CenterPoint Writing Off '90% Of Our Problems'

NILES, IL-A 267,344-sf office property at 5800 W. Touhy Ave. represents 1.5% of CenterPoint Properties Trust’s portfolio, co-chairman and CEO John S. Gates, Jr. notes, as well as “90%-plus of our problems and 100% of the conversation out there.” Hoping to change the subject, the REIT’s board of directors will write off “a significant — but still undetermined” piece of its $63.5-million investment before the end of the year.

“We’ve become a one-building company,” Gates said in a conference call Wednesday, when the largest industrial property owner in the market revealed it expects funds from operations of $3.94 to $4.06 per share in 2002. However, it would be $0.35 per share, or 9%, higher without the HALO write-off.

Designed by renowned architect Helmut Jahn, the building in this north suburb of Chicago was constructed for longstanding tenant HALO Industries, Inc., which moved into the new headquarters and warehouse facility in 1998, when the marketing specialties company was enjoying heady times. However, the company’s $240-million purchase of Starbelly.com resulted in a write-off of more than 75% of its investment before HALO filed for Chapter 11 bankruptcy protection. The company moved out of the building early last month.

Gates says CenterPoint is exploring sale, lease and joint venture possibilities in hopes of disposing of the building next year. “It’s too early to tell how that’s going to happen,” he adds. A lease, company officials admit, won’t happen without considerable concessions.

Short of a quick sale, the actual size of the write-down could be determined by an appraisal or discussions with other market experts, says chief financial officer Paul S. Fisher. Regardless, officials of the Oak Brook, IL-based REIT are resigned to receiving less than $238 per sf for the property. By just one comparison, the new Windy Point I and II developments in northwest suburban Schaumburg, which are said to be closing before year’s end, had been offered at $192 per sf – 20% less than CenterPoint’s cost at 5800 W. Touhy Ave.

“Our board decided simply to flush it,” Gates says. “We’re going to write it down. We’re going to get rid of it.”

While biting that bullet, CenterPoint board members increased its annual dividend 10% to $2.31 per share while its 2002 budget takes a conservative approach. “If the economy worsens, we expect vacancy to increase two to three percentage points market wide and same store growth for CenterPoint will flatten,” Gates says. However, CenterPoint will deliver more than $100 million worth of pre-leased or pre-sold build-to-suits in 2002.