UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended DECEMBER 31, 1997 or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ---
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______________ to _______________
Commission file number 1-12630
-----------------
CENTERPOINT PROPERTIES TRUST
------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
MARYLAND 36-3910279
- --------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
401 North Michigan Avenue, Suite 3000, Chicago, Illinois 60611
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:(312) 346-5600
--------------
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Shares of Beneficial New York Stock Exchange
Interest, par value $.001
8.22% Convertible Subordinated New York Stock Exchange
Debentures due 2004
8.48% Series A Preferred Shares New York Stock Exchange
of Beneficial Interest, par value
$.001
Securities registered pursuant to Section 12(g) of the Act:
None
-------------------------------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
- --- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
As of March 12, 1998, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $502,172,731 (based on 14,962,316 shares
held by non-affiliates and computed by reference to the reported closing price).
The registrant had 16,923,565 common shares of beneficial interest, $.001 par
value, outstanding as of March 12, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Common Stock and Debenture Prospectuses of the registrant, dated
December 3, 1993, and a Common Stock Prospectus of the registrant, dated
January 19, 1995, each filed pursuant to Rule 424 under the Securities Act of
1933, as amended, portions of the Registration Statement on Form S-3 dated
January 6, 1997, portions of the registrant's Form 10-Q for the quarter ended
September 30, 1995, portions of the 10-K for the year ended December 31,
1995, portions of the 10-Q for quarter ended September 30, 1996 , portions
of the Form 10-K for the year ended December 31, 1996, portions of the Form
S-4 dated August 13, 1997 and Pre-Effective Amendment No. 1 to the S-4dated
August 28, 1997, portions of the Form 8-A dated November 5, 1997 and portions
of the Form 10-Q for the quarter ended September 30, 1997 are incorporated by
reference into Part IV of this Annual Report on Form 10-K. A portion of the
registrant's definitive proxy statement is incorporated by reference into
Part III of this Annual Report on Form 10-K.
TABLE OF CONTENTS
PART I Page
----
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . .22
Item 4. Submission of Certain Items to a Vote of Security Holders. . . . . .22
PART II
Item 5. Market for Registrant's Common Equity and Related Matters. . . . . .23
Item 6. Selected Historical Financial Data . . . . . . . . . . . . . . . . .24
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations. . . . . . . . . . . . . . . . . . . . . . . .26
Item 8. Financial Statements and Supplementary Data. . . . . . . . . . . . .32
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . .32
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . .33
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . .33
Item 12. Security Ownership of Certain Beneficial Owners and Management . . .33
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . .33
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. . .34
-i-
PART I
This Annual Report on Form 10-K contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The Company's
actual results could differ materially from those set forth in the forward
looking statements as a result of various factors, including, but are not
limited to, uncertainties affecting real estate businesses generally (such as
entry into new leases, renewals of leases and dependence on tenants' business
operations), risks relating to acquisition, construction and development
activities, possible environmental liabilities, risks relating to leverage, debt
service and obligations with respect to the payment of dividends (including
availability of financing terms acceptable to the Company and sensitivity of the
Company's operations to fluctuations in interest rates), the potential for the
need to use borrowings to make distributions necessary for the Company to
qualify as a REIT, dependence on the primary market in which the Company's
properties are located, the existence of complex regulations relating to the
Company's status as a REIT and the potential adverse impact of market interest
rates on the cost of borrowings by the Company and on the market price for the
Company's securities.
ITEM 1. BUSINESS.
THE COMPANY
CenterPoint Properties Trust (the "Company") is a fully integrated real
estate investment trust focused on the acquisition, development, redevelopment,
management and ownership of warehouse/industrial property located in Greater
Chicago (defined as the area within a 150-mile radius of Chicago, including
Milwaukee, Wisconsin and South Bend, Indiana), which, according to a ranking of
markets published by Torto Wheaton Research and information published by CB
Commercial, totals approximately 1.2 billion square feet, making it the largest
warehouse/industrial market in the United States. The Company's investment and
management portfolio currently consists of 95 warehouse/industrial properties
containing approximately 22.1 million square feet (see the table of
warehouse/industrial properties beginning on p. 14). The Company also owns and
manages three retail properties, one parking lot and one apartment property,
holds mortgages on two warehouse/industrial properties, and is developing eight
build-to-suit projects. The Company's total investment and management
portfolio, including the non-industrial properties, mortgage investments and
build-to-suit projects, is approximately 25 million square feet. Based on
published statistics regarding square feet of space owned and managed by other
firms and publicly available information filed with the Securities and Exchange
Commission, as well as its knowledge and experience in the market, the Company
believes it is the largest owner and operator of warehouse/industrial property
in Greater Chicago. As of December 31, 1997, the Company's properties were 97%
leased, excluding properties which are currently being redeveloped and not
leasable. The warehouse/industrial properties are occupied by 178 tenants in
diverse industries. No tenant accounts for the lease of more than 5% of the
Company's total revenues. Substantially all of the Company's properties have
been constructed or renovated during the past ten years.
INVESTMENT OBJECTIVES AND BUSINESS POLICIES
The Company's objective is to maximize shareholder value by pursuing a
business strategy focused on investment and ownership of warehouse/industrial
properties in Greater Chicago and a growth strategy consisting of (i) intensive
management of its existing properties and (ii) the acquisition of existing
leased warehouse/industrial properties, build-to-suit projects and properties
suitable for redevelopment; and (iii) development of buildings for purchase by
tenants or institutions generating fee income for the Company.
-1-
BUSINESS STRATEGIES
WAREHOUSE/INDUSTRIAL PROPERTY. The Company believes that for the following
reasons investment in warehouse/industrial property provides the opportunity for
attractive returns and stable cash flow:
- LOW CAPITAL REQUIREMENTS. The cost per square foot of developing
warehouse/industrial properties typically ranges between $40-45 per
square foot, which is lower than the cost of developing other types of
property. From the Company's perspective, this results in less capital
committed to any particular property, permitting greater
diversification of the Company's risk. In addition, relative to other
property types, fewer tenant improvements are required to renew or
lease warehouse industrial space, minimizing the level of recurring
capital expenditures necessary to sustain rental income.
- HIGH TENANT RETENTION. Unlike office, retail and multi-family
buildings, most warehouse/industrial buildings are occupied by a
single tenant. Relocation tends to be costly for tenants of
warehouse/industrial properties because of high tenant investment in
production set up expenses, machinery and other site specific
improvements (in many cases higher than the landlord's investment).
To avoid these costs, tenants typically lease space that exceeds their
immediate needs or space in buildings that are readily expandable.
Tenant retention and expansion therefore tend to be higher than for
other property types.
- FAVORABLE LEASE TERMS. Warehouse/industrial buildings generally are
leased on a "triple net" basis, under which tenants are contractually
obligated to pay directly, or reimburse the landlord, for virtually
all costs of occupancy, including property taxes, utilities, insurance
and maintenance. In addition, the leases generally provide for rent
growth through contractual rent increases or increases tied to certain
indices such as the Consumer Price Index.
- SHORT CONSTRUCTION PERIODS. The Company believes that the
comparatively short development period for industrial buildings
(typically six to nine months) relative to other property types has
resulted in less speculative building and, therefore, a supply of
industrial property that more closely corresponds to tenant demand.
This has kept vacancy levels on average lower than for other property
types and has produced greater rental rate stability.
- LOW COST OF MANAGEMENT. The Company believes that the cost of
managing warehouse/industrial property tends to be less than for other
property types, because of large average tenant spaces, more limited
building and tenant improvements to maintain, and relatively long
lease terms.
- LIMITED INSTITUTIONAL COMPETITION. The Company believes that higher
overall investment returns are achievable for warehouse/industrial
property than other property types because such assets, typically $3
to $6 million in purchase price, are too small to justify
institutional attention. The Company's typical competitor for assets
of this size is a sponsor of a single asset partnership that typically
has a higher cost of capital and less financial flexibility than the
Company.
GREATER CHICAGO. The Company believes that Greater Chicago offers
significant opportunities for investment in and ownership of
warehouse/industrial property for the following reasons:
- ECONOMIC CHARACTERISTICS AND GROWTH. Greater Chicago is the nation's
largest
-2-
warehouse/industrial market, with a diverse tenant base that lessens
cyclical risk and a central continental location and transportation
infrastructure that support continued growth. Greater Chicago is
currently enjoying very favorable trends in growth, business
investment, utilization and employment, which have resulted in
increased space demand and increasing rents. Although the Company
believes it is the largest owner and operator of warehouse/industrial
property in Greater Chicago, its properties represented less than 2%
of the market (based on square footage) as of December 31, 1997,
allowing substantial opportunities for future growth through
acquisitions.
- MANAGEMENT EXPERIENCE. The Company's executive officers and the vice
chairman together have over 100 years of combined real estate
experience, primarily in warehouse/industrial properties located in
Greater Chicago. Since 1977, they have completed approximately 300
industrial or commercial real estate projects aggregating over
approximately 30 million square feet. This experience creates numerous
opportunities for acquisitions, redevelopments and build-to-suits
because of management's long-standing relationships with tenants and
brokers within Greater Chicago. Management's market knowledge enables
the Company to rapidly evaluate and respond to investment and leasing
transactions and to actively create such opportunities.
- BUSINESS EFFICIENCIES. The Company believes that geographic
concentration provides significant business efficiencies. As a large
owner of warehouse/industrial property located in most major Greater
Chicago submarkets, the Company is able to market multiple locations
and buildings and consequently has a competitive advantage in securing
leasing opportunities. The Company also believes that operating
economies of scale resulting from geographic concentration enhance its
ability to offer lower occupancy costs to its tenants. The Company
believes that its focus on warehouse/industrial properties in Greater
Chicago also enables the expansion of its portfolio without a
corresponding increase in general and administrative expense.
GROWTH STRATEGIES
INTENSIVE PROPERTY MANAGEMENT. The Company strives to provide the highest
possible service to its tenants by addressing its tenants' occupancy needs and
meeting their evolving space requirements. The Company seeks to become the
"industrial landlord of choice" in the markets it operates. Management believes
tenant satisfaction resulting from the Company's "hands on" management approach
increases rental revenues by increasing tenant retention, minimizing reletting
expense and facilitating rental increases. Management also believes that tenant
satisfaction creates profitable expansion and build-to-suit opportunities from
existing tenants.
To develop its tenant franchise, the Company provides a variety of tenant
services, including providing high quality, attractive space; promptly and
fairly attending to tenant building or billing concerns; obtaining the lowest
possible utility, insurance and real estate tax charges; responding rapidly to
expansion or space reconfiguration requests; and assisting tenants in meeting
their capital equipment needs. The Company views tenant service as a key factor
in its business and has established tenant satisfaction as one of its primary
corporate goals and a principal measure in the Company's incentive pay program
for employees.
The Company's tenant service strategy benefits from the size and
concentration of the Company's real estate holdings in Greater Chicago. As a
large owner of warehouse/industrial properties in a single
-3-
geographic market, the Company believes it can obtain for its tenants the
benefits of bulk purchase of goods and services. Management believes that
minimizing tenants' occupancy costs builds tenant loyalty and provides the
Company with a significant marketing advantage.
The Company's own staff is responsible for managing the Company's entire
real estate portfolio. The Company currently staffs eight management regions,
each serving a particular segment of Greater Chicago, and each staffed with a
team consisting of a regional manager, an assistant manager and accounting
support personnel. Each team is responsible for all aspects of the management
and leasing of its assigned properties. The Company intends to establish
additional regional offices as the size of its portfolio increases.
To motivate employees to provide the highest level of tenant service, the
Company has established a pay-for-performance compensation plan under which the
incentive pay of each participating employee depends in part on the results of
an annual tenant satisfaction survey administered by the Company's independent
directors. Employee incentive pay is also dependent on the achievement of
targeted portfolio occupancy and targeted per share funds from operations, each
of which the Company believes is enhanced by tenant service.
VALUE-ADDED INVESTMENTS. The Company seeks to acquire warehouse/industrial
properties that have an initial cash yield greater than the Company's cost of
capital (currently estimated to be less than 10.0%), that offer the best
opportunity for cash flow growth and that meet the Company's investment
criteria. The Company focuses on three types of transactions to which it can
add value through the application of its development, management, construction,
marketing and financial expertise. These transactions include the acquisition
of: (i) existing leased properties, (ii) build-to-suit projects and
(iii) older, economically viable properties that can be redeveloped. A table of
the Company's warehouse/industrial properties with a description of each
investment type is set forth beginning on page 14 hereof.
- EXISTING LEASED PROPERTIES. The Company focuses primarily on
warehouse/industrial properties and build-to-suits with purchase
prices ranging between $3 million and $6 million, which management
believes are too small to be efficiently acquired on an individual
basis by most institutions. As a public company with significant
access to capital, including its lines of credit, the Company believes
that it will continue to be able to take advantage of numerous
acquisition opportunities in this price range.
- BUILD-TO-SUIT PROPERTIES. In a build-to-suit transaction, the Company
typically enters into a fixed-price forward purchase commitment for a
property that has been substantially preleased to a single tenant,
thereby eliminating the construction and leasing risk generally
associated with speculative building. Although tenants are involved
in site selection and design decisions, it is management's policy to
acquire buildings readily adaptable to a variety of tenants and
alternative uses. The Company has achieved and expects to continue to
achieve favorable yields from build-to-suit transactions because of
the Company's active involvement in the creation and financing of
these projects.
- REDEVELOPMENT PROPERTIES. The Company seeks to acquire certain
warehouse/industrial properties for redevelopment, subdivision and
re-leasing. Such properties are generally larger than the leased
properties and build-to-suits acquired by the Company and typically
involve significant reconfiguration and redevelopment expense prior to
re-leasing. Competition for these properties is limited because, in
management's experience, institutional investors generally lack
redevelopment capability and prefer to invest in new leased product
and because
-4-
smaller privately held firms typically lack the capital necessary to
engage in redevelopments. Management intends to acquire for
redevelopment only properties with sufficient existing cash flow or
expected cash flow from pre-leasing to cover the capital cost of the
Company's initial investment. Redevelopment projects will be acquired
only if the Company determines that underlying tenant demand exists to
complete the leasing of any vacant space at favorable rates, that a
substantial rent advantage can be secured through lower property
acquisition cost and that the anticipated increase in Company cash
flow justifies associated project risks.
- REDEPLOYMENT OF CAPITAL. The Company seeks, where possible, to sell
properties in transactions intended to qualify as tax-free exchanges
under applicable provisions of the Internal Revenue Code and redeploy
the proceeds of such sales in properties with higher yielding
opportunities where the Company believes significant value can be
added.
The Company has developed the following investment criteria which it has
determined are important to maximize its return on investment:
- ADAPTABLE STRUCTURE AND CONFIGURATION. To maximize occupancy and
minimize reletting expense and portfolio vacancy, the Company seeks
"generic" properties or properties that have flexible floor plans
amenable to inexpensive subdivision and adaptable to a wide variety of
industrial or warehouse uses. A building should typically be
single-story, with a ceiling height of at least 18 feet (measured from
the floor to the lowest point of the horizontal roof supports). The
building must be structurally sound, capable of bearing heavy floor
loads and readily divisible for use by multiple tenants. Generally,
less than 10% of the building's gross leasable area should be devoted
to office or similar uses. The Company generally does not intend to
invest in tenant-specific improvements not usable by other potential
tenants, and it generally does not intend to acquire limited or
special use properties, such as those devoted to research and
development, heavy manufacturing processes or retail warehouse
outlets.
- LOCATION AND TRANSPORTATION ACCESS. To be acceptable to diverse
tenants, a property should be located in a well-maintained industrial
park or area zoned for industrial uses and be in close proximity to
easily accessible interstate highway interchanges. The building
itself should have adequate loading docks and be sited to permit truck
access and circulation. Rail service is also desirable.
- ENVIRONMENTAL AND ZONING COMPLIANCE. A property must be in compliance
with applicable environmental regulations, must not present material
financial risk to the Company due to potential remediation costs
associated with prior or ongoing practices or environmental conditions
at the property, and must not be likely to be threatened by
ascertainable material environmental hazards emanating from
surrounding properties. The intended use of the property must also be
in compliance with all applicable zoning, fire and business
ordinances.
- EXPANSION POTENTIAL. A property should have available additional land
to permit expansion by existing tenants.
- TENANT CREDIT. A property should be leased to one or more
well-managed, creditworthy tenants that are capable of meeting their
rent and other lease obligations. A tenant's operations must be
environmentally sound and must not damage the property or impair
reletting. The tenant's business should also be consistent with the
Company's tenant diversification goals.
-5-
- LEASE CHARACTERISTICS. Existing or anticipated leases should provide
for (i) rents consistent with the rents paid by comparable tenants in
similar facilities in the same submarkets; (ii) the pass through to
tenants of all operating, maintenance, tax and administrative costs
and increases in such costs; (iii) rent indexation or fixed rental
increases that equal or exceed management's expectation for inflation;
and (iv) a term consistent with the amount of the Company's investment
in the property and compatible with the Company's overall lease
expiration schedule.
OTHER TENANT SERVICES. The Company, through its unconsolidated subsidiary,
CenterPoint Realty Services, also seeks to provide value-added services by the
development of assets for purchase and by making various commodities and
services available to tenants.
The Company develops assets for purchase by tenants and institutions for
which the Company earns fees. Typically, these transactions have yields below
the Company's investment return hurdle, but offer substantial profit
opportunities relative to the level of required capital and management time.
The Company is afforded these opportunities as a consequence of the size of its
existing portfolio and its market penetration. The Company's fee development
business has been, and is expected to continue to be, a recurring source of
revenue.
In addition, the Company continues to explore various avenues to provide
tenants with additional services, including providing equipment leasing services
through joint ventures with capital equipment providers, obtaining cooperative
energy purchases for tenants and making other commodities and services available
to tenants. By providing value-added services to its tenants, the Company
enhances its brand name and further develops its franchise.
THE COMPANY'S MARKET AREA: GREATER CHICAGO
The Company's target market is Greater Chicago (the region within a
150-mile radius of the City of Chicago, including Milwaukee, Wisconsin and South
Bend, Indiana), although the Company may in certain instances consider the
development of warehouse/industrial properties in other areas (for example, a
readily salable building, fully-leased to a creditworthy tenant). Greater
Chicago lies at the center of one of the nation's principal population and
production regions and, as a consequence, has become a major
warehouse/industrial market. Management believes that the size, location,
transportation and demographic advantages, tenant diversity, favorable growth
trends and real estate market conditions of its target market will support
continued leasing and acquisition activity, enhancing the Company's growth in
per share distributable cash flow.
Besides market activity from in-migration and firm expansion, a
consistently high level of industrial real estate activity results from the
changing space needs of individual industries and because different industries
move in different cycles. The Greater Chicago region's continuous activity
enables the Company to produce consistently high cash flow because the Company
invests in and operates "generic" real estate, suitable for multiple industries,
and the Company is highly skilled in "value-added" investing, acquiring and
re-adapting space for disparate uses.
-6-
LOCATION, TRANSPORTATION AND DEMOGRAPHIC ADVANTAGES
Greater Chicago encompasses over 1.2 billion square feet of
warehouse/industrial property, making the area the largest warehouse/industrial
market in the United States. The Greater Chicago market is comprised of 19
discreet geographic submarkets, many of which would independently rank among the
nation's largest (Source: Torto Wheaton Research) and in most of which the
Company owns warehouse/industrial properties. The area has achieved its
prominence as a manufacturing and distribution center as a result of its central
continental location and extensive air, roadway, rail and water transportation
infrastructure connecting the Greater Chicago area with a contiguous 13-state
region consisting of Illinois, Wisconsin, Michigan, Ohio, Pennsylvania, West
Virginia, Tennessee, Kentucky, Indiana, Missouri, Iowa, Nebraska and Minnesota.
The latest census report issued by the United States Department of Commerce
reported that this 13-state region accounted for $1.6 trillion in gross product
(representing approximately one-third of the nation's economic activity),
produced by 1.8 million industrial and commercial firms serving a residential
population of approximately 78 million residents. Published census data
indicate that Greater Chicago is the dominant economic, work and population
center of this region as the home to over eight million residents and over
59,000 diverse industrial and commercial firms. The diversity of Greater
Chicago business provides the Company the opportunity to capitalize on different
trends affecting real estate demand and usage by different manufacturers and
wholesalers. The diversity of business also reduces the Company's exposure to
changes in the fortunes of any single type of business.
ECONOMIC AND EMPLOYMENT TRENDS
Current manufacturing, productivity, business investment, capacity
utilization, and employment trends in the Midwest region of the U.S. and in
Greater Chicago are positive. The Midwest Manufacturing Index for the Midwest
region, as published by the Federal Reserve Bank of Chicago, has been steadily
expanding since 1991. The Midwest region has also recorded increases in
manufacturing and wholesale employment and has exceeded the rates of growth of
the United States as a whole. Management believes that these trends are
favorable indicators of growth in the warehouse/industrial property market. The
Greater Chicago area is the largest job market in the nation.
