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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, 1998 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
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CENTERPOINT PROPERTIES TRUST
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(Exact Name of Registrant as Specified in its Charter)
Maryland 36-3910279
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
1808 Swift Drive, Oak Brook, Illinois 60523
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (630) 586-8000
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Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class Name of Each Exchange On Which Registered
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Common Shares, par value $.001 New York Stock Exchange
8.22% Convertible Subordinated Debentures due 2004 New York Stock Exchange
8.48% Preferred Shares, par value $.001 New York Stock Exchange
Preferred Share Purchase Rights,
with respect to common shares, par $.001 New York Stock Exchange
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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 (Section229.405 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 11, 1999, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $624,185,696 (based on 19,505,803 shares
held by non-affiliates and computed by reference to the reported closing price).
The registrant had 20,051,448 shares of its common stock, $.001 par value,
outstanding as of March 11, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Common Stock and Debenture Prospectuses of the registrant, dated
December 3, 1993, and a Common Stock Prospectus of the registrant, dated January
19, 1995, each filed pursuant to Rule 424 under the Securities Act of 1933, as
amended, portions of the Registration Statement on Form S-3 dated January 6,
1997, portions of the registrant's Form 10-Q for the quarter ended September 30,
1995, portions of the 10-K for the year ended December 31, 1995 and portions of
the 10-Q for quarter ended September 30, 1996 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.
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TABLE OF CONTENTS
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PART I Page
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<S> <C>
Item 1. Business............................................................................................1
Item 2. Properties.........................................................................................12
Item 3. Legal Proceedings..................................................................................24
Item 4. Submission of Certain Items to a Vote of Security Holders..........................................24
PART II
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Item 5. Market for Registrant's Common Equity and Related Matters..........................................25
Item 6. Selected Historical Financial Data.................................................................26
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..............29
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.........................................36
Item 8. Financial Statements and Supplementary Data........................................................37
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...............37
PART III
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Item 10. Directors and Executive Officers of the Registrant.................................................39
Item 11. Executive Compensation.............................................................................39
Item 12. Security Ownership of Certain Beneficial Owners and Management.....................................39
Item 13. Certain Relationships and Related Transactions.....................................................39
PART IV
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Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K....................................40
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PART I
ITEM 1. BUSINESS.
THE COMPANY
CenterPoint Properties Trust ("CenterPoint" or the "Company"), a
publicly traded real estate investment trust (REIT), is the first major REIT to
focus on the industrial sector. CenterPoint is focused on providing unsurpassed
tenant satisfaction, and adds value to its shareholders through customer-driven
management, investment, development, and redevelopment of warehouse, light
manufacturing, and industrial facilities. The Company believes it is the largest
owner and operator of warehouse/industrial property in the 1.25 billion
square-foot Greater Chicago Region, the largest and most diverse industrial
market in the United States. The Company is a Maryland business trust and is
listed on the New York Stock Exchange.
A predecessor of CenterPoint began operations in 1984 as the principal
division and U.S. subsidiary of United Kingdom-based Capital and Regional
Properties. The stock of Capital and Regional was publicly traded on the London
Exchange in 1986, providing the Company with the longest public market history
of any industrial REIT. CenterPoint completed its initial U.S. public offering
after consolidating its operations with, and acquiring the properties controlled
by, FCLS Investors Group, a Chicago-based industrial development company with 30
years local experience.
In July 1998, the Company consolidated its three regional offices into
redeveloped warehouse space suburban Oak Brook, Illinois, centrally located in
the Chicago region. Intentionally, all of CenterPoint's assets are located
within a two-hour drive of its headquarters. The Company believes that its
geographic focus has enabled rapid and entrepreneurial response to market
opportunities and has fostered constant interaction among tenants and management
in furtherance of the Company's focus on customer satisfaction, which anchors
CenterPoint's strategy.
BUSINESS OBJECTIVES AND GROWTH PLANS
The Company's fundamental business objective is to maximize total
return to shareholders through increases in per share distributions and
increases in the value of the Company's franchise. The Company's goal is to
sustain strong growth in per share funds from operations ("FFO"), with
accompanying growth in per share distributions and share value. To achieve this
objective, the Company pursues complementary operating, investment, disposition
and financial strategies:
- - PORTFOLIO OPERATIONS. The Company seeks to grow its results from operations
by increasing revenues through lease renewals or replacements at increased
rental rates and by increasing occupancy where vacancies exist. The Company
believes above average rental growth is primarily achievable because the
Company's focus on tenant service generates higher renewal and occupancy
rates. Moreover, the Company's size, Chicago focus and market penetration
provide superior access to favorable leasing transactions and investments
offering below market rents and growth opportunities. The Company's
property investments as of December 31, 1998 was leased at an average net
rental rate of $3.57 per square foot, approximately 25% below the average
market rental rate (published by CB Richard Ellis)of $4.67 per square foot.
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- - INVESTMENT. The Company believes that per share growth is maximized through
investment activity concentrating on properties offering immediate cash
yields above its long term cost of capital, with the potential for rapid
yield growth. The Company seeks to invest exclusively in
warehouse/industrial properties that satisfy its yield and growth
objectives through the lease up of vacancy, property expansion,
redevelopment, or the development or disposition of surplus land. The
Company strictly limits speculative investment.
- - DISPOSITIONS. Management undertakes to maximize the yield on invested
capital by aggressively selling properties where growth has been achieved
and where future prospects for growth are limited. As an allied strategy,
the Company undertakes the development of buildings for immediate sale to
users or investors. These "merchant" transactions provide attractive fees
and profits for reinvestment in the Company's "core" value added business.
- - FINANCIAL. The Company maintains conservative financial and leverage
policies to provide financial capacity and flexibility. This strategy
facilitates opportunistic investment by helping assure substantial in place
liquidity. The Company and its affiliates maintain lines of credit of $300
million. The Company's financial strategy also allows it to secure capital
in the most favorable markets. CenterPoint benefits from investment grade
ratings on its senior unsecured debt and preferred securities, providing
substantial execution efficiency and a lower overall cost of capital.
- - MANAGEMENT CONTROLS AND SYSTEMS. The Company's strategy also seeks growth
by controlling expenses through the implementation of efficient information
and governance systems. The Company has invested in state of the art
systems, which it seeks to continually improve. The Company also believes
that it enjoys operating efficiencies attributable to the scale of its
operations and Chicago market focus, generating greater rates of cash flow
growth and retention.
BUSINESS FOCUS
As CenterPoint continues to grow, its mission remains to become the
industrial landlord of choice in the Greater Chicago region. CenterPoint
endeavors to achieve this goal by cultivating and maintaining long-term
relationships with its tenants. The Company, highly responsive to the changing
needs of its tenants, is always prepared to meet any challenge, and is
continually innovating processes and procedures to enhance mutual growth.
CenterPoint seeks to provide high-quality, attractive space at competitive
rates; unwavering attention to the care and maintenance of its properties;
operating charges that reflect economic responsibility; and rapid response to
expansion, relocation and other space requirements. CenterPoint maintains a 93%
tenant retention rate, confirming its commitment to tenant satisfaction, and in
turn, increasing both cash flow and the value of the portfolio.
Underpinning the value of CenterPoint's portfolio is the strength of
its internal resources. Key among these is management experience. CenterPoint's
management staff averages 20 years of experience in the industry. Enabled by
strong ties to the real estate development community, an in-depth knowledge of
the market sector, and the ability to gauge and anticipate market trends,
management can creatively and flexibly accommodate tenant requirements in a
manner that is mutually beneficial.
In order to successfully execute its business strategies, CenterPoint
adheres to the five following disciplines:
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FOCUS ON INDUSTRIAL REAL ESTATE. The Company focuses on
warehouse/industrial properties, because management believes this property type,
for the following reasons, offers consistently 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 LEVEL OF TENANT INVESTMENT. 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.
- SUPPLY BUILT ON DEMAND. 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.
- LIMITED COMPETITION. Higher overall investment returns are more
achievable for warehouse/industrial property than other property
types because such assets, typically $3 million 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.
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FOCUS IN GREATER CHICAGO. CenterPoint's target market, Greater Chicago,
is comprised of the region within a 150-mile radius of the City of Chicago,
including Milwaukee, Wisconsin and South Bend, Indiana. It lies at the center of
one of the nation's principal population and production regions.
With over 1.5 billion square-feet of industrial/warehouse space
(according to a ranking of markets published by Torto Wheaton Research and CB
Richard Ellis), Greater Chicago has become the largest and most diverse
warehouse/industrial market. In addition to its size and geographic location,
the Midwest possesses certain critical components such as transportation
advantages, business diversity, favorable economic trends, and thriving real
estate market conditions. These factors have supported the Company's continued
strong leasing, acquisition, and development activity. As a result, Greater
Chicago offers significant opportunities for investment in, and ownership of,
warehouse/industrial property.
- TRANSPORTATION ADVANTAGES. The Midwest's transportation network is
integral to its status as a manufacturing and distribution center.
The area has achieved its prominence as a result of its central
continental location, as well as its extensive roadway, rail, air,
and water transportation infrastructure. This infrastructure
connects Greater Chicago with a contiguous 13-state region
consisting of Illinois, Wisconsin, Michigan, Ohio, Pennsylvania,
West Virginia, Tennessee, Kentucky, Indiana, Missouri, Iowa,
Nebraska and Minnesota.
Seven major east-west or north-south interstate highways either
terminate or pass through the Greater Chicago region, making it
the nation's largest trucking market. This infrastructure
accommodates approximately 418,000 truck movements per day. In
Chicago alone, approximately 220,000 cross-town truck trips are
made to move containers between rail terminals annually.
CenterPoint expects Greater Chicago will soon see further growth
as the new administration of Governor George Ryan accelerates the
expansion and improvement of metro Chicago's expressway and other
infrastructures.
Intermodal, which involves the movement of goods by two or more
modes of transportation, is re-emerging as a very attractive
distribution channel. Rail service and marshalling yards in the
Midwest handle approximately 75% of nation's rail freight, making
Chicago a major hub for intermodal freight transportation. Nearly
half of all intermodal rail shipments originate, terminate, or
connect there. Currently, it is the fastest growing part of the
rail industry, and most rail yards have already been converted to
handle intermodal traffic. On a daily basis, Chicago alone handles
nearly 23,000 freight cars and 13,500 intermodal freight
containers and truck trailers, far more than any other city.
O'Hare International Airport, located within Chicago's city
limits, is one of the country's fastest growing airfreight hubs,
and has spurred the expansion of this industry in the region. The
efficiency and quick turn-around time of airfreight has made it
the delivery method of choice for many shippers. By handling 3,722
tons of airfreight per day, in addition to the 70 million
commercial passengers it serves annually, O'Hare has earned its
moniker of "the world's busiest airport".
Lastly, Chicago is also a major gateway for waterborne freight.
The Port of Chicago estimates that it ships in excess of 25
million tons of freight annually.
- DIVERSITY OF BUSINESSES. Published census data indicate that
Greater Chicago is the dominant economic, work, and population
center of this region. Not only does the Chicago region
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contain the nation's largest job market, but one-third of the
nation's Gross Domestic Product is created and consumed within 8
hours of Chicago, making it one of the most important export hubs
in the nation. Many of the exports are of manufactured goods made
in the state of Illinois. In 1997, total exports grew by 5.4% to
$23,210 million, a greater increase than during the previous year.
Home to over 59,000 industrial and commercial firms, Chicago is
second only to New York in the number of Fortune 500 corporate
headquarters. Virtually all of the "Global 1000""maintain
facilities in the Chicago metro area.
The diversity of businesses in the Midwest provides the Company
with the opportunity to capitalize on different trends affecting
real estate demand and usage in a wide range of industries. An
assorted tenant base also lessens the Company's cyclical risk,
reducing its exposure to changes in the fortunes of any single
type of business.
For example, manufacturing companies are one component of the
Company's tenant mix. Greater Chicago's manufacturing base is
extremely diverse, with nearly equal shares of durable and
non-durable industries in a broad mix of old-line and high-tech
manufacturing. In recent years, Chicago has had great success in
attracting manufacturing expansions because manufacturers benefit
from Chicago's well-developed transportation systems and
distribution network. Zoning initiatives have further encouraged
manufacturing activity by producing Planned Manufacturing
Districts (PMDs) in the city proper.
However, as in other large industrial metropolitan areas, Greater
Chicago's diversity has been increasing with the transformation
from a manufacturing to a service-based economy. The
diversification has accelerated during the current expansion as
growth has been driven by service industries.
- FAVORABLE ECONOMIC TRENDS/CHARACTERISTICS. 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 has also recorded increases in
industrial employment opportunities, and has exceeded the rates of
growth of the United States as a whole. These trends are favorable
indicators of continuing growth in the warehouse/industrial
property market.
In recent months, the unemployment rate in Chicago has averaged
only 4.3%, about equal to the national rate. Job creation has
helped to keep the jobless rate this low.
Business services in particular have expanded strongly due to the
concentration of headquarters operations in the metro area, as
well as the growth of the computer software industry. Business
services account for 40% of the new jobs created in the Chicago
economy during the past year.
The concentration of high technology employment ranks Chicago
third in the nation. Of all the metro areas in the Midwest, the
Chicago economy has been most successful in developing its
high-technology industries. The Chicago metro area, in particular,
has a concentration of information technology businesses involved
in every aspect of digitally based products and services such as
software, electronic commerce, computer hardware, and telecom
services. The number of Chicago-based information technology
companies has increased by one-third since 1992 and employment has
increased by more than 20%. Growth in high tech services is
expected to remain strong.
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Chicago is also the largest financial center for commodities in
the United States. The Chicago Board of Trade (CBOT) is the
world's largest commodities exchange and the Chicago Mercantile
Exchange (CME) is the third largest.
- REAL ESTATE MARKET CONDITIONS/WAREHOUSE SUPPLY & DEMAND. Favorable
trends in growth, business investment, utilization, and employment
in the Midwest 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 portfolio represented less than 2% of the market
(based on square footage) as of December 31, 1998. In a 1.25
billion square-foot industrial market, this allows substantial
opportunities for future growth.
Geographic concentration provides significant business
efficiencies for the Company. As a primary 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. Operating economies
of scale resulting from geographic concentration enhances the
Company's ability to offer lower occupancy costs to its tenants.
The Company's focus on warehouse/industrial properties in Greater
Chicago also enables the expansion of its portfolio without a
corresponding increase in general and administrative expense.
According to CB Richard Ellis, during 1998 Chicago's industrial
property market added 33.5 million square feet, the fifth
consecutive year of 30.0 million square feet or greater gross
absorption. Gross regional absorption was approximately 38.0
million square feet and 75% of the transactions were from new
leases. In the fourth quarter of 1998 the overall nominal
industrial vacancy rate in Chicago was 6.9%, a decrease of 100
basis points from the fourth quarter of 1997. However, the
effective vacancy rate (net of obsolete and environmentally
tainted properties) remained less than 4% overall.
FOCUS ON TENANT SATISFACTION. To become the landlord of choice in the
Greater Chicago Region, the Company strives to provide the highest possible
service to its tenants by addressing its tenants' occupancy needs and meeting
their evolving space requirements. Management believes tenant satisfaction,
resulting from the Company's "hands on" management approach, fuels rental
revenues by increasing tenant retention, minimizing re-letting expense and
facilitating rental increases. Management also believes that tenant satisfaction
creates profitable expansion and build-to-suit opportunities from existing
tenants.
The Company views tenant service as a key factor in its business and
has established tenant satisfaction as one of its primary corporate goals. To
develop its tenant franchise, the Company provides a variety of tenant services:
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; and responding rapidly to expansion or space reconfiguration
requests.
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 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.
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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, independently administered by CEL &
Associates and the Company's independent trustees. Employee incentive pay is
also dependent on the achievement of targeted per share funds from operations
and the results of a company-wide audit pertaining to the implementation of
internal processes and procedures, all of which the Company believes is enhanced
by tenant service.
FOCUS ON VALUE-ADDED INVESTMENTS. The Company seeks to acquire
warehouse/industrial properties that have an initial cash yield greater than the
Company's long term cost of capital (currently estimated to be 9.5% to 10.5%),
that offer the best opportunity for cash flow growth, and that meet the
Company's investment criteria. Management has established strategies for
responding to every stage of the economic cycle, altering its investment
emphasis through the recovery, strong economy, and recession phases. This
ensures that when conditions change, the Company is well prepared to meet the
needs of its clients with minimal reaction time. All investment activities are
focused on creating value for its tenants by providing high quality and
efficient facilities at attractive rental rates
- RECOVERY --> ACQUISITIONS. During a recovering economy,
CenterPoint acquires existing leased generic industrial buildings
that are suitable for a wide variety of tenant uses.
Traditionally, the seller is a company that is growing rapidly and
can better invest its capital in its own business rather than in
owning bricks and mortar. CenterPoint takes on that responsibility
and enhances the facility through professional management.
- STRONG ECONOMY --> BUILD-TO-SUITS. During a strong economy,
many tenants want to expand their space. As a result of the
comfort level achieved through CenterPoint's long-term
relationships with their tenants, as well as constant
communication, the Company can ascertain the specific requirements
of the tenant's future home. It can then be designed and built in
the right location, on time, and within budget.
- RECESSION --> RE-DEVELOPMENTS. During a weaker economy,
companies, on average, want to shrink capacity. Therefore,
CenterPoint has developed a number of refinements within older,
economically viable properties, completely rebuilding an existing
facility within a tenant's time frame. By understanding their
tenant's business needs, the Company can envision the potential of
a building and match it to the market.
In September 1998, the Company developed an Airport Properties division
to facilitate the expansion of its portfolio of air cargo facilities and other
area airport related investments. CenterPoint believes it is the pre-eminent
private sector provider, owner, and manager of airfreight and airport-related
facilities in the Chicago region.
CenterPoint's land inventory consists of approximately 300 acres in
various submarkets throughout the Chicago Market upon which 5 million square
feet could be developed. In addition, 1,800 acres of land at the former Joliet
Arsenal is under contract. Currently, this project is undergoing extensive
economic, environmental and property due diligence, including a determination of
whether government agencies will provide the necessary infrastructure to support
the industrial development of the property.
In addition to revenues from value-added investments, the Company earns
fees from the development of assets for purchase by tenants and institutions.
Typically, these transactions have yields
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below the Company's investment return hurdle, but offer substantial profit
opportunities relative to the level of required capital and management time. The
Company believes it 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.
FOCUS ON OPERATIONS. The Company is a full service real estate company
with an entire staff responsible for managing its entire real estate portfolio.
Six regions, each serving a particular segment of Greater Chicago, are operated
by a team consisting of a regional manager, a property manager, administrative
assistant and accounting support personnel who are required to visit each
tenant, on site, at least once every 90 days.
The Company believes it derives its competitive advantage from its
market penetration, local expertise, tenant relationships and quality reputation
with the Greater Chicago area. Another competitive advantage is its "state of
the art" information system which fully integrates corporate, property
management and accounting systems, enabling the Company to monitor and project
each asset and its financial performance. The Company believes this long-term
platform is capable of supporting its operating and financial objectives as well
as its continued strong growth.
