<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1997 or
-----------------
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______________ to _______________
Commission file number 1-12630
-------
CENTERPOINT PROPERTIES TRUST
----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Maryland 36-3910279
- -------------------------------------------------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1808 Swift Drive, Oak Brook, Illinois 60523
- ---------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (630) 586-8000
----------------------
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
<S> <C>
Common Shares of Beneficial Interest, par value $.001 New York Stock Exchange
8.22% Convertible Subordinated Debentures due 2004 New York Stock Exchange
8.48% Series A Preferred Shares of Beneficial Interest, par value $.001 New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
-------------------------------
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
X Yes No
- --- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K/A or any amendment to this Form 10-K/A. [ ]
As of March 12, 1998, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $502,172,731 (based on 14,962,316 shares
held by non-affiliates and computed by reference to the reported closing price).
The registrant had 16,923,565 shares of its common stock, $.001 par value,
outstanding as of March 12, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Common Stock and Debenture Prospectuses of the registrant, dated
December 3, 1993, and a Common Stock Prospectus of the registrant, dated January
19, 1995, each filed pursuant to Rule 424 under the Securities Act of 1933, as
amended, portions of the Registration Statement on Form S-3 dated January 6,
1997, portions of the registrant's Form 10-Q for the quarter ended September 30,
1995, portions of the 10-K/A for the year ended December 31, 1995, portions of
the 10-Q for quarter ended September 30, 1996 , portions of the Form 10-K/A for
the year ended December 31, 1996, portions of the Form S-4 dated August 13, 1997
and Pre-Effective Amendment No. 1 to the S-4dated August 28, 1997, portions of
the Form 8-A dated November 5, 1997 and portions of the Form 10-Q for the
quarter ended September 30, 1997 are incorporated by reference into Part IV of
this Annual Report on Form 10-K/A. A portion of the registrant's definitive
proxy statement is incorporated by reference into Part III of this Annual Report
on Form 10-K/A.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I Page
----
<S> <C> <C>
Item 1. Business..................................................................................1
Item 2. Properties...............................................................................12
Item 3. Legal Proceedings........................................................................22
Item 4. Submission of Certain Items to a Vote of Security Holders................................22
PART II
Item 5. Market for Registrant's Common Equity and Related Matters................................23
Item 6. Selected Historical Financial Data.......................................................24
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....26
Item 8. Financial Statements and Supplementary Data..............................................32
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.....32
PART III
Item 10. Directors and Executive Officers of the Registrant.......................................33
Item 11. Executive Compensation...................................................................33
Item 12. Security Ownership of Certain Beneficial Owners and Management...........................33
Item 13. Certain Relationships and Related Transactions...........................................33
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..........................34
</TABLE>
-i-
<PAGE>
PART I
This Annual Report on Form 10-K/A contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. The Company's
actual results could differ materially from those set forth in the forward
looking statements as a result of various factors, including, but are not
limited to, uncertainties affecting real estate businesses generally (such as
entry into new leases, renewals of leases and dependence on tenants' business
operations), risks relating to acquisition, construction and development
activities, possible environmental liabilities, risks relating to leverage, debt
service and obligations with respect to the payment of dividends (including
availability of financing terms acceptable to the Company and sensitivity of the
Company's operations to fluctuations in interest rates), the potential for the
need to use borrowings to make distributions necessary for the Company to
qualify as a REIT, dependence on the primary market in which the Company's
properties are located, the existence of complex regulations relating to the
Company's status as a REIT and the potential adverse impact of market interest
rates on the cost of borrowings by the Company and on the market price for the
Company's securities.
ITEM 1. BUSINESS.
THE COMPANY
CenterPoint Properties Trust (the "Company") is a fully integrated real
estate investment trust focused on the acquisition, development, redevelopment,
management and ownership of warehouse/industrial property located in Greater
Chicago (defined as the area within a 150-mile radius of Chicago, including
Milwaukee, Wisconsin and South Bend, Indiana), which, according to a ranking of
markets published by Torto Wheaton Research and information published by CB
Commercial, totals approximately 1.2 billion square feet, making it the largest
warehouse/industrial market in the United States. The Company's investment and
management portfolio currently consists of 95 warehouse/industrial properties
containing approximately 22.1 million square feet (see the table of
warehouse/industrial properties beginning on p. 14). The Company also owns and
manages three retail properties, one parking lot and one apartment property,
holds mortgages on two warehouse/industrial properties, and is developing eight
build-to-suit projects. The Company's total investment and management portfolio,
including the non-industrial properties, mortgage investments and build-to-suit
projects, is approximately 25 million square feet. Based on published statistics
regarding square feet of space owned and managed by other firms and publicly
available information filed with the Securities and Exchange Commission, as well
as its knowledge and experience in the market, the Company believes it is the
largest owner and operator of warehouse/industrial property in Greater Chicago.
As of December 31, 1997, the Company's properties were 97% leased, excluding
properties which are currently being redeveloped and not leasable. The
warehouse/industrial properties are occupied by 179 tenants in diverse
industries. No tenant accounts for the lease of more than 5% of the Company's
total revenues. Substantially all of the Company's properties have been
constructed or renovated during the past ten years.
INVESTMENT OBJECTIVES AND BUSINESS POLICIES
The Company's objective is to maximize shareholder value by pursuing a
business strategy focused on investment and ownership of warehouse/industrial
properties in Greater Chicago and a growth strategy consisting of (i) intensive
management of its existing properties and (ii) the acquisition of existing
leased warehouse/industrial properties, build-to-suit projects and properties
suitable for redevelopment; and (iii) development of buildings for purchase by
tenants or institutions generating fee income for the Company.
-1-
<PAGE>
BUSINESS STRATEGIES
WAREHOUSE/INDUSTRIAL PROPERTY. The Company believes that for the
following reasons investment in warehouse/industrial property provides the
opportunity for attractive returns and stable cash flow:
- LOW CAPITAL REQUIREMENTS. The cost per square foot of
developing warehouse/industrial properties typically ranges
between $40-45 per square foot, which is lower than the cost
of developing other types of property. From the Company's
perspective, this results in less capital committed to any
particular property, permitting greater diversification of the
Company's risk. In addition, relative to other property types,
fewer tenant improvements are required to renew or lease
warehouse industrial space, minimizing the level of recurring
capital expenditures necessary to sustain rental income.
- HIGH TENANT RETENTION. Unlike office, retail and multi-family
buildings, most warehouse/industrial buildings are occupied by
a single tenant. Relocation tends to be costly for tenants of
warehouse/industrial properties because of high tenant
investment in production set up expenses, machinery and other
site specific improvements (in many cases higher than the
landlord's investment). To avoid these costs, tenants
typically lease space that exceeds their immediate needs or
space in buildings that are readily expandable. Tenant
retention and expansion therefore tend to be higher than for
other property types.
- FAVORABLE LEASE TERMS. Warehouse/industrial buildings
generally are leased on a "triple net" basis, under which
tenants are contractually obligated to pay directly, or
reimburse the landlord, for virtually all costs of occupancy,
including property taxes, utilities, insurance and
maintenance. In addition, the leases generally provide for
rent growth through contractual rent increases or increases
tied to certain indices such as the Consumer Price Index.
- SHORT CONSTRUCTION PERIODS. The Company believes that the
comparatively short development period for industrial
buildings (typically six to nine months) relative to other
property types has resulted in less speculative building and,
therefore, a supply of industrial property that more closely
corresponds to tenant demand. This has kept vacancy levels on
average lower than for other property types and has produced
greater rental rate stability.
- LOW COST OF MANAGEMENT. The Company believes that the cost of
managing warehouse/industrial property tends to be less than
for other property types, because of large average tenant
spaces, more limited building and tenant improvements to
maintain, and relatively long lease terms.
- LIMITED INSTITUTIONAL COMPETITION. The Company believes that
higher overall investment returns are achievable for
warehouse/industrial property than other property types
because such assets, typically $3 to $6 million in purchase
price, are too small to justify institutional attention. The
Company's typical competitor for assets of this size is a
sponsor of a single asset partnership that typically has a
higher cost of capital and less financial flexibility than the
Company.
GREATER CHICAGO. The Company believes that Greater Chicago offers
significant opportunities for investment in and ownership of
warehouse/industrial property for the following reasons:
- ECONOMIC CHARACTERISTICS AND GROWTH. Greater Chicago is the
nation's largest
-2-
<PAGE>
warehouse/industrial market, with a diverse tenant base
that lessens cyclical risk and a central continental
location and transportation infrastructure that support
continued growth. Greater Chicago is currently enjoying
very favorable trends in growth, business investment,
utilization and employment, which have resulted in
increased space demand and increasing rents. Although the
Company believes it is the largest owner and operator of
warehouse/industrial property in Greater Chicago, its
properties represented less than 2% of the market (based on
square footage) as of December 31, 1997, allowing
substantial opportunities for future growth through
acquisitions.
- MANAGEMENT EXPERIENCE. The Company's executive officers and
the vice chairman together have over 100 years of combined
real estate experience, primarily in warehouse/industrial
properties located in Greater Chicago. Since 1977, they have
completed approximately 300 industrial or commercial real
estate projects aggregating over approximately 30 million
square feet. This experience creates numerous opportunities
for acquisitions, redevelopments and build-to-suits because of
management's long-standing relationships with tenants and
brokers within Greater Chicago. Management's market knowledge
enables the Company to rapidly evaluate and respond to
investment and leasing transactions and to actively create
such opportunities.
- BUSINESS EFFICIENCIES. The Company believes that geographic
concentration provides significant business efficiencies. As a
large owner of warehouse/industrial property located in most
major Greater Chicago submarkets, the Company is able to
market multiple locations and buildings and consequently has a
competitive advantage in securing leasing opportunities. The
Company also believes that operating economies of scale
resulting from geographic concentration enhance its ability to
offer lower occupancy costs to its tenants. The Company
believes that its focus on warehouse/industrial properties in
Greater Chicago also enables the expansion of its portfolio
without a corresponding increase in general and administrative
expense.
GROWTH STRATEGIES
INTENSIVE PROPERTY MANAGEMENT. The Company strives to provide the
highest possible service to its tenants by addressing its tenants' occupancy
needs and meeting their evolving space requirements. The Company seeks to become
the "industrial landlord of choice" in the markets it operates. Management
believes tenant satisfaction resulting from the Company's "hands on" management
approach increases rental revenues by increasing tenant retention, minimizing
reletting expense and facilitating rental increases. Management also believes
that tenant satisfaction creates profitable expansion and build-to-suit
opportunities from existing tenants.
To develop its tenant franchise, the Company provides a variety of
tenant services, including providing high quality, attractive space; promptly
and fairly attending to tenant building or billing concerns; obtaining the
lowest possible utility, insurance and real estate tax charges; responding
rapidly to expansion or space reconfiguration requests; and assisting tenants in
meeting their capital equipment needs. The Company views tenant service as a key
factor in its business and has established tenant satisfaction as one of its
primary corporate goals and a principal measure in the Company's incentive pay
program for employees.
The Company's tenant service strategy benefits from the size and
concentration of the Company's real estate holdings in Greater Chicago. As a
large owner of warehouse/industrial properties in a single
-3-
<PAGE>
geographic market, the Company believes it can obtain for its tenants the
benefits of bulk purchase of goods and services. Management believes that
minimizing tenants' occupancy costs builds tenant loyalty and provides the
Company with a significant marketing advantage.
The Company's own staff is responsible for managing the Company's
entire real estate portfolio. The Company currently staffs eight management
regions, each serving a particular segment of Greater Chicago, and each staffed
with a team consisting of a regional manager, an assistant manager and
accounting support personnel. Each team is responsible for all aspects of the
management and leasing of its assigned properties. The Company intends to
establish additional regional offices as the size of its portfolio increases.
To motivate employees to provide the highest level of tenant service,
the Company has established a pay-for-performance compensation plan under which
the incentive pay of each participating employee depends in part on the results
of an annual tenant satisfaction survey administered by the Company's
independent directors. Employee incentive pay is also dependent on the
achievement of targeted portfolio occupancy and targeted per share funds from
operations, each of which the Company believes is enhanced by tenant service.
VALUE-ADDED INVESTMENTS. The Company seeks to acquire
warehouse/industrial properties that have an initial cash yield greater than the
Company's cost of capital (currently estimated to be less than 10.0%), that
offer the best opportunity for cash flow growth and that meet the Company's
investment criteria. The Company focuses on three types of transactions to which
it can add value through the application of its development, management,
construction, marketing and financial expertise. These transactions include the
acquisition of: (i) existing leased properties, (ii) build-to-suit projects and
(iii) older, economically viable properties that can be redeveloped. A table of
the Company's warehouse/industrial properties with a description of each
investment type is set forth beginning on page 14 hereof.
- EXISTING LEASED PROPERTIES. The Company focuses primarily on
warehouse/industrial properties and build-to-suits with
purchase prices ranging between $3 million and $6 million,
which management believes are too small to be efficiently
acquired on an individual basis by most institutions. As a
public company with significant access to capital, including
its lines of credit, the Company believes that it will
continue to be able to take advantage of numerous acquisition
opportunities in this price range.
- BUILD-TO-SUIT PROPERTIES. In a build-to-suit transaction, the
Company typically enters into a fixed-price forward purchase
commitment for a property that has been substantially
preleased to a single tenant, thereby eliminating the
construction and leasing risk generally associated with
speculative building. Although tenants are involved in site
selection and design decisions, it is management's policy to
acquire buildings readily adaptable to a variety of tenants
and alternative uses. The Company has achieved and expects to
continue to achieve favorable yields from build-to-suit
transactions because of the Company's active involvement in
the creation and financing of these projects.
- REDEVELOPMENT PROPERTIES. The Company seeks to acquire certain
warehouse/industrial properties for redevelopment, subdivision
and re-leasing. Such properties are generally larger than the
leased properties and build-to-suits acquired by the Company
and typically involve significant reconfiguration and
redevelopment expense prior to re-leasing. Competition for
these properties is limited because, in management's
experience, institutional investors generally
-4-
<PAGE>
lack redevelopment capability and prefer to invest in new
leased product and because smaller privately held firms
typically lack the capital necessary to engage in
redevelopments. Management intends to acquire for
redevelopment only properties with sufficient existing cash
flow or expected cash flow from pre-leasing to cover the
capital cost of the Company's initial investment.
Redevelopment projects will be acquired only if the Company
determines that underlying tenant demand exists to complete
the leasing of any vacant space at favorable rates, that a
substantial rent advantage can be secured through lower
property acquisition cost and that the anticipated increase
in Company cash flow justifies associated project risks.
- REDEPLOYMENT OF CAPITAL. The Company seeks, where possible, to
sell properties in transactions intended to qualify as
tax-free exchanges under applicable provisions of the Internal
Revenue Code and redeploy the proceeds of such sales in
properties with higher yielding opportunities where the
Company believes significant value can be added.
The Company has developed the following investment criteria which it
has determined are important to maximize its return on investment:
- ADAPTABLE STRUCTURE AND CONFIGURATION. To maximize occupancy
and minimize reletting expense and portfolio vacancy, the
Company seeks "generic" properties or properties that have
flexible floor plans amenable to inexpensive subdivision and
adaptable to a wide variety of industrial or warehouse uses. A
building should typically be single-story, with a ceiling
height of at least 18 feet (measured from the floor to the
lowest point of the horizontal roof supports). The building
must be structurally sound, capable of bearing heavy floor
loads and readily divisible for use by multiple tenants.
Generally, less than 10% of the building's gross leasable area
should be devoted to office or similar uses. The Company
generally does not intend to invest in tenant-specific
improvements not usable by other potential tenants, and it
generally does not intend to acquire limited or special use
properties, such as those devoted to research and development,
heavy manufacturing processes or retail warehouse outlets.
- LOCATION AND TRANSPORTATION ACCESS. To be acceptable to
diverse tenants, a property should be located in a
well-maintained industrial park or area zoned for industrial
uses and be in close proximity to easily accessible interstate
highway interchanges. The building itself should have adequate
loading docks and be sited to permit truck access and
circulation. Rail service is also desirable.
- ENVIRONMENTAL AND ZONING COMPLIANCE. A property must be in
compliance with applicable environmental regulations, must not
present material financial risk to the Company due to
potential remediation costs associated with prior or ongoing
practices or environmental conditions at the property, and
must not be likely to be threatened by ascertainable material
environmental hazards emanating from surrounding properties.
The intended use of the property must also be in compliance
with all applicable zoning, fire and business ordinances.
- EXPANSION POTENTIAL. A property should have available
additional land to permit expansion by existing tenants.
- TENANT CREDIT. A property should be leased to one or more
well-managed, creditworthy tenants that are capable of meeting
their rent and other lease obligations. A tenant's operations
must be environmentally sound and must not damage the property
or impair reletting. The tenant's
-5-
<PAGE>
business should also be consistent with the Company's
tenant diversification goals.
- LEASE CHARACTERISTICS. Existing or anticipated leases should
provide for (i) rents consistent with the rents paid by
comparable tenants in similar facilities in the same
submarkets; (ii) the pass through to tenants of all operating,
maintenance, tax and administrative costs and increases in
such costs; (iii) rent indexation or fixed rental increases
that equal or exceed management's expectation for inflation;
and (iv) a term consistent with the amount of the Company's
investment in the property and compatible with the Company's
overall lease expiration schedule.
OTHER TENANT SERVICES. The Company, through its unconsolidated
subsidiary, CenterPoint Realty Services, also seeks to provide value-added
services by the development of assets for purchase and by making various
commodities and services available to tenants.
The Company develops assets for purchase by tenants and institutions
for which the Company earns fees. Typically, these transactions have yields
below the Company's investment return hurdle, but offer substantial profit
opportunities relative to the level of required capital and management time. The
Company is afforded these opportunities as a consequence of the size of its
existing portfolio and its market penetration. The Company's fee development
business has been, and is expected to continue to be, a recurring source of
revenue.
In addition, the Company continues to explore various avenues to
provide tenants with additional services, including providing equipment leasing
services through joint ventures with capital equipment providers, obtaining
cooperative energy purchases for tenants and making other commodities and
services available to tenants. By providing value-added services to its tenants,
the Company enhances its brand name and further develops its franchise.
THE COMPANY'S MARKET AREA: GREATER CHICAGO
The Company's target market is Greater Chicago (the region within a
150-mile radius of the City of Chicago, including Milwaukee, Wisconsin and South
Bend, Indiana), although the Company may in certain instances consider the
development of warehouse/industrial properties in other areas (for example, a
readily salable building, fully-leased to a creditworthy tenant). Greater
Chicago lies at the center of one of the nation's principal population and
production regions and, as a consequence, has become a major
warehouse/industrial market. Management believes that the size, location,
transportation and demographic advantages, tenant diversity, favorable growth
trends and real estate market conditions of its target market will support
continued leasing and acquisition activity, enhancing the Company's growth in
per share distributable cash flow.
Besides market activity from in-migration and firm expansion, a
consistently high level of industrial real estate activity results from the
changing space needs of individual industries and because different industries
move in different cycles. The Greater Chicago region's continuous activity
enables the Company to produce consistently high cash flow because the Company
invests in and operates "generic" real estate, suitable for multiple industries,
and the Company is highly skilled in "value-added" investing, acquiring and
re-adapting space for disparate uses.
-6-
<PAGE>
LOCATION, TRANSPORTATION AND DEMOGRAPHIC ADVANTAGES
Greater Chicago encompasses over 1.2 billion square feet of
warehouse/industrial property, making the area the largest warehouse/industrial
market in the United States. The Greater Chicago market is comprised of 19
discreet geographic submarkets, many of which would independently rank among the
nation's largest (Source: Torto Wheaton Research) and in most of which the
Company owns warehouse/industrial properties. The area has achieved its
prominence as a manufacturing and distribution center as a result of its central
continental location and extensive air, roadway, rail and water transportation
infrastructure connecting the Greater Chicago area with a contiguous 13-state
region consisting of Illinois, Wisconsin, Michigan, Ohio, Pennsylvania, West
Virginia, Tennessee, Kentucky, Indiana, Missouri, Iowa, Nebraska and Minnesota.
The latest census report issued by the United States Department of
Commerce reported that this 13-state region accounted for $1.6 trillion in gross
product (representing approximately one-third of the nation's economic
activity), produced by 1.8 million industrial and commercial firms serving a
residential population of approximately 78 million residents. Published census
data indicate that Greater Chicago is the dominant economic, work and population
center of this region as the home to over eight million residents and over
59,000 diverse industrial and commercial firms. The diversity of Greater Chicago
business provides the Company the opportunity to capitalize on different trends
affecting real estate demand and usage by different manufacturers and
wholesalers. The diversity of business also reduces the Company's exposure to
changes in the fortunes of any single type of business.
ECONOMIC AND EMPLOYMENT TRENDS
Current manufacturing, productivity, business investment, capacity
utilization, and employment trends in the Midwest region of the U.S. and in
Greater Chicago are positive. The Midwest Manufacturing Index for the Midwest
region, as published by the Federal Reserve Bank of Chicago, has been steadily
expanding since 1991. The Midwest region has also recorded increases in
manufacturing and wholesale employment and has exceeded the rates of growth of
the United States as a whole. Management believes that these trends are
favorable indicators of growth in the warehouse/industrial property market. The
Greater Chicago area is the largest job market in the nation.
WAREHOUSE/INDUSTRIAL DEMAND AND SUPPLY
Historically, occupancy rates in Greater Chicago have demonstrated a
high degree of stability. Over the last seventeen years, occupancy rates for the
Greater Chicago region have exceeded the national average by 1.45%, with an
average occupancy rate of nearly 94% (Source: CBC/Torto Wheaton Research). The
region's annual absorption from 1994 to 1997 averaged approximately 40 million
square feet (Source: CB Commercial).
During 1997, Greater Chicago's industrial property market added 13.1
million square feet, and gross regional absorption was approximately 45 million
square feet. According to CB Commercial, in the fourth quarter of 1997 the
overall nominal industrial vacancy rate in the Greater Chicago area was 6.9%, an
increase of 30 basis points from the third quarter. However, the effective
vacancy rate (net of obsolete and environmentally tainted properties) remained
less than 5% overall. This increase in vacancy was primarily due to speculative
construction in two Illinois submarkets which the Company has consistently
avoided based on its prediction of a demand/supply imbalance in those
submarkets.
-7-
<PAGE>
TRANSACTIONS DURING 1997
During 1997, the Company accomplished the following:
1997 ACQUISITIONS AND DISPOSITIONS
During 1997, the Company acquired or completed development of 28
warehouse/industrial properties totaling 8.8 million square feet at a total cost
of approximately $195.6 million, including the acquisition of a 1.75 million
square foot facility in McCook, Illinois from General Motors, the largest single
acquisition in the history of the Chicago industrial property market, a 1.1
million square foot facility in Aurora, Illinois, an 888,335 square foot
facility in Elk Grove, Village, Illinois and an 812,000 square foot
build-to-suit warehouse in Granite City, Illinois for the Dial Corporation, the
largest development of any type begun in the State of Illinois in 1997. Also in
1997, the Company disposed of two warehouse/industrial properties and one office
building totaling approximately 201,318 square feet for approximately $12.6
million.
1997 SECURITIES OFFERINGS
- On March 6, 1997, the Company completed a public offering of
2,250,000 common shares at $31.50 per share under a shelf
registration statement. Net proceeds from the offering after
the underwriting discounts and other offering costs were
approximately $66.8 million. The proceeds of the offering were
used to repay approximately $58.2 million outstanding under
the Company's unsecured revolving line of credit co-led by The
First National Bank of Chicago and Lehman Brothers Holdings
Inc. with the balance of $8.6 million to fund investments.
- On November 10, 1997, the Company completed a public offering
of 3,000,000 8.48% Series A Cumulative Redeemable Preferred
Shares of Beneficial Interest, Liquidation Preference $25.00
per share, at $25.00 per share, under the Company's shelf
registration statement, as amended, which was declared
effective on October 23, 1997. Net proceeds from the offering
after underwriting discounts were approximately $72.7 million.
All of the proceeds from the offering were used to repay
amounts outstanding under the Company's unsecured revolving
credit facility co-led by The First National Bank of Chicago
and Lehman Brothers Holdings Inc.
1997 FINANCINGS
- On September 18, 1997, the Company completed a $55 million
tax-exempt bond financing for the development of the Company's
O'Hare Express air freight center. The complex is a 825,000
square foot air freight forwarding and warehouse facility,
anticipated to be constructed in three phases over a
three-year period by CenterPoint O'Hare L.L.C., a subsidiary
of the Company. The unsecured bonds were issued at par,
bearing an initial interest rate of 4%.
-8-
<PAGE>
- On November 13, 1997, the Company amended its existing
unsecured revolving credit facility co-led by The First
National Bank of Chicago and Lehman Brothers Holdings Inc. to,
among other things, increase the principal amount available
under the line from $135 million to $150 million and provide
the Company with a competitive bid option under the line. The
interest rate on borrowings under the unsecured credit
facility adjusts based on the Company's senior debt ratings.
The current interest rate is LIBOR plus 80 basis points for
LIBOR borrowings and prime rate for other borrowings.
REORGANIZATION
On October 15, 1997, the Company completed a reorganization pursuant to
which it converted from a Maryland corporation to a Maryland real estate
investment trust by means of a merger of CenterPoint Properties Corporation (the
"Corporation") with and into the Company, which prior to the merger was a
wholly-owned subsidiary of the Corporation, with the Company as the surviving
entity. Pursuant to a Plan of Reorganization, which was approved by the
stockholders of the Corporation at a Special Meeting of Stockholders held on
October 1, 1997, each issued and outstanding share of common stock of the
corporation, par value $.001 per share (the "Common Stock"), was converted into
one common share of beneficial interest in the Company, par value $.001 per
share (the "Common Shares"), each outstanding share of Class B common stock of
the Corporation was converted into one Class B common share of beneficial
interest in the Company; and the outstanding principal amount of the
Corporation's 8.22% Convertible Subordinated Debentures due 2004 was assumed by
the Company and converted into the same principal amount of 8.22% Convertible
Subordinated Debentures due 2004 of the Company (the "Company Debentures"). The
Common Shares and the Company Debentures currently trade on the NYSE in the same
manner as the Common Stock and debentures of the Corporation, respectively,
traded on the NYSE prior to consummation of the merger.
EMPLOYEES
At March 1, 1998, the Company had 125 full-time and 30 part-time
employees. Of the full-time employees, 107 are involved with property
management, operations, leasing and acquisition activities, 8 are involved with
general financial administration, financing services, reporting and acquisition
analysis, and 10 are clerical workers. All property management activities are
currently provided by the Company's employees. The Company does not intend to
enter into any agreement with any entity or person relating to such services.
However, the Company's Declaration of Trust does not contain any prohibition on
the use of third parties to perform such services, and such services may
therefore be performed by third parties in the future.
-9-
<PAGE>
ENVIRONMENTAL MATTERS
Under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended ("CERCLA"), as well as similar state and local
laws, owners and operators of property, both past and present, may be held
financially responsible for the investigation and, if appropriate, the
remediation of releases or threatened releases of hazardous substances into the
environment. Other parties who arranged for the disposal of hazardous substances
or transported hazardous substances for disposal at a property also may be held
liable. Liability under CERCLA and similar laws is strict, joint and several
unless a legally and factually sufficient basis for apportionment is
demonstrated and in most instances, liability may be imposed without regard to
the party's culpability concerning the presence of hazardous substances at the
property. Potentially responsible parties may be liable to one another, the
government and under some circumstances, third parties.
To the extent the Company in the future may incur hazardous
substance response costs in connection with any of its properties, the
Company may seek to recover such costs from responsible parties under CERCLA.
Costs recoverable under CERCLA must be incurred in a manner consistent with
the National Contingency Plan. The National Contingency Plan establishes a
procedure whereby contaminated properties may be identified and, if
necessary, remediated. If remediation is conducted in the appropriate manner,
the costs that may be recovered include but may not be limited to funds
expended to investigate and to remediate hazardous substance releases. Costs
associated with any such environmental activity may be substantial.
