-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FB3yow7IkT3NCx6CWyp06P6nnOnTJESObx/pC7+GG+scDCyutg7PLdUZmTJHj2gl 3PqRumkilJzzJxkriAQhkQ== 0000912057-00-000140.txt : 20000105 0000912057-00-000140.hdr.sgml : 20000105 ACCESSION NUMBER: 0000912057-00-000140 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 20000104 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTERPOINT PROPERTIES TRUST CENTRAL INDEX KEY: 0000912893 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 363910279 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: SEC FILE NUMBER: 001-12630 FILM NUMBER: 500808 BUSINESS ADDRESS: STREET 1: 1808 SWIFT ROAD CITY: OAK BROOK STATE: IL ZIP: 60523 BUSINESS PHONE: 3123465600 MAIL ADDRESS: STREET 1: 1808 SWIFT ROAD CITY: OAK BROOK STATE: IL ZIP: 60523 FORMER COMPANY: FORMER CONFORMED NAME: CENTERPOINT PROPERTIES CORP DATE OF NAME CHANGE: 19931001 10-K/A 1 10-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K/A (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE --- SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1997 or ----------------- --- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ______________ to _______________ Commission file number 1-12630 ------- CENTERPOINT PROPERTIES TRUST ---------------------------------------------------- (Exact Name of Registrant as Specified in its Charter) Maryland 36-3910279 - ------------------------------------------------------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 1808 Swift Drive, Oak Brook, Illinois 60523 - --------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (630) 586-8000 ---------------------- Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered ------------------- ----------------------------------------- Common Shares of Beneficial Interest, par value $.001 New York Stock Exchange 8.22% Convertible Subordinated Debentures due 2004 New York Stock Exchange 8.48% Series A Preferred Shares of Beneficial Interest, par value $.001 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None ------------------------------- (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No - --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K/A or any amendment to this Form 10-K/A. [ ] As of March 12, 1998, the aggregate market value of the voting stock held by non-affiliates of the registrant was $502,172,731 (based on 14,962,316 shares held by non-affiliates and computed by reference to the reported closing price). The registrant had 16,923,565 shares of its common stock, $.001 par value, outstanding as of March 12, 1998. DOCUMENTS INCORPORATED BY REFERENCE Portions of Common Stock and Debenture Prospectuses of the registrant, dated December 3, 1993, and a Common Stock Prospectus of the registrant, dated January 19, 1995, each filed pursuant to Rule 424 under the Securities Act of 1933, as amended, portions of the Registration Statement on Form S-3 dated January 6, 1997, portions of the registrant's Form 10-Q for the quarter ended September 30, 1995, portions of the 10-K/A for the year ended December 31, 1995, portions of the 10-Q for quarter ended September 30, 1996 , portions of the Form 10-K/A for the year ended December 31, 1996, portions of the Form S-4 dated August 13, 1997 and Pre-Effective Amendment No. 1 to the S-4dated August 28, 1997, portions of the Form 8-A dated November 5, 1997 and portions of the Form 10-Q for the quarter ended September 30, 1997 are incorporated by reference into Part IV of this Annual Report on Form 10-K/A. A portion of the registrant's definitive proxy statement is incorporated by reference into Part III of this Annual Report on Form 10-K/A. TABLE OF CONTENTS
PART I Page ---- Item 1. Business..................................................................................1 Item 2. Properties...............................................................................12 Item 3. Legal Proceedings........................................................................22 Item 4. Submission of Certain Items to a Vote of Security Holders................................22 PART II Item 5. Market for Registrant's Common Equity and Related Matters................................23 Item 6. Selected Historical Financial Data.......................................................24 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....26 Item 8. Financial Statements and Supplementary Data..............................................32 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.....32 PART III Item 10. Directors and Executive Officers of the Registrant.......................................33 Item 11. Executive Compensation...................................................................33 Item 12. Security Ownership of Certain Beneficial Owners and Management...........................33 Item 13. Certain Relationships and Related Transactions...........................................33 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..........................34
-i- PART I This Annual Report on Form 10-K/A contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company's actual results could differ materially from those set forth in the forward looking statements as a result of various factors, including, but are not limited to, uncertainties affecting real estate businesses generally (such as entry into new leases, renewals of leases and dependence on tenants' business operations), risks relating to acquisition, construction and development activities, possible environmental liabilities, risks relating to leverage, debt service and obligations with respect to the payment of dividends (including availability of financing terms acceptable to the Company and sensitivity of the Company's operations to fluctuations in interest rates), the potential for the need to use borrowings to make distributions necessary for the Company to qualify as a REIT, dependence on the primary market in which the Company's properties are located, the existence of complex regulations relating to the Company's status as a REIT and the potential adverse impact of market interest rates on the cost of borrowings by the Company and on the market price for the Company's securities. ITEM 1. BUSINESS. THE COMPANY CenterPoint Properties Trust (the "Company") is a fully integrated real estate investment trust focused on the acquisition, development, redevelopment, management and ownership of warehouse/industrial property located in Greater Chicago (defined as the area within a 150-mile radius of Chicago, including Milwaukee, Wisconsin and South Bend, Indiana), which, according to a ranking of markets published by Torto Wheaton Research and information published by CB Commercial, totals approximately 1.2 billion square feet, making it the largest warehouse/industrial market in the United States. The Company's investment and management portfolio currently consists of 95 warehouse/industrial properties containing approximately 22.1 million square feet (see the table of warehouse/industrial properties beginning on p. 14). The Company also owns and manages three retail properties, one parking lot and one apartment property, holds mortgages on two warehouse/industrial properties, and is developing eight build-to-suit projects. The Company's total investment and management portfolio, including the non-industrial properties, mortgage investments and build-to-suit projects, is approximately 25 million square feet. Based on published statistics regarding square feet of space owned and managed by other firms and publicly available information filed with the Securities and Exchange Commission, as well as its knowledge and experience in the market, the Company believes it is the largest owner and operator of warehouse/industrial property in Greater Chicago. As of December 31, 1997, the Company's properties were 97% leased, excluding properties which are currently being redeveloped and not leasable. The warehouse/industrial properties are occupied by 179 tenants in diverse industries. No tenant accounts for the lease of more than 5% of the Company's total revenues. Substantially all of the Company's properties have been constructed or renovated during the past ten years. INVESTMENT OBJECTIVES AND BUSINESS POLICIES The Company's objective is to maximize shareholder value by pursuing a business strategy focused on investment and ownership of warehouse/industrial properties in Greater Chicago and a growth strategy consisting of (i) intensive management of its existing properties and (ii) the acquisition of existing leased warehouse/industrial properties, build-to-suit projects and properties suitable for redevelopment; and (iii) development of buildings for purchase by tenants or institutions generating fee income for the Company. -1- BUSINESS STRATEGIES WAREHOUSE/INDUSTRIAL PROPERTY. The Company believes that for the following reasons investment in warehouse/industrial property provides the opportunity for attractive returns and stable cash flow: - LOW CAPITAL REQUIREMENTS. The cost per square foot of developing warehouse/industrial properties typically ranges between $40-45 per square foot, which is lower than the cost of developing other types of property. From the Company's perspective, this results in less capital committed to any particular property, permitting greater diversification of the Company's risk. In addition, relative to other property types, fewer tenant improvements are required to renew or lease warehouse industrial space, minimizing the level of recurring capital expenditures necessary to sustain rental income. - HIGH TENANT RETENTION. Unlike office, retail and multi-family buildings, most warehouse/industrial buildings are occupied by a single tenant. Relocation tends to be costly for tenants of warehouse/industrial properties because of high tenant investment in production set up expenses, machinery and other site specific improvements (in many cases higher than the landlord's investment). To avoid these costs, tenants typically lease space that exceeds their immediate needs or space in buildings that are readily expandable. Tenant retention and expansion therefore tend to be higher than for other property types. - FAVORABLE LEASE TERMS. Warehouse/industrial buildings generally are leased on a "triple net" basis, under which tenants are contractually obligated to pay directly, or reimburse the landlord, for virtually all costs of occupancy, including property taxes, utilities, insurance and maintenance. In addition, the leases generally provide for rent growth through contractual rent increases or increases tied to certain indices such as the Consumer Price Index. - SHORT CONSTRUCTION PERIODS. The Company believes that the comparatively short development period for industrial buildings (typically six to nine months) relative to other property types has resulted in less speculative building and, therefore, a supply of industrial property that more closely corresponds to tenant demand. This has kept vacancy levels on average lower than for other property types and has produced greater rental rate stability. - LOW COST OF MANAGEMENT. The Company believes that the cost of managing warehouse/industrial property tends to be less than for other property types, because of large average tenant spaces, more limited building and tenant improvements to maintain, and relatively long lease terms. - LIMITED INSTITUTIONAL COMPETITION. The Company believes that higher overall investment returns are achievable for warehouse/industrial property than other property types because such assets, typically $3 to $6 million in purchase price, are too small to justify institutional attention. The Company's typical competitor for assets of this size is a sponsor of a single asset partnership that typically has a higher cost of capital and less financial flexibility than the Company. GREATER CHICAGO. The Company believes that Greater Chicago offers significant opportunities for investment in and ownership of warehouse/industrial property for the following reasons: - ECONOMIC CHARACTERISTICS AND GROWTH. Greater Chicago is the nation's largest -2- warehouse/industrial market, with a diverse tenant base that lessens cyclical risk and a central continental location and transportation infrastructure that support continued growth. Greater Chicago is currently enjoying very favorable trends in growth, business investment, utilization and employment, which have resulted in increased space demand and increasing rents. Although the Company believes it is the largest owner and operator of warehouse/industrial property in Greater Chicago, its properties represented less than 2% of the market (based on square footage) as of December 31, 1997, allowing substantial opportunities for future growth through acquisitions. - MANAGEMENT EXPERIENCE. The Company's executive officers and the vice chairman together have over 100 years of combined real estate experience, primarily in warehouse/industrial properties located in Greater Chicago. Since 1977, they have completed approximately 300 industrial or commercial real estate projects aggregating over approximately 30 million square feet. This experience creates numerous opportunities for acquisitions, redevelopments and build-to-suits because of management's long-standing relationships with tenants and brokers within Greater Chicago. Management's market knowledge enables the Company to rapidly evaluate and respond to investment and leasing transactions and to actively create such opportunities. - BUSINESS EFFICIENCIES. The Company believes that geographic concentration provides significant business efficiencies. As a large owner of warehouse/industrial property located in most major Greater Chicago submarkets, the Company is able to market multiple locations and buildings and consequently has a competitive advantage in securing leasing opportunities. The Company also believes that operating economies of scale resulting from geographic concentration enhance its ability to offer lower occupancy costs to its tenants. The Company believes that its focus on warehouse/industrial properties in Greater Chicago also enables the expansion of its portfolio without a corresponding increase in general and administrative expense. GROWTH STRATEGIES INTENSIVE PROPERTY MANAGEMENT. The Company strives to provide the highest possible service to its tenants by addressing its tenants' occupancy needs and meeting their evolving space requirements. The Company seeks to become the "industrial landlord of choice" in the markets it operates. Management believes tenant satisfaction resulting from the Company's "hands on" management approach increases rental revenues by increasing tenant retention, minimizing reletting expense and facilitating rental increases. Management also believes that tenant satisfaction creates profitable expansion and build-to-suit opportunities from existing tenants. To develop its tenant franchise, the Company provides a variety of tenant services, including providing high quality, attractive space; promptly and fairly attending to tenant building or billing concerns; obtaining the lowest possible utility, insurance and real estate tax charges; responding rapidly to expansion or space reconfiguration requests; and assisting tenants in meeting their capital equipment needs. The Company views tenant service as a key factor in its business and has established tenant satisfaction as one of its primary corporate goals and a principal measure in the Company's incentive pay program for employees. The Company's tenant service strategy benefits from the size and concentration of the Company's real estate holdings in Greater Chicago. As a large owner of warehouse/industrial properties in a single -3- geographic market, the Company believes it can obtain for its tenants the benefits of bulk purchase of goods and services. Management believes that minimizing tenants' occupancy costs builds tenant loyalty and provides the Company with a significant marketing advantage. The Company's own staff is responsible for managing the Company's entire real estate portfolio. The Company currently staffs eight management regions, each serving a particular segment of Greater Chicago, and each staffed with a team consisting of a regional manager, an assistant manager and accounting support personnel. Each team is responsible for all aspects of the management and leasing of its assigned properties. The Company intends to establish additional regional offices as the size of its portfolio increases. To motivate employees to provide the highest level of tenant service, the Company has established a pay-for-performance compensation plan under which the incentive pay of each participating employee depends in part on the results of an annual tenant satisfaction survey administered by the Company's independent directors. Employee incentive pay is also dependent on the achievement of targeted portfolio occupancy and targeted per share funds from operations, each of which the Company believes is enhanced by tenant service. VALUE-ADDED INVESTMENTS. The Company seeks to acquire warehouse/industrial properties that have an initial cash yield greater than the Company's cost of capital (currently estimated to be less than 10.0%), that offer the best opportunity for cash flow growth and that meet the Company's investment criteria. The Company focuses on three types of transactions to which it can add value through the application of its development, management, construction, marketing and financial expertise. These transactions include the acquisition of: (i) existing leased properties, (ii) build-to-suit projects and (iii) older, economically viable properties that can be redeveloped. A table of the Company's warehouse/industrial properties with a description of each investment type is set forth beginning on page 14 hereof. - EXISTING LEASED PROPERTIES. The Company focuses primarily on warehouse/industrial properties and build-to-suits with purchase prices ranging between $3 million and $6 million, which management believes are too small to be efficiently acquired on an individual basis by most institutions. As a public company with significant access to capital, including its lines of credit, the Company believes that it will continue to be able to take advantage of numerous acquisition opportunities in this price range. - BUILD-TO-SUIT PROPERTIES. In a build-to-suit transaction, the Company typically enters into a fixed-price forward purchase commitment for a property that has been substantially preleased to a single tenant, thereby eliminating the construction and leasing risk generally associated with speculative building. Although tenants are involved in site selection and design decisions, it is management's policy to acquire buildings readily adaptable to a variety of tenants and alternative uses. The Company has achieved and expects to continue to achieve favorable yields from build-to-suit transactions because of the Company's active involvement in the creation and financing of these projects. - REDEVELOPMENT PROPERTIES. The Company seeks to acquire certain warehouse/industrial properties for redevelopment, subdivision and re-leasing. Such properties are generally larger than the leased properties and build-to-suits acquired by the Company and typically involve significant reconfiguration and redevelopment expense prior to re-leasing. Competition for these properties is limited because, in management's experience, institutional investors generally -4- lack redevelopment capability and prefer to invest in new leased product and because smaller privately held firms typically lack the capital necessary to engage in redevelopments. Management intends to acquire for redevelopment only properties with sufficient existing cash flow or expected cash flow from pre-leasing to cover the capital cost of the Company's initial investment. Redevelopment projects will be acquired only if the Company determines that underlying tenant demand exists to complete the leasing of any vacant space at favorable rates, that a substantial rent advantage can be secured through lower property acquisition cost and that the anticipated increase in Company cash flow justifies associated project risks. - REDEPLOYMENT OF CAPITAL. The Company seeks, where possible, to sell properties in transactions intended to qualify as tax-free exchanges under applicable provisions of the Internal Revenue Code and redeploy the proceeds of such sales in properties with higher yielding opportunities where the Company believes significant value can be added. The Company has developed the following investment criteria which it has determined are important to maximize its return on investment: - ADAPTABLE STRUCTURE AND CONFIGURATION. To maximize occupancy and minimize reletting expense and portfolio vacancy, the Company seeks "generic" properties or properties that have flexible floor plans amenable to inexpensive subdivision and adaptable to a wide variety of industrial or warehouse uses. A building should typically be single-story, with a ceiling height of at least 18 feet (measured from the floor to the lowest point of the horizontal roof supports). The building must be structurally sound, capable of bearing heavy floor loads and readily divisible for use by multiple tenants. Generally, less than 10% of the building's gross leasable area should be devoted to office or similar uses. The Company generally does not intend to invest in tenant-specific improvements not usable by other potential tenants, and it generally does not intend to acquire limited or special use properties, such as those devoted to research and development, heavy manufacturing processes or retail warehouse outlets. - LOCATION AND TRANSPORTATION ACCESS. To be acceptable to diverse tenants, a property should be located in a well-maintained industrial park or area zoned for industrial uses and be in close proximity to easily accessible interstate highway interchanges. The building itself should have adequate loading docks and be sited to permit truck access and circulation. Rail service is also desirable. - ENVIRONMENTAL AND ZONING COMPLIANCE. A property must be in compliance with applicable environmental regulations, must not present material financial risk to the Company due to potential remediation costs associated with prior or ongoing practices or environmental conditions at the property, and must not be likely to be threatened by ascertainable material environmental hazards emanating from surrounding properties. The intended use of the property must also be in compliance with all applicable zoning, fire and business ordinances. - EXPANSION POTENTIAL. A property should have available additional land to permit expansion by existing tenants. - TENANT CREDIT. A property should be leased to one or more well-managed, creditworthy tenants that are capable of meeting their rent and other lease obligations. A tenant's operations must be environmentally sound and must not damage the property or impair reletting. The tenant's -5- business should also be consistent with the Company's tenant diversification goals. - LEASE CHARACTERISTICS. Existing or anticipated leases should provide for (i) rents consistent with the rents paid by comparable tenants in similar facilities in the same submarkets; (ii) the pass through to tenants of all operating, maintenance, tax and administrative costs and increases in such costs; (iii) rent indexation or fixed rental increases that equal or exceed management's expectation for inflation; and (iv) a term consistent with the amount of the Company's investment in the property and compatible with the Company's overall lease expiration schedule. OTHER TENANT SERVICES. The Company, through its unconsolidated subsidiary, CenterPoint Realty Services, also seeks to provide value-added services by the development of assets for purchase and by making various commodities and services available to tenants. The Company develops assets for purchase by tenants and institutions for which the Company earns fees. Typically, these transactions have yields below the Company's investment return hurdle, but offer substantial profit opportunities relative to the level of required capital and management time. The Company is afforded these opportunities as a consequence of the size of its existing portfolio and its market penetration. The Company's fee development business has been, and is expected to continue to be, a recurring source of revenue. In addition, the Company continues to explore various avenues to provide tenants with additional services, including providing equipment leasing services through joint ventures with capital equipment providers, obtaining cooperative energy purchases for tenants and making other commodities and services available to tenants. By providing value-added services to its tenants, the Company enhances its brand name and further develops its franchise. THE COMPANY'S MARKET AREA: GREATER CHICAGO The Company's target market is Greater Chicago (the region within a 150-mile radius of the City of