The Company's believes its dedication to efficient internal processes
and "back of the house" practices has resulted in significant improvement to
operating margins. As of December 31, 1998, Net Revenue margin increased to
88.7% from 88.1%; EBITDA margin increased to 64.5% from 62.4%; and Net Operating
Income ("NOI") margin increased to 65.8% from 63.9%.
FOCUS ON CONSERVING CAPITAL. The Company seeks to create and maintain
substantial balance sheet capacity, which provides the Company flexibility to
opportunistically tap favorably priced capital to support accretive investments.
The Company believes it can maximize internal capital formation by (i) investing
at yields above its long term cost of capital; (ii) pursuing current and future
long-term debt financings and refinancings on an unsecured basis; and (iii)
redeploying its capital through asset sales. The Company will seek, where
possible, to sell properties in transactions intended to qualify as tax-free
exchanges under applicable provisions of the Internal Revenue Code and re-deploy
the proceeds of such sales in properties with higher yielding opportunities
where the Company believes significant value can be added.
The Company targets a ratio of long-term debt to total market
capitalization of 25% to 40%, and a ratio of earnings before interest, taxes,
depreciation and amortization ("EBITDA") to debt service and fixed charges of
3.0 and 2.5 times or higher, respectively. For the year ended December 31, 1998,
the Company's ratio of EBITDA to debt service was 5.4 and the ratio of EBITDA to
fixed charges was 3.9.
TRANSACTIONS DURING 1998
During 1998, the Company accomplished the following:
1998 ACQUISITIONS AND DISPOSITIONS. During 1998, the Company acquired
or completed development of 32 warehouse/industrial properties totaling 4.0
million square feet and approximately $111.5 million in total investment. Also
in 1998, the Company disposed of 6 warehouse/industrial properties totaling
approximately 871,000 square feet for approximately $36.4 million. In addition,
during 1998 the Company sold approximately 32 acres of undeveloped land for
approximately $21.0 million.
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1998 SECURITIES ACTIVITIES:
- On March 25, 1998, the Company completed a public offering of
370,371 common shares of beneficial interest at $32.0625 per share
in an underwritten offering to a unit investment trust. Net
proceeds from the offering after the underwriting discounts were
approximately $11.8 million. The proceeds were used to repay a
portion of amounts outstanding under the Company's line of credit
co-led by The First National Bank of Chicago and Lehman Brothers
Holdings Inc.
- On April 8, 1998 the Company completed a private placement to an
institutional investor of 370,000 common shares of beneficial
interest at $33.375 per share. The net proceeds of the offering of
approximately $12.1 million were used to fund working capital
requirements.
- In July, 1998, the Board of Trustees approved a shareholder
protection plan (the "plan"), declaring a dividend of one right
for each share of the Company's common shares outstanding on or
after August 11, 1998. Exercisable 10 days after any person or
group acquires 15 percent or more or commences a tender offer for
15 percent or more of the Company's common shares, each right
entitles the holder to purchase from the Company one
one-thousandth of a Junior Preferred Share of Beneficial
Interest, Series A (a "Rights Preferred Share"), at a price of
$120, subject to adjustment. The Rights Preferred Shares (1) are
non-redeemable, (2) are entitled to a minimum preferential
quarterly dividend payment equal to the greater of $25 per share
or 1,000 times the Company's common share dividend, (3) have a
minimum liquidation preference equal to the greater of $100 per
share or 1,000 times the liquidation payment made per common
share and (4) are entitled to vote with the common shares with
each Rights Preferred Share having 1,000 votes. 50,000 of the
Company's authorized preferred shares have been designated for
the Plan.
1998 FINANCINGS. On April 5, 1998 the Company issued $100 million of
6.75% senior unsecured notes due April 1, 2005. The net proceeds of $99 million
were used to repay substantially all amounts outstanding under the Company's
line of credit co-led by The First National Bank of Chicago and Lehman Brothers
Holdings Inc. In November 1998, the Company increased its unsecured credit
facility to $250 million.
SUBSEQUENT TRANSACTIONS
On March 15, 1999, the Company issued $100 million in senior unsecured
notes, due March 15, 2004 and bearing interest at 7.142%. The notes are co-lead
by Lehman Brothers Holdings, NationsBanc Montgomery Securities LLC, First
Chicago Capital Markets and First Union Capital Markets. The net proceeds of the
issuance of approximately $99.3 million were used to pay down the Company's line
of credit.
Since December 31, 1998, 1,321,286 non-voting Class B Shares converted
to voting shares.
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EMPLOYEES
At February 12, 1999, the Company had 123 full-time and 25 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 activities, reporting and
acquisition analysis, and 8 are clerical workers. Currently, the Company's
employees provide all property management activities. 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.
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
conducted in the appropriate manner, the costs that may be recovered will
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 a Phase I and or
similar environmental assessments. 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
information from environmental agencies; and a walk through survey for suspected
asbestos containing or other toxic materials.
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
10
<PAGE>
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 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 closure certification for each tank from the former
owner/operator in due course.
3. 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.
4. 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, however, 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.
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.
11
<PAGE>
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, 1998, the Company had advanced to CRS approximately
$41.4 million under a demand loan with interest rates ranging from 8% to 11.1%.
The proceeds of the loan were required 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 120 properties totaling approximately 23.6 million square feet.
During 1998, the Company acquired 30 fully-leased warehouse/industrial
properties, completed the construction of two fully leased warehouse/industrial
build-to-suit properties with a total area of approximately 4.0 million square
feet, disposed of six warehouse/industrial properties with a total area of
approximately 872,000 square feet. Also, a 910,800 thousand square foot
warehouse property was demolished with part of the land sold and the remaining
land retained for development of a build-to-suit.
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 multi-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 196,959 square feet, and, on average,
a tenant at an industrial property occupies 112,015 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 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.
12
<PAGE>
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 15 years, with a weighted average remaining
term, based on square footage, of approximately 4.0 years as of December 31,
1998.
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,
1998 no single industry, other than Wholesale Trade-Durable Goods and
Trucking/Warehousing, accounted for more than 5.8% of the leased space in the
warehouse/industrial properties currently owned by the Company. Wholesale
Trade-Durable Goods and Trucking/Warehousing, which encompasses a wide variety
of industries, accounted for 25.9% of the leased space in the
warehouse/industrial properties currently owned by the Company at December 31,
1998, and the six largest industries, other than Wholesale Trade-Durable Goods
and Trucking/Warehousing, represented by tenants accounted collectively for only
30.8% of such space. In addition, rent from no single tenant comprised more than
3% of the Company's total revenues as of December 31, 1998.
OTHER INFORMATION REGARDING WAREHOUSE/INDUSTRIAL PROPERTIES. The
following table sets forth certain information regarding the Company's portfolio
of warehouse/industrial properties, separately identifying 1998 investments of
the Company:
13
<PAGE>
CENTERPOINT PROPERTIES TRUST
PROPERTY SUMMARY
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
YEAR OF ORIGINAL
CONSTRUCTION/LAST ANNUALIZED AVERAGE
REDEVELOPMENT BASE RENT RENT PER GLA
PROPERTY ADDRESS CITY STATE AND/OR EXPANSION (1) REVENUES SQ. FT. (2) SQ. FT. (3)
---------------- ---- ----- -------------------- -------- ----------- -----------
1998 INVESTMENTS
----------------
<S> <C> <C> <C> <C> <C> <C>
LAKE COUNTY
28160 N. Keith Lake Forest IL 1989 $307,800 $3.95 77,924
28618 N. Ballard Lake Forest IL 1984 284,755 4.77 59,688
28167 N Keith Lake Forest IL 1986 177,066 6.79 26,082
N. KANE COUNTY
1575 Executive Drive Elgin IL 1980 156,804 5.05 31,050
1925 Holmes Rd. (6) Elgin IL 1989 503,622 4.28 117,600
CHICAGO O'HARE AREA
2121 Touhy Avenue (7) Elk Grove IL 1962 450,100 3.50 128,600
2021 Lunt Avenue (7) Elk Grove IL 1972 243,084 3.80 64,000
2001 S. Mt. Prospect Road (7) Des Plaines IL 1980 566,810 3.41 166,220
755 Dillon Drive Wood Dale IL 1986 317,280 6.62 47,928
201 Oakton Des Plaines IL 1984 719,196 4.49 160,102
543 W. Algonquin Rd. (6) Arlington Heights IL 1970 167,629 4.90 34,210
CITY NORTH
860 W. Evergreen Chicago IL 1890/1995 648,204 4.63 140,000
5730 North Tripp (6) Chicago IL 1975 405,264 3.48 116,584
1381 N. Northbranch (6) Chicago IL 1900 117,000 3.34 35,000
NEAR WEST SUBURBS
3601 N. Runge Franklin Park IL 1962/1968 412,407 3.61 114,266
3400 N. Powell Franklin Park IL 1961/1980 415,260 3.61 115,097
11100 W. Addison Franklin Park IL 1967 189,636 5.20 36,469
11140 W. Addison Franklin Park IL 1961/1965 345,330 3.09 111,588
3434 N. Powell Franklin Park IL 1960/1966 327,000 3.60 90,760
1999 N. Ruby Melrose Park IL 1952/1962 213,906 1.98 107,852
11550 W. King Franklin Park IL 1963 192,252 2.80 68,663
200 Champion Drive Northlake IL 1998 665,640 4.02 165,612
<CAPTION>
PERCENT
OF GLA
PERCENT LEASED
OF TOTAL AS OF NO. OF PROPERTY
PROPERTY ADDRESS GLA (4) 12/31/98 TENANTS TYPE(5)
---------------- --------- -------- ------- -------
1998 INVESTMENTS
----------------
<S> <C> <C> <C> <C>
LAKE COUNTY
28160 N. Keith 0.33% 100% 1 ACQ
28618 N. Ballard 0.25% 100% 1 ACQ
28167 N Keith 0.11% 100% 1 ACQ
N. KANE COUNTY
1575 Executive Drive 0.13% 100% 1 ACQ
1925 Holmes Rd. (6) 0.49% 100% 1 ACQ
CHICAGO O'HARE AREA
2121 Touhy Avenue (7) 0.53% 100% 1 ACQ
2021 Lunt Avenue (7) 0.27% 100% 1 ACQ
2001 S. Mt. Prospect Road (7) 0.68% 100% 1 ACQ
755 Dillon Drive 0.20% 100% 1 ACQ
201 Oakton 0.66% 75% 2 ACQ
543 W. Algonquin Rd. (6) 0.14% 100% 1 ACQ
CITY NORTH
860 W. Evergreen 0.58% 100% 1 ACQ
5730 North Tripp (6) 0.48% 100% 1 ACQ
1381 N. Northbranch (6) 0.15% 100% 1 ACQ
NEAR WEST SUBURBS
3601 N. Runge 0.47% 100% 1 ACQ
3400 N. Powell 0.47% 100% 1 ACQ
11100 W. Addison 0.15% 100% 1 ACQ
11140 W. Addison 0.46% 100% 1 ACQ
3434 N. Powell 0.38% 100% 1 ACQ
1999 N. Ruby 0.44% 100% 1 ACQ
11550 W. King 0.29% 100% 1 ACQ
200 Champion Drive 0.68% 100% 1 BTS
14
<PAGE>
<CAPTION>
YEAR OF ORIGINAL
CONSTRUCTION/LAST ANNUALIZED AVERAGE
REDEVELOPMENT BASE RENT RENT PER GLA
PROPERTY ADDRESS CITY STATE AND/OR EXPANSION (1) REVENUES SQ. FT. (2) SQ. FT. (3)
---------------- ---- ----- -------------------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CENTRAL KANE/N. DUPAGE
1030 Fabyan Parkway Batavia IL 1978 $684,700 $3.22 212,728
SOUTHWEST SUBURBS
7633 S. Sayre Bedford Park IL 1968 91,200 6.50 14,039
7201 S. Lemington Bedford Park IL 1958 360,000 3.37 106,800
7200 S. Mason Bedford Park IL 1974 606,420 2.92 207,345
6000 W. 73rd Bedford Park IL 1974 397,391 2.68 148,091
SOUTH SUBURBS
2601 Bond Street University Park IL 1975 224,000 3.50 64,000
11801 S. Central Alsip IL 1985 853,158 3.00 284,386
MILWAUKEE COUNTY
4700 Ironwood Drive Franklin WI 1998 412,720 3.35 123,200
5521 Mill Road Milwaukee WI 1960 103,700 2.33 44,435
DOWNSTATE ILLINOIS
Dial, Build-to-Suit Granite City IL 1998 2,120,016 2.61 812,000
---------
SUBTOTAL $13,575,650 4,032,319
----------- ---------
AVERAGE $3.37 126,010
----- ---------
PREVIOUSLY OWNED PROPERTIES
---------------------------
LAKE COUNTY
3145 Central Avenue(6) Waukegan IL 1958 788,500 2.63 300,000
1810-1820 Industrial Drive Libertyville IL 1977 267,756 3.15 85,000
1 Wildlife Way Long Grove IL 1994 684,852 12.66 54,100
620-630 Butterfield Road Mundelein IL 1990 254,484 10.50 24,237
1700 Butterfield Road Mundelein IL 1976 232,500 3.88 60,000
950-970 Tower Road Mundelein IL 1979/1990 154,805 4.04 38,359
2339-41 Ernie Krueger Court Waukegan IL 1990/1993 219,615 4.03 54,450
1300 Northpoint Road Waukegan IL 1994 338,351 5.21 65,000
<CAPTION>
PERCENT
OF GLA
PERCENT LEASED AS
OF TOTAL OF NO. OF PROPERTY
PROPERTY ADDRESS GLA (4) 12/31/98 TENANTS TYPE(5)
---------------- -------- -------- ------- ------
<S> <S> <C> <C> <C>
CENTRAL KANE/N. DUPAGE
1030 Fabyan Parkway 0.87% 100% 1 ACQ
SOUTHWEST SUBURBS
7633 S. Sayre 0.06% 100% 1 ACQ
7201 S. Lemington 0.44% 100% 1 ACQ
7200 S. Mason 0.85% 100% 1 ACQ
6000 W. 73rd 0.61% 100% 2 ACQ
SOUTH SUBURBS
2601 Bond Street 0.27% 100% 1 ACQ
11801 S. Central 1.17% 100% 1 ACQ
MILWAUKEE COUNTY
4700 Ironwood Drive 0.51% 100% 1 BTS
5521 Mill Road 0.19% 100% 1 ACQ
DOWNSTATE ILLINOIS
Dial, Build-to-Suit 3.33 100% 1 BTS
------ ----
SUBTOTAL 16.64%
------
AVERAGE 0.52%
------
PREVIOUSLY OWNED PROPERTIES
---------------------------
LAKE COUNTY
3145 Central Avenue(6) 1.23% 100% 2 ACQ
1810-1820 Industrial Drive 0.35% 100% 1 ACQ
1 Wildlife Way 0.23% 100% 1 RDV
620-630 Butterfield Road 0.10% 0% 0 BTS
1700 Butterfield Road 0.25% 100% 1 ACQ
950-970 Tower Road 0.16% 100% 3 BTS
2339-41 Ernie Krueger Court 0.23% 100% 1 BTS
1300 Northpoint Road 0.28% 100% 1 ACQ
15
<PAGE>
<CAPTION>
YEAR OF ORIGINAL
CONSTRUCTION/LAST ANNUALIZED AVERAGE
REDEVELOPMENT BASE RENT RENT PER GLA
PROPERTY ADDRESS CITY STATE AND/OR EXPANSION (1) REVENUES SQ. FT. (2) SQ. FT. (3)
---------------- ---- ----- -------------------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
N.W. COOK COUNTY
1500 West Dundee Road (6) Arlington Heights IL 1969 $2,107,009 $4.21 500,000
900 W. University Drive Arlington Heights IL 1974 586,000 6.79 86,254
N. KANE COUNTY
825 Tollgate Road Elgin IL 1989 389,490 4.69 83,122
CHICAGO O'HARE AREA
O'Hare Express-Phase A-2 Chicago IL 1997 1,080,616 8.93 120,971
O'Hare Express-Phase B-1 Chicago IL 1997 2,125,388 12.38 171,685
110-190 Old Higgins Road Des Plaines IL 1980 1,246,757 10.36 120,292
1796 Sherwin Des Plaines IL 1964 617,252 6.48 95,220
2525 Busse Road Elk Grove Village IL 1975 3,314,136 3.73 888,335
2701-2781 Busse Road Elk Grove Village IL 1997 1,222,932 4.87 251,076
2801-2881 Busse Road Elk Grove Village IL 1997 1,112,802 4.43 251,076
1951 Landmeier Elk Grove Village IL 1967 237,384 5.66 41,976
745 Birginal Road Bensenville IL 1974 505,166 4.46 113,266
2743 Armstrong Court Des Plaines IL 1989 300,843 5.64 53,325
850 Arthur Avenue (8) Elk Grove Village IL 1971/1973 181,941 4.28 42,490
1400 Busse Road Elk Grove Village IL 1975 442,421 2.98 148,436
1100 Chase Avenue (7) Elk Grove Village IL 1980/1996 150,778 3.62 41,651
2600 Elmhurst Road Elk Grove Village IL 1995 531,917 5.07 105,000
875 Fargo Avenue Elk Grove Village IL 1980 424,596 5.15 82,368
1850 Greenleaf Elk Grove Village IL 1965 255,024 4.35 58,627
1201 Lunt Avenue Elk Grove Village IL 1971 45,118 6.11 7,380
1501 Pratt Avenue Elk Grove Village IL 1973 589,132 3.88 151,900
1520 Pratt Avenue Elk Grove Village IL 1968 243,551 3.89 62,546
10601 Seymour Avenue (6) Franklin Park IL 1963/1970 2,755,299 4.07 677,000
