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THE
CHICAGO DOCK &
CANAL TRUST
1995 ANNUAL REPORT
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[Photo of Kenneth S. Axelson]
KENNETH S. AXELSON
To Retire
Kenneth S. Axelson will retire as a Trustee of the Trust at the October
Annual Meeting of Shareholders. Ken was first elected to the Board in 1983.
At that time, he was also a Trustee of the New York Public Library. Ken
currently is the chairman of the Compensation Committee and also previously
served as a member of the Long Range Planning Committee.
The experience he gained as Deputy Mayor of New York during its financial
crisis in the mid 1970's helped Mr. Axelson successfully guide the Trust through
its difficult years of the early 1990's. During the term of his service, Ken
helped direct the redevelopment of the Trust's property into one of the most
desirable neighborhoods in Chicago. The Trustees and the management of the Trust
convey their appreciation and thanks to Mr. Axelson for his contributions to the
Trust and its shareholders during his many years of service.
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Inside cover:
Map of Cityfront Center
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TO THE SHAREHOLDERS
Ladies and Gentlemen:
In the early 1990's, when the extent, impact and consequences of
overbuilding in our commercial real estate markets were finally understood, Sam
Zell, the legendary investor and real estate mogul, said that the goal for real
estate owners and developers at that time should be "to stay alive 'till '95".
How right he was and how successful The Chicago Dock and Canal Trust has been in
achieving that goal is the message of this year's Annual Report. Thanks to the
vision and courage of our Trustees, the Trust is not only alive in 1995, but is
also well positioned to stimulate, promote and cultivate awareness, interest and
ultimately new development in Cityfront Center.
The following are just some of the significant actions which the Trust has
taken to achieve this position:
- We reduced general and administrative expenses from a peak in fiscal
1990 of $2.8 million to less than $1.9 million in both fiscal 1994 and
1995.
- We reduced dividends from a peak of $.31 per share in fiscal 1992 to
the current level of $.04 per share.
- We refused to fund cash shortfalls resulting from changing office
market conditions at our One Michigan Avenue property in Lansing,
Michigan. To avoid investing additional cash in the property, we
ultimately disposed of the property at a price well in excess of its
then current market value.
- We sold land with severely limited development potential to the
Chicago Music and Dance Theater, Inc. In doing so, we received
unexpected current value for the land while also bringing the theater
and its ancillary short and long term benefits to Cityfront Center.
- We ensured completion of the Riverfront Esplanade under Columbus Drive
Bridge and between Columbus Drive and Michigan Avenue, thus enhancing
the accessibility and visibility of the Trust's property.
- We successfully limited the Trust's exposure to the cost of completing
the remediation of its environmentally impacted site to the lesser of
25% of such costs or $750,000.
As for current opportunities, the Trust, in early 1995, stimulated renewed
interest in the
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development of Cityfront Center by exploring potential uses and opportunities
not specifically contemplated in the original master plan. This led very
quickly to preliminary discussions with a number of highly successful townhome,
senior housing and retail entertainment complex developers. We continued these
discussions throughout the year although caution and the need for
confidentiality preclude me from expanding on them further in this letter. We
do expect, however, to be able to provide additional information about them at
the Annual Meeting, if not before.
The summer of 1995 demonstrated how much the Trust stands to benefit from
the redevelopment of Navy Pier, Cityfront Center's neighbor to the east. This
new and exciting entertainment destination on Chicago's lakefront has created
significant demand for the Trust's surface parking lots in the Illinois and
Grand corridor. That activity alone will provide a boost to the Trust's
operating income particularly after December 31, 1995 when the current master
lease on those lots to North Pier Chicago terminates.
Additional detail on the Trust's properties and opportunities is provided
in the following section of this report and in the accompanying Form 10-K.
Unfortunately, I must also report again this year on the retirement of a
loyal, dedicated and accomplished Trustee. Kenneth S. Axelson has served on the
board since 1983 and is currently Chairman of the Compensation Committee. As
the former Chief Financial Officer for JC Penney Company, a deputy mayor of the
city of New York during its financial difficulties of the mid 1970's and a
member of other companies' boards, Ken brought significant experience and
expertise to the Trust. He has been a leader in making the tough decisions
required in recent years, a great resource to the Board and an outspoken
advocate for the Trust's shareholders. We all will miss Ken's involvement and I
thank him on behalf of all of you for his participation.
Sincerely,
/s/ Charles R. Gardner
Charles R. Gardner
President
August 18, 1995
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YEAR IN REVIEW
CITYFRONT CENTER
ENVIRONMENTAL SITUATION
As previously reported, one of the Trust's parcels in Cityfront Center,
currently used as a surface parking lot, is contaminated with the radioactive
element thorium. This contamination appears to have been caused by Lindsay
Light Company, which was the tenant on the parcel from 1915 to 1933.
During fiscal 1995, the Trust completed the testing specified in the
consent order which it entered into in 1994 with the United States Environmental
Protection Agency. Soil samples were taken from the block bounded by Grand,
Columbus, Illinois and McClurg Court in Chicago. The results of the analysis of
these samples were consistent with the above ground testing performed in the
prior fiscal year. They confirmed that a portion of the site has concentrations
of thorium in excess of normal amounts. The highest concentrations are within
the footprint of a building which had been occupied by Lindsay Light and which
was demolished by the Trust following Lindsay's departure in the mid 1930's.
The tests also confirmed that, in its current state, the site does not pose a
hazard to human health.
After completing the testing, the Trust submitted the results to the EPA in
September, 1994 as required under the terms of the consent order. The EPA has
not completed its review of the data and accordingly has not specified when
remediation may be required nor the scope of such remediation.
The subsurface testing also confirmed the range of estimated remediation
costs which had been previously reported. However, while that range is from a
minimum of approximately $1
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million to as much as $5 million, the Trust's consultant has concluded that
$3.5 million is the most likely amount within the range.
After receiving the results of the test, the Trust reached agreement with
Kerr-McGee Chemical Corporation, the successor to Lindsay Light, regarding the
financial responsibilities of the parties for the remediation of the site.
Under the terms of the agreement, Kerr-McGee will be responsible for the
remediation of the site and the Trust will reimburse Kerr-McGee for 25% of the
cost of remediation but SUBJECT TO A MAXIMUM REIMBURSEMENT OBLIGATION OF THE
TRUST OF $750,000.
This agreement is very favorable for the Trust for two primary reasons.
First, it eliminates the uncertainty regarding the sharing of remediation costs
between the Trust and Kerr-McGee by establishing a reasonable allocation of the
costs. More importantly, it establishes an absolute maximum cost to the Trust
for the remediation. The Trust's consultants have often warned that there is no
way of knowing the actual cost of remediation until the work is undertaken. In
many other remediation situations, the final cost has exceeded the initial
estimates by substantial amounts. By entering into this agreement, the Trust
has limited that exposure. In addition, the Trust will aggressively pursue
claims against its insurance carriers for recovery of the amounts which it has
spent or will spend on the remediation.
As a result of the agreement with Kerr-McGee and the remediation cost
estimates, the Trust has recorded $750,000, its maximum exposure, plus $285,000
of previously incurred testing and related costs, as an expense in the fourth
quarter of fiscal 1995.
CITYFRONT PLACE APARTMENTS
The residential market showed continued strength in fiscal 1995. Rental
rates increased approximately 4% in the Mid-rise and 5% in the High-rise over
the average rates in the prior
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year. Occupancy was 92 percent during the year in the Mid-rise and 96 percent
in the High-rise, approximately the same occupancy as in the prior year. In
addition, over 60% of tenants renewed their leases in the Mid-rise, compared to
approximately 50% which renewed in the prior year.
During the year, a separate exercise facility was constructed in the Mid-
rise to complement the full service health club in the High-rise which is
available to residents of both buildings. This amenity makes the Mid-rise more
convenient and attractive to both current and prospective tenants and therefore
more competitive in the market place.
PERFORMING ARTS THEATER
On December 30, 1994 the Trust sold approximately one acre of land to the
Chicago Music and Dance Theater, Inc. for the construction of a performing arts
theater. The theater site is in the view-corridor on-axis with Ogden Slip to
the east and the Tribune Tower to the west. Accordingly, under the zoning for
Cityfront Center, this site is subject to a severe height restriction and was
not contemplated for an individual development in the original Master Plan. The
major benefits of the transaction, therefore, are not so much the proceeds from
the sale of the site, but rather 1) the continued development momentum created
by the theater construction and the neighborhood activity which will result from
the performances at the theater; 2) the expected increase in parking revenues in
the adjacent Ogden Plaza parking facility and 3) a significant reduction in the
Trust's annual property taxes. Fundraising for the construction of the theater
is progressing well with more than $24 million pledged; the total fundraising
goal is $33 million. Construction is currently scheduled to begin this fall
with opening of the facility expected in the fall of 1997.
OGDEN PLAZA PARKING FACILITY
Revenue generated by the parking facility located under Ogden Plaza
stabilized in fiscal
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1995 at the level achieved in 1994. The facility serves the needs of the
adjacent Sheraton Chicago Hotel & Towers, nearby office buildings and the
University of Chicago Graduate School of Business. Modest increases in revenue
are expected in the next year or two through increased rates and occupancy. In
addition, more significant increases are expected when the performing arts
theater opens.
SURFACE PARKING LOTS
The Trust currently leases a portion of its surface parking lots between
Illinois Street and Grand Avenue to the owner of North Pier Chicago. The lease,
which expires at the end of calendar 1995, requires the lessee to pay the Trust
approximately $300,000 per year as well as all operating expenses and real
estate taxes.
The public use of these lots has exceeded expectations in recent months due
both to high customer traffic at North Pier and the opening of Navy Pier.
Accordingly, the Trust expects a substantial increase in operating income from
those lots beginning in calendar 1996 either from a new lease with North Pier or
from the Trust's assumption of operation of the lots.
SHERATON CHICAGO HOTEL & TOWERS
The Sheraton completed its third full year of operation at the end of
February 1995. The results of the hotel operations reflect its status as a top
convention hotel in Chicago and also the general improvement in the hotel
market. During calendar 1994, the hotel generated revenues in excess of $58
million, an increase of over 7% compared to the prior calendar year. Its
occupancy was 68% in calendar 1994, up from 65% in 1993.
Starting July 1, 1995, the base rent payable to the Trust increased to an
annual rate of $1.8 million from the previous annual amount of $150,000. While
all of this increase will be paid as additional debt service on the loan which
financed the infrastructure improvements
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associated with the hotel, it is the starting point for future increases in
minimum base rent and minimum rent will exceed the debt service beginning in
1999.
Also starting July 1, 1995, the percentage rent provisions of the ground
lease became effective. These provisions, which are discussed in greater detail
in the Notes to Consolidated Financial Statements, call for additional rent
payments to the Trust to the extent that gross revenues exceed certain amounts.
In fact, Sheraton's current projections of operations for the second half of
calendar 1995 suggest that the Trust may collect a relatively small amount of
percentage rent for that period. Such projections, however, are just that -
projections - and while there is no assurance that the projections will be
achieved, the overall success of the Sheraton adds value and activity to the
rest of the Trust's property in Cityfront Center.
HEALTH CARE SERVICE CORPORATION
Last year the Trust made a proposal to Health Care Service Corporation
(HCSC, also known as Blue Cross/Blue Shield of Illinois) for a new headquarters
building to be built on the Trust's land in Cityfront Center. Instead of
accepting the Trust's proposal, HCSC purchased a piece of property in Illinois
Center just across the Chicago River from the Trust's property and close to the
building it currently occupies. It was reported that one of its primary
decision criteria was the proximity to the commuter train station in Illinois
Center, the primary means of transportation used by a majority of its employees.
While the Trust would have preferred that HCSC locate in Cityfront Center, its
decision to develop a new building is an indication that there may be some life
in the commercial development sector in Chicago.
RIVERFRONT ESPLANADE
During fiscal 1995, the riverfront esplanade was completed on Equitable's
portion of Cityfront Center. The Trust and Equitable jointly constructed the
pedestrian bridge under
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Columbus Drive which connects the east and west portions of Cityfront Center.
It is now possible to walk along the river between Michigan Avenue, the
Sheraton, Cityfront Place and the Centennial Fountain. This walkway
significantly enhances the enjoyment of "on foot" commuting from the eastern
portion of Cityfront Center to the Loop and surrounding areas.
NON-CHICAGO PROPERTIES
The most significant development in the properties outside of Chicago was
the decision to permit the sale by foreclosure of the Trust's property in
Lansing, Michigan. After lengthy negotiations with the lender, it was concluded
that the investment of additional capital required to retain ownership of the
property was not justified by the expected returns to be generated by the
property. While this decision was not easy nor pleasant to make, it was in the
best long-term interest of the Trust and its shareholders.
The Trust's other two properties outside Chicago (neither of which is
subject to any debt) produced results in fiscal 1995 similar to those in the
prior year. However, at Waterplace Park in Indianapolis, the largest tenant,
Tri-County Mental Health, as expected, vacated at the expiry of its lease on
March 31, 1995. Tri-County occupied 29,000 s.f. or about 28% of the total
rentable space in the complex. Preliminary negotiations have been held with
several potential tenants, including a current tenant in Waterplace Park which
is considering expansion, and the Trust is hopeful that the space will be
released in the near future.
At Lincoln Garden in Tampa, occupancy averaged 90% during fiscal 1995 and
was 87% at April 30, 1995. While the downtown Tampa market still has a
significant amount of available space, the Carollwood sub-market in which
Lincoln Garden is located attracts smaller tenants and conditions are somewhat
better than in the downtown market.
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OUR AUSTERITY PROGRAM
The Trust continued its austerity program during fiscal 1995 with all of
the annual Trustee fees and 20% of the executive officers' compensation paid in
stock options. These same measures will be continued into the fiscal year which
began May 1, 1995. As a result of these and related measures adopted in the
early 1990's, general and administrative expenses have been reduced by more than
a third from a peak of $2.8 million in fiscal 1990 to less than $1.9 million in
both fiscal 1994 and 1995.
LOOKING TO THE FUTURE
The Trust's overall business strategy is to develop its property
expeditiously while limiting the amount of risk it assumes in that development.
In order to successfully implement this strategy, conditions in the real estate
market must be conducive to development and the Trust must have the financial
resources to enable such development. The Trust strengthened its financial
position during the year by reducing its debt outstanding and by securing a $20
million revolving credit agreement. The expected increase in parking revenues
from the North Pier lots will help offset the carrying cost of the Trust's
vacant land and will enhance the resources of the Trust to enable it to pursue
opportunities as they become available in what is a rapidly improving real
estate market.
Some of the opportunities for new construction in Cityfront Center include
the development of townhomes, senior living facilities and entertainment
complexes. Since early this year, we have been holding discussions with
developers who are interested in pursuing these uses and who believe that
Cityfront Center is the ideal location for such projects. We look forward to
finalizing arrangements with one or more such developers and to publicizing such
arrangements either at or prior to this year's Annual Meeting.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED APRIL 30, 1995
COMMISSION FILE NUMBER 0-13804
------------------------
THE CHICAGO DOCK AND CANAL TRUST
(Exact name of registrant as specified in its charter)
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<S> <C>
ILLINOIS 36-2476640
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
</TABLE>
455 EAST ILLINOIS STREET, SUITE 565, CHICAGO, ILLINOIS 60611
(Address of Principal Executive Offices)
(312) 467-1870
(Registrant's Telephone Number, Including Area Code)
------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------------------------------------ ----------------------
<S> <C>
Common Shares of Beneficial Interest-no par Not Listed
value
</TABLE>
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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) with the Commission, and (2) has
been subject to the filing requirements for at least the past 90 days.
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Yes X No
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</TABLE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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. /X/
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MARKET VALUE
Based on the last sale price on June 1, 1995 of $11.50 per share, as
reported on NASDAQ, the aggregate market value of the outstanding Shares of
Beneficial Interest held by non-affiliates of the Registrant as of June 1, 1995
was $65,012,502.
OUTSTANDING SHARES
The number of Common Shares of Beneficial Interest, no par value,
outstanding as of June 1, 1995 was 5,783,800.
DOCUMENTS INCORPORATED BY REFERENCE
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<CAPTION>
PORTION OF FORM 10-K
DESCRIPTION OF DOCUMENT WHERE INCORPORATED
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Portions of the Registrant's definitive Proxy Statement, to be filed
pursuant to Regulation 14A, issued in connection with its Annual Meeting of Part III Items 10, 11, 12 and
Shareholders to be held on October 5, 1995. 13.
</TABLE>
2
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THE CHICAGO DOCK AND CANAL TRUST
FORM 10-K
ANNUAL REPORT FOR THE FISCAL YEAR ENDED APRIL 30, 1995
TABLE OF CONTENTS
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DESCRIPTION PAGE
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PART I
Item 1. Business...................................................................................... 4
Item 2. Properties.................................................................................... 11
Item 3. Legal Proceedings............................................................................. 13
Item 4. Submission of Matters to a Vote of Security Holders........................................... 13
Executive Officers of the Trust............................................................... 14
PART II
Item 5. Market for the Trust's Common Shares and Related Security Holder Matters...................... 15
Item 6. Selected Financial Data....................................................................... 16
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations......... 18
Item 8. Financial Statements and Supplementary Data................................................... 27
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......... 48
PART III
Item 10. Trustees and Executive Officers of the Trust.................................................. 48
Item 11. Executive Compensation........................................................................ 48
Item 12. Security Ownership of Certain Beneficial Owners and Management................................ 48
Item 13. Certain Relationships and Related Transactions................................................ 48
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.............................. 48
</TABLE>
3
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THE CHICAGO DOCK AND CANAL TRUST
FORM 10-K, ANNUAL REPORT
FOR FISCAL YEAR ENDED APRIL 30, 1995
PART I
ITEM 1. BUSINESS
The Chicago Dock and Canal Trust ("Trust") is an equity oriented real estate
investment trust which owns partially developed land located in downtown
Chicago, Illinois and income producing real property in Chicago and elsewhere.
The Trust was organized in 1962, succeeding to the business of its corporate
predecessor. The Trust has elected to continue its operation as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended
("Code"). The Trust is self administered. Its principal executive offices are
located at 455 East Illinois Street, Suite 565, Chicago, Illinois, 60611. The
telephone number is (312) 467-1870.
