Catellus Profit Down 43% in Second Quarter

Catellus Development Corp., one of California’s largest landowners and builders, said late Tuesday that second-quarter profit fell 43% as its property sales decreased.

San Francisco-based Catellus said earnings for the quarter ended June 30 dropped to $19.3 million, or 21 cents a share, from $33.6 million, or 37 cents, a year earlier. That fell short of analysts’ estimates of 37 cents, according to Zacks Investment Research.

The company said the profit downturn was attributed to the company’s accelerated sales of residential land in the first half of last year as Catellus took advantage of a hot real estate investment market.

Chairman Nelson Rising said in a conference call with analysts that he was “extremely pleased with our results,” citing a slight increase in occupancy in the company’s 37.4 million square feet of rental property, to 94.4%, from 93.9% a year ago. Net operating income from Catellus’ rental properties increased 13%.

He confirmed the company’s guidance of 10% growth in earnings per share for 2003, adjusted for costs related to conversion to a real estate investment trust. The previously announced restructuring of Catellus to a REIT will take place Jan. 1 if shareholders approve it in a vote scheduled for the third quarter.

A REIT allows individual investors to participate in large real estate ventures. Unlike other public companies, REITs must distribute 95% of their income to shareholders.

Catellus reported funds from operations, a key profitability measure for REITs, rose 21.2% to $38.3 million, or 42 cents a share, compared with $31.6 million, or 35 cents, a year ago.

“I think they did a good job in a tough environment,” said analyst Jim Sullivan of Green Street Advisors, which does not own shares of Catellus or provide it with investment banking services. “Their industrial development talents have been understated and they are getting their share of the business.”

That was reflected in an increase in fees that Catellus charges for managing other companies’ real estate, and in a 13% gain in operating income from its rental properties.

As a REIT, the company will turn its focus from large urban mixed-use developments to the more predictably profitable business of developing and operating industrial parks.

Shares of Catellus rose 23 cents to $23 on the New York Stock Exchange.