WAREHOUSE/INDUSTRIAL DEMAND AND SUPPLY
Historically, occupancy rates in Greater Chicago have demonstrated a high
degree of stability. Over the last seventeen years, occupancy rates for the
Greater Chicago region have exceeded the national average by 1.45%, with an
average occupancy rate of nearly 94% (Source: CBC/Torto Wheaton Research). The
region's annual absorption from 1994 to 1997 averaged approximately 40 million
square feet (Source: CB Commercial).
During 1997, Greater Chicago's industrial property market added 13.1
million square feet, and gross regional absorption was approximately 45 million
square feet. According to CB Commercial, in the fourth quarter of 1997 the
overall nominal industrial vacancy rate in the Greater Chicago area was 6.9%, an
increase of 30 basis points from the third quarter. However, the effective
vacancy rate (net of obsolete and environmentally tainted properties) remained
less than 5% overall. This increase in vacancy was primarily due to speculative
construction in two Illinois submarkets which the Company has consistently
avoided based on its prediction of a demand/supply imbalance in those
submarkets.
-7-
TRANSACTIONS DURING 1997
During 1997, the Company accomplished the following:
1997 ACQUISITIONS AND DISPOSITIONS
During 1997, the Company acquired or completed development of 27
warehouse/industrial properties totaling 8.7 million square feet at a total cost
of approximately $190.6 million, including the acquisition of a 1.75 million
square foot facility in McCook, Illinois from General Motors, the largest single
acquisition in the history of the Chicago industrial property market, a 1.1
million square foot facility in Aurora, Illinois, an 888,335 square foot
facility in Elk Grove, Village, Illinois and an 812,000 square foot
build-to-suit warehouse in Granite City, Illinois for the Dial Corporation, the
largest development of any type begun in the State of Illinois in 1997. Also in
1997, the Company disposed of two warehouse/industrial properties and one office
building totaling approximately 201,318 square feet for approximately $12.6
million.
1997 Securities Offerings
- On March 6, 1997, the Company completed a public offering of 2,250,000
common shares at $31.50 per share under a shelf registration
statement. Net proceeds from the offering after the underwriting
discounts and other offering costs were approximately $66.8 million.
The proceeds of the offering were used to repay approximately $58.2
million outstanding under the Company's unsecured revolving line of
credit co-led by The First National Bank of Chicago and Lehman
Brothers Holdings Inc. with the balance of $8.6 million to fund
investments.
- On November 10, 1997, the Company completed a public offering of
3,000,000 8.48% Series A Cumulative Redeemable Preferred Shares of
Beneficial Interest, Liquidation Preference $25.00 per share, at
$25.00 per share, under the Company's shelf registration statement, as
amended, which was declared effective on October 23, 1997. Net
proceeds from the offering after underwriting discounts were
approximately $72.7 million. All of the proceeds from the offering
were used to repay amounts outstanding under the Company's unsecured
revolving credit facility co-led by The First National Bank of Chicago
and Lehman Brothers Holdings Inc.
1997 FINANCINGS
- On September 18, 1997, the Company completed a $55 million tax-exempt
bond financing for the development of the Company's O'Hare Express air
freight center. The complex is a 825,000 square foot air freight
forwarding and warehouse facility, anticipated to be constructed in
three phases over a three-year period by CenterPoint O'Hare L.L.C., a
subsidiary of the Company. The unsecured bonds were issued at par,
bearing an initial interest rate of 4%.
-8-
- On November 13, 1997, the Company amended its existing unsecured
revolving credit facility co-led by The First National Bank of Chicago
and Lehman Brothers Holdings Inc. to, among other things, increase the
principal amount available under the line from $135 million to $150
million and provide the Company with a competitive bid option under
the line. The interest rate on borrowings under the unsecured credit
facility adjusts based on the Company's senior debt ratings. The
current interest rate is LIBOR plus 80 basis points for LIBOR
borrowings and prime rate for other borrowings.
REORGANIZATION
On October 15, 1997, the Company completed a reorganization pursuant to
which it converted from a Maryland corporation to a Maryland real estate
investment trust by means of a merger of CenterPoint Properties Corporation (the
"Corporation") with and into the Company, which prior to the merger was a
wholly-owned subsidiary of the Corporation, with the Company as the surviving
entity. Pursuant to a Plan of Reorganization, which was approved by the
stockholders of the Corporation at a Special Meeting of Stockholders held on
October 1, 1997, each issued and outstanding share of common stock of the
corporation, par value $.001 per share (the "Common Stock"), was converted into
one common share of beneficial interest in the Company, par value $.001 per
share (the "Common Shares"), each outstanding share of Class B common stock of
the Corporation was converted into one Class B common share of beneficial
interest in the Company; and the outstanding principal amount of the
Corporation's 8.22% Convertible Subordinated Debentures due 2004 was assumed by
the Company and converted into the same principal amount of 8.22% Convertible
Subordinated Debentures due 2004 of the Company (the "Company Debentures"). The
Common Shares and the Company Debentures currently trade on the NYSE in the same
manner as the Common Stock and debentures of the Corporation, respectively,
traded on the NYSE prior to consummation of the merger.
EMPLOYEES
At March 1, 1998, the Company had 125 full-time and 30 part-time employees.
Of the full-time employees, 107 are involved with property management,
operations, leasing and acquisition activities, 8 are involved with general
financial administration, financing services, reporting and acquisition
analysis, and 10 are clerical workers. All property management activities are
currently provided by the Company's employees. The Company does not intend to
enter into any agreement with any entity or person relating to such services.
However, the Company's Declaration of Trust does not contain any prohibition on
the use of third parties to perform such services, and such services may
therefore be performed by third parties in the future.
-9-
ENVIRONMENTAL MATTERS
Under the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA"), as well as similar state and local laws,
owners and operators of property, both past and present, may be held financially
responsible for the investigation and, if appropriate, the remediation of
releases or threatened releases of hazardous substances into the environment.
Other parties who arranged for the disposal of hazardous substances or
transported hazardous substances for disposal at a property also may be held
liable. Liability under CERCLA and similar laws is strict, joint and several
unless a legally and factually sufficient basis for apportionment is
demonstrated and in most instances, liability may be imposed without regard to
the party's culpability concerning the presence of hazardous substances at the
property. Potentially responsible parties may be liable to one another, the
government and under some circumstances, third parties.
To the extent the Company in the future may incur hazardous substance
response costs in connection with any of its properties, the Company may seek to
recover such costs from responsible parties under CERCLA. Costs recoverable
under CERCLA must be incurred in a manner consistent with the National
Contingency Plan. The National Contingency Plan establishes a procedure whereby
contaminated properties may be identified and, if necessary, remediated. If
remediation is conducted in the appropriate manner, the costs that may be
recovered include but may not be limited to funds expended to investigate and to
remediate hazardous substance releases. Costs associated with any such
environmental activity may be substantial.
All of the Company's existing properties have been, and all properties the
Company may acquire in the future will be, subjected to an ASTM Phase I and or
similar environmental assessment. The purpose of a Phase I environmental
assessment is to determine if past and present uses of a property indicate the
potential for soil or groundwater contamination or if other environmental
conditions might affect the value of or future uses of the property. Phase I
environmental assessments generally include the following: visual inspection of
environmental conditions at and around the property; review of available land
use records; interviews with the property representatives; examination of
publicly available information from environmental agencies; and a walk through
survey for suspected asbestos containing or other toxic materials. Where a
Phase I environmental assessment of a property indicates a need for further
investigation, the Company commissions a more detailed Phase II environmental
assessment.
Apart from certain conditions currently being remedied, as described below,
the Phase I and Phase II environmental assessment reports have not revealed any
environmental condition affecting any of the Company's existing properties or
any properties under binding contract that the Company believes requires
remediation that would have a material adverse effect on the Company's business
or assets, nor is the Company aware of any such environmental condition. The
Company believes that either the properties are in compliance or the remediation
activities are in compliance in all material respects with applicable Federal,
state and local laws, ordinances and regulations concerning the presence of
hazardous substances. The Company has not been notified by any governmental
authority, and is not otherwise aware, of any material noncompliance, liability
or claim relating to hazardous substances in connection with any of its
properties. Based on its current knowledge and currently applicable laws and
regulations, the Company is aware of the following environmental issues, none of
which the Company believes are material to its financial condition:
1. Certain remediation activities are currently being conducted at
Great Lakes Industrial Center by Neo Industries, a previous tenant, which
is investigating chromium releases from its plating operations and is
currently remediating the chromium contamination in the soil
-10-
and the groundwater. The Company does not expect to incur any remediation
costs with respect to this property.
2. The former owner/operator of one property, 1700 West Hawthorne
Lane, West Chicago, Illinois, has removed various underground and
above-ground storage tanks and performed remediation of releases from these
tanks where necessary. Closure reports have been or are being submitted by
the former owner/operator for each tank removal. The Company expects to
receive Illinois Environmental Protection Agency ("IEPA") closure
certification for each tank from the former owner/operator in due course.
3. The former owner/operator of one property, the Allsteel facility
in Montgomery, Illinois, has closed seven underground storage tanks
associated with former operations and is currently remediating
solvent-contaminated soil and groundwater. The IEPA is supervising the
remedial activities, and the Company expects to receive a No Further
Remediation letter from the IEPA once the remediation is complete. The
Company does not expect to incur any remediation costs in connection with
this property because both the former owner/operator and the former
owner/operator's parent company have agreed to (1) perform the remediation,
and (2) indemnify the Company against any losses.
4. The Company is currently remediating one property located at 5700
West Touhy in Niles, Illinois. This property has limited petroleum and
metals contamination associated with the manufacturing and storage
activities of the prior owner. The IEPA is supervising the remedial
activities, and the Company expects to receive a No Further Remediation
letter from the IEPA once the remediation is complete.
5. Certain of the properties are in the vicinity of properties that
contain or have contained storage tanks or on which hazardous substances or
petroleum products have been or may in the future be used or stored. Based
on the Phase I and, in some cases, additional environmental assessments
conducted with respect to its properties, the Company is not aware that
these conditions have had, and believes it unlikely that these conditions
will have, any adverse effect on its properties. Should there be any
adverse effect requiring response by the Company, the Company believes that
it may be able to recover its response costs from the responsible parties.
6. Limited quantities of asbestos containing materials ("ACM") are
present in various building materials at many of the Company's properties.
The ACM present at the properties generally is in good condition and for
the most part is non-friable. The Company has implemented an operation and
maintenance plan for ACM, including periodic inspections. This plan
includes removal and abatement activity whenever damaged ACM is discovered
in areas where human exposure may occur. It also includes an annual ACM
abatement program and ACM abatement during property renovation or
reconstruction.
It is possible that the environmental assessments of the Company's
properties do not reveal all environmental liability concerns or that there are
material environmental liabilities of which the Company is unaware. Given the
nature of the properties that are now owned by the Company or that may be
acquired in the future, no assurances can be given that (i) future laws,
ordinances or regulations will not require or impose any material expenditures
or liabilities in connection with environmental conditions by or on the Company
or its properties; (ii) the current environmental condition of the Company's
properties will not be affected by tenants and occupants of such properties, by
the condition of properties in the vicinity of such properties or by third
parties unrelated to the Company; and (iii) prior owners of any of the Company's
-11-
properties did not create environmental problems of which the Company is not
aware.
COMPETITION
All of the Company's existing properties are, and all of the properties
that it may acquire in the future are expected to be, located in areas that
include numerous other warehouse/industrial properties, many of which may be
deemed to be more suitable to a potential tenant than the Company's properties.
The resulting competition could have a material adverse effect on the Company's
ability to lease its properties and to increase the rentals charged on existing
leases.
INVESTMENT IN AND ADVANCES TO AFFILIATE
The Company holds approximately 99% of the economic interest in CenterPoint
Realty Services Corporation, an Illinois corporation ("CRS"). To maintain
compliance with limitations on income from business activities received by REITs
and their qualified REIT subsidiaries, the Company holds its interest in CRS in
the form of non-voting equity ownership which qualifies CRS as an unconsolidated
taxable subsidiary.
As of December 31, 1997, the Company had advanced to CRS approximately $7.9
million under a demand loan with an interest rate of 8.125%. The proceeds of
the loan were used for development projects. Principal and interest are due
upon demand.
ITEM 2. PROPERTIES.
THE COMPANY'S WAREHOUSE/INDUSTRIAL PROPERTIES
The Company's investment portfolio of warehouse/industrial properties
consists of 95 properties totaling approximately 22.1 million square feet.
During 1997, the Company acquired 21 fully-leased warehouse/industrial
properties and completed the construction of 6 fully leased warehouse/industrial
build-to-suit properties with a total area of approximately 8.7 million square
feet, and the Company disposed of 2 warehouse/industrial properties with a total
area of approximately 43,500 square feet.
LOCATION. The Company's current properties are well located, with
convenient access to area interstate highway, rail, and air transportation. The
properties are in good physical condition, most of them having been built or
substantially renovated within the last 10 years.
BUILDING CHARACTERISTICS. Most of the space in the warehouse/industrial
properties currently owned by the Company or under contract has been designed
for warehousing and distribution. The remainder of the space is comprised of
light manufacturing space. A number of the industrial properties include both
distribution and light manufacturing space so as to provide tenants with
increased flexibility. The Company's largest industrial property contains
approximately 1,700,000 rentable square feet in a single-tenant warehousing and
manufacturing property, available for redevelopment into a multi-tenant
warehouse/industrial complex. The Company's present warehouse/industrial
properties have an average project size of approximately 232,123 square feet,
and, on average, a tenant at an industrial property occupies approximately
319,000 rentable square feet. Although a number of the industrial properties are
single-tenant build-to-suit facilities, all are designed to be divisible and to
be leased by multiple tenants. The Company has had substantial experience in
subdividing older space for new tenants.
The Company's present warehousing and distribution properties, as well as
warehousing and
-12-
distribution properties under contract, are designed for bulk storage of
materials and manufactured goods in buildings with interior heights typically of
22 feet or more. All of the warehousing and distribution properties have dock
facilities for trucks as well as grade level loading for lighter vehicles and
vans. Typically, the distribution buildings are used for storage and contain a
minimal amount of office space.
LEASE CHARACTERISTICS. The Company believes that the lease agreements for
its warehouse/industrial properties, which in most cases provide for scheduled
or indexed increases in rent, as well as the strengthening economy, will provide
opportunities for rental growth. The Company, in substantially all cases, passes
operating expenses and real estate tax increases on to tenants. The leases for
the warehouse/industrial properties currently owned by the Company have terms
between one and 5 years, with a weighted average remaining term, based on square
footage, of approximately 4.14 years as of December 31, 1997.
TENANT DIVERSITY. The composition of tenants in the warehouse/industrial
properties currently owned by the Company reflects the commercial diversity of
businesses operating in Greater Chicago. At December 31, 1997, no single
industry, other than Wholesale Trade-Durable Goods and Trucking/Warehousing,
accounted for more than 10.8% of the leased space in the warehouse/industrial
properties currently owned by the Company. Wholesale Trade-Durable Goods and
Trucking/Warehousing, which encompass a wide variety of industries, accounted
for 27.2% of the leased space in the warehouse/industrial properties currently
owned by the Company at December 31, 1997, and the five largest industries,
other than Wholesale Trade-Durable Goods and Trucking/Warehousing, represented
by tenants accounted collectively for only 35.6% of such space. In addition, no
single tenant comprised more than 5% of the Company's total revenues as of
December 31, 1997.