All of the Company's existing properties have been, and all properties
the Company may acquire in the future will be, subjected to an ASTM Phase I and
or similar environmental assessment. The purpose of a Phase I environmental
assessment is to determine if past and present uses of a property indicate the
potential for soil or groundwater contamination or if other environmental
conditions might affect the value of or future uses of the property. Phase I
environmental assessments generally include the following: visual inspection of
environmental conditions at and around the property; review of available land
use records; interviews with the property representatives; examination of
publicly available information from environmental agencies; and a walk through
survey for suspected asbestos containing or other toxic materials. Where a Phase
I environmental assessment of a property indicates a need for further
investigation, the Company commissions a more detailed Phase II environmental
assessment.
Apart from certain conditions currently being remedied, as described
below, the Phase I and Phase II environmental assessment reports have not
revealed any environmental condition affecting any of the Company's existing
properties or any properties under binding contract that the Company believes
requires remediation that would have a material adverse effect on the Company's
business or assets, nor is the Company aware of any such environmental
condition. The Company believes that either the properties are in compliance or
the remediation activities are in compliance in all material respects with
applicable Federal, state and local laws, ordinances and regulations concerning
the presence of hazardous substances. The Company has not been notified by any
governmental authority, and is not otherwise aware, of any material
noncompliance, liability or claim relating to hazardous substances in connection
with any of its properties. Based on its current knowledge and currently
applicable laws and regulations, the Company is aware of the following
environmental issues, none of which the Company believes are material to its
financial condition:
1. Certain remediation activities are currently being
conducted at Great Lakes Industrial Center by Neo Industries, a
previous tenant, which is investigating chromium releases from its
plating operations and is currently remediating the chromium
contamination in the soil and the groundwater. The Company does not
expect to incur any remediation costs with respect
-10-
<PAGE>
to this property.
2. The former owner/operator of one property, 1700 West
Hawthorne Lane, West Chicago, Illinois, has removed various underground
and above-ground storage tanks and performed remediation of releases
from these tanks where necessary. Closure reports have been or are
being submitted by the former owner/operator for each tank removal. The
Company expects to receive Illinois Environmental Protection Agency
("IEPA") closure certification for each tank from the former
owner/operator in due course.
3. The former owner/operator of one property, the Allsteel
facility in Montgomery, Illinois, has closed seven underground storage
tanks associated with former operations and is currently remediating
solvent-contaminated soil and groundwater. The IEPA is supervising the
remedial activities, and the Company expects to receive a No Further
Remediation letter from the IEPA once the remediation is complete. The
Company does not expect to incur any remediation costs in connection
with this property because both the former owner/operator and the
former owner/operator's parent company have agreed to (1) perform the
remediation, and (2) indemnify the Company against any losses.
4. The Company is currently remediating one property located
at 5700 West Touhy in Niles, Illinois. This property has limited
petroleum and metals contamination associated with the manufacturing
and storage activities of the prior owner. The IEPA is supervising the
remedial activities, and the Company expects to receive a No Further
Remediation letter from the IEPA once the remediation is complete.
5. Certain of the properties are in the vicinity of properties
that contain or have contained storage tanks or on which hazardous
substances or petroleum products have been or may in the future be used
or stored. Based on the Phase I and, in some cases, additional
environmental assessments conducted with respect to its properties, the
Company is not aware that these conditions have had, and believes it
unlikely that these conditions will have, any adverse effect on its
properties. Should there be any adverse effect requiring response by
the Company, the Company believes that it may be able to recover its
response costs from the responsible parties.
6. Limited quantities of asbestos containing materials ("ACM")
are present in various building materials at many of the Company's
properties. The ACM present at the properties generally is in good
condition and for the most part is non-friable. The Company has
implemented an operation and maintenance plan for ACM, including
periodic inspections. This plan includes removal and abatement activity
whenever damaged ACM is discovered in areas where human exposure may
occur. It also includes an annual ACM abatement program and ACM
abatement during property renovation or reconstruction.
It is possible that the environmental assessments of the Company's
properties do not reveal all environmental liability concerns or that there are
material environmental liabilities of which the Company is unaware. Given the
nature of the properties that are now owned by the Company or that may be
acquired in the future, no assurances can be given that (i) future laws,
ordinances or regulations will not require or impose any material expenditures
or liabilities in connection with environmental conditions by or on the Company
or its properties; (ii) the current environmental condition of the Company's
properties will not be affected by tenants and occupants of such properties, by
the condition of properties in the vicinity of such properties or by third
parties unrelated to the Company; and (iii) prior owners of any of the Company's
properties did not create environmental problems of which the Company is not
aware.
-11-
<PAGE>
COMPETITION
All of the Company's existing properties are, and all of the properties
that it may acquire in the future are expected to be, located in areas that
include numerous other warehouse/industrial properties, many of which may be
deemed to be more suitable to a potential tenant than the Company's properties.
The resulting competition could have a material adverse effect on the Company's
ability to lease its properties and to increase the rentals charged on existing
leases.
INVESTMENT IN AND ADVANCES TO AFFILIATE
The Company holds approximately 99% of the economic interest in
CenterPoint Realty Services Corporation, an Illinois corporation ("CRS"). To
maintain compliance with limitations on income from business activities received
by REITs and their qualified REIT subsidiaries, the Company holds its interest
in CRS in the form of non-voting equity ownership which qualifies CRS as an
unconsolidated taxable subsidiary.
As of December 31, 1997, the Company had advanced to CRS approximately
$7.9 million under a demand loan with an interest rate of 8.125%. The proceeds
of the loan were used for development projects. Principal and interest are due
upon demand.
ITEM 2. PROPERTIES.
THE COMPANY'S WAREHOUSE/INDUSTRIAL PROPERTIES
The Company's investment portfolio of warehouse/industrial properties
consists of 96 properties totaling approximately 22.1 million square feet.
During 1997, the Company acquired 21 fully-leased warehouse/industrial
properties and completed the construction of 7 fully leased warehouse/industrial
build-to-suit properties with a total area of approximately 8.8 million square
feet, and the Company disposed of 2 warehouse/industrial properties with a total
area of approximately 43,500 square feet.
LOCATION. The Company's current properties are well located, with
convenient access to area interstate highway, rail, and air transportation. The
properties are in good physical condition, most of them having been built or
substantially renovated within the last 10 years.
BUILDING CHARACTERISTICS. Most of the space in the warehouse/industrial
properties currently owned by the Company or under contract has been designed
for warehousing and distribution. The remainder of the space is comprised of
light manufacturing space. A number of the industrial properties include both
distribution and light manufacturing space so as to provide tenants with
increased flexibility. The Company's largest industrial property contains
approximately 1,700,000 rentable square feet in a single-tenant warehousing and
manufacturing property, available for redevelopment into a multi-tenant
warehouse/industrial complex. The Company's present warehouse/industrial
properties have an average project size of approximately 232,123 square feet,
and, on average, a tenant at an industrial property occupies approximately
319,000 rentable square feet. Although a number of the industrial properties are
single-tenant build-to-suit facilities, all are designed to be divisible and to
be leased by multiple tenants. The Company has had substantial experience in
subdividing older space for new tenants.
The Company's present warehousing and distribution properties, as well
as warehousing and distribution properties under contract, are designed for bulk
storage of materials and manufactured goods in
-12-
<PAGE>
buildings with interior heights typically of 22 feet or more. All of the
warehousing and distribution properties have dock facilities for trucks as
well as grade level loading for lighter vehicles and vans. Typically, the
distribution buildings are used for storage and contain a minimal amount of
office space.
LEASE CHARACTERISTICS. The Company believes that the lease agreements
for its warehouse/industrial properties, which in most cases provide for
scheduled or indexed increases in rent, as well as the strengthening economy,
will provide opportunities for rental growth. The Company, in substantially all
cases, passes operating expenses and real estate tax increases on to tenants.
The leases for the warehouse/industrial properties currently owned by the
Company have terms between one and 5 years, with a weighted average remaining
term, based on square footage, of approximately 4.14 years as of December 31,
1997.
TENANT DIVERSITY. The composition of tenants in the
warehouse/industrial properties currently owned by the Company reflects the
commercial diversity of businesses operating in Greater Chicago. At December 31,
1997, no single industry, other than Wholesale Trade-Durable Goods and
Trucking/Warehousing, accounted for more than 10.8% of the leased space in the
warehouse/industrial properties currently owned by the Company. Wholesale
Trade-Durable Goods and Trucking/Warehousing, which encompass a wide variety of
industries, accounted for 27.2% of the leased space in the warehouse/industrial
properties currently owned by the Company at December 31, 1997, and the five
largest industries, other than Wholesale Trade-Durable Goods and
Trucking/Warehousing, represented by tenants accounted collectively for only
35.6% of such space. In addition, no single tenant comprised more than 5% of the
Company's total revenues as of December 31, 1997.
OTHER INFORMATION REGARDING WAREHOUSE/INDUSTRIAL PROPERTIES. The
following table sets forth certain information regarding the Company's portfolio
of warehouse/industrial properties, separately identifying 1997 investments of
the Company:
-13-
<PAGE>
CENTERPOINT PROPERTIES TRUST
PROPERTY SUMMARY
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
YEAR OF ORIGINAL
CONSTRUCTION/LAST ANNUALIZED AVERAGE
REDEVELOPMENT AND/OR BASE RENT RENT PER GLA
1997 INVESTMENTS CITY STATE EXPANSION (1) REVENUE SQ. FT. (2) SQ. FT. (3)
---------------- ---- ----- -------------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
LAKE COUNTY
3145 Central Avenue(6) Waukegan IL 1958 $990,000 $3.30 300,000
N.E. COOK COUNTY
5700 West Touhy Avenue Niles IL 1948 0 0 910,760
CHICAGO O'HARE AREA
O'Hare Express-Phase A-2 Chicago IL 1997 1,070,090 8.85 120,971
O'Hare Express-Phase B-1 Chicago IL 1997 2,068,590 12.05 171,685
110-190 Old Higgins Road Des Plaines IL 1980 1,256,784 10.45 120,292
1796 Sherwin Des Plaines IL 1964 600,211 6.30 95,220
2525 Busse Road Elk Grove Village IL 1975 2,817,353 3.17 888,335
2701-2781 Busse Road Elk Grove Village IL 1997 1,180,716 4.70 251,076
2801-2881 Busse Road Elk Grove Village IL 1997 1,112,802 4.43 251,076
1951 Landmeier Elk Grove Village IL 1967 203,880 4.86 41,976
WEST SUBURBS
2901 Centre Circle (7) Downers Grove IL 1979 148,764 7.07 21,056
FAR WEST SUBURBS
1 Allsteel Drive (7) Aurora IL 1960 2,729,435 2.71 1,008,120
2727 West Diehl Road Naperville IL 1997 1,836,240 4.17 440,343
2885 West Diehl Road Naperville IL 1997 1,145,928 3.80 301,560
SOUTHWEST SUBURBS
7447 South Central Avenue Bedford Park IL 1975 275,842 2.33 118,218
7400 S. Narragansett Ave (6) Bedford Park IL 1976 515,424 2.95 174,720
6751-55 South Sayre Avenue Bedford Park IL 1974 746,378 3.08 242,690
7525 South Sayre Bedford Park IL 1981 386,577 3.14 123,178
6464 West 51st Street Forest View IL 1973 736,040 3.53 208,713
6500 West 51st Street Forest View IL 1975 500,297 2.70 185,295
9301 W. 55th Street (6) McCook IL 1979 1,620,000 0.95 1,700,000
FAR S.W. SUBURBS
2301 North Route 30 Plainfield IL 1972 815,625 2.89 282,679
1355 Enterprise Drive (6) Romeoville IL 1980 354,123 2.90 122,100
755 REMMINGTON Bolingbrook IL 1997 548,000 3.78 144,844
CHICAGO SOUTH
3133 East 106th (6) Chicago IL 1971 300,285 3.75 80,076
MILWAUKEE COUNTY
1475 S. 101st West Allis WI 1969 188,832 4.02 46,973
2003-2201 S. 114th Street West Allis WI 1965 628,380 2.58 243,350
RACINE COUNTY
1333 Grandview Drive Yorkville WI 1994 796,572 3.79 210,000
---------- ---- ---------
SUBTOTAL 25,573,168 8,805,306
---------- ---------
AVERAGE 2.89(9) 320,758(10)
---- ---------
<CAPTION>
PERCENT
PERCENT OF GLA
OF TOTAL LEASED AS NO. OF PROPERTY
1997 INVESTMENTS GLA (4) OF 12/31/97 TENANTS TYPE(5)
---------------- -------- ----------- ------- --------
<S> <C> <C> <C> <C>
LAKE COUNTY
3145 Central Avenue(6) 1.36% 100% 2 ACQ
N.E. COOK COUNTY
5700 West Touhy Avenue 4.13% 100% 1 RDV
CHICAGO O'HARE AREA
O'Hare Express-Phase A-2 0.55% 100% 2 BTS
O'Hare Express-Phase B-1 0.78% 100% 1 BTS
110-190 Old Higgins Road 0.55% 100% 9 ACQ
1796 Sherwin 0.43% 100% 2 ACQ
2525 Busse Road 4.03% 100% 5 ACQ
2701-2781 Busse Road 1.14% 100% 2 BTS
2801-2881 Busse Road 1.14% 100% 2 BTS
1951 Landmeier 0.19% 100% 2 ACQ
WEST SUBURBS
2901 Centre Circle (7) 0.09% 100% 1 ACQ
FAR WEST SUBURBS
1 Allsteel Drive (7) 4.57% 100% 2 ACQ
2727 West Diehl Road 2.00% 100% 1 BTS
2885 West Diehl Road 1.37% 100% 1 BTS
SOUTHWEST SUBURBS
7447 South Central Avenue 0.54% 100% 1 ACQ
7400 S. Narragansett Ave (6) 0.79% 100% 1 ACQ
6751-55 South Sayre Avenue 1.10% 100% 2 ACQ
7525 South Sayre 0.56% 100% 2 ACQ
6464 West 51st Street 0.95% 100% 4 ACQ
6500 West 51st Street 0.84% 100% 1 ACQ
9301 W. 55th Street (6) 7.71% 100% 1 RDV
FAR S.W. SUBURBS
2301 North Route 30 1.28% 100% 1 ACQ
1355 Enterprise Drive (6) 0.55% 100% 1 ACQ
755 REMMINGTON 100% 2 BTS
CHICAGO SOUTH
3133 East 106th (6) 0.36% 100% 1 ACQ
MILWAUKEE COUNTY
1475 S. 101st 0.21% 100% 1 ACQ
2003-2201 S. 114th Street 1.10% 100% 2 ACQ
RACINE COUNTY
1333 Grandview Drive 0.95% 100% 1 ACQ
-----
SUBTOTAL 39.27%
-----
AVERAGE 1.45%
-----
</TABLE>
-14-
<PAGE>
CENTERPOINT PROPERTIES TRUST
PROPERTY SUMMARY
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
YEAR OF ORIGINAL
CONSTRUCTION/LAST ANNUALIZED AVERAGE
REDEVELOPMENT AND/OR BASE RENT RENT PER GLA
PREVIOUSLY OWNED PROPERTIES CITY STATE EXPANSION (1) REVENUE SQ. FT. (2) SQ. FT. (3)
--------------------------- ---- ------ -------------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
LAKE COUNTY
911 Commerce (6) Buffalo Grove IL 1993 703,636 5.96 118,009
1800 Industrial Drive Libertyville IL 1992/1994 1,079,292 6.16 175,196
1810-1820 Industrial Drive Libertyville IL 1977 256,700 3.02 85,000
1 Wildlife Way Long Grove IL 1994 665,068 12.29 54,100
620-630 Butterfield Road Mundelein IL 1990 297,680 12.28 24,237
1700 Butterfield Road Mundelein IL 1976 229,750 3.83 60,000
950-970 Tower Road Mundelein IL 1979-1990 90,861 2.37 38,359
2339-41 Ernie Krueger Court Waukegan IL 1990/1993 223,245 4.10 54,450
1300 Northpoint Road Waukegan IL 1994 310,409 4.78 65,000
N.E. COOK COUNTY
5990 Touhy Avenue Niles IL 1960/1993 1,502,864 5.08 295,964
N.W. COOK COUNTY
1500 West Dundee Road (6) Arlington Heights IL 1969 1,463,525 2.93 500,000
900 W. University Drive Arlington Heights IL 1974 501,083 5.81 86,254
1015 East State Parkway Schaumburg IL 1980 132,330 6.76 19,576
N. KANE COUNTY
825 Tollgate Road Elgin IL 1989 424,988 5.11 83,122
CHICAGO O'HARE AREA
745 Birginal Road Bensenville IL 1974 378,875 3.35 113,266
2743 Armstrong Court Des Plaines IL 1989 314,178 5.89 53,325
850 Arthur Avenue (8) Elk Grove Village IL 1971/1973 250,717 5.90 42,490
1400 Busse Road Elk Grove Village IL 1975 347,038 2.34 148,436
800 Chase Avenue (6) Elk Grove Village IL 1972 1,182,792 3.46 341,848
1100 Chase Avenue (7) Elk Grove Village IL 1980/1996 176,618 4.24 41,651
2600 Elmhurst Road Elk Grove Village IL 1995 521,170 4.96 105,000
875 Fargo Avenue Elk Grove Village IL 1980 345,946 4.20 82,368
1850 Greenleaf Elk Grove Village IL 1965 233,280 3.98 58,627
1201 Lunt Avenue Elk Grove Village IL 1971 47,820 6.48 7,380
1501 Pratt Avenue Elk Grove Village IL 1973 600,573 3.95 151,900
1520 Pratt Avenue Elk Grove Village IL 1968 243,148 3.89 62,546
10601 Seymour Avenue (6) Franklin Park IL 1963/1970 0 0 677,000
2553 North Edgington Franklin Park IL 1967/1995 1,376,770 5.02 274,303
10740 West Grand Avenue (7) Franklin Park IL 1965/1971 247,175 3.75 66,000
1800 Bruning Drive Itasca IL 1975/1978 1,115,617 5.52 202,000
245 Beinoris Drive Wood Dale IL 1988/1993 85,776 7.15 11,989
<CAPTION>
PERCENT
PERCENT OF GLA
OF TOTAL LEASED AS NO. OF PROPERTY
PREVIOUSLY OWNED PROPERTIES GLA (4) OF 12/31/97 TENANTS TYPE(5)
--------------------------- -------- ----------- ------- --------
<S> <C> <C> <C> <C>
LAKE COUNTY
911 Commerce (6) 0.54% 100% 2 ACQ
1800 Industrial Drive 0.79% 100% 1 ACQ
1810-1820 Industrial Drive 0.39% 100% 1 ACQ
1 Wildlife Way 0.25% 100% 1 RDV
620-630 Butterfield Road 0.11% 90% 1 BTS
1700 Butterfield Road 0.27% 100% 1 ACQ
950-970 Tower Road 0.17% 100% 3 BTS
2339-41 Ernie Krueger Court 0.25% 100% 1 BTS
1300 Northpoint Road 0.29% 100% 1 ACQ
N.E. COOK COUNTY
5990 Touhy Avenue 1.34% 100% 3 RDV
N.W. COOK COUNTY
1500 West Dundee Road (6) 2.27% 100% 2 ACQ
900 W. University Drive 0.39% 100% 1 ACQ
1015 East State Parkway 0.09% 0% 0 ACQ
N. KANE COUNTY
825 Tollgate Road 0.38% 100% 2 ACQ
CHICAGO O'HARE AREA
745 Birginal Road 0.51% 0% 0 ACQ
2743 Armstrong Court 0.24% 0% 0 BTS
850 Arthur Avenue (8) 0.19% 100% 1 ACQ
1400 Busse Road 0.67% 90% 10 ACQ
800 Chase Avenue (6) 1.55% 0% 0 ACQ
1100 Chase Avenue (7) 0.19% 100% 1 ACQ
2600 Elmhurst Road 0.48% 100% 1 BTS
875 Fargo Avenue 0.37% 100% 1 ACQ
1850 Greenleaf 0.27% 100% 1 ACQ
1201 Lunt Avenue 0.03% 100% 1 ACQ
1501 Pratt Avenue 0.69% 100% 2 ACQ
1520 Pratt Avenue 0.28% 100% 1 ACQ
10601 Seymour Avenue (6) 3.07% 0% 0 ACQ/RDV
2553 North Edgington 1.24% 100% 4 ACQ
10740 West Grand Avenue (7) 0.30% 100% 1 ACQ
1800 Bruning Drive 0.92% 100% 1 ACQ
245 Beinoris Drive 0.05% 100% 1 BTS/RDV
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
YEAR OF ORIGINAL
CONSTRUCTION/LAST ANNUALIZED AVERAGE
REDEVELOPMENT BASE RENT RENT PER GLA
PREVIOUSLY OWNED PROPERTIES CITY STATE AND/OR EXPANSION (1) REVENUE SQ. FT. (2) SQ. FT. (3)
- --------------------------- ---- ----- -------------------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CHICAGO NORTH
4501 West Augusta Boulevard Chicago IL 1942/1989 748,070 1.73 432,661
N.W. SUBURBS
400 North Wolf Road Northlake IL 1956/1997 4,319,091 2.83 1,527,593
CENTRAL KANE/N. DUPAGE
425 South 37th Avenue (7) St. Charles IL 1975 399,309 3.87 103,106
1250 Carolina Drive West Chicago IL 1988 572,325 3.82 150,000
1645 Downs Drive West Chicago IL 1975 361,008 2.79 129,390
1733 Downs Drive West Chicago IL 1975 363,816 2.50 145,528
825-845 Hawthorne Lane (6) West Chicago IL 1974 639,499 4.03 158,772
1700 West Hawthorne (6) West Chicago IL 1959/1969 1,381,800 1.88 735,196
FAR WEST SUBURBS
800 Enterprise Court Naperville IL 1985 183,666 5.25 34,984
720 Frontenac Naperville IL 1991 537,560 3.13 171,935
820 Frontenac Naperville IL 1988 645,137 4.20 153,604
920 Frontenac Naperville IL 1987 402,829 3.32 121,200
1020 Frontenac Naperville IL 1980 441,750 4.43 99,684
1120 Frontenac Naperville IL 1980/1994 543,639 3.53 153,902
1510 Frontenac Naperville IL 1986 281,331 2.68 104,886
1560 Frontenac Naperville IL 1987 298,280 3.48 85,608
1651 Frontenac Naperville IL 1978 120,135 3.95 30,414
2764 Golfview Naperville IL 1985 99,420 4.97 20,022
1500 Shore Drive Naperville IL 1985 165,932 3.84 43,230
1150 Shore Road Naperville IL 1985 174,888 5.79 30,184
SOUTHWEST SUBURBS
6600 River Road Hodgkins IL 1968 1,398,000 2.22 630,410
FAR S.W. SUBURBS
16400 West 103rd Street (7) Lemont IL 1983/1995 278,939 4.39 63,612
1319 Marquette Drive Romeoville IL 1990 392,206 10.79 36,349
7001 Adams Street Willowbrook IL 1994 192,716 7.61 25,324
CHICAGO SOUTH
4400 South Kolmar (6) Chicago IL 1966 438,840 4.77 92,000
900 East 103rd Street Chicago IL 1910/1990 1,967,449 3.42 575,462
750 East 110th Street Chicago IL 1966 237,972 3.33 71,510
SOUTH SUBURBS
11601 South Central Avenue Alsip IL 1970 894,834 3.45 259,000
11701 South Central Avenue Alsip IL 1970 870,000 2.93 297,207
5619-25 West 115th Street Alsip IL 1974 1,847,819 4.65 396,979
21399 Torrence Avenue Sauk Village IL 1987 745,164 2.00 372,835
N.W. INDIANA
425 West 151st Street East Chicago IN 1913/1991 1,328,038 3.80 349,236
201 Mississippi Street Gary IN 1945/1988 3,651,848 3.47 1,052,173
1827 North Bendix Drive (6) South Bend IN 1964/1990 554,580 2.78 199,730
<CAPTION>
PERCENT
PERCENT OF GLA
OF TOTAL LEASED AS NO. OF PROPERTY
PREVIOUSLY OWNED PROPERTIES GLA (4) OF 12/31/97 TENANTS TYPE(5)
- --------------------------- ------- ----------- ------- -------
<S> <C> <C> <C> <C>
CHICAGO NORTH
4501 West Augusta Boulevard 1.96% 95% 7 RDV
N.W. SUBURBS
400 North Wolf Road 6.93% 100% 4 ACQ
CENTRAL KANE/N. DUPAGE
425 South 37th Avenue (7) 0.47% 100% 1 ACQ
1250 Carolina Drive 0.68% 100% 2 BTS
1645 Downs Drive 0.59% 100% 1 ACQ
1733 Downs Drive 0.66% 100% 1 ACQ
825-845 Hawthorne Lane (6) 0.72% 83% 3 ACQ
1700 West Hawthorne (6) 3.33% 100% 1 ACQ
FAR WEST SUBURBS
800 Enterprise Court 0.16% 100% 1 ACQ
720 Frontenac 0.78% 100% 2 ACQ
820 Frontenac 0.70% 100% 1 ACQ
920 Frontenac 0.55% 100% 1 ACQ
1020 Frontenac 0.45% 100% 1 ACQ
1120 Frontenac 0.70% 100% 1 ACQ
1510 Frontenac 0.48% 100% 1 ACQ
1560 Frontenac 0.39% 100% 2 ACQ
1651 Frontenac 0.14% 100% 1 ACQ
2764 Golfview 0.09% 100% 1 ACQ
1500 Shore Drive 0.20% 100% 2 ACQ
1150 Shore Road 0.14% 100% 1 ACQ
SOUTHWEST SUBURBS
6600 River Road 2.86% 100% 1 ACQ
FAR S.W. SUBURBS
16400 West 103rd Street (7) 0.29% 100% 1 ACQ
1319 Marquette Drive 0.16% 100% 1 BTS
7001 Adams Street 0.11% 100% 1 BTS
CHICAGO SOUTH
4400 South Kolmar (6) 0.42% 100% 1 ACQ
900 East 103rd Street 2.61% 100% 3 RDV
750 East 110th Street 0.32% 100% 1 ACQ/RDV
SOUTH SUBURBS
11601 South Central Avenue 1.18% 100% 1 ACQ
11701 South Central Avenue 1.35% 100% 1 ACQ
5619-25 West 115th Street 1.80% 98% 5 RDV
21399 Torrence Avenue 1.69% 100% 1 ACQ
N.W. INDIANA
425 West 151st Street 1.58% 97% 9 RDV
201 Mississippi Street 4.77% 97% 15 RDV
1827 North Bendix Drive (6) 0.91% 100% 1 ACQ
</TABLE>
-16-
<PAGE>
<TABLE>
<CAPTION>
YEAR OF ORIGINAL
CONSTRUCTION/LAST ANNUALIZED AVERAGE
REDEVELOPMENT AND/OR BASE RENT RENT PER GLA
PREVIOUSLY OWNED PROPERTIES CITY STATE EXPANSION (1) REVENUE SQ. FT. (2) SQ. FT. (3)
- --------------------------- ---- ----- ------------- ------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
MILWAUKEE COUNTY
7501 North 81st Street Milwaukee WI 1987 576,000 3.13 183,958
KENOSHA COUNTY
8200 100th Street Pleasant Prairie WI 1990 568,361 3.83 148,472
8901 102nd Street Pleasant Prairie WI 1990 643,018 6.09 105,637
------- ---- -------
SUBTOTAL 44,614,193 3.33 13,391.189
---------- ---- ----------
AVERAGE 196,929(10)
-------
GRAND TOTAL ALL WAREHOUSE/
INDUSTRIAL PROPERTIES $70,187,361 22,196,495
----------- ----------
AVERAGE ALL WAREHOUSE/
INDUSTRIAL PROPERTIES $3.16(9) 232,123(10)
----- -------
GRAND TOTAL ALL WAREHOUSE/
INDUSTRIAL PROPERTIES
EXCLUDING REDEVELOPMENTS
AT 12/31/97 $69,639,361 20,463,891
----------- ----------
AVERAGE ALL WAREHOUSE/
INDUSTRIAL PROPERTIES $3.40(9) 220,042(10)
----- -------
<CAPTION>
PERCENT
PERCENT OF GLA
OF TOTAL LEASED AS NO. OF PROPERTY
PREVIOUSLY OWNED PROPERTIES GLA (4) OF 12/31/97 TENANTS TYPE(5)
- --------------------------- ------- ----------- ------- -------
<S> <C> <C> <C> <C>
MILWAUKEE COUNTY
7501 North 81st Street 0.83% 100% 1 ACQ
KENOSHA COUNTY
8200 100th Street 0.67% 100% 1 ACQ
8901 102nd Street 0.48% 100% 1 ACQ
----
SUBTOTAL 60.73%
-----
AVERAGE 0.89%
----
GRAND TOTAL ALL WAREHOUSE/
INDUSTRIAL PROPERTIES 100% 178
---
AVERAGE ALL WAREHOUSE/
INDUSTRIAL PROPERTIES 94%
GRAND TOTAL ALL WAREHOUSE/
INDUSTRIAL PROPERTIES
EXCLUDING REDEVELOPMENTS
AT 12/31/97 97%
AVERAGE ALL WAREHOUSE/
INDUSTRIAL PROPERTIES
</TABLE>
-17-
<PAGE>
- ------------------
(1) First date of original construction; second date is year of last
redevelopment and/or expansion. If only one date appears, it is the
acquisition date; the property has not been redeveloped or expanded.
