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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to .
 Commission File Number: 001-16765
 TRIZEC PROPERTIES, INC.
  Delaware
    
    33-0387846(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 10 South Riverside PlazaChicago, IL
    
    60606(Address of principal executive offices)
    
    (Zip Code)
 312-798-6000
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Exchange on Which RegisteredCommon Stock, $0.01 par value
    
    New York Stock Exchange
 Securities registered pursuant to Section 12(g) of the Act:
  þ o
 o þ
 þ o
 o
  þ o o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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Table of Contents
 PagePART I
    
    
    4Item 1. Business
    
    
    4Item 1A. Risk Factors
    
    
    9Item 1B. Unresolved Staff Comments
    
    
    28Item 2. Properties
    
    
    28Item 3. Legal Proceedings
    
    
    36Item 4. Submission of Matters to a Vote of Security Holders
    
    
    36PART II
    
    
    36Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    36Item 6. Selected Financial Data
    
    
    37Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    41Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    76Item 8. Financial Statements and Supplementary Data
    
    
    76Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
    
    
    76Item 9A. Controls and Procedures
    
    
    77Item 9B. Other Information
    
    
    77PART III
    
    
    77Item 10. Directors and Executive Officers of the Registrant
    
    
    77Item 11. Executive Compensation
    
    
    78Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    78Item 13. Certain Relationships and Related Transactions
    
    
    78Item 14. Principal Accountant Fees and Services
    
    
    78PART IV
    
    
    78Item 15. Exhibits and Financial Statement Schedules
    
    
    782002 Long Term Incentive PlanComputation of Ratio of Earnings to Combined Fixed ChargesSubdiariesConsent of PricewaterhouseCoopers LLPConsentCertification of Chief Executive OfficerCertification of Chief Financil OfficerSection 1350 Certification of Chief Executive OfficerSection 1350 Certification of Chief Financial Officer
  FORWARD-LOOKING STATEMENTS
  
    
    changes in national and local economic conditions, including those economic conditions
in our seven core markets;
    
    the extent, duration and strength of any economic recovery;
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
    
    our ability to maintain occupancy and to timely lease or re-lease office space;
    
    the extent of any tenant bankruptcies and insolvencies;
    
    our ability to sell our non-core office properties in a timely manner;
    
    our ability to acquire office properties selectively in our core markets;
    
    our ability to integrate and realize the full benefits from our acquisitions, including
the pending acquisition of certain office properties and undeveloped land parcels that are
currently owned by Arden Realty, Inc.;
    
    our ability to maintain real estate investment trust (REIT) qualification and changes
to U.S. tax laws that affect REITs;
    
    material increases in the amount of special dividends payable to affiliates of Trizec
Canada on shares of our special voting stock as a result of increases in the applicable
cross-border withholding tax rates;
    
    Canadian tax laws that affect treatment of investment in U.S. real estate companies;
    
    the competitive environment in which we operate;
    
    the cost and availability of debt and equity financing;
    
    the effect of any impairment charges associated with changes in market conditions;
    
    the sale or other disposition of shares of our common stock owned by Trizec Canada Inc.;
    
    our ability to obtain, at a reasonable cost, adequate insurance coverage for
catastrophic events, such as earthquakes and terrorist acts; and
    
    other risks and uncertainties detailed from time to time in our filings with the SEC.
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PART I
 In this report, the terms we, us, our, our company and Trizec refer to Trizec
Properties, Inc. and its consolidated subsidiaries.
 
 Item 1. Business
 Overview
   2002 Reorganization
   
    
    shares of our common stock;
    
    exchange certificates representing underlying shares of our common stock; or
    
    Trizec Canada subordinate voting shares.
   4




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UPREIT Conversion
  Pending Arden Portfolio Acquisition
   Business and Growth Strategies
  
    
    leasing and managing our properties to maximize property rent revenue and minimize
property operating expenses;
    
    engaging in asset management to enhance the value of our properties;
    
    actively managing our portfolio to maximize total value of our properties, and
selectively acquiring office properties in our core markets;
    
    improving the efficiency and productivity of our operations; and
    
    maintaining a prudent and flexible capital plan.
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Leasing and Managing Our Properties
  
    
    providing appropriate, profitable tenant services;
    
    where market rents exceed in-place rents, narrowing the gap between market rents and
in-place rents as leases for our properties expire;
    
    increasing occupancy in our properties;
    
    renewing leases with existing tenants;
    
    carefully controlling operating costs; and
    
    carefully managing investments in tenant improvements.
    Engaging in Asset Management
   Actively Managing Our Portfolio
  6




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Improving the Efficiency and Productivity of Our Operations
  Maintaining a Prudent and Flexible Capital Plan
  
    
    maintain adequate working capital and lines of credit to ensure liquidity and flexibility;
    
    maintain an appropriate degree of leverage;
    
    maintain floating rate debt at a level that allows us to take advantage of lower
interest rates and minimize loan pre-payment fees when possible; and
    
    actively manage our exposure to interest rate volatility through the use of
long-term fixed-rate debt and various hedging strategies.
     7




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Competition
  Industry Segments and Seasonality
  Employees and Organizational Structure
  Environmental Matters
    8




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Available Information
   
 Item 1A. Risk Factors
 You should carefully consider the risks described below. These risks are not the only ones
that we may face. Additional risks not presently known to us or that we currently consider
immaterial may also impair our results of operations, financial condition and business operations
generally, and hinder our ability to make distributions to our stockholders.
 Risks Relating To Our Business
 Our operating and financial performance and our financial condition, as well as the value of
our real estate assets, are subject to the risks incidental to the ownership and operation of real
estate properties.
  9




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
    
    adverse changes in the national and regional economic climate, as well as the local
economic conditions in core markets in which our properties are located, which
generally will negatively impact the demand for office space and rental rates;
    
    cyclical nature of the real estate industry, particularly in the commercial office
sector, and possible oversupply of office properties, including space available by
sublease, or reduced demand for office space in our core markets which would make it
more difficult for us to lease space at attractive rental rates, or at all;
    
    negative trends in employment levels;
    
    competition from other commercial office real estate owners who own properties in
our core markets which could cause us to lose current or prospective tenants to other
properties or cause us to reduce our rental rates;
    
    vacancies and unfavorable changes in market rental rates and our ability to rent
space on favorable terms;
    
    bankruptcy, insolvency or credit deterioration of our tenants and our ability to
collect rents from our tenants;
    
    increase in interest rates and lack of availability of attractive financing;
    
    increases in operating costs, including utilities, real estate taxes, state and
local taxes, heightened security costs and costs incurred for periodic renovations and
repairs that are necessary as our properties age;
    
    illiquidity of real estate assets, which may make it difficult for us to sell our
real estate investments in response to changes in the economic climate and real estate
industry;
    
    civil unrest, acts of terrorism, earthquakes and other natural disasters or acts of
God that may result in underinsured or uninsured losses;
    
    relative or decreased attractiveness of our properties to tenants;
    
    changes in the availability and affordability of insurance on commercially
reasonable terms, in levels of coverage for our real estate assets and in exclusions
from insurance policies for our real estate assets; and
    
    unfavorable financing market conditions which could affect our ability to complete
any property dispositions or acquisitions on a timely basis or on economically
attractive terms.
  If we are not able to renew leases or enter into new leases on favorable terms or at all as
our existing leases expire, our revenue, operating results and cash flows will be reduced.
  
    
    the rental rates of the renewal or new leases may be significantly lower than those
of the expiring leases; or
    
    substantial tenant installation costs, including the cost of required renovations or
concessions to tenants, may be significant.
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Decreases in occupancy and rental rates will harm our revenue and our operating results.
  If a significant number of our tenants or a major tenant defaulted on their leases or sought
bankruptcy protection, our cash flows and operating results would suffer.
  Our business is substantially dependent on the economic climates of seven core markets and the
adverse conditions in these markets, or in the national economy generally, may adversely impact our
results of operations and financial condition.
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Provisions for losses of real estate investments may negatively affect our operating results.
  We may have difficulty selling our properties due to economic, tax and other reasons. As a
result, we may not be able to sell our properties when appropriate and our repositioning strategy
may be negatively impacted.
  Actual or perceived threat of terrorism may adversely affect operating results from our
properties.
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Compliance with our tax cooperation agreement for the benefit of Trizec Canada Inc. may limit
our flexibility in making real estate investments and conducting our business.
  Our financial covenants could adversely affect our financial condition and results of
operations.
   Our degree of leverage may adversely affect our business and the market price of our common
stock.
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If we are unable to manage our interest rate risk effectively, our cash flows and operating
results may suffer.
  Our insurance may not cover some potential losses or may not be obtainable at commercially
reasonable rates, which could adversely affect our financial condition and results of operations.
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Fixed real estate costs may intensify revenue losses when income from our properties
decreases.
  Competition may adversely affect our ability to lease our properties, which may cause our cash
flows and operating results to suffer.
  We face significant competition for acquisitions which could adversely affect our growth
strategy.
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We face various risks associated with acquisitions of properties.
  Properties that we acquire may result in unknown liability and require us to pay a significant
amount to contest or satisfy such liability, which would adversely affect our operating results.
  
    
    liabilities for clean-up or remediation of environmental contamination;
    
    claims by third parties for liabilities incurred in the ordinary course of business;
    
    claims by tenants, vendors or other persons against the former owners of the properties; and
    
    claims for indemnification by general partners, directors, officers and others
indemnified by the former owners of the properties.
 Because we must distribute a substantial portion of our net income to qualify as a REIT, we
will be dependent on third-party sources of capital to fund our future capital needs.
  We face risks associated with the use of debt to finance our business, including refinancing
risk.
  16




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
    
    our financial position;
    
    the estimated cash flow of our properties;
    
    the value of our properties;
    
    liquidity in the debt markets;
    
    the availability on commercially acceptable terms of insurance coverage required by lenders;
    
    general economic and real estate market conditions; and
    
    financial, competitive, business and other factors, including factors beyond our control.
  Restrictions in loan agreements may limit the distributions we receive from our operating
subsidiaries and the amounts available for distributions to you as dividends on our common stock.
  Our success depends on key personnel whose continued service is not guaranteed.
  Environmental problems at our properties are possible and may be costly.
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Additional regulations applicable to our properties could require us to make substantial
expenditures to ensure compliance, which could adversely affect our cash flows and operating
results.
  18




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Compliance with changing regulation of corporate governance and public disclosure may result
in additional expense.
  Compliance or failure to comply with the Americans with Disabilities Act could result in
substantial costs.
  We do not have sole control over the properties that we hold with co-venturers or partners or
over the revenues and certain decisions associated with those properties, which may limit our
flexibility with respect to these investments.
  
    
    may have economic or business interests or goals that are inconsistent with our
economic or business interests or goals;
    
    may take actions contrary to our instructions or requests, or contrary to our
policies or objectives with respect to our real estate investments (including actions
that may be inconsistent with our REIT status);
    
    may have to give its consent with respect to certain major decisions, including the
decision to distribute cash, refinance a property or sell a property;
    
    may become bankrupt, limiting its ability to meet calls for capital contributions
and potentially making it more difficult to refinance or sell the property;
    
    may become engaged in a dispute with us that might affect our ability to develop or
operate a property; and
    
    may have competing interests in our markets that could create conflict of interest
issues.
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
    
    the sale of the properties;
    
    refinancing;
    
    timing and amount of distributions of cash from such properties to us;
    
    capital improvements; and
    
    calling for capital contributions.
  Our failure to qualify as a REIT would decrease the funds available for distribution to our
stockholders and adversely affect the market price of our common stock.
  
    
    we will be subject to tax on our taxable income at regular corporate rates;
    
    we will not be able to deduct, and will not be required to make, distributions to
stockholders in any year in which we fail to qualify as a REIT;
    
    we could be subject to federal alternative minimum tax and/or increased state and
local taxes; and
    
    unless we are entitled to relief under specific statutory provisions, we will be
disqualified from taxation as a REIT for the four taxable years following the year
during which we lost our qualification.
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Risks Relating To Our Capital Stock
 P.M. Capital Inc., a corporation controlled by Peter Munk, our chairman, maintains an
ownership interest in Trizec Canada Inc. by which Mr. Munk will control the election of members of
our board of directors until January 1, 2008.
  Limitations on ownership of our capital stock by stockholders that are not qualifying U.S.
Persons may adversely affect the market price of our common stock.
  
    
    a U.S. citizen;
    
    a U.S. resident individual;
    
    an S corporation;
    
    a partnership (including, a limited liability company, or other entity, that is
classified as a partnership for U.S. federal income tax purposes) (i) that is created
or organized in or under the laws of the United States or any State or the District of
Columbia and (ii) at least 95% (by value) of the interests in which are owned by U.S.
Persons;
    
    a corporation or business trust (or other entity classified as a corporation for
United States federal income tax purposes) (i) that is created or organized in or under
the laws of the United States or any State or the District of Columbia and (ii) at
least 95% (by value) of the shares, units or other ownership interests in which are
owned by U.S. Persons;
    
    an estate if (i) its income is subject to U.S. tax regardless of source and (ii) at
least 95% of amounts distributable by it are distributable to U.S. Persons;
    
    a registered investment company (as defined in Section 851 of the Code) that is
offered for sale only in the United States;
    
    a trust if (i) a court within the United States is able to exercise primary
jurisdiction over its administration, (ii) one or more United States persons (as
defined in Section 7701(a)(30) of the Code) have the authority to control all
substantial decisions of the trust, and (iii) at least 95% of amounts distributable by
it are distributable to U.S. Persons;
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
    
    a corporation, fund, foundation or other organization organized under the laws of
the United States or any State or the District of Columbia and that is generally exempt
from tax therein and is described in Section 501(c)(3) of the Code;
    
    a legal person organized under the laws of the United States or any State or the
District of Columbia and that is generally exempt from tax therein and is established
and maintained to provide pensions or other similar benefits in connection with
employment pursuant to a plan (including, without limitation, (i) a trust described in
Section 401(a) of the Code and (ii) an eligible deferred compensation plan as defined
in Section 457 of the Code in respect of which the employer is a U.S. Person);
    
    a simplified employee pension plan described in Section 408(k) of the Code, an
individual retirement account, an account described in Section 408(p) of the Code, an
annuity plan described in Section 403 of the Code, and any similar plan permitted under
the Code in respect of individual retirement benefits or similar benefits, provided
that in each case at least 95% of all amounts payable under such plan are payable to
U.S. Persons;
    
    a group trust in which assets of persons described in paragraph (10) or (11) above
are pooled;
    
    a Keogh plan, provided that at least 95% of all amounts payable under such plan are
payable to U.S. Persons;
    
    a governmental entity consisting of any of: (a) any governing body of the United
States, or of a political subdivision or local authority of the United States; (b) a
person that is wholly owned, directly or indirectly, by the United States or a
political subdivision or local authority of the United States provided (i) it is
created or organized in or under the laws of the United States, or of any State or the
District of Columbia, (ii) its earnings are credited to its own account with no portion
of its income inuring to the benefit of any private person, and (iii) its assets vest
in the United States or a political subdivision or local authority of the United States
upon dissolution; or (c) a pension trust or fund of a person described in subparagraph
(a) or (b) that is created or organized in or under the laws of the United States or of
any State or of the District of Columbia and that is constituted and operated
exclusively to administer or provide pension benefits to individuals in respect of
services rendered to such person in the discharge of functions of a governmental
nature;
    
    a common trust fund as defined in Section 584 of the Code or separate account,
respectively, (i) established by a bank or insurance company, respectively, organized
in the United States or under the laws of the United States or any State or the
District of Columbia and (ii) at least 95% (by value) of the interests in which are
owned by U.S. Persons; or
    
    an investment club or similar entity (i) that is created or organized in or under
the laws of the United States or any State or the District of Columbia and (ii) at
least 95% (by value) of the interests in which are owned by U.S. Persons.
  Changes
in market conditions could adversely affect the market value of our securities.
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
    
    the extent of investor interest in us;
    
    the general reputation of REITs and the attractiveness of our equity securities
(including anticipated levels of distribution) in comparison to other equity
securities, including securities issued by other real estate-based companies;
    
    our underlying asset value;
    
    national economic conditions;
    
    government action or regulation, including changes in tax law;
    
    our financial performance and the perceived attractiveness of our portfolio of assets; and
    
    general stock market conditions.
  Higher market interest rates and low trading volume may adversely affect the market price of
our common stock.
  The sale or availability for sale of approximately 60 million shares of our common stock owned
indirectly by Trizec Canada Inc. or shares of our common stock that may be issued hereafter could
adversely affect the market price of our common stock.
  
    
    Trizec Canada Inc. shareholders will have the right to redeem their shares from time
to time, and Trizec Canada Inc. will have the option of satisfying these redemptions
with shares of our common stock held by the Hungarian subsidiary; and
    
    Trizec Canada Inc. may cause the Hungarian subsidiary to dispose of some or all of
the shares of our common stock held by the Hungarian subsidiary at any time for any
reason. In this regard, it should be noted that it is expected that we will qualify as
a domestically-controlled REIT in mid to late 2007, at which time the Hungarian
subsidiary could sell its shares of our common stock without incurring U.S. federal
income tax liability with respect to such stock.
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
    
    upon exercises of our stock options and warrants; and
    
    upon conversions of our Class F convertible stock (for additional information on the
conversion of our Class F convertible stock, see Risk FactorsThe issuance of
additional shares of our common stock pursuant to the terms of our Class F convertible
stock may dilute your interest in our company and adversely affect the market price of
our common stock below).
    Limits on changes of control may discourage takeover attempts that may be beneficial to
holders of our common stock.
  
    
    delay or prevent a change of control over us or a tender offer for our common stock,
even if those actions might be beneficial to holders of our common stock; and
    
    limit our stockholders opportunity to receive a potential premium for their shares
of common stock over then-prevailing market prices.
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Dividends payable on our special voting stock may decrease the amount of our dividends on
our common stock and there may be an increase in the amount of dividends on our special voting
stock as a result of anticipated changes in the U.S.-Hungary income tax treaty or as a result of
restructuring by Trizec Canada Inc.
     The issuance of additional shares of our common stock pursuant to the terms of our Class F
convertible stock may dilute your interest in our company and adversely affect the market price of
our common stock.
  
    
    the 2002 corporate reorganization; or
    
    specified future transactions or events that allow for the conversion of our Class F
convertible stock into common stock, including:
 
    
    dispositions of our common stock in connection with major corporate
transactions or events, such as mergers, requiring the approval of a specified
portion of our common stockholders or the tendering of a specified portion of our
common stock to affect those transactions or events; and
    
    transactions or events during a specified period after the end of the
five-year period ending in 2007, after which it is expected that we will qualify as
a domestically-controlled REIT.
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The reduction of the tax rate on certain dividends from non-REIT C corporations may adversely
affect us and our stockholders.
  26




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We might have to pay federal income taxes with respect to past years or we might have to pay
additional distributions to our shareholders as a result of a current Internal Revenue Service
Audit of us and certain of our subsidiaries.
  Even if we qualify as a REIT, we are required to pay some taxes, which may result in less cash
available for distribution to stockholders.
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Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   Our Properties
  Year of
    
    
    
    
    
    Owned
    
    Occupancycompletion/
    
    Total area
    
    area
    
    weighted onName (Ownership)(1)
    
    Location
    
    renovation
    
    (sq. ft.)
    
    (sq. ft.)
    
    owned area(2)Core MarketsAtlantaInterstate North Parkway
    
    Atlanta, GA
    
    
    1973/84/01
    
    
    
    955,000
    
    
    
    955,000
    
    
    
    91.3
    %Colony Square
    
    Atlanta, GA
    
    
    1970/73/95
    
    
    
    837,000
    
    
    
    837,000
    
    
    
    88.3
    %The Palisades
    
    Atlanta, GA
    
    
    1981/83/99
    
    
    
    627,000
    
    
    
    627,000
    
    
    
    90.1
    %One Alliance Center
    
    Atlanta, GA
    
    
    2001
    
    
    
    558,000
    
    
    
    558,000
    
    
    
    99.9
    %Midtown Plaza
    
    Atlanta, GA
    
    
    1984/85
    
    
    
    504,000
    
    
    
    504,000
    
    
    
    87.7
    %Total  Atlanta
    
    (5 properties)
    
    
    
    
    
    
    3,481,000
    
    
    
    3,481,000
    
    
    
    91.2
    %ChicagoTwo North LaSalle
    
    Chicago, IL
    
    
    1979/00
    
    
    
    692,000
    
    
    
    692,000
    
    
    
    96.3
    %10 South Riverside
    
    Chicago, IL
    
    
    1965/99
    
    
    
    685,000
    
    
    
    685,000
    
    
    
    93.1
    %120 South Riverside
    
    Chicago, IL
    
    
    1967/99
    
    
    
    685,000
    
    
    
    685,000
    
    
    
    81.3
    %550 West Washington
    
    Chicago, IL
    
    
    2000
    
    
    
    372,000
    
    
    
    372,000
    
    
    
    70.1
    %Total  Chicago
    
    (4 properties)
    
    
    
    
    
    
    2,434,000
    
    
    
    2,434,000
    
    
    
    87.1
    %DallasRenaissance Tower
    
    Dallas, TX
    
    
    1974/92
    
    
    
    1,739,000
    
    
    
    1,739,000
    
    
    
    86.5
    %Bank One Center (50%)
    
    Dallas, TX
    
    
    1987
    
    
    
    1,531,000
    
    
    
    765,000
    
    
    
    84.6
    %Galleria Towers I, II and III
    
    Dallas, TX
    
    
    1982/85/91
    
    
    
    1,418,000
    
    
    
    1,418,000
    
    
    
    89.6
    %Plaza of the Americas (50%)
    
    Dallas, TX
    
    
    1980
    
    
    
    1,176,000
    
    
    
    588,000
    
    
    
    68.4
    %Total  Dallas
    
    (4 properties)
    
    
    
    
    
    
    5,864,000
    
    
    
    4,510,000
    
    
    
    84.8
    %HoustonAllen Center
    
    Houston, TX
    
    
    1972/78/80/95
    
    
    
    3,184,000
    
    
    
    3,184,000
    
    
    
    88.5
    %Cullen CenterContinental Center I
    
    Houston, TX
    
    
    1984
    
    
    
    1,098,000
    
    
    
    1,098,000
    
    
    
    75.2
    %Continental Center II
    
    Houston, TX
    
    
    1971
    
    
    
    449,000
    
    
    
    449,000
    
    
    
    87.4
    %Kellogg Brown & Root Tower (50%)
    
    Houston, TX
    
    
    1978
    
    
    
    1,048,000
    
    
    
    524,000
    
    
    
    84.1
    %500 Jefferson
    
    Houston, TX
    
    
    1962/83
    
    
    
    390,000
    
    
    
    390,000
    
    
    
    73.1
    %Total  Houston
    
    (5 properties)
    
    
    
    
    
    
    6,169,000
    
    
    
    5,645,000
    
    
    
    84.3
    %
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Year of
    
    
    
    
    
    Owned
    
    Occupancycompletion/
    
    Total area
    
    area
    
    weighted onName (Ownership)(1)
    
    Location
    
    renovation
    
    (sq. ft.)
    
    (sq. ft.)
    
    owned area(2)Los Angeles AreaBank of America Plaza
    
    Los Angeles, CA
    
    
    1974
    
    
    
    1,422,000
    
    
    
    1,422,000
    
    
    
    90.8
    %Ernst & Young Plaza
    
    Los Angeles, CA
    
    
    1985
    
    
    
    1,245,000
    
    
    
    1,245,000
    
    
    
    88.7
    %Figueroa at Wilshire
    
    Los Angeles, CA
    
    
    1990
    
    
    
    1,039,000
    
    
    
    1,039,000
    
    
    
    89.4
    %Marina Towers (50%)
    
    Los Angeles, CA
    
    
    1971/76
    
    
    
    381,000
    
    
    
    191,000
    
    
    
    87.3
    %Landmark Square
    
    Long Beach, CA
    
    
    1991
    
    
    
    443,000
    
    
    
    443,000
    
    
    
    86.1
    %Total  Los Angeles Area
    
    (5 properties)
    
    
    
    
    
    
    4,530,000
    
    
    
    4,340,000
    
    
    
    89.2
    %New York AreaOne New York Plaza
    
    New York, NY
    
    
    1970/95
    
    
    
    2,458,000
    
    
    
    2,458,000
    
    
    
    95.6
    %The Grace Building (50%)
    
    New York, NY
    
    
    1971/02
    
    
    
    1,518,000
    
    
    
    758,000
    
    
    
    99.3
    %1411 Broadway (50%)
    
    New York, NY
    
    
    1970
    
    
    
    1,146,000
    
    
    
    572,000
    
    
    
    97.6
    %1065 Ave. of the Americas (99%)
    
    New York, NY
    
    
    1958
    
    
    
    665,000
    
    
    
    659,000
    
    
    
    92.6
    %1460 Broadway (50%)
    
    New York, NY
    
    
    1951/00
    
    
    
    215,000
    
    
    
    107,000
    
    
    
    100.0
    %Newport Tower
    
    Jersey City, NJ
    
    
    1990
    
    
    
    1,061,000
    
    
    
    1,061,000
    
    
    
    76.1
    %Total  New York Area
    
    (6 properties)
    
    
    
    
    
    
    7,063,000
    
    
    
    5,615,000
    
    
    
    92.3
    %Washington, D.C. Area1200 K Street, N.W.
    
    Washington, D.C.
    
    
    1992
    
    
    
    389,000
    
    
    
    389,000
    
    
    
    98.4
    %2000 L Street, N.W.
    
    Washington, D.C.
    
    
    1968/98
    
    
    
    383,000
    
    
    
    383,000
    
    
    
    98.8
    %Victor Building (50%)
    
    Washington, D.C.
    
    
    2000
    
    
    
    343,000
    
    
    
    172,000
    
    
    
    99.8
    %2001 M Street (98%)
    
    Washington, D.C.
    
    
    1987
    
    
    
    229,000
    
    
    
    224,000
    
    
    
    100.0
    %1225 Connecticut, N.W.
    
    Washington, D.C.
    
    
    1968/94
    
    
    
    217,000
    
    
    
    217,000
    
    
    
    98.0
    %1400 K Street, N.W.
    
    Washington, D.C.
    
    
    1982/02
    
    
    
    189,000
    
    
    
    189,000
    
    
    
    96.9
    %1250 Connecticut, N.W.
    
    Washington, D.C.
    
    
    1964/96
    
    
    
    172,000
    
    
    
    172,000
    
    
    
    93.9
    %1250 23rd Street, N.W.
    
    Washington, D.C.
    
    
    1990
    
    
    
    116,000
    
    
    
    116,000
    
    
    
    100.0
    %2401 Pennsylvania
    
    Washington, D.C.
    
    
    1991
    
    
    
    77,000
    
    
    
    77,000
    
    
    
    93.6
    %Washington, D.C.
    
    (9 properties)
    
    
    
    
    
    
    2,115,000
    
    
    
    1,939,000
    
    
    
    98.1
    %Bethesda Crescent
    
    Bethesda, MD
    
    
    1987
    
    
    
    269,000
    
    
    
    269,000
    
    
    
    86.2
    %Silver Spring Metro Plaza
    
    Silver Spring, MD
    
    
    1986
    
    
    
    688,000
    
    
    
    688,000
    
    
    
    97.6
    %Suburban Maryland
    
    (2 properties)
    
    
    
    
    
    
    957,000
    
    
    
    957,000
    
    
    
    94.4
    %Two Ballston Plaza
    
    Arlington, VA
    
    
    1988
    
    
    
    223,000
    
    
    
    223,000
    
    
    
    99.9
    %1550 Wilson Boulevard
    
    Arlington, VA
    
    
    1983
    
    
    
    136,000
    
    
    
    136,000
    
    
    
    84.2
    %1560 Wilson Boulevard
    
    Arlington, VA
    
    
    1987
    
    
    
    126,000
    
    
    
    126,000
    
    
    
    69.6
    %12010 Sunrise Valley Drive
    
    Reston, VA
    
    
    1980
    
    
    
    238,000
    
    
    
    238,000
    
    
    
    0.0
    %One Reston Crescent
    
    Reston, VA
    
    
    2000
    
    
    
    185,000
    
    
    
    185,000
    
    
    
    100.0
    %Sunrise Tech Park
    
    Reston, VA
    
    
    1983/85
    
    
    
    315,000
    
    
    
    315,000
    
    
    
    100.0
    %Northern Virginia
    
    (6 properties)
    
    
    
    
    
    
    1,223,000
    
    
    
    1,223,000
    
    
    
    75.6
    %Total  Washington, D.C. Area
    
    (17 properties)
    
    
    
    
    
    
    4,295,000
    
    
    
    4,119,000
    
    
    
    90.6
    %Secondary MarketsCharlotteBank of America Plaza
    
    Charlotte, NC
    
    
    1974
    
    
    
    891,000
    
    
    
    891,000
    
    
    
    99.3
    %First Citizens Plaza
    
    Charlotte, NC
    
    
    1985
    
    
    
    477,000
    
    
    
    477,000
    
    
    
    89.5
    %Total  Charlotte
    
    (2 properties)
    
    
    
    
    
    
    1,368,000
    
    
    
    1,368,000
    
    
    
    95.9
    %MinneapolisNorthstar Center
    
    Minneapolis, MN
    
    
    1916/62/86
    
    
    
    813,000
    
    
    
    813,000
    
    
    
    71.6
    %Total  Minneapolis
    
    (1 property)
    
    
    
    
    
    
    813,000
    
    
    
    813,000
    
    
    
    71.6
    %TulsaWilliams Center I & II
    
    Tulsa, OK
    
    
    1982/83
    
    
    
    770,000
    
    
    
    770,000
    
    
    
    82.8
    %Total  Tulsa
    
    (1 property)
    
    
    
    
    
    
    770,000
    
    
    
    770,000
    
    
    
    82.8
    %Total
    
    (50 properties)
    
    
    
    
    
    
    36,787,000
    
    
    
    33,095,000
    
    
    
    88.2%
    (3)
 (1)
    
    The economic interest of our owning entity is 100% unless otherwise noted.(2)
    
    Total occupancy as shown is weighted average based on owned area.(3)
    
    The occupancy for the consolidated properties was 88.2%. The occupancy for the
unconsolidated real estate joint venture properties which is based on total area was 88.3%.
 29




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##### Table of Contents



Geographic Diversity
    Office Portfolio Summary
(At December 31, 2005)
 OWNED AREAOccupancy at
    
    
    In-PlaceMarket Distribution
    
    
    December 31,
    
    
    Gross RentProperties
    
    
    Sq. Ft. (000s)
    
    
    Percentage
    
    
    2005
    
    
    ($ per Sq. Ft.)(1)Core MarketsAtlanta
    
    
    5
    
    
    
    3,481
    
    
    
    11
    %
    
    
    91.2
    %
    
    $
    22.70Chicago
    
    
    4
    
    
    
    2,434
    
    
    
    7
    %
    
    
    87.1
    %
    
    
    27.90Dallas
    
    
    4
    
    
    
    4,510
    
    
    
    14
    %
    
    
    84.8
    %
    
    
    19.30Houston
    
    
    5
    
    
    
    5,645
    
    
    
    17
    %
    
    
    84.3
    %
    
    
    20.20Los Angeles Area
    
    
    5
    
    
    
    4,340
    
    
    
    13
    %
    
    
    89.2
    %
    
    
    29.60New York Area
    
    
    6
    
    
    
    5,615
    
    
    
    17
    %
    
    
    92.3
    %
    
    
    35.00Washington D.C. Area
    
    
    17
    
    
    
    4,119
    
    
    
    12
    %
    
    
    90.6
    %
    
    
    31.00Total Core Markets
    
    
    46
    
    
    
    30,144
    
    
    
    91
    %
    
    
    88.5
    %
    
    $
    26.70Secondary MarketsCharlotte
    
    
    2
    
    
    
    1,368
    
    
    
    4
    %
    
    
    95.9
    %
    
    $
    19.40Minneapolis
    
    
    1
    
    
    
    813
    
    
    
    3
    %
    
    
    71.6
    %
    
    
    11.90Tulsa
    
    
    1
    
    
    
    770
    
    
    
    2
    %
    
    
    82.8
    %
    
    
    13.60Total Secondary Markets
    
    
    4
    
    
    
    2,951
    
    
    
    9
    %
    
    
    85.8
    %
    
    $
    16.40Total Office Properties
    
    
    50
    
    
    
    33,095
    
    
    
    100
    %
    
    
    88.2
    %
    
    $
    25.80
 TOTAL AREAOccupancy at
    
    
    In-PlaceMarket Distribution
    
    
    December 31,
    
    
    Gross RentProperties
    
    
    Sq. Ft. (000s)
    
    
    Percentage
    
    
    2005
    
    
    ($ per Sq. Ft.)(1)Consolidated Properties
    
    
    42
    
    
    
    29,429
    
    
    
    80
    %
    
    
    88.2
    %
    
    $
    25.10Unconsolidated Real Estate Joint Venture
Properties
    
    
    8
    
    
    
    7,358
    
    
    
    20
    %
    
    
    88.3
    %
    
    
    32.10Total Office Properties
    
    
    50
    
    
    
    36,787
    
    
    
    100
    %
    
    
    88.2
    %
    
    $
    26.50
 
 (1)
    
    Based on owned area that is occupied. Represents average current
in-place base rents, including expense reimbursements. Excludes straight-line rent.
 30




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##### Table of Contents



Lease Profile
  Scheduled Annual Expirations of Office Leases (1)  (At December 31, 2005)
 2006 Expirations
    
    
    2007 Expirations
    
    
    2008 Expirations000s
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    000s
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    000ssq. ft.
    