OTHER INFORMATION REGARDING WAREHOUSE/INDUSTRIAL PROPERTIES. The following
table sets forth certain information regarding the Company's portfolio of
warehouse/industrial properties, separately identifying 1997 investments of the
Company:
-13-
CENTERPOINT PROPERTIES TRUST
PROPERTY SUMMARY
AS OF DECEMBER 31, 1997
YEAR OF ORIGINAL
CONSTRUCTION/LAST ANNUALIZED AVERAGE
REDEVELOPMENT AND/OR BASE RENT RENT PER GLA
1997 INVESTMENTS CITY STATE EXPANSION (1) REVENUE SQ. FT. (2) SQ. FT. (3)
---------------- ---- ----- -------------------- ---------- ----------- -----------
LAKE COUNTY
3145 Central Avenue(6) Waukegan IL 1958 $ 990,000 $ 3.30 300,000
N.E. COOK COUNTY
5700 West Touhy Avenue Niles IL 1948 0 0 910,760
CHICAGO O'HARE AREA
O'Hare Express-Phase A-2 Chicago IL 1997 1,070,090 8.85 120,971
O'Hare Express-Phase B-1 Chicago IL 1997 2,068,590 12.05 171,685
110-190 Old Higgins Road Des Plaines IL 1980 1,256,784 10.45 120,292
1796 Sherwin Des Plaines IL 1964 600,211 6.30 95,220
2525 Busse Road Elk Grove Village IL 1975 2,817,353 3.17 888,335
2701-2781 Busse Road Elk Grove Village IL 1997 1,180,716 4.70 251,076
2801-2881 Busse Road Elk Grove Village IL 1997 1,112,802 4.43 251,076
1951 Landmeier Elk Grove Village IL 1967 203,880 4.86 41,976
WEST SUBURBS
2901 Centre Circle (7) Downers Grove IL 1979 148,764 7.07 21,056
FAR WEST SUBURBS
1 Allsteel Drive (7) Aurora IL 1960 2,729,435 2.71 1,008,120
2727 West Diehl Road Naperville IL 1997 1,836,240 4.17 440,343
2885 West Diehl Road Naperville IL 1997 1,145,928 3.80 301,560
SOUTHWEST SUBURBS
7447 South Central Avenue Bedford Park IL 1975 275,842 2.33 118,218
7400 S. Narragansett Ave (6) Bedford Park IL 1976 515,424 2.95 174,720
6751-55 South Sayre Avenue Bedford Park IL 1974 746,378 3.08 242,690
7525 South Sayre Bedford Park IL 1981 386,577 3.14 123,178
6464 West 51st Street Forest View IL 1973 736,040 3.53 208,713
6500 West 51st Street Forest View IL 1975 500,297 2.70 185,295
9301 W. 55th Street (6) McCook IL 1979 1,620,000 0.95 1,700,000
FAR S.W. SUBURBS
2301 North Route 30 Plainfield IL 1972 815,625 2.89 282,679
1355 Enterprise Drive (6) Romeoville IL 1980 354,123 2.90 122,100
CHICAGO SOUTH
3133 East 106th (6) Chicago IL 1971 300,285 3.75 80,076
MILWAUKEE COUNTY
1475 S. 101st West Allis WI 1969 188,832 4.02 46,973
2003-2201 S. 114th Street West Allis WI 1965 628,380 2.58 243,350
RACINE COUNTY
1333 Grandview Drive Yorkville WI 1994 796,572 3.79 210,000
---------- ---------
SUBTOTAL 25,025,168 8,660,462
AVERAGE ---------- ---------
2.89(9) 320,758(10)
---- ---------
PERCENT
PERCENT OF GLA
OF TOTAL LEASED AS NO. OF PROPERTY
1997 INVESTMENTS GLA (4) OF 12/31/97 TENANTS TYPE(5)
---------------- -------- ------------ -------- ----------
LAKE COUNTY
3145 Central Avenue(6) 1.36% 100% 2 ACQ
N.E. COOK COUNTY
5700 West Touhy Avenue 4.13% 100% 1 RDV
CHICAGO O'HARE AREA
O'Hare Express-Phase A-2 0.55% 100% 2 BTS
O'Hare Express-Phase B-1 0.78% 100% 1 BTS
110-190 Old Higgins Road 0.55% 100% 9 ACQ
1796 Sherwin 0.43% 100% 2 ACQ
2525 Busse Road 4.03% 100% 5 ACQ
2701-2781 Busse Road 1.14% 100% 2 BTS
2801-2881 Busse Road 1.14% 100% 2 BTS
1951 Landmeier 0.19% 100% 2 ACQ
WEST SUBURBS
2901 Centre Circle (7) 0.09% 100% 1 ACQ
FAR WEST SUBURBS
1 Allsteel Drive (7) 4.57% 100% 2 ACQ
2727 West Diehl Road 2.00% 100% 1 BTS
2885 West Diehl Road 1.37% 100% 1 BTS
SOUTHWEST SUBURBS
7447 South Central Avenue 0.54% 100% 1 ACQ
7400 S. Narragansett Ave (6) 0.79% 100% 1 ACQ
6751-55 South Sayre Avenue 1.10% 100% 2 ACQ
7525 South Sayre 0.56% 100% 2 ACQ
6464 West 51st Street 0.95% 100% 4 ACQ
6500 West 51st Street 0.84% 100% 1 ACQ
9301 W. 55th Street (6) 7.71% 100% 1 RDV
FAR S.W. SUBURBS
2301 North Route 30 1.28% 100% 1 ACQ
1355 Enterprise Drive (6) 0.55% 100% 1 ACQ
CHICAGO SOUTH
3133 East 106th (6) 0.36% 100% 1 ACQ
MILWAUKEE COUNTY
1475 S. 101st 0.21% 100% 1 ACQ
2003-2201 S. 114th Street 1.10% 100% 2 ACQ
RACINE COUNTY
1333 Grandview Drive 0.95% 100% 1 ACQ
SUBTOTAL 39.27%
-----
AVERAGE 1.45%
-----
-14-
YEAR OF ORIGINAL
CONSTRUCTION/LAST ANNUALIZED AVERAGE
REDEVELOPMENT AND/OR BASE RENT RENT PER GLA
PREVIOUSLY OWNED PROPERTIES CITY STATE EXPANSION (1) REVENUE SQ. FT. (2) SQ. FT. (3)
- --------------------------- ----- ----- -------------------- ----------- ----------- -----------
LAKE COUNTY
911 Commerce (6) Buffalo Grove IL 1993 703,636 5.96 118,009
1800 Industrial Drive Libertyville IL 1992/1994 1,079,292 6.16 175,196
1810-1820 Industrial Drive Libertyville IL 1977 256,700 3.02 85,000
1 Wildlife Way Long Grove IL 1994 665,068 12.29 54,100
620-630 Butterfield Road Mundelein IL 1990 297,680 12.28 24,237
1700 Butterfield Road Mundelein IL 1976 229,750 3.83 60,000
950-970 Tower Road Mundelein IL 1979-1990 90,861 2.37 38,359
2339-41 Ernie Krueger Court Waukegan IL 1990/1993 223,245 4.10 54,450
1300 Northpoint Road Waukegan IL 1994 310,409 4.78 65,000
N.E. COOK COUNTY
5990 Touhy Avenue Niles IL 1960/1993 1,502,864 5.08 295,964
N.W. COOK COUNTY
1500 West Dundee Road (6) Arlington Heights IL 1969 1,463,525 2.93 500,000
900 W. University Drive Arlington Heights IL 1974 501,083 5.81 86,254
1015 East State Parkway Schaumburg IL 1980 132,330 6.76 19,576
N. KANE COUNTY
825 Tollgate Road Elgin IL 1989 424,988 5.11 83,122
CHICAGO O'HARE AREA
745 Birginal Road Bensenville IL 1974 378,875 3.35 113,266
2743 Armstrong Court Des Plaines IL 1989 314,178 5.89 53,325
850 Arthur Avenue (8) Elk Grove Village IL 1971/1973 250,717 5.90 42,490
1400 Busse Road Elk Grove Village IL 1975 347,038 2.34 148,436
800 Chase Avenue (6) Elk Grove Village IL 1972 1,182,792 3.46 341,848
1100 Chase Avenue (7) Elk Grove Village IL 1980/1996 176,618 4.24 41,651
2600 Elmhurst Road Elk Grove Village IL 1995 521,170 4.96 105,000
875 Fargo Avenue Elk Grove Village IL 1980 345,946 4.20 82,368
1850 Greenleaf Elk Grove Village IL 1965 233,280 3.98 58,627
1201 Lunt Avenue Elk Grove Village IL 1971 47,820 6.48 7,380
1501 Pratt Avenue Elk Grove Village IL 1973 600,573 3.95 151,900
1520 Pratt Avenue Elk Grove Village IL 1968 243,148 3.89 62,546
10601 Seymour Avenue (6) Franklin Park IL 1963/1970 0 0 677,000
2553 North Edgington Franklin Park IL 1967/1995 1,376,770 5.02 274,303
10740 West Grand Avenue (7) Franklin Park IL 1965/1971 247,175 3.75 66,000
1800 Bruning Drive Itasca IL 1975/1978 1,115,617 5.52 202,000
245 Beinoris Drive Wood Dale IL 1988/1993 85,776 7.15 11,989
PERCENT
PERCENT OF GLA
OF TOTAL LEASED AS NO. OF PROPERTY
PREVIOUSLY OWNED PROPERTIES GLA (4) OF 12/31/97 TENANTS TYPE(5)
- --------------------------- -------- ----------- -------- ---------
LAKE COUNTY
911 Commerce (6) 0.54% 100% 2 ACQ
1800 Industrial Drive 0.79% 100% 1 ACQ
1810-1820 Industrial Drive 0.39% 100% 1 ACQ
1 Wildlife Way 0.25% 100% 1 RDV
620-630 Butterfield Road 0.11% 90% 1 BTS
1700 Butterfield Road 0.27% 100% 1 ACQ
950-970 Tower Road 0.17% 100% 3 BTS
2339-41 Ernie Krueger Court 0.25% 100% 1 BTS
1300 Northpoint Road 0.29% 100% 1 ACQ
N.E. COOK COUNTY
5990 Touhy Avenue 1.34% 100% 3 RDV
N.W. COOK COUNTY
1500 West Dundee Road (6) 2.27% 100% 2 ACQ
900 W. University Drive 0.39% 100% 1 ACQ
1015 East State Parkway 0.09% 0% 0 ACQ
N. KANE COUNTY
825 Tollgate Road 0.38% 100% 2 ACQ
CHICAGO O'HARE AREA
745 Birginal Road 0.51% 0% 0 ACQ
2743 Armstrong Court 0.24% 0% 0 BTS
850 Arthur Avenue (8) 0.19% 100% 1 ACQ
1400 Busse Road 0.67% 90% 10 ACQ
800 Chase Avenue (6) 1.55% 0% 0 ACQ
1100 Chase Avenue (7) 0.19% 100% 1 ACQ
2600 Elmhurst Road 0.48% 100% 1 BTS
875 Fargo Avenue 0.37% 100% 1 ACQ
1850 Greenleaf 0.27% 100% 1 ACQ
1201 Lunt Avenue 0.03% 100% 1 ACQ
1501 Pratt Avenue 0.69% 100% 2 ACQ
1520 Pratt Avenue 0.28% 100% 1 ACQ
10601 Seymour Avenue (6) 3.07% 0% 0 ACQ/RDV
2553 North Edgington 1.24% 100% 4 ACQ
10740 West Grand Avenue (7) 0.30% 100% 1 ACQ
1800 Bruning Drive 0.92% 100% 1 ACQ
245 Beinoris Drive 0.05% 100% 1 BTS/RDV
-15-
YEAR OF ORIGINAL
CONSTRUCTION/LAST ANNUALIZED AVERAGE
REDEVELOPMENT AND/OR BASE RENT RENT PER GLA
PREVIOUSLY OWNED PROPERTIES CITY STATE EXPANSION (1) REVENUE SQ. FT. (2) SQ. FT. (3)
- --------------------------- --------- ----- --------------------- --------- ----------- -----------
CHICAGO NORTH
4501 West Augusta Boulevard Chicago IL 1942/1989 748,070 1.73 432,661
N.W. SUBURBS
400 North Wolf Road Northlake IL 1956/1997 4,319,091 2.83 1,527,593
CENTRAL KANE/N. DUPAGE
425 South 37th Avenue (7) St. Charles IL 1975 399,309 3.87 103,106
1250 Carolina Drive West Chicago IL 1988 572,325 3.82 150,000
1645 Downs Drive West Chicago IL 1975 361,008 2.79 129,390
1733 Downs Drive West Chicago IL 1975 363,816 2.50 145,528
825-845 Hawthorne Lane (6) West Chicago IL 1974 639,499 4.03 158,772
1700 West Hawthorne (6) West Chicago IL 1959/1969 1,381,800 1.88 735,196
FAR WEST SUBURBS
800 Enterprise Court Naperville IL 1985 183,666 5.25 34,984
720 Frontenac Naperville IL 1991 537,560 3.13 171,935
820 Frontenac Naperville IL 1988 645,137 4.20 153,604
920 Frontenac Naperville IL 1987 402,829 3.32 121,200
1020 Frontenac Naperville IL 1980 441,750 4.43 99,684
1120 Frontenac Naperville IL 1980/1994 543,639 3.53 153,902
1510 Frontenac Naperville IL 1986 281,331 2.68 104,886
1560 Frontenac Naperville IL 1987 298,280 3.48 85,608
1651 Frontenac Naperville IL 1978 120,135 3.95 30,414
2764 Golfview Naperville IL 1985 99,420 4.97 20,022
1500 Shore Drive Naperville IL 1985 165,932 3.84 43,230
1150 Shore Road Naperville IL 1985 174,888 5.79 30,184
SOUTHWEST SUBURBS
6600 River Road Hodgkins IL 1968 1,398,000 2.22 630,410
FAR S.W. SUBURBS
16400 West 103rd Street (7) Lemont IL 1983/1995 278,939 4.39 63,612
1319 Marquette Drive Romeoville IL 1990 392,206 10.79 36,349
7001 Adams Street Willowbrook IL 1994 192,716 7.61 25,324
CHICAGO SOUTH
4400 South Kolmar (6) Chicago IL 1966 438,840 4.77 92,000
900 East 103rd Street Chicago IL 1910/1990 1,967,449 3.42 575,462
750 East 110th Street Chicago IL 1966 237,972 3.33 71,510
SOUTH SUBURBS
11601 South Central Avenue Alsip IL 1970 894,834 3.45 259,000
11701 South Central Avenue Alsip IL 1970 870,000 2.93 297,207
5619-25 West 115th Street Alsip IL 1974 1,847,819 4.65 396,979
21399 Torrence Avenue Sauk Village IL 1987 745,164 2.00 372,835
N.W. INDIANA
425 West 151st Street East Chicago IN 1913/1991 1,328,038 3.80 349,236
201 Mississippi Street Gary IN 1945/1988 3,651,848 3.47 1,052,173
1827 North Bendix Drive (6) South Bend IN 1964/1990 554,580 2.78 199,730
PERCENT
PERCENT OF GLA
OF TOTAL LEASED AS NO. OF PROPERTY
PREVIOUSLY OWNED PROPERTIES GLA (4) OF 12/31/97 TENANTS TYPE(5)
- --------------------------- -------- ----------- ------- ---------
CHICAGO NORTH
4501 West Augusta Boulevard 1.96% 95% 7 RDV
N.W. SUBURBS
400 North Wolf Road 6.93% 100% 4 ACQ
CENTRAL KANE/N. DUPAGE
425 South 37th Avenue (7) 0.47% 100% 1 ACQ
1250 Carolina Drive 0.68% 100% 2 BTS
1645 Downs Drive 0.59% 100% 1 ACQ
1733 Downs Drive 0.66% 100% 1 ACQ
825-845 Hawthorne Lane (6) 0.72% 83% 3 ACQ
1700 West Hawthorne (6) 3.33% 100% 1 ACQ
FAR WEST SUBURBS
800 Enterprise Court 0.16% 100% 1 ACQ
720 Frontenac 0.78% 100% 2 ACQ
820 Frontenac 0.70% 100% 1 ACQ
920 Frontenac 0.55% 100% 1 ACQ
1020 Frontenac 0.45% 100% 1 ACQ
1120 Frontenac 0.70% 100% 1 ACQ
1510 Frontenac 0.48% 100% 1 ACQ
1560 Frontenac 0.39% 100% 2 ACQ
1651 Frontenac 0.14% 100% 1 ACQ
2764 Golfview 0.09% 100% 1 ACQ
1500 Shore Drive 0.20% 100% 2 ACQ
1150 Shore Road 0.14% 100% 1 ACQ
SOUTHWEST SUBURBS
6600 River Road 2.86% 100% 1 ACQ
FAR S.W. SUBURBS
16400 West 103rd Street (7) 0.29% 100% 1 ACQ
1319 Marquette Drive 0.16% 100% 1 BTS
7001 Adams Street 0.11% 100% 1 BTS
CHICAGO SOUTH
4400 South Kolmar (6) 0.42% 100% 1 ACQ
900 East 103rd Street 2.61% 100% 3 RDV
750 East 110th Street 0.32% 100% 1 ACQ/RDV
SOUTH SUBURBS
11601 South Central Avenue 1.18% 100% 1 ACQ
11701 South Central Avenue 1.35% 100% 1 ACQ
5619-25 West 115th Street 1.80% 98% 5 RDV
21399 Torrence Avenue 1.69% 100% 1 ACQ
N.W. INDIANA
425 West 151st Street 1.58% 97% 9 RDV
201 Mississippi Street 4.77% 97% 15 RDV
1827 North Bendix Drive (6) 0.91% 100% 1 ACQ
-16-
YEAR OF ORIGINAL
CONSTRUCTION/LAST ANNUALIZED AVERAGE
REDEVELOPMENT AND/OR BASE RENT RENT PER GLA
PREVIOUSLY OWNED PROPERTIES CITY STATE EXPANSION (1) REVENUE SQ. FT. (2) SQ. FT. (3)
- --------------------------- ----- ----- -------------------- ---------- ----------- -----------
MILWAUKEE COUNTY
7501 North 81st Street Milwaukee WI 1987 576,000 3.13 183,958
KENOSHA COUNTY
8200 100th Street Pleasant Prairie WI 1990 568,361 3.83 148,472
8901 102nd Street Pleasant Prairie WI 1990 643,018 6.09 105,637
----------- ----- ----------
SUBTOTAL 44,614,193 3.33 13,391.189
----------- ----- ----------
AVERAGE 196,929(10)
- ----------
GRAND TOTAL ALL WAREHOUSE/INDUSTRIAL PROPERTIES $69,639,361 22,051,651
----------- ----------
AVERAGE ALL WAREHOUSE/INDUSTRIAL PROPERTIES $3.16(9) 232,123(10)
----------- ----- ----------
GRAND TOTAL ALL WAREHOUSE/INDUSTRIAL PROPERTIES
EXCLUDING REDEVELOPMENTS AT 12/31/97 $69,639,361 20,463,891
----------- ----------
AVERAGE ALL WAREHOUSE/INDUSTRIAL PROPERTIES $3.40(9) 220,042(10)
----- ----------
PERCENT
PERCENT OF GLA
OF TOTAL LEASED AS NO. OF PROPERTY
PREVIOUSLY OWNED PROPERTIES GLA (4) OF 12/31/97 TENANTS TYPE(5)
- --------------------------- -------- ----------- ------- ---------
MILWAUKEE COUNTY
7501 North 81st Street 0.83% 100% 1 ACQ
KENOSHA COUNTY
8200 100th Street 0.67% 100% 1 ACQ
8901 102nd Street 0.48% 100% 1 ACQ
------
SUBTOTAL 60.73%
------
AVERAGE 0.89%
------
GRAND TOTAL ALL WAREHOUSE/INDUSTRIAL PROPERTIES 100% 178
------
AVERAGE ALL WAREHOUSE/INDUSTRIAL PROPERTIES 94%
GRAND TOTAL ALL WAREHOUSE/INDUSTRIAL PROPERTIES 97%
EXCLUDING REDEVELOPMENTS AT 12/31/97
AVERAGE ALL WAREHOUSE/INDUSTRIAL PROPERTIES
-17-
- ------------------
(1) First date of original construction; second date is year of last
redevelopment and/or expansion. If only one date appears, it is the
acquisition date; the property has not been redeveloped or expanded.
(2) Determined by dividing annualized base rent revenue by GLA.
(3) "GLA" means gross leasable area.
(4) Determined as a percent of the total GLA for the warehouse/industrial
properties.
(5) ACQ refers to an existing leased property acquired by the Company, BTS
refers to a build-to-suit property and RDV refers to a redevelopment
property. Two of the redevelopment properties, 5700 Touhy Avenue, Niles,
Illinois and 10601 Seymour Avenue, Elk Grove Village, Illinois, were under
redevelopment construction and not leasable as of December 31, 1997.
(6) Properties purchased through a sale-leaseback to the previous owner have no
operating history relevant to third party usage.
(7) Properties purchased from an owner occupant have no prior operating history
relevant to third party usage.
(8) The seller of this property holds a note payable by the Company in the
principal amount of $575,000 and secured by this property.
(9) Average Rent per square foot equals annualized base rental revenue divided
by GLA leased as of December 31, 1997.
(10) Average size equals total GLA divided by the number of properties.
LEASE EXPIRATIONS
The following table shows as of December 31, 1997 scheduled lease
expirations for the Company's warehouse/industrial properties commencing January
1, 1998 and for the next ten years, assuming that no tenants exercise renewal
options:
AVERAGE % OF TOTAL
BASE RENT PROPERTIES % OF 1997
GLA OF ANNUALIZED PER SQ. FT. GLA BASE RENT
NO. OF EXPIRING BASE RENT UNDER REPRESENTED REPRESENTED
LEASES LEASES EXPIRING EXPIRING BY EXPIRING BY EXPIRING
EXPIRING (SQ. FT.) LEASES LEASES LEASES LEASES
-------- ------- ------ ------ ------ ------
YEAR ENDING DECEMBER 31
1998 ............................................ 37 2,899,866 $10,507,956 $3.62 15.52% 18.27%
1999 ............................................ 30 3,927,435 9,018,461 2.30 21.01% 15.68%
2000 ............................................ 29 2,289,947 9,132,094 3.99 12.25% 15.88%
2001 ............................................ 16 1,328,270 5,539,526 4.17 7.11% 9.63%
2002 ............................................ 18 2,293,479 7,152,093 3.12 12.27% 12.43%
2003 ............................................ 10 555,538 2,821,050 5.08 2.97% 4.90%
2004 ............................................ 10 1,851,202 7,484,499 4.04 9.90% 13.01%
2005 ............................................ 6 945,726 3,408,648 3.60 5.06% 5.93%
2006 ............................................ 5 1,186,602 5,974,005 5.03 6.35% 10.39%
2007 ............................................ 7 1,065,987 7,064,402 6.63 5.70% 12.28%
-18-
OPTIONS TO PURCHASE GRANTED TO CERTAIN TENANTS
The following warehouse/industrial properties of the Company are subject to
purchase options granted to certain tenants as follows:
- A portion of the building complex at 4501 Augusta Boulevard is subject
to an option to purchase at fixed prices ranging from $2,779,320 to
$3,447,970 exercisable between September 1 and October 31 of each year
until 2003.
- One Waterfowl Way is subject to an option to purchase at any time
through October 31, 1999, exercisable on or before February 1, 1999.
The purchase price is equal to the annualized monthly rent being paid
as of the closing of the purchase, capitalized at 10%.
- 8901 102nd Street is subject to an option to purchase exercisable on
February 28, 2006 at a purchase price equal to 95% of "fair market
value," equal to the average of three independent appraisals.
- 1700 West Hawthorne is subject to a purchase option exercisable at any
time prior to December 1, 1998 (with the closing to occur during
December, 1999 regardless of when the option exercised) at a price of
$12,809,333 and again between December 1, 2002, and December 1, 2003
(with the closing to occur during December, 2004 regardless of when
the option is exercised) at a price of $15,033,636. If the property is
expanded, at tenant's option, the purchase price will be increased to
$12,909,333 for the first exercise period, and $15,233,636 for the
second exercise period, plus the construction cost of the expansion.
- 850 Arthur Avenue is subject to an option exercisable during March
1999 to purchase the premises on August 31, 1999 for a purchase price
equal to the fair market value of the premises as determined by the
Company or by an appraisal process.
- 2600 Elmhurst Road is subject to an option exercisable on or before
July 31, 2000 to purchase the premises during January 2001 for a
purchase price of $5,000,000.
- 21399 Torrence Avenue is subject to an option exercisable between
December 1, 1998 and May 31, 2000 and again between December 31, 2000
and May 31, 2002 to purchase the property on November 30, 2000 for
$8,941,920 and November 30, 2002 for $9,314,500.
In each case, the option price exceeds the Company's current net book
value. The Company believes that even if all of the purchase options are
exercised, such exercises will not have an adverse effect upon the operations of
the Company or its ability to maintain its dividend distribution policy. If any
purchase option is exercised, the Company intends to either distribute the cash
proceeds to shareholders or reinvest the cash proceeds in additional properties.
No assurance can be given that such distribution or reinvestment will occur.
In addition to purchase options, the Company has granted to tenants of
certain properties a right of first refusal (in the event the Company has
received an unsolicited offer from a third party to purchase the property which
the Company desires to accept) or a right of first offer (in the event the
Company has not received an unsolicited third party offer for the property but
desires to entertain an offer). The properties subject to one or both of these
rights include One Waterfowl Way, 8901 102nd Street, 825 Tollgate Road,
1400 Busse Road, 1651 Frontenac Road, 7001 Adams Street, 950 Tower Road and
-19-
6312 W. 74th Street. The existence of those rights will not compel the Company
to sell a property for a price less than the price the Company desires to
accept.
THE COMPANY'S OTHER PROPERTIES
In addition to its warehouse/industrial properties, the Company owns three
retail properties having approximately 61,000 square feet of GLA, one 682-unit
apartment complex located at 440 North Lake Street, Miller, Indiana and known as
Lakeshore Dunes Apartments and a fully leased parking lot. The Company does not
intend to acquire properties other than warehouse/industrial properties in the
future. The Company believes, however, that these properties are favorable
investments for the Company, adding to distributable cash flow per share.
Furthermore, the Lakeshore Dunes Apartments were financed through the issuance
of tax-exempt revenue bonds on favorable terms, benefiting the Company by
reducing its overall borrowing costs. The Company has no present plans to sell
those properties but would entertain a sale if the price were sufficiently high,
given other investment opportunities that would be available to the Company, and
the enhanced operating performance expected to result, from redeployment of the
sales proceeds.
