Prentiss Properties Reports Results of Operations for Fourth Quarter 2

Prentiss Properties Reports Results of Operations for Fourth Quarter 2004

    Business Editors/Real Estate Writers

    DALLAS--(BUSINESS WIRE)--Feb. 1, 2005--Prentiss Properties Trust (NYSE:PP), a real estate investment trust (REIT) which focuses on office property ownership and development in select markets, today announced results for the fourth quarter of 2004. The following summarizes the results for the quarter ended Dec. 31, 2004:

--	For the fourth quarter 2004, the Company reported net income of $14.1 million, or $0.27 per common share (diluted), compared to net income of $21.2 million, or $0.45 per common share (diluted) for the fourth quarter of 2003.
--	For the fourth quarter 2004, Adjusted FFO totaled $37.4 million, or $0.75 per common share (diluted) and FFO, which includes a $2.9 million impairment loss, totaled $34.5 million or $0.69 per common share (diluted), compared to Adjusted FFO and FFO of $36.6 million, or $0.77 per common share (diluted) for the fourth quarter of 2003.
--	Higher than normal capital expenditures of $15 million were incurred due to the timing of some significant tenants' spaces being built out during the fourth quarter 2004.
--	As of Dec. 31, 2004 the Company's overall portfolio was 88.1 percent leased versus 88.9 percent at the end of the third quarter of 2004 and 91.2 percent at the end of the fourth quarter of 2003. As of Dec. 31, 2004 the Company's office portfolio was 88.2 percent leased versus 88.3 percent at the end of the third quarter of 2004 and 90.0 percent at the end of the fourth quarter of 2003.
--	On Oct. 29, 2004 the Company purchased Lakeside Point I & II, a 198,000 square foot, class A office complex located in Amhurst Business Park in Waukegan, Ill. This project was purchased in the Company's joint venture with ABP. The contract price was $32.6 million, or $164 per foot, and has an initial cash yield of 9.2% and an initial GAAP yield of 9.9%.
--	On Nov. 19, 2004 the Company closed the sale of its 1800 Sherman Avenue project for a sales price of $18.2 million and recognized a gain on sale of $3.6 million. The Company recognized a $2.9 million impairment loss during the quarter related to a note receivable it received from a property sale in 2001.
--	On Oct. 8, 2004, the Company purchased the 2101 Webster building and the 2353 Webster structured parking garage for a purchase price of $64.75 million.
--	On Jan. 7, 2005, the Company paid a dividend of $0.56 per share for the fourth quarter.

    Asset Acquisitions & Sales

    Lakeside Point I & II

    On Oct. 29, 2004, the Company purchased Lakeside Point I & II, a 198,000 square foot, class A office complex located in Amhurst Business Park in Waukegan, Ill. This project was purchased in the Company's joint venture with ABP. The contract price was $32.6 million, or $164 per foot, and has an initial cash yield of 9.2% and an initial GAAP yield of 9.9%. The project contains two three-story buildings, both of which are 100% leased to Abbott Laboratories through August of 2008. Abbott Laboratories has occupied the majority of the space in these buildings since their initial development in 1990 and 1998. The buildings have 30,000 square foot floor plates which can accommodate large users but are also very functional for multi-tenant users. The complex includes a generous 4.5 per 1000 ratio of parking-to-office space to accommodate dense space users such as Abbott. The project is also linked to Abbott's fiber optic communication network that runs throughout the business park.

    2101 Webster

    On Oct. 8, 2004, the Company purchased the 2101 Webster building and the 2353 Webster structured parking garage for a purchase price of $64.75 million, or about $141 per rentable foot including the structured parking. The office building is a 459,000 square foot, 20 story, class A office project located in downtown Oakland near the Company's Ordway and Lake Merritt Tower projects. The purchase has a first year cash yield of approximately 8.6% and a first year GAAP yield of 9.2%.

    1800 Sherman Sale

    On Nov. 19, 2004, the Company closed the sale of its 1800 Sherman Avenue project for a sales price of $18.2 million and recognized a gain on sale of $3.6 million. The 135,679 square foot, eight story, class A office property is located in Evanston, Ill. Prentiss acquired the project in 1998 and will continue to manage and lease the building for the new owner.