    %
    
    $ psf
    
    %
    
    
    sq. ft.
    
    %
    
    $ psf
    
    %
    
    
    sq. ft.
    
    %
    
    $ psf
    
    %Core MarketsAtlanta
    
    
    414
    
    
    
    11.9
    %
    
    $
    23.20
    
    
    
    13.3
    %
    
    
    
    534
    
    
    
    15.3
    %
    
    $
    22.32
    
    
    
    16.5
    %
    
    
    
    345
    
    
    
    9.9
    %
    
    $
    23.22
    
    
    
    11.1
    %Chicago
    
    
    368
    
    
    
    15.1
    %
    
    
    25.86
    
    
    
    16.1
    %
    
    
    
    62
    
    
    
    2.5
    %
    
    
    29.86
    
    
    
    3.1
    %
    
    
    
    41
    
    
    
    1.7
    %
    
    
    32.03
    
    
    
    2.2
    %Dallas
    
    
    286
    
    
    
    6.3
    %
    
    
    20.41
    
    
    
    7.9
    %
    
    
    
    667
    
    
    
    14.8
    %
    
    
    18.01
    
    
    
    16.3
    %
    
    
    
    361
    
    
    
    8.0
    %
    
    
    20.15
    
    
    
    9.9
    %Houston
    
    
    314
    
    
    
    5.6
    %
    
    
    20.51
    
    
    
    6.7
    %
    
    
    
    580
    
    
    
    10.3
    %
    
    
    19.81
    
    
    
    12.0
    %
    
    
    
    579
    
    
    
    10.3
    %
    
    
    23.38
    
    
    
    14.1
    %Los Angeles Area
    
    
    654
    
    
    
    15.1
    %
    
    
    34.37
    
    
    
    19.6
    %
    
    
    
    187
    
    
    
    4.3
    %
    
    
    26.53
    
    
    
    4.3
    %
    
    
    
    354
    
    
    
    8.2
    %
    
    
    30.22
    
    
    
    9.3
    %New York Area
    
    
    281
    
    
    
    5.0
    %
    
    
    39.27
    
    
    
    6.1
    %
    
    
    
    237
    
    
    
    4.2
    %
    
    
    36.61
    
    
    
    4.8
    %
    
    
    
    239
    
    
    
    4.3
    %
    
    
    39.82
    
    
    
    5.2
    %Washington, D.C. Area
    
    
    332
    
    
    
    8.1
    %
    
    
    31.95
    
    
    
    9.2
    %
    
    
    
    583
    
    
    
    14.2
    %
    
    
    35.59
    
    
    
    17.9
    %
    
    
    
    444
    
    
    
    10.8
    %
    
    
    33.31
    
    
    
    12.8
    %Total Core Markets
    
    
    2,649
    
    
    
    8.8
    %
    
    $
    28.51
    
    
    
    10.6
    %
    
    
    
    2,850
    
    
    
    9.5
    %
    
    $
    25.14
    
    
    
    10.1
    %
    
    
    
    2,363
    
    
    
    7.8
    %
    
    $
    27.57
    
    
    
    9.1
    %Secondary Markets
    
    
    889
    
    
    
    30.1
    %
    
    
    17.30
    
    
    
    37.0
    %
    
    
    
    271
    
    
    
    9.2
    %
    
    
    17.52
    
    
    
    11.4
    %
    
    
    
    309
    
    
    
    10.5
    %
    
    
    16.51
    
    
    
    12.3
    %Total  Owned Area
    
    
    3,538
    
    
    
    10.7
    %
    
    $
    25.69
    
    
    
    12.1
    %
    
    
    
    3,121
    
    
    
    9.4
    %
    
    $
    24.48
    
    
    
    10.1
    %
    
    
    
    2,672
    
    
    
    8.1
    %
    
    $
    26.29
    
    
    
    9.3
    %Consolidated Properties
    
    
    3,212
    
    
    
    10.9
    %
    
    $
    25.25
    
    
    
    12.4
    %
    
    
    
    2,846
    
    
    
    9.7
    %
    
    $
    24.40
    
    
    
    10.7
    %
    
    
    
    2,473
    
    
    
    8.4
    %
    
    $
    25.53
    
    
    
    9.7
    %Unconsolidated JV Properties
    
    
    659
    
    
    
    9.0
    %
    
    $
    30.11
    
    
    
    9.5
    %
    
    
    
    558
    
    
    
    7.6
    %
    
    $
    25.47
    
    
    
    6.8
    %
    
    
    
    404
    
    
    
    5.5
    %
    
    
    35.82
    
    
    
    6.9
    %Total Area
    
    
    3,871
    
    
    
    10.5
    %
    
    $
    26.08
    
    
    
    11.7
    %
    
    
    
    3,404
    
    
    
    9.3
    %
    
    $
    24.57
    
    
    
    9.7
    %
    
    
    
    2,877
    
    
    
    7.8
    %
    
    $
    26.97
    
    
    
    9.0
    %
 2009 Expirations
    
    
    2010 Expirations000s
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    000ssq. ft.
    
    %
    
    $psf
    
    %
    
    
    sq. ft.
    
    %
    
    $psf
    
    %Core MarketsAtlanta
    
    
    374
    
    
    
    10.7
    %
    
    $
    21.89
    
    
    
    11.4
    %
    
    
    
    314
    
    
    
    9.0
    %
    
    $
    23.10
    
    
    
    10.1
    %Chicago
    
    
    27
    
    
    
    1.1
    %
    
    
    25.18
    
    
    
    1.1
    %
    
    
    
    155
    
    
    
    6.4
    %
    
    
    32.64
    
    
    
    8.6
    %Dallas
    
    
    301
    
    
    
    6.7
    %
    
    
    21.67
    
    
    
    8.8
    %
    
    
    
    497
    
    
    
    11.0
    %
    
    
    23.11
    
    
    
    15.6
    %Houston
    
    
    221
    
    
    
    3.9
    %
    
    
    21.94
    
    
    
    5.0
    %
    
    
    
    967
    
    
    
    17.1
    %
    
    
    19.41
    
    
    
    19.5
    %Los Angeles Area
    
    
    112
    
    
    
    2.6
    %
    
    
    30.45
    
    
    
    3.0
    %
    
    
    
    431
    
    
    
    9.9
    %
    
    
    31.34
    
    
    
    11.8
    %New York Area
    
    
    760
    
    
    
    13.5
    %
    
    
    31.70
    
    
    
    13.3
    %
    
    
    
    395
    
    
    
    7.0
    %
    
    
    36.50
    
    
    
    7.9
    %Washington, D.C. Area
    
    
    497
    
    
    
    12.1
    %
    
    
    31.41
    
    
    
    13.5
    %
    
    
    
    243
    
    
    
    5.9
    %
    
    
    33.37
    
    
    
    7.0
    %Total Core Markets
    
    
    2,292
    
    
    
    7.6
    %
    
    $
    27.64
    
    
    
    8.9
    %
    
    
    
    3,002
    
    
    
    10.0
    %
    
    $
    26.18
    
    
    
    11.0
    %Secondary Markets
    
    
    172
    
    
    
    5.8
    %
    
    
    16.28
    
    
    
    6.7
    %
    
    
    
    158
    
    
    
    5.4
    %
    
    
    14.44
    
    
    
    5.5
    %Total  Owned Area
    
    
    2,464
    
    
    
    7.4
    %
    
    $
    26.85
    
    
    
    8.8
    %
    
    
    
    3,160
    
    
    
    9.5
    %
    
    $
    25.60
    
    
    
    10.7
    %Consolidated Properties
    
    
    2,292
    
    
    
    7.8
    %
    
    $
    26.43
    
    
    
    9.3
    %
    
    
    
    2,761
    
    
    
    9.4
    %
    
    $
    24.41
    
    
    
    10.3
    %Unconsolidated JV
Properties
    
    
    346
    
    
    
    4.7
    %
    
    $
    32.61
    
    
    
    5.4
    %
    
    
    
    806
    
    
    
    11.0
    %
    
    $
    33.91
    
    
    
    13.1
    %Total Area
    
    
    2,638
    
    
    
    7.2
    %
    
    $
    27.24
    
    
    
    8.4
    %
    
    
    
    3,567
    
    
    
    9.7
    %
    
    $
    26.56
    
    
    
    11.0
    %
 
 (1)
    
    Expiring rental rates per square foot represent base rents at time of
expiry plus current expense reimbursements and exclude straight-line rent.
   31




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##### Table of Contents



Tenant Diversity
  Industry
    
    % Owned AreaBanking/Securities Brokers
    
    
    20
    %Legal Services
    
    
    13
    %Oil and Gas
    
    
    7
    %Computers/Communications
    
    
    6
    %Miscellaneous Business Services
    
    
    6
    %Wholesale/Retailers
    
    
    5
    %Insurance/Non-Bank Financial
    
    
    5
    %Government
    
    
    4
    %Accounting
    
    
    4
    %Engineering and Architectural
    
    
    4
    %
   % RentalTop Ten Tenants by Rental Revenue
    
    Revenue(1)
    
    % Owned AreaWachovia Securities Financial Holdings
    
    
    5.9
    %
    
    
    4.3
    %GSA
    
    
    3.5
    %
    
    
    2.5
    %The Goldman Sachs Group
    
    
    2.6
    %
    
    
    1.7
    %Bank of America
    
    
    2.1
    %
    
    
    2.4
    %Continental Airlines
    
    
    2.0
    %
    
    
    2.2
    %Fried, Frank, Harris
    
    
    1.8
    %
    
    
    1.1
    %Ernst & Young
    
    
    1.8
    %
    
    
    1.1
    %Devon Energy Corporation
    
    
    1.7
    %
    
    
    1.6
    %The Capital Group Corporation
    
    
    1.3
    %
    
    
    1.0
    %Bank of the West
    
    
    1.2
    %
    
    
    0.7
    %Total Top Ten Tenants
    
    
    23.9
    %
    
    
    18.6
    %
 
 (1)
    
    Represents current in-place base rents, including expense
reimbursements, and excluding straight-line rent.
 32




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##### Table of Contents



Our Top Office Properties
  Top Ten Properties by
    
    
    
    % RentalRental Revenue Contribution
    
    
    
    Revenue(1)
    
    % Owned AreaOne New York Plaza
    
    New York, NY
    
    9.6%
    
    7.4%Allen Center
    
    Houston, TX
    
    8.7%
    
    9.6%Bank of America Plaza
    
    Los Angeles, CA
    
    5.4%
    
    4.3%Figueroa at Wilshire(2)
    
    Los Angeles, CA
    
    4.4%
    
    3.1%The Grace Building (50%)
    
    New York, NY
    
    4.3%
    
    2.3%Ernst & Young Plaza
    
    Los Angeles, CA
    
    3.7%
    
    3.8%Galleria Towers
    
    Dallas, TX
    
    3.6%
    
    4.3%Renaissance Tower
    
    Dallas, TX
    
    3.5%
    
    5.3%Newport Tower
    
    Jersey City, NJ
    
    3.1%
    
    3.2%1411 Broadway (50%)
    
    New York, NY
    
    3.0%
    
    1.7%Total Top Ten Properties
    
    
    
    49.3%
    
    45.0%
 
 (1)   (2)
 Unsecured Credit Facility
    33




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##### Table of Contents



TrizecHahn Office Properties Trust Commercial Mortgage Pass-Through Certificates
  One New York Plaza Trust Commercial Mortgage Pass-Through Certificates
   Mortgage Debt and Other Loans
  34




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##### Table of Contents



Maturity
    
    Current
    
    Principal
    
    Term toProperty/(Ownership)
    
    F/V(1)
    
    Date
    
    Rate
    
    Balance
    
    Maturity(At December 31, 2005)
    
    
    
    
    
    
    
    
    
    
    
    
    
    ($ in 000s)
    
    (Years)CMBS TransactionClass A-2
    
    
    F
    
    
    May-11
    
    
    6.09
    %
    
    $
    48,245
    
    
    
    5.4Class A-3 FL
    
    
    V
    
    
    Mar-08
    
    
    4.75
    %
    
    
    75,821
    
    
    
    2.2Class A-3
    
    
    F
    
    
    Mar-08
    
    
    6.21
    %
    
    
    78,900
    
    
    
    2.2Class A-4
    
    
    F
    
    
    May-11
    
    
    6.53
    %
    
    
    240,600
    
    
    
    5.4Class B-3 FL
    
    
    V
    
    
    Mar-08
    
    
    4.90
    %
    
    
    13,934
    
    
    
    2.2Class B-3
    
    
    F
    
    
    Mar-08
    
    
    6.36
    %
    
    
    14,500
    
    
    
    2.2Class B-4
    
    
    F
    
    
    May-11
    
    
    6.72
    %
    
    
    47,000
    
    
    
    5.4Class C-3
    
    
    F
    
    
    Mar-08
    
    
    6.52
    %
    
    
    101,400
    
    
    
    2.2Class C-4
    
    
    F
    
    
    May-11
    
    
    6.89
    %
    
    
    45,600
    
    
    
    5.4Class D-3
    
    
    F
    
    
    Mar-08
    
    
    6.94
    %
    
    
    106,100
    
    
    
    2.2Class D-4
    
    
    F
    
    
    May-11
    
    
    7.28
    %
    
    
    40,700
    
    
    
    5.4Class E-3
    
    
    F
    
    
    Mar-08
    
    
    7.25
    %
    
    
    73,300
    
    
    
    2.2Class E-4
    
    
    F
    
    
    May-11
    
    
    7.60
    %
    
    
    32,300
    
    
    
    5.4Pre-swap:
    
    
    
    
    
    
    
    
    
    
    6.51
    %
    
    $
    918,400
    
    
    
    3.8Post-swap: (2)
    
    
    
    
    
    
    
    
    
    
    6.63
    %
    
    $
    918,400
    
    
    
    3.8Renaissance Tower
    
    
    F
    
    
    Jan-10
    
    
    4.98
    %
    
    $
    92,000
    
    
    
    4.0Ernst & Young Plaza
    
    
    F
    
    
    Feb-14
    
    
    5.07
    %
    
    
    116,742
    
    
    
    8.1One New York Plaza
    
    
    F
    
    
    May-06
    
    
    7.27
    %
    
    
    228,696
    
    
    
    0.32000 L Street, N.W.
    
    
    F
    
    
    Aug-07
    
    
    6.26
    %
    
    
    56,100
    
    
    
    1.61400 K Street, N.W.
    
    
    F
    
    
    May-06
    
    
    7.20
    %
    
    
    20,816
    
    
    
    0.32001 M Street (98%)(3)
    
    
    F
    
    
    Dec-14
    
    
    5.25
    %
    
    
    44,500
    
    
    
    9.0Bethesda Crescent
    
    
    F
    
    
    Jan-08
    
    
    7.10
    %
    
    
    31,826
    
    
    
    2.0Bethesda Crescent
    
    
    F
    
    
    Jan-08
    
    
    6.70
    %
    
    
    2,637
    
    
    
    2.0Two Ballston Plaza
    
    
    F
    
    
    Jun-08
    
    
    6.91
    %
    
    
    26,020
    
    
    
    2.4Bank of America Plaza (Los Angeles)
    
    
    F
    
    
    Sep-14
    
    
    5.31
    %
    
    
    242,000
    
    
    
    8.7One Alliance Center
    
    
    F
    
    
    Jul-13
    
    
    4.78
    %
    
    
    67,358
    
    
    
    7.5Unsecured Credit Facility
    
    
    V
    (4)
    
    Oct-08
    
    
    5.59
    %
    
    
    347,000
    
    
    
    2.8Other  Fixed
    
    
    F
    
    
    May-11
    
    
    6.57
    %
    
    
    16,178
    
    
    
    5.4Total Consolidated Debt
    
    
    
    
    
    
    
    
    
    
    6.16
    %
    
    $
    2,210,273
    
    
    
    4.1Bank One Center (50%) (5)
    
    
    V
    
    
    Dec-06
    
    
    4.52
    %
    
    $
    53,444
    
    
    
    0.9The Grace Building (50%)
    
    
    F
    
    
    Jul-14
    
    
    5.54
    %
    
    
    190,119
    
    
    
    8.51411 Broadway (50%)
    
    
    F
    
    
    Jul-14
    
    
    5.50
    %
    
    
    109,281
    
    
    
    8.51460 Broadway (50%)
    
    
    F
    
    
    Nov-12
    
    
    5.11
    %
    
    
    12,446
    
    
    
    6.8Waterview (25%)
    
    
    V
    
    
    Aug-09
    
    
    5.99
    %
    
    
    14,420
    
    
    
    3.7Plaza of the Americas (50%)
    
    
    F
    
    
    Jul-11
    
    
    5.12
    %
    
    
    34,000
    
    
    
    5.5Unconsolidated Real Estate Joint Venture Mortgage Debt
    
    
    5.37
    %
    
    $
    413,710
    
    
    
    7.1
 
 (1)
    
    F refers to fixed rate debt, V refers to variable rate debt. References
to V represent the underlying loan, some of which have been fixed through hedging
instruments.(2)
    
    Approximately $89.8 million of the seven-year floating rate tranche
of the CMBS loan has been swapped from one-month LIBOR plus various spreads to
a 5.98% fixed rate.(3)
    
    Consolidated entity.(4)
    
    Reflects notional allocation of approximately $60.2 million of the
floating rate unsecured credit facility debt that has been swapped from
one-month LIBOR plus spread to a 6.57% fixed rate.(5)
    
    Approximately $53.4 million of the floating rate debt has been capped
at a 4.52% fixed rate.
 35




---



##### Table of Contents



Item 3.
    
    Legal Proceedings
  
 Item 4.
    
    Submission of Matters to a Vote of Security Holders.
  
 PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 Market for Our Common Stock
  DividendsQuarterly Period Ended
    
    High
    
    Low
    
    Declared2005December 31
    
    $
    23.14
    
    
    $
    20.45
    
    
    $
    0.2000September 30
    
    
    23.73
    
    
    
    20.40
    
    
    
    0.2000June 30
    
    
    20.61
    
    
    
    18.65
    
    
    
    0.2000March 31
    
    
    19.85
    
    
    
    17.26
    
    
    
    0.20002004December 31
    
    $
    19.05
    
    
    $
    15.75
    
    
    $
    0.2000September 30
    
    
    17.55
    
    
    
    15.80
    
    
    
    0.2000June 30
    
    
    17.38
    
    
    
    13.50
    
    
    
    0.2000March 31
    
    
    17.15
    
    
    
    14.98
    
    
    
    0.2000
 Dividend Policy
   36




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##### Table of Contents



Use of Proceeds
      
 Item 6.
    
    Selected Financial Data
   37




---



##### Table of Contents



For the years ended December 312005
    
    2004
    
    2003
    
    2002
    

(Restated)
2001($ in millions)Operating Data:RevenuesRentals and recoveries from tenants
    
    $
    611.0
    
    
    $
    548.3
    
    
    $
    548.1
    
    
    $
    553.2
    
    
    $
    531.3Total Revenues
    
    
    722.0
    
    
    
    647.4
    
    
    
    646.4
    
    
    
    651.9
    
    
    
    646.1ExpensesOperating expenses and property taxes
    
    
    337.4
    
    
    
    289.5
    
    
    
    307.0
    
    
    
    297.1
    
    
    
    274.4General and administrative
    
    
    38.7
    
    
    
    39.8
    
    
    
    40.4
    
    
    
    50.1
    
    
    
    25.9Depreciation and amortization
    
    
    170.7
    
    
    
    132.6
    
    
    
    122.9
    
    
    
    117.4
    
    
    
    106.1Reorganization (recovery) costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3.3
    )
    
    
    15.9Provision for loss on real estate
    
    
    
    
    
    
    12.7
    
    
    
    
    
    
    
    
    
    
    
    70.3Loss on and provision for loss on investment
    
    
    
    
    
    
    14.6
    
    
    
    15.5
    
    
    
    60.8
    
    
    
    15.4Total Expenses
    
    
    546.8
    
    
    
    489.2
    
    
    
    485.8
    
    
    
    522.1
    
    
    
    508.0Operating Income
    
    
    175.2
    
    
    
    158.2
    
    
    
    160.6
    
    
    
    129.8
    
    
    
    138.1Other Income (Expense)Interest and other income
    
    
    6.6
    
    
    
    5.3
    
    
    
    7.3
    
    
    
    6.0
    
    
    
    13.9Foreign currency exchange gain
    
    
    
    
    
    
    3.3
    
    
    
    
    
    
    
    
    
    
    
    (Loss) Gain on early debt retirement
    
    
    (6.8
    )
    
    
    (7.0
    )
    
    
    2.3
    
    
    
    
    
    
    
    (16.9
    )Recovery on insurance claims
    
    
    0.1
    
    
    
    0.7
    
    
    
    6.7
    
    
    
    3.8
    
    
    
    Interest expense
    
    
    (138.6
    )
    
    
    (137.4
    )
    
    
    (141.3
    )
    
    
    (141.0
    )
    
    
    (106.5
    )Derivative gain
    
    
    
    
    
    
    1.1
    
    
    
    
    
    
    
    
    
    
    
    Lawsuit and other settlements
    
    
    3.3
    
    
    
    3.7
    
    
    
    26.7
    
    
    
    
    
    
    
    Total Other Expense
    
    
    (135.4
    )
    
    
    (130.3
    )
    
    
    (98.3
    )
    
    
    (131.2
    )
    
    
    (109.5
    )Income (Loss) before Income Taxes, Minority
Interest, Income (Loss) from Unconsolidated
Real Estate Joint Ventures, Discontinued
Operations, Gain (Loss) on Disposition of
Real Estate, Net, and Cumulative Effect of a
Change in Accounting Principle
    
    
    39.8
    
    
    
    27.9
    
    
    
    62.3
    
    
    
    (1.4
    )
    
    
    28.6Benefit (Provision) for income and other
corporate taxes, net
    
    
    3.8
    
    
    
    (4.4
    )
    
    
    41.8
    
    
    
    (4.9
    )
    
    
    (13.0
    )Minority interest
    
    
    (1.1
    )
    
    
    (1.8
    )
    
    
    (1.6
    )
    
    
    1.8
    
    
    
    0.4Income (Loss) from unconsolidated real estate
joint ventures
    
    
    15.0
    
    
    
    15.2
    
    
    
    23.3
    
    
    
    (47.6
    )
    
    
    (39.8
    )Income (Loss) from Continuing Operations
    
    
    57.5
    
    
    
    36.9
    
    
    
    125.8
    
    
    
    (52.1
    )
    
    
    (23.8
    )Income (Loss) from discontinued operations
    
    
    19.6
    
    
    
    (68.5
    )
    
    
    11.7
    
    
    
    (153.5
    )
    
    
    (127.8
    )Gain on disposition of discontinued real
estate, net
    
    
    133.1
    
    
    
    125.5
    
    
    
    58.8
    
    
    
    14.7
    
    
    
    Income (Loss) before Gain (Loss) on
Disposition of Real Estate, Net, and
Cumulative Effect of a Change in Accounting
Principle
    
    
    210.2
    
    
    
    93.9
    
    
    
    196.3
    
    
    
    (190.9
    )
    
    
    (151.6
    )Gain (Loss) on disposition of real estate, net
    
    
    0.1
    
    
    
    7.4
    
    
    
    11.3
    
    
    
    3.0
    
    
    
    (2.1
    )Cumulative effect of a change in accounting
principle
    
    
    (4.9
    )
    
    
    
    
    
    
    (3.8
    )
    
    
    
    
    
    
    (4.6
    )Net Income (Loss)
    
    
    205.4
    
    
    
    101.3
    
    
    
    203.8
    
    
    
    (187.9
    )
    
    
    (158.3
    )Special voting and Class F convertible
stockholders dividends
    
    
    (4.4
    )
    
    
    (4.8
    )
    
    
    (5.2
    )
    
    
    (0.9
    )
    
    
    Net Income (Loss) Available to Common
Stockholders
    
    $
    201.0
    
    
    $
    96.5
    
    
    $
    198.6
    
    
    $
    (188.8
    )
    
    $
    (158.3
    )
 38




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##### Table of Contents



For the years ended December 312005
    
    2004
    
    2003
    
    2002
    

(Restated)
2001Pro forma(1)Income (Loss) from Continuing
Operations Available to Common
Stockholders per Weighted Average
Common Share OutstandingBasic
    
    $
    0.34
    
    
    $
    0.26
    
    
    $
    0.88
    
    
    $
    (0.33
    )
    
    $
    (0.17
    )Diluted
    
    $
    0.34
    
    
    $
    0.26
    
    
    $
    0.88
    
    
    $
    (0.33
    )
    
    $
    (0.17
    )Net Income (Loss) Available to
Common Stockholders per Weighted
Average Common Share OutstandingBasic
    
    $
    1.30
    
    
    $
    0.64
    
    
    $
    1.32
    
    
    $
    (1.26
    )
    
    $
    (1.06
    )Diluted
    
    $
    1.27
    
    
    $
    0.63
    
    
    $
    1.32
    
    
    $
    (1.26
    )
    
    $
    (1.06
    )Weighted average shares outstandingBasic
    
    
    154,847,663
    
    
    
    151,596,514
    
    
    
    150,005,663
    
    
    
    149,477,187
    
    
    
    149,849,246Diluted
    
    
    157,877,915
    
    
    
    153,109,854
    
    
    
    150,453,281
    
    
    
    149,477,187
    
    
    
    149,849,246
 For the years ended December 312005
    

(Restated)
2004
    
    (Restated)2003
    
    (Restated)2002
    
    (Restated)2001($ in millions)Balance Sheet Data (at end of period):Real estate, net of accumulated depreciation
    
    $
    3,897.4
    
    
    $
    3,716.2
    
    
    $
    4,262.7
    
    
    $
    4,781.2
    
    
    $
    4,929.5Cash and cash equivalents
    
    
    36.5
    
    
    
    194.3
    
    
    
    129.3
    
    
    
    62.3
    
    
    
    297.4Investment in unconsolidated real estate joint
ventures
    
    
    206.6
    
    
    
    113.8
    
    
    
    225.4
    
    
    
    214.8
    
    
    
    283.4Total assets
    
    
    4,710.3
    
    
    
    4,519.6
    
    
    
    5,120.9
    
    
    
    5,540.6
    
    
    
    6,059.7Total debt
    
    
    2,210.3
    
    
    
    2,219.3
    
    
    
    2,867.0
    
    
    
    3,345.2
    
    
    
    3,017.8Total liabilities
    
    
    2,593.0
    
    
    
    2,565.8
    
    
    
    3,161.0
    
    
    
    3,667.9
    
    
    
    3,629.9Stockholders equity
    
    
    2,117.1
    
    
    
    1,953.6
    
    
    
    1,959.7
    
    
    
    1,872.5
    
    
    
    2,429.6Special voting and Class F convertible stock
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2
    
    
    
    0.2Cash Flow Information:Cash provided by operating activities
    
    $
    193.9
    
    
    $
    288.7
    
    
    $
    249.7
    
    
    $
    213.1
    
    
    $
    462.9Cash (used in) provided by investing activities
    
    $
    (304.9
    )
    
    $
    536.1
    
    
    $
    412.1
    
    
    $
    (17.4
    )
    
    $
    (597.0
    )Cash (used in) provided by financing activities
    
    $
    (46.8
    )
    
    $
    (759.8
    )
    
    $
    (594.7
    )
    
    $
    (430.9
    )
    
    $
    361.3Other Data:Number of office properties
    
    
    50
    
    
    
    52
    
    
    
    64
    
    
    
    72
    
    
    
    76Net rentable square feet of office properties
(in millions)
    
    
    36.8
    
    
    
    37.3
    
    
    
    42.5
    
    
    
    48.6
    
    
    
    48.9Occupancy of office properties weighted on
owned area
    
    
    88.2
    %
    
    
    89.5
    %
    
    
    86.6
    %
    
    
    89.0
    %
    
    
    94.3
    %Dividends per share (3)
    
    $
    0.80
    
    
    $
    0.80
    
    
    $
    0.80
    
    
    $
    0.26
    
    
    $
    Funds from operations (2) (4)
    
    $
    266.7
    
    
    $
    141.8
    
    
    $
    334.4
    
    
    $
    (16.1
    )
    
    $
    29.0
 39




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##### Table of Contents



(1) Prior to the corporate reorganization, Trizec Properties was an indirect
wholly-owned subsidiary of TrizecHahn. Accordingly, share and per share information for
periods prior to the corporate reorganization have been presented based on the number of
shares and the dilutive impact of options and warrants outstanding on May 8, 2002, the date
our common stock commenced regular trading. This share and per share information is referred
to as pro forma.(2) Funds from operations is a non-GAAP financial measure. Funds from operations is
defined by the Board of Governors of the National Association of Real Estate Investment
Trusts, or NAREIT, as net income, computed in accordance with accounting principles generally
accepted in the United States, or GAAP, excluding gains or losses from sales of properties and
cumulative effect of a change in accounting principle, plus real estate related depreciation
and amortization, and after adjustments for unconsolidated partnerships and joint ventures.
Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds
from operations on the same basis. Effective as of the fourth quarter of 2003, we adopted the
NAREIT calculation of funds from operations. Prior to our adoption of the NAREIT methodology
for calculating funds from operations, we historically excluded certain items in calculating
funds from operations, such as gain on lawsuit settlement, gain on early debt retirement,
minority interest, recovery on insurance claims, effects of provision for loss on real estate
and loss on and provision for loss on investments, net of the tax benefit, that are required
to be factored into the calculation of funds from operations under the NAREIT methodology.
The historical calculations of funds from operations have been revised in accordance with the
NAREIT calculation.We believe that funds from operations is helpful to investors as one of several measures of the
performance of an equity REIT. We further believe that by excluding the effect of
depreciation, amortization and gains or losses from sales of real estate, all of which are
based on historical costs and which may be of limited relevance in evaluating current
performance, funds from operations can facilitate comparisons of operating performance between
periods and between other equity REITS. Investors should review funds from operations, along
with GAAP net income and cash flows from operating activities, investing activities and
financing activities, when trying to understand an equity REITs operating performance. As
discussed above, we compute funds from operations in accordance with current standards
established by NAREIT, which may not be comparable to funds from operations reported by other
REITs that do not define the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently than we do. While funds from operations is
a relevant and widely used measure of operating performance of equity REITs, it does not
represent cash generated from operating activities in accordance with GAAP, nor does it
represent cash available to pay distributions and should not be considered as an alternative to
net income, determined in accordance with GAAP, as an indication of our financial performance,
or to cash flows from operating activities, determined in accordance with GAAP, as a measure of
our liquidity, nor is it indicative of funds available to fund our cash needs, including our
ability to make cash distributions.(3) During the years ended December 31, 2005, 2004 and 2003, we declared and paid four
quarterly dividends of $0.20 per common share. In 2002, subsequent to the corporate
reorganization, we declared and paid three quarterly dividends of $0.0875 per common share.
Information regarding periods prior to the corporate reorganization has not been provided as
the dividends were paid to our parent company.(4) The following table sets forth the reconciliation of funds from operations to net
income (loss) available to common stockholders: For the years ended December 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    (Restated)2001(dollars in thousands)Net income (loss) available to common
stockholders
    
    $
    201,012
    
    
    $
    96,489
    
    
    $
    198,527
    
    
    $
    (188,783
    )
    
    $
    (158,293
    )Add/(deduct):(Gain) loss on disposition of real estate, net
    
    
    (145
    )
    
    
    (7,358
    )
    
    
    (11,351
    )
    
    
    (2,996
    )
    
    
    2,053Gain on disposition of discontinued real
estate, net
    
    
    (133,075
    )
    
    
    (125,508
    )
    
    
    (58,834
    )
    
    
    (14,716
    )
    
    
    Gain on disposition of real estate from
unconsolidated real estate joint ventures
    
    
    
    
    
    
    (704
    )
    
    
    (230
    )
    
    
    
    
    
    
    Depreciation and amortization (real estate
related) including share of unconsolidated
real estate joint ventures and discontinued
operations
    
    
    194,024
    
    
    
    178,847
    
    
    
    202,490
    
    
    
    190,397
    
    
    
    180,652Cumulative effect of a change in accounting
principle, net of minority interest
    
    
    4,871
    
    
    
    
    
    
    
    3,845
    
    
    
    
    
    
    
    4,631Funds from operations available to common
stockholders
    
    $
    266,687
    
    
    $
    141,766
    
    
    $
    334,447
    
    
    $
    (16,098
    )
    
    $
    29,043
 40




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##### Table of Contents



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 In Item 7, the terms we, us, our and our company refer to Trizec Properties, Inc. as
of and for the years ended December 31, 2005, 2004 and 2003.
 The following discussion should be read in conjunction with Forward-Looking Statements and
the consolidated financial statements and the notes thereto that appear elsewhere in this Form
10-K. The following discussion may contain forward-looking statements within the meaning of the
securities laws. Actual results could differ materially from those projected in such statements as
a result of certain factors set forth in this Form 10-K for the year ended December 31, 2005.
 Executive Summary
       41




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##### Table of Contents



Trends in Occupancy
  OWNED AREA
  OCCUPANCY RATES AT
    
    Percentage of spaceDecember 31, 2005
    
    December 31, 2004
    
    expiring during 2006CORE MARKETSAtlanta
    
    
    91.2
    %
    
    
    89.0
    %
    
    
    11.9
    %Chicago
    
    
    87.1
    %
    
    
    94.0
    %
    
    
    15.1
    %Dallas
    
    
    84.8
    %
    
    
    85.2
    %
    
    
    6.3
    %Houston
    
    
    84.3
    %
    
    
    84.4
    %
    
    
    5.6
    %Los Angeles
    
    
    89.2
    %
    
    
    88.4
    %
    
    
    15.1
    %New York
    
    
    92.3
    %
    
    
    96.8
    %
    
    
    5.0
    %Washington, D.C.
    
