LNR Property Corporation Reports 2004 Earnings Per Share of $4.04

    Business Editors

    MIAMI BEACH, Fla.--(BUSINESS WIRE)--Jan. 5, 2005--LNR Property Corporation (NYSE:LNR):

FISCAL YEAR 2004 HIGHLIGHTS

-- Earnings per share of $4.04

-- Closed over $1.2 billion of new value-add investments

-- Closed $1 billion Newhall acquisition with Lennar Corporation

-- Generated $760 million from asset sales, recognizing $161 million in gains

-- Announced proposed acquisition of Company by Cerberus/Blackacre

FOURTH QUARTER 2004 HIGHLIGHTS

-- Earnings per share of $0.83

-- Over $275 million of new investments in the pipeline

-- $1.8 billion of current liquidity available
    LNR Property Corporation (NYSE:LNR), one of the nation's leading real estate investment, finance and management companies, today reported net earnings for its fourth quarter ended November 30, 2004 of $27.7 million, or $0.83 per share diluted, compared to net earnings of $19.6 million, or $0.65 per share diluted, for the same quarter in 2003. For the year ended November 30, 2004, net earnings were $126.2 million, or $4.04 per share diluted, compared to net earnings of $109.6 million, or $3.57 per share diluted, for 2003.
    Mr. Jeffrey P. Krasnoff, President and Chief Executive Officer of LNR, stated, "Throughout 2004, our unique franchise continued to create and then realize value from our real estate investments. With strong capital inflows into the real estate sector during the year, we took advantage of the demand for our valuable income producing assets, bringing in $760 million of cash from sales of our assets, recognizing $161 million in gains."
    Mr. Krasnoff added, "We continued to maintain our disciplined investment strategy of deploying our capital to those opportunities that demonstrate the most attractive risk adjusted returns. With this approach, we were successful in acquiring over $1.2 billion of assets during the year in the U.S. and Europe. Utilizing our disciplined value-add asset management culture, we ended the year with a diverse portfolio of real estate assets, an effectively match-funded balance sheet and a strong liquidity position."

PENDING TRANSACTION

    On August 29, 2004, LNR entered into a merger agreement with a newly formed company, which will be majority owned by funds and accounts managed by Cerberus Capital Management, L.P. and other investors selected by Cerberus, under which holders of LNR's common stock and Class B common stock will receive $63.10 per share in cash and LNR will become indirectly wholly owned by the newly formed company, Riley Property Holdings. Cerberus is a New York-based global private investment firm which, together with its affiliates, manages in excess of $14 billion of capital.
    The transaction will require approval by the holders of a majority in voting power of LNR's stock. Stuart A. Miller, Chairman of the LNR Board of Directors, partnerships owned by his family and a trust of which he is a primary beneficiary, collectively own shares carrying the power to cast approximately 77% of the votes that can be cast with regard to the transaction. Mr. Miller, the partnerships and the trust have agreed to vote their shares in favor of the merger as long as the Company's Board of Directors and a special committee of the Board continue to recommend the transaction.
    A shareholders' meeting to approve the merger has been scheduled for January 31, 2005 and a proxy statement relating to that meeting has been mailed to shareholders. Additional information related to the merger transaction and the shareholders' meeting can be found in the proxy statement. The merger is expected to be completed shortly after the shareholders' meeting.
    In anticipation of the merger and the resulting capital structure of LNR, all three rating agencies have recently downgraded the Company's debt ratings. Moody's Investors Services downgraded the Company's ratings for senior unsecured debt from Ba2 to B3, and senior subordinated notes from Ba3 to Caa1. Standard and Poor's Ratings Services downgraded the Company's ratings for senior unsecured debt from BB to B, and senior subordinated notes from B+ to CCC+. Fitch Ratings downgraded the Company's ratings for senior unsecured debt from BB+ to B, and senior subordinated notes from BB- to B-.

RESULTS OF OPERATIONS (In thousands, except per share amounts and percentages)

Three Months Ended Twelve Months Ended November 30, November 30, ------------------- ------------------- 2004 2003 2004 2003 --------- --------- --------- --------- Total revenues and other operating income(1) $136,541 117,550 536,957 491,554 Segment earnings before income taxes(1) : Real estate properties $47,841 25,493 160,137 113,696 Real estate loans 10,294 12,955 53,631 47,673 Real estate securities 21,941 43,966 134,688 169,388 Corporate and interest (37,207) (52,654) (152,841) (164,724) --------- --------- --------- --------- Total earnings before income taxes(1) 42,869 29,760 195,615 166,033 Income taxes(1) 15,218 10,118 69,443 56,451 --------- --------- --------- --------- Net earnings $27,651 19,642 126,172 109,582 ========= ========= ========= ========= Earnings from continuing operations $18,049 16,643 97,429 86,333 Earnings from discontinued operations 9,602 2,999 28,743 23,249 --------- --------- --------- --------- Net earnings $27,651 19,642 126,172 109,582 ========= ========= ========= ========= Weighted average shares outstanding: Basic - Common stock 19,142 18,663 18,995 19,508 Basic - Class B common stock 9,770 9,775 9,771 9,781 Diluted 35,746 30,183 31,716 30,718 Net earnings per share(4): Basic - Common stock $ 0.99 0.72 4.54 3.87 Basic - Class B common stock $ 0.89 0.64 4.09 3.48 Diluted $ 0.83 0.65 4.04 3.57

