<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 1999
( ) Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
----------------------
Commission file number 1-12630
CENTERPOINT PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland 36-3910279
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1808 Swift Road, Oak Brook, Illinois 60523-1501
(Address of principal executive offices)
(630) 586-8000
(Registrant's telephone number, including area code)
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
--- ---
Number of Common Shares of Beneficial Interest outstanding as of May 12, 1999:
20,108,528. Number of Class B Common Shares of Beneficial Interest outstanding
as of May 12, 1999: 76,802.
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE INFORMATION)
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
MARCH 31, DECEMBER 31,
1999 1998
---------- ------------
<S> <C> <C>
Assets:
Investment in real estate:
Land and leasehold $ 131,996 $ 128,045
Buildings 505,173 487,996
Building improvements 99,852 94,474
Furniture, fixtures, and equipment 18,855 18,817
Construction in progress 27,432 18,401
--------- ----------
783,308 747,733
Less accumulated depreciation and amortization 67,821 62,257
--------- ----------
Net investment in real estate 715,487 685,476
Cash and cash equivalents 45,577 475
Restricted cash and cash equivalents 29,324 33,056
Tenant accounts receivable, net 19,884 18,067
Mortgage notes receivable 20,348 20,353
Investment in and advances to affiliate 46,927 48,564
Prepaid expenses and other assets 6,902 5,264
Deferred expenses, net 12,434 10,681
--------- ---------
$ 896,883 $821,936
--------- ----------
--------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 103,256 $ 103,520
Senior unsecured debt 200,000 100,000
Tax-exempt debt 75,540 75,540
Line of credit 52,900 77,600
Convertible subordinated debentures payable 7,878 8,058
Preferred dividends payable 1,060 1,060
Accounts payable 6,705 7,986
Accrued expenses 32,694 30,810
Rents received in advance and security deposits 6,241 5,323
--------- ---------
486,274 409,897
--------- ---------
Commitments and contingencies
Shareholders' equity:
Preferred shares of beneficial interest, $.001 par value, 10,000,000 shares
authorized; 3,000,000 issued and outstanding having a liquidation
preference of $25 per share ($75,000) 3 3
Common shares of beneficial interest, $.001 par value, 47,727,273 shares
authorized; 20,095,058 and 18,753,474 issued and outstanding, respectively 20 19
Class B common shares of beneficial interest, $.001 par value, 2,727,727
shares authorized; 76,802 and 1,398,088 issued and outstanding, respectively 1
Additional paid-in-capital 449,612 449,229
Retained earnings (deficit) (38,742) (36,917)
Unearned compensation - restricted stock (284) (296)
--------- ---------
Total shareholders' equity 410,609 412,039
--------- ---------
$ 896,883 $ 821,936
--------- ----------
--------- ----------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE>
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1999 1998
--------- ---------
<S> <C> <C>
Revenue:
Operating and investment revenue:
Minimum rents $ 20,813 $ 17,747
Straight-line rents 844 1,364
Expense reimbursements 6,568 5,458
Mortgage interest income 554 656
--------- ---------
Total operating and investment revenue 28,779 25,225
--------- ---------
Other Revenue:
Real estate fee income 2,701 1,967
Equity in net income of affiliate (246) 125
--------- ---------
Total other revenue 2,455 2,092
--------- ---------
Total revenue 31,234 27,317
--------- ---------
Expenses:
Real estate taxes 6,565 5,948
Property operating and leasing 3,581 3,542
General and administrative 905 990
Depreciation and amortization 5,997 4,696
Interest expense:
Interest incurred, net 4,359 2,928
Amortization of deferred financing costs 458 486
--------- ---------
Total expenses 21,865 18,590
--------- ---------
Operating income 9,369 8,727
Other expenses, net (20) (16)
--------- ---------
Net income 9,349 8,711
Preferred dividends (1,590) (1,590)
--------- ---------
Net income available to common shareholders $ 7,759 $ 7,121
--------- ---------
--------- ---------
Per share net income available to common shareholders:
Basic $0.38 $0.37
Diluted $0.38 $0.37
Distributions per common share $0.475 $0.438
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,349 $ 8,711
Adjustments to reconcile net income to net cash provided
by operating activities:
Bad debts 100
Depreciation 5,645 4,427
Amortization of deferred financing costs 458 486
Other amortization 352 269
Straight-line rents (844) (1,364)
Incentive stock awards 12 48
Interest on converted debentures (1) 2
Equity in net income of affiliate 246 (125)