    
    90.6
    %
    
    
    95.0
    %
    
    
    8.1
    %TOTAL CORE MARKETS
    
    
    88.5
    %
    
    
    90.2
    %
    
    
    8.8
    %Secondary Markets
    
    
    85.8
    %
    
    
    83.9
    %
    
    
    30.1
    %TOTAL OFFICE PROPERTIES
    
    
    88.2
    %
    
    
    89.5
    %
    
    
    10.7
    %
 TOTAL AREA
  OCCUPANCY RATES AT
    
    Percentage of spaceDecember 31, 2005
    
    December 31, 2004
    

expiring during 2006Consolidated Properties
    
    
    88.2
    %
    
    
    89.8
    %
    
    
    10.9
    %Unconsolidated JV
Properties
    
    
    88.3
    %
    
    
    86.9
    %
    
    
    9.0
    %TOTAL OFFICE PROPERTIES
    
    
    88.2
    %
    
    
    89.3
    %
    
    
    10.5
    %
   42




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##### Table of Contents



Acquisition and Disposition Activities
   Office
    
    RetailPro rata
    
    
    
    
    
    
    
    
    
    Pro rataTotal
    
    Owned
    
    
    
    
    
    
    
    
    
    OwnedProperties as of:
    
    Properties
    
    Sq.Ft.
    
    Sq.Ft.
    
    Properties
    
    Total Sq.Ft.
    
    Sq.Ft.(in thousands)
    
    
    
    
    
    (in thousands)December 31, 2002
    
    
    73
    
    
    
    48,884
    
    
    
    42,276
    
    
    
    4
    
    
    
    2,285
    
    
    
    2,076Dispositions
    
    
    (8
    )
    
    
    (6,357
    )
    
    
    (2,472
    )
    
    
    (2
    )
    
    
    (1,010
    )
    
    
    (855
    )Acquisitions
    
    
    
    
    
    
    232
    
    
    
    24
    
    
    
    
    
    
    
    (30
    )
    
    
    (30
    )December 31, 2003
    
    
    65
    
    
    
    42,759
    
    
    
    39,828
    
    
    
    2
    
    
    
    1,245
    
    
    
    1,191Dispositions
    
    
    (15
    )
    
    
    (7,091
    )
    
    
    (7,091
    )
    
    
    (2
    )
    
    
    (1,245
    )
    
    
    (1,191
    )Acquisitions
    
    
    2
    
    
    
    1,651
    
    
    
    1,646
    
    
    
    
    
    
    
    
    
    
    
    Sale of interest to a joint venture.
    
    
    
    
    
    
    
    
    
    
    (588
    )
    
    
    
    
    
    
    
    
    
    
    Re-measurements
    
    
    
    
    
    
    (11
    )
    
    
    (11
    )
    
    
    
    
    
    
    
    
    
    
    December 31, 2004
    
    
    52
    
    
    
    37,308
    
    
    
    33,784
    
    
    
    
    
    
    
    
    
    
    
    Dispositions
    
    
    (5
    )
    
    
    (2,310
    )
    
    
    (2,310
    )
    
    
    
    
    
    
    
    
    
    
    Acquisitions
    
    
    3
    
    
    
    1,771
    
    
    
    1,600
    
    
    
    
    
    
    
    
    
    
    
    Re-measurements
    
    
    
    
    
    
    18
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    December 31, 2005
    
    
    50
    
    
    
    36,787
    
    
    
    33,095
    
    
    
    
    
    
    
    
    
    
    
    
 43




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##### Table of Contents



2005 Accomplishments
  
    
    In January 2005, we announced the appointment of Brian K. Lipson as Executive Vice
President and Chief Investment Officer.
    
    In February 2005, we announced the completion of a 15-year lease extension with
prominent international law firm Fried, Frank, Harris, Shriver & Jacobson, LLP at One
New York Plaza, located in New York, New York. Under the lease agreement, which will
extend through February 2024, the firm will expand its space from approximately 338,000
square feet to approximately 380,000 square feet.
    
    In February 2005, we announced the approval of Morgan Stanleys 450,000 square foot
sublease agreement with existing tenant, Wachovia Securities, at One New York Plaza.
The term of the sublease runs through December 2014, which is the remaining term of the
Wachovia lease.
    
    In April 2005, we sold Shoreline Square, located in Long Beach, California, which
was designated as held for sale pursuant to Statement of Financial Accounting Standards
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No.
144), for a gross sale price of approximately $87.4 million.
    
    In April 2005, we acquired 1200 K Street, N.W., located in Washington, D.C., for
approximately $194.3 million.
    
    In April 2005, we announced the commencement of construction at Waterview, a
one-million square foot mixed-use development that will include two 300-foot high
towers in Rosslyn, Virginia. The 633,000 square foot, 24-story office building has
been leased by The Corporate Executive Board for 20 years. Another 29-story tower will
feature 136 condominium residences and a 155-room hotel.
    
    In July 2005, we acquired Figueroa at Wilshire, a 1,039,000 square-foot office
property, located in the Central Business District of Los Angeles, California, for
approximately $360.0 million. To finance a substantial portion of the purchase price
of this acquisition, we borrowed approximately $302.0 million under our unsecured
credit facility.
    
    In July 2005, we sold Metropolitan Square, a 1,041,000 square-foot office property
located in St. Louis, Missouri, which was designated as held for sale pursuant to SFAS
No. 144, for a gross sale price of approximately $165.8 million.
    
    In October 2005, we and the lenders under the 2004 Unsecured Credit Facility agreed
to amend and restate the 2004 Unsecured Credit Facility (the 2005 Unsecured Credit
Facility). Among other things, the lenders agreed to convert the facility from a
$600.0 million revolver component and a $150.0 million term component to a $750.0
million revolver with no term component, reduce the interest rate on borrowings and
extend the term through October 2008.
    
    In October 2005, we repaid and retired the mortgage loan collateralized by Sunrise
Tech Park, located in Reston, Virginia. The mortgage loan had a principal balance of
approximately $22.5 million, bore interest at a fixed rate of 6.75% and was scheduled
to mature in January 2006.
    
    In October 2005, we sold Watergate Office Building, located in Washington, D.C.,
which was designated as held for sale pursuant to SFAS No. 144, for a gross sale price
of approximately $86.5 million.
    
    In October 2005, we sold Twinbrook Metro Plaza, located in Rockville, Maryland,
which was designated as held for sale pursuant to SFAS No. 144, for a gross sale price
of approximately $52.0
 44




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##### Table of Contents



million. In conjunction with the sale of Twinbrook Metro Plaza, we repaid and retired
the mortgage loan collateralized by the property. The mortgage loan had a principal
balance of approximately $16.0 million, bore interest at a fixed rate of 6.65% and was
scheduled to mature in September 2008.
    
    In October 2005, we sold Beaumeade Corporate Park, located in Ashburn, Virginia,
which was designated as held for sale pursuant to SFAS No. 144, for a gross sale price
of approximately $53.0 million.
    
    In October 2005, 1460 Leasehold TrizecHahn Swig L.L.C. and 1460 Fee TrizecHahn Swig
L.L.C. (together 1460 Swig), a joint venture through which we own a 50% interest in
1460 Broadway, located in New York, New York, refinanced the mortgage loan
collateralized by such property. 1460 Swig refinanced a $25.0 million mortgage loan,
which bore interest at a variable rate of LIBOR plus 1.5% and was scheduled to mature
in May 2006, with a $25.0 million mortgage loan bearing interest at a fixed rate of
5.11% and scheduled to mature in November 2012.
    
    In November 2005, a joint venture partnership between us and Principal Real Estate
Investors acquired the Victor Building, located at 750 9th Street, N.W.,
Washington, D.C., for approximately $159.9 million. We and Principal Real Estate
Investors each have an approximately 50% respective ownership position in the joint
venture that acquired the property.
    
    In November 2005, we were awarded the 2005 Gold Leader in the Light award from the
National Association of Real Estate Investment Trusts in collaboration with the United
States Environmental Protection Agency. This award recognized company-wide operations
that generate substantially improved energy efficiency and expense management.
    
    In December 2005, Marina Airport Building, Ltd., a joint venture through which we
own a 50% interest in Marina Towers, located in Los Angeles, California, repaid and
retired a mortgage loan with a principal balance of approximately $29.7 million that
bore interest at a fixed rate of 7.92% and was scheduled to mature in August 2007.
    
    In December 2005, we entered into a purchase agreement with General Electric Capital
Corporation (GECC), and a merger agreement with GECC, Arden Realty, Inc. (Arden)
and certain of their affiliates pursuant to which we have agreed to acquire 13 office
properties totaling approximately 4.1 million square feet and several development land
parcels located in Southern California that are currently owned by Arden (the Arden
portfolio) for an aggregate consideration of approximately $1.63 billion. We expect
to fund the acquisition with a bridge loan of up to $1.48 billion. We anticipate that
the bridge loan will have a twelve-month term, with two six-month extension options.
The balance of the acquisition price will be funded with a draw on our existing
unsecured credit facility and the issuance of up to approximately $75.0 million of
common units in Trizec Holdings Operating LLC to holders of limited partnership
interests in Ardens operating partnership. We anticipate that the outstanding balance
on the bridge loan and unsecured credit facility will be gradually repaid with proceeds
from future property dispositions and permanent mortgage financings.Our acquisition of the Arden portfolio is contingent upon the completion of GECCs
acquisition of Arden. We anticipate that the closing of the Arden portfolio acquisition
will occur by the end of the second quarter of 2006.
  
    
    In January 2006, we announced lease renewal and expansion transactions with CDW
Corporation and Arnstein & Lehr totaling approximately 346,000 square feet,
representing approximately 50% of the rentable space at 120 South Riverside Plaza in
downtown Chicago, Illinois.
 45




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##### Table of Contents




    
    In January 2006, we announced the renewal of Bank of Americas leases for more than
29 floors, totaling approximately 640,000 square feet of Class A office space, at Bank
of America Plaza in downtown Charlotte, North Carolina.
    
    In January 2006, we sold Williams Center I & II, located in Tulsa, Oklahoma, for a
gross sale price of approximately $42.5 million.
    
    In January 2006, 750 Ninth Street, L.L.C., a wholly-owned subsidiary of a joint
venture partnership between us and Principal Real Estate Investors, secured an
approximately $106.0 million mortgage loan commitment, which bears interest at a fixed
rate of 5.39% and is scheduled to mature in February 2016. Of the $106.0 million
mortgage loan commitment, $95.0 million was funded on the closing date and the balance
will be funded in accordance with the terms and conditions of the mortgage loan
agreement. The $95.0 million of loan proceeds has been distributed to the partners in
accordance with the partnership agreement.
    
    In February 2006, we repaid and retired the mortgage loan collateralized by 1400 K
Street, N.W., located in Washington, D.C. At December 31, 2005, the mortgage loan had
a principal balance of approximately $20.8 million, bore interest at a fixed rate of
7.20% and was scheduled to mature in May 2006.
    
    In March 2006, we refinanced the mortgage loan collateralized by One New York Plaza,
located in New York, New York. The mortgage loan, which, at December 31, 2005, had a
principal balance of approximately $228.7 million and bore interest at a fixed rate of
7.27%, was refinanced with a $400.0 million mortgage loan scheduled to mature in March
2016, and bearing interest at a fixed rate of approximately 5.14%, after settlement of
forward-starting swap contracts.
    
    In March 2006, we sold First Citizens, located in Charlotte, North Carolina, for a
gross sale price of approximately $77.3 million.
 Restatement
  Critical Accounting Policies
   46




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##### Table of Contents



Real Estate - Held for the Long Term
  Real Estate - Held for Disposition
  Depreciation
    1)
    
    estimate the value of the property as if vacant as of the acquisition date;2)
    
    allocate the fair value of the property among land, site improvement, building,
and equipment and determine the associated asset life for each;
 47




---



##### Table of Contents



3)
    
    estimate the fair value of the tenant improvements and calculate the associated
asset life;4)
    
    allocate the value of the above and below market leases to the intangible
assets and determine the associated life of the above/below market leases;5)
    
    allocate the value of the lease origination costs to the intangible assets and
calculate the associated asset life;6)
    
    calculate the intangible value to the in-place leases and the associated asset
life for each;7)
    
    calculate the value and associated life of the tenant relationships, if any;
and8)
    
    allocate the remaining value (if any) to goodwill and allocate to the purchase
price.
 Investments in Joint Ventures
   Deferred Charges
   Revenue Recognition
   48




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##### Table of Contents



Derivative Instruments
     Fair Value of Financial Instruments
  49




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##### Table of Contents



Income Taxes
  Insurance
   Results of Operations
   50




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##### Table of Contents



Comparison of Year Ended Decmber 31, 2005 to Year Ended December 31, 2004
  For the years endedDecember 31,
    
    
    Increase
    
    
    %2005
    
    
    2004
    
    
    (Decrease)
    
    
    Change(dollars in thousands)Total Revenues
    
    $
    721,994
    
    
    $
    647,391
    
    
    $
    74,603
    
    
    
    11.5
    %ExpensesProperty operating expenses
    
    
    337,357
    
    
    
    289,514
    
    
    
    47,843
    
    
    
    16.5
    %General and administrative
    
    
    38,653
    
    
    
    39,759
    
    
    
    (1,106
    )
    
    
    2.8
    %Depreciation and amortization
    
    
    170,753
    
    
    
    132,644
    
    
    
    38,109
    
    
    
    28.7
    %Provision for loss on real estate
    
    
    
    
    
    
    12,749
    
    
    
    (12,749
    )
    
    
    Provision for loss on investment
    
    
    
    
    
    
    14,558
    
    
    
    (14,558
    )
    
    
    Total Expenses
    
    
    546,763
    
    
    
    489,224
    
    
    
    57,539
    
    
    
    11.8
    %Operating Income
    
    
    175,231
    
    
    
    158,167
    
    
    
    17,064
    
    
    
    10.8
    %Other Income (Expense)Interest and other income
    
    
    6,597
    
    
    
    5,280
    
    
    
    1,317
    
    
    
    24.9
    %Foreign currency exchange gain
    
    
    
    
    
    
    3,340
    
    
    
    (3,340
    )
    
    
    Loss on early debt retirement
    
    
    (6,842
    )
    
    
    (7,032
    )
    
    
    190
    
    
    
    2.7
    %Recovery on insurance claims
    
    
    74
    
    
    
    739
    
    
    
    (665
    )
    
    
    90.0
    %Interest expense
    
    
    (138,564
    )
    
    
    (137,398
    )
    
    
    (1,166
    )
    
    
    0.8
    %Derivative gain
    
    
    
    
    
    
    1,073
    
    
    
    (1,073
    )
    
    
    Lawsuit and other settlements
    
    
    3,288
    
    
    
    3,676
    
    
    
    (388
    )
    
    
    10.6
    %Total Other Expense
    
    
    (135,447
    )
    
    
    (130,322
    )
    
    
    (5,125
    )
    
    
    3.9
    %Income before Income Taxes, Minority Interest, Income from
Unconsolidated Real Estate Joint Ventures, Discontinued
Operations, Gain on Disposition of Real Estate, Net, and
Cumulative Effect of a Change in Accounting Principle
    
    
    39,784
    
    
    
    27,845
    
    
    
    11,939
    
    
    
    42.9
    %Benefit (Provision) for income and other corporate taxes, net
    
    
    3,754
    
    
    
    (4,379
    )
    
    
    8,133
    
    
    
    185.7
    %Minority interest
    
    
    (1,045
    )
    
    
    (1,834
    )
    
    
    789
    
    
    
    43.0
    %Income from unconsolidated real estate joint ventures
    
    
    14,997
    
    
    
    15,243
    
    
    
    (246
    )
    
    
    1.6
    %Income from Continuing Operations
    
    
    57,490
    
    
    
    36,875
    
    
    
    20,615
    
    
    
    55.9
    %Discontinued OperationsIncome (Loss) from discontinued operations
    
    
    19,614
    
    
    
    (68,428
    )
    
    
    88,042
    
    
    
    128.7
    %Gain on disposition of discontinued real estate, net
    
    
    133,075
    
    
    
    125,508
    
    
    
    7,567
    
    
    
    6.0
    %Income Before Gain on Disposition of Real Estate, Net, and
Cumulative Effect of a Change in Accounting Principle
    
    
    210,179
    
    
    
    93,955
    
    
    
    116,224
    
    
    
    123.7
    %Gain on disposition of real estate, net
    
    
    145
    
    
    
    7,358
    
    
    
    (7,213
    )
    
    
    98.0
    %Income Before Cumulative Effect of a Change in Accounting
Principle
    
    
    210,324
    
    
    
    101,313
    
    
    
    109,011
    
    
    
    107.6
    %Cumulative effect of a change in accounting principle
    
    
    (4,874
    )
    
    
    
    
    
    
    (4,874
    )
    
    
    Net Income
    
    
    205,450
    
    
    
    101,313
    
    
    
    104,137
    
    
    
    102.8
    %Special voting and Class F convertible stockholders dividends
    
    
    (4,438
    )
    
    
    (4,824
    )
    
    
    386
    
    
    
    8.0
    %Net Income Available to Common Stockholders
    
    $
    201,012
    
    
    $
    96,489
    
    
    $
    104,523
    
    
    
    108.3
    %Straight Line Revenue (excluding discontinued operations)
    
    $
    13,599
    
    
    $
    16,249
    
    
    $
    (2,650
    )
    
    
    16.3
    %Lease Termination Fees (excluding discontinued operations)
    
    $
    6,998
    
    
    $
    7,488
    
    
    $
    (490
    )
    
    
    6.5
    %
 51




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##### Table of Contents



Total Revenues
   Property Operating Expenses
   General and Administrative
   52




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##### Table of Contents



Depreciation and Amortization
  Provision for Loss on Real Estate
  Provision for Loss on Investment
  Interest and Other Income
  Foreign Currency Exchange Gain
  Loss on Early Debt Retirement
  53




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##### Table of Contents



Recovery on Insurance Claims
   Interest Expense
  54




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##### Table of Contents



Derivative Gain
  Lawsuit and Other Settlements
   Benefit (Provision) for Income and Other Corporate Taxes, Net
   Minority Interest
   55




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##### Table of Contents



Income from Unconsolidated Real Estate Joint Ventures
  Discontinued Operations
        Gain on Disposition of Real Estate, Net
  56




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##### Table of Contents



Cumulative Effect of a Change in Accounting Principle
  57




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##### Table of Contents



Comparison of Year Ended December 31, 2004 to Year Ended December 31, 2003
  For the years endedDecember 31,
    
    
    Increase
    
    
    %2004
    
    
    2003
    
    
    (Decrease)
    
    
    Change(dollars in thousands)Total Revenues
    
    $
    647,391
    
    
    $
    646,362
    
    
    $
    1,029
    
    
    
    0.2
    %Property operating expenses
    
    
    289,514
    
    
    
    306,986
    
    
    
    (17,472
    )
    
    
    5.7
    %General and administrative
    
    
    39,759
    
    
    
    40,358
    
    
    
    (599
    )
    
    
    1.5
    %Depreciation and amortization
    
    
    132,644
    
    
    
    122,935
    
    
    
    9,709
    
    
    
    7.9
    %Provision for loss on real estate
    
    
    12,749
    
    
    
    
    
    
    
    12,749
    
    
    
    Loss on and provision for loss on investment
    
    
    14,558
    
    
    
    15,491
    
    
    
    (933
    )
    
    
    6.0
    %Total Expenses
    
    
    489,224
    
    
    
    485,770
    
    
    
    3,454
    
    
    
    0.7
    %Operating Income
    
    
    158,167
    
    
    
    160,592
    
    
    
    (2,425
    )
    
    
    1.5
    %Other Income (Expense)Interest and other income
    
    
    5,280
    
    
    
    7,300
    
    
    
    (2,020
    )
    
    
    27.7
    %Foreign currency exchange gain
    
    
    3,340
    
    
    
    
    
    
    
    3,340
    
    
    
    (Loss) Gain on early debt retirement
    
    
    (7,032
    )
    
    
    2,262
    
    
    
    (9,294
    )
    
    
    410.9
    %Recovery on insurance claims
    
    
    739
    
    
    
    6,673
    
    
    
    (5,934
    )
    
    
    88.9
    %Interest expense
    
    
    (137,398
    )
    
    
    (141,267
    )
    
    
    3,869
    
    
    
    2.7
    %Derivative gain
    
    
    1,073
    
    
    
    
    
    
    
    1,073
    
    
    
    Lawsuit and other settlements
    
    
    3,676
    
    
    
    26,659
    
    
    
    (22,983
    )
    
    
    86.2
    %Total Other Expense
    
    
    (130,322
    )
    
    
    (98,373
    )
    
    
    (31,949
    )
    
    
    32.5
    %Income before Income Taxes, Minority Interest, Income from
Unconsolidated Real Estate Joint Ventures, Discontinued
Operations, Gain on Disposition of Real Estate, Net, and
Cumulative Effect of a Change in Accounting Principle
    
    
    27,845
    
    
    
    62,219
    
    
    
    (34,374
    )
    
    
    55.2
    %(Provision) Benefit for income and other corporate taxes, net
    
    
    (4,379
    )
    
    
    41,777
    
    
    
    (46,156
    )
    
    
    110.5
    %Minority interest
    
    
    (1,834
    )
    
    
    (1,626
    )
    
    
    (208
    )
    
    
    12.8
    %Income from unconsolidated real estate joint ventures
    
    
    15,243
    
    
    
    23,336
    
    
    
    (8,093
    )
    
    
    34.7
    %Income from Continuing Operations
    
    
    36,875
    
    
    
    125,706
    
    
    
    (88,831
    )
    
    
    70.7
    %Discontinued Operations(Loss) Income from discontinued operations
    
    
    (68,428
    )
    
    
    11,707
    
    
    
    (80,135
    )
    
    
    684.5
    %Gain on disposition of discontinued real estate, net
    
    
    125,508
    
    
    
    58,834
    
    
    
    66,674
    
    
    
    113.3
    %Income Before Gain on Disposition of Real Estate, Net, and
Cumulative Effect of a Change in Accounting Principle
    
    
    93,955
    
    
    
    196,247
    
    
    
    (102,292
    )
    
    
    52.1
    %Gain on disposition of real estate, net
    
    
    7,358
    
    
    
    11,351
    
    
    
    (3,993
    )
    
    
    35.2
    %Income before Cumulative Effect of a Change in Accounting
Principle
    
    
    101,313
    
    
    
    207,598
    
    
    
    (106,285
    )
    
    
    51.2
    %Cumulative effect of a change in accounting principle
    
    
    
    
    
    
    (3,845
    )
    
    
    3,845
    
    
    
    Net Income
    
    
    101,313
    
    
    
    203,753
    
    
    
    (102,440
    )
    
    
    50.3
    %Special voting and Class F convertible stockholders dividends
    
    
    (4,824
    )
    
    
    (5,226
    )
    
    
    402
    
    
    
    7.7
    %Net Income Available to Common Stockholders
    
    $
    96,489
    
    
    $
    198,527
    
    
    $
    (102,038
    )
    
    
    51.4
    %Straight Line Revenue (excluding discontinued operations)
    
    $
    16,249
    
    
    $
    21,998
    
    
    $
    (5,749
    )
    
    
    26.1
    %Lease Termination Fees (excluding discontinued operations)
    
    $
    7,488
    
    
    $
    4,211
    
    
    $
    3,277
    
    
    
    77.8
    %
 58




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##### Table of Contents



Total Revenues
   Property Operating Expenses
   General and Administrative
  Depreciation and Amortization
  59




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##### Table of Contents



Provision for Loss on Real Estate
  Loss on and Provision for Loss on Investment
   Interest and Other Income
  Foreign Currency Exchange Gain
  (Loss) Gain on Early Debt Retirement
  60




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##### Table of Contents



Recovery on Insurance Claims
   Interest Expense
  Derivative Gain
  61




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##### Table of Contents



Lawsuit Settlement
   (Provision) Benefit for Income and Other Corporate Taxes, Net
  Minority Interest
   Income from Unconsolidated Real Estate Joint Ventures
  62




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##### Table of Contents



Discontinued Operations
      Gain on Disposition of Real Estate, Net
   Cumulative
Effect of a Change in Accounting Principle
  63




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##### Table of Contents



Liquidity and Capital Resources
      64




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##### Table of Contents



Contractual Obligations
  Payments Due by Period ($ in thousands)Less than
    
    
    1  3
    
    
    3  5
    
    
    More thanTotal
    
    

1 Year
    
    
    Years
    
    
    Years
    
    

5 YearsLong-term debt
obligations (1)
    
    $
    2,210,273
    
    
    $
    402,674
    
    
    $
    827,825
    
    
    $
    119,693
    
    
    $
    860,081Ground lease obligations
    
    
    226,139
    
    
    
    1,050
    
    
    
    2,258
    
    
    
    2,258
    
    
    
    220,573Operating lease obligations
    
    
    16,787
    
    
    
    2,992
    
    
    
    5,784
    
    
    
    3,747
    
    
    
    4,264Purchase obligations (2)
    
    
    45,338
    
    
    
    28,109
    
    
    
    7,724
    
    
    
    5,811
    
    
    
    3,694Tenant obligations
    
    
    116,049
    
    
    
    91,849
    
    
    
    20,775
    
    
    
    2,078
    
    
    
    1,347Total
    
    $
    2,614,586
    
    
    $
    526,674
    
    
    $
    864,366
    
    
    $
    133,587
    
    
    $
    1,089,959
 
 (1)
    
    Included on balance sheet.(2)
    
    Purchase obligations include agreements to purchase goods or services that are
enforceable and legally binding and that specify all significant terms, including:
fixed or minimum quantities to be purchased; fixed, minimum or variable price
provisions; and the approximate timing of the transaction.
  Off-Balance Sheet Arrangements
  65




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##### Table of Contents



Cash Flow Activity
  For the years ended December 31,2005
    
    
    2004
    
    
    2003(dollars in thousands)Cash provided by operating activities
    
    $
    193,919
    
    
    $
    288,680
    
    
    $
    249,650Cash (used in) provided by investing activities
    
    
    (304,877
    )
    
    
    536,119
    
    
    
    412,115Cash used in financing activities
    
    
    (46,809
    )
    
    
    (759,833
    )
    
    
    (594,719
    )$
    (157,767
    )
    
    $
    64,966
    
    
    $
    67,046
 Operating Activities
  Investing Activities
  Acquisitions
   Dispositions
  66




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##### Table of Contents



Tenant Installation Costs
  For the years ended December 31,2005
    
    2004
    
    2003(in thousands)Square feet leased- new leasing
    
    
    2,406
    
    
    
    2,727
    
    
    
    3,196- renewal leasing
    
    
    2,857
    
    
    
    2,784
    
    
    
    2,982Tenant square feet leased
    
    
    5,263
    
    
    
    5,511
    
    
    
    6,178Tenant installation costs
    
    $
    99,879
    
    
    $
    114,027
    
    
    $
    91,618
 Capital Expenditures
  Reconciliation to Combined Consolidated Statements of Cash Flows
  67




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##### Table of Contents



For the years ended December 31,2005
    
    
    2004
    
    
    2003(dollars in thousands)Tenant installation
costs, including leasing costs
for the owned office portfolio
    
    $
    99,879
    
    
    $
    114,027
    
    
    $
    91,618Tenant installation costs,
including leasing costs for
properties disposed of during
the period
    
    
    5,345
    
    
    
    20,506
    
    
    
    3,140Capital expenditures
    
    
    28,858
    
    
    
    13,938
    
    
    
    21,590Pro rata joint venture activity
    
    
    (11,878
    )
    
    
    (6,210
    )
    
    
    (13,016
    )Timing differences
    
    
    (22,791
    )
    
    
    (13,607
    )
    
    
    4,911Retail activity
    
    
    
    
    
    
    150
    
    
    
    6,942Total tenant improvements,
leasing costs and capital
expenditures per consolidated
statements of cash flows
    
    $
    99,413
    
    
    $
    128,804
    
    
    $
    115,185
 Unconsolidated Real Estate Joint Ventures
 th
      68




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##### Table of Contents



Financing Activities
    Mortgage Debt, Other Loans and Unsecured Credit Facility
  69




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##### Table of Contents



December 31,Debt Summary
    
    2005
    
    
    2004(dollars in thousands)Balance:Fixed rate
    
    $
    1,923,518
    
    
    $
    2,110,511Variable rate
    
    
    286,755
    
    
    
    108,771Total
    
    $
    2,210,273
    
    
    $
    2,219,282Collateralized property
    
    $
    1,847,095
    
    
    $
    2,024,055Unsecured credit facility
    
    
    347,000
    
    
    
    150,000Other loans
    
    
    16,178
    
    
    
    45,227Total
    
    $
    2,210,273
    
    
    $
    2,219,282Percent of total debt:Fixed rate
    
    
    87.0
    %
    
    
    95.1
    %Variable rate
    
    
    13.0
    %
    
    
    4.9
    %Total
    
    
    100.0
    %
    
    
    100.0
    %Weighted average interest rate at period end:Fixed rate
    
    
    6.27
    %
    
    
    6.33
    %Variable rate
    
    
    5.38
    %
    
    
    3.87
    %Total
    
    
    6.16
    %
    
    
    6.21
    %Leverage ratio:Net debt to net debt plus book equity
    
    
    51.1
    %
    
    
    53.1
    %
  Unsecured Credit Facility
   70




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##### Table of Contents



Early Debt Retirement
        Hedging Activities
  71




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##### Table of Contents



Unconsolidated Real Estate Joint Venture Mortgage Debt
  Principal Repayments
   Total Debt(1)Office
    
    
    Other
    
    
    Total(dollars in thousands)Principal repayments due in:2006
    
    $
    402,450
    
    
    $
    224
    
    
    $
    402,6742007
    
    
    77,574
    
    
    
    259
    
    
    
    77,8332008
    
    
    402,716
    
    
    
    276
    
    
    
    402,9922009
    
    
    14,876
    
    
    
    295
    
    
    
    15,1712010
    
    
    104,208
    
    
    
    314
    
    
    
    104,522Subsequent to 2010
    
    
    845,271
    
    
    
    14,810
    
    
    
    860,081Total
    
    $
    1,847,095
    
    
    $
    16,178
    
    
    $
    1,863,273Weighted average interest rate at December 31, 2005
    
    
    6.26
    %
    
    
    6.57
    %
    
    
    6.26
    %Weighted average term to maturity (in years)
    
    
    4.4
    
    
    
    5.4
    
    
    
    4.4Percentage of fixed rate debt including variable rate debt
subject to interest rate caps and interest rate swap
contracts
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
 
 (1)
    
    Excludes unsecured credit facility.
 72




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##### Table of Contents



Dividends
 Common Dividends:
 TotalDividend
    
    Dividend2005
    
    
    
    
    
    Declaration Date
    
    Record Date
    
    Payable Date
    
    Per Share
    
    (In Millions)Fourth Quarter
    
    
    
    
    
    
    12/13/2005
    
    
    
    12/30/2005
    
    
    
    01/17/2006
    
    
    $
    0.20
    
    
    $
    31.6Third Quarter
    
    
    
    
    
    
    09/13/2005
    
    
    
    09/30/2005
    
    
    
    10/17/2005
    
    
    $
    0.20
    
    
    $
    31.4Second Quarter
    
    
    
    
    
    
    06/14/2005
    
    
    
    06/30/2005
    
    
    
    07/15/2005
    
    
    $
    0.20
    
    
    $
    31.2First Quarter
    
    
    
    
    
    
    03/10/2005
    
    
    
    03/31/2005
    
    
    
    04/15/2005
    
    
    $
    0.20
    
    
    $
    31.0
  Special Voting Stock Dividends:
 Total Dividend2005
    
    
    
    
    
    
    
    
    
    Declaration Date
    
    Record Date
    
    Payable Date
    
    (In Millions)Fourth Quarter
    
    
    
    
    
    
    
    
    
    
    12/13/2005
    
    
    
    12/30/2005
    
    
    
    01/17/2006
    
    
    $
    0.7Third Quarter
    
    
    
    
    
    
    
    
    
    
    09/13/2005
    
    
    
    09/30/2005
    
    
    
    10/17/2005
    
    
    $
    1.3Second Quarter
    
    
    
    
    
    
    
    
    
    
    06/14/2005
    
    
    
    06/30/2005
    
    
    
    07/15/2005
    
    
    $
    1.2First Quarter
    
    
    
    
    
    
    
    
    
    
    03/10/2005
    
    
    
    03/31/2005
    
    
    
    04/15/2005
    
    
    $
    1.2
 Class F Convertible Stock Dividends:
  Market Risk  Quantitative and Qualitative Information
   73




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##### Table of Contents



Gain Contingencies
  Subsequent Events
    74




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##### Table of Contents



Newly Issued Accounting Standards
    Inflation
  Funds from Operations
  75




---



##### Table of Contents



For the years ended December 31,2005
    
    
    2004
    
    
    2003(dollars in thousands)Net income available to common stockholders
    
    $
    201,012
    
    
    $
    96,489
    
    
    $
    198,527Add/(deduct):Gain on disposition of real estate, net
    
    
    (145
    )
    
    
    (7,358
    )
    
    
    (11,351
    )Gain on disposition of discontinued real estate, net
    
    
    (133,075
    )
    
    
    (125,508
    )
    
    
    (58,834
    )Gain on disposition of real estate from
unconsolidated real estate joint ventures
    
    
    
    
    
    
    (704
    )
    
    
    (230
    )Depreciation and amortization (real estate related)
including share of unconsolidated real estate joint
ventures and discontinued operations
    
    
    194,024
    
    
    
    178,847
    
    
    
    202,490Cumulative effect of a change in accounting
principle, net of minority interest
    
    
    4,871
    
    
    
    
    
    
    
    3,845Funds from operations available to common stockholders
    
    $
    266,687
    
    
    $
    141,766
    
    
    $
    334,447
 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  76




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##### Table of Contents



Item 9A. Controls and Procedures
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
  Managements Consideration of the Restatement
  Changes in Internal Control Over Financial Reporting
  
 Item 9B. Other Information
  
 PART III
 
 Item 10. Directors and Executive Officers of the Registrant
  77




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##### Table of Contents



www.trz.com.
 