Recurring income(1)(2) $74,149 65,263 321,928 293,828 EBITDA(1)(3) $80,236 81,598 348,484 333,240

2004 change from prior year: Total revenues and other operating income(1) 16% 9% Recurring income(1)(2) 14% 10% EBITDA(1)(3) (2%) 5% Net earnings per share - Basic - Common stock(4) 38% 17% Net earnings per share - Basic - Class B common stock(4) 39% 18% Net earnings per share - Diluted(4) 28% 13%

(1) Includes amounts reported in discontinued operations as a result of the application of Statement of Financial Accounting Standards No. 144. See "Supplemental Disclosures" table.

(2) Recurring income is defined as net rents (rental income less cost of rental operations), interest income and fees, including the Company's pro rata share of net rents, interest income and fees from unconsolidated entities. See "Supplemental Disclosures" table.

(3) EBITDA is defined as earnings before interest, taxes, depreciation, amortization and loss on early extinguishment of debt. See "Supplemental Disclosures" table.

(4) Quarterly and fiscal year computations of per share amounts are made independently; therefore, the sum of per share amounts for the quarters may not equal per share amounts for the fiscal year.
    As required, the Company follows Statement of Financial Accounting Standards (SFAS) No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Under SFAS No. 144, any time the Company sells, or determines to sell, a rental real estate property, it is required to reclassify the revenues and expenses of that property, including the profit or loss on the sale of that property, both with regard to the current period and with regard to the past, as discontinued operations. Primarily because of this, approximately 35% of the Company's earnings during the fourth quarter and approximately 23% of the Company's earnings during the fiscal year are characterized as earnings from discontinued operations. However, because the Company, as a real estate operating company, is regularly engaged in the business of acquiring and developing properties for the purpose of improving them and selling them at a profit, the Company's management considers earnings from properties the Company sells, or holds for sale, as an important part of its ongoing operations.
    The Company believes that in order for its investors to better understand its business and its operating performance, financial information which combines the results from both continuing operations and operations classified as discontinued, because of the application of SFAS No. 144, should be provided. Accordingly, the following discussion and analysis of the Company's fourth quarter and fiscal year performance is presented on a combined basis. Condensed financial statements under SFAS No. 144 appear immediately following the discussion and analysis, and a full reconciliation of the condensed financial statements to the combined amounts that appear in the discussion and analysis can be found in the "Supplemental Disclosures" tables.

FOURTH QUARTER PERFORMANCE

    Net earnings for the quarter increased by $8.0 million, or 41%, compared with last year's fourth quarter. This increase resulted primarily from a higher level of recurring income, including higher management and servicing fees, interest income and net rents (rental income less costs of rental operations). In addition, last year's fourth quarter results included a one-time charge of $18.3 million related to the early extinguishment of debt. These increases were partially offset by property impairment charges recorded in the current quarter and higher general and administrative expenses.
    Total revenues and other operating income increased by $19.0 million, or 16% this quarter, compared with last year's fourth quarter. Total revenues and other operating income increased primarily as a result of higher gains on sales of real estate property assets, higher equity in earnings of unconsolidated entities, higher rental income, higher management and servicing fee income, and higher interest income. These increases were partially offset by lower gains on sales of real estate securities in 2004, compared to 2003.