    Note Impairment

    The Company sold its Crescent Center asset, an Atlanta office property, during 2001. As part of the sale price, the Company received a $4.4 million sales note receivable from the buyer. The note is due on March 1, 2005 and after discussions with the obligor, the Company believes only $1.5 million of the note is collectible. The Company has therefore recognized a $2.9 million impairment loss this quarter on the note.

    Development Activity

    During the second quarter of 2004, the Company began construction of High Bluff Ridge, a 158,000 net rentable square foot, Class A, office development in the northern San Diego suburb of Del Mar. The project is 50% pre-leased to Morrison & Foerster LLP.
    The Company is developing High Bluff Ridge through a joint venture with Southwind Construction, Inc. The Company is a 70% owner and the managing general partner.

    Consolidated Financial Results

    Fourth quarter 2004 revenues totaled $98.2 million compared to $86.0 million during the fourth quarter of 2003. For the fourth quarter 2004, the Company reported net income of $14.1 million, or $0.27 per common share (diluted), compared to $21.2 million, or $0.45 per common share (diluted), for the fourth quarter of 2003. Adjusted FFO totaled $37.4 million, or $0.75 per common share (diluted) for the fourth quarter 2004, compared to $36.6 million, or $0.77 per common share (diluted) for the fourth quarter of 2003. Operating results were positively impacted by the Lakeside Point acquisition and negatively impacted by rental rate roll-downs, decline in occupancy, property sales and increased depreciation and amortization expenses.
    FFO is a widely recognized measure of REIT operating performance. FFO is a non-GAAP financial measure and, as defined by the National Association of Real Estate Investment Trusts, means net income, computed in accordance with GAAP, excluding extraordinary items, as defined by GAAP, and gains (or losses) from sales of property, plus depreciation and amortization on real estate assets, and after adjustments for unconsolidated partnerships, joint ventures and subsidiaries. We believe that FFO is helpful to investors and our management as a measure of our operating performance because it excludes depreciation and amortization, gains and losses from property dispositions, and extraordinary items, and, as a result, when compared year over year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, development activities, general and administrative expenses, and interest costs, providing perspective not immediately apparent from net income. In addition, we believe that FFO provides useful information to the investment community about our financial performance when compared to other REITs since FFO is generally recognized as the industry standard for reporting the operating performance of REITs. However, our FFO may not be comparable to FFO reported by other REITs that do not define FFO exactly as we do. We believe that in order to facilitate a clear understanding of our operating results, FFO should be examined in conjunction with net income as presented in our consolidated financial statements. We believe that net income is the most directly comparable GAAP financial measure to FFO. FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered as an alternative to net income or to cash flows as an indication of our performance or as a measure of liquidity or ability to make distributions. A reconciliation of net income, the most directly comparable GAAP measure, to FFO is attached as a schedule to this press release.
    FFO does not reflect depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties. These are significant economic costs that could materially impact our results of operations.
    Adjusted FFO is a non-GAAP financial measure that we define as FFO (defined above) excluding (adding back) impairment losses related to real estate and real estate related assets and debt defeasance losses related to real estate assets sold. We believe that our Adjusted FFO provides useful information to the investment community about our financial performance when compared to other REITs as it eliminates FFO differences caused by the timing and classification within the income statement of real estate and real estate debt related losses. However, our Adjusted FFO may not be comparable to FFO or Adjusted FFO reported by other REITs that do not define FFO or Adjusted FFO exactly as we do. We believe that in order to facilitate a clear understanding of our operating results, Adjusted FFO should be examined in conjunction with net income as presented in our consolidated financial statements and notes thereto. We believe that net income is the most directly comparable GAAP financial measure to Adjusted FFO. Adjusted FFO does not represent cash generated from operating activities in accordance with GAAP and should not be considered as an alternative to net income as an indication of our performance or to cash flows as a measure of liquidity or ability to make distributions.
    Like FFO, our Adjusted FFO does not reflect either depreciation and amortization costs or the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, which are significant economic costs that could materially impact our results of operations.
    Earnings guidance for 2005 will be discussed by management on the Feb. 2, 2005 conference call. Instructions for accessing the conference call can be found in the Additional Information section of this press release.