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  
 Item 13. Certain Relationships and Related Transactions
  
 Item 14. Principal Accountant Fees and Services
 
 
 PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)
    
    Financial Statements and Financial Statement Schedules
 (1)
    
    Financial StatementsSee Index to Financial Statements on page F-1 of this Form 10-K.(2)
    
    Financial Statement SchedulesSee page F-63 of this Form 10-K.(3)
    
    ExhibitsThe exhibits required by this item are set forth on the Exhibit Index attached hereto.
 78




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##### Table of Contents



SIGNATURES
  TRIZEC PROPERTIES, INC.Date:
March 14;, 2006By:
    
    /s/ Timothy H. CallahanTimothy H. CallahanPresident, Chief Executive Officer and Director
  Date:
March 14, 2006
    
    /s/ Timothy H. CallahanTimothy H. CallahanPresident, Chief Executive Officer and Director(Principal executive officer)/s/ Michael C. ColleranMichael C. ColleranExecutive Vice President and Chief Financial Officer(Principal financial and accounting officer)/s/ Peter MunkPeter MunkChairman of the Board of Directors/s/ L. Jay CrossL. Jay CrossDirector/s/ Brian MulroneyBrian MulroneyDirector/s/ James J. OConnorJames J. OConnorDirector/s/ Glenn RufranoGlenn RufranoDirector
 79




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##### Table of Contents



/s/ Richard ThomsonRichard ThomsonDirector/s/ Polyvios VintiadisPolyvios VintiadisDirector
 80




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##### Table of Contents



INDEX OF EXHIBITS
 ExhibitNumber
    
    Description2.1
    
    
    Arrangement Agreement dated as of March 8, 2002 by and among TrizecHahn
Corporation, Trizec Canada Inc., 4007069 Canada Inc. and Trizec Properties, Inc.
(incorporated by reference to Exhibit 2.1 to Trizec Properties, Inc.s
Registration Statement on Form S-11, File No. 333-84878).2.2
    
    
    Arrangement Agreement Amending Agreement dated as of April 23, 2002 by and among
TrizecHahn Corporation, Trizec Canada Inc., 4007069 Canada Inc. and Trizec
Properties, Inc. (incorporated by reference to Exhibit 2.2 to Trizec Properties,
Inc.s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).2.3
    
    
    Purchase and Sale Agreement, dated December 19, 2005, by and between Trizec
Holdings Operating LLC and General Electric Capital Corporation, as amended by the
First Amendment to Purchase and Sale Agreement, dated as of December 21, 2005, by
and between GECC and the Operating Company (incorporated by reference to Exhibit
2.1 of Trizec Properties, Inc.s Current Report on Form 8-K dated December 22,
2005).2.4
    
    
    Agreement and Plan of Merger, dated as of December 21, 2005, by and among Arden
Realty, Inc., Arden Realty Limited Partnership, General Electric Capital
Corporation, Atlas Merger Sub, Inc., Atlas Partnership Merger Sub, Inc., Trizec
Properties, Inc. and Trizec Holdings Operating LLC (incorporated by reference to
Exhibit 2.2 of Trizec Properties, Inc.s Current Report on Form 8-K dated December
22, 2005).3.1
    
    
    Fourth Amended and Restated Certificate of Incorporation of Trizec Properties,
Inc., filed on February 11, 2002 (incorporated by reference to Exhibit 3.1 to
Trizec Properties, Inc.s Registration Statement on Form 10, File No. 001-16765).3.2
    
    
    Certificate of Amendment to Fourth Amended and Restated Certificate of
Incorporation of Trizec Properties, Inc., filed on April 29, 2002 (incorporated by
reference to Exhibit 4.4 to Trizec Properties, Inc.s Registration Statement on
Form S-8, File No. 333-87548).3.3
    
    
    Certificate of Amendment to Fourth Amended and Restated Certificate of
Incorporation of Trizec Properties, Inc., filed on May 20, 2004 (incorporated by
reference to Exhibit 3.1 of Trizec Properties, Inc.s Quarterly Report on Form
10-Q for the Quarterly Period Ended June 30, 2004).3.4
    
    
    Amended and Restated Bylaws of Trizec Properties, Inc. (incorporated by reference
to Exhibit 3.3 to Trizec Properties, Inc.s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2002).4.1
    
    
    Specimen of Common Stock Certificates (incorporated by reference to Exhibit 4.1 to
Trizec Properties, Inc.s Registration Statement on Form 10 (File No. 001-16765)).4.2
    
    
    Form of Exchange Certificates (incorporated by reference to Exhibit 4.2 to Trizec
Properties, Inc.s Registration Statement on Form 10 (File No. 001-16765)).4.3
    
    
    Form of Custody Agreement relating to the Exchange Certificates (incorporated by
reference to Exhibit 4.3 to Trizec Properties, Inc.s Registration Statement on
Form 10, File No. 001-16765).10.1
    
    
    Contribution Agreement, dated as of December 22, 2004, by and between Trizec
Properties, Inc. and Trizec Holdings Operating LLC (incorporated by reference to
Exhibit 10.1 of Trizec Properties, Inc.s Current Report on Form 8-K dated
December 22, 2004).10.2
    
    
    Assignment and Assumption Agreement, dated as of December 22, 2004, by and between
Trizec Properties, Inc. and Trizec Holdings Operating LLC (incorporated by
reference to Exhibit 10.2 of Trizec Properties, Inc.s Current Report on Form 8-K
dated December 22, 2004).10.3
    
    
    Limited Liability Company Agreement of Trizec Holdings Operating LLC, dated as of
December 22, 2004 (incorporated by reference to Exhibit 10.3 of Trizec Properties,
Inc.s Current Report on Form 8-K dated December 22, 2004).
 81




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##### Table of Contents



ExhibitNumber
    
    Description10.4
    
    
    Credit Agreement, dated as of June 29, 2004, among Trizec Properties, Inc. and
Trizec Holdings, Inc., as Borrowers, the Lenders party thereto from time to time,
and Deutsche Bank Trust Company Americas, as Administrative Agent (incorporated by
reference to Exhibit 10.1 of Trizec Properties, Inc.s Quarterly Report on Form
10-Q for the Quarterly Period Ended June 30, 2004).10.5
    
    
    Amended and Restated Credit Agreement, dated as of October 31, 2005, among Trizec
Holdings Operating LLC, as Borrower, Trizec Properties, Inc., as Guarantor,
Deutsche Bank Securities Inc. and Banc of America Securities LLC, as co-lead
arrangers and joint book running managers, Deutsche Bank Trust Company Americas,
as administrative agent, and various lenders parties thereto (incorporated by
reference to Exhibit 10.1 of Trizec Properties, Inc.s Current Report on Form 8-K
dated November 2, 2005).10.6
    
    
    Joinder Agreement, dated as of December 22, 2004, by Trizec Holdings Operating LLC
(relating to the Credit Agreement referenced as Exhibit 10.4 above) (incorporated
by reference to Exhibit 10.4 of Trizec Properties, Inc.s Current Report on Form
8-K dated December 22, 2004).10.7
    
    
    Loan Agreement dated as of May 17, 2001 between Secore Financial Corporation, as
lender, and certain subsidiaries of Trizec Properties, Inc. named on the signature
page thereof, as borrowers and guarantors (incorporated by reference to Exhibit
10.14 to Trizec Properties, Inc.s Annual Report on Form 10-K for the year ended
December 31, 2002).10.8
    
    
    Canadian Tax Cooperation Agreement dated as of May 8, 2002 between TrizecHahn
Office Properties Ltd. and Trizec Properties, Inc. (incorporated by reference to
Exhibit 10.15 to Trizec Properties, Inc.s Annual Report on Form 10-K for the year
ended December 31, 2002).10.9
    *
    
    Registration Rights Agreement, dated as of May 2, 2002, by and between Trizec
Properties, Inc., Trizec Canada Inc. and Emerald Blue Kft. (incorporated by
reference to Exhibit 10.6 of Trizec Properties, Inc.s Quarterly Report on Form
10-Q for the quarterly period ended March 31, 2005).10.10
    
    
    Commitment Letter, dated December 21, 2005, by and between Trizec Properties,
Inc., Deutsche Bank Securities Inc. and Deutsche Bank Trust Company Americas
(incorporated by reference to Exhibit 10.1 of Trizec Properties, Inc.s Current
Report on Form 8-K dated December 22, 2005).10.11
    *
    
    Employment Agreement, dated as of November 22, 2005, by and between Trizec
Properties, Inc. and Timothy H. Callahan (incorporated by reference to Exhibit
10.1 of Trizec Properties, Inc.s Current Report on Form 8-K dated November 23,
2005).10.12
    *
    
    Employment Agreement, dated as of January 4, 2005, by and between Trizec
Properties, Inc. and Brian Lipson (incorporated by reference to Exhibit 10.1 of
Trizec Properties, Inc.s Current Report on Form 8-K dated January 4, 2005).10.13
    *
    
    Employment Agreement, dated as of January 4, 2005, by and between Trizec
Properties, Inc. and Michael Colleran (incorporated by reference to Exhibit 10.2
of Trizec Properties, Inc.s Current Report on Form 8-K dated January 4, 2005).10.14
    *
    
    Employment Agreement, dated as of January 4, 2005, by and between Trizec
Properties, Inc. and William Tresham (incorporated by reference to Exhibit 10.3 of
Trizec Properties, Inc.s Current Report on Form 8-K dated January 4, 2005).10.15
    *
    
    Employment Arrangement Letter, dated as of February 13, 2003, by and between
Trizec Properties, Inc. and Ted Jadwin (incorporated by reference to Exhibit 10.12
of Trizec Properties, Inc.s Annual Report on Form 10-K for the year ended
December 31, 2004).10.16
    *
    
    Resignation Agreement, dated as of September 17, 2004, by and between Trizec
Properties, Inc. and Casey R. Wold (incorporated by reference to Exhibit 10.1 of
Trizec Properties, Inc.s Current Report on Form 8-K dated September 17, 2004).
 82




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##### Table of Contents



ExhibitNumber
    
    Description10.17
    *
    
    Form of Bonus Restricted Stock Rights Agreement under the Trizec Properties, Inc.
2003 Long-Term Incentive Plan (as amended and restated effective May 29, 2003)
(incorporated by reference to Exhibit 10.1 to Trizec Properties, Inc.s Current
Report on Form 8-K dated February 18, 2005).10.18
    *
    
    Form of Long-Term Incentive Restricted Stock Rights Award Agreement under the
Trizec Properties, Inc. Long-Term Incentive Plan (incorporated by reference to
Exhibit 10.2 to Trizec Properties, Inc.s Current Report on Form 8-K dated
February 18, 2005).10.19
    *
    
    Cancellation of Employment and Mutual Release Agreement dated January 17, 2003
between Lee Wagman and Trizec Properties, Inc. (incorporated by reference to
Exhibit 10.12 to Trizec Properties, Inc.s Annual Report on Form 10-K for the year
ended December 31, 2002).10.20
    *
    
    Trizec Properties, Inc. 2002 Long Term Incentive Plan (Amended and Restated
effective February 6, 2006).10.21
    *
    
    Trizec Properties, Inc. 2003 Employee Stock Purchase Plan (incorporated by
reference to Exhibit 4.3 to Trizec Properties, Inc.s Registration Statement on
Form S-8, File No. 333-106514).10.22
    *
    
    Trizec Properties, Inc. Deferred Compensation Plan (incorporated by reference to
Exhibit 10.12 of Trizec Properties, Inc.s Annual Report on Form 10-K for the year
ended December 31, 2003).10.23
    *
    
    Amendment, dated May 4, 2004, to Trizec Properties, Inc. Deferred Compensation
Plan (incorporated by reference to Exhibit 10.1 of Trizec Properties, Inc.s
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004).10.24
    *
    
    Second Amendment, dated as of August 3, 2004, to Trizec Properties, Inc. Deferred
Compensation Plan (incorporated by reference to Exhibit 10.23 of Trizec
Properties, Inc.s Annual Report on Form 10-K for the year ended December 31,
2004).10.25
    *
    
    Trizec Properties, Inc. 2004 Long-Term Outperformance Compensation Program under
the Trizec Properties, Inc. 2002 Long-Term Incentive Plan (which includes a form
of award agreement as Exhibit A thereto) (incorporated by reference to Exhibit
10.1 of Trizec Properties, Inc.s Current Report on Form 8-K dated October 21,
2004).10.26
    *
    
    Trizec Properties, Inc. Non-Employee Directors Deferred Compensation Plan
(incorporated by reference to Exhibit 10.2 of Trizec Properties, Inc.s Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 2004).10.27
    *
    
    First Amendment, dated as of August 3, 2004, to Trizec Properties, Inc.
Non-Employee Directors Deferred Compensation Plan (incorporated by reference to
Exhibit 10.26 of Trizec Properties, Inc.s Annual Report on Form 10-K for the year
ended December 31, 2004).10.28
    *
    
    2004 Non-Employee Director Fees and Other Compensation (incorporated by reference
to Exhibit 10.27 of Trizec Properties, Inc.s Annual Report on Form 10-K for the
year ended December 31, 2004).10.29
    *
    
    2004 Compensation for Named Executive Officers (incorporated by reference to
Exhibit 10.28 of Trizec Properties, Inc.s Annual Report on Form 10-K for the year
ended December 31, 2004).10.30
    *
    
    2005 Non-Employee Director Fees and Other Compensation Schedule (incorporated by
reference to Exhibit 10.1 of Trizec Properties, Inc.s Current Report on Form 8-K
dated December 15, 2005).10.31
    *
    
    2005 Named Executive Officer Compensation Schedule (incorporated by reference to
Exhibit 10.1 of Trizec Properties, Inc.s Current Report on Form 8-K dated
February 10, 2006).10.32
    *
    
    Separation Agreement dated April 14, 2005 by and between Trizec Properties, Inc.
and Michael J. Escalante (incorporated by reference to Exhibit 10.1 of Trizec
Properties, Inc.s Current Report on Form 8-K dated April 18, 2005).
 83




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##### Table of Contents



ExhibitNumber
    
    Description12.1
    
    
    Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends.21.1
    
    
    Subsidiaries of Trizec Properties, Inc.23.1
    
    
    Consent of PricewaterhouseCoopers LLP.23.2
    
    
    Consent of
Torto Wheaton Research.31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer.31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer.32.1
    
    
    Section 1350 Certification of the Chief Executive Officer.32.2
    
    
    Section 1350 Certification of the Chief Financial Officer.
 
 
    
    Filed herewith.*
    
    Denotes a management contract or compensatory plan, contract or arrangement. 84




---



##### 



INDEX TO FINANCIAL STATEMENTS
 PageManagements Report on Internal Control Over Financial Reporting.
    
    F-2Report of Independent Registered Public Accounting Firm.
    
    F-3Consolidated Balance Sheets at December 31, 2005 and 2004.
    
    F-5Consolidated Statements of Operations for the years ended December
31, 2005, 2004 and 2003.
    
    F-6Consolidated Statements of Comprehensive Income (Loss) for the years
ended December 31, 2005, 2004 and 2003.
    
    F-8Consolidated Statements of Changes in Stockholders Equity for the
years ended December 31, 2005, 2004 and 2003.
    
    F-9Consolidated Statements of Cash Flows for the years ended December
31, 2005, 2004 and 2003.
    
    F-11Notes to the Consolidated Financial Statements.
    
    F-15Schedule III  Real Estate and Accumulated Depreciation.
    
    F-63




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##### Table of Contents



Managements Report on Internal Control Over Financial Reporting
 Internal Control  Integrated Framework Internal
Control  Integrated Framework,




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
  Consolidated financial statements and financial statement schedule
    Internal control over financial reporting
 Internal Control  Integrated Framework Internal Control  Integrated Framework




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##### Table of Contents








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##### Table of Contents



Trizec Properties, Inc.
    
    Consolidated Balance Sheets
 December 31,
    
    
    (Restated)
December 31,$ in thousands, except share and per share amounts
    
    2005
    
    
    2004AssetsReal estate
    
    $
    4,570,824
    
    
    $
    4,335,159Less: accumulated depreciation
    
    
    (673,443
    )
    
    
    (619,010
    )Real estate, net
    
    
    3,897,381
    
    
    
    3,716,149Cash and cash equivalents
    
    
    36,498
    
    
    
    194,265Escrows and restricted cash
    
    
    70,004
    
    
    
    83,789Investment in unconsolidated real estate joint ventures
    
    
    206,602
    
    
    
    113,839Office tenant receivables (net of allowance for doubtful accounts of
$3,718 and $6,677 at December 31, 2005 and December 31, 2004,
respectively)
    
    
    13,087
    
    
    
    9,306Deferred rent receivables (net of allowance for doubtful accounts of
$1,438 and $831 at December 31, 2005 and December 31, 2004,
respectively)
    
    
    139,135
    
    
    
    137,561Other receivables (net of allowance for doubtful accounts of $3,080
and $2,473 at December 31, 2005 and December 31, 2004, respectively)
    
    
    7,384
    
    
    
    9,914Deferred charges (net of accumulated amortization of $82,365 and
$68,802 at December 31, 2005 and December 31, 2004, respectively)
    
    
    124,061
    
    
    
    115,669Prepaid expenses and other assets, net
    
    
    216,098
    
    
    
    139,118Total Assets
    
    $
    4,710,250
    
    
    $
    4,519,610Liabilities and Stockholders EquityLiabilitiesMortgage debt and other loans
    
    $
    1,863,273
    
    
    $
    2,069,282Unsecured credit facility
    
    
    347,000
    
    
    
    150,000Trade, construction and tenant improvements payables
    
    
    19,127
    
    
    
    25,386Accrued interest expense
    
    
    5,697
    
    
    
    8,116Accrued operating expenses and property taxes
    
    
    108,099
    
    
    
    86,713Other accrued liabilities
    
    
    181,798
    
    
    
    135,201Dividends payable
    
    
    32,329
    
    
    
    32,407Taxes payable
    
    
    27,508
    
    
    
    51,406Total Liabilities
    
    
    2,584,831
    
    
    
    2,558,511Commitments and Contingencies
    
    
    
    
    
    
    Minority Interest
    
    
    8,134
    
    
    
    7,348Special Voting and Class F Convertible Stock
    
    
    200
    
    
    
    200Stockholders EquityPreferred stock, 50,000,000 shares authorized, $0.01 par value, none issued and
outstanding at December 31, 2005 and December 31, 2004, respectively
    
    
    
    
    
    
    Common stock, 500,000,000 shares authorized, $0.01 par value, 156,478,409 and
152,164,471 issued at December 31, 2005 and December 31, 2004, respectively,
and 156,419,864 and 152,132,857 outstanding at December 31, 2005 and December
31, 2004, respectively
    
    
    1,565
    
    
    
    1,521Additional paid in capital
    
    
    2,283,591
    
    
    
    2,211,545Accumulated deficit
    
    
    (163,049
    )
    
    
    (238,767
    )Treasury stock, at cost, 58,545 and 31,614 shares at December 31, 2005 and
December 31, 2004, respectively
    
    
    (750
    )
    
    
    (415
    )Unearned compensation
    
    
    (446
    )
    
    
    (798
    )Accumulated other comprehensive loss
    
    
    (3,826
    )
    
    
    (19,535
    )Total Stockholders Equity
    
    
    2,117,085
    
    
    
    1,953,551Total Liabilities and Stockholders Equity
    
    $
    4,710,250
    
    
    $
    4,519,610




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##### Table of Contents



Trizec Properties, Inc.
    
    Consolidated Statements of Operations
 For the years ended December 31,$ in thousands, except share and per share amounts
    
    2005
    
    
    2004
    
    
    2003RevenuesRentals
    
    $
    499,918
    
    
    $
    454,241
    
    
    $
    455,503Recoveries from tenants
    
    
    111,099
    
    
    
    94,097
    
    
    
    92,609Parking and other
    
    
    104,090
    
    
    
    88,005
    
    
    
    87,544Fee income
    
    
    6,887
    
    
    
    11,048
    
    
    
    10,706Total Revenues
    
    
    721,994
    
    
    
    647,391
    
    
    
    646,362ExpensesOperating
    
    
    249,245
    
    
    
    216,935
    
    
    
    232,284Property taxes
    
    
    88,112
    
    
    
    72,579
    
    
    
    74,702General and administrative
    
    
    38,653
    
    
    
    39,759
    
    
    
    40,358Depreciation and amortization
    
    
    170,753
    
    
    
    132,644
    
    
    
    122,935Provision for loss on real estate
    
    
    
    
    
    
    12,749
    
    
    
    Loss on and provision for loss on investment
    
    
    
    
    
    
    14,558
    
    
    
    15,491Total Expenses
    
    
    546,763
    
    
    
    489,224
    
    
    
    485,770Operating Income
    
    
    175,231
    
    
    
    158,167
    
    
    
    160,592Other Income (Expense)Interest and other income
    
    
    6,597
    
    
    
    5,280
    
    
    
    7,300Foreign currency exchange gain
    
    
    
    
    
    
    3,340
    
    
    
    (Loss) Gain on early debt retirement
    
    
    (6,842
    )
    
    
    (7,032
    )
    
    
    2,262Recovery on insurance claims
    
    
    74
    
    
    
    739
    
    
    
    6,673Interest expense
    
    
    (138,564
    )
    
    
    (137,398
    )
    
    
    (141,267
    )Derivative gain
    
    
    
    
    
    
    1,073
    
    
    
    Lawsuit and other settlements
    
    
    3,288
    
    
    
    3,676
    
    
    
    26,659Total Other Expense
    
    
    (135,447
    )
    
    
    (130,322
    )
    
    
    (98,373
    )Income before Income Taxes, Minority Interest, Income from
Unconsolidated Real Estate Joint Ventures, Discontinued
Operations, Gain on Disposition of Real Estate, Net, and
Cumulative Effect of a Change in Accounting Principle
    
    
    39,784
    
    
    
    27,845
    
    
    
    62,219Benefit (Provision) for income and other corporate taxes, net
    
    
    3,754
    
    
    
    (4,379
    )
    
    
    41,777Minority interest
    
    
    (1,045
    )
    
    
    (1,834
    )
    
    
    (1,626
    )Income from unconsolidated real estate joint ventures
    
    
    14,997
    
    
    
    15,243
    
    
    
    23,336Income from Continuing Operations
    
    
    57,490
    
    
    
    36,875
    
    
    
    125,706Discontinued OperationsIncome (Loss) from discontinued operations
    
    
    19,614
    
    
    
    (68,428
    )
    
    
    11,707Gain on disposition of discontinued real estate, net
    
    
    133,075
    
    
    
    125,508
    
    
    
    58,834Income Before Gain on Disposition of Real Estate, Net, and
Cumulative Effect of a Change in Accounting Principle
    
    
    210,179
    
    
    
    93,955
    
    
    
    196,247Gain on disposition of real estate, net
    
    
    145
    
    
    
    7,358
    
    
    
    11,351Income before Cumulative Effect of a Change in Accounting
Principle
    
    
    210,324
    
    
    
    101,313
    
    
    
    207,598Cumulative effect of a change in accounting principle
    
    
    (4,874
    )
    
    
    
    
    
    
    (3,845
    )Net Income
    
    
    205,450
    
    
    
    101,313
    
    
    
    203,753Special voting and Class F convertible stockholders dividends
    
    
    (4,438
    )
    
    
    (4,824
    )
    
    
    (5,226
    )Net Income Available to Common Stockholders
    
    $
    201,012
    
    
    $
    96,489
    
    
    $
    198,527




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##### Table of Contents



Trizec Properties, Inc.
    
    Consolidated Statements of Operations (Continued)
 For the years ended December 31,$ in thousands, except share and per share amounts
    
    2005
    
    
    2004
    
    
    2003Earnings per common shareIncome from Continuing Operations Available
to Common Stockholders per Weighted Average
Common Share Outstanding:Basic
    
    $
    0.34
    
    
    $
    0.26
    
    
    $
    0.88Diluted
    
    $
    0.34
    
    
    $
    0.26
    
    
    $
    0.88Net Income Available to Common Stockholders
per Weighted Average Common Share
Outstanding:Basic
    
    $
    1.30
    
    
    $
    0.64
    
    
    $
    1.32Diluted
    
    $
    1.27
    
    
    $
    0.63
    
    
    $
    1.32Weighted average shares outstandingBasic
    
    
    154,847,663
    
    
    
    151,596,514
    
    
    
    150,005,663Diluted
    
    
    157,877,915
    
    
    
    153,109,854
    
    
    
    150,453,281




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##### Table of Contents



Trizec Properties, Inc.
    
    Consolidated Statements of Comprehensive Income (Loss)
 For the years ended December 31,$ in thousands
    
    2005
    
    
    2004
    
    
    2003Net income
    
    $
    205,450
    
    
    $
    101,313
    
    
    $
    203,753Other comprehensive income (loss):Unrealized gains on investments in securities:Unrealized foreign currency exchange gains
arising during the period
    
    
    135
    
    
    
    188
    
    
    
    259Unrealized foreign currency exchange gains
(losses) on foreign operations
    
    
    58
    
    
    
    (260
    )
    
    
    2,643Realized foreign currency exchange gain on
foreign operations
    
    
    
    
    
    
    (3,340
    )
    
    
    Unrealized derivative gains (losses):Effective portion of interest rate contracts
    
    
    14,449
    
    
    
    13,187
    
    
    
    (4,256
    )Ineffective portion of interest rate contracts
    
    
    
    
    
    
    317
    
    
    
    Amortization of forward rate contracts
    
    
    1,067
    
    
    
    766
    
    
    
    (126
    )Settlement of forward rate contracts
    
    
    
    
    
    
    (9,524
    )
    
    
    (3,311
    )Total other comprehensive income (loss)
    
    
    15,709
    
    
    
    1,334
    
    
    
    (4,791
    )Net comprehensive income
    
    $
    221,159
    
    
    $
    102,647
    
    
    $
    198,962




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##### Table of Contents



Trizec Properties, Inc.
    
    Consolidated Statements of Changes in Stockholders Equity
 (Restated)
AccumulatedCommon Stock
    
    
    Additional
    
    
    (Restated)
    
    
    
    
    
    
    
    
    
    
    OtherPaid In
    
    
    Accumulated
    
    
    Treasury
    
    
    Unearned
    
    
    Comprehensive$
    
    
    Shares
    
    
    Capital
    
    
    Deficit
    
    
    Stock
    
    
    Compensation
    
    
    Income (Loss)
    
    
    TotalBalance
at December 31, 2002, as Previously Reported
    
    $
    1,500
    
    
    
    150,029,664
    
    
    $
    2,181,958
    
    
    $
    (285,482
    )
    
    $
    (40
    )
    
    $
    (3,593
    )
    
    $
    (16,078
    )
    
    $
    1,878,265Adjustment
(see Note 2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,802
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,802
    )Balance at December 31, 2002, as Restated
    
    $
    1,500
    
    
    
    150,029,664
    
    
    $
    2,181,958
    
    
    $
    (291,284
    )
    
    $
    (40
    )
    
    $
    (3,593
    )
    
    $
    (16,078
    )
    
    $
    1,872,463Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    203,753
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    203,753Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (125,666
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (125,666
    )Amortization of escrowed share grants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,598
    
    
    
    
    
    
    
    2,598Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,791
    )
    
    
    (4,791
    )Issuance of restricted stock
    
    
    3
    
    
    
    345,000
    
    
    
    3,785
    
    
    
    
    
    
    
    
    
    
    
    (3,788
    )
    
    
    
    
    
    
    Cancellation of restricted stock
    
    
    (2
    )
    
    
    (233,000
    )
    
    
    (2,302
    )
    
    
    
    
    
    
    
    
    
    
    2,304
    
    
    
    
    
    
    
    Amortization of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    379
    
    
    
    
    
    
    
    379Issuance of shares upon exercise of warrants and
stock options
    
    
    9
    
    
    
    877,256
    
    
    
    9,961
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,970Issuance of shares, ESPP
    
    
    
    
    
    
    35,925
    
    
    
    445
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    445Intrinsic value option expense for vested options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    402
    
    
    
    
    
    
    
    402Fair value option expense
    
    
    
    
    
    
    
    
    
    
    652
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    652Forfeiture of stock options
    
    
    
    
    
    
    
    
    
    
    (234
    )
    
    
    
    
    
    
    
    
    
    
    234
    
    
    
    
    
    
    
    Deemed equity contribution on repayment of
advances to parent
    
    
    
    
    
    
    
    
    
    
    (537
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (537
    )Treasury shares
    
    
    
    
    
    
    (14,365
    )
    
    
    
    
    
    
    
    
    
    
    (197
    )
    
    
    197
    
    
    
    
    
    
    
    Balance at December 31, 2003
    
    $
    1,510
    
    
    
    151,040,480
    
    
    $
    2,193,728
    
    
    $
    (213,197
    )
    
    $
    (237
    )
    
    $
    (1,267
    )
    
    $
    (20,869
    )
    
    $
    1,959,668Net Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101,313
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    101,313Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (126,883
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (126,883
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,334
    
    
    
    1,334Cancellation of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (91
    )
    
    
    91
    
    
    
    
    
    
    
    Amortization of restricted stock and units
    
    
    
    
    
    
    
    
    
    
    2,448
    
    
    
    
    
    
    
    
    
    
    
    221
    
    
    
    
    
    
    
    2,669Issuance of shares upon exercise of warrants and
stock options
    
    
    10
    
    
    
    1,013,549
    
    
    
    12,802
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,812Issuance of shares, ESPP
    
    
    1
    
    
    
    92,431
    
    
    
    1,331
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,332Intrinsic value option expense for vested options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    103
    
    
    
    
    
    
    
    103Fair value option expense
    
    
    
    
    
    
    
    
    
    
    1,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,200Forfeiture of stock options
    
    
    
    
    
    
    
    
    
    
    (54
    )
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    Amortization of outperformance plan
    
    
    
    
    
    
    
    
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90Treasury shares
    
    
    
    
    
    
    (13,603
    )
    
    
    
    
    
    
    
    
    
    
    (87
    )
    
    
    
    
    
    
    
    
    
    
    (87
    )
  F-9




---



##### Table of Contents



Trizec Properties, Inc.
    