    Real Estate Properties

    Earnings before income taxes from real estate property activities were $47.8 million for the quarter ended November 30, 2004, compared to $25.5 million for the same period in 2003. This increase was primarily due to higher gains on sales of real estate property assets, higher equity in earnings of unconsolidated entities, and higher net rents, partially offset by an $8.6 million impairment charge primarily related to two under-performing hospitality properties.
    Gains on sales of real estate property assets were $29.6 million for the quarter ended November 30, 2004, compared to $13.3 million for the same period in 2003. Gains on sales of real estate property assets fluctuate from quarter to quarter primarily due to the timing of asset sales.
    Equity in earnings of unconsolidated entities increased by $16.1 million for the quarter ended November 30, 2004, compared to the same period in 2003. This increase primarily resulted from higher earnings on sales of underlying assets, including homesites, commercial land and operating properties.
    Net rents increased to $9.2 million for the quarter ended November 30, 2004, from $7.2 million for the same period in 2003, primarily due to the portfolio of income producing properties acquired from The Newhall Land and Farming Company ("Newhall") late in the first quarter of 2004 and development properties coming on-line, partially offset by sales of stabilized properties in 2004.
    LNR's domestic real estate portfolio, including properties held in unconsolidated entities, at quarter-end included approximately 6.7 million square feet of office, retail, industrial and warehouse space, 0.5 million square feet of ground leases, 1,500 hotel rooms, and 9,500 apartments (8,800 in affordable housing communities), either completed or under development. This compares with approximately 6.5 million square feet of office, retail, industrial and warehouse space, 0.3 million square feet of ground leases, 2,100 hotel rooms, and 11,000 apartments (9,500 in affordable housing communities), either completed or under development, twelve months earlier. At November 30, 2004, LNR's consolidated domestic operating property portfolio, excluding $289.9 million of market-rate properties undergoing development or repositioning and $74.5 million relating to the affordable housing business, was yielding approximately 12% on net book cost.

    Real Estate Loans

    LNR's real estate loan business consists of lending in unique high-yielding situations. Earnings before income taxes from real estate loans were $10.3 million for the quarter ended November 30, 2004, compared to $13.0 million for the same period in 2003. This decrease was primarily due to higher operating expenses related to growth in the Company's loan investing activity in the U.S. and Europe.
    During the fourth quarter, the Company funded five new B-note investments for $80.2 million and received $47.2 million from the payment in full of three B-note investments and the sale of one B-note investment. Subsequent to the end of the fourth quarter, the Company purchased or committed to fund four additional B-note investments for $94.3 million. Assuming these loans are funded, investments under the Company's B-note program will have a face value of approximately $583.0 million, a 32% increase over November 30, 2003.

    Real Estate Securities

    Earnings before income taxes from real estate securities were $21.9 million for the quarter ended November 30, 2004, compared to $44.0 million for the same period in 2003. This decrease was primarily due to lower gains on sales of real estate securities, lower equity in earnings of unconsolidated entities and higher operating expenses, partially offset by higher management and servicing fee income and higher interest income.
    The Company recorded no gains on sales of real estate securities during the quarter ended November 30, 2004, compared to $22.9 million for the same period in 2003. The gain in the prior year primarily resulted from a CMBS resecuritization transaction completed in September 2003.
    Equity in earnings of unconsolidated entities decreased by $7.4 million for the quarter ended November 30, 2004, compared to the same period in 2003. The decline in earnings is primarily due to reduced income from the Madison Square joint venture ("Madison") and from a joint venture that owned several investments at a discount which paid off in the prior year period. Madison's income decreased because of lower interest income resulting from the timing and amount of expected principal collections related to short-term floating-rate securities owned by the venture and higher interest expense due to a refinancing within the venture, which occurred in the second quarter of 2004. At the end of the fourth quarter, the Company's investment in Madison was $31.7 million. Since inception, the Company has received $188.7 million in cash distributions and fees from Madison on an original investment of $90.1 million.
    Management and servicing fee income increased to $13.8 million for the quarter ended November 30, 2004, from $8.5 million for the same period in 2003, primarily due to the growth of the Company's special servicing activity.
    Operating expenses increased to $8.3 million for the quarter ended November 30, 2004, from $5.1 million for the same period in 2003, primarily due to increases in personnel and out-of-pocket expenses directly related to growth of the Company's CMBS portfolio in the U.S. and Europe and increased special servicing activity.
    Interest income increased to $22.9 million for the quarter ended November 30, 2004, from $18.4 million for the same period in 2003, primarily due to an increase in yields and a higher average level of CMBS investments, slightly offset by a higher level of write-downs on a small number of bond positions.
    The Company's annualized cash yield on its fixed-rate CMBS portfolio was approximately 16% at the end of the 2004 period. The cash yield on the unrated portion of this portfolio was approximately 37% at the end of the 2004 period.
    During the quarter ended November 30, 2004, the Company acquired $72.8 million face amount of non-investment grade CMBS for $38.3 million in seven separate CMBS transactions. Subsequent to the end of the quarter, the Company purchased or committed to purchase securities in six additional CMBS transactions. Assuming these transactions close as anticipated, the total face amount of the Company's direct non-investment grade CMBS investments will be approximately $2.7 billion with an amortized cost of approximately $1.0 billion. The rated portion of this portfolio will be approximately $1.3 billion of face value with an amortized cost of approximately $821 million. The unrated portion of this portfolio will be approximately $1.4 billion of face value with an amortized cost of approximately $208 million.
    With these new transactions, the Company will have an investment in or have servicing rights for 155 CMBS pools with an aggregate original face amount of approximately $152 billion, compared to 119 pools with an aggregate original face amount of $102 billion at November 30, 2003.