    Portfolio Performance

    The Company's office portfolio was 88.2 percent leased at the end of the fourth quarter 2004 versus 88.3 percent at the end of the third quarter 2004 and 90.0 percent at the end of the fourth quarter of 2003. The Company's industrial portfolio was 87.8 percent leased at the end of the fourth quarter 2004 versus 92.8 percent at the end of the third quarter 2004 and 99.2 percent at the end of the fourth quarter of 2003.
    The Company's overall portfolio was 88.1 percent leased at the end of the fourth quarter 2004 versus 88.9 percent at the end of the third quarter 2004 and 91.2 percent at the end of the fourth quarter of 2003.
    During the quarter, the Company signed office property renewals and new leases totaling 533,000 square feet and industrial property renewals and new leases totaling 58,000 square feet, for a total of 591,000 square feet of signed leases.
    Average straight-line net rents on new and renewed office leases were 13 percent below those on expiring leases and average straight-line net rents on new and renewed industrial leases were 15 percent above those on expiring leases.
    The Company's largest lease executions during the quarter are as follows:

    1) Perot Systems Government Services, Inc., executed a new 90,103
    square foot, 10 year 3 month lease at Willow Oaks III in
    Fairfax, Va.

    2) Tokyu World Transport, Inc. executed a new 45,360 square foot,
    5 year lease at Pacific Gateway Center in Torrance, Calif.

    3) United Healthcare Services, Inc. executed a new 41,289 square
    foot, 5 year lease at the Corporetum in Lisle, Ill.

    4) Direct Holdings Americas Inc., executed a new 35,155 square
    foot, 10 1/2 year lease at Willow Oaks II in Fairfax, Va.

    5) Equitable (AXA Advisors), executed an 16,814 square foot,
    2 year lease renewal at 3141 Fairview Drive in Falls Church,
    Va.

    6) HIFN, Inc. executed a 16,562 square foot, 5 year lease renewal
    at Pacific View in Carlsbad, Calif.

    7) Kisco Development, LLC. executed a 12,830 square foot, 5 year
    lease renewal at Pacific Ridge in Carlsbad, Calif.

    Lease expirations for office properties for 2005 and 2006 total 1,184,000 square feet and 1,666,000 square feet, respectively, which equates to 7 percent and 10 percent of the Company's net rentable office square feet during those years.

    Capital Markets and Financing

    As of Dec. 31, 2004, the Company's market value of equity was $1.92 billion. Total market capitalization at Dec. 31, 2004 was $3.13 billion, compared to a total asset book value of $2.31 billion (including a pro-rata share of unconsolidated and consolidated joint venture assets). As of Dec. 31, 2004, Debt to Total Market Capitalization (market value equity plus debt) stood at 38.8 percent compared to 38.9 percent as of September 30, 2004 and 39.8 percent as of Dec. 31, 2003.
    The Company's debt balance at Dec. 31, 2004, including its share of unconsolidated and consolidated joint venture debt, was $1.21 billion. Of this amount, $659.6 million was fixed rate, non-recourse, long-term mortgages and fixed rate, recourse debt. The remaining $553.8 million was floating rate debt, of which $360.7 million was hedged as of the end of the fourth quarter of 2004.
    During the fourth quarter the Company, through its POI Joint Venture, entered into a $20 million Dollar non recourse loan. The loan funded on Dec. 22, 2004 and is secured by POI's Lakeside Point property. The loan has a floating rate and currently bears an interest rate of 1.1% over LIBOR and is for a five year term. The Company's pro-rata share of this debt is $10.2 million.
    In January, 2005 the POI Joint Venture executed an interest rate swap agreement for a notional amount of $20 million. The Company's share of the notional amount of this hedge is $10.2 million. This swap is effective Feb. 1, 2005 and effectively fixes the LIBOR borrowing rate at 4.0% during the next five years. Including the Company's existing hedges, the Company's exposure to floating rate debt represented approximately 5.7 percent of its total market capitalization as of the end of the fourth quarter of 2004.
    During the fourth quarter of 2004, the Company's weighted average cost of debt, including all costs related to hedge amortization, swap payments and unused commitment fees, was 6.04 percent. At Dec. 31, 2004, excluding the Company's line of credit, the weighted average maturity of debt was 4.1 years.