    Consolidated Statements of Changes in Stockholders Equity (Continued)
 AccumulatedCommon Stock
    
    
    Additional
    
    
    (Restated)
    
    
    
    
    
    
    
    
    
    
    OtherPaid In
    
    
    Accumulated
    
    
    Treasury
    
    
    Unearned
    
    
    Comprehensive$
    
    
    Shares
    
    
    Capital
    
    
    Deficit
    
    
    Stock
    
    
    Compensation
    
    
    Income (Loss)
    
    
    TotalBalance at December 31, 2004
    
    $
    1,521
    
    
    
    152,132,857
    
    
    $
    2,211,545
    
    
    $
    (238,767
    )
    
    $
    (415
    )
    
    $
    (798
    )
    
    $
    (19,535
    )
    
    $
    1,953,551Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205,450
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205,450Dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (129,732
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (129,732
    )Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,709
    
    
    
    15,709Cancellation of restricted stock
    
    
    
    
    
    
    (22,600
    )
    
    
    
    
    
    
    
    
    
    
    (248
    )
    
    
    248
    
    
    
    
    
    
    
    Amortization of restricted stock,
restricted units and restricted
stock rights
    
    
    
    
    
    
    
    
    
    
    4,237
    
    
    
    
    
    
    
    
    
    
    
    104
    
    
    
    
    
    
    
    4,341Issuance of shares upon exercise
of warrants and stock options
    
    
    42
    
    
    
    4,166,102
    
    
    
    65,698
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    65,740Issuance of shares, ESPP
    
    
    1
    
    
    
    99,897
    
    
    
    1,779
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,780Dividend reinvestment
    
    
    
    
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14Issuance of shares upon vesting of
restricted stock, restricted units
and restricted stock rights
    
    
    1
    
    
    
    47,939
    
    
    
    (305
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (304
    )Fair value option expense
    
    
    
    
    
    
    
    
    
    
    87
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    87Amortization of outperformance plan
    
    
    
    
    
    
    
    
    
    
    536
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    536Treasury shares
    
    
    
    
    
    
    (4,331
    )
    
    
    
    
    
    
    
    
    
    
    (87
    )
    
    
    
    
    
    
    
    
    
    
    (87
    )Balance at December 31, 2005
    
    $
    1,565
    
    
    
    156,419,864
    
    
    $
    2,283,591
    
    
    $
    (163,049
    )
    
    $
    (750
    )
    
    $
    (446
    )
    
    $
    (3,826
    )
    
    $
    2,117,085
  F-10




---



##### Table of Contents



Trizec Properties, Inc.
    
    Consolidated Statements of Cash Flows
 For the years ended December 31,$ in thousands
    
    2005
    
    
    2004
    
    
    2003Cash Flows from Operating ActivitiesNet Income
    
    $
    205,450
    
    
    $
    101,313
    
    
    $
    203,753Adjustments to reconcile net income to net cash provided by
operating activities:Income from unconsolidated real estate joint ventures
    
    
    (14,997
    )
    
    
    (15,243
    )
    
    
    (23,336
    )Distributions from unconsolidated real estate joint ventures
    
    
    3,970
    
    
    
    15,243
    
    
    
    21,660Depreciation and amortization expense (including
discontinued operations)
    
    
    180,023
    
    
    
    166,008
    
    
    
    186,056Amortization of financing costs
    
    
    5,545
    
    
    
    7,293
    
    
    
    9,464Amortization of value of acquired operating leases to
rental revenue, net
    
    
    (3,314
    )
    
    
    (949
    )
    
    
    Provision for bad debt
    
    
    3,002
    
    
    
    4,845
    
    
    
    14,336Gain on disposition of real estate (including discontinued
operations)
    
    
    (133,220
    )
    
    
    (132,866
    )
    
    
    (70,185
    )Provision for loss on real estate (including discontinued
operations)
    
    
    3,531
    
    
    
    121,737
    
    
    
    18,164Provision for loss on investment
    
    
    
    
    
    
    14,558
    
    
    
    15,491Foreign currency exchange gain
    
    
    
    
    
    
    (3,340
    )
    
    
    Derivative gain
    
    
    
    
    
    
    (1,073
    )
    
    
    Loss (gain) on early debt retirement
    
    
    280
    
    
    
    7,032
    
    
    
    (2,262
    )Lawsuit and other settlements
    
    
    
    
    
    
    (94
    )
    
    
    (26,659
    )Minority interest
    
    
    1,045
    
    
    
    1,834
    
    
    
    1,626Amortization of equity compensation
    
    
    4,877
    
    
    
    2,759
    
    
    
    2,977Compensation charge for net settlement of warrants
    
    
    
    
    
    
    
    
    
    
    2,080Stock option grant expense
    
    
    87
    
    
    
    1,303
    
    
    
    1,054Cumulative effect of a change in accounting principle
    
    
    4,874
    
    
    
    
    
    
    
    3,845Changes in assets and liabilities:Escrows and restricted cash
    
    
    (18,520
    )
    
    
    3,787
    
    
    
    4,637Office tenant receivables
    
    
    (4,829
    )
    
    
    (3,133
    )
    
    
    4,891Other receivables
    
    
    1,755
    
    
    
    9,142
    
    
    
    3,471Deferred rent receivables
    
    
    (13,491
    )
    
    
    (18,952
    )
    
    
    (28,336
    )Prepaid expenses and other assets
    
    
    (8,757
    )
    
    
    23,737
    
    
    
    (36,287
    )Accounts payable, accrued liabilities and other liabilities
    
    
    (23,392
    )
    
    
    (16,261
    )
    
    
    (56,790
    )Net cash provided by operating activities
    
    
    193,919
    
    
    
    288,680
    
    
    
    249,650Cash Flows from Investing ActivitiesReal estate:Tenant improvements and capital expenditures
    
    
    (71,594
    )
    
    
    (96,509
    )
    
    
    (88,844
    )Tenant leasing costs
    
    
    (27,819
    )
    
    
    (32,295
    )
    
    
    (26,341
    )Acquisitions
    
    
    (553,532
    )
    
    
    (493,428
    )
    
    
    Dispositions
    
    
    424,519
    
    
    
    959,868
    
    
    
    573,713Development expenditures
    
    
    
    
    
    
    
    
    
    
    (903
    )Redemption of minority interest units
    
    
    
    
    
    
    (499
    )
    
    
    Payment of minority interest
    
    
    (259
    )
    
    
    (4,660
    )
    
    
    Contribution from minority interest
    
    
    
    
    
    
    1,011
    
    
    
    Cash from consolidation of joint venture
    
    
    
    
    
    
    
    
    
    
    9,659Escrows and restricted cash
    
    
    3,601
    
    
    
    14,031
    
    
    
    (30,701
    )Escrows and restricted cash from consolidation of joint venture
    
    
    
    
    
    
    
    
    
    
    2,594Unconsolidated real estate joint ventures:Investments
    
    
    (101,943
    )
    
    
    (49,708
    )
    
    
    (27,062
    )Distributions
    
    
    22,150
    
    
    
    238,308
    
    
    
    Net cash (used in) provided by investing activities
    
    
    (304,877
    )
    
    
    536,119
    
    
    
    412,115
  F-11




---



##### Table of Contents



Trizec Properties, Inc.
    
    Consolidated Statements of Cash Flows (Continued)
 For the years ended December 31,$ in thousands
    
    2005
    
    
    2004
    
    
    2003Cash Flows from Financing ActivitiesMortgage debt and other loans:Property financing
    
    
    
    
    
    
    120,000
    
    
    
    85,862Principal repayments
    
    
    (108,326
    )
    
    
    (882,297
    )
    
    
    (191,197
    )Repaid on dispositions
    
    
    (97,683
    )
    
    
    (279,827
    )
    
    
    (307,702
    )Draws on credit line
    
    
    459,500
    
    
    
    811,250
    
    
    
    160,100Paydowns on credit line
    
    
    (262,500
    )
    
    
    (661,250
    )
    
    
    (250,100
    )Acquisition financing
    
    
    
    
    
    
    286,500
    
    
    
    Financing expenditures
    
    
    (4,237
    )
    
    
    (10,909
    )
    
    
    (2,481
    )Escrows and restricted cash
    
    
    28,704
    
    
    
    (28,704
    )
    
    
    Settlement of forward rate contracts
    
    
    
    
    
    
    (3,767
    )
    
    
    (3,437
    )Settlement of swap agreements
    
    
    
    
    
    
    1,073
    
    
    
    Issuance of common stock
    
    
    67,520
    
    
    
    14,144
    
    
    
    8,335Dividends
    
    
    (129,787
    )
    
    
    (126,046
    )
    
    
    (94,099
    )Net cash used in financing activities
    
    
    (46,809
    )
    
    
    (759,833
    )
    
    
    (594,719
    )Net (Decrease) Increase in Cash and Cash Equivalents
    
    
    (157,767
    )
    
    
    64,966
    
    
    
    67,046Cash and Cash Equivalents, beginning of year
    
    
    194,265
    
    
    
    129,299
    
    
    
    62,253Cash and Cash Equivalents, end of year
    
    $
    36,498
    
    
    $
    194,265
    
    
    $
    129,299
  F-12




---



##### Table of Contents



Trizec Properties, Inc.
    
    Consolidated Statements of Cash Flows (Continued)
 For the years ended December 31,$ in thousands
    
    2005
    
    
    2004
    
    
    2003Supplemental cash flow disclosures:Cash paid (received) during the year for:Interest, inclusive of interest capitalized
    
    $
    141,949
    
    
    $
    154,131
    
    
    $
    176,417Interest capitalized to investment in unconsolidated real
estate joint ventures
    
    $
    667
    
    
    $
    
    
    
    $
    Taxes
    
    $
    24,465
    
    
    $
    (25,327
    )
    
    $
    55,378Write-off of accounts receivable
    
    $
    4,747
    
    
    $
    13,720
    
    
    $
    19,865Write-off of retired assets
    
    $
    32,965
    
    
    $
    41,671
    
    
    $
    48,962Non-cash investing and financing activities:Forgiveness of debt upon property disposition
    
    $
    
    
    
    $
    1,237
    
    
    $
    Forgiveness of debt upon conveyance of property
    
    $
    
    
    
    $
    
    
    
    $
    17,896Mortgage debt and other loans assumed by purchasers on
property dispositions
    
    $
    
    
    
    $
    41,106
    
    
    $
    25,594Dividends payable on common stock, special voting stock and
Class F convertible preferred stock
    
    $
    32,329
    
    
    $
    32,407
    
    
    $
    31,567Non-cash issuance of restricted stock
    
    $
    
    
    
    $
    
    
    
    $
    3,788Changes in accounts due to non-cash contribution into an
unconsolidated real estate joint venture:Investment in unconsolidated real estate joint ventures
    
    $
    
    
    
    $
    48,000
    
    
    $
    Real estate
    
    
    
    
    
    
    (48,000
    )
    
    
    Changes in accounts due to basis differential adjustment in
connection with non-cash contribution to an unconsolidated
real estate joint venture:Investment in unconsolidated real estate joint ventures
    
    $
    
    
    
    $
    5,148
    
    
    $
    Deferred rent receivables, net
    
    
    
    
    
    
    (1,768
    )
    
    
    Deferred charges, net
    
    
    
    
    
    
    (1,195
    )
    
    
    Prepaid expenses and other assets
    
    
    
    
    
    
    (2,185
    )
    
    
    
  F-13




---



##### Table of Contents



Trizec Properties, Inc.
    
    Consolidated Statements of Cash Flows (Continued)
 For the years ended December 31,$ in thousands
    
    2005
    
    
    2004
    
    
    2003In conjunction with the property and land acquisitions,
the following assets and liabilities were assumed:Purchase of real estate
    
    $
    554,276
    
    
    $
    496,254
    
    
    $
    Prepaid expenses and other assets, net
    
    
    22
    
    
    
    
    
    
    
    Accrued operating expenses and real estate taxes
    
    
    (460
    )
    
    
    (1,353
    )
    
    
    Other accrued liabilities
    
    
    (306
    )
    
    
    (1,473
    )
    
    
    Acquisition of real estate
    
    $
    553,532
    
    
    $
    493,428
    
    
    $
    Assets and liabilities from consolidation of joint venture:Net investment in real estate
    
    $
    
    
    
    $
    
    
    
    $
    84,696Other receivables
    
    
    
    
    
    
    
    
    
    
    2,140Prepaid expenses and other assets
    
    
    
    
    
    
    
    
    
    
    2,918Mortgage debt
    
    
    
    
    
    
    
    
    
    
    (81,517
    )Other accrued liabilities
    
    
    
    
    
    
    
    
    
    
    (3,274
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    (4,868
    )
  F-14




---



##### Table of Contents



Notes to the Consolidated Financial Statements$ in thousands, except share and per share amounts
 1.
    
    ORGANIZATION AND DESCRIPTION OF THE BUSINESS
 Organization
   Pending Acquisition
   UPREIT Structure
  F-15




---



##### Table of Contents



Notes to the Consolidated Financial Statements$ in thousands, except share and per share amounts
  2.
    
    SIGNIFICANT ACCOUNTING POLICIES
 Restatement
  Basis of Presentation
   Accounting Estimates
  Real Estate
   F-16




---



##### Table of Contents



Notes to the Consolidated Financial Statements$ in thousands, except share and per share amounts
    1)
    
    estimate the value of the property as if vacant as of the acquisition date;2)
    
    allocate the fair value of the property among land, site improvement, building,
and equipment and determine the associated asset life for each;3)
    
    estimate the fair value of the tenant improvements and calculate the associated
asset life;4)
    
    allocate the value of the above and below market leases to the intangible
assets and determine the associated life of the above/below market leases;5)
    
    allocate the value of the lease origination costs to the intangible assets and
calculate the associated asset life;6)
    
    calculate the intangible value to the in-place leases and the associated asset
life for each;7)
    
    calculate the value and associated asset life of the tenant relationships, if
any; and8)
    
    allocate the remaining value (if any) to goodwill and allocate to the purchase
price.
    F-17




---



##### Table of Contents



Notes to the Consolidated Financial Statements$ in thousands, except share and per share amounts
  Revenue Recognition
         Investments
  F-18




---



##### Table of Contents



Notes to the Consolidated Financial Statements$ in thousands, except share and per share amounts
      Income Taxes
     F-19




---



##### Table of Contents



Notes to the Consolidated Financial Statements$ in thousands, except share and per share amounts
  Cash and Cash Equivalents
  Escrows and Restricted Cash
  Deferred Charges
   Derivative Instruments
    F-20




---



##### Table of Contents



Notes to the Consolidated Financial Statements$ in thousands, except share and per share amounts
  Fair Value of Financial Instruments
   Stock Based Compensation
   F-21




---



##### Table of Contents



Notes to the Consolidated Financial Statements$ in thousands, except share and per share amounts


For the years ended December 31,2005
    
    
    2004
    
    
    2003Net income available to common
stockholders, as reported
    
    $
    201,012
    
    
    $
    96,489
    
    
    $
    198,527Add back:Stock option grant expense, as reported
    
    
    87
    
    
    
    1,303
    
    
    
    1,054Deduct:Stock option grant expense, pro forma
    
    
    (87
    )
    
    
    (1,705
    )
    
    
    (3,308
    )Net income available to common
stockholders, pro forma
    
    $
    201,012
    
    
    $
    96,087
    
    
    $
    196,273Net income available to common
stockholders per weighted average common
share outstanding:Basic, as reported
    
    $
    1.30
    
    
    $
    0.64
    
    
    $
    1.32Basic, pro forma
    
    $
    1.30
    
    
    $
    0.63
    
    
    $
    1.31Diluted, as reported
    
    $
    1.27
    
    
    $
    0.63
    
    
    $
    1.32Diluted, pro forma
    
    $
    1.27
    
    
    $
    0.63
    
    
    $
    1.30
  Recent Accounting Pronouncements
  F-22




---



##### Table of Contents



Notes to the Consolidated Financial Statements$ in thousands, except share and per share amounts
    Earnings Per Share
  3.
    
    REAL ESTATE
  December 31,2005
    
    
    2004Properties:Held for the long term, net
    
    $
    3,749,836
    
    
    $
    3,621,634Held for disposition, net
    
    
    147,545
    
    
    
    94,515$
    3,897,381
    
    
    $
    3,716,149
 Properties  Held for the Long Term
 December 31,2005
    
    
    2004Rental properties:Land
    
    $
    563,729
    
    
    $
    510,662Buildings and improvements
    
    
    3,483,814
    
    
    
    3,399,132Tenant improvements
    
    
    302,878
    
    
    
    278,794Furniture, fixtures and equipment
    
    
    13,941
    
    
    
    9,4694,364,362
    
    
    
    4,198,057Less: accumulated depreciation
    
    
    (638,956
    )
    
    
    (600,853
    )3,725,406
    
    
    
    3,597,204Properties held for development
    
    
    24,430
    
    
    
    24,430Properties held for the long term, net
    
    $
    3,749,836
    
    
    $
    3,621,634
 F-23




---



##### Table of Contents



Notes to the Consolidated Financial Statements$ in thousands, except share and per share amounts
 Properties  Held for Disposition
 December 31,2005
    
    
    2004Rental Properties:Land
    
    $
    5,704
    
    
    $
    9,229Buildings and improvements
    
    
    164,343
    
    
    
    94,863Tenant improvements
    
    
    11,985
    
    
    
    8,580182,032
    
    
    
    112,672Less: accumulated depreciation
    
    
    (34,487
    )
    
    
    (18,157
    )Properties held for disposition, net
    
    $
    147,545
    
    
    $
    94,515
 (i)
    
    The table below summarizes the Corporations properties designated as held for
disposition subject to the transition rules of SFAS No. 144 and, accordingly, accounted
for pursuant to Statement of Financial Accounting Standards No. 121, Accounting for
the Impairment of Long-Lived Assets to be Disposed Of (SFAS No. 121).
 Date Designated as
    
    
    DateProperty
    
    Location
    
    
    Held for Disposition
    
    
    DisposedPaseo Colorado
    
    Pasadena, CA
    
    Dec-01
    
    Jan-03151 Front Street
    
    Toronto, ON
    
    Apr-02
    
    Jan-04
   For the years ended December 31,2005
    
    
    2004
    
    
    2003Total revenues
    
    $
    
    
    
    $
    484
    
    
    $
    12,265Operating expenses
    
    
    
    
    
    
    (419
    )
    
    
    (6,280
    )Property taxes
    
    
    
    
    
    
    (75
    )
    
    
    (1,732
    )Interest expense
    
    
    
    
    
    
    (100
    )
    
    
    (1,417
    )(Loss) Income before
gain on disposition of
real estate, net
    
    $
    
    
    
    $
    (110
    )
    
    $
    2,836
 F-24




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##### Table of Contents



Notes to the Consolidated Financial Statements$ in thousands, except share and per share amounts
 (ii)
    
    The table below summarizes the Corporations properties designated as held
for disposition pursuant to SFAS No. 144.
 DateDesignatedas Held for
    
    Provision
    
    DateProperty
    
    Location
    
    Disposition
    
    Taken
    
    DisposedGoddard Corporate Park
    
    Lanham, MD
    
    Dec-02
    
    $
    9,782
    
    
    Feb-03Rosslyn Gateway
    
    Arlington, VA
    
    Dec-02
    
    
    
    
    
    Mar-03Esperante Office Building
    
    W. Palm Beach, FL
    
    Mar-03
    
    
    
    
    
    Sep-03Clark Tower
    
    Memphis, TN
    
    Jun-03
    
    
    14,592
    
    
    Aug-03Minnesota Center
    
    Minneapolis, MN
    
    Sep-03
    
    
    3,572
    
    
    Oct-039800 La Cienega
    
    Los Angeles, CA
    
    Dec-03
    
    
    
    
    
    Nov-03Park Central II
    
    Dallas, TX
    
    Dec-03
    
    
    
    
    
    Dec-03Desert Passage
    
    Las Vegas, NV
    
    Dec-03
    
    
    57,024
    
    
    Dec-03Hollywood & Highland Retail
    
    Los Angeles, CA
    
    Feb-04
    
    
    142,431
    
    
    Feb-04Hollywood & Highland Hotel
    
    Los Angeles, CA
    
    Feb-04
    
    
    
    
    
    Feb-041441 Main Street
    
    Columbia, SC
    
    Jun-04
    
    
    
    
    
    Jun-04St. Louis Place
    
    St. Louis, MO
    
    Jun-04
    
    
    
    
    
    Jun-04Borden Building
    
    Columbus, OH
    
    Jun-04
    
    
    22,095
    
    
    Jul-04Park Central I
    
    Dallas, TX
    
    Jun-04
    
    
    2,703
    
    
    Aug-041333 Main Street
    
    Columbia, SC
    
    Jun-04
    
    
    7,023
    
    
    Aug-043700 Bay Area Blvd.
    
    Houston, TX
    
    Jun-04
    
    
    
    
    
    Sep-04Lakeside Centre and New
Market Business Park
    
    Atlanta, GA
    
    Jun-04
    
    
    10,261
    
    
    Dec-04Bank of America-Columbia
    
    Columbia, SC
    
    Jun-04
    
    
    3,525
    
    
    Dec-04Williams Center I & II
    
    Tulsa, OK
    
    Jun-04
    
    
    26,582
    
    
    Jan-06Capital Center II & III
    
    Sacramento, CA
    
    Sep-04
    
    
    
    
    
    Sep-04Silver Spring Centre
    
    Silver Spring, MD
    
    Sep-04
    
    
    
    
    
    Nov-04Gateway Center
    
    Pittsburgh, PA
    
    Sep-04
    
    
    40,330
    
    
    Dec-04110 William Street
    
    New York, NY
    
    Sep-04
    
    
    
    
    
    Dec-04250 West Pratt Street
    
    Baltimore, MD
    
    Sep-04
    
    
    
    
    
    Dec-04Shoreline Square
    
    Long Beach, CA
    
    Sep-04
    
    
    
    
    
    April-05Northstar Center
    
    Minneapolis, MN
    
    Jun-05
    
    
    
    
    
    N/AMetropolitan Square
    
    St. Louis, MO
    
    Jun-05
    
    
    
    
    
    Jul-05Watergate Office Building
    
    Washington, D.C.
    
    Jun-05
    
    
    
    
    
    Oct-05Twinbrook Metro Plaza
    
    Rockville, MD
    
    Sep-05
    
    
    
    
    
    Oct-05Beaumeade Corporate Park
    
    Ashburn, VA
    
    Sep-05
    
    
    
    
    
    Oct-05First Citizens
    
    Charlotte, NC
    
    Dec-05
    
    
    
    
    
    Mar-06
  F-25




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##### Table of Contents



Notes to the Consolidated Financial Statements$ in thousands, except share and per share amounts
  For the years ended December 31,2005
    
    
    2004
    
    
    2003Total revenues
    
    $
    69,697
    
    
    $
    197,493
    
    
    $
    302,052Operating expenses
    
    
    (32,182
    )
    
    
    (87,469
    )
    
    
    (140,483
    )Property taxes
    
    
    (707
    )
    
    
    (17,172
    )
    
    
    (25,265
    )Depreciation and amortization
    
    
    (9,270
    )
    
    
    (33,364
    )
    
    
    (63,121
    )Provision for loss on discontinued real estate
    
    
    (3,531
    )
    
    
    (108,988
    )
    
    
    (18,164
    )Interest and other income
    
    
    403
    
    
    
    3,810
    
    
    
    1,231Interest expense
    
    
    (5,844
    )
    
    
    (22,738
    )
    
    
    (44,543
    )Income and other taxes
    
    
    1,048
    
    
    
    
    
    
    
    Income from discontinued operations before
cumulative effect of a change in accounting
principle
    
    $
    19,614
    
    
    $
    (68,428
    )
    
    $
    11,707
 Acquisitions of Real Estate During the Year Ended December 31, 2005
 NetDate
    
    
    
    
    
    
    
    
    
    Rentable
    
    
    PurchasePurchased
    
    Property
    
    
    Location
    
    
    Sq. Ft.
    
    
    Price(unaudited)April 28
    
    1200 K Street, N.W.
    
    Washington, D.C.
    
    
    389,000
    
    
    $
    194,288July 20
    
    Figueroa at Wilshire
    
    Los Angeles, CA
    
    
    1,039,000
    
    
    
    359,988$
    554,276
    1200 K Street,
    
    
    Figueroa atN.W.
    
    
    Wilshire
    
    
    TotalLand
    
    $
    48,252
    
    
    $
    31,975
    
    
    $
    80,227Building and improvements
    
    
    119,700
    
    
    
    291,446
    
    
    
    411,146Tenant improvements
    
    
    7,114
    
    
    
    10,550
    
    
    
    17,664Leasing commissions
    
    
    9,748
    
    
    
    7,292
    
    
    
    17,040In-place lease value at market
    
    
    32,857
    
    
    
    18,002
    
    
    
    50,859Tenant relationship value
    
    
    19,108
    
    
    
    10,129
    
    
    
    29,237Above market lease value
    
    
    
    
    
    
    2,173
    
    
    
    2,173Below market lease value
    
    
    (42,491
    )
    
    
    (11,579
    )
    
    
    (54,070
    )$
    194,288
    
    
    $
    359,988
    
    
    $
    554,276
 F-26




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##### Table of Contents



Notes to the Consolidated Financial Statements
 Acquisitions of Real Estate During the Year Ended December 31, 2004
 NetDate
    
    
    
    
    
    Rentable
    
    
    PurchasePurchased
    
    Property
    
    Location
    
    Sq. Ft.
    
    
    Price(unaudited)August 27
    
    Bank of America Plaza
    
    Los Angeles, CA
    
    
    1,422,000
    
    
    $
    420,693November 12
    
    2001 M Street
    
    Washington, D.C.
    
    
    229,000
    
    
    
    75,561
    (1)$
    496,254
 
 (1)
    
    Value of acquired interest
    Bank ofAmerica Plaza
    
    
    2001 M Street
    
    
    TotalLand
    
    $
    51,774
    
    
    $
    24,920
    
    
    $
    76,694Building and Improvements
    
    
    292,471
    
    
    
    46,763
    
    
    
    339,234Chiller Plant
    
    
    11,151
    
    
    
    
    
    
    
    11,151Tenant Improvements
    
    
    9,520
    
    
    
    1,501
    
    
    
    11,021Leasing Commissions
    
    
    6,608
    
    
    
    1,049
    
    
    
    7,657In-Place Lease Value at Market
    
    
    26,563
    
    
    
    6,390
    
    
    
    32,953Tenant Relationship Value
    
    
    27,269
    
    
    
    5,792
    
    
    
    33,061Above Market Lease Value
    
    
    5,477
    
    
    
    67
    
    
    
    5,544Below Market Lease Value
    
    
    (10,140
    )
    
    
    (10,921
    )
    
    
    (21,061
    )$
    420,693
    
    
    $
    75,561
    
    
    $
    496,254
 Ground Lease Obligations
  Years ending December 31, 2006
    
    
    
    
    
    $
    1,0502007
    
    
    
    
    
    
    1,1292008
    
    
    
    
    
    
    1,1292009
    
    
    
    
    
    
    1,1292010
    
    
    
    
    
    
    1,129Thereafter
    
    
    
    
    
    
    220,573$
    226,139
 F-27




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##### Table of Contents



Notes to the Consolidated Financial Statements
  Future Minimum Rents
  Years ending December 31, 2006
    
    
    
    
    
    $
    464,1382007
    
    
    
    
    
    
    432,7362008
    
    
    
    
    
    
    398,8022009
    
    
    
    
    
    
    365,1782010
    
    
    
    
    
    
    311,566Thereafter
    
    
    
    
    
    
    1,272,575$
    3,244,995
 4.
    
    UNCONSOLIDATED REAL ESTATE JOINT VENTURES
   Legal Interest(1)December 31,Entity
    
    Property and Location
    
    2005
    
    2004Marina Airport Building, Ltd.
    
    Marina Towers, Los Angeles, CA
    
    
    50
    %
    
    
    50
    %Dresser Cullen Venture
    
    Kellogg, Brown & Root Tower, Houston, TX
    
    
    50
    %
    
    
    50
    %Main Street Partners, L.P.
    
    Bank One Center, Dallas, TX
    
    
    50
    %
    
    
    50
    %1114 TrizecHahn-Swig, L.L.C.
    
    The Grace Building, New York, NY
    
    
    50
    %
    
    
    50
    %1411 TrizecHahn-Swig, L.L.C.
    
    1411 Broadway, New York, NY
    
    
    50
    %
    
    
    50
    %1460 Leasehold TrizecHahn Swig
L.L.C./1460 Fee TrizecHahn Swig
L.L.C.
    
    1460 Broadway, New York, NY
    
    
    50
    %
    
    
    50
    %Trizec Plaza of the Americas, L.P.
    
    Plaza of the Americas, Dallas, TX
    
    
    50
    %
    
    
    50
    %Waterview Investor, L.P.
    
    Waterview Development, Arlington, VA
    
    
    25
    %
    
    
    25
    %750 Ninth Street Parent, L.L.C.
    
    Victor Building, Washington, D.C.
    
    
    50
    %
    
    
    
 
 (1)
    
    The amounts shown above approximate the Corporations legal ownership interest
as of December 31, 2005 and December 31, 2004. Cash flows from operations, capital
transactions and net income are allocated to the joint venture partners in accordance with
their respective partnership agreements. The Corporations share of these items is subject to
change based on, among other things, the operations of the property and the timing and amount
of capital transactions. Unconsolidated Real Estate Joint Venture Financial Information
  F-28




---



##### Table of Contents



Notes to the Consolidated Financial Statements
 Balance Sheet Information
 December 31,2005
    
    
    2004The Grace
    
    
    Other Joint
    
    
    
    
    
    
    The Grace
    
    
    Other JointBuilding
    
    
    Ventures
    
    
    Total
    
    
    Building
    
    
    Ventures
    
    
    TotalAssetsReal estate, net
    
    $
    48,496
    
    
    $
    644,452
    
    
    $
    692,948
    
    
    $
    49,799
    
    
    $
    471,962
    
    
    $
    521,761Other assets
    
    
    79,454
    
    
    
    177,455
    
    
    
    256,909
    
    
    
    70,483
    
    
    
    143,970
    
    
    
    214,453Total Assets
    
    $
    127,950
    
    
    $
    821,907
    
    
    $
    949,857
    
    
    $
    120,282
    
    
    $
    615,932
    
    
    $
    736,214LiabilitiesMortgage debt and other loans
    
    $
    381,000
    
    
    $
    476,509
    
    
    $
    857,509
    
    
    $
    381,000
    
    
    $
    469,908
    
    
    $
    850,908Other liabilities
    
    
    15,401
    
    
    
    43,336
    
    
    
    58,737
    
    
    
    8,448
    
    
    
    25,198
    
    
    
    33,646Partners equity
    
    
    (268,451
    )
    
    
    302,062
    
    
    
    33,611
    
    
    
    (269,166
    )
    
    
    120,826
    
    
    
    (148,340
    )Total Liabilities and Equity
    
    $
    127,950
    
    
    $
    821,907
    
    
    $
    949,857
    
    
    $
    120,282
    
    
    $
    615,932
    
    
    $
    736,214Corporations share of equity
    
    
    
    
    
    
    
    
    
    $
    1,580
    
    
    
    
    
    
    
    
    
    
    $
    (91,486
    )Net excess of cost of
investments over the net book value
of underlying assets
    
    
    
    
    
    
    
    
    
    
    160,832
    
    
    
    
    
    
    
    
    
    
    
    162,137Reclassification of
distributions in excess of
investments in unconsolidated real
estate joint ventures
    
    
    
    
    
    
    
    
    
    
    44,190
    
    
    
    
    
    
    
    
    
    
    
    43,188Carrying Value of
Corporations Investment In
Unconsolidated Real Estate Joint
Ventures
    
    
    
    
    
    
    
    
    
    $
    206,602
    
    
    
    
    
    
    
    
    
    
    $
    113,839Corporations Share of Mortgage Debt
    
    
    
    
    
    
    
    
    
    $
    413,710
    
    
    
    
    
    
    
    
    
    
    $
    420,160
 F-29




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##### Table of Contents



Notes to the Consolidated Financial Statements
 Income Statement Information
 For the Years Ended December 31,2005
    
    
    2004
    
    
    2003Other
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    
    
    
    
    OtherThe Grace
    
    
    Joint
    
    
    
    
    
    
    The Grace
    
    
    Joint
    
    
    
    
    
    
    The Grace
    
    
    JointBuilding
    
    
    Ventures
    
    
    Total
    
    
    Building
    
    
    Ventures
    
    
    Total
    
    
    Building
    
    
    Ventures
    
    
    TotalTotal Revenues
    
    $
    78,051
    
    
    $
    139,885
    
    
    $
    217,936
    
    
    $
    72,170
    
    
    $
    132,352
    
    
    $
    204,522
    
    
    $
    70,127
    
    
    $
    142,986
    
    
    $
    213,113ExpensesOperating and other
    
    
    31,901
    
    
    
    70,841
    
    
    
    102,742
    
    
    
    29,788
    
    
    
    70,280
    
    
    
    100,068
    
    
    
    30,688
    
    
    
    69,887
    
    
    
    100,575Depreciation and
amortization
    
    
    6,083
    
    
    
    21,790
    
    
    
    27,873
    
    
    
    5,443
    
    
    
    19,542
    
    
    
    24,985
    
    
    
    5,010
    
    
    
    21,904
    
    
    
    26,914Total Expenses
    
    
    37,984
    
    
    
    92,631
    
    
    
    130,615
    
    
    
    35,231
    
    
    
    89,822
    
    
    
    125,053
    
    
    
    35,698
    
    
    
    91,791
    
    
    
    127,489Other Income (Expense)Interest and other income
    
    
    624
    
    
    
    1,273
    
    
    
    1,897
    
    
    
    362
    
    
    
    481
    
    
    
    843
    
    
    
    214
    
    
    
    388
    
    
    
    602(Loss) Gain on early
debt retirement
    
    
    
    
    
    
    (1,507
    )
    
    
    (1,507
    )
    
    
    (5,406
    )
    
    
    (4,857
    )
    
    
    (10,263
    )
    
    
    
    
    
    
    4,125
    
    
    
    4,125Interest expense
    
    
    (22,326
    )
    
    
    (26,957
    )
    
    
    (49,283
    )
    
    
    (16,728
    )
    
    
    (25,878
    )
    
    
    (42,606
    )
    
    
    (9,671
    )
    
    
    (28,256
    )
    
    
    (37,927
    )Total Other Expense
    
    
    (21,702
    )
    
    
    (27,191
    )
    
    
    (48,893
    )
    
    
    (21,772
    )
    
    
    (30,254
    )
    
    
    (52,026
    )
    
    
    (9,457
    )
    
    
    (23,743
    )
    
    
    (33,200
    )Income before Gain on
Disposition of Real Estate
    
    
    18,365
    
    
    
    20,063
    
    
    
    38,428
    
    
    
    15,167
    
    
    
    12,276
    
    
    
    27,443
    
    
    
    24,972
    
    
    
    27,452
    
    
    
    52,424Gain on disposition of real
estate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,080
    
    
    
    1,080
    
    
    
    
    
    
    
    1,136
    
    
    
    1,136Income before Cumulative
Effect of a Change in
Accounting Principle
    
    
    18,365
    
    
    
    20,063
    
    
    
    38,428
    
    
    
    15,167
    
    
    
    13,356
    
    
    
    28,523
    
    
    
    24,972
    
    
    
    28,588
    
    
    
    53,560Cumulative effect of a
change in accounting
principle
    
    
    (549
    )
    
    
    (1,197
    )
    
    
    (1,746
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income
    
    $
    17,816
    
    
    $
    18,866
    
    
    $
    36,682
    
    
    $
    15,167
    
    
    $
    13,356
    
    
    $
    28,523
    
    
    $
    24,972
    
    
    $
    28,588
    
    
    $
    53,560Corporations Share of
Income before Cumulative
Effect of a Change in
Accounting Principle
    
    $
    7,993
    
    
    $
    7,004
    
    
    $
    14,997
    
    
    $
    6,509
    
    
    $
    8,734
    
    
    $
    15,243
    
    
    $
    11,330
    
    
    $
    12,006
    
    
    $
    23,336
 F-30




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##### Table of Contents



Notes to the Consolidated Financial Statements
 750 Ninth Street Parent, L.L.C
 th
  Victor BuildingLand
    
    $
    44,767Building and improvements
    
    
    94,096Tenant improvements
    
    
    8,004Leasing commissions
    
    
    7,524In-place lease value at market
    
    
    12,262Tenant relationship value
    
    
    2,589Below market lease value
    
    
    (9,382
    )$
    159,860
  Waterview Investor, L.P.
    F-31




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##### Table of Contents



Notes to the Consolidated Financial Statements
  Marina Airport Building, Ltd.
  1460 Leasehold TrizecHahn Swig L.L.C. and 1460 Fee TrizecHahn Swig L.L.C.
  1114 TrizecHahn-Swig, L.L.C. and 1411 TrizecHahn-Swig, L.L.C.
   Main Street Partners, L.P.
  F-32




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##### Table of Contents



Notes to the Consolidated Financial Statements
   Trizec Plaza of the Americas, L.P.
   Contributions, Advances and Distributions
     F-33




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##### Table of Contents



Notes to the Consolidated Financial Statements
 5. CONSOLIDATED REAL ESTATE JOINT VENTURES
  Legal Interest(1)December 31,Entity
    
    Property and Location
    
    2005
    
    2004TrizecHahn 1065 Avenue of the Americas L.L.C.
    