(2) Determined by dividing annualized base rent revenue by GLA.
(3) "GLA" means gross leasable area.
(4) Determined as a percent of the total GLA for the warehouse/industrial
properties.
(5) ACQ refers to an existing leased property acquired by the Company, BTS
refers to a build-to-suit property and RDV refers to a redevelopment
property. Two of the redevelopment properties, 5700 Touhy Avenue,
Niles, Illinois and 10601 Seymour Avenue, Elk Grove Village, Illinois,
were under redevelopment construction and not leasable as of December
31, 1997.
(6) Properties purchased through a sale-leaseback to the previous owner
have no operating history relevant to third party usage.
(7) Properties purchased from an owner occupant have no prior operating
history relevant to third party usage.
(8) The seller of this property holds a note payable by the Company in the
principal amount of $575,000 and secured by this property.
(9) Average Rent per square foot equals annualized base rental revenue
divided by GLA leased as of December 31, 1997.
(10) Average size equals total GLA divided by the number of properties.
LEASE EXPIRATIONS
The following table shows as of December 31, 1997 scheduled lease
expirations for the Company's warehouse/industrial properties commencing January
1, 1998 and for the next ten years, assuming that no tenants exercise renewal
options:
<TABLE>
<CAPTION>
AVERAGE % OF TOTAL
BASE RENT PROPERTIES % OF 1997
GLA OF ANNUALIZED PER SQ. FT. GLA BASE RENT
NO. OF EXPIRING BASE RENT UNDER REPRESENTED REPRESENTED
LEASES LEASES EXPIRING EXPIRING BY EXPIRING BY EXPIRING
EXPIRING (SQ. FT.) LEASES LEASES LEASES LEASES
-------- --------- ---------- ---------- ----------- -----------
YEAR ENDING DECEMBER 31
<S> <C> <C> <C> <C> <C> <C>
1998 ................... 37 2,899,866 $10,507,956 $3.62 15.69% 18.16%
1999 ................... 30 3,927,435 9,018,461 2.30 21.29% 15.58%
2000 ................... 29 2,289,947 9,132,094 3.99 12.39% 15.78%
2001 ................... 16 1,328,270 5,539,526 4.17 7.18% 9.57%
2002 ................... 18 2,293,479 7,152,093 3.12 12.40% 12.36%
2003 ................... 10 555,538 2,821,050 5.08 3.00% 4.87%
2004 ................... 10 1,851,202 7,484,499 4.04 10.01% 12.93%
2005 ................... 6 945,726 3,408,648 3.60 5.12% 5.89%
2006 ................... 5 1,186,602 5,974,005 5.03 6.42% 10.32%
2007 ................... 8 1,210,831 7,612,402 6.29 6.55% 13.15%
</TABLE>
-18-
<PAGE>
OPTIONS TO PURCHASE GRANTED TO CERTAIN TENANTS
The following warehouse/industrial properties of the Company are
subject to purchase options granted to certain tenants as follows:
- A portion of the building complex at 4501 Augusta Boulevard is
subject to an option to purchase at fixed prices ranging from
$2,779,320 to $3,447,970 exercisable between September 1 and
October 31 of each year until 2003.
- One Waterfowl Way is subject to an option to purchase at any
time through October 31, 1999, exercisable on or before
February 1, 1999. The purchase price is equal to the
annualized monthly rent being paid as of the closing of the
purchase, capitalized at 10%.
- 8901 102nd Street is subject to an option to purchase
exercisable on February 28, 2006 at a purchase price equal to
95% of "fair market value," equal to the average of three
independent appraisals.
- 1700 West Hawthorne is subject to a purchase option
exercisable at any time prior to December 1, 1998 (with the
closing to occur during December, 1999 regardless of when the
option exercised) at a price of $12,809,333 and again between
December 1, 2002, and December 1, 2003 (with the closing to
occur during December, 2004 regardless of when the option is
exercised) at a price of $15,033,636. If the property is
expanded, at tenant's option, the purchase price will be
increased to $12,909,333 for the first exercise period, and
$15,233,636 for the second exercise period, plus the
construction cost of the expansion.
- 850 Arthur Avenue is subject to an option exercisable during
March 1999 to purchase the premises on August 31, 1999 for a
purchase price equal to the fair market value of the premises
as determined by the Company or by an appraisal process.
- 2600 Elmhurst Road is subject to an option exercisable on or
before July 31, 2000 to purchase the premises during January
2001 for a purchase price of $5,000,000.
- 21399 Torrence Avenue is subject to an option exercisable
between December 1, 1998 and May 31, 2000 and again between
December 31, 2000 and May 31, 2002 to purchase the property on
November 30, 2000 for $8,941,920 and November 30, 2002 for
$9,314,500.
In each case, the option price exceeds the Company's current net book
value. The Company believes that even if all of the purchase options are
exercised, such exercises will not have an adverse effect upon the operations of
the Company or its ability to maintain its dividend distribution policy. If any
purchase option is exercised, the Company intends to either distribute the cash
proceeds to shareholders or reinvest the cash proceeds in additional properties.
No assurance can be given that such distribution or reinvestment will occur.
In addition to purchase options, the Company has granted to tenants of
certain properties a right of first refusal (in the event the Company has
received an unsolicited offer from a third party to purchase the property which
the Company desires to accept) or a right of first offer (in the event the
Company has not received an unsolicited third party offer for the property but
desires to entertain an offer). The properties subject to one or both of these
rights include One Waterfowl Way, 8901 102nd Street,
-19-
<PAGE>
825 Tollgate Road, 1400 Busse Road, 1651 Frontenac Road, 7001 Adams Street,
950 Tower Road and 6312 W. 74th Street. The existence of those rights will
not compel the Company to sell a property for a price less than the price the
Company desires to accept.
THE COMPANY'S OTHER PROPERTIES
In addition to its warehouse/industrial properties, the Company owns
three retail properties having approximately 61,000 square feet of GLA, one
682-unit apartment complex located at 440 North Lake Street, Miller, Indiana
and known as Lakeshore Dunes Apartments and a fully leased parking lot. The
Company does not intend to acquire properties other than warehouse/industrial
properties in the future. The Company believes, however, that these
properties are favorable investments for the Company, adding to distributable
cash flow per share. Furthermore, the Lakeshore Dunes Apartments were
financed through the issuance of tax-exempt revenue bonds on favorable terms,
benefiting the Company by reducing its overall borrowing costs. The Company
has no present plans to sell those properties but would entertain a sale if
the price were sufficiently high, given other investment opportunities that
would be available to the Company, and the enhanced operating performance
expected to result, from redeployment of the sales proceeds.
The following table sets forth certain information regarding the
Company's retail properties:
<TABLE>
<CAPTION>
PERCENT
YEAR OF OF
ACQUISITION/ PERCENT GLA AVERAGE
LAST YEAR OF TOTAL OF LEASED RENT
REDEVELOPMENT ORIGINAL GLA TOTAL AS OF ANNUALIZED PER NUMBER
OF CONSTRUCTION/ (SQ. FT.) GLA DECEMBER BASE RENT SQ. FT. OF
EXPANSION (1) EXPANSION (2) (3) 31, 1997 REVENUE (4) TENANTS
------------- ------------ --------- ------- -------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
4-48 Barrington Rd. 1994 1991 38,633 63.1% 68.8% $301,496 $7.80 8
Streamwood, IL
84-120 McHenry Rd. 1990/1993 1989 20,535 33.6% 89.5% 313,140 15.25 7
Wheeling, IL
351 North Rohlwing Rd. 1993 1989 2,015 3.3% 100.0% 61,440 30.49 1
Itasca, IL ----- ---- ------ ----- --
TOTAL 61,183 100.0% $676,076 $11.05 16
====== ====== ======== ====== ==
</TABLE>
- ---------------
(1) First date is year of acquisition; second date is year of most recent
redevelopment or expansion. If only one date appears, it is the
acquisition date; the property has not been redeveloped or expanded.
(2) "GLA" means gross leasable area.
(3) Determined as a percent of the total GLA for the retail properties.
(4) Determined by dividing annualized base rent revenue by GLA.
The tenants of the Company's retail properties are typical of
tenants in smaller retail centers in Greater Chicago. Generally, the leases
require tenants to pay a fixed base, or "minimum" rent, subject to scheduled
increases. Tenants generally are required to pay their proportionate share of
common area maintenance charges, insurance expenses, operating expenses and
real estate taxes or their portion of these expenses is included in their
base rent.
20
<PAGE>
The following table shows as of December 31, 1997 scheduled lease
expirations for the retail properties commencing January 1, 1998, and for the
next ten years, assuming no tenants exercise renewal options.
<TABLE>
<CAPTION>
% OF TOTAL
GLA OF ANNUALIZED RETAIL % OF 1997 RETAIL
NO. OF EXPIRING BASE RENT AVERAGE BASE RENT PROPERTIES GLA BASE RENT
YEAR ENDING LEASES LEASES EXPIRING PER SQ. FT. UNDER REPRESENTED BY REPRESENTED BY
DECEMBER 31 EXPIRING (SQ. FT.) LEASES EXPIRING LEASES EXPIRING LEASES EXPIRING LEASES
- ----------- -------- --------- ------ --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1998 3 8,214 $116,196 $14.15 18.93% 17.11%
1999 2 3,937 57,468 14.60 9.08% 8.46%
2000 3 10,334 107,295 10.38 23.82% 15.80%
2001 3 9,242 112,759 12.20 21.30% 16.60%
2002 0 0 0 0 0% 0%
2003 0 0 0 0 0% 0%
2004 0 0 0 0 0% 0%
2005 1 2,400 86,089 35.87 5.53% 12.68%
2006 3 9,254 199,299 21.54 21.33% 29.35%
2007 0 0 0 0 0% 0%
</TABLE>
Lakeshore Dunes Apartments, which was constructed in 1971 and renovated
between 1991 and September, 1993, is comprised of 682 units in 15 contiguous
buildings located on an approximately 20.12 acre site in Miller, Indiana, a
suburb of Gary, Indiana, located on Lake Michigan. The property is bordered by
the Indiana Dunes National Park and by the Calumet Lagoon and is less than
one-half mile from public beaches. Amenities of the complex include redesigned
units with updated kitchens and appliances, carpeting, lighting, windows and
mini-blinds, bathrooms and fixtures, elevators, laundry rooms, play lots, tennis
courts, picnic areas, a new outdoor pool, roads, parking areas, landscaping and
a 24-hour safety patrol and card access system. The community center also serves
as the management and leasing office. The Company maintains a complete
management, leasing and maintenance team at the property.
As of December 31, 1997, 630 of the units, or 92%, were leased,
providing for a monthly base rent of approximately $287,000 or $7.72 per square
foot per annum (determined by dividing annualized base rent by total leased
square footage of the apartment units), or an annualized base rent of
$3,444,000. Current leases provide for customary one year terms and require that
tenants pay a fixed rent based on the type of apartment and square footage.
Tenants are responsible for utilities. The following table sets forth the
apartment mix at this property as of December 31, 1997:
21
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF UNITS TOTAL GLA AVERAGE GLA PER AVERAGE MONTHLY
TYPE OF APARTMENT IN COMPLEX (SQ. FT.) APARTMENT (SQ. FT.) RENT PER UNIT
- ----------------- --------------- --------- ------------------- -------------
<S> <C> <C> <C> <C>
Studio 48 20,208 421 $ 374
One Bedroom 171 99,009 579 459
Deluxe One Bedroom 43 29,283 681 467
Two Bedroom 390 308,100 790 533
Three Bedroom 30 28,500 950 656
--- -------
TOTALS: 682 485,100
=== =======
</TABLE>
In 1996, a parking lot within an industrial park was purchased.
The parking lot is leased for ten years through January 2006 for an annual
minimum rent of $26,400. In 1997, the Company sold a 118,000 square foot office
building.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not subject to or involved in, nor is the Company aware
of, any pending or threatened litigation which could be material to the
financial position or results of operations of the Company. For a description of
remediation activities currently underway at certain of the Company's
properties, see "Environmental Matters" under Item 1 above.
ITEM 4. SUBMISSION OF CERTAIN ITEMS TO A VOTE OF SECURITY HOLDERS.
The Company held a Special Meeting of Stockholders on October 1, 1997
to approve the reorganization of the Company from a Maryland corporation to a
Maryland real estate investment trust, pursuant to a Plan of Reorganization. At
the Special Meeting of Stockholders, the Plan of Reorganization was approved as
follows: 12,620,549 shares were voted in person or by proxy at the Special
Meeting of Stockholders; 12,593,693 shares were voted in favor of the Plan of
Reorganization; 5,427 shares were voted against the Plan of Reorganization; and
21,429 shares abstained from voting.
22
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS.
(a) The Company's Common Shares are listed and traded on the New York
Stock Exchange under the symbol "CNT." The following table sets forth, for the
periods indicated, the high and low sale prices of the Common Shares (as
reported by the AMEX prior to June 12, 1996 and as reported by the NYSE on and
after June 12, 1996) and the cash distributions paid in such periods.
<TABLE>
<CAPTION>
CASH
QUARTERLY PERIOD ENDING HIGH LOW DISTRIBUTION/SHARE
----------------------- ---- --- ------------------
<S> <C> <C> <C>
December 31, 1995............... $23-3/8 $21-5/8 $0.390
March 31, 1996.................. 24-1/8 22 0.405
June 30, 1996................... 27 26-1/8 0.405
September 30, 1996.............. 26-7/8 26-3/4 0.405
December 31, 1996............... 32-3/4 30-7/8 0.405
March 31, 1997.................. 32-7/8 30-1/4 0.420
June 30, 1997................... 31-7/8 28-1/2 0.420
September 30, 1997.............. 36-5/16 31-7/8 0.420
December 31, 1997............... 37-1/16 31-1/4 0.420
</TABLE>
(b) As of March 17, 1998, there were approximately 142 holders of
record of the Company's Common Shares.
(c) Cash distributions paid on the Company's Class B Common Shares,
which are non-voting and are not publicly traded, were $0.4167 per share per
quarter for the last three quarters of 1996, and $0.4325 per share per quarter
in 1997.
23
<PAGE>
ITEM 6.
SELECTED HISTORICAL FINANCIAL DATA
The following tables set forth, on a historical basis, Selected
Financial Data for the Company. The following table should be read in
conjunction with the historical financial statements of the Company and
"MANAGEMENT DISCUSSION AND ANALYSIS STATEMENTS OF THE COMPANY AND RESULTS OF
OPERATION," both included elsewhere in this Form 10-K/A.
As discussed in Note 2 to the financial statements, the Company
determined that it had recognized certain participation, assignment, consulting
and financing fees in periods in advance of that permitted and has revised
previously issued financial statements. Accordingly, the financial statements
and the Selected Financial Data for the year ended December 31, 1997 shown below
have been revised.
The Selected Financial Data for the Company is not necessarily
indicative of the actual financial position of the Company or results of
operations at any future date or for a future period.
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA, RATIOS AND NUMBER OF PROPERTIES)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997
REVISED 1996 1995 1994 1993
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Data:
Revenues $ 85,588 $ 63,330 $ 46,952 $ 33,633 $ 9,068
Expenses:
Operating expenses excluding depreciation and
amortization (1) (29,182) (20,751) (14,774) (11,442) (4,124)
Depreciation and other amortization (15,278) (10,648) (8,456) (6,176) (2,539)
General and administrative (3,105) (2,567) (2,150) (1,573) (3,223)
Interest expense:
Interest incurred, net (10,071) (9,865) (11,562) (11,073) (3,808)
Amortization of deferred financing costs (800) (1,127) (1,150) (976) (228)
--------- --------- --------- --------- ---------
Operating income (loss) 27,152 18,372 8,860 2,393 (4,854)
Other income (expense) (2) 108 (100) (16) (34) (76)
--------- --------- --------- --------- ---------
Income (loss) before extraordinary item 27,260 18,272 8,844 2,359 (4,930)
Extraordinary item -- (3,331) (632) -- --
--------- --------- --------- --------- ---------
Net income (loss) 27,260 14,941 8,212 2,359 (4,930)
Preferred dividend (901) (947) (1,002) -- --
--------- --------- --------- --------- ---------
Net income (loss) available to common shareholders 26,359 13,994 7,210 2,359 (4,930)
Per share net income (loss) available to
common shareholders before extraordinary item:
Basic 1.41 1.25 0.85 0.41 (3.90)
Diluted 1.39 1.22 0.84 0.41 (3.90)
Per share net income (loss) available
to common shareholders:
Basic 1.41 1.01 0.78 0.41 (3.90)
Diluted 1.39 0.99 0.77 0.41 (3.90)
Balance Sheet Data (End of Period):
Investment in real estate (before accumulated
depreciation) $ 662,275 $ 429,034 $ 317,460 $ 248,281 $ 180,396
Net investment in real estate 617,923 398,828 295,884 234,825 172,946
24
<PAGE>
Total assets 699,055 451,206 334,866 254,073 190,289
Total debt 270,735 177,349 145,271 179,492 131,963
Shareholders' equity 387,756 248,114 168,320 59,016 46,240
Other Data:
Funds from Operations (3) $ 42,684 $ 30,445 $ 20,492 $ 13,138 $ (2,110)
EBITDA (4) 53,409 39,912 30,013 20,584 1,564
Net cash flow:
Operating activities 39,411 29,552 16,473 8,976 275
Investing activities (245,336) (111,554) (82,556) (65,311) (140,120)
Financing activities 206,507 80,194 68,541 52,837 142,443
Distributions 32,046 24,065 15,953 8,775 1,295
Return of capital portion of distribution 3,916 12,280 8,554 4,320 --
Number of properties included in operating 101 76 69 53 38
results (5)
Ratio of earnings to fixed charges (6) 3.24 2.33 1.63 1.19 --
Ratio of earnings to combined fixed charges and
preferred dividends (6) 3.01 2.15 1.51 1.19 --
</TABLE>
- -----------------------
(1) Operating expenses include real estate taxes, repairs and maintenance,
insurance and utilities and exclude interest, depreciation and
amortization and general and administrative expenses.
(2) Other income (expense) includes gains and losses on property
dispositions in 1997 and 1996, and other miscellaneous operating and
non-operating items.
(3) Funds from Operations represents net income (loss), excluding
extraordinary items, plus depreciation and amortization, convertible
subordinated debenture interest and amortization of deferred financing
costs on convertible subordinated debentures. Dividends on Convertible
Preferred Shares for 1996 and 1995 are not excluded from net income as
such shares were automatically converted to Class B Common Shares in
1996. Funds from operations is computed as follows:
<TABLE>
<CAPTION>
1997
REVISED 1996 1995 1994 1993
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net income (loss) available to common
shareholders $26,359 $14,941 $ 8,212 $ 2,359 ($4,930)
Extraordinary item 3,331 632 -- --
Depreciation and amortization 15,278 10,648 8,456 6,176 2,540
Amortization of deferred financing costs,
debentures 48 67 135 267 13
Convertible subordinated debenture 999 1,385 3,057 4,336 267
interest
Loss on disposition of properties 73 -- -- --
------- ------- ------- ------- -------
Funds from Operations $42,684 $30,445 $20,492 $13,138 ($2,110)
======= ======= ======= ======= =======
</TABLE>
Management of the Company believes that Funds from Operations is
helpful to investors as a measure of the performance of equity REIT
shares because, along with cash flows from operating activities,
financing activities and investing activities, it provides investors an
understanding of the ability of the Company to incur and service debt
and to make capital expenditures. Funds from Operations does not
represent cash flow from operations as defined by generally accepted
accounting principles ("GAAP"), should not be considered by the reader
as an alternative to net income as an indicator of the Company's
operating performance or to cash flows as a measure of liquidity, and
is not indicative of cash available to fund all cash flow needs.
Investors are cautioned that Funds from Operations, as calculated by
the Company, may not be comparable to similarly titled but differently
calculated measures for other REITs.
25
<PAGE>
The National Association of Real Estate Investment Trusts (NAREIT)
defines funds from operations as net income before extraordinary items
plus depreciation and amortization less the amortization of deferred
financing costs.
(4) Earnings before interest, income taxes, depreciation and amortization.
Management believes that EBITDA is helpful to investors as an
indication of property operations, because it excludes costs of
financing and non-cash depreciation and amortization amounts. EBITDA
does not represent cash flows from operations as defined by GAAP,
should not be considered by the reader as an alternative to net income
as an indicator of the Company's operating performance, and is not
indicative of cash available to fund all cash flow needs.
(5) Increase in number of properties in 1994 reflects the acquisition of 15
properties throughout 1994. Increase in number of properties in 1995
reflects acquisition of 16 properties throughout 1995. Increase in
number of properties in 1996 reflects acquisition of 15 properties and
the disposition of 8 properties throughout 1996. Increase in number of
properties in 1997 reflects the acquisition of 21 properties, the
completion of 7 developments, and the disposition of 3 properties
throughout 1997. See "MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
(6) The ratio of earnings to fixed charges for the year ended December 31,
1993, was less than one to one. The approximate dollar amount (in
thousands) necessary to cover the deficiency in that period was $5,400.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL BACKGROUND
The following is a discussion of the historical operating results of
the Company. This discussion should be read in conjunction with the Financial
Statements and the information set forth under "SELECTED HISTORICAL FINANCIAL
DATA."
The Company announced in the 3rd quarter 1999 that it was restating
previously audited and unaudited financial statements for the years 1997, 1998
and 1999. See Exhibit 99 to this Form 10-K/A.
The revision reflects the recognition of gains, for financial reporting
purposes, on certain completed sales structured as tax-deferred exchanges under
Section 1031 of the Internal Revenue Code, where gains are not recognized for
tax purposes. Secondly, the revision reflects the timing of gain recognition
from other property sales related to the Company's development activity. While
the timing of the reported gains from these latter transactions has been
shifted, the aggregate gain remains unchanged and no cash or tax effect has
resulted. As of the 3rd quarter 1999, all gains have been recognized.
The results of the Company reflect cumulative significant acquisition,
build-to-suit and redevelopment activities. Since 1989, the Company has grown
its portfolio of owned properties from 6 properties, with approximately 1.9
million square feet, to 101 properties with approximately 22.7 million
26
<PAGE>
square feet as of December 31, 1997. This total excludes properties under
development and mortgage investments. Through the issuance of mortgages on
properties and build-to-suit projects under development, the Company has a
total of 109 property investments, excluding the parking lot, representing
approximately 25 million square feet.
The Company grew its total property investments by 52% in 1997, which
includes build-to-suits in progress and mortgage investments. In addition, the
Company grew its portfolio of owned properties by 60.3% during the year by
concluding twenty-one warehouse/industrial property acquisitions and seven
warehouse/industrial build-to-suit properties. The Company disposed of two
warehouse/industrial properties and one office property in 1997. The Company's
total increase in owned warehouse/industrial area, net of dispositions, was 8.6
million square feet.
Despite its growth in property investments and Funds from Operations
during 1997, the Company improved its EBITDA/ Debt Service Coverage to 5.3 to 1.
Also, as of December 31, 1997, the Company maintained a conservative Debt to
Total Market Capitalization of 25.1%.
The Company's Consolidated Financial Statements for the year ended
December 31, 1997, 1996 and 1995 reflect partial period results for
acquisitions, dispositions and expansions made during each respective year.
These statements also include the lease-up of previously vacant space, related
to the properties owned by the Company as of January 1, 1997, 1996 and 1995,
respectively. The Company's 1996 acquisitions included three additional
properties and 1997 acquisitions include one additional property previously
owned by entities in which certain executive officers of the Company had an
interest. These transactions satisfied the Company's investment criteria and
were approved by the Company's independent trustees.
Finally, the historical results of the Company reflect the Company's
significant property redevelopment and development activities in which
substantial capital costs and related expenses were incurred in advance of
receipt of rental income. At December 31, 1997, the Company and its subsidiaries
had $42 million invested in build-to-suit projects under development which were
not producing income as of the end of the year. Four of the Company's properties
preceding the Company's initial public offering in 1993, with a total area of
approximately 1.9 million square feet, were property redevelopments. The Company
has added nine properties totaling 4.5 million square feet that the Company has
redeveloped or is currently holding the property to redevelop. Redevelopments
are typically larger properties that are acquired, subdivided and released.
During construction, certain costs are capitalized; however, in certain
circumstances, such costs are expended after completion but prior to leasing,
resulting in a decline in net income.
RESULTS OF OPERATIONS
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996
Total revenues increased by $22.3 million or 35.1% over the same period
last year. The revenues of the Company are derived primarily from base rents and
additional rents from expense reimbursements, pursuant to the terms of tenant
leases for occupied space at the warehouse/industrial properties.
Warehouse/industrial properties represented approximately 98% of the gross
leasable area of the Company's portfolio as of December 31, 1997.
Operating and investment revenue increased by $23.8 million in 1997.
This was due in part to a full period of income from thirteen
warehouse/industrial properties totaling 3.3 million square feet
27
<PAGE>
acquired in 1996 net of seven property dispositions. Also, this increase was
attributable to twenty-one properties acquired totaling 7.1 million square
feet and seven build-to-suit properties coming on-line totaling 1.6 million
square feet in 1997, net of three property dispositions. The initial
annualized minimum net rental income from the 1997 acquisition and completed
build-to-suit properties is approximately $25 million.
Real estate fee income primarily consisting of fees earned by the
Company in connection with its build-to-suit and development activities and
third party management fees decreased by $2.6 million. The Company's equity in
net income of affiliate increased by $1.1 million due to the affiliate's
increase in property and build-to-suit sales. The Company's unconsolidated
affiliate, CenterPoint Realty Services, began operations during the third
quarter of 1995 and did not recognize income from development activities until
1996.
On a "same-store" basis (comparing the results of operations, on a cash
basis, of the properties owned at December 31, 1996, with the results of
operations of the same properties at December 31, 1997), the Company recognized
an increase of approximately 6% in net operating income primarily due to lease
up of vacant space, rental increases on renewed leases and contractual increases
in minimum rent under leases in place.
Real estate tax expense and property operating and leasing expense
increased by $8.4 million, from $20.8 million in 1996 to $29.2 million in 1997.
$5.2 million of the increase is due to real estate taxes. The majority of the
real estate tax increase, $5.0 million, resulted from 1995 and 1996 acquisitions
and the balance, $0.2 million, from net tax increases throughout the portfolio
with the largest increase in Cook County, Illinois. Property operating and
leasing expenses, including insurance, utilities, repairs and maintenance and
property management costs increased at levels comparable to the level of
acquisitions. Also, property operating and leasing costs as a percentage of
total revenues increased only slightly from 14.0% to 14.1% when comparing 1996
to 1997.
Depreciation and other amortization increased by $4.7 million, from
$10.6 million in 1996 to $15.3 million in 1997. The increase is due primarily to
full period depreciation on acquisitions completed during 1996 and depreciation
from dates of acquisition for the 1997 acquisitions and fixed asset additions.
General and administrative expenses increased by $0.5 million, from $2.6 million
in 1996 to $3.1 million in 1997, due primarily to the growth of the Company.
Interest incurred increased by approximately $206,000 over last year.