Chicago, including Milwaukee, Wisconsin and South Bend, Indiana), although the Company may in certain instances consider the development of warehouse/industrial properties in other areas (for example, a readily salable building, fully-leased to a creditworthy tenant). Greater Chicago lies at the center of one of the nation's principal population and production regions and, as a consequence, has become a major warehouse/industrial market. Management believes that the size, location, transportation and demographic advantages, tenant diversity, favorable growth trends and real estate market conditions of its target market will support continued leasing and acquisition activity, enhancing the Company's growth in per share distributable cash flow. Besides market activity from in-migration and firm expansion, a consistently high level of industrial real estate activity results from the changing space needs of individual industries and because different industries move in different cycles. The Greater Chicago region's continuous activity enables the Company to produce consistently high cash flow because the Company invests in and operates "generic" real estate, suitable for multiple industries, and the Company is highly skilled in "value-added" investing, acquiring and re-adapting space for disparate uses. -6- LOCATION, TRANSPORTATION AND DEMOGRAPHIC ADVANTAGES Greater Chicago encompasses over 1.2 billion square feet of warehouse/industrial property, making the area the largest warehouse/industrial market in the United States. The Greater Chicago market is comprised of 19 discreet geographic submarkets, many of which would independently rank among the nation's largest (Source: Torto Wheaton Research) and in most of which the Company owns warehouse/industrial properties. The area has achieved its prominence as a manufacturing and distribution center as a result of its central continental location and extensive air, roadway, rail and water transportation infrastructure connecting the Greater Chicago area with a contiguous 13-state region consisting of Illinois, Wisconsin, Michigan, Ohio, Pennsylvania, West Virginia, Tennessee, Kentucky, Indiana, Missouri, Iowa, Nebraska and Minnesota. The latest census report issued by the United States Department of Commerce reported that this 13-state region accounted for $1.6 trillion in gross product (representing approximately one-third of the nation's economic activity), produced by 1.8 million industrial and commercial firms serving a residential population of approximately 78 million residents. Published census data indicate that Greater Chicago is the dominant economic, work and population center of this region as the home to over eight million residents and over 59,000 diverse industrial and commercial firms. The diversity of Greater Chicago business provides the Company the opportunity to capitalize on different trends affecting real estate demand and usage by different manufacturers and wholesalers. The diversity of business also reduces the Company's exposure to changes in the fortunes of any single type of business. ECONOMIC AND EMPLOYMENT TRENDS Current manufacturing, productivity, business investment, capacity utilization, and employment trends in the Midwest region of the U.S. and in Greater Chicago are positive. The Midwest Manufacturing Index for the Midwest region, as published by the Federal Reserve Bank of Chicago, has been steadily expanding since 1991. The Midwest region has also recorded increases in manufacturing and wholesale employment and has exceeded the rates of growth of the United States as a whole. Management believes that these trends are favorable indicators of growth in the warehouse/industrial property market. The Greater Chicago area is the largest job market in the nation. WAREHOUSE/INDUSTRIAL DEMAND AND SUPPLY Historically, occupancy rates in Greater Chicago have demonstrated a high degree of stability. Over the last seventeen years, occupancy rates for the Greater Chicago region have exceeded the national average by 1.45%, with an average occupancy rate of nearly 94% (Source: CBC/Torto Wheaton Research). The region's annual absorption from 1994 to 1997 averaged approximately 40 million square feet (Source: CB Commercial). During 1997, Greater Chicago's industrial property market added 13.1 million square feet, and gross regional absorption was approximately 45 million square feet. According to CB Commercial, in the fourth quarter of 1997 the overall nominal industrial vacancy rate in the Greater Chicago area was 6.9%, an increase of 30 basis points from the third quarter. However, the effective vacancy rate (net of obsolete and environmentally tainted properties) remained less than 5% overall. This increase in vacancy was primarily due to speculative construction in two Illinois submarkets which the Company has consistently avoided based on its prediction of a demand/supply imbalance in those submarkets. -7- TRANSACTIONS DURING 1997 During 1997, the Company accomplished the following: 1997 ACQUISITIONS AND DISPOSITIONS During 1997, the Company acquired or completed development of 28 warehouse/industrial properties totaling 8.8 million square feet at a total cost of approximately $195.6 million, including the acquisition of a 1.75 million square foot facility in McCook, Illinois from General Motors, the largest single acquisition in the history of the Chicago industrial property market, a 1.1 million square foot facility in Aurora, Illinois, an 888,335 square foot facility in Elk Grove, Village, Illinois and an 812,000 square foot build-to-suit warehouse in Granite City, Illinois for the Dial Corporation, the largest development of any type begun in the State of Illinois in 1997. Also in 1997, the Company disposed of two warehouse/industrial properties and one office building totaling approximately 201,318 square feet for approximately $12.6 million. 1997 SECURITIES OFFERINGS - On March 6, 1997, the Company completed a public offering of 2,250,000 common shares at $31.50 per share under a shelf registration statement. Net proceeds from the offering after the underwriting discounts and other offering costs were approximately $66.8 million. The proceeds of the offering were used to repay approximately $58.2 million outstanding under the Company's unsecured revolving line of credit co-led by The First National Bank of Chicago and Lehman Brothers Holdings Inc. with the balance of $8.6 million to fund investments. - On November 10, 1997, the Company completed a public offering of 3,000,000 8.48% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest, Liquidation Preference $25.00 per share, at $25.00 per share, under the Company's shelf registration statement, as amended, which was declared effective on October 23, 1997. Net proceeds from the offering after underwriting discounts were approximately $72.7 million. All of the proceeds from the offering were used to repay amounts outstanding under the Company's unsecured revolving credit facility co-led by The First National Bank of Chicago and Lehman Brothers Holdings Inc. 1997 FINANCINGS - On September 18, 1997, the Company completed a $55 million tax-exempt bond financing for the development of the Company's O'Hare Express air freight center. The complex is a 825,000 square foot air freight forwarding and warehouse facility, anticipated to be constructed in three phases over a three-year period by CenterPoint O'Hare L.L.C., a subsidiary of the Company. The unsecured bonds were issued at par, bearing an initial interest rate of 4%. -8- - On November 13, 1997, the Company amended its existing unsecured revolving credit facility co-led by The First National Bank of Chicago and Lehman Brothers Holdings Inc. to, among other things, increase the principal amount available under the line from $135 million to $150 million and provide the Company with a competitive bid option under the line. The interest rate on borrowings under the unsecured credit facility adjusts based on the Company's senior debt ratings. The current interest rate is LIBOR plus 80 basis points for LIBOR borrowings and prime rate for other borrowings. REORGANIZATION On October 15, 1997, the Company completed a reorganization pursuant to which it converted from a Maryland corporation to a Maryland real estate investment trust by means of a merger of CenterPoint Properties Corporation (the "Corporation") with and into the Company, which prior to the merger was a wholly-owned subsidiary of the Corporation, with the Company as the surviving entity. Pursuant to a Plan of Reorganization, which was approved by the stockholders of the Corporation at a Special Meeting of Stockholders held on October 1, 1997, each issued and outstanding share of common stock of the corporation, par value $.001 per share (the "Common Stock"), was converted into one common share of beneficial interest in the Company, par value $.001 per share (the "Common Shares"), each outstanding share of Class B common stock of the Corporation was converted into one Class B common share of beneficial interest in the Company; and the outstanding principal amount of the Corporation's 8.22% Convertible Subordinated Debentures due 2004 was assumed by the Company and converted into the same principal amount of 8.22% Convertible Subordinated Debentures due 2004 of the Company (the "Company Debentures"). The Common Shares and the Company Debentures currently trade on the NYSE in the same manner as the Common Stock and debentures of the Corporation, respectively, traded on the NYSE prior to consummation of the merger. EMPLOYEES At March 1, 1998, the Company had 125 full-time and 30 part-time employees. Of the full-time employees, 107 are involved with property management, operations, leasing and acquisition activities, 8 are involved with general financial administration, financing services, reporting and acquisition analysis, and 10 are clerical workers. All property management activities are currently provided by the Company's employees. The Company does not intend to enter into any agreement with any entity or person relating to such services. However, the Company's Declaration of Trust does not contain any prohibition on the use of third parties to perform such services, and such services may therefore be performed by third parties in the future. -9- ENVIRONMENTAL MATTERS Under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), as well as similar state and local laws, owners and operators of property, both past and present, may be held financially responsible for the investigation and, if appropriate, the remediation of releases or threatened releases of hazardous substances into the environment. Other parties who arranged for the disposal of hazardous substances or transported hazardous substances for disposal at a property also may be held liable. Liability under CERCLA and similar laws is strict, joint and several unless a legally and factually sufficient basis for apportionment is demonstrated and in most instances, liability may be imposed without regard to the party's culpability concerning the presence of hazardous substances at the property. Potentially responsible parties may be liable to one another, the government and under some circumstances, third parties. To the extent the Company in the future may incur hazardous substance response costs in connection with any of its properties, the Company may seek to recover such costs from responsible parties under CERCLA. Costs recoverable under CERCLA must be incurred in a manner consistent with the National Contingency Plan. The National Contingency Plan establishes a procedure whereby contaminated properties may be identified and, if necessary, remediated. If remediation is conducted in the appropriate manner, the costs that may be recovered include but may not be limited to funds expended to investigate and to remediate hazardous substance releases. Costs associated with any such environmental activity may be substantial. All of the Company's existing properties have been, and all properties the Company may acquire in the future will be, subjected to an ASTM Phase I and or similar environmental assessment. The purpose of a Phase I environmental assessment is to determine if past and present uses of a property indicate the potential for soil or groundwater contamination or if other environmental conditions might affect the value of or future uses of the property. Phase I environmental assessments generally include the following: visual inspection of environmental conditions at and around the property; review of available land use records; interviews with the property representatives; examination of publicly available information from environmental agencies; and a walk through survey for suspected asbestos containing or other toxic materials. Where a Phase I environmental assessment of a property indicates a need for further investigation, the Company commissions a more detailed Phase II environmental assessment. Apart from certain conditions currently being remedied, as described below, the Phase I and Phase II environmental assessment reports have not revealed any environmental condition affecting any of the Company's existing properties or any properties under binding contract that the Company believes requires remediation that would have a material adverse effect on the Company's business or assets, nor is the Company aware of any such environmental condition. The Company believes that either the properties are in compliance or the remediation activities are in compliance in all material respects with applicable Federal, state and local laws, ordinances and regulations concerning the presence of hazardous substances. The Company has not been notified by any governmental authority, and is not otherwise aware, of any material noncompliance, liability or claim relating to hazardous substances in connection with any of its properties. Based on its current knowledge and currently applicable laws and regulations, the Company is aware of the following environmental issues, none of which the Company believes are material to its financial condition: 1. Certain remediation activities are currently being conducted at Great Lakes Industrial Center by Neo Industries, a previous tenant, which is investigating chromium releases from its plating operations and is currently remediating the chromium contamination in the soil and the groundwater. The Company does not expect to incur any remediation costs with respect -10- to this property. 2. The former owner/operator of one property, 1700 West Hawthorne Lane, West Chicago, Illinois, has removed various underground and above-ground storage tanks and performed remediation of releases from these tanks where necessary. Closure reports have been or are being submitted by the former owner/operator for each tank removal. The Company expects to receive Illinois Environmental Protection Agency ("IEPA") closure certification for each tank from the former owner/operator in due course. 3. The former owner/operator of one property, the Allsteel facility in Montgomery, Illinois, has closed seven underground storage tanks associated with former operations and is currently remediating solvent-contaminated soil and groundwater. The IEPA is supervising the remedial activities, and the Company expects to receive a No Further Remediation letter from the IEPA once the remediation is complete. The Company does not expect to incur any remediation costs in connection with this property because both the former owner/operator and the former owner/operator's parent company have agreed to (1) perform the remediation, and (2) indemnify the Company against any losses. 4. The Company is currently remediating one property located at 5700 West Touhy in Niles, Illinois. This property has limited petroleum and metals contamination associated with the manufacturing and storage activities of the prior owner. The IEPA is supervising the remedial activities, and the Company expects to receive a No Further Remediation letter from the IEPA once the remediation is complete. 5. Certain of the properties are in the vicinity of properties that contain or have contained storage tanks or on which hazardous substances or petroleum products have been or may in the future be used or stored. Based on the Phase I and, in some cases, additional environmental assessments conducted with respect to its properties, the Company is not aware that these conditions have had, and believes it unlikely that these conditions will have, any adverse effect on its properties. Should there be any adverse effect requiring response by the Company, the Company believes that it may be able to recover its response costs from the responsible parties. 6. Limited quantities of asbestos containing materials ("ACM") are present in various building materials at many of the Company's properties. The ACM present at the properties generally is in good condition and for the most part is non-friable. The Company has implemented an operation and maintenance plan for ACM, including periodic inspections. This plan includes removal and abatement activity whenever damaged ACM is discovered in areas where human exposure may occur. It also includes an annual ACM abatement program and ACM abatement during property renovation or reconstruction. It is possible that the environmental assessments of the Company's properties do not reveal all environmental liability concerns or that there are material environmental liabilities of which the Company is unaware. Given the nature of the properties that are now owned by the Company or that may be acquired in the future, no assurances can be given that (i) future laws, ordinances or regulations will not require or impose any material expenditures or liabilities in connection with environmental conditions by or on the Company or its properties; (ii) the current environmental condition of the Company's properties will not be affected by tenants and occupants of such properties, by the condition of properties in the vicinity of such properties or by third parties unrelated to the Company; and (iii) prior owners of any of the Company's properties did not create environmental problems of which the Company is not aware. -11- COMPETITION All of the Company's existing properties are, and all of the properties that it may acquire in the future are expected to be, located in areas that include numerous other warehouse/industrial properties, many of which may be deemed to be more suitable to a potential tenant than the Company's properties. The resulting competition could have a material adverse effect on the Company's ability to lease its properties and to increase the rentals charged on existing leases. INVESTMENT IN AND ADVANCES TO AFFILIATE The Company holds approximately 99% of the economic interest in CenterPoint Realty Services Corporation, an Illinois corporation ("CRS"). To maintain compliance with limitations on income from business activities received by REITs and their qualified REIT subsidiaries, the Company holds its interest in CRS in the form of non-voting equity ownership which qualifies CRS as an unconsolidated taxable subsidiary. As of December 31, 1997, the Company had advanced to CRS approximately $7.9 million under a demand loan with an interest rate of 8.125%. The proceeds of the loan were used for development projects. Principal and interest are due upon demand. ITEM 2. PROPERTIES. THE COMPANY'S WAREHOUSE/INDUSTRIAL PROPERTIES The Company's investment portfolio of warehouse/industrial properties consists of 96 properties totaling approximately 22.1 million square feet. During 1997, the Company acquired 21 fully-leased warehouse/industrial properties and completed the construction of 7 fully leased warehouse/industrial build-to-suit properties with a total area of approximately 8.8 million square feet, and the Company disposed of 2 warehouse/industrial properties with a total area of approximately 43,500 square feet. LOCATION. The Company's current properties are well located, with convenient access to area interstate highway, rail, and air transportation. The properties are in good physical condition, most of them having been built or substantially renovated within the last 10 years. BUILDING CHARACTERISTICS. Most of the space in the warehouse/industrial properties currently owned by the Company or under contract has been designed for warehousing and distribution. The remainder of the space is comprised of light manufacturing space. A number of the industrial properties include both distribution and light manufacturing space so as to provide tenants with increased flexibility. The Company's largest industrial property contains approximately 1,700,000 rentable square feet in a single-tenant warehousing and manufacturing property, available for redevelopment into a multi-tenant warehouse/industrial complex. The Company's present warehouse/industrial properties have an average project size of approximately 232,123 square feet, and, on average, a tenant at an industrial property occupies approximately 319,000 rentable square feet. Although a number of the industrial properties are single-tenant build-to-suit facilities, all are designed to be divisible and to be leased by multiple tenants. The Company has had substantial experience in subdividing older space for new tenants. The Company's present warehousing and distribution properties, as well as warehousing and distribution properties under contract, are designed for bulk storage of materials and manufactured goods in -12- buildings with interior heights typically of 22 feet or more. All of the warehousing and distribution properties have dock facilities for trucks as well as grade level loading for lighter vehicles and vans. Typically, the distribution buildings are used for storage and contain a minimal amount of office space. LEASE CHARACTERISTICS. The Company believes that the lease agreements for its warehouse/industrial properties, which in most cases provide for scheduled or indexed increases in rent, as well as the strengthening economy, will provide opportunities for rental growth. The Company, in substantially all cases, passes operating expenses and real estate tax increases on to tenants. The leases for the warehouse/industrial properties currently owned by the Company have terms between one and 5 years, with a weighted average remaining term, based on square footage, of approximately 4.14 years as of December 31, 1997. TENANT DIVERSITY. The composition of tenants in the warehouse/industrial properties currently owned by the Company reflects the commercial diversity of businesses operating in Greater Chicago. At December 31, 1997, no single industry, other than Wholesale Trade-Durable Goods and Trucking/Warehousing, accounted for more than 10.8% of the leased space in the warehouse/industrial properties currently owned by the Company. Wholesale Trade-Durable Goods and Trucking/Warehousing, which encompass a wide variety of industries, accounted for 27.2% of the leased space in the warehouse/industrial properties currently owned by the Company at December 31, 1997, and the five largest industries, other than Wholesale Trade-Durable Goods and Trucking/Warehousing, represented by tenants accounted collectively for only 35.6% of such space. In addition, no single tenant comprised more than 5% of the Company's total revenues as of December 31, 1997. OTHER INFORMATION REGARDING WAREHOUSE/INDUSTRIAL PROPERTIES. The following table sets forth certain information regarding the Company's portfolio of warehouse/industrial properties, separately identifying 1997 investments of the Company: -13- CENTERPOINT PROPERTIES TRUST PROPERTY SUMMARY AS OF DECEMBER 31, 1997