FISCAL YEAR PERFORMANCE

    Real Estate Properties

    For the year ended November 30, 2004, real estate property earnings before income taxes increased to $160.1 million, from $113.7 million for the same period in 2003, primarily due to higher gains on sales of real estate property assets, including sales of property assets within unconsolidated entities, partially offset by lease termination fee income received in the prior year and lower net rents.
    Net rents decreased to $44.8 million for the year ended November 30, 2004, from $48.1 million for the same period in 2003. The decrease in net rents was primarily due to sales of properties throughout 2003 and 2004, as well as the loss of a tenant in the third quarter of 2003 that had leased 100% of one of the Company's office buildings. The Company received a lease termination fee from this tenant of $15.1 million in 2003. These decreases were partially offset by the portfolio of income producing properties acquired from Newhall late in the first quarter of 2004.

    Real Estate Loans

    For the year ended November 30, 2004, real estate loan earnings before income taxes increased to $53.6 million, from $47.7 million for the same period in 2003, primarily due to higher interest income and higher gains on sales of mortgage loans, partially offset by higher operating expenses.
    Interest income increased to $54.5 million for the year ended November 30, 2004, from $49.4 million for the same period in 2003. This increase was primarily due to a higher average level of loan investments primarily related to the Company's B-note portfolio.
    Gains on sales of mortgage loans were $4.0 million for the year ended November 30, 2004, primarily due to the third quarter sale of a mortgage loan assumed by the Company through the unwinding of a CMBS trust, which occurred during the second quarter of 2004, for a gain of $3.8 million. There were no sales of mortgage loans in 2003.
    Operating expenses increased to $5.9 million for the year ended November 30, 2004, from $4.2 million for the same period in 2003, primarily due to growth in the Company's loan investing activity in the U.S. and Europe.

    Real Estate Securities

    For the year ended November 30, 2004, real estate securities earnings before income taxes decreased to $134.7 million, from $169.4 million for the same period in 2003, primarily due to lower gains on sales of real estate securities, lower equity in earnings of unconsolidated entities and higher operating expenses, partially offset by higher management and servicing fee income.
    Gains on sales of securities were $21.3 million for the year ended November 30, 2004, compared to $52.7 million for the same period in 2003. During the first quarter of 2004, the Company sold $28.7 million face amount of investment grade rated CMBS through a resecuritization of one non-investment grade rated CMBS bond and recognized a pretax gain of $17.3 million. During the year ended November 30, 2003, pretax gains of $47.7 million were recognized on sales of investment grade CMBS through resecuritization transactions.
    Equity in earnings of unconsolidated entities decreased by $14.2 million for the year ended November 30, 2004, compared to the same period in 2003, primarily reflecting a decrease in earnings from Madison, as previously discussed.
    Management and servicing fee income increased to $56.1 million for the year ended November 30, 2004, compared to $35.7 million for the same period in 2003, primarily due to increased activity in the Company's specially serviced portfolio.
    Operating expenses increased by $7.1 million for the year ended November 30, 2004, compared to the same period in 2003, primarily due to increases in personnel and out-of-pocket expenses directly related to growth of the Company's CMBS portfolio in the U.S. and Europe and increased special servicing activity.

FINANCING AND CAPITAL STRUCTURE

    The following discussion of financing and capital structure is based upon financing arrangements currently in place. If the transaction with Riley Property Holdings takes place as anticipated, all or substantially all of the Company's current financing arrangements will be replaced with new arrangements that will be significantly different from those described below.
    At November 30, 2004, the Company had $1.8 billion of available liquidity, which consisted primarily of cash and availability under existing credit facilities. Only 9% of the Company's debt is scheduled to mature over the next twelve months, assuming extension options are exercised.
    The Company continues its efforts to maintain a highly match-funded balance sheet. In order to minimize the effects of interest rate risk, the Company seeks to match fixed-rate assets with fixed-rate debt, and floating-rate assets with floating-rate debt. At November 30, 2004, a 100 basis point increase in LIBOR would decrease the Company's net earnings by $0.3 million, or $0.01 per share diluted, on an annualized basis. The Company also seeks to fund itself so the maturities of its liabilities closely match the maturities of its assets. At November 30, 2004, the Company's weighted average debt maturity was 6.5 years, which the Company believes matches well with its expected asset holding periods.
    Interest expense increased by 6% and 4% for the three- and twelve-month periods ended November 30, 2004, respectively, compared to the same periods in the prior year, primarily due to higher average debt balances, partially offset by lower average interest rates. The weighted average interest rate on outstanding debt was 6.2% at November 30, 2004, compared to 6.5% at November 30, 2003.
    At November 30, 2004, the Company was operating at a 1.24:1 net debt to book equity ratio, compared to 1.27:1 at November 30, 2003.