Although the acquisition level was higher during 1997, interest expense was held
to approximately the same level as 1996 due to the repayment of debt from public
offerings of common equity in March and preferred equity in November, 1997, and
reduced borrowing rates. Other income (expenses) increased by approximately
$208,000 from the same period last year due in part to the gain on disposition
of one property totaling approximately $140,000 in 1997. The remaining net
increase was the result of losses recorded on the disposition of three
properties in 1996.
As a result of the factors described above, income before extraordinary
item increased by $9.0 million from $18.3 million in 1996 to $27.3 million in
1997, an increase of 49.2%. Earnings before interest, income taxes, depreciation
and amortization increased by $13.5 million, from $39.9 million in 1996 to $53.4
million in 1997.
In 1996, the Company incurred an extraordinary loss of $3.3 million
representing a write off of unamortized deferred financing costs as a result of
the re-financing of its outstanding revenue bonds. In
28
<PAGE>
addition, the Company replaced its $92 million secured lines of credit with a
$135 million unsecured credit facility at a significant savings in interest.
No debt was re-financed in 1997, and the unsecured credit facility was
increased to $150 million.
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995
Total revenues in 1996 increased by $16.3 million or 34.9% over 1995.
Tenants occupied approximately 95% of the gross leasable area of the Company's
portfolio as of December 31, 1996.
Rental revenues increased by $8.0 million in 1996 primarily because of
full period income from sixteen warehouse/industrial properties acquired
totaling 2.7 million square feet in 1995 and thirteen warehouse/industrial
properties acquired totaling 3.3 million square feet in 1996 net of seven
property disposals. Initial minimum net rental income from the 1996 acquisition
properties is approximately $13.1 million. In addition, mortgage interest income
from mortgage financing activities, which originated in December, 1995,
contributed $1.4 million to the increase in revenue. Real estate fee income
primarily consisting of fees earned by the Company in connection with its
build-to-suit and development activities and third party management fees
increased by $3.7 million. Also, equity in net income of affiliate increased by
$1.0 million due to their increased activity in build-to-suit activity. The
Company's unconsolidated affiliate, CenterPoint Realty Services, began
operations during the third quarter of 1995 and did not recognize income from
development activities until 1996.
On a "same-store" basis (comparing the results of operations, on a cash
basis, of the properties owned at December 31, 1995, with the results of
operations of the same properties at December 31, 1996), the Company recognized
an increase of approximately 4% in net operating income primarily due to lease
up of vacant space, rental increases on renewed leases and contractual increases
in minimum rent under leases in place.
Total operating expenses, excluding general and administrative
expenses, interest, depreciation and amortization, increased by $6.0 million,
from $14.8 million in 1995 to $20.8 million in 1996. $4.1 million of the
increase was due to real estate taxes. The majority of the real estate tax
increase, $3.3 million, resulted from 1995 and 1996 acquisitions and the
balance, $0.8 million, from tax increases throughout the portfolio, with the
largest increase in Cook County, Illinois. Property operating and leasing
expenses increased at levels comparable to the level of acquisitions.
Depreciation and other amortization increased by $2.1 million, from
$8.5 million in 1995 to $10.6 million in 1996. The increase is due primarily to
full period depreciation on acquisitions completed during 1995 and depreciation
from dates of acquisition for the 1996 additions. General and administrative
expenses increased by $0.4 million, from $2.1 million in 1995 to $2.5 million in
1996, due primarily to the growth of the Company.
Interest incurred decreased by $1.7 million over the same period in
1995 due in part to the conversion to common stock of $8.9 million of
convertible subordinated debentures. Although the acquisition level was higher
during 1996, interest expense was held to approximately the same level as 1995
due to the repayment of debt from a public offering that closed in July, 1996,
and reduced borrowing rates. Other expenses increased by approximately $84,000
from the same period last year due to the loss on disposition of three
properties totaling approximately $72,000.
As a result of the factors described above, income before extraordinary
item increased by $9.5 million from $8.8 million in 1995 to $18.3 million in
1996, an increase of 108.0%. Earnings before
29
<PAGE>
interest, income taxes, depreciation and amortization increased by $9.9
million, from $30.0 million in 1995 to $39.9 million in 1996.
In 1996 and 1995, the Company incurred an extraordinary loss of
approximately $3.3 million and approximately $0.6 million, respectively,
representing the write-off of unamortized deferred financing costs as a result
of the early extinguishment of certain debt obligations resulting from the
Company's debt transactions.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow generated from Company operations has historically been
utilized for working capital purposes and distributions, while proceeds from
financings and capital raises have been used to fund acquisitions and other
capital costs. Cash flow from operations during 1997 of $39.4 million net of
$31.1 million of current year distributions provided $8.3 million of retained
capital to fund investment activities. The Company expects retained capital to
fund future investment activities.
Acquisitions, construction in progress on development projects,
advances to affiliate, advances on mortgage notes receivable, advances to
affiliate and improvements and additions to properties of approximately $226.5
million for 1997 were funded with borrowings under the Company's unsecured line
of credit totaling $211.7 million, a portion of proceeds from the disposition of
real estate of $13.5 million, repayment of mortgage notes receivable of $5.7
million and a portion of the net proceeds from the March 6, 1997 public offering
of common shares.
At December 31, 1997, the Company's debt constituted approximately
25.1% of its fully diluted market capitalization. Also, the Company's coverage
ratio remained high at 5.3 to 1. The Company's fully diluted equity market
capitalization was approximately $774 million, and its fully diluted total
market capitalization exceeded $1.0 billion. The Company's leverage ratios
benefited during 1997 from the conversion of approximately $2.6 million of its
8.22% Convertible Subordinated Debentures, due 2004, to 144,640 common shares.
At December 31, 1997, the Company had a $150 million unsecured credit
facility co-led by First Chicago NBD and Lehman Brothers with participating
banks. As of December 31, 1997, the Company had outstanding borrowings of
approximately $97.7 million under the unsecured revolving line of credit
(approximately 9.5% of the Company's fully diluted market capitalization), and
the Company had remaining availability of approximately $52.3 million under its
unsecured line of credit.
On September 18, 1997, the Company issued $55 million unsecured
tax-exempt bonds for the development costs of the Company's O'Hare Express air
freight center. With the completion of this issue, 34% of the Company's senior
debt (excluding line of credit) was tax exempt as of December 31, 1997, saving
approximately 200 basis points on average from comparable taxable financing.
On March 6, 1997, the Company completed a public offering of 2,250,000
common shares at $31.50 per share under a shelf registration statement. Net
proceeds from the offering after the underwriting discounts and other offering
costs were approximately $66.8 million. The proceeds of the offering were used
to refund approximately $58.2 million outstanding under the Company's line of
credit with the balance of $8.6 million to fund investments.
On November 10, 1997, the Company completed a public offering of
3,000,000 shares of 8.48% preferred at $25 per share under a shelf registration
statement. Net proceeds from the offering after
30
<PAGE>
underwriting discounts and other offering costs were approximately $71.9
million. The proceeds of the offering were used to refund amounts outstanding
under the Company's line of credit.
In February, 1998, Duff & Phelps Credit Rating Co. joined Moody's
Investors Service's January, 1997 evaluation by assigning investment grade
rating to the Company's senior unsecured debt and preferred stock issuable under
the Company's shelf registration and convertible subordinated notes. Also in
1997, Standard and Poors assigned an investment grade rating to the Company's
senior unsecured debt. These investment grade ratings further enhance the
Company's financial flexibility.
As of December 31, 1997, the Company had approximately $36.5 million in
restricted cash, $34.6 million of which was held in a construction escrow for
the Company's build-to-suit development at O'Hare Express Center. Most of the
remainder of the restricted cash is made up of real estate tax escrows for
tenants requiring such escrows under the terms of their leases.
During 1997, the Company declared and paid distributions on common
shares of $27.2 million or $1.68 per share and on class B common shares of $3.9
million or $1.73 per share. Also, in 1997, the Company declared dividends on
preferred shares of $1.43 million or $0.477 per share, payable in January 1998.
The dividends on preferred shares attributable to 1997 income, which appear on
the Company's Consolidated Statements of Operations and Shareholders' Equity
were $901 thousand or $0.30 per share. The following factors, among others, will
affect the future availability of funds for distribution: (i) scheduled
increases in base rents under existing leases and (ii) changes in minimum base
rents attributable to replacement of existing leases with new or replacement
leases.
The Company has considered its short-term (one year or less) capital
needs, in conjunction with its estimated future cash flow from operations and
other expected sources. The Company believes that its ability to fund operating
expenses, building improvements, debt service requirements and the minimum
distribution required to maintain the Company's REIT qualification under the
Internal Revenue Code, will be met by recurring operating and investment revenue
and other real estate income.
Long-term (greater than one year) capital needs for property
acquisitions, scheduled debt maturities, major redevelopment projects,
expansions, and construction of build-to-suit properties will be supported
through draws on the Company's unsecured line of credit, the issuance of
long-term unsecured indebtedness and the issuance of equity securities.
INFLATION
Inflation has not had a significant impact on the Company because of
the relatively low inflation rates in the Company's markets of operation. Most
of the Company's leases require the tenants to pay their share of operating
expenses, including common area maintenance, real estate taxes and insurance,
thereby reducing the Company's exposure to increases in costs and operating
expenses resulting from inflation. In addition, many of the leases are for
remaining terms less than five years which may enable the Company to replace
existing leases with new leases at higher base rental rates if rents of existing
leases are below the then-existing market rate.
ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income" and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." Both SFAS No. 130 and SFAS
31
<PAGE>
No. 131 are effective for financial statements for years beginning after
December 15, 1997. SFAS No. 130 requires the reporting of comprehensive
income beginning 1998 and SFAS No. 131 establishes standards for
publicly-held business enterprises to report information about operating
segments in annual financial statements and requires that these enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. The Company plans to adopt SFAS No. 130 and
No. 131 in 1998.
YEAR 2000 COMPLIANCE
In response to the Year 2000 issue, the Company initiated a project in
early 1997 to identify, evaluate and implement a new computerized real estate
management system. The Company is addressing the issue through a combination of
modifications to existing programs and conversion to Year 2000 compliant
software. In addition, the Company is discussing with its tenants, vendors, and
other service providers the possibility of any interface difficulties relating
to the Year 2000 issue which may effect the Company. If the Company and those it
conducts business with do not make modifications or conversions in a timely
manner, the Year 2000 issue may have a material adverse affect on the Company's
business, financial condition, and results of operations. The total cost
associated with the required modifications is not expected to be material to the
Company's consolidated results of operations and financial position, and is
being expensed as incurred.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Index to Financial Statements on Page F-1 of this Annual Report on
Form 10-K/A for the financial statements and financial statement schedules.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
32
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Item 10 is incorporated herein pursuant to General Instruction G to
Form 10-K/A by referencing the Company's definitive proxy statement, which will
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
not later than 120 days after the close of the fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
Item 11 is incorporated herein pursuant to General Instruction G to
Form 10-K/A by referencing the Company's definitive proxy statement, which will
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
not later than 120 days after the close of the fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Item 12 is incorporated herein pursuant to General Instruction G to
Form 10-K/A by referencing the Company's definitive proxy statement, which will
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
not later than 120 days after the close of the fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Item 13 is incorporated herein pursuant to General Instruction G to
Form 10-K/A by referencing the Company's definitive proxy statement, which will
be filed with the Securities and Exchange Commission pursuant to Regulation 14A
not later than 120 days after the close of the fiscal year.
33
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
The following documents are filed as part of this report:
(1)(2) The consolidated financial statements and related
schedules indicated in Part II, Item 8, "Financial
Statements and Supplementary Data."
(3) Exhibit 12-1 - Computation of Ratio of Combined
Earnings to Fixed Charges
(4) Exhibit 12-2 - Computation of Ratio of Combined
Earnings to Fixed Charges and Preferred Dividends
(5) Exhibit 27 - Financial Data Schedule
(6) Exhibit 99 - Press release dated September 28, 1999.
The following exhibits are incorporated by reference from the
Registrant's Registration Statement on Form S-11 (File No.
33-69710), referencing the exhibit numbers used in such
Registration Statement:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
4.3 Form of Indenture
10.3(a) Mortgage Documents regarding 440 North Lake Street,
Gary, IN
10.3(c) Mortgage Documents regarding 905-909 Irving Park
Road, Itasca, IL
10.3(d) Mortgage Documents regarding 6845 Santa Fe, Hodgkins,
IL
10.4 Form of Noncompetition Agreement for Executive
Officers
10.5 Form of Employment Agreement for Executive Officers
10.10 Indemnification Agreement among John S. Gates, Jr.,
Capital and Regional Properties and the Company
10.11 Indemnification Agreement among Robert L. Stovall,
Michael M. Mullen and the Company
10.12 Indemnification Agreement between David Kahnweiler
and the Company
</TABLE>
34
<PAGE>
The following exhibits are incorporated by reference from
Pre-Effective Amendment No. 2 to the Registrant's
Registration Statement on Form S-11 (File No. 33-69710),
referencing the exhibit numbers used in such Amendment No.
2:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.1 Stock Option Plan
</TABLE>
The following exhibits are incorporated by reference from the
Registrant's Registration Statement on Form S-11 (File No.
33-85440), referencing the numbers used in such Registration
Statement:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
10.32 Registration Rights Agreement between the Company and
Corum Zeller Venture
10.38 Promissory Note from the Company to the Prudential
Insurance Company of America
10.39 Mortgage, Security Agreement and Fixture Filing
relating to the Promissory Note form the Company to
The Prudential Insurance Company of America
</TABLE>
The following exhibits are incorporated by reference from the
Registrant's Form 10-Q for the fiscal quarter ended September
30, 1995, referencing the numbers used in such Form 10-Q:
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
4.1 1995 Restricted Stock Incentive Plan
4.2 1995 Director Stock Plan
4.3 Bonus Stock Grant Agreement between the Company and
John S. Gates, Jr.
4.4 Bonus Stock Grant Agreement between the Company and
Robert L. Stovall
4.5 Series A Preferred Stock Purchase Agreement between
the Company and LaSalle Advisors Limited Partnership
4.6 Registration Rights Agreement between the Company and
LaSalle Advisors Limited Partnership
</TABLE>
The following exhibits are incorporated by reference from the
Registrant's Form 10-K for the fiscal year ended December 31,
1995, referencing the numbers used in such Form 10-K:
35
<PAGE>
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
4.1 Indenture of CP Financing Trust
10.1 First Amendment to Stock Option Plan
10.2 Mortgage Documents regarding 850 Arthur Street, Elk
Grove Village, Illinois
10.3(a) Mortgage, Assignment of Rents and Leases and Security
Agreement of CP Financing Trust regarding the
following properties in Cook County, Illinois
1520 Pratt, Elk Grove Village
1201 Lunt, Elk Grove Village
1390 Lunt, Elk Grove Village
5619-25 W. 115th St., Alsip
900 University Dr., Arlington Heights
10.3(b) Mortgage, Assignment of Rents and Leases and Security
Agreement of CP Financing Trust regarding the
following properties in DuPage County, Illinois
7001 Adams, Willowbrook
245 Benoris, Wood Dale
1733 Downs Dr., W. Chicago
1645 Downs Dr., W. Chicago
10.3(c) Mortgage, Assignment of Rents and Leases and Security
Agreement of CP Financing Trust regarding the
following properties in Lake County, Illinois
1300 Northpoint, Waukegan
1800 Industrial Dr., Libertyville
950-970 Tower Rd., Mundelein
1 Wildlife Way, Long Grove
1810-20 Industrial Dr., Libertyville
1700 Butterfield, Mundelein
10.3(d) Mortgage, Assignment of Rents and Leases and Security
Agreement of CP Financing Trust regarding the
following property in Kane County, Illinois
315 Kirk Rd., St. Charles
10.3(e) Mortgage, Assignment of Rents and Leases and Security
Agreement of CP Financing Trust regarding the
following property in Will County, Illinois
1319 Marquette, Romeoville
10.3(f) Mortgage, Assignment of Rents and Leases and Security
Agreement of CP Financing Trust regarding the
following properties in Wisconsin
36
<PAGE>
8200 100th St., Pleasant Prairie
8901 102nd St., Pleasant Prairie
10.3(g) Mortgage, Assignment of Rents and Leases and Security
Agreement of CP Financing Trust regarding the
following property in Indiana
201 E. Mississippi, Gary
10.3(h) Assignment and Assumption of Mortgage and Other
Obligations between CP Financing Trust and Great
Lakes Industrial Partners, L.P.
10.3(i) Assignment and Assumption of Tenant Leases and
Contracts between CP Financing Trust and the Company
10.3(j) Assignment and Assumption of Tenant Leases and
Contracts between CP Financing Trust and Great Lakes
Industrial Partners, L.P.
</TABLE>
The following exhibit is incorporated by reference from the
Registrant's Form 10-Q for the fiscal quarter ended
September 30, 1996, referencing the number used in such
Form 10-Q:
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
10.43 Unsecured Revolving Credit Agreement among The First
National Bank of Chicago, Lehman Brothers Holdings
Inc., the other Lenders named therein and the Company
</TABLE>
The following exhibits are incorporated by reference from
the Registrant's Registration Statement on Form S-3 (File
No. 333-18235), referencing the exhibit numbers used in
such Form S-3:
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
4.3 Form of Senior Securities Indenture
4.4 Form of Subordinated Securities Indenture
</TABLE>
The following exhibits are incorporated by reference from the
Registrant's Form 10-K for the fiscal year ended December 31,
1996, referencing the numbers used in such Form 10-K:
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
10.44 Second Amendment to Stock Option Plan
10.45 Settlement Agreement and Mutual Release
10.46 Employment Separation Agreement between the Company
and Robert L. Stovall
37
<PAGE>
10.47 Documents relating to City of Gary, Indiana Revenue
Refinancing Bonds, Series 1996A and Series 1996B, of
the Miller Partnership, L.P.
10.48 First Amendment to Unsecured Revolving Credit
Agreement
10.49 Second Amendment to Unsecured Revolving Credit
Agreement
21 List of Subsidiaries
</TABLE>
The following exhibits are incorporated by reference from the
Registrant's Registration Statement on Form S-4 (File No.
333-33515), referencing the numbers used in such Form S-4:
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
2 Plan of Reorganization
3.3 Declaration of Trust of the Registrant
3.4 By-Laws of the Registrant
</TABLE>
The following exhibits are incorporated by reference from
the Registrant's Pre-Effective Amendment No. 1 to Form S-4
(File No. 333-33515), referencing the numbers used in such
Pre-Effective Amendment No. 1:
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
4.1 Form of certificate representing common shares of
beneficial interest in the Registrant
4.2 Form of certificate representing 8.22% Convertible
Subordinated Debentures
4.4 Form of First Supplemental Indenture
</TABLE>
The following exhibits are incorporated by reference from the
Registrant's Form 8-A filed on November 5, 1997, referencing
the numbers used in such Form 8-A:
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
1 Articles Supplementary to the Declaration of Trust of
the Registrant establishing and fixing the rights and
preferences of the Series A Preferred Shares
4 Form of certificate representing Series A Preferred
Shares of beneficial interest in the Registrant
</TABLE>
The following exhibits are incorporated by reference from the
Registrant's Form 10-Q for the fiscal quarter ended September
30, 1997, referencing the numbers used in such Form 10-Q:
38
<PAGE>
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
10.50 Documents relating to $55 million City of Chicago
Variable/Fixed Rate Demand Special Facilities Airport
Revenue Bonds (CenterPoint O'Hare, L.L.C. Project)
Series 1997
</TABLE>
(b) During the fourth quarter of 1997, the Company filed a Current
Report on Form 8-K on December 30, 1997 to report the acquisition by the Company
of properties which constituted more than 10% of the total assets of the Company
and its consolidated subsidiaries.
(c) An annual report will be sent to Stockholders subsequent to this
filing, and the Company will furnish copies of such report to the Securities and
Exchange Commission.
(d) Not applicable.
(1) Exhibit 99 - Press release dated September 28, 1999.
39
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CENTERPOINT PROPERTIES TRUST,
a Maryland corporation
By: /s/ John S. Gates, Jr.
---------------------------------------
John S. Gates, Jr., President
and Chief Executive Officer
(Principal Executive Officer)
By: /s/ Paul S. Fisher
---------------------------------------
Paul S. Fisher, Executive Vice
President and Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed by the following persons on behalf of the registrant in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE NAME AND TITLE DATE
- --------- -------------- ----
<S> <C> <C>
/s/ Martin Barber Martin Barber, Chairman Dec. 29, 1998
- ----------------------------- and Trustee
/s/ John S. Gates, Jr. John S. Gates, Jr., President Dec. 29, 1998
- ----------------------------- Chief Executive Officer and
Trustee
/s/ Robert L. Stovall Robert L. Stovall, Vice Dec. 29, 1998
- ----------------------------- Chairman and Trustee
/s/ Nicholas C. Babson Nicholas C. Babson, Trustee Dec. 29, 1998
- -----------------------------
/s/ Alan D. Feld Alan D. Feld, Trustee Dec. 29, 1998
- -----------------------------
/s/ John J. Kinsella John J. Kinsella, Trustee Dec. 29, 1998
- -----------------------------
/s/ Thomas E. Robinson Thomas E. Robinson, Dec. 29, 1998
- ----------------------------- Trustee
</TABLE>
40
<PAGE>
CENTERPOINT PROPERTIES TRUST
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Page(s)
<S> <C>
Consolidated Financial Statements:
Report of Independent Accountants....................................................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1996............................ F-3
Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995...................................................... F-4
Consolidated Statements of Shareholders' Equity for
the years ended December 31, 1997, 1996 and 1995...................................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995...................................................... F-6
Notes to Consolidated Financial Statements.............................................. F-7 to F-21
Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts......................................... F-22
Schedule III - Real Estate and Accumulated Depreciation................................. F-23 to F-28
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of CenterPoint Properties Trust
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity and cash flows
present fairly, in all material respects, the financial position of
CenterPoint Properties Trust and its subsidiaries at December 31, 1997 and
1996, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997 in conformity with
accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 2, the financial statements as of December 31, 1997 and
for the year then ended have been revised with respect to the timing of
recognition of certain fees.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
February 10, 1998
except for Note 2 for which the date is November 15, 1999
F-2
<PAGE>
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
ASSETS
DECEMBER 31,
------------
1997
REVISED 1996
------- ----
<S> <C> <C>
Assets:
Investment in real estate:
Land and leasehold $ 124,011 $ 72,004
Buildings 418,303 284,626
Building improvements 64,372 43,583
Furniture, fixtures, and equipment 13,912 10,429
Construction in progress 41,677 18,392
--------- ---------
662,275 429,034
Less accumulated depreciation and amortization 44,352 30,206
--------- ---------
Net investment in real estate 617,923 398,828
Cash and cash equivalents 1,652 1,070
Restricted cash and cash equivalents 36,509 977
Tenant accounts receivable, net 12,416 10,193
Mortgage notes receivable 9,668 22,665
Investment in and advances to affiliate 11,107 9,673
Prepaid expenses and other assets 3,119 3,630
Deferred expenses, net 6,661 4,170
--------- ---------
$ 699,055 $ 451,206
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 85,755 $ 114,451
Line of credit 97,700 46,100
Bonds payable 75,540
Convertible subordinated debentures payable 11,740 14,380
Notes payable 2,418
Preferred dividends payable 901
Accounts payable 10,311 4,130
Accrued expenses 24,593 17,914
Rents received in advance and security deposits 4,759 3,700
--------- ---------
311,299 203,093
--------- ---------
Commitments and contingencies
Shareholders' equity:
Preferred shares of beneficial interest, $.001 par value, 10,000,000 shares
authorized; 3,000,000 and 0 issued and outstanding, respectively,
having a liquidation preference of $25 per share ($75,000) 3
Common shares of beneficial interest, $.001 par value, 47,727,273 shares
authorized; 16,891,951 and 14,333,231 issued and outstanding, respectively 17 14
Class B common shares of beneficial interest, $.001 par value, 2,272,727
shares authorized; 2,272,727 issued and outstanding 2 2
Additional paid-in-capital 420,743 276,142
Retained earnings (deficit) (32,512) (27,726)
Unearned compensation - restricted stock (497) (319)
--------- ---------
Total shareholders' equity 387,756 248,113
--------- ---------
$ 699,055 $ 451,206
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE>
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997
REVISED 1996 1995
------- ---- ----
<S> <C> <C> <C>
Revenue:
Operating and investment revenue:
Minimum rents $ 57,878 $ 42,107 $ 34,066
Straight-line rents 2,732 2,087 1,349
Expense reimbursements 18,228 11,413 8,781
Mortgage interest income 2,098 1,514 84
-------- -------- --------
Total operating and investment revenue 80,936 57,121 44,280
-------- -------- --------
Other revenue:
Real estate fee income 2,514 5,140 2,639
Equity in net income of affiliate 2,138 1,069 33
-------- -------- --------
Total other revenue 4,652 6,209 2,672
-------- -------- --------
Total revenue 85,588 63,330 46,952
-------- -------- --------
Expenses:
Real estate taxes 17,091 11,868 7,719
Property operating and leasing 12,091 8,883 7,055
General and administrative 3,105 2,567 2,150
Depreciation and amortization 15,278 10,648 8,456
Interest expense:
Interest incurred, net 10,071 9,865 11,562
Amortization of deferred financing costs 800 1,127 1,150
-------- -------- --------
Total expenses 58,436 44,958 38,092
-------- -------- --------
Operating income 27,152 18,372 8,860
Other income (expense) 108 (100) (16)
-------- -------- --------
Income before extraordinary item 27,260 18,272 8,844
Extraordinary item, early extinguishment of debt (3,331) (632)
-------- -------- --------
Net income 27,260 14,941 8,212
Preferred dividends (901) (947) (1,002)
-------- -------- --------
Net income available to common shareholders $ 26,359 $ 13,994 $ 7,210
======== ======== ========
Per share net income available to common shareholders
before extraordinary item:
Basic $ 1.41 $ 1.25 $ 0.85
Diluted $ 1.39 $ 1.22 $ 0.84
Per share net income available to common shareholders:
Basic $ 1.41 $ 1.01 $ 0.78
Diluted $ 1.39 $ 0.99 $ 0.77
Distributions per common share $ 1.68 $ 1.62 $ 1.56
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
CLASS B COMMON
PREFERRED SHARES SHARES COMMON SHARES
-------------------- ------------------- ------------------- ADDITIONAL
NUMBER NUMBER NUMBER PAID-IN
OF SHARES AMOUNT OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL
--------- ------ --------- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 0 $0 0 $0 6,415,883 $6 $69,871
Issuance of common shares,
less $5,160 of offering costs 2,736,700 3 45,446
Shares issued for purchase of property 48,261 1,122
Issuance of convertible preferred shares
in private offering 2,272,727 2 49,998
Conversion of convertible subordinated
debentures to common shares 1,137,165 1 20,315
Shares issued for stock options exercised 600 11
Incentive share awards 17,499 341
Director share awards 2,850 57
Amortization of unearned compensation
Distributions declared on common shares,
$1.56 per share
Distributions declared on convertible
preferred shares, $0.44 per share
Net income
--------- ------ --------- ------ --------- ------ -------
Balance, December 31, 1995 2,272,727 2 0 0 10,358,958 10 187,161
Issuance of common shares,
less $2,387 of offering costs 3,450,000 3 79,547
Conversion of convertible preferred shares
to Class B common shares (2,272,727) (2) 2,272,7272 2
Conversion of convertible subordinated
debentures to common shares 485,680 1 8,683
Shares issued for stock options exercised 27,787 508
Incentive shares awards 8,290 186
Director shares awards 2,516 57
Amortization of unearned compensation
Distributions declared on common shares,
$1.62 per share
Distributions declared on convertible
preferred shares, $0.42 per share
Distributions declared on Class B common
shares, $1.25 per share
Net income
--------- ------ --------- ------ --------- ------ -------
Balance, December 31, 1996 0 0 2,272,727 2 14,333,231 14 276,142
Issuance of common shares,
less $4,054 of offering costs 2,250,000 2 66,819
Issuance of preferred shares,
less $3,101 of offering costs 3,000,000 3 71,896
Conversion of convertible subordinated
debentures to common shares 144,640 2,564
Shares issued for stock options exercised 149,715 1 2,873
Incentive share awards 12,444 392
Director share awards 1,921 57
Amortization of unearned compensation
Distributions declared on common shares,
$1.68 per share
Distributions declared on preferred shares,
$0.30 per share
Distributions declared on Class B common
shares, $1.73 per share
Net income - revised
--------- ------ --------- ------ --------- ------ -------
Balance, December 31, 1997 as revised 3,000,000 $3 2,272,727 $2 16,891,951 $17 $420,743
========= ====== ========= ====== ========== ====== ========
<CAPTION>
UNEARNED
RETAINED COMPENSATION- TOTAL
EARNINGS RESTRICTED SHAREHOLDERS'
(DEFICIT) SHARES EQUITY
--------- ------ -------
<S> <C> <C> <C>
Balance, January 1, 1995 ($10,861) $0 $59,016
Issuance of common shares,
less $5,160 of offering costs 45,449
Shares issued for purchase of property 1,122
Issuance of convertible preferred shares
in private offering 50,000
Conversion of convertible subordinated
debentures to common shares 20,316
Shares issued for stock options exercised 11
Incentive share awards (341)
Director share awards 57
Amortization of unearned compensation 90 90
Distributions declared on common shares,
$1.56 per share (14,951) (14,951)
Distributions declared on convertible
preferred shares, $0.44 per share (1,002) (1,002)
Net income 8,212 8,212
------- ------ -------
Balance, December 31, 1995 (18,602) (251) 168,320
Issuance of common shares,
less $2,387 of offering costs 79,550
Conversion of convertible preferred shares
to Class B common shares
Conversion of convertible subordinated
debentures to common shares 8,684
Shares issued for stock options exercised 508
Incentive shares awards (186)
Director shares awards 57
Amortization of unearned compensation 118 118
Distributions declared on common shares,
$1.62 per share (20,277) (20,277)
Distributions declared on convertible
preferred shares, $0.42 per share (947) (947)
Distributions declared on Class B common
shares, $1.25 per share (2,841) (2,841)
Net income 14,941 14,941
------- ------ -------
Balance, December 31, 1996 (27,726) (319) 248,113
Issuance of common shares,
less $4,054 of offering costs 66,821
Issuance of preferred shares,
less $3,101 of offering costs 71,899
Conversion of convertible subordinated
debentures to common shares 2,564
Shares issued for stock options exercised 2,874
Incentive share awards (392)
Director share awards 57
Amortization of unearned compensation 214 214
Distributions declared on common shares,
$1.68 per share (27,221) (27,221)
Distributions declared on preferred shares,
$0.30 per share (901) (901)
Distributions declared on Class B common
shares, $1.73 per share (3,924) (3,924)
Net income - revised 27,260 27,260
------- ----- --------
Balance, December 31, 1997 as revised ($32,512) ($497) $387,756
======== ===== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997
REVISED 1996 1995
------- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 27,260 $ 14,941 $ 8,212
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary item-early extinguishment of debt 3,331 632
Bad debts 279 462 433
Depreciation 14,275 10,199 8,161
Amortization of deferred financing costs 800 1,127 1,150
Other amortization 1,003 449 295
Straight-line rents (2,732) (2,087) (1,349)
Incentive stock awards 271 175 147
Interest on converted debentures 12 77 235
Equity in net income of affiliate (2,138) (1,069) (33)
(Gain) / loss on disposal of real estate (140) 60
Net changes in:
Tenant accounts receivable (973) 197 (2,654)
Prepaid expenses and other assets (21) (937) (293)
Rents received in advance and security deposits 317 589 119
Accounts payable and accrued expenses 1,198 2,036 1,418
------- ------- -------
Net cash provided by operating activities 39,411 29,552 16,473
------- ------- -------
Cash flows from investing activities:
Change in restricted cash and cash equivalents (35,532) 325 5
Acquisition of real estate (122,090) (85,268) (61,881)
Construction in progress (42,311) (17,063)
Improvements and additions to properties (42,441) (12,575) (5,031)
Disposition of real estate 13,510 18,991 2,384
Change in deposits on acquisitions 1,303 1,037 (502)
Issuance of mortgage notes receivable (18,523) (9,588)
Repayment of mortgage notes receivable 5,670 5,543
Investment in and advances to affiliate (19,639) (1,048) (5,324)
Receivables from affiliates and employees (3) 106 274
Additions to deferred expenses (3,803) (3,079) (2,893)
------- ------- -------
Net cash used in investing activities (245,336) (111,554) (82,556)
------- ------- -------
Cash flows from financing activities:
Proceeds from sale of preferred shares 75,000 50,000
Proceeds from sale of common shares 73,749 82,445 50,620
Offering costs paid (7,155) (2,387) (4,386)
Proceeds from line of credit 211,650 46,100
Repayment of line of credit (160,050)
Proceeds from issuance of bonds payable 55,000 45,882 50,000
Repayments of mortgage notes payable (8,156) (62,705) (63,930)
Repayments of notes payable (2,385) (123) (112)
Distributions (31,145) (29,017) (13,650)
Conversion of convertible subordinated
debentures payable (1) (1) (1)
------- ------- -------
Net cash provided by financing activities 206,507 80,194 68,541
------- ------- -------
Net change in cash and cash equivalents 582 (1,808) 2,458
Cash and cash equivalents, beginning of the year 1,070 2,878 420
------- ------- -------
Cash and cash equivalents, end of year $ 1,652 $ 1,070 $ 2,878
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
F-6
<PAGE>
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
1. ORGANIZATION
CenterPoint Properties Trust (the "Company"), a Maryland trust, and
its subsidiaries, owns and operates primarily warehouse/industrial properties
in the metropolitan Chicago area and operates as a real estate investment
trust.
