’s consolidated results that would have occurred if the transaction and adjustments reflected therein had been consummated in the period or on the date presented, or on any particular date in the future, nor does it purport to present the Corporation’s financial position or results of operations for future periods.
As the properties will be directly or indirectly owned by entities that will elect or have elected to be treated as real estate investment trusts (as specified under sections 856-860 of the Internal Revenue Code of 1986) for Federal income tax purposes, a presentation of estimated taxable operating results is not applicable.

10

Table of Contents

TRIZEC PROPERTIES, INC.   Pro Forma Consolidated Balance Sheet (unaudited)
 
                         
    Trizec Properties, Inc.     Arden     Trizec Properties, Inc.  
    As of March 31, 2006     Portfolio     As of  
    (Historical)     Adjustments     March 31, 2006  
$ in thousands, except share and per share amounts   (Note 1 (a))     (Note 1(b))     (Pro Forma)  
 
Assets
                        
Real estate
   $ 4,484,310     $ 1,527,111     $ 6,011,421  
Less: accumulated depreciation
     (674,789 )     —       (674,789 )
 
                  
Real estate, net
     3,809,521       1,527,111       5,336,632  
Cash and cash equivalents
     41,473       —       41,473  
Escrows and restricted cash
     147,080       —       147,080  
Investment in unconsolidated real estate joint ventures
     146,406       —       146,406  
Office tenant receivables
     10,444       —       10,444  
Deferred rent receivables
     141,805       —       141,805  
Other receivables
     8,872       —       8,872  
Deferred charges
     138,451       26,746       165,197  
Prepaid expenses and other assets, net
     177,485       163,775       341,260  
 
                  
Total Assets
   $ 4,621,537     $ 1,717,632     $ 6,339,169  
 
                  
Liabilities and Stockholders’ Equity
                        
Liabilities
                        
Mortgage debt and other loans
   $ 2,009,490     $ 58,480     $ 2,067,970  
Unsecured credit facility
     120,000       221,038       341,038  
Term loan
     —       1,300,000       1,300,000  
Trade, construction and tenant improvement payables
     19,861       —       19,861  
Accrued interest expense
     6,576       —       6,576  
Accrued operating expenses and property taxes
     62,596       —       62,596  
Other accrued liabilities
     186,615       76,686       263,301  
Dividends payable
     32,170       —       32,170  
Taxes payable
     25,881       —       25,881  
 
                  
Total Liabilities
     2,463,189       1,656,204       4,119,393  
 
                  
Commitments and Contingencies
     —       —       —  
Minority Interest
     8,681       61,428       70,109  
Special Voting and Class F Convertible Stock
     200       —       200  
 
Stockholders’ Equity
                        
Preferred stock, 50,000,000 shares authorized, $0.01 par value, none issued and outstanding at March 31, 2006 and December 31, 2005 respectively
     —       —       —  
Common stock, 500,000,000 shares authorized, $0.01 par value, 157,241,959 and 156,478,409 issued at March 31, 2006 and December 31, 2005, respectively, and 157,180,414 and 156,419,864 outstanding at March 31, 2006 and December 31, 2005, respectively
     1,572       —       1,572  
Additional paid in capital
     2,298,013       —       2,298,013  
Accumulated deficit
     (149,920 )     —       (149,920 )
Treasury stock, at cost, 61,545 and 58,545 shares at March 31, 2006 and December 31, 2005, respectively
     (783 )     —       (783 )
Accumulated other comprehensive income
     585       —       585  
 
                  
Total Stockholders’ Equity
     2,149,467       —       2,149,467  
 
                  
Total Liabilities and Stockholders’ Equity
   $ 4,621,537     $ 1,717,632     $ 6,339,169  
 
                  

11

Table of Contents

TRIZEC PROPERTIES, INC.   Pro Forma Consolidated Statement of Operations (unaudited)
 
                                 
    Trizec Properties,                        
    Inc.                     Trizec Properties,  
    For the Three                     Inc.  
    Months Ended     Arden     Other     For the Three  
    March 31, 2006     Portfolio     Pro Forma     Months Ended  
    (Historical)     Adjustments     Adjustments     March 31, 2006  
$ in thousands, except share and per share amounts   (Note 2 (a))     (Note 2 (b))     (Note 2 (c))     (Pro Forma)  
 