    Some of the statements contained in this press release are "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995. Generally, the words "believe," "expect," "intend," "anticipate," "will," "may" and similar expressions identify forward-looking statements. Forward-looking statements inherently involve risks and uncertainties. The factors, among others, that could cause actual results to differ materially from those anticipated by the forward-looking statements in this press release include, but are not limited to (i) changes in demand for commercial real estate nationally and internationally, in areas in which the Company owns properties, or in areas (including areas outside the United States) in which properties securing mortgages directly or indirectly owned by the Company are located, (ii) changes in international, national or regional business conditions which affect the ability of mortgage obligors to pay principal or interest when it is due, (iii) the cyclical nature of the commercial real estate business, (iv) changes in interest rates, (v) changes in the market for various types of real estate based securities, (vi) changes in the Company's capital structure, due to availability of capital or the terms on which it is available due to a proposed acquisition of us or otherwise, (vii) changes in availability of qualified personnel and (viii) changes in government regulations, including, without limitation, environmental regulations. Further, these forward-looking statements do not take account of the expected transaction by which the Company becomes an indirect subsidiary of Riley Property Holdings or the related anticipated financing. See the Company's Form 10-K for the year ended November 30, 2003, for a further discussion of risks and uncertainties applicable to the Company's business.

    Previous press releases may be obtained by calling (305) 695-5401. A conference call to discuss the Company's fourth quarter results will be held at 11:00 AM Eastern Time on January 6, 2004. This call will be broadcast live over the Internet at http://phx.corporate-ir.net/playerlink.zhtml?c=108120&s=wm&e=993354. A replay of the conference call will be available later that day by calling (888) 203-1112 and entering the confirmation number 624054. The replay may also be accessed over the Internet by visiting the Company's website at http://www.lnrproperty.com/.

LNR Property Corporation and Subsidiaries Consolidated Condensed Statements of Earnings (In thousands, except per share amounts)

Three Months Twelve Months Ended Ended November 30, November 30, ----------------- ----------------- 2004 2003 2004 2003 -------- -------- -------- -------- Revenues Rental income $23,123 14,084 83,397 60,804 Management and servicing fees 14,504 10,410 59,076 41,240 -------- -------- -------- -------- Total revenues 37,627 24,494 142,473 102,044 -------- -------- -------- -------- Other operating income Equity in earnings of unconsolidated entities 23,592 15,076 84,906 51,974 Interest income 35,652 32,381 159,245 157,875 Gains on sales of: Real estate 11,246 5,221 19,533 16,743 Investment securities - 22,903 21,270 52,667 Mortgage loans - - 3,960 - Other, net 1,472 (170) (430) (1,056) -------- -------- -------- -------- Total other operating income 71,962 75,411 288,484 278,203 -------- -------- -------- -------- Costs and expenses Cost of rental operations 15,831 9,405 51,363 35,165 General and administrative 29,261 22,626 104,408 87,747 Depreciation 5,563 3,438 18,518 13,322 Impairment of long-lived assets 6,700 - 6,700 - Minority interests (106) (45) 53 97 Interest 25,211 21,313 97,978 86,103 Loss on early extinguishment of debt - 18,329 3,440 28,672 -------- -------- -------- -------- Total costs and expenses 82,460 75,066 282,460 251,106 -------- -------- -------- -------- Earnings from continuing operations before income taxes 27,129 24,839 148,497 129,141 Income taxes 9,080 8,196 51,068 42,808 -------- -------- -------- -------- Earnings from continuing operations 18,049 16,643 97,429 86,333 -------- -------- -------- -------- Discontinued operations: Loss from operating properties sold or held for sale, net of tax (1,598) (1,917) (8,629) (3,334) Gains on sales of operating properties, net of tax 11,200 4,916 37,372 26,583 -------- -------- -------- -------- Earnings from discontinued operations 9,602 2,999 28,743 23,249 -------- -------- -------- -------- Net earnings $27,651 19,642 126,172 109,582 ======== ======== ======== ========

LNR Property Corporation and Subsidiaries Consolidated Condensed Statements of Earnings - Continued (In thousands, except per share amounts)