    Dividends, Capital Expenditures and Funds Available for Distribution (FAD)

    The Company declared a $0.56 regular quarterly dividend on Dec. 9, 2004, to owners (shares and units) of record as of Dec. 27, 2004, and paid the dividend on Jan. 7, 2005. The annualized dividend of $2.24 per share represented a yield of 6.3 percent based on the Monday, Jan. 31 closing share price of $35.83. The Adjusted FFO and FAD payout ratios for the quarter ended Dec. 31, 2004, were 75.07 percent and 135.3 percent.
    The Company spent $15.0 million in non-incremental capital expenditures during the quarter, of which $1.8 million represented capital improvements and repairs to the properties and $13.2 million represented costs paid with respect to leasing and tenant improvements.
    The actual cash expenditures of $15.0 million during the quarter is higher than normal due to the timing of some significant lease improvements which were all under construction during the quarter. These tenants included NLU, United Health, Sigmatel, AIG, Liberty Mutual, Time Life and others.
    For office leases signed during the quarter, the Company's average non-incremental leasing and tenant improvement costs per square foot were $14.75, or $2.69 per square foot per year. These costs were based on 501,000 square feet of non-incremental office leases signed during the quarter.
    For industrial leases signed during the quarter, the Company's average non-incremental leasing and tenant improvement costs per square foot were $3.08, or $0.79 per square foot per year. These costs were based on new industrial leases of 58,000 square feet during the quarter.
    Funds Available for Distribution (FAD) totaled approximately $20.8 million for the quarter ended Dec. 31, 2004.
    FAD is a non-GAAP financial measure that we define as Adjusted FFO (as defined above) less non-incremental capital expenditures, straight-line rent adjustments, rental income adjustments recognized in accordance with Statement of Financial Accounting Standards No. 141 (SFAS No. 141) and the amortization of financing costs. We believe that FAD is helpful to investors and our management as a measure of the performance of an equity REIT because, along with cash flow from operating activities, financing and investing activities, it provides investors with an indication of our ability to incur and service debt and to fund dividends and other cash needs. Our FAD may not be comparable to FAD reported by other REITs that do not define FAD exactly as we do. We believe that in order to facilitate a clear understanding of our operating results, FAD should be examined in conjunction with net income as presented in our consolidated financial statements and notes thereto.
    We believe that net income is the most directly comparable GAAP financial measure to FAD. FAD does not represent cash generated from operating activities in accordance with GAAP and should not be considered as an alternative to net income as an indication of our performance or to cash flows as a measure of liquidity or ability to make distributions. A reconciliation of net income, the most directly comparable GAAP measure, to FAD is attached as a schedule to this press release.

    Additional Information

    The Company will broadcast its fourth quarter 2004 earnings conference call on Wednesday, Feb. 2, 2005. The conference call will begin at 1:00 p.m. CST and will last for approximately one hour. Those interested in listening via the Internet can access the conference call at www.prentissproperties.com. Please go to the Company's Web site 15 minutes prior to the start of the call to register. It may be necessary to download audio software to hear the conference call. To do so, click on the Real Player icon and follow directions from there. Those interested in listening via the telephone can access the conference call at 303-262-2137. A replay of the conference call will be available via phone through Feb. 9, 2005 at 303-590-3000, passcode #11021146 or via the Internet on the Company's Web site. Additional information on Prentiss Properties Trust, including an archive of corporate press releases and conference calls, is available on the Company's Web site. The Company's fourth quarter 2004 Supplemental Operating and Financial Data, which includes a reconciliation of GAAP to Non-GAAP financial measures, will be available on the Company's Web site at www.prentissproperties.com prior to the start of the conference call.