Revenues
                                
Rentals
   $ 128,773     $ 27,055     $ 3,714     $ 159,542  
Recoveries from tenants
     28,950       1,950       —       30,900  
Parking and other income
     25,087       5,476       —       30,563  
Fee income
     1,595       —       —       1,595  
 
                        
Total Revenues
     184,405       34,481       3,714       222,600  
 
                        
 
                                
Expenses
                                
Operating
     63,025       8,767       78       71,870  
Property taxes
     23,003       2,430       —       25,433  
General and administrative
     9,274       —       —       9,274  
Depreciation and amortization
     47,137       —       18,573       65,710  
 
                        
Total Expenses
     142,439       11,197       18,651       172,287  
 
                        
 
                                
Operating Income
     41,966       23,284       (14,937 )     50,313  
 
                        
 
                                
Other Income (Expense)
                                
Interest and other income
     1,078       —       —       1,078  
Loss on early debt retirement
     (312 )     —       —       (312 )
Recovery on insurance claims
     113       —       —       113  
Interest expense
     (34,239 )     —       (25,184 )     (59,423 )
 
                        
Total Other Expense
     (33,360 )     —       (25,184 )     (58,544 )
 
                        
 
                                
Income (Loss) Before Income Taxes, Minority Interest and Income from Unconsolidated Real Estate Joint Ventures
     8,606       23,284       (40,121 )     (8,231 )
Benefit for income and other corporate taxes, net
     88       —       —       88  
Minority interest
     (677 )     —       (442 )     (1,119 )
Income from unconsolidated real estate joint ventures
     2,934       —       —       2,934  
 
                        
 
                                
Income (Loss) from Continuing Operations
   $ 10,951     $ 23,284     $ (40,563 )   $ (6,328 )
 
                        
 
                                
Earnings per Common Share
                                
Income (Loss) from Continuing Operations Available to Common Stockholders per Weighted Average Common Share Outstanding
                                
Basic
   $ 0.07                          
 
                              
Diluted
   $ 0.07                          
 
                              
 
                                
Pro Forma Income (Loss) from Continuing Operations Available to Common Stockholders per Weighted Average Common Share Outstanding
                                
Basic
                           $ (0.04 )
 
                              
Diluted
                           $ (0.04 )
 
                              
 
                                
Weighted Average Shares Outstanding:
                                
Basic
     156,691,554                       156,691,554  
 
                            
Diluted
     159,944,117                       156,691,554  
 
                            

12

Table of Contents

     
TRIZEC PROPERTIES, INC.   Pro Forma Consolidated Statement of Operations (unaudited)
 
                                 
    Trizec Properties,                     Trizec Properties,  
    Inc.                     Inc.  
    For the Year Ended     Arden     Other     For the Year  
    December 31, 2005     Portfolio     Pro Forma     Ended December  
    (Historical)     Adjustments     Adjustments     31, 2005  
$ in thousands, except share and per share amounts   (Note 3 (a))     (Note 3 (b))     (Note 3 (c))     (Pro Forma)  
 
Revenues
                                
Rentals
   $ 499,918     $ 106,456     $ 12,733     $ 619,107  
Recoveries from tenants
     111,099       4,814       —       115,913  
Parking and other income
     104,090       20,495       —       124,585  
Fee income
     6,887       —       —       6,887  
 
                        
Total Revenues
     721,994       131,765       12,733       866,492  
 
                        
 
                                
Expenses
                                
Operating
     249,245       34,001       311       283,557  
Property taxes
     88,112       10,857       —       98,969  
General and administrative
     38,653       —       —       38,653  
Depreciation and amortization
     170,753       —       79,261       250,014  
 
                        
Total Expenses
     546,763       44,858       79,572       671,193  
 
                        
 
                                
Operating Income
     175,231       86,907       (66,839 )     195,299  
 
                        
 
                                
Other Income (Expense)
                                
Interest and other income
     6,597       —       —       6,597  
Loss on early debt retirement
     (6,842 )     —       —       (6,842 )
Recovery on insurance claims
     74       —       —       74  
Interest expense
     (138,564 )     —       (78,976 )     (217,540 )
Lawsuit and other settlements
     3,288       —       —       3,288  
 
                        
Total Other Expense
     (135,447 )     —       (78,976 )     (214,423 )
 
                        
 