YEAR OF ORIGINAL CONSTRUCTION/LAST ANNUALIZED AVERAGE REDEVELOPMENT AND/OR BASE RENT RENT PER GLA 1997 INVESTMENTS CITY STATE EXPANSION (1) REVENUE SQ. FT. (2) SQ. FT. (3) ---------------- ---- ----- -------------------- ---------- ----------- ----------- LAKE COUNTY 3145 Central Avenue(6) Waukegan IL 1958 $990,000 $3.30 300,000 N.E. COOK COUNTY 5700 West Touhy Avenue Niles IL 1948 0 0 910,760 CHICAGO O'HARE AREA O'Hare Express-Phase A-2 Chicago IL 1997 1,070,090 8.85 120,971 O'Hare Express-Phase B-1 Chicago IL 1997 2,068,590 12.05 171,685 110-190 Old Higgins Road Des Plaines IL 1980 1,256,784 10.45 120,292 1796 Sherwin Des Plaines IL 1964 600,211 6.30 95,220 2525 Busse Road Elk Grove Village IL 1975 2,817,353 3.17 888,335 2701-2781 Busse Road Elk Grove Village IL 1997 1,180,716 4.70 251,076 2801-2881 Busse Road Elk Grove Village IL 1997 1,112,802 4.43 251,076 1951 Landmeier Elk Grove Village IL 1967 203,880 4.86 41,976 WEST SUBURBS 2901 Centre Circle (7) Downers Grove IL 1979 148,764 7.07 21,056 FAR WEST SUBURBS 1 Allsteel Drive (7) Aurora IL 1960 2,729,435 2.71 1,008,120 2727 West Diehl Road Naperville IL 1997 1,836,240 4.17 440,343 2885 West Diehl Road Naperville IL 1997 1,145,928 3.80 301,560 SOUTHWEST SUBURBS 7447 South Central Avenue Bedford Park IL 1975 275,842 2.33 118,218 7400 S. Narragansett Ave (6) Bedford Park IL 1976 515,424 2.95 174,720 6751-55 South Sayre Avenue Bedford Park IL 1974 746,378 3.08 242,690 7525 South Sayre Bedford Park IL 1981 386,577 3.14 123,178 6464 West 51st Street Forest View IL 1973 736,040 3.53 208,713 6500 West 51st Street Forest View IL 1975 500,297 2.70 185,295 9301 W. 55th Street (6) McCook IL 1979 1,620,000 0.95 1,700,000 FAR S.W. SUBURBS 2301 North Route 30 Plainfield IL 1972 815,625 2.89 282,679 1355 Enterprise Drive (6) Romeoville IL 1980 354,123 2.90 122,100 755 REMMINGTON Bolingbrook IL 1997 548,000 3.78 144,844 CHICAGO SOUTH 3133 East 106th (6) Chicago IL 1971 300,285 3.75 80,076 MILWAUKEE COUNTY 1475 S. 101st West Allis WI 1969 188,832 4.02 46,973 2003-2201 S. 114th Street West Allis WI 1965 628,380 2.58 243,350 RACINE COUNTY 1333 Grandview Drive Yorkville WI 1994 796,572 3.79 210,000 ---------- ---- --------- SUBTOTAL 25,573,168 8,805,306 ---------- --------- AVERAGE 2.89(9) 320,758(10) ---- --------- PERCENT PERCENT OF GLA OF TOTAL LEASED AS NO. OF PROPERTY 1997 INVESTMENTS GLA (4) OF 12/31/97 TENANTS TYPE(5) ---------------- -------- ----------- ------- -------- LAKE COUNTY 3145 Central Avenue(6) 1.36% 100% 2 ACQ N.E. COOK COUNTY 5700 West Touhy Avenue 4.13% 100% 1 RDV CHICAGO O'HARE AREA O'Hare Express-Phase A-2 0.55% 100% 2 BTS O'Hare Express-Phase B-1 0.78% 100% 1 BTS 110-190 Old Higgins Road 0.55% 100% 9 ACQ 1796 Sherwin 0.43% 100% 2 ACQ 2525 Busse Road 4.03% 100% 5 ACQ 2701-2781 Busse Road 1.14% 100% 2 BTS 2801-2881 Busse Road 1.14% 100% 2 BTS 1951 Landmeier 0.19% 100% 2 ACQ WEST SUBURBS 2901 Centre Circle (7) 0.09% 100% 1 ACQ FAR WEST SUBURBS 1 Allsteel Drive (7) 4.57% 100% 2 ACQ 2727 West Diehl Road 2.00% 100% 1 BTS 2885 West Diehl Road 1.37% 100% 1 BTS SOUTHWEST SUBURBS 7447 South Central Avenue 0.54% 100% 1 ACQ 7400 S. Narragansett Ave (6) 0.79% 100% 1 ACQ 6751-55 South Sayre Avenue 1.10% 100% 2 ACQ 7525 South Sayre 0.56% 100% 2 ACQ 6464 West 51st Street 0.95% 100% 4 ACQ 6500 West 51st Street 0.84% 100% 1 ACQ 9301 W. 55th Street (6) 7.71% 100% 1 RDV FAR S.W. SUBURBS 2301 North Route 30 1.28% 100% 1 ACQ 1355 Enterprise Drive (6) 0.55% 100% 1 ACQ 755 REMMINGTON 100% 2 BTS CHICAGO SOUTH 3133 East 106th (6) 0.36% 100% 1 ACQ MILWAUKEE COUNTY 1475 S. 101st 0.21% 100% 1 ACQ 2003-2201 S. 114th Street 1.10% 100% 2 ACQ RACINE COUNTY 1333 Grandview Drive 0.95% 100% 1 ACQ ----- SUBTOTAL 39.27% ----- AVERAGE 1.45% -----
-14- CENTERPOINT PROPERTIES TRUST PROPERTY SUMMARY AS OF DECEMBER 31, 1997
YEAR OF ORIGINAL CONSTRUCTION/LAST ANNUALIZED AVERAGE REDEVELOPMENT AND/OR BASE RENT RENT PER GLA PREVIOUSLY OWNED PROPERTIES CITY STATE EXPANSION (1) REVENUE SQ. FT. (2) SQ. FT. (3) --------------------------- ---- ------ -------------------- ---------- ----------- ----------- LAKE COUNTY 911 Commerce (6) Buffalo Grove IL 1993 703,636 5.96 118,009 1800 Industrial Drive Libertyville IL 1992/1994 1,079,292 6.16 175,196 1810-1820 Industrial Drive Libertyville IL 1977 256,700 3.02 85,000 1 Wildlife Way Long Grove IL 1994 665,068 12.29 54,100 620-630 Butterfield Road Mundelein IL 1990 297,680 12.28 24,237 1700 Butterfield Road Mundelein IL 1976 229,750 3.83 60,000 950-970 Tower Road Mundelein IL 1979-1990 90,861 2.37 38,359 2339-41 Ernie Krueger Court Waukegan IL 1990/1993 223,245 4.10 54,450 1300 Northpoint Road Waukegan IL 1994 310,409 4.78 65,000 N.E. COOK COUNTY 5990 Touhy Avenue Niles IL 1960/1993 1,502,864 5.08 295,964 N.W. COOK COUNTY 1500 West Dundee Road (6) Arlington Heights IL 1969 1,463,525 2.93 500,000 900 W. University Drive Arlington Heights IL 1974 501,083 5.81 86,254 1015 East State Parkway Schaumburg IL 1980 132,330 6.76 19,576 N. KANE COUNTY 825 Tollgate Road Elgin IL 1989 424,988 5.11 83,122 CHICAGO O'HARE AREA 745 Birginal Road Bensenville IL 1974 378,875 3.35 113,266 2743 Armstrong Court Des Plaines IL 1989 314,178 5.89 53,325 850 Arthur Avenue (8) Elk Grove Village IL 1971/1973 250,717 5.90 42,490 1400 Busse Road Elk Grove Village IL 1975 347,038 2.34 148,436 800 Chase Avenue (6) Elk Grove Village IL 1972 1,182,792 3.46 341,848 1100 Chase Avenue (7) Elk Grove Village IL 1980/1996 176,618 4.24 41,651 2600 Elmhurst Road Elk Grove Village IL 1995 521,170 4.96 105,000 875 Fargo Avenue Elk Grove Village IL 1980 345,946 4.20 82,368 1850 Greenleaf Elk Grove Village IL 1965 233,280 3.98 58,627 1201 Lunt Avenue Elk Grove Village IL 1971 47,820 6.48 7,380 1501 Pratt Avenue Elk Grove Village IL 1973 600,573 3.95 151,900 1520 Pratt Avenue Elk Grove Village IL 1968 243,148 3.89 62,546 10601 Seymour Avenue (6) Franklin Park IL 1963/1970 0 0 677,000 2553 North Edgington Franklin Park IL 1967/1995 1,376,770 5.02 274,303 10740 West Grand Avenue (7) Franklin Park IL 1965/1971 247,175 3.75 66,000 1800 Bruning Drive Itasca IL 1975/1978 1,115,617 5.52 202,000 245 Beinoris Drive Wood Dale IL 1988/1993 85,776 7.15 11,989 PERCENT PERCENT OF GLA OF TOTAL LEASED AS NO. OF PROPERTY PREVIOUSLY OWNED PROPERTIES GLA (4) OF 12/31/97 TENANTS TYPE(5) --------------------------- -------- ----------- ------- -------- LAKE COUNTY 911 Commerce (6) 0.54% 100% 2 ACQ 1800 Industrial Drive 0.79% 100% 1 ACQ 1810-1820 Industrial Drive 0.39% 100% 1 ACQ 1 Wildlife Way 0.25% 100% 1 RDV 620-630 Butterfield Road 0.11% 90% 1 BTS 1700 Butterfield Road 0.27% 100% 1 ACQ 950-970 Tower Road 0.17% 100% 3 BTS 2339-41 Ernie Krueger Court 0.25% 100% 1 BTS 1300 Northpoint Road 0.29% 100% 1 ACQ N.E. COOK COUNTY 5990 Touhy Avenue 1.34% 100% 3 RDV N.W. COOK COUNTY 1500 West Dundee Road (6) 2.27% 100% 2 ACQ 900 W. University Drive 0.39% 100% 1 ACQ 1015 East State Parkway 0.09% 0% 0 ACQ N. KANE COUNTY 825 Tollgate Road 0.38% 100% 2 ACQ CHICAGO O'HARE AREA 745 Birginal Road 0.51% 0% 0 ACQ 2743 Armstrong Court 0.24% 0% 0 BTS 850 Arthur Avenue (8) 0.19% 100% 1 ACQ 1400 Busse Road 0.67% 90% 10 ACQ 800 Chase Avenue (6) 1.55% 0% 0 ACQ 1100 Chase Avenue (7) 0.19% 100% 1 ACQ 2600 Elmhurst Road 0.48% 100% 1 BTS 875 Fargo Avenue 0.37% 100% 1 ACQ 1850 Greenleaf 0.27% 100% 1 ACQ 1201 Lunt Avenue 0.03% 100% 1 ACQ 1501 Pratt Avenue 0.69% 100% 2 ACQ 1520 Pratt Avenue 0.28% 100% 1 ACQ 10601 Seymour Avenue (6) 3.07% 0% 0 ACQ/RDV 2553 North Edgington 1.24% 100% 4 ACQ 10740 West Grand Avenue (7) 0.30% 100% 1 ACQ 1800 Bruning Drive 0.92% 100% 1 ACQ 245 Beinoris Drive 0.05% 100% 1 BTS/RDV
-15-
YEAR OF ORIGINAL CONSTRUCTION/LAST ANNUALIZED AVERAGE REDEVELOPMENT BASE RENT RENT PER GLA PREVIOUSLY OWNED PROPERTIES CITY STATE AND/OR EXPANSION (1) REVENUE SQ. FT. (2) SQ. FT. (3) - --------------------------- ---- ----- -------------------- ------- ----------- ----------- CHICAGO NORTH 4501 West Augusta Boulevard Chicago IL 1942/1989 748,070 1.73 432,661 N.W. SUBURBS 400 North Wolf Road Northlake IL 1956/1997 4,319,091 2.83 1,527,593 CENTRAL KANE/N. DUPAGE 425 South 37th Avenue (7) St. Charles IL 1975 399,309 3.87 103,106 1250 Carolina Drive West Chicago IL 1988 572,325 3.82 150,000 1645 Downs Drive West Chicago IL 1975 361,008 2.79 129,390 1733 Downs Drive West Chicago IL 1975 363,816 2.50 145,528 825-845 Hawthorne Lane (6) West Chicago IL 1974 639,499 4.03 158,772 1700 West Hawthorne (6) West Chicago IL 1959/1969 1,381,800 1.88 735,196 FAR WEST SUBURBS 800 Enterprise Court Naperville IL 1985 183,666 5.25 34,984 720 Frontenac Naperville IL 1991 537,560 3.13 171,935 820 Frontenac Naperville IL 1988 645,137 4.20 153,604 920 Frontenac Naperville IL 1987 402,829 3.32 121,200 1020 Frontenac Naperville IL 1980 441,750 4.43 99,684 1120 Frontenac Naperville IL 1980/1994 543,639 3.53 153,902 1510 Frontenac Naperville IL 1986 281,331 2.68 104,886 1560 Frontenac Naperville IL 1987 298,280 3.48 85,608 1651 Frontenac Naperville IL 1978 120,135 3.95 30,414 2764 Golfview Naperville IL 1985 99,420 4.97 20,022 1500 Shore Drive Naperville IL 1985 165,932 3.84 43,230 1150 Shore Road Naperville IL 1985 174,888 5.79 30,184 SOUTHWEST SUBURBS 6600 River Road Hodgkins IL 1968 1,398,000 2.22 630,410 FAR S.W. SUBURBS 16400 West 103rd Street (7) Lemont IL 1983/1995 278,939 4.39 63,612 1319 Marquette Drive Romeoville IL 1990 392,206 10.79 36,349 7001 Adams Street Willowbrook IL 1994 192,716 7.61 25,324 CHICAGO SOUTH 4400 South Kolmar (6) Chicago IL 1966 438,840 4.77 92,000 900 East 103rd Street Chicago IL 1910/1990 1,967,449 3.42 575,462 750 East 110th Street Chicago IL 1966 237,972 3.33 71,510 SOUTH SUBURBS 11601 South Central Avenue Alsip IL 1970 894,834 3.45 259,000 11701 South Central Avenue Alsip IL 1970 870,000 2.93 297,207 5619-25 West 115th Street Alsip IL 1974 1,847,819 4.65 396,979 21399 Torrence Avenue Sauk Village IL 1987 745,164 2.00 372,835 N.W. INDIANA 425 West 151st Street East Chicago IN 1913/1991 1,328,038 3.80 349,236 201 Mississippi Street Gary IN 1945/1988 3,651,848 3.47 1,052,173 1827 North Bendix Drive (6) South Bend IN 1964/1990 554,580 2.78 199,730 PERCENT PERCENT OF GLA OF TOTAL LEASED AS NO. OF PROPERTY PREVIOUSLY OWNED PROPERTIES GLA (4) OF 12/31/97 TENANTS TYPE(5) - --------------------------- ------- ----------- ------- ------- CHICAGO NORTH 4501 West Augusta Boulevard 1.96% 95% 7 RDV N.W. SUBURBS 400 North Wolf Road 6.93% 100% 4 ACQ CENTRAL KANE/N. DUPAGE 425 South 37th Avenue (7) 0.47% 100% 1 ACQ 1250 Carolina Drive 0.68% 100% 2 BTS 1645 Downs Drive 0.59% 100% 1 ACQ 1733 Downs Drive 0.66% 100% 1 ACQ 825-845 Hawthorne Lane (6) 0.72% 83% 3 ACQ 1700 West Hawthorne (6) 3.33% 100% 1 ACQ FAR WEST SUBURBS 800 Enterprise Court 0.16% 100% 1 ACQ 720 Frontenac 0.78% 100% 2 ACQ 820 Frontenac 0.70% 100% 1 ACQ 920 Frontenac 0.55% 100% 1 ACQ 1020 Frontenac 0.45% 100% 1 ACQ 1120 Frontenac 0.70% 100% 1 ACQ 1510 Frontenac 0.48% 100% 1 ACQ 1560 Frontenac 0.39% 100% 2 ACQ 1651 Frontenac 0.14% 100% 1 ACQ 2764 Golfview 0.09% 100% 1 ACQ 1500 Shore Drive 0.20% 100% 2 ACQ 1150 Shore Road 0.14% 100% 1 ACQ SOUTHWEST SUBURBS 6600 River Road 2.86% 100% 1 ACQ FAR S.W. SUBURBS 16400 West 103rd Street (7) 0.29% 100% 1 ACQ 1319 Marquette Drive 0.16% 100% 1 BTS 7001 Adams Street 0.11% 100% 1 BTS CHICAGO SOUTH 4400 South Kolmar (6) 0.42% 100% 1 ACQ 900 East 103rd Street 2.61% 100% 3 RDV 750 East 110th Street 0.32% 100% 1 ACQ/RDV SOUTH SUBURBS 11601 South Central Avenue 1.18% 100% 1 ACQ 11701 South Central Avenue 1.35% 100% 1 ACQ 5619-25 West 115th Street 1.80% 98% 5 RDV 21399 Torrence Avenue 1.69% 100% 1 ACQ N.W. INDIANA 425 West 151st Street 1.58% 97% 9 RDV 201 Mississippi Street 4.77% 97% 15 RDV 1827 North Bendix Drive (6) 0.91% 100% 1 ACQ
-16-
YEAR OF ORIGINAL CONSTRUCTION/LAST ANNUALIZED AVERAGE REDEVELOPMENT AND/OR BASE RENT RENT PER GLA PREVIOUSLY OWNED PROPERTIES CITY STATE EXPANSION (1) REVENUE SQ. FT. (2) SQ. FT. (3) - --------------------------- ---- ----- ------------- ------- ----------- ----------- MILWAUKEE COUNTY 7501 North 81st Street Milwaukee WI 1987 576,000 3.13 183,958 KENOSHA COUNTY 8200 100th Street Pleasant Prairie WI 1990 568,361 3.83 148,472 8901 102nd Street Pleasant Prairie WI 1990 643,018 6.09 105,637 ------- ---- ------- SUBTOTAL 44,614,193 3.33 13,391.189 ---------- ---- ---------- AVERAGE 196,929(10) ------- GRAND TOTAL ALL WAREHOUSE/ INDUSTRIAL PROPERTIES $70,187,361 22,196,495 ----------- ---------- AVERAGE ALL WAREHOUSE/ INDUSTRIAL PROPERTIES $3.16(9) 232,123(10) ----- ------- GRAND TOTAL ALL WAREHOUSE/ INDUSTRIAL PROPERTIES EXCLUDING REDEVELOPMENTS AT 12/31/97 $69,639,361 20,463,891 ----------- ---------- AVERAGE ALL WAREHOUSE/ INDUSTRIAL PROPERTIES $3.40(9) 220,042(10) ----- ------- PERCENT PERCENT OF GLA OF TOTAL LEASED AS NO. OF PROPERTY PREVIOUSLY OWNED PROPERTIES GLA (4) OF 12/31/97 TENANTS TYPE(5) - --------------------------- ------- ----------- ------- ------- MILWAUKEE COUNTY 7501 North 81st Street 0.83% 100% 1 ACQ KENOSHA COUNTY 8200 100th Street 0.67% 100% 1 ACQ 8901 102nd Street 0.48% 100% 1 ACQ ---- SUBTOTAL 60.73% ----- AVERAGE 0.89% ---- GRAND TOTAL ALL WAREHOUSE/ INDUSTRIAL PROPERTIES 100% 178 --- AVERAGE ALL WAREHOUSE/ INDUSTRIAL PROPERTIES 94% GRAND TOTAL ALL WAREHOUSE/ INDUSTRIAL PROPERTIES EXCLUDING REDEVELOPMENTS AT 12/31/97 97% AVERAGE ALL WAREHOUSE/ INDUSTRIAL PROPERTIES
-17- - ------------------ (1) First date of original construction; second date is year of last redevelopment and/or expansion. If only one date appears, it is the acquisition date; the property has not been redeveloped or expanded. (2) Determined by dividing annualized base rent revenue by GLA. (3) "GLA" means gross leasable area. (4) Determined as a percent of the total GLA for the warehouse/industrial properties. (5) ACQ refers to an existing leased property acquired by the Company, BTS refers to a build-to-suit property and RDV refers to a redevelopment property. Two of the redevelopment properties, 5700 Touhy Avenue, Niles, Illinois and 10601 Seymour Avenue, Elk Grove Village, Illinois, were under redevelopment construction and not leasable as of December 31, 1997. (6) Properties purchased through a sale-leaseback to the previous owner have no operating history relevant to third party usage. (7) Properties purchased from an owner occupant have no prior operating history relevant to third party usage. (8) The seller of this property holds a note payable by the Company in the principal amount of $575,000 and secured by this property. (9) Average Rent per square foot equals annualized base rental revenue divided by GLA leased as of December 31, 1997. (10) Average size equals total GLA divided by the number of properties. LEASE EXPIRATIONS The following table shows as of December 31, 1997 scheduled lease expirations for the Company's warehouse/industrial properties commencing January 1, 1998 and for the next ten years, assuming that no tenants exercise renewal options:
AVERAGE % OF TOTAL BASE RENT PROPERTIES % OF 1997 GLA OF ANNUALIZED PER SQ. FT. GLA BASE RENT NO. OF EXPIRING BASE RENT UNDER REPRESENTED REPRESENTED LEASES LEASES EXPIRING EXPIRING BY EXPIRING BY EXPIRING EXPIRING (SQ. FT.) LEASES LEASES LEASES LEASES -------- --------- ---------- ---------- ----------- ----------- YEAR ENDING DECEMBER 31 1998 ................... 37 2,899,866 $10,507,956 $3.62 15.69% 18.16% 1999 ................... 30 3,927,435 9,018,461 2.30 21.29% 15.58% 2000 ................... 29 2,289,947 9,132,094 3.99 12.39% 15.78% 2001 ................... 16 1,328,270 5,539,526 4.17 7.18% 9.57% 2002 ................... 18 2,293,479 7,152,093 3.12 12.40% 12.36% 2003 ................... 10 555,538 2,821,050 5.08 3.00% 4.87% 2004 ................... 10 1,851,202 7,484,499 4.04 10.01% 12.93% 2005 ................... 6 945,726 3,408,648 3.60 5.12% 5.89% 2006 ................... 5 1,186,602 5,974,005 5.03 6.42% 10.32% 2007 ................... 8 1,210,831 7,612,402 6.29 6.55% 13.15%
-18- OPTIONS TO PURCHASE GRANTED TO CERTAIN TENANTS The following warehouse/industrial properties of the Company are subject to purchase options granted to certain tenants as follows: - A portion of the building complex at 4501 Augusta Boulevard is subject to an option to purchase at fixed prices ranging from $2,779,320 to $3,447,970 exercisable between September 1 and October 31 of each year until 2003. - One Waterfowl Way is subject to an option to purchase at any time through October 31, 1999, exercisable on or before February 1, 1999. The purchase price is equal to the annualized monthly rent being paid as of the closing of the purchase, capitalized at 10%. - 8901 102nd Street is subject to an option to purchase exercisable on February 28, 2006 at a purchase price equal to 95% of "fair market value," equal to the average of three independent appraisals. - 1700 West Hawthorne is subject to a purchase option exercisable at any time prior to December 1, 1998 (with the closing to occur during December, 1999 regardless of when the option exercised) at a price of $12,809,333 and again between December 1, 2002, and December 1, 2003 (with the closing to occur during December, 2004 regardless of when the option is exercised) at a price of $15,033,636. If the property is expanded, at tenant's option, the purchase price will be increased to $12,909,333 for the first exercise period, and $15,233,636 for the second exercise period, plus the construction cost of the expansion. - 850 Arthur Avenue is subject to an option exercisable during March 1999 to purchase the premises on August 31, 1999 for a purchase price equal to the fair market value of the premises as determined by the Company or by an appraisal process. - 2600 Elmhurst Road is subject to an option exercisable on or before July 31, 2000 to purchase the premises during January 2001 for a purchase price of $5,000,000. - 21399 Torrence Avenue is subject to an option exercisable between December 1, 1998 and May 31, 2000 and again between December 31, 2000 and May 31, 2002 to purchase the property on November 30, 2000 for $8,941,920 and November 30, 2002 for $9,314,500. In each case, the option price exceeds the Company's current net book value. The Company believes that even if all of the purchase options are exercised, such exercises will not have an adverse effect upon the operations of the Company or its ability to maintain its dividend distribution policy. If any purchase option is exercised, the Company intends to either distribute the cash proceeds to shareholders or reinvest the cash proceeds in additional properties. No assurance can be given that such distribution or reinvestment will occur. In addition to purchase options, the Company has granted to tenants of certain properties a right of first refusal (in the event the Company has received an unsolicited offer from a third party to purchase the property which the Company desires to accept) or a right of first offer (in the event the Company has not received an unsolicited third party offer for the property but desires to entertain an offer). The properties subject to one or both of these rights include One Waterfowl Way, 8901 102nd Street, -19- 825 Tollgate Road, 1400 Busse Road, 1651 Frontenac Road, 7001 Adams Street, 950 Tower Road and 6312 W. 74th Street. The existence of those rights will not compel the Company to sell a property for a price less than the price the Company desires to accept. THE COMPANY'S OTHER PROPERTIES In addition to its warehouse/industrial properties, the Company owns three retail properties having approximately 61,000 square feet of GLA, one 682-unit apartment complex located at 440 North Lake Street, Miller, Indiana and known as Lakeshore Dunes Apartments and a fully leased parking lot. The Company does not intend to acquire properties other than warehouse/industrial properties in the future. The Company believes, however, that these properties are favorable investments for the Company, adding to distributable cash flow per share. Furthermore, the Lakeshore Dunes Apartments were financed through the issuance of tax-exempt revenue bonds on favorable terms, benefiting the Company by reducing its overall borrowing costs. The Company has no present plans to sell those properties but would entertain a sale if the price were sufficiently high, given other investment opportunities that would be available to the Company, and the enhanced operating performance expected to result, from redeployment of the sales proceeds. The following table sets forth certain information regarding the Company's retail properties:
PERCENT YEAR OF OF ACQUISITION/ PERCENT GLA AVERAGE LAST YEAR OF TOTAL OF LEASED RENT REDEVELOPMENT ORIGINAL GLA TOTAL AS OF ANNUALIZED PER NUMBER OF CONSTRUCTION/ (SQ. FT.) GLA DECEMBER BASE RENT SQ. FT. OF EXPANSION (1) EXPANSION (2) (3) 31, 1997 REVENUE (4) TENANTS ------------- ------------ --------- ------- -------- ---------- -------- ------- 4-48 Barrington Rd. 1994 1991 38,633 63.1% 68.8% $301,496 $7.80 8 Streamwood, IL 84-120 McHenry Rd. 1990/1993 1989 20,535 33.6% 89.5% 313,140 15.25 7 Wheeling, IL 351 North Rohlwing Rd. 1993 1989 2,015 3.3% 100.0% 61,440 30.49 1 Itasca, IL ----- ---- ------ ----- -- TOTAL 61,183 100.0% $676,076 $11.05 16 ====== ====== ======== ====== ==
- --------------- (1) First date is year of acquisition; second date is year of most recent redevelopment or expansion. If only one date appears, it is the acquisition date; the property has not been redeveloped or expanded. (2) "GLA" means gross leasable area. (3) Determined as a percent of the total GLA for the retail properties. (4) Determined by dividing annualized base rent revenue by GLA. The tenants of the Company's retail properties are typical of tenants in smaller retail centers in Greater Chicago. Generally, the leases require tenants to pay a fixed base, or "minimum" rent, subject to scheduled increases. Tenants generally are required to pay their proportionate share of common area maintenance charges, insurance expenses, operating expenses and real estate taxes or their portion of these expenses is included in their base rent. 20 The following table shows as of December 31, 1997 scheduled lease expirations for the retail properties commencing January 1, 1998, and for the next ten years, assuming no tenants exercise renewal options.
% OF TOTAL GLA OF ANNUALIZED RETAIL % OF 1997 RETAIL NO. OF EXPIRING BASE RENT AVERAGE BASE RENT PROPERTIES GLA BASE RENT YEAR ENDING LEASES LEASES EXPIRING PER SQ. FT. UNDER REPRESENTED BY REPRESENTED BY DECEMBER 31 EXPIRING (SQ. FT.) LEASES EXPIRING LEASES EXPIRING LEASES EXPIRING LEASES - ----------- -------- --------- ------ --------------- --------------- --------------- 1998 3 8,214 $116,196 $14.15 18.93% 17.11% 1999 2 3,937 57,468 14.60 9.08% 8.46% 2000 3 10,334 107,295 10.38 23.82% 15.80% 2001 3 9,242 112,759 12.20 21.30% 16.60% 2002 0 0 0 0 0% 0% 2003 0 0 0 0 0% 0% 2004 0 0 0 0 0% 0% 2005 1 2,400 86,089 35.87 5.53% 12.68% 2006 3 9,254 199,299 21.54 21.33% 29.35% 2007 0 0 0 0 0% 0%
Lakeshore Dunes Apartments, which was constructed in 1971 and renovated between 1991 and September, 1993, is comprised of 682 units in 15 contiguous buildings located on an approximately 20.12 acre site in Miller, Indiana, a suburb of Gary, Indiana, located on Lake Michigan. The property is bordered by the Indiana Dunes National Park and by the Calumet Lagoon and is less than one-half mile from public beaches. Amenities of the complex include redesigned units with updated kitchens and appliances, carpeting, lighting, windows and mini-blinds, bathrooms and fixtures, elevators, laundry rooms, play lots, tennis courts, picnic areas, a new outdoor pool, roads, parking areas, landscaping and a 24-hour safety patrol and card access system. The community center also serves as the management and leasing office. The Company maintains a complete management, leasing and maintenance team at the property. As of December 31, 1997, 630 of the units, or 92%, were leased, providing for a monthly base rent of approximately $287,000 or $7.72 per square foot per annum (determined by dividing annualized base rent by total leased square footage of the apartment units), or an annualized base rent of $3,444,000. Current leases provide for customary one year terms and require that tenants pay a fixed rent based on the type of apartment and square footage. Tenants are responsible for utilities. The following table sets forth the apartment mix at this property as of December 31, 1997: 21
NUMBER OF UNITS TOTAL GLA AVERAGE GLA PER AVERAGE MONTHLY TYPE OF APARTMENT IN COMPLEX (SQ. FT.) APARTMENT (SQ. FT.) RENT PER UNIT - ----------------- --------------- --------- ------------------- ------------- Studio 48 20,208 421 $ 374 One Bedroom 171 99,009 579 459 Deluxe One Bedroom 43 29,283 681 467 Two Bedroom 390 308,100 790 533 Three Bedroom 30 28,500 950 656 --- ------- TOTALS: 682 485,100 === =======
In 1996, a parking lot within an industrial park was purchased. The parking lot is leased for ten years through January 2006 for an annual minimum rent of $26,400. In 1997, the Company sold a 118,000 square foot office building. ITEM 3. LEGAL PROCEEDINGS. The Company is not subject to or involved in, nor is the Company aware of, any pending or threatened litigation which could be material to the financial position or results of operations of the Company. For a description of remediation activities currently underway at certain of the Company's properties, see "Environmental Matters" under Item 1 above. ITEM 4. SUBMISSION OF CERTAIN ITEMS TO A VOTE OF SECURITY HOLDERS. The Company held a Special Meeting of Stockholders on October 1, 1997 to approve the reorganization of the Company from a Maryland corporation to a Maryland real estate investment trust, pursuant to a Plan of Reorganization. At the Special Meeting of Stockholders, the Plan of Reorganization was approved as follows: 12,620,549 shares were voted in person or by proxy at the Special Meeting of Stockholders; 12,593,693 shares were voted in favor of the Plan of Reorganization; 5,427 shares were voted against the Plan of Reorganization; and 21,429 shares abstained from voting. 22 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED MATTERS. (a) The Company's Common Shares are listed and traded on the New York Stock Exchange under the symbol "CNT." The following table sets forth, for the periods indicated, the high and low sale prices of the Common Shares (as reported by the AMEX prior to June 12, 1996 and as reported by the NYSE on and after June 12, 1996) and the cash distributions paid in such periods.