The following table sets forth certain information regarding the Company's
retail properties:
PERCENT
YEAR OF OF
ACQUISITION/ PERCENT GLA AVERAGE
LAST YEAR OF TOTAL OF LEASED RENT
REDEVELOPMENT ORIGINAL GLA TOTAL AS OF ANNUALIZED Per NUMBER
OF CONSTRUCTION/ (SQ. FT.) GLA DECEMBER BASE RENT SQ. FT. OF
EXPANSION (1) EXPANSION (2) (3) 31, 1997 REVENUE (4) TENANTS
------------- --------- - - -------- ------- - -------
4-48 Barrington Rd. 1994 1991 38,633 63.1% 68.8% $301,496 $ 7.80 8
Streamwood, IL
84-120 McHenry Rd. 1990/1993 1989 20,535 33.6% 89.5% 313,140 15.25 7
Wheeling, IL
351 North Rohlwing 1993 1989 2,015 3.3% 100.0% 61,440 30.49 1
Rd. Itasca, IL
------ ----- -------- ------
TOTAL 61,183 100.0% $676,076 $11.05 16
------ ----- -------- ------ --
------ ----- -------- ------ --
- --------------
(1) First date is year of acquisition; second date is year of most recent
redevelopment or expansion. If only one date appears, it is the
acquisition date; the property has not been redeveloped or expanded.
(2) "GLA" means gross leasable area.
(3) Determined as a percent of the total GLA for the retail properties.
(4) Determined by dividing annualized base rent revenue by GLA.
The tenants of the Company's retail properties are typical of tenants in
smaller retail centers in Greater Chicago. Generally, the leases require
tenants to pay a fixed base, or "minimum" rent, subject to scheduled increases.
Tenants generally are required to pay their proportionate share of common area
maintenance charges, insurance expenses, operating expenses and real estate
taxes or their portion of these expenses is included in their base rent.
-20-
The following table shows as of December 31, 1997 scheduled lease
expirations for the retail properties commencing January 1, 1998, and for the
next ten years, assuming no tenants exercise renewal options.
GLA OF ANNUALIZED AVERAGE BASE % OF TOTAL RETAIL % OF 1997 RETAIL
NO. OF EXPIRING BASE RENT RENT PROPERTIES GLA BASE RENT
YEAR ENDING LEASES LEASES EXPIRING PER SQ. FT. UNDER REPRESENTED BY REPRESENTED BY
DECEMBER 31 EXPIRING (SQ. FT.) LEASES EXPIRING LEASES EXPIRING LEASES EXPIRING LEASES
- ----------- -------- --------- ------ --------------- --------------- ---------------
1998 3 8,214 $116,196 $14.15 18.93% 17.11%
1999 2 3,937 57,468 14.60 9.08% 8.46%
2000 3 10,334 107,295 10.38 23.82% 15.80%
2001 3 9,242 112,759 12.20 21.30% 16.60%
2002 0 0 0 0 0% 0%
2003 0 0 0 0 0% 0%
2004 0 0 0 0 0% 0%
2005 1 2,400 86,089 35.87 5.53% 12.68%
2006 3 9,254 199,299 21.54 21.33% 29.35%
2007 0 0 0 0 0% 0%
Lakeshore Dunes Apartments, which was constructed in 1971 and renovated
between 1991 and September, 1993, is comprised of 682 units in 15 contiguous
buildings located on an approximately 20.12 acre site in Miller, Indiana, a
suburb of Gary, Indiana, located on Lake Michigan. The property is bordered by
the Indiana Dunes National Park and by the Calumet Lagoon and is less than
one-half mile from public beaches. Amenities of the complex include redesigned
units with updated kitchens and appliances, carpeting, lighting, windows and
mini-blinds, bathrooms and fixtures, elevators, laundry rooms, play lots, tennis
courts, picnic areas, a new outdoor pool, roads, parking areas, landscaping and
a 24-hour safety patrol and card access system. The community center also serves
as the management and leasing office. The Company maintains a complete
management, leasing and maintenance team at the property.
As of December 31, 1997, 630 of the units, or 92%, were leased, providing
for a monthly base rent of approximately $287,000 or $7.72 per square foot per
annum (determined by dividing annualized base rent by total leased square
footage of the apartment units), or an annualized base rent of $3,444,000.
Current leases provide for customary one year terms and require that tenants pay
a fixed rent based on the type of apartment and square footage. Tenants are
responsible for utilities. The following table sets forth the apartment mix at
this property as of December 31, 1997:
-21-
NUMBER OF UNITS TOTAL GLA AVERAGE GLA PER AVERAGE MONTHLY
TYPE OF APARTMENT IN COMPLEX (SQ. FT.) APARTMENT (SQ. FT.) Rent Per Unit
- ----------------- ---------- --------- ------------------- -------------
Studio 48 20,208 421 $ 374
One Bedroom 171 99,009 579 459
Deluxe One Bedroom 43 29,283 681 467
Two Bedroom 390 308,100 790 533
Three Bedroom 30 28,500 950 656
--- -------
TOTALS: 682 485,100
--- -------
--- -------
In 1996, a parking lot within an industrial park was purchased. The
parking lot is leased for ten years through January 2006 for an annual minimum
rent of $26,400. In 1997, the Company sold a 118,000 square foot office
building.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not subject to or involved in, nor is the Company aware of,
any pending or threatened litigation which could be material to the financial
position or results of operations of the Company. For a description of
remediation activities currently underway at certain of the Company's
properties, see "Environmental Matters" under Item 1 above.
ITEM 4. SUBMISSION OF CERTAIN ITEMS TO A VOTE OF SECURITY HOLDERS.
The Company held a Special Meeting of Stockholders on October 1, 1997 to
approve the reorganization of the Company from a Maryland corporation to a
Maryland real estate investment trust, pursuant to a Plan of Reorganization. At
the Special Meeting of Stockholders, the Plan of Reorganization was approved as
follows: 12,620,549 shares were voted in person or by proxy at the Special
Meeting of Stockholders; 12,593,693 shares were voted in favor of the Plan of
Reorganization; 5,427 shares were voted against the Plan of Reorganization; and
21,429 shares abstained from voting.
-22-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS.
(a) The Company's Common Shares are listed and traded on the New York
Stock Exchange under the symbol "CNT." The following table sets forth, for the
periods indicated, the high and low sale prices of the Common Shares (as
reported by the AMEX prior to June 12, 1996 and as reported by the NYSE on and
after June 12, 1996) and the cash distributions paid in such periods.
CASH
QUARTERLY PERIOD ENDING HIGH LOW DISTRIBUTION/SHARE
----------------------- ---- --- ------------------
December 31, 1995................. $23-3/8 $21-5/8 $0.390
March 31, 1996.................... 24-1/8 22 0.405
June 30, 1996..................... 27 26-1/8 0.405
September 30, 1996................ 26-7/8 26-3/4 0.405
December 31, 1996................. 32-3/4 30-7/8 0.405
March 31, 1997.................... 32-7/8 30-1/4 0.420
June 30, 1997..................... 31-7/8 28-1/2 0.420
September 30, 1997................ 36-5/16 31-7/8 0.420
December 31, 1997................. 37-1/16 31-1/4 0.420
(b) As of March 17, 1998, there were approximately 142 holders of record
of the Company's Common Shares.
(c) Cash distributions paid on the Company's Class B Common Shares, which
are non-voting and are not publicly traded, were $0.4167 per share per quarter
for the last three quarters of 1996, and $0.4325 per share per quarter in 1997.
-23-
ITEM 6.
SELECTED HISTORICAL FINANCIAL DATA
The following tables set forth, on a historical basis, Selected Financial
Data for the Company. The following table should be read in conjunction with
the historical financial statements of the Company and "MANAGEMENT DISCUSSION
AND ANALYSIS STATEMENTS OF THE COMPANY AND RESULTS OF OPERATION," both included
elsewhere in this Form 10-K.
The Selected Financial Data for the Company is not necessarily indicative
of the actual financial position of the Company or results of operations at any
future date or for a future period.
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA, RATIOS AND NUMBER OF PROPERTIES)
YEAR ENDED DECEMBER 31,
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Operating Data
Revenues $85,958 $63,330 $46,952 $33,633 $9,068
Expenses:
Operating expenses excluding depreciation and
amortization (1) (29,182) (20,751) (14,774) (11,442) (4,124)
Depreciation and other amortization (15,278) (10,648) (8,456) (6,176) (2,539)
General and administrative (3,105) (2,567) (2,150) (1,573) (3,223)
Interest expense:
Interest incurred, net (10,071) (9,865) (11,562) (11,073) (3,808)
Amortization of deferred financing costs (800) (1,127) (1,150) (976) (228)
------- ------- ------- ------- ------
Operating income (loss) 27,522 18,372 8,860 2,393 (4,854)
Other income (expense) (2) 108 (100) (16) (34) (76)
------- ------- ------- ------- ------
Income (loss) before extraordinary item 27,630 18,272 8,844 2,359 (4,930)
Extraordinary item -- (3,331) (632) -- --
------- ------- ------- ------- ------
Net income (loss) 27,630 14,941 8,212 2,359 (4,930)
Preferred dividend (901) (947) (1,002) -- --
------- ------- ------- ------- ------
Net income (loss) available to common shareholders 26,729 13,994 7,210 2,359 (4,930)
Per share net income (loss) available to common
shareholders before extraordinary item:
Basic 1.43 1.25 0.85 0.41 (3.90)
Diluted 1.41 1.22 0.84 0.41 (3.90)
Per share net income (loss) available to common
shareholders:
Basic 1.43 1.01 0.78 0.41 (3.90)
Diluted 1.41 0.99 0.77 0.41 (3.90)
Balance Sheet Data (End of Period):
Investment in real estate (before accumulated depreciation) $641,646 $429,034 $317,460 $248,281 $180,396
Net investment in real estate 597,294 398,828 295,884 234,825 172,946
Total assets 699,275 451,206 334,866 254,073 190,289
Total debt 270,768 177,349 145,271 179,492 131,963
Shareholders' equity 388,126 248,114 168,320 59,016 46,240
Other Data:
Funds from Operations (3) $42,968 $30,445 $20,492 $ 13,138 $ (2,110)
EBITDA (4) 53,779 39,912 30,013 20,584 1,564
-24-
Net cash flow:
Operating activities 39,411 29,552 16,473 8,976 275
Investing activities (245,336) (111,554) (82,556) (65,311) (140,120)
Financing activities 206,507 80,194 68,541 52,837 142,443
Distributions 32,046 24,065 15,953 8,775 1,295
Return of capital portion of distribution 3,916 12,280 8,554 4,320 --
Number of properties included in operating results (5) 100 76 69 53 38
Ratio of earnings to fixed charges (6) 3.27 2.33 1.63 1.19 --
Ratio of earnings to combined fixed charges and
preferred dividends (6) 3.04 2.15 1.51 1.19 --
- --------------
(1) Operating expenses include real estate taxes, repairs and maintenance,
insurance and utilities and exclude interest, depreciation and amortization
and general and administrative expenses.
(2) Other income (expense) includes gains and losses on property dispositions
in 1997 and 1996, and other miscellaneous operating and non-operating
items.
(3) Funds from Operations represents net income (loss), excluding extraordinary
items, sales of (or adjustments to basis of) properties plus depreciation
and amortization, convertible subordinated debenture interest and
amortization of deferred financing costs on convertible subordinated
debentures. Dividends on Convertible Preferred Shares for 1996 and 1995
are not excluded from net income as such shares were automatically
converted to Class B Common Shares in 1996. Funds from operations is
computed as follows:
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Net income (loss) available to common
shareholders $26,729 $14,941 $8,212 $2,359 $(4,930)
Extraordinary item 3,331 632 -- --
Depreciation and amortization 15,278 10,648 8,456 6,176 2,540
Amortization of deferred financing costs,
debentures 48 67 135 267 13
Convertible subordinated debenture interest 999 1,385 3,057 4,336 267
(Gain) Loss on disposition of properties
(86) 73 -- -- --
------- ------- ------- ------- ------
Funds from Operations $42,968 $30,445 $20,492 $13,138 $(2,110)
------- ------- ------- ------- ------
------- ------- ------- ------- ------
Management of the Company believes that Funds from Operations is helpful to
investors as a measure of the performance of equity REIT shares because,
along with cash flows from operating activities, financing activities and
investing activities, it provides investors an understanding of the ability
of the Company to incur and service debt and to make capital expenditures.
Funds from Operations does not represent cash flow from operations as
defined by generally accepted accounting principles ("GAAP"), should not be
considered by the reader as an alternative to net income as an indicator of
the Company's operating performance or to cash flows as a measure of
liquidity, and is not indicative of cash available to fund all cash flow
needs. Investors are cautioned that Funds from Operations, as calculated
by the Company, may not be comparable to similarly titled but differently
calculated measures for other REITs.
The National Association of Real Estate Investment Trusts (NAREIT) defines
funds from operations as net income before extraordinary items plus
depreciation and amortization less the amortization of deferred financing
costs.
(4) Earnings before interest, income taxes, depreciation and amortization.
Management believes
-25-
that EBITDA is helpful to investors as an indication of property
operations, because it excludes costs of financing and non-cash
depreciation and amortization amounts. EBITDA does not represent cash
flows from operations as defined by GAAP, should not be considered by the
reader as an alternative to net income as an indicator of the Company's
operating performance, and is not indicative of cash available to fund all
cash flow needs.
(5) Increase in number of properties in 1994 reflects the acquisition of 15
properties throughout 1994. Increase in number of properties in 1995
reflects acquisition of 16 properties throughout 1995. Increase in number
of properties in 1996 reflects acquisition of 15 properties and the
disposition of 8 properties throughout 1996. Increase in number of
properties in 1997 reflects the acquisition of 21 properties, the
completion of 6 developments, and the disposition of 3 properties
throughout 1997. See "MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
(6) The ratio of earnings to fixed charges for the year ended December 31,
1993, was less than one to one. The approximate dollar amount (in
thousands) necessary to cover the deficiency in that period was $5,400.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL BACKGROUND
The following is a discussion of the historical operating results of the
Company. This discussion should be read in conjunction with the Financial
Statements and the information set forth under "SELECTED HISTORICAL FINANCIAL
DATA."
The results of the Company reflect cumulative significant acquisition,
build-to-suit and redevelopment activities. Since 1989, the Company has grown
its portfolio of owned properties from 6 properties, with approximately 1.9
million square feet, to 100 properties with approximately 22.6 million square
feet as of December 31, 1997. This total excludes properties under development
and mortgage investments. Through the issuance of mortgages on properties and
build-to-suit projects under development, the Company has a total of 109
property investments, excluding the parking lot, representing approximately 25
million square feet.
The Company grew its total property investments by 52% in 1997, which
includes build-to-suits in progress and mortgage investments. In addition, the
Company grew its portfolio of owned properties by 60.3% during the year by
concluding twenty-one warehouse/industrial property acquisitions and six
warehouse/industrial build-to-suit properties. The Company disposed of two
warehouse/industrial properties and one office property in 1997. The Company's
total increase in owned warehouse/industrial area, net of dispositions, was 8.5
million square feet.
Despite its growth in property investments and Funds from Operations during
1997, the Company improved its EBITDA/ Debt Service Coverage to 6 to 1. Also,
as of December 31, 1997, the Company maintained a conservative Debt to Total
Market Capitalization of 25.1%.
The Company's Consolidated Financial Statements for the year ended December
31, 1997, 1996 and 1995 reflect partial period results for acquisitions,
dispositions and expansions made during each respective year. These statements
also include the lease-up of previously vacant space, related to the properties
owned by the Company as of January 1, 1997, 1996 and 1995, respectively. The
Company's
-26-
1996 acquisitions included three additional properties and 1997 acquisitions
include one additional property previously owned by entities in which certain
executive officers of the Company had an interest. These transactions satisfied
the Company's investment criteria and were approved by the Company's independent
trustees.
Finally, the historical results of the Company reflect the Company's
significant property redevelopment and development activities in which
substantial capital costs and related expenses were incurred in advance of
receipt of rental income. At December 31, 1997, the Company and its
subsidiaries had $26 million invested in build-to-suit projects under
development which were not producing income as of the end of the year. Four of
the Company's properties preceding the Company's initial public offering in
1993, with a total area of approximately 1.9 million square feet, were property
redevelopments. The Company has added nine properties totaling 4.5 million
square feet that the Company has redeveloped or is currently holding the
property to redevelop. Redevelopments are typically larger properties that are
acquired, subdivided and released. During construction, certain costs are
capitalized; however, in certain circumstances, such costs are expended after
completion but prior to leasing, resulting in a decline in net income.
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996
Total revenues increased by $22.6 million or 35.7% over the same period
last year. The revenues of the Company are derived primarily from base rents
and additional rents from expense reimbursements, pursuant to the terms of
tenant leases for occupied space at the warehouse/industrial properties.
Warehouse/industrial properties represented approximately 98% of the gross
leasable area of the Company's portfolio as of December 31, 1997.
Rental revenues increased by $15.4 million in 1997. This was due in part
to a full period of income from thirteen warehouse/industrial properties
totaling 3.3 million square feet acquired in 1996 net of seven property
dispositions. Also, this increase was attributable to twenty-one properties
acquired totaling 7.1 million square feet and six build-to-suit properties
coming on-line totaling 1.5 million square feet in 1997, net of three property
dispositions. The initial annualized minimum net rental income from the 1997
acquisition and completed build-to-suit properties is approximately $25 million.
In addition, mortgage interest income contributed approximately $632,000 to
the increase in revenue. Real estate fee income primarily consisting of fees
earned by the Company in connection with its build-to-suit and development
activities and third party management fees decreased by $2.0 million. The
Company's equity in net income of affiliate increased by $1.1 million due to the
affiliate's increase in property and build-to-suit sales. The Company's
unconsolidated affiliate, CenterPoint Realty Services, began operations during
the third quarter of 1995 and did not recognize income from development
activities until 1996.
On a "same-store" basis (comparing the results of operations, on a cash
basis, of the properties owned at December 31, 1996, with the results of
operations of the same properties at December 31, 1997), the Company recognized
an increase of approximately 6% in net operating income primarily due to lease
up of vacant space, rental increases on renewed leases and contractual increases
in minimum rent under leases in place.
Real estate tax expense and property operating and leasing expense
increased by $8.4 million,
-27-
from $20.8 million in 1996 to $29.2 million in 1997. $5.2 million of the
increase is due to real estate taxes. The majority of the real estate tax
increase, $5.0 million, resulted from 1995 and 1996 acquisitions and the
balance, $0.2 million, from net tax increases throughout the portfolio with the
largest increase in Cook County, Illinois. Property operating and leasing
expenses, including insurance, utilities, repairs and maintenance and property
management costs increased at levels comparable to the level of acquisitions.
Also, property operating and leasing costs as a percentage of total revenues
remained consistent when comparing 1997 to 1996 at approximately 14%.
Depreciation and other amortization increased by $4.7 million, from $10.6
million in 1996 to $15.3 million in 1997. The increase is due primarily to full
period depreciation on acquisitions completed during 1996 and depreciation from
dates of acquisition for the 1997 acquisitions and fixed asset additions.
General and administrative expenses increased by $0.5 million, from $2.6 million
in 1996 to $3.1 million in 1997, due primarily to the growth of the Company.
Interest incurred increased by approximately $206,000 over last year.
Although the acquisition level was higher during 1997, interest expense was held
to approximately the same level as 1996 due to the repayment of debt from public
offerings of common equity in March and preferred equity in November, 1997, and
reduced borrowing rates. Other income (expenses) increased by approximately
$208,000 from the same period last year due in part to the gain on disposition
of one property totaling approximately $140,000 in 1997. The remaining net
increase was the result of losses recorded on the disposition of three
properties in 1996.
As a result of the factors described above, income before extraordinary
item increased by $9.3 million from $18.3 million in 1996 to $27.6 million in
1997, an increase of 50.8%. Earnings before interest, income taxes,
depreciation and amortization increased by $13.9 million, from $39.9 million in
1996 to $53.8 million in 1997.
In 1996, the Company incurred an extraordinary loss of $3.3 million
representing a write off of unamortized deferred financing costs as a result of
the re-financing of its outstanding revenue bonds. In addition, the Company
replaced its $92 million secured lines of credit with a $135 million unsecured
credit facility at a significant savings in interest. No debt was re-financed
in 1997, and the unsecured credit facility was increased to $150 million.
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
Total revenues in 1996 increased by $16.3 million or 34.9% over 1995.
Tenants occupied approximately 95% of the gross leasable area of the Company's
portfolio as of December 31, 1996.
Rental revenues increased by $8.0 million in 1996 primarily because of full
period income from sixteen warehouse/industrial properties acquired totaling 2.7
million square feet in 1995 and thirteen warehouse/industrial properties
acquired totaling 3.3 million square feet in 1996 net of seven property
disposals. Initial minimum net rental income from the 1996 acquisition
properties is approximately $13.1 million. In addition, mortgage interest
income from mortgage financing activities, which originated in December, 1995,
contributed $1.4 million to the increase in revenue. Real estate fee income
primarily consisting of fees earned by the Company in connection with its
build-to-suit and development activities and third party management fees
increased by $3.7 million. Also, equity in net income of affiliate increased by
$1.0 million due to their increased activity in build-to-suit activity. The
Company's unconsolidated affiliate, CenterPoint Realty Services, began
operations during the third quarter of 1995 and did not recognize income from
development activities until 1996.