Net changes in:
Tenant accounts receivable (1,000) (1,738)
Prepaid expenses and other assets 597 (353)
Rents received in advance and security deposits 941 1,294
Accounts payable and accrued expenses 362 1,411
-------- ---------
Net cash provided by operating activities 16,117 13,167
-------- ---------
Cash flows from investing activities:
Change in restricted cash and cash equivalents 3,732 (21,256)
Acquisition of real estate (16,868) (6,706)
Additions to construction in progress (7,035) (7,219)
Improvements and additions to properties (14,367) (9,747)
Disposition of real estate 2,867 24,118
Change in deposits on acquisitions (2,221) (1,176)
Issuance of mortgage notes receivable (18,837)
Repayment of mortgage notes receivable 5 20,111
Investment in and advances to affiliate 1,390 (245)
Receivables from affiliates and employees (19) 77
Additions to deferred expenses (2,563) (1,075)
-------- ---------
Net cash used in investing activities (35,079) (21,956)
-------- ---------
Cash flows from financing activities:
Proceeds from sale of common shares 207 11,875
Offering costs paid (3) (12)
Proceeds from issuance of unsecured notes payable 100,000
Proceeds from line of credit 85,600 35,900
Repayment of mortgage notes payable (265)
Repayment of line of credit (110,300) (30,100)
Repayment of notes payable (33)
Distributions (11,175) (9,856)
-------- ---------
Net cash provided by financing activities 64,064 7,774
-------- ---------
Net change in cash and cash equivalents 45,102 (1,015)
Cash and cash equivalents, beginning of the year 475 1,652
-------- ---------
Cash and cash equivalents, end of period $ 45,577 $ 637
-------- ---------
-------- ---------
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
BASIS OF PRESENTATION:
These unaudited Consolidated Financial Statements of CenterPoint Properties
Trust, a Maryland real estate investment trust, and Subsidiaries (the
"Company"), have been prepared pursuant to the Securities and Exchange
Commission ("SEC") rules and regulations and should be read in conjunction with
the December 31, 1998, Financial Statements and Notes thereto included in the
Company's Form 10-K. References herein to the "Company" shall mean CenterPoint
Properties Trust and Subsidiaries. The following Notes to Consolidated Financial
Statements highlight significant changes to the Notes included in the December
31, 1998, Audited Financial Statements and present interim disclosures as
required by the SEC. The accompanying Consolidated Financial Statements reflect,
in the opinion of management, all adjustments necessary for a fair presentation
of the interim financial statements. All such adjustments are of a normal and
recurring nature. The consolidated balance sheet as of December 31, 1998 has
been derived from the Company's audited Financial Statements.
The consolidated statements of operations and statements of cash flows for prior
periods have been reclassified to conform with current classifications with no
effect on results of operations or cash flows.
1. CASH AND CASH EQUIVALENTS
As of March 31, 1999, the Company had approximately $33.9 million in cash and
cash equivalents on hand to advance to an affiliate for the purchase of a
property, which was expected to close before the end of the quarter. The
proceeds were borrowed on the Company's unsecured line of credit co-led by The
First National Bank of Chicago and Lehman Brothers Holdings Inc ("the Company's
unsecured line of credit"). The funds were advanced and the property was
purchased on April 2, 1999 and is further explained in note 9.
2. PREFERRED SHARES, COMMON SHARES OF BENEFICIAL INTEREST AND RELATED
TRANSACTIONS
In January and February, 1999, 536,981 and 784,305 of the Company's Class B
common shares, respectively, were converted by the holder of the Class B common
shares into 536,981 and 784,305 common shares.
3. RECENT PRONOUNCEMENTS
In May, 1998, the FASB issued SFAS Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement, effective for financial
statements for fiscal years beginning after June 15, 1999, provides a
comprehensive and consistent
5
<PAGE>
standard for the recognition and measurement of derivatives and hedging
activities. The Company currently has no derivatives outstanding.
4. ACQUISITION AND DISPOSITION OF REAL ESTATE
In February, 1999, the Company disposed of a property, located in Chicago,
Illinois, for approximately $3.7 million. The disposition of the property
qualified for treatment as a tax-free exchange under the Internal Revenue Code.
Also in February, 1999, the Company purchased a property for approximately $4.3
million with borrowings from the Company's unsecured line of credit.