2553 North Edgington Franklin Park IL 1967/1995 1,176,222 4.29 274,303
10740 West Grand Avenue (7) Franklin Park IL 1965/1971 189,052 2.86 66,000
1800 Bruning Drive Itasca IL 1975/1978 1,169,203 5.79 202,000
245 Beinoris Drive Wood Dale IL 1988/1993 93,741 7.82 11,989
4501 West Augusta Boulevard Chicago IL 1942/1989 792,975 1.83 432,661
<CAPTION>
PERCENT
OF GLA
PERCENT LEASED AS
OF TOTAL OF NO. OF PROPERTY
PROPERTY ADDRESS GLA (4) 12/31/98 TENANTS TYPE(5)
---------------- -------- --------- ------- --------
<S> <C> <C> <C> <C>
N.W. COOK COUNTY
1500 West Dundee Road (6) 2.05% 49% 2 ACQ
900 W. University Drive 0.36% 100% 1 ACQ
N. KANE COUNTY
825 Tollgate Road 0.34% 100% 2 ACQ
CHICAGO O'HARE AREA
O'Hare Express-Phase A-2 0.50% 100% 2 BTS
O'Hare Express-Phase B-1 0.71% 100% 1 BTS
110-190 Old Higgins Road 0.50% 99% 7 ACQ
1796 Sherwin 0.39% 100% 2 ACQ
2525 Busse Road 3.64% 85% 9 ACQ
2701-2781 Busse Road 1.03% 100% 2 BTS
2801-2881 Busse Road 1.03% 100% 2 BTS
1951 Landmeier 0.18% 100% 2 ACQ
745 Birginal Road 0.47% 100% 1 ACQ
2743 Armstrong Court 0.23% 100% 1 BTS
850 Arthur Avenue (8) 0.18% 100% 1 ACQ
1400 Busse Road 0.61% 39% 12 ACQ
1100 Chase Avenue (7) 0.18% 100% 1 ACQ
2600 Elmhurst Road 0.43% 100% 1 BTS
875 Fargo Avenue 0.34% 100% 1 ACQ
1850 Greenleaf 0.25% 100% 1 ACQ
1201 Lunt Avenue 0.03% 100% 1 ACQ
1501 Pratt Avenue 0.63% 100% 2 ACQ
1520 Pratt Avenue 0.26% 100% 1 ACQ
10601 Seymour Avenue (6) 2.77% 74% 2 ACQ/
RDV
2553 North Edgington 1.13% 100% 4 ACQ
10740 West Grand Avenue (7) 0.28% 100% 1 ACQ
1800 Bruning Drive 0.83% 100% 1 ACQ
245 Beinoris Drive 0.05% 100% 1 BTS/
RDV
4501 West Augusta Boulevard 1.77% 97% 8 RDV
16
<PAGE>
<CAPTION>
YEAR OF ORIGINAL
CONSTRUCTION/LAST ANNUALIZED AVERAGE
REDEVELOPMENT BASE RENT RENT PER GLA
PROPERTY ADDRESS CITY STATE AND/OR EXPANSION (1) REVENUES SQ. FT. (2) SQ. FT. (3)
---------------- ---- ----- -------------------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
N.W. SUBURBS
400 North Wolf Road Northlake IL 1956/1997 $5,128,034 $3.36 1,527,593
CENTRAL KANE/N. DUPAGE
425 South 37th Avenue (7) St. Charles IL 1975 393,581 3.82 103,106
1250 Carolina Drive West Chicago IL 1988 514,500 3.43 150,000
1645 Downs Drive West Chicago IL 1975 414,048 3.20 129,390
1733 Downs Drive West Chicago IL 1975 363,816 2.50 145,528
825-845 Hawthorne Lane (6) West Chicago IL 1974 527,700 3.32 158,772
1700 West Hawthorne (6) West Chicago IL 1959/1969 1,381,800 1.88 735,196
WEST SUBURBS
2901 Centre Circle (7) Downers Grove IL 1979 153,238 7.28 21,056
FAR WEST SUBURBS
1 Allsteel Drive (7) Aurora IL 1960 2,387,565 2.37 1,008,120
2727 West Diehl Road Naperville IL 1997 2,047,896 4.65 440,343
2885 West Diehl Road Naperville IL 1997 1,145,928 3.80 301,560
SOUTHWEST SUBURBS
7447 South Central Avenue Bedford Park IL 1975 283,723 2.40 118,218
7400 S. Narragansett Ave (6) Bedford Park IL 1976 515,424 2.95 174,720
6751-55 South Sayre Avenue Bedford Park IL 1974 695,352 2.87 242,690
7525 South Sayre Bedford Park IL 1981 411,261 3.34 123,178
6464 West 51st Street Forest View IL 1973 730,326 3.50 208,713
6500 West 51st Street Forest View IL 1975 500,292 2.70 185,295
9301 W. 55th Street (6) McCook IL 1979 1,620,000 0.95 1,700,000
<CAPTION>
PERCENT
OF GLA
PERCENT LEASED AS
OF TOTAL OF NO. OF PROPERTY
PROPERTY ADDRESS GLA (4) 12/31/98 TENANTS TYPE(5)
---------------- -------- --------- ------- --------
<S> <C> <C> <C> <C>
N.W. SUBURBS
400 North Wolf Road 6.25% 100% 4 ACQ
CENTRAL KANE/N. DUPAGE
425 South 37th Avenue (7) 0.43% 100% 1 ACQ
1250 Carolina Drive 0.62% 100% 1 BTS
1645 Downs Drive 0.53% 100% 1 ACQ
1733 Downs Drive 0.60% 100% 1 ACQ
825-845 Hawthorne Lane (6) 0.65% 83% 5 ACQ
1700 West Hawthorne (6) 3.01% 100% 1 ACQ
WEST SUBURBS
2901 Centre Circle (7) 0.09% 100% 1 ACQ
FAR WEST SUBURBS
1 Allsteel Drive (7) 4.13% 99% 3 ACQ
2727 West Diehl Road 1.81% 100% 1 BTS
2885 West Diehl Road 1.24% 100% 1 BTS
SOUTHWEST SUBURBS
7447 South Central Avenue 0.49% 100% 1 ACQ
7400 S. Narragansett Ave (6) 0.72% 100% 1 ACQ
6751-55 South Sayre Avenue 1.00% 100% 2 ACQ
7525 South Sayre 0.51% 63% 2 ACQ
6464 West 51st Street 0.86% 100% 4 ACQ
6500 West 51st Street 0.76% 100% 1 ACQ
9301 W. 55th Street (6) 6.96% 100% 1 RDV
17
<PAGE>
<CAPTION>
YEAR OF ORIGINAL
CONSTRUCTION/LAST ANNUALIZED AVERAGE
REDEVELOPMENT BASE RENT RENT PER GLA
PROPERTY ADDRESS CITY STATE AND/OR EXPANSION (1) REVENUES SQ. FT. (2) SQ. FT. (3)
---------------- ---- ----- -------------------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
800 Enterprise Court Naperville IL 1985 $183,660 $5.25 34,984
720 Frontenac Naperville IL 1991 524,308 3.05 171,935
820 Frontenac Naperville IL 1988 500,045 3.26 153,604
920 Frontenac Naperville IL 1987 413,900 3.42 121,200
1020 Frontenac Naperville IL 1980 441,750 4.43 99,684
1120 Frontenac Naperville IL 1980/1994 578,915 3.76 153,902
1510 Frontenac Naperville IL 1986 359,287 3.43 104,886
1560 Frontenac Naperville IL 1987 305,278 3.57 85,608
1651 Frontenac Naperville IL 1978 123,139 4.05 30,414
2764 Golfview Naperville IL 1985 102,284 5.11 20,022
1500 Shore Drive Naperville IL 1985 144,150 3.33 43,230
1150 Shore Road Naperville IL 1985 126,773 4.20 30,184
2301 North Route 30 Plainfield IL 1972 777,367 2.75 282,679
1355 Enterprise Drive (6) Romeoville IL 1980 341,880 2.80 122,100
SOUTHWEST SUBURBS
6600 River Road Hodgkins IL 1968 1,438,178 2.28 630,410
FAR S.W. SUBURBS
16400 West 103rd Street (7) Lemont IL 1983/1995 299,616 4.71 63,612
1319 Marquette Drive Romeoville IL 1990 218,094 6.00 36,349
7001 Adams Street Willowbrook IL 1994 192,720 7.61 25,324
CHICAGO SOUTH
3133 East 106th (6) Chicago IL 1971 300,285 3.75 80,076
4400 South Kolmar (6) Chicago IL 1966 290,182 3.15 92,000
900 East 103rd Street Chicago IL 1910/1990 1,853,141 3.22 575,462
<CAPTION>
PERCENT
OF GLA
PERCENT LEASED AS
OF TOTAL OF NO. OF PROPERTY
PROPERTY ADDRESS GLA (4) 12/31/98 TENANTS TYPE(5)
---------------- -------- --------- ------- --------
<S> <C> <C> <C> <C>
800 Enterprise Court 0.15% 100% 1 ACQ
720 Frontenac 0.71% 100% 2 ACQ
820 Frontenac 0.63% 100% 1 ACQ
920 Frontenac 0.50% 100% 1 ACQ
1020 Frontenac 0.41% 100% 1 ACQ
1120 Frontenac 0.63% 100% 1 ACQ
1510 Frontenac 0.43% 100% 1 ACQ
1560 Frontenac 0.36% 100% 2 ACQ
1651 Frontenac 0.13% 100% 1 ACQ
2764 Golfview 0.08% 100% 1 ACQ
1500 Shore Drive 0.18% 100% 2 ACQ
1150 Shore Road 0.13% 100% 1 ACQ
2301 North Route 30 1.16% 100% 1 ACQ
1355 Enterprise Drive (6) 0.50% 25% 1 ACQ
SOUTHWEST SUBURBS
6600 River Road 2.58% 100% 1 ACQ
FAR S.W. SUBURBS
16400 West 103rd Street (7) 0.27% 100% 1 ACQ
1319 Marquette Drive 0.15% 0% 0 BTS
7001 Adams Street 0.11% 100% 1 BTS
CHICAGO SOUTH
3133 East 106th (6) 0.33% 100% 1 ACQ
4400 South Kolmar (6) 0.38% 100% 1 ACQ
900 East 103rd Street 2.36% 24% 1 RDV
18
<PAGE>
<CAPTION>
YEAR OF ORIGINAL
CONSTRUCTION/LAST ANNUALIZED AVERAGE
REDEVELOPMENT BASE RENT RENT PER GLA
PROPERTY ADDRESS CITY STATE AND/OR EXPANSION (1) REVENUES SQ. FT. (2) SQ. FT. (3)
---------------- ---- ----- -------------------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
11701 South Central Avenue Alsip IL 1970 $951,136 $3.20 297,207
5619-25 West 115th Street Alsip IL 1974 1,805,830 4.55 396,979
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 1,310,418 3.75 349,236
201 Mississippi Street Gary IN 1945/1988 3,782,586 3.60 1,052,173
1827 North Bendix Drive (6) South Bend IN 1964/1990 583,212 2.92 199,730
MILWAUKEE COUNTY
7501 North 81st Street Milwaukee WI 1987 576,000 3.13 183,958
1475 S. 101st West Allis WI 1969 194,013 4.13 46,973
2003-2201 S. 114th Street West Allis WI 1965 642,540 2.64 243,350
KENOSHA COUNTY
8200 100th Street Pleasant Prairie WI 1990 568,361 3.83 148,472
8901 102nd Street Pleasant Prairie WI 1990 649,532 6.15 105,637
RACINE COUNTY
1333 Grandview Drive Yorkville WI . 796,572 3.79 210,000
SUBTOTAL $70,631,809 20,414,752
----------
AVERAGE $3.46 229,379
----------
GRAND TOTAL ALL WAREHOUSE/
INDUSTRIAL PROPERTIES $84,207,459 24,447,071
----------
AVERAGE ALL WAREHOUSE/
INDUSTRIAL PROPERTIES (9) $3.44 202,042
----------
GRAND TOTAL ALL WAREHOUSE/
INDUSTRIAL PROPERTIES
EXCLUDING REDEVELOPMENTS
AT 12/31/98 $84,207,459 23,871,609
AVERAGE ALL WAREHOUSE/
INDUSTRIAL PROPERTIES
EXCLUDING REDEVELOPMENTS
AT 12/31/98 (9) $3.56 168,568
----------
<CAPTION>
PERCENT
OF GLA
PERCENT LEASED AS
OF TOTAL OF NO. OF PROPERTY
PROPERTY ADDRESS GLA (4) 12/31/98 TENANTS TYPE(5)
---------------- ------- --------- ------- --------
<S> <C> <C> <C> <C>
11701 South Central Avenue 1.22% 100% 1 ACQ
5619-25 West 115th Street 1.63% 100% 4 RDV
21399 Torrence Avenue 1.53% 100% 1 ACQ
N.W. INDIANA
425 West 151st Street 1.43% 96% 9 RDV
201 Mississippi Street 4.31% 95% 14 RDV
1827 North Bendix Drive (6) 0.82% 100% 1 ACQ
MILWAUKEE COUNTY
7501 North 81st Street 0.76% 100% 1 ACQ
1475 S. 101st 0.20% 100% 1 ACQ
2003-2201 S. 114th Street 1.00% 100% 2 ACQ
KENOSHA COUNTY
8200 100th Street 0.61% 100% 1 ACQ
8901 102nd Street 0.44% 100% 1 ACQ
RACINE COUNTY
1333 Grandview Drive 0.86% 100% 1 ACQ
SUBTOTAL 83.36%
AVERAGE 0.94%
GRAND TOTAL ALL WAREHOUSE/
INDUSTRIAL PROPERTIES 100.00% 211
AVERAGE ALL WAREHOUSE/
INDUSTRIAL PROPERTIES (9) 95%
GRAND TOTAL ALL WAREHOUSE/
INDUSTRIAL PROPERTIES
EXCLUDING REDEVELOPMENTS
AT 12/31/98 96%
AVERAGE ALL WAREHOUSE/
INDUSTRIAL PROPERTIES
EXCLUDING REDEVELOPMENTS
AT 12/31/98 (9)
</TABLE>
19
<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. One of the redevelopment properties, 900 East 103rd Street,
Chicago Illinois, has been taken out of operations as of December 31,
1998 to complete rehab construction.
(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 size equals total GLA divided by the number of
warehouse/industrial properties.
LEASE EXPIRATIONS
The following table shows as of December 31, 1998 scheduled lease
expirations for the Company's warehouse/industrial properties commencing January
1, 1999 and for the next ten years, assuming that no tenants exercise renewal
options:
<TABLE>
<CAPTION>
AVERAGE % OF TOTAL
BASE RENT PROPERTIES % OF 1998
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>
1999 ...................... 51 3,966,037 $12,402,962 $3.13 19.14% 16.02%
2000 ...................... 45 2,668,046 9,203,895 3.45 12.88% 11.89%
2001 ...................... 21 1,563,859 6,132,702 3.92 7.55% 7.92%
2002 ...................... 28 3,432,979 10,088,978 2.94 16.57% 13.03%
2003 ...................... 25 2171065 8283914 3.82 10.48% 10.7%
2004 ...................... 10 1,650,214 6,054,731 3.67 7.97% 7.82%
2005 ...................... 11 1,526,940 4,716,660 3.09 7.37% 6.09%
2006 ...................... 9 1,604,063 5,451,730 3.40 7.74% 7.04%
2007 ...................... 7 704,764 4,687,687 6.65 3.4% 6.06%
2008 ...................... 8 1,429,729 6,684,065 4.68 6.9% 8.63%
</TABLE>
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 purchase option which was outstanding at December 31, 1998 for One
Wildlife Way, Long Grove, Illinois expired as of February 1, 1999.
20
<PAGE>
- 8901 102nd Street, Pleasant Prairie, Wisconsin is subject to an
option to purchase exercisable on February 28, 2006 at a purchase
price equal to 95% of "fair market value," determined by the
average of three independent appraisals.
- 1700 West Hawthorne, West Chicago, Illinois is subject to a
purchase option exercisable 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 $15,233,636, plus the cost of construction.
- 2600 Elmhurst Road, Elk Grove Village, Illinois is subject to an
option exercisable on or before July 31, 2000 to purchase the
premises during January of 2001 for a purchase price of
$5,265,000.
- 21399 Torrence Avenue, Sauk Village, Illinois is subject to an
option exercisable on or 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 or November 30,
2002 for $9,314,500.
- 11440 W. Addison, Franklin Park, Illinois is subject to a purchase
option any time after May 1, 1999, but not later than June 30,
1999 (with closing to occur on November 1, 1999) for a purchase
price of $3,000,000.
In each case, the option price exceeds the Company's current net book
value for each such property. The Company believes that even if all of the
purchase options are exercised, such exercise will not have an adverse effect
upon the operations of the Company or its ability to maintain its distribution
policy. In addition, if any purchase option is exercised, the Company intends to
either distribute the cash proceeds to stockholders or reinvest the cash
proceeds in additional properties. However, 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 Wildlife Way, Long Grove, Illinois, 8901 102nd Street,
Pleasant Prairie, Wisconsin, 825 Tollgate Road, Elgin, Illinois, 1651 Frontenac
Road, Naperville, Illinois 7001 Adams Street, Willowbrook, Illinois, 950 Tower
Road, Mundelein, Illinois, 6312 W. 74th Street, Bedford Park, Illinois, 11440 W.
Addison, Franklin Park, Illinois and 7633 S. Sayre, Bedford Park, Illinois. 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.
21
<PAGE>
THE COMPANY'S OTHER PROPERTIES AND INVESTMENTS
In addition to its warehouse/industrial properties, the Company owns
three retail properties having approximately 61,000 square feet of GLA, one
office building having approximately 94,000 square feet of GLA in which the
offices of the management company use approximately 48,000 square feet and the
remaining portion is under redevelopment, 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 Company also has investments in 9 uncompleted build-to-suit
properties totaling approximately 1.6 million square feet, and has two mortgage
receivables on properties totaling 824,000 square feet.
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, 1998 REVENUE (4) TENANTS
------------- --------- --- --- -------- ------- --- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
4-48 Barring Rd. 1994 1991 38,633 63.1% 76.9% $315,565 $8.17 8
Streamwood, IL
84-120 McHenry Rd. 1990/1993 1989 20,535 33.6% 80.0% 307,774 14.99 8
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% $684,779 $11.19 17
====== ====== ======== ====== ==
</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.
22
<PAGE>
The following table shows as of December 31, 1998 scheduled lease
expirations for the retail properties commencing January 1, 1999, and for the
next ten years, assuming no tenants exercise renewal options.
<TABLE>
<CAPTION>
GLA OF ANNUALIZED % OF TOTAL RETAIL % OF 1998 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>
1999 2 3,918 $57,468 $14.67 9.14% 9.48%
2000 5 10,334 113,100 10.94 24.11% 18.66%
2001 5 14,120 150,084 10.63 32.94% 24.77%
2002 0 0 0 0 0% 0%
2003 1 3,080 31,596 10.26 7.19% 5.21%
2004 2 5,274 125,976 23.89 12.30% 20.79%
2005 0 0 0 0 0% 0%
2006 1 6,140 127,788 20.81 14.32% 21.09%
2007 0 0 0 0 0% 0%
2008 0 0 0 0 0% 0%
</TABLE>
Lakeshore Dunes Apartments, which was completed 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, 1998, 621 of the units, or 91%, were leased,
providing for a monthly base rent of approximately $270,000 or $7.34 per square
foot (determined by dividing annualized base rent by total leased square footage
of the apartment units), or an annualized base rent of $3,240,000. 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, 1998:
<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, the Company purchased a parking lot within an industrial
park. The parking lot is leased for ten years through January 2006 for an annual
minimum rent of $26,400.
23
<PAGE>
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.
None.
24
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS.
(a) Prior to June 12, 1996, the Company's Common Stock was listed and
traded on the American Stock Exchange under the symbol "CNT." Effective on June
12, 1996, the Company's Common Stock is 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 Stock (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
March 31, 1998................................. 36-1/16 32-3/4 0.438
June 30, 1998.................................. 35-5/8 31-7/16 0.438
September 30, 1998............................. 36-7/16 30-11/16 0.438
December 31, 1998.............................. 36-7/8 32-1/4 0.438
</TABLE>
(b) As of March 11, 1999, there were approximately 163 holders of
record of the Company's Common Stock.