    About Prentiss Properties Trust

    Prentiss Properties Trust is a self-administered and self-managed real estate investment trust ("REIT"). It owns interests in 133 operating properties with approximately 18.4 million square feet -- 16.2 million of office properties and 2.2 million of industrial properties. The Company also has a 158,000 square foot development project in construction at this time. The Company, through various management subsidiaries, manages approximately 28.2 million square feet of office and industrial properties owned by Prentiss, its affiliates and third parties.
    With its headquarters in Dallas, Prentiss Properties focuses on the ownership of office properties in Metropolitan Washington D.C., Chicago, Dallas, Austin, Northern California and Southern California. It is a full service real estate company with in-house expertise in areas such as acquisitions, development, facilities management, property management and leasing.

    Statements contained in this press release that are not historical facts may be forward-looking statements within the meaning of the Private Litigation Reform Act of 1995. Such statements may use words such as "anticipate," "believe," "estimate," "expect," "intent," "predict," "project" and similar expressions as they relate to Prentiss Properties Trust or our management. When we make forward-looking statements, we are basing them on our management's beliefs and assumptions, using information currently available to us. Although we believe that the expectations reflected in the forward-looking statements are reasonable, these forward-looking statements are subject to risks, uncertainties and assumptions including the risks discussed in our filings with the Securities and Exchange Commission. If one or more of these risks materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what we projected. Any forward-looking statements contained in this press release reflect our current views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. We have no current intention, and disclaim any obligation, to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise.
    For more information on Prentiss Properties Trust, visit the Company's website at www.prentissproperties.com.

Calculation of FFO and FAD For Common Shares and Common Share Equivalents (000s, except per share data)

Twelve Months Ended Three Months Ended ---------------------------------------------- Funds from Operations (FFO): 12/31/2004 12/31/2003 12/31/2004 9/30/2004 --------------------- ------------ ----------- ----------- ----------

Net income $62,423 $59,417 $14,078 $12,554 Adjustments: Real estate depreciation and amortization (1) 95,429 79,972 24,294 24,368 Minority interests (2) 1,733 1,875 366 333 Minority interest share of depreciation and amortization (4,682) -- (1,377) (1,181) Pro rata share of joint venture depreciation and amortization 2,985 2,960 756 749 Issue costs of preferred units redeemed (1,600) -- -- -- (Gain)/loss on sale of real estate (13,179) (4,978) (3,593) 1,821 FFO applicable to common and common equivalents $143,109 $139,246 $34,524 $38,644

Impairment losses and debt defeasance related to real estate 8,216 1,792 2,900 --

Adjusted FFO applicable to common and common equivalents $151,325 $141,038 $37,424 $38,644

Weighted average common shares, units and common shares equivalents (diluted) 49,727 45,533 50,174 50,086

Adjusted FFO per weighted average shares outstanding (diluted) $3.04 $3.10 $0.75 $0.77

Funds Available for Distribution (FAD): ------------------------

Adjusted FFO $151,325 $141,038 $37,424 $38,644

Adjustments: Straight-line rent adjustment (8,962) (7,946) (2,053) (2,199)

FAS 141 adjustment (752) (390) (162) (344)

Amortization of deferred financing fees 2,351 2,340 544 646

Capital expenditures (42,758) (31,816) (14,987) (10,077)

FAD $101,204 $103,226 $20,766 $26,670

Weighted average common shares, units and common shares equivalents (diluted) 49,727 45,533 50,174 50,086

Dividend per share $2.240 $2.240 $0.560 $0.560

Total dividend declared $111,927 $102,860 $28,096 $28,065

Payout ratio of Adjusted FFO 73.96% 72.93% 75.07% 72.62%

Payout ratio of FAD 110.60% 99.65% 135.30% 105.23%

Three Months Ended --------------------------------- Funds from Operations (FFO): 6/30/2004 3/31/2004 12/31/2003 ------------------------ ---------- ---------- -----------

Net income $18,792 $16,999 $21,177 Adjustments: Real estate depreciation and amortization (1) 23,785 22,982 21,524 Minority interests (2) 538 496 670 Minority interest share of depreciation and amortization (1,303) (821) -- Pro rata share of joint venture depreciation and amortization 744 736 750 Issue costs of preferred units redeemed -- (1,600) -- (Gain)/loss on sale of real estate (10,091) (1,316) (7,525) FFO applicable to common and common equivalents $32,465 $37,476 $36,596