-28-
On a "same-store" basis (comparing the results of operations, on a cash
basis, of the properties owned at December 31, 1995, with the results of
operations of the same properties at December 31, 1996), the Company recognized
an increase of approximately 4% in net operating income primarily due to lease
up of vacant space, rental increases on renewed leases and contractual increases
in minimum rent under leases in place.
Total operating expenses, excluding general and administrative expenses,
interest, depreciation and amortization, increased by $6.0 million, from $14.8
million in 1995 to $20.8 million in 1996. $4.1 million of the increase was due
to real estate taxes. The majority of the real estate tax increase, $3.3
million, resulted from 1995 and 1996 acquisitions and the balance, $0.8 million,
from tax increases throughout the portfolio, with the largest increase in Cook
County, Illinois. Property operating and leasing expenses increased at levels
comparable to the level of acquisitions.
Depreciation and other amortization increased by $2.1 million, from $8.5
million in 1995 to $10.6 million in 1996. The increase is due primarily to full
period depreciation on acquisitions completed during 1995 and depreciation from
dates of acquisition for the 1996 additions. General and administrative
expenses increased by $0.4 million, from $2.1 million in 1995 to $2.5 million in
1996, due primarily to the growth of the Company.
Interest incurred decreased by $1.7 million over the same period in 1995
due in part to the conversion to common stock of $8.9 million of convertible
subordinated debentures. Although the acquisition level was higher during 1996,
interest expense was held to approximately the same level as 1995 due to the
repayment of debt from a public offering that closed in July, 1996, and reduced
borrowing rates. Other expenses increased by approximately $84,000 from the
same period last year due to the loss on disposition of three properties
totaling approximately $72,000.
As a result of the factors described above, income before extraordinary
item increased by $9.5 million from $8.8 million in 1995 to $18.3 million in
1996, an increase of 108.0%. Earnings before interest, income taxes,
depreciation and amortization increased by $9.9 million, from $30.0 million in
1995 to $39.9 million in 1996.
In 1996 and 1995, the Company incurred an extraordinary loss of
approximately $3.3 million and approximately $0.6 million, respectively,
representing the write-off of unamortized deferred financing costs as a result
of the early extinguishment of certain debt obligations resulting from the
Company's debt transactions.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow generated from Company operations has historically been utilized
for working capital purposes and distributions, while proceeds from financings
and capital raises have been used to fund acquisitions and other capital costs.
However, cash flow from operations during 1997 of $39.4 million net of $31.1
million of current year distributions provided $8.3 million of retained capital
to fund investment activities. The Company expects retained capital to fund
future investment activities.
Acquisitions, construction in progress on development projects, advances to
affiliate, advances on mortgage notes receivable, and improvements and additions
to properties of approximately $226.5 million for 1997 were funded with
borrowings under the Company's unsecured line of credit totaling $211.7 million,
a portion of proceeds from the disposition of real estate of $13.5 million,
repayment of
-29-
mortgage notes receivable of $5.7 million and a portion of the net proceeds from
the March 6, 1997 public offering of common shares.
At December 31, 1997, the Company's debt constituted approximately 25.1% of
its fully diluted market capitalization. Also, the Company's coverage ratio
remained high at 6 to 1. The Company's fully diluted equity market
capitalization was approximately $774 million, and its fully diluted total
market capitalization exceeded $1.0 billion. The Company's leverage ratios
benefited during 1997 from the conversion of approximately $2.6 million of its
8.22% Convertible Subordinated Debentures, due 2004, to 144,640 common shares.
At December 31, 1997, the Company had a $150 million unsecured credit
facility co-led by First Chicago NBD and Lehman Brothers with participating
banks. As of December 31, 1997, the Company had outstanding borrowings of
approximately $97.7 million under the unsecured revolving line of credit
(approximately 9.5% of the Company's fully diluted market capitalization), and
the Company had remaining availability of approximately $52.3 million under its
unsecured line of credit.
On September 18, 1997, the Company issued $55 million unsecured tax-exempt
bonds for the development costs of the Company's O'Hare Express air freight
center. With the completion of this issue, 34% of the Company's senior debt
(excluding line of credit) was tax exempt as of December 31, 1997, saving
approximately 200 basis points on average from comparable taxable financing.
On March 6, 1997, the Company completed a public offering of 2,250,000
common shares at $31.50 per share under a shelf registration statement. Net
proceeds from the offering after the underwriting discounts and other offering
costs were approximately $66.8 million. The proceeds of the offering were used
to refund approximately $58.2 million outstanding under the Company's line of
credit with the balance of $8.6 million to fund investments.
On November 10, 1997, the Company completed a public offering of 3,000,000
shares of 8.48% preferred at $25 per share under a shelf registration statement.
Net proceeds from the offering after underwriting discounts and other offering
costs were approximately $71.9 million. The proceeds of the offering were used
to refund amounts outstanding under the Company's line of credit.
In February, 1998, Duff & Phelps Credit Rating Co. joined Moody's Investors
Service's January, 1997 evaluation by assigning investment grade rating to the
Company's senior unsecured debt and preferred stock issuable under the Company's
shelf registration and convertible subordinated notes. Also in 1997, Standard
and Poors assigned an investment grade rating to the Company's senior unsecured
debt. These investment grade ratings further enhance the Company's financial
flexibility.
As of December 31, 1997, the Company had approximately $36.5 million in
restricted cash, $34.6 million of which was held in a construction escrow for
the Company's build-to-suit development at O'Hare Express Center. Most of the
remainder of the restricted cash is made up of real estate tax escrows for
tenants requiring such escrows under the terms of their leases.
During 1997, the Company declared and paid distributions on common shares
of $27.2 million or $1.68 per share and on class B common shares of $3.9 million
or $1.73 per share. Also, in 1997, the Company declared dividends on preferred
shares of $1.43 million or $0.477 per share, payable in January 1998. The
dividends on preferred shares attributable to 1997 income, which appear on the
Company's Consolidated Statements of Operations and Shareholders' Equity were
$901 thousand or $0.30 per share. The following factors, among others, will
affect the future availability of funds for
-30-
distribution: (i) scheduled increases in base rents under existing leases and
(ii) changes in minimum base rents attributable to replacement of existing
leases with new or replacement leases.
The Company has considered its short-term (one year or less) capital needs,
in conjunction with its estimated future cash flow from operations and other
expected sources. The Company believes that its ability to fund operating
expenses, building improvements, debt service requirements and the minimum
distribution required to maintain the Company's REIT qualification under the
Internal Revenue Code, will be met by recurring operating and investment revenue
and other real estate income.
Long-term (greater than one year) capital needs for property acquisitions,
scheduled debt maturities, major redevelopment projects, expansions, and
construction of build-to-suit properties will be supported through draws on the
Company's unsecured line of credit, the issuance of long-term unsecured
indebtedness and the issuance of equity securities.
- -
INFLATION
Inflation has not had a significant impact on the Company because of the
relatively low inflation rates in the Company's markets of operation. Most of
the Company's leases require the tenants to pay their share of operating
expenses, including common area maintenance, real estate taxes and insurance,
thereby reducing the Company's exposure to increases in costs and operating
expenses resulting from inflation. In addition, many of the leases are for
remaining terms less than five years which may enable the Company to replace
existing leases with new leases at higher base rental rates if rents of existing
leases are below the then-existing market rate.
ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." Both SFAS No. 130 and SFAS No. 131 are effective for
financial statements for years beginning after December 15, 1997. SFAS No. 130
requires the reporting of comprehensive income beginning 1998 and SFAS No. 131
establishes standards for publicly-held business enterprises to report
information about operating segments in annual financial statements and requires
that these enterprises report selected information about operating segments in
interim financial reports issued to shareholders. The Company plans to adopt
SFAS No. 130 and No. 131 in 1998.
YEAR 2000 COMPLIANCE
In response to the Year 2000 issue, the Company initiated a project in
early 1997 to identify, evaluate and implement a new computerized real estate
management system. The Company is addressing the issue through a combination of
modifications to existing programs and conversion to Year 2000 compliant
software. In addition, the Company is discussing with its tenants, vendors, and
other service providers the possibility of any interface difficulties relating
to the Year 2000 issue which may effect the Company. If the Company and those
it conducts business with do not make modifications or conversions in a timely
manner, the Year 2000 issue may have a material adverse affect on the Company's
business, financial condition, and results of operations. The total cost
associated with the required modifications is not expected to be material to the
Company's consolidated results of operations and financial position, and is
being expensed as incurred.
-31-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Index to Financial Statements on Page F-1 of this Annual Report on Form
10-K for the financial statements and financial statement schedules.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
-32-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Item 10 is incorporated herein pursuant to General Instruction G to Form
10-K by referencing the Company's definitive proxy statement, which will be
filed with the Securities and Exchange Commission pursuant to Regulation 14A not
later than 120 days after the close of the fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
Item 11 is incorporated herein pursuant to General Instruction G to Form
10-K by referencing the Company's definitive proxy statement, which will be
filed with the Securities and Exchange Commission pursuant to Regulation 14A not
later than 120 days after the close of the fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Item 12 is incorporated herein pursuant to General Instruction G to Form
10-K by referencing the Company's definitive proxy statement, which will be
filed with the Securities and Exchange Commission pursuant to Regulation 14A not
later than 120 days after the close of the fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Item 13 is incorporated herein pursuant to General Instruction G to Form
10-K by referencing the Company's definitive proxy statement, which will be
filed with the Securities and Exchange Commission pursuant to Regulation 14A not
later than 120 days after the close of the fiscal year.
-33-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
(1) (2) The consolidated financial statements and related schedules
indicated in Part II, Item 8, "Financial Statements and
Supplementary Data."
(3) Exhibit 10.51 - Amended and Restated Unsecured Revolving
Credit Agreement among the Company, The First National Bank
of Chicago, Lehman Brothers Holdings and the other lenders
named therein
(4) Exhibit 10.52 - Third Amendment to Stock Option Plan
(5) Exhibit 10.53 - First Amendment to Credit Agreement
(6) Exhibit 12 - Computation of Ratio of Combined Earnings to
Fixed Charges and Preferred Dividends
(7) Exhibit 13 - Annual Report to Security Holders
(8) Exhibit 23 - Consent of Independent Accountants
(9) Exhibit 27 - Financial Data Schedule
The following exhibits are incorporated by reference from the
Registrant's Registration Statement on Form S-11 (File No. 33-69710),
referencing the exhibit numbers used in such Registration Statement:
Exhibit Number Description
-------------- ------------
4.3 Form of Indenture
10.3(a) Mortgage Documents regarding 440 North Lake
Street, Gary, IN
10.3(c) Mortgage Documents regarding 905-909 Irving Park
Road, Itasca, IL
10.3(d) Mortgage Documents regarding 6845 Santa Fe,
Hodgkins, IL
10.4 Form of Noncompetition Agreement for Executive
Officers
10.5 Form of Employment Agreement for Executive
Officers
10.10 Indemnification Agreement among John S. Gates,
Jr., Capital and Regional Properties and the
Company
10.11 Indemnification Agreement among Robert L. Stovall,
Michael M.
-34-
Mullen and the Company
10.12 Indemnification Agreement between David Kahnweiler
and the Company
The following exhibits are incorporated by reference from
Pre-Effective Amendment No. 2 to the Registrant's Registration
Statement on Form S-11 (File No. 33-69710), referencing the exhibit
numbers used in such Amendment No. 2:
Exhibit Number Description
-------------- ------------
10.1 Stock Option Plan
The following exhibits are incorporated by reference from the
Registrant's Registration Statement on Form S-11 (File No. 33-85440),
referencing the numbers used in such Registration Statement:
Exhibit Number Description
-------------- ------------
10.32 Registration Rights Agreement between the Company
and Corum Zeller Venture
10.38 Promissory Note from the Company to the Prudential
Insurance Company of America
10.39 Mortgage, Security Agreement and Fixture Filing
relating to the Promissory Note form the Company
to The Prudential Insurance Company of America
The following exhibits are incorporated by reference from the
Registrant's Form 10-Q for the fiscal quarter ended September 30,
1995, referencing the numbers used in such Form 10-Q:
Exhibit Number Description
-------------- ------------
4.1 1995 Restricted Stock Incentive Plan
4.2 1995 Director Stock Plan
4.3 Bonus Stock Grant Agreement between the Company
and John S. Gates, Jr.
4.4 Bonus Stock Grant Agreement between the Company
and Robert L. Stovall
4.5 Series A Preferred Stock Purchase Agreement
between the Company and LaSalle Advisors Limited
Partnership
4.6 Registration Rights Agreement between the Company
and LaSalle
-35-
Advisors Limited Partnership
The following exhibits are incorporated by reference from the
Registrant's Form 10-K for the fiscal year ended December 31, 1995,
referencing the numbers used in such Form 10-K:
Exhibit Number Description
-------------- ------------
4.1 Indenture of CP Financing Trust
10.1 First Amendment to Stock Option Plan
10.2 Mortgage Documents regarding 850 Arthur Street,
Elk Grove Village, Illinois
10.3(a) Mortgage, Assignment of Rents and Leases and
Security Agreement of CP Financing Trust regarding
the following properties in Cook County, Illinois
1520 Pratt, Elk Grove Village
1201 Lunt, Elk Grove Village
1390 Lunt, Elk Grove Village
5619-25 W. 115th St., Alsip
900 University Dr., Arlington Heights
10.3(b) Mortgage, Assignment of Rents and Leases and
Security Agreement of CP Financing Trust regarding
the following properties in DuPage County,
Illinois
7001 Adams, Willowbrook
245 Benoris, Wood Dale
1733 Downs Dr., W. Chicago
1645 Downs Dr., W. Chicago
10.3(c) Mortgage, Assignment of Rents and Leases and
Security Agreement of CP Financing Trust regarding
the following properties in Lake County, Illinois
1300 Northpoint, Waukegan
1800 Industrial Dr., Libertyville
950-970 Tower Rd., Mundelein
1 Wildlife Way, Long Grove
1810-20 Industrial Dr., Libertyville
1700 Butterfield, Mundelein
10.3(d) Mortgage, Assignment of Rents and Leases and
Security Agreement of CP Financing Trust regarding
the following property in Kane County, Illinois
315 Kirk Rd., St. Charles
10.3(e) Mortgage, Assignment of Rents and Leases and
Security Agreement of CP Financing Trust regarding
the following
-36-
property in Will County, Illinois
1319 Marquette, Romeoville
10.3(f) Mortgage, Assignment of Rents and Leases and
Security Agreement of CP Financing Trust regarding
the following properties in Wisconsin
8200 100th St., Pleasant Prairie
8901 102nd St., Pleasant Prairie
10.3(g) Mortgage, Assignment of Rents and Leases and
Security Agreement of CP Financing Trust regarding
the following property in Indiana
201 E. Mississippi, Gary
10.3(h) Assignment and Assumption of Mortgage and Other
Obligations between CP Financing Trust and Great
Lakes Industrial Partners, L.P.
10.3(i) Assignment and Assumption of Tenant Leases and
Contracts between CP Financing Trust and the
Company
10.3(j) Assignment and Assumption of Tenant Leases and
Contracts between CP Financing Trust and Great
Lakes Industrial Partners, L.P.
The following exhibit is incorporated by reference from the
Registrant's Form 10-Q for the fiscal quarter ended September 30,
1996, referencing the number used in such Form 10-Q:
Exhibit Number Description
-------------- ------------
10.43 Unsecured Revolving Credit Agreement among The
First National Bank of Chicago, Lehman Brothers
Holdings Inc., the other Lenders named therein and
the Company
The following exhibits are incorporated by reference from the
Registrant's Registration Statement on Form S-3 (File No. 333-18235),
referencing the exhibit numbers used in such Form S-3:
Exhibit Number Description
-------------- ------------
4.3 Form of Senior Securities Indenture
4.4 Form of Subordinated Securities Indenture
-37-
The following exhibits are incorporated by reference from the
Registrant's Form 10-K for the fiscal year ended December 31, 1996,
referencing the numbers used in such Form 10-K:
Exhibit Number Description
-------------- ------------
10.44 Second Amendment to Stock Option Plan
10.45 Settlement Agreement and Mutual Release
10.46 Employment Separation Agreement between the Company and
Robert L. Stovall
10.47 Documents relating to City of Gary, Indiana Revenue
Refinancing Bonds, Series 1996A and Series 1996B, of the
Miller Partnership, L.P.
10.48 First Amendment to Unsecured Revolving Credit Agreement
10.49 Second Amendment to Unsecured Revolving Credit Agreement
21 List of Subsidiaries
The following exhibits are incorporated by reference from the
Registrant's Registration Statement on Form S-4 (File No. 333-33515),
referencing the numbers used in such Form S-4:
Exhibit Number Description
-------------- -----------
2 Plan of Reorganization
3.3 Declaration of Trust of the Registrant
3.4 By-Laws of the Registrant
The following exhibits are incorporated by reference from the
Registrant's Pre-Effective Amendment No. 1 to Form S-4 (File No.
333-33515), referencing the numbers used in such Pre-Effective
Amendment No. 1:
Exhibit Number Description
-------------- -----------
4.1 Form of certificate representing common shares of beneficial
interest in the Registrant
4.2 Form of certificate representing 8.22% Convertible Subordinated
Debentures
4.4 Form of First Supplemental Indenture
The following exhibits are incorporated by reference from the
Registrant's Form 8-A filed on November 5, 1997, referencing the
numbers used in such Form 8-A:
-38-
Exhibit Number Description
-------------- -----------
1 Articles Supplementary to the Declaration of Trust of the
Registrant establishing and fixing the rights and
preferences of the Series A Preferred Shares
4 Form of certificate representing Series A Preferred Shares
of beneficial interest in the Registrant
The following exhibits are incorporated by reference from the
Registrant's Form 10-Q for the fiscal quarter ended September 30,
1997, referencing the numbers used in such Form 10-Q:
Exhibit Number Description
-------------- ------------
10.50 Documents relating to $55 million City of Chicago
Variable/Fixed Rate Demand Special Facilities Airport
Revenue Bonds (CenterPoint O'Hare, L.L.C. Project) Series
1997
(b) During the fourth quarter of 1997, the Company filed a Current Report
on Form 8-K on December 30, 1997 to report the acquisition by the Company of
properties which constituted more than 10% of the total assets of the Company
and its consolidated subsidiaries.
(c) An annual report will be sent to Stockholders subsequent to this
filing, and the Company will furnish copies of such report to the Securities and
Exchange Commission.
(d) Not applicable.
-39-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CENTERPOINT PROPERTIES TRUST,
a Maryland corporation
By: /s/ John S. Gates, Jr.
---------------------------------------------
John S. Gates, Jr., President
and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Paul S. Fisher
---------------------------------------------
Paul S. Fisher, Executive Vice
President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Act of 1934, this report has
been signed by the following persons on behalf of the registrant in the
capaciies and on the dates indicated.
