Catellus Confirms Agreement in Principle with the City of San Francisco on Development Proposal for 65-Acre Portion of Mission Bay.

SAN FRANCISCO--(BUSINESS WIRE)--Sept. 30, 1996--Catellus Development Corporation (NYSE:CDX) confirmed the City of San Francisco's announcement earlier today that an agreement in principle has been reached on a development proposal for a 65-acre portion of the Company's Mission Bay project.

The project site, located north of the Mission Creek channel on the Company's 313-acre Mission Bay mixed-use development property, will be served by major access routes from Interstate 280 which connects to the airport, south bay peninsula and Silicon Valley.

The development proposal for the 65-acre site contains up to 3,000 housing units, 20% of which will be affordable. The plan also includes a retail/entertainment complex of up to 350,000 square feet adjacent to the future San Francisco Giants Ballpark, as well as neighborhood and community-serving retail of up to 250,000 square feet.

Under the terms of the proposed agreement, the affordable housing development and the public infrastructure improvements would be financed by tax increment generated by the development.

"This agreement provides the basis for structuring the more detailed entitlement documents with the San Francisco Redevelopment Agency," stated Nelson C. Rising, president and chief executive officer. "Our next step will be to immediately begin the entitlement process.

"We are particularly pleased with the land uses agreed upon in the proposal. The site provides an excellent opportunity for entertainment and retail uses due to its adjacency to the future Giants Ballpark," continued Rising. "Additionally, the housing market in San Francisco is attractive with vacancy rates under 2%."

In February of 1996, Catellus terminated the previous Development Agreement for its entire Mission Bay project after it determined that the financial obligations imposed by the Agreement rendered the project uneconomic. According to Rising, "The 1991 Development Agreement was entered into in a different era and the entitlements and financial obligations could not be economically justified. This new agreement for the 65-acre initial-phase site successfully meets both the economic objectives of Catellus and the affordable housing needs and open space requirements of the City of San Francisco."

Today's announcement comes two weeks after the City of Fremont gave final approval on Catellus 840-acre business park, Pacific Commons and three months after the City of Los Angeles gave final approval for the Company's seven million square foot mixed-use project at Los Angeles Union Station.

Rising concluded: "The recent success with entitlements is the result of the efforts of the Company s new management team over the past two years to reevaluate and reposition our mixed-use development projects."

Catellus Development Corporation is a full service real estate company that owns, manages and develops real estate for its own account and others. At June 30, 1996, the Company's portfolio included 15.5 million square feet of income producing properties, 5,400 acres of land leases, interests in nine joint ventures and 854,000 acres of land.

The following is the announcement released today by the Office of the Mayor, San Francisco:

MAYOR WILLIE L. BROWN JR. APPROVES MISSION BAY PROPOSAL

Mayor Willie L. Brown Jr. is pleased to announce his enthusiastic support of a proposal to develop 65 acres north of Mission Creek in the Mission Bay Area.

The plan was negotiated over several months by Brown's senior negotiating team and Catellus Development Corp. and satisfies the mayor's goals that affordable housing be provided, that retail and entertainment facilities be incorporated into the plan, that open space areas be designated and that toxic clean-up efforts meet all appropriate standards.

"My staff has assured me that the plan meets all city objectives -- affordable housing, open space and economic opportunity," Brown said Monday. "At the same time, Catellus has assured me the plan is economically viable, and unlike previous plans, can in fact be built. Based on unanimous recommendations from my staff, I enthusiastically endorse the proposal."

Development plans for Mission Bay have been under way for nearly 10 years and have spanned three previous mayoral administrations. Brown promised to jump start Mission Bay during the first year of his administration. Previous plans proved to be economically unfeasible and were canceled by Catellus.

Highlights from the new proposal include:

-- Catellus and the City's non-profit housing development corporations will build up to 3,000 units of ownership and rental housing. Of those 3,000, 20 percent will be units affordable by households earning between 50 percent and 110 percent of median income. The percentage of affordable housing units exceeds state requirements.

-- Catellus will deliver to the City at no cost 2.5 to 3.8 acres of clean, infrastructured land for housing development. As Catellus develops the site, the company will clean to required standards.

-- The City will have access to 20 percent of tax increments for non-profit housing. Sixty percent of the increment generated on-site would go first toward infrastructure, then equally to subsidize non-profit and Catellus very low income housing. Increments not needed for infrastructure or housing could be applied elsewhere.

-- Catellus will develop and convey to the City up to 4.3 acres of improved public space, which will be maintained by a special assessment on Catellus land. The open space will include a pedestrian walkway along the northern bank of China Basin Channel, as well as landscaped public plazas and an enhanced pedestrian environment in the retail and entertainment areas along Berry, King and Third streets.

-- On blocks near the proposed Giants ballpark, up to 350,000 square feet of entertainment and retail space will be developed. An additional retail center of up to 200,000 square feet could be developed at the western end of the project. Up to 50,000 square feet of neighborhood retail businesses will serve the residents of Mission Bay North. Catellus will fund a $500,000 revolving loan fund for minority and disadvantaged businesses in the plan area. Up to 5,000 square feet of retail space will be set aside for use in a business incubator/entrepreneur program.

-- All affirmative action plans will meet or exceed agency requirements. -0-

"I will appoint a citizens committee to advise the Redevelopment Agency on the Mission Bay North plan," Brown said. "That group will be broadly representative of interest groups that have concerned themselves over the years with development of this important area of our city."

CONTACT: Catellus Development Corp., San Francisco

Jennifer Ruddock, 415/974-4649