Impairment losses and debt defeasance related to real estate 5,316 -- --

Adjusted FFO applicable to common and common equivalents $37,781 $37,476 $36,596

Weighted average common shares, units and common shares equivalents (diluted) 49,738 48,896 47,510

Adjusted FFO per weighted average shares outstanding (diluted) $0.76 $0.77 $0.77

Funds Available for Distribution (FAD): ------------------------

Adjusted FFO $37,781 $37,476 $36,596

Adjustments: Straight-line rent adjustment (2,231) (2,479) (2,438)

FAS 141 adjustment (256) 10 (5)

Amortization of deferred financing fees 582 579 575

Capital expenditures (8,209) (9,485) (11,570)

FAD $27,667 $26,101 $23,158

Weighted average common shares, units and common shares equivalents (diluted) 49,738 48,896 47,510

Dividend per share $0.560 $0.560 $0.560

Total dividend declared $28,032 $27,734 $26,820

Payout ratio of Adjusted FFO 74.20% 74.00% 73.29%

Payout ratio of FAD 101.32% 106.26% 115.81%

(1) - Excludes depreciation and amortization not related to real estate.

(2) - Represents the minority interest attributable to holders of common partnership units. The units are included in the share count.

Prentiss Properties Trust Consolidated Statements of Income

(in thousands, except per share amounts)

Twelve Months Ended Three Months Ended ----------------------- ----------------------- 12/31/2004 12/31/2003 12/31/2004 9/30/2004 ----------- ----------- ----------- ---------- Revenues: Rental income $356,825 $314,718 $93,897 $91,008 Service business and other income 13,909 16,769 4,277 3,216 ----------- ----------- ----------- ---------- 370,734 331,487 98,174 94,224 ----------- ----------- ----------- ----------

Expenses: Property operating and maintenance 91,681 80,583 25,604 22,685 Real estate taxes 39,406 31,274 10,894 9,396 General and administrative and personnel cost 11,803 10,988 3,010 3,423 Expenses of service business 9,998 10,513 3,213 2,670 Interest expense 68,037 67,232 17,433 17,580 Amortization of deferred financing costs 2,343 2,284 559 651 Depreciation and amortization 92,315 72,483 24,393 24,171 ----------- ----------- ----------- ---------- 315,583 275,357 85,106 80,576 ----------- ----------- ----------- ----------

Income from continuing operations before minority interests and equity in income of unconsolidated joint ventures 55,151 56,130 13,068 13,648

Minority interests (2,744) (10,227) (258) (323) Equity in income of unconsolidated joint ventures 2,429 2,555 639 616 Loss on investment in securities (420) -- -- -- Loss from impairment of mortgage loan (2,900) -- (2,900) -- ----------- ----------- ----------- ----------

Income from continuing operations 51,516 48,458 10,549 13,941

Discontinued operations: Income from discontinued operations including impairment losses 3,354 6,034 44 390 Gain/(loss) from disposition of discontinued operations 11,957 (4,457) 3,593 (1,821) Loss from debt defeasance related to sale of real estate (5,316) -- -- -- Minority interest related to discontinued operations (310) (53) (108) 44 ----------- ----------- ----------- ---------- 9,685 1,524 3,529 (1,387)

Income before gain on sale of properties 61,201 49,982 14,078 12,554

Gain/(loss) on sale of land 1,222 9,435 -- -- ----------- ----------- ----------- ----------

Net income 62,423 59,417 14,078 12,554 Preferred dividends (10,052) (8,452) (2,113) (2,113) ----------- ----------- ----------- ---------- Net income applicable to common shareholders $52,371 $50,965 $11,965 $10,441 =========== =========== =========== ==========

Net income per common share - basic $1.18 $1.27 $0.27 $0.23 =========== =========== =========== ==========

Weighted average number of common shares outstanding - basic 44,330 40,068 44,799 44,691 =========== =========== =========== ==========