CASH QUARTERLY PERIOD ENDING HIGH LOW DISTRIBUTION/SHARE ----------------------- ---- --- ------------------ December 31, 1995............... $23-3/8 $21-5/8 $0.390 March 31, 1996.................. 24-1/8 22 0.405 June 30, 1996................... 27 26-1/8 0.405 September 30, 1996.............. 26-7/8 26-3/4 0.405 December 31, 1996............... 32-3/4 30-7/8 0.405 March 31, 1997.................. 32-7/8 30-1/4 0.420 June 30, 1997................... 31-7/8 28-1/2 0.420 September 30, 1997.............. 36-5/16 31-7/8 0.420 December 31, 1997............... 37-1/16 31-1/4 0.420
(b) As of March 17, 1998, there were approximately 142 holders of record of the Company's Common Shares. (c) Cash distributions paid on the Company's Class B Common Shares, which are non-voting and are not publicly traded, were $0.4167 per share per quarter for the last three quarters of 1996, and $0.4325 per share per quarter in 1997. 23 ITEM 6. SELECTED HISTORICAL FINANCIAL DATA The following tables set forth, on a historical basis, Selected Financial Data for the Company. The following table should be read in conjunction with the historical financial statements of the Company and "MANAGEMENT DISCUSSION AND ANALYSIS STATEMENTS OF THE COMPANY AND RESULTS OF OPERATION," both included elsewhere in this Form 10-K/A. As discussed in Note 2 to the financial statements, the Company determined that it had recognized certain participation, assignment, consulting and financing fees in periods in advance of that permitted and has revised previously issued financial statements. Accordingly, the financial statements and the Selected Financial Data for the year ended December 31, 1997 shown below have been revised. The Selected Financial Data for the Company is not necessarily indicative of the actual financial position of the Company or results of operations at any future date or for a future period. CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES SELECTED HISTORICAL FINANCIAL DATA (IN THOUSANDS, EXCEPT FOR PER SHARE DATA, RATIOS AND NUMBER OF PROPERTIES)
YEAR ENDED DECEMBER 31, ----------------------- 1997 REVISED 1996 1995 1994 1993 ------- ---- ---- ---- ---- Operating Data: Revenues $ 85,588 $ 63,330 $ 46,952 $ 33,633 $ 9,068 Expenses: Operating expenses excluding depreciation and amortization (1) (29,182) (20,751) (14,774) (11,442) (4,124) Depreciation and other amortization (15,278) (10,648) (8,456) (6,176) (2,539) General and administrative (3,105) (2,567) (2,150) (1,573) (3,223) Interest expense: Interest incurred, net (10,071) (9,865) (11,562) (11,073) (3,808) Amortization of deferred financing costs (800) (1,127) (1,150) (976) (228) --------- --------- --------- --------- --------- Operating income (loss) 27,152 18,372 8,860 2,393 (4,854) Other income (expense) (2) 108 (100) (16) (34) (76) --------- --------- --------- --------- --------- Income (loss) before extraordinary item 27,260 18,272 8,844 2,359 (4,930) Extraordinary item -- (3,331) (632) -- -- --------- --------- --------- --------- --------- Net income (loss) 27,260 14,941 8,212 2,359 (4,930) Preferred dividend (901) (947) (1,002) -- -- --------- --------- --------- --------- --------- Net income (loss) available to common shareholders 26,359 13,994 7,210 2,359 (4,930) Per share net income (loss) available to common shareholders before extraordinary item: Basic 1.41 1.25 0.85 0.41 (3.90) Diluted 1.39 1.22 0.84 0.41 (3.90) Per share net income (loss) available to common shareholders: Basic 1.41 1.01 0.78 0.41 (3.90) Diluted 1.39 0.99 0.77 0.41 (3.90) Balance Sheet Data (End of Period): Investment in real estate (before accumulated depreciation) $ 662,275 $ 429,034 $ 317,460 $ 248,281 $ 180,396 Net investment in real estate 617,923 398,828 295,884 234,825 172,946 24 Total assets 699,055 451,206 334,866 254,073 190,289 Total debt 270,735 177,349 145,271 179,492 131,963 Shareholders' equity 387,756 248,114 168,320 59,016 46,240 Other Data: Funds from Operations (3) $ 42,684 $ 30,445 $ 20,492 $ 13,138 $ (2,110) EBITDA (4) 53,409 39,912 30,013 20,584 1,564 Net cash flow: Operating activities 39,411 29,552 16,473 8,976 275 Investing activities (245,336) (111,554) (82,556) (65,311) (140,120) Financing activities 206,507 80,194 68,541 52,837 142,443 Distributions 32,046 24,065 15,953 8,775 1,295 Return of capital portion of distribution 3,916 12,280 8,554 4,320 -- Number of properties included in operating 101 76 69 53 38 results (5) Ratio of earnings to fixed charges (6) 3.24 2.33 1.63 1.19 -- Ratio of earnings to combined fixed charges and preferred dividends (6) 3.01 2.15 1.51 1.19 --
- ----------------------- (1) Operating expenses include real estate taxes, repairs and maintenance, insurance and utilities and exclude interest, depreciation and amortization and general and administrative expenses. (2) Other income (expense) includes gains and losses on property dispositions in 1997 and 1996, and other miscellaneous operating and non-operating items. (3) Funds from Operations represents net income (loss), excluding extraordinary items, plus depreciation and amortization, convertible subordinated debenture interest and amortization of deferred financing costs on convertible subordinated debentures. Dividends on Convertible Preferred Shares for 1996 and 1995 are not excluded from net income as such shares were automatically converted to Class B Common Shares in 1996. Funds from operations is computed as follows:
1997 REVISED 1996 1995 1994 1993 ------- ---- ---- ---- ---- Net income (loss) available to common shareholders $26,359 $14,941 $ 8,212 $ 2,359 ($4,930) Extraordinary item 3,331 632 -- -- Depreciation and amortization 15,278 10,648 8,456 6,176 2,540 Amortization of deferred financing costs, debentures 48 67 135 267 13 Convertible subordinated debenture 999 1,385 3,057 4,336 267 interest Loss on disposition of properties 73 -- -- -- ------- ------- ------- ------- ------- Funds from Operations $42,684 $30,445 $20,492 $13,138 ($2,110) ======= ======= ======= ======= =======
Management of the Company believes that Funds from Operations is helpful to investors as a measure of the performance of equity REIT shares because, along with cash flows from operating activities, financing activities and investing activities, it provides investors an understanding of the ability of the Company to incur and service debt and to make capital expenditures. Funds from Operations does not represent cash flow from operations as defined by generally accepted accounting principles ("GAAP"), should not be considered by the reader as an alternative to net income as an indicator of the Company's operating performance or to cash flows as a measure of liquidity, and is not indicative of cash available to fund all cash flow needs. Investors are cautioned that Funds from Operations, as calculated by the Company, may not be comparable to similarly titled but differently calculated measures for other REITs. 25 The National Association of Real Estate Investment Trusts (NAREIT) defines funds from operations as net income before extraordinary items plus depreciation and amortization less the amortization of deferred financing costs. (4) Earnings before interest, income taxes, depreciation and amortization. Management believes that EBITDA is helpful to investors as an indication of property operations, because it excludes costs of financing and non-cash depreciation and amortization amounts. EBITDA does not represent cash flows from operations as defined by GAAP, should not be considered by the reader as an alternative to net income as an indicator of the Company's operating performance, and is not indicative of cash available to fund all cash flow needs. (5) Increase in number of properties in 1994 reflects the acquisition of 15 properties throughout 1994. Increase in number of properties in 1995 reflects acquisition of 16 properties throughout 1995. Increase in number of properties in 1996 reflects acquisition of 15 properties and the disposition of 8 properties throughout 1996. Increase in number of properties in 1997 reflects the acquisition of 21 properties, the completion of 7 developments, and the disposition of 3 properties throughout 1997. See "MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." (6) The ratio of earnings to fixed charges for the year ended December 31, 1993, was less than one to one. The approximate dollar amount (in thousands) necessary to cover the deficiency in that period was $5,400. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. GENERAL BACKGROUND The following is a discussion of the historical operating results of the Company. This discussion should be read in conjunction with the Financial Statements and the information set forth under "SELECTED HISTORICAL FINANCIAL DATA." The Company announced in the 3rd quarter 1999 that it was restating previously audited and unaudited financial statements for the years 1997, 1998 and 1999. See Exhibit 99 to this Form 10-K/A. The revision reflects the recognition of gains, for financial reporting purposes, on certain completed sales structured as tax-deferred exchanges under Section 1031 of the Internal Revenue Code, where gains are not recognized for tax purposes. Secondly, the revision reflects the timing of gain recognition from other property sales related to the Company's development activity. While the timing of the reported gains from these latter transactions has been shifted, the aggregate gain remains unchanged and no cash or tax effect has resulted. As of the 3rd quarter 1999, all gains have been recognized. The results of the Company reflect cumulative significant acquisition, build-to-suit and redevelopment activities. Since 1989, the Company has grown its portfolio of owned properties from 6 properties, with approximately 1.9 million square feet, to 101 properties with approximately 22.7 million 26 square feet as of December 31, 1997. This total excludes properties under development and mortgage investments. Through the issuance of mortgages on properties and build-to-suit projects under development, the Company has a total of 109 property investments, excluding the parking lot, representing approximately 25 million square feet. The Company grew its total property investments by 52% in 1997, which includes build-to-suits in progress and mortgage investments. In addition, the Company grew its portfolio of owned properties by 60.3% during the year by concluding twenty-one warehouse/industrial property acquisitions and seven warehouse/industrial build-to-suit properties. The Company disposed of two warehouse/industrial properties and one office property in 1997. The Company's total increase in owned warehouse/industrial area, net of dispositions, was 8.6 million square feet. Despite its growth in property investments and Funds from Operations during 1997, the Company improved its EBITDA/ Debt Service Coverage to 5.3 to 1. Also, as of December 31, 1997, the Company maintained a conservative Debt to Total Market Capitalization of 25.1%. The Company's Consolidated Financial Statements for the year ended December 31, 1997, 1996 and 1995 reflect partial period results for acquisitions, dispositions and expansions made during each respective year. These statements also include the lease-up of previously vacant space, related to the properties owned by the Company as of January 1, 1997, 1996 and 1995, respectively. The Company's 1996 acquisitions included three additional properties and 1997 acquisitions include one additional property previously owned by entities in which certain executive officers of the Company had an interest. These transactions satisfied the Company's investment criteria and were approved by the Company's independent trustees. Finally, the historical results of the Company reflect the Company's significant property redevelopment and development activities in which substantial capital costs and related expenses were incurred in advance of receipt of rental income. At December 31, 1997, the Company and its subsidiaries had $42 million invested in build-to-suit projects under development which were not producing income as of the end of the year. Four of the Company's properties preceding the Company's initial public offering in 1993, with a total area of approximately 1.9 million square feet, were property redevelopments. The Company has added nine properties totaling 4.5 million square feet that the Company has redeveloped or is currently holding the property to redevelop. Redevelopments are typically larger properties that are acquired, subdivided and released. During construction, certain costs are capitalized; however, in certain circumstances, such costs are expended after completion but prior to leasing, resulting in a decline in net income. RESULTS OF OPERATIONS COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996 Total revenues increased by $22.3 million or 35.1% over the same period last year. The revenues of the Company are derived primarily from base rents and additional rents from expense reimbursements, pursuant to the terms of tenant leases for occupied space at the warehouse/industrial properties. Warehouse/industrial properties represented approximately 98% of the gross leasable area of the Company's portfolio as of December 31, 1997. Operating and investment revenue increased by $23.8 million in 1997. This was due in part to a full period of income from thirteen warehouse/industrial properties totaling 3.3 million square feet 27 acquired in 1996 net of seven property dispositions. Also, this increase was attributable to twenty-one properties acquired totaling 7.1 million square feet and seven build-to-suit properties coming on-line totaling 1.6 million square feet in 1997, net of three property dispositions. The initial annualized minimum net rental income from the 1997 acquisition and completed build-to-suit properties is approximately $25 million. Real estate fee income primarily consisting of fees earned by the Company in connection with its build-to-suit and development activities and third party management fees decreased by $2.6 million. The Company's equity in net income of affiliate increased by $1.1 million due to the affiliate's increase in property and build-to-suit sales. The Company's unconsolidated affiliate, CenterPoint Realty Services, began operations during the third quarter of 1995 and did not recognize income from development activities until 1996. On a "same-store" basis (comparing the results of operations, on a cash basis, of the properties owned at December 31, 1996, with the results of operations of the same properties at December 31, 1997), the Company recognized an increase of approximately 6% in net operating income primarily due to lease up of vacant space, rental increases on renewed leases and contractual increases in minimum rent under leases in place. Real estate tax expense and property operating and leasing expense increased by $8.4 million, from $20.8 million in 1996 to $29.2 million in 1997. $5.2 million of the increase is due to real estate taxes. The majority of the real estate tax increase, $5.0 million, resulted from 1995 and 1996 acquisitions and the balance, $0.2 million, from net tax increases throughout the portfolio with the largest increase in Cook County, Illinois. Property operating and leasing expenses, including insurance, utilities, repairs and maintenance and property management costs increased at levels comparable to the level of acquisitions. Also, property operating and leasing costs as a percentage of total revenues increased only slightly from 14.0% to 14.1% when comparing 1996 to 1997. Depreciation and other amortization increased by $4.7 million, from $10.6 million in 1996 to $15.3 million in 1997. The increase is due primarily to full period depreciation on acquisitions completed during 1996 and depreciation from dates of acquisition for the 1997 acquisitions and fixed asset additions. General and administrative expenses increased by $0.5 million, from $2.6 million in 1996 to $3.1 million in 1997, due primarily to the growth of the Company. Interest incurred increased by approximately $206,000 over last year. Although the acquisition level was higher during 1997, interest expense was held to approximately the same level as 1996 due to the repayment of debt from public offerings of common equity in March and preferred equity in November, 1997, and reduced borrowing rates. Other income (expenses) increased by approximately $208,000 from the same period last year due in part to the gain on disposition of one property totaling approximately $140,000 in 1997. The remaining net increase was the result of losses recorded on the disposition of three properties in 1996. As a result of the factors described above, income before extraordinary item increased by $9.0 million from $18.3 million in 1996 to $27.3 million in 1997, an increase of 49.2%. Earnings before interest, income taxes, depreciation and amortization increased by $13.5 million, from $39.9 million in 1996 to $53.4 million in 1997. In 1996, the Company incurred an extraordinary loss of $3.3 million representing a write off of unamortized deferred financing costs as a result of the re-financing of its outstanding revenue bonds. In 28 addition, the Company replaced its $92 million secured lines of credit with a $135 million unsecured credit facility at a significant savings in interest. No debt was re-financed in 1997, and the unsecured credit facility was increased to $150 million. COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31, 1995 Total revenues in 1996 increased by $16.3 million or 34.9% over 1995. Tenants occupied approximately 95% of the gross leasable area of the Company's portfolio as of December 31, 1996. Rental revenues increased by $8.0 million in 1996 primarily because of full period income from sixteen warehouse/industrial properties acquired totaling 2.7 million square feet in 1995 and thirteen warehouse/industrial properties acquired totaling 3.3 million square feet in 1996 net of seven property disposals. Initial minimum net rental income from the 1996 acquisition properties is approximately $13.1 million. In addition, mortgage interest income from mortgage financing activities, which originated in December, 1995, contributed $1.4 million to the increase in revenue. Real estate fee income primarily consisting of fees earned by the Company in connection with its build-to-suit and development activities and third party management fees increased by $3.7 million. Also, equity in net income of affiliate increased by $1.0 million due to their increased activity in build-to-suit activity. The Company's unconsolidated affiliate, CenterPoint Realty Services, began operations during the third quarter of 1995 and did not recognize income from development activities until 1996. On a "same-store" basis (comparing the results of operations, on a cash basis, of the properties owned at December 31, 1995, with the results of operations of the same properties at December 31, 1996), the Company recognized an increase of approximately 4% in net operating income primarily due to lease up of vacant space, rental increases on renewed leases and contractual increases in minimum rent under leases in place. Total operating expenses, excluding general and administrative expenses, interest, depreciation and amortization, increased by $6.0 million, from $14.8 million in 1995 to $20.8 million in 1996. $4.1 million of the increase was due to real estate taxes. The majority of the real estate tax increase, $3.3 million, resulted from 1995 and 1996 acquisitions and the balance, $0.8 million, from tax increases throughout the portfolio, with the largest increase in Cook County, Illinois. Property operating and leasing expenses increased at levels comparable to the level of acquisitions. Depreciation and other amortization increased by $2.1 million, from $8.5 million in 1995 to $10.6 million in 1996. The increase is due primarily to full period depreciation on acquisitions completed during 1995 and depreciation from dates of acquisition for the 1996 additions. General and administrative expenses increased by $0.4 million, from $2.1 million in 1995 to $2.5 million in 1996, due primarily to the growth of the Company. Interest incurred decreased by $1.7 million over the same period in 1995 due in part to the conversion to common stock of $8.9 million of convertible subordinated debentures. Although the acquisition level was higher during 1996, interest expense was held to approximately the same level as 1995 due to the repayment of debt from a public offering that closed in July, 1996, and reduced borrowing rates. Other expenses increased by approximately $84,000 from the same period last year due to the loss on disposition of three properties totaling approximately $72,000. As a result of the factors described above, income before extraordinary item increased by $9.5 million from $8.8 million in 1995 to $18.3 million in 1996, an increase of 108.0%. Earnings before 29 interest, income taxes, depreciation and amortization increased by $9.9 million, from $30.0 million in 1995 to $39.9 million in 1996. In 1996 and 1995, the Company incurred an extraordinary loss of approximately $3.3 million and approximately $0.6 million, respectively, representing the write-off of unamortized deferred financing costs as a result of the early extinguishment of certain debt obligations resulting from the Company's debt transactions. LIQUIDITY AND CAPITAL RESOURCES Cash flow generated from Company operations has historically been utilized for working capital purposes and distributions, while proceeds from financings and capital raises have been used to fund acquisitions and other capital costs. Cash flow from operations during 1997 of $39.4 million net of $31.1 million of current year distributions provided $8.3 million of retained capital to fund investment activities. The Company expects retained capital to fund future investment activities. Acquisitions, construction in progress on development projects, advances to affiliate, advances on mortgage notes receivable, advances to affiliate and improvements and additions to properties of approximately $226.5 million for 1997 were funded with borrowings under the Company's unsecured line of credit totaling $211.7 million, a portion of proceeds from the disposition of real estate of $13.5 million, repayment of mortgage notes receivable of $5.7 million and a portion of the net proceeds from the March 6, 1997 public offering of common shares. At December 31, 1997, the Company's debt constituted approximately 25.1% of its fully diluted market capitalization. Also, the Company's coverage ratio remained high at 5.3 to 1. The Company's fully diluted equity market capitalization was approximately $774 million, and its fully diluted total market capitalization exceeded $1.0 billion. The Company's leverage ratios benefited during 1997 from the conversion of approximately $2.6 million of its 8.22% Convertible Subordinated Debentures, due 2004, to 144,640 common shares. At December 31, 1997, the Company had a $150 million unsecured credit facility co-led by First Chicago NBD and Lehman Brothers with participating banks. As of December 31, 1997, the Company had outstanding borrowings of approximately $97.7 million under the unsecured revolving line of credit (approximately 9.5% of the Company's fully diluted market capitalization), and the Company had remaining availability of approximately $52.3 million under its unsecured line of credit. On