As a result of the company's restructuring following HALO's $300-million Starbelly.com Internet debacle, new management is negotiating with CenterPoint on an adjustment of the lease, which has been amended five times, primarily to meet real and anticipated needs of the tenant. While the current renegotiation will not affect the Chicago market's largest industrial REIT's 2001 earnings, it may in 2002, company officials concede.
"There's a thousand ways this deal could end up," says CenterPoint president and CEO John Gates.
CenterPoint officials decline to be more specific, citing a confidentiality agreement between the two parties on the renegotiation discussions. However, company officials concede the lease is about $10 per sf above the current market in this suburb just north of Chicago. Also, Gates is impressed with new management's efforts to pull their business from the brink. HALO has reduced its debt from $74 million to $14 million under the leadership of new CEO Marc S. Simon, divesting itself of two marketing service units as well as a licensing joint venture with Ford Motor Co.
"They've done a very good job of turning the business around, but in no way are they out of the woods," Gates adds.
HALO provides a case study of the roller-coaster ride of dot-com players, as well as the property owners who leased space to them.
In April 1993, HALO took 85,000 sf of warehouse and office space. "The company was a real go-getter," Mullen says. "It was the sort of firm CenterPoint has done business with."
In 1997, HALO was thinking of expanding to 450,000 sf. As a result, CenterPoint bought the former A.B. Dick manufacturing plant to the east, Mullen says, selling two-thirds of it for shopping center development and keeping 18.5 acres for a HALO campus. Revenues had grown dramatically, and the company had $58 million in cash, Mullen recalls. "This seemed like a very strong, solid company," he adds.
Red flags began flying in 1999, however. HALO acquired another company and didn't need the warehouse space it once anticipated, Mullen says. When CenterPoint was topping off the structure in July, he recalls, HALO announced a restructuring and $30-million charge.
The next chapter was even worse. In May 2000, HALO invested $240 million for Starbelly.com. When the company moved into its new, expanded facility this April, it wrote off more than $300 million as a result of Starbelly.com.
"HALO elected to turn itself into a dot-com and did what many dot-coms have done," Mullen says.
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