(c) During 1998, the Company paid distributions on common shares
of $31.2 million or $1.75 per share and on class B common shares of $3.7 million
or $1.80 per share. Also, in January of 1998, the Company paid dividends on
preferred shares of $1.4 million or $0.477 per share, and in April, July and
October of 1998, paid dividends of $1.6 million or $0.53 per share each time. As
of the end of 1998, the Company declared preferred dividends of $1.6 million or
$0.53 per share to be paid in January, 1999. 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. The Company's
Consolidated Statements of Operations and Shareholders' Equity for 1997 included
$901 thousand or $0.30 per share of preferred dividends attributable to 1997.
The following factors, among others, will affect the future
availability of funds for distribution: (i) scheduled increases in base rents
under existing leases, (ii) changes in minimum base rents attributable to
replacement of existing leases with new or replacement leases and (iii)
restrictions under certain covenants of the Company's unsecured credit facility
co-led by The First National Bank of Chicago and Lehman Brothers Holdings, Inc.
25
<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'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION," both included elsewhere in this Form 10-K/A.
As discussed in Note 2A 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. In addition, the Company
revised previously issued financial statements to recognize, for financial
reporting purposes, certain gains in connection with tax-deferred exchanges that
had not been previously recognized. Accordingly, the financial statements and
the Selected Financial Data for the years ended December 31, 1998 and 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,
-----------------------
1998 1997
REVISED REVISED 1996 1995 1994
------- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Data:
Revenues $107,226 $85,588 $63,330 $46,952 $33,633
Expenses:
Operating expenses excluding depreciation
and amortization (1) (35,700) (29,182) (20,751) (14,774) (11,442)
Depreciation and other amortization (21,418) (15,278) (10,648) (8,456) (6,176)
General and administrative (4,041) (3,105) (2,567) (2,150) (1,573)
Interest expense:
Interest incurred, net (13,659) (10,071) (9,865) (11,562) (11,073)
Amortization of deferred financing costs (1,817) (800) (1,127) (1,150) (976)
-------- -------- -------- -------- --------
Operating income 30,591 27,152 18,372 8,860 2,393
Gain on real estate 1,672
Other income (expense) (2) (15) 108 (100) (16) (34)
-------- -------- -------- -------- --------
Income before extraordinary item 32,248 27,260 18,272 8,844 2,359
Extraordinary item (3,331) (632)
-------- -------- -------- -------- --------
Net income 32,248 27,260 14,941 8,212 2,359
Preferred dividend (6,360) (901) (947) (1,002)
-------- -------- -------- -------- --------
Net income available to common shareholders 25,888 26,359 13,994 7,210 2,359
Per share net income available to common
Shareholders before extraordinary item:
Basic 1.30 1.41 1.25 0.85 0.41
Diluted 1.29 1.39 1.22 0.84 0.41
26
<PAGE>
<S> <C> <C> <C> <C> <C>
Per share net income available to common
shareholders:
Basic 1.30 1.41 1.01 0.78 0.41
Diluted 1.29 1.39 0.99 0.77 0.41
Balance Sheet Data (End of Period):
Investment in real estate (before accumulated
depreciation) $768,857 $662,275 $429,034 $317,460 $248,281
Net investment in real estate 706,600 617,923 398,828 295,884 234,825
Total assets 817,606 699,055 451,206 334,866 254,073
Total debt 364,718 270,735 177,349 145,271 179,492
Shareholders' equity 407,459 387,756 248,114 168,320 59,016
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
1998 1997
REVISED REVISED 1996 1995 1994
------- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Other Data:
Funds from Operations (3) $46,777 $42,684 $30,445 $20,492 $13,138
EBITDA (4) 69,142 53,409 39,912 30,013 20,584
Net cash flow:
Operating activities 57,804 39,411 29,552 16,473 8,976
Investing activities (118,706) (245,336) (111,554) (82,556) (65,311)
Financing activities 59,725 206,507 80,194 68,541 52,837
Distributions 41,233 32,046 24,065 15,953 8,775
Return of capital portion of distribution 3,711 3,916 12,280 8,554 4,320
Number of properties included in operating
results (5) 126 101 76 69 53
Ratio of earnings to fixed charges 2.70 3.24 2.33 1.63 1.19
Ratio of earnings to combined fixed charges
and preferred dividends 1.98 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 available to common
shareholders, 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 common shares in 1996. Funds from operations is computed
as follows:
<TABLE>
<CAPTION>
1998 1997
REVISED REVISED 1996 1995 1994
------- ------- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net income available to common
Shareholders $25,888 $26,359 $14,941 $8,212 $2,359
Extraordinary item 3,331 632 --
Depreciation and amortization 21,418 15,278 10,648 8,456 6,176
Amortization of deferred financing costs,
Debentures 38 48 67 135 267
Convertible subordinated debenture
interest 783 999 1,385 3,057 4,336
Depreciation of properties sold (1350)
Loss on disposition of properties -- -- 73 -- --
------ ------ ------ ------ ------
Funds from Operations $46,777 $42,684 $30,445 $20,492 $13,138
======= ======= ======= ======= =======
</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
28
<PAGE>
cautioned that Funds from Operations, as calculated by the Company, may
not be comparable to similarly titled but differently calculated
measurers for other REITs.
The National Association of Real Estate Investment Trusts (NAREIT)
defines funds from operations as net income before extraordinary items
plus depreciation and amortization less the amortization of deferred
financing costs.
(4) Earnings before interest, income taxes, depreciation and amortization.
Management believes 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 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. Increase in number of properties in 1998 reflects the
acquisition of 30 properties, the completion of 2 developments, and
the disposition of 6 properties throughout 1998. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
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 acquisitions,
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 126 properties with approximately 25.0 million
29
<PAGE>
square feet as of December 31, 1998. 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 136 property investments, excluding the parking lot, representing
approximately 26.6 million square feet.
The Company grew its total property investments by 6% in 1998, which
includes build-to-suits in progress and mortgage investments. In addition, the
Company grew its portfolio of owned properties during the year by concluding
thirty warehouse/industrial property acquisitions and two warehouse/industrial
build-to-suit properties, net of the disposition of six warehouse/industrial
properties. The Company's total increase in owned warehouse/industrial area, net
of disposals, was 3.4 million square feet or 16.7%.
The Company's Consolidated Financial Statements for the years ended
December 31, 1998, 1997 and 1996 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, 1998, 1997 and 1996,
respectively. Certain executive officers of the Company had an interest in
entities which were purchased by the Company (one property in 1998, one property
in 1997 and three properties in 1996). 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 development and redevelopment activities in which
substantial capital costs and related expenses were incurred in advance of
receipt of rental income. At December 31, 1998, the Company and its subsidiaries
had $18.4 million invested in build-to-suit projects under development which
were not producing income as of the end of the year. As of December 31, 1998,
the Company owns 11 properties totaling 6.0 million square feet that the Company
has redeveloped or is currently holding 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, 1998 TO YEAR ENDED DECEMBER 31, 1997
REVENUES
Total revenues increased by $21.6 million or 25.3% over the same period last
year.
In the twelve months of 1998, 97.4% of total revenues of the Company were
derived primarily from base rents, straight-line rents, expense reimbursements
and mortgage income (operating and investment revenue), pursuant to the terms of
tenant leases and mortgages for occupied space at the warehouse/industrial
properties.
Operating and investment revenues increased by $23.5 million in 1998. A portion
of the increase from the prior year is due to income from thirty properties
acquired in 1998 and two build-to-suit property coming on line totaling 4.0
million square feet, net of six dispositions as of the end of the year. The
remainder of the increase was attributable to a full period of income from the
1997 acquisition of twenty-
30
<PAGE>
one properties, totaling 7.1 million square feet and seven build-to-suit
properties totaling 1.6 million square feet coming on-line in 1997, net of three
property dispositions.
Other revenues decreased $1.9 million due to decreased fees earned and profits
realized by the Company and the Company's unconsolidated affiliate in connection
with increased build-to-suit, development and leasing activities.
OPERATING AND NONOPERATING EXPENSES
Real estate tax expense and property operating and leasing expense increased by
$6.5 million from year to year. The majority of the increase, $5.1 million,
resulted from a full period of real estate taxes on 1997 acquisitions and a
partial period of real estate taxes on 1998 acquisitions, net of dispositions.
The balance of the increase was due to increased leasing expenses, insurance,
utilities, repairs and maintenance and property management costs, which
increased proportionate to the level of acquisitions. However, property
operating and leasing costs as a percentage of total revenues decreased from
14.1% to 12.6% when comparing 1997 to 1998 due to efficiencies realized by the
Company.
General and administrative expenses increased by $0.9 million for the period due
primarily to the growth of the Company, but as a percentage of total revenues
increased only slightly from 3.6% to 3.8% when comparing years.
Depreciation and amortization increased by $6.1 million due to a full period of
depreciation on 1997 acquisitions and depreciation on 1998 acquisitions.
Interest incurred increased by approximately $3.6 million over the same period
last year due to the Company holding higher average balances outstanding in the
second quarter of 1998 compared to 1997.
Other income (expenses) increased due to gains earned upon the disposition of
six properties in 1998. In 1997, the Company disposed of three properties with
much lower gains earned.
NET INCOME AND OTHER MEASURES OF OPERATIONS
Net income increased $5.0 million or 18.3% due to the growth of the Company
through the net acquisition of Warehouse/Industrial real estate and merchant
income.
Funds from operations ("FFO") increased 9.6% from $42.7 million to $46.8
million. The National Association of Real Estate Investment Trusts ("NAREIT")
defines funds from operations as net income before extraordinary items plus
depreciation and amortization less the amortization of deferred financing costs.
The Company considers FFO and FFO growth to be one relevant measure of financial
performance of equity REITs that provides a relevant basis for comparison among
REITs, and it is presented to assist investors in analyzing the performance of
the Company.
On a cash basis, when comparing the 1997 results of operations of properties
owned January 1, 1997 with the results of operations of the same properties for
1998 (the "same property" portfolio), the Company recognized an increase of
approximately 2.0% in net operating income. This same property increase was due
to the timely lease up of vacant space, rental increases on renewed leases and
contractual increases in minimum rent under leases in place.
31
<PAGE>
The Company assesses its operating results, in part, by comparing the Net
Revenue Margin between periods. Net Revenue Margin is calculated for the "in
service" portfolio by dividing net revenue (total operating and investment
revenue less real estate taxes and property operating and leasing expense) by
adjusted operating and investment revenue (operating and investment revenue less
expense reimbursements, adjusted for leases containing expense stops). This
margin indicates the percentage of revenue actually retained by the Company or,
alternatively, the amount of property related expenses not recovered by tenant
reimbursements. The margin for 1998 was 88.7% compared with 88.1% for 1997.
COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996
REVENUES
Total revenues increased by $22.3 million or 35.1% over 1996.
In the twelve months of 1997, 94.6% of total revenues of the Company were
derived primarily from base rents, straight-line rents, expense reimbursements
and mortgage income (operating and investment revenue), pursuant to the terms of
tenant leases and mortgages for occupied space at the warehouse/industrial
properties.
Operating and investment revenues increased by $23.8 million in 1997. A portion
of the increase from the prior year is due to income from twenty-one properties
acquired in 1997 and seven build-to-suit properties coming on line totaling 8.7
million square feet, net of three dispositions as of the end of the year. The
remainder of the increase was attributable to a full period of income from the
1996 acquisition of thirteen properties, totaling 3.3 million square feet, net
of seven property dispositions.
Other revenues decreased $1.6 million due to decreased fees earned and profits
realized by the Company and the Company's unconsolidated affiliate in connection
with decreased build-to-suit, development and leasing activities.
OPERATING AND NONOPERATING EXPENSES
Real estate tax expense and property operating and leasing expense increased by
$8.4 million from year to year. The majority of the increase, $5.2 million,
resulted from a full period of real estate taxes on 1996 acquisitions and a
partial period of real estate taxes on 1997 acquisitions, net of dispositions.
The balance of the increase was due to increased leasing expenses, insurance,
utilities, repairs and maintenance and property management costs, which
increased proportionate to the level of acquisitions. However, 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 due to efficiencies
realized by the Company.
General and administrative expenses increased by $0.5 million for the period due
primarily to the growth of the Company, but as a percentage of total revenues
decreased from 4.1% to 3.6% when comparing years.
Depreciation and amortization increased by $4.6 million due to a full period of
depreciation on 1996 acquisitions and depreciation on 1997 acquisitions.
Interest incurred increased by approximately $0.2 million over the same period
last year due to the Company holding higher average balances outstanding in the
second quarter of 1997 compared to 1996.
32
<PAGE>
Other income (expenses) increased due to the non-recurring disposal of fixed
assets for a gain which occurred in 1997.
In 1996, the Company incurred an extraordinary loss of $3.3 million representing
a write off of unamortized deferred financing costs as a result of the
re-financing of its outstanding revenue bonds. In addition, the Company replaced
its $92 million secured lines of credit with a $135 million unsecured credit
facility at a significant savings in interest.
NET INCOME AND OTHER MEASURES OF OPERATIONS
Net income increased $12.3 million or 82.5% due to the growth of the Company
through the net acquisition of Warehouse/Industrial real estate and merchant
income.
FFO increased 40.5% from $30.4 million to $42.7 million.
On a cash basis, when comparing the 1996 results of operations of properties
owned January 1, 1996 with the results of operations of the same properties for
1997 (the "same property" portfolio), the Company recognized an increase of
approximately 6.0% in net operating income. This same property increase was due
to the timely lease up of vacant space, rental increases on renewed leases and
contractual increases in minimum rent under leases in place.
The Net Revenue Margin for 1997 was 88.1% compared with 84.3% for 1996.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING AND INVESTMENT CASH FLOW
Cash flow generated from Company operations has historically been utilized for
working capital purposes and distributions, while proceeds from financings and
capital raises have been used to fund acquisitions and other capital costs.
However, cash flow from operations during 1998 of $57.8 million net of $41.1
million of 1998 distributions provided $16.7 million of retained capital. The
Company expects retained capital to fund a portion of future investment
activities.
In 1998, the Company's investment activities include acquisitions of $69.7
million, advances for construction in progress of $23.8 million, advances on
mortgage notes receivable of $17.5 million, advances to affiliate to fund
construction activities of $33.5 million and improvements and additions to
properties of $27.0 million. These activities were funded with dispositions of
real estate of $33.9 million, advances on the company's line of credit of $132.0
million and a portion of the Company's retained capital.
EQUITY AND SHARE ACTIVITY
On March 25, 1998, the Company completed a public offering of 370,371 common
shares of beneficial interest at $32.0625 per share in an underwritten offering
to a unit investment trust. Net proceeds of $11.8 million from the public
offering, proceeds from the repayment of mortgage notes receivable, and working
capital were used to repay amounts outstanding under the Company's line of
credit of $30.1 million.
33
<PAGE>
On April 8, 1998 the Company completed the private placement of 370,000 common
shares of beneficial interest at $33.375 per share to an institutional investor.
The net proceeds of the offering of approximately $12.1 million were used to
fund working capital requirements.
During 1998, the Company paid distributions on common shares of $31.2 million or
$1.75 per share and on class B common shares of $3.7 million or $1.80 per share.
Also, in January of 1998, the Company paid dividends on preferred shares of $1.4
million or $0.477 per share, and in April, July and October of 1998, paid
dividends of $1.6 million or $0.53 per share each time. The following factors,
among others, will affect the future availability of funds for distribution: (i)
scheduled increases in base rents under existing leases, (ii) changes in minimum
base rents attributable to replacement of existing leases with new or
replacement leases and (iii) restrictions under certain covenants of the
Company's unsecured credit facility co-led by The First National Bank of Chicago
and Lehman Brothers Holdings, Inc.
DEBT CAPACITY
In November, 1998, the Company increased to $250 million its unsecured credit
facility co-led by The First National Bank of Chicago and Lehman Brothers
Holdings Inc. As of March 11, 1999, the Company had outstanding borrowings of
approximately $102.6 million under the unsecured revolving line of credit
(approximately 9.2% of the Company's fully diluted total market capitalization),
and the Company had remaining availability of approximately $147.4 million under
its unsecured line of credit.
At December 31, 1998, the Company's debt constituted approximately 31.7% of its
fully diluted total market capitalization. Also, the Company's EBITDA to debt
service coverage ratio remained high at 5.7 to 1, and the Company's EBITDA to
fixed charge coverage ratio decreased to 3.8 to 1 due to preferred dividends.
The Company's fully diluted common equity market capitalization was
approximately $696.3 million, and its fully diluted total market capitalization
exceeded $1.1 billion. The Company's leverage ratios benefited during 1998 from
the conversion of approximately $3.7 million of its 8.22% Convertible
Subordinated Debentures, due 2004, to 201,748 common shares.
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 statement 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.
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, initially, by draws
on the Company's unsecured line of credit, followed by the issuance of long-term
unsecured indebtedness and the issuance of equity securities. Management expects
that a significant portion of the Company's investment funds will be supplied by
the proceeds of property dispositions.
34
<PAGE>
INFLATION
Inflation has not had a significant impact on the Company because of the
relatively low inflation rates in the Company's markets of operation. Most of
the Company's leases require the tenants to pay their share of operating
expenses, including common area maintenance, real estate taxes and insurance,
thereby reducing the Company's exposure to increases in costs and operating
expenses resulting from inflation. In addition, many of the leases are for
remaining terms less than five years which may enable the Company to replace
existing leases with new leases at higher base rental rates if rents of existing
leases are below the then-existing market rate.
YEAR 2000 COMPLIANCE
In response to the Year 2000 issue, the Company initiated a project in early
1997 to identify, evaluate and implement a new computerized real estate
management system. The Company is addressing the issue through a combination of
modifications to existing programs and conversion to Year 2000 compliant
software. In addition, the Company is discussing with its tenants, vendors, and
other service providers the possibility of any interface difficulties relating
to the Year 2000 issue which may affect the Company. If the Company and those it
conducts business with do not make modifications or conversions in a timely
manner, the Year 2000 issue may have a material adverse effect on the Company's
business, financial condition, and results of operations. The total cost
associated with the required modifications is not expected to be material to the
Company's consolidated results of operations, liquidity and financial position,
and is being expensed as incurred.
RECENT PRONOUNCEMENTS
In June, 1997, the FASB issued SFAS Statement No. 130, "Reporting Comprehensive
Income." This statement, effective for periods beginning after December 15,
1997, requires the Company to report components of comprehensive income in a
financial statement that is displayed with the same prominence as other
financial statements. Comprehensive income is defined by Concepts Statement No.
6, "Elements of Financial Statements" as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from nonowner sources. It includes all changes in equity during the period
except those resulting from investment by owners and distributions to owners. As
required by this statement, the Company adopted the new standard for reporting
comprehensive income. The Company's net income is equal to comprehensive income.
In June, 1997, the FASB issued SFAS Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This statement, effective
for financial statements for fiscal years beginning after December 15, 1997,
requires that a public business enterprise report financial and descriptive
information about its reportable operating segments. Generally, financial
information is required to be reported on the basis that it is used internally
for evaluating segment performance and deciding how to allocate resources to
segments. The Company has determined its statement disclosure reflects the basis
by which management analyzes the Company's performance.
In March, 1998, the FASB's Emerging Issues Task Force ("EITF") issued EITF Issue
No. 97-11, "Accounting for Internal Costs Related to Real Estate Acquisitions."