September 18, 1997, the Company issued $55 million unsecured tax-exempt bonds for the development costs of the Company's O'Hare Express air freight center. With the completion of this issue, 34% of the Company's senior debt (excluding line of credit) was tax exempt as of December 31, 1997, saving approximately 200 basis points on average from comparable taxable financing. On March 6, 1997, the Company completed a public offering of 2,250,000 common shares at $31.50 per share under a shelf registration statement. Net proceeds from the offering after the underwriting discounts and other offering costs were approximately $66.8 million. The proceeds of the offering were used to refund approximately $58.2 million outstanding under the Company's line of credit with the balance of $8.6 million to fund investments. On November 10, 1997, the Company completed a public offering of 3,000,000 shares of 8.48% preferred at $25 per share under a shelf registration statement. Net proceeds from the offering after 30 underwriting discounts and other offering costs were approximately $71.9 million. The proceeds of the offering were used to refund amounts outstanding under the Company's line of credit. In February, 1998, Duff & Phelps Credit Rating Co. joined Moody's Investors Service's January, 1997 evaluation by assigning investment grade rating to the Company's senior unsecured debt and preferred stock issuable under the Company's shelf registration and convertible subordinated notes. Also in 1997, Standard and Poors assigned an investment grade rating to the Company's senior unsecured debt. These investment grade ratings further enhance the Company's financial flexibility. As of December 31, 1997, the Company had approximately $36.5 million in restricted cash, $34.6 million of which was held in a construction escrow for the Company's build-to-suit development at O'Hare Express Center. Most of the remainder of the restricted cash is made up of real estate tax escrows for tenants requiring such escrows under the terms of their leases. During 1997, the Company declared and paid distributions on common shares of $27.2 million or $1.68 per share and on class B common shares of $3.9 million or $1.73 per share. Also, in 1997, the Company declared dividends on preferred shares of $1.43 million or $0.477 per share, payable in January 1998. The dividends on preferred shares attributable to 1997 income, which appear on the Company's Consolidated Statements of Operations and Shareholders' Equity were $901 thousand or $0.30 per share. The following factors, among others, will affect the future availability of funds for distribution: (i) scheduled increases in base rents under existing leases and (ii) changes in minimum base rents attributable to replacement of existing leases with new or replacement leases. The Company has considered its short-term (one year or less) capital needs, in conjunction with its estimated future cash flow from operations and other expected sources. The Company believes that its ability to fund operating expenses, building improvements, debt service requirements and the minimum distribution required to maintain the Company's REIT qualification under the Internal Revenue Code, will be met by recurring operating and investment revenue and other real estate income. Long-term (greater than one year) capital needs for property acquisitions, scheduled debt maturities, major redevelopment projects, expansions, and construction of build-to-suit properties will be supported through draws on the Company's unsecured line of credit, the issuance of long-term unsecured indebtedness and the issuance of equity securities. INFLATION Inflation has not had a significant impact on the Company because of the relatively low inflation rates in the Company's markets of operation. Most of the Company's leases require the tenants to pay their share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing the Company's exposure to increases in costs and operating expenses resulting from inflation. In addition, many of the leases are for remaining terms less than five years which may enable the Company to replace existing leases with new leases at higher base rental rates if rents of existing leases are below the then-existing market rate. ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." Both SFAS No. 130 and SFAS 31 No. 131 are effective for financial statements for years beginning after December 15, 1997. SFAS No. 130 requires the reporting of comprehensive income beginning 1998 and SFAS No. 131 establishes standards for publicly-held business enterprises to report information about operating segments in annual financial statements and requires that these enterprises report selected information about operating segments in interim financial reports issued to shareholders. The Company plans to adopt SFAS No. 130 and No. 131 in 1998. YEAR 2000 COMPLIANCE In response to the Year 2000 issue, the Company initiated a project in early 1997 to identify, evaluate and implement a new computerized real estate management system. The Company is addressing the issue through a combination of modifications to existing programs and conversion to Year 2000 compliant software. In addition, the Company is discussing with its tenants, vendors, and other service providers the possibility of any interface difficulties relating to the Year 2000 issue which may effect the Company. If the Company and those it conducts business with do not make modifications or conversions in a timely manner, the Year 2000 issue may have a material adverse affect on the Company's business, financial condition, and results of operations. The total cost associated with the required modifications is not expected to be material to the Company's consolidated results of operations and financial position, and is being expensed as incurred. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See Index to Financial Statements on Page F-1 of this Annual Report on Form 10-K/A for the financial statements and financial statement schedules. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. 32 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Item 10 is incorporated herein pursuant to General Instruction G to Form 10-K/A by referencing the Company's definitive proxy statement, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the fiscal year. ITEM 11. EXECUTIVE COMPENSATION Item 11 is incorporated herein pursuant to General Instruction G to Form 10-K/A by referencing the Company's definitive proxy statement, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the fiscal year. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Item 12 is incorporated herein pursuant to General Instruction G to Form 10-K/A by referencing the Company's definitive proxy statement, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the fiscal year. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Item 13 is incorporated herein pursuant to General Instruction G to Form 10-K/A by referencing the Company's definitive proxy statement, which will be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the fiscal year. 33 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. The following documents are filed as part of this report: (1)(2) The consolidated financial statements and related schedules indicated in Part II, Item 8, "Financial Statements and Supplementary Data." (3) Exhibit 12-1 - Computation of Ratio of Combined Earnings to Fixed Charges (4) Exhibit 12-2 - Computation of Ratio of Combined Earnings to Fixed Charges and Preferred Dividends (5) Exhibit 27 - Financial Data Schedule (6) Exhibit 99 - Press release dated September 28, 1999. The following exhibits are incorporated by reference from the Registrant's Registration Statement on Form S-11 (File No. 33-69710), referencing the exhibit numbers used in such Registration Statement:
Exhibit Number Description ------- ----------- 4.3 Form of Indenture 10.3(a) Mortgage Documents regarding 440 North Lake Street, Gary, IN 10.3(c) Mortgage Documents regarding 905-909 Irving Park Road, Itasca, IL 10.3(d) Mortgage Documents regarding 6845 Santa Fe, Hodgkins, IL 10.4 Form of Noncompetition Agreement for Executive Officers 10.5 Form of Employment Agreement for Executive Officers 10.10 Indemnification Agreement among John S. Gates, Jr., Capital and Regional Properties and the Company 10.11 Indemnification Agreement among Robert L. Stovall, Michael M. Mullen and the Company 10.12 Indemnification Agreement between David Kahnweiler and the Company
34 The following exhibits are incorporated by reference from Pre-Effective Amendment No. 2 to the Registrant's Registration Statement on Form S-11 (File No. 33-69710), referencing the exhibit numbers used in such Amendment No. 2:
Exhibit Number Description ------- ----------- 10.1 Stock Option Plan
The following exhibits are incorporated by reference from the Registrant's Registration Statement on Form S-11 (File No. 33-85440), referencing the numbers used in such Registration Statement:
Exhibit Number Description ------- ----------- 10.32 Registration Rights Agreement between the Company and Corum Zeller Venture 10.38 Promissory Note from the Company to the Prudential Insurance Company of America 10.39 Mortgage, Security Agreement and Fixture Filing relating to the Promissory Note form the Company to The Prudential Insurance Company of America
The following exhibits are incorporated by reference from the Registrant's Form 10-Q for the fiscal quarter ended September 30, 1995, referencing the numbers used in such Form 10-Q:
Exhibit Number Description ------- ----------- 4.1 1995 Restricted Stock Incentive Plan 4.2 1995 Director Stock Plan 4.3 Bonus Stock Grant Agreement between the Company and John S. Gates, Jr. 4.4 Bonus Stock Grant Agreement between the Company and Robert L. Stovall 4.5 Series A Preferred Stock Purchase Agreement between the Company and LaSalle Advisors Limited Partnership 4.6 Registration Rights Agreement between the Company and LaSalle Advisors Limited Partnership
The following exhibits are incorporated by reference from the Registrant's Form 10-K for the fiscal year ended December 31, 1995, referencing the numbers used in such Form 10-K: 35
Exhibit Number Description -------------- ----------- 4.1 Indenture of CP Financing Trust 10.1 First Amendment to Stock Option Plan 10.2 Mortgage Documents regarding 850 Arthur Street, Elk Grove Village, Illinois 10.3(a) Mortgage, Assignment of Rents and Leases and Security Agreement of CP Financing Trust regarding the following properties in Cook County, Illinois 1520 Pratt, Elk Grove Village 1201 Lunt, Elk Grove Village 1390 Lunt, Elk Grove Village 5619-25 W. 115th St., Alsip 900 University Dr., Arlington Heights 10.3(b) Mortgage, Assignment of Rents and Leases and Security Agreement of CP Financing Trust regarding the following properties in DuPage County, Illinois 7001 Adams, Willowbrook 245 Benoris, Wood Dale 1733 Downs Dr., W. Chicago 1645 Downs Dr., W. Chicago 10.3(c) Mortgage, Assignment of Rents and Leases and Security Agreement of CP Financing Trust regarding the following properties in Lake County, Illinois 1300 Northpoint, Waukegan 1800 Industrial Dr., Libertyville 950-970 Tower Rd., Mundelein 1 Wildlife Way, Long Grove 1810-20 Industrial Dr., Libertyville 1700 Butterfield, Mundelein 10.3(d) Mortgage, Assignment of Rents and Leases and Security Agreement of CP Financing Trust regarding the following property in Kane County, Illinois 315 Kirk Rd., St. Charles 10.3(e) Mortgage, Assignment of Rents and Leases and Security Agreement of CP Financing Trust regarding the following property in Will County, Illinois 1319 Marquette, Romeoville 10.3(f) Mortgage, Assignment of Rents and Leases and Security Agreement of CP Financing Trust regarding the following properties in Wisconsin 36 8200 100th St., Pleasant Prairie 8901 102nd St., Pleasant Prairie 10.3(g) Mortgage, Assignment of Rents and Leases and Security Agreement of CP Financing Trust regarding the following property in Indiana 201 E. Mississippi, Gary 10.3(h) Assignment and Assumption of Mortgage and Other Obligations between CP Financing Trust and Great Lakes Industrial Partners, L.P. 10.3(i) Assignment and Assumption of Tenant Leases and Contracts between CP Financing Trust and the Company 10.3(j) Assignment and Assumption of Tenant Leases and Contracts between CP Financing Trust and Great Lakes Industrial Partners, L.P.
The following exhibit is incorporated by reference from the Registrant's Form 10-Q for the fiscal quarter ended September 30, 1996, referencing the number used in such Form 10-Q:
Exhibit Number Description -------------- ----------- 10.43 Unsecured Revolving Credit Agreement among The First National Bank of Chicago, Lehman Brothers Holdings Inc., the other Lenders named therein and the Company
The following exhibits are incorporated by reference from the Registrant's Registration Statement on Form S-3 (File No. 333-18235), referencing the exhibit numbers used in such Form S-3:
Exhibit Number Description -------------- ----------- 4.3 Form of Senior Securities Indenture 4.4 Form of Subordinated Securities Indenture
The following exhibits are incorporated by reference from the Registrant's Form 10-K for the fiscal year ended December 31, 1996, referencing the numbers used in such Form 10-K:
Exhibit Number Description -------------- ----------- 10.44 Second Amendment to Stock Option Plan 10.45 Settlement Agreement and Mutual Release 10.46 Employment Separation Agreement between the Company and Robert L. Stovall 37 10.47 Documents relating to City of Gary, Indiana Revenue Refinancing Bonds, Series 1996A and Series 1996B, of the Miller Partnership, L.P. 10.48 First Amendment to Unsecured Revolving Credit Agreement 10.49 Second Amendment to Unsecured Revolving Credit Agreement 21 List of Subsidiaries
The following exhibits are incorporated by reference from the Registrant's Registration Statement on Form S-4 (File No. 333-33515), referencing the numbers used in such Form S-4:
Exhibit Number Description -------------- ----------- 2 Plan of Reorganization 3.3 Declaration of Trust of the Registrant 3.4 By-Laws of the Registrant
The following exhibits are incorporated by reference from the Registrant's Pre-Effective Amendment No. 1 to Form S-4 (File No. 333-33515), referencing the numbers used in such Pre-Effective Amendment No. 1:
Exhibit Number Description -------------- ----------- 4.1 Form of certificate representing common shares of beneficial interest in the Registrant 4.2 Form of certificate representing 8.22% Convertible Subordinated Debentures 4.4 Form of First Supplemental Indenture
The following exhibits are incorporated by reference from the Registrant's Form 8-A filed on November 5, 1997, referencing the numbers used in such Form 8-A:
Exhibit Number Description -------------- ----------- 1 Articles Supplementary to the Declaration of Trust of the Registrant establishing and fixing the rights and preferences of the Series A Preferred Shares 4 Form of certificate representing Series A Preferred Shares of beneficial interest in the Registrant
The following exhibits are incorporated by reference from the Registrant's Form 10-Q for the fiscal quarter ended September 30, 1997, referencing the numbers used in such Form 10-Q: 38
Exhibit Number Description -------------- ----------- 10.50 Documents relating to $55 million City of Chicago Variable/Fixed Rate Demand Special Facilities Airport Revenue Bonds (CenterPoint O'Hare, L.L.C. Project) Series 1997
(b) During the fourth quarter of 1997, the Company filed a Current Report on Form 8-K on December 30, 1997 to report the acquisition by the Company of properties which constituted more than 10% of the total assets of the Company and its consolidated subsidiaries. (c) An annual report will be sent to Stockholders subsequent to this filing, and the Company will furnish copies of such report to the Securities and Exchange Commission. (d) Not applicable. (1) Exhibit 99 - Press release dated September 28, 1999. 39 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CENTERPOINT PROPERTIES TRUST, a Maryland corporation By: /s/ John S. Gates, Jr. --------------------------------------- John S. Gates, Jr., President and Chief Executive Officer (Principal Executive Officer) By: /s/ Paul S. Fisher --------------------------------------- Paul S. Fisher, Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Act of 1934, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.
SIGNATURE NAME AND TITLE DATE - --------- -------------- ---- /s/ Martin Barber Martin Barber, Chairman Dec. 29, 1998 - ----------------------------- and Trustee /s/ John S. Gates, Jr. John S. Gates, Jr., President Dec. 29, 1998 - ----------------------------- Chief Executive Officer and Trustee /s/ Robert L. Stovall Robert L. Stovall, Vice Dec. 29, 1998 - ----------------------------- Chairman and Trustee /s/ Nicholas C. Babson Nicholas C. Babson, Trustee Dec. 29, 1998 - ----------------------------- /s/ Alan D. Feld Alan D. Feld, Trustee Dec. 29, 1998 - ----------------------------- /s/ John J. Kinsella John J. Kinsella, Trustee Dec. 29, 1998 - ----------------------------- /s/ Thomas E. Robinson Thomas E. Robinson, Dec. 29, 1998 - ----------------------------- Trustee
40 CENTERPOINT PROPERTIES TRUST INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Page(s) Consolidated Financial Statements: Report of Independent Accountants....................................................... F-2 Consolidated Balance Sheets as of December 31, 1997 and 1996............................ F-3 Consolidated Statements of Operations for the years ended December 31, 1997, 1996 and 1995...................................................... F-4 Consolidated Statements of Shareholders' Equity for the years ended December 31, 1997, 1996 and 1995...................................... F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995...................................................... F-6 Notes to Consolidated Financial Statements.............................................. F-7 to F-21 Financial Statement Schedules: Schedule II - Valuation and Qualifying Accounts......................................... F-22 Schedule III - Real Estate and Accumulated Depreciation................................. F-23 to F-28
F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of CenterPoint Properties Trust In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, shareholders' equity and cash flows present fairly, in all material respects, the financial position of CenterPoint Properties Trust and its subsidiaries at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997 in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 2, the financial statements as of December 31, 1997 and for the year then ended have been revised with respect to the timing of recognition of certain fees. PRICEWATERHOUSECOOPERS LLP Chicago, Illinois February 10, 1998 except for Note 2 for which the date is November 15, 1999 F-2 CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
ASSETS DECEMBER 31, ------------ 1997 REVISED 1996 ------- ---- Assets: Investment in real estate: Land and leasehold $ 124,011 $ 72,004 Buildings 418,303 284,626 Building improvements 64,372 43,583 Furniture, fixtures, and equipment 13,912 10,429 Construction in progress 41,677 18,392 --------- --------- 662,275 429,034 Less accumulated depreciation and amortization 44,352 30,206 --------- --------- Net investment in real estate 617,923 398,828 Cash and cash equivalents 1,652 1,070 Restricted cash and cash equivalents 36,509 977 Tenant accounts receivable, net 12,416 10,193 Mortgage notes receivable 9,668 22,665 Investment in and advances to affiliate 11,107 9,673 Prepaid expenses and other assets 3,119 3,630 Deferred expenses, net 6,661 4,170 --------- --------- $ 699,055 $ 451,206 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgage notes payable $ 85,755 $ 114,451 Line of credit 97,700 46,100 Bonds payable 75,540 Convertible subordinated debentures payable 11,740 14,380 Notes payable 2,418 Preferred dividends payable 901 Accounts payable 10,311 4,130 Accrued expenses 24,593 17,914 Rents received in advance and security deposits 4,759 3,700 --------- --------- 311,299 203,093 --------- --------- Commitments and contingencies Shareholders' equity: Preferred shares of beneficial interest, $.001 par value, 10,000,000 shares authorized; 3,000,000 and 0 issued and outstanding, respectively, having a liquidation preference of $25 per share ($75,000) 3 Common shares of beneficial interest, $.001 par value, 47,727,273 shares authorized; 16,891,951 and 14,333,231 issued and outstanding, respectively 17 14 Class B common shares of beneficial interest, $.001 par value, 2,272,727 shares authorized; 2,272,727 issued and outstanding 2 2 Additional paid-in-capital 420,743 276,142 Retained earnings (deficit) (32,512) (27,726) Unearned compensation - restricted stock (497) (319) --------- --------- Total shareholders' equity 387,756 248,113 --------- --------- $ 699,055 $ 451,206 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. F-3 CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
YEARS ENDED DECEMBER 31, ------------------------ 1997 REVISED 1996 1995 ------- ---- ---- Revenue: Operating and investment revenue: Minimum rents $ 57,878 $ 42,107 $ 34,066 Straight-line rents 2,732 2,087 1,349 Expense reimbursements 18,228 11,413 8,781 Mortgage interest income 2,098 1,514 84 -------- -------- -------- Total operating and investment revenue 80,936 57,121 44,280 -------- -------- -------- Other revenue: Real estate fee income 2,514 5,140 2,639 Equity in net income of affiliate 2,138 1,069 33 -------- -------- -------- Total other revenue 4,652 6,209 2,672 -------- -------- -------- Total revenue 85,588 63,330 46,952 -------- -------- -------- Expenses: Real estate taxes 17,091 11,868 7,719 Property operating and leasing 12,091 8,883 7,055 General and administrative 3,105 2,567 2,150 Depreciation and amortization 15,278 10,648 8,456 Interest expense: Interest incurred, net 10,071 9,865 11,562 Amortization of deferred financing costs 800 1,127 1,150 -------- -------- -------- Total expenses 58,436 44,958 38,092 -------- -------- -------- Operating income 27,152 18,372 8,860 Other income (expense) 108 (100) (16) -------- -------- -------- Income before extraordinary item 27,260 18,272 8,844 Extraordinary item, early extinguishment of debt (3,331) (632) -------- -------- -------- Net income 27,260 14,941 8,212 Preferred dividends (901) (947) (1,002) -------- -------- -------- Net income available to common shareholders $ 26,359 $ 13,994 $ 7,210 ======== ======== ======== Per share net income available to common shareholders before extraordinary item: Basic $ 1.41 $ 1.25 $ 0.85 Diluted $ 1.39 $ 1.22 $ 0.84 Per share net income available to common shareholders: Basic $ 1.41 $ 1.01 $ 0.78 Diluted $ 1.39 $ 0.99 $ 0.77 Distributions per common share $ 1.68 $ 1.62 $ 1.56
The accompanying notes are an integral part of these consolidated financial statements. F-4 CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