Three Months Twelve Months Ended Ended November 30, November 30, ----------------- ----------------- 2004 2003 2004 2003 -------- -------- -------- -------- Weighted average shares outstanding: Basic - Common stock 19,142 18,663 18,995 19,508 Basic - Class B common stock 9,770 9,775 9,771 9,781 Diluted(1) 35,746 30,183 31,716 30,718

Net earnings per share from continuing operations(2): Basic - Common stock $0.65 0.61 3.51 3.05 Basic - Class B common stock $0.58 0.55 3.15 2.74 Diluted $0.56 0.55 3.14 2.81

Net earnings per share from discontinued operations(2): Basic - Common stock $0.34 0.11 1.03 0.82 Basic - Class B common stock $0.31 0.09 0.94 0.74 Diluted $0.27 0.10 0.90 0.76

Net earnings per share(2): Basic - Common stock $0.99 0.72 4.54 3.87 Basic - Class B common stock $0.89 0.64 4.09 3.48 Diluted $0.83 0.65 4.04 3.57

(1) Weighted average diluted shares outstanding for the three and twelve months ended November 30, 2004 include the assumed conversion of convertible debt which became convertible during the quarter ended November 30, 2004.

(2) Quarterly and fiscal year computations of per share amounts are made independently; therefore, the sum of per share amounts for the quarters may not equal per share amounts for the fiscal year.

LNR Property Corporation and Subsidiaries Consolidated Condensed Balance Sheets (In thousands, except per share amounts)

November 30, November 30, 2004 2003 ----------- ----------- ASSETS Cash and cash equivalents $ 43,543 29,667 Restricted cash 4,512 23,732 Investment securities 1,057,973 900,334 Mortgage loans, net 523,928 462,545 Operating properties and equipment, net 621,730 416,558 Land held for investment 84,991 58,578 Investments in unconsolidated entities 513,732 426,576 Assets held for sale(1) 28,429 227,835 Other assets 118,832 87,189 ----------- ----------- Total assets $2,997,670 2,633,014 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Accounts payable and other liabilities $ 208,433 180,367 Liabilities related to assets held for sale(1) 11,782 145,965 Mortgage notes and other debts payable 1,546,782 1,254,759 ----------- ----------- Total liabilities 1,766,997 1,581,091

Minority interests 10,689 1,056

Stockholders' equity 1,219,984 1,050,867 ----------- ----------- Total liabilities and stockholders' equity $2,997,670 2,633,014 =========== ===========

Shares outstanding 29,890 29,716

Stockholders' equity per share $ 40.82 35.36

(1) See "Supplemental Disclosures" table for details of assets held for sale and liabilities related to assets held for sale.

LNR Property Corporation and Subsidiaries Supplemental Disclosures DISCONTINUED OPERATIONS

Assets held for sale include the following:

November 30, November 30, (In thousands) 2004 2003 ----------- -----------

Operating properties and equipment, net $28,335 224,384 Other assets 94 3,451 ----------- ----------- Total $28,429 227,835 =========== ===========

Liabilities related to assets held for sale include the following:

November 30, November 30, (In thousands) 2004 2003 ----------- -----------

Accounts payable and other liabilities $ 2,045 17,938 Mortgage notes and other debt payable 9,737 128,027 ----------- ----------- Total $11,782 145,965 =========== ===========

RECURRING INCOME(1)

Three Months Twelve Months Ended Ended November 30, November 30, ----------------- ----------------- (In thousands) 2004 2003 2004 2003 -------- -------- -------- --------

Consolidated components: Rental income $23,123 14,084 83,397 60,804 Cost of rental operations (15,831) (9,405) (51,363) (35,165) Interest income 35,652 32,381 159,245 157,875 Management and servicing fees 14,504 10,410 59,076 41,240 Pro rata share of earnings of unconsolidated entities 14,664 15,223 57,724 46,539 -------- -------- -------- -------- Recurring income from continuing operations 72,112 62,693 308,079 271,293

Recurring income from discontinued operations 2,037 2,570 13,849 22,535 -------- -------- -------- -------- Total recurring income(1) $74,149 65,263 321,928 293,828 ======== ======== ======== ========

(1) Recurring income is defined as net rents (rental income less cost of rental operations), interest income and fees, including the Company's pro rata share of net rents, interest income and fees from unconsolidated entities. The Company considers recurring income an important supplemental measure for making decisions and believes it provides relevant information about the Company's operations and along with net income, is useful in understanding its operating results. Recurring income is not a financial measure calculated in accordance with generally accepted accounting principles and may not be comparable to similarly titled measures employed by other companies.