This statement, effective as of
35
<PAGE>
March 19, 1998, requires that internal costs of identifying and acquiring
operating properties should be expensed as incurred. Prior to March 19, 1998,
the Company capitalized internal preacquisition costs. The adoption of this EITF
has not had a significant impact on the results of current operations and the
Company estimates this EITF will not have a significant impact on the results of
operations in the future.
In May, 1998, the FASB issued SFAS Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement, effective for financial
statements for fiscal years beginning after June 15, 1999, provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. The Company has disclosed its only
derivative position within the Debt footnote to the financial statements.
FORWARD LOOKING STATEMENTS
This Report on Form 10-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 not limited to, uncertainties
affecting real estate businesses generally (such as entry into new leases,
renewals of leases and dependence on tenants' business operations), risks
relating to acquisition, construction and development activities, possible
environmental liabilities, risks relating to leverage, debt service and
obligations with respect to the payment of dividends (including availability of
financing terms acceptable to the Company and sensitivity of the Company's
operations to fluctuations in interest rates), the potential for the need to use
borrowings to make distributions necessary for the Company to qualify as a REIT,
dependence on the primary market in which the Company's properties are located,
the existence of complex regulations relating to the Company's status as a REIT,
the failure of the Company and entities the Company does business with to make
necessary modifications and conversions to Year 2000 compliant software in a
timely manner and the potential adverse impact of the market interest rates on
the cost of borrowings by the Company and on the market price for the Company's
securities.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is subject to market risk associated with changes in interest rates
as follows:
During 1998 the Company entered into an agreement to lock in a fixed interest
rate on an anticipated 1999 refinancing of certain mortgage notes payable. The
agreement has a notional amount of $25 million and provides that the Company
will either receive or pay an amount equal to the spread between a locked in
treasury rate (4.835%) and the interest rate on treasury securities underlying
the agreement as of the determination date, which is to be triggered by the
Company on or before May 17, 1999. If settlement of the agreement had been
triggered at December 31, 1998 or February 25, 1999 the Company would have had
to pay approximately $365,000 or would have received approximately $436,000,
respectively. A 25 basis point movement in the base treasury securities
underlying the agreement would have an approximately $468,000 increase or
decrease in the amount the Company would receive or pay under the agreement as
of February 25, 1999.
As of December 31, 1998 the Company's long term debt includes a mortgage note
payable, tax exempt debt and borrowings under a line of credit totaling $154.8
million, all of which bear interest at variable rates that float with the
market. A 25 basis point movement in the interest rates underlying these debt
36
<PAGE>
agreements would result in an approximate $387,000 annualized increase or
decrease in interest expense and cash flows. The remaining debt is fixed rate
debt.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Index to Financial Statements on Page F-1 of this Annual Report on
Form 10-A for the financial statements and financial statement schedules.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
37
<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 business trust
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.
SIGNATURE NAME AND TITLE DATE
- --------- -------------- ----
/s/ Martin Barber Martin Barber, Dec. 29, 1999
- ------------------------ Chairman and Trustee
/s/ John S. Gates, Jr. John S. Gates, Jr., President Dec. 29, 1999
- ------------------------ Chief Executive Officer and
Trustee
/s/ Robert L. Stovall Robert L. Stovall, Dec. 29, 1999
- ------------------------ Vice Chairman and Trustee
/s/ Nicholas C. Babson Nicholas C. Babson, Trustee Dec. 29, 1999
- ------------------------
/s/ Alan D. Feld Alan D. Feld, Trustee Dec. 29, 1999
- ------------------------
/s/ John J. Kinsella John J. Kinsella, Trustee Dec. 29, 1999
- ------------------------
/s/ Thomas E. Robinson Thomas E. Robinson, Trustee Dec. 29, 1999
- ------------------------
/s/ Norman Bobins Norman Bobins, Trustee Dec. 29, 1999
- ------------------------
38
<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.
39
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
1. The consolidated financial statements indicated in
Part II, 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.
2. The financial statement schedules indicated in Part
II, 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.
3. The exhibits listed in part (c) of this Item 14.
(b) Reports on Form 8-K filed during the fourth quarter:
1. A Current Report on Form 8-K for October 23, 1998
pursuant to Item 5 - "Other Events" announced the
Company's filing of supplement to the Company's
registration statement on Form S-3, Registration
Statement No. 333-49359, with the Securities and
Exchange Commission relating to the issuance and sale
from time to time of $250,000,000 aggregate principal
amount of the Company's Medium Term Notes, Series A.
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
Exhibit 11 - Computation of per share earnings
Exhibit 12 - Computation of the ratios of earnings to fixed
charges
Exhibit 21 - Subsidiaries of the Company
Exhibit 23 - Consent of Independent Accountants
Exhibit 27 - Financial Data Schedule
Exhibit 99 - Press release dated September 28, 1999.
40
<PAGE>
10.1 Second Amended and Restated Credit Agreement dated as
of November 23, 1998 among CenterPoint Properties
Trust, the First National Bank of Chicago and Bank of
America N.T.S.A.
10.2 Form of Employment and Severance Agreement between
the Company and each of John S. Gates, Jr., Paul S.
Fisher, Rockford O. Kottka, Paul T. Ahern and Mike M.
Mullen
***10.3 Stock Purchase Agreement between the Company and
Davis Selected Advisors, L.P.
***10.4 CenterPoint Properties Amended and Restated 1993
Stock Option Plan, as amended
***10.5 First Amendment to the CenterPoint Properties 1995
Director Stock Plan
***10.6 Stock Option Agreement between the Company and Martin
Barber
***10.7 Stock Option Agreement between the Company and
Nicholas C. Babson
***10.8 Stock Option Agreement between the Company and Alan
D. Feld
***10.9 Stock Option Agreement between the Company and John
J. Kinsella
***10.10 Stock Option Agreement between the Company and Thomas
E. Robinson
***10.11 Stock Option Agreement between the Company and Robert
L. Stovall
***10.12 Stock Option Agreement between the Company and Norman
Bobins
11 Computation of per share earnings
12 Computation of the ratios of earnings to fixed
charges
21 Subsidiaries of the Company
23 Consent of Independent Accountants
27 Financial Data Schedule
</TABLE>
- --------------
* Incorporated by reference to the Company's
Registration Statement on Form S-3 (File No.
333-49359)
** Incorporated by reference to the Company's
Registration Statement on Form S-11 File
No. 333-85440)
*** Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended June
30, 1998
**** Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended June
30, 1996
***** Incorporated by reference to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended June
30, 1995
****** Incorporated by reference to the Company's Current
Report on Form 8-K dated August 3, 1998
******* Incorporated by reference to the Company's Current
Report on Form 8-K dated October 23, 1998
41
<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, 1998 and 1997......... F-3
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996................................... F-4
Consolidated Statements of Shareholders' Equity for
the years ended December 31, 1998, 1997 and 1996................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996................................... F-6
Notes to Consolidated Financial Statements........................... F-7 to F-23
Financial Statement Schedules:
Report of Independent Accountants.................................... F-24
Schedule II - Valuation and Qualifying Accounts...................... F-25
Schedule III - Real Estate and Accumulated Depreciation.............. F-26 to F-31
</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, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1998 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 2A, the financial statements as of December 31, 1998 and
1997 and for the years then ended have been revised with respect to the timing
of recognition of certain fees and gains.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
February 9, 1999
except for Note 2A 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,
------------
1998 1997
REVISED REVISED
------- -------
<S> <C> <C>
Assets:
Investment in real estate:
Land and leasehold $132,270 $124,011
Buildings 504,895 418,303
Building improvements 94,474 64,372
Furniture, fixtures, and equipment 18,817 13,912
Construction in progress 18,401 41,677
-------- --------
768,857 662,275
Less accumulated depreciation and amortization 62,257 44,352
-------- --------
Net investment in real estate 706,600 617,923
Cash and cash equivalents 475 1,652
Restricted cash and cash equivalents 33,056 36,509
Tenant accounts receivable, net 18,067 12,416
Mortgage notes receivable 901 9,668
Investment in and advances to affiliate 43,796 11,107
Prepaid expenses and other assets 4,030 3,119
Deferred expenses, net 10,681 6,661
-------- --------
$817,606 $699,055
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable and other debt $103,520 $85,755
Senior unsecured debt 100,000
Tax-exempt debt 75,540 75,540
Line of credit 77,600 97,700
Convertible subordinated debentures payable 8,058 11,740
Preferred dividends payable 1,060 901
Accounts payable 7,986 10,311
Accrued expenses 31,060 24,593
Rents received in advance and security deposits 5,323 4,759
-------- --------
410,147 311,299
-------- --------
Commitments and contingencies
Shareholders' equity:
Preferred shares of beneficial interest, $.001 par value, 10,000,000 shares
authorized; 3,000,000 issued and outstanding, having a liquidation
preference of $25 per share ($75,000) 3 3
Common shares of beneficial interest, $.001 par value, 47,727,273 shares
authorized; 18,753,474 and 16,891,951 issued and outstanding, respectively 19 17
Class B common shares of beneficial interest, $.001 par value, 2,272,727 shares
authorized; 1,398,088 and 2,272,727 issued and outstanding, respectively 1 2
Additional paid-in-capital 449,229 420,743
Retained earnings (deficit) (41,497) (32,512)
Unearned compensation - restricted shares (296) (497)
-------- --------
Total shareholders' equity 407,459 387,756
-------- --------
$817,606 $699,055
======== ========
</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,
------------------------
1998 1997
REVISED REVISED 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
Operating and investment revenue:
Minimum rents $77,409 $57,878 $42,107
Straight-line rents 4,030 2,732 2,087
Expense reimbursements 21,924 18,228 11,413
Mortgage interest income 1,061 2,098 1,514
--------- --------- ---------
Total operating and investment revenue 104,424 80,936 57,121
--------- --------- ---------
Other revenue:
Real estate fee income 3,657 2,514 5,140
Equity in net income (loss) of affiliate (855) 2,138 1,069
--------- --------- ---------
Total other revenue 2,802 4,652 6,209
--------- --------- ---------
Total revenue 107,226 85,588 63,330
--------- --------- ---------
Expenses:
Real estate taxes 22,218 17,091 11,868
Property operating and leasing 13,482 12,091 8,883
General and administrative 4,041 3,105 2,567
Depreciation and amortization 21,418 15,278 10,648
Interest expense:
Interest incurred, net 13,659 10,071 9,865
Amortization of deferred financing costs 1,817 800 1,127
--------- --------- ---------
Total expenses 76,635 58,436 44,958
--------- --------- ---------
Operating income 30,591 27,152 18,372
Other income (expense):
Gain on sale of real estate 1,672
Other income (expense) (15) 108 (100)
--------- --------- ---------
Income before extraordinary item 32,248 27,260 18,272
Extraordinary item, early extinguishment of debt (3,331)
--------- --------- ---------
Net income 32,248 27,260 14,941
Preferred dividends (6,360) (901) (947)
--------- --------- ---------
Net income available to common shareholders $25,888 $26,359 $13,994
========= ========= =========
Per share net income available to common shareholders
before extraordinary item:
Basic $1.30 $1.41 $1.25
Diluted $1.29 $1.39 $1.22
Per share net income available to common shareholders:
Basic $1.30 $1.41 $1.01
Diluted $1.29 $1.39 $0.99
Distributions per common share $1.75 $1.68 $1.62
</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
---------------- ----------------- ----------------
NUMBER NUMBER NUMBER
OF SHARES AMOUNT OF SHARES AMOUNT OF SHARES AMOUNT
--------- ------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 2,272,727 $2 0 $0 10,358,958 $10
Issuance of common shares,
less $2,387 of offering costs 3,450,000 3
Conversion of convertible preferred shares
to Class B common shares (2,272,727) (2) 2,272,727 2
Conversion of convertible subordinated
debentures to common shares 485,680 1
Shares issued for stock options exercised 27,787
Incentive share awards 8,290
Director share awards 2,516
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
Issuance of common shares,
less $4,054 of offering costs 2,250,000 2
Issuance of preferred shares,
less $3,101 of offering costs 3,000,000 3
Conversion of convertible subordinated
debentures to common shares 144,640
Shares issued for stock options exercised 149,715 1
Incentive share awards 12,444
Director share awards 1,921
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 as revised
--------- ------ --------- ---- ---------- ----
Balance, December 31, 1997 3,000,000 3 2,272,727 2 16,891,951 17
Issuance of common shares,
less $343 of offering costs 740,371 1
Conversion of Class B common shares to
common shares (874,639) (1) 874,639
Conversion of convertible subordinated
debentures to common shares 201,748
Shares issued for stock options exercised 42,461
Director share awards 2,304
Amortization of unearned compensation
Distributions declared on common shares,
$1.75 per share
Distributions declared on preferred shares,
$2.12 per share
Distributions declared on Class B common
shares, $1.80 per share
Net income as revised
--------- ------ --------- ---- ---------- ----
Balance, December 31, 1998 3,000,000 $3 1,398,088 $1 18,753,474 $19
========= ====== ========= ==== ========== ====
<CAPTION>
UNEARNED
ADDITIONAL RETAINED COMPENSATION- TOTAL
PAID-IN EARNINGS RESTRICTED SHAREHOLDERS'
CAPITAL (DEFICIT) SHARES EQUITY
<S> <C> <C> <C> <C>
Balance, January 1, 1996 $187,161 ($18,602) ($251) $168,320
Issuance of common shares,
less $2,387 of offering costs 79,547 79,550
Conversion of convertible preferred shares
to Class B common shares
Conversion of convertible subordinated
debentures to common shares 8,683 8,684
Shares issued for stock options exercised 508 508
Incentive share awards 186 (186)
Director share awards 57 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 276,142 (27,726) (319) 248,113
Issuance of common shares,
less $4,054 of offering costs 66,819 66,821
Issuance of preferred shares,
less $3,101 of offering costs 71,896 71,899
Conversion of convertible subordinated
debentures to common shares 2,564 2,564
Shares issued for stock options exercised 2,873 2,874
Incentive share awards 392 (392)
Director share awards 57 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 as revised 27260 27,260
------- ------- ----- --------
Balance, December 31, 1997 420,743 (32512) (497) 387756
Issuance of common shares,
less $343 of offering costs 23,880 23,881
Conversion of Class B common shares to
common shares
Conversion of convertible subordinated
debentures to common shares 3,644 3,644
Shares issued for stock options exercised 882 882
Director share awards 80 80
Amortization of unearned compensation 201 201
Distributions declared on common shares,
$1.75 per share (31,182) (31,182)
Distributions declared on preferred shares,
$2.12 per share (6,360) (6,360)
Distributions declared on Class B common
shares, $1.80 per share (3,691) (3,691)
Net income as revised 32,248 32,248
------- ------- ----- --------
Balance, December 31, 1998 $449,229 ($41,497) ($296) $407,459
======== ========= ===== ========
</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,
------------------------
1998 1997
REVISED REVISED 1996
------- ------- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $32,248 $27,260 $14,941
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary item-early extinguishment of debt 3,331
Bad debts 550 279 462
Depreciation 20,081 14,275 10,199
Amortization of deferred financing costs 1,817 800 1,127
Other amortization 1,337 1,003 449
Straight-line rents (4,030) (2,732) (2,087)
Incentive stock awards 281 271 175
Interest on converted debentures 44 12 77
Equity in net (income) loss of affiliate 855 (2,138) (1,069)
(Gain) loss on disposal of real estate (1,672) (140) 60
Net changes in:
Tenant accounts receivable (1,604) (973) 197
Prepaid expenses and other assets 1,107 (21) (937)
Rents received in advance and security deposits 623 317 590
Accounts payable and accrued expenses 6,167 1,198 2,037
--------- ---------- ---------
Net cash provided by operating activities 57,804 39,411 29,552
--------- ---------- ---------
Cash flows from investing activities:
Change in restricted cash and cash equivalents 3,746 (35,532) 325
Acquisition of real estate (69,700) (122,090) (85,268)
Construction in progress (23,756) (42,311) (17,063)
Improvements and additions to properties (27,038) (42,441) (12,575)
Disposition of real estate 33,948 13,510 18,991
Change in deposits on acquisitions (2,081) 1,303 1,037
Issuance of mortgage notes receivable (17,462) (18,523)
Repayment of mortgage notes receivable 24,392 5,670 5,543
Investment in and advances to affiliate (33,543) (19,639) (1,048)
Receivables from affiliates and employees 62 (3) 106
Additions to deferred expenses (7,274) (3,803) (3,079)
--------- ---------- ---------
Net cash used in investing activities (118,706) (245336) (111,554)
--------- ---------- ---------
Cash flows from financing activities:
Proceeds from sale of preferred shares 75,000
Proceeds from sale of common shares 25,106 73,749 82,445
Offering costs paid (343) (7,155) (2,387)
Proceeds from issuance of unsecured bonds 100,000
Proceeds from issuance of line of credit 132,000 211,650 46,100
Repayment of line of credit (152,100) (160,050)
Proceeds from issuance of bonds payable 55,000 45,882
Repayments of mortgage notes payable (3,831) (8,156) (62,705)
Repayments of notes payable (33) (2,385) (123)
Distributions (41,074) (31,145) (29,017)
Conversion of convertible subordinated
debentures payable (1) (1)
--------- ---------- ---------
Net cash provided by financing activities 59,725 206,507 80,194
--------- ---------- ---------
Net change in cash and cash equivalents (1,177) 582 (1,808)
Cash and cash equivalents, beginning of year 1,652 1,070 2,878
--------- ---------- ---------
Cash and cash equivalents, end of year $475 $1,652 $1,070
========= ========== =========
</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.
In June, 1997, the FASB issued SFAS Statement No. 131, "Disclosures
about Segments of an Enterprise and Related Information." This statement,
effective for financial statements for fiscal years beginning after December
15, 1997, requires that a public business enterprise report financial and
descriptive information about its reportable operating segments. Generally,
financial information is required to be reported on the basis that it is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. Based on this criteria, the Company has determined
that it operates in one business segment, that being the development,
management and ownership of warehouse/industrial property located in Greater
Chicago. Thus, all information required by SFAS No. 131 is included in the
Company's financial statements. No single tenant represented more than 10% of
consolidated minimum rents in 1998, 1997 and 1996.
2A. REVISION
During the third quarter of 1999, the Company determined that it had
recognized certain participation, assignment, consulting and financing fees
in 1998 and 1997 in advance of that permitted and has revised previously
issued financial statements accordingly. In addition, the Company revised
previously issued financial statements to recognize, for financial reporting
purposes, certain gains in connection with tax-deferred exchanges that had
not been previously recognized. The financial statement revisions effect only
the timing of fee revenue and HAVE NO EFFECT ON PREVIOUSLY REPORTED CASH FLOW
or on the total fee revenue to be recognized.