SIGNATURE NAME AND TITLE DATE
- --------- ---------------------- ---------------
/s/ Martin Barber Martin Barber, Chairman March 16, 1998
- ---------------------- and Trustee
/s/ John S. Gates, Jr. John S. Gates, Jr., President March 16, 1998
- ----------------------
Chief Executive Officer and
Trustee
/s/ Robert L. Stovall Robert L. Stovall, Vice March 16, 1998
- ---------------------- Chairman and Trustee
/s/ Nicholas C. Babson Nicholas C. Babson, Trustee March 16, 1998
- ----------------------
/s/ Alan D. Feld Alan D. Feld, Trustee March 16, 1998
- ----------------------
/s/ John J. Kinsella John J. Kinsella, Trustee March 16, 1998
- ----------------------
/s/ Thomas E. Robinson Thomas E. Robinson, March 16, 1998
- ---------------------- Trustee
-40-
CENTERPOINT PROPERTIES TRUST
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
PAGE(S)
Consolidated Financial Statements:
Report of Independent Accountants................................ F-2
Consolidated Balance Sheets as of December 31, 1997 and 1996..... F-3
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995............................... F-4
Consolidated Statements of Shareholders' Equity for
the years ended December 31, 1997, 1996 and 1995............... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995............................... F-6
Notes to Consolidated Financial Statements............................ F-7 to F-18
Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts................. F-19
Schedule III - Real Estate and Accumulated Depreciation.......... F-20 to F-25
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
CenterPoint Properties Trust
We have audited the accompanying consolidated balance sheets of
CenterPoint Properties Trust and Subsidiaries (formerly CenterPoint
Properties Corporation) as of December 31, 1997 and 1996, and the related
consolidated statements of operations, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
CenterPoint Properties Trust and Subsidiaries as of December 31, 1997 and
1996, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
February 10, 1998
F-2
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
ASSETS
DECEMBER 31,
1997 1996
-------- -------
Assets:
Investment in real estate:
Land and leasehold $123,014 $72,004
Buildings 414,314 284,626
Building improvements 64,372 43,583
Furniture, fixtures, and equipment 13,912 10,429
Construction in progress 26,034 18,392
-------- -------
641,646 429,034
Less accumulated depreciation and amortization 44,352 30,206
-------- -------
Net investment in real estate 597,294 398,828
Cash and cash equivalents 1,652 1,070
Restricted cash and cash equivalents 36,509 977
Tenant accounts receivable, net 12,416 10,193
Mortgage notes receivable 30,297 22,665
Investment in and advances to affiliate 11,143 9,673
Prepaid expenses and other assets 3,303 3,630
Deferred expenses, net 6,661 4,170
-------- -------
$699,275 $451,206
-------- -------
-------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $106,295 $114,451
Line of credit 97,700 46,100
Bonds payable 55,000
Convertible subordinated debentures payable 11,740 14,380
Notes payable 33 2,418
Preferred dividends payable 901
Accounts payable 10,311 4,130
Accrued expenses 24,410 17,914
Rents received in advance and security deposits 4,759 3,700
-------- -------
311,149 203,093
-------- -------
Commitments and contingencies
Shareholders' equity:
Preferred shares of beneficial interest, $.001 par value, 10,000,000 shares
authorized; 3,000,000 and 0 issued and outstanding, respectively,
having a liquidation preference of $25 per share ($75,000) 3
Common shares of beneficial interest, $.001 par value, 47,727,273 shares
authorized; 16,891,951 and 14,333,231 issued and outstanding, respectively 17 14
Class B common shares of beneficial interest, $.001 par value, 2,272,727
shares authorized; 2,272,727 issued and outstanding 2 2
Additional paid-in-capital 420,743 276,142
Retained earnings (deficit) (32,142) (27,726)
Unearned compensation - restricted stock (497) (319)
-------- -------
Total shareholders' equity 388,126 248,113
-------- -------
$699,275 $451,206
-------- -------
-------- -------
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
YEARS ENDED DECEMBER 31,
------------------------
1997 1996 1995
------- ------- -------
Revenue:
Operating and investment revenue:
Minimum rents $57,519 $42,107 $34,066
Straight-line rents 2,732 2,087 1,349
Expense reimbursements 18,228 11,413 8,781
Mortgage interest income 2,146 1,514 84
------- ------- -------
Total operating and investment revenue 80,625 57,121 44,280
------- ------- -------
Other revenue:
Real estate fee income 3,159 5,140 2,639
Equity in net income of affiliate 2,174 1,069 33
------- ------- -------
Total other revenue 5,333 6,209 2,672
------- ------- -------
Total revenue 85,958 63,330 46,952
------- ------- -------
Expenses:
Real estate taxes 17,091 11,868 7,719
Property operating and leasing 12,091 8,883 7,055
General and administrative 3,105 2,567 2,150
Depreciation and amortization 15,278 10,648 8,456
Interest expense:
Interest incurred, net 10,071 9,865 11,562
Amortization of deferred financing costs 800 1,127 1,150
------- ------- -------
Total expenses 58,436 44,958 38,092
------- ------- -------
Operating income 27,522 18,372 8,860
Other income (expense) 108 (100) (16)
------- ------- -------
Income before extraordinary item 27,630 18,272 8,844
Extraordinary item, early extinguishment of debt (3,331) (632)
------- ------- -------
Net income 27,630 14,941 8,212
Preferred dividends (901) (947) (1,002)
------- ------- -------
Net income available to common shareholders $26,729 $13,994 $7,210
------- ------- -------
------- ------- -------
Per share net income available to common shareholders
before extraordinary item:
Basic $1.43 $1.25 $0.85
Diluted $1.41 $1.22 $0.84
Per share net income available to common shareholders:
Basic $1.43 $1.01 $0.78
Diluted $1.41 $0.99 $0.77
Distributions per common share $1.68 $1.62 $1.56
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
CLASS B COMMON
PREFERRED SHARES SHARES COMMON SHARES ADDITIONAL RETAINED
---------------- ----------------- -----------------
NUMBER NUMBER NUMBER PAID-IN EARNINGS
OF SHARES AMOUNT OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL (DEFICIT)
--------- ------ --------- ------ --------- ------ ------- ---------
Balance, January 1, 1995 0 $0 0 $0 6,415,883 $6 $69,871 ($10,861)
Issuance of common shares,
less $5,160 of offering costs 2,736,700 3 45,446
Shares issued for purchase of property 48,261 1,122
Issuance of convertible preferred shares
in private offering 2,272,727 2 49,998
Conversion of convertible subordinated
debentures to common shares 1,137,165 1 20,315
Shares issued for stock options exercised 600 11
Incentive share awards 17,499 341
Director share awards 2,850 57
Amortization of unearned compensation
Distributions declared on common shares,
$1.56 per share (14,951)
Distributions declared on convertible
preferred shares, $0.44 per share (1,002)
Net income 8,212
--------- ------ --------- ------ --------- ------ ------- ---------
Balance, December 31, 1995 2,272,727 2 0 0 10,358,958 10 187,161 (18,602)
Issuance of common shares,
less $2,387 of offering costs 3,450,000 3 79,547
Conversion of convertible preferred shares
to Class B common shares (2,272,727) (2) 2,272,7272 2
Conversion of convertible subordinated
debentures to common shares 485,680 1 8,683
Shares issued for stock options exercised 27,787 508
Incentive shares awards 8,290 186
Director shares awards 2,516 57
Amortization of unearned compensation
Distributions declared on common shares,
$1.62 per share (20,277)
Distributions declared on convertible
preferred shares, $0.42 per share (947)
Distributions declared on Class B common
shares, $1.25 per share (2,841)
Net income 14,941
--------- ------ --------- ------ --------- ------ ------- ---------
Balance, December 31, 1996 0 0 2,272,727 2 14,333,231 14 276,142 (27,726)
Issuance of common shares,
less $4,054 of offering costs 2,250,000 2 66,819
Issuance of preferred shares,
less $3,101 of offering costs 3,000,000 3 71,896
Conversion of convertible subordinated
debentures to common shares 144,640 2,564
Shares issued for stock options exercised 149,715 1 2,873
Incentive share awards 12,444 392
Director share awards 1,921 57
Amortization of unearned compensation
Distributions declared on common shares,
$1.68 per share (27,221)
Distributions declared on preferred shares,
$0.30 per share (901)
Distributions declared on Class B common
shares, $1.73 per share (3,924)
Net income 27,630
--------- ------ --------- ------ --------- ------ ------- ---------
Balance, December 31, 1997 3,000,000 $3 2,272,727 $2 16,891,951 $17 $420,743 ($32,142)
--------- ------ --------- ------ --------- ------ ------- ---------
--------- ------ --------- ------ --------- ------ ------- ---------
UNEARNED
COMPENSATION- TOTAL
RESTRICTED SHAREHOLDERS'
SHARES EQUITY
------- ---------
Balance, January 1, 1995 $0 $59,016
Issuance of common shares,
less $5,160 of offering costs 45,449
Shares issued for purchase of property 1,122
Issuance of convertible preferred shares
in private offering 50,000
Conversion of convertible subordinated
debentures to common shares 20,316
Shares issued for stock options exercised 11
Incentive share awards (341)
Director share awards 57
Amortization of unearned compensation 90 90
$1.56 per share (14,951)
Distributions declared on convertible
preferred shares, $0.44 per share (1,002)
Net income 8,212
------- ---------
Balance, December 31, 1995 (251) 168,320
Issuance of common shares,
less $2,387 of offering costs 79,550
Conversion of convertible preferred shares
to Class B common shares
Conversion of convertible subordinated
debentures to common shares 8,684
Shares issued for stock options exercised 508
Incentive shares awards (186)
Director shares awards 57
Amortization of unearned compensation 118 118
Distributions declared on common shares,
$1.62 per share (20,277)
Distributions declared on convertible
preferred shares, $0.42 per share (947)
Distributions declared on Class B common
shares, $1.25 per share (2,841)
Net income 14,941
------- ---------
Balance, December 31, 1996 (319) 248,113
Issuance of common shares,
less $4,054 of offering costs 66,821
Issuance of preferred shares,
less $3,101 of offering costs 71,899
Conversion of convertible subordinated
debentures to common shares 2,564
Shares issued for stock options exercised 2,874
Incentive share awards (392)
Director share awards 57
Amortization of unearned compensation 214 214
Distributions declared on common shares,
$1.68 per share (27,221)
Distributions declared on preferred shares,
$0.30 per share (901)
Distributions declared on Class B common
shares, $1.73 per share (3,924)
Net income 27,630
------- ---------
Balance, December 31, 1997 ($497) $388,126
------- ---------
------- ---------
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEARS ENDED DECEMBER 31,
------------------------
1997 1996 1995
------- ------- ------
Cash flows from operating activities:
Net income $27,630 $14,941 $8,212
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary item-early extinguishment of debt 3,331 632
Bad debts 279 462 433
Depreciation 14,275 10,199 8,161
Amortization of deferred financing costs 800 1,127 1,150
Other amortization 1,003 449 295
Straight-line rents (2,732) (2,087) (1,349)
Incentive stock awards 271 175 147
Interest on converted debentures 12 77 235
Equity in net income of affiliate (2,174) (1,069) (33)
(Gain) / loss on disposal of real estate (140) 60
Net changes in:
Tenant accounts receivable (973) 197 (2,654)
Prepaid expenses and other assets (205) (937) (293)
Rents received in advance and security deposits 317 589 119
Accounts payable and accrued expenses 1,048 2,036 1,418
------- ------- ------
Net cash provided by operating activities 39,411 29,552 16,473
------- ------- ------
Cash flows from investing activities:
Change in restricted cash and cash equivalents (35,532) 325 5
Acquisition of real estate (121,661) (85,268) (61,881)
Construction in progress (26,625) (17,063)
Improvements and additions to properties (42,441) (12,575) (5,031)
Disposition of real estate 13,510 18,991 2,384
Change in deposits on acquisitions 1,303 1,037 (502)
Issuance of mortgage notes receivable (16,115) (18,523) (9,588)
Repayment of mortgage notes receivable 5,670 5,543
Investment in and advances to affiliate (19,639) (1,048) (5,324)
Receivables from affiliates and employees (3) 106 274
Additions to deferred expenses (3,803) (3,079) (2,893)
------- ------- ------
Net cash used in investing activities (245,336) (111,554) (82,556)
------- ------- ------
Cash flows from financing activities:
Proceeds from sale of preferred shares 75,000 50,000
Proceeds from sale of common shares 73,749 82,445 50,620
Offering costs paid (7,155) (2,387) (4,386)
Proceeds from line of credit 211,650 46,100
Repayment of line of credit (160,050)
Proceeds from issuance of bonds payable 55,000 45,882 50,000
Repayments of mortgage notes payable (8,156) (62,705) (63,930)
Repayments of notes payable (2,385) (123) (112)
Distributions (31,145) (29,017) (13,650)
Conversion of convertible subordinated
debentures payable (1) (1) (1)
------- ------- ------
Net cash provided by financing activities 206,507 80,194 68,541
------- ------- ------
Net change in cash and cash equivalents 582 (1,808) 2,458
Cash and cash equivalents, beginning of the year 1,070 2,878 420
------- ------- ------
Cash and cash equivalents, end of year $1,652 $1,070 $2,878
------- ------- ------
------- ------- ------
The accompanying notes are an integral part of these consolidated financial
statements
F-6
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
1. ORGANIZATION
CenterPoint Properties Trust (the "Company"), a Maryland trust, and its
subsidiaries, owns and operates primarily warehouse/industrial properties in
the metropolitan Chicago area and operates as a real estate investment trust.
On October 15, 1997, the Company completed a reorganization pursuant to
which it converted from a Maryland corporation to a Maryland real estate
investment trust by means of a merger of CenterPoint Properties Corporation
(the "Corporation") with and into the Company, which prior to the merger was
a wholly-owned subsidiary of the Corporation, with the Company as the
surviving entity. Pursuant to a Plan of Reorganization, which was approved
by the stockholders of the Corporation at a Special Meeting of Stockholders
held on October 1, 1997, each issued and outstanding share of common stock of
the corporation, par value $.001 per share (the "Common Stock"), was
converted into one common share of beneficial interest in the Company, par
value $.001 per share (the "Common Shares"), each outstanding share of Class
B common stock of the Corporation was converted into one Class B common share
of beneficial interest (the "Class B Common Shares") in the Company; and the
outstanding principal amount of the Corporation's 8.22% Convertible
Subordinated Debentures due 2004 was assumed by the Company and converted
into the same principal amount of 8.22% Convertible Subordinated Debentures
due 2004 of the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Minimum rents are recognized on a straight-line basis over the terms of
the respective leases. Unbilled rents receivable represents the amount that
straight-line rental revenue exceeds rents due under the lease agreements.
Unbilled rents receivable, included in tenants accounts receivable, at
December 31, 1997 and 1996 were $5,075 and $4,099, respectively. Recoveries
from tenants for taxes, insurance and other property operating expenses are
recognized in the period the applicable costs are incurred.
Real estate fee income includes tenant lease termination fees of $1,894
in 1997 and $1,200 in 1995.
The Company provides an allowance for doubtful accounts against the
portion of accounts receivable which is estimated to be uncollectible.
Accounts receivable in the consolidated balance sheets are shown net of an
allowance for doubtful accounts of $272 and $748 as of December 31, 1997 and
1996, respectively.
DEFERRED EXPENSES
Deferred expenses consist principally of financing fees and leasing
commissions. Leasing commissions are amortized on a straight-line basis over
the terms of the respective lease agreements ranging from 1 to 8 years.
Financing costs are amortized over the terms of the respective loan
agreements. Deferred expenses relating to debenture conversions of $86 and
$257 were charged to paid-in capital in 1997 and 1996, respectively, and
fully amortized deferred expenses of $1,207 and $57 were written off in 1997
and 1996, respectively. The balances are as follows:
F-7
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
DECEMBER 31,
------------
1997 1996
------ ------
Deferred financing costs, net of accumulated
amortization of $1,081 and $823 $2,766 $2,019
Deferred leasing and other costs, net of accumulated
amortization of $1,478 and $1,387 3,895 2,151
------ ------
$6,661 $4,170
------ ------
------ ------
PROPERTIES
Real estate assets are stated at cost. Interest and real estate taxes
and other directly related expenses incurred during construction periods are
capitalized and amortized on the same basis as the related assets.
Depreciation expense is computed using the straight-line method based upon
the following estimated useful lives:
YEARS
-----
Building and improvements 31.5 and 40
Land improvements 15
Furniture, fixtures and equipment 4 to 15
Construction allowances for tenant improvements are capitalized and
amortized over the terms of each specific lease. Repairs and maintenance are
charged to expense when incurred. Expenditures for improvements are
capitalized. When assets are sold or retired, their cost and related
accumulated depreciation are removed from the accounts with the resulting
gains or losses reflected in operations.
The Company annually reviews the recoverability of the carrying value of
its investment in real estate. The reviews are conducted by estimating the
fair value of its properties generally by analysis and comparison of the
capitalized values of the expected net operating cash flows of the
properties. If management determines that an impairment of property has
occurred, the carrying value of such property will be reduced to its fair
value.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated financial statements, the Company
considers all liquid investments purchased with original maturities of three
months or less to be cash equivalents.
INVESTMENT IN AND ADVANCES TO AFFILIATE
The Company accounts for its investment in affiliate using the equity
method whereby its cost of the investment is adjusted for its share of equity
in net income or loss from the date of acquisition and reduced by
distributions received.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INCOME TAXES
The Company qualifies as a real estate investment trust ("REIT") under
sections 856-860 of the Internal Revenue Code beginning January 1, 1994. In
order to qualify as a REIT, the Company is required to distribute at
F-8
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
least 95% of its taxable income to shareholders and to meet certain asset and
income tests as well as certain other requirements. As a REIT, the Company
will generally not be liable for Federal income taxes, provided it satisfies
the necessary distribution requirements. The distributions declared and paid
for the years ended December 31, 1997, 1996 and 1995 represent a return of
capital of approximately 12%, 51% and 54%, respectively.
EARNINGS PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share," which became effective for both
interim and annual financial statement periods ending after December 15,
1997. As required by this statement, the Company adopted the new standards
for computing and presenting earnings per share ("EPS") for 1997, and for all
prior period earnings per share data presented. Following are the
reconciliations of the numerators and denominators of the basic and diluted
EPS.
YEARS ENDED DECEMBER 31,
------------------------
1997 1996 1995
------- ------- ------
Numerators:
Income before extraordinary items $27,630 $18,272 $8,844
Dividends on preferred shares (901) - -
Dividends on convertible preferred stock - (947) (1,002)
---------- ---------- ---------
Income available to common shareholders
before extraordinary item - for basic and diluted EPS $26,729 $17,325 $7,842
Extraordinary items - (3,331) (632)
---------- ---------- ---------
Net income available to common shareholders - for
basic and diluted EPS $26,729 $13,994 $7,210
---------- ---------- ---------
---------- ---------- ---------
Denominators:
Weighted average common shares outstanding - for
basic EPS 18,634,850 13,890,049 9,236,612
Effect of dilutive securities - options 312,280 285,913 121,810
---------- ---------- ---------
Weighted average common shares outstanding - for
diluted EPS 18,947,130 14,175,962 9,358,422
---------- ---------- ---------
---------- ---------- ---------
The assumed conversion of the convertible subordinated debentures into
common shares for purposes of computing diluted EPS by adding interest
expense for the debentures to the numerators and adding assumed share
conversions to the denominators for 1997, 1996 and 1995 would be anti
dilutive. The assumed conversion of the convertible preferred stock in 1996
and 1995 would also be anti dilutive.
RECLASSIFICATIONS
Certain items presented in the consolidated statements of operations for
prior periods have been reclassified to conform with current classifications
with no effect on results of operations.
ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." Both SFAS No. 130 and SFAS No. 131 are effective for
F-9
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
financial statements for years beginning after December 15, 1997. SFAS No.
130 requires the reporting of comprehensive income beginning 1998 and SFAS
No. 131 establishes standards for publicly-held business enterprises to
report information about operating segments in annual financial statements
and requires that these enterprises report selected information about
operating segments in interim financial reports issued to shareholders. The
Company plans to adopt SFAS No. 130 and No. 131 in 1998.
3. PROPERTY ACQUISITIONS AND DISPOSITIONS
During each of the years ended December 31, 1997 and 1996, the Company
acquired twenty-one and fifteen properties, respectively, consisting
principally of single-tenant buildings for an aggregate amount of
approximately $124,923 and $103,532, respectively. Substantially all
properties were acquired in singular transactions, and except for one
transaction in 1997 and three transactions in 1996, were acquired from
unrelated third parties. The properties were funded with borrowings under
the Company's lines of credit, proceeds from properties sold during 1997 and
1996, from proceeds of public offerings of the Company's common shares
completed on July 2, 1996 and March 6, 1997, and from proceeds of a public
offering of the Company's preferred shares completed on November 10, 1997.
The acquisitions have been accounted for utilizing the purchase method of
accounting, and accordingly, the results of operations of the acquired
properties are included in the consolidated statements of operations from the
dates of acquisition.
The Company disposed of three properties during the year ended December
31, 1997 and eight properties during the year ended December 31, 1996. In
1997 and 1996, one and five of the properties, respectively, were disposed of
in transactions that qualify as a tax-free exchange under applicable
provisions of the Internal Revenue Code.
Due to the effect of the July, 1996 public offering, the March, 1997
public offering, the November, 1997 public offering and the acquisitions and
dispositions of properties, the historical results are not indicative of the
future results of operations. The following unaudited pro forma information
is presented as if the 1995 and 1996 acquisitions and dispositions of
properties, the July, 1996 public offering, and the corresponding repayment
of certain debt had occurred on January 1, 1995, and as if the March, 1997
public offering, the November 1997 public offering, the corresponding
repayment of certain debt, and the 1997 acquisitions and dispositions had all
occurred on January 1, 1996 (or on the date the property first commenced
operations with a third party tenant, if later). The unaudited pro forma
information is based upon the historical consolidated statements of
operations before any extraordinary items and does not purport to present
what actual results would have been had the transactions, in fact, occurred
at the beginning of 1996 or 1995, or to project results for any future period.
PROFORMA FOR THE YEARS
ENDED DECEMBER 31, (UNAUDITED)
-------------------------------------
1997 1996 1995
------- ------- -------
Total revenues $91,669 $80,294 $57,411
Total expenses 59,108 50,103 41,764
------- ------- -------
Income before extraordinary item 32,561 30,191 15,647
Preferred dividends (6,360) (7,307) (1,002)
------- ------- -------
Income available to common shareholders
before extraordinary item $26,201 $22,884 $14,645
------- ------- -------
------- ------- -------
Per share income available to common shareholders
before extraordinary item:
Basic $1.41 $1.28 $1.14
Diluted $1.38 $1.26 $1.13
4. MORTGAGE NOTES RECEIVABLE
F-10
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
As of December 31, 1997 and 1996, the Company had notes receivable
outstanding of $30,297 and $22,665, respectively, consisting of mortgage
loans and construction loans. The notes bear interest from 8.25% to 11.25%
and mature from March, 1998 to June, 2010.