CLASS B COMMON PREFERRED SHARES SHARES COMMON SHARES -------------------- ------------------- ------------------- ADDITIONAL NUMBER NUMBER NUMBER PAID-IN OF SHARES AMOUNT OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL --------- ------ --------- ------ --------- ------ ------- Balance, January 1, 1995 0 $0 0 $0 6,415,883 $6 $69,871 Issuance of common shares, less $5,160 of offering costs 2,736,700 3 45,446 Shares issued for purchase of property 48,261 1,122 Issuance of convertible preferred shares in private offering 2,272,727 2 49,998 Conversion of convertible subordinated debentures to common shares 1,137,165 1 20,315 Shares issued for stock options exercised 600 11 Incentive share awards 17,499 341 Director share awards 2,850 57 Amortization of unearned compensation Distributions declared on common shares, $1.56 per share Distributions declared on convertible preferred shares, $0.44 per share Net income --------- ------ --------- ------ --------- ------ ------- Balance, December 31, 1995 2,272,727 2 0 0 10,358,958 10 187,161 Issuance of common shares, less $2,387 of offering costs 3,450,000 3 79,547 Conversion of convertible preferred shares to Class B common shares (2,272,727) (2) 2,272,7272 2 Conversion of convertible subordinated debentures to common shares 485,680 1 8,683 Shares issued for stock options exercised 27,787 508 Incentive shares awards 8,290 186 Director shares awards 2,516 57 Amortization of unearned compensation Distributions declared on common shares, $1.62 per share Distributions declared on convertible preferred shares, $0.42 per share Distributions declared on Class B common shares, $1.25 per share Net income --------- ------ --------- ------ --------- ------ ------- Balance, December 31, 1996 0 0 2,272,727 2 14,333,231 14 276,142 Issuance of common shares, less $4,054 of offering costs 2,250,000 2 66,819 Issuance of preferred shares, less $3,101 of offering costs 3,000,000 3 71,896 Conversion of convertible subordinated debentures to common shares 144,640 2,564 Shares issued for stock options exercised 149,715 1 2,873 Incentive share awards 12,444 392 Director share awards 1,921 57 Amortization of unearned compensation Distributions declared on common shares, $1.68 per share Distributions declared on preferred shares, $0.30 per share Distributions declared on Class B common shares, $1.73 per share Net income - revised --------- ------ --------- ------ --------- ------ ------- Balance, December 31, 1997 as revised 3,000,000 $3 2,272,727 $2 16,891,951 $17 $420,743 ========= ====== ========= ====== ========== ====== ======== UNEARNED RETAINED COMPENSATION- TOTAL EARNINGS RESTRICTED SHAREHOLDERS' (DEFICIT) SHARES EQUITY --------- ------ ------- Balance, January 1, 1995 ($10,861) $0 $59,016 Issuance of common shares, less $5,160 of offering costs 45,449 Shares issued for purchase of property 1,122 Issuance of convertible preferred shares in private offering 50,000 Conversion of convertible subordinated debentures to common shares 20,316 Shares issued for stock options exercised 11 Incentive share awards (341) Director share awards 57 Amortization of unearned compensation 90 90 Distributions declared on common shares, $1.56 per share (14,951) (14,951) Distributions declared on convertible preferred shares, $0.44 per share (1,002) (1,002) Net income 8,212 8,212 ------- ------ ------- Balance, December 31, 1995 (18,602) (251) 168,320 Issuance of common shares, less $2,387 of offering costs 79,550 Conversion of convertible preferred shares to Class B common shares Conversion of convertible subordinated debentures to common shares 8,684 Shares issued for stock options exercised 508 Incentive shares awards (186) Director shares awards 57 Amortization of unearned compensation 118 118 Distributions declared on common shares, $1.62 per share (20,277) (20,277) Distributions declared on convertible preferred shares, $0.42 per share (947) (947) Distributions declared on Class B common shares, $1.25 per share (2,841) (2,841) Net income 14,941 14,941 ------- ------ ------- Balance, December 31, 1996 (27,726) (319) 248,113 Issuance of common shares, less $4,054 of offering costs 66,821 Issuance of preferred shares, less $3,101 of offering costs 71,899 Conversion of convertible subordinated debentures to common shares 2,564 Shares issued for stock options exercised 2,874 Incentive share awards (392) Director share awards 57 Amortization of unearned compensation 214 214 Distributions declared on common shares, $1.68 per share (27,221) (27,221) Distributions declared on preferred shares, $0.30 per share (901) (901) Distributions declared on Class B common shares, $1.73 per share (3,924) (3,924) Net income - revised 27,260 27,260 ------- ----- -------- Balance, December 31, 1997 as revised ($32,512) ($497) $387,756 ======== ===== ========
The accompanying notes are an integral part of these consolidated financial statements. F-5 CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEARS ENDED DECEMBER 31, ------------------------ 1997 REVISED 1996 1995 ------- ---- ---- Cash flows from operating activities: Net income $ 27,260 $ 14,941 $ 8,212 Adjustments to reconcile net income to net cash provided by operating activities: Extraordinary item-early extinguishment of debt 3,331 632 Bad debts 279 462 433 Depreciation 14,275 10,199 8,161 Amortization of deferred financing costs 800 1,127 1,150 Other amortization 1,003 449 295 Straight-line rents (2,732) (2,087) (1,349) Incentive stock awards 271 175 147 Interest on converted debentures 12 77 235 Equity in net income of affiliate (2,138) (1,069) (33) (Gain) / loss on disposal of real estate (140) 60 Net changes in: Tenant accounts receivable (973) 197 (2,654) Prepaid expenses and other assets (21) (937) (293) Rents received in advance and security deposits 317 589 119 Accounts payable and accrued expenses 1,198 2,036 1,418 ------- ------- ------- Net cash provided by operating activities 39,411 29,552 16,473 ------- ------- ------- Cash flows from investing activities: Change in restricted cash and cash equivalents (35,532) 325 5 Acquisition of real estate (122,090) (85,268) (61,881) Construction in progress (42,311) (17,063) Improvements and additions to properties (42,441) (12,575) (5,031) Disposition of real estate 13,510 18,991 2,384 Change in deposits on acquisitions 1,303 1,037 (502) Issuance of mortgage notes receivable (18,523) (9,588) Repayment of mortgage notes receivable 5,670 5,543 Investment in and advances to affiliate (19,639) (1,048) (5,324) Receivables from affiliates and employees (3) 106 274 Additions to deferred expenses (3,803) (3,079) (2,893) ------- ------- ------- Net cash used in investing activities (245,336) (111,554) (82,556) ------- ------- ------- Cash flows from financing activities: Proceeds from sale of preferred shares 75,000 50,000 Proceeds from sale of common shares 73,749 82,445 50,620 Offering costs paid (7,155) (2,387) (4,386) Proceeds from line of credit 211,650 46,100 Repayment of line of credit (160,050) Proceeds from issuance of bonds payable 55,000 45,882 50,000 Repayments of mortgage notes payable (8,156) (62,705) (63,930) Repayments of notes payable (2,385) (123) (112) Distributions (31,145) (29,017) (13,650) Conversion of convertible subordinated debentures payable (1) (1) (1) ------- ------- ------- Net cash provided by financing activities 206,507 80,194 68,541 ------- ------- ------- Net change in cash and cash equivalents 582 (1,808) 2,458 Cash and cash equivalents, beginning of the year 1,070 2,878 420 ------- ------- ------- Cash and cash equivalents, end of year $ 1,652 $ 1,070 $ 2,878 ======= ======= =======
The accompanying notes are an integral part of these consolidated financial statements F-6 CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA) 1. ORGANIZATION CenterPoint Properties Trust (the "Company"), a Maryland trust, and its subsidiaries, owns and operates primarily warehouse/industrial properties in the metropolitan Chicago area and operates as a real estate investment trust. On October 15, 1997, the Company completed a reorganization pursuant to which it converted from a Maryland corporation to a Maryland real estate investment trust by means of a merger of CenterPoint Properties Corporation (the "Corporation") with and into the Company, which prior to the merger was a wholly-owned subsidiary of the Corporation, with the Company as the surviving entity. Pursuant to a Plan of Reorganization, which was approved by the stockholders of the Corporation at a Special Meeting of Stockholders held on October 1, 1997, each issued and outstanding share of common stock of the corporation, par value $.001 per share (the "Common Stock"), was converted into one common share of beneficial interest in the Company, par value $.001 per share (the "Common Shares"), each outstanding share of Class B common stock of the Corporation was converted into one Class B common share of beneficial interest (the "Class B Common Shares") in the Company; and the outstanding principal amount of the Corporation's 8.22% Convertible Subordinated Debentures due 2004 was assumed by the Company and converted into the same principal amount of 8.22% Convertible Subordinated Debentures due 2004 of the Company. 2. REVISION During the third quarter of 1999, the Company determined that it had recognized certain participation, assignment, consulting and financing fees in 1997 in advance of that permitted and has revised previously issued financial statements accordingly. The financial statement revisions effect only the timing of fee revenue recognition and HAVE NO EFFECT ON PREVIOUSLY REPORTED CASH FLOW or on the total fee revenue to be recognized. F-7 The effect of this revised reporting on the Company's condensed balance sheet, condensed statement of operations, net income and earnings per share for the year ended December 31, 1997 is as follows (1996 was not affected):
1997 ---------- Previously As Reported Revised ---------- -------- Condensed Balance Sheets: Investment in real estate, net 597,294 617,923 Mortgage notes receivable 30,297 9,668 Other assets 71,684 71,464 --------- --------- Total assets $ 699,275 $ 699,055 ========= ========= Long term debt $ 270,735 $ 270,735 Other liabilities 40,414 40,564 Shareholders' equity 388,126 387,756 --------- --------- Total liabilities and shareholders' equity $ 699,275 $ 699,055 ========= ========= Condensed Statement of Operations: Operating and investment revenue $ 80,625 $ 80,936 Other revenue 5,333 4,652 --------- --------- Total revenue 85,958 85,588 Operating expenses (58,436) (58,436) --------- --------- Other income (expense) 108 108 ---------- ---------- Net income $ 27,630 $ 27,260 ========== ========== Net income available to common shareholders per share: Net income per share- basic $ 1.43 $ 1.41 Net income per share- diluted $ 1.41 $ 1.39
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REVENUE RECOGNITION Minimum rents are recognized on a straight-line basis over the terms of the respective leases. Unbilled rents receivable represents the amount that straight-line rental revenue exceeds rents due under the lease agreements. Unbilled rents receivable, included in tenants accounts receivable, at December 31, 1997 and 1996 were $5,075 and $4,099, respectively. Recoveries from tenants for taxes, insurance and other property operating expenses are recognized in the period the applicable costs are incurred. Real estate fee income includes tenant lease termination fees of $1,894 in 1997 and $1,200 in 1995. The Company provides an allowance for doubtful accounts against the portion of accounts receivable which is estimated to be uncollectible. Accounts receivable in the consolidated balance sheets are shown net of an allowance for doubtful accounts of $272 and $748 as of December 31, 1997 and 1996, respectively. DEFERRED EXPENSES Deferred expenses consist principally of financing fees and leasing commissions. Leasing commissions are amortized on a straight-line basis over the terms of the respective lease agreements ranging from 1 to 8 years. F-8 Financing costs are amortized over the terms of the respective loan agreements. Deferred expenses relating to debenture conversions of $86 and $257 were charged to paid-in capital in 1997 and 1996, respectively, and fully amortized deferred expenses of $1,207 and $57 were written off in 1997 and 1996, respectively. The balances are as follows:
DECEMBER 31, ------------ 1997 1996 ---- ---- Deferred financing costs, net of accumulated amortization of $1,081 and $823 $2,766 $2,019 Deferred leasing and other costs, net of accumulated amortization of $1,478 and $1,387 3,895 2,151 ------ ------ $6,661 $4,170 ====== ======
PROPERTIES Real estate assets are stated at cost. Interest and real estate taxes and other directly related expenses incurred during construction periods are capitalized and amortized on the same basis as the related assets. Depreciation expense is computed using the straight-line method based upon the following estimated useful lives:
YEARS ----- Building and improvements 31.5 and 40 Land improvements 15 Furniture, fixtures and equipment 4 to 15
Construction allowances for tenant improvements are capitalized and amortized over the terms of each specific lease. Repairs and maintenance are charged to expense when incurred. Expenditures for improvements are capitalized. When assets are sold or retired, their cost and related accumulated depreciation are removed from the accounts with the resulting gains or losses reflected in operations. The Company annually reviews the recoverability of the carrying value of its investment in real estate. The reviews are conducted by estimating the fair value of its properties generally by analysis and comparison of the capitalized values of the expected net operating cash flows of the properties. If management determines that an impairment of property has occurred, the carrying value of such property will be reduced to its fair value. CASH AND CASH EQUIVALENTS For purposes of the consolidated financial statements, the Company considers all liquid investments purchased with original maturities of three months or less to be cash equivalents. INVESTMENT IN AND ADVANCES TO AFFILIATE The Company accounts for its investment in affiliate using the equity method whereby its cost of the investment is adjusted for its share of equity in net income or loss from the date of acquisition and reduced by distributions received. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INCOME TAXES F-9 The Company qualifies as a real estate investment trust ("REIT") under sections 856-860 of the Internal Revenue Code beginning January 1, 1994. In order to qualify as a REIT, the Company is required to distribute at least 95% of its taxable income to shareholders and to meet certain asset and income tests as well as certain other requirements. As a REIT, the Company will generally not be liable for Federal income taxes, provided it satisfies the necessary distribution requirements. The distributions declared and paid for the years ended December 31, 1997, 1996 and 1995 represent a return of capital of approximately 12%, 51% and 54%, respectively. EARNINGS PER COMMON SHARE In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," which became effective for both interim and annual financial statement periods ending after December 15, 1997. As required by this statement, the Company adopted the new standards for computing and presenting earnings per share ("EPS") for 1997, and for all prior period earnings per share data presented. Following are the reconciliations of the numerators and denominators of the basic and diluted EPS.
YEARS ENDED DECEMBER 31, ------------------------ 1997 1996 1995 ---- ---- ---- Numerators: Income before extraordinary items $ 27,260 $ 18,272 $ 8,844 Dividends on preferred shares (901) - - Dividends on convertible preferred stock - (947) (1,002) ------------ ------------ ------------ Income available to common shareholders before extraordinary item - for basic and diluted EPS $ 26,359 $ 17,325 $ 7,842 Extraordinary items - (3,331) (632) ------------ ------------ ------------ Net income available to common shareholders - for basic and diluted EPS $ 26,359 $ 13,994 $ 7,210 ============ ============ ============ Denominators: Weighted average common shares outstanding - for basic EPS 18,634,850 13,890,049 9,236,612 Effect of dilutive securities - options 312,280 285,913 121,810 ------------ ------------ ------------ Weighted average common shares outstanding - for diluted EPS 18,947,130 14,175,962 9,358,422 ============ ============ ============
The assumed conversion of the convertible subordinated debentures into common shares for purposes of computing diluted EPS by adding interest expense for the debentures to the numerators and adding assumed share conversions to the denominators for 1997, 1996 and 1995 would be anti dilutive. The assumed conversion of the convertible preferred stock in 1996 and 1995 would also be anti dilutive. RECLASSIFICATIONS Certain items presented in the consolidated statements of operations for prior periods have been reclassified to conform with current classifications with no effect on results of operations. F-10 ACCOUNTING PRONOUNCEMENTS In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information." Both SFAS No. 130 and SFAS No. 131 are effective for financial statements for years beginning after December 15, 1997. SFAS No. 130 requires the reporting of comprehensive income beginning 1998 and SFAS No. 131 establishes standards for publicly-held business enterprises to report information about operating segments in annual financial statements and requires that these enterprises report selected information about operating segments in interim financial reports issued to shareholders. The Company plans to adopt SFAS No. 130 and No. 131 in 1998. 4. PROPERTY ACQUISITIONS AND DISPOSITIONS During each of the years ended December 31, 1997 and 1996, the Company acquired twenty-one and fifteen properties, respectively, consisting principally of single-tenant buildings for an aggregate amount of approximately $124,923 and $103,532, respectively. Substantially all properties were acquired in singular transactions, and except for one transaction in 1997 and three transactions in 1996, were acquired from unrelated third parties. The properties were funded with borrowings under the Company's lines of credit, proceeds from properties sold during 1997 and 1996, from proceeds of public offerings of the Company's common shares completed on July 2, 1996 and March 6, 1997, and from proceeds of a public offering of the Company's preferred shares completed on November 10, 1997. The acquisitions have been accounted for utilizing the purchase method of accounting, and accordingly, the results of operations of the acquired properties are included in the consolidated statements of operations from the dates of acquisition. The Company disposed of three properties during the year ended December 31, 1997 and eight properties during the year ended December 31, 1996. F-11 Due to the effect of the July, 1996 public offering, the March, 1997 public offering, the November, 1997 public offering and the acquisitions and dispositions of properties, the historical results are not indicative of the future results of operations. The following unaudited pro forma information is presented as if the 1995 and 1996 acquisitions and dispositions of properties, the July, 1996 public offering, and the corresponding repayment of certain debt had occurred on January 1, 1995, and as if the March, 1997 public offering, the November 1997 public offering, the corresponding repayment of certain debt, and the 1997 acquisitions and dispositions had all occurred on January 1, 1996 (or on the date the property first commenced operations with a third party tenant, if later). The unaudited pro forma information is based upon the historical consolidated statements of operations before any extraordinary items and does not purport to present what actual results would have been had the transactions, in fact, occurred at the beginning of 1996 or 1995, or to project results for any future period.
PROFORMA FOR THE YEARS ---------------------- ENDED DECEMBER 31, (UNAUDITED) ------------------------------ 1997 1996 1995 ---- ---- ---- Total revenues $ 91,299 $ 80,294 $ 57,411 Total expenses 59,108 50,103 41,764 -------- -------- -------- Income before extraordinary item 32,191 30,191 15,647 Preferred dividends (6,360) (7,307) (1,002) -------- -------- -------- Income available to common shareholders before extraordinary item $ 25,831 $ 22,884 $ 14,645 ======== ======== ======== Per share income available to common shareholders before extraordinary item: Basic $ 1.39 $ 1.28 $ 1.14 Diluted $ 1.36 $ 1.26 $ 1.13
5. MORTGAGE NOTES RECEIVABLE As of December 31, 1997 and 1996, the Company had notes receivable outstanding of $9,668 and $22,665, respectively, consisting of mortgage loans and construction loans. The notes bear interest from 8.25% to 11.25% and mature from March, 1998 to June, 2010. As of December 31, 1997 mortgage notes receivable mature as follows: 1998.................................................... $ 17 1999.................................................... 24 2000.................................................... 8,782 2001.................................................... 41 2002.................................................... 50 Thereafter.............................................. 754 -------- Total......................................... $ 9,668 ========
Based on borrowing rates available at the end of 1997 and 1996 for mortgage loans with similar terms and maturities, the fair value of the mortgage notes receivable approximates the carrying values. Land and buildings have been pledged as collateral for the above notes receivable. 6. INVESTMENT IN AND ADVANCES TO AFFILIATE The Company holds approximately 99% of the economic interest in CenterPoint Realty Services Corporation ("CRS"). To maintain compliance with limitations on income from business activities received by F-12 REITs and their qualified REIT subsidiaries, the Company holds its interest in CRS in the form of non-voting equity ownership which qualifies as an unconsolidated taxable subsidiary. As of December 31, 1997 and 1996, the Company had an outstanding balance due from CRS of $7,868 and $6,333, respectively, under a demand loan with an interest rate of 8.125%. The proceeds of the loans were required for development projects. Certain revisions to the Company's previously issued financial statements described in Note 2 are derived from revisions to the 1997 financial statements of CRS. Accordingly, the summarized financial information of CRS as of December 31, 1997 and for the year then ended (shown below) have been revised. Summarized financial information of CRS is shown below. Balance Sheets:
DECEMBER 31, ------------ 1997 REVISED 1996 ------- ---- Assets: Investment in real estate $ 11,140 $ 10,024 Notes receivable 59 Other assets 832 1,050 -------- -------- $ 12,031 $ 11,074 ======== ======== Liabilities: Note payable to affiliate $ 7,868 $ 6,333 Other liabilities 929 3,566 -------- -------- 8,797 9,899 Stockholder's equity 3,234 1,175 -------- -------- $ 12,031 $ 11,074 ======== ========
Statements of Operations:
YEARS ENDED DECEMBER 31, ------------------------ 1997 REVISED 1996 ------- ---- Total Income $ 40,092 $ 16,000 Operating Expenses (36,627) (14,261) Provision for income taxes (1,305) (659) -------- -------- Net income $ 2,160 $ 1,080 ======== ========