In March, 1999, the Company purchased three properties. The first property,
located in Yorkville, Wisconsin, was purchased for approximately $3.8 million
with proceeds from proceeds from the tax-free exchange account. The second
property, located in Willowbrook, Illinois, was purchased for approximately
$4.2 million with proceeds from the tax-free exchange account. The third
property, located in Munster, Indiana, was purchased for approximately $9.6
million with borrowings from the Company's unsecured line of credit.
5. INVESTMENT IN AND ADVANCES TO AFFILIATE
The Company holds approximately 99% of the economic interest in CenterPoint
Realty Services Corporation ("CRS"), an unconsolidated taxable subsidiary, in
the form of non-voting common equity. CRS and its subsidiaries engage in
businesses and services which compliment the Company's business, including the
provision of services and commodities to tenants of the Company, the development
of real property and the management of properties owned by third parties. Income
from these activities, received by REITs and their qualified REIT subsidiaries,
is limited under current REIT tax regulations.
As of March 31, 1999, the Company had advanced to CRS approximately $37.0
million under a series of demand loans with interest rates ranging from 8.0% to
11.1%. CRS used the proceeds of the loans towards development projects currently
under construction and the purchase of land held for future development.
Principal and interest are due upon demand.
The Company typically purchases development projects upon completion of
construction on a turnkey basis or develops the property under guaranteed
maximum price contracts, substantially eliminating any construction risk.
6
<PAGE>
6. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Supplemental disclosures of cash flow information for the three months ended
March 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
----------- ------------
<S> <C> <C>
Interest paid $ 2,024 $ 3,761
Interest capitalized 297 594
Construction costs paid by the Company
through mortgage notes receivable 1,136
</TABLE>
In conjunction with the acquisition of real estate, for the three months ended
March 31, 1999 and 1998 the Company acquired the following asset and assumed the
following liability amounts:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Purchase of real estate $ 17,694 $ 6,909
Liabilities, net of other assets (826) (203)
---------- ----------
Acquisition of real estate $ 16,868 $ 6,706
---------- ----------
---------- ----------
</TABLE>
In conjunction with the disposition of real estate, the Company disposed of the
following asset and liability amounts for the three months ended March 31, 1999
and 1998:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Disposal of real estate $ 3,173 $ 24,589
Liabilities, net of other assets (306) (471)
---------- ---------
Disposition of real estate $ 2,867 $ 24,118
---------- ---------
---------- ---------
</TABLE>
Conversion of convertible subordinated debentures payable for the three months
ended March 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C>
Convertible subordinated debentures converted $ 180 $ 577
Common shares issued at $18.25 per share
9,861 and 31,614, respectively 180 577
---------- ---------
Cash disbursed for fractional shares $ - $ -
---------- ---------
---------- ---------
</TABLE>
7. SENIOR UNSECURED DEBT
On March 15, 1999 the Company issued $100 million, 7.142 percent senior
unsecured notes due March 15, 2004. The net proceeds of $99.3 million were used
to repay substantially all amounts then outstanding under the Company's line of
credit co-led by The First National Bank of Chicago and Lehman Brothers Holdings
Inc.
8. COMMITMENTS AND CONTINGENCIES
In the normal course of business, from time to time, the Company is involved in
legal actions relating to the ownership and operations of its properties. In
management's opinion, the liabilities, if any, that may ultimately result from
such legal actions are not
7
<PAGE>
expected to have a materially adverse effect on the consolidated financial
position, results of operations and liquidity of the Company.
The Company has entered into other contracts for the acquisition of properties.
Each acquisition is subject to satisfactory completion of due diligence and, in
the case of development projects, completion and occupancy of the projects.
At March 31, 1999, six of the properties owned by the Company are subject to
purchase options held by certain tenants. The purchase options are exercisable
at various intervals through 2006 for amounts that are greater than the net book
value of the assets. Management is not currently aware of planned exercises of
options and believes that any potential exercises would not materially affect
the results or prospects of the Company.
9. SUBSEQUENT EVENTS
On April 2, 1999, the Company advanced approximately $33.9 million to CRS for
the purchase of a property in Cincinnati, Ohio. The proceeds for the advance
were drawn from the Company's line of credit co-led by The First National Bank
of Chicago and Lehman Brothers Holdings Inc.