The effect of this revised reporting on the Company's condensed balance
sheets, condensed statements of operations, net income and earnings per share
is as follows (1996 was not affected):
F-7
<PAGE>
<TABLE>
<CAPTION>
1998 1997
---- ----
Previously As Previously As
Reported Revised Reported Revised
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Condensed Balance Sheets:
Investment in real estate, net $685,476 $706,600 $597,294 $617,923
Mortgage notes receivable 20,353 901 30,297 9,668
Other assets 116,107 110,105 71,684 71,464
-------- -------- -------- --------
Total assets $821,936 $817,606 $699,275 $699,055
======== ======== ======== ========
Long term debt $364,718 $364,718 $270,735 270,735
Other liabilities 45,179 45,429 40,414 40,564
Shareholders' equity 412,039 407,459 388,126 387,756
-------- -------- -------- --------
Total liabilities and
Shareholders' equity $821,936 $817,606 $699,275 $699,055
======== ======== ======== ========
Condensed Statement of Operations:
Operating and investment revenue 104,290 104,424 80,625 80,936
Other revenue 8,818 2,802 5,333 4,652
-------- -------- -------- --------
Total revenue 113,108 107,226 85,958 85,588
Operating expenses (76,635) (76,635) (58,436) (58,436)
Other income (expense) (15) 1,657 108 108
-------- -------- -------- --------
Net income $36,458 $32,248 $27,630 $27,260
======== ======== ======== ========
Net income available to common shareholders per share:
Net income per share- basic $ 1.51 $ 1.30 $ 1.43 $ 1.41
Net income per share- diluted $ 1.50 $ 1.29 $ 1.41 $ 1.39
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Minimum rents are recognized on a straight-line basis over the terms of
the respective leases. Unbilled rents receivable represents the amount that
straight-line rental revenue exceeds rents due under the lease agreements.
Unbilled rents receivable, included in tenants accounts receivable, at December
31, 1998 and 1997 were $8,530 and $5,075, 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 $1,770
in 1998, $1,894 in 1997 and $1,200 in 1996.
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 $575 and $272 as of December 31, 1998 and 1997,
respectively.
F-8
<PAGE>
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 15 years. Financing
costs are amortized over the terms of the respective loan agreements. Deferred
expenses relating to debenture conversions of $82 and $86 were charged to
paid-in capital in 1998 and 1997, respectively, and fully amortized deferred
expenses of $1,562 and $1,207 were written off in 1998 and 1997, respectively.
Also, in 1998 the Company disposed of properties and deferred leasing and other
costs of $94 were written off.
The balances are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1998 1997
------- ------
<S> <C> <C>
Deferred financing costs, net of accumulated
amortization of $1,893 and $1,081 $4,601 $2,766
Deferred leasing and other costs, net of accumulated
amortization of $2,127 and $1,478 6,080 3,895
------- ------
$10,681 $6,661
======= ======
</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. The resulting gains or losses for taxable
dispositions of properties are reflected in operations. However, no gain or loss
is recognized for transactions that qualify as tax-free exchanges of properties.
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 a 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 investments purchased with original maturities of three months or
less to be cash equivalents.
F-9
<PAGE>
INVESTMENT IN AND ADVANCES TO AFFILIATE
The Company accounts for its investment in affiliate using the equity
method whereby its cost of the investment is adjusted for its share of equity in
net income or loss from the date of acquisition and reduced by distributions
received.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
INCOME TAXES
The Company qualifies as a real estate investment trust ("REIT") under
sections 856-860 of the Internal Revenue Code beginning January 1, 1994. In
order to qualify as a REIT, the Company is required to distribute at 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, 1998, 1997 and 1996 include a return of capital of
approximately 9%, 12% and 51%, respectively.
EARNINGS PER COMMON SHARE
Following are the reconciliations of the numerators and denominators
for computing basic and diluted earnings per share ("EPS") data:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Numerators:
Income before extraordinary items $32,248 $27,260 $18,272
Dividends on preferred shares (6,360) (901)
Dividends on convertible preferred stock (947)
---------- ---------- ----------
Income available to common shareholders
before extraordinary item - for basic and diluted EPS 25,888 26,359 17,325
Extraordinary items (3,331)
---------- ---------- ----------
Net income available to common shareholders - for
basic and diluted EPS $25,888 $26,359 $13,994
========== ========== ==========
Denominators:
Weighted average common shares outstanding - for
basic EPS 19,867,509 18,634,850 13,890,049
Effect of dilutive securities - options 234,428 312,280 285,913
---------- ---------- ----------
Weighted average common shares outstanding - for
diluted EPS 20,101,937 18,947,130 14,175,962
========== ========== ==========
</TABLE>
F-10
<PAGE>
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 1998, 1997 and 1996 would be anti-dilutive. The assumed
conversion of the convertible preferred stock in 1996 would also be
anti-dilutive.
RECLASSIFICATIONS
Certain items presented in the consolidated statements of operations
for prior periods have been reclassified to conform with current classifications
with no effect on results of operations.
ACCOUNTING PRONOUNCEMENTS
In June, 1997, the FASB issued SFAS Statement No. 130, "Reporting
Comprehensive Income." This statement, effective for periods beginning after
December 15, 1997, requires the Company to report components of comprehensive
income in a financial statement that is displayed with the same prominence as
other financial statements. Comprehensive income is defined by Concepts
Statement No. 6, "Elements of Financial Statements" as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from nonowner sources. It includes all changes in equity during
the period except those resulting from investment by owners and distributions to
owners. As required by this statement, the Company adopted the new standard for
reporting comprehensive income. The Company's net income is equal to
comprehensive income.
In March, 1998, the FASB's Emerging Issues Task Force ("EITF") issued
EITF Issue No. 97-11, "Accounting for Internal Costs Related to Real Estate
Acquisitions." This statement, effective as of March 19, 1998, requires that
internal costs of identifying and acquiring operating properties should be
expensed as incurred. Prior to March 19, 1998, the Company capitalized internal
preacquisition costs. The adoption of this EITF has not had a significant impact
on the results of current operations and the Company estimates this EITF will
not have a significant impact on the results of operations in the future.
In May, 1998, the FASB issued SFAS Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities." This statement, effective for
financial statements for fiscal years beginning after June 15, 1999, provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. The Company has disclosed its only
derivative position within the Long Term Debt note.
3. PROPERTY ACQUISITIONS AND DISPOSITIONS
During each of the years ended December 31, 1998, 1997 and 1996, the
Company acquired thirty, twenty-one and fifteen properties, respectively,
consisting principally of single-tenant buildings for an aggregate amount of
approximately $91,692, $124,923 and $103,532, respectively. Fifteen of the
properties in 1998 were acquired as a portfolio from an unrelated third
party. All of the remaining property acquisitions were closed in singular
transactions, and except for one transaction in 1998, 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 1998, 1997 and 1996, and from
proceeds of public offerings of the Company's common shares completed in
1998, 1997 and 1996, and from proceeds of a
F-11
<PAGE>
public offering of the Company's preferred shares completed in 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 six properties during the 1998, three
properties during 1997 and eight properties during 1996.
Due to the effect of the March, 1997 common offering, the November,
1997 preferred offering, the May and April, 1998 common offerings and the
acquisitions and dispositions of properties, the historical results are not
indicative of the future results of operations. The following 1996 unaudited pro
forma information is presented as if the 1996 and 1997 acquisitions and
dispositions of properties, the 1997 and 1996 offerings, and the corresponding
repayment of certain debt had occurred on January 1, 1996. The 1997 and 1998
unaudited proforma information is presented as if the 1998 and 1997 offerings,
the corresponding repayment of certain debt, and the 1998 and 1997 acquisitions
and dispositions had all occurred on January 1, 1997. 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 1997 or 1996, or to project results for any future period.
<TABLE>
<CAPTION>
PROFORMA FOR THE YEARS
----------------------
ENDED DECEMBER 31, (UNAUDITED)
------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Total revenues $107,106 $ 95,607 $ 80,294
Total expenses 79,882 61,983 50,103
-------- --------- --------
Income before extraordinary item 27,224 33,624 30,191
Preferred dividends (6,360) (6,360) (7,307)
-------- --------- --------
Income available to common shareholders
before extraordinary item $ 20,864 $ 27,264 $ 22,884
======== ======== ========
Per share income available to common shareholders
before extraordinary item:
Basic $1.04 $1.37 $1.28
Diluted $1.03 $1.35 $1.26
</TABLE>
4. MORTGAGE NOTES RECEIVABLE
As of December 31, 1998, the Company had a mortgage loan receivable
outstanding of $901, bearing interest at a rate of 10.50% and maturing in June,
2010. As of December 31, 1997, the Company had mortgage loans receivable
outstanding of $9,668, bearing interest at rates ranging from 8.5% to
10.5%.Certain notes require payment of interest and principle monthly. As of
December 31, 1998, the note matures as follows:
<TABLE>
<S> <C>
1999.............................................. $ 24
2000.............................................. 258
2001.............................................. 84
2002.............................................. 88
2003.............................................. 91
Thereafter........................................ 356
----
Total.................................... $901
====
</TABLE>
F-12
<PAGE>
Based on borrowing rates available at the end of 1998 and 1997 for
mortgage loans with similar terms and maturities, the fair value of the mortgage
notes receivable approximates the carrying values.
Land and buildings have been pledged as collateral for the above notes
receivable.
5. INVESTMENT IN AND ADVANCES TO AFFILIATE
The Company holds approximately 99% of the economic interest in
CenterPoint Realty Services Corporation ("CRS"). To maintain compliance with
limitations on income from business activities received by REITs and their
qualified REIT subsidiaries, the Company holds its interest in CRS in the form
of non-voting equity ownership which qualifies as an unconsolidated taxable
subsidiary.
As of December 31, 1998 and 1997, the Company had an outstanding
balance due from CRS of $41,379 and $7,868, respectively, under a series of
demand loans with interest rates ranging from 8.0% to 11.1%.The proceeds of the
loans were required for development projects.
Certain revisions to the Company's previously issued financial
statements described in Note 2A are derived from revisions to the 1998 and 1997
financial statements of CRS. Accordingly, the summarized financial information
of CRS as of December 31, 1998 and 1997 and for the years then ended (shown
below) have been revised.
Summarized financial information of CRS is shown below.
Balance Sheets:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1998 1997
REVISED REVISED
------- -------
<S> <C> <C>
Assets:
Investment in land and real estate under development $48,270 $11,140
Notes receivable 59
Other assets 4,644 832
------- -------
$52,914 $12,031
======= =======
Liabilities:
Note payable to affiliate $41,379 $7,868
Due to affiliate 33
Other liabilities 9,187 929
------- -------
50,599 8,797
Stockholder's equity 2,315 3,234
------- -------
$52,914 $12,031
======= =======
</TABLE>
Statements of Operations:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1998 1997
REVISED REVISED 1996
------- ------- ----
<S> <C> <C> <C>
Total Income $4,823 $40,092 $16,000
Operating Expenses (6,282) (36,627) (14,261)
F-13
<PAGE>
Benefit (provision) for income taxes 595 (1,305) (659)
--------- --------- --------
Net income (loss) $ (864) $ 2,160 $1,080
========= ========= ========
</TABLE>
F-14
<PAGE>
6. LONG TERM DEBT
The long-term debt as of December 31, 1998 and 1997 consist of the
following:
<TABLE>
<CAPTION>
CARRYING AMOUNT OF PERIODIC ESTIMATED FINAL
PROPERTY PLEDGED AS NOTES DECEMBER 31, INTEREST PAYMENT BALLOON PAYMENT MATURITY
COLLATERAL 1998 1997 RATE TERMS AT MATURITY DATE
---------- ---- ---- ---- ----- ----------- ----
<S> <C> <C> <C> <C> <C> <C>
MORTGAGE NOTES PAYABLE AND
OTHER DEBT:
Designated pool of 20
properties $50,000 $50,000 7.62% $318(a) $50,000 11/1/02
Designated pool of 18
properties 30,000 30,000 6.91% 173(a) 30,000 5/15/99
850 Arthur Avenue
Elk Grove Village, IL 575 575 8.00% 12(b) 575 10/3/00
11801 South Central
Alsip, IL 4,901 7.35% 49(c) 1/1/12
2553 N. Edgington Avenue
Franklin Park, IL (d) 3,500 (e)
Designated pool of 11
properties 8,985 8.81% 114(c) 8,484 1/1/00
Designated pool of 2
properties 4,108 9.21% 45(c) 3,936 1/1/00
Designated pool of 2
properties 2,261 7.71% 21(c) 2,181 1/1/00
440 N. Lake Street
Miller, IN 1,680 1,680 (f) (a) 1,680 3/1/31
Capitalized lease obligation 1,010 7.00% 19(c) 101 12/1/03
-------- --------
103,520 85,755
-------- --------
SENIOR UNSECURED DEBT:
Bonds Payable 100,000 6.75% (g) 100,000 4/1/05
-------- --------
TAX EXEMPT DEBT:
City of Chicago Revenue Bonds 55,000 55,000 (h) (a) 55,000 9/8/32
440 N. Lake Street
Miller, IN 20,540 20,540 (f) (a) 20,540 3/1/31
-------- --------
75,540 75,540
-------- --------
LINE OF CREDIT:
Revolving line of credit 77,600 97,700 (i) (a) 10/24/01
-------- --------
Total long term debt $356,660 $258,995
======== ========
</TABLE>
F-15
<PAGE>
- ---------------------------
(a) The note requires monthly payments of interest only.
(b) The note requires quarterly payments of interest only.
(c) Amount represents the monthly payment of principal and interest.
(d) In November, 1998, the Company repaid the outstanding amount upon
maturity.
(e) The interest rate is one month LIBOR plus 1.75% (6.9% at December 31,
1997).
(f) These revenue bonds consist of two series ($1,680 taxable and $20,540
tax-exempt) of Economic Development Revenue Bonds issued in April,
1996 by the City of Gary, Indiana. $1,680 of the bonds are
collateralized by a letter of credit which contains certain financial
covenants pertaining to the tangible net worth and liabilities in
relation to portfolio value of the Company. The bonds bear interest
based on the Weekly Adjustable Interest Rate Mode at a rate determined
by the Remarketing Agent (5.15% and 6.1% on the taxable bonds and 4.1%
and 4.2% on the tax exempt bonds at December 31, 1998 and 1997,
respectively).
(g) The note requires semi-annual payments of interest only.
(h) These 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 covenants
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 (4.2% and 3.95% at December 31, 1998 and 1997,
respectively). The bonds require monthly payments of interest only and
mature in September, 2032. Of the original proceeds, the Company holds
$30,447 and $34,593 in escrow at December 31, 1998 and 1997,
respectively, for future construction costs.
(i) In October, 1996, the Company obtained a $135,000 unsecured line of
credit, and increased the line in November 1997 and November 1998 to
$150 million and $250 million, respectively. The interest rate at
December 31, 1998 is 6.1125% (LIBOR plus 1.0%) for LIBOR borrowings
and Prime Rate (7.75%) for other borrowings. As of December 31, 1997,
the interest rate range from 6.8% to 6.863% (LIBOR plus 0.80%) for
LIBOR borrowings and Prime Rate (8.5%) for other borrowings. The
Company may receive competitive bids for up to half its commitment.
The line requires payments of interest only when LIBOR contracts
mature and monthly on borrowings under Prime Rate. There is a
commitment fee of $300 per year. At December 31, 1998 and 1997, the
Company had $172,400 and $52,300, respectively, available under the
line.
As of December 31, 1998 mortgage notes, other debt, senior unsecured
debt, tax-exempt debt and line of credit mature as follows:
<TABLE>
<S> <C>
1999..................................................... $ 31,141
2000..................................................... 15,595
2001..................................................... 78,049
2002..................................................... 50,483
2003..................................................... 620
Thereafter............................................... 180,772
--------
Total........................................... $356,660
========
</TABLE>
Based on borrowing rates available to the Company at the end of 1998
and 1997 for mortgage loans with similar terms and maturities, the fair value of
the mortgage notes payable approximates the carrying values.
On September 10, 1998, the Company entered into an interest rate
protection agreement to lock into a fixed interest rate on an anticipated
refinancing of mortgage notes payable with a notional amount of $25,000.
F-16
<PAGE>
The agreement provides that the Company will either receive or pay an
amount equal to the spread between a locked in treasury rate (4.835%) and the
interest rate on treasury securities underlying the agreement as of the
determination date. The determination date is to be triggered by the Company
before May 17, 1999. If not triggered, the agreement will be settled on May 17,
1999 based on interest rates effective at the time. If settlement of the
agreement had been triggered at December 31, 1998 the Company would have had to
pay $365. The Company plans that ultimate receipt or payment made upon
settlement of the agreement will be reflected as an adjustment to interest
expense on the related refinancing.
Land, buildings and equipment related to such mortgages with an
aggregate net book value of approximately $212,168 at December 31, 1998 have
been pledged as collateral for the above debt.
7. EXTRAORDINARY ITEM
In 1996, the Company incurred a loss of $3,331 (per share - basic
$0.24; diluted $0.23), representing a write off of unamortized deferred
financing costs as a result of early extinguishment of certain debt obligations.
8. 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, 1998 and 1997, $8,058 and $11,740 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 1998, 1997 and 1996 debentures
totaling $3,682, $2,640 and $8,864, respectively, were converted into shares of
common stock. Based principally on the conversion feature and share price of
common stock at the end of 1998 and 1997, the fair value of the outstanding
Debentures approximates $14,929 and $22,595, respectively.
9. RELATED PARTY TRANSACTIONS
In May, 1998 and December, 1997, the Company purchased a fully leased
building, located in Wood Dale, Illinois and Des Plaines, Illinois,
respectively, from partnerships, in which one of the Company's Senior Officers
and a Company Director were limited partners. The two properties were purchased
for approximately $3.3 million and $4.7 million, respectively. 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.
10. SHAREHOLDERS' EQUITY
F-17
<PAGE>
COMMON SHARES OF BENEFICIAL INTEREST
As of December 31, 1998 the Company has reserved 621,829 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, 65,409 Common
Shares for future issuance under the 1995 Director Stock Plan, 441,534 Common
Shares for issuance upon the conversion of the Debentures and 1,000,000 Common
Shares for future issuance under the dividend reinvestment and stock purchase
plan.
CLASS B COMMON SHARES OF BENEFICIAL INTEREST
On September 22, 1995, the Company completed a $50 million private
equity placement of non-voting preferred shares of beneficial interest. In May,
1996, the preferred shares of beneficial interest automatically converted, on a
share for share basis, to non-voting Class B Common Shares, upon shareholder
approval of an amendment to the Company's charter permitting non-voting Class B
Common Shares at the Company's annual meeting. The distribution on the
non-voting shares is equal to the distribution paid on the voting shares of the
Company plus an additional $.0468 per share. In October, 1998, 874,639
non-voting Class B Shares converted to voting shares. In May, 1999, a portion of
the remaining non-voting Class B shares will be converted to voting common
shares on a share for share basis up to 4.9 percent of the Company's then
outstanding voting shares with all shares to fully convert within ten years. As
the shares convert to voting common, the distribution paid shall be the same as
all other voting common shares.
PREFERRED SHARES OF BENEFICIAL INTEREST
On November 10, 1997, the Company issued 3 million shares of 8.48%
Series A Cumulative Redeemable Preferred Shares of Beneficial Interest
("Preferred Shares") at a purchase price of $25 per share. Dividends on the
Preferred Shares are cumulative from the date of issuance and payable quarterly
commencing on January 30, 1998. The payment of dividends and amounts upon
liquidation will rank senior to the Common Shares and Class B Common Shares,
which are the only other shares of the Company currently outstanding. The
Preferred Shares are not redeemable prior to October 30, 2002. On or after
October 30, 2002 the Preferred Shares will be redeemable for cash at the option
of the Company, in whole or part, at the redemption price of $25 per share, plus
dividends accrued and unpaid to the redemption date. The Preferred Shares are
not convertible into or exchangeable for any other property or securities of the
Company.