    1065 Avenue of the Americas, New York, NY
    
    
    99.0
    %
    
    
    99.0
    %Trizec 2001 M Street Holdings
L.L.C.
    
    2001 M Street, Washington, D.C.
    
    
    98.0
    %
    
    
    98.0
    %TrizecHahn Mid-Atlantic I Limited
Partnership
    
    Various
    
    
    98.0
    %
    
    
    98.0
    %
 
 (1)
 TrizecHahn Mid-Atlantic I Limited Partnership
  6. DEFERRED CHARGES
  December 31,2005
    
    
    2004Leasing costs
    
    $
    172,415
    
    
    $
    152,521Financing costs
    
    
    34,011
    
    
    
    31,950206,426
    
    
    
    184,471Less: Accumulated amortization
    
    
    (82,365
    )
    
    
    (68,802
    )$
    124,061
    
    
    $
    115,669
 F-34




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##### Table of Contents



Notes to the Consolidated Financial Statements
 7. MORTGAGE DEBT, OTHER LOANS AND UNSECURED CREDIT FACILITY
 Total DebtDecember 31, 2005
    
    December 31, 2004Weighted
    
    
    
    
    
    WeightedAverage
    
    Principal
    
    Average
    
    PrincipalInterest Rates
    
    Balance
    
    Interest Rates
    
    BalanceCollateralized property loans:At fixed rates (1)
    
    
    6.26
    %
    
    $
    1,847,095
    
    
    
    6.31
    %
    
    $
    2,024,055Other loans:At fixed rates
    
    
    6.57
    %
    
    
    16,178
    
    
    
    6.43
    %
    
    
    45,227Total collateralized property and
other loans
    
    
    6.26
    %
    
    $
    1,863,273
    
    
    
    6.32
    %
    
    $
    2,069,282Unsecured credit facility:At fixed rates (1)
    
    
    6.57
    %
    
    $
    60,245
    
    
    
    7.12
    %
    
    $
    41,229At variable rates
    
    
    5.38
    %
    
    
    286,755
    
    
    
    3.87
    %
    
    
    108,771Total unsecured credit facility
    
    
    5.59
    %
    
    $
    347,000
    
    
    
    4.76
    %
    
    $
    150,0006.16
    %
    
    $
    2,210,273
    
    
    
    6.21
    %
    
    $
    2,219,282
 
 (1)
    
    Includes $150,000 of variable rate debt that has been fixed through interest
rate swap contracts at December 31, 2005 and 2004, see discussion below.
  Collateralized Property Loans
     F-35




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##### Table of Contents



Notes to the Consolidated Financial Statements
   Collateralized
    
    
    OtherProperty Loans
    
    
    Loans
    
    
    TotalYears ending December 31, 2006
    
    $
    402,450
    
    
    $
    224
    
    
    $
    402,6742007
    
    
    77,574
    
    
    
    259
    
    
    
    77,8332008
    
    
    402,716
    
    
    
    276
    
    
    
    402,9922009
    
    
    14,876
    
    
    
    295
    
    
    
    15,1712010
    
    
    104,208
    
    
    
    314
    
    
    
    104,522Subsequent
to                  2010
    
    
    845,271
    
    
    
    14,810
    
    
    
    860,081$
    1,847,095
    
    
    $
    16,178
    
    
    $
    1,863,273
  Early Debt Retirement and Refinancing
 Year Ended December 31, 2005
     F-36




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Notes to the Consolidated Financial Statements
   Year Ended December 31, 2004
        F-37




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##### Table of Contents



Notes to the Consolidated Financial Statements
 Year Ended December 31, 2003
    Unsecured Credit Facility
   F-38




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##### Table of Contents



Notes to the Consolidated Financial Statements
  Limitations on Indebtedness
  8. PROVISION FOR LOSS ON REAL ESTATE
  9. PROVISION FOR LOSS AND RECOVERY OF PROVISION FOR LOSS ON DISCONTINUED REAL ESTATE
     F-39




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Notes to the Consolidated Financial Statements
     10. LOSS ON AND PROVISION FOR LOSS ON INVESTMENT
   F-40




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##### Table of Contents



Notes to the Consolidated Financial Statements
 11. INCOME AND OTHER CORPORATE TAXES
 Reconciliation of Net Income to Taxable Income
  For the years ended December 31,2005
    
    
    2004
    
    
    2003Net Income Available to Common Stockholders
    
    $
    201,012
    
    
    $
    96,489
    
    
    $
    198,527Elimination of earnings from unconsolidated
subsidiaries
    
    
    (39,198
    )
    
    
    (18,412
    )
    
    
    6,897Special dividend not deductible for tax purposes
    
    
    4,438
    
    
    
    4,824
    
    
    
    5,226Federal income tax benefit
    
    
    (3,810
    )
    
    
    (1,520
    )
    
    
    (50,178
    )Book/tax differences on losses from disposition
    
    
    (92,935
    )
    
    
    (144,020
    )
    
    
    (56,423
    )Straight-line rent adjustments
    
    
    (12,014
    )
    
    
    (19,010
    )
    
    
    (26,305
    )Depreciation and amortization timing differences
    
    
    60,990
    
    
    
    36,819
    
    
    
    35,143Net operating loss utilized
    
    
    
    
    
    
    (34,172
    )
    
    
    (4,437
    )Provision for losses not deductible for tax
    
    
    
    
    
    
    136,295
    
    
    
    Dividend income from taxable REIT subsidiaries
    
    
    2,000
    
    
    
    21,252
    
    
    
    Other book/tax differences, net
    
    
    (9,611
    )
    
    
    (5,238
    )
    
    
    16,980REIT Taxable Income
    
    $
    110,872
    
    
    $
    73,307
    
    
    $
    125,430
 Benefit (Provision) for Income and Other Corporate Taxes
  For the years ended December 31,2005
    
    
    2004
    
    
    2003Provision computed at combined federal
and state statutory rates
    
    $
    
    
    
    $
    
    
    
    $
    Franchise, income, alternative minimum
and foreign tax
    
    
    622
    
    
    
    (3,963
    )
    
    
    (6,102
    )Capital loss carryback
    
    
    
    
    
    
    730
    
    
    
    26,902Change in reserve
    
    
    3,132
    
    
    
    (1,146
    )
    
    
    20,977Benefit (Provision) from operations
    
    
    3,754
    
    
    
    (4,379
    )
    
    
    41,777Benefit from discontinued operations
    
    
    1,048
    
    
    
    
    
    
    
    (Provision) Benefit on gains and losses
    
    
    (1,973
    )
    
    
    (9,218
    )
    
    
    2,333Total benefits (provisions)
    
    $
    2,829
    
    
    $
    (13,597
    )
    
    $
    44,110
   F-41




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##### Table of Contents



Notes to the Consolidated Financial Statements
   12. GAIN (LOSS) ON DISPOSITION OF REAL ESTATE
  Gain (Loss) on Disposition of Real Estate, Net, During the Year Ended December 31, 2004
 Date
    
    
    
    
    
    
    
    
    
    Rentable
    
    
    Net Sale
    
    
    Gain (Loss)Sold
    
    Property
    
    
    Location
    
    
    Sq. Ft.
    
    
    Price
    
    
    On Sale(unaudited)January 15
    
    151 Front Street
    
    Toronto, ON
    
    
    272,000
    
    
    $
    58,228
    
    
    $
    20,343May 10
    
    Residual land
    
    Sarasota, FL
    
    
    
    
    
    
    1,005
    
    
    
    1,005May 18
    
    Plaza of the Americas(l)
    
    Dallas, TX
    
    
    588,000
    (2)
    
    $
    47,794
    
    
    
    (20,724
    )June 14
    
    Woodbridge land
    
    Woodbridge, VA
    
    
    
    
    
    
    15,359
    
    
    
    7,380November 23
    
    Residual Land
    
    Woodbridge, VA
    
    
    
    
    
    
    4,489
    
    
    
    4,489$
    126,875
    
    
    $
    12,493Tax expense related to sale
    
    
    
    
    (5,135
    )Gain on disposition of real estate, net


    
    
    
    $
    7,358
 
 (1)
    
    On May 18, 2004, the Corporation sold a 50% interest in Plaza of the
Americas and formed Trizec Plaza of the Americas, L.P. joint venture.(2)
    
    Represents 50% of rentable square feet.
  Gain on Disposition of Real Estate During the Year Ended December 31, 2003
 Date
    
    
    
    
    
    
    
    
    
    Rentable
    
    
    Net Sales
    
    
    GainSold
    
    Property
    
    
    Location
    
    
    Sq.ft.
    
    
    Price
    
    
    On Sale(unaudited)January 15
    
    Paseo Colorado
    
    Pasadena, CA
    
    
    410,000
    
    
    $
    111,402
    
    
    $
    13,605Gain on disposition of real estate
    
    $
    111,402
    
    
    $
    13,605
 F-42




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##### Table of Contents



Notes to the Consolidated Financial Statements
 13.
    
    GAIN (LOSS) ON DISPOSITION OF DISCONTINUED REAL ESTATEDuring the three years ended December 31, 2005, the Corporation sold the following
properties that had been designated as held for disposition pursuant to SFAS No. 144:Gain on Disposition of Discontinued Real Estate, Net, During the Year Ended December 31,
2005 for Properties Designated as Held for Disposition Pursuant to SFAS No. 144
 Date
    
    
    
    
    
    
    
    
    Rentable
    
    
    Net Sales
    
    
    GainSold
    
    
    Property
    
    Location
    
    
    Sq. Ft.
    
    
    Price
    
    
    On Sale(unaudited)April 7
    
    Shoreline Square
    
    Long Beach, CA
    
    
    383,000
    
    
    $
    86,668
    
    
    $
    21,423July 29
    
    Metropolitan Square
    
    St. Louis, MO
    
    
    1,041,000
    
    
    
    149,910
    
    
    
    20,507October 7
    
    Watergate Office Building
    
    Washington, D.C.
    
    
    261,000
    
    
    
    84,933
    
    
    
    39,364October 18
    
    Twinbrook Metro Plaza
    
    Rockville, MD
    
    
    165,000
    
    
    
    50,731
    
    
    
    24,414October 18
    
    Beaumeade Corporate Park
    
    Ashburn, VA
    
    
    460,000
    
    
    
    52,395
    
    
    
    29,606$
    424,637
    
    
    $
    135,314Tax expense related to sales, net
    
    
    
    
    
    
    (2,293
    )Gain on disposition of discontinued real estate, net
    
    
    
    
    
    $
    133,021
 Gain (Loss) on Disposition of Discontinued Real Estate, Net, During the Year Ended December
31, 2004 for Properties Designated as Held for Disposition Pursuant to SFAS No. 144
 Date
    
    
    
    
    
    
    
    
    Rentable
    
    
    Net Sales
    
    
    Gain (Loss)Sold
    
    
    Property
    
    Location
    
    
    Sq. Ft.
    
    
    Price
    
    
    On Sale(unaudited)February 27
    
    Hollywood & Highland Retail
    
    Los Angeles, CA
    
    
    645,000
    
    
    $
    114,415
    
    
    $
    23,583February 27
    
    Hollywood & Highland Hotel
    
    Los Angeles, CA
    
    
    600,000
    
    
    
    84,332
    
    
    
    8,607June 24
    
    1441 Main Street
    
    Columbia, SC
    
    
    274,000
    
    
    
    26,415
    
    
    
    6,020June 30
    
    St. Louis Place
    
    St. Louis, MO
    
    
    337,000
    
    
    
    30,097
    
    
    
    (8,847
    )July 30
    
    Borden Building
    
    Columbus, OH
    
    
    569,000
    
    
    
    28,305
    
    
    
    (274
    )August 20
    
    Park Central I
    
    Dallas, TX
    
    
    128,000
    
    
    
    4,668
    
    
    
    (281
    )August 27
    
    1333 Main Street
    
    Columbia, SC
    
    
    225,000
    
    
    
    12,087
    
    
    
    112September 22
    
    Capital Center II & III
    
    Sacramento, CA
    
    
    529,000
    
    
    
    68,940
    
    
    
    15,600September 28
    
    3700 Bay Area Blvd
    
    Houston, TX
    
    
    399,000
    
    
    
    41,992
    
    
    
    3,725November 30
    
    Silver Spring Centre
    
    Silver Spring, MD
    
    
    216,000
    
    
    
    37,018
    
    
    
    15,323December 1
    
    Lakeside Centre/New Market
Business Park
    
    Atlanta, GA
    
    
    1,135,000
    
    
    
    91,423
    
    
    
    206December 10
    
    Gateway Center
    
    Pittsburgh, PA
    
    
    1,468,000
    
    
    
    51,185
    
    
    
    7,692December 16
    
    110 William Street
    
    New York, NY
    
    
    868,000
    
    
    
    158,472
    
    
    
    55,177December 17
    
    250 West Pratt Street
    
    Baltimore, MD
    
    
    368,000
    
    
    
    50,509
    
    
    
    3,551December 30
    
    Bank of America Plaza
    
    Columbia, SC
    
    
    303,000
    
    
    
    33,135
    
    
    
    (603
    )$
    832,993
    
    
    $
    129,591Tax expense related to sales, net
    
    
    
    
    
    
    (4,083
    )Gain on disposition of discontinued real estate, net
    
    
    
    
    
    $
    125,508
 F-43




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##### Table of Contents



Notes to the Consolidated Financial Statements
 Gain (Loss) on Disposition of Discontinued Real Estate, Net, During the Year Ended December
31, 2003 for Properties Designated as Held for Disposition Pursuant to SFAS No. 144.
 GainDate
    
    
    
    
    
    
    
    
    Rentable
    
    
    Net Sales
    
    
    (Loss)Sold
    
    
    Property
    
    Location
    
    
    Sq.ft.
    
    
    Price
    
    
    On Sale(unaudited)February 25
    
    Goddard Corporate Park
    
    Lanham, MD
    
    
    203,000
    
    
    $
    17,908
    
    
    $
    (890
    )March 14
    
    Rosslyn Gateway
    
    Arlington, VA
    
    
    253,000
    
    
    
    53,911
    
    
    
    9,429August 6
    
    Clark Tower
    
    Memphis, TN
    
    
    650,000
    
    
    
    38,907
    
    
    
    59September 25
    
    Esperante Office Building
    
    W. Palm Beach, FL
    
    
    248,000
    
    
    
    59,886
    
    
    
    19,155October 15
    
    Minnesota Center
    
    Minneapolis, MN
    
    
    289,000
    
    
    
    40,236
    
    
    
    459November 19
    
    9800 LaCienega
    
    Los Angeles, CA
    
    
    358,000
    
    
    
    21,915
    
    
    
    941December 15
    
    Park Central II
    
    Dallas, TX
    
    
    140,000
    
    
    
    7,726
    
    
    
    838December 22
    
    Desert Passage
    
    Las Vegas, NV
    
    
    445,000
    
    
    
    239,119
    
    
    
    26,510$
    479,608
    
    
    $
    56,501Tax benefit related to sales, net
    
    
    
    
    
    
    2,333Gain on disposition of discontinued real estate, net
    
    
    
    
    
    $
    58,834
 14.
    
    LAWSUIT AND OTHER SETTLEMENTSIn December 2005, the Corporation received approximately $610 as final settlement of damage
claims related to certain of the Corporations sold properties.In November 2005, the Corporation received approximately $1,043 related to the settlement
and recovery of damages from a former tenant at 12010 Sunrise Valley Drive, located in
Reston, Virginia.In September 2005, the Corporation received approximately $875 related to the recovery of
damages on development land at Interstate North Parkway, located in Atlanta, Georgia.In December 2004, the Corporation received approximately $3,582 as final settlement of
outstanding asbestos property damage claims related to certain of the Corporations sold
properties. Cash proceeds from this lawsuit settlement were received in the fourth quarter
of 2004.In July 2003, the Corporation reached an agreement in which the Corporation agreed to end
litigation and resolve standing disputes concerning the development and subsequent
bankruptcy of the hotel and casino adjacent to the Desert Passage project. In exchange for
the Corporations agreement to end the development litigation and the Corporations
agreement to permit and assist in the re-theming of the hotel and casino complex, the other
parties to the litigation agreed to dismiss all claims against the Corporation. This
settlement agreement was approved by the United States Bankruptcy Court for the District of
Nevada in August 2003. In the third quarter of 2003, the Corporation recognized a gain on
lawsuit settlement of approximately $26,659 comprised primarily of the forgiveness of debt.
The Corporation did not receive any cash proceeds from the litigation settlement.15.
    
    RELATED PARTY INFORMATIONTransactions During 2005In March 2005, Trizec Canada Inc. paid the Corporation approximately $760 as reimbursement
for legal expenses that it incurred in connection with a litigation matter in which the
Corporation, Trizec Canada Inc. and Peter Munk were co-plaintiffs. As of March 24, 2005,
Trizec Canada Inc. owned, together with its affiliates, approximately 39% of the
Corporations common stock and all of its outstanding special voting stock and Class F
convertible stock. Mr. Munk is the Chairman and Chief Executive Officer of Trizec Canada
Inc. and indirectly has majority voting power with respect to the election of Trizec Canada
Inc.s board of directors and certain other matters.
 F-44




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##### Table of Contents



Notes to the Consolidated Financial Statements
 The Corporation had previously recorded a tax liability related to 1998 tax issues between
the Corporation, and a wholly-owned subsidiary of Trizec Canada Inc. and the IRS. During the second quarter of 2005, the wholly-owned
subsidiary of Trizec Canada Inc. reached a settlement with, and made payment to, the IRS
with regard to the 1998 tax matters. As a result, the Corporation has determined that it
has been relieved of any potential tax liability related to this matter and, therefore, has
reduced its tax liability by, and recorded a benefit from income taxes of, approximately
$2.8 million.Transactions During 2004On October 9, 2003, 4172352 Canada, Inc., an affiliate of Trizec Canada Inc.,
contributed approximately $4,000 to the Corporation in exchange for preferred
membership units in an entity that indirectly held a 91.5% interest in the Hollywood &
Highland Hotel. The holders of the preferred membership units were entitled to an
initial dividend of 8% per annum, increasing to 12% per annum, as well as any
unrecovered capital contribution at the time of liquidation. On February 27, 2004, the
Corporation sold the Hollywood & Highland Hotel. The Corporation remitted
approximately $4,790 to 4172352 Canada, Inc. in full satisfaction of any outstanding
dividends and unrecovered capital contribution.In December 2004, the Corporation sold 110 William Street, located in New York,
New York, to an affiliate of Swig Investment Company, one of the Corporations joint
venture partners, for a net sale price of approximately $158,472.Transactions During 2003In July 2003, the Corporation issued 173,006 shares of its common stock to its Chairman of
the Board as a net settlement of the exercise of 1,000,000 warrants held by the Chairman.
The Corporation recognized compensation expense of approximately $2,080 related to the net
settlement of such warrants, which is included in general and administrative expense.Other Related Party InformationFor the year ended December 31, 2003, the Corporation, in the normal course of business,
reimbursed its parent and/or affiliates for direct third party purchased services and a
portion of salaries for certain employees for direct services rendered. A significant
portion of the reimbursements had been for allocated or direct insurance premiums, which
amounted to approximately $196.In connection with the Reorganization, the Corporation entered into a tax cooperation
agreement with TrizecHahn Office Properties, Limited. Under the agreement, the Corporation
agreed to continue to conduct its business activities with regard to the consequences under
Canadian tax legislation to TrizecHahn Office Properties, Limited, related Canadian
corporations and Trizec Canada Inc. Compliance with this agreement may require the
Corporation to conduct its business in a manner that may not always be the most efficient or
effective because of potential adverse Canadian tax consequences. Furthermore, the
Corporation may incur incremental costs due to the need to reimburse these entities for any
negative tax consequences.In connection with the Reorganization, the Corporation entered into a shared services
agreement with TrizecHahn. Under the agreement, the Corporation agreed to provide certain
services to assist TrizecHahn in fulfilling its public disclosure obligations and conducting
investor, media and public relations. TrizecHahn agreed to provide IT consulting and other
services. For the years ended December 31, 2005, 2004 and 2003, the Corporation recorded
other income of approximately $310, $106 and $404, respectively, for such services provided
to TrizecHahn. In addition, the Corporation recorded general and administrative expense for
the years ended December 31, 2005, 2004 and 2003 of approximately $179, $350 and $478,
respectively, for such services provided to the Corporation. At December 31, 2005, the
Corporation had a receivable balance of approximately $416 and a payable balance of
approximately $30 related to such services. At December 31, 2004, the Corporation had a
receivable balance of approximately $510 and a payable balance of approximately $460 related
to such services.
 F-45




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##### Table of Contents



Notes to the Consolidated Financial Statements
 16.
    
    REDEEMABLE STOCKThe following classes of stock have been presented on the balance sheet outside of
stockholders equity as a result of the redemption features available to the holders of the
stock.Class F Convertible StockOn December 3, 2001, the Corporation authorized and issued 100,000 shares of Class F
Convertible Stock with a par value of $0.01 per share.The Class F Convertible Stock is held by a subsidiary of Trizec Canada Inc. and is
non-voting, entitled to cumulative dividends at a fixed rate per annum of $0.05 per share,
redeemable at the Corporations option or the holders option after the expiration of the
conversion period for $1.00 per share plus unpaid declared dividends and convertible at the
holders option only upon the occurrence of certain defined events during a defined
conversion period into a number of shares of common stock based on a defined formula.The stock is convertible into additional shares of the Corporations common stock so that
the Corporation and its stockholders, and Trizec Canada Inc. and its shareholders, may share
the burden if tax pursuant to the Foreign Investment in Real Property Tax Act of 1980, or
FIRPTA, is payable in connection with the Reorganization or other limited types of
transactions or events.The Corporation cannot declare or pay dividends on any of the other classes of stock nor can
the Corporation redeem or purchase for cancellation any of the other classes of stock unless
all unpaid and undeclared cumulative dividends have been declared and paid or set apart for
payment.The Corporation has recorded the holders redemption feature at $100 at December 31, 2005
and 2004.Special Voting StockOn December 3, 2001, the Corporation authorized and issued 100 shares of Special Voting
Stock with a par value of $0.01 per share. All shares of Special Voting Stock are held by a
subsidiary of Trizec Canada Inc.The Special Voting Stock has special voting rights that give the holder, when aggregated
with the voting rights of Trizec Canada Inc. and its subsidiaries pursuant to ownership of
common stock, a majority of votes in elections of directors to the Board of Directors of the
Corporation at any time prior to January 1, 2008, so long as Trizec Canada Inc. and its
subsidiaries hold at least 5% of the Corporations common stock. Thereafter, the Special
Voting Stock is non-voting. In addition, for 66 months after the effective date of the
Reorganization, this stock will entitle its holder to cash dividends that reflect
non-Canadian taxes, principally cross-border withholding taxes, payable in respect of common
stock dividends and special voting stock dividends paid to Trizec Canada Inc. or its
subsidiaries. The Special Voting Stock is redeemable at the Corporations or the holders
option after a defined date at $1,000 per share plus unpaid declared dividends.The Corporation has recorded the holders redemption feature at $100 at December 31, 2005
and 2004.
 F-46




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##### Table of Contents



Notes to the Consolidated Financial Statements
 17.
    
    STOCKHOLDERS EQUITYCommon Dividends:
 Dividend
    
    TotalDeclaration Date
    
    Record Date
    
    Payable Date
    
    Per Share
    
    Dividend2005Fourth Quarter
    
    
    12/13/2005
    
    
    
    12/30/2005
    
    
    
    01/17/2006
    
    
    $
    0.20
    
    
    $
    31,620Third Quarter
    
    
    09/13/2005
    
    
    
    09/30/2005
    
    
    
    10/17/2005
    
    
    $
    0.20
    
    
    $
    31,419Second Quarter
    
    
    06/14/2005
    
    
    
    06/30/2005
    
    
    
    07/15/2005
    
    
    $
    0.20
    
    
    $
    31,225First Quarter
    
    
    03/10/2005
    
    
    
    03/31/2005
    
    
    
    04/15/2005
    
    
    $
    0.20
    
    
    $
    31,0292004Fourth Quarter
    
    
    12/10/2004
    
    
    
    12/31/2004
    
    
    
    01/15/2005
    
    
    $
    0.20
    
    
    $
    30,557Third Quarter
    
    
    09/14/2004
    
    
    
    09/30/2004
    
    
    
    10/15/2004
    
    
    $
    0.20
    
    
    $
    30,518Second Quarter
    
    
    06/14/2004
    
    
    
    06/30/2004
    
    
    
    07/15/2004
    
    
    $
    0.20
    
    
    $
    30,496First Quarter
    
    
    03/10/2004
    
    
    
    03/31/2004
    
    
    
    04/15/2004
    
    
    $
    0.20
    
    
    $
    30,4882003Fourth Quarter
    
    
    12/10/2003
    
    
    
    12/31/2003
    
    
    
    01/15/2004
    
    
    $
    0.20
    
    
    $
    30,255Third Quarter
    
    
    09/16/2003
    
    
    
    09/30/2003
    
    
    
    10/15/2003
    
    
    $
    0.20
    
    
    $
    30,107Second Quarter
    
    
    06/17/2003
    
    
    
    06/30/2003
    
    
    
    07/15/2003
    
    
    $
    0.20
    
    
    $
    30,071First Quarter
    
    
    03/18/2003
    
    
    
    03/31/2003
    
    
    
    04/15/2003
    
    
    $
    0.20
    
    
    $
    30,006
 For federal income tax purposes, 91.0% of the dividends paid to common stockholders in 2005
represents ordinary income. Approximately 15.8% of the ordinary dividend income is treated
as qualified dividends. Approximately 9.0% of the dividends paid to common stockholders in
2005 represents return of capital. The AMT adjustments apportioned to the common
stockholders in 2005 was $(0.01) per share.For federal income tax purposes, 84.1% of the dividends paid to common stockholders in 2004
represents ordinary income. Approximately 21.0% of the ordinary dividend income is treated
as qualified dividends. Approximately 15.9% of the dividends paid to common stockholders in
2004 represents return of capital. The AMT adjustments apportioned to the common
stockholders in 2004 was $(0.13) per share.For federal income tax purposes, 100% of the dividends paid to common stockholders in 2003
represents ordinary income. Approximately 0.4% of the ordinary dividend income is treated
as qualified dividends. The AMT adjustments apportioned to the common stockholders in 2003
was $(0.03) per share.Special Voting Stock Dividends:
 Declaration Date
    
    Record Date
    
    Payable Date
    
    Total Dividend2005Fourth Quarter
    
    
    12/13/2005
    
    
    
    12/30/2005
    
    
    
    01/17/2006
    
    
    $
    741Third Quarter
    
    
    09/13/2005
    
    
    
    09/30/2005
    
    
    
    10/17/2005
    
    
    $
    1,311Second Quarter
    
    
    06/14/2005
    
    
    
    06/30/2005
    
    
    
    07/15/2005
    
    
    $
    1,174First Quarter
    
    
    03/10/2005
    
    
    
    03/31/2005
    
    
    
    04/15/2005
    
    
    $
    1,2082004Fourth Quarter
    
    
    12/10/2004
    
    
    
    12/31/2004
    
    
    
    01/15/2005
    
    
    $
    908Third Quarter
    
    
    09/14/2004
    
    
    
    09/30/2004
    
    
    
    10/15/2004
    
    
    $
    1,393Second Quarter
    
    
    06/14/2004
    
    
    
    06/30/2004
    
    
    
    07/15/2004
    
    
    $
    629
    (1)First Quarter
    
    
    03/10/2004
    
    
    
    03/31/2004
    
    
    
    04/15/2004
    
    
    $
    629
    (2)2003Fourth Quarter
    
    
    12/10/2003
    
    
    
    12/31/2003
    
    
    
    01/15/2004
    
    
    $
    1,308Third Quarter
    
    
    09/16/2003
    
    
    
    09/30/2003
    
    
    
    10/15/2003
    
    
    $
    2,504Second Quarter
    
    
    06/17/2003
    
    
    
    06/30/2003
    
    
    
    07/15/2003
    
    
    $
    629First Quarter
    
    
    03/18/2003
    
    
    
    03/31/2003
    
    
    
    04/15/2003
    
    
    $
    776
 
 (1)
    
    The Corporation accrued an additional $587.(2)
    
    The Corporation accrued an additional $674. F-47




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##### Table of Contents



Notes to the Consolidated Financial Statements
 Class F Convertible Stock Dividends:On March 10, 2005, the Corporation declared an aggregate annual dividend of approximately $5
for the Class F convertible stock, payable on April 15, 2005, to the holders of record at
the close of business on March 31, 2005. The Corporation accrued an additional $1 dividend
for the Class F convertible stock on each of March 31, 2005, June 30, 2005, September 30,
2005 and December 31, 2005, respectively.On March 10, 2004, the Corporation declared an aggregate annual dividend of approximately $5
for the Class F convertible stock, payable on April 15, 2004, to the holders of record at
the close of business on March 31, 2004. The Corporation accrued an additional $1 dividend
for the Class F convertible stock on each of March 31, 2004, June 30, 2004, September 30,
2004 and December 31, 2004, respectively.On March 18, 2003, the Corporation declared an aggregate annual dividend of approximately $6
for the Class F convertible stock, payable on April 15, 2003. The Corporation accrued an
additional $1 dividend for the Class F convertible stock on each of March 31, 2003, June 30,
2003, September 30, 2003 and December 31, 2003, respectively.Dividend Reinvestment and Stock Purchase PlanIn June 2004, the Corporation established a dividend reinvestment and stock purchase plan
which allows stockholders to reinvest all or a portion of their dividends in additional
shares of the Corporations common stock. The dividend reinvestment and stock purchase plan
also allows non-stockholders to purchase shares of the Corporations common stock through
the plan and provides both stockholders and non-stockholders the option to purchase shares
of the Corporations common stock without paying fees or commissions by making optional cash
investments of $0.1 to $10 per month for current stockholders or $0.3 to $10 per month for
persons who are not current stockholders. Purchases of greater than $10 per month can be
accomplished by the Corporation granting a waiver to the $10 limit.Treasury StockDuring the year ended December 31, 2005, common shares held in treasury increased by
approximately $335 with approximately $87 of this increase due to surrendering of 4,331
common shares as payment of statutory withholdings for the vesting of restricted common
stock and approximately $248 of this increase due to the forfeiture of 22,600 shares of
restricted common stock.During the year ended December 31, 2004, common shares held in treasury increased by
approximately $178 with approximately $88 of this increase due to surrendering of 5,403
common shares as payment of statutory withholdings for the vesting of restricted common
stock and approximately $90 of this increase due to the forfeiture of 8,200 shares of
restricted common stock.During the year ended December 31, 2003, common shares held in treasury increased by
approximately $197 due to forfeiture of 14,365 escrowed shares.PriorityThe capital stock of the Corporation has the following ranking upon the voluntary or
involuntary liquidation, dissolution or winding up of, or any distribution of the assets of
the Corporation among its shareholders for the purpose of winding up its affairs (from most
senior to the least): Class F Convertible Stock; Special Voting Stock; and common stock.Restrictions on OwnershipPursuant to the Corporations certificate of incorporation, ownership of the Corporations
capital stock by persons other than qualifying U.S. persons is limited to 45% of value in
the aggregate so that the Corporation will be in a position to attain
domestically-controlled REIT status for U.S. federal income tax purposes within 63 months
after the effective date of the Reorganization.
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##### Table of Contents



Notes to the Consolidated Financial Statements
 18.
    
