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Trizec Loss Widens After Write-Downs

November 05, 2002|David M. Levitt | Bloomberg News

Trizec Properties Inc.'s third-quarter loss widened as the second-largest U.S. office owner on Monday again cut the value of its two biggest retail projects, including a Hollywood development that is the home of the Academy Awards show.

The net loss increased to $254.3 million, or $1.70 a share, from $8.49 million, or 6 cents, a year earlier, the co-owner of Chicago's Sears Tower said. Revenue rose 5.7% to $244 million in the quarter.

The company wrote down its investments in the Hollywood & Highland retail and office complex by $181.4 million and in the Desert Passage Mall at the bankrupt Aladdin Casino in Las Vegas by $57 million. It also wrote down its investment in Sears Tower's second mortgage by $48.3 million.

After a failed diversification into European real estate, U.S. retail space and "telecom hotels" that house switching equipment, Trizec chose to focus on U.S. offices just as vacancies were rising to a five-year high. Chairman Peter Munk in August hired Timothy Callahan, formerly of Equity Office Properties Trust, as the second chief executive since Trizec changed strategies.

Lower-than-expected returns from the Hollywood & Highland and Desert Passage properties contributed to a 35% drop in New York-based Trizec's share price this year.

The write-downs on the two properties are the second this year. Trizec took a $239.4-million charge in the first quarter on the Hollywood & Highland project, which opened a year ago, citing cost overruns and the post-Sept. 11 decline in tourism.

The property, which originally was valued at $615 million, encompasses cinemas, television studios, a hotel, restaurants and the Kodak Theatre.

The value of the Desert Passage property was $260 million before Monday's write-down.

Munk, reiterated he intends to sell the retail properties and focus on office buildings.

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