                                
Income (Loss) Before Income Taxes, Minority Interest and Income from Unconsolidated Real Estate Joint Ventures
     39,784       86,907       (145,815 )     (19,124 )
Benefit for income and other corporate taxes, net
     3,754       —       —       3,754  
Minority interest
     (1,045 )     —       (2,314 )     (3,359 )
Income from unconsolidated real estate joint ventures
     14,997       —       —       14,997  
 
                        
 
                                
Income (Loss) from Continuing Operations
   $ 57,490     $ 86,907     $ (148,129 )   $ (3,732 )
 
                        
 
                                
Earnings per Common Share
                                
Income (Loss) from Continuing Operations Available to Common Stockholders per Weighted Average Common Share Outstanding
                                
Basic
   $ 0.34                          
 
                              
Diluted
   $ 0.34                          
 
                              
 
                                
Pro Forma Income (Loss) from Continuing Operations Available to Common Stockholders per Weighted Average Common Share Outstanding
                                
Basic
                           $ (0.05 )
 
                              
Diluted
                           $ (0.05 )
 
                              
 
                                
Weighted Average Shares Outstanding:
                                
Basic
     154,847,663                       154,847,663  
 
                            
Diluted
     157,877,915                       154,847,663  
 
                            

13

Table of Contents

     
TRIZEC PROPERTIES, INC.   Notes to Pro Forma Financial Statements (unaudited)
($ in thousands)
 
1.   Balance Sheet Adjustments – As of March 31, 2006
  (a)   The Trizec Properties, Inc. historical balance sheet reflects the financial position of the Corporation as of March 31, 2006 as reported in the Corporation’s Form 10-Q filed May 5, 2006.
 
  (b)   Represents the necessary adjustments to reflect the acquisition of the Arden Portfolio that was acquired on May 2, 2006 as if such acquisition had occurred on March 31, 2006.
 
      In accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS No. 141”), the Corporation allocates the purchase price of real estate to land, building, tenant improvements and, if determined to be material, intangibles, such as the value of above, below and at-market leases, origination costs associated with the in-place leases, and the value of tenant relationships, if any.
 
      In accordance with SFAS No. 141, the Corporation’s allocation of the net purchase price of the Arden Portfolio is as follows:
         
    Arden Portfolio  
Land
   $ 231,728  
Building and Improvements
     1,233,192  
Tenant Improvements
     62,191  
 
      
Real Estate Adjustment Total
   $ 1,527,111  
 
      
 
        
Leasing Commissions
   $ 22,238  
 
      
Deferred Charges Adjustment Total
   $ 22,238  
 
      
 
        
In-Place Lease Value at Market
   $ 58,817  
Tenant Relationship Value
     74,900  
Above Market Lease Value
     30,058  
 
      
Prepaid Expenses and Other Assets, Net Adjustment Total
   $ 163,775  
 
      
 
        
Below Market Lease Value
   $ 76,686  
 
      
Other Accrued Liabilities Adjustment Total
   $ 76,686  
 
      
      Real Estate
 
      The real estate adjustment of $1,527,111 reflects the portion of the purchase price of the Arden Portfolio allocated to land, building and improvements and tenant improvements as calculated in accordance with SFAS No. 141 (see table above).
 
      Deferred Charges
 
      The deferred charges adjustment of $26,746 reflects the portion of the purchase price of the Arden Portfolio allocated as the estimate of the fair value of lease origination costs of $22,238 as calculated in accordance with SFAS No. 141 (see table above) and $4,508 of financing charges incurred in connection with the assumption of the $58,480 mortgage loan.

14

Table of Contents

     
TRIZEC PROPERTIES, INC.   Notes to Pro Forma Financial Statements (unaudited)
($ in thousands)
 
      Prepaid Expenses and Other Assets, net
 
      The prepaid and other assets, net, adjustment of $163,775 reflects the portion of the purchase price of the Arden Portfolio allocated as the estimate of the fair value of in-place lease value, tenant relationship value and above market leases as calculated in accordance with SFAS No. 141 (see table above).
 
      Mortgage Debt and Other Loans
 
      The mortgage debt and other loans adjustment reflects the fair value of the $58,480 mortgage loan assumed in conjunction with the acquisition of the Arden Portfolio. The assumed mortgage loan bears interest at LIBOR plus 1.15% and is scheduled to mature in May 2008.
 