    LONG TERM INCENTIVE PLAN AND OTHER AWARDSOn May 8, 2002, the effective date of the Reorganization, the Corporation adopted the 2002
Stock Option Plan (the Plan). The purpose of the Plan is to attract, retain and motivate
directors, officers and key employees and advisors of the Corporation and to advance the
interest of the Corporation by affording these individuals the opportunity, through the
grant of stock-based awards, to acquire an increased proprietary interest in the
Corporation. The Plan also permitted certain non-qualified stock options to be granted in
connection with the Reorganization. The Plan was subsequently amended and restated,
effective May 29, 2003, as the 2002 Long Term Incentive Plan, as amended (the 2002 LTIP).
The 2002 Plan is administered by the Compensation Committee which is appointed by the
Corporations Board of Directors.The 2002 Plan authorizes the grant to eligible individuals of incentive stock options,
non-qualified stock options, stock appreciation rights (either alone or in tandem with a
stock option grant), restricted stock awards, performance awards and other compensation
based on shares of the Corporations common stock.A maximum of 19,000,000 shares of Trizec Properties common stock were approved to be issued
under the Plan. At December 31, 2005, 9,330,891 shares were available for future awards
under the 2002 Plan.Stock OptionsThe Corporation did not grant non-qualified stock options during the years ended December
31, 2005 and December 31, 2004.During the year ended December 31, 2003, the Corporation granted 2,297,500 non-qualified
stock options to certain employees. The non-qualified stock options granted vest over three
years, have a weighted average strike price of $8.66 per share and expire ten years from
date of grant.In connection with the Reorganization, employees, former employees and non-employee
directors holding options to purchase subordinate voting shares of TrizecHahn that were
cancelled in exchange for options received such options under the Plan. The vesting periods
for these options range from immediately upon grant to up to four years. The options have a
life of between 5.5 and 7 years.The table below shows the Corporations stock option activity during the years ended
December 31, 2005, 2004 and 2003. Prior to Reorganization, the Corporation did not have a
stock option plan.
 Weighted
    
    
    Number ofAverage Price
    
    
    OptionsBalance at December 31, 2002
    
    $
    16.77
    
    
    
    8,575,432Options granted
    
    
    8.66
    
    
    
    2,297,500Options canceled/forfeited
    
    
    17.22
    
    
    
    (1,675,768
    )Balance at December 31, 2003
    
    
    14.66
    
    
    
    9,197,164Options exercised
    
    
    12.21
    
    
    
    (742,612
    )Options canceled/forfeited
    
    
    16.20
    
    
    
    (1,158,369
    )Balance at December 31, 2004
    
    
    14.67
    
    
    
    7,296,183Options exercised
    
    
    16.02
    
    
    
    (3,108,602
    )Options canceled/forfeited
    
    
    11.76
    
    
    
    (159,267
    )Balance at December 31, 2005
    
    $
    13.74
    
    
    
    4,028,314
 F-49




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##### Table of Contents



Notes to the Consolidated Financial Statements
  Outstanding Options
    
    
    Exercisable OptionsWtd. Avg. years
    
    
    
    
    
    
    
    
    
    
    Wtd. Avg.Number
    
    
    remaining before
    
    
    Wtd. Avg.
    
    
    Number
    
    
    ExerciseRange of Prices
    
    Outstanding
    
    
    expiration
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Price$  8.61 - $10.98
    
    
    1,350,940
    
    
    
    7.15
    
    
    $
    8.69
    
    
    
    840,640
    
    
    $
    8.70$11.94 - $16.34
    
    
    1,386,250
    
    
    
    3.23
    
    
    
    12.93
    
    
    
    1,386,250
    
    
    
    12.93$16.97 - $22.01
    
    
    1,291,124
    
    
    
    2.14
    
    
    
    19.89
    
    
    
    1,286,324
    
    
    
    19.904,028,314
    
    
    
    4.20
    
    
    $
    13.74
    
    
    
    3,513,214
    
    
    $
    14.47
 The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average assumptions:
 2003Expected Dividend Yield
    
    
    9.2
    %Expected Price Volatility
    
    
    24.7
    %Risk Free Interest Rate
    
    
    2.7
    %Expected Life of Options
    
    5-YearsFair Value of Options
    
    $
    0.59
 Restricted Stock, Restricted Units and Restricted Stock RightsDuring the year ended December 31, 2005, the Corporation awarded 619,628 restricted stock
rights and 333,680 performance based restricted stock rights to certain employees. These
restricted stock rights and performance based restricted stock rights had fair values of
approximately $12,485 and $6,993, respectively, on the date of grant. The restricted stock
rights vest ratably over periods of one to five years, except for 4,492 restricted stock
rights which vested immediately. The performance based restricted stock rights vest ratably
over a period of five years provided that specific performance objectives are achieved. The
fair value of the restricted stock rights will be charged to earnings as compensation
expense over the vesting period, except for the fair value of the 4,492 restricted stock
rights that vested immediately which was charged to earnings as compensation expense
immediately.During the year ended December 31, 2005, the Corporation awarded 12,276 restricted stock
rights to certain directors of the Corporation. These restricted stock rights had a fair
value of approximately $216 on the date of grant. The restricted stock rights vested
immediately and the fair value of the restricted stock rights was charged to earnings as
compensation expense immediately.During the year ended December 31, 2004, the Corporation awarded 405,950 restricted stock
rights and 115,700 performance based restricted stock rights to certain employees. These
restricted stock rights and performance based restricted stock rights had fair values of
approximately $6,816 and $1,943, respectively, on the date of grant. The restricted stock
rights vest ratably over periods of three to five years. The performance based restricted
stock rights vest ratably over a period of five years provided that specific performance
objectives are achieved. Compensation expense will be charged to earnings over the vesting
period.During the year ended December 31, 2004, the Corporation awarded 14,056 restricted stock
rights to certain directors of the Corporation. These restricted stock rights had a fair
value of approximately $229 on the date of grant. The restricted stock rights vest on
January 1, 2005. Compensation expense was charged to earnings over the vesting period.During the year ended December 31, 2003, the Corporation awarded 172,500 shares of
restricted common stock and 172,500 shares of performance based restricted common stock to
certain employees. These shares of restricted common stock and performance based restricted
common stock had fair values of approximately $1,894 and $1,894, respectively, on the date
of grant. The restricted common stock vests ratably over five years. The performance based
restricted common stock vests over periods from one to five years provided that specific
performance objectives are achieved. Compensation expense will be charged
to earnings over the vesting period. In December 2003, certain employees elected to have
116,500 shares
 F-50




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##### Table of Contents



Notes to the Consolidated Financial Statements
 of restricted common stock and 116,500 shares of performance based restricted
common stock cancelled and were issued 116,500 restricted units and 116,500 performance
based restricted units in their place. The restricted units vest over the same five-year
period and have the same fair value as the restricted common shares cancelled. The
performance based restricted units vest over the same one to five year period, provided that
specific performance objectives are achieved, and have the same fair value as the
performance based restricted common shares cancelled. Holders of the restricted units and
performance based restricted units have the option to defer settlement of such units for a
period of at least three additional years. Compensation expense will be charged to earnings
over the vesting period.Compensation expense related to restricted stock, restricted units and restricted stock
rights totaled approximately $4,341, $2,669 and $379 for the years ended December 31, 2005,
2004 and 2003, respectively.WarrantsIn connection with the Reorganization, the Corporation issued 8,772,418 warrants. The table
below summarizes the Corporations warrant activity during the years ended December 31,
2005, 2004 and 2003. Prior to the Reorganization, the Corporation did not have warrants
outstanding. The Corporation did not grant warrants subsequent to the Reorganization.
 Weighted
    
    
    Number ofAverage Price
    
    
    WarrantsBalance at December 31, 2002
    
    $
    15.51
    
    
    
    7,347,918Warrants exercised
    
    
    10.48
    
    
    
    (1,704,250
    )Warrants canceled/forfeited
    
    
    18.01
    
    
    
    (2,369,534
    )Balance at December 31, 2003
    
    
    16.34
    
    
    
    3,274,134Warrants exercised
    
    
    14.19
    
    
    
    (263,581
    )Warrants canceled/forfeited
    
    
    20.83
    
    
    
    (632,261
    )Balance at December 31, 2004
    
    
    15.38
    
    
    
    2,378,292Warrants exercised
    
    
    15.07
    
    
    
    (1,057,500
    )Warrants canceled/forfeited
    
    
    19.71
    
    
    
    (15,000
    )Balance at December 31, 2005
    
    $
    15.58
    
    
    
    1,305,792
 The following table summarizes certain information about the
outstanding warrants at December 31, 2005:
 Outstanding Warrants
    
    
    Exercisable WarrantsWtd. Avg. years
    
    
    
    
    
    
    
    
    
    
    Wtd. Avg.Number
    
    
    remaining before
    
    
    Wtd. Avg.
    
    
    Number
    
    
    ExerciseRange of Prices
    
    Outstanding
    
    
    expiration
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Price$14.51 - $15.15
    
    
    487,625
    
    
    
    1.95
    
    
    $
    15.06
    
    
    
    487,625
    
    
    $
    15.06$15.50 - $15.57
    
    
    579,167
    
    
    
    1.10
    
    
    
    15.56
    
    
    
    579,167
    
    
    
    15.56$16.01 - $20.41
    
    
    239,000
    
    
    
    2.50
    
    
    
    16.71
    
    
    
    239,000
    
    
    
    16.711,305,792
    
    
    
    1.67
    
    
    $
    15.58
    
    
    
    1,305,792
    
    
    $
    15.58
 F-51




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Notes to the Consolidated Financial Statements
 19.
    
    EARNINGS PER SHARE
 For the years ended December 31,2005
    
    
    2004
    
    
    2003Income from continuing operations
    
    $
    57,490
    
    
    $
    36,875
    
    
    $
    125,706Gain on disposition of real estate, net
    
    
    145
    
    
    
    7,358
    
    
    
    11,351Less: Special voting and Class F convertible
stockholders dividends
    
    
    (4,438
    )
    
    
    (4,824
    )
    
    
    (5,226
    )Income from Continuing Operations Available to
Common Stockholders
    
    
    53,197
    
    
    
    39,409
    
    
    
    131,831Discontinued operations
    
    
    152,689
    
    
    
    57,080
    
    
    
    70,541Cumulative effect of a change in accounting principle
    
    
    (4,874
    )
    
    
    
    
    
    
    (3,845
    )Net Income Available to Common Stockholders
    
    $
    201,012
    
    
    $
    96,489
    
    
    $
    198,527Basic Earnings per Common ShareIncome from continuing operations available to
common stockholders
    
    $
    0.34
    
    
    $
    0.26
    
    
    $
    0.88Discontinued operations
    
    
    0.99
    
    
    
    0.38
    
    
    
    0.47Cumulative effect of a change in accounting principle
    
    
    (0.03
    )
    
    
    
    
    
    
    (0.03
    )Net Income Available to Common Stockholders per
Weighted Average Common Share Outstanding 
Basic(1)
    
    $
    1.30
    
    
    $
    0.64
    
    
    $
    1.32Diluted Earnings per Common ShareIncome from continuing operations available to
common stockholders
    
    $
    0.34
    
    
    $
    0.26
    
    
    $
    0.88Discontinued operations
    
    
    0.97
    
    
    
    0.37
    
    
    
    0.47Cumulative effect of a change in accounting principle
    
    
    (0.03
    )
    
    
    
    
    
    
    (0.03
    )Net Income Available to Common Stockholders per
Weighted Average Common Share Outstanding 
Diluted(1)
    
    $
    1.27
    
    
    $
    0.63
    
    
    $
    1.32Weighted average shares outstandingBasic
    
    
    154,847,663
    
    
    
    151,596,514
    
    
    
    150,005,663Dilutive Effect of Securities (2)
    
    
    3,030,252
    
    
    
    1,513,340
    
    
    
    447,618Diluted
    
    
    157,877,915
    
    
    
    153,109,854
    
    
    
    150,453,281
 
 (1)
    
    May not total the sum of the per share components due to rounding.(2)
    
    Represents the dilutive effect of stock options, restricted stock, restricted units,
restricted stock rights, warrants and potential shares to be issued under the Corporations
Long-Term Outperformance Compensation Program (the OPP). The dilutive effect of securities for the years ended December 31, 2005, 2004 and 2003 were
calculated based on $20.54 per share, $16.20 per share and $11.31 per share, respectively,
which represent the average daily trading price for the years ended December 31, 2005, 2004
and 2003, respectively. Not included in the computation of diluted net income available to
common stockholders per share, as they would have had an anti-dilutive effect were the
following securities:
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##### Table of Contents



Notes to the Consolidated Financial Statements
 For the years ended December 31,2005
    
    2004
    
    2003Stock Options
    
    
    717,500
    
    
    
    3,306,598
    
    
    
    8,671,032Restricted Stock, Restricted
Units and Restricted Stock
Rights
    
    
    460,193
    
    
    
    535,706
    
    
    
    Warrants
    
    
    
    
    
    
    707,000
    
    
    
    5,966,918
 20.
    
    EMPLOYEE BENEFIT PLANS401(k)PlansThe TrizecHahn (USA) Employee 401(k) Plan and the TrizecHahn Developments Employee 401(k)
Plan were established to cover eligible employees of Trizec Properties and TrizecHahn
Development Inc. and employees of any designated affiliates. The two plans were merged on
December 8, 2002 to form the Trizec Properties, Inc. 401(k) plan (the 401(k) Plan). The
401(k) Plan permits eligible persons to defer up to 100% (30% prior to September 1, 2005) of
their annual compensation, subject to certain limitations imposed by the Code. The
employees elective deferrals are immediately vested and non-forfeitable upon contribution
to the 401(k) Plan. In 2005, the Corporation matched dollar for dollar employee
contributions to the 401(k) Plan up to 5% of the employees annual compensation, subject to
certain limitations imposed by the Code. In 2004 and 2003, the Corporation matched dollar
for dollar employee contributions to the 401(k) Plan up to 5% of the employees annual
compensation not to exceed $6. The Corporation incurred expense of approximately $1,701,
$1,641 and $1,646 for the years ended December 31, 2005, 2004 and 2003, respectively,
related to the 401(k) Plan.Deferred Compensation PlansTwo of the Corporations subsidiaries had deferred compensation plans for a select group of
management and highly compensated employees. Effective May 5, 2003, the two plans were
merged (the 2003 Plan).Under the 2003 Plan, employees were permitted to defer up to 100% of their base salary
and/or bonus on a pre-tax basis and to invest the deferred amount in various investment
options. Additionally, the Corporation could make discretionary contributions under the
2003 Plan on behalf of participants. Upon completion of a minimum deferral period of four
years, participants could elect to release a portion of the deferred amount. In connection
with the deferred compensation plan, a grantor trust had been established and contributions
were made to the trust in amounts equal to participants deferrals and any discretionary
contributions. Amounts deferred, and discretionary contributions if any, were expensed as
funded. The Corporation incurred expense of approximately $10, $13 and $38 for the years
ended December 31, 2005, 2004 and 2003, respectively. At December 31, 2004, the Corporation
had assets, included in prepaid expenses and other assets, of approximately $5,614 and a
liability of approximately $2,605, representing the contributions to the 2003 Plan and
obligations to the 2003 Plan, respectively. The 2003 Plan was terminated as of September
30, 2005. Participants had the option to receive a cash distribution or to roll-over their
assets into the 2004 Plan (described below).In December 2003, the Compensation Committee and the Corporations Board of Directors
approved a deferred compensation plan effective as of January 1, 2004 (the 2004 Plan).
Under the 2004 Plan, a select group of management and highly compensated employees of the
Corporation are permitted to defer up to 75% of their base salary and/or up to 100% of their
commission and bonus on a pre-tax basis and to invest the deferred amount in various
investment options. The minimum amount of salary, commissions or bonus that may be deferred
is one percent, but not less than $5 per deferral period. In addition, the 2004 Plan
permits certain employees who receive restricted stock rights or other equity-based awards
to defer settlement of such awards. The Corporation may make discretionary contributions
under the 2004 Plan on behalf of participants. Such employees can elect to receive the
deferred amounts as either a lump sum payment or annual installments for up to five years
after a minimum five-year deferral period. Amounts deferred and discretionary
contributions, if any, are expensed as funded. The Corporation incurred expense of
approximately $9 and $52 for the years ended December 31, 2005 and 2004, respectively. As
of December 31, 2005 and 2004, the Corporation had a liability of approximately $2,686 and
$730, respectively, representing the obligations to the 2004 Plan.
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Notes to the Consolidated Financial Statements
 Employee Stock Purchase PlanOn March 18, 2003, the Board of Directors of the Corporation approved an employee stock
purchase plan (the ESPP) that became effective upon approval by the Corporations
stockholders on May 29, 2003. A total of 2,250,000 shares of the Corporations common stock
are available for purchase under the ESPP. All employees of the Corporation and certain
designated subsidiaries of the Corporation are eligible to participate in the ESPP as of the
first offering period following the completion of six months of continuous employment. The
ESPP provides for an offering period which generally runs from March 1 to February 28 or 29
of each year; however, the initial offering period under the ESPP ran from September 2, 2003
through February 29, 2004. Eligible employees may purchase shares worth up to $25 in fair
market value per calendar year. The purchase price of the common stock under the ESPP is
85% of the lower of the fair market value of the common stock on (a) the first day of the
offering period or (b) the date when the shares are purchased. Shares are purchased on the
last trading day of each calendar month. For the years ended December 31, 2005, 2004 and
2003, 99,897 shares, 92,431 shares and 35,925 shares had been issued to employees under the
ESPP, respectively.Long-Term Outperformance Compensation ProgramOn October 21, 2004, the Compensation Committee of the Corporations Board of Directors made
awards to certain senior executives of the Corporation under a long-term incentive
compensation program known as the Trizec Properties, Inc. 2004 Long-Term Outperformance
Compensation Program (the OPP). The OPP was designed as a feature of the Trizec
Properties, Inc. 2002 LTIP, which plan previously was approved by the Corporations
stockholders, to provide meaningful incentives to senior executives to increase stockholder
value by aligning the interests of senior management with the interests of the Corporations
stockholders. The size and dollar value of the incentive pool, if any, will depend on the
extent to which the Corporations performance over a three-year period commencing on October
20, 2004 and ending on October 19, 2007, as measured by the Corporations total rate of
return to stockholders, exceeds a pre-established performance threshold. The
pre-established performance threshold under the OPP is equal to the greater of (a) 110% of
the average of the total rate of return to stockholders achieved by members of a
pre-determined peer group of companies over the three-year measurement period and (b) a 10%
total annual rate of return to the Corporations stockholders, compounded annually over the
three-year measurement period. The aggregate award amount potentially allocable to the
senior executives will be a dollar amount equal to 6% of the product of (a) the
Corporations total rate of return to stockholders over the three-year measurement period
minus the pre-established performance threshold, multiplied by (b) the Corporations market
capitalization on October 20, 2004. The aggregate award amount will be paid in the form of
shares of restricted stock granted under the 2002 LTIP. Subject to certain limited
exceptions, the aggregate award amount and maximum number of shares of restricted stock
issuable to participants may not exceed the lesser of (a) $25,000 and (b) 2.5% of the
aggregate number of shares of the Corporations common stock outstanding on a fully diluted
basis as of October 19, 2007. The fair value of the award on October 20, 2004 was $1,720.
The Corporation will amortize the value of the award over the vesting period. Seventy-five
percent of the award vests on October 19, 2007 and 25% of the award vests on October 19,
2008.21.
    
    ESCROWED SHARE GRANTSOn November 9, 2000, TrizecHahn Corporation made grants of escrowed shares to 26 U.S.
employees under which an escrow agent purchased a total of 904,350 TrizecHahn subordinate
voting shares in the open market and deposited them in escrowed accounts. The grants were
made for the purpose of retaining key employees. In connection with the Reorganization, the
TrizecHahn subordinate voting shares in escrow were exchanged in the same manner that all
other subordinate voting shares of TrizecHahn were exchanged. The employee is entitled to
the voting rights and dividends paid on the shares during the escrow period. One-third of
the share grant vests and is released to the employee on each of the anniversary dates of
the grant over a three-year period. Under the terms of the grants, an employee who
voluntarily terminates employment, unless such termination was the result of the alteration
by the Corporation of the essential terms of employment without the employees consent in a
manner materially adverse to the employee, or whose employment was terminated for cause,
forfeited any entitlement to the shares not yet released from escrow. Fully accelerated
vesting occurred if an employees employment was terminated by the Corporation without cause, by an employee as a result of the alteration by
the Corporation of the essential terms of employment without the employees consent in a
manner materially
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Notes to the Consolidated Financial Statements
 adverse to the employee, or due to the death of the employee. Upon a
change of control, some employees were also entitled to receive fully accelerated vesting.
The first and second tranches of shares vested on November 9, 2001 and November 9, 2002,
respectively. Prior to the vesting of the third tranche, a limited number of the employees
who received grants were given the opportunity to defer the vesting until a later date.
Five of the eligible employees deferred their vesting, so that on November 9, 2003, 174,034
shares that had not been deferred, fully vested and 55,004 shares remained unvested due to
these deferrals. On February 22, 2004, all of the remaining grants vested. The cost of
acquiring the shares of $12,402 was being amortized to compensation expense, on a
straight-line basis, over the vesting period. The amount expensed in respect of the
escrowed share grants totaled approximately $2,598 for the year ended December 31, 2003.
During the year ended December 31, 2003, 14,365 shares reverted back to the Corporation with
an unamortized unearned compensation amount of approximately $197 and are held in treasury.22.
    
    CONTINGENCIESLitigationThe Corporation is contingently liable under guarantees that are issued in the normal course
of business and with respect to litigation and claims arising from time to time. While the
final outcome with respect to claims and litigation pending at December 31, 2005 cannot be
predicted with certainty, in the opinion of management, any liability which may arise from
such contingencies would not have a material adverse effect on the consolidated financial
position, results of operations or liquidity of the Corporation.Concentration of Credit RiskThe Corporation maintains its cash and cash equivalents at financial institutions. The
combined account balances at each institution typically exceed Federal Deposit Insurance
Corporation (FDIC) insurance coverage and, as a result, there is a concentration of credit
risk related to amounts on deposit in excess of FDIC insurance coverage. Management
believes that this risk is not significant.The Corporation performs ongoing credit evaluations of tenants and may require tenants to
provide some form of credit support, such as corporate guarantees and/or other financial
guarantees. Although the Corporations properties are geographically diverse and tenants
operate in a variety of industries, to the extent the Corporation has a significant
concentration of rental revenue from any single tenant, the inability of that tenant to make
its lease payments could have an adverse effect on the Corporation.EnvironmentalThe Corporation, as an owner of real estate, is subject to various federal, state and local
laws and regulations relating to environmental matters. Under these laws, the Corporation
is exposed to liability primarily as an owner or operator of real property and, as such, may
be responsible for the cleanup or other remediation of contaminated property.Contamination for which the Corporation may be liable could include historic contamination,
spills of hazardous materials in the course of its tenants regular business operations and
spills or releases of petroleum or other hazardous substances. An owner or operator can be
liable for contamination in some circumstances whether or not the owner or operator knew of,
or was responsible for, the presence of such contamination. In addition, the presence of
contamination on property, or the failure to properly clean up or remediate such
contamination when present, may materially and adversely affect the ability to sell or lease
such contaminated property or to borrow using such property as collateral.As an owner and operator of real property, the Corporation is also subject to various
environmental laws that regulate the use, generation, storage, handling, and disposal of any
hazardous substances used in the ordinary course of its business, including those relating
to the storage of petroleum in aboveground or underground storage tanks, and the use of any ozone-depleting substances in cooling systems.
The Corporation believes that it is in substantial compliance with applicable
environmental laws.
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Notes to the Consolidated Financial Statements
 Asbestos-containing material is present in some of the Corporations properties. Federal
regulations require building owners and operators to identify and warn, via signs and
labels, of potential hazards posed by workplace exposure to installed asbestos-containing
materials in their building. The regulations also set forth employee training and record
keeping requirements pertaining to asbestos-containing materials and potentially
asbestos-containing materials. Significant fines can be assessed for violation of these
regulations. Building owners and operators may be subject to an increased risk of personal
injury lawsuits by workers and others exposed to asbestos-containing materials. The
regulations may affect the value of a building containing asbestos-containing materials.
Federal, state and local laws and regulations also govern the removal, release,
encapsulation, disturbance, handling and/or disposal of asbestos-containing materials. Such
laws may impose liability for improper handling or a release to the environment of
asbestos-containing materials, including the imposition of substantial fines.The cost of compliance with existing environmental laws has not had a material adverse
effect on the Corporations financial condition and results of operations, and the
Corporation does not believe it will have such an impact in the future. In addition, the
Corporation has not incurred, and does not expect to incur any material costs or liabilities
due to environmental contamination at properties it currently owns or has owned in the past.
However, the Corporation cannot predict the impact of new or changed laws or regulations on
its properties or on properties that it may acquire in the future. The Corporation has no
current plans for substantial capital expenditures with respect to compliance with
environmental laws.InsuranceThe Corporation carries insurance on its properties of types and in amounts that it believes
are in line with coverage customarily obtained by owners of similar properties. The
Corporation believes all of its properties are adequately insured. Some risks to the
Corporations properties, such as losses due to terrorism, earthquakes, floods and
windstorms, are insured subject to policy limits which may not be sufficient to cover all of
the Corporations losses. There are other types of losses, such as from acts of war or acts
of bio-terrorism, for which coverage is not available in the market. If the Corporation
experiences a loss that is uninsured or that exceeds policy limits, it could lose the
capital invested in the damaged properties as well as the anticipated future cash flows from
those properties, and the Corporation could be liable for mortgage indebtedness or other
obligations related to the property. In addition, if any of the Corporations properties
were to experience a catastrophic loss that was insured, it could still seriously disrupt
the Corporations operations, daily revenue and result in large expenses to repair or
rebuild the property, and due to inflation, changes in codes and ordinances, environmental
considerations and other factors, it may not be feasible to use insurance proceeds to
replace a building after it has been damaged or destroyed. Additionally, it is possible
that third-party insurance carriers would not be able to maintain reinsurance sufficient to
cover any losses that may be incurred. Any such loss could materially and adversely affect
the Corporations business and financial condition and results of operations. The property
insurance that has been maintained historically has been on an all risk basis, which,
until 2003, included losses caused by acts of terrorism.In response to the uncertainty in the insurance market following the terrorist attacks of
September 11, 2001, the Terrorism Risk Insurance Act of 2002 (TRIA) was enacted in
November 2002, which established the Terrorism Risk Insurance Program to mandate that
insurance carriers offer insurance covering physical damage from terrorist incidents
certified by the U.S. government as foreign terrorist acts. Under TRIA, the federal
government shares in the risk of loss associated with certain future terrorist acts. TRIA
was scheduled to expire on December 31, 2005. However, on December 22, 2005, the Terrorism
Risk Insurance Extension Act of 2005 was enacted, which extended the duration of TRIA until
December 31, 2007, while expanding the private sector role and reducing the amount of
coverage that the U.S. government is required to provide for insured losses.The Corporations terrorism insurance program consists of coverage from third-party
commercial insurers as well as wholly-owned subsidiaries that the Corporation has formed to
act as captive insurance companies. Under the extended TRIA, if the Corporations
third-party and wholly-owned captive insurers comply with TRIA, it has a per occurrence deductible of $1,100 and retains responsibility
for 10% of the cost of each nuclear, chemical and biological certified event up to a maximum
of $50,000 per occurrence. If the TRIA certified terrorism event is not found to be a
nuclear, chemical or biological event, the Corporations 10% exposure is limited to the
$1,100 deductible. The Corporations terrorism limit for TRIA certified events is $500,000
and the federal government is obligated to cover the remaining 90% of
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Notes to the Consolidated Financial Statements
       F-57




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Notes to the Consolidated Financial Statements
  23. SEGMENTED INFORMATION
   F-58




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Notes to the Consolidated Financial Statements
 23. SEGMENTED INFORMATION, continued
 For the years ended December 31, 2005, 2004 and 2003
 Office Properties
 Atlanta
    
    
    
    Chicago
    
    
    
    Dallas
    
    
    
    Houston2005
    
    
    2004
    
    
    2003
    
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    
    2005
    
    
    2004
    
    
    2003Property OperationsTotal property revenue
    
    
    $
    78,666
    
    
    $
    88,532
    
    
    $
    88,499
    
    
    
    $
    72,238
    
    
    $
    75,137
    
    
    $
    71,277
    
    
    
    $
    87,772
    
    
    $
    88,304
    
    
    $
    93,279
    
    
    
    $
    120,006
    
    
    $
    122,387
    
    
    $
    128,138Total property expense
    
    
    
    (32,489
    )
    
    
    (35,800
    )
    
    
    (36,912
    )
    
    
    
    (34,306
    )
    
    
    (33,863
    )
    
    
    (34,567
    )
    
    
    
    (48,879
    )
    
    
    (47,136
    )
    
    
    (54,722
    )
    
    
    
    (64,250
    )
    
    
    (61,084
    )
    
    
    (61,218
    )Internal Operating Income
    
    
    $
    46,177
    
    
    $
    52,732
    
    
    $
    51,587
    
    
    
    $
    37,932
    
    
    $
    41,274
    
    
    $
    36,710
    
    
    
    $
    38,893
    
    
    $
    41,168
    
    
    $
    38,557
    
    
    
    $
    55,756
    
    
    $
    61,303
    
    
    $
    66,920Internal Property Assets
    
    
    $
    397,750
    
    
    $
    406,837
    
    
    
    
    
    
    
    $
    389,968
    
    
    $
    382,680
    
    
    
    
    
    
    
    $
    495,819
    
    
    $
    503,372
    
    
    
    
    
    
    
    $
    423,450
    
    
    $
    434,726
 Office Properties, continued
 Los Angeles
    
    
    
    New York
    
    
    
    Washington, D.C.2005
    
    
    2004
    
    
    2003
    
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    
    2005
    
    
    2004
    
    
    2003Property OperationsTotal property revenue
    
    
    $
    117,174
    
    
    $
    72,217
    
    
    $
    66,016
    
    
    
    $
    205,282
    
    
    $
    217,761
    
    
    $
    215,181
    
    
    
    $
    138,976
    
    
    $
    118,926
    
    
    $
    117,338Total property expense
    
    
    
    (54,098
    )
    
    
    (33,380
    )
    
