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Jan 6, 2003  •  Post A Comment

MORE SPACE TO LET AT FACTORIES, MALLSVacancies continued to rise at Chicago-area industrial properties and shopping centers in the fourth quarter, according to two reports. The vacancy rate for area industrial space rose to 10.5%, up from 9.7% in the third quarter and 8.6% in fourth-quarter 2001, according to a survey by New York-based real estate firm Insignia/ESG Inc. Average gross asking rents held steady at $5.91 a square foot. “We are definitely at the nadir right now,” said James Swart-child, executive director of Insignia/ESG’s industrial services group. “I don’t think we’re coming out of it yet.” Vacancy rates at area shopping centers, meanwhile, rose to 11.1% at the end of the fourth quarter, up from 10.1% at the beginning of the period, according to a CB Richard Ellis Inc. survey. It’s the highest rate since the firm began the survey in 1990. “Overall, the number of new and existing merchants is down and marginal operators are being squeezed out because of consumer cutbacks in spending,” said Todd Caruso, a managing director in Los Angeles-based CB Richard Ellis’ Bannockburn office.

CATERPILLAR URGED TO EXPENSE OPTIONSThe International Brotherhood of Electrical Workers (IBEW) Pension Benefit Fund is pushing a shareholder resolution calling on Peoria-based Caterpillar Inc. to recognize the costs of all future stock options issued by the company as expenses in its financial statements. The union, whose $35-billion-asset pension funds hold 300,000 shares of Caterpillar, is raising this issue with about 15 large companies, says James Voye, an international representative of the union. “It would achieve greater transparency in financial statements for all companies,” he says. In 2001, the maker of earth-moving equipment issued 7.6 million options to officers, directors and employees, up 13% from 2000, and ended the year with 32.3 million options outstanding, according to a filing with the Securities and Exchange Commission (SEC). Last month, Caterpillar asked the SEC’s enforcement division for its “concurrence” that it would “not recommend enforcement action if we exclude the proposal from our proxy materials”; in its response, the SEC said it was “unable to concur” and that Caterpillar “may not omit the proposal.” Caterpillar officials were not available for comment. The proposal on expensing options will be voted on at the company’s annual meeting in April.

UAL CORP.: Takes both sides on ESOP salesUAL Corp. has asked the Internal Revenue Service (IRS) to rule that the trustee for its employee stock ownership plan (ESOP) may sell UAL stock without wiping out billions of dollars in tax benefits. The Elk Grove Township-based parent of United Airlines, which is in Chapter 11 bankruptcy, won a court order last month that temporarily prevents the trustee, Boston-based State Street Bank & Trust Co., from selling UAL stock. (See related story on Page 1.) If State Street sells the 32.5 million UAL shares it currently oversees for the employee owners, as it has said it intends to do, UAL employees would no longer own a majority of the company. Under tax laws, such a change in ownership structure would eliminate UAL’s ability to use its net operating loss to reduce taxes once it becomes profitable. Even as it seeks to block the stock sale in Bankruptcy Court, UAL is attempting to persuade the IRS to view the sale, for tax purposes, as individual employees selling stock, rather than a change in ownership structure. A UAL spokesman says it will take at least four to eight weeks to get a ruling from the IRS. The Bankruptcy Court judge is scheduled to hear arguments on the dispute on Jan. 15. Separately, UAL said late Friday that it will close all of its 32 ticket offices in the U.S. as of Jan. 28. The offices, which enable passengers to purchase tickets in person outside of airports, employ 188 workers.

CONGRESS: Lipinski could land key transit postU.S. Rep. William Lipinski, D-Chicago, is in line for an influential new committee assignment as Congress prepares to overhaul highway and transit programs this year. The state’s senior Democrat could become ranking minority member of the highway and transit subcommittee of the Committee on Transportation and Infrastructure. Rep. Nick Rahall, D-W.Va., has slightly more seniority for the post, but sources say he likely will opt to remain ranking Democrat on an energy subcommittee. The new slot would force Rep. Lipinski to step down as the top Democrat on the aviation subcommittee, at a time when aviation issues are heating up, too. Until it’s clear he has to choose, Rep. Lipinski said, “I really haven’t made up my mind.”

MIDWAY GAMES: Layoffs follow loss warningMidway Games Inc. laid off 30 San Diego-based employees, or about 5% of its workforce, late last month, a company spokesman confirmed. The layoffs follow the company’s Dec. 24 warning that it would post a loss for the fourth quarter. Analysts had expected the Chicago-based video games maker to record a quarterly profit of $15 million to $40 million. Midway blamed the anticipated loss on the flops of new games launched last year. The company spokesman said the December layoffs were scattered among several departments.

DEERFIELD: Office complex near Tri-State on blockThe 322,000-square-foot Hyatt Deerfield office campus in Deerfield is for sale. Paul Lundstedt, executive director of real estate brokerage Cushman & Wakefield Inc., said his firm has been hired to market the property for owner Koll Bren Schreiber Realty Advisors, a Newport Beach, Calif.-based pension fund adviser. The four-building property, near the intersection of Lake-Cook Road and the Tri-State Tollway, is expected to fetch about $35 million, according to real estate sources. About 13% of its space is vacant. Tenants include Walgreen Co. and Evanston Northwestern Healthcare.

CDW: Krasny distributes more shares Michael Krasny, founder and former CEO of CDW Computer Centers Inc., last week gave 256,346 shares of the computer distributor worth $11.5 million to about 60 employees who’ve worked for the Vernon Hills company since it went public in 1992. With this gift, an annual occurrence, Mr. Krasny depletes the MPK Restricted Stock Plan, which he established in 1992 with a grant of 2.7 million shares of restricted stock. The stock gift is non-dilutive to outside shareholders, says Robert Welyki, CDW’s treasurer, since Mr. Krasny was simply transferring shares from his personal holdings of CDW shares.

DIVINE/FAXON: Creditors join forcesSome of the nation’s leading libraries and publishers have banded together to protect their interests in the wake of the collapse of Divine/Faxon Library Services, which handled orders for thousands of magazine and journal subscriptions. Representatives of the Library of Congress, National Institutes of Health, Johns Hopkins University and a unit of British publishing giant Reed Elsevier Group plc and others have formed an ad hoc creditors committee. They have hired accountancy PricewaterhouseCoopers LLP and Cleveland-based law firm Jones Day to help investigate the financial condition of Chicago’s Divine Inc. and its RoweCom subsidiary, which operated the library service, focusing on the status of customer orders and cash payments already made for 2003 subscriptions, confirms a spokesman for Chicago’s Rush University, which is participating in the effort. Divine notified the libraries last month that it was shuttering the subscription service. A Divine spokeswoman says her firm is working closely with the committee, which she describes as a byproduct of the information technology firm’s negotiations with publishers.

ETC.: Merc recovers cashThe Chicago Mercantile Exchange said it would recoup half of a $15-million August settlement related to litigation over an electronic-trading patent, reducing the cost associated with expansion of its Globex trading system. Euronext-Paris SA will pay the Merc $3.75 million immediately and an equal installment by the end of this year, the Merc said. . . .The Near North Side headquarters of the shuttered Tower Oldsmobile dealership is on the block, with an asking pri
ce of $22.9 million, according to Oak Brook-based Inland Real Estate, which has been hired to market the property. . . .Gov. George Ryan’s press secretary, Dennis Culloton, is joining Chicago communications and public affairs firm Res Publica Group as executive vice-president.