As of April 30, 1995, the Trust's principal real estate investments
consisted of: (i) fee title or other interests in approximately 22 acres of
partially developed land in Cityfront Center in downtown Chicago (including
certain developed sites discussed below); (ii) Waterplace Park, an office
complex in Indianapolis, Indiana; and (iii) Lincoln Garden, an office complex in
Tampa, Florida.
The corporate predecessor of the Trust was formed in 1857 to own and develop
certain land located on the north side of the Chicago River at its intersection
with Lake Michigan. That land, together with neighboring parcels acquired
thereafter, represents the primary asset of the Trust. During the latter part of
the 19th century, the land was developed for industrial use, benefiting from its
prime location as a transportation hub with water and rail access.
In the early 1960's, the Trust adopted a program to redevelop its property
for residential and commercial use commencing with the orderly termination of
industrial and warehouse leases. Initial redevelopment occurred in 1965 with the
long-term ground lease of a site for Lake Point Tower, a 70 story apartment
building; this site was exchanged in 1983 for other developed real estate, an
installment note and cash.
In 1983 the Trust contributed its remaining land and industrial buildings to
Chicago Dock-Equitable Venture ("CDEV"), a joint venture with The Equitable Life
Assurance Society of the United States ("Equitable"). Equitable contributed cash
and two buildings adjoining the Trust's land: the Equitable Building, a 35 story
office building, and the Mandel Building, an older mixed use warehouse, office
and storage building. In 1985, the Chicago City Council approved a Planned
Development Ordinance for the property owned by CDEV and the project was named
Cityfront Center. In November 1985, the Venturers agreed to dissolve CDEV
because of their inability to agree on basic business strategies relating to the
development of CDEV's property. The Trust received the portion of the Cityfront
Center property lying east of Columbus Drive in Chicago that it had originally
contributed to CDEV and a 62% interest in the Equitable Building. The Trust
entered into a lease with Equitable for the Trust's 62% interest in the
Equitable Building and granted Equitable an option to acquire the Trust's
interest. Equitable exercised this option and acquired the Trust's interest in
the Equitable Building on December 17, 1991.
Since the dissolution of CDEV, the following developments have been
completed on the Trust's portion of Cityfront Center:
4
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NORTH PIER
In fiscal 1987, the Trust disposed of a portion of the property it received
in the dissolution of CDEV to enable the redevelopment of North Pier, an
existing warehouse building in Cityfront Center. The disposition was structured
as an exchange of property and resulted in the acquisition of Waterplace Park.
The redevelopment was completed in June 1989 and contains 250,000 square feet of
office space and 200,000 square feet of retail space. During fiscal 1993, the
Trust relocated its administrative offices to North Pier.
In April 1989, the Trust sold the site adjacent to North Pier on the east to
Brick Venture for an installment note, the final installment of which was
collected in June 1992. A 61 story residential building containing 505 units was
completed on the site in early calendar 1991.
SHERATON CHICAGO HOTEL & TOWERS
In October 1988, the Trust entered into a 50 year ground lease (with lessee
options to extend the term 49 more years) for 2.3 acres of land with Tishman
Realty Corporation of Cook County ("Tishman Realty"). The lease required the
development of a convention hotel containing 1,200 rooms. The ground lease also
contains a lessee option to purchase the property first exercisable in the year
2003. The Trust was obligated to provide certain infrastructure improvements in
the area of the hotel prior to its completion. Construction of the required
infrastructure began in July 1990 and was completed in March 1992. The hotel
also opened in March 1992.
CITYFRONT PLACE MID-RISE
On December 17, 1991, the Trust acquired the Cityfront Place Mid-Rise
apartment complex ("Mid-Rise"). The acquisition of the Mid-Rise was part of a
transaction in which the Trust exchanged its 62% undivided interest in the
Equitable Building in Chicago for the Mid-Rise. The Mid-Rise, which is part of
the three building complex known as Cityfront Place, consists of two 12-story
buildings containing a total of 424 rental units and parking for 339 cars. The
Mid-Rise first opened in May 1991 and was acquired by the Trust for $52.5
million.
CITYFRONT PLACE HIGH-RISE
In August 1989, the Trust contributed a 0.6 acre site (the "High-Rise"
site), to a wholly owned subsidiary, CDCT Residence Corporation (the "Residence
Corp."). The Residence Corp. then contributed the High-Rise site as its capital
contribution to a partnership, LCD Partnership ("LCD"), with Daniel E. Levin
("Levin"). The Residence Corp. is a two-thirds partner in LCD and Levin is a
one-third partner. LCD then entered into a joint venture, New Street Joint
Venture ("NSJV"), with Northwestern Mutual Life Insurance Company ("Northwestern
Mutual") to develop the site with a 39 story building containing 480 rental
units, a health club and parking for 288 cars. Northwestern Mutual and LCD are
50/50 partners in NSJV (resulting in the Trust effectively owning one-third of
NSJV) subject to Northwestern Mutual's priority over LCD in certain
distributions of cash flow and proceeds from sale or refinancing. The building
opened in July 1991. The High-Rise and Mid-Rise are jointly managed and leased.
OGDEN PLAZA PARKING FACILITY
In conjunction with the infrastructure associated with the Sheraton Chicago
Hotel & Towers, the Trust constructed a 300 stall parking facility under and
adjacent to Ogden Plaza. The facility contains an additional 100 stalls in an
area under Columbus Drive, adjacent to Ogden Plaza. This area is occupied
pursuant to a license from the City of Chicago. This public facility, which
opened in March 1992, serves parking needs for the hotel and the current
surrounding office and residential buildings. It will also serve
5
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the future planned developments adjacent to the east and north of the facility,
including the performing arts theater discussed below.
CHICAGO MUSIC AND DANCE THEATER, INC.
During the third quarter of fiscal 1995, the Trust sold a parcel of land to
the Chicago Music and Dance Theater, Inc. (the "Theater") for the construction
of a 1,500 seat performing arts theater in Cityfront Center. The site is
approximately 41,000 square feet and is located in the view corridor on the
east-west axis with Ogden Slip. Under the zoning applicable to the site, there
is a height limitation of 150 feet. The Theater is currently raising funds for
the construction of the project. Ground breaking is expected to occur in late
calendar 1995.
UNDEVELOPED LAND
In addition to the developments described above, the zoning applicable to
the Trust's portion of Cityfront Center pertains to the following areas owned or
controlled by the Trust and permits the following uses and building areas:
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<CAPTION>
TOTAL DEVELOPABLE BUILDING
SITE AREA AREA
(IN ACRES) (IN MILLION SQ. FT)
------------------------------ ------------------------------
INCREASE/ INCREASE/
4/30/94 (DECREASE) 4/30/95 4/30/94 (DECREASE) 4/30/95
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Commercial...................................................... 5.1 (.9) 4.2 5.6 (.1) 5.5
Residentia1..................................................... 9.0 -- 9.0 4.1 -- 4.1
</TABLE>
The decrease in site area and developable building area in the above table
represents the land and building areas sold to the Chicago Music and Dance
Theater, Inc. in fiscal 1995.
The Trust has some flexibility in the uses allowed under its zoning. It can
substitute up to 500,000 square feet of residential building area for commercial
building area or substitute up to 3,650,000 square feet of commercial building
area for residential building area.
In addition to the above, the Trust owns a 2.1 acre site in Cityfront Center
which is currently occupied by the Kraft Building. It is under lease until April
2016, at which time the improvements thereon will revert to the Trust. Due to
the length of the lease, this site was not included in the Planned Development
Ordinance.
INFRASTRUCTURE IMPROVEMENTS
The Trust plans to construct infrastructure at Cityfront Center in three
phases, two of which are now complete. In fiscal 1988, Phase I infrastructure
was completed. The major elements of Phase I consisted of filling a portion of
Ogden Slip, constructing a portion of the River Esplanade, upgrading Illinois
Street and a portion of East North Water Street and the construction of three
new roads: (1) McClurg Court between Grand Avenue and the Chicago River, (2) New
Street, a street west of McClurg Court between Illinois and East North Water
Streets and (3) River Drive, a street adjacent to the River Esplanade, west of
McClurg Court.
In conjunction with the development of the Sheraton Chicago Hotel & Towers,
the Trust completed the construction of Phase II in fiscal 1992. Phase II
consists of Ogden Plaza, elevated roadways adjacent
6
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to Columbus Drive and surrounding the plaza and a parking facility under and
adjacent to the plaza. The portion of the River Esplanade adjacent to the hotel
was also completed at that time by the developers of the hotel.
Phase III infrastructure will consist primarily of the River Esplanade and
River Drive east of McClurg Court, Du Sable Park (a 3 acre park east of Lake
Shore Drive), the slip promenade on the south bank of the Ogden Slip and the
upgrading of the remainder of East North Water Street. The current cost of Phase
III is estimated to be approximately $12 million. The Trust is obligated to
contribute $600,000 for improvements to be made in Du Sable Park, which are
expected to be completed during calendar 1996. The remainder of Phase III will
be constructed as needed to support additional development in the area but not
later than the completion of 2,500 units of residential development on the east
portion of Cityfront Center of which approximately 1,400 units have been
completed to date.
INVESTMENT PORTFOLIO DIVERSIFICATION
As of April 30, 1995, the Trust owned property located in Chicago, Illinois,
Tampa, Florida and Indianapolis, Indiana.
The Tampa property was acquired on July 31, 1986 as part of the exchange of
the Trust's interests in the Palmolive Building located in Chicago, Illinois.
The Indianapolis property was acquired on September 30, 1986 in exchange for a
portion of North Pier in Chicago, Illinois. These acquisitions enabled the Trust
to diversify into other geographic markets, thereby reducing the impact of
adverse market conditions in any single geographic area.
REAL ESTATE INVESTMENTS
The following table summarizes the Trust's real estate investments by type
as of April 30, 1995:
<TABLE>
<CAPTION>
FINANCIAL STATEMENT
NET CARRYING VALUE
NUMBER OF ----------------------
TYPE OF INVESTMENT INVESTMENTS AMOUNT PERCENT
- ------------------------------------------------------------------ ----------------- ----------- ---------
<S> <C> <C> <C>
Residential (Outright ownership and partnership interest)......... 2 $46,343,601 56.3%
Land and land improvements held for development................... 1 15,247,084 18.5%
Office............................................................ 2 12,545,134 15.3%
Ground lease (Hotel).............................................. 1 5,626,644 6.8%
Parking garage.................................................... 1 2,551,900 3.1%
-
----------- ---------
Total........................................................... 7 $82,314,363 100.0%
-
-
----------- ---------
----------- ---------
</TABLE>
INVESTMENT STRATEGY
The Trust emphasizes long-term asset appreciation related to its undeveloped
properties and the maximization of cash flow and asset value of its interests in
currently developed properties. It seeks to develop its property expeditiously
while limiting the amount of risk it assumes in that development. It also seeks
to participate in potential increases in cash flows and residual values in its
development projects. To accomplish these objectives, the Trust has entered into
a participating, unsubordinated ground lease, formed a joint venture and
exchanged other assets to acquire a completed residential building in Cityfront
Center. It continues to seek future development opportunities for its property
in Cityfront Center in similar arrangements, but will also consider other
transaction structures which it believes will maximize the value of its assets.
In order to maximize the value of the undeveloped property it owns in
Chicago, substantial land improvements are required (See Item 7: Management's
Discussion and Analysis of Financial Condition
7
<PAGE>
and Results of Operations). The Trust views these expenditures as consistent
with its investment philosophy of maximizing future asset value.
The Trust is not currently seeking to make mortgage loan investments, its
present intention being to invest principally in real estate equities. However,
the Trust in the future may also invest in mortgages. The Trust has entered into
and may consider entering into additional partnerships, joint ventures or
similar arrangements with other parties for the development of individual
parcels in Cityfront Center.
While the Trust may not, under federal tax law applicable to REIT's, hold
property for sale in the ordinary course of business, its policy is to evaluate
periodically its portfolio of properties which might be considered for sale,
lease or exchange, for example, the recent sale transaction with the Chicago
Music and Dance Theater, Inc. (See Item 7: Management's Discussion and Analysis
of Financial Condition and Results of Operations). The Trust's preference is to
structure transactions to defer the current recognition of taxable gain, either
through exchanges, installment sales or long-term ground leases.
The Trust also evaluates the acquisition of properties for its portfolio.
Currently, it has limited its focus to properties in the vicinity of its
Cityfront Center property in Chicago.
COMPETITION
With respect to its property in Chicago, the Trust is faced with competition
from existing buildings and other undeveloped sites. The office segment of the
Chicago real estate market remains overbuilt, making it unlikely that any
significant office project will be started on the Trust property during the next
several years. Development of the Trust's Chicago property will require
substantial financing (See Item 7: Management's Discussion and Analysis of
Financial Condition and Results of Operations). The real estate development and
investment business in Chicago is highly competitive and many of the Trust's
competitors have substantially greater financial resources. As a REIT, the Trust
is also subject to certain limitations on its ability to sell and develop
properties which are not applicable to non-REIT competitors.
As an owner of developed commercial and residential real estate properties,
the Trust competes with other owners of similar properties. The Trust competes
with other residential buildings in the area, including the Cityfront Place
High-Rise, in which the Trust is also a partner, and North Pier Apartment Tower,
both of which are located in Cityfront Center. With respect to its ground lease
on the Sheraton Chicago Hotel & Towers site, the minimum rent is payable without
regard to the occupancy of the hotel. Beginning July 1, 1995, the Trust will
receive percentage rent based on the hotel's gross revenues if and to the extent
such percentage rent exceeds base rent.
EMPLOYEES
The Trust is self administered and had eight full time employees as of June
1, 1995.
FEDERAL INCOME TAXATION
The Trust has elected to be treated as a REIT under sections 856 through 860
of the Code. While the Trust expects to continue to operate and invest in a
manner which will maintain its qualification as a REIT, it continually evaluates
the benefits of qualifying as a REIT and the operating and investment
restrictions imposed by the Code. The Trust elected to be taxed as a REIT in
1962 and believes that in all intervening years it has qualified as a REIT.
During this period, Arthur Andersen LLP, independent public accountants,
annually audited the Trust's financial statements and in conjunction with Wilson
& McIlvaine, general counsel to the Trust, concluded that the Trust has met the
REIT qualification tests.
8
<PAGE>
TRUSTEES
At April 30, 1995 there were nine Trustees of the Trust, one of whom was
also an employee of the Trust. The non-employee Trustees are paid base fees
(currently in the form of stock options), meeting fees and committee fees and
are reimbursed for travel and related expenses. The non-employee Trustees also
participate in two Trustee Stock Option Plans.
ENVIRONMENTAL MATTERS
A number of jurisdictions, including Illinois, have laws and regulations
related to environmental controls in the development or transfer of real estate.
These laws and regulations may reduce the number of investment opportunities
available to the Trust, impose remediation costs associated with any adverse
conditions discovered or increase the cost of development opportunities which
the Trust elects to pursue.
In June 1993, the U.S. Environmental Protection Agency (the "EPA") conducted
preliminary surface tests on a 2.8 acre site currently used as a surface parking
lot (the "Tested Site"). The Tested Site was examined because thorium, a
radioactive element, may have been used on the Tested Site earlier in the
century by a former tenant, in a building which was demolished in the mid 1930's
after the expiry of the tenant's lease.
In January 1994, the Trust entered into a consent order with the EPA
regarding preliminary testing to be performed on the Tested Site. Initial
on-site tests were conducted pursuant to that order in May 1994 and laboratory
analysis was completed on these samples in June 1994. The results of the tests
indicate one concentrated area which appears to be contaminated by thorium, and
other scattered areas on the Tested Site with significantly lower levels of
contamination. The most contaminated area is within the footprint of the former
building previously occupied by the former tenant. The Trust submitted the
results of the testing to the EPA in September 1994. The EPA is currently
evaluating the results of those tests.
The Trust's consultants have prepared cost estimates to remediate the
contaminated areas on the Tested Site which range from $1 million to $5 million,
with $3.5 million representing the most likely amount. That range of costs is
estimated based on the results of surface measurements and the analysis of
samples gathered from nine borings taken on the site. While these tests were
made pursuant to the consent order with the EPA, additional conditions may exist
on the site which would be discovered only upon excavation.
On August 11, 1995, the Trust entered into an agreement with Kerr-McGee
Chemical Corporation ("KMCC"), the successor to a former tenant of the Tested
Site, regarding the financial responsibilities of the parties for the
remediation of the Tested Site (the "Reimbursement Agreement"). Under the terms
of the Reimbursement Agreement, KMCC will be responsible for the remediation of
the Tested Site and the Trust has the obligation to reimburse KMCC for 25% of
the cost of remediation, not to exceed a maximum reimbursement obligation of the
Trust of $750,000. Legal counsel has advised the Trust that it may have claims
for coverage for some or all of its share of the remediation costs under its
current or prior insurance policies.
The EPA has not made a ruling on whether current remediation will be
required nor the form or scope of such remediation. At the latest, the Tested
Site will be remediated when redevelopment occurs. The remediation will most
likely be in the form of excavation and disposal of the soil in specified
disposal areas. It is probable that the Trust and/or KMCC will enter into a
subsequent consent order regarding remediation.
In connection with the option to lease three parcels in Cityfront Center
which the Trust granted to Northwestern Memorial Hospital (the "Hospital") in
June 1992 and which terminated in November 1992,
9
<PAGE>
the Hospital hired an independent consultant to conduct certain tests on the
parcels subject to option. The results of those tests were consistent with the
findings reported based on the Trust's preliminary environmental reconnaissance
conducted in 1989, but also noted the presence of petroleum products spread over
an approximate 24,000 square foot area, a portion of which is located under the
Tested Site. Based on chemical testing results, the soil is not considered to be
hazardous waste. There is no current requirement to remediate the site for this
condition.
In connection with the development of the convention hotel by Tishman
Realty, excavation on that parcel revealed an underground fuel storage tank
installed by an earlier lessee of the parcel. The tank and contaminated soil
were removed and disposed of as required by law, with Tishman Realty bearing the
majority of such expense.
In light of the earlier industrial uses of portions of the Trust's property
in Chicago, other kinds of adverse environmental conditions may exist on the
property, although the Trust is not currently aware of any such material
conditions. The Trust commissioned a preliminary environmental reconnaissance of
the property in 1989 by an independent consultant. The consultant's report,
while noting the presence of certain materials in trace amounts, concluded that
there were no known unusual conditions at the property, given its prior
manufacturing and warehousing uses. However, this reconnaissance did not test
for radioactive materials. The Trust is not aware of any conditions, other than
the Tested Site as discussed above, which would require current remediation or
which would materially increase the cost of future development of its property
in Chicago.