7. MORTGAGE NOTES PAYABLE MORTGAGE NOTES PAYABLE As of December 31, 1997 and 1996, the Company had mortgage notes payable outstanding of $84,075 and $92,231, respectively. The mortgage notes are collateralized by two designated pools of properties in both 1997 and 1996 and two and three other individual properties, at December 31, 1997 and 1996, respectively. One of the designated pool of properties consists of 20 properties collateralizing $50,000 bonds at December 31, 1997 and 1996, bearing interest of 7.62% and maturing in November, 2002. The second designated F-13 pool of properties consists of 18 properties collateralizing $30,000 of debt at December 31, 1997 and 1996, bearing interest of 6.91% and maturing in May, 1999. The other mortgage notes payable aggregate $4,075 and $12,231 at December 31, 1997 and 1996, respectively, and bear interest ranging from 6.9% to 8.0%. In October, 1997, $8,156 of mortgage notes were repaid. The mortgage notes outstanding as of December 31, 1997, mature from November, 1998 to October, 2000. REVENUE BONDS As of December 31, 1997 and 1996, the Company had revenue bonds, consisting of Economic Development Revenue Bonds issued by the City of Gary, Indiana ($22,220 outstanding at December 31, 1997 and 1996) and Variable/Fixed Rate Demand Special Facilities Airport Revenue Bonds issued by the City of Chicago, Illinois ($55,000 outstanding at December 31, 1997). The Economic Development Revenue Bonds issued by the City of Gary, Indiana are collateralized by a letter of credit. The letter of credit contains certain financial covenants pertaining to the tangible net worth and liabilities in relation to portfolio value of the Company. In April 1996, the bonds outstanding at December 31, 1995 were refunded. The new bonds were issued in two series; $20,540,000 tax exempt and $1,680,000 taxable, bearing interest in the Weekly Adjustable Interest Rate Mode at a rate determined by the Remarketing Agent (4.20% on the tax exempt bonds and 6.10% on the taxable bonds at December 31, 1997). The new bonds require monthly payments of interest only and mature in March, 2031. The Variable/Fixed Rate Demand Special Facilities Airport Revenue Bonds issued by the City of Chicago, Illinois are enhanced by a letter of credit. The letter of credit contains certain financial convenants pertaining to consolidated net worth. The tax-exempt bonds bear initial interest at a Weekly Adjustable Interest Rate, which from time to time may be changed by the Company, at a rate determined by the Remarketing Agent (3.95% at December 31, 1997). The bonds require monthly payments of interest only and mature in September, 2032. Of the original proceeds, the Company holds $34,593 in escrow at December 31, 1997 for future construction costs. As of December 31, 1997 mortgage notes mature as follows: 1998.................................................................... $ 3,500 1999.................................................................... 30,000 2000.................................................................... 575 2001.................................................................... 0 2002.................................................................... 50,000 Thereafter.............................................................. 77,220 -------- Total.......................................................... $161,295 ========
Based on borrowing rates available to the Company at the end of 1997 and 1996 for mortgage loans with similar terms and maturities, the fair value of the mortgage notes payable approximates the carrying values. Land, buildings and equipment related to such mortgages with an aggregate net book value of approximately $199,000 at December 31, 1997 have been pledged as collateral for the above debt. 8. LINE OF CREDIT In October, 1996, the Company obtained a $135 million unsecured line of credit, and subsequently increased the line to $150 million in November 1997. The current interest rate is LIBOR plus .80% for LIBOR borrowings (a range of 6.8% to 6.863% at December 31, 1997) and Prime Rate (8.5% at December 31, 1997) for other borrowings. The Company may receive competitive bids for up to half its commitment (a range of 6.60% to 6.75% at December 31, 1997). The line requires payments of interest only when LIBOR contracts mature and F-14 monthly on borrowings under Prime Rate. The line matures on October 24, 1999. There is a fee of 1/5% per year on the total line commitment. At December 31, 1997 and 1996, the Company had $52,300 and $88,900, respectively, available under the line. As the line of credit is at a variable rate, the carrying value approximates fair value. 9. EXTRAORDINARY ITEM In 1996 and 1995, the Company incurred losses of $3,331 (per share - basic $0.24; diluted $0.23) and $632 (per share - basic $0.07; diluted $0.07), respectively, representing a write off of unamortized deferred financing costs as a result of early extinguishment of certain debt obligations. 10. CONVERTIBLE SUBORDINATED DEBENTURES PAYABLE Concurrent with the initial public offering in December, 1993, the Company issued $58,500 of convertible subordinated debentures ("Debentures") due 2004. At December 31, 1997 and 1996, $11,740 and $14,380 of debentures were outstanding, respectively. The Debentures are unsecured general obligations of the Company and are subordinate to all existing and subsequently incurred indebtedness of the Company. The Debentures are optionally redeemable by the Company, at par, commencing December 4, 1998. Holders may convert the Debentures at any time, without premium, to Common Shares of the Company at a conversion price of $18.25 per share, subject to certain adjustments. The Debentures bear interest at 8.22% per annum, payable semiannually on January 15 and July 15 of each year, commencing July 15, 1994. During 1997, 1996 and 1995 debentures totaling $2,640, $8,864 and $20,754, respectively, were converted into shares of common stock. Based principally on the conversion feature and share price of common stock at the end of 1997 and 1996, the fair value of the outstanding Debentures approximates $22,595 and $25,805, respectively. 11. RELATED PARTY TRANSACTIONS In December 1997, the Company purchased a fully leased building, located in Des Plaines, Illinois, from a partnership, in which one of the Company's Senior Officers and a Company Director were limited partners, for approximately $4.7 million. In June, 1996, the Company acquired three properties in which the Company's Chief Operations Officer and Director, and the Company's Executive Vice President of Acquisitions during 1996 had an interest and, in which they, continue to own an insignificant interest in two of the properties. The three properties were purchased for an aggregate amount of approximately $24.6 million. The above transactions satisfied the Company's investment criteria and were approved by the Company's independent directors. Notes payable at December 31, 1997 and 1996 includes amounts payable to related parties as a consequence of properties acquired and settlement of tax reimbursement obligations of the Company during 1996 totaling $33 and $483, respectively. 12. SHAREHOLDERS' EQUITY COMMON SHARES OF BENEFICIAL INTEREST As of December 31, 1997 the Company has reserved 584,229 Common Shares for future issuance under the 1993 Stock Option Plan, 119,596 Common Shares for future issuance under the 1995 Restricted Stock Incentive Plan, 67,713 Common Shares for future issuance under the 1995 Director Stock Plan, 643,288 Common Shares for issuance upon the conversion of the Debentures and 1,000,000 Common Shares for future issuance under the dividend reinvestment and stock purchase plan. CLASS B COMMON SHARES OF BENEFICIAL INTEREST On September 22, 1995, the Company completed a $50 million private equity placement of non-voting preferred shares of beneficial interest. In May, 1996, the preferred shares of beneficial interest automatically F-15 converted, on a share for share basis, to non-voting Class B Common Shares, upon shareholder approval of an amendment to the Company's charter permitting non-voting Class B Common Shares at the Company's annual meeting. The distribution on the non-voting shares is equal to the distribution paid on the voting shares of the Company plus an additional $.0468 per share. Unless previously converted, after three years, the shares will be converted to voting common shares on a share for share basis up to 4.9 percent of the Company's then outstanding voting shares with all shares to fully convert within ten years. As the shares convert to voting common, the distribution paid shall be the same as all other voting common shares. F-16 PREFERRED SHARES OF BENEFICIAL INTEREST On November 10, 1997, the Company issued 3 million shares of 8.48% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest ("Preferred Shares") at a purchase price of $25 per share. Dividends on the Preferred Shares are cumulative from the date of issuance and payable quarterly commencing on January 30, 1998. The payment of dividends and amounts upon liquidation will rank senior to the Common Shares and Class B Common Shares, which are the only other shares of the Company currently outstanding. The Preferred Shares are not redeemable prior to October 30, 2002. On or after October 30, 2002 the Preferred Shares will be redeemable for cash at the option of the Company, in whole or part, at the redemption price of $25 per share, plus dividends accrued and unpaid to the redemption date. The Preferred Shares are not convertible into or exchangeable for any other property or securities of the Company. RESTRICTED STOCK INCENTIVE PLAN Under the terms of the 1995 Restricted Stock Incentive Plan, adopted in 1995 the Company initially reserved 150,000 common shares for future grants. In 1997, 1996 and 1995 certain key employees were granted 12,444, 8,290 and 9,670 restricted shares, respectively. Shares were awarded in the name of each of the participants, who have all the rights of other common shareholders, subject to certain restrictions and forfeiture provisions. Restrictions on the shares expire no more than eight years after the date of award, or earlier if certain performance targets are met. Under the terms of the Company's Restricted Stock Grant Agreements, certain key employees were granted 7,829 restricted shares of the Company's common shares in 1995. Shares were awarded in the name of each of the employees, who have all the rights of other common shareholders, subject to certain restrictions and for future provisions. Restrictions on the shares expired one year after the date of the award. Unearned compensation is recorded at the date of awards based on the market value of shares. Unearned compensation, which is shown as a separate component of shareholders' equity, is being amortized to expense over the eight year vesting period. The amount amortized to expense during 1997, 1996 and 1995 was $214, $118 and $90, respectively. DIRECTOR STOCK PLAN The 1995 Director Stock Plan is for an aggregate of 75,000 common shares and provides that each independent director, upon election or re-election to the Board, may elect to receive 50% of his annual retainer fee in Common Shares at the market price on such date. In 1997, 1996 and 1995, 1,921, 2,516 and 2,850 Common Shares were issued under this plan, respectively. In connection with the issuance of such shares, $57, $57 and $57 was charged to expense in 1997, 1996 and 1995, respectively. 13. STOCK OPTION PLAN The Company has adopted the 1993 Stock Option Plan (the "Plan") and in May, 1996, increased the maximum number of shares from 750,000 to 1,500,000 common shares of beneficial interest which may be granted for qualified and non-qualified options. The Company adopted the Plan to provide additional incentives to attract and retain directors, officers and key employees. The Plan was amended in 1995 to provide that each independent director receive an option for 3,000 common shares of beneficial interest at fair market value at the time of being elected or re-elected to the Board. Options are to be granted by the Compensation Committee of the Board of Directors. The term of the option shall be fixed by the Compensation Committee, but no option shall be exercisable more than 10 years after the date of grant. The options granted are at fair market value on the date of grant, are for 10 year terms and become exercisable in 20% annual increments after one year from date of grant. Option activity for the three years ended December 31, 1997 is as follows: F-17
1997 1996 1995 ---- ---- ---- WEIGHTED WEIGHTED WEIGHTED AVERAGE AVERAGE AVERAGE EXERCISE EXERCISE EXERCISE SHARES PRICE SHARES PRICE SHARES PRICE ---------------- ---------------- ----------------- Outstanding at beginning of year 683,480 $19.20 606,839 $18.59 494,460 $18.37 Granted 241,769 31.38 104,428 22,50 112,979 19.55 Exercised (149,715) 19.19 (27,787) 18.28 (600) 18.25 Expired (34,865) 24.73 - - -------- ------- ------- Outstanding at end of year 740,669 $22.92 683,480 $19.20 606,839 $18.59 ======== ======= ======= Exercisable at end of year 327,137 282,784 189,084 Available for future grant at year end 584,229 791,133 145,561 Weighted average per share fair value of options granted during the year $3.65 $2.43 $2.41
The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
1997 1996 1995 ---- ---- ---- Risk free interest rate 6.4% 6.1% 7.0% Dividend yield 6.5% 6.5% 6.5% Expected lives 6 years 6 years 6 years Expected volatility 17.5% 17.4% 17.4%
The following table summarized information about stock options at December 31, 1997:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE ------------------- ------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED NUMBER REMAINING AVERAGE NUMBER AVERAGE RANGE OF OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE EXERCISE PRICE AT 12/31/97 LIFE PRICE AT 12/31/97 PRICE -------------- ----------- ----------- --------- ----------- -------- $18.25-$31.50 740,669 7.8 years $22.92 327,137 $18.66
The Company has applied Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its Plan, accordingly, no compensation costs have been recognized. Had compensation costs for the Company's Plan been determined based on the fair value at the grant date for options granted in 1997, 1996 and 1995 in accordance with the method required by Statement of Financial Accounting Standards No. 123, the Company's net income and net income per share would have been reduced to the pro forma amounts as follows:
Year ended December 31, (in thousands, except per share data) ----------------------------------- 1997 1996 1995 ---- ---- ---- Net income available to common shareholders As reported $26,359 $13,994 $7,210 Pro forma $26,221 13,901 7,169 Per share net income available to common shareholders As reported Basic 1.41 1.01 0.78 F-18 Diluted 1.39 0.99 0.77 Pro forma Basic 1.41 1.00 0.78 Diluted 1.38 0.98 0.77
14. FUTURE RENTAL REVENUES Under existing noncancelable operating lease agreements as of December 31, 1997, tenants of the warehouse/industrial properties are committed to pay in aggregate the following minimum rentals: 1998..................................................................... $ 60,765 1999..................................................................... 52,448 2000..................................................................... 43,926 2001..................................................................... 35,683 2002..................................................................... 29,339 Thereafter............................................................... 88,670 -------- Total............................................................ $310,831 ========
At December 31, 1997, 630 of the total 682 apartments available for rental at the Lakeshore Dunes property were leased. Lease terms are generally for one year. No single tenant represented more than 10% of consolidated minimum rents in 1997, 1996 and 1995. 15. SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, ----------------------- 1997 1996 1995 ---- ---- ---- Supplemental disclosure of cash flow information: Interest paid, net of interest capitalized $ 11,820 $ 10,603 $ 13,344 Interest capitalized 893 142 20 Dividends declared, not paid 901 - 4,952 Assignment of note receivable to affiliate 4,650 - - Repayment of advance from affiliate with real estate at book value 24,993 - - In conjunction with the property acquisitions, the Company assumed the following assets and liabilities: Purchase of real estate $ 125,352 $ 103,532 $ 65,828 Liabilites, net of other assets (3,262) (4,956) (2,250) Mortgage notes payable (13,308) (575) Issuance of Common Stock (1,122) --------- --------- --------- Acquisition of real estate $ 122,090 $ 85,268 $ 61,881 ========= ========= ========= In conjunction with the property dispositions, the Company disposed of the following assets and liabilities: Sale of real estate $ (12,877) $ (22,481) $ (2,429) Liabilities, net of other assets (633) 1,421 45 Mortgage notes payable 2,069 --------- --------- --------- Disposition of real estate $ (13,510) $ (18,991) $ (2,384) ========= ========= ========= F-19 Conversion of convertible subordinated debentures payable: Convertible subordinated dentures converted $ 2,640 $ 8,864 $ 20,754 Common shares issued at $18.25 per share; 144,640, 485,680 and 1,137,165 2,639 8,863 20,753 --------- --------- --------- Cash disbursed for fractional shares $ 1 $ 1 $ 1 ========= ========= =========
16. COMMITMENTS AND CONTINGENCIES In the normal course of business, from time to time, the Company is involved in legal actions relating to the ownership and operations of its properties. In management's opinion, the liabilities, if any, that may ultimately result from such legal actions are not expected to have a materially adverse effect on the consolidated financial position, results of operations, or liquidity of the Company. The Company has entered into several contracts for the acquisition of properties. Each acquisition is subject to satisfactory completion of due diligence and, in the case of developments, completion and occupancy of the project. At December 31, 1997, seven of the properties owned are subject to purchase options held by certain tenants. The purchase options are exercisable at various intervals through 2006 for amounts which are greater than the net book value of the assets. The tenant at a property in Woodale, IL exercised its option to purchase the building in May, 1997. F-20 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders CenterPoint Properties Trust Our report on the consolidated financial statements of CenterPoint Properties Trust and Subsidiaries is included as page F-2 of this Form 10-K/A. In connection with our audits of such financial statements, we have also audited the related financial statement schedules listed in the Index to Consolidated Financial Statements on page F-1 of this Form 10-K/A. In our opinion, these revised financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. Chicago, Illinois PRICEWATERHOUSECOOPERS LLP November 15, 1999 F-21 CENTERPOINT PROPERTIES TRUST VALUATION AND QUALIFYING ACCOUNTS SCHEDULE II (DOLLARS IN THOUSANDS)
BEGINNING CHARGE TO COST ENDING BALANCE AND EXPENSES RECOVERIES DEDUCTIONS(a) BALANCE --------- -------------- ---------- ------------- ------- DESCRIPTION - ----------- For year ended December 31, 1997: Allowance for doubtful accounts $748 $279 $ - ($755) $272 For year ended December 31, 1996: ==== === === ====== === Allowance for doubtful accounts 500 462 - (214) 748 For year ended December 31, 1995: === === === ===== === Allowance for doubtful accounts $120 $433 - (53) $500 ==== ==== === === ====
- --------------------------- NOTE: (a) Deductions represent write-off of accounts receivable against the allowance for doubtful accounts. F-22 CENTERPOINT PROPERTIES CORPORATION AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 1997
INITIAL COSTS COSTS CAPITALIZED GROSS AMOUNTS AT WHICH --------------------- SUBSEQUENT TO ACQUISITION CARRIED AT CLOSE OF PERIOD BUILDINGS AND ----------------------------- -------------------------- ENCUMBRANCES IMPROVEMENTS BUILDINGS AND CARRYING BUILDINGS AND DESCRIPTION (e) LAND (a) LAND IMPROVEMENTS COSTS (b) LAND IMPROVEMENTS TOTAL(c)(d) - -------------------- ------------ ------- ----------- ---- ------------- --------- ------- ------------- ----------- WAREHOUSE/INDUSTRIAL PROPERTIES: 425 W. 151st Street East Chicago, IN $ 252 $ 1,805 $ 33 $ 4,410 $ 1,155 $ 285 $ 7,370 $ 7,655 201 Mississippi Street Gary, IN $50,000(h) 807 9,948 275 14,697 1,082 24,645 25,727 1201 Lunt Avenue Elk Grove Village, IL (h) 57 146 4 57 150 207 620 Butterfield Road Mundelein, IL 30,000(g) 335 1,974 61 396 1,974 2,370 1319 Marquette Drive Romeoville, IL (h) 948 2,530 7 948 2,537 3,485 900 E. 103rd Street Chicago, IL 2,226 10,693 3,631 2,226 14,324 16,550 1520 Pratt Avenue Elk Grove Village, IL (h) 498 1,558 6 498 1,564 2,062 1850 Greenleaf Elk Grove Village, IL 509 1,386 1 509 1,387 1,896 2743 Armstrong Court Des Plaines, IL 1,320 2,679 133 1,320 2,812 4,132 5990 Touhy Avenue Niles, IL 2,047 8,509 1,073 2,047 9,582 11,629 950 Tower Road Mundelein, IL (h) 171 778 131 171 909 1,080 2339 Ernie Krueger Court Waukegan, IL (g) 158 1,819 158 1,819 1,977 4501 W. Augusta Blvd. Chicago, IL 175 4,988 700 175 5,688 5,863 1800 Industrial Drive Libertyville, IL (h) 673 3,741 395 4,452 1,068 8,193 9,261 1400 Busse Road Elk Grove Village, IL 439 5,719 277 439 5,996 6,435 1250 Carolina Drive West Chicago, IL (g) 583 3,836 231 583 4,067 4,650 5619 W. 115th Street Alsip, IL (h) 2,267 12,169 1,621 2,267 13,790 16,057 825 Tollgate Road Elgin, IL (g) 712 3,584 12 712 3,596 4,308 720 Frontenac Naperville, IL (g) 1,014 4,055 22 102 1,036 4,157 5,193 820 Frontenac Naperville, IL (g) 906 3,626 17 906 3,643 4,549 1120 Frontenac Naperville, IL (g) 791 3,164 23 612 814 3,776 4,590 1510 Frontenac Naperville, IL (g) 621 2,485 16 69 637 2,554 3,191 1020 Frontenac Naperville, IL (g) 591 2,363 11 214 602 2,577 3,179 1560 Frontenac Naperville, IL (g) 508 2,034 11 66 519 2,100 2,619 LIFE UPON WHICH DEPRECIATION IN LATEST INCOME ACCUMULATED DATE OF DATE STATEMENT IS DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED - -------------------- ------------ ------------ -------- ------------ WAREHOUSE/INDUSTRIAL PROPERTIES: 425 W. 151st Street East Chicago, IN $(2,555) 1913/1988-1990 1987 (f) 201 Mississippi Street Gary, IN (8,286) 1946/1985-1988 1985 (f) 1201 Lunt Avenue Elk Grove Village, IL (19) 1971 1993 (f) 620 Butterfield Road Mundelein, IL (254) 1990 1993 (f) 1319 Marquette Drive Romeoville, IL (326) 1990-1991 1993 (f) 900 E. 103rd Street Chicago, IL (1,710) 1910 1993 (f) 1520 Pratt Avenue Elk Grove Village, IL (201) 1968 1993 (f) 1850 Greenleaf Elk Grove Village, IL (178) 1965 1993 (f) 2743 Armstrong Court Des Plaines, IL (354) 1989-1990 1993 (f) 5990 Touhy Avenue Niles, IL (1,140) 1957 1993 (f) 950 Tower Road Mundelein, IL (109) 1979 1993 (f) 2339 Ernie Krueger Court Waukegan, IL (234) 1990 1993 (f) 4501 W. Augusta Blvd. Chicago, IL (693) 1942-1943 1993 (f) 1800 Industrial Drive Libertyville, IL (761) 1992-1993 1993 (f) 1400 Busse Road Elk Grove Village, IL (764) 1987 1993 (f) 1250 Carolina Drive West Chicago, IL (506) 1989-1990 1993 (f) 5619 W. 115th Street Alsip, IL (1,704) 1974 1993 (f) 825 Tollgate Road Elgin, IL (462) 1989-1991 1993 (f) 720 Frontenac Naperville, IL (529) 1991 1993 (f) 820 Frontenac Naperville, IL (467) 1988 1993 (f) 1120 Frontenac Naperville, IL (468) 1980 1993 (f) 1510 Frontenac Naperville, IL (325) 1986 1993 (f) 1020 Frontenac Naperville, IL (313) 1980 1993 (f) 1560 Frontenac Naperville, IL (267) 1987 1993 (f)
F-23