10. EARNINGS PER COMMON SHARE
The following are the reconciliations of the numerators and denominators of the
basic and diluted EPS for the three months ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1999 1998
---------- -----------
(in thousands, except for share data)
<S> <C> <C>
Numerators:
Net income $ 9,349 $ 8,711
Dividends on preferred shares (1,590) (1,590)
---------- ----------
Net income available to common shareholders - for
basic and diluted EPS $ 7,759 $ 7,121
---------- ----------
---------- ----------
Denominators:
Weighted average common shares outstanding - for
basic EPS 20,161,803 19,215,431
Effect of dilutive securities - options 206,141 243,288
---------- ----------
Weighted average common shares outstanding - for
diluted EPS 20,367,944 19,458,654
---------- ----------
---------- ----------
</TABLE>
The assumed conversion of the convertible subordinated debentures into common
shares for purposes of computing diluted EPS by adding interest expense for the
debentures to the numerators, and adding assumed share conversions to the
denominators for the three months ended March 31, 1999 and 1998 would be
anti-dilutive.
8
<PAGE>
11. PRO FORMA FINANCIAL INFORMATION
Due to the effect of securities offerings in March, 1998, and April 1998, and
the 1998 and 1999 acquisitions and dispositions of properties, the historical
results are not indicative of the future results of operations. The following
unaudited pro forma information for the three months ended March 31, 1999 and
1998 is presented as if the 1998 and 1999 acquisitions and dispositions, the
1998 securities offerings, and the corresponding repayment of certain debt had
all occurred on January 1, 1998 (or the date the property first commenced
operations with a third party tenant, if later). The pro forma information is
based upon historical information and does not purport to present what actual
results would have been had the offerings and related transactions, in fact,
occurred at January 1, 1998, or to project results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
--------- ---------
(in thousands, except for per share data)
<S> <C> <C>
Total revenues $ 31,734 $ 29,401
Total expenses 22,283 20,235
--------- ---------
Net income 9,451 9,166
Preferred dividends (1,590) (1,590)
--------- ---------
Net income available to common
shareholders $ 7,861 $ 7,576
--------- ---------
--------- ---------
Per share income available to common shareholders:
Basic $ 0.39 $ 0.38
Diluted $ 0.39 $ 0.38
</TABLE>
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
The following is a discussion of the historical operating results of the
Company. The discussion should be read in conjunction with the Form 10-K filed
for the fiscal year ended December 31, 1998 and the unaudited Financial
Statements presented with this Form 10-Q.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1999 TO THREE MONTHS ENDED MARCH 31,
1998.
REVENUES
Total revenues increased by $3.9 million or 14.3% over the same period last
year.
In the first quarter of 1999, 92.1% of total revenues of the Company were
derived primarily from base rents, straight-line rents, expense reimbursements
and mortgage income (operating and investment revenue), pursuant to the terms of
tenant leases and mortgages held for space at the warehouse/industrial
properties.
Operating and investment revenues increased by $3.6 million in the first quarter
of 1999. A portion of the increase from the prior year is due to income from
four properties acquired in the first three months of 1999, totaling 0.7 million
square feet, net of one disposition as of March 31, 1999. The remainder of the
increase was attributable to a full period of income from the 1998 acquisition
of thirty properties and one completed build-to-suit property, totaling 3.2
million square feet, net of five property dispositions.
Other revenues increased $0.4 million due to increased real estate fee income
earned by the Company in connection with build-to-suit, development and leasing
activities which was partially offset by decreased property and build-to suit
sales by the Company's unconsolidated affiliate.
OPERATING AND NONOPERATING EXPENSES
Real estate tax expense and property operating and leasing expense increased by
$0.7 million from period to period. The majority of the increase, $0.6 million,
resulted from a full period of real estate taxes on 1998 acquisitions and a
partial period of real estate taxes on 1999 acquisitions, net of dispositions.
Property operating and leasing costs increased slightly. However, property
operating and leasing costs as a percentage of total revenues decreased from
13.0% to 11.5% when comparing the first quarter of 1998 to the first quarter of
1999 due mainly to "economies of scale" realized by the Company.
General and administrative expenses decreased slightly when comparing periods
despite the growth of the Company. As a percentage of total revenues, general
and
10
<PAGE>
administrative expenses decreased from 3.6% to 2.9% when comparing the first
quarter of 1998 to the first quarter of 1999 due to efficiencies realized by
the Company.
Depreciation and amortization increased by $1.3 million due to a full period of
depreciation on 1998 acquisitions and partial period depreciation on 1999
acquisitions.
Interest incurred increased by approximately $1.4 million over the same period
last year due to higher average balances outstanding in the first quarter of
1999 compared to 1998.