RESTRICTED STOCK INCENTIVE PLAN
Under the terms of the 1995 Restricted Stock Incentive Plan, adopted in
1995, the Company initially reserved 150,000 common shares for future grants. In
1997 and 1996 certain key employees were granted 12,444 and 8,290 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.
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
F-18
<PAGE>
over the eight year vesting period. The amount amortized to expense during 1998,
1997 and 1996 was $201, $214, and $118, 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 1998, 1997, and 1996, 2,304, 1,921,
and 2,516 Common Shares were issued under this plan, respectively. In connection
with the issuance of such shares, $80, $57 and $57 was charged to expense in
1998, 1997 and 1996, respectively.
SHAREHOLDER RIGHTS PLAN
In July, 1998, the Board of Trustees approved a shareholder protection
plan (the "plan"), declaring a dividend of one right for each share of the
Company's common shares outstanding on or after August 11, 1998. Exercisable 10
days after any person or group acquires 15 percent or more or commences a tender
offer for 15 percent or more of the Company's common shares, each right entitles
the holder to purchase from the Company one one-thousandth of a Junior Preferred
Share of Beneficial Interest, Series A (a "Rights Preferred Share"), at a price
of $120, subject to adjustment. The Rights Preferred Shares (1) are
non-redeemable, (2) are entitled to a minimum preferential quarterly dividend
payment equal to the greater of $25 per share or 1,000 times the Company's
common share dividend, (3) have a minimum liquidation preference equal to the
greater of $100 per share or 1,000 times the liquidation payment made per common
share and (4) are entitled to vote with the common shares with each Rights
Preferred Share having 1,000 votes. 50,000 of the Company's authorized preferred
shares have been designated for the plan.
The plan was not adopted in response to any takeover attempt but was
intended to provide the Board with sufficient time to consider any and all
alternatives under such circumstances. Its provisions are designed to protect
the Company's shareholders in the event of an unsolicited attempt to acquire the
Company at a value that is not in the best interest of the Company's
shareholders.
11. 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. In May, 1998, the Plan was amended to increase the
maximum number of shares to 10% of the total number of common shares outstanding
as of May 1, 1998 (2,003,915). The May, 1998, Plan amendment also provides that
the maximum number of options granted under the plan be the total of 10% of the
number of common shares outstanding on the last day of the preceding calendar
year, commencing January 1, 1999, minus the number of options previously granted
under the Plan before the end of the preceding calendar year plus the number of
options which have expired. 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.
F-19
<PAGE>
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, 1998
is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
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 740,669 $22.92 683,480 $19.20 606,839 $18.59
Granted 588,179 33.97 241,769 31.38 104,428 22.50
Exercised (25,500) 18.86 (149,715) 19.19 (27,787) 18.28
Expired (69,190) 32.00 (34,865) 24.73 -
---------- ------- -------
Outstanding at end of year 1,234,158 $27.76 740,669 $22.92 683,480 $19.20
========== ======= =======
Exercisable at end of year 441,126 327,137 282,784
Available for future grant at year end 569,155 584,229 791,133
Weighted average per share fair value of
options granted during the year $4.92 $3.65 $2.43
</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>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Risk free interest rate 5.7% 6.4% 6.1%
Dividend yield 5.1% 6.5% 6.5%
Expected lives 6 years 6 years 6 years
Expected volatility 18.6% 17.5% 17.4%
</TABLE>
The following table summarizes information about stock options at
December 31, 1998:
<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 12/31/98 LIFE PRICE AT 12/31/98 PRICE
-------------- ----------- ----------- -------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
$18.25-$22.50 487,711 5.83 years $19.19 406,539 $18.79
$31.50-$34.375 746,447 9.77 years $33.36 34,587 $31.34
</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
1998, 1997 and 1996 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:
F-20
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income available to common shareholders
As reported $25,888 $26,359 $13,994
Pro forma $25,406 $26,221 $13,901
Per share net income available to common shareholders
As reported
Basic 1.30 1.41 1.01
Diluted 1.29 1.39 0.99
Pro forma
Basic 1.28 1.41 1.00
Diluted 1.26 1.38 0.98
</TABLE>
12. FUTURE RENTAL REVENUES
Under existing noncancelable operating lease agreements as of December
31, 1998, tenants of the warehouse/industrial properties are committed to pay in
aggregate the following minimum rentals:
<TABLE>
<S> <C>
1998............................................ $ 66,720
1999............................................ 55,643
2000............................................ 48,391
2001............................................ 42,775
2002............................................ 35,161
Thereafter...................................... 88,175
--------
Total................................... $336,865
========
</TABLE>
At December 31, 1998 and 1997, 621 and 630, respectively, of the total
682 apartments available for rental at the Lakeshore Dunes property were leased.
Lease terms are generally for one year.
13. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Supplemental disclosure of cash flow information:
Interest paid, net of interest capitalized $12,122 $11,820 $10,603
Interest capitalized 2,214 893 142
Dividends declared, not paid 1,060 901
Assignment of note receivable to affiliate 4,650
Repayment of advance from affiliate
with real estate at book value 24,993
</TABLE>
F-21
<PAGE>
In conjunction with the property acquisitions, the Company assumed the
following assets and liabilities:
<TABLE>
<S> <C> <C> <C>
Purchase of real estate $92,510 $125,352 $103,532
Liabilities, net of other assets (2,224) (3,262) (4,956)
Mortgage notes payable (20,586) (13,308)
------- -------- --------
Acquisition of real estate $69,700 $122,090 $85,268
======= ======== ========
</TABLE>
In conjunction with the property dispositions, the Company disposed of
the following assets and liabilities:
<TABLE>
<S> <C> <C> <C>
Sale of real estate $(34,513) $(12,877) $(22,481)
Liabilities, net of other assets 565 (633) 1,421
Mortgage notes payable 2,069
--------- --------- ----------
Disposition of real estate $(33,948) $(13,510) $(18,991)
========= ========= ==========
</TABLE>
Conversion of convertible subordinated debentures payable:
<TABLE>
<S> <C> <C> <C>
Convertible subordinated dentures converted $3,682 $2,640 $8,864
Common shares issued at $18.25 per share;
201,748, 144,640 and 485,680 3,682 2,639 8,863
---------- --------- ----------
Cash disbursed for fractional shares $ - $ 1 $ 1
========== ========= ==========
</TABLE>
14. 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, 1998, six 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 that are greater than the net book
value of the assets. The tenant for a property at 655 Wheat Lane, Wood Dale,
Illinois exercised its option and purchase the building in May, 1997.
F-22
<PAGE>
15. QUARTERLY FINANCIAL HIGHLIGHTS (UNAUDITED)
The following table reflects the results of operations for the Company during
the four quarters of 1998 and 1997. Certain quarterly information has been
revised (dollars in thousands, except unit and per share data):
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------- YEAR ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1998 1998 1998 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenues $26,786 $26,581 $27,104 $26,755 $107,226
Net income available to common
shareholders 7,981 6,088 6,518 5,301 25,888
Net income available to common
shareholders per share:
Basic 0.42 0.30 0.32 0.26 1.30
Diluted 0.41 0.30 0.32 0.26 1.29
EBITDA (earnings before interest, 17,681 16,359 17,668 17,434 69,142
taxes, amortization and
depreciation)
Per share distributions 0.438 0.438 0.438 0.438 1.75
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------- YEAR ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1997 1997 1997 1997 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenues $19,789 $19,911 $21,251 $24,637 $85,588
Net income available to common
shareholders 5,731 6,924 6,434 7,270 26,359
Net income available to common
shareholders per share:
Basic 0.33 0.36 0.34 0.38 1.41
Diluted 0.33 0.36 0.33 0.37 1.39
EBITDA (earnings before interest, 11,759 12,752 13,493 15,405 53,409
taxes, amortization and
depreciation)
Per share distributions 0.42 0.42 0.42 0.42 1.68
</TABLE>
F-23
<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.
PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
November 15, 1999
F-24
<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
------- ------------ ---------- ------------- -------
<S> <C> <C> <C> <C> <C>
DESCRIPTION
- -----------
For year ended December 31, 1998:
Allowance for doubtful accounts $272 $550 $ - ($247) $575
==== ==== ==== ===== ====
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
==== ==== ==== ===== ====
</TABLE>
- ---------------------------
NOTE: (a) Deductions represent write-off of accounts receivable against the
allowance for doubtful accounts.
F-25
<PAGE>
<TABLE>
<CAPTION>
CENTERPOINT PROPERTIES CORPORATION AND SUBSIDIARIES SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1998
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>
WAREHOUSE/INDUSTRIAL
PROPERTIES:
425 W. 151st Street
East Chicago, IN $ 252 $ 1,805 $ 34 $ 4,523 $ 1,155
201 Mississippi Street
Gary, IN $50,000(h) 807 9,948 275 18,042
1201 Lunt Avenue
Elk Grove Village, IL (h) 57 146 4
620 Butterfield Road
Mundelein, IL 30,000(g) 335 1,974 61 6
1319 Marquette Drive
Romeoville, IL (h) 948 2,530 98
900 E. 103rd Street
Chicago, IL 2,226 10,693 4,497
1520 Pratt Avenue
Elk Grove Village, IL (h) 498 1,558 6
1850 Greenleaf
Elk Grove Village, IL 509 1,386 349
2743 Armstrong Court
Des Plaines, IL 1,320 2,679 1 280
5990 Touhy Avenue
Niles, IL 2,047 8,509 1,238
950 Tower Road
Mundelein, IL (h) 171 778 142
2339 Ernie Krueger Court
Waukegan, IL (g) 158 1,819 10
4501 W. Augusta Blvd.
Chicago, IL 175 4,988 859
1400 Busse Road
Elk Grove Village, IL 439 5,719 287
1250 Carolina Drive
West Chicago, IL (g) 583 3,836 260
5619 W. 115th Street
Alsip, IL (h) 2,267 12,169 1,640
825 Tollgate Road
Elgin, IL (g) 712 3,584 113
720 Frontenac
Naperville, IL (g) 1,014 4,055 22 121
820 Frontenac
Naperville, IL (g) 906 3,626 111
1120 Frontenac
Naperville, IL (g) 791 3,164 23 720
1510 Frontenac
Naperville, IL (g) 621 2,485 16 83
1020 Frontenac
Naperville, IL (g) 591 2,363 11 225
1560 Frontenac
Naperville, IL (g) 508 2,034 11 72
1500 Shore Road
Naperville, IL (g) 260 1,042 7 58
800 Enterprise
Naperville, IL (g) 212 849 6 40
1651 Frontenac
Naperville, IL (g) 185 742 5 61
1150 Shore Road
Naperville, IL (g) 184 736 5 121
<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>
WAREHOUSE/INDUSTRIAL
PROPERTIES:
425 W. 151st Street
East Chicago, IN $ 286 $ 7,483 $ 7,769 $ (2,864) 1913/1988-1990 1987 (f)
201 Mississippi Street
Gary, IN 1,082 27,990 29,072 (9,432) 1946/1985-1988 1985 (f)
1201 Lunt Avenue
Elk Grove Village, IL 57 150 207 (24) 1971 1993 (f)
620 Butterfield Road
Mundelein, IL 396 1,980 2,376 (317) 1990 1993 (f)
1319 Marquette Drive
Romeoville, IL 948 2,628 3,576 (408) 1990-1991 1993 (f)
900 E. 103rd Street
Chicago, IL 2,226 15,190 17,416 (2,197) 1910 1993 (f)
1520 Pratt Avenue
Elk Grove Village, IL 498 1,564 2,062 (250) 1968 1993 (f)
1850 Greenleaf
Elk Grove Village, IL 509 1,735 2,244 (225) 1965 1993 (f)
2743 Armstrong Court
Des Plaines, IL 1,321 2,959 4,280 (449) 1989-1990 1993 (f)
5990 Touhy Avenue
Niles, IL 2,047 9,747 11,794 (1,462) 1957 1993 (f)
950 Tower Road
Mundelein, IL 171 920 1,091 (139) 1979 1993 (f)
2339 Ernie Krueger Court
Waukegan, IL 158 1,829 1,987 (292) 1990 1993 (f)
4501 W. Augusta Blvd.
Chicago, IL 175 5,847 6,022 (878) 1942-1943 1993 (f)
1400 Busse Road
Elk Grove Village, IL 439 6,006 6,445 (1,029) 1987 1993 (f)
1250 Carolina Drive
West Chicago, IL 583 4,096 4,679 (637) 1989-1990 1993 (f)
5619 W. 115th Street
Alsip, IL 2,267 13,809 16,076 (2,154) 1974 1993 (f)
825 Tollgate Road
Elgin, IL 712 3,697 4,409 (579) 1989-1991 1993 (f)
720 Frontenac
Naperville, IL 1,036 4,176 5,212 (663) 1991 1993 (f)
820 Frontenac
Naperville, IL 906 3,737 4,643 (584) 1988 1993 (f)
1120 Frontenac
Naperville, IL 814 3,884 4,698 (592) 1980 1993 (f)
1510 Frontenac
Naperville, IL 637 2,568 3,205 (406) 1986 1993 (f)
1020 Frontenac
Naperville, IL 602 2,588 3,190 (398) 1980 1993 (f)
1560 Frontenac
Naperville, IL 519 2,106 2,625 (335) 1987 1993 (f)
1500 Shore Road
Naperville, IL 267 1,100 1,367 (172) 1985 1993 (f)
800 Enterprise
Naperville, IL 218 889 1,107 (139) 1985 1993 (f)
1651 Frontenac
Naperville, IL 190 803 993 (122) 1978 1993 (f)
1150 Shore Road
Naperville, IL 189 857 1,046 (122) 1985 1993 (f)
</TABLE>
F-26
<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>
2764 Golfview
Naperville, IL (g) 125 498 4 33
920 Frontenac
Naperville, IL (g) 717 2,367 486
1300 Northpoint Road
Waukegan IL (h) 592 2,366 17
1 Wildlife Way
Long Grove, IL 530 2,122 129
900 W. University Drive
Arlington Heights, IL (h) 817 3,268 17 95
7001 Adams Street
Willowbrook, IL (h) 297 1,326 4
745 Birginal Drive
Bensenville, IL 601 2,406 498
21399 Torrence Avenue
Sauk Village , IL 1,550 6,199 566 707
2600 N. Elmhurst Road
Elk Grove Village, IL. (g) 842 3,366 8 46
8901 W. 102nd Street
Pleasant Prarie, WI (h) 900 3,608 47
8200 100th Street
Pleasant Prarie, WI (h) 1,220 4,890 42
1700 Hawthorne
West Chicago, IL 2,522 10,089 1 25
245 Beinoris Drive
Wood Dale, IL (h) 168 570 5
825-845 Hawthorne
West Chicago, IL (g) 721 2,884 23 503
1700 Butterfield Road
Mundelein, IL (h) 343 1,371 (1) 143
1810-1820 Industrial Drive
Libertyville, IL (h) 407 1,629 (5) 173
1733 Downs Drive
West Chicago (h) 488 1,953 1 45
1645 Downs Drive
West Chicago (h) 508 2,033 571
10601 Seymour Avenue
Franklin Park, IL 2,020 8,081 184 10,716
11701 South Central
Alsip, IL 1,241 4,964 22 1,242
11601 South Central
Alsip, IL 1,071 4,285 51 376
850 Arthur Avenue
Elk Grove Village, IL 575 270 1,081 1 283
1827 North Bendix Drive
South Bend, IN (h) 1,010 4,040 24 109
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 83
1100 Chase Avenue
Elk Grove Village, IL 248 993 6 239
2553 N. Edgington
Franklin Park, IL 1,870 7,481 67 1,278
<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>
2764 Golfview 129 531 660 (83) 1985 1993 (f)
Naperville, IL
920 Frontenac 717 2,853 3,570 (413) 1987 1993 (f)
Naperville, IL
1300 Northpoint Road 592 2,383 2,975 (350) 1994 1994 (f)
Waukegan IL
1 Wildlife Way 530 2,251 2,781 (329) 1994 1994 (f)
Long Grove, IL
900 W. University Drive 834 3,363 4,197 (479) 1974 1994 (f)
Arlington Heights, IL
7001 Adams Street 297 1,330 1,627 (188) 1994 1994 (f)
Willowbrook, IL
745 Birginal Drive 601 2,904 3,505 (359) 1974 1994 (f)
Bensenville, IL
21399 Torrence Avenue 2,116 6,906 9,022 (957) 1987 1994 (f)
Sauk Village , IL
2600 N. Elmhurst Road 850 3,412 4,262 (409) 1995 1995 (f)
Elk Grove Village, IL.