LNR Property Corporation and Subsidiaries Supplemental Disclosures

EBITDA(1) Three Months Twelve Months Ended Ended (In thousands) November 30, November 30, ----------------- ----------------- 2004 2003 2004 2003 -------- -------- -------- -------- Continuing operations: Earnings $18,049 16,643 97,429 86,333 Add back: Income tax expense 9,080 8,196 51,068 42,808 Interest expense 25,211 21,313 97,978 86,103 Depreciation expense 5,563 3,438 18,518 13,322 Amortization expense 3,875 2,846 13,758 8,915 Loss on early extinguishment of debt - 18,329 3,440 28,672 -------- -------- -------- -------- EBITDA from continuing operations 61,778 70,765 282,191 266,153 -------- -------- -------- -------- Discontinued operations: Earnings 9,602 2,999 28,743 23,249 Add back: Income tax expense 6,138 1,922 18,375 13,643 Interest expense 1,734 4,020 11,775 19,244 Depreciation expense 983 1,877 7,373 10,401 Amortization expense 1 15 27 550 -------- -------- -------- -------- EBITDA from discontinued operations 18,458 10,833 66,293 67,087 -------- -------- -------- -------- EBITDA $80,236 81,598 348,484 333,240 ======== ======== ======== ========

(1) EBITDA is defined as earnings before interest, taxes, depreciation, amortization and loss on early extinguishment of debt. EBITDA should not be interpreted as an alternative measure of net earnings or cash flows from operating activities, both determined in accordance with generally accepted accounting principles. Additionally, EBITDA is not necessarily indicative of cash available to fund cash needs. Trends or changes in items excluded from EBITDA (including income tax expense, interest expense, depreciation expense, amortization expense and loss on early extinguishment of debt) are not captured in EBITDA. These excluded items must also be considered when assessing or understanding the Company's financial performance. Because EBITDA is not a measure determinable under generally accepted accounting principles, there are no standards for calculating EBITDA. Therefore, EBITDA as calculated by the Company may not be comparable to similarly titled measures employed by other companies.

    The Company uses EBITDA as a supplemental measure for making decisions and believes it provides relevant information about its operations and its ability to service debt, to make investments and to fund other items as needed, and, along with net earnings, is useful in understanding its operating results. Also, many of the Company's debt instruments have covenants relating to its EBITDA or similar measures. The Company believes investors may find information about its EBITDA helpful, because prices of securities of companies in real estate related businesses often are affected by their EBITDA. Because of the nature of its business, the Company believes net earnings is the measure of financial performance calculated in accordance with generally accepted accounting principles that is most comparable to EBITDA.

LNR Property Corporation and Subsidiaries Supplemental Disclosures

NET DEBT TO EQUITY November 30, November 30, (In thousands, except ratios) 2004 2003 ----------- ----------- Debt (1) $1,556,519 $1,382,786 Less: Cash and cash equivalents (43,543) (29,667) Section 1031 funds included in restricted cash - (19,505) ----------- ----------- Net debt $1,512,976 $1,333,614 =========== =========== Equity $1,219,984 $1,050,867 =========== =========== Net debt to equity 1.24:1x 1.27:1x =========== ===========

(1) Includes $9,737 and $128,027 of debt at November 30, 2004 and 2003, respectively, classified as "liabilities related to assets held for sale."

LNR Property Corporation and Subsidiaries Supplemental Disclosures

EFFECT OF CLASSIFYING PROPERTIES SOLD OR HELD FOR SALE AS DISCONTINUED OPERATIONS IN ACCORDANCE WITH SFAS No. 144

Three Months Ended Three Months Ended (In thousands) November 30, 2004 November 30, 2003 ------------------------- ------------------------- Dis- Dis- contin- contin- ued ued As Oper- As Oper- Reported ations Combined Reported ations Combined -------- ------- -------- -------- ------- -------- Revenues Rental income $23,123 8,449 31,572 14,084 9,566 23,650 Management and servicing fees 14,504 18 14,522 10,410 (6) 10,404 -------- ------- -------- -------- ------- -------- Total revenues 37,627 8,467 46,094 24,494 9,560 34,054 -------- ------- -------- -------- ------- -------- Other operating income Equity in earnings of unconsolidated entities 23,592 - 23,592 15,076 - 15,076 Interest income 35,652 124 35,776 32,381 11 32,392 Gains on sales of: Real estate 11,246 18,360 29,606 5,221 8,059 13,280 Investment securities - - - 22,903 - 22,903 Other, net 1,472 1 1,473 (170) 15 (155) -------- ------- -------- -------- ------- -------- Total other operating income 71,962 18,485 90,447 75,411 8,085 83,496 -------- ------- -------- -------- ------- -------- Costs and expenses Cost of rental operations 15,831 6,554 22,385 9,405 7,001 16,406 General and administrative 29,261 - 29,261 22,626 - 22,626 Depreciation 5,563 983 6,546 3,438 1,877 5,315 Impairment of long-lived assets 6,700 1,941 8,641 - - - Minority interests (106) - (106) (45) (174) (219) Interest 25,211 1,734 26,945 21,313 4,020 25,333 Loss on early extinguishment of debt - - - 18,329 - 18,329 -------- ------- -------- -------- ------- -------- Total costs and expenses 82,460 11,212 93,672 75,066 12,724 87,790 -------- ------- -------- -------- ------- --------