On October 15, 1997, the Company completed a reorganization pursuant
to which it converted from a Maryland corporation to a Maryland real estate
investment trust by means of a merger of CenterPoint Properties Corporation
(the "Corporation") with and into the Company, which prior to the merger was
a wholly-owned subsidiary of the Corporation, with the Company as the
surviving entity. Pursuant to a Plan of Reorganization, which was approved by
the stockholders of the Corporation at a Special Meeting of Stockholders held
on October 1, 1997, each issued and outstanding share of common stock of the
corporation, par value $.001 per share (the "Common Stock"), was converted
into one common share of beneficial interest in the Company, par value $.001
per share (the "Common Shares"), each outstanding share of Class B common
stock of the Corporation was converted into one Class B common share of
beneficial interest (the "Class B Common Shares") in the Company; and the
outstanding principal amount of the Corporation's 8.22% Convertible
Subordinated Debentures due 2004 was assumed by the Company and converted
into the same principal amount of 8.22% Convertible Subordinated Debentures
due 2004 of the Company.
2. REVISION
During the third quarter of 1999, the Company determined that it had
recognized certain participation, assignment, consulting and financing fees
in 1997 in advance of that permitted and has revised previously issued
financial statements accordingly. The financial statement revisions effect
only the timing of fee revenue recognition and HAVE NO EFFECT ON PREVIOUSLY
REPORTED CASH FLOW or on the total fee revenue to be recognized.
F-7
<PAGE>
The effect of this revised reporting on the Company's condensed
balance sheet, condensed statement of operations, net income and earnings per
share for the year ended December 31, 1997 is as follows (1996 was not
affected):
<TABLE>
<CAPTION>
1997
----------
Previously As
Reported Revised
---------- --------
<S> <C> <C>
Condensed Balance Sheets:
Investment in real estate, net 597,294 617,923
Mortgage notes receivable 30,297 9,668
Other assets 71,684 71,464
--------- ---------
Total assets $ 699,275 $ 699,055
========= =========
Long term debt $ 270,735 $ 270,735
Other liabilities 40,414 40,564
Shareholders' equity 388,126 387,756
--------- ---------
Total liabilities and shareholders' equity $ 699,275 $ 699,055
========= =========
Condensed Statement of Operations:
Operating and investment revenue $ 80,625 $ 80,936
Other revenue 5,333 4,652
--------- ---------
Total revenue 85,958 85,588
Operating expenses (58,436) (58,436)
--------- ---------
Other income (expense) 108 108
---------- ----------
Net income $ 27,630 $ 27,260
========== ==========
Net income available to common shareholders per share:
Net income per share- basic $ 1.43 $ 1.41
Net income per share- diluted $ 1.41 $ 1.39
</TABLE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Minimum rents are recognized on a straight-line basis over the terms
of the respective leases. Unbilled rents receivable represents the amount
that straight-line rental revenue exceeds rents due under the lease
agreements. Unbilled rents receivable, included in tenants accounts
receivable, at December 31, 1997 and 1996 were $5,075 and $4,099,
respectively. Recoveries from tenants for taxes, insurance and other property
operating expenses are recognized in the period the applicable costs are
incurred.
Real estate fee income includes tenant lease termination fees of
$1,894 in 1997 and $1,200 in 1995.
The Company provides an allowance for doubtful accounts against the
portion of accounts receivable which is estimated to be uncollectible.
Accounts receivable in the consolidated balance sheets are shown net of an
allowance for doubtful accounts of $272 and $748 as of December 31, 1997 and
1996, respectively.
DEFERRED EXPENSES
Deferred expenses consist principally of financing fees and leasing
commissions. Leasing commissions are amortized on a straight-line basis over the
terms of the respective lease agreements ranging from 1 to 8 years.
F-8
<PAGE>
Financing costs are amortized over the terms of the respective loan
agreements. Deferred expenses relating to debenture conversions of $86 and
$257 were charged to paid-in capital in 1997 and 1996, respectively, and
fully amortized deferred expenses of $1,207 and $57 were written off in 1997
and 1996, respectively. The balances are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997 1996
---- ----
<S> <C> <C>
Deferred financing costs, net of accumulated
amortization of $1,081 and $823 $2,766 $2,019
Deferred leasing and other costs, net of accumulated
amortization of $1,478 and $1,387 3,895 2,151
------ ------
$6,661 $4,170
====== ======
</TABLE>
PROPERTIES
Real estate assets are stated at cost. Interest and real estate
taxes and other directly related expenses incurred during construction
periods are capitalized and amortized on the same basis as the related
assets. Depreciation expense is computed using the straight-line method based
upon the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Building and improvements 31.5 and 40
Land improvements 15
Furniture, fixtures and equipment 4 to 15
</TABLE>
Construction allowances for tenant improvements are capitalized and
amortized over the terms of each specific lease. Repairs and maintenance are
charged to expense when incurred. Expenditures for improvements are
capitalized. When assets are sold or retired, their cost and related
accumulated depreciation are removed from the accounts with the resulting
gains or losses reflected in operations.
The Company annually reviews the recoverability of the carrying
value of its investment in real estate. The reviews are conducted by
estimating the fair value of its properties generally by analysis and
comparison of the capitalized values of the expected net operating cash flows
of the properties. If management determines that an impairment of property
has occurred, the carrying value of such property will be reduced to its fair
value.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated financial statements, the Company
considers all liquid investments purchased with original maturities of three
months or less to be cash equivalents.
INVESTMENT IN AND ADVANCES TO AFFILIATE
The Company accounts for its investment in affiliate using the
equity method whereby its cost of the investment is adjusted for its share of
equity in net income or loss from the date of acquisition and reduced by
distributions received.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INCOME TAXES
F-9
<PAGE>
The Company qualifies as a real estate investment trust ("REIT") under
sections 856-860 of the Internal Revenue Code beginning January 1, 1994. In
order to qualify as a REIT, the Company is required to distribute at least 95%
of its taxable income to shareholders and to meet certain asset and income tests
as well as certain other requirements. As a REIT, the Company will generally not
be liable for Federal income taxes, provided it satisfies the necessary
distribution requirements. The distributions declared and paid for the years
ended December 31, 1997, 1996 and 1995 represent a return of capital of
approximately 12%, 51% and 54%, respectively.
EARNINGS PER COMMON SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share," which became effective for both interim
and annual financial statement periods ending after December 15, 1997. As
required by this statement, the Company adopted the new standards for computing
and presenting earnings per share ("EPS") for 1997, and for all prior period
earnings per share data presented. Following are the reconciliations of the
numerators and denominators of the basic and diluted EPS.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Numerators:
Income before extraordinary items $ 27,260 $ 18,272 $ 8,844
Dividends on preferred shares (901) - -
Dividends on convertible preferred stock - (947) (1,002)
------------ ------------ ------------
Income available to common shareholders
before extraordinary item - for basic and diluted EPS $ 26,359 $ 17,325 $ 7,842
Extraordinary items - (3,331) (632)
------------ ------------ ------------
Net income available to common shareholders - for
basic and diluted EPS $ 26,359 $ 13,994 $ 7,210
============ ============ ============
Denominators:
Weighted average common shares outstanding - for
basic EPS 18,634,850 13,890,049 9,236,612
Effect of dilutive securities - options 312,280 285,913 121,810
------------ ------------ ------------
Weighted average common shares outstanding - for
diluted EPS 18,947,130 14,175,962 9,358,422
============ ============ ============
</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 1997, 1996 and 1995 would be anti
dilutive. The assumed conversion of the convertible preferred stock in 1996
and 1995 would also be anti dilutive.
RECLASSIFICATIONS
Certain items presented in the consolidated statements of operations
for prior periods have been reclassified to conform with current
classifications with no effect on results of operations.
F-10
<PAGE>
ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosures About Segments of an
Enterprise and Related Information." Both SFAS No. 130 and SFAS No. 131 are
effective for financial statements for years beginning after December 15,
1997. SFAS No. 130 requires the reporting of comprehensive income beginning
1998 and SFAS No. 131 establishes standards for publicly-held business
enterprises to report information about operating segments in annual
financial statements and requires that these enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. The Company plans to adopt SFAS No. 130 and No. 131 in 1998.
4. PROPERTY ACQUISITIONS AND DISPOSITIONS
During each of the years ended December 31, 1997 and 1996, the
Company acquired twenty-one and fifteen properties, respectively, consisting
principally of single-tenant buildings for an aggregate amount of
approximately $124,923 and $103,532, respectively. Substantially all
properties were acquired in singular transactions, and except for one
transaction in 1997 and three transactions in 1996, were acquired from
unrelated third parties. The properties were funded with borrowings under the
Company's lines of credit, proceeds from properties sold during 1997 and
1996, from proceeds of public offerings of the Company's common shares
completed on July 2, 1996 and March 6, 1997, and from proceeds of a public
offering of the Company's preferred shares completed on November 10, 1997.
The acquisitions have been accounted for utilizing the purchase method of
accounting, and accordingly, the results of operations of the acquired
properties are included in the consolidated statements of operations from the
dates of acquisition.
The Company disposed of three properties during the year ended
December 31, 1997 and eight properties during the year ended December 31,
1996.
F-11
<PAGE>
Due to the effect of the July, 1996 public offering, the March, 1997
public offering, the November, 1997 public offering and the acquisitions and
dispositions of properties, the historical results are not indicative of the
future results of operations. The following unaudited pro forma information
is presented as if the 1995 and 1996 acquisitions and dispositions of
properties, the July, 1996 public offering, and the corresponding repayment
of certain debt had occurred on January 1, 1995, and as if the March, 1997
public offering, the November 1997 public offering, the corresponding
repayment of certain debt, and the 1997 acquisitions and dispositions had all
occurred on January 1, 1996 (or on the date the property first commenced
operations with a third party tenant, if later). The unaudited pro forma
information is based upon the historical consolidated statements of
operations before any extraordinary items and does not purport to present
what actual results would have been had the transactions, in fact, occurred
at the beginning of 1996 or 1995, or to project results for any future period.
<TABLE>
<CAPTION>
PROFORMA FOR THE YEARS
----------------------
ENDED DECEMBER 31, (UNAUDITED)
------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Total revenues $ 91,299 $ 80,294 $ 57,411
Total expenses 59,108 50,103 41,764
-------- -------- --------
Income before extraordinary item 32,191 30,191 15,647
Preferred dividends (6,360) (7,307) (1,002)
-------- -------- --------
Income available to common shareholders
before extraordinary item $ 25,831 $ 22,884 $ 14,645
======== ======== ========
Per share income available to common shareholders
before extraordinary item:
Basic $ 1.39 $ 1.28 $ 1.14
Diluted $ 1.36 $ 1.26 $ 1.13
</TABLE>
5. MORTGAGE NOTES RECEIVABLE
As of December 31, 1997 and 1996, the Company had notes receivable
outstanding of $9,668 and $22,665, respectively, consisting of mortgage loans
and construction loans. The notes bear interest from 8.25% to 11.25% and mature
from March, 1998 to June, 2010.
As of December 31, 1997 mortgage notes receivable mature as follows:
<TABLE>
<S> <C>
1998.................................................... $ 17
1999.................................................... 24
2000.................................................... 8,782
2001.................................................... 41
2002.................................................... 50
Thereafter.............................................. 754
--------
Total......................................... $ 9,668
========
</TABLE>
Based on borrowing rates available at the end of 1997 and 1996 for
mortgage loans with similar terms and maturities, the fair value of the mortgage
notes receivable approximates the carrying values.
Land and buildings have been pledged as collateral for the above notes
receivable.
6. INVESTMENT IN AND ADVANCES TO AFFILIATE
The Company holds approximately 99% of the economic interest in
CenterPoint Realty Services Corporation ("CRS"). To maintain compliance with
limitations on income from business activities received by
F-12
<PAGE>
REITs and their qualified REIT subsidiaries, the Company holds its interest
in CRS in the form of non-voting equity ownership which qualifies as an
unconsolidated taxable subsidiary.
As of December 31, 1997 and 1996, the Company had an outstanding
balance due from CRS of $7,868 and $6,333, respectively, under a demand loan
with an interest rate of 8.125%. The proceeds of the loans were required for
development projects.
Certain revisions to the Company's previously issued financial
statements described in Note 2 are derived from revisions to the 1997 financial
statements of CRS. Accordingly, the summarized financial information of CRS as
of December 31, 1997 and for the year then ended (shown below) have been
revised.
Summarized financial information of CRS is shown below.
Balance Sheets:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1997
REVISED 1996
------- ----
<S> <C> <C>
Assets:
Investment in real estate $ 11,140 $ 10,024
Notes receivable 59
Other assets 832 1,050
-------- --------
$ 12,031 $ 11,074
======== ========
Liabilities:
Note payable to affiliate $ 7,868 $ 6,333
Other liabilities 929 3,566
-------- --------
8,797 9,899
Stockholder's equity 3,234 1,175
-------- --------
$ 12,031 $ 11,074
======== ========
</TABLE>
Statements of Operations:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997
REVISED 1996
------- ----
<S> <C> <C>
Total Income $ 40,092 $ 16,000
Operating Expenses (36,627) (14,261)
Provision for income taxes (1,305) (659)
-------- --------
Net income $ 2,160 $ 1,080
======== ========
</TABLE>
7. MORTGAGE NOTES PAYABLE
MORTGAGE NOTES PAYABLE
As of December 31, 1997 and 1996, the Company had mortgage notes
payable outstanding of $84,075 and $92,231, respectively. The mortgage notes are
collateralized by two designated pools of properties in both 1997 and 1996 and
two and three other individual properties, at December 31, 1997 and 1996,
respectively.
One of the designated pool of properties consists of 20 properties
collateralizing $50,000 bonds at December 31, 1997 and 1996, bearing interest of
7.62% and maturing in November, 2002. The second designated
F-13
<PAGE>
pool of properties consists of 18 properties collateralizing $30,000 of debt
at December 31, 1997 and 1996, bearing interest of 6.91% and maturing in May,
1999.
The other mortgage notes payable aggregate $4,075 and $12,231 at
December 31, 1997 and 1996, respectively, and bear interest ranging from 6.9% to
8.0%. In October, 1997, $8,156 of mortgage notes were repaid. The mortgage notes
outstanding as of December 31, 1997, mature from November, 1998 to October,
2000.
REVENUE BONDS
As of December 31, 1997 and 1996, the Company had revenue bonds,
consisting of Economic Development Revenue Bonds issued by the City of Gary,
Indiana ($22,220 outstanding at December 31, 1997 and 1996) and Variable/Fixed
Rate Demand Special Facilities Airport Revenue Bonds issued by the City of
Chicago, Illinois ($55,000 outstanding at December 31, 1997).
The Economic Development Revenue Bonds issued by the City of Gary,
Indiana are collateralized by a letter of credit. The letter of credit contains
certain financial covenants pertaining to the tangible net worth and liabilities
in relation to portfolio value of the Company. In April 1996, the bonds
outstanding at December 31, 1995 were refunded. The new bonds were issued in two
series; $20,540,000 tax exempt and $1,680,000 taxable, bearing interest in the
Weekly Adjustable Interest Rate Mode at a rate determined by the Remarketing
Agent (4.20% on the tax exempt bonds and 6.10% on the taxable bonds at December
31, 1997). The new bonds require monthly payments of interest only and mature in
March, 2031.
The Variable/Fixed Rate Demand Special Facilities Airport Revenue Bonds
issued by the City of Chicago, Illinois are enhanced by a letter of credit. The
letter of credit contains certain financial convenants pertaining to
consolidated net worth. The tax-exempt bonds bear initial interest at a Weekly
Adjustable Interest Rate, which from time to time may be changed by the Company,
at a rate determined by the Remarketing Agent (3.95% at December 31, 1997). The
bonds require monthly payments of interest only and mature in September, 2032.
Of the original proceeds, the Company holds $34,593 in escrow at December 31,
1997 for future construction costs.
As of December 31, 1997 mortgage notes mature as follows:
<TABLE>
<S> <C>
1998.................................................................... $ 3,500
1999.................................................................... 30,000
2000.................................................................... 575
2001.................................................................... 0
2002.................................................................... 50,000
Thereafter.............................................................. 77,220
--------
Total.......................................................... $161,295
========
</TABLE>
Based on borrowing rates available to the Company at the end of 1997
and 1996 for mortgage loans with similar terms and maturities, the fair value of
the mortgage notes payable approximates the carrying values.
Land, buildings and equipment related to such mortgages with an
aggregate net book value of approximately $199,000 at December 31, 1997 have
been pledged as collateral for the above debt.
8. LINE OF CREDIT
In October, 1996, the Company obtained a $135 million unsecured line of
credit, and subsequently increased the line to $150 million in November 1997.
The current interest rate is LIBOR plus .80% for LIBOR borrowings (a range of
6.8% to 6.863% at December 31, 1997) and Prime Rate (8.5% at December 31, 1997)
for other borrowings. The Company may receive competitive bids for up to half
its commitment (a range of 6.60% to 6.75% at December 31, 1997). The line
requires payments of interest only when LIBOR contracts mature and
F-14
<PAGE>
monthly on borrowings under Prime Rate. The line matures on October 24, 1999.
There is a fee of 1/5% per year on the total line commitment. At December 31,
1997 and 1996, the Company had $52,300 and $88,900, respectively, available
under the line. As the line of credit is at a variable rate, the carrying
value approximates fair value.
9. EXTRAORDINARY ITEM
In 1996 and 1995, the Company incurred losses of $3,331 (per share -
basic $0.24; diluted $0.23) and $632 (per share - basic $0.07; diluted $0.07),
respectively, representing a write off of unamortized deferred financing costs
as a result of early extinguishment of certain debt obligations.
10. CONVERTIBLE SUBORDINATED DEBENTURES PAYABLE
Concurrent with the initial public offering in December, 1993, the
Company issued $58,500 of convertible subordinated debentures ("Debentures") due
2004. At December 31, 1997 and 1996, $11,740 and $14,380 of debentures were
outstanding, respectively. The Debentures are unsecured general obligations of
the Company and are subordinate to all existing and subsequently incurred
indebtedness of the Company. The Debentures are optionally redeemable by the
Company, at par, commencing December 4, 1998. Holders may convert the Debentures
at any time, without premium, to Common Shares of the Company at a conversion
price of $18.25 per share, subject to certain adjustments. The Debentures bear
interest at 8.22% per annum, payable semiannually on January 15 and July 15 of
each year, commencing July 15, 1994. During 1997, 1996 and 1995 debentures
totaling $2,640, $8,864 and $20,754, respectively, were converted into shares of
common stock. Based principally on the conversion feature and share price of
common stock at the end of 1997 and 1996, the fair value of the outstanding
Debentures approximates $22,595 and $25,805, respectively.
11. RELATED PARTY TRANSACTIONS
In December 1997, the Company purchased a fully leased building,
located in Des Plaines, Illinois, from a partnership, in which one of the
Company's Senior Officers and a Company Director were limited partners, for
approximately $4.7 million. In June, 1996, the Company acquired three properties
in which the Company's Chief Operations Officer and Director, and the Company's
Executive Vice President of Acquisitions during 1996 had an interest and, in
which they, continue to own an insignificant interest in two of the properties.
The three properties were purchased for an aggregate amount of approximately
$24.6 million. The above transactions satisfied the Company's investment
criteria and were approved by the Company's independent directors.
Notes payable at December 31, 1997 and 1996 includes amounts payable to
related parties as a consequence of properties acquired and settlement of tax
reimbursement obligations of the Company during 1996 totaling $33 and $483,
respectively.
12. SHAREHOLDERS' EQUITY
COMMON SHARES OF BENEFICIAL INTEREST
As of December 31, 1997 the Company has reserved 584,229 Common Shares
for future issuance under the 1993 Stock Option Plan, 119,596 Common Shares for
future issuance under the 1995 Restricted Stock Incentive Plan, 67,713 Common
Shares for future issuance under the 1995 Director Stock Plan, 643,288 Common
Shares for issuance upon the conversion of the Debentures and 1,000,000 Common
Shares for future issuance under the dividend reinvestment and stock purchase
plan.
CLASS B COMMON SHARES OF BENEFICIAL INTEREST
On September 22, 1995, the Company completed a $50 million private
equity placement of non-voting preferred shares of beneficial interest. In May,
1996, the preferred shares of beneficial interest automatically
F-15
<PAGE>
converted, on a share for share basis, to non-voting Class B Common Shares,
upon shareholder approval of an amendment to the Company's charter permitting
non-voting Class B Common Shares at the Company's annual meeting. The
distribution on the non-voting shares is equal to the distribution paid on
the voting shares of the Company plus an additional $.0468 per share. Unless
previously converted, after three years, the shares will be converted to
voting common shares on a share for share basis up to 4.9 percent of the
Company's then outstanding voting shares with all shares to fully convert
within ten years. As the shares convert to voting common, the distribution
paid shall be the same as all other voting common shares.
F-16
<PAGE>
PREFERRED SHARES OF BENEFICIAL INTEREST
On November 10, 1997, the Company issued 3 million shares of 8.48%
Series A Cumulative Redeemable Preferred Shares of Beneficial Interest
("Preferred Shares") at a purchase price of $25 per share. Dividends on the
Preferred Shares are cumulative from the date of issuance and payable quarterly
commencing on January 30, 1998. The payment of dividends and amounts upon
liquidation will rank senior to the Common Shares and Class B Common Shares,
which are the only other shares of the Company currently outstanding. The
Preferred Shares are not redeemable prior to October 30, 2002. On or after
October 30, 2002 the Preferred Shares will be redeemable for cash at the option
of the Company, in whole or part, at the redemption price of $25 per share, plus
dividends accrued and unpaid to the redemption date. The Preferred Shares are
not convertible into or exchangeable for any other property or securities of the
Company.
RESTRICTED STOCK INCENTIVE PLAN
Under the terms of the 1995 Restricted Stock Incentive Plan, adopted in
1995 the Company initially reserved 150,000 common shares for future grants. In
1997, 1996 and 1995 certain key employees were granted 12,444, 8,290 and 9,670
restricted shares, respectively. Shares were awarded in the name of each of the
participants, who have all the rights of other common shareholders, subject to
certain restrictions and forfeiture provisions. Restrictions on the shares
expire no more than eight years after the date of award, or earlier if certain
performance targets are met.
Under the terms of the Company's Restricted Stock Grant Agreements,
certain key employees were granted 7,829 restricted shares of the Company's
common shares in 1995. Shares were awarded in the name of each of the employees,
who have all the rights of other common shareholders, subject to certain
restrictions and for future provisions. Restrictions on the shares expired one
year after the date of the award.