8901 W. 102nd Street 900 3,655 4,555 (485) 1990 1994 (f)
Pleasant Prarie, WI
8200 100th Street 1,220 4,932 6,152 (657) 1990 1994 (f)
Pleasant Prarie, WI
1700 Hawthorne 2,523 10,114 12,637 (1,312) 1959/1969 1994 (f)
West Chicago, IL
245 Beinoris Drive 168 575 743 (91) 1988 1984 (f)
Wood Dale, IL
825-845 Hawthorne 744 3,387 4,131 (367) 1974 1995 (f)
West Chicago, IL
1700 Butterfield Road 342 1,514 1,856 (169) 1976 1995 (f)
Mundelein, IL
1810-1820 Industrial Drive 402 1,802 2,204 (188) 1977 1995 (f)
Libertyville, IL
1733 Downs Drive 489 1,998 2,487 (221) 1976 1995 (f)
West Chicago
1645 Downs Drive 508 2,604 3,112 (280) 1976 1995 (f)
West Chicago
10601 Seymour Avenue 2,204 18,797 21,001 (999) 1963/1965 1995 (f)
Franklin Park, IL
11701 South Central 1,263 6,206 7,469 (555) 1972 1995 (f)
Alsip, IL
11601 South Central 1,122 4,661 5,783 (469) 1971 1995 (f)
Alsip, IL
850 Arthur Avenue 271 1,364 1,635 (132) 1972/1973 1995 (f)
Elk Grove Village, IL
1827 North Bendix Drive 1,034 4,149 5,183 (411) 1964/1990 1995 (f)
South Bend, IN
4400 S. Kolmar 612 2,482 3,094 (245) 1964 1995 (f)
Chicago, IL
6600 River Road 2,687 10,912 13,599 (933) Unknown 1996 (f)
Hodgkins, IL
7501 N. 81st Street 1,037 4,156 5,193 (345) 1987 1996 (f)
Milwaukee, WI
1100 Chase Avenue 254 1,232 1,486 (104) 1969 1996 (f)
Elk Grove Village, IL
2553 N. Edgington 1,937 8,759 10,696 (649) 1967/1989 1996 (f)
Franklin Park, IL
</TABLE>
F-27
<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>
875 Fargo Avenue
Elk Grove Village, IL 572 2,284 14 882
1800 Bruning Drive
Itasca, IL 1,999 7,995 26 108
1501 Pratt
Elk Grove Village, IL 1,047 4,189 67 501
400 N. Wolf Road
Northlake, IL 4,504 18,017 (418) 7,478
10740 W. Grand Avenue
Franklin Park, IL 383 1,532 8 173
16400 W. 103rd Street
Lemont, IL 446 1,748 21 236
425 S. 37th Avenue
St. Charles, IL 644 2,575 7 236
1500 W. Dundee Road
Arlington Heights, IL 4,995 10,006 (1,073) 5,649
Lot 51-Naperville Business
Center Naperville, IL 220 (11) 1
3145 Central Avenue
Waukeegan, IL 1,270 5,080 20 1,620
2003-2207 South 114th Street
West Allis, WI 942 3,770 6 77
2501-2701 Busse Road
Elk Grove Village, IL (h) 1,875 7,556 12 578 107
6464 West 51st Street
Forest View, IL 934 3,734 3 156
6500 West 51st Street
Forest View, IL 805 3,221 3 29
7447 South Central Avenue
Bedford Park, IL 437 1,748 7 36
7525 S. Sayre Avenue
Bedford Park, IL 587 2,345 4 29
2901 Centre Circle
Downers Grove, IL 207 828 4 557
1 Allsteel Drive
Aurora, IL 2,458 9,832 28 7,929
2525 Busse Highway
Elk Grove Village, IL 5,400 12,601 (729) 2,558
106th and Buffalo Avenue
Chicago, IL 248 992 9 558
7400 South Narragansett
Bedford Park,IL 743 2,972 9 179
2701 S. Busse Road
Elk Grove Village, IL (h) 1,875 5,667 4 1,288 255
East Avenue and 55th Street
McCook, IL 1,190 4,761 47 430
6757 S. Sayre
Bedford Park, IL 1,236 4,945 7 28
1951 Landmeir Road
Elk Grove Village, IL 280 1,120 11 48
1355 Enterprise Drive
Romeoville, IL 580 2,320 8 111
110-190 Old Higgins Road
Des Plaines, IL 1,862 7,447 12 327
1475 S. 101st Street
West Allis, WI 331 1,323 1 40
1333 Grandview Drive
Yorkville, WI 1,516 6,062 5 21
<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>
875 Fargo Avenue 586 3,166 3,752 (220) 1979 1996 (f)
Elk Grove Village, IL
1800 Bruning Drive 2,025 8,103 10,128 (653) 1975/1978 1996 (f)
Itasca, IL
1501 Pratt 1,114 4,690 5,804 (371) 1973 1996 (f)
Elk Grove Village, IL
400 N. Wolf Road 4,086 25,495 29,581 (1,716) 1956/1965 1996 (f)
Northlake, IL
10740 W. Grand Avenue 391 1,705 2,096 (126) 1964/1970 1996 (f)
Franklin Park, IL
16400 W. 103rd Street 467 1,984 2,451 (131) 1983 1996 (f)
Lemont, IL
425 S. 37th Avenue 651 2,811 3,462 (195) 1976 1996 (f)
St. Charles, IL
1500 W. Dundee Road 3,922 15,655 19,577 (853) 1969/1971 1996 (f)
Arlington Heights, IL
Lot 51-Naperville Business 209 1 210 - 1996 1996 (f)
Center Naperville, IL
3145 Central Avenue 1,290 6,700 7,990 (396) 1960 1997 (f)
Waukeegan, IL
2003-2207 South 114th 948 3,847 4,795 (212) 1965/1966 1997 (f)
Street West Allis, WI
2501-2701 Busse Road 1,887 8,241 10,128 (453) 1997 1997 (f)
Elk Grove Village, IL
6464 West 51st Street 937 3,890 4,827 (205) 1973 1997 (f)
Forest View, IL
6500 West 51st Street 808 3,250 4,058 (171) 1974 1997 (f)
Forest View, IL
7447 South Central Avenue 444 1,784 2,228 (94) 1980 1997 (f)
Bedford Park, IL
7525 S. Sayre Avenue 591 2,374 2,965 (125) 1980 1997 (f)
Bedford Park, IL
2901 Centre Circle 211 1,385 1,596 (67) 1975 1997 (f)
Downers Grove, IL
1 Allsteel Drive 2,486 17,761 20,247 (755) 1957-1967 1997 (f)
Aurora, IL
2525 Busse Highway 4,671 15,159 19,830 (645) 1975 1997 (f)
Elk Grove Village, IL
106th and Buffalo Avenue 257 1,550 1,807 (89) 1971 1997 (f)
Chicago, IL
7400 South Narragansett 752 3,151 3,903 (129) 1977 1997 (f)
Bedford Park,IL
2701 S. Busse Road 1,879 7,210 9,089 (227) 1997 1997 (f)
Elk Grove Village, IL
East Avenue and 55th Street 1,237 5,191 6,428 (201) 1979 1997 (f)
McCook, IL
6757 S. Sayre 1,243 4,973 6,216 (197) 1975 1997 (f)
Bedford Park, IL
1951 Landmeir Road 291 1,168 1,459 (46) 1967 1997 (f)
Elk Grove Village, IL
1355 Enterprise Drive 588 2,431 3,019 (93) 1980/1986 1997 (f)
Romeoville, IL
110-190 Old Higgins Road 1,874 7,774 9,648 (243) 1980 1997 (f)
Des Plaines, IL
1475 S. 101st Street 332 1,363 1,695 (43) 1968/1988 1997 (f)
West Allis, WI
1333 Grandview Drive 1,521 6,083 7,604 (193) 1994 1997 (f)
Yorkville, WI
</TABLE>
F-28
<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>
2301 Route 30
Plainfield, IL 1,217 4,868 69 1,310
1796 Sherwin Avenue
Des Plaines, IL 944 3,778 8 1,032
2885 W. Diehl Road
Naperville, IL 1,539 8,630 2 112
2727 W. Diehl Road
Naperville, IL 3,071 14,232 5 388
O'hare Express Center - A2
Elk GroveVillage, IL 1,097 7,060 244 110
O'hare Express Center - B1
Elk GroveVillage, IL 1,682 10,500 522 96
2021 Lunt Avenue
Elk Grove, IL 464 1,855 7 130
2121 Touhy Avenue
Elk Grove, IL 918 3,672 11 163
Champion
North Lake, IL 467 6,124 87
860 West Evergreen
Chicago, IL 1,169 4,675 10 59
2001 S. Mt. Prospect Road
Des Plaines, IL 1,056 4,223 (76) 256
745 Dillon Drive
Wood Dale, IL 705 2,820 (60) (208)
1030 Fabyan Parkway
Batavia, IL 1,323 5,292 (117) (211)
5730 N. Tripp
Chicago, IL 647 2,990 3 (176)
4700 Ironwood Drive
Franklin, WI 419 3,415 7 151
2601 Bond Street
University Park, IL 382 1,527 6 21
201 Oakton
Des Plaines, IL 838 3,351 6 1,109
3601 Runge Avenue
Franklin Park, IL 8,985(i) 541 2,180 3 45
3400 N. Powell
Franklin Park, IL (i) 812 3,277 3 30
11100 West Addition
Franklin Park, IL (i) 250 1,013 3 34
11440 West Addition
Franklin Park, IL (i) 540 2,200 3 45
3434 N. Powell
Franklin Park, IL (i) 429 1,723 3 26
7633 S. Sayre
Bedford Park (i) 167 700 3 25
1999 N. Ruby
Franklin Park, IL (i) 402 1,615 3 34
11550 W. King Drive
Franklin Park, IL (i) 320 1,303 3 27
7201 S. Leamington
Bedford Park, IL (i) 340 1,697 (4)
1575 Executive Drive
Elgin, IL (i) 240 964 3 27
7200 S. Mason
Bedford Park, IL (i) 1,037 4,286 3 24
6000 W. 73rd
Bedford Park, IL 4,107(k) 794 3,190 3 27
<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>
2301 Route 30 1,286 6,178 7,464 (185) 1972/1984 1997 (f)
Plainfield, IL
1796 Sherwin Avenue 952 4,810 5,762 (152) 1964 1997 (f)
Des Plaines, IL
2885 W. Diehl Road 1,541 8,742 10,283 (276) 1997 1997 (f)
Naperville, IL
2727 W. Diehl Road 3,076 14,620 17,696 (460) 1997 1997 (f)
Naperville, IL
O'hare Express Center - A2 1,097 7,414 8,511 (376) 1997 1997 (f)
Elk GroveVillage, IL
O'hare Express Center - B1 1,682 11,118 12,800 (547) 1997 1997 (f)
Elk GroveVillage, IL
2021 Lunt Avenue 471 1,985 2,456 (56) 1972 1998 (f)
Elk Grove, IL
2121 Touhy Avenue 929 3,835 4,764 (109) 1962 1998 (f)
Elk Grove, IL
Champion 467 6,211 6,678 (163) 1998 1998 (f)
North Lake, IL
860 West Evergreen 1,179 4,734 5,913 (113) 1890/1995 1998 (f)
Chicago, IL
2001 S. Mt. Prospect Road 980 4,479 5,459 (92) 1980 1998 (f)
Des Plaines, IL
745 Dillon Drive 645 2,612 3,257 (50) 1985/1986 1998 (f)
Wood Dale, IL
1030 Fabyan Parkway 1,206 5,081 6,287 (99) 1978 1998 (f)
Batavia, IL
5730 N. Tripp 650 2,814 3,464 (77) 1975 1998 (f)
Chicago, IL
4700 Ironwood Drive 426 3,566 3,992 (70) 1998 1998 (f)
Franklin, WI
2601 Bond Street 388 1,548 1,936 (28) 1975 1998 (f)
University Park, IL
201 Oakton 844 4,460 5,304 (57) 1984 1998 (f)
Des Plaines, IL
3601 Runge Avenue 544 2,225 2,769 (35) 1962 1998 (f)
Franklin Park, IL
3400 N. Powell 815 3,307 4,122 (52) 1961 1998 (f)
Franklin Park, IL
11100 West Addition 253 1,047 1,300 (16) 1967 1998 (f)
Franklin Park, IL
11440 West Addition 543 2,245 2,788 (35) 1961 1998 (f)
Franklin Park, IL
3434 N. Powell 432 1,749 2,181 (28) 1960 1998 (f)
Franklin Park, IL
7633 S. Sayre 170 725 895 (11) 1968/1969 1998 (f)
Bedford Park
1999 N. Ruby 405 1,649 2,054 (26) 1962 1998 (f)
Franklin Park, IL
11550 W. King Drive 323 1,330 1,653 (21) 1963 1998 (f)
Franklin Park, IL
7201 S. Leamington 336 1,697 2,033 (27) 1958 1998 (f)
Bedford Park, IL
1575 Executive Drive 243 991 1,234 (16) 1980 1998 (f)
Elgin, IL
7200 S. Mason 1,040 4,310 5,350 (68) 1974 1998 (f)
Bedford Park, IL
6000 W. 73rd 797 3,217 4,014 (51) 1974 1998 (f)
Bedford Park, IL
</TABLE>
F-29
<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>
28160 N. Keith
Lake Forest, IL (k) 616 2,496 3 26
28618 N. Ballard
Lake Forest, IL 2,260(j) 469 1,943 3 30
28161 N. Keith
Lake Forest, IL (j) 270 1,092 3 24
11400 W. Melrose Street
Franklin Park, IL 168 43 3 11
11801 S. Central
Alsip, IL 4,901 1,592 6,367 2 753
1925 Holmes Road
Elgin, IL 772 3,087 1 16
1381 N. Northbrank
Chicago, IL 161 645 14 56
5611 W. Mill Road
Milwaukee, WI 231 925 (23) (94)
543 W. Algonquin
Arlington Heights, IL 260 1,041
Dial
Granite City, IL 3,891 15,555
CONSTRUCTION IN PROGRESS:
O'hare Express - B2
Elk Grove Village, IL 1,618 6,287 216
O'hare Express - C
Elk Grove Village, IL 2,603 1,890 92
1808 Swift Road
Oak Brook, IL 143 123 332 2,497
5480 W. 70th
Bedford Park, IL 475
NIC (South Building)
Northlake, IL - 5,026 81
10801 W. Irving Park Rd
Chicago, IL - 1,106 6
5700 West Touhy Avenue
Niles, IL 18,005 139 (9,108) 911 30
RETAIL PROPERTIES:
84 Old McHenry Road
Wheeling, IL 482 2,152 31
351 N. Rohlwing Road
Itasca, IL 81 464
4-48 Barrington Road
Streamwood, IL 573 2,297 (62) 92
RESIDENTIAL PROPERTIES
440 North Lake Street
Miller, IN 22,220 711 3,086 101 18,470 3,980
OFFICES OF THE MANAGEMENT
COMPANY
CHICAGO, IL - 15,918 826 513
-------------- ------- ------- ------- -------- ------
Totals $ 123,050,221 140,632 517,646 (8,362) 112,213 6,728
============== ======== ======== ======= ======== ======
<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>
28160 N. Keith 619 2,522 3,141 (40) 1989 1998 (f)
Lake Forest, IL
28618 N. Ballard 472 1,973 2,445 (31) 1984 1998 (f)
Lake Forest, IL
28161 N. Keith 273 1,116 1,389 (18) 1986 1998 (f)
Lake Forest, IL
11400 W. Melrose Street 171 54 225 (4) 1998 (f)
Franklin Park, IL
11801 S. Central 1,594 7,120 8,714 (70) 1985 1998 (f)
Alsip, IL
1925 Holmes Road 773 3,103 3,876 (33) 1989 1998 (f)
Elgin, IL
1381 N. Northbrank 175 701 876 (6) 1900 1998 (f)
Chicago, IL
5611 W. Mill Road 208 831 1,039 (4) 1960 1998 (f)
Milwaukee, WI
543 W. Algonquin 260 1,041 1,301 (3) 1970 1998 (f)
Arlington Heights, IL
Dial 3,891 15,555 19,446 1998 1998 (f)
Granite City, IL
CONSTRUCTION IN PROGRESS:
O'hare Express - B2 1,618 6,503 8,121 (66)
Elk Grove Village, IL
O'hare Express - C 2,603 1,982 4,585 (107)
Elk Grove Village, IL
1808 Swift Road 475 2,620 3,095 Var. (f)
Oak Brook, IL
5480 W. 70th 475 - 475
Bedford Park, IL
NIC (South Building) - 5,107 5,107
Northlake, IL
10801 W. Irving Park Rd - 1,112 1,112
Chicago, IL
5700 West Touhy Avenue 8,897 1,080 9,977 (8) 1948 1997 (f)
Niles, IL
RETAIL PROPERTIES:
84 Old McHenry Road 482 2,183 2,665 (376) 1989-1990 1993 (f)
Wheeling, IL
351 N. Rohlwing Road 81 464 545 (75) 1989 1993 (f)
Itasca, IL
4-48 Barrington Road 511 2,389 2,900 (334) 1989 1994 (f)
Streamwood, IL
RESIDENTIAL PROPERTIES
440 North Lake Street 812 25,536 26,348 (6,791) 1971/1990-1993 1990 (f)
Miller, IN
OFFICES OF THE MANAGEMENT
COMPANY
CHICAGO, IL 826 16,431 17,257 (3,098)
-------- -------- ------- --------
Totals 132,270 636,587 768,857 (62,257)
======== ======== ======= ========
</TABLE>
F-30
<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, 1998, the aggregate cost of land and buildings and
equipment for Federal income tax purposes was approximately $772 million.
(d) Reconciliation of real estate and accumulated depreciation:
RECONCILIATION OF REAL ESTATE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance at the beginning of year $662,275 $429,034 $317,460
Additions 143,342 246,463 135,342
Dispositions (36,760) (13,222) (23,768)
-------- -------- --------
Balance at close of year $768,857 $662,275 $429,034
======== ======== ========
</TABLE>
RECONCILIATION OF ACCUMULATED DEPRECIATION AND AMORTIZATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $44,352 $30,206 $21,576
Depreciation and amortization 20,151 14,494 10,199
Dispositions (2,246) (348) (1,569)
------- ------- -------
Balance at close of year $62,257 $44,352 $30,206
======= ======= =======
</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.
(i) These 11 properties collateralize a $8,985 mortgage loan payable.
(j) These 2 properties collateralize a $4,108 mortgage loan payable.
(k) These 2 properties collateralize a $2,261 mortgage loan payable.
F-31
<PAGE>
EXHIBIT 12-1
CENTERPOINT PROPERTIES TRUST
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Available earnings:
Net income $32,248 $27,260 $14,941 $ 8,212 $ 2,359
Add interest expense (1) 15,476 10,871 10,992 12,985 12,157
------- ------- -------- ------- -------
Available earnings (2) $47,724 $38,131 $25,933 $21,197 $14,516
======= ======= ======== ======= =======
Fixed charges:
Interest expense $15,476 $10,871 $10,992 $12,985 $12,157
Capitalized interest 2,214 893 142 20 63
------- ------- -------- ------- -------
Total fixed charges $17,690 $11,764 $11,134 $13,005 $12,220
======= ======= ======= ======= =======
Ratio of earnings to fixed charges 2.70 3.24 2.33 1.63 1.19
======= ======= ======== ======= =======
</TABLE>
- ------------------------------------
NOTES:
(1) Interest expense includes amortization of deferred financing costs.
(2) Interest portion of rental expense is not calculated because annual
rental expense for the Company is not significant.
<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,
-----------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Available earnings:
Net income $32,248 $27,260 $14,941 $ 8,212 $ 2,359
Add interest expense (1) 15,476 10,871 10,992 12,985 12,157
------- ------- ------- ------- -------
Available earnings (2) $47,724 $38,131 $25,933 $21,197 $14,516
======= ======= ======== ======= =======
Combined fixed charges:
Interest expense $15,476 $10,871 $10,992 $12,985 $12,157
Capitalized interest 2,214 893 142 20 63
Preferred dividends 6,360 901 947 1,002
------- ------- ------- ------- -------
Total fixed charges $24,050 $12,665 $12,081 $14,007 $12,220
======= ======= ======= ======= =======
Ratio of earnings to combined
fixed charges 1.98 3.01 2.15 1.51 1.19
======= ======= ======= ======= =======
</TABLE>
- ------------------------------------
NOTES:
(1) Interest expense includes amortization of deferred financing costs.
(2) Interest portion of rental expense is not calculated because annual
rental expense for the Company is not significant.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We 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 9, 1999, except for Note 2A 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.
Chicago, Illinois PRICEWATERHOUSECOOPERS LLP
December 27, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 33,531
<SECURITIES> 0
<RECEIVABLES> 18,067
<ALLOWANCES> 575
<INVENTORY> 0
<CURRENT-ASSETS> 59,408
<PP&E> 768,857
<DEPRECIATION> 62,257
<TOTAL-ASSETS> 817,606
<CURRENT-LIABILITIES> 45,429
<BONDS> 364,718
0
3
<COMMON> 20
<OTHER-SE> 407,436
<TOTAL-LIABILITY-AND-EQUITY> 817,606
<SALES> 0
<TOTAL-REVENUES> 107,226
<CGS> 0
<TOTAL-COSTS> 76,635
<OTHER-EXPENSES> (1,657)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,476
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,888
<EPS-BASIC> 1.30
<EPS-DILUTED> 1.29
</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>