      Unsecured Credit Facility
 
      The unsecured credit facility adjustment reflects the fair value of assumed borrowings under the Corporation’s unsecured credit facility to finance the acquisition of the Arden Portfolio. For purposes of this pro forma balance sheet, it is assumed that any cash used to fund the acquisition of the Arden Portfolio is the result of draws under the unsecured credit facility. The unsecured credit facility bears interest at LIBOR plus a spread of 0.95% to 1.65% based on the Corporation’s total leverage, and is scheduled to mature in October 2008.
 
      Term Loan
 
      The term loan adjustment reflects the fair value of the borrowing under the Corporation’s term loan used to finance the acquisition of the Arden Portfolio. The term loan expires in May 2007 and has two six-month extension options. The outstanding balance of the term loan is subject to an interest rate of LIBOR plus 1.40% during the initial one-year term, LIBOR plus 2.00% during the first extension period and LIBOR plus 2.50% during the second extension period. The Corporation is currently the sole guarantor under the term loan but some of its subsidiaries may be required to become additional guarantors under certain circumstances in the future.
 
      Other Accrued Liabilities
 
      The other accrued liabilities adjustment of $76,686 reflects the portion of the purchase price of the Arden Portfolio allocated as the estimate of the fair value of below market leases as calculated in accordance with SFAS No. 141 (see table above).
 
      Minority Interest
 
      The minority interest adjustment reflects the fair value of 2,499,116 common units of limited liability membership interests in Trizec OP issued in conjunction with the acquisition of the Arden Portfolio.
2.   Income Statement Adjustments – For the Three Months Ended March 31, 2006
  (a)   The Trizec Properties, Inc. historical income statement reflects the operations of the Corporation for the period January 1, 2006 through March 31, 2006 as reported in the Corporation’s Form 10-Q filed May 5, 2006.

15

Table of Contents

     
TRIZEC PROPERTIES, INC.   Notes to Pro Forma Financial Statements (unaudited)
($ in thousands)
 
  (b)   Reflects the historical operations of the Arden Portfolio for the period January 1, 2006 through March 31, 2006.
 
  (c)   Represents necessary adjustments to reflect the operations of the Arden Portfolio for the three months ended March 31, 2006 as if it was acquired on January 1, 2005.
 
      Rentals
 
      The adjustment to rental revenue of $3,714 reflects the net amortization of above and below market leases of $2,477 for the Arden Portfolio for the period January 1, 2006 through March 31, 2006 as well as the impact of straight-lining of rental revenue of $1,237.
 
      Operating Expenses
 
      The adjustment to operating expenses of $78 reflects the net amortization of above and below market ground leases for the Arden Portfolio for the period January 1, 2006 through March 31, 2006.
 
      Depreciation and Amortization
 
      The adjustment to depreciation and amortization of $18,573 reflects the depreciation and amortization of building, site improvements, tenant improvements, leasing commissions, in-place lease value and tenant relationship value for the Arden Portfolio for the period January 1, 2006 through March 31, 2006.
 
      Interest Expense
 
      The adjustment to interest expense reflects interest expense for the period January 1, 2006 through March 31, 2006 associated with the assumption of the $58,480 mortgage loan used to finance the acquisition of the Arden Portfolio. The assumed mortgage loan bears interest at LIBOR plus 1.15%. The weighted average pro forma interest rate for the three months ended March 31, 2006 is 5.61%.
 
      The adjustment to interest expense also reflects interest expense for the period January 1, 2006 through March 31, 2006 associated with the assumed increase in borrowings of $221,038 under the Corporation’s unsecured credit facility used to finance the acquisition of the Arden Portfolio. The assumed borrowings under the Corporation’s unsecured credit facility bear interest at LIBOR plus 0.95% to 1.65% based on the Corporation’s total leverage. The weighted average pro forma interest rate for the three months ended March 31, 2006 is 5.41%.
 
      In addition, the adjustment to interest expense reflects interest expense for the period January 1, 2006 through March 31, 2006 related to the Corporation’s $1,300,000 term loan used to finance the acquisition of the Arden Portfolio. The outstanding balance of the term loan is subject to an interest rate of LIBOR plus 1.40% during the initial one-year term, LIBOR plus 2.00% during the first six-month extension period and LIBOR plus 2.50% during the second six-month extension period. The weighted average pro forma interest rate for the three months ended March 31, 2006 is 6.58%.
 
