SAN FRANCISCO-An affiliate of locally based Farallon Capital Management has acquired $343 million of land and developments from Catellus Development Corporation, which is shedding non-core assets as it shifts to an industrial-focused REIT. The purchase includes nearly all of the unsold land and entitlements at Mission Bay–much of which is under contracts to be sold to third parties–as well as land and developments in San Diego and the Los Angeles area and the 485-unit Bayport residential project in Alameda. The $343 million purchase price includes $69 million in cash and approximately $274 million in debt secured by the assets sold and financed by Catellus subsidiaries. Catellus expects to generate approximately $36 million of additional revenue from the debt financing and, as the ongoing development manager for the developable land, will earn another $$37 million in development fees over a 10-year period, up to $28 million in incentive fees. Those fees will be based on the amount and timing of certain land sales at Mission Bay and West Bluffs, and a promoted interest of approximately $13 million in the event Farallon achieves returns in excess of 18%.According to a company announcement, the purchase includes:–All of the remaining undeveloped land, infrastructure obligations, and outstanding infrastructure reimbursements receivables at Mission Bay, including parcels under contract for sale that have not yet closed, but excluding the 9.65-acre land parcel that Catellus recently announced it is negotiating to ground lease to University of California, and excluding all previously developed parcels (Avalon Bay I and II land leases, Mission Place land lease, GAP office building, and Glassworks commercial space);– The last remaining undeveloped parcel and infrastructure obligations at Santa Fe Depot in San Diego;– West Bluffs, a 114-unit single-family home development in the Westchester-Playa del Rey area of Los Angeles; and– All of Catellus’ interest in the residential project at Bayport, a 485-unit single-family home development in Alameda, including its joint venture interest and rights under the development agreement. The commercial development component in Alameda, on a site adjacent to Bayport, is not included in the sale.Catellus’ debt financing of Farallon’s acquisition has a six-year term, includes annual amortization requirements, and has release price mechanisms requiring the loan be paid down as Farallon sells the assets. Catellus expects the debt financing to be fully repaid in less than three years. The interest rate accrues quarterly, at annual rates starting at 12% and declining to 10% over time, but requires mandatory interest payments of 6% per annum. The financing also includes upfront fees and prepayment penalties, bringing expected income to the aforementioned $36 million.In addition, Catellus says as part of the pre-existing purchase and sale agreements for the Mission Bay land it expects to provide debt financing to certain buyers at loan-to-value rations of 60% to 80%, with terms ranging from one to two years following the closing of the sales by Farallon. Gary McKitterick, senior transactional partner with the Irvine office of Allen Matkins Leck Gamble & Mallory represented Catellus Development Corp. in the transaction. The transaction, leaves Catellus witht the folowing non-core assets:– A 9.65-acre site entitled for approximately one million square feet of commercial development at Mission Bay that Catellus recently announced it is negotiating to ground lease to University of California. Upon commencement of the ground lease, the rent on the 99-year lease would be included in Catellus’ rental portfolio. Final lease terms will be announced upon execution of the lease;– The remaining development land at Los Angeles Union Station;– Oceanside, a five-block land site in Oceanside, CA, which is under contract to sell for an estimated $14 million;– Parkway, a residential community development in Sacramento, California, which will be substantially complete by the end of the second quarter of 2005. Parkway has approximately $11 million of cash flow remaining;– Serrano, a residential community development in Sacramento, CA, for which Catellus is negotiating a sale;– Mission Place at Mission Bay. Catellus and a joint venture partner entered into a contract to sell the leasehold interest in Mission Place. Catellus expects to receive approximately $25 million and will continue to own fee interest in the land and include ground rent on the ground lease in its rental portfolio;– Cash flow from tax increment bonds and profit participation at Victoria-by-the-Bay, a completed residential development in Hercules, CA, that is expected to total $3.5 million annually by 2008, at full build-out, and grow annually through 2044, as property assessments increase;– The two commercial components at Glassworks: Catellus has placed one component under contract to sell to one party and is negotiating the sale of the second component to another party for a total of approximately $8.6 million; and– The Prop 10 building, an office building currently under construction at Los Angeles Union Station with a total projected cost of approximately $10 million, $7.1 million of which has been spent as “Urban, Residential, and Other Segment, Work-in-Progress”, as of September 30, 2004.

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