Unearned compensation is recorded at the date of awards based on the
market value of shares. Unearned compensation, which is shown as a separate
component of shareholders' equity, is being amortized to expense over the eight
year vesting period. The amount amortized to expense during 1997, 1996 and 1995
was $214, $118 and $90, respectively.
DIRECTOR STOCK PLAN
The 1995 Director Stock Plan is for an aggregate of 75,000 common
shares and provides that each independent director, upon election or re-election
to the Board, may elect to receive 50% of his annual retainer fee in Common
Shares at the market price on such date. In 1997, 1996 and 1995, 1,921, 2,516
and 2,850 Common Shares were issued under this plan, respectively. In connection
with the issuance of such shares, $57, $57 and $57 was charged to expense in
1997, 1996 and 1995, respectively.
13. STOCK OPTION PLAN
The Company has adopted the 1993 Stock Option Plan (the "Plan") and in
May, 1996, increased the maximum number of shares from 750,000 to 1,500,000
common shares of beneficial interest which may be granted for qualified and
non-qualified options. The Company adopted the Plan to provide additional
incentives to attract and retain directors, officers and key employees. The Plan
was amended in 1995 to provide that each independent director receive an option
for 3,000 common shares of beneficial interest at fair market value at the time
of being elected or re-elected to the Board. Options are to be granted by the
Compensation Committee of the Board of Directors. The term of the option shall
be fixed by the Compensation Committee, but no option shall be exercisable more
than 10 years after the date of grant.
The options granted are at fair market value on the date of grant, are
for 10 year terms and become exercisable in 20% annual increments after one year
from date of grant. Option activity for the three years ended December 31, 1997
is as follows:
F-17
<PAGE>
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
---------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 683,480 $19.20 606,839 $18.59 494,460 $18.37
Granted 241,769 31.38 104,428 22,50 112,979 19.55
Exercised (149,715) 19.19 (27,787) 18.28 (600) 18.25
Expired (34,865) 24.73 - -
-------- ------- -------
Outstanding at end of year 740,669 $22.92 683,480 $19.20 606,839 $18.59
======== ======= =======
Exercisable at end of year 327,137 282,784 189,084
Available for future grant at year end 584,229 791,133 145,561
Weighted average per share fair value of
options granted during the year $3.65 $2.43 $2.41
</TABLE>
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Risk free interest rate 6.4% 6.1% 7.0%
Dividend yield 6.5% 6.5% 6.5%
Expected lives 6 years 6 years 6 years
Expected volatility 17.5% 17.4% 17.4%
</TABLE>
The following table summarized information about stock options at
December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------- -------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
RANGE OF OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICE AT 12/31/97 LIFE PRICE AT 12/31/97 PRICE
-------------- ----------- ----------- --------- ----------- --------
<S> <C> <C> <C> <C> <C>
$18.25-$31.50 740,669 7.8 years $22.92 327,137 $18.66
</TABLE>
The Company has applied Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for its Plan, accordingly, no compensation
costs have been recognized. Had compensation costs for the Company's Plan been
determined based on the fair value at the grant date for options granted in
1997, 1996 and 1995 in accordance with the method required by Statement of
Financial Accounting Standards No. 123, the Company's net income and net income
per share would have been reduced to the pro forma amounts as follows:
<TABLE>
<CAPTION>
Year ended December 31,
(in thousands, except per share data)
-----------------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income available to common shareholders
As reported $26,359 $13,994 $7,210
Pro forma $26,221 13,901 7,169
Per share net income available to common shareholders
As reported
Basic 1.41 1.01 0.78
F-18
<PAGE>
Diluted 1.39 0.99 0.77
Pro forma
Basic 1.41 1.00 0.78
Diluted 1.38 0.98 0.77
</TABLE>
14. FUTURE RENTAL REVENUES
Under existing noncancelable operating lease agreements as of December
31, 1997, tenants of the warehouse/industrial properties are committed to pay in
aggregate the following minimum rentals:
<TABLE>
<S> <C>
1998..................................................................... $ 60,765
1999..................................................................... 52,448
2000..................................................................... 43,926
2001..................................................................... 35,683
2002..................................................................... 29,339
Thereafter............................................................... 88,670
--------
Total............................................................ $310,831
========
</TABLE>
At December 31, 1997, 630 of the total 682 apartments available for
rental at the Lakeshore Dunes property were leased. Lease terms are generally
for one year.
No single tenant represented more than 10% of consolidated minimum
rents in 1997, 1996 and 1995.
15. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Supplemental disclosure of cash flow information:
Interest paid, net of interest capitalized $ 11,820 $ 10,603 $ 13,344
Interest capitalized 893 142 20
Dividends declared, not paid 901 - 4,952
Assignment of note receivable to affiliate 4,650 - -
Repayment of advance from affiliate
with real estate at book value 24,993 - -
In conjunction with the property acquisitions, the Company
assumed the following assets and liabilities:
Purchase of real estate $ 125,352 $ 103,532 $ 65,828
Liabilites, net of other assets (3,262) (4,956) (2,250)
Mortgage notes payable (13,308) (575)
Issuance of Common Stock (1,122)
--------- --------- ---------
Acquisition of real estate $ 122,090 $ 85,268 $ 61,881
========= ========= =========
In conjunction with the property dispositions, the Company
disposed of the following assets and liabilities:
Sale of real estate $ (12,877) $ (22,481) $ (2,429)
Liabilities, net of other assets (633) 1,421 45
Mortgage notes payable 2,069
--------- --------- ---------
Disposition of real estate $ (13,510) $ (18,991) $ (2,384)
========= ========= =========
F-19
<PAGE>
Conversion of convertible subordinated debentures payable:
Convertible subordinated dentures converted $ 2,640 $ 8,864 $ 20,754
Common shares issued at $18.25 per share;
144,640, 485,680 and 1,137,165 2,639 8,863 20,753
--------- --------- ---------
Cash disbursed for fractional shares $ 1 $ 1 $ 1
========= ========= =========
</TABLE>
16. COMMITMENTS AND CONTINGENCIES
In the normal course of business, from time to time, the Company is
involved in legal actions relating to the ownership and operations of its
properties. In management's opinion, the liabilities, if any, that may
ultimately result from such legal actions are not expected to have a materially
adverse effect on the consolidated financial position, results of operations, or
liquidity of the Company.
The Company has entered into several contracts for the acquisition of
properties. Each acquisition is subject to satisfactory completion of due
diligence and, in the case of developments, completion and occupancy of the
project.
At December 31, 1997, seven of the properties owned are subject to
purchase options held by certain tenants. The purchase options are exercisable
at various intervals through 2006 for amounts which are greater than the net
book value of the assets. The tenant at a property in Woodale, IL exercised its
option to purchase the building in May, 1997.
F-20
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
CenterPoint Properties Trust
Our report on the consolidated financial statements of CenterPoint
Properties Trust and Subsidiaries is included as page F-2 of this Form 10-K/A.
In connection with our audits of such financial statements, we have also audited
the related financial statement schedules listed in the Index to Consolidated
Financial Statements on page F-1 of this Form 10-K/A.
In our opinion, these revised financial statement schedules referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information required to be
included therein.
Chicago, Illinois PRICEWATERHOUSECOOPERS LLP
November 15, 1999
F-21
<PAGE>
CENTERPOINT PROPERTIES TRUST
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BEGINNING CHARGE TO COST ENDING
BALANCE AND EXPENSES RECOVERIES DEDUCTIONS(a) BALANCE
--------- -------------- ---------- ------------- -------
DESCRIPTION
- -----------
<S> <C> <C> <C> <C> <C>
For year ended December 31, 1997:
Allowance for doubtful accounts $748 $279 $ - ($755) $272
For year ended December 31, 1996: ==== === === ====== ===
Allowance for doubtful accounts 500 462 - (214) 748
For year ended December 31, 1995: === === === ===== ===
Allowance for doubtful accounts $120 $433 - (53) $500
==== ==== === === ====
</TABLE>
- ---------------------------
NOTE: (a) Deductions represent write-off of accounts receivable against the
allowance for doubtful accounts.
F-22
<PAGE>
CENTERPOINT PROPERTIES CORPORATION AND SUBSIDIARIES SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
INITIAL COSTS COSTS CAPITALIZED GROSS AMOUNTS AT WHICH
--------------------- SUBSEQUENT TO ACQUISITION CARRIED AT CLOSE OF PERIOD
BUILDINGS AND ----------------------------- --------------------------
ENCUMBRANCES IMPROVEMENTS BUILDINGS AND CARRYING BUILDINGS AND
DESCRIPTION (e) LAND (a) LAND IMPROVEMENTS COSTS (b) LAND IMPROVEMENTS TOTAL(c)(d)
- -------------------- ------------ ------- ----------- ---- ------------- --------- ------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WAREHOUSE/INDUSTRIAL
PROPERTIES:
425 W. 151st Street
East Chicago, IN $ 252 $ 1,805 $ 33 $ 4,410 $ 1,155 $ 285 $ 7,370 $ 7,655
201 Mississippi Street
Gary, IN $50,000(h) 807 9,948 275 14,697 1,082 24,645 25,727
1201 Lunt Avenue
Elk Grove Village, IL (h) 57 146 4 57 150 207
620 Butterfield Road
Mundelein, IL 30,000(g) 335 1,974 61 396 1,974 2,370
1319 Marquette Drive
Romeoville, IL (h) 948 2,530 7 948 2,537 3,485
900 E. 103rd Street
Chicago, IL 2,226 10,693 3,631 2,226 14,324 16,550
1520 Pratt Avenue
Elk Grove Village, IL (h) 498 1,558 6 498 1,564 2,062
1850 Greenleaf
Elk Grove Village, IL 509 1,386 1 509 1,387 1,896
2743 Armstrong Court
Des Plaines, IL 1,320 2,679 133 1,320 2,812 4,132
5990 Touhy Avenue
Niles, IL 2,047 8,509 1,073 2,047 9,582 11,629
950 Tower Road
Mundelein, IL (h) 171 778 131 171 909 1,080
2339 Ernie Krueger Court
Waukegan, IL (g) 158 1,819 158 1,819 1,977
4501 W. Augusta Blvd.
Chicago, IL 175 4,988 700 175 5,688 5,863
1800 Industrial Drive
Libertyville, IL (h) 673 3,741 395 4,452 1,068 8,193 9,261
1400 Busse Road
Elk Grove Village, IL 439 5,719 277 439 5,996 6,435
1250 Carolina Drive
West Chicago, IL (g) 583 3,836 231 583 4,067 4,650
5619 W. 115th Street
Alsip, IL (h) 2,267 12,169 1,621 2,267 13,790 16,057
825 Tollgate Road
Elgin, IL (g) 712 3,584 12 712 3,596 4,308
720 Frontenac
Naperville, IL (g) 1,014 4,055 22 102 1,036 4,157 5,193
820 Frontenac
Naperville, IL (g) 906 3,626 17 906 3,643 4,549
1120 Frontenac
Naperville, IL (g) 791 3,164 23 612 814 3,776 4,590
1510 Frontenac
Naperville, IL (g) 621 2,485 16 69 637 2,554 3,191
1020 Frontenac
Naperville, IL (g) 591 2,363 11 214 602 2,577 3,179
1560 Frontenac
Naperville, IL (g) 508 2,034 11 66 519 2,100 2,619
<CAPTION>
LIFE UPON
WHICH
DEPRECIATION
IN LATEST
INCOME
ACCUMULATED DATE OF DATE STATEMENT IS
DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
- -------------------- ------------ ------------ -------- ------------
<S> <C> <C> <C> <C>
WAREHOUSE/INDUSTRIAL
PROPERTIES:
425 W. 151st Street
East Chicago, IN $(2,555) 1913/1988-1990 1987 (f)
201 Mississippi Street
Gary, IN (8,286) 1946/1985-1988 1985 (f)
1201 Lunt Avenue
Elk Grove Village, IL (19) 1971 1993 (f)
620 Butterfield Road
Mundelein, IL (254) 1990 1993 (f)
1319 Marquette Drive
Romeoville, IL (326) 1990-1991 1993 (f)
900 E. 103rd Street
Chicago, IL (1,710) 1910 1993 (f)
1520 Pratt Avenue
Elk Grove Village, IL (201) 1968 1993 (f)
1850 Greenleaf
Elk Grove Village, IL (178) 1965 1993 (f)
2743 Armstrong Court
Des Plaines, IL (354) 1989-1990 1993 (f)
5990 Touhy Avenue
Niles, IL (1,140) 1957 1993 (f)
950 Tower Road
Mundelein, IL (109) 1979 1993 (f)
2339 Ernie Krueger Court
Waukegan, IL (234) 1990 1993 (f)
4501 W. Augusta Blvd.
Chicago, IL (693) 1942-1943 1993 (f)
1800 Industrial Drive
Libertyville, IL (761) 1992-1993 1993 (f)
1400 Busse Road
Elk Grove Village, IL (764) 1987 1993 (f)
1250 Carolina Drive
West Chicago, IL (506) 1989-1990 1993 (f)
5619 W. 115th Street
Alsip, IL (1,704) 1974 1993 (f)
825 Tollgate Road
Elgin, IL (462) 1989-1991 1993 (f)
720 Frontenac
Naperville, IL (529) 1991 1993 (f)
820 Frontenac
Naperville, IL (467) 1988 1993 (f)
1120 Frontenac
Naperville, IL (468) 1980 1993 (f)
1510 Frontenac
Naperville, IL (325) 1986 1993 (f)
1020 Frontenac
Naperville, IL (313) 1980 1993 (f)
1560 Frontenac
Naperville, IL (267) 1987 1993 (f)
</TABLE>
F-23
<PAGE>
<TABLE>
<CAPTION>
INITIAL COSTS COSTS CAPITALIZED GROSS AMOUNTS AT WHICH
--------------------- SUBSEQUENT TO ACQUISITION CARRIED AT CLOSE OF PERIOD
BUILDINGS AND ----------------------------- --------------------------
ENCUMBRANCES IMPROVEMENTS BUILDINGS AND CARRYING BUILDINGS AND
DESCRIPTION (e) LAND (a) LAND IMPROVEMENTS COSTS (b) LAND IMPROVEMENTS TOTAL(c)(d)
- -------------------- ------------ ------- ----------- ---- ------------- --------- ------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1500 Shore Road
Naperville, IL (g) 260 1,042 7 37 267 1,079 1,346
800 Enterprise
Naperville, IL (g) 212 849 6 25 218 874 1,092
1651 Frontenac
Naperville, IL (g) 185 742 5 19 190 761 951
1150 Shore Road
Naperville, IL (g) 184 736 5 22 189 758 947
2764 Golfview
Naperville, IL (g) 125 498 3 27 128 525 653
920 Frontenac
Naperville, IL (g) 717 2,367 482 717 2,849 3,566
1300 Northpoint Road
Waukegan IL (h) 592 2,366 17 592 2,383 2,975
1 Wildlife Way
Long Grove, IL (h) 530 2,122 122 530 2,244 2,774
900 W. University Drive
Arlington Heights, IL (h) 817 3,268 17 96 834 3,364 4,198
7001 Adams Street
Willowbrook, IL (h) 297 1,326 4 297 1,330 1,627
745 Birginal Drive
Bensenville, IL 601 2,406 16 601 2,422 3,023
21399 Torrence Avenue
Sauk Village , IL 1,550 6,199 557 707 2,107 6,906 9,013
2600 N. Elmhurst Road
Elk Grove Village, IL. (g) 842 3,366 8 46 850 3,412 4,262
8901 W. 102nd Street
Pleasant Prarie, WI (h) 900 3,608 36 900 3,644 4,544
8200 100th Street
Pleasant Prarie, WI (h) 1,220 4,890 42 1,220 4,932 6,152
1700 Hawthorne
West Chicago, IL 2,522 10,089 1 25 2,523 10,114 12,637
1015 E. State Parkway
Schaumburg, IL 190 760 13 190 773 963
245 Beinoris Drive
Wood Dale, IL (h) 168 570 5 168 575 743
800-1000 Chase Avenue
Elk Grove Village, IL 2,250 9,001 (444) 41 1,806 9,042 10,848
750 E. 110th Street
Chicago, IL 335 1,340 15 331 350 1,671 2,021
825-845 Hawthorne
West Chicago, IL (g) 721 2,884 23 302 744 3,186 3,930
1700 Butterfield Road
Mundelein, IL (h) 343 1,371 (1) 141 342 1,512 1,854
1810-1820 Industrial Drive
Libertyville, IL (h) 407 1,629 (5) 26 402 1,655 2,057
1733 Downs Drive
West Chicago (h) 488 1,953 1 22 489 1,975 2,464
1645 Downs Drive
West Chicago (h) 508 2,033 1 470 509 2,503 3,012
10601 Seymour Avenue
Franklin Park, IL 2,020 8,081 183 1,034 2,203 9,115 11,318
11701 South Central
Alsip, IL 1,241 4,964 22 618 1,263 5,582 6,845
<CAPTION>
LIFE UPON
WHICH
DEPRECIATION
IN LATEST
INCOME
ACCUMULATED DATE OF DATE STATEMENT IS
DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
- -------------------- ------------ ------------ -------- ------------
<S> <C> <C> <C> <C>
1500 Shore Road
Naperville, IL (137) 1985 1993 (f)
800 Enterprise
Naperville, IL (111) 1985 1993 (f)
1651 Frontenac
Naperville, IL (97) 1978 1993 (f)
1150 Shore Road
Naperville, IL (96) 1985 1993 (f)
2764 Golfview
Naperville, IL (66) 1985 1993 (f)
920 Frontenac
Naperville, IL (320) 1987 1993 (f)
1300 Northpoint Road
Waukegan IL (274) 1994 1994 (f)
1 Wildlife Way
Long Grove, IL (257) 1994 1994 (f)
900 W. University Drive
Arlington Heights, IL (372) 1974 1994 (f)
7001 Adams Street
Willowbrook, IL (146) 1994 1994 (f)
745 Birginal Drive
Bensenville, IL (272) 1974 1994 (f)
21399 Torrence Avenue
Sauk Village , IL (737) 1987 1994 (f)
2600 N. Elmhurst Road
Elk Grove Village, IL. (301) 1995 1995 (f)
8901 W. 102nd Street
Pleasant Prarie, WI (369) 1990 1994 (f)
8200 100th Street
Pleasant Prarie, WI (500) 1990 1994 (f)
1700 Hawthorne
West Chicago, IL (991) 1959/1969 1994 (f)
1015 E. State Parkway
Schaumburg, IL (77) 1980 1994 (f)
245 Beinoris Drive
Wood Dale, IL (73) 1988 1984 (f)
800-1000 Chase Avenue
Elk Grove Village, IL (848) 1972 1995 (f)
750 E. 110th Street
Chicago, IL (142) 1966 1995 (f)
825-845 Hawthorne
West Chicago, IL (262) 1974 1995 (f)
1700 Butterfield Road
Mundelein, IL (121) 1976 1995 (f)
1810-1820 Industrial Drive
Libertyville, IL (133) 1977 1995 (f)
1733 Downs Drive
West Chicago (159) 1976 1995 (f)
1645 Downs Drive
West Chicago (198) 1976 1995 (f)
10601 Seymour Avenue
Franklin Park, IL (618) 1963/1965 1995 (f)
11701 South Central
Alsip, IL (376) 1972 1995 (f)
</TABLE>
F-24
<PAGE>
<TABLE>
<CAPTION>
INITIAL COSTS COSTS CAPITALIZED
------------------------------- SUBSEQUENT TO ACQUISITION
BUILDINGS AND ------------------------------------------
ENCUMBRANCES IMPROVEMENTS BUILDINGS AND CARRYING
DESCRIPTION (e) LAND (a) LAND IMPROVEMENTS COSTS (b)
- -------------------------------- ------------ ------------- -------------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
11601 South Central
Alsip, IL 1,071 4,285 48 380
850 Arthur Avenue
Elk Grove Village, IL 575 270 1,081 1 230
1827 North Bendix Drive
South Bend, IN (h) 1,010 4,040 24 105
4400 S. Kolmar
Chicago, IL (h) 603 2,412 9 70
6600 River Road
Hodgkins, IL 2,640 10,562 47 350
7501 N. 81st Street
Milwaukee, WI 1,018 4,073 19 81
1100 Chase Avenue
Elk Grove Village, IL 248 993 7 238
2553 N. Edgington
Franklin Park, IL 6,000 1,870 7,481 67 925
875 Fargo Avenue
Elk Grove Village, IL 572 2,284 14 424
1800 Bruning Drive
Itasca, IL 1,999 7,995 26 108
1501 Pratt
Elk Grove Village, IL 1,047 4,189 67 459
400 N. Wolf Road
Northlake, IL 4,504 18,017 49 6,735
10740 W. Grand Avenue
Franklin Park, IL 383 1,532 8 172
911 Commerce Court
Buffalo Grove, IL 1,171 4,686 14 475
16400 W. 103rd Street
Lemont, IL 446 1,748 21 122
425 S. 37th Avenue
St. Charles, IL 644 2,575 7 236
1500 W. Dundee Road
Arlington Heights, IL 4,995 10,006 (1,076) 3,030
Lot 51-Naperville Business Center
Naperville, IL 220 (11)
3145 Central Avenue
Waukeegan, IL 1,270 5,080 20 1,133
2003-2207 South 114th Street
West Allis, WI 942 3,770 5 54
2501-2701 Busse Road
Elk Grove Village, IL 1,875 7,556 12 733
6464 West 51st Street
Forest View, IL 934 3,734 3 156
6500 West 51st Street
Forest View, IL 805 3,221 4 21
7447 South Central Avenue
Bedford Park, IL 437 1,748 7 37
7525 S. Sayre Avenue
Bedford Park, IL 587 2,345 4 26
2901 Centre Circle
Downers Grove, IL 207 828 4 557
1 Allsteel Drive
Aurora, IL 2,458 9,832 27 5,120
<CAPTION>
LIFE UPON
WHICH
GROSS AMOUNTS AT WHICH DEPRECIATION
CARRIED AT CLOSE OF PERIOD IN LATEST
-------------------------- INCOME
BUILDINGS AND ACCUMULATED DATE OF DATE STATEMENT IS
DESCRIPTION LAND IMPROVEMENTS TOTAL (c)(d) DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
- -------------------------------- ---------- ------------- ------------- ------------ ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
11601 South Central
Alsip, IL 1,119 4,665 5,784 (320) 1971 1995 (f)
850 Arthur Avenue
Elk Grove Village, IL 271 1,311 1,582 (88) 1972/1973 1995 (f)
1827 North Bendix Drive
South Bend, IN 1,034 4,145 5,179 (279) 1964/1990 1995 (f)
4400 S. Kolmar
Chicago, IL 612 2,482 3,094 (166) 1964 1995 (f)
6600 River Road
Hodgkins, IL 2,687 10,912 13,599 (583) Unknown 1996 (f)
7501 N. 81st Street
Milwaukee, WI 1,037 4,154 5,191 (213) 1987 1996 (f)
1100 Chase Avenue
Elk Grove Village, IL 255 1,231 1,486 (64) 1969 1996 (f)
2553 N. Edgington
Franklin Park, IL 1,937 8,406 10,343 (376) 1967/1989 1996 (f)
875 Fargo Avenue
Elk Grove Village, IL 586 2,708 3,294 (123) 1979 1996 (f)
1800 Bruning Drive
Itasca, IL 2,025 8,103 10,128 (396) 1975/1978 1996 (f)
1501 Pratt
Elk Grove Village, IL 1,114 4,648 5,762 (223) 1973 1996 (f)
400 N. Wolf Road
Northlake, IL 4,553 24,752 29,305 (895) 1956/1965 1996 (f)
10740 W. Grand Avenue
Franklin Park, IL 391 1,704 2,095 (70) 1964/1970 1996 (f)
911 Commerce Court
Buffalo Grove, IL 1,185 5,161 6,346 (193) 1992 1996 (f)
16400 W. 103rd Street
Lemont, IL 467 1,870 2,337 (71) 1983 1996 (f)
425 S. 37th Avenue
St. Charles, IL 651 2,811 3,462 (106) 1976 1996 (f)
1500 W. Dundee Road
Arlington Heights, IL 3,919 13,036 16,955 (386) 1969/1971 1996 (f)
Lot 51-Naperville Business Center
Naperville, IL 209 209 1996 1996 (f)
3145 Central Avenue
Waukeegan, IL 1,290 6,213 7,503 (192) 1960 1997 (f)
2003-2207 South 114th Street
West Allis, WI 947 3,824 4,771 (90) 1965/1966 1997 (f)
2501-2701 Busse Road
Elk Grove Village, IL 1,887 8,289 10,176 (189) 1997 1997 (f)
6464 West 51st Street
Forest View, IL 937 3,890 4,827 (81) 1973 1997 (f)
6500 West 51st Street
Forest View, IL 809 3,242 4,051 (69) 1974 1997 (f)
7447 South Central Avenue
Bedford Park, IL 444 1,785 2,229 (38) 1980 1997 (f)
7525 S. Sayre Avenue
Bedford Park, IL 591 2,371 2,962 (50) 1980 1997 (f)
2901 Centre Circle
Downers Grove, IL 211 1,385 1,596 (23) 1975 1997 (f)
1 Allsteel Drive
Aurora, IL 2,485 14,952 17,437 (248) 1957-1967 1997 (f)
</TABLE>
F-25
<PAGE>
<TABLE>
<CAPTION>
INITIAL COSTS COSTS CAPITALIZED
------------------------ SUBSEQUENT TO ACQUISITION
BUILDINGS AND ------------------------------------
ENCUMBRANCES IMPROVEMENTS BUILDINGS AND CARRYING
DESCRIPTION (e) LAND (a) LAND IMPROVEMENTS COSTS (b)
- ---------------------------- ------------ -------- ------------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
2525 Busse Highway
Elk Grove Village, IL 5,400 12,601 29 510
106th and Buffalo Avenue
Chicago, IL 248 992 9 534
7400 South Narraganset
Bedford Park,IL 743 2,972 9 38
2701 S. Busse Road
Elk Grove Village, IL 1 3
East Avenue and 55th Street
McCook, IL 1,190 4,761 33 197
6757 S. Sayre
Bedford Park, IL 1,236 4,945 4 16
1951 Landmeir Road
Elk Grove Village, IL 280 1,120 10 39
1355 Enterprise Drive
Romeoville, IL 580 2,320 2 9
5700 West Touhy Avenue
Niles, IL 18,005 139 174 8
110-190 Old Higgins Road
Des Plaines, IL 1,862 7,447 7 28
1475 S. 101st Street
West Allis, WI 331 1,323 1 4
1333 Grandview Drive
Yorkville, WI 1,516 6,062 1 7
2301 Route 30
Plainfield, IL 1,217 4,868 64 254
1796 Sherwin Avenue
Des Plaines, IL 944 3,778 1 530
2885 W. Diehl Road
Naperville, IL 1,539 8,630
2727 W. Diehl Road
Naperville, IL 3,071 14,233
O'hare Express Center - A2
Elk GroveVillage, IL 1,097 7,060 110
O'hare Express Center - B1
Elk GroveVillage, IL 1,683 10,500 96
755 Remmington
Bolingbrook, IL 997 3,989
CONSTRUCTION IN PROGRESS:
O'hare West
Elk Grove Village, IL 1,875 5,667 7 281
O'hare Express - B2
Elk Grove Village, IL 1,618 2,981 37
O'hare Express - C
Elk Grove Village, IL 2,603 1,537 0 36
1808 Swift Road
Oak Brook, IL 7,535
Champion
North Lake, IL 5,514
Ameritech
Gurnee, IL 2,446
Dial
Granite City, IL 15,643
<CAPTION>
LIFE UPON
WHICH
GROSS AMOUNTS AT WHICH DEPRECIATION
CARRIED AT CLOSE OF PERIOD IN LATEST
-------------------------- INCOME
BUILDINGS AND ACCUMULATED DATE OF DATE STATEMENT IS
DESCRIPTION LAND IMPROVEMENTS TOTAL(c)(d) DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
- ------------------ -------- --------------- --------------- -------------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
2525 Busse Highway
Elk Grove Village, IL 5,429 13,111 18,540 (169) 1975 1997 (f)
106th and Buffalo Avenue
Chicago, IL 257 1,526 1,783 (22) 1971 1997 (f)
7400 South Narraganset
Bedford Park,IL 752 3,010 3,762 (32) 1977 1997 (f)
2701 S. Busse Road
Elk Grove Village, IL 1 3 4 1997 1997 (f)
East Avenue and 55th Street
McCook, IL 1,223 4,958 6,181 (39) 1979 1997 (f)
6757 S. Sayre
Bedford Park, IL 1,240 4,961 6,201 (39) 1975 1997 (f)
1951 Landmeir Road
Elk Grove Village, IL 290 1,159 1,449 (9) 1967 1997 (f)
1355 Enterprise Drive
Romeoville, IL 582 2,329 2,911 (19) 1980/1986 1997 (f)
5700 West Touhy Avenue
Niles, IL 18,179 147 18,326 1948 1997 (f)
110-190 Old Higgins Road
Des Plaines, IL 1,869 7,475 9,344 1980 1997 (f)
1475 S. 101st Street
West Allis, WI 332 1,327 1,659 1968/1988 1997 (f)
1333 Grandview Drive
Yorkville, WI 1,517 6,069 7,586 1994 1997 (f)
2301 Route 30
Plainfield, IL 1,281 5,122 6,403 1972/1984 1997 (f)
1796 Sherwin Avenue
Des Plaines, IL 945 4,308 5,253 1964 1997 (f)
2885 W. Diehl Road
Naperville, IL 1,539 8,630 10,169 1997 1997 (f)
2727 W. Diehl Road
Naperville, IL 3,071 14,233 17,304 1997 1997 (f)
O'hare Express Center - A2
Elk GroveVillage, IL 1,097 7,170 8,267 (117) 1997 1997 (f)
O'hare Express Center - B1
Elk GroveVillage, IL 1,683 10,596 12,279 (155) 1997 1997 (f)
755 Remmington
Bolingbrook, IL 997 3,989 4,986 1997 1997 (f)
CONSTRUCTION IN PROGRESS:
O'hare West
Elk Grove Village, IL 1,662 5,948 7,830
O'hare Express - B2
Elk Grove Village, IL 1,618 3,018 4,636 (52)
O'hare Express - C
Elk Grove Village, IL 2,603 1,573 4,176 (82)
1808 Swift Road
Oak Brook, IL 7,535 7,535
Champion
North Lake, IL 5,514 5,514
Ameritech
Gurnee, IL 2,446 2,446
Dial
Granite City, IL 15,643 15,643
F-26
<PAGE>
INITIAL COSTS COSTS CAPITALIZED
------------------------ SUBSEQUENT TO ACQUISITION
BUILDINGS AND ------------------------------------
ENCUMBRANCES IMPROVEMENTS BUILDINGS AND CARRYING
DESCRIPTION (e) LAND (a) LAND IMPROVEMENTS COSTS (b)
- ---------------------------- ------------ -------- ------------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
RETAIL PROPERTIES:
84 Old McHenry Road
Wheeling, IL 482 2,152 31
351 N. Rohlwing Road
Itasca, IL 81 464 0
4-48 Barrington Road
Streamwood, IL 573 2,297 (62) 82
RESIDENTIAL PROPERTIES:
440 North Lake Street
Miller, IN 22,220 710 3,086 102 17,698 3,980
OFFICES OF THE MANAGEMENT
COMPANY
CHICAGO, IL 4,228
--------- --------- --------- ------- -------- -------
Totals $ 108,795 $ 122,940 $ 449,184 $ 1,071 $ 83,385 $ 5,695
========= ========= ========= ======= ======== =======
<CAPTION>
LIFE UPON
WHICH
GROSS AMOUNTS AT WHICH DEPRECIATION
CARRIED AT CLOSE OF PERIOD IN LATEST
-------------------------- INCOME
BUILDINGS AND ACCUMULATED DATE OF DATE STATEMENT IS
DESCRIPTION LAND IMPROVEMENTS TOTAL(c)(d) DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED
- --------------- -------- --------------- --------------- -------------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
RETAIL PROPERTIES:
84 Old McHenry Road
Wheeling, IL 482 2,183 2,665 (281) 1989-1990 1993 (f)
351 N. Rohlwing Road
Itasca, IL 81 464 545 (60) 1989 1983 (f)
4-48 Barrington Road
Streamwood, IL 511 2,379 2,890 (225) 1989 1994 (f)
RESIDENTIAL PROPERTIES:
440 North Lake Street
Miller, IN 812 24,764 25,576 (5,099) 1971/1990-1993 1990 (f)
OFFICES OF THE MANAGEMENT
COMPANY
CHICAGO, IL 4,228 4,228 (1,742) Var. (f)
---------- ---------- ---------- ----------
Totals $ 124,011 $ 538,264 $ 662,275 $ (44,352)
========== ========== ========== ==========
</TABLE>
F-27
<PAGE>
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
SCHEDULE III (CONTINUED)
(DOLLARS IN THOUSANDS)
Notes to Schedule III:
(a) Initial cost for each respective property is the total acquisition
costs associated with its purchase.