10
<PAGE>
ITEM 2. PROPERTIES
The following tables and accompanying discussion set forth information
concerning each property in which the Trust owns an equity interest or has a
leasehold interest as of April 30, 1995. See also Schedule III in Item 8 for
additional information.
<TABLE>
<CAPTION>
RENTABLE
YEAR YEAR BUILDING AREA NUMBER OF OCCUPANCY AT
COMPLETED ACQUIRED (SQUARE FEET) TENANTS 4/30/95
------------- ----------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
OFFICE COMPLEXES--
Lincoln Garden 1981 1986 72,800 31 87%
Tampa, Florida
Waterplace Park 1980 1986 105,000 26 60%
Indianapolis, Indiana
<CAPTION>
PRINCIPAL TENANTS
-----------------------------
<S> <C>
OFFICE COMPLEXES--
Lincoln Garden Engineering Science
Tampa, Florida Nationwide Insurance
Managed Care
Waterplace Park General Services Admin.
Indianapolis, Indiana Indianapolis Physical Therapy
Center for Neuro Rehab
</TABLE>
<TABLE>
<CAPTION>
TOTAL UNIT MIX
RENTABLE AREA ---------------------------------------------
YEAR YEAR (1) (SQUARE
COMPLETED ACQUIRED FEET) STUDIOS CONVERTIBLES 1-BEDROOM
------------- ----------- ------------- ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
APARTMENTS--
Cityfront Place Mid-Rise 1991 1991 343,519 80 40 210
Chicago, Illinois
Cityfront Place High-Rise (2) 1991 1989 368,442 120 120 180
Chicago, Illinois
<CAPTION>
RESIDENTIAL
2-BEDROOM + PARKING OCCUPANCY AT
DUPLEXES STALLS 4/30/95
----------------- ----------- -------------
<S> <C> <C> <C>
APARTMENTS--
Cityfront Place Mid-Rise 94 339 97%
Chicago, Illinois
Cityfront Place High-Rise (2) 60 288 96%
Chicago, Illinois
</TABLE>
<TABLE>
<CAPTION>
YEAR YEAR SITE AREA
COMPLETED ACQUIRED (ACRES)
------------- ------------ -------------
<S> <C> <C> <C> <C>
OTHER--
Parking Facility-- 1992 1992 1.8
Ogden Plaza
Chicago, Illinois
Ground lease (Hotel)- 1992 1985(4) 2.3
Sheraton Chicago Hotel & Towers
Chicago, Illinois
Land and land improvements N/A 1985(4) 15.3
held for development--
Chicago, Illinois
NOTES:
<CAPTION>
OTHER
---------------------------------------------
<S> <C>
OTHER--
Parking Facility-- 400 stalls (3)
Ogden Plaza
Chicago, Illinois
Ground lease (Hotel)- 1,200 rooms
Sheraton Chicago Hotel & Towers
Chicago, Illinois
Land and land improvements Current uses include Surface Parking, Vacant
held for development-- Land and Ground Lease (Kraft Building)
Chicago, Illinois
NOTES:
<FN>
- ------------------------------
(1) The Mid-Rise includes 11,000 square feet of commercial space, all of which
was occupied at April 30, 1995. The High-Rise includes 7,708 square feet of
commercial space, of which 3,424 square feet was occupied at April 30,
1995.
(2) The Trust owns an effective 1/3 interest in this building, subject to
priority distributions to one of the Venture partners.
(3) Of these stalls, 100 stalls are in an area under Columbus Drive, adjacent
to Ogden Plaza, which is subject to a license from the City of Chicago.
(4) Received in the dissolution of CDEV in 1985. The Trust initially
contributed this property, a substantial portion of which was owned by the
Trust since 1857, to CDEV in 1983 (See Item 1).
</TABLE>
11
<PAGE>
LINCOLN GARDEN
At Lincoln Garden, the Trust's office complex in Tampa, Florida, rent and
vacancy levels remain stable. Occupancy averaged 90% during fiscal 1995 and was
87% at April 30, 1995. For the remainder of calendar 1995, leases are due to
expire on 15% of the total leasable area.
WATERPLACE PARK
Occupancy at Waterplace Park averaged 89% during the fiscal year. However,
occupancy at April 30, 1995 had dropped to 60% due to the expiration of the
lease for Tri-County Mental Health ("Tri-County") in March 1995. Tri-County,
which had occupied approximately 28% of Waterplace Park, was the largest tenant
at the property. The Trust has had constructive discussions with an existing
tenant about leasing 50% of the old Tri-County space, and is actively pursuing
new tenants for the remainder of Tri-County's space. For the remainder of
calendar 1995, 8% of the total leasable area is due to expire.
CITYFRONT PLACE
During fiscal 1995, occupancy averaged 92% and 96% for the Mid-Rise and
High-Rise buildings, respectively.Average rental rates per square foot at April
30, 1995 were 4% higher in the Mid-Rise and 5% higher in the High-Rise compared
to rates in effect at April 30, 1994.
OGDEN PLAZA PARKING FACILITY
At the Ogden Plaza parking facility, net revenues for fiscal 1995 were
$512,000, approximately the same as in the prior fiscal year. The parking
facility continues to benefit from the usage of the adjacent Sheraton Chicago
Hotel & Towers as well as special events in the vicinity of the facility.
SHERATON CHICAGO HOTEL & TOWERS
The Trust's ground lease related to the Sheraton Chicago Hotel & Towers
provides that minimum base rent is due to the Trust regardless of the operations
of the hotel. However, the Trust will receive percentage rent beginning July 1,
1995 if gross revenues from the operations of the hotel multiplied by applicable
percentages exceed base rent (See Note 3 to the financial statements). Calendar
1994 gross revenues from operations of the hotel equaled $58 million. In
comparison, during calendar 1993 the hotel recognized gross revenues from
operations of $54 million. Average occupancy during calendar 1994 was
approximately 68%, an increase over the average occupancy during calendar 1993
of 65%.
LAND AND LAND IMPROVEMENTS
Land and land improvements held for development includes surface parking
lots, vacant land and a 2.1 acre site which is currently occupied by the Kraft
Building. The surface lots are leased on a triple-net basis to North Pier
Chicago through December 31, 1995. Net rent from the surface parking lots
received by the Trust during fiscal 1995 equaled approximately $300,000. In
addition, the Trust recorded revenues from real estate taxes payable by lessees
of $1,013,000 from the surface parking lots during fiscal 1995. Real estate
taxes payable by lessees are also reflected as an expense, and therefore, do not
affect net income.
One of the surface parking lots includes the Tested Site (See Item 1). In
the fourth quarter of fiscal 1995, the Trust recorded environmental remediation
expense of $1,035,000 based upon the resolution of accounting and other issues
related to environmental remediation costs of property held for development.
This amount includes the Trust's share of testing and legal costs related to the
Tested Site through April 30, 1995, plus $750,000, which is the maximum
reimbursement obligation of the Trust pursuant to the
12
<PAGE>
Reimbursement Agreement entered into with KMCC (See Item 1: Business).
ITEM 3. LEGAL PROCEEDINGS
In January 1994, the Trust entered into a consent order with the EPA
regarding the Tested Site. Preliminary tests indicate that the Tested Site is
contaminated by thorium, which was used by a prior tenant on the site. On August
11, 1995, the Trust entered into an agreement with KMCC regarding the financial
responsibilities of the parties for the remediation of the Tested Site (See Item
1: Business).
The Trust's legal counsel has advised the Trust that it may have claims for
coverage for some or all of its share of the remediation costs under its current
or prior insurance policies.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Trust's security holders during
the last quarter of its fiscal year ended April 30, 1995.
13
<PAGE>
EXECUTIVE OFFICERS OF THE TRUST
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATIONS AND
AFFILIATIONS DURING THE
NAME AGE PAST FIVE YEARS
- ------------------- --- -------------------------------------------------------------------------
<S> <C> <C>
Charles R. Gardner 50 President and Chief Executive Officer of the Trust since January 1982.
David R. Tinkham 40 Vice President-Finance, of the Trust since June 1985. Treasurer of the
Trust since September 1993, and Assistant Secretary since December 1993.
</TABLE>
There is no family relationship among any of the officers listed above nor any
arrangements or understandings between any such officer and any other person
pursuant to which he was elected an officer. Each officer may be removed by the
Trustees at any time subject to severance payments as stipulated in his
employment contract.
All required filings by officers and Trustees were timely.
14
<PAGE>
PART II
ITEM 5. MARKET FOR THE TRUST'S COMMON SHARES AND RELATED SECURITY HOLDER MATTERS
MARKET INFORMATION AND DIVIDENDS DECLARED
The Trust's Common Shares of Beneficial Interest (the "shares") are traded
in the over-the-counter market and the prices are quoted on the National Market
System of the National Association of Securities Dealers' Automated Quotations
System ("NASDAQ"). The symbol is "DOCKS".
The following table sets forth the high and low closing sale prices of the
shares, as reported by NASDAQ, and dividends declared per share:
<TABLE>
<CAPTION>
FISCAL 1996
---------------------------------
DIVIDENDS
QUARTER HIGH LOW DECLARED
- ----------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
First, through June 1, 1995.................................................. $ 12.25 $ 11.50 (Note 1)
<CAPTION>
FISCAL 1995
---------------------------------
DIVIDENDS
QUARTER HIGH LOW DECLARED
- ----------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
Fourth....................................................................... $ 11.50 $ 10.25 $ .01
Third........................................................................ 12.00 10.00 .01
Second....................................................................... 11.50 9.50 .01
First........................................................................ 10.25 9.00 .01
<CAPTION>
FISCAL 1994
---------------------------------
DIVIDENDS
QUARTER HIGH LOW DECLARED
- ----------------------------------------------------------------------------- --------- --------- -----------
<S> <C> <C> <C>
Fourth....................................................................... $ 11.00 $ 8.75 $ .01
Third........................................................................ 10.50 8.625 .01
Second....................................................................... 10.75 8.25 .01
First........................................................................ 10.25 7.75 .01
<FN>
- ------------------------------
(1) A dividend of $.01 per share for the first quarter of fiscal 1996 was
declared at the July 19, 1995 meeting of the Board of Trustees.
</TABLE>
APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS
<TABLE>
<CAPTION>
APPROXIMATE NUMBER OF RECORD
TITLE OF CLASS HOLDERS AS OF JUNE 1, 1995
- -------------------------------------------------------------------- -------------------------------
<S> <C>
Common Shares of Beneficial Interest 540
</TABLE>
15
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Trust and
should be read in conjunction with the financial statements and notes thereto
included in Part II, Item 8.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED APRIL 30,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
REVENUES..................................................... $ 22,389 $ 20,714 $ 20,554 $ 19,224 $ 20,431
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
OPERATING INCOME (LOSS)...................................... $ (1,019) $ 309 $ (1,412) $ 1,484 $ 4,021
INVESTMENT AND OTHER INCOME.................................. 342 321 376 706 898
EQUITY IN NET LOSS OF LCD PARTNERSHIP........................ (475) (530) (1,218) (830) --
NET GAIN (LOSS) FROM DISPOSITION OF REAL ESTATE.............. (1,729) -- -- 43,849 --
RESERVE FOR ASSET IMPAIRMENT................................. -- -- -- -- (787)
--------- --------- --------- --------- ---------
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM.................. (2,881) 100 (2,254) 45,209 4,132
EXTRAORDINARY ITEM:
GAIN FROM EXTINGUISHMENT OF DEBT 2,067 -- -- -- --
--------- --------- --------- --------- ---------
NET INCOME (LOSS)............................................ $ (814) $ 100 $ (2,254) $ 45,209 $ 4,132
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
REAL ESTATE, net............................................. $ 82,314 $ 103,029 $ 106,329 $ 110,157 $ 69,193
TOTAL ASSETS................................................. 123,276 140,156 139,573 138,320 101,620
MORTGAGE NOTES PAYABLE....................................... 27,369 44,121 42,493 41,080 42,196
SHAREHOLDERS' EQUITY......................................... 82,897 83,942 84,073 87,773 44,357
PER SHARE:
EARNINGS (LOSS)............................................ $ (.14) $ .02 $ (.39) $ 7.82 $ .71
DIVIDENDS DECLARED......................................... .04 .04 .25 .31 .31
BOOK VALUE................................................. 14.33 14.51 14.54 15.18 7.67
OTHER SUPPLEMENTARY DATA:
CASH FLOWS PROVIDED BY (USED IN):
OPERATING ACTIVITIES....................................... $ 2,115 $ 2,468 $ (26) $ 1,145 $ 3,448
INVESTING ACTIVITIES....................................... 2,225 (2,148) 1,953 (3,290) (15,470)
FINANCING ACTIVITIES....................................... (4,483) (409) (2,033) 1,946 12,063
FUNDS FROM OPERATIONS (See Note 1)........................... 2,859 4,454 2,328 4,225 6,888
NOTE 1
The Board of Governors of the National Association of Real Estate Investment Trusts in 1991 adopted a definition of
"Funds From Operations" as follows:
Funds from Operations means net income (computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the
same basis.
</TABLE>
In March 1995, the Board of Governors clarified this definition with respect
to the treatment of certain items, although the clarification did not affect the
Trust's reporting of such funds. The above definition of Funds from Operations
includes certain material non-cash items which are reported in income and
expense of the Trust. Specifically, accrued environmental remediation, the
effect of averaging rental revenue from the hotel ground lease, and the
difference between current interest payable and contractual interest on the note
secured by the rents from and the land under the hotel, are included in Funds
from Operations. Please refer to the Consolidated Statements of Cash Flows in
the financial statements for the computation of cash flows from operating,
investing and financing activities.
16
<PAGE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
------------------------------------------------------
JULY 31, OCTOBER 31, JANUARY 31, APRIL 30,
1994 1994 1995 1995
----------- ------------- ------------- -----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
REVENUES-
Revenue from rental property...................................... $ 3,956 $ 4,045 $ 3,894 $ 3,630
Real estate taxes payable by lessees.............................. 1,886 1,660 1,659 1,659
----------- ------------- ------------- -----------
Total revenues.................................................. 5,842 5,705 5,553 5,289
----------- ------------- ------------- -----------
EXPENSES-
Real estate taxes................................................. 788 805 761 743
Real estate taxes payable by lessees.............................. 1,886 1,660 1,659 1,659
Property operating expenses....................................... 846 967 703 791
Environmental remediation expense................................. -- -- -- 1,035
General and administrative........................................ 409 441 520 487
Depreciation and amortization..................................... 926 951 863 757
Interest expense.................................................. 913 1,060 1,015 763
----------- ------------- ------------- -----------
Total expenses.................................................. 5,768 5,884 5,521 6,235
----------- ------------- ------------- -----------
Operating income (loss)......................................... 74 (179) 32 (946)
INVESTMENT AND OTHER INCOME......................................... 76 88 101 77
EQUITY IN NET LOSS OF LCD PARTNERSHIP............................... (141) (112) (119) (103)
NET LOSS FROM DISPOSITION OF REAL ESTATE............................ -- -- (1,729) --
----------- ------------- ------------- -----------
Net income (loss) before extraordinary item....................... 9 (203) (1,715) (972)
EXTRAORDINARY ITEM -
Gain from extinguishment of debt -- -- 2,067 --
----------- ------------- ------------- -----------
Net income (loss)............................................... $ 9 $ (203) $ 352 $ (972)
----------- ------------- ------------- -----------
----------- ------------- ------------- -----------
EARNINGS (LOSS) PER SHARE........................................... $ .00 $ (.03) $ .06 $ (.17)
----------- ------------- ------------- -----------
----------- ------------- ------------- -----------
<CAPTION>
FOR THE QUARTER ENDED
------------------------------------------------------
JULY 31, OCTOBER 31, JANUARY 31, APRIL 30,
1993 1993 1994 1994
----------- ------------- ------------- -----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
REVENUES-
Revenue from rental property...................................... $ 4,224 $ 4,173 $ 4,050 $ 4,099
Real estate taxes payable by lessees.............................. 1,619 1,152 674 723
----------- ------------- ------------- -----------
Total revenues.................................................. 5,843 5,325 4,724 4,822
----------- ------------- ------------- -----------
EXPENSES-
Real estate taxes................................................. 754 778 769 702
Real estate taxes payable by lessees.............................. 1,619 1,152 674 723
Property operating expenses....................................... 871 855 800 918
General and administrative........................................ 477 470 450 468
Depreciation and amortization..................................... 938 942 936 965
Interest expense.................................................. 1,040 1,051 1,062 991
----------- ------------- ------------- -----------
Total expenses.................................................. 5,699 5,248 4,691 4,767
----------- ------------- ------------- -----------
Operating income................................................ 144 77 33 55
INVESTMENT AND OTHER INCOME......................................... 79 78 81 83
EQUITY IN NET LOSS OF LCD PARTNERSHIP............................... (186) (149) (83) (112)
----------- ------------- ------------- -----------
Net income...................................................... $ 37 $ 6 $ 31 $ 26
----------- ------------- ------------- -----------
----------- ------------- ------------- -----------
EARNINGS PER SHARE.................................................. $ .01 $ .00 $ .01 $ .00
----------- ------------- ------------- -----------
----------- ------------- ------------- -----------
</TABLE>
17
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION
During the third quarter of fiscal 1995, the Trust completed the sale of a
parcel of land located in Cityfront Center to the Chicago Music and Dance
Theater, Inc. The site is scheduled to be improved with a new 1,500 seat
performing arts theater and an adjacent concourse for public pedestrian traffic.
The parcel contains approximately 41,000 square feet. The Trust recognized a
gain from disposition of real estate of $1,603,000 from this transaction.
On December 16, 1994, the Trust permitted the sale by foreclosure of One
Michigan Avenue, an office building in Lansing, Michigan to its lender, Pacific
Mutual Life Insurance Company, in full satisfaction of the note secured by One
Michigan Avenue. The One Michigan Avenue note, issued in August 1987, modified
in March 1994 and further modified in August 1994 (the "August modification")
was non-recourse with respect to the Trust. Accordingly, the Trust's financial
exposure was limited to the loss of the property. The Trust concluded that the
property's reasonably estimated future value was insufficient to warrant the
future capital investment required to satisfy the terms of the August
modification agreement to the loan. The Trust recognized a net loss of
$1,265,000 during the third quarter of fiscal 1995 as a result of the sale by
foreclosure (See Net Loss From Disposition of Real Estate and Gain From
Extinguishment of Debt which follows in Results of Operations for a more
complete discussion).