INITIAL COSTS COSTS CAPITALIZED GROSS AMOUNTS AT WHICH --------------------- SUBSEQUENT TO ACQUISITION CARRIED AT CLOSE OF PERIOD BUILDINGS AND ----------------------------- -------------------------- ENCUMBRANCES IMPROVEMENTS BUILDINGS AND CARRYING BUILDINGS AND DESCRIPTION (e) LAND (a) LAND IMPROVEMENTS COSTS (b) LAND IMPROVEMENTS TOTAL(c)(d) - -------------------- ------------ ------- ----------- ---- ------------- --------- ------- ------------- ----------- 1500 Shore Road Naperville, IL (g) 260 1,042 7 37 267 1,079 1,346 800 Enterprise Naperville, IL (g) 212 849 6 25 218 874 1,092 1651 Frontenac Naperville, IL (g) 185 742 5 19 190 761 951 1150 Shore Road Naperville, IL (g) 184 736 5 22 189 758 947 2764 Golfview Naperville, IL (g) 125 498 3 27 128 525 653 920 Frontenac Naperville, IL (g) 717 2,367 482 717 2,849 3,566 1300 Northpoint Road Waukegan IL (h) 592 2,366 17 592 2,383 2,975 1 Wildlife Way Long Grove, IL (h) 530 2,122 122 530 2,244 2,774 900 W. University Drive Arlington Heights, IL (h) 817 3,268 17 96 834 3,364 4,198 7001 Adams Street Willowbrook, IL (h) 297 1,326 4 297 1,330 1,627 745 Birginal Drive Bensenville, IL 601 2,406 16 601 2,422 3,023 21399 Torrence Avenue Sauk Village , IL 1,550 6,199 557 707 2,107 6,906 9,013 2600 N. Elmhurst Road Elk Grove Village, IL. (g) 842 3,366 8 46 850 3,412 4,262 8901 W. 102nd Street Pleasant Prarie, WI (h) 900 3,608 36 900 3,644 4,544 8200 100th Street Pleasant Prarie, WI (h) 1,220 4,890 42 1,220 4,932 6,152 1700 Hawthorne West Chicago, IL 2,522 10,089 1 25 2,523 10,114 12,637 1015 E. State Parkway Schaumburg, IL 190 760 13 190 773 963 245 Beinoris Drive Wood Dale, IL (h) 168 570 5 168 575 743 800-1000 Chase Avenue Elk Grove Village, IL 2,250 9,001 (444) 41 1,806 9,042 10,848 750 E. 110th Street Chicago, IL 335 1,340 15 331 350 1,671 2,021 825-845 Hawthorne West Chicago, IL (g) 721 2,884 23 302 744 3,186 3,930 1700 Butterfield Road Mundelein, IL (h) 343 1,371 (1) 141 342 1,512 1,854 1810-1820 Industrial Drive Libertyville, IL (h) 407 1,629 (5) 26 402 1,655 2,057 1733 Downs Drive West Chicago (h) 488 1,953 1 22 489 1,975 2,464 1645 Downs Drive West Chicago (h) 508 2,033 1 470 509 2,503 3,012 10601 Seymour Avenue Franklin Park, IL 2,020 8,081 183 1,034 2,203 9,115 11,318 11701 South Central Alsip, IL 1,241 4,964 22 618 1,263 5,582 6,845 LIFE UPON WHICH DEPRECIATION IN LATEST INCOME ACCUMULATED DATE OF DATE STATEMENT IS DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED COMPUTED - -------------------- ------------ ------------ -------- ------------ 1500 Shore Road Naperville, IL (137) 1985 1993 (f) 800 Enterprise Naperville, IL (111) 1985 1993 (f) 1651 Frontenac Naperville, IL (97) 1978 1993 (f) 1150 Shore Road Naperville, IL (96) 1985 1993 (f) 2764 Golfview Naperville, IL (66) 1985 1993 (f) 920 Frontenac Naperville, IL (320) 1987 1993 (f) 1300 Northpoint Road Waukegan IL (274) 1994 1994 (f) 1 Wildlife Way Long Grove, IL (257) 1994 1994 (f) 900 W. University Drive Arlington Heights, IL (372) 1974 1994 (f) 7001 Adams Street Willowbrook, IL (146) 1994 1994 (f) 745 Birginal Drive Bensenville, IL (272) 1974 1994 (f) 21399 Torrence Avenue Sauk Village , IL (737) 1987 1994 (f) 2600 N. Elmhurst Road Elk Grove Village, IL. (301) 1995 1995 (f) 8901 W. 102nd Street Pleasant Prarie, WI (369) 1990 1994 (f) 8200 100th Street Pleasant Prarie, WI (500) 1990 1994 (f) 1700 Hawthorne West Chicago, IL (991) 1959/1969 1994 (f) 1015 E. State Parkway Schaumburg, IL (77) 1980 1994 (f) 245 Beinoris Drive Wood Dale, IL (73) 1988 1984 (f) 800-1000 Chase Avenue Elk Grove Village, IL (848) 1972 1995 (f) 750 E. 110th Street Chicago, IL (142) 1966 1995 (f) 825-845 Hawthorne West Chicago, IL (262) 1974 1995 (f) 1700 Butterfield Road Mundelein, IL (121) 1976 1995 (f) 1810-1820 Industrial Drive Libertyville, IL (133) 1977 1995 (f) 1733 Downs Drive West Chicago (159) 1976 1995 (f) 1645 Downs Drive West Chicago (198) 1976 1995 (f) 10601 Seymour Avenue Franklin Park, IL (618) 1963/1965 1995 (f) 11701 South Central Alsip, IL (376) 1972 1995 (f)
F-24
INITIAL COSTS COSTS CAPITALIZED ------------------------------- SUBSEQUENT TO ACQUISITION BUILDINGS AND ------------------------------------------ ENCUMBRANCES IMPROVEMENTS BUILDINGS AND CARRYING DESCRIPTION (e) LAND (a) LAND IMPROVEMENTS COSTS (b) - -------------------------------- ------------ ------------- -------------- ---------- ------------- ------------ 11601 South Central Alsip, IL 1,071 4,285 48 380 850 Arthur Avenue Elk Grove Village, IL 575 270 1,081 1 230 1827 North Bendix Drive South Bend, IN (h) 1,010 4,040 24 105 4400 S. Kolmar Chicago, IL (h) 603 2,412 9 70 6600 River Road Hodgkins, IL 2,640 10,562 47 350 7501 N. 81st Street Milwaukee, WI 1,018 4,073 19 81 1100 Chase Avenue Elk Grove Village, IL 248 993 7 238 2553 N. Edgington Franklin Park, IL 6,000 1,870 7,481 67 925 875 Fargo Avenue Elk Grove Village, IL 572 2,284 14 424 1800 Bruning Drive Itasca, IL 1,999 7,995 26 108 1501 Pratt Elk Grove Village, IL 1,047 4,189 67 459 400 N. Wolf Road Northlake, IL 4,504 18,017 49 6,735 10740 W. Grand Avenue Franklin Park, IL 383 1,532 8 172 911 Commerce Court Buffalo Grove, IL 1,171 4,686 14 475 16400 W. 103rd Street Lemont, IL 446 1,748 21 122 425 S. 37th Avenue St. Charles, IL 644 2,575 7 236 1500 W. Dundee Road Arlington Heights, IL 4,995 10,006 (1,076) 3,030 Lot 51-Naperville Business Center Naperville, IL 220 (11) 3145 Central Avenue Waukeegan, IL 1,270 5,080 20 1,133 2003-2207 South 114th Street West Allis, WI 942 3,770 5 54 2501-2701 Busse Road Elk Grove Village, IL 1,875 7,556 12 733 6464 West 51st Street Forest View, IL 934 3,734 3 156 6500 West 51st Street Forest View, IL 805 3,221 4 21 7447 South Central Avenue Bedford Park, IL 437 1,748 7 37 7525 S. Sayre Avenue Bedford Park, IL 587 2,345 4 26 2901 Centre Circle Downers Grove, IL 207 828 4 557 1 Allsteel Drive Aurora, IL 2,458 9,832 27 5,120 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 - -------------------------------- ---------- ------------- ------------- ------------ ------------ -------- -------- 11601 South Central Alsip, IL 1,119 4,665 5,784 (320) 1971 1995 (f) 850 Arthur Avenue Elk Grove Village, IL 271 1,311 1,582 (88) 1972/1973 1995 (f) 1827 North Bendix Drive South Bend, IN 1,034 4,145 5,179 (279) 1964/1990 1995 (f) 4400 S. Kolmar Chicago, IL 612 2,482 3,094 (166) 1964 1995 (f) 6600 River Road Hodgkins, IL 2,687 10,912 13,599 (583) Unknown 1996 (f) 7501 N. 81st Street Milwaukee, WI 1,037 4,154 5,191 (213) 1987 1996 (f) 1100 Chase Avenue Elk Grove Village, IL 255 1,231 1,486 (64) 1969 1996 (f) 2553 N. Edgington Franklin Park, IL 1,937 8,406 10,343 (376) 1967/1989 1996 (f) 875 Fargo Avenue Elk Grove Village, IL 586 2,708 3,294 (123) 1979 1996 (f) 1800 Bruning Drive Itasca, IL 2,025 8,103 10,128 (396) 1975/1978 1996 (f) 1501 Pratt Elk Grove Village, IL 1,114 4,648 5,762 (223) 1973 1996 (f) 400 N. Wolf Road Northlake, IL 4,553 24,752 29,305 (895) 1956/1965 1996 (f) 10740 W. Grand Avenue Franklin Park, IL 391 1,704 2,095 (70) 1964/1970 1996 (f) 911 Commerce Court Buffalo Grove, IL 1,185 5,161 6,346 (193) 1992 1996 (f) 16400 W. 103rd Street Lemont, IL 467 1,870 2,337 (71) 1983 1996 (f) 425 S. 37th Avenue St. Charles, IL 651 2,811 3,462 (106) 1976 1996 (f) 1500 W. Dundee Road Arlington Heights, IL 3,919 13,036 16,955 (386) 1969/1971 1996 (f) Lot 51-Naperville Business Center Naperville, IL 209 209 1996 1996 (f) 3145 Central Avenue Waukeegan, IL 1,290 6,213 7,503 (192) 1960 1997 (f) 2003-2207 South 114th Street West Allis, WI 947 3,824 4,771 (90) 1965/1966 1997 (f) 2501-2701 Busse Road Elk Grove Village, IL 1,887 8,289 10,176 (189) 1997 1997 (f) 6464 West 51st Street Forest View, IL 937 3,890 4,827 (81) 1973 1997 (f) 6500 West 51st Street Forest View, IL 809 3,242 4,051 (69) 1974 1997 (f) 7447 South Central Avenue Bedford Park, IL 444 1,785 2,229 (38) 1980 1997 (f) 7525 S. Sayre Avenue Bedford Park, IL 591 2,371 2,962 (50) 1980 1997 (f) 2901 Centre Circle Downers Grove, IL 211 1,385 1,596 (23) 1975 1997 (f) 1 Allsteel Drive Aurora, IL 2,485 14,952 17,437 (248) 1957-1967 1997 (f)
F-25
INITIAL COSTS COSTS CAPITALIZED ------------------------ SUBSEQUENT TO ACQUISITION BUILDINGS AND ------------------------------------ ENCUMBRANCES IMPROVEMENTS BUILDINGS AND CARRYING DESCRIPTION (e) LAND (a) LAND IMPROVEMENTS COSTS (b) - ---------------------------- ------------ -------- ------------- -------- ------------- ----------- 2525 Busse Highway Elk Grove Village, IL 5,400 12,601 29 510 106th and Buffalo Avenue Chicago, IL 248 992 9 534 7400 South Narraganset Bedford Park,IL 743 2,972 9 38 2701 S. Busse Road Elk Grove Village, IL 1 3 East Avenue and 55th Street McCook, IL 1,190 4,761 33 197 6757 S. Sayre Bedford Park, IL 1,236 4,945 4 16 1951 Landmeir Road Elk Grove Village, IL 280 1,120 10 39 1355 Enterprise Drive Romeoville, IL 580 2,320 2 9 5700 West Touhy Avenue Niles, IL 18,005 139 174 8 110-190 Old Higgins Road Des Plaines, IL 1,862 7,447 7 28 1475 S. 101st Street West Allis, WI 331 1,323 1 4 1333 Grandview Drive Yorkville, WI 1,516 6,062 1 7 2301 Route 30 Plainfield, IL 1,217 4,868 64 254 1796 Sherwin Avenue Des Plaines, IL 944 3,778 1 530 2885 W. Diehl Road Naperville, IL 1,539 8,630 2727 W. Diehl Road Naperville, IL 3,071 14,233 O'hare Express Center - A2 Elk GroveVillage, IL 1,097 7,060 110 O'hare Express Center - B1 Elk GroveVillage, IL 1,683 10,500 96 755 Remmington Bolingbrook, IL 997 3,989 CONSTRUCTION IN PROGRESS: O'hare West Elk Grove Village, IL 1,875 5,667 7 281 O'hare Express - B2 Elk Grove Village, IL 1,618 2,981 37 O'hare Express - C Elk Grove Village, IL 2,603 1,537 0 36 1808 Swift Road Oak Brook, IL 7,535 Champion North Lake, IL 5,514 Ameritech Gurnee, IL 2,446 Dial Granite City, IL 15,643 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 - ------------------ -------- --------------- --------------- -------------- -------------- ---------- ---------- 2525 Busse Highway Elk Grove Village, IL 5,429 13,111 18,540 (169) 1975 1997 (f) 106th and Buffalo Avenue Chicago, IL 257 1,526 1,783 (22) 1971 1997 (f) 7400 South Narraganset Bedford Park,IL 752 3,010 3,762 (32) 1977 1997 (f) 2701 S. Busse Road Elk Grove Village, IL 1 3 4 1997 1997 (f) East Avenue and 55th Street McCook, IL 1,223 4,958 6,181 (39) 1979 1997 (f) 6757 S. Sayre Bedford Park, IL 1,240 4,961 6,201 (39) 1975 1997 (f) 1951 Landmeir Road Elk Grove Village, IL 290 1,159 1,449 (9) 1967 1997 (f) 1355 Enterprise Drive Romeoville, IL 582 2,329 2,911 (19) 1980/1986 1997 (f) 5700 West Touhy Avenue Niles, IL 18,179 147 18,326 1948 1997 (f) 110-190 Old Higgins Road Des Plaines, IL 1,869 7,475 9,344 1980 1997 (f) 1475 S. 101st Street West Allis, WI 332 1,327 1,659 1968/1988 1997 (f) 1333 Grandview Drive Yorkville, WI 1,517 6,069 7,586 1994 1997 (f) 2301 Route 30 Plainfield, IL 1,281 5,122 6,403 1972/1984 1997 (f) 1796 Sherwin Avenue Des Plaines, IL 945 4,308 5,253 1964 1997 (f) 2885 W. Diehl Road Naperville, IL 1,539 8,630 10,169 1997 1997 (f) 2727 W. Diehl Road Naperville, IL 3,071 14,233 17,304 1997 1997 (f) O'hare Express Center - A2 Elk GroveVillage, IL 1,097 7,170 8,267 (117) 1997 1997 (f) O'hare Express Center - B1 Elk GroveVillage, IL 1,683 10,596 12,279 (155) 1997 1997 (f) 755 Remmington Bolingbrook, IL 997 3,989 4,986 1997 1997 (f) CONSTRUCTION IN PROGRESS: O'hare West Elk Grove Village, IL 1,662 5,948 7,830 O'hare Express - B2 Elk Grove Village, IL 1,618 3,018 4,636 (52) O'hare Express - C Elk Grove Village, IL 2,603 1,573 4,176 (82) 1808 Swift Road Oak Brook, IL 7,535 7,535 Champion North Lake, IL 5,514 5,514 Ameritech Gurnee, IL 2,446 2,446 Dial Granite City, IL 15,643 15,643 F-26 INITIAL COSTS COSTS CAPITALIZED ------------------------ SUBSEQUENT TO ACQUISITION BUILDINGS AND ------------------------------------ ENCUMBRANCES IMPROVEMENTS BUILDINGS AND CARRYING DESCRIPTION (e) LAND (a) LAND IMPROVEMENTS COSTS (b) - ---------------------------- ------------ -------- ------------- -------- ------------- ----------- RETAIL PROPERTIES: 84 Old McHenry Road Wheeling, IL 482 2,152 31 351 N. Rohlwing Road Itasca, IL 81 464 0 4-48 Barrington Road Streamwood, IL 573 2,297 (62) 82 RESIDENTIAL PROPERTIES: 440 North Lake Street Miller, IN 22,220 710 3,086 102 17,698 3,980 OFFICES OF THE MANAGEMENT COMPANY CHICAGO, IL 4,228 --------- --------- --------- ------- -------- ------- Totals $ 108,795 $ 122,940 $ 449,184 $ 1,071 $ 83,385 $ 5,695 ========= ========= ========= ======= ======== ======= 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 - --------------- -------- --------------- --------------- -------------- -------------- ---------- ---------- RETAIL PROPERTIES: 84 Old McHenry Road Wheeling, IL 482 2,183 2,665 (281) 1989-1990 1993 (f) 351 N. Rohlwing Road Itasca, IL 81 464 545 (60) 1989 1983 (f) 4-48 Barrington Road Streamwood, IL 511 2,379 2,890 (225) 1989 1994 (f) RESIDENTIAL PROPERTIES: 440 North Lake Street Miller, IN 812 24,764 25,576 (5,099) 1971/1990-1993 1990 (f) OFFICES OF THE MANAGEMENT COMPANY CHICAGO, IL 4,228 4,228 (1,742) Var. (f) ---------- ---------- ---------- ---------- Totals $ 124,011 $ 538,264 $ 662,275 $ (44,352) ========== ========== ========== ==========
F-27 CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES SCHEDULE III (CONTINUED) (DOLLARS IN THOUSANDS) Notes to Schedule III: (a) Initial cost for each respective property is the total acquisition costs associated with its purchase. (b) Carrying costs consist of capitalized construction period interest, taxes and insurance. (c) At December 31, 1997, the aggregate cost of land and buildings and equipment for Federal income tax purposes was approximately $681 million. (d) Reconciliation of real estate and accumulated depreciation: RECONCILIATION OF REAL ESTATE
YEAR ENDED DECEMBER 31, ----------------------- 1997 1996 1995 ---- ---- ---- Balance at the beginning of year $429,034 $317,460 $248,281 Additions 246,463 135,342 71,315 Dispositions (13,222) (23,768) (2,136) -------- -------- -------- Balance at close of year $662,275 $429,034 $317,460 ======== ======== ========
RECONCILIATION OF ACCUMULATED DEPRECIATION
YEAR ENDED DECEMBER 31, ----------------------- 1997 1996 1995 ---- ---- ---- Balance at beginning of year $30,206 $21,576 $13,455 Depreciation and amortization 14,494 10,199 8,161 Dispositions (348) (1,569) (40) ------- ------- ------- Balance at close of year $44,352 $30,206 $21,576 ======= ======= =======
(e) See description of encumbrances in Note 6 to Consolidated Financial Statements. (f) Depreciation is computed based upon the following estimated lives: Buildings, improvements and carrying costs 31.5 to 40 years Land improvements 15 years Furniture, fixtures and equipment 4 to 15 years
(g) These 18 properties collateralize a $30,000 mortgage loan payable. (h) These 20 properties collateralize $50,000 of mortgage bonds payable. F-28 EX-12.1 2 EXHIBIT 12.1 EXHIBIT 12-1 CENTERPOINT PROPERTIES TRUST COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ----------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Available earnings: Net income (loss) $27,260 $14,941 $ 8,212 $ 2,359 ($4,930) Add interest expense (1) 10,871 10,992 12,985 12,157 4,111 ------- ------- ------- ------- ------- Available earnings (loss) (2) $38,131 $25,933 $21,197 $14,516 ($ 819) ======= ======= ======= ======= ======= Fixed Charges: Interest expense $10,871 $10,992 $12,985 $12,157 $ 4,111 Capitalized interest 893 142 20 63 470 ------- ------- ------- ------- ------- Total Fixed Charges $11,764 $11,134 $13,005 $12,220 $ 4,581 ======= ======= ======= ======= ======= Ratio of earnings to Fixed Charges (3) 3.24 2.33 1.63 1.19 ======= ======= ======= =======
- ------------------------------------ NOTES: (1) Interest expense includes amortization of debt expense. (2) Interest portion of rental expense is not calculated because annual rental expense for the Company is not significant. (3) The ratio of earnings to fixed charges for the year ended December 31, 1993 was less than one to one. The approximate dollar amount necessary to cover the deficiency in that period was $5,400. EX-12.2 3 EXHIBIT 12.2 EXHIBIT 12-2 CENTERPOINT PROPERTIES TRUST COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS (DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31, ----------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Available earnings: Net income (loss) $27,260 $14,941 $ 8,212 $ 2,359 ($4,930) Add interest expense (1) 10,871 10,992 12,985 12,157 4,111 ------- ------- ------- ------- ------- Available earnings (loss) (2) $38,131 $25,933 $21,197 $14,516 ($ 819) ======= ======= ======= ======= ======= Fixed Charges: Interest expense $10,871 $10,992 $12,985 $12,157 $ 4,111 Capitalized interest 893 142 20 63 470 Preferred dividends 901 947 1,002 ------- ------- ------- ------- ------- Total Fixed Charges $12,665 $12,081 $14,007 $12,220 $ 4,581 ======= ======= ======= ======= ======= Ratio of earnings to Fixed Charges (3) 3.01 2.15 1.51 1.19 ======= ======= ======= =======
- ------------------------------------ NOTES: (1) Interest expense includes amortization of debt expense. (2) Interest portion of rental expense is not calculated because annual rental expense for the Company is not significant. (3) The ratio of earnings to fixed charges for the year ended December 31, 1993 was less than one to one. The approximate dollar amount necessary to cover the deficiency in that period was $5,400. EX-23 4 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the registration statements of CenterPoint Properties Trust on Form S-3 (File Nos. 33-95792, 33-99858, 333-18235 and 333-49359), Form S-8/S-3 (File Nos. 333-05087 and 333-34687) and Form S-8 (File No. 333-05141 and 333-62887) of our report dated February 10, 1998, except for Note 2 for which the date is November 15, 1999, relating to the financial statements, which appears in the Annual Report to Shareholders, which is incorporated in this Annual Report on Form 10-K/A. We also consent to the incorporation by reference of our report dated November 15, 1999 relating to the financial statement schedules which appears in this Form 10-K/A. PRICEWATERHOUSECOOPERS LLP Chicago, Illinois December 27, 1999 EX-27 5 EXHIBIT 27
5 1,000 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 38,161 0 12,416 272 0 30,555 662,275 44,352 699,055 40,564 270,735 0 3 19 387,734 699,055 0 85,588 0 58,436 (108) 0 10,871 0 0 0 0 0 0 26,359 1.41 1.39
EX-99 6 EXHIBIT 99 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 rmork@centerpoint-prop.com 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." 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. ### CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
MARCH 31, 1997 (UNAUDITED) ------------------------------------------ REPORTED ADJUSTMENT RESTATED -------- ---------- -------- 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 ==========================================
JUNE 30,1997 SEPTEMBER 30, 1997 (UNAUDITED) (UNAUDITED) --------------------------------------------------------------------------- REPORTED ADJUSTMENT RESTATED REPORTED ADJUSTMENT RESTATED -------- ---------- -------- -------- ---------- -------- 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 ==================================== =================================
DECEMBER 31, 1997 ----------------------------------------- REPORTED ADJUSTMENT RESTATED -------- ---------- -------- 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 =========================================
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) JUNE 30, 1997 (UNAUDITED) ------------------------------------- ------------------------------------ REPORTED ADJUSTMENT RESTATED REPORTED ADJUSTMENT RESTATED -------- ---------- -------- -------- ---------- -------- 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 ===================================== ====================================
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED) DECEMBER 31, 1997 (UNAUDITED) ----------------------------------- ----------------------------------- REPORTED ADJUSTMENT RESTATED REPORTED ADJUSTMENT RESTATED -------- ---------- -------- -------- ---------- -------- 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 ==================================== ====================================
FOR THE YEAR ENDED DECEMBER 31, 1997 ------------------------------------ REPORTED ADJUSTMENT RESTATED -------- ---------- -------- 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 =====================================
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
MARCH 31, 1998 JUNE 30, 1998 (UNAUDITED) (UNAUDITED) --------------------------------- --------------------------------- REPORTED ADJUSTMENT RESTATED REPORTED ADJUSTMENT RESTATED -------- ---------- --------- -------- ---------- --------- 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 ================================== =================================
SEPTEMBER 30, 1998 (UNAUDITED) DECEMBER 31, 1998 --------------------------------- --------------------------------- REPORTED ADJUSTMENT RESTATED REPORTED ADJUSTMENT RESTATED -------- ---------- --------- -------- ---------- --------- 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 ================================= =================================
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED) JUNE 30, 1998 (UNAUDITED) -------------------------------- --------------------------------- REPORTED ADJUSTMENT RESTATED REPORTED ADJUSTMENT RESTATED -------- ---------- --------- -------- ---------- --------- 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 ================================ =================================
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 (UNAUDITED) DECEMBER 31, 1998 (UNAUDITED) -------------------------------- -------------------------------- REPORTED ADJUSTMENT RESTATED REPORTED ADJUSTMENT RESTATED -------- ---------- --------- -------- ---------- --------- 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 ================================ ================================
FOR THE YEAR ENDED DECEMBER 31, 1998 ---------------------------------- REPORTED ADJUSTMENT RESTATED -------- ---------- --------- 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 ==================================
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
MARCH 31, 1999 (UNAUDITED) --------------------------------------------- REPORTED ADJUSTMENT RESTATED -------- ---------- -------- 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 ==========================================
JUNE 30,1999 (UNAUDITED) --------------------------------------------- REPORTED ADJUSTMENT RESTATED -------- ---------- -------- 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 ==========================================
SEPTEMBER 30, 1999 (UNAUDITED) ------------------ ADJUSTMENT ---------- 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 ==========================
CENTERPOINT PROPERTIES TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT FOR SHARE INFORMATION)
FOR THE THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED) --------------------------------------- REPORTED ADJUSTMENT RESTATED -------- ---------- -------- 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 =======================================
FOR THE THREE MONTHS ENDED JUNE 30, 1999 (UNAUDITED) ---------------------------------------- REPORTED ADJUSTMENT RESTATED -------- ---------- -------- 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 ========================================
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED) ---------------------------- ADJUSTMENT ---------- 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 ============================
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