As of December 31, 1997 mortgage notes receivable mature as follows:
1998........................................................ $ 20,646
1999........................................................ 24
2000........................................................ 8,782
2001........................................................ 41
2002........................................................ 50
Thereafter.................................................. 754
-------
Total.................................................. $30,297
-------
-------
Based on borrowing rates available at the end of 1997 and 1996 for
mortgage loans with similar terms and maturities, the fair value of the
mortgage notes receivable approximates the carrying values.
Land and buildings have been pledged as collateral for the above notes
receivable.
5. INVESTMENT IN AND ADVANCES TO AFFILIATE
The Company holds approximately 99% of the economic interest in
CenterPoint Realty Services Corporation ("CRS"). To maintain compliance with
limitations on income from business activities received by REITs and their
qualified REIT subsidiaries, the Company holds its interest in CRS in the
form of non-voting equity ownership which qualifies as an unconsolidated
taxable subsidiary.
As of December 31, 1997 and 1996, the Company had an outstanding balance
due from CRS of $7,868 and $6,333, respectively, under a demand loan with an
interest rate of 8.125%. The proceeds of the loans were required for
development projects.
Summarized financial information of CRS is shown below.
Balance Sheets:
DECEMBER 31,
------------
1997 1996
---- ----
Assets:
Investment in real estate $9,405 $10,024
Notes receivable 1,559
Other assets 832 1,050
------- -------
$11,796 $11,074
------- -------
------- -------
Liabilities:
Note payable to affiliate $7,868 $6,333
Other liabilities 658 3,566
------- -------
8,526 9,899
Stockholder's equity 3,270 1,175
------- -------
$11,796 $11,074
------- -------
------- -------
Statements of Operations:
F-11
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
YEARS ENDED DECEMBER 31,
------------------------
1997 1996
---- ----
Total Income $45,794 $16,000
Operating Expenses (42,269) (14,261)
Provision for income taxes (1,329) (659)
------- -------
Net income $2,196 $1,080
------- -------
------- -------
6. MORTGAGE NOTES PAYABLE
MORTGAGE NOTES PAYABLE
As of December 31, 1997 and 1996, the Company had mortgage notes payable
outstanding of $84,075 and $92,231, respectively. The mortgage notes are
collateralized by two designated pools of properties in both 1997 and 1996
and two and three other individual properties, at December 31, 1997 and 1996,
respectively.
One of the designated pool of properties consists of 20 properties
collateralizing $50,000 bonds at December 31, 1997 and 1996, bearing interest
of 7.62% and maturing in November, 2002. The second designated pool of
properties consists of 18 properties collateralizing $30,000 of debt at
December 31, 1997 and 1996, bearing interest of 6.91% and maturing in May,
1999.
The other mortgage notes payable aggregate $4,075 and $12,231 at
December 31, 1997 and 1996, respectively, and bear interest ranging from 6.9%
to 8.0%. In October, 1997, $8,156 of mortgage notes were repaid. The
mortgage notes outstanding as of December 31, 1997, mature from November,
1998 to October, 2000.
Revenue Bonds
As of December 31, 1997 and 1996, the Company had revenue bonds,
consisting of Economic Development Revenue Bonds issued by the City of Gary,
Indiana ($22,220 outstanding at December 31, 1997 and 1996) and
Variable/Fixed Rate Demand Special Facilities Airport Revenue Bonds issued by
the City of Chicago, Illinois ($55,000 outstanding at December 31, 1997).
The Economic Development Revenue Bonds issued by the City of Gary,
Indiana are collateralized by a letter of credit. The letter of credit
contains certain financial covenants pertaining to the tangible net worth and
liabilities in relation to portfolio value of the Company. In April 1996,
the bonds outstanding at December 31, 1995 were refunded. The new bonds were
issued in two series; $20,540,000 tax exempt and $1,680,000 taxable, bearing
interest in the Weekly Adjustable Interest Rate Mode at a rate determined by
the Remarketing Agent (4.20% on the tax exempt bonds and 6.10% on the taxable
bonds at December 31, 1997). The new bonds require monthly payments of
interest only and mature in March, 2031.
The Variable/Fixed Rate Demand Special Facilities Airport Revenue Bonds
issued by the City of Chicago, Illinois are enhanced by a letter of credit.
The letter of credit contains certain financial convenants pertaining to
consolidated net worth. The tax-exempt bonds bear initial interest at a
Weekly Adjustable Interest Rate, which from time to time may be changed by
the Company, at a rate determined by the Remarketing Agent (3.95% at December
31, 1997). The bonds require monthly payments of interest only and mature in
September, 2032. Of the original proceeds, the Company holds $34,593 in
escrow at December 31, 1997 for future construction costs.
F-12
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
As of December 31, 1997 mortgage notes mature as follows:
1998..................................................... $ 3,500
1999..................................................... 30,000
2000..................................................... 575
2001..................................................... 0
2002..................................................... 50,000
Thereafter............................................... 77,220
--------
Total............................................... $161,295
--------
--------
Based on borrowing rates available to the Company at the end of 1997 and
1996 for mortgage loans with similar terms and maturities, the fair value of
the mortgage notes payable approximates the carrying values.
Land, buildings and equipment related to such mortgages with an
aggregate net book value of approximately $199,000 at December 31, 1997 have
been pledged as collateral for the above debt.
7. LINE OF CREDIT
In October, 1996, the Company obtained a $135 million unsecured line of
credit, and subsequently increased the line to $150 million in November 1997.
The current interest rate is LIBOR plus .80% for LIBOR borrowings (a range of
6.8% to 6.863% at December 31, 1997) and Prime Rate (8.5% at December 31,
1997) for other borrowings. The Company may receive competitive bids for up
to half its commitment (a range of 6.60% to 6.75% at December 31, 1997). The
line requires payments of interest only when LIBOR contracts mature and
monthly on borrowings under Prime Rate. The line matures on October 24,
1999. There is a fee of 1/5% per year on the total line commitment. At
December 31, 1997 and 1996, the Company had $52,300 and $88,900,
respectively, available under the line. As the line of credit is at a
variable rate, the carrying value approximates fair value.
8. EXTRAORDINARY ITEM
In 1996 and 1995, the Company incurred losses of $3,331 (per share -
basic $0.24; diluted $0.23) and $632 (per share - basic $0.07; diluted
$0.07), respectively, representing a write off of unamortized deferred
financing costs as a result of early extinguishment of certain debt
obligations.
9. CONVERTIBLE SUBORDINATED DEBENTURES PAYABLE
Concurrent with the initial public offering in December, 1993, the
Company issued $58,500 of convertible subordinated debentures ("Debentures")
due 2004. At December 31, 1997 and 1996, $11,740 and $14,380 of debentures
were outstanding, respectively. The Debentures are unsecured general
obligations of the Company and are subordinate to all existing and
subsequently incurred indebtedness of the Company. The Debentures are
optionally redeemable by the Company, at par, commencing December 4, 1998.
Holders may convert the Debentures at any time, without premium, to Common
Shares of the Company at a conversion price of $18.25 per share, subject to
certain adjustments. The Debentures bear interest at 8.22% per annum,
payable semiannually on January 15 and July 15 of each year, commencing July
15, 1994. During 1997, 1996 and 1995 debentures totaling $2,640, $8,864 and
$20,754, respectively, were converted into shares of common stock. Based
principally on the conversion feature and share price of common stock at the
end of 1997 and 1996, the fair value of the outstanding Debentures
approximates $22,595 and $25,805, respectively.
10. RELATED PARTY TRANSACTIONS
In December 1997, the Company purchased a fully leased building, located
in Des Plaines, Illinois, from a partnership, in which one of the Company's
Senior Officers and a Company Director were limited partners, for
F-13
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
approximately $4.7 million. In June, 1996, the Company acquired three
properties in which the Company's Chief Operations Officer and Director, and
the Company's Executive Vice President of Acquisitions during 1996 had an
interest and, in which they, continue to own an insignificant interest in two
of the properties. The three properties were purchased for an aggregate
amount of approximately $24.6 million. The above transactions satisfied the
Company's investment criteria and were approved by the Company's independent
directors.
Notes payable at December 31, 1997 and 1996 includes amounts payable to
related parties as a consequence of properties acquired and settlement of tax
reimbursement obligations of the Company during 1996 totaling $33 and $483,
respectively.
11. SHAREHOLDERS' EQUITY
COMMON SHARES OF BENEFICIAL INTEREST
As of December 31, 1997 the Company has reserved 584,229 Common Shares
for future issuance under the 1993 Stock Option Plan, 119,596 Common Shares
for future issuance under the 1995 Restricted Stock Incentive Plan, 67,713
Common Shares for future issuance under the 1995 Director Stock Plan, 643,288
Common Shares for issuance upon the conversion of the Debentures and
1,000,000 Common Shares for future issuance under the dividend reinvestment
and stock purchase plan.
CLASS B COMMON SHARES OF BENEFICIAL INTEREST
On September 22, 1995, the Company completed a $50 million private
equity placement of non-voting preferred shares of beneficial interest. In
May, 1996, the preferred shares of beneficial interest automatically
converted, on a share for share basis, to non-voting Class B Common Shares,
upon shareholder approval of an amendment to the Company's charter permitting
non-voting Class B Common Shares at the Company's annual meeting. The
distribution on the non-voting shares is equal to the distribution paid on
the voting shares of the Company plus an additional $.0468 per share. Unless
previously converted, after three years, the shares will be converted to
voting common shares on a share for share basis up to 4.9 percent of the
Company's then outstanding voting shares with all shares to fully convert
within ten years. As the shares convert to voting common, the distribution
paid shall be the same as all other voting common shares.
PREFERRED SHARES OF BENEFICIAL INTEREST
On November 10, 1997, the Company issued 3 million shares of 8.48%
Series A Cumulative Redeemable Preferred Shares of Beneficial Interest
("Preferred Shares") at a purchase price of $25 per share. Dividends on the
Preferred Shares are cumulative from the date of issuance and payable
quarterly commencing on January 30, 1998. The payment of dividends and
amounts upon liquidation will rank senior to the Common Shares and Class B
Common Shares, which are the only other shares of the Company currently
outstanding. The Preferred Shares are not redeemable prior to October 30,
2002. On or after October 30, 2002 the Preferred Shares will be redeemable
for cash at the option of the Company, in whole or part, at the redemption
price of $25 per share, plus dividends accrued and unpaid to the redemption
date. The Preferred Shares are not convertible into or exchangeable for any
other property or securities of the Company.
RESTRICTED STOCK INCENTIVE PLAN
Under the terms of the 1995 Restricted Stock Incentive Plan, adopted in
1995 the Company initially reserved 150,000 common shares for future grants.
In 1997, 1996 and 1995 certain key employees were granted 12,444, 8,290 and
9,670 restricted shares, respectively. Shares were awarded in the name of
each of the participants, who have all the rights of other common
shareholders, subject to certain restrictions and forfeiture provisions.
Restrictions on the shares expire no more than eight years after the date of
award, or earlier if certain performance targets are met.
F-14
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
Under the terms of the Company's Restricted Stock Grant Agreements,
certain key employees were granted 7,829 restricted shares of the Company's
common shares in 1995. Shares were awarded in the name of each of the
employees, who have all the rights of other common shareholders, subject to
certain restrictions and for future provisions. Restrictions on the shares
expired one year after the date of the award.
Unearned compensation is recorded at the date of awards based on the
market value of shares. Unearned compensation, which is shown as a separate
component of shareholders' equity, is being amortized to expense over the
eight year vesting period. The amount amortized to expense during 1997, 1996
and 1995 was $214, $118 and $90, respectively.
DIRECTOR STOCK PLAN
The 1995 Director Stock Plan is for an aggregate of 75,000 common shares
and provides that each independent director, upon election or re-election to
the Board, may elect to receive 50% of his annual retainer fee in Common
Shares at the market price on such date. In 1997, 1996 and 1995, 1,921,
2,516 and 2,850 Common Shares were issued under this plan, respectively. In
connection with the issuance of such shares, $57, $57 and $57 was charged to
expense in 1997, 1996 and 1995, respectively.
12. STOCK OPTION PLAN
The Company has adopted the 1993 Stock Option Plan (the "Plan") and in
May, 1996, increased the maximum number of shares from 750,000 to 1,500,000
common shares of beneficial interest which may be granted for qualified and
non-qualified options. The Company adopted the Plan to provide additional
incentives to attract and retain directors, officers and key employees. The
Plan was amended in 1995 to provide that each independent director receive an
option for 3,000 common shares of beneficial interest at fair market value at
the time of being elected or re-elected to the Board. Options are to be
granted by the Compensation Committee of the Board of Directors. The term of
the option shall be fixed by the Compensation Committee, but no option shall
be exercisable more than 10 years after the date of grant.
The options granted are at fair market value on the date of grant, are
for 10 year terms and become exercisable in 20% annual increments after one
year from date of grant. Option activity for the three years ended December
31, 1997 is as follows:
1997 1996 1995
---- ---- ----
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------------------- ------------------ -------------------
Outstanding at beginning of year 683,480 $19.20 606,839 $18.59 494,460 $18.37
Granted 241,769 31.38 104,428 22,50 112,979 19.55
Exercised (149,715) 19.19 (27,787) 18.28 (600) 18.25
Expired (34,865) 24.73 - -
------- ------- -------
Outstanding at end of year 740,669 $22.92 683,480 $19.20 606,839 $18.59
------- ------- -------
------- ------- -------
Exercisable at end of year 327,137 282,784 189,084
Available for future grant at year end 584,229 791,133 145,561
Weighted average per share fair value of
options granted during the year $3.65 $2.43 $2.41
F-15
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
1997 1996 1995
---- ---- ----
Risk free interest rate 6.4% 6.1% 7.0%
Dividend yield 6.5% 6.5% 6.5%
Expected lives 6 years 6 years 6 years
Expected volatility 17.5% 17.4% 17.4%
The following table summarized information about stock options at
December 31, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------- -------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
RANGE OF OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICE AT 12/31/97 LIFE PRICE AT 12/31/97 PRICE
-------------- ----------- ----------- -------- ----------- --------
$18.25-$31.50 740,669 7.8 years $22.92 327,137 $18.66
The Company has applied Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for its Plan, accordingly, no
compensation costs have been recognized. Had compensation costs for the
Company's Plan been determined based on the fair value at the grant date for
options granted in 1997, 1996 and 1995 in accordance with the method required
by Statement of Financial Accounting Standards No. 123, the Company's net
income and net income per share would have been reduced to the pro forma
amounts as follows:
YEAR ENDED DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------
1997 1996 1995
---- ---- ----
Net income available to common shareholders
As reported $26,729 $13,994 $7,210
Pro forma 26,591 13,901 7,169
Per share net income available to common shareholders
As reported
Basic 1.43 1.01 0.78
Diluted 1.41 0.99 0.77
Pro forma
Basic 1.43 1.00 0.78
Diluted 1.40 0.98 0.77
13. FUTURE RENTAL REVENUES
Under existing noncancelable operating lease agreements as of December
31, 1997, tenants of the warehouse/industrial properties are committed to pay
in aggregate the following minimum rentals:
F-16
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
1998 . . . . . . . . . . . $ 60,765
1999 . . . . . . . . . . . 52,448
2000 . . . . . . . . . . . 43,926
2001 . . . . . . . . . . . 35,683
2002 . . . . . . . . . . . 29,339
Thereafter . . . . . . . . 88,670
--------
Total . . . . . . . . . $310,831
--------
--------
At December 31, 1997, 630 of the total 682 apartments available for
rental at the Lakeshore Dunes property were leased. Lease terms are
generally for one year.
No single tenant represented more than 10% of consolidated minimum rents
in 1997, 1996 and 1995.
14. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
---- ---- ----
Supplemental disclosure of cash flow information:
Interest paid, net of interest capitalized $ 11,820 $ 10,603 $13,344
Interest capitalized 893 142 20
Dividends declared, not paid 901 - 4,952
Assignment of note receivable to affiliate 4,650 - -
Repayment of advance from affiliate
with real estate at book value 24,993 - -
In conjunction with the property acquisitions, the Company
assumed the following assets and liabilities:
Purchase of real estate $124,923 $103,532 $65,828
Liabilites, net of other assets (3,262) (4,956) (2,250)
Mortgage notes payable (13,308) (575)
Issuance of Common Stock (1,122)
-------- -------- -------
Acquisition of real estate $121,661 $ 85,268 $61,881
-------- -------- -------
-------- -------- -------
In conjunction with the property dispositions, the Company
disposed of the following assets and liabilities:
Sale of real estate $(12,877) $(22,481) $(2,429)
Liabilities, net of other assets (633) 1,421 45
Mortgage notes payable 2,069
-------- -------- -------
Disposition of real estate $(13,510) $(18,991) $(2,384)
-------- -------- -------
-------- -------- -------
Conversion of convertible subordinated debentures payable:
Convertible subordinated dentures converted $2,640 $8,864 $20,754
Common shares issued at $18.25 per share;
144,640, 485,680 and 1,137,165 2,639 8,863 20,753
Cash disbursed for fractional shares $ 1 $ 1 $ 1
-------- -------- -------
-------- -------- -------
F-17
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
15. COMMITMENTS AND CONTINGENCIES
In the normal course of business, from time to time, the Company is
involved in legal actions relating to the ownership and operations of its
properties. In management's opinion, the liabilities, if any, that may
ultimately result from such legal actions are not expected to have a
materially adverse effect on the consolidated financial position, results of
operations, or liquidity of the Company.
The Company has entered into several contracts for the acquisition of
properties. Each acquisition is subject to satisfactory completion of due
diligence and, in the case of developments, completion and occupancy of the
project.
At December 31, 1997, seven of the properties owned are subject to
purchase options held by certain tenants. The purchase options are
exercisable at various intervals through 2006 for amounts which are greater
than the net book value of the assets. The tenant at a property in Woodale,
IL exercised its option to purchase the building in May, 1997.
F-18
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
CenterPoint Properties Trust
Our report on the consolidated financial statements of CenterPoint
Properties Trust and Subsidiaries is included as page F-2 of this Form 10-K.
In connection with our audits of such financial statements, we have also
audited the related financial statement schedules listed in the Index to
Consolidated Financial Statements on page F-1 of this Form 10-K.
In our opinion, these financial statement schedules referred to above,
when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information required to
be included therein.
Chicago, Illinois COOPERS & LYBRAND L.L.P.
February 10, 1998
F-19
CENTERPOINT PROPERTIES TRUST
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
(DOLLARS IN THOUSANDS)
BEGINNING CHARGE TO COST ENDING
BALANCE AND EXPENSES RECOVERIES DEDUCTIONS(a) BALANCE
--------- -------------- ---------- ------------ -------
DESCRIPTION
- -----------
For year ended December 31, 1997:
Allowance for doubtful accounts $748 $279 $ - ($755) $272
---- ---- ----- ------ ----
---- ---- ----- ------ ----
For year ended December 31, 1996:
Allowance for doubtful accounts 500 462 - (214) 748
---- ---- ----- ------ ----
---- ---- ----- ------ ----
For year ended December 31, 1995:
Allowance for doubtful accounts $120 $433 - (53) $500
---- ---- ----- ------ ----
---- ---- ----- ------ ----
- ---------------------------
NOTE: (a) Deductions represent write-off of accounts receivable against the
allowance for doubtful accounts.