During fiscal 1995, average occupancy of the Mid-Rise and High-Rise
Buildings of Cityfront Place was 92% and 96%, respectively. However, occupancy
had risen to 97% at the Mid-Rise and equaled 96% at the High-Rise as of April
30, 1995. At the Trust's property in Tampa, occupancy declined slightly to 87%
at April 30, 1995 compared with 90% a year earlier. Average occupancy for the
Tampa property during fiscal 1995 equaled 90%. Occupancy at the Trust's property
in Indianapolis averaged 89% during fiscal 1995. However, occupancy at April 30,
1995 had dropped to 60% due to the expiration of the lease for Tri-County Mental
Health ("Tri-County") in March 1995. Tri-County, which had occupied
approximately 28% of Waterplace Park, was the largest tenant at the property.
The Trust has had constructive discussions with an existing tenant about leasing
50% of the old Tri-County space, and is actively pursuing new tenants for the
remainder of Tri-County's space. Neither the Waterplace Park property nor the
Lincoln Garden property is subject to any debt.
During fiscal 1995, the Trust completed the testing specified in the consent
order which it entered into in 1994 with the United States Environmental
Protection Agency (the "EPA"). The results of this testing confirmed that a
portion of the Tested Site (See Item 1) has concentrations of thorium in excess
of normal amounts. The highest concentrations are within the footprint of a
building which was demolished in the mid 1930's and which had been occupied by a
former tenant of the Trust. The tests also confirmed that, in its current state,
the site does not pose a hazard to human health.
After completing the testing, the Trust submitted the results to the EPA in
September 1994 as required under the terms of the consent order. The EPA has not
completed its review of the data and accordingly has not specified when
remediation may be required nor the scope of such remediation. The subsurface
testing also confirmed the range of estimated remediation costs which had been
previously reported. That range is from a minimum of approximately $1 million to
as much as $5 million. The most likely amount of estimated remediation costs
equals $3.5 million.
On August 11, 1995, the Trust entered into an agreement with Kerr-McGee
Chemical Corporation ("KMCC") regarding the financial responsibilities of the
parties for the remediation of the Tested Site (the "Reimbursement Agreement").
Under the terms of the Reimbursement Agreement, KMCC will be responsible for the
remediation of the Tested Site and the Trust has the obligation to reimburse
KMCC for 25% of the cost of remediation, not to exceed a maximum reimbursement
obligation of the Trust of $750,000. The Trust may recover some or all of its
share of the remediation costs from its insurance
18
<PAGE>
carriers.
The Ogden Plaza parking facility continued to produce good operating results
during fiscal 1995. During the year, the Trust recorded $512,000 of net revenue
from the operation of the facility, approximately the same as in the prior
fiscal year. Revenues from both years reflect demand for parking created by the
adjacent Sheraton Chicago Hotel & Towers, as well as attendance at special
events nearby.
Certain tenants are required to pay real estate taxes on land they lease
from the Trust. These real estate taxes payable by lessees are reflected as both
revenue and expense, and therefore, do not affect net income. Real estate taxes
payable by lessees are also reflected as both a receivable and payable in the
Trust's consolidated balance sheets. The difference between the receivable and
the payable amounts reflects monthly escrow payments made by the owners of North
Pier Chicago to the Trust for real estate taxes on surface parking lots leased
by North Pier. These monthly escrow payments are included in security deposit
cash in the Trust's consolidated balance sheets until they are paid to the Cook
County Collector.
The office segment of the Chicago real estate market remains overbuilt. It
is unlikely that there will be any significant office project started on the
Trust property for at least the next several years. While occupancy in the
residential segment of the market has remained relatively strong, current rent
levels do not justify new construction. The Trust has eight residential sites
currently available for development, two of which require no additional
infrastructure improvements. The Trust continues to pursue development
opportunities in the form of ground leases, joint ventures or outright
ownership.
RESULTS OF OPERATIONS
FISCAL 1995 VERSUS FISCAL 1994
REVENUES:
Revenue from rental property decreased in fiscal 1995 compared to fiscal
1994 primarily due to the disposition of One Michigan Avenue in December 1994.
Furthermore, revenues at One Michigan Avenue declined in the current fiscal year
prior to the disposition, due to the decrease in occupancy and rental rate under
the terms of IBM's new lease at the property. The combination of these two
factors resulted in a decrease in revenue from One Michigan Avenue during fiscal
1995 of $1,054,000.
The increase in real estate taxes payable by lessees during fiscal 1995
reflects an increase in the estimated tax assessment on the Sheraton Chicago
Hotel & Towers. Real estate taxes payable by lessees are also reflected as an
expense, and therefore, do not affect net income.
Equity in Net Loss of LCD Partnership reflects the Trust's effective
one-third share of the operations of New Street Joint Venture, the entity which
owns the Cityfront Place High-Rise. The fiscal 1995 loss reflects the building's
operations from January 1, 1994 through December 31, 1994, New Street Joint
Venture's fiscal year. The 1995 loss had no impact on Trust cash flows since New
Street Joint Venture had positive income before depreciation and amortization
expense and because of the cash flow priority of LCD's partner in New Street
Joint Venture.
EXPENSES:
Real estate taxes increased in fiscal 1995 compared to fiscal 1994 due to
refunds of prior year real estate taxes received in fiscal 1994. Refunds of
prior year real estate taxes received during fiscal 1995 were significantly
less. The fiscal 1995 increase was partially offset by the disposition of One
Michigan Avenue in December 1994 and by the sale in December 1994 of a parcel of
land located in Cityfront Center to the Chicago Music and Dance Theater, Inc.
19
<PAGE>
The decreases in property operating expenses and in depreciation and
amortization expense during fiscal 1995 reflect the disposition of One Michigan
Avenue in December 1994. The Trust stopped recording these expenses on December
16, 1994, the date of the sale by foreclosure of One Michigan Avenue.
Accordingly, for fiscal 1995, the Trust recorded only seven and a half months of
these expenses compared to twelve months for fiscal 1994.
In the fourth quarter of fiscal 1995, the Trust recorded environmental
remediation expense of $1,035,000 based upon the resolution of accounting and
other issues related to environmental remediation costs of property held for
development and the execution of the Reimbursement Agreement with KMCC (See Item
1: Business). No such expense was recorded during fiscal 1994. This amount
includes the Trust's share of testing and legal costs related to the Tested Site
through April 30, 1995, plus $750,000, which is the maximum reimbursement
obligation of the Trust pursuant to the terms of the Reimbursement Agreement.
This amount excludes the amount of the potential claims for some or all of the
Trust's share of the remediation costs under the Trust's current or prior
insurance policies.
Interest expense for fiscal 1995 decreased compared to fiscal 1994 primarily
due to the disposition of One Michigan Avenue in December 1994. Although the
Trust suspended regular debt service on the One Michigan Avenue note subsequent
to the September 1, 1993 payment, the Trust continued to accrue interest on the
loan through the date of the disposition of the property. See Note 4 to the
financial statements for a more complete discussion of the One Michigan Avenue
note. The decrease in interest expense was partially offset by an increase in
interest expense on the note secured by the rents from and the land under the
Sheraton Chicago Hotel & Towers due to the increased principal balance of this
note resulting from the additional accrual of interest under the terms of the
note.
NET LOSS FROM DISPOSITION OF REAL ESTATE AND GAIN FROM EXTINGUISHMENT OF
DEBT:
The Trust recognized a gain of $1,603,000 from the sale of a parcel of land
to the Chicago Music and Dance Theater, Inc. during the third quarter of fiscal
1995. Total consideration from the sale equaled $2,638,000 which consisted of
cash received of $1,250,000 plus the value of a construction obligation of
$1,388,000 assumed by the Theater which will benefit the surrounding parcels
still owned by the Trust. This construction obligation is a pedestrian concourse
through the theater site which was required under the Planned Development
Ordinance affecting the Trust's land at Cityfront Center.
During the third quarter of fiscal 1995, the Trust also recognized a net
loss of $1,265,000 as a result of the sale by foreclosure of One Michigan
Avenue. The net loss consisted of a loss from disposition of real estate of
$3,332,000 and an extraordinary gain from the extinguishment of debt of
$2,067,000. The loss from real estate represents the difference between the
carrying value of the property and the estimated fair market value of the
property on the date of foreclosure. The extraordinary gain represents the
difference between the principal amount of the note plus accrued interest and
the estimated fair market value of the property on the date of the foreclosure.
FISCAL 1994 VERSUS FISCAL 1993
REVENUES:
Revenue from rental property increased in fiscal 1994 compared to fiscal
1993 primarily due to higher occupancy at the Mid-Rise. During fiscal 1993, the
initial lease-up of the Mid-Rise was still in progress, while the building was
substantially fully occupied throughout fiscal 1994. As a result, revenues from
the Mid-Rise increased by $1,004,000. In addition, fiscal 1994 parking revenues
increased by $150,000 due to increased activity at the Ogden Plaza parking
garage. These increases were partially offset by the $220,000 of revenue the
Trust recorded during fiscal 1993 from the lease option granted to Northwestern
Memorial Hospital. No such revenue was recorded during fiscal 1994.
20
<PAGE>
The decrease in real estate taxes payable by lessees during fiscal 1994
reflects a lower than estimated tax assessment on the Sheraton Chicago Hotel &
Towers. This decrease was partially offset by an increase in real estate taxes
on the Kraft Building. Real estate taxes payable by lessees are also reflected
as an expense, and therefore, do not affect net income.
Equity in Net Loss of LCD Partnership reflects the Trust's effective
one-third share of the operations of New Street Joint Venture, the entity which
owns the Cityfront Place High-Rise. The fiscal 1994 loss reflects the building's
operations from January 1, 1993 through December 31, 1993, New Street Joint
Venture's fiscal year. The fiscal 1994 loss was smaller than the loss in fiscal
1993 due to higher occupancy. The fiscal 1993 loss reflects the ongoing initial
lease-up of the High-Rise during that period. The 1994 loss had no impact on
Trust cash flows since New Street Joint Venture had positive income before
depreciation and amortization expense and because of the cash flow priority of
LCD's partner in New Street Joint Venture.
EXPENSES:
The decrease in real estate taxes during fiscal 1994 reflects refunds of
prior year real estate taxes received during the first quarter of fiscal 1994.
The decrease in general and administrative expense during fiscal 1994
reflects the substitution of stock options for 100% of the Trustees' retainer
fees and 20% of key employees' cash compensation.
The increase in interest expense during fiscal 1994 was due to the increased
balance on the note secured by the rents from and the land under the Sheraton
Chicago Hotel & Towers. However, the impact of aggregate interest expense on the
cash flows of the Trust was favorable compared to fiscal 1993. The Trust
suspended regular debt service on the One Michigan Avenue note subsequent to the
September 1, 1993 payment. The Trust continued, however, to accrue interest on
the loan for the entire fiscal year. The accrued but unpaid interest related to
One Michigan Avenue totaled $644,000 during fiscal 1994. See Note 4 to the
financial statements for a more complete discussion of the One Michigan Avenue
note.
LIQUIDITY AND CAPITAL RESOURCES
FISCAL 1995 VERSUS FISCAL 1994
CASH FLOWS:
Operating:
Cash flows from operating activities decreased in fiscal 1995 compared to
fiscal 1994 by $353,000. This decrease was primarily due to a decrease during
fiscal 1995 of $359,000 in refunds of prior year real estate taxes. The amount
of refunds received during fiscal 1994 was unusually high. During fiscal 1994
the Trust received $473,000 in refunds compared to just $114,000 received during
fiscal 1995.
Cash flows from operating activities from the Mid-Rise increased during
fiscal 1995 due to lower real estate tax payments. Fiscal 1994 payments were
unusually high due to the change in the assessment of the Mid-Rise site from
partially developed. This increase in fiscal 1995 cash flows was partially
offset by higher real estate tax payments on the Trust's other Cityfront Center
land. Cash flows from operating activities for the Trust's other operating
properties as a group were substantially unchanged from fiscal 1994 to fiscal
1995.
No change occurred from fiscal 1994 to fiscal 1995 in the effect of
averaging rental revenue. This item represents the difference between revenue
recognized and cash rent received during the year on the hotel ground lease. In
both fiscal years the Trust recorded revenue of $4,848,000 while receiving cash
of
21
<PAGE>
$150,000.
The difference between current interest payable and contractual interest
represents the difference between interest expense on the note secured by the
rents from and the land under the hotel, and the interest paid on this note.
This difference was $160,000 greater in fiscal 1995 due to the increase in the
outstanding principal balance of the loan. The cash interest paid equals the
minimum cash rent from the hotel ground lease through December 31, 1998.
Investing:
Cash flows from investing activities increased in fiscal 1995 compared to
fiscal 1994 due to several factors. First, cash received from the sale of land
to the Chicago Music and Dance Theater, Inc. equaled $1,250,000 during fiscal
1995. Second, the $1,000,000 One Michigan Avenue loan escrow funded during
fiscal 1994 was returned to the Trust during fiscal 1995. Finally, the Trust
sold United States Treasury Notes with a par value of $1,250,000 to facilitate
the paydown of the $4,000,000 advance on its line of credit with First Bank,
N.A.
Additions to investments in real estate during fiscal 1995 consisted
primarily of tenant improvements of $694,000 and building improvements of
$245,000. In contrast, fiscal 1994 additions to investments in real estate
consisted primarily of tenant improvements of $254,000, costs related to
environmental matters of $203,000 and building improvements of $90,000.
Financing:
Cash flows used in financing activities increased in fiscal 1995 compared to
fiscal 1994 due to the paydown of the Trust's $4,000,000 advance on its line of
credit with First Bank, N.A., during fiscal 1995. Earlier in fiscal 1995 the
Trust prepaid the $4,000,000 Cityfront Place Mid-Rise note issued February 25,
1992, using the proceeds from a $4,000,000 advance on its available $20,000,000
line of credit with First Bank, N.A.
FUNDS FROM OPERATIONS:
Funds from Operations decreased during fiscal 1995 compared to fiscal 1994
by $1,595,000 primarily due to three factors. First, the Trust recorded
environmental remediation expense of $1,035,000 during fiscal 1995. No such
expense was recorded during fiscal 1994. Second, refunds of prior year real
estate taxes decreased during fiscal 1995 by $359,000. Third, interest expense
increased by $160,000 during fiscal 1995 on the note secured by the rents from
and the land under the Sheraton Chicago Hotel & Towers due to the increasing
balance of this note resulting from the additional accrual of interest under the
terms of the note. Funds from Operations includes certain material non-cash
items which are reported in income and expense of the Trust. Please refer to the
Consolidated Statements of Cash Flows in the financial statements for the
computation of cash flows from operating, investing and financing activities.
FISCAL 1994 VERSUS FISCAL 1993
CASH FLOWS:
Operating:
Cash flows from operating activities increased in fiscal 1994 compared to
fiscal 1993 by $2,494,000. The change in net income from fiscal 1993 to fiscal
1994 accounts for $2,354,000 of this increase. Included in the change in net
income are depreciation and amortization and equity in net loss of LCD
Partnership. Both are non-cash items and had no impact on cash flows from
operating activities.
22
<PAGE>
No change occurred from fiscal 1993 to fiscal 1994 in the effect of
averaging rental revenue. This item represents the difference between revenue
recognized and cash rent received during the year on the hotel ground lease. In
both fiscal years the Trust recorded revenue of $4,848,000 while receiving cash
of $150,000.
The difference between current interest payable and contractual interest
represents the difference between interest expense on the note secured by the
rents from and the land under the hotel, and the interest paid on this note.
This difference was $171,000 greater in fiscal 1994 due to the increase in the
outstanding principal balance of the loan. The cash interest paid equals the
minimum cash rent from the hotel ground lease through December 31, 1998.
Mid-Rise real estate taxes paid during fiscal 1994 reflect an increase of
$1,056,000 over the prior fiscal year. Since real estate taxes in Chicago are
assessed on a calendar-year basis, one year in arrears, Mid-Rise real estate
taxes paid during fiscal 1993 reflected a period when the Mid-Rise site was
assessed as partially developed.
The Trust suspended regular debt service on the One Michigan Avenue note
subsequent to the September 1, 1993 payment. The Trust continued, however, to
accrue interest on the loan for the entire fiscal year. The accrued but unpaid
interest related to One Michigan Avenue totaled $644,000 during fiscal 1994.
This amount was reflected as an expense, but was not paid.
Investing:
Cash flows from investing activities decreased in fiscal 1994 compared to
fiscal 1993 primarily due to the receipt of the second and final installment
payment on the Brick Venture note of $2,950,000 during fiscal 1993. A second
factor occurred during the fourth quarter of fiscal 1994 when the Trust placed
$1,000,000 into an escrow account as part of the One Michigan Avenue loan
modification agreement.
Additions to investments in real estate during fiscal 1994 consisted
primarily of tenant improvements of $254,000, costs related to environmental
matters of $203,000 and building improvements of $90,000. In contrast, fiscal
1993 additions to investments in real estate consisted primarily of tenant
improvements of $496,000, Phase II infrastructure costs of $389,000 and building
improvements of $107,000.
FINANCING:
Cash flows used in financing activities decreased in fiscal 1994 compared to
fiscal 1993 primarily as a result of the reduction of the Trust's quarterly
dividend from $.08 per share to $.01 per share effective beginning for the
dividend payable on June 1, 1993.
FUNDS FROM OPERATIONS:
Funds from Operations increased during fiscal 1994 compared to fiscal 1993
due primarily to three factors. First, higher occupancy at the Mid-Rise
increased revenues by $1,004,000. Second, higher occupancy at the High-Rise led
to a reduction in the Equity in Net Loss of LCD Partnership of $688,000. Third,
refunds of prior year real estate taxes led to a decrease in real estate tax
expense of $404,000. Funds from Operations includes certain material non-cash
items which are reported in income and expense of the Trust. Please refer to the
Consolidated Statements of Cash Flows in the financial statements for the
computation of cash flows from operating, investing and financing activities.
23
<PAGE>
The Trust has historically used non-recourse debt secured by individual
properties as the primary source of additional capital, when needed, to fund
acquisitions or development. It has also acquired income producing properties in
tax-deferred exchanges in which little or no debt was required. The Trust
currently has four income producing properties with no debt -- Waterplace Park,
Lincoln Garden, the Cityfront Place Mid-Rise and the Ogden Plaza parking
facility.