Other income (expenses) remained consistent when comparing periods.
NET INCOME AND OTHER MEASURES OF OPERATIONS
Net income increased $0.6 million or 7.3% due to the growth of the Company
through the net acquisition of warehouse/industrial real estate.
Funds from operations (FFO) increased 14.9% from $12.1 million to $13.9 from the
first quarter of 1998 to the first quarter of 1999. The National Association of
Real Estate Investment Trusts (NAREIT) defines funds from operations as net
income before extraordinary items plus depreciation and amortization less the
amortization of deferred financing costs. The Company considers FFO and FFO
growth to be one relevant measure of financial performance of equity REITs that
provides a relevant basis for comparison among REITs, and it is presented to
assist investors in analyzing the performance of the Company.
When comparing the first quarter results of operations of properties owned at
January 1, 1998 with the results of operations of the same properties for the
first quarter 1999 (the "same property" portfolio), the Company recognized an
increase of approximately 8.4% in net operating income. This same property
increase was due to the timely lease up of vacant space, rental increases on
renewed leases and contractual increases in minimum rent under leases in place.
The Company assesses its operating results, in part, by comparing the Net
Revenue Margin between periods. Net Revenue Margin is calculated for the "in
service" portfolio by dividing net revenue (total operating and investment
revenue less real estate taxes and property operating and leasing expense) by
adjusted operating and investment revenue (operating and investment revenue less
expense reimbursements, adjusted for leases containing expense stops). This
margin indicates the percentage of revenue actually retained by the Company or,
alternatively, the amount of property related expenses not recovered by tenant
reimbursements. The margin for the first quarter of 1999 was 88.3% compared with
87.9% for the same period last year. The first quarter margin was in line with
the Company's expectations.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
OPERATING AND INVESTMENT CASH FLOW
Cash flow generated from Company operations has historically been utilized for
working capital purposes and distributions, while proceeds from financings and
capital raises have been used to fund acquisitions and other capital costs.
However, cash flow from operations during the first three months of 1999 of
$16.1 million net of $11.2 million of 1999 distributions provided $4.9 million
of retained capital. The Company expects retained capital to fund a portion of
future investment activities.
As of March 31, 1999, the Company had approximately $33.9 million in cash and
cash equivalents on hand to advance to an affiliate for the purchase of a
property, which was expected to close before the end of the quarter. The
proceeds were borrowed on the Company's unsecured line of credit. On April 2,
1999, the Company advanced the funds to CRS for the purchase of a property in
Cincinnati, Ohio.
For the first three months of 1999, the Company's investment activities include
acquisitions of $16.9 million, advances for construction in progress of $7.0
million, and improvements and additions to properties of $14.4 million. These
activities were funded with dispositions of real estate of $2.9 million,
advances on the company's line of credit and a portion of the Company's retained
capital.
EQUITY AND SHARE ACTIVITY
During the first three months of 1999, the Company paid distributions on common
shares of $9.2 million or $0.475 per share and on class B common shares of $0.4
million or $0.487 per share. Also, in January, 1999, the Company paid dividends
on preferred shares of $1.59 million or $0.53 per share. The following factors,
among others, will affect the future availability of funds for distribution: (i)
scheduled increases in base rents under existing leases, (ii) changes in minimum
base rents attributable to replacement of existing leases with new or
replacement leases and (iii) restrictions under certain covenants of the
Company's unsecured line of credit.
DEBT CAPACITY
The Company has a $250 million unsecured credit facility co-led by The First
National Bank of Chicago and Lehman Brothers Holdings Inc. As of May 12, 1999,
the Company had outstanding borrowings of approximately $103.9 million under the
Company's unsecured line of credit (approximately 8.0% of the Company's fully
diluted total market capitalization), and the Company had remaining availability
of approximately $146.1 million under its unsecured line of credit.
At March 31, 1999, the Company's debt constituted approximately 37.7% of its
fully diluted total market capitalization. Also, the Company's debt service
coverage ratio remained high at 4.8 to 1, and the Company's fixed charge
coverage ratio was 3.5 to 1 due to preferred dividends. The Company's fully
diluted common equity market
12
<PAGE>
capitalization was approximately $644 million, and its fully diluted total
market capitalization exceeded $1.1 billion. The Company's leverage ratios
benefited during the first three months of 1999 from the conversion of
approximately $0.2 million of its 8.22% Convertible Subordinated Debentures,
due 2004, to 9,861 common shares.