(b) Carrying costs consist of capitalized construction period interest,
taxes and insurance.
(c) At December 31, 1997, the aggregate cost of land and buildings and
equipment for Federal income tax purposes was approximately $681
million.
(d) Reconciliation of real estate and accumulated depreciation:
RECONCILIATION OF REAL ESTATE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance at the beginning of year $429,034 $317,460 $248,281
Additions 246,463 135,342 71,315
Dispositions (13,222) (23,768) (2,136)
-------- -------- --------
Balance at close of year $662,275 $429,034 $317,460
======== ======== ========
</TABLE>
RECONCILIATION OF ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $30,206 $21,576 $13,455
Depreciation and amortization 14,494 10,199 8,161
Dispositions (348) (1,569) (40)
------- ------- -------
Balance at close of year $44,352 $30,206 $21,576
======= ======= =======
</TABLE>
(e) See description of encumbrances in Note 6 to Consolidated Financial
Statements.
(f) Depreciation is computed based upon the following estimated lives:
<TABLE>
<S> <C>
Buildings, improvements and carrying costs 31.5 to 40 years
Land improvements 15 years
Furniture, fixtures and equipment 4 to 15 years
</TABLE>
(g) These 18 properties collateralize a $30,000 mortgage loan payable.
(h) These 20 properties collateralize $50,000 of mortgage bonds payable.
F-28
<PAGE>
EXHIBIT 12-1
CENTERPOINT PROPERTIES TRUST
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Available earnings:
Net income (loss) $27,260 $14,941 $ 8,212 $ 2,359 ($4,930)
Add interest expense (1) 10,871 10,992 12,985 12,157 4,111
------- ------- ------- ------- -------
Available earnings (loss) (2) $38,131 $25,933 $21,197 $14,516 ($ 819)
======= ======= ======= ======= =======
Fixed Charges:
Interest expense $10,871 $10,992 $12,985 $12,157 $ 4,111
Capitalized interest 893 142 20 63 470
------- ------- ------- ------- -------
Total Fixed Charges $11,764 $11,134 $13,005 $12,220 $ 4,581
======= ======= ======= ======= =======
Ratio of earnings to Fixed Charges (3) 3.24 2.33 1.63 1.19
======= ======= ======= =======
</TABLE>
- ------------------------------------
NOTES:
(1) Interest expense includes amortization of debt expense.
(2) Interest portion of rental expense is not calculated because annual
rental expense for the Company is not significant.
(3) The ratio of earnings to fixed charges for the year ended December 31,
1993 was less than one to one. The approximate dollar amount necessary
to cover the deficiency in that period was $5,400.
<PAGE>
EXHIBIT 12-2
CENTERPOINT PROPERTIES TRUST
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED DIVIDENDS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Available earnings:
Net income (loss) $27,260 $14,941 $ 8,212 $ 2,359 ($4,930)
Add interest expense (1) 10,871 10,992 12,985 12,157 4,111
------- ------- ------- ------- -------
Available earnings (loss) (2) $38,131 $25,933 $21,197 $14,516 ($ 819)
======= ======= ======= ======= =======
Fixed Charges:
Interest expense $10,871 $10,992 $12,985 $12,157 $ 4,111
Capitalized interest 893 142 20 63 470
Preferred dividends 901 947 1,002
------- ------- ------- ------- -------
Total Fixed Charges $12,665 $12,081 $14,007 $12,220 $ 4,581
======= ======= ======= ======= =======
Ratio of earnings to Fixed Charges (3) 3.01 2.15 1.51 1.19
======= ======= ======= =======
</TABLE>
- ------------------------------------
NOTES:
(1) Interest expense includes amortization of debt expense.
(2) Interest portion of rental expense is not calculated because annual
rental expense for the Company is not significant.
(3) The ratio of earnings to fixed charges for the year ended December 31,
1993 was less than one to one. The approximate dollar amount necessary
to cover the deficiency in that period was $5,400.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
registration statements of CenterPoint Properties Trust on Form S-3 (File
Nos. 33-95792, 33-99858, 333-18235 and 333-49359), Form S-8/S-3 (File Nos.
333-05087 and 333-34687) and Form S-8 (File No. 333-05141 and 333-62887) of
our report dated February 10, 1998, except for Note 2 for which the date is
November 15, 1999, relating to the financial statements, which appears in the
Annual Report to Shareholders, which is incorporated in this Annual Report on
Form 10-K/A. We also consent to the incorporation by reference of our report
dated November 15, 1999 relating to the financial statement schedules which
appears in this Form 10-K/A.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
December 27, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 38,161
<SECURITIES> 0
<RECEIVABLES> 12,416
<ALLOWANCES> 272
<INVENTORY> 0
<CURRENT-ASSETS> 30,555
<PP&E> 662,275
<DEPRECIATION> 44,352
<TOTAL-ASSETS> 699,055
<CURRENT-LIABILITIES> 40,564
<BONDS> 270,735
0
3
<COMMON> 19
<OTHER-SE> 387,734
<TOTAL-LIABILITY-AND-EQUITY> 699,055
<SALES> 0
<TOTAL-REVENUES> 85,588
<CGS> 0
<TOTAL-COSTS> 58,436
<OTHER-EXPENSES> (108)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,871
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,359
<EPS-BASIC> 1.41
<EPS-DILUTED> 1.39
</TABLE>
<PAGE>
1808 SWIFT DRIVE
OAK BROOK, ILLINOIS 60523-1501
[CENTERPOINT LOGO] PHONE: 630.586.8000
FAX: 630.586.8010
WWW.CENTERPOINT-PROP.COM
NEWS RELEASE
CONTACT AT THE COMPANY:
---------------------------------------------------------------------
John S. Gates, Jr. Rhonda Mork
CEO & President Director of External Affairs
630-586-8000 630-586-8101
[email protected]
FOR IMMEDIATE RELEASE
SEPTEMBER 28, 1999
CENTERPOINT REPORTS RESTATEMENT OF
1997, 1998 AND 1999 FINANCIAL RESULTS;
CUMULATIVE NET INCOME INCREASES BY $2.1 MILLION
CUMULATIVE FFO INCREASES $0.03 PER SHARE FOR THE SAME PERIODS
OAK BROOK, SEPTEMBER 28, 1999. CenterPoint Properties Trust (NYSE: CNT)
announced today that the Company is restating previously audited results for the
years 1997 and 1998, as well as the unaudited first two quarters of 1999. The
Company's independent accountants, PricewaterhouseCoopers ("PwC"), are in
concurrence with these reported changes. The restatement, which concerns gain
recognition related to completed property sales, results in a cumulative
increase in net income of $2.1 million over previously reported net income.
Cumulative Funds From Operations ("FFO") increases $0.7 million, equal to $0.03
per share.
CenterPoint President and CEO, John Gates, emphasized that the restatement will
not affect the Company's business or strategy. "This is a technical reporting
change. It has no impact whatsoever on the economics of the sales involved and
will have no impact on anticipated future selling. CenterPoint is committed to
our strategy of recycling capital through sales and the Company's business
prospects remain exceptionally strong."
The restatement reflects the recognition of gains, not previously reported,
related to certain completed sales structured as tax-deferred exchanges under
Section 1031 of the Internal Revenue Code, where gains were not reported for tax
purposes. Secondly, the restatement reflects the retiming of gain recognition
from other completed property sales related to the Company's development
activity. While the timing of reported gains from these latter transactions has
been shifted, the aggregate gain remains unchanged and no cash or tax effect has
resulted.
As part of the restatement, $3.5 million in net income originally reported in
1998 will be shifted into the third quarter of 1999. Other than this shift,
management expects third quarter 1999 results to be in line with current
expectations.
Stated Gates, "In the final analysis, when CenterPoint reports its third quarter
results, cumulative retained earnings will be $2.1 million higher than
heretofore anticipated."
<PAGE>
BACKGROUND
On August 9, 1999, CenterPoint announced that, based on a recommendation by its
independent accountants, PricewaterhouseCoopers, it was shifting $1.5 million of
net income from the second quarter of 1999 to the third quarter of 1999.
Although the shift had no effect on the full year results, the August 9th
release specified that the independent accountants would review prior, similar
transactions. Based on the results of the review, which is now complete, the
Company is restating the affected periods from 1997 to 1999.
Revised quarterly statements follow (6 pages).
CENTERPOINT PROPERTIES TRUST
Statements in this release, which are not historical, may be deemed
forward-looking statements under federal securities laws. There can be not
assurance that future results will be achieved and actual results could defer
materially from forecasts and estimates. Factors that could cause actual results
to differ materially are general business and economic conditions, completion of
pending acquisitions, competitive market conditions, weather, pricing of debt
and equity capital markets and other risks inherent in the real estate business.
CenterPoint is a publicly traded real estate investment trust (REIT). It is the
largest industrial property company in the 1.25 billion square foot Chicago
regional market, with a current portfolio of approximately 30 million square
feet and an additional 605 acres of land upon which 12.2 million square feet
could be developed. The Company is focused on providing unsurpassed tenant
satisfaction and adding value to its shareholders through customer driven
management, investment, development and redevelopment of warehouse/industrial
facilities. The first major REIT to focus on the industrial property sector,
CenterPoint has a current total market capitalization of approximately $1.3
billion.
###
<PAGE>
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
MARCH 31, 1997
(UNAUDITED)
------------------------------------------
REPORTED ADJUSTMENT RESTATED
-------- ---------- --------
<S> <C> <C> <C>
ASSETS
Assets:
Investment in real estate:
Land $80,299 $ - $80,299
Buildings 289,867 - 289,867
Building improvements 45,063 - 45,063
Furniture, fixtures, and equipment 10,885 - 10,885
Construction in progress 18,522 4,557 23,079
------------------------------------------
444,636 4,557 449,193
Less accumulated
depreciation and amortization 33,328 - 33,328
------------------------------------------
Net investment in real estate 411,308 4,557 415,865
Cash and cash equivalents 6,585 - 6,585
Restricted cash and cash equivalents 396 - 396
Tenant accounts receivable, net 12,440 - 12,440
Mortgage notes receivable 19,809 (4,557) 15,252
Investment in and advances to affiliate 15,664 - 15,664
Prepaid expenses and other assets 3,404 60 3,464
Deferred expenses, net 4,262 - 4,262
------------------------------------------
$473,868 $ 60 $473,928
==========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable and other debt $111,917 $ - $111,917
Senior unsecured debt - - -
Tax-exempt debt - - -
Line of credit 7,500 - 7,500
Convertible subordinated debentures
payable 12,135 - 12,135
Preferred dividends payable - - -
Accounts payable 3,498 - 3,498
Accrued expenses 18,576 - 18,576
Rents received in advance and
security deposits 4,008 - 4,008
------------------------------------------
157,634 - 157,634
------------------------------------------
Stockholders' equity:
Perferred Stock, $.001 par value - - -
Common stock, $.001 par value 17 - 17
Class B common stock, $.001 par value 2 - 2
Additional paid-in-capital 345,982 - 345,982
Retained earnings(deficit) (29,105) 60 (29,045)
Unearned compensation - restricted stock (662) - (662)
------------------------------------------
Total stockholders' equity 316,234 60 316,294
------------------------------------------
$473,868 $ 60 $473,928
==========================================
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,1997 SEPTEMBER 30, 1997
(UNAUDITED) (UNAUDITED)
---------------------------------------------------------------------------
REPORTED ADJUSTMENT RESTATED REPORTED ADJUSTMENT RESTATED
-------- ---------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Assets:
Investment in real estate:
Land $86,407 $ 997 $87,404 $ 90,411 $ 997 $ 91,408
Buildings 321,846 3,989 325,835 357,868 3,989 361,857
Building improvements 50,029 - 50,029 60,119 - 60,119
Furniture, fixtures, and equipment 11,284 - 11,284 12,983 - 12,983
Construction in progress 19,812 - 19,812 17,332 4,928 22,260
------------------------------------ ---------------------------------
489,378 4,986 494,364 538,713 9,914 548,627
Less accumulated
depreciation and amortization 36,404 - 36,404 40,406 - 40,406
------------------------------------ ---------------------------------
Net investment in real estate 452,974 4,986 457,960 498,307 9,914 508,221
Cash and cash equivalents 2,006 - 2,006 13,866 - 13,866
Restricted cash and cash equivalents 866 - 866 40,279 - 40,279
Tenant accounts receivable, net 13,153 - 13,153 14,071 - 14,071
Mortgage notes receivable 20,225 (4,986) 15,239 19,584 (9,914) 9,670
Investment in and advances to affiliate 15,120 (36) 15,084 32,957 (36) 32,921
Prepaid expenses and other assets 3,412 27 3,439 4,647 (281) 4,366
Deferred expenses, net 4,481 - 4,481 5,611 - 5,611
------------------------------------ ---------------------------------
$512,237 $ (9) $512,228 $629,322 $ (317) $629,005
==================================== =================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable and other debt $111,892 $ - $111,892 $166,865 $ - $166,865
Senior unsecured debt - - - - - -
Tax-exempt debt 42,550 - 42,550 103,250 - 103,250
Line of credit - - - 11,790 - 11,790
Convertible subordinated debentures
payable 12,055 - 12,055 83 - 83
Preferred dividends payable - - - - - -
Accounts payable 5,163 - 5,163 11,315 - 11,315
Accrued expenses 21,722 150 21,872 17,171 150 17,321
Rents received in advance and
security deposits 3,483 - 3,483 4,196 - 4,196
------------------------------------ ---------------------------------
196,865 150 197,015 314,670 150 314,820
------------------------------------ ---------------------------------
Stockholders' equity:
Perferred Stock, $.001 par value - - - - - -
Common stock, $.001 par value 17 - 17 17 - 17
Class B common stock, $.001 par value 2 - 2 2 - 2
Additional paid-in-capital 345,850 - 345,850 346,377 - 346,377
Retained earnings(deficit) (29,964) (159) (30,123) (31,241) (467) (31,708)
Unearned compensation - restricted stock (533) - (533) (503) - (503)
------------------------------------ ---------------------------------
Total stockholders' equity 315,372 (159) 315,213 314,652 (467) 314,185
------------------------------------ ---------------------------------
$512,237 $ (9) $512,228 $629,322 $ (317) $629,005
==================================== =================================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------
REPORTED ADJUSTMENT RESTATED
-------- ---------- --------
<S> <C> <C> <C>
ASSETS
Assets:
Investment in real estate:
Land $123,014 $ 997 $124,011
Buildings 414,314 3,989 418,303
Building improvements 64,372 - 64,372
Furniture, fixtures, and equipment 13,912 - 13,912
Construction in progress 26,034 15,643 41,677
-----------------------------------------
641,646 20,629 662,275
Less accumulated
depreciation and amortization 44,352 - 44,352
-----------------------------------------
Net investment in real estate 597,294 20,629 617,923
Cash and cash equivalents 1,652 - 1,652
Restricted cash and cash equivalents 36,509 - 36,509
Tenant accounts receivable, net 12,416 - 12,416
Mortgage notes receivable 30,297 (20,629) 9,668
Investment in and advances to affiliate 11,143 (36) 11,107
Prepaid expenses and other assets 3,303 (184) 3,119
Deferred expenses, net 6,661 - 6,661
-----------------------------------------
$699,275 $ (220) $699,055
=========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable and other debt $85,755 $ - $85,755
Senior unsecured debt - - -
Tax-exempt debt 75,540 - 75,540
Line of credit 97,700 - 97,700
Convertible subordinated debentures
payable 11,740 - 11,740
Preferred dividends payable 901 - 901
Accounts payable 10,311 - 10,311
Accrued expenses 24,443 150 24,593
Rents received in advance and
security deposits 4,759 - 4,759
-----------------------------------------
311,149 150 311,299
-----------------------------------------
Stockholders' equity:
Perferred Stock, $.001 par value 3 - 3
Common stock, $.001 par value 17 - 17
Class B common stock, $.001 par value 2 - 2
Additional paid-in-capital 420,743 - 420,743
Retained earnings(deficit) (32,142) (370) (32,512)
Unearned compensation - restricted stoc (497) - (497)
-----------------------------------------
Total stockholders' equity 388,126 (370) 387,756
-----------------------------------------
$699,275 $ (220) $699,055
=========================================
</TABLE>
<PAGE>
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED
MARCH 31, 1997 (UNAUDITED) JUNE 30, 1997 (UNAUDITED)
------------------------------------- ------------------------------------
REPORTED ADJUSTMENT RESTATED REPORTED ADJUSTMENT RESTATED
-------- ---------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Operating and investment revenue:
Minimum rents $ 12,771 $ - $ 12,771 $ 13,540 $ 66 $ 13,606
Straight-line rents 654 - 654 633 - 633
Expense reimbursements 4,895 - 4,895 4,480 - 4,480
Mortgage interest income 655 60 715 524 1 525
------------------------------------- ------------------------------------
Total operating and investment revenue 18,975 60 19,035 19,177 67 19,244
------------------------------------- ------------------------------------
Other revenue:
Fee income 802 - 802 813 (250) 563
Equity in net income of affiliate (48) - (48) 140 (36) 104
------------------------------------- ------------------------------------
Total other revenue 754 - 754 953 (286) 667
------------------------------------- ------------------------------------
Total revenue 19,729 60 19,789 20,130 (219) 19,911
------------------------------------- ------------------------------------
Expenses:
Real estate taxes 4,270 - 4,270 4,097 - 4,097
Property operating and leasing 3,023 - 3,023 2,424 - 2,424
General and administrative 703 - 703 739 - 739
Depreciation and amortization 3,210 - 3,210 3,379 - 3,379
Interest expense:
Interest incurred, net 2,626 - 2,626 2,246 - 2,246
Amortization of deferred financing costs 192 - 192 203 - 203
------------------------------------- ------------------------------------
Total expenses 14,024 - 14,024 13,088 - 13,088
------------------------------------- ------------------------------------
Operating income 5,705 60 5,765 7,042 (219) 6,823
Other income (expense)
Gain or (loss) on sale of real estate - - - - - -
Other income (34) - (34) 101 - 101
------------------------------------- ------------------------------------
Income before extraordinary item 5,671 60 5,731 7,143 (219) 6,924
Extraordinary item, early extinguishment of debt - - - - - -
------------------------------------- ------------------------------------
Net income 5,671 60 5,731 7,143 (219) 6,924
Preferred Dividends - - - - - -
------------------------------------- ------------------------------------
Net income available to common shareholders $ 5,671 $ 60 $ 5,731 $ 7,143 $ (219) $ 6,924
===================================== ====================================
Net income available to common shareholders per share
Basic $ 0.33 $ 0.00 $ 0.33 $ 0.38 $ (0.01) $ 0.36
Diluted $ 0.32 $ 0.00 $ 0.33 $ 0.37 $ (0.01) $ 0.36
Funds from operations
Add back:
Depreciation and amortization 3,210 - 3,210 3,379 - 3,379
Amortization of deferred financing - - - - - -
costs on debentures 13 - 13 12 - 12
Convertible subordinated debenture interest 266 - 266 248 - 248
------------------------------------- ------------------------------------
Funds from operations $ 9,160 $ 60 $ 9,220 $ 10,782 $ (219) $ 10,563
------------------------------------- ------------------------------------
Funds from operations per share $ 0.51 $ 0.00 $ 0.51 $ 0.55 $ (0.01) $ 0.54
===================================== ====================================
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1997 (UNAUDITED) DECEMBER 31, 1997 (UNAUDITED)
----------------------------------- -----------------------------------
REPORTED ADJUSTMENT RESTATED REPORTED ADJUSTMENT RESTATED
-------- ---------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Operating and investment revenue:
Minimum rents $ 14,544 $ 137 $ 14,681 $ 16,663 $ 156 $ 16,819
Straight-line rents 566 - 566 878 - 878
Expense reimbursements 4,283 - 4,283 4,570 - 4,570
Mortgage interest income 447 (50) 397 520 (59) 461
------------------------------------ ------------------------------------
Total operating and investment revenue 19,840 87 19,927 22,631 97 22,728
------------------------------------ ------------------------------------
Other revenue:
Fee income 455 (395) 60 1,090 - 1,090
Equity in net income of affiliate 1,264 - 1,264 818 - 818
------------------------------------ ------------------------------------
Total other revenue 1,719 (395) 1,324 1,908 - 1,908
------------------------------------ ------------------------------------
Total revenue 21,559 (308) 21,251 24,539 97 24,636
------------------------------------ ------------------------------------
Expenses:
Real estate taxes 4,187 - 4,187 4,537 - 4,537
Property operating and leasing 2,847 - 2,847 3,798 - 3,798
General and administrative 783 - 783 880 - 880
Depreciation and amortization 4,179 - 4,179 4,511 - 4,511
Interest expense:
Interest incurred, net 2,687 - 2,687 2,512 - 2,512
Amortization of deferred financing costs 193 - 193 211 - 211
------------------------------------ ------------------------------------
Total expenses 14,876 - 14,876 16,449 - 16,449
------------------------------------ ------------------------------------
Operating income 6,683 (308) 6,375 8,090 97 8,187
Other income (expense)
Gain or (loss) on sale of real estate - - - - - -
Other income 59 - 59 (17) - (17)
------------------------------------ ------------------------------------
Income before extraordinary item 6,742 (308) 6,434 8,073 97 8,170
Extraordinary item, early extinguishment of debt - - - - - -
------------------------------------ ------------------------------------
Net income 6,742 (308) 6,434 8,073 97 8,170
Preferred Dividends - - - (901) - (901)
------------------------------------ ------------------------------------
Net income available to common shareholders $ 6,742 $ (308) $ 6,434 $ 7,172 $ 97 $ 7,269
==================================== ====================================
Net income available to common shareholders per share
Basic $ 0.35 $ (0.02) $ 0.34 $ 0.38 $ 0.01 $ 0.38
Diluted $ 0.35 $ (0.02) $ 0.33 $ 0.37 $ 0.01 $ 0.38
Funds from operations
Add back:
Depreciation and amortization 4,179 - 4,179 4,511 - 4,511
Amortization of deferred financing - - - - - -
costs on debentures 12 - 12 12 - 12
Convertible subordinated debenture interest 243 - 243 242 - 242
------------------------------------ ------------------------------------
Funds from operations $ 11,176 $ (308) $ 10,868 $ 11,937 $ 97 $ 12,034
------------------------------------ ------------------------------------
Funds from operations per share $ 0.57 $ (0.02) $ 0.55 $ 0.60 $ 0.00 $ 0.61
==================================== ====================================
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1997
------------------------------------
REPORTED ADJUSTMENT RESTATED
-------- ---------- --------
<S> <C> <C> <C>
Revenue:
Operating and investment revenue:
Minimum rents $ 57,519 $ 359 $ 57,878
Straight-line rents 2,732 - 2,732
Expense reimbursements 18,228 - 18,228
Mortgage interest income 2,146 (48) 2,098
-------------------------------------
Total operating and investment revenue 80,625 311 80,936
-------------------------------------
Other revenue:
Fee income 3,159 (645) 2,514
Equity in net income of affiliate 2,174 (36) 2,138
-------------------------------------
Total other revenue 5,333 (681) 4,652
-------------------------------------
Total revenue 85,958 (370) 85,588
-------------------------------------
Expenses:
Real estate taxes 17,091 - 17,091
Property operating and leasing 12,091 - 12,091
General and administrative 3,105 - 3,105
Depreciation and amortization 15,278 - 15,278
Interest expense:
Interest incurred, net 10,071 - 10,071
Amortization of deferred financing costs 800 - 800
-------------------------------------
Total expenses 58,436 - 58,436
-------------------------------------
Operating income 27,522 (370) 27,152
Other income (expense)
Gain or (loss) on sale of real estate - - -
Other income 108 - 108
-------------------------------------
Income before extraordinary item 27,630 (370) 27,260
Extraordinary item, early extinguishment of debt - - -
-------------------------------------
Net income 27,630 (370) 27,260
Preferred Dividends (901) - (901)
-------------------------------------
Net income available to common shareholders $ 26,729 $ (370) $26,359
=====================================
Net income available to common shareholders per share
Basic $ 1.43 $ (0.02) $ 1.41
Diluted $ 1.41 $ (0.02) $ 1.39
Funds from operations
Add back:
Depreciation and amortization 15,278 - 15,278
Amortization of deferred financing - - -
costs on debentures 48 - 48
Convertible subordinated debenture interest 999 - 999
-------------------------------------
Funds from operations $ 43,054 $ (370) $42,684
-------------------------------------
Funds from operations per share $ 2.23 $ (0.02) $ 2.21
=====================================
</TABLE>
<PAGE>
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
MARCH 31, 1998 JUNE 30, 1998
(UNAUDITED) (UNAUDITED)
--------------------------------- ---------------------------------
REPORTED ADJUSTMENT RESTATED REPORTED ADJUSTMENT RESTATED
-------- ---------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Assets:
Investment in real estate:
Land $120,764 $ 278 $121,042 $126,280 $ 4,007 $130,287
Buildings 412,495 1,113 413,608 435,096 16,029 451,125
Building improvements 66,507 - 66,507 70,542 - 70,542
Furniture, fixtures, and equipment 14,854 - 14,854 16,561 - 16,561
Construction in progress 18,849 17,720 36,569 20,453 - 20,453
---------------------------------- ---------------------------------
633,469 19,111 652,580 668,932 20,036 688,968
Less accumulated depreciation and amortization 46,837 - 46,837 51,704 - 51,704
---------------------------------- ---------------------------------
Net investment in real estate 586,632 19,111 605,743 617,228 20,036 637,264
Cash and cash equivalents 637 - 637 2,039 - 2,039
Restricted cash and cash equivalents 57,765 - 57,765 33,828 - 33,828