During the third quarter of fiscal 1995, the Trust entered into a three year
$20,000,000 revolving credit agreement with First Bank, N.A. secured by the
Mid-Rise apartment building. At April 30, 1995, the full amount of the facility
is available. The Trust agreed to make monthly payments into an escrow account
to fund the semi-annual real estate tax payments due on the Cityfront Place
Mid-Rise. At April 30, 1995 the balance in this account equaled $130,000.
At April 30, 1995, total interest bearing debt of the Trust equaled
$27,369,000, all of which was fixed rate debt.
The Trust has occasionally sold properties. The most recent sale occurred
during the third quarter of fiscal 1995 when the Trust sold a parcel containing
approximately 41,000 square feet to the Chicago Music and Dance Theater, Inc.
The Trust received total consideration of $2,638,000 from this sale, of which
$1,250,000 was in cash and $1,388,000 represents the assumption by the Theater
of an obligation under the Planned Development Ordinance affecting the Trust's
land at Cityfront Center, to construct a pedestrian concourse adjacent to the
theater site. Prior to this, the Trust sold the land under the Brick Venture
apartment building adjacent to North Pier at Cityfront Center in fiscal 1989.
The Trust received installment payments of $1.5 million in fiscal 1992 and $2.95
million in fiscal 1993 related to that sale.
In January 1994, the Trust entered into a consent order with the EPA
regarding preliminary testing to be performed on a 2.8 acre site in Cityfront
Center currently used as a parking lot (the "Tested Site"). The EPA has not made
a ruling on whether current remediation will be required nor the form or scope
of such remediation. The Trust's consultants have prepared cost estimates to
remediate the contaminated areas on the Tested Site which range from $1 million
to $5 million, with $3.5 million representing the most likely amount.
On August 11, 1995, the Trust entered into an agreement with KMCC regarding
the financial responsibilities of the parties for the remediation of the Tested
Site (the "Reimbursement Agreement"). Under the terms of the Reimbursement
Agreement, KMCC will be responsible for the remediation of the Tested Site and
the Trust has the obligation to reimburse KMCC for 25% of the cost of
remediation, not to exceed a maximum reimbursement obligation of the Trust of
$750,000.
The Trust will consider using its current cash, investments available for
sale or its current credit facility, to fund its obligations under the
Reimbursement Agreement with KMCC. The Trust may have claims for coverage for
some or all of its share of the remediation costs under its current or prior
insurance policies.
In order to fully develop the land owned by the Trust in Chicago, additional
infrastructure expenditures will be required. These improvements are necessary
to fully redevelop the property in accordance with the Planned Development
Ordinance approved by the Chicago City Council on November 6, 1985.
The Trust completed Phase I infrastructure in fiscal 1988 using the proceeds
from borrowings secured by the Kraft Building and One Michigan Avenue. Total
Phase I expenditures amounted to approximately $10 million. The Trust completed
Phase II infrastructure in fiscal 1992 using the proceeds from a borrowing
secured by the rents from and land under the Sheraton Chicago Hotel & Towers
ground lease.
Phase III infrastructure consists primarily of the River Esplanade and River
Drive east of McClurg Court, Du Sable Park (a 3 acre park east of Lake Shore
Drive), the slip promenade on the south bank
24
<PAGE>
of the Ogden Slip and the upgrading of the remainder of East North Water Street.
The total current cost of the improvements is estimated to be approximately $12
million. The Trust is obligated to contribute $600,000 for improvements to be
made in Du Sable Park, which are expected to be completed during calendar 1996.
The remainder of Phase III will be constructed as needed to support additional
development in the area. However, certain improvements are required to be
completed no later than the completion of 2,500 units of residential development
on the east portion of Cityfront Center. It is the intention of the Trust to
finance future infrastructure with cash on hand, its current credit facility,
general corporate indebtedness, borrowings secured by its income producing
properties and ground leases, asset sales or some combination of these sources.
The New Street Joint Venture Agreement obligates LCD and Northwestern Mutual
to contribute, if necessary, their prorata shares of funds related to the
operation of the High-Rise building. As of April 30, 1995, LCD had funded
$335,000 as its share of additional capital contributions, all of which was
contributed prior to fiscal 1994. LCD currently holds approximately $800,000 in
short term investments. The Trust's two-thirds share of these short term
investments is not reflected on the Trust's balance sheet and is in addition to
the Trust's cash and investments. The New Street Joint Venture agreement
provides for Northwestern Mutual to receive a priority return of operating cash
flow and the proceeds from sale or refinancing of the High-Rise. Cash flow must
increase significantly from its current level for LCD to receive any cash
distributions from New Street Joint Venture after the payment of Northwestern's
preferential return.
On December 16, 1994 the Trust agreed to permit the sale by foreclosure of
One Michigan Avenue, an office building in Lansing, Michigan to its lender,
Pacific Mutual Life Insurance Company, in full satisfaction of the note secured
by One Michigan Avenue. The One Michigan Avenue note, issued in August 1987,
modified in March 1994 and further modified in August 1994 had an interest rate
of 10% and carrying value at December 15, 1994 of $14,590,000. The disposition
of the property will not have a significant impact on the future cash flow of
the Trust. Cash flow from the property was not significant in fiscal 1995.
At Waterplace Park in Indianapolis, the lease for the largest tenant expired
at the end of March 1995. The Trust is currently seeking replacement tenants for
the 29,000 square feet, or 28% of the total building which the tenant vacated.
It is expected that substantial tenant improvement work will be required to
attract new tenants and that brokerage commissions will also be paid in
releasing the space. All of the space is currently vacant.
The Trust currently leases three surface parking lots to the owner of North
Pier Chicago. The lease expires at the end of December 1995. It is anticipated
that there will be an increase in the net cash flow to the Trust after the
expiry of the lease from either a renegotiation of the current lease terms or
from the Trust regaining control of the lots.
Starting July 1, 1995, the base rent payable to the Trust from its lease
with Cityfront Hotel Associates Limited Partnership for the Sheraton Chicago
Hotel & Towers increases to an annual rate of $1.8 million from the current
annual amount of $150,000. While all of this increase will be paid as additional
debt service on the loan which financed the infrastructure improvements
associated with the hotel, it is the starting point for future increases in
minimum base rent and minimum rent will exceed the debt service beginning in
1999. Also starting July 1, 1995, the percentage rent provisions of the ground
lease become effective.
On April 14, 1993 the Board of Trustees of the Trust declared a reduction of
the Trust's quarterly dividend to $.01 per share from $.08 per share effective
for the dividend payable on June 1, 1993. Quarterly dividends declared since
that date have remained at $.01 per share. The dividend reduction is part of an
overall asset management program implemented in order to conserve cash within
the Trust.
25
<PAGE>
Management considers that the Trust's liquidity at April 30, 1995 is
adequate to meet its operating needs and commitments.
26
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Trustees of
The Chicago Dock and Canal Trust:
We have audited the accompanying consolidated balance sheets of The Chicago
Dock and Canal Trust and Subsidiaries as of April 30, 1995 and 1994, and the
related consolidated statements of income, cash flows, and shareholders' equity
for each of the three years in the period ended April 30, 1995. These financial
statements are the responsibility of the Trust'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 The Chicago
Dock and Canal Trust and Subsidiaries as of April 30, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended April 30, 1995, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
August 14, 1995
27
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF APRIL 30, 1995 AND 1994
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
INVESTMENT IN REAL ESTATE, at cost:
Developed properties (Note 3)........................................................... $ 70,487 $ 91,771
Land and land improvements held for development (Note 3)................................ 16,916 18,298
Land subject to hotel ground lease (Note 3)............................................. 6,549 6,500
Less-Accumulated depreciation and amortization.......................................... (11,638) (13,540)
---------- ----------
Net investment in real estate......................................................... 82,314 103,029
---------- ----------
OTHER ASSETS:
Cash and cash equivalents............................................................... 344 487
---------- ----------
Investments available for sale, at cost (approximate market value of $3,721 and $4,985
in 1995 and 1994, respectively)........................................................ 3,725 5,023
---------- ----------
Short-term investments-restricted (approximate market value of $130 and $1,001 in 1995
and 1994, respectively) (Note 10)...................................................... 130 1,000
---------- ----------
Security deposit cash................................................................... 1,330 1,240
---------- ----------
Receivables-
Tenants (including $25,887 and $21,491 of accrued but unbilled rents in 1995 and 1994,
respectively) (Note 3)............................................................... 26,009 21,926
Real estate taxes payable by lessees.................................................. 6,012 5,016
Land improvements (Note 3)............................................................ 1,388 --
Interest.............................................................................. 91 85
Other................................................................................. 506 478
---------- ----------
Total receivables................................................................... 34,006 27,505
---------- ----------
Other assets, net....................................................................... 1,427 1,872
---------- ----------
$ 123,276 $ 140,156
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued expenses:
Real estate taxes..................................................................... $ 3,817 $ 3,815
Real estate taxes payable by lessees.................................................. 6,893 5,861
Accrued environmental remediation costs (Note 11)..................................... 750 --
Other................................................................................. 1,492 2,359
Cash dividends payable (Note 5)......................................................... 58 58
Mortgage notes payable (Note 4)......................................................... 27,369 44,121
---------- ----------
Total liabilities................................................................... 40,379 56,214
---------- ----------
SHAREHOLDERS' EQUITY (Note 5):
Common shares of beneficial interest:
No par value, 20,000,000 authorized, 5,944,200 issued.................................. 3,101 3,101
---------- ----------
Preferred shares of beneficial interest:
No par value, 1,000,000 authorized, none issued........................................ -- --
---------- ----------
Undistributed income before net gain from sale of real estate properties................ 7,870 9,022
Undistributed net gain from sale of real estate properties.............................. 72,545 72,438
---------- ----------
Total undistributed net income...................................................... 80,415 81,460
---------- ----------
Less-
Treasury shares of beneficial interest, at cost-160,400 at April 30, 1995 and 1994.... (619) (619)
---------- ----------
Total shareholders' equity.......................................................... 82,897 83,942
---------- ----------
$ 123,276 $ 140,156
---------- ----------
---------- ----------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
28
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
REVENUES:
Revenue from rental property......................................................................... $15,525 $16,546 $15,609
Real estate taxes payable by lessees................................................................. 6,864 4,168 4,945
------- ------- -------
Total revenues..................................................................................... 22,389 20,714 20,554..
------- ------- -------
EXPENSES:
Real estate taxes.................................................................................... 3,097 3,003 3,407
Real estate taxes payable by lessees................................................................. 6,864 4,168 4,945
Property operating expenses.......................................................................... 3,307 3,444 3,390
Environmental remediation expense (Note 11).......................................................... 1,035 -- --
General and administrative........................................................................... 1,857 1,865 2,156
Depreciation and amortization........................................................................ 3,497 3,781 3,982
Interest expense..................................................................................... 3,751 4,144 4,086
------- ------- -------
Total expenses..................................................................................... 23,408 20,405 21,966
------- ------- -------
Operating income (loss)............................................................................ (1,019) 309 (1,412)
INVESTMENT AND OTHER INCOME............................................................................ 342 321 376
EQUITY IN NET LOSS OF LCD PARTNERSHIP (Note 2)......................................................... (475) (530) (1,218)
NET LOSS FROM DISPOSITION OF REAL ESTATE (Note 3)...................................................... (1,729) -- --
------- ------- -------
Net income (loss) before extraordinary item.......................................................... (2,881) 100 (2,254)
EXTRAORDINARY ITEM:
Gain from extinguishment of debt (Note 3)............................................................ 2,067 -- --
------- ------- -------
Net income (loss).................................................................................... $ (814) $ 100 $(2,254)
------- ------- -------
------- ------- -------
EARNINGS (LOSS) PER SHARE.............................................................................. $(.14) $.02 $(.39)
------- ------- -------
------- ------- -------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
29
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................................................................................... $ (814) $ 100 $(2,254)
Add (deduct)-Adjustments to reconcile net income to net cash flows from operating activities:
Net loss from disposition of real estate........................................................... 1,729 -- --
Gain from extinguishment of debt................................................................... (2,067) -- --
Depreciation and amortization...................................................................... 3,497 3,781 3,982
Environmental remediation costs.................................................................... 953 -- --
Effect of averaging rental revenue................................................................. (4,698) (4,698) (4,698)
Equity in net loss of LCD Partnership.............................................................. 475 530 1,218
Changes in receivables............................................................................. (871) 1,815 (4,225)
Changes in accounts payable and accrued expenses................................................... 1,834 (898) 4,290
Difference between current interest payable and contractual interest............................... 1,922 1,762 1,591
Amortization of loan fees.......................................................................... 155 90 89
Other.............................................................................................. -- (14) (19)
------- ------- -------
Cash flows provided by (used in) operating activities................................................ 2,115 2,468 (26)
------- ------- -------
Cash flows from investing activities:
Proceeds from sales and maturities of investments available for sale............................... 1,755 500 --
Purchases of investments available for sale........................................................ (1,963) (1,006) (1,553)
Net (acquisition) disposition of short-term investments............................................ 1,506 273 1,594
Net (acquisition) disposition of short-term investments-restricted................................. 870 (1,000) 438
Additions to investments in real estate............................................................ (1,099) (620) (1,149)
Music and Dance Theater land sale.................................................................. 1,250 -- --
Receipt of installment payment on Brick Venture transaction........................................ -- -- 2,950
Lease commissions and other........................................................................ (94) (295) (327)
------- ------- -------
Cash flows provided by (used in) investing activities................................................ 2,225 (2,148) 1,953
------- ------- -------
Cash flows from financing activities:
Cash dividends declared............................................................................ (231) (231) (1,446)
Change in dividends payable........................................................................ -- -- (405)
Proceeds from bank line of credit.................................................................. 4,000 -- --
Payment of mortgage loan fees...................................................................... (168) (44) (4)
Principal payments on loans........................................................................ (8,084) (134) (178)
------- ------- -------
Cash flows provided by (used in) financing activities................................................ (4,483) (409) (2,033)
------- ------- -------
Increase (decrease) in cash and cash equivalents....................................................... (143) (89) (106)
Cash and cash equivalents, beginning of period......................................................... 487 576 682
------- ------- -------
Cash and cash equivalents, end of period............................................................... $ 344 $ 487 $ 576
------- ------- -------
------- ------- -------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
30
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED APRIL 30, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNDISTRIBUTED
INCOME BEFORE UNDISTRIBUTED
COMMON NET GAIN FROM NET GAIN FROM TREASURY
SHARES OF SALE OF REAL SALE OF REAL SHARES OF
BENEFICIAL ESTATE ESTATE BENEFICIAL
INTEREST PROPERTIES PROPERTIES INTEREST TOTAL
--------- ------------- ------------- --------- -------
<S> <C> <C> <C> <C> <C>
BALANCE, April 30, 1992.......................................... $3,101 $11,407 $73,884 $(619) $87,773
Net loss for the year.......................................... -- (2,254) -- -- (2,254)
Cash dividends declared, $.25 per share (Note 5)............... -- -- (1,446) -- (1,446)
--------- ------------- ------------- --------- -------
BALANCE, April 30, 1993.......................................... 3,101 9,153 72,438 (619) 84,073
Net income for the year........................................ -- 100 -- -- 100
Cash dividends declared, $.04 per share (Note 5)............... -- (231) -- -- (231)
--------- ------------- ------------- --------- -------
BALANCE, April 30, 1994.......................................... 3,101 9,022 72,438 (619) 83,942
Net income (loss) for the year................................. -- (1,152) 338 -- (814)
Cash dividends declared, $.04 per share (Note 5)............... -- -- (231) -- (231)
--------- ------------- ------------- --------- -------
BALANCE, April 30, 1995.......................................... $3,101 $ 7,870 $72,545 $(619) $82,897
--------- ------------- ------------- --------- -------
--------- ------------- ------------- --------- -------
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
31
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(A) PRINCIPLES OF CONSOLIDATION --
The consolidated financial statements include the accounts of the Trust and
its wholly owned subsidiaries. All material intercompany accounts are eliminated
in consolidation.
(B) INCOME TAXES --
The Trust has elected to be taxed as a real estate investment trust and
intends to make distributions to its shareholders so as to be relieved of
substantially all federal income taxes relating to ordinary income under
provisions of current tax regulations (See Note 5).
(C) EARNINGS PER SHARE --
The computation of earnings per share is based on 5,783,800 shares
outstanding for 1995, 1994 and 1993.
(D) INVESTMENTS IN REAL ESTATE --
Real estate investments are stated at the cost incurred to acquire the
properties. In addition, costs to develop the properties, including interest,
taxes, development, legal and architectural fees are added to the cost of land
or buildings, as appropriate. No interest or taxes were capitalized in fiscal
1995, 1994 or 1993.
Costs incurred for improving tenant spaces in the Trust's office buildings
in conjunction with new leases and renewals are capitalized. Costs incurred in
connection with leasing apartments in the Trust's residential building such as
painting and carpeting are charged to expense when incurred.
(E) ENVIRONMENTAL REMEDIATION COSTS --
In general, the Trust charges environmental remediation costs to expense.
However, the Trust capitalizes these costs, if recoverable and if one of the
following criteria is met:
1. The costs extend the life, increase the capacity, or improve the safety
or efficiency of property owned by the company. However, the condition of
the property after the costs are incurred must be improved as compared
with the condition of the property when originally constructed or
acquired, if later.
2. The costs mitigate or prevent environmental contamination that has yet
to occur.
3. The costs are incurred in preparing for sale that property currently
held for sale.
The Trust accrues for losses related to environmental remediation, if it is
probable that a liability has been incurred and if the amount of the loss can be
reasonably estimated. If the amount of the liability falls within a range and no
amount within that range can be determined to be the better estimate, the Trust
recognizes the minimum amount of the range. The Trust does not discount
environmental liabilities unless
32
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
the amount of the liability and the timing of cash payments are fixed or
reliably determinable. The Trust does not offset claims for potential recoveries
against environmental remediation costs.
(F) DEPRECIATION AND AMORTIZATION --
Developed properties and infrastructure improvements are depreciated over
their estimated useful lives, using the straight-line method of depreciation.
Depreciation of leasehold improvements is computed using the straight-line
method over the terms of the related leases and commences when the improvements
are placed in service. Amortization of leasing commissions is computed using the
straight-line method over the terms of the related leases.