Net income per common share - diluted $1.18 $1.27 $0.27 $0.23 =========== =========== =========== ==========

Weighted average number of common shares and common share equivalents outstanding-diluted 44,529 40,270 45,024 44,882 =========== =========== =========== ==========

Three Months Ended ---------------------------------- 6/30/2004 3/31/2004 12/31/2003 ----------- ---------- ----------- Revenues: Rental income $87,622 $84,298 $81,384 Service business and other income 2,928 3,488 4,615 ----------- ---------- ----------- 90,550 87,786 85,999 ----------- ---------- -----------

Expenses: Property operating and maintenance 22,015 21,377 22,795 Real estate taxes 9,780 9,336 5,875 General and administrative and personnel cost 2,785 2,585 2,613 Expenses of service business 2,466 1,649 2,914 Interest expense 16,825 16,199 16,882 Amortization of deferred financing costs 568 565 561 Depreciation and amortization 22,467 21,284 19,985 ----------- ---------- ----------- 76,906 72,995 71,625 ----------- ---------- -----------

Income from continuing operations before minority interests and equity in income of unconsolidated joint ventures 13,644 14,791 14,374

Minority interests (563) (1,600) (2,578) Equity in income of unconsolidated joint ventures 596 578 622 Loss on investment in securities (420) -- -- Loss from impairment of mortgage loan -- -- -- ----------- ---------- -----------

Income from continuing operations 13,257 13,769 12,418

Discontinued operations: Income from discontinued operations including impairment losses 942 1,978 1,277 Gain/(loss) from disposition of discontinued operations 10,185 -- -- Loss from debt defeasance related to sale of real estate (5,316) -- -- Minority interest related to discontinued operations (182) (64) (43) ----------- ---------- ----------- 5,629 1,914 1,234

Income before gain on sale of properties 18,886 15,683 13,652

Gain/(loss) on sale of land (94) 1,316 7,525 ----------- ---------- -----------

Net income 18,792 16,999 21,177 Preferred dividends (2,113) (3,713) (2,113) ----------- ---------- ----------- Net income applicable to common shareholders $16,679 $13,286 $19,064 =========== ========== ===========

Net income per common share - basic $0.38 $0.31 $0.45 =========== ========== ===========

Weighted average number of common shares outstanding - basic 44,386 43,426 42,059 =========== ========== ===========

Net income per common share - diluted $0.37 $0.30 $0.45 =========== ========== ===========

Weighted average number of common shares and common share equivalents outstanding-diluted 44,527 43,670 42,255 =========== ========== ===========

Prentiss Properties Trust Consolidated Balance Sheets

(in thousands, except share and per share amounts)

Assets 12/31/2004 9/30/2004 6/30/2004 ------- ------------ ----------- ----------- Operating real estate: Land $341,321 $336,245 $345,089 Buildings and improvements 1,789,043 1,731,346 1,779,810 Less: accumulated depreciation (234,007) (224,748) (221,575) ----------- ----------- ----------- 1,896,357 1,842,843 1,903,324

Construction in progress 23,417 18,085 12,594 Land held for development 59,014 58,871 43,678

Deferred charges and other assets, net 260,283 236,392 233,238 Notes receivable, net 1,500 5,440 5,942 Receivables, net 55,772 54,841 51,030 Cash and cash equivalents 8,586 6,956 10,035 Escrowed cash 9,584 9,579 10,149 Investments in securities and insurance contracts 3,279 2,928 3,030 Investments in unconsolidated joint ventures 12,943 12,906 12,774 Interest rate hedges 2,804 2,107 5,099 ----------- ----------- ----------- Total assets $2,333,539 $2,250,948 $2,290,893 =========== =========== ===========

Liabilities and Shareholders' Equity -------------------------------- Liabilities: Mortgages and notes payable $1,191,911 $1,115,534 $1,103,992 Interest rate hedges 3,850 6,775 5,277 Accounts payable and other liabilities 105,304 93,255 82,706 Mandatorily redeemable preferred units -- -- -- Distributions payable 28,103 28,072 28,041 ----------- ----------- ----------- Total liabilities 1,329,168 1,243,636 1,220,016 ----------- ----------- -----------