      The Corporation entered into an interest rate swap agreement with The Bank of Nova Scotia to convert the interest rate on a notional amount of $250,000 of the Corporation’s indebtedness from variable to fixed, at a fixed rate of 5.23%.

16

Table of Contents

     
TRIZEC PROPERTIES, INC.   Notes to Pro Forma Financial Statements (unaudited)
($ in thousands)
 
      Minority Interest
 
      The minority interest adjustment reflects income attributable to units issued to unitholders in conjunction with the acquisition of the Arden Portfolio. The minority interest adjustment reflects a weighted average 1.6% minority interest for the three months ended March 31, 2006.
3.   Income Statement Adjustments – For the Year Ended December 31, 2005
  (a)   The Trizec Properties, Inc. historical income statement reflects the operations of the Corporation for the period January 1, 2005 through December 31, 2005 as reported in the Corporation’s Form 10-K filed March 14, 2006.
 
  (b)   Reflects the historical operations of the Arden Portfolio for the period January 1, 2005 through December 31, 2005.
 
  (c)   Represents necessary adjustments to reflect the operations of the Arden Portfolio as if it was acquired on January 1, 2005.
 
      Rentals
 
      The adjustment to rental revenue of $12,733 reflects the net amortization of above and below market leases of $10,208 for the Arden Portfolio for the period January 1, 2005 through December 31, 2005 as well as the impact of straight-lining of rental revenue of $2,525.
 
      Operating Expenses
 
      The adjustment to operating expenses of $311 reflects the net amortization of above and below market ground leases for the Arden Portfolio for the period January 1, 2005 through December 31, 2005.
 
      Depreciation and Amortization
 
      The adjustment to depreciation and amortization of $79,261 reflects the depreciation and amortization of building, site improvements, tenant improvements, leasing commissions, in-place lease value and tenant relationship value for the Arden Portfolio for the period January 1, 2005 through December 31, 2005.
 
      Interest Expense
 
      The adjustment to interest expense reflects interest expense for the period January 1, 2005 through December 31, 2005 associated with the assumption of the $58,480 mortgage loan used to finance the acquisition of the Arden Portfolio. The assumed mortgage loan bears interest at LIBOR plus 1.15%. The weighted average pro forma interest rate for the year ended December 31, 2005 is 4.46%.
 
      The adjustment to interest expense also reflects interest expense for the period January 1, 2005 through December 31, 2005 associated with the assumed increase in borrowings of $221,038 under the Corporation’s unsecured credit facility used to finance the acquisition of the Arden Portfolio. The assumed borrowings under the Corporation’s unsecured credit facility bear interest at LIBOR plus 0.95% to 1.65% based on the Corporation’s total leverage. The weighted average pro forma interest rate for the year ended December 31, 2005 is 4.67%.

17

Table of Contents

     
TRIZEC PROPERTIES, INC.   Notes to Pro Forma Financial Statements (unaudited)
($ in thousands)
 
      In addition, the adjustment to interest expense reflects interest expense for the period January 1, 2005 through December 31, 2005 related to the Corporation’s $1,300,000 term loan used to finance the acquisition of the Arden Portfolio. The outstanding balance of the term loan is subject to an interest rate of LIBOR plus 1.40% during the initial one-year term, LIBOR plus 2.00% during the first six-month extension period and LIBOR plus 2.50% during the second six-month extension period. The weighted average pro forma interest rate for the year ended December 31, 2005 is 5.08%.
 
      The Corporation entered into an interest rate swap agreement with The Bank of Nova Scotia to convert the interest rate on a notional amount of $250,000 of the Corporation’s indebtedness from variable to fixed, at a fixed rate of 5.23%.
 
      Minority Interest
 
      The minority interest adjustment reflects income attributable to units issued to unitholders in conjunction with the acquisition of the Arden Portfolio. The minority interest adjustment reflects a weighted average 1.6% minority interest for the year ended December 31, 2005.

18

Table of Contents

SIGNATURE
     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
                 
 
               
        TRIZEC PROPERTIES, INC.    
 
                
Date: July 14, 2006
      By:   /s/ Jerry Kyriazis    
 
               
 
          Jerry Kyriazis    
 
          Vice President and Chief Accounting Officer    

19

Table of Contents

EXHIBIT INDEX
     
Exhibit Number   Description
 
    
23.1
  Consent of Independent Accountants