(G) REAL ESTATE TAXES --
In Chicago and certain other jurisdictions in which the Trust owns property,
real estate taxes are assessed on a calendar-year basis, one year in arrears. At
April 30, 1995 the Trust has accrued $10,710,000 as its estimate of unpaid 1994
and 1995 real estate taxes including $6,893,000 payable by lessees pursuant to
ground leases. The Trust does not believe that the difference between the actual
real estate taxes and the current estimates will be material to the financial
statements.
(H) RENTAL INCOME RECOGNITION --
Aggregate rentals from tenant leases are recognized as revenue ratably over
the lives of the leases when collection of all amounts is reasonably assured.
Rental payments received prior to their recognition as income are classified as
deferred rental income and are included in other accrued expenses. Rental
revenues recognized prior to their billing are classified as unbilled rents and
are included in tenant receivables.
(I) PENSION PLANS --
The Trust adopted two defined benefit pension plans in fiscal 1987 which
have been subsequently amended: (1) The Chicago Dock and Canal Trust Retirement
Plan which covers all employees of the Trust; and (2) The Chicago Dock and Canal
Trust Supplemental Executive Retirement Plan which covers the executive officers
of the Trust. The total pension expense for fiscal 1995, 1994 and 1993 was
$87,480, $91,634 and $81,557, respectively, of which $0, $19,842 and $0, was
funded in fiscal 1995, 1994 and 1993, respectively. A comparison of accumulated
plan benefits and plan net assets for the plans, at April 30, 1995, is presented
below:
<TABLE>
<CAPTION>
SUPPLEMENTAL
EXECUTIVE
RETIREMENT RETIREMENT
PLAN PLAN
----------- ------------
<S> <C> <C>
Actuarial present value of accumulated plan benefits:
Vested............................................................................... $ 196,529 $ 75,769
Non-vested........................................................................... 17,987 11,675
----------- ------------
$ 214,516 $ 87,444
----------- ------------
----------- ------------
Net assets available for benefits...................................................... $ 282,898 $ 160,150
----------- ------------
----------- ------------
</TABLE>
The assumed rate of return used in determining the actuarial present value
of accumulated plan
33
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
benefits was 8% for 1995, 1994 and 1993.
(J) CONSOLIDATED STATEMENTS OF CASH FLOWS --
In fiscal 1995, 1994 and 1993, the Trust, in non-cash transactions, retired
fully depreciated leasehold improvements of $170,000, $843,000 and $536,000,
respectively. In fiscal 1995, the Trust, in a non-cash transaction, eliminated
net investment in real estate of $17,332,000, accrued interest payable of
$1,477,000 and mortgage note payable of $14,590,000 related to the One Michigan
Avenue foreclosure. In fiscal 1995, the Trust received total consideration of
$2,638,000 from the sale to the Chicago Music and Dance Theater, Inc. Total
consideration included a non-cash transaction of $1,388,000 which represents the
assumption by the Theater of an obligation under the Planned Development
Ordinance affecting the Trust's land at Cityfront Center to construct a
pedestrian concourse adjacent to the theater site. The Trust paid $977,000,
$1,646,000 and $2,410,000 in interest on borrowings in fiscal 1995, 1994 and
1993, respectively.
(K) CASH AND CASH EQUIVALENTS --
For purposes of the Consolidated Balance Sheets and Consolidated Statements
of Cash Flows, Cash and Cash Equivalents consist of amounts held in demand
deposit and money market accounts.
(L) INVESTMENTS --
The Trust has designated all unrestricted investment securities as available
for sale. As of April 30, 1995 the cost of these securities approximated market
value.
(M) RECLASSIFICATIONS --
Certain reclassifications have been made to prior year statements to make
them comparable with the classifications used in fiscal 1995.
(2) SUBSIDIARIES AND JOINT VENTURE:
CDCT PLAZA CORPORATION --
CDCT Plaza Corporation (the "Plaza Corp.") was formed by the Trust as a
wholly owned subsidiary. The Plaza Corp. owns or controls the 400 stall parking
facility under and adjacent to Ogden Plaza. The Plaza Corp. owns the area under
Park Drive, adjacent to Ogden Plaza, has a lessee's interest in a long term
lease from the Chicago Park District in the area under Ogden Plaza, and has a
licensee's interest in the area under Columbus Drive, adjacent to Ogden Plaza,
from the City of Chicago. The license expires February 2002, subject to the City
of Chicago's right to cancel the license for the payment of a fee to the Plaza
Corp. The area subject to the license contains 100 parking stalls and is
separate from the main portion of the parking facility which contains 300
stalls. An independent contractor operates the 400 stall parking facility, with
the Plaza Corp. receiving a varying percentage of gross revenues. The Trust
consolidates the operations of the Plaza Corp. in these financial statements.
OMA LANSING CORPORATION --
OMA Lansing Corporation (the "Lansing Corp.") was formed by the Trust during
fiscal 1994 as a wholly owned subsidiary. Lansing Corp. owned One Michigan
Avenue, a 148,000 sq. ft. office building located
34
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1995, 1994 AND 1993
(2) SUBSIDIARIES AND JOINT VENTURE: (CONTINUED)
in Lansing, Michigan until December 16, 1994 when the Trust agreed to permit the
sale by foreclosure of the building to its lender, Pacific Mutual Life Insurance
Company. The Trust consolidates the operations of the Lansing Corp. in these
financial statements.
CDCT RESIDENCE CORPORATION --
CDCT Residence Corporation (the "Residence Corp.") is a wholly owned
subsidiary which was capitalized with land located at the southeast corner of
East North Water and New Streets, (the "High-Rise" site) in Cityfront Center.
The Trust consolidates the operations of the Residence Corp. in these financial
statements.
In August 1989, the Residence Corp. entered into a partnership, LCD
Partnership ("LCD"), with Daniel E. Levin ("Levin"). The Residence Corp.
contributed the High-Rise site which was valued at $6,602,000 and which had an
historic cost of $1,689,000. Levin contributed cash, building plans for the
High-Rise building and a note for $903,000 which matured and was paid in
September 1991. Levin's contribution was valued at $3,301,000. The Residence
Corp. is a two-thirds partner in LCD and Levin is a one-third partner. Major
decisions of LCD, however, require unanimous approval. Accordingly, the
Residence Corp. accounts for its investment in LCD under the equity method.
In August 1989, LCD entered into a joint venture, New Street Joint Venture
("NSJV"), with Northwestern Mutual Life Insurance Company ("Northwestern
Mutual"). LCD contributed the High-Rise site, the plans and other assets related
to the development of the building (excluding the $903,000 note from Levin).
LCD's capital account was credited with $9,000,000. Northwestern Mutual
contributed an equal amount of cash. Northwestern Mutual and LCD are 50/50
partners in NSJV, subject, however, to Northwestern Mutual's priority over LCD
in certain distributions of cash flow and proceeds from sale or refinancing. LCD
accounts for its investment in NSJV under the equity method. The NSJV agreement
provides for Northwestern Mutual to receive a priority return of operating cash
flow and the proceeds from sale or refinancing of the High-Rise. Cash flow must
increase significantly from its current level for LCD to receive any cash
distributions from NSJV after the payment of Northwestern's preferential return.
Northwestern Mutual also loaned NSJV $36,700,000 on a non-recourse basis. In
addition, the NSJV Agreement calls for LCD and Northwestern Mutual to
contribute, if necessary, their prorata shares of shortfalls in operating and
capital requirements. The High-Rise building opened in July 1991 and contains
480 units.
As of December 31, 1994, total assets and liabilities of NSJV were
$47,928,000 and $38,903,000, respectively. For the year ended December 31, 1994,
NSJV recorded gross revenues of $6,637,000 and total expenses of $8,203,000,
which resulted in a net loss of $1,566,000. Included in total expenses is
depreciation and amortization expense, which for the year equaled $1,700,000.
LCD has a fiscal year which ends on April 30 and NSJV uses the calendar year.
Accordingly, LCD records its proportionate share of NSJV's operating results
four months in arrears.
(3) INVESTMENTS IN REAL ESTATE:
DEVELOPED PROPERTIES --
At April 30, 1995 and 1994, the Trust's investment in developed properties,
including leasehold interests, underlying land and a partnership interest in LCD
(which is accounted for under the equity method) consisted of the following:
35
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1995, 1994 AND 1993
(3) INVESTMENTS IN REAL ESTATE: (CONTINUED)
<TABLE>
<CAPTION>
1995 1994
(IN 000'S) (IN 000'S)
---------- ----------
<S> <C> <C>
Apartment buildings..................................................................................... $51,648 $51,983
Office buildings........................................................................................ 16,036 37,018
Parking facility........................................................................................ 2,803 2,770
---------- ----------
70,487 91,771
Accumulated depreciation and amortization............................................................... (9,046) (11,428)
---------- ----------
$61,441 $80,343
---------- ----------
---------- ----------
</TABLE>
CITYFRONT PLACE MID-RISE -- On December 17, 1991, the Trust acquired the
Mid-Rise apartment complex and related leasehold. The acquisition of the
Mid-Rise was part of a transaction in which the Trust exchanged its 62%
undivided interest in the Equitable Building in Chicago for the Mid-Rise. The
Mid-Rise is a residential complex located in Cityfront Center in downtown
Chicago. It consists of two 12-story buildings containing a total of 424 rental
units. The Mid-Rise was acquired at a total cost of $52.5 million. The price was
determined pursuant to a Sale Option Agreement dated August 31, 1989, between
the Trust and Levin.
The Equitable Life Assurance Society of the United States ("Equitable")
acquired the Trust's 62% interest in the Equitable Building pursuant to an
option granted to Equitable as part of the dissolution of the Chicago
Dock-Equitable Venture. The price for such interest was $50 million. In December
1990, Equitable exercised its option under the Option Agreement to acquire the
Trust's interest in the Equitable Building and acquired the Trust's interest on
December 17, 1991.
ONE MICHIGAN AVENUE -- On December 16, 1994 the Trust permitted the sale by
foreclosure of One Michigan Avenue, an office building in Lansing, Michigan to
its lender, Pacific Mutual Life Insurance Company, in full satisfaction of the
note secured by One Michigan Avenue. The Trust conducted extensive negotiations
with the lender including modifications to the note in March 1994 and again in
August 1994 (the "August modification"), in an effort to restructure the loan.
However, the Trust concluded that the property's reasonably estimated future
value was insufficient to warrant the future capital investment required to
satisfy the terms of the August modification agreement to the loan. The loan was
non-recourse with respect to the Trust. Accordingly, the Trust's financial
exposure was limited to the loss of the building. The Trust recognized a net
loss of $1,265,000 on the transaction; of this, $3,332,000 was recorded as a
loss from disposition of real estate representing the difference between the
carrying value of the property and the fair market value of the property on the
date of the foreclosure. An extraordinary gain from the extinguishment of
indebtedness of $2,067,000 was also recorded during the third quarter of fiscal
1995, representing the difference between the principal amount of the note plus
accrued interest and the fair market value of the property on the date of the
foreclosure.
LAND AND LAND IMPROVEMENTS HELD FOR DEVELOPMENT --
MUSIC AND DANCE THEATER SITE -- On December 30, 1994, the Chicago Music and
Dance Theater, Inc. (the "Theater") acquired from the Trust a parcel of land
containing approximately 41,000 square feet, located in Cityfront Center which
is planned to be the site of a new 1,500 seat performing arts theater. The Trust
received $1,250,000 in cash shortly after the closing. The contract also
obligates the Theater to construct a pedestrian concourse through the theater
site. This concourse is an obligation under the Planned Development Ordinance
affecting the Trust's land at Cityfront Center and will benefit not only the
theater site but also the future buildings planned for the sites owned by the
Trust adjacent to the theater.
36
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1995, 1994 AND 1993
(3) INVESTMENTS IN REAL ESTATE: (CONTINUED)
The estimated cost of this work is $1,500,000. The Theater is required to
commence construction by September 1, 1996, subject to force majeure delays.
In computing the gain on the sale of $1,603,000, total consideration
includes the cash received plus the value of the construction obligation assumed
by the Theater which will benefit the surrounding parcels still owned by the
Trust.
The Trust, together with other businesses near the theater site, agreed to
provide the Theater with an annual operating subsidy for up to twenty years. The
Trust agreed to provide up to $50,000 in the first year of the theater's
operation. This amount increases annually in years 2 through 10 by the increase
in the Consumer Price Index, but no more than 5% over the prior year amount.
During years 11 through 14, the amount is the same as the year 10 amount. The
amount declines during the 15th through 20th years. The amount of the subsidy
may be reduced based on the number of annual public performances at the theater.
The Trust agreed to provide the subsidy in light of the anticipated increase in
parking revenues at its Ogden Plaza parking facility from the theater patrons.
In management's opinion this increase in parking revenues will equal or exceed
the subsidy on an annual basis. The parking facility is adjacent to the theater
site and will be connected to the theater at grade level providing direct access
to the parking facility from the theater.
LAND SUBJECT TO HOTEL GROUND LEASE --
SHERATON CHICAGO HOTEL & TOWERS -- During fiscal 1989, the Trust entered
into a 50 year ground lease (with lessee options to extend the term 49 more
years) with Tishman Realty Corporation of Cook County ("Tishman Realty") for
approximately 2.3 acres of land in Cityfront Center in Chicago. Tishman Realty
subsequently assigned this lease to Cityfront Hotel Associates Limited
Partnership ("Cityfront Hotel Associates"), the current lessee. The site is
currently improved with a 1,200 room convention hotel called the Sheraton
Chicago Hotel & Towers which opened in March 1992. The lease provides for
minimum annual rental payments which are fixed at $150,000 through calendar
1994, and for payments totaling $75,000 for the six month period January 1, 1995
through June 30, 1995. The payments increase to $900,000 for the six month
period July 1, 1995 through December 31, 1995, and to $2,100,000 for calendar
1996. After 1996, the base rent increases annually by the increase in the
Consumer Price Index, but not less than 5% nor more than 10% per year. In
addition to the base rent, percentage rent is also payable beginning July 1,
1995. Percentage rent equals the amount by which base rent is exceeded by the
product obtained by multiplying gross revenues from operations by the following
applicable percentages:
APPLICABLE PERCENTAGES
<TABLE>
<CAPTION>
ROOM FOOD BEVERAGE OTHER
DATE REVENUES REVENUES REVENUES REVENUES
- -------------------------------------------------------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
July 1, 1995 -- February 28, 1999..................................................... 3.50% 2.00% 3.00% 3.00%
March 1, 1999 -- February 28, 2001.................................................... 3.75% 2.50% 3.25% 3.50%
March 1, 2001 -- February 28, 2003.................................................... 4.00% 3.00% 3.50% 4.00%
March 1, 2003 -- February 28, 2007.................................................... 4.50% 4.50% 4.50% 4.50%
March 1, 2007 and after............................................................... 5.00% 5.00% 5.00% 5.00%
</TABLE>
The lessee also acquired an option to purchase the land. The earliest date
on which the land could be acquired pursuant to the option is July 1, 2003. The
purchase option provides that the land price will be the greater of (i) $40
million at January 1, 1999 escalating thereafter by the increase in the Consumer
37
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1995, 1994 AND 1993
(3) INVESTMENTS IN REAL ESTATE: (CONTINUED)
Price Index, but not less than 5% nor more than 10% per year or (ii) the highest
annual ground rent payable during the thirty-six month period preceding the
closing date divided by the following Applicable Capitalization Rates:
<TABLE>
<CAPTION>
APPLICABLE
CAPITALIZATION
OPTION EXERCISE DATE RATE
- ----------------------------------------------------------------------------------------------------------------- --------------
<S> <C>
March 1, 2003 -- February 28, 2004............................................................................... 7.5%
March 1, 2004 -- February 28, 2007............................................................................... 7.2%
March 1, 2007 -- February 29, 2008............................................................................... 7.3%
March 1, 2008 and after.......................................................................................... 7.5%
</TABLE>
In addition, in the event the option is exercised during the twelfth
operating year beginning March 1, 2003, a supplemental amount of $2.5 million
will be added to the purchase price. If the option were exercised at its
earliest date, March 1, 2003, the minimum purchase price which the Trust would
receive is approximately $52 million.
The Trust recognizes as rental revenue the average minimum base rent payable
over the initial 50 year term of the lease. This rent increases from $150,000 in
1989 to $16.1 million in 2038. The average rent calculation also considers the
minimum purchase price pursuant to the terms of the above described purchase
option. Under the Trust's method of revenue recognition, the total carrying
value of the land and the related accrued rent receivable will never exceed the
minimum option purchase price. The annual rental income recognized on the lease
is approximately $4,848,000. The cash rent received during fiscal 1995 equaled
$150,000.
The lease obligated the Trust to construct certain Phase II infrastructure
prior to the opening of the hotel. These development obligations consisted
primarily of Ogden Plaza and the elevated roadways adjacent to Columbus Drive
and surrounding the plaza. In addition to the infrastructure obligation under
the terms of the lease, the Trust also constructed the parking facility under
Ogden Plaza (See Note 2). Phase II infrastructure was substantially completed in
March 1992. This infrastructure was financed with the proceeds from a loan which
has debt service payments which, for the first eight years, correspond to the
base rent payable on the ground lease (See Note 4).
OPTION --
OPEN AREAS -- In December 1988, the Trust dedicated to the Chicago Park
District a portion of the Ogden Slip Turning Basin and the three major open
areas called for in the Planned Development Ordinance for Cityfront Center: (1)
Approximately 1.3 acres of River Esplanade extending east along the north bank
of the Chicago River from Columbus Drive to Lake Shore Drive; (2) Ogden Plaza,
approximately 1.2 acres of land adjacent to Columbus Drive; and (3) Du Sable
Park, which consists of approximately 3 acres of land east of Lake Shore Drive.
The dedication restricts all of these areas for use as public parks. However,
the Trust has the right and is exercising this right to lease the area under
Ogden Plaza for parking. The Trust is responsible for the construction of the
infrastructure as described in the Planned Development Ordinance. The Trust is
obligated to contribute $600,000 for improvements to be made in Du Sable Park.
These improvements are expected to be completed during calendar 1996. The Trust
retained an option to lease a portion of Du Sable Park to construct and operate
a public facility such as a restaurant.