    
    (30,476
    )
    
    
    
    (100,423
    )
    
    
    (100,057
    )
    
    
    (99,277
    )
    
    
    
    (52,783
    )
    
    
    (45,509
    )
    
    
    (47,735
    )Internal Operating Income
    
    
    $
    63,076
    
    
    $
    38,837
    
    
    $
    35,540
    
    
    
    $
    104,859
    
    
    $
    117,704
    
    
    $
    115,904
    
    
    
    $
    86,193
    
    
    $
    73,417
    
    
    $
    69,603Internal Property Assets
    
    
    $
    1,023,571
    
    
    $
    743,012
    
    
    
    
    
    
    
    $
    949,783
    
    
    $
    936,574
    
    
    
    
    
    
    
    $
    1,046,008
    
    
    $
    836,287
 Office Properties, continued
 Secondary Markets
    
    
    
    Corporate and Other
    
    
    
    Total2005
    
    
    2004
    
    
    2003
    
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    
    2005
    
    
    2004
    
    
    2003Property OperationsTotal property revenue
    
    
    $
    69,732
    
    
    $
    131,188
    
    
    $
    180,545
    
    
    
    $
    9,925
    
    
    $
    31,574
    
    
    $
    103,185
    
    
    
    $
    899,771
    
    
    $
    946,026
    
    
    $
    1,063,458Total property expense
    
    
    
    (36,755
    )
    
    
    (73,200
    )
    
    
    (98,438
    )
    
    
    
    2,278
    
    
    
    (10,549
    )
    
    
    (66,778
    )
    
    
    
    (421,705
    )
    
    
    (440,578
    )
    
    
    (530,123
    )Internal Operating Income
    
    
    $
    32,977
    
    
    $
    57,988
    
    
    $
    82,107
    
    
    
    $
    12,203
    
    
    $
    21,025
    
    
    $
    36,407
    
    
    
    $
    478,066
    
    
    $
    505,448
    
    
    $
    533,335Internal Property Assets
    
    
    $
    283,719
    
    
    $
    446,563
    
    
    
    
    
    
    
    $
    94,735
    
    
    $
    219,688
    
    
    
    
    
    
    
    $
    5,104,803
    
    
    $
    4,909,739
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Notes to the Consolidated Financial Statements
 23. SEGMENTED INFORMATION, continued
  For the years ended December 31,2005
    
    
    2004
    
    
    2003Internal property revenue
    
    $
    899,771
    
    
    $
    946,026
    
    
    $
    1,063,458Less: Real estate joint venture property
revenue
    
    
    (108,080
    )
    
    
    (101,142
    )
    
    
    (115,044
    )Less: Discontinued operations
    
    
    (69,697
    )
    
    
    (197,493
    )
    
    
    (302,052
    )Total revenues
    
    
    721,994
    
    
    
    647,391
    
    
    
    646,362Internal property operating expenses
    
    
    (421,705
    )
    
    
    (440,578
    )
    
    
    (530,123
    )Less: Real estate joint venture operating
expenses
    
    
    51,459
    
    
    
    46,423
    
    
    
    57,389Less: Discontinued operations
    
    
    32,889
    
    
    
    104,641
    
    
    
    165,748Total operating expenses and property taxes
    
    
    (337,357
    )
    
    
    (289,514
    )
    
    
    (306,986
    )General and administrative
    
    
    (38,653
    )
    
    
    (39,759
    )
    
    
    (40,358
    )Depreciation and amortization
    
    
    (170,753
    )
    
    
    (132,644
    )
    
    
    (122,935
    )Provision for loss on real estate
    
    
    
    
    
    
    (12,749
    )
    
    
    Loss on and provision for loss on investment
    
    
    
    
    
    
    (14,558
    )
    
    
    (15,491
    )Interest and other income
    
    
    6,597
    
    
    
    5,280
    
    
    
    7,300Foreign currency exchange gain
    
    
    
    
    
    
    3,340
    
    
    
    (Loss) Gain on early debt retirement
    
    
    (6,842
    )
    
    
    (7,032
    )
    
    
    2,262Recovery on insurance claims
    
    
    74
    
    
    
    739
    
    
    
    6,673Interest expense
    
    
    (138,564
    )
    
    
    (137,398
    )
    
    
    (141,267
    )Derivative gain
    
    
    
    
    
    
    1,073
    
    
    
    Lawsuit settlement
    
    
    3,288
    
    
    
    3,676
    
    
    
    26,659Benefit (Provision) for income and other
corporate taxes, net
    
    
    3,754
    
    
    
    (4,379
    )
    
    
    41,777Minority interest
    
    
    (1,045
    )
    
    
    (1,834
    )
    
    
    (1,626
    )Income from unconsolidated real estate
joint ventures
    
    
    14,997
    
    
    
    15,243
    
    
    
    23,336Income from Continuing Operations
    
    $
    57,490
    
    
    $
    36,875
    
    
    $
    125,706
  2005
    
    
    2004Internal property assets
    
    $
    5,104,803
    
    
    $
    4,909,739Less: Pro rata real estate joint venture assets
    
    
    (601,155
    )
    
    
    (503,968
    )Add: Investment in unconsolidated real estate
joint ventures
    
    
    206,602
    
    
    
    113,839Total Assets
    
    $
    4,710,250
    
    
    $
    4,519,610
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Notes to the Consolidated Financial Statements
 24. SUBSEQUENT EVENTS
     25. INTERIM FINANCIAL INFORMATION (UNAUDITED)
  2005First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterTotal revenues
    
    $
    171,273
    
    
    $
    174,675
    
    
    $
    187,002
    
    
    $
    189,044Income before income taxes, minority
interest, income from unconsolidated real
estate joint ventures, discontinued
operations, gain (loss) on disposition of
real estate, net, and cumulative effect of a
change in accounting principle
    
    
    14,642
    
    
    
    14,580
    
    
    
    5,096
    
    
    
    5,466Income from continuing operations
    
    
    18,259
    
    
    
    21,421
    
    
    
    8,700
    
    
    
    9,110Discontinued operations
    
    
    8,237
    
    
    
    24,689
    
    
    
    24,019
    
    
    
    95,744Gain (Loss) on disposition of real estate, net
    
    
    
    
    
    
    256
    
    
    
    (90
    )
    
    
    (21
    )Cumulative effect of a change in accounting
principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,874
    )Net income
    
    
    26,496
    
    
    
    46,366
    
    
    
    32,629
    
    
    
    99,959Net income available to common stockholders
    
    $
    25,287
    
    
    $
    45,191
    
    
    $
    31,317
    
    
    $
    99,217Net income available to common stockholders:Basic
    
    $
    0.17
    
    
    $
    0.29
    
    
    $
    0.20
    
    
    $
    0.64Diluted
    
    $
    0.16
    
    
    $
    0.29
    
    
    $
    0.20
    
    
    $
    0.62Weighted average shares:Basic
    
    
    153,090,527
    
    
    
    154,536,290
    
    
    
    155,519,138
    
    
    
    156,203,111Diluted
    
    
    155,122,317
    
    
    
    156,745,758
    
    
    
    158,826,905
    
    
    
    159,191,349
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Notes to the Consolidated Financial Statements
 2004First
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    QuarterTotal revenues
    
    $
    157,181
    
    
    $
    156,451
    
    
    $
    164,175
    
    
    $
    169,584Income (Loss) before income taxes, minority
interest, income from unconsolidated real
estate joint ventures, discontinued
operations and gain (loss) on disposition of
real estate, net
    
    
    19,041
    
    
    
    (10,395
    )
    
    
    7,317
    
    
    
    11,882Income (Loss) from continuing operations
    
    
    22,711
    
    
    
    (9,787
    )
    
    
    10,732
    
    
    
    13,219Discontinued operations
    
    
    47,125
    
    
    
    (114,732
    )
    
    
    38,563
    
    
    
    86,124Gain (Loss) on disposition of real estate, net
    
    
    14,771
    
    
    
    (12,426
    )
    
    
    249
    
    
    
    4,764Net income (loss)
    
    
    84,607
    
    
    
    (136,945
    )
    
    
    49,544
    
    
    
    104,107Net income (loss) available to common
stockholders
    
    $
    83,303
    
    
    $
    (138,162
    )
    
    $
    48,150
    
    
    $
    103,198Net income (loss) available to common
stockholders:Basic
    
    $
    0.55
    
    
    $
    (0.91
    )
    
    $
    0.32
    
    
    $
    0.68Diluted
    
    $
    0.55
    
    
    $
    (0.91
    )
    
    $
    0.31
    
    
    $
    0.67Weighted average shares:Basic
    
    
    151,124,515
    
    
    
    151,609,430
    
    
    
    151,762,294
    
    
    
    151,884,824Diluted
    
    
    152,767,608
    
    
    
    151,609,430
    
    
    
    153,351,683
    
    
    
    153,470,355
 F-62




---



##### Table of Contents



Schedule III  Real Estate and
Accumulated Depreciation at December 31, 2005
 Subsequent CostsInitial Cost to Company
    
    
    Capitalized, Net
    
    
    Total Cost at 12/31/05Date ofEncumbrances
    
    
    
    
    
    
    Building and
    
    
    
    
    
    
    Building and
    
    
    
    
    
    
    Building and
    
    
    
    
    
    
    Accumulated
    
    
    Construction/
    
    
    
    DepreciableDescription
    
    Notes
    
    
    Location
    
    at 12/31/05
    
    
    Land
    
    
    Additions
    
    
    Land
    
    
    Additions
    
    
    Land
    
    
    Additions
    
    
    Total (1)
    
    
    Depreciation
    
    
    Renovation
    
    Date Acquired
    
    Lives (2)Properties held for the long termRental PropertiesAtlantaInterstate North Parkway
    
    
    
    
    
    Atlanta, GA
    
    $
    (50,345
    )
    
    $
    6,900
    
    
    $
    63,619
    
    
    $
    
    
    
    $
    29,422
    
    
    $
    6,900
    
    
    $
    93,041
    
    
    $
    99,941
    
    
    $
    (19,252
    )
    
    1973/84/01
    
    Dec. 10/98
    
    40Colony Square
    
    
    
    
    
    Atlanta, GA
    
    
    (60,624
    )
    
    
    8,900
    
    
    
    53,408
    
    
    
    
    
    
    
    19,238
    
    
    
    8,900
    
    
    
    72,646
    
    
    
    81,546
    
    
    
    (15,906
    )
    
    1970/73/95
    
    Dec. 23/96
    
    40The Palisades
    
    
    
    
    
    Atlanta, GA
    
    
    
    
    
    
    7,250
    
    
    
    67,499
    
    
    
    171
    
    
    
    16,487
    
    
    
    7,421
    
    
    
    83,986
    
    
    
    91,407
    
    
    
    (17,627
    )
    
    1981/83/99
    
    Dec. 16/98
    
    40Midtown Plaza
    
    
    
    
    
    Atlanta, GA
    
    
    (41,610
    )
    
    
    9,093
    
    
    
    52,923
    
    
    
    
    
    
    
    6,435
    
    
    
    9,093
    
    
    
    59,358
    
    
    
    68,451
    
    
    
    (13,485
    )
    
    1984/85
    
    Nov. 19/97
    
    40One Alliance Center
    
    
    
    
    
    Atlanta, GA
    
    
    (67,358
    )
    
    
    10,079
    
    
    
    
    
    
    
    
    
    
    
    87,909
    
    
    
    10,079
    
    
    
    87,909
    
    
    
    97,988
    
    
    
    (12,916
    )
    
    2001
    
    Dec. 16/98
    
    40Total  Atlanta
    
    
    
    
    
    
    
    
    (219,937
    )
    
    
    42,222
    
    
    
    237,449
    
    
    
    171
    
    
    
    159,491
    
    
    
    42,393
    
    
    
    396,940
    
    
    
    439,333
    
    
    
    (79,186
    )ChicagoFranklin Garage
    
    
    
    
    
    Chicago, IL
    
    
    
    
    
    
    30,438
    
    
    
    10,612
    
    
    
    
    
    
    
    1,683
    
    
    
    30,438
    
    
    
    12,295
    
    
    
    42,733
    
    
    
    (2,350
    )
    
    1974
    
    Dec. 3/97
    
    40Two North LaSalle
    
    
    
    
    
    Chicago, IL
    
    
    (41,115
    )
    
    
    9,305
    
    
    
    54,094
    
    
    
    
    
    
    
    23,952
    
    
    
    9,305
    
    
    
    78,046
    
    
    
    87,351
    
    
    
    (15,824
    )
    
    1979/00
    
    Dec. 10/98
    
    4010 South Riverside
    
    
    
    
    
    Chicago, IL
    
    
    (47,526
    )
    
    
    14,262
    
    
    
    63,171
    
    
    
    
    
    
    
    39,407
    
    
    
    14,262
    
    
    
    102,578
    
    
    
    116,840
    
    
    
    (19,332
    )
    
    1965/99
    
    Dec. 10/98, Nov. 10/01, Jun. 3/02
    
    40120 South Riverside
    
    
    
    
    
    Chicago, IL
    
    
    (46,266
    )
    
    
    14,262
    
    
    
    53,222
    
    
    
    
    
    
    
    22,668
    
    
    
    14,262
    
    
    
    75,890
    
    
    
    90,152
    
    
    
    (15,595
    )
    
    1967/99
    
    Dec. 10/98, Nov.10/01, Jun. 3/02
    
    40550 West Washington
    
    
    
    
    
    Chicago, IL
    
    
    (33,144
    )
    
    
    11,505
    
    
    
    65,830
    
    
    
    
    
    
    
    417
    
    
    
    11,505
    
    
    
    66,247
    
    
    
    77,752
    
    
    
    (7,638
    )
    
    2000
    
    May 15/01
    
    40Total  Chicago
    
    
    
    
    
    
    
    
    (168,051
    )
    
    
    79,772
    
    
    
    246,929
    
    
    
    
    
    
    
    88,127
    
    
    
    79,772
    
    
    
    335,056
    
    
    
    414,828
    
    
    
    (60,739
    )DallasRenaissance Tower
    
    
    
    
    
    Dallas, TX
    
    
    (92,000
    )
    
    
    3,150
    
    
    
    105,834
    
    
    
    
    
    
    
    33,145
    
    
    
    3,150
    
    
    
    138,979
    
    
    
    142,129
    
    
    
    (42,619
    )
    
    1974/92
    
    Oct. 31/96
    
    40Galleria Towers I, II and III
    
    
    
    
    
    Dallas, TX
    
    
    
    
    
    
    21,435
    
    
    
    196,728
    
    
    
    
    
    
    
    24,220
    
    
    
    21,435
    
    
    
    220,948
    
    
    
    242,383
    
    
    
    (39,699
    )
    
    1982/85/91
    
    Jan. 15/99
    
    40Total  Dallas
    
    
    
    
    
    
    
    
    (92,000
    )
    
    
    24,585
    
    
    
    302,562
    
    
    
    
    
    
    
    57,365
    
    
    
    24,585
    
    
    
    359,927
    
    
    
    384,512
    
    
    
    (82,318
    )HoustonAllen Center
    
    
    
    
    
    Houston, TX
    
    
    (294,023
    )
    
    
    21,375
    
    
    
    236,851
    
    
    
    
    
    
    
    31,102
    
    
    
    21,375
    
    
    
    267,953
    
    
    
    289,328
    
    
    
    (61,810
    )
    
    1972/78/80/95
    
    Nov. 19/96
    
    40Continental Center I
    
    
    
    
    
    Houston, TX
    
    
    (92,559
    )
    
    
    14,756
    
    
    
    69,741
    
    
    
    
    
    
    
    28,982
    
    
    
    14,756
    
    
    
    98,723
    
    
    
    113,479
    
    
    
    (30,791
    )
    
    1984
    
    Oct. 31/96
    
    40Continental Center II
    
    
    
    
    
    Houston, TX
    
    
    (18,913
    )
    
    
    1,500
    
    
    
    9,793
    
    
    
    
    
    
    
    12,108
    
    
    
    1,500
    
    
    
    21,901
    
    
    
    23,401
    
    
    
    (7,957
    )
    
    1971
    
    Oct. 31/96
    
    40500 Jefferson
    
    
    
    
    
    Houston, TX
    
    
    
    
    
    
    413
    
    
    
    7,937
    
    
    
    
    
    
    
    2,571
    
    
    
    413
    
    
    
    10,508
    
    
    
    10,921
    
    
    
    (2,616
    )
    
    1962/83
    
    Oct. 31/96
    
    40Total  Houston
    
    
    
    
    
    
    
    
    (405,495
    )
    
    
    38,044
    
    
    
    324,322
    
    
    
    
    
    
    
    74,763
    
    
    
    38,044
    
    
    
    399,085
    
    
    
    437,129
    
    
    
    (103,174
    )
 F-63




---



##### Table of Contents



Schedule III  Real Estate and
Accumulated Depreciation at December 31, 2005
 Subsequent CostsInitial Cost to Company
    
    
    Capitalized, Net
    
    
    Total Cost at 12/31/05Date ofEncumbrances
    
    
    
    
    
    
    Building and
    
    
    
    
    
    
    Building and
    
    
    
    
    
    
    Building and
    
    
    Accumulated
    
    
    Construction/
    
    
    
    DepreciableDescription
    
    Notes
    
    
    Location
    
    at 12/31/05
    
    
    Land
    
    
    Additions
    
    
    Land
    
    
    Additions
    
    
    Land
    
    
    Additions
    
    
    Total (1)
    
    
    Depreciation
    
    
    Renovation
    
    Date Acquired
    
    Lives (2)Los Angeles AreaLandmark Square
    
    
    
    
    
    Long Beach, CA
    
    
    (43,674
    )
    
    
    18,477
    
    
    
    68,813
    
    
    
    
    
    
    
    5,824
    
    
    
    18,477
    
    
    
    74,637
    
    
    
    93,114
    
    
    
    (14,674
    )
    
    1991
    
    Aug. 11/98
    
    40Ernst & Young Plaza
    
    
    
    
    
    Los Angeles, CA
    
    
    (116,742
    )
    
    
    31,445
    
    
    
    113,490
    
    
    
    
    
    
    
    5,281
    
    
    
    31,445
    
    
    
    118,771
    
    
    
    150,216
    
    
    
    (24,134
    )
    
    1985
    
    June 4/02
    
    40Bank of America Plaza
    
    
    
    
    
    Los Angeles, CA
    
    
    (242,000
    )
    
    
    51,774
    
    
    
    313,143
    
    
    
    10
    
    
    
    2,059
    
    
    
    51,784
    
    
    
    315,202
    
    
    
    366,986
    
    
    
    (12,459
    )
    
    1974
    
    Aug. 27/04
    
    40Figueroa at Wilshire
    
    
    
    
    
    Los Angeles, CA
    
    
    
    
    
    
    31,975
    
    
    
    301,996
    
    
    
    
    
    
    
    554
    
    
    
    31,975
    
    
    
    302,550
    
    
    
    334,525
    
    
    
    (4,678
    )
    
    1990
    
    Jul. 20/05
    
    40Total  Los Angeles Area
    
    
    
    
    
    
    
    
    (402,416
    )
    
    
    133,671
    
    
    
    797,442
    
    
    
    10
    
    
    
    13,718
    
    
    
    133,681
    
    
    
    811,160
    
    
    
    944,841
    
    
    
    (55,945
    )New York AreaOne New York Plaza
    
    
    
    
    
    New York, NY
    
    
    (228,696
    )
    
    
    58,676
    
    
    
    340,107
    
    
    
    
    
    
    
    33,151
    
    
    
    58,676
    
    
    
    373,258
    
    
    
    431,934
    
    
    
    (61,156
    )
    
    1970/95
    
    Apr. 30/99
    
    401065 Avenue of the Americas
    
    
    
    
    
    New York, NY
    
    
    
    
    
    
    19,715
    
    
    
    44,882
    
    
    
    
    
    
    
    13,843
    
    
    
    19,715
    
    
    
    58,725
    
    
    
    78,440
    
    
    
    (12,466
    )
    
    1958
    
    Jan. 5/97
    
    40Newport Tower
    
    
    
    
    
    Jersey City, NJ
    
    
    
    
    
    
    2,054
    
    
    
    161,582
    
    
    
    
    
    
    
    3,484
    
    
    
    2,054
    
    
    
    165,066
    
    
    
    167,120
    
    
    
    (33,768
    )
    
    1990
    
    Feb. 24/97
    
    40Total  New York Area
    
    
    
    
    
    
    
    
    (228,696
    )
    
    
    80,445
    
    
    
    546,571
    
    
    
    
    
    
    
    50,478
    
    
    
    80,445
    
    
    
    597,049
    
    
    
    677,494
    
    
    
    (107,390
    )Washington, D.C. Area2000 L Street, N.W.
    
    
    
    
    
    Washington, D.C.
    
    
    (56,100
    )
    
    
    7,728
    
    
    
    56,767
    
    
    
    
    
    
    
    20,709
    
    
    
    7,728
    
    
    
    77,476
    
    
    
    85,204
    
    
    
    (20,506
    )
    
    1968/98
    
    Feb. 2/98
    
    401200 K Street, N.W.
    
    
    
    
    
    Washington, D.C.
    
    
    
    
    
    
    48,252
    
    
    
    126,814
    
    
    
    
    
    
    
    
    
    
    
    48,252
    
    
    
    126,814
    
    
    
    175,066
    
    
    
    (2,815
    )
    
    1992
    
    Apr. 28/05
    
    401400 K Street, N.W.
    
    
    
    
    
    Washington, D.C.
    
    
    (20,816
    )
    
    
    8,786
    
    
    
    21,219
    
    
    
    
    
    
    
    14,154
    
    
    
    8,786
    
    
    
    35,373
    
    
    
    44,159
    
    
    
    (8,323
    )
    
    1982/02
    
    Feb. 2/98
    
    401250 Connecticut, N.W.
    
    
    
    
    
    Washington, D.C.
    
    
    (24,963
    )
    
    
    6,457
    
    
    
    37,427
    
    
    
    
    
    
    
    2,628
    
    
    
    6,457
    
    
    
    40,055
    
    
    
    46,512
    
    
    
    (7,825
    )
    
    1964/96
    
    Jan. 11/99
    
    401250 23rd Street, N.W.
    
    
    
    
    
    Washington, D.C.
    
    
    
    
    
    
    3,515
    
    
    
    24,922
    
    
    
    
    
    
    
    347
    
    
    
    3,515
    
    
    
    25,269
    
    
    
    28,784
    
    
    
    (6,477
    )
    
    1990
    
    Feb. 2/98
    
    402401 Pennsylvania
    
    
    
    
    
    Washington, D.C.
    
    
    (17,512
    )
    
    
    4,419
    
    
    
    24,674
    
    
    
    
    
    
    
    2,239
    
    
    
    4,419
    
    
    
    26,913
    
    
    
    31,332
    
    
    
    (5,019
    )
    
    1991
    
    Dec. 16/98
    
    401225 Connecticut, N.W.
    
    
    
    
    
    Washington, D.C.
    
    
    
    
    
    
    8,865
    
    
    
    51,010
    
    
    
    
    
    
    
    989
    
    
    
    8,865
    
    
    
    51,999
    
    
    
    60,864
    
    
    
    (5,895
    )
    
    1968/94
    
    May 24/01
    
    402001 M Street
    
    
    
    
    
    Washington, D.C.
    
    
    (44,500
    )
    
    
    24,919
    
    
    
    48,265
    
    
    
    
    
    
    
    255
    
    
    
    24,919
    
    
    
    48,520
    
    
    
    73,439
    
    
    
    (1,620
    )
    
    1987
    
    Nov. 12/04
    
    40Bethesda Crescent
    
    
    
    
    
    Bethesda, MD
    
    
    (34,463
    )
    
    
    7,359
    
    
    
    55,509
    
    
    
    
    
    
    
    2,954
    
    
    
    7,359
    
    
    
    58,463
    
    
    
    65,822
    
    
    
    (14,721
    )
    
    1987
    
    Dec. 23/97
    
    40Silver Spring Metro Plaza
    
    
    
    
    
    Silver Spring, MD
    
    
    (57,720
    )
    
    
    5,311
    
    
    
    98,142
    
    
    
    
    
    
    
    10,813
    
    
    
    5,311
    
    
    
    108,955
    
    
    
    114,266
    
    
    
    (20,452
    )
    
    1986
    
    Dec. 2/98
    
    401550 & 1560 Wilson Blvd.
    
    
    
    
    
    Arlington, VA
    
    
    (26,012
    )
    
    
    4,958
    
    
    
    28,849
    
    
    
    
    
    
    
    6,136
    
    
    
    4,958
    
    
    
    34,985
    
    
    
    39,943
    
    
    
    (6,903
    )
    
    1983/87
    
    Dec. 10/98
    
    40Two Ballston Plaza
    
    
    
    
    
    Arlington, VA
    
    
    (26,020
    )
    
    
    6,691
    
    
    
    37,837
    
    
    
    
    
    
    
    2,525
    
    
    
    6,691
    
    
    
    40,362
    
    
    
    47,053
    
    
    
    (5,022
    )
    
    1988
    
    May 11/01
    
    4012010 Sunrise Valley Drive
    
    
    
    
    
    Reston, VA
    
    
    (20,113
    )
    
    
    5,706
    
    
    
    34,934
    
    
    
    
    
    
    
    3
    
    
    
    5,706
    
    
    
    34,937
    
    
    
    40,643
    
    
    
    (9,160
    )
    
    1980
    
    Feb. 2/98
    
    40One Reston Crescent
    
    
    
    
    
    Reston, VA
    
    
    (18,459
    )
    
    
    4,247
    
    
    
    810
    
    
    
    
    
    
    
    27,577
    
    
    
    4,247
    
    
    
    28,387
    
    
    
    32,634
    
    
    
    (3,814
    )
    
    2000
    
    Feb. 2/98
    
    40Sunrise Tech Park
    
    
    
    
    
    Reston, VA
    
    
    
    
    
    
    6,346
    
    
    
    36,618
    
    
    
    
    
    
    
    4,067
    
    
    
    6,346
    
    
    
    40,685
    
    
    
    47,031
    
    
    
    (7,497
    )
    
    1983/85
    
    Dec. 15/98
    
    40Total  Washington, D.C. Area
    
    
    
    
    
    
    
    
    (346,678
    )
    
    
    153,559
    
    
    
    683,797
    
    
    
    
    
    
    
    95,396
    
    
    
    153,559
    
    
    
    779,193
    
    
    
    932,752
    
    
    
    (126,049
    )
 F-64




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##### Table of Contents



Schedule III  Real Estate and
Accumulated Depreciation at December 31,2005
 Initial Cost to Company
    
    Subsequent Costs, Capitalized Net
    
    
    Total Cost at 12/31/05Date ofEncumbrances
    
    
    
    
    
    
    Building and
    
    
    
    
    
    
    Building and
    
    
    
    
    
    
    Building and
    
    
    
    
    
    
    Accumulated
    
    
    Construction/
    
    
    
    DepreciableDescription
    
    Notes
    
    Location
    
    at 12/31/05
    
    
    Land
    
    
    Additions
    
    
    Land
    
    
    Additions
    
    
    Land
    
    
    Additions
    
    
    Total (1)
    
    
    Depreciation
    
    
    Renovation
    
    Date Acquired
    
    Lives (2)CharlotteBank of America Plaza
    
    
    
    Charlotte, NC
    
    
    
    
    
    
    11,250
    
    
    
    103,530
    
    
    
    
    
    
    
    4,752
    
    
    
    11,250
    
    
    
    108,282
    
    
    
    119,532
    
    
    
    (18,613
    )
    
    1974
    
    Dec. 21/98
    
    40Total  Charlotte
    
    
    
    
    
    
    
    
    
    
    11,250
    
    
    
    103,530
    
    
    
    
    
    
    
    4,752
    
    
    
    11,250
    
    
    
    108,282
    
    
    
    119,532
    
    
    
    (18,613
    )Total Rental Properties
    
    
    
    
    
    
    (1,863,273
    )
    
    
    563,548
    
    
    
    3,242,602
    
    
    
    181
    
    
    
    544,090
    
    
    
    563,729
    
    
    
    3,786,692
    
    
    
    4,350,421
    
    
    
    (633,414
    )Properties held for future developmentOther residual land
    
    
    
    Various
    
    
    
    
    
    
    24,430
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,430
    
    
    
    
    
    
    
    24,430
    
    
    
    Total  Properties held for the
long-term
    
    
    
    
    
    
    (1,863,273
    )
    
    
    587,978
    
    
    
    3,242,602
    
    
    
    181
    
    
    
    544,090
    
    
    
    588,159
    
    
    
    3,786,692
    
    
    
    4,374,851
    
    
    
    (633,414
    )Properties held for dispositionRental propertiesWilliams Center I & II
    
    (3)
    
    Tulsa, OK
    
    
    
    
    
    
    3,204
    
    
    
    29,404
    
    
    
    
    
    
    
    8,491
    
    
    
    3,204
    
    
    
    37,895
    
    
    
    41,099
    
    
    
    (7,697
    )
    
    1982/83
    
    Dec. 10/98
    
    40Northstar Center
    
    
    
    Minneapolis, MN
    
    
    
    
    
    
    2,500
    
    
    
    44,501
    
    
    
    
    
    
    
    28,123
    
    
    
    2,500
    
    
    
    72,624
    
    
    
    75,124
    
    
    
    (12,755
    )
    
    1916/62/86
    
    Oct. 31/96
    
    40First Citizens Plaza
    
    
    
    Charlotte, NC
    
    
    
    
    
    
    
    
    
    
    61,348
    
    
    
    
    
    
    
    4,461
    
    
    
    
    
    
    
    65,809
    
    
    
    65,809
    
    
    
    (14,035
    )
    
    1985
    
    Jul. 15/98
    
    40Total properties held for disposition
    
    
    
    
    
    
    
    
    
    
    5,704
    
    
    
    135,253
    
    
    
    
    
    
    
    41,075
    
    
    
    5,704
    
    
    
    176,328
    
    
    
    182,032
    
    
    
    (34,487
    )Management businessFurniture, fixtures and equipment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,941
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,941
    
    
    
    13,941
    
    
    
    (5,542
    )Total Real Estate
    
    
    
    
    
    $
    (1,863,273
    )
    
    $
    593,682
    
    
    $
    3,391,796
    
    
    $
    181
    
    
    $
    585,165
    
    
    $
    593,863
    
    
    $
    3,976,961
    
    
    $
    4,570,824
    
    
    $
    (673,443
    )
 F-65




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##### Table of Contents



NOTES
 1.
    
    The aggregate cost for federal income tax purposes as of December 31, 2005 was approximately
$3.2 billion.
 2.
    
    The life to compute depreciation on buildings is 40 years. The life to compute depreciation
on building improvements is over the term of the related lease. Furniture, fixtures and
equipment are depreciated over periods of up to 10 years.
 3.
    
    Provisions were taken on this property in the second quarter of 2004 and fourth quarter of
2005.
 SUMMARY OF ACTIVITY
   December 31,2005
    
    
    2004
    
    
    2003Balance, beginning of the year
    
    $
    4,335,159
    
    
    $
    4,905,287
    
    
    $
    5,346,547Additions during the year:Acquisitions
    
    
    509,037
    
    
    
    438,100
    
    
    
    Improvements
    
    
    74,478
    
    
    
    104,989
    
    
    
    85,727Cumulative effect of a change in
accounting principle
    
    
    5,701
    
    
    
    
    
    
    
    Previously held in an unconsolidated
joint venture now consolidated
    
    
    
    
    
    
    
    
    
    
    88,615Deductions during the year:Properties disposed of
    
    
    (328,024
    )
    
    
    (925,637
    )
    
    
    (564,075
    )Provision for loss on properties
held for disposition
    
    
    (3,531
    )
    
    
    (108,625
    )
    
    
    (18,164
    )Sale of interest to unconsolidated
joint venture
    
    
    
    
    
    
    (48,000
    )
    
    
    Write-off of fully depreciated assets
    
    
    (21,996
    )
    
    
    (30,955
    )
    
    
    (33,363
    )Balance, end of year
    
    $
    4,570,824
    
    
    $
    4,335,159
    
    
    $
    4,905,287
  December 31,2005
    
    
    2004
    
    
    2003Balance, beginning of the year
    
    $
    (619,010
    )
    
    $
    (642,627
    )
    
    $
    (565,350
    )Additions during the year:Depreciation
    
    
    (131,542
    )
    
    
    (138,307
    )
    
    
    (159,311
    )Cumulative effect of a change in
accounting principle
    
    
    (992
    )
    
    
    
    
    
    
    Previously held in an unconsolidated
joint venture now consolidated
    
    
    
    
    
    
    
    
    
    
    (3,919
    )Deductions during the year:Properties disposed of
    
    
    56,105
    
    
    
    130,969
    
    
    
    52,590Write-off of fully depreciated assets
    
    
    21,996
    
    
    
    30,955
    
    
    
    33,363Balance, end of year
    
    $
    (673,443
    )
    
    $
    (619,010
    )
    
    $
    (642,627
    )
 F-66