Tenant accounts receivable, net 15,027 - 15,027 17,492 - 17,492
Mortgage notes receivable 27,887 (17,720) 10,167 28,802 (18,634) 10,168
Investment in and advances to affiliate 11,513 (266) 11,247 17,885 (1,314) 16,571
Prepaid expenses and other assets 4,789 (635) 4,154 7,883 (989) 6,894
Deferred expenses, net 6,878 - 6,878 8,000 - 8,000
---------------------------------- ---------------------------------
$711,128 $ 490 $711,618 $733,157 $ (901) $732,256
================================== =================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable and other debt $85,755 $ - $85,755 $185,755 $ - $185,755
Senior unsecured debt - - - - - -
Tax-exempt debt 75,540 - 75,540 75,540 - 75,540
Line of credit 103,500 - 103,500 12,500 - 12,500
Convertible subordinated debentures payable 11,163 - 11,163 9,613 - 9,613
Preferred dividends payable 1,060 - 1,060 1,060 - 1,060
Accounts payable 5,501 - 5,501 3,714 - 3,714
Accrued expenses 23,407 - 23,407 28,219 - 28,219
Rents received in advance and security deposits 5,904 - 5,904 4,535 - 4,535
---------------------------------- ---------------------------------
311,830 - 311,830 320,936 - 320,936
---------------------------------- ---------------------------------
Stockholders' equity:
Perferred Stock, $.001 par value 3 - 3 3 - 3
Common stock, $.001 par value 17 - 17 18 - 18
Class B common stock, $.001 par value 2 - 2 2 - 2
Additional paid-in-capital 433,171 - 433,171 447,352 - 447,352
Retained earnings(deficit) (33,447) 490 (32,957) (34,761) (901) (35,662)
Unearned compensation - restricted stock (448) - (448) (393) - (393)
---------------------------------- ---------------------------------
Total stockholders' equity 399,298 490 399,788 412,221 (901) 411,320
---------------------------------- ---------------------------------
$711,128 $ 490 $711,618 $733,157 $ (901) $732,256
================================== =================================
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
(UNAUDITED) DECEMBER 31, 1998
--------------------------------- ---------------------------------
REPORTED ADJUSTMENT RESTATED REPORTED ADJUSTMENT RESTATED
-------- ---------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Assets:
Investment in real estate:
Land $138,298 $ 4,028 $142,326 $128,045 $ 4,225 $132,270
Buildings 488,704 16,111 504,815 487,996 16,899 504,895
Building improvements 80,082 - 80,082 94,474 - 94,474
Furniture, fixtures, and equipment 17,564 - 17,564 18,817 - 18,817
Construction in progress 13,472 - 13,472 18,401 - 18,401
--------------------------------- ---------------------------------
738,120 20,139 758,259 747,733 21,124 768,857
Less accumulated depreciation and amortization 56,728 - 56,728 62,257 - 62,257
--------------------------------- ---------------------------------
Net investment in real estate 681,392 20,139 701,531 685,476 21,124 706,600
Cash and cash equivalents 4,696 - 4,696 475 - 475
Restricted cash and cash equivalents 31,545 - 31,545 33,056 - 33,056
Tenant accounts receivable, net 19,062 - 19,062 18,067 - 18,067
Mortgage notes receivable 19,655 (18,737) 918 20,353 (19,452) 901
Investment in and advances to affiliate 21,534 (2,702) 18,832 48,564 (4,768) 43,796
Prepaid expenses and other assets 6,025 (1,063) 4,962 5,264 (1,234) 4,030
Deferred expenses, net 8,607 - 8,607 10,681 - 10,681
--------------------------------- ---------------------------------
$792,516 $ (2,363) $790,153 $821,936 $ (4,330) $817,606
================================= =================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable and other debt $106,225 $ - $106,225 $103,520 $ - 103,520
Senior unsecured debt 100,000 - 100,000 100,000 - 100,000
Tax-exempt debt 75,540 - 75,540 75,540 - 75,540
Line of credit 44,000 - 44,000 77,600 - 77,600
Convertible subordinated debentures payable 8,583 - 8,583 8,058 - 8,058
Preferred dividends payable 1,060 - 1,060 1,060 - 1,060
Accounts payable 4,633 - 4,633 7,986 - 7,986
Accrued expenses 34,420 - 34,420 30,810 250 31,060
Rents received in advance and security deposits 5,372 - 5,372 5,323 - 5,323
--------------------------------- ---------------------------------
379,833 - 379,833 409,897 250 410,147
--------------------------------- ---------------------------------
Stockholders' equity:
Perferred Stock, $.001 par value 3 - 3 3 - 3
Common stock, $.001 par value 18 - 18 19 - 19
Class B common stock, $.001 par value 2 - 2 1 - 1
Additional paid-in-capital 448,606 - 448,606 449,229 - 449,229
Retained earnings(deficit) (35,602) (2,363) (37,965) (36,917) (4,580) (41,497)
Unearned compensation - restricted stock (344) - (344) (296) - (296)
--------------------------------- ---------------------------------
Total stockholders' equity 412,683 (2,363) 410,320 412,039 (4,580) 407,459
--------------------------------- ---------------------------------
$792,516 $ (2,363) $790,153 $821,936 $ (4,330) $817,606
================================= =================================
</TABLE>
<PAGE>
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED
MARCH 31, 1998 (UNAUDITED) JUNE 30, 1998 (UNAUDITED)
-------------------------------- ---------------------------------
REPORTED ADJUSTMENT RESTATED REPORTED ADJUSTMENT RESTATED
-------- ---------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Operating and investment revenue:
Minimum rents $ 17,747 $ 56 $ 17,803 $ 18,050 $ 530 $ 18,580
Straight-line rents 1,364 - 1,364 1,157 - 1,157
Expense reimbursements 5,458 - 5,458 6,115 - 6,115
Mortgage interest income 656 (101) 555 679 (434) 245
-------------------------------- ---------------------------------
Total operating and investment revenue 25,225 (45) 25,180 26,001 96 26,097
-------------------------------- ---------------------------------
Other revenue:
Fee income 1,967 (256) 1,711 1,707 (1,110) 597
Equity in net income of affiliate 125 (230) (105) 275 (388) (113)
-------------------------------- ---------------------------------
Total other revenue 2,092 (486) 1,606 1,982 (1,498) 484
-------------------------------- ---------------------------------
Total revenue 27,317 (531) 26,786 27,983 (1,402) 26,581
-------------------------------- ---------------------------------
Expenses:
Real estate taxes 5,948 - 5,948 6,001 - 6,001
Property operating and leasing 3,542 - 3,542 3,210 - 3,210
General and administrative 990 - 990 1,001 - 1,001
Depreciation and amortization 4,696 - 4,696 5,186 - 5,186
Interest expense:
Interest incurred, net 2,928 - 2,928 3,056 - 3,056
Amortization of deferred financing costs 486 - 486 439 - 439
-------------------------------- ---------------------------------
Total expenses 18,590 - 18,590 18,893 - 18,893
-------------------------------- ---------------------------------
Operating income 8,727 (531) 8,196 9,090 (1,402) 7,688
Other income (expense)
Gain or (loss) on sale of real estate - 1,391 1,391 - 11 11
Other income (16) - (16) (21) - (21)
-------------------------------- ---------------------------------
Income before extraordinary item 8,711 860 9,571 9,069 (1,391) 7,678
Extraordinary item, early extinguishment of debt - - - - - -
-------------------------------- ---------------------------------
Net income 8,711 860 9,571 9,069 (1,391) 7,678
Preferred Dividends (1,590) - (1,590) (1,590) - (1,590)
-------------------------------- ---------------------------------
Net income available to common shareholders $ 7,121 $ 860 $ 7,981 $ 7,479 $ (1,391) $ 6,088
================================ =================================
Net income available to common shareholders per share
Basic $ 0.37 $ 0.04 $ 0.42 $ 0.37 $ (0.07) $ 0.30
Diluted $ 0.37 $ 0.04 $ 0.41 $ 0.37 $ (0.07) $ 0.30
FUNDS FROM OPERATIONS
Add back:
Depreciation and amortization 4,696 - 4,696 5,186 - 5,186
Amortization of deferred financing
costs on debentures 11 - 11 10 - 10
Convertible subordinated debenture interest 233 - 233 205 - 205
Depreciation on sold properties - (1,064) (1,064) - - -
-------------------------------- ---------------------------------
Funds from operations $ 12,061 $ (204) $ 11,857 $ 12,880 $ (1,391) $ 11,489
-------------------------------- ---------------------------------
Funds from operations per share $ 0.61 $ (0.01) $ 0.60 $ 0.63 $ (0.07) $ 0.56
================================ =================================
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1998 (UNAUDITED) DECEMBER 31, 1998 (UNAUDITED)
-------------------------------- --------------------------------
REPORTED ADJUSTMENT RESTATED REPORTED ADJUSTMENT RESTATED
-------- ---------- --------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Operating and investment revenue:
Minimum rents $ 19,479 $ 530 $ 20,009 $20,487 $ 530 $ 21,017
Straight-line rents 742 - 742 767 - 767
Expense reimbursements 5,737 - 5,737 4,614 - 4,614
Mortgage interest income 600 (466) 134 637 (511) 126
-------------------------------- --------------------------------
Total operating and investment revenue 26,558 64 26,622 26,505 19 26,524
-------------------------------- --------------------------------
Other revenue:
Fee income 1,962 (1,118) 844 2,946 (2,440) 506
Equity in net income of affiliate 46 (408) (362) (210) (66) (276)
-------------------------------- --------------------------------
Total other revenue 2,008 (1,526) 482 2,736 (2,506) 230
-------------------------------- --------------------------------
Total revenue 28,566 (1,462) 27,104 29,241 (2,487) 26,754
-------------------------------- --------------------------------
Expenses:
Real estate taxes 5,786 - 5,786 4,484 - 4,484
Property operating and leasing 2,674 - 2,674 4,056 - 4,056
General and administrative 969 - 969 1,080 - 1,080
Depreciation and amortization 5,392 - 5,392 6,145 - 6,145
Interest expense:
Interest incurred, net 3,759 - 3,759 3,917 - 3,917
Amortization of deferred financing costs 409 - 409 482 - 482
-------------------------------- --------------------------------
Total expenses 18,989 - 18,989 20,164 - 20,164
-------------------------------- --------------------------------
Operating income 9,577 (1,462) 8,115 9,077 (2,487) 6,590
Other income (expense)
Gain or (loss) on sale of real estate - - - - 270 270
Other income (7) - (7) 30 - 30
-------------------------------- --------------------------------
Income before extraordinary item 9,570 (1,462) 8,108 9,107 (2,217) 6,890
Extraordinary item, early extinguishment of debt - - - - - -
-------------------------------- --------------------------------
Net income 9,570 (1,462) 8,108 9,107 (2,217) 6,890
Preferred Dividends (1,590) - (1,590) (1,590) - (1,590)
-------------------------------- --------------------------------
Net income available to common shareholders $ 7,980 $ (1,462) $ 6,518 $ 7,517 $ (2,217) $ 5,300
================================ ================================
Net income available to common shareholders per share
Basic $ 0.40 $ (0.07) $ 0.32 $ 0.37 $ (0.11) $ 0.26
Diluted $ 0.39 $ (0.07) $ 0.32 $ 0.37 $ (0.11) $ 0.26
FUNDS FROM OPERATIONS
Add back:
Depreciation and amortization 5,392 - 5,392 6,145 - 6,145
Amortization of deferred financing
costs on debentures 9 - 9 8 - 8
Convertible subordinated debenture interest 180 - 180 166 - 166
Depreciation on sold properties - (286) (286) - - -
-------------------------------- --------------------------------
Funds from operations $ 13,561 $ (1,748) $ 11,813 $13,836 $ (2,217) $ 11,619
-------------------------------- --------------------------------
Funds from operations per share $ 0.66 $ (0.08) $ 0.57 $ 0.67 $ (0.11) $ 0.56
================================ ================================
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1998
----------------------------------
REPORTED ADJUSTMENT RESTATED
-------- ---------- ---------
<S> <C> <C> <C>
Revenue:
Operating and investment revenue:
Minimum rents $75,763 $ 1,646 $ 77,409
Straight-line rents 4,030 - 4,030
Expense reimbursements 21,924 - 21,924
Mortgage interest income 2,573 (1,512) 1,061
----------------------------------
Total operating and investment revenue 104,290 134 104,424
----------------------------------
Other revenue:
Fee income 8,581 (4,924) 3,657
Equity in net income of affiliate 237 (1,092) (855)
----------------------------------
Total other revenue 8,818 (6,016) 2,802
----------------------------------
Total revenue 113,108 (5,882) 107,226
----------------------------------
Expenses:
Real estate taxes 22,218 - 22,218
Property operating and leasing 13,482 - 13,482
General and administrative 4,041 - 4,041
Depreciation and amortization 21,418 - 21,418
Interest expense:
Interest incurred, net 13,659 - 13,659
Amortization of deferred financing costs 1,817 - 1,817
----------------------------------
Total expenses 76,635 - 76,635
----------------------------------
Operating income 36,473 (5,882) 30,591
Other income (expense)
Gain or (loss) on sale of real estate - 1,672 1,672
Other income (15) - (15)
----------------------------------
Income before extraordinary item 36,458 (4,210) 32,248
Extraordinary item, early extinguishment of debt - - -
----------------------------------
Net income 36,458 (4,210) 32,248
Preferred Dividends (6,360) - (6,360)
----------------------------------
Net income available to common shareholders $30,098 $ (4,210) $25,888
==================================
Net income available to common shareholders per share
Basic $1.51 $ (0.21) $ 1.30
Diluted $1.50 $ (0.21) $ 1.29
FUNDS FROM OPERATIONS
Add back:
Depreciation and amortization 21,418 - 21,418
Amortization of deferred financing
costs on debentures 38 - 38
Convertible subordinated debenture interest 783 - 783
Depreciation on sold properties - (1,350) (1,350)
----------------------------------
Funds from operations 52,337 $ (5,560) 46,777
----------------------------------
Funds from operations per share $2.57 $ (0.27) $ 2.29
==================================
</TABLE>
<PAGE>
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
MARCH 31, 1999
(UNAUDITED)
---------------------------------------------
REPORTED ADJUSTMENT RESTATED
-------- ---------- --------
<S> <C> <C> <C>
ASSETS
Assets:
Investment in real estate:
Land $131,996 $ 4,315 $136,311
Buildings 505,173 17,257 522,430
Building improvements 99,852 - 99,852
Furniture, fixtures, and equipment 18,855 - 18,855
Construction in progress 27,432 - 27,432
------------------------------------------
783,308 21,572 804,880
Less accumulated depreciation and amortization 67,821 - 67,821
------------------------------------------
Net investment in real estate 715,487 21,572 737,059
Cash and cash equivalents 45,577 - 45,577
Restricted cash and cash equivalents 29,324 - 29,324
Tenant accounts receivable, net 19,884 - 19,884
Mortgage notes receivable 20,348 (19,452) 896
Investment in and advances to affiliate 46,927 (3,454) 43,473
Prepaid expenses and other assets 6,902 (436) 6,466
Deferred expenses, net 12,434 - 12,434
------------------------------------------
$896,883 $ (1,770) $895,113
==========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable and other debt $103,256 $ - $103,256
Senior unsecured debt 200,000 - 200,000
Tax-exempt debt 75,540 - 75,540
Line of credit 52,900 - 52,900
Convertible subordinated debentures payable 7,878 - 7,878
Preferred dividends payable 1,060 - 1,060
Accounts payable 6,705 - 6,705
Accrued expenses 32,694 - 32,694
Rents received in advance and security deposits 6,241 - 6,241
------------------------------------------
486,274 - 486,274
------------------------------------------
Stockholders' equity:
Perferred Stock, $.001 par value 3 - 3
Common stock, $.001 par value 20 - 20
Class B common stock, $.001 par value - - -
Additional paid-in-capital 449,612 - 449,612
Retained earnings(deficit) (38,742) (1,770) (40,512)
Unearned compensation - restricted stock (284) - (284)
------------------------------------------
Total stockholders' equity 410,609 (1,770) 408,839
------------------------------------------
$896,883 $ (1,770) $895,113
==========================================
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,1999
(UNAUDITED)
---------------------------------------------
REPORTED ADJUSTMENT RESTATED
-------- ---------- --------
<S> <C> <C> <C>
ASSETS
Assets:
Investment in real estate:
Land $152,880 $ 425 $153,305
Buildings 585,638 1,695 587,333
Building improvements 107,353 - 107,353
Furniture, fixtures, and equipment 19,713 - 19,713
Construction in progress 22,282 - 22,282
------------------------------------------
887,866 2,120 889,986
Less accumulated depreciation and amortization 74,533 - 74,533
------------------------------------------
Net investment in real estate 813,333 2,120 815,453
Cash and cash equivalents 2,659 - 2,659
Restricted cash and cash equivalents 28,200 - 28,200
Tenant accounts receivable, net 21,733 - 21,733
Mortgage notes receivable 890 - 890
Investment in and advances to affiliate 90,364 (3,454) 86,910
Prepaid expenses and other assets 6,893 - 6,893
Deferred expenses, net 14,193 - 14,193
------------------------------------------
$978,265 $ (1,334) $976,931
==========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable and other debt $92,899 $ - $92,899
Senior unsecured debt 200,000 - 200,000
Tax-exempt debt 55,000 - 55,000
Line of credit 111,600 - 111,600
Convertible subordinated debentures payable 7,551 - 7,551
Preferred dividends payable 1,132 - 1,132
Accounts payable 10,507 - 10,507
Accrued expenses 38,898 - 38,898
Rents received in advance and security deposits 5,572 - 5,572
------------------------------------------
523,159 - 523,159
------------------------------------------
Stockholders' equity:
Perferred Stock, $.001 par value 3 - 3
Common stock, $.001 par value 1 - 1
Class B common stock, $.001 par value 20 - 20
Additional paid-in-capital 498,371 - 498,371
Retained earnings(deficit) (43,017) (1,334) (44,351)
Unearned compensation - restricted stock (272) - (272)
------------------------------------------
Total stockholders' equity 455,106 (1,334) 453,772
------------------------------------------
$978,265 $ (1,334) $976,931
==========================================
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
(UNAUDITED)
------------------
ADJUSTMENT
----------
<S> <C>
ASSETS
Assets:
Investment in real estate:
Land $ 425
Buildings 1,695
Building improvements -
Furniture, fixtures, and equipment -
Construction in progress -
--------------------------
2,120
Less accumulated depreciation and amortization -
--------------------------
Net investment in real estate 2,120
Cash and cash equivalents -
Restricted cash and cash equivalents -
Tenant accounts receivable, net -
Mortgage notes receivable -
Investment in and advances to affiliate -
Prepaid expenses and other assets -
Deferred expenses, net -
--------------------------
$ 2,120
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable and other debt $ -
Senior unsecured debt -
Tax-exempt debt -
Line of credit -
Convertible subordinated debentures payable -
Preferred dividends payable -
Accounts payable -
Accrued expenses -
Rents received in advance and security deposits -
--------------------------
-
--------------------------
Stockholders' equity:
Perferred Stock, $.001 par value -
Common stock, $.001 par value -
Class B common stock, $.001 par value -
Additional paid-in-capital -
Retained earnings(deficit) 2,120
Unearned compensation - restricted stock -
--------------------------
Total stockholders' equity 2,120
--------------------------
$ 2,120
==========================
</TABLE>
<PAGE>
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31, 1999 (UNAUDITED)
---------------------------------------
REPORTED ADJUSTMENT RESTATED
-------- ---------- --------
<S> <C> <C> <C>
Revenue:
Operating and investment revenue:
Minimum rents $ 20,813 $ 530 $ 21,343
Straight-line rents 844 - 844
Expense reimbursements 6,568 - 6,568
Mortgage interest income 554 (510) 44
---------------------------------------
Total operating and investment revenue 28,779 20 28,799
---------------------------------------
Other revenue:
Fee income 2,701 1,688 4,389
Equity in net income of affiliate (246) 654 408
---------------------------------------
Total other revenue 2,455 2,342 4,797
---------------------------------------
Total revenue 31,234 2,362 33,596
---------------------------------------
Expenses:
Real estate taxes 6,565 - 6,565
Property operating and leasing 3,581 - 3,581
General and administrative 905 - 905
Depreciation and amortization 5,997 - 5,997
Interest expense:
Interest incurred, net 4,359 - 4,359
Amortization of deferred financing costs 458 - 458
---------------------------------------
Total expenses 21,865 - 21,865
---------------------------------------
Operating income 9,369 2,362 11,731
Other income (expense)
Gain or (loss) on sale of real estate - 448 448
Other income (20) - (20)
---------------------------------------
Income before extraordinary item 9,349 2,810 12,159
Extraordinary item, early extinguishment of debt - - -
---------------------------------------
Net income 9,349 2,810 12,159
Preferred Dividends (1,590) - (1,590)
---------------------------------------
Net income available to common shareholders $ 7,759 $ 2,810 $ 10,569
=======================================
Net income available to common shareholders per share
before extraordinary item
Basic $ 0.49 $ 0.15 $ 0.63
Diluted $ 0.48 $ 0.14 $ 0.62
Net income available to common shareholders per share
Basic $ 0.40 $ 0.15 $ 0.55
Diluted $ 0.40 $ 0.14 $ 0.54
FUNDS FROM OPERATIONS
Add back:
Depreciation and amortization 5,997 - 5,997
Amortization of deferred financing
costs on debentures 8 - 8
Convertible subordinated debenture interest 161 - 161
Depreciation from unconsolidated
subsidiary, net of tax - - -
Extraordinary item, early extinquishment of debt - - -
Convertible preferred dividend - - -
Depreciation on sold properties - (99) (99)
---------------------------------------
Funds from operations $ 13,925 $ 2,711 $ 16,636
---------------------------------------
Funds from operations per share $ 0.68 $ 0.13 $ 0.81
=======================================
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
JUNE 30, 1999 (UNAUDITED)
----------------------------------------
REPORTED ADJUSTMENT RESTATED
-------- ---------- --------
<S> <C> <C> <C>
Revenue:
Operating and investment revenue:
Minimum rents $ 21,598 $ - $ 21,598
Straight-line rents 1,420 - 1,420
Expense reimbursements 6,229 - 6,229
Mortgage interest income 364 - 364
----------------------------------------
Total operating and investment revenue 29,611 - 29,611
----------------------------------------
Other revenue:
Fee income 1,542 436 1,978
Equity in net income of affiliate 465 - 465
----------------------------------------
Total other revenue 2,007 436 2,443
----------------------------------------
Total revenue 31,618 436 32,054
----------------------------------------
Expenses:
Real estate taxes 7,127 - 7,127
Property operating and leasing 3,282 - 3,282
General and administrative 940 - 940
Depreciation and amortization 7,223 - 7,223
Interest expense:
Interest incurred, net 5,018 - 5,018
Amortization of deferred financing costs 505 - 505
----------------------------------------
Total expenses 24,095 - 24,095
----------------------------------------
Operating income 7,523 436 7,959
Other income (expense)
Gain or (loss) on sale of real estate - - -
Other income (7) - (7)
----------------------------------------
Income before extraordinary item 7,516 436 7,952
Extraordinary item, early extinguishment of debt (582) - (582)
----------------------------------------
Net income 6,934 436 7,370
Preferred Dividends (1,662) - (1,662)
----------------------------------------
Net income available to common shareholders $ 5,272 $ 436 $ 5,708
========================================
Net income available to common shareholders per share
before extraordinary item
Basic $ 0.38 $ 0.02 $ 0.40
Diluted $ 0.37 $ 0.02 $ 0.39
Net income available to common shareholders per share
Basic $ 0.26 $ 0.02 $ 0.29
Diluted $ 0.26 $ 0.02 $ 0.28
FUNDS FROM OPERATIONS
Add back:
Depreciation and amortization 7,223 - 7,223
Amortization of deferred financing
costs on debentures 6 - 6
Convertible subordinated debenture interest 184 - 184
Depreciation from unconsolidated
subsidiary, net of tax 135 - 135
Extraordinary item, early extinquishment of debt 582 - 582
Convertible preferred dividend 72 - 72
Depreciation on sold properties - - -
----------------------------------------
Funds from operations $ 13,474 $ 436 $ 13,910
----------------------------------------
Funds from operations per share $ 0.65 $ 0.02 $ 0.67
========================================
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 (UNAUDITED)
----------------------------
ADJUSTMENT
----------
<S> <C>
Revenue:
Operating and investment revenue:
Minimum rents $ -
Straight-line rents -
Expense reimbursements -
Mortgage interest income -
----------------------------
Total operating and investment revenue -
----------------------------
Other revenue:
Fee income 2,980
Equity in net income of affiliate 474
----------------------------
Total other revenue 3,454
----------------------------
Total revenue 3,454
----------------------------
Expenses:
Real estate taxes -
Property operating and leasing -
General and administrative -
Depreciation and amortization
Interest expense:
Interest incurred, net -
Amortization of deferred financing costs -
----------------------------
Total expenses -
----------------------------
Operating income 3,454
Other income (expense)
Gain or (loss) on sale of real estate -
Other income -
----------------------------
Income before extraordinary item 3,454
Extraordinary item, early extinguishment of debt -
----------------------------
Net income 3,454
Preferred Dividends -
----------------------------
Net income available to common shareholders $ 3,454
============================
Net income available to common shareholders per share
before extraordinary item
Basic
Diluted
Net income available to common shareholders per share
Basic
Diluted
FUNDS FROM OPERATIONS
Add back:
Depreciation and amortization -
Amortization of deferred financing
costs on debentures -
Convertible subordinated debenture interest -
Depreciation from unconsolidated
subsidiary, net of tax -
Extraordinary item, early extinquishment of debt -
Convertible preferred dividend -
Depreciation on sold properties -
----------------------------
Funds from operations $ 3,454
----------------------------
Funds from operations per share $ 0.17
============================
</TABLE>