Earnings before income taxes 27,129 15,740 42,869 24,839 4,921 29,760 Income taxes 9,080 6,138 15,218 8,196 1,922 10,118 -------- ------- -------- -------- ------- -------- Earnings from continuing operations 18,049 9,602 27,651 16,643 2,999 19,642 -------- ------- -------- -------- ------- -------- Discontinued operations: Loss from operating properties sold or held for sale, net of tax (1,598) 1,598 - (1,917) 1,917 - Gains on sales of operating properties, net of tax 11,200 (11,200) - 4,916 (4,916) - -------- ------- -------- -------- ------- -------- Earnings from discontinued operations 9,602 (9,602) - 2,999 (2,999) - -------- ------- -------- -------- ------- -------- Net earnings $27,651 - 27,651 19,642 - 19,642 ======== ======= ======== ======== ======= ========

LNR Property Corporation and Subsidiaries Supplemental Disclosures

EFFECT OF CLASSIFYING PROPERTIES SOLD OR HELD FOR SALE AS DISCONTINUED OPERATIONS IN ACCORDANCE WITH SFAS No. 144 - Continued

Three Months Ended Three Months Ended (In thousands) November 30, 2004 November 30, 2003 ------------------------- ------------------------- Dis- Dis- contin- contin- ued ued As Oper- As Oper- Reported ations Combined Reported ations Combined -------- ------- -------- -------- ------- -------- Revenues Rental income $83,397 43,716 127,113 60,804 52,549 113,353 Management and servicing fees 59,076 814 59,890 41,240 (13) 41,227 -------- ------- -------- -------- ------- -------- Total revenues 142,473 44,530 187,003 102,044 52,536 154,580 -------- ------- -------- -------- ------- -------- Other operating income Equity in earnings of unconsolidated entities 84,906 - 84,906 51,974 - 51,974 Interest income 159,245 230 159,475 157,875 61 157,936 Gains on sales of: Real estate 19,533 61,266 80,799 16,743 43,579 60,322 Investment securities 21,270 - 21,270 52,667 - 52,667 Mortgage loans 3,960 - 3,960 - - - Lease termination fee - - - - 15,115 15,115 Other, net (430) (26) (456) (1,056) 16 (1,040) -------- ------- -------- -------- ------- -------- Total other operating income 288,484 61,470 349,954 278,203 58,771 336,974 -------- ------- -------- -------- ------- -------- Costs and expenses Cost of rental operations 51,363 30,911 82,274 35,165 30,062 65,227 General and administrative 104,408 - 104,408 87,747 - 87,747 Depreciation 18,518 7,373 25,891 13,322 10,401 23,723 Impairment of long-lived assets 6,700 9,191 15,891 - 15,050 15,050 Minority interests 53 (368) (315) 97 (342) (245) Interest 97,978 11,775 109,753 86,103 19,244 105,347 Loss on early extinguishment of debt 3,440 - 3,440 28,672 - 28,672 -------- ------- -------- -------- ------- -------- Total costs and expenses 282,460 58,882 341,342 251,106 74,415 325,521 -------- ------- -------- -------- ------- -------- Earnings before income taxes 148,497 47,118 195,615 129,141 36,892 166,033 Income taxes 51,068 18,375 69,443 42,808 13,643 56,451 -------- ------- -------- -------- ------- -------- Earnings from continuing operations 97,429 28,743 126,172 86,333 23,249 109,582 -------- ------- -------- -------- ------- -------- Discontinued operations: Loss from operating properties sold or held for sale, net of tax (8,629) 8,629 - (3,334) 3,334 - Gains on sales of operating properties, net of tax 37,372 (37,372) - 26,583 (26,583) - -------- ------- -------- -------- ------- -------- Earnings from discontinued operations 28,743 (28,743) - 23,249 (23,249) - -------- ------- -------- -------- ------- -------- Net earnings $126,172 - 126,172 109,582 - 109,582 ======== ======= ======== ======== ======= ========

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CONTACT: LNR Property Corporation, Miami Beach Shelly Rubin, 305-695-5440

KEYWORD: FLORIDA INDUSTRY KEYWORD: BANKING REAL ESTATE BUILDING/CONSTRUCTION EARNINGS CONFERENCE CALLS SOURCE: LNR Property Corporation

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