Duff & Phelps Credit Rating Co. and Moody's Investors Service's have assigned an
investment grade rating to the Company's convertible subordinated notes and
senior unsecured debt and preferred stock issuable under the Company's shelf
registration statement.
The Company has considered it's short-term (one year or less) capital needs, in
conjunction with its estimated future cash flow from operations and other
expected sources. The Company believes that its ability to fund operating
expenses, building improvements, debt service requirements and the minimum
distribution required to maintain the Company's REIT qualification under the
Internal Revenue Code, will be met by recurring operating and investment revenue
and other real estate income.
Long-term (greater than one year) capital needs for property acquisitions,
scheduled debt maturities, major redevelopment projects, expansions, and
construction of build-to-suit properties will be supported, initially, by draws
on the Company's unsecured line of credit, followed by the issuance of long-term
unsecured indebtedness and the issuance of equity securities. Management expects
that a significant portion of the Company's investment funds will be supplied by
the proceeds of property dispositions.
INFLATION
Inflation has not had a significant impact on the Company because of the
relatively low inflation rates in the Company's markets of operation. Most of
the Company's leases require the tenants to pay their share of operating
expenses, including common area maintenance, real estate taxes and insurance,
thereby reducing the Company's exposure to increases in costs and operating
expenses resulting from inflation. In addition, many of the leases are for
remaining terms less than five years which may enable the Company to replace
existing leases with new leases at higher base rental rates if rents of existing
leases are below the then-existing market rate.
YEAR 2000 COMPLIANCE
In response to the Year 2000 issue, the Company initiated a project in early
1997 to identify, evaluate and implement a new computerized real estate
management system. The Company is addressing the issue through a combination of
modifications to existing programs and conversion to Year 2000 compliant
software. In addition, the Company is discussing with its tenants, vendors, and
other service providers the possibility of any interface difficulties relating
to the Year 2000 issue which may affect the Company. If the Company and those it
conducts business with do not make modifications or conversions in a timely
manner, the Year 2000 issue may have a material adverse effect on the Company's
business, financial condition, and results of operations. The total cost
associated with the
13
<PAGE>
required modifications is not expected to be material to the Company's
consolidated results of operations, liquidity and financial position, and is
being expensed as incurred.
RECENT PRONOUNCEMENTS
In May, 1998, the FASB issued SFAS Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement, effective for financial
statements for fiscal years beginning after June 15, 1999, provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. The Company currently has no derivatives
outstanding.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The Company's
actual results could differ materially from those set forth in the forward
looking statements as a result of various factors, including, but not limited
to, uncertainties affecting real estate businesses generally (such as entry into
new leases, renewals of leases and dependence on tenants' business operations),
risks relating to acquisition, construction and development activities, possible
environmental liabilities, risks relating to leverage, debt service and
obligations with respect to the payment of dividends (including availability of
financing terms acceptable to the Company and sensitivity of the Company's
operations to fluctuations in interest rates), the potential for the need to use
borrowings to make distributions necessary for the Company to qualify as a REIT,
dependence on the primary market in which the Company's properties are located,
the existence of complex regulations relating to the Company's status as a REIT,
the failure of the Company and entities the Company does business with to make
necessary modifications and conversions to Year 2000 compliant software in a
timely manner and the potential adverse impact of the market interest rates on
the cost of borrowings by the Company and on the market price for the Company's
securities.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CENTERPOINT PROPERTIES TRUST
a Maryland Company
By: /s/ Paul S. Fisher
----------------------------------
Paul S. Fisher
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
May 12, 1999
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1998
<CASH> 74,901
<SECURITIES> 0
<RECEIVABLES> 40,232
<ALLOWANCES> 575
<INVENTORY> 0
<CURRENT-ASSETS> 66,263
<PP&E> 783,308
<DEPRECIATION> 67,821
<TOTAL-ASSETS> 896,883
<CURRENT-LIABILITIES> 46,700
<BONDS> 439,574
0
3
<COMMON> 20
<OTHER-SE> 410,586
<TOTAL-LIABILITY-AND-EQUITY> 896,883
<SALES> 0
<TOTAL-REVENUES> 31,234
<CGS> 0
<TOTAL-COSTS> 17,048
<OTHER-EXPENSES> 20
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,817
<INCOME-PRETAX> 7,759
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,759
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,759
<EPS-PRIMARY> 0.38
<EPS-DILUTED> 0.38
</TABLE>