38
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1995, 1994 AND 1993
(4) MORTGAGE NOTES PAYABLE:
At April 30, 1995, mortgage notes payable consisted of two notes secured by
first mortgages on the rents from and the land under the Kraft Building, and the
rents from and the land under the Sheraton Chicago Hotel & Towers. Both notes
are non-recourse with respect to the Trust.
The principal balance of the Kraft Building note issued in May 1987, was
$5,812,000 at April 30, 1995. It is due in April 2016, bears interest at an
annual rate of 9.5%, payable monthly, and is self-amortizing over its term. The
carrying value of collateral pledged on this note at April 30, 1995 equaled
$15,000.
At April 30, 1995, the principal balance of the note secured by the rents
from and the land under the Sheraton Chicago Hotel & Towers was $21,557,000. The
note is due January 1, 2005. The initial principal amount of the loan was
$14,367,000 and the interest rate is 10.25%. Amounts are payable monthly, but
through December 31, 1998, the debt service currently payable coincides with the
ground rent due under the Sheraton lease. The difference between current
interest payable and the contractual interest is added to principal. Starting in
1999, debt service will be computed on a 30 year amortization based on the then
current principal balance. The carrying value of collateral pledged on this note
at April 30, 1995 was $31,466,000 and consisted of land, the depreciated basis
in land improvements and accrued but unbilled rent.
On December 16, 1994, the Trust permitted the sale by foreclosure of One
Michigan Avenue, an office building in Lansing, Michigan to its lender, Pacific
Mutual Life Insurance Company, in full satisfaction of the note secured by One
Michigan Avenue. The One Michigan Avenue note, issued in August 1987, modified
in March 1994 (the "March modification") and further modified in August 1994
(the "August modification") had an interest rate of 10% and a carrying value at
December 15, 1994 of $14,590,000.
Due to the significant reduction in cash flow from One Michigan Avenue after
the IBM (the building's largest tenant) lease renewal took effect, the Trust
suspended regular debt service subsequent to the September 1, 1993 payment.
Under the terms of the March modification agreement, the lender received the
cash flow from the property from September 1, 1993 to August 31, 1994, in place
of regular debt service. Under the terms of the August modification agreement,
cash flow from the property also replaced regular debt service to the lender
from September 1, 1994 to December 15, 1994.
The Trust continued to accrue interest on the loan at the contractual rate
through the effective date of the March modification agreement. Subsequent to
the date of the March modification agreement and up until the date of the August
modification agreement, the Trust accrued interest at a rate which applied a
constant effective interest rate to the carrying amount of the note for each
period from the March modification date to the maturity of the note taking into
account the accrued interest to be forgiven under the March modification
agreement. This constant effective interest rate was approximately 5.5%. After
the August modification agreement was signed and through the date of the
foreclosure sale on December 16, 1994, the Trust accrued interest on the loan at
the original contractual rate of 10%. At December 15, 1994, accrued interest on
this note equaled $1,477,000.
This loan was non-recourse with respect to the Trust. Accordingly, the
Trust's financial exposure was limited to the loss of the property. The Trust
recognized a net loss of $1,265,000 during the third quarter of fiscal 1995 as a
result of the sale by foreclosure.
39
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1995, 1994 AND 1993
(4) MORTGAGE NOTES PAYABLE: (CONTINUED)
Principal repayments are due on the two outstanding notes as follows during
the next five years:
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
- ------------------------------------------------------------------------------------------------------------------------ --------
<S> <C>
1996.................................................................................................................... $ 92,000
1997.................................................................................................................... 101,000
1998.................................................................................................................... 111,000
1999.................................................................................................................... 160,000
2000.................................................................................................................... 256,000
</TABLE>
REVOLVING CREDIT FACILITY --
On December 23, 1994, the Trust entered into a revolving credit agreement
with First Bank, N.A. The agreement has a three year term and provides for a
maximum commitment by the lender of $20,000,000. The agreement is secured by the
Cityfront Place Mid-Rise. Initially the Trust borrowed $4,000,000 of the
available credit and used the proceeds to retire the $4,000,000 Cityfront Place
Mid-Rise note issued February 25, 1992. During the fourth quarter of fiscal
1995, the Trust repaid the $4,000,000 initially advanced under the credit
facility using available cash and cash equivalents and investments available for
sale. Accordingly, at April 30, 1995, the full amount of the facility is
available. Interest only, based on LIBOR plus 135 basis points, is due monthly
on the amount advanced under the revolving credit agreement. The carrying value
of collateral pledged on this revolving credit agreement at April 30, 1995
equaled $47,700,000.
(5) SHAREHOLDERS' EQUITY:
On July 20, 1988, the Board of Trustees of the Trust declared a dividend of
one Right for each common share of the Trust entitling the holder to purchase
from the Trust one common share at a price of $75.00 per share, subject to
adjustment. The Rights are not exercisable until a date (the "Distribution
Date") ten days after a person (or group of affiliated persons) acquires 25% or
more of the common shares and thereby becomes an "Acquiring Person" or announces
its intention to make a tender offer which would result in the beneficial
ownership by a person of greater than 30% of the Trust's common shares. If the
Distribution Date has occurred and a person becomes an Acquiring Person, each
holder of a Right, other than the Rights held by the Acquiring Person, will,
thereafter, have the right to receive upon exercise that number of common shares
having a market value of two times the exercise price of the Right. The Rights
may be redeemed in whole at a price of one cent per Right by the Board of
Trustees at any time until ten days following the public announcement that a
person has become an Acquiring Person, and any exercise of the Rights is subject
to such redemption right.
Included in undistributed income before net gain from the sale of real
estate properties is approximately $2,385,000, representing total retained
earnings at January 22, 1962, the date on which The Chicago Dock and Canal
Company converted to a REIT.
In order to retain its status as a qualified real estate investment trust,
the Trust is required to distribute at least 95% of taxable ordinary income
computed in accordance with Federal income tax laws and regulations. The amount
of taxable income differs from reported net income due to differences in the
treatment of certain items for tax and financial reporting purposes. Dividends
paid may be applied to
40
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1995, 1994 AND 1993
(5) SHAREHOLDERS' EQUITY: (CONTINUED)
different fiscal years for tax and financial reporting purposes.
The following analysis reconciles reported net loss for fiscal 1995 to
estimated taxable loss for that period:
<TABLE>
<CAPTION>
PER
TOTAL SHARE
---------- ------
<S> <C> <C>
(IN 000'S)
Net loss per statement of income......................................................................... $ (814) $ (.14)
Adjustments required to determine taxable income--
Book to tax adjustment on property transactions........................................................ 10,037 1.73
Net operating loss carry forward from prior years...................................................... (7,129) (1.23)
Accrued rent on hotel ground lease..................................................................... (4,698) (.81)
Book depreciation in excess of tax..................................................................... 1,388 .24
Environmental remediation expense...................................................................... 750 .13
Other, net............................................................................................. (381) (.07)
---------- ------
Taxable loss............................................................................................. $ (847) $ (.15)
---------- ------
---------- ------
</TABLE>
The tax status of dividends for Federal income tax purposes for each of the
last three fiscal years was:
<TABLE>
<CAPTION>
FISCAL YEAR
----------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Ordinary income................................. $-- $.04 $--
Capital gain.................................... .04 -- .25
---- ---- ----
Total......................................... $.04 $.04 $.25
---- ---- ----
---- ---- ----
</TABLE>
(6) RELATED-PARTY TRANSACTIONS:
The Trust incurred legal fees of approximately $209,000, $309,000 and
$220,000, with the law firm of Wilson & McIlvaine for services rendered in
fiscal 1995, 1994 and 1993, respectively. Frank A. Reichelderfer, who retired as
the Secretary of the Trust on September 23, 1992, is a former partner in Wilson
& McIlvaine. Michael F. Csar, who has served as Secretary or Assistant Secretary
of the Trust since 1992, is a partner in Wilson & McIlvaine.
The Trust incurred management fees of approximately $109,000, $108,000 and
$88,000, with the Habitat Company, for property management services for the
Mid-Rise, in fiscal 1995, 1994 and 1993, respectively, pursuant to a long term
management agreement with the Habitat Company. The Habitat Company is
substantially owned by Daniel E. Levin, a partner in LCD Partnership ("LCD"),
along with the Trust's wholly owned subsidiary, CDCT Residence Corporation. LCD
entered into a joint venture, NSJV, with Northwestern Mutual Life Insurance
Company. NSJV, which owns the High-Rise, retained the Habitat Company to provide
property management services for the High-Rise. NSJV incurred management fees
for the High-Rise of approximately $166,000, $157,000 and $102,000 for the years
ended December 31, 1994, 1993 and 1992, respectively. The Habitat Company has
retained LCD to provide consulting services regarding operation of the High-Rise
and incurred fees of approximately $41,000, $39,000 and $26,000 for the years
ended December 31, 1994, 1993 and 1992, respectively.
41
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1995, 1994 AND 1993
(7) FUTURE MINIMUM RENTALS:
The following is a schedule of minimum lease payments receivable under
operating leases signed as of April 30, 1995 that have initial or noncancelable
lease terms in excess of one year, reported on a cash basis:
<TABLE>
<CAPTION>
Fiscal Year --
<S> <C>
1996............................................................................. $ 3,974,000
1997............................................................................. 4,101,000
1998............................................................................. 3,736,000
1999............................................................................. 3,436,000
2000............................................................................. 3,482,000
Thereafter....................................................................... 301,082,000
-------------
$ 319,811,000
-------------
-------------
</TABLE>
In addition to the above listed amounts, certain tenants are required to pay
a portion of executory costs, including real estate taxes, insurance,
maintenance and other operating expenses. Real estate taxes payable by all
tenants under "net" leases, which are reflected as both revenue and expense,
were $6,864,000, $4,168,000 and $4,945,000, in fiscal years 1995, 1994 and 1993,
respectively.
Revenues recognized during fiscal 1995 from Cityfront Hotel Associates for
average minimum base rent and real estate taxes payable were $4,848,000 and
$5,524,000, respectively, for a total of $10,372,000 or 46% of total revenues of
$22,389,000. In management's opinion the collection of this lease obligation is
reasonably assured, given that the Trust's interest in the land is not
subordinated to any of the debt or equity invested in the improvements.
Accordingly, the Trust will either collect the rent due under the lease, or in
the case of a default and termination of the lease, succeed to ownership of the
improvements not subject to any of the debt. Gross revenues from operations of
the hotel equaled $58 million during calendar 1994 and $54 million during
calendar 1993. Average occupancy during calendar 1994 equaled 68% and during
calendar 1993 equaled 65%.
The following tenants comprise a significant amount of the total minimum
rentals disclosed above (See Note 3):
<TABLE>
<CAPTION>
AMOUNT PERCENT
------------- ------------
<S> <C> <C>
Cityfront Hotel Associates (Sheraton Chicago Hotel & Towers)...................... $ 301,017,000 94.1%
Kraft............................................................................. 13,440,000 4.2%
------------- ---
$ 314,457,000 98.3%
------------- ---
------------- ---
</TABLE>
(8) EMPLOYEE STOCK OPTIONS:
At April 30, 1995, there are outstanding, under both incentive and
non-qualified plans, options to purchase 423,276 shares of Beneficial Interest
which were granted to certain key employees. The exercise prices of the options
range from $9.00 to $24.75 per share, which represent the fair market values at
the dates of grant. Generally, the non-qualified options have a term of 20 years
and are exercisable at the rate of 10% per year starting one year from the date
of grant. Incentive stock options have a term of 10 years and are exercisable at
the rate of 20% per year starting one year from the date
42
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1995, 1994 AND 1993
(8) EMPLOYEE STOCK OPTIONS: (CONTINUED)
of grant.
On April 14, 1993, the Trust amended the employment agreements for Messrs.
Gardner and Tinkham allowing up to 20% of stipulated cash compensation to be
paid in stock options in lieu of cash at the discretion of the Trust. On May 2,
1995, for fiscal year 1996, options to purchase 20,316 and 8,804 shares were
granted to Messrs. Gardner and Tinkham, respectively, in lieu of cash pursuant
to the terms of The Chicago Dock and Canal Trust 1993 Employees' Stock Option
Plan. Twenty-five percent of these options first become exercisable quarterly in
the applicable fiscal year, starting August 1, and the options have a term of 20
years. During fiscal year 1995, 20% of stipulated cash compensation for Messrs.
Gardner and Tinkham was replaced with options to purchase 22,588 and 9,788
shares, respectively. During fiscal year 1994, 20% of stipulated cash
compensation for Messrs. Gardner and Tinkham was replaced with options to
purchase 24,000 and 10,400 shares, respectively.
At April 30, 1995, no options have been exercised; options granted pursuant
to all plans covering 228,038 shares had vested and were exercisable.
(9) TRUSTEE STOCK OPTIONS:
At April 30, 1995, there are outstanding options to purchase 25,500 shares
of Beneficial Interest which, were granted to non-employee Trustees pursuant to
The Chicago Dock and Canal Trust 1988 Trustees' Stock Option Plan. The exercise
prices of the options range from $9.00 to $25.00 per share, which represent the
fair market values at the dates of grant. The options generally become
exercisable one year after their grant except in the case of death or qualified
retirement of a Trustee, in which case they become exercisable immediately.
On April 12, 1995, the Trustees unanimously voted to replace the annual cash
retainer for fiscal 1996 with the grant of Trustee stock options pursuant to The
Chicago Dock and Canal Trust 1993 Trustees' Stock Option Plan. Each Trustee
received a grant to acquire 3,676 shares at $10.875 per share, the market price
on the date of grant. During fiscal years 1995 and 1994, stock options also
replaced the annual cash retainer for the Trustees at exercise prices equal to
the market price on the dates of grant. Each Trustee received a grant to acquire
3,764 shares at $10.625 per share during fiscal year 1995 and 4,000 shares at
$10.00 per share during fiscal year 1994. Twenty-five percent of these options
first become exercisable quarterly, in the applicable fiscal year, starting May
1, and the options have a term of 20 years.
At April 30, 1995, no options have been exercised; options granted and
outstanding pursuant to both plans equaled 114,138, of which 80,730 shares were
exercisable.
(10) SHORT-TERM INVESTMENTS -- RESTRICTED:
During the fourth quarter of fiscal 1994, the Trust placed $1,000,000 into
an escrow account as part of the loan modification agreement (subsequently
amended) entered into with the lender of the loan secured by the property at One
Michigan Avenue. On December 16, 1994, the Trust permitted the sale by
foreclosure of One Michigan Avenue to its lender, Pacific Mutual Life Insurance
Company, and the funds in the escrow were returned to the Trust during the third
quarter of fiscal 1995.
As a requirement of the revolving credit agreement entered into by the Trust
on December 23, 1994 with First Bank, N.A., the Trust agreed to make monthly
payments into an escrow account. This account funds the semi-annual real estate
tax payments due on the Cityfront Place Mid-Rise. At April 30, 1995,
43
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
APRIL 30, 1995, 1994 AND 1993
(10) SHORT-TERM INVESTMENTS -- RESTRICTED: (CONTINUED)
the balance in this account equaled $130,000.
(11) ENVIRONMENTAL REMEDIATION COSTS:
In June 1993, the U.S. Environmental Protection Agency (the "EPA") conducted
preliminary surface tests on a 2.8 acre site currently used as a surface parking
lot (the "Tested Site"). The Tested Site was examined because thorium, a
radioactive element, may have been used on the Tested Site earlier in the
century by a former tenant, in a building which was demolished in the mid 1930's
after the expiry of the tenant's lease.
In January 1994, the Trust entered into a consent order with the EPA
regarding preliminary testing to be performed on the Tested Site. Initial
on-site tests were conducted pursuant to that order in May 1994 and laboratory
analysis was completed on the samples in June 1994. The results of the tests
indicate one concentrated area which appears to be contaminated by thorium, and
other scattered areas on the Tested Site with significantly lower levels of
contamination. The most contaminated area is within the footprint of the
building previously occupied by the former tenant. The Trust submitted the
results of the testing to the EPA in September 1994. The EPA is currently
evaluating the results of these tests.
The Trust's consultants have prepared cost estimates to remediate the
contaminated areas on the Tested Site which range from $1 million to $5 million,
with $3.5 million representing the most likely amount. That range of costs is
estimated based on the results of surface measurements and the analysis of
samples gathered from nine borings taken on the site. While these tests were
made pursuant to the consent order with the EPA, additional conditions may exist
on the site which would be discovered only upon excavation.
On August 11, 1995, the Trust entered into an agreement with Kerr-McGee
Chemical Corporation ("KMCC"), the successor to a former tenant of the Tested
Site, regarding the financial responsibilities of the parties for the
remediation of the Tested Site (the "Reimbursement Agreement"). Under the terms
of the Reimbursement Agreement, KMCC will be responsible for the remediation of
the Tested Site and the Trust has the obligation to reimburse KMCC for 25% of
the cost of remediation, not to exceed a maximum reimbursement obligation of the
Trust of $750,000. Legal counsel has advised the Trust that it may have claims
for coverage for some or all of its share of the remediation costs under its
current or prior insurance policies.
The EPA has not made a ruling on whether current remediation will be
required nor the form or scope of such remediation. At the latest, the Tested
Site will be remediated when redevelopment occurs. The remediation will most
likely be in the form of excavation and disposal of the soil in specified
disposal areas. It is probable that the Trust and/or KMCC will enter into a
subsequent consent order regarding remediation.
In the fourth quarter of fiscal 1995, the Trust recorded environmental
remediation expense of $1,035,000 based upon the resolution of accounting and
other issues related to environmental remediation costs of property held for
development and the execution of the Reimbursement Agreement with KMCC. This
amount includes the Trust's share of testing and legal costs related to the
Tested Site through April 30, 1995, plus $750,000, which is the maximum
reimbursement obligation of the Trust pursuant to the terms of the Reimbursement
Agreement. This amount excludes the amount of the potential claims for some or
all of the Trust's share of the remediation costs under the Trust's current or
prior insurance policies.
44
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SUPPLEMENTAL SCHEDULE
To the Shareholders and Trustees of
The Chicago Dock and Canal Trust:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of THE CHICAGO DOCK AND CANAL TRUST AND
SUBSIDIARIES included in this Form 10-K, and have issued our report thereon
dated August 14, 1995. Our audit was made for the purpose of forming an opinion
on those statements taken as a whole. Supplemental schedule III is the
responsibility of the Trust's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
August 14, 1995
45
<PAGE>
SCHEDULE III
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF APRIL 30, 1995
<TABLE>
<CAPTION>
INITIAL COST
----------------------- COST SUBSEQUENT TO
LAND AND BUILDINGS ACQUISITION
LAND AND ------------------------
IMPROVE- IMPROVE- IMPROVE- CARRYING
DESCRIPTION ENCUMBRANCES MENTS MENTS MENTS COSTS
- ---------------------------------------- ------------ ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Office Complexes-
Lincoln Garden
2901 West Busch Boulevard
Tampa, Florida........................ -- $1,600,000 $ 5,200,041 $ 610,355 --
Waterplace Park
8925-9011 N. Meridian St.