Minority interest in operating partnership 24,990 26,790 27,738 ----------- ----------- -----------

Minority interest in real estate partnerships 35,792 30,858 77,843 ----------- ----------- -----------

Commitments and contingencies

Shareholders' equity: Preferred shares $.01 par value, 20,000,000 shares authorized, 3,773,585 shares issued and outstanding 100,000 100,000 100,000 Common shares $.01 par value, 100,000,000 shares authorized, 48,268,845 and 45,772,383 (includes 3,286,957 and 3,159,089 in treasury) shares issued and outstanding at December 31, 2004 and December 31, 2003, respectively 483 481 480 Additional paid-in capital 1,020,917 1,017,744 1,014,116 Common shares in treasury, at cost, 3,286,957 and 3,159,089 shares at December 31, 2004 and December 31, 2003, respectively (82,694) (82,505) (82,159) Unearned compensation (3,386) (3,827) (4,254) Accumulated other comprehensive income (302) (4,061) 564 Retained earnings/(distributions in excess of earnings) (91,429) (78,168) (63,451) ----------- ----------- ----------- Total shareholders' equity 943,589 949,664 965,296 ----------- ----------- ----------- Total liabilities and shareholders' equity $2,333,539 $2,250,948 $2,290,893 =========== =========== ===========

Assets 3/31/2004 12/31/2003 ------- ----------- ----------- Operating real estate: Land $325,623 $325,623 Buildings and improvements 1,728,823 1,727,056 Less: accumulated depreciation (222,080) (210,944) ----------- ----------- 1,832,366 1,841,735

Construction in progress -- -- Land held for development 47,462 47,202

Deferred charges and other assets, net 209,744 210,420 Notes receivable, net 6,440 15,904 Receivables, net 49,451 47,412 Cash and cash equivalents 11,215 5,945 Escrowed cash 13,062 11,913 Investments in securities and insurance contracts 3,395 2,579 Investments in unconsolidated joint ventures 14,274 14,215 Interest rate hedges 475 1,768 ----------- ----------- Total assets $2,187,884 $2,199,093 =========== ===========

Liabilities and Shareholders' Equity ------------------------------ Liabilities: Mortgages and notes payable $1,034,934 $1,029,035 Interest rate hedges 10,476 9,842 Accounts payable and other liabilities 70,492 84,366 Mandatorily redeemable preferred units -- 10,000 Distributions payable 27,742 28,986 ----------- ----------- Total liabilities 1,143,644 1,162,229 ----------- -----------

Minority interest in operating partnership 27,476 123,058 ----------- -----------

Minority interest in real estate partnerships 69,841 1,565 ----------- -----------

Commitments and contingencies

Shareholders' equity: Preferred shares $.01 par value, 20,000,000 shares authorized, 3,773,585 shares issued and outstanding 100,000 100,000 Common shares $.01 par value, 100,000,000 shares authorized, 48,268,845 and 45,772,383 (includes 3,286,957 and 3,159,089 in treasury) shares issued and outstanding at December 31, 2004 and December 31, 2003, respectively 475 458 Additional paid-in capital 997,537 942,644 Common shares in treasury, at cost, 3,286,957 and 3,159,089 shares at December 31, 2004 and December 31, 2003, respectively (82,115) (78,000) Unearned compensation (4,782) (2,176) Accumulated other comprehensive income (9,176) (7,198) Retained earnings/(distributions in excess of earnings) (55,016) (43,487) ----------- ----------- Total shareholders' equity 946,923 912,241 ----------- ----------- Total liabilities and shareholders' equity $2,187,884 $2,199,093 =========== ===========

--30--LR/da*

CONTACT: Prentiss Properties Trust, Dallas Thomas F. August, 214-654-0886

KEYWORD: CALIFORNIA VIRGINIA TEXAS ILLINOIS GEORGIA INDUSTRY KEYWORD: REAL ESTATE BUILDING/CONSTRUCTION EARNINGS CONFERENCE CALLS SOURCE: Prentiss Properties Trust

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