F-20
SCHEDULE III
CENTERPOINT PROPERTIES CORPORATION AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
As of December 31, 1997
Initial Costs
--------------------- Costs Capitalized
Subsequent to Acquisition
Buildings and -------------------------
Encumbrances Improvements Buildings and Carrying
Description (a) Land (a) Land Improvements Costs And
- ----------- ------------ ------- ------------- ---- ------------- ---------
WAREHOUSE/INDUSTRIAL
Properties:
425 W. 151st Street
East Chicago, IN $ 252 $ 1,805 $ 33 $ 4,410 $ 1,155
201 Mississippi Street
Gary, IN $50,000(h) 807 9,948 275 14,697
1201 Lunt Avenue
Elk Grove Village, IL (h) 57 146 4
620 Butterfield Road
Mundelein, IL 30,000(g) 335 1,974 61
1319 Marquette Drive
Romeoville, IL (h) 948 2,530 7
900 E. 103rd Street
Chicago, IL 2,226 10,693 3,631
1520 Pratt Avenue
Elk Grove Village, IL (h) 498 1,558 6
1850 Greenleaf
Elk Grove Village, IL 509 1,386 1
2743 Armstrong Court
Des Plaines, IL 1,320 2,679 133
5990 Touhy Avenue
Niles, IL 2,047 8,509 1,073
950 Tower Road
Mundelein, IL (h) 171 778 131
2339 Ernie Krueger Court
Waukegan, IL (g) 158 1,819
4501 W. Augusta Blvd.
Chicago, IL 175 4,988 700
1800 Industrial Drive
Libertyville, IL (h) 673 3,741 395 4,452
1400 Busse Road
Elk Grove Village, IL 439 5,719 277
1250 Carolina Drive
West Chicago, IL (g) 583 3,836 231
5619 W. 115th Street
Alsip, IL (h) 2,267 12,169 1,621
825 Tollgate Road
Elgin, IL (g) 712 3,584 12
720 Frontenac
Naperville, IL (g) 1,014 4,055 22 102
820 Frontenac
Naperville, IL (g) 906 3,626 17
1120 Frontenac
Naperville, IL (g) 791 3,164 23 612
1510 Frontenac
Naperville, IL (g) 621 2,485 16 69
1020 Frontenac
Naperville, IL (g) 591 2,363 11 214
1560 Frontenac
Naperville, IL (g) 508 2,034 11 66
1500 Shore Road
Naperville, IL (g) 260 1,042 7 37
800 Enterprise
Naperville, IL (g) 212 849 6 25
1651 Frontenac
Naperville, IL (g) 185 742 5 19
1150 Shore Road
Naperville, IL (g) 184 736 5 22
2764 Golfview
Naperville, IL (g) 125 498 3 27
920 Frontenac
Naperville, IL (g) 717 2,367 482
1300 Northpoint Road
Waukegan IL (h) 592 2,366 17
1 Wildlife Way
Long Grove, IL (h) 530 2,122 122
900 W. University Drive
Arlington Heights, IL (h) 817 3,268 17 96
7001 Adams Street
Willowbrook, IL (h) 297 1,326 4
745 Birginal Drive
Bensenville, IL 601 2,406 16
21399 Torrence Avenue
Sauk Village , IL 1,550 6,199 557 707
2600 N. Elmhurst Road
Elk Grove Village, IL. (g) 842 3,366 8 46
8901 W. 102nd Street
Pleasant Prarie, WI (h) 900 3,608 36
8200 100th Street
Pleasant Prarie, WI (h) 1,220 4,890 42
1700 Hawthorne
West Chicago, IL 2,522 10,089 1 25
1015 E. State Parkway
Schaumburg, IL 190 760 13
245 Beinoris Drive
WoodDale, IL (h) 168 570 5
800-1000 Chase Avenue
Elk Grove Village, IL 2,250 9,001 (444) 41
750 E. 110th Street
Chicago, IL 335 1,340 15 331
825-845 Hawthorne
West Chicago, IL (g) 721 2,884 23 302
1700 Butterfield Road
Mundelein, IL (h) 343 1,371 (1) 141
1810-1820 Industrial Drive
Libertyville, IL (h) 407 1,629 (5) 26
1733 Downs Drive
West Chicago (h) 488 1,953 1 22
1645 Downs Drive
West Chicago (h) 508 2,033 1 470
10601 Seymour Avenue
Franklin Park, IL 2,020 8,081 183 1,034
11701 South Central
Alsip, IL 1,241 4,964 22 618
11601 South Central
Alsip, IL 1,071 4,285 48 380
850 Arthur Avenue
Elk Grove Village, IL 575 270 1,081 1 230
1827 North Bendix Drive
South Bend, IN (h) 1,010 4,040 24 105
4400 S. Kolmar
Chicago, IL (h) 603 2,412 9 70
6600 River Road
Hodgkins, IL 2,640 10,562 47 350
7501 N. 81st Street
Milwaukee, WI 1,018 4,073 19 81
1100 Chase Avenue
Elk Grove Village, IL 248 993 7 238
2553 N. Edgington
Franklin Park, IL 6,000 1,870 7,481 67 925
875 Fargo Avenue
Elk Grove Village, IL 572 2,284 14 424
1800 Bruning Drive
Itasca, IL 1,999 7,995 26 108
1501 Pratt
Elk Grove Village, IL 1,047 4,189 67 459
400 N. Wolf Road
Northlake, IL 4,504 18,017 49 6,735
10740 W. Grand Avenue
Franklin Park, IL 383 1,532 8 172
911 Commerce Court
Buffalo Grove, IL 1,171 4,686 14 475
16400 W. 103rd Street
Lemont, IL 446 1,748 21 122
425 S. 37th Avenue
St. Charles, IL 644 2,575 7 236
1500 W. Dundee Road
Arlington Heights, IL 4,995 10,006 (1,076) 3,030
Lot 51-Naperville Business Center
Naperville, IL 220 (11)
3145 Central Avenue
Waukeegan, IL 1,270 5,080 20 1,133
2003-2207 South 114th Street
West Allis, WI 942 3,770 5 54
2501-2701 Busse Road
Elk Grove Village, IL 1,875 7,556 12 733
6464 West 51st Street
Forest View, IL 934 3,734 3 156
6500 West 51st Street
Forest View, IL 805 3,221 4 21
7447 South Central Avenue
Bedford Park, IL 437 1,748 7 37
7525 S. Sayre Avenue
Bedford Park, IL 587 2,345 4 26
2901 Centre Circle
Downers Grove, IL 207 828 4 557
1 Allsteel Drive
Aurora, IL 2,458 9,832 27 5,120
2525 Busse Highway
Elk Grove Village, IL 5,400 12,601 29 510
106th and Buffalo Avenue
Chicago, IL 248 992 9 534
7400 South Narragansett
Bedford Park,IL 743 2,972 9 38
2701 S. Busse Road
Elk Grove Village, IL 1 3
East Avenue and 55th Street
McCook, IL 1,190 4,761 33 197
6757 S. Sayre
Bedford Park, IL 1,236 4,945 4 16
1951 Landmeir Road
Elk Grove Village, IL 280 1,120 10 39
1355 Enterprise Drive
Romeoville, IL 580 2,320 2 9
5700 West Touhy Avenue
Niles, IL 18,005 139 174 8
110-190 Old Higgins Road
Des Plaines, IL 1,862 7,447 7 28
1475 S. 101st Street
West Allis, WI 331 1,323 1 4
1333 Grandview Drive
Yorkville, WI 1,516 6,062 1 7
2301 Route 30
Plainfield, IL 1,217 4,868 64 254
1796 Sherwin Avenue
Des Plaines, IL 944 3,778 1 530
2885 W. Diehl Road
Naperville, IL 1,539 8,630
2727 W. Diehl Road
Naperville, IL 3,071 14,233 -
O'hare Express Center - A2
Elk Grove Village, IL 1,097 7,060 110
O'hare Express Center - B1
Elk Grove Village, IL 1,683 10,500 96
CONSTRUCTION IN PROGRESS:
O'hare West
Elk Grove Village, IL 1,875 5,667 7 281
O'hare Express - B2
Elk Grove Village, IL 1,618 2,981 37
O'hare Express - C
Elk Grove Village, IL 2,603 1,537 0 36
1808 Swift Road
Oak Brook, IL 7,535
Champion
North Lake, IL 5,514
Ameritech
Gurnee, IL 2,446
RETAIL PROPERTIES:
84 Old McHenry Road
Wheeling, IL 482 2,152 31
351 N. Rohlwing Road
Itasca, IL 81 464 0
4-48 Barrington Road
Streamwood, IL 573 2,297 (62) 82
RESIDENTIAL PROPERTIES:
440 North Lake Street
Miller, IN 22,220 710 3,086 102 17,698 3,980
OFFICES OF THE MANAGEMENT
COMPANY
CHICAGO, IL 4,228
---------- --------- ---------- -------- --------- -------
Totals $ 108,795 $ 121,943 $ 429,552 $ 1,071 $ 83,385 5,695
---------- --------- ---------- -------- --------- -------
---------- --------- ---------- -------- --------- -------
CENTERPOINT PROPERTIES CORPORATION AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
As of December 31, 1997
Life Upon
Gross Amounts at Which Which
Carried at Close of Period Depreciation
-------------------------- in Latest
income
Buildings and Accumulated Date of Date Statement is
Description Land Improvements Total(a)(d) Depreciation Construction Acquired Computed
- ----------- ----- ------------ ----------- ------------ ------------- --------- --------
WAREHOUSE/INDUSTRIAL
Properties:
425 W. 151st Street
East Chicago, IN $ 285 $ 7,370 $ 7,655 $ (2,555) 1913/1988-1990 1987 (f)
201 Mississippi Street
Gary, IN 1,082 24,645 25,727 (8,286) 1946/1985-1988 1985 (f)
1201 Lunt Avenue
Elk Grove Village, IL 57 150 207 (19) 1971 1993 (f)
620 Butterfield Road
Mundelein, IL 396 1,974 2,370 (254) 1990 1993 (f)
1319 Marquette Drive
Romeoville, IL 948 2,537 3,485 (326) 1990-1991 1993 (f)
900 E. 103rd Street
Chicago, IL 2,226 14,324 16,550 (1,710) 1910 1993 (f)
1520 Pratt Avenue
Elk Grove Village, IL 498 1,564 2,062 (201) 1968 1993 (f)
1850 Greenleaf
Elk Grove Village, IL 509 1,387 1,896 (178) 1965 1993 (f)
2743 Armstrong Court
Des Plaines, IL 1,320 2,812 4,132 (354) 1989-1990 1993 (f)
5990 Touhy Avenue
Niles, IL 2,047 9,582 11,629 (1,140) 1957 1993 (f)
950 Tower Road
Mundelein, IL 171 909 1,080 (109) 1979 1993 (f)
2339 Ernie Krueger Court
Waukegan, IL 158 1,819 1,977 (234) 1990 1993 (f)
4501 W. Augusta Blvd.
Chicago, IL 175 5,688 5,863 (693) 1942-1943 1993 (f)
1800 Industrial Drive
Libertyville, IL 1,068 8,193 9,261 (761) 1992-1993 1993 (f)
1400 Busse Road
Elk Grove Village, IL 439 5,996 6,435 (764) 1987 1993 (f)
1250 Carolina Drive
West Chicago, IL 583 4,067 4,650 (506) 1989-1990 1993 (f)
5619 W. 115th Street
Alsip, IL 2,267 13,790 16,057 (1,704) 1974 1993 (f)
825 Tollgate Road
Elgin, IL 712 3,596 4,308 (462) 1989-1991 1993 (f)
720 Frontenac
Naperville, IL 1,036 4,157 5,193 (529) 1991 1993 (f)
820 Frontenac
Naperville, IL 906 3,643 4,549 (467) 1988 1993 (f)
1120 Frontenac
Naperville, IL 814 3,776 4,590 (468) 1980 1993 (f)
1510 Frontenac
Naperville, IL 637 2,554 3,191 (325) 1986 1993 (f)
1020 Frontenac
Naperville, IL 602 2,577 3,179 (313) 1980 1993 (f)
1560 Frontenac
Naperville, IL 519 2,100 2,619 (267) 1987 1993 (f)
1500 Shore Road
Naperville, IL 267 1,079 1,346 (137) 1985 1993 (f)
800 Enterprise
Naperville, IL 218 874 1,092 (111) 1985 1993 (f)
1651 Frontenac
Naperville, IL 190 761 951 (97) 1978 1993 (f)
1150 Shore Road
Naperville, IL 189 758 947 (96) 1985 1993 (f)
2764 Golfview
Naperville, IL 128 525 653 (66) 1985 1993 (f)
920 Frontenac
Naperville, IL 717 2,849 3,566 (320) 1987 1993 (f)
1300 Northpoint Road
Waukegan IL 592 2,383 2,975 (274) 1994 1994 (f)
1 Wildlife Way
Long Grove, IL 530 2,244 2,774 (257) 1994 1994 (f)
900 W. University Drive
Arlington Heights, L 834 3,364 4,198 (372) 1974 1994 (f)
7001 Adams Street
Willowbrook, IL 297 1,330 1,627 (146) 1994 1994 (f)
745 Birginal Drive
Bensenville, IL 601 2,422 3,023 (272) 1974 1994 (f)
21399 Torrence Avenue
Sauk Village , IL 2,107 6,906 9,013 (737) 1987 1994 (f)
2600 N. Elmhurst Road
Elk Grove Village, IL. 850 3,412 4,262 (301) 1995 1995 (f)
8901 W. 102nd Street
Pleasant Prarie, WI 900 3,644 4,544 (369) 1990 1994 (f)
8200 100th Street
Pleasant Prarie, WI 1,220 4,932 6,152 (500) 1990 1994 (f)
1700 Hawthorne
West Chicago, IL 2,523 10,114 12,637 (991) 1959/1969 1994 (f)
1015 E. State Parkway
Schaumburg, IL 190 773 963 (77) 1980 1994 (f)
245 Beinoris Drive
Wood Dale, IL 168 575 743 (73) 1988 1984 (f)
800-1000 Chase Avenue
Elk Grove Village, IL 1,806 9,042 10,848 (848) 1972 1995 (f)
750 E. 110th Street
Chicago, IL 350 1,671 2,021 (142) 1966 1995 (f)
825-845 Hawthorne
West Chicago, IL 744 3,186 3,930 (262) 1974 1995 (f)
1700 Butterfield Road
Mundelein, IL 342 1,512 1,854 (121) 1976 1995 (f)
1810-1820 Industrial Drive
Libertyville, IL 402 1,655 2,057 (133) 1977 1995 (f)
1733 Downs Drive
West Chicago 489 1,975 2,464 (159) 1976 1995 (f)
1645 Downs Drive
West Chicago 509 2,503 3,012 (198) 1976 1995 (f)
10601 Seymour Avenue
Franklin Park, IL 2,203 9,115 11,318 (618) 1963/1965 1995 (f)
11701 South Central
Alsip, IL 1,263 5,582 6,845 (376) 1972 1995 (f)
11601 South Central
Alsip, IL 1,119 4,665 5,784 (320) 1971 1995 (f)
850 Arthur Avenue
Elk Grove Village, IL 271 1,311 1,582 (88) 1972/1973 1995 (f)
1827 North Bendix Drive
South Bend, IN 1,034 4,145 5,179 (279) 1964/1990 1995 (f)
4400 S. Kolmar
Chicago, IL 612 2,482 3,094 (166) 1964 1995 (f)
6600 River Road
Hodgkins, IL 2,687 10,912 13,599 (583) Unknown 1996 (f)
7501 N. 81st Street
Milwaukee, WI 1,037 4,154 5,191 (213) 1987 1996 (f)
1100 Chase Avenue
Elk Grove Village, IL 255 1,231 1,486 (64) 1969 1996 (f)
2553 N. Edgington
Franklin Park, IL 1,937 8,406 10,343 (376) 1967/1989 1996 (f)
875 Fargo Avenue
Elk Grove Village, IL 586 2,708 3,294 (123) 1979 1996 (f)
1800 Bruning Drive
Itasca, IL 2,025 8,103 10,128 (396) 1975/1978 1996 (f)
1501 Pratt
Elk Grove Village, IL 1,114 4,648 5,762 (223) 1973 1996 (f)
400 N. Wolf Road
Northlake, IL 4,553 24,752 29,305 (895) 1956/1965 1996 (f)
10740 W. Grand Avenue
Franklin Park, IL 391 1,704 2,095 (70) 1964/1970 1996 (f)
911 Commerce Court
Buffalo Grove, IL 1,185 5,161 6,346 (193) 1992 1996 (f)
16400 W. 103rd Street
Lemont, IL 467 1,870 2,337 (71) 1983 1996 (f)
425 S. 37th Avenue
St. Charles, IL 651 2,811 3,462 (106) 1976 1996 (f)
1500 W. Dundee Road
Arlington Heights, IL 3,919 13,036 16,955 (386) 1969/1971 1996 (f)
Lot 51-Naperville Business Center
Naperville, IL 209 209 1996 1996 (f)
3145 Central Avenue
Waukeegan, IL 1,290 6,213 7,503 (192) 1960 1997 (f)
2003-2207 South 114th Street
West Allis, WI 947 3,824 4,771 (90) 1965/1966 1997 (f)
2501-2701 Busse Road
Elk Grove Village, IL 1,887 8,289 10,176 (189) 1997 1997 (f)
6464 West 51st Street
Forest View, IL 937 3,890 4,827 (81) 1973 1997 (f)
6500 West 51st Street
Forest View, IL 809 3,242 4,051 (69) 1974 1997 (f)
7447 South Central Avenue
Bedford Park, IL 444 1,785 2,229 (38) 1980 1997 (f)
7525 S. Sayre Avenue
Bedford Park, IL 591 2,371 2,962 (50) 1980 1997 (f)
2901 Centre Circle
Downers Grove, IL 211 1,385 1,596 (23) 1975 1997 (f)
1 Allsteel Drive
Aurora, IL 2,485 14,952 17,437 (248) 1957-1967 1997 (f)
2525 Busse Highway
Elk Grove Village, IL 5,429 13,111 18,540 (169) 1975 1997 (f)
106th and Buffalo Avenue
Chicago, IL 257 1,526 1,783 (22) 1971 1997 (f)
7400 South Narragansett
Bedford Park,IL 752 3,010 3,762 (32) 1977 1997 (f)
2701 S. Busse Road
Elk Grove Village, IL 1 3 4 1997 1997 (f)
East Avenue and 55th Street
McCook, IL 1,223 4,958 6,181 (39) 1979 1997 (f)
6757 S. Sayre
Bedford Park, IL 1,240 4,961 6,201 (39) 1975 1997 (f)
1951 Landmeir Road
Elk Grove Village, IL 290 1,159 1,449 (9) 1967 1997 (f)
1355 Enterprise Drive
Romeoville, IL 582 2,329 2,911 (19) 1980/1986 1997 (f)
5700 West Touhy Avenue
Niles, IL 18,179 147 18,326 1948 1997 (f)
110-190 Old Higgins Road
Des Plaines, IL 1,869 7,475 9,344 1980 1997 (f)
1475 S. 101st Street
West Allis, WI 332 1,327 1,659 1968/1988 1997 (f)
1333 Grandview Drive
Yorkville, WI 1,517 6,069 7,586 1994 1997 (f)
2301 Route 30
Plainfield, IL 1,281 5,122 6,403 1972/1984 1997 (f)
1796 Sherwin Avenue
Des Plaines, IL 945 4,308 5,253 1964 1997 (f)
2885 W. Diehl Road
Naperville, IL 1,539 8,630 10,169 1997 1997 (f)
2727 W. Diehl Road
Naperville, IL 3,071 14,233 17,304 1997 1997 (f)
O'hare Express Center - A2
Elk GroveVillage, IL 1,097 7,170 8,267 (117) 1997 197 (f)
O'hare Express Center - B1
Elk GroveVillage, IL 1,683 10,596 12,279 (155) 1997 1997 (f)
CONSTRUCTION IN PROGRESS:
O'hare West
Elk Grove Village, IL 1,882 5,948 7,830
O'hare Express - B2
Elk Grove Village, IL 1,618 3,018 4,636 (52)
O'hare Express - C
Elk Grove Village, IL 2,603 1,573 4,176 (82)
1808 Swift Road
Oak Brook, IL 7,535 7,535
Champion
North Lake, IL 5,514 5,514
Ameritech
Gurnee, IL 2,446 2,446
RETAIL PROPERTIES:
84 Old McHenry Road
Wheeling, IL 482 2,183 2,665 (281) 1989-1990 1993 (f)
351 N. Rohlwing Road
Itasca, IL 81 464 545 (60) 1989 1993 (f)
4-48 Barrington Road
Streamwood, IL 511 2,379 2,890 (225) 1989 1994 (f)
RESIDENTIAL PROPERTIES:
440 North Lake Street
Miller, IN 812 24,764 25,576 (5,099) 971/1990-1993 1990 (f)
OFFICES OF THE MANAGEMENT
Company
CHICAGO, IL 4,228 4,228 (1,742) Var. (f)
---------- --------- ---------- ----------
Totals $ 123,014 $ 518,632 $ 641,646 $ (44,352)
---------- --------- ---------- ----------
---------- --------- ---------- ----------
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
SCHEDULE III (CONTINUED)
(DOLLARS IN THOUSANDS)
Notes to Schedule III:
(a) Initial cost for each respective property is the total acquisition costs
associated with its purchase.
(b) Carrying costs consist of capitalized construction period interest, taxes
and insurance.
(c) At December 31, 1997, the aggregate cost of land and buildings and
equipment for Federal income tax purposes was approximately $681 million.
(d) Reconciliation of real estate and accumulated depreciation:
RECONCILIATION OF REAL ESTATE
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
-------- -------- --------
Balance at the beginning of year $429,034 $317,460 $248,281
Additions 200,409 135,342 71,315
Dispositions (12,203) (23,768) (2,136)
-------- -------- --------
Balance at close of year $641,646 $429,034 $317,460
-------- -------- --------
-------- -------- --------
RECONCILIATION OF ACCUMULATED DEPRECIATION
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
-------- -------- --------
Balance at beginning of year $30,206 $21,576 $13,455
Depreciation and amortization 14,494 10,199 8,161
Dispositions (348) (1,569) (40)
-------- -------- --------
Balance at close of year $44,352 $30,206 $21,576
-------- -------- --------
-------- -------- --------
(e) See description of encumbrances in Note 6 to Consolidated Financial
Statements.
(f) Depreciation is computed based upon the following estimated lives:
Buildings, improvements and carrying costs 31.5 to 40 years
Land improvements 15 years
Furniture, fixtures and equipment 4 to 15 years
(g) These 18 properties collateralize a $30,000 mortgage loan payable.
(h) These 20 properties collateralize $50,000 of mortgage bonds payable.