Indianapolis, Indiana................. -- 1,400,000 6,300,000 925,808 --
Apartment Complex-
Cityfront Place Mid-Rise
440-480 North McClurg Court
Chicago, Illinois..................... -- 214,428 52,593,152 196,074 --
Parking Facility-
Ogden Plaza
300 East North Water Street
Chicago, Illinois..................... -- -- 2,762,698 40,471 --
Ground lease (Hotel)-
Sheraton Chicago Hotel & Towers
301 East North Water Street
Chicago, Illinois..................... 21,557,146 643,284 -- 5,562,854 343,100
Investment in LCD Partnership (66 2/3%
partnership interest) LCD Partnership
has 50% partnership interest in New
Street Joint Venture which owns:
Apartment Building -
Cityfront Place High-Rise
400 North McClurg Court
Chicago, Illinois (1)................. -- 1,689,161 -- -- (3,045,359)
Land and land improvements held for
development: approximately 15 acres in
Chicago, Illinois, boundaries being the
Chicago River on the South, Grand
Avenue on the North, Lake Shore Drive
and the Ogden Slip Turning Basin on the
East and Columbus Drive on the West.... 5,812,372 3,052,228 -- 11,910,507 1,953,334
------------ ---------- ----------- ----------- -----------
Total (2)........................... $27,369,518 $8,599,101 $66,855,891 $19,246,069 $ (748,925)
------------ ---------- ----------- ----------- -----------
------------ ---------- ----------- ----------- -----------
<CAPTION>
GROSS AMOUNT AT APRIL
30, 1995 GROSS
------------------------ AMOUNT AT
LAND AND BUILDINGS APRIL 30,
LAND AND 1995
IMPROVE- IMPROVE- ----------- ACCUMULATED DATE OF DATE
DESCRIPTION MENTS MENTS TOTAL DEPRECIATION CONSTRUCTION ACQUIRED
- ---------------------------------------- ----------- ----------- ----------- ----------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Office Complexes-
Lincoln Garden
2901 West Busch Boulevard
Tampa, Florida........................ $ 1,600,000 $ 5,810,396 $ 7,410,396 $1,559,846 1981 7/31/86
Waterplace Park
8925-9011 N. Meridian St.
Indianapolis, Indiana................. 1,400,000 7,225,808 8,625,808 1,931,224 1980 9/30/86
Apartment Complex-
Cityfront Place Mid-Rise
440-480 North McClurg Court
Chicago, Illinois..................... 214,428 52,789,226 53,003,654 5,303,855 1991 12/17/91
Parking Facility-
Ogden Plaza
300 East North Water Street
Chicago, Illinois..................... -- 2,803,169 2,803,169 251,269 1992 3/01/92
Ground lease (Hotel)-
Sheraton Chicago Hotel & Towers
301 East North Water Street
Chicago, Illinois..................... 6,549,238 -- 6,549,238 922,594 -- 12/31/85
Investment in LCD Partnership (66 2/3%
partnership interest) LCD Partnership
has 50% partnership interest in New
Street Joint Venture which owns:
Apartment Building -
Cityfront Place High-Rise
400 North McClurg Court
Chicago, Illinois (1)................. (1,356,198) -- (1,356,198) -- -- 8/31/89
Land and land improvements held for
development: approximately 15 acres in
Chicago, Illinois, boundaries being the
Chicago River on the South, Grand
Avenue on the North, Lake Shore Drive
and the Ogden Slip Turning Basin on the
East and Columbus Drive on the West.... 16,916,069 -- 16,916,069 1,668,985 -- 12/31/85
----------- ----------- ----------- -----------
Total (2)........................... $25,323,537 $68,628,599 $93,952,136 $11,637,773
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<FN>
- ----------------------------------------
NOTES:
(1) Initial cost represents the carrying value of assets contributed to LCD
Partnership as of August 31, 1989, the date of formation of LCD. Costs
subsequent to acquisition include net distributions from LCD to the Trust
of $45,798 and the Trust's Equity in Net Loss of LCD Partnership of
$2,999,561 most of which represents the development loss from New Street
Joint Venture during the period from opening of the High-Rise, July 1, 1991
to December 31, 1994.
(2) Aggregate basis for Federal income tax purposes is approximately
$49,000,000.
</TABLE>
46
<PAGE>
SCHEDULE III
CONTINUED
<TABLE>
<CAPTION>
LAND AND LAND BUILDINGS AND
IMPROVEMENTS IMPROVEMENTS TOTAL
------------- ------------- -------------
<S> <C> <C> <C>
Real estate-
Balance at April 30, 1992.......................................... $29,170,405 $89,118,081 $ 118,288,486
Additions during the year........................................ 327,350 627,304 954,654
Deductions of property transferred (1)........................... (1,345,437) (559,256) (1,904,693)
------------- ------------- -------------
Balance at April 30, 1993.......................................... 28,152,318 89,186,129 117,338,447
Additions during the year........................................ 259,900 343,488 603,388
Deductions of property transferred (1)........................... (530,238) (842,789) (1,373,027)
------------- ------------- -------------
Balance at April 30, 1994.......................................... 27,881,980 88,686,828 116,568,808
Additions during the year........................................ 158,458 940,074 1,098,532
Deductions of property transferred (1)........................... (2,716,901) (20,998,303) (23,715,204)
------------- ------------- -------------
Balance at April 30, 1995.......................................... $25,323,537 $68,628,599 $ 93,952,136
------------- ------------- -------------
------------- ------------- -------------
Accumulated depreciation-
Balance at April 30, 1992.......................................... $ 8,131,041
Add-Depreciation charged to expense during period (2)............ 3,414,136
Deduct-assets transferred........................................ (535,794)
-------------
Balance at April 30, 1993.......................................... 11,009,383
Add-Depreciation charged to expense during period (2)............ 3,373,373
Deduct-assets transferred........................................ (842,789)
-------------
Balance at April 30, 1994.......................................... 13,539,967
Add-Depreciation charged to expense during period (2)............ 3,181,826
Deduct-assets transferred........................................ (5,084,020)
-------------
Balance at April 30, 1995.......................................... $ 11,637,773
-------------
-------------
<FN>
- ------------------------------
Note (1) Includes the Trust's Equity in Net Loss of LCD Partnership of $475,571,
$530,238 and $1,217,719 during fiscal 1995, 1994 and 1993,
respectively.
Note (2) Developed properties and infrastructure improvements are depreciated
over 35 years or their remaining estimated useful lives, using the
straight-line method of depreciation. Depreciation of leasehold
improvements is computed using the straight-line method over the terms
of the related leases and commences when the improvements are placed in
service.
</TABLE>
47
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. TRUSTEES AND EXECUTIVE OFFICERS OF THE TRUST
Incorporated herein by reference from the Trust's definitive Proxy Statement
for the Annual Meeting of Shareholders to be held on October 5, 1995.
Information concerning the Executive Officers is included in Part I on page 14.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference from the Trust's definitive Proxy Statement
for the Annual Meeting of Shareholders to be held on October 5, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference from the Trust's definitive Proxy Statement
for the Annual Meeting of Shareholders to be held on October 5, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference from the Trust's definitive Proxy Statement
for the Annual Meeting of Shareholders to be held on October 5, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS
The financial statements listed in the accompanying index to financial
statements on page 49 are filed as part of this annual report.
2. FINANCIAL STATEMENT SCHEDULES
The financial statement schedule listed in the accompanying index to
financial statements on page 49 is filed as part of this annual report.
3. EXHIBITS
The exhibits listed in the accompanying index to exhibits on pages 50-51
are filed as part of this annual report.
(B) REPORTS ON FORM 8-K
A Form 8-K was filed February 9, 1995 by the Trust reporting the sale of a
parcel of land containing approximately 41,000 square feet, located in Cityfront
Center to the Chicago Music and Dance Theater, Inc.
48
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENTS SCHEDULES
(ITEM 14(A))
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of independent public accountants................................................................... 27
Consolidated balance sheets as of April 30, 1995 and 1994.................................................. 28
Consolidated statements of income for each of the three years in the period ended April 30, 1995........... 29
Consolidated statements of cash flows for each of the three years in the period ended April 30, 1995....... 30
Consolidated statements of shareholders' equity for each of the three years in the period ended April 30,
1995...................................................................................................... 31
Notes to consolidated financial statements................................................................. 32
Schedule as of April 30, 1995:
III-Real estate and accumulated depreciation........................................................... 46
</TABLE>
All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the financial
statements and notes thereto.
49
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST AND SUBSIDIARIES
INDEX TO EXHIBITS
(ITEM 14(A))
<TABLE>
<CAPTION>
DESCRIPTION
<C> <S>
3 Articles of Incorporation.
3.1 Declaration of Trust (as amended September 16, 1986) incorporated herein by reference to Exhibit 3.1 to
Form 10-K dated July 29, 1987 and further amended September 19, 1989 incorporated herein by reference to
Appendices A through C of the Trust's definitive proxy statement dated August 7, 1989 and further amended
September 22, 1993 incorporated herein by reference to Appendix A of the Trust's definitive proxy statement
dated August 9, 1993 (Commission File No. 0-13804).
4 Instruments Defining the Rights of Security Holders and Holders of Long-Term Debt.
4.1 Promissory Note, dated May 29, 1987 between The Chicago Dock and Canal Trust and Pacific Mutual Life
Insurance Company and related mortgage and assignment documents will be filed in accordance with Item
601(b)(4)(iii) of Regulation S-K if so requested by the Commission.
4.2 Rights Agreement dated as of July 20, 1988 between The Chicago Dock and Canal Trust and Harris Trust and
Savings Bank is incorporated herein by reference to the Form 8-K, dated July 8, 1988 (Commission File No.
0-13804).
4.3 Promissory Note dated December 27, 1990 between The Chicago Dock and Canal Trust and National Home Life
Assurance Company and related guaranty, mortgage and assignment documents are incorporated herein by
reference to Exhibit 4.5 to Form 10-K dated July 29, 1991 (Commission File No. 0-13804).
4.4 Revolving Credit Agreement dated December 23, 1994 between The Chicago Dock and Canal Trust and First Bank
N.A. and related promissory note, mortgage and assignment documents are filed herewith.
10 Material Contracts.
10.1 The Chicago Dock and Canal Trust 1982 Employees' Stock Option Plan, as amended and restated effective April
10, 1991, is incorporated herein by reference to Appendix B of the Trust's 1991 definitive proxy statement
dated August 9, 1991 (Commission File No. 0-13804).
10.2 The Chicago Dock and Canal Trust 1986 Employees' Stock Option Plan, as amended and restated effective April
10, 1991, is incorporated herein by reference to Appendix C of the Trust's 1991 definitive proxy statement
dated August 9, 1991 (Commission File No. 0-13804).
10.3 The Chicago Dock and Canal Trust 1988 Employees' Stock Option Plan, as amended and restated effective April
10, 1991, is incorporated herein by reference to Appendix D of the Trust's 1991 definitive proxy statement
dated August 9, 1991 (Commission File No. 0-13804).
10.4 The Chicago Dock and Canal Trust 1988 Trustees' Stock Option Plan, as amended September 22, 1993, is
incorporated herein by reference to Appendix D of the Trust's definitive proxy statement
</TABLE>
50
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION
dated August 9, 1993 (Commission File No. 0-13804).
<C> <S>
10.5 The Chicago Dock and Canal Trust 1991 Employees' Stock Option Plan is incorporated herein by reference to
Appendix A of the Trust's 1991 definitive proxy statement dated August 9, 1991 (Commission File No.
0-13804).
10.6 Supplemental Executive Retirement Plan dated January 1, 1986 is incorporated herein by reference to Exhibit
10.6 to Form 10-K dated July 29, 1987 (Commission File No. 0-13804).
10.7 Employment Agreement between the Trust and Charles R. Gardner dated April 14, 1993, is incorporated herein
by reference to Exhibit 10.7 to Form 10-K filed July 29, 1993 (Commission File No. 0-13804).
10.8 Employment Agreement between the Trust and David R. Tinkham dated April 14, 1993, is incorporated herein by
reference to Exhibit 10.8 to Form 10-K filed July 29, 1993 (Commission File No. 0-13804).
10.9 Amendments effective May 1, 1993 to the Supplemental Executive Retirement Plan dated January 1, 1986, are
incorporated herein by reference to Exhibit 10.9 to Form 10-K filed July 29, 1993 (Commission File No.
0-13804).
10.10 The Chicago Dock and Canal Trust 1993 Trustees' Stock Option Plan is incorporated herein by reference to
Appendix C of the Trust's 1993 definitive proxy statement dated August 9, 1993 (Commission File No.
0-13804) .
10.11 The Chicago Dock and Canal Trust 1993 Employees' Stock Option Plan is incorporated herein by reference to
Appendix B of the Trust's 1993 definitive proxy statement dated August 9, 1993 (Commission File No.
0-13804).
10.12 Letter agreement among the Trust, Private Capital Management, Inc. and Mr. Bruce Sherman is incorporated
herein by reference to Exhibit 1 to the Form 8-K dated April 27, 1994 (Commission File No. 0-13804).
10.13 Amendment to Employment Agreement between the Trust and Charles R. Gardner dated July 19, 1995 is filed
herewith.
10.14 Amendment to Employment Agreement between the Trust and David R. Tinkham dated July 19, 1995 is filed
herewith.
10.15 Agreement between the Trust and Kerr-McGee Chemical Corporation dated August 11, 1995 is filed herewith.
</TABLE>
51
<PAGE>
SIGNATURE
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 in
its behalf by the undersigned, thereunto duly authorized.
THE CHICAGO DOCK AND CANAL TRUST
By /s/ CHARLES R. GARDNER
------------------------------------
Charles R. Gardner, President and
Trustee (Principal Executive
Officer)
Date _________August 14, 1995_________
By /s/ DAVID R. TINKHAM
------------------------------------
David R. Tinkham, Vice President
(Principal Financial Officer)
Date _________August 14, 1995_________
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<S> <C>
/s/ KENNETH S. AXELSON
------------------------------------------------------------------------------------------ Date August 14, 1995
Kenneth S. Axelson, Trustee
/s/ EDWARD MCCORMICK BLAIR, JR.
------------------------------------------------------------------------------------------ Date August 14, 1995
Edward McCormick Blair, Jr., Trustee
/s/ PETER J.P. BRICKFIELD
------------------------------------------------------------------------------------------ Date August 14, 1995
Peter J.P. Brickfield, Trustee
/s/ OGDEN MCCLURG HUNNEWELL
------------------------------------------------------------------------------------------ Date August 14, 1995
Ogden McClurg Hunnewell, Trustee
/s/ GEORGE A. RANNEY, JR.
------------------------------------------------------------------------------------------ Date August 14, 1995
George A. Ranney, Jr., Trustee
/s/ CHARLES N. SEIDLITZ
------------------------------------------------------------------------------------------ Date August 14, 1995
Charles N. Seidlitz, Trustee
/s/ NANCY W. TROWBRIDGE
------------------------------------------------------------------------------------------ Date August 14, 1995
Nancy W. Trowbridge, Trustee
/s/ ROBERT E. WOOD II
------------------------------------------------------------------------------------------ Date August 14, 1995
Robert E. Wood II, Trustee
</TABLE>
52
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST
The Chicago Dock and Canal Trust is an equity-oriented real estate investment
trust that owns developed and undeveloped land in downtown Chicago, Illinois,
and income-producing real property in Chicago and elsewhere. The Trust was
organized in 1962 to succeed its corporate predecessor, The Chicago Dock and
Canal Company. The Trust is self-administered and has elected to continue its
operation as a real estate investment trust under the Internal Revenue Code.
Form 10-K
A copy of the Trust's 1995 Form 10-K as filed with the Securities and Exchange
Commission has been incorporated in this Annual Report. Exhibits will be
provided upon the payment of a reasonable fee determined by the Trust.
BOARD OF TRUSTEES
Kenneth S. Axelson
Former Executive Vice
President and Director
J.C. Penney Company, Inc.
Rockland, Maine
Edward McCormick Blair, Jr.
Partner
William Blair & Company
Chicago, Illinois
Peter J.P. Brickfield
Brickfield, Burchette &
Ritts, P.C.
Washington, D.C.
Charles R. Gardner
President
The Chicago Dock and
Canal Trust
Chicago, Illinois
Ogden McClurg Hunnewell
Senior Vice President
Northland Investment Corporation
Newton, Massachusetts
George A. Ranney, Jr.
Partner
Mayer, Brown & Platt
Chicago, Illinois
C.N. Seidlitz
President
Bristol Associates, Inc.
Washington, D.C.
Nancy W. Trowbridge
Law Office of
Nancy W. Trowbridge
New York, New York
Robert E. Wood II
Senior Executive Vice
President and Chief
Administrative Officer
Dean Witter Discover
& Co.
New York, New York
Honorary Trustees
Carl F. Chapman
Former Associate Treasurer
The University of Chicago
Park Ridge, Illinois
William B. Ogden III
Former Senior Vice
President and Trust Officer
Merchants National Bank &
Trust Company of Syracuse
Naples, Florida
Nathan W. Pearson
Financial Advisor
Paul Mellon Family Interests
Pittsburgh, Pennsylvania
OFFICERS
Charles R. Gardner
President
David R. Tinkham
Vice President, Finance,
Treasurer and Assistant
Secretary
Peter B. Holland
Assistant Treasurer
Michael F. Csar
Secretary
Office
455 East Illinois Street
Suite 565
Chicago, Illinois 60611
312-467-1870
General Counsel
Wilson & McIlvaine
Chicago, Illinois
Auditors
Arthur Andersen LLP
Chicago, Illinois
Transfer Agent
Registrar and Distribution
Disbursing Agent
Harris Trust and Savings
Bank
Chicago, Illinois
<PAGE>
THE CHICAGO DOCK AND CANAL TRUST 455 East Illinois Street Suite 565
Chicago, Illinois 60611
