GREAT LAKES REIT, 10-K, 1999-03-19

GREAT LAKES REIT
10-K, 1999-03-19
REAL ESTATE INVESTMENT TRUSTS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

------------------------

FORM 10-K

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 0-28354

------------------------

GREAT LAKES REIT

(Exact Name of Registrant as Specified in Its Charter)

MARYLAND 36-4238056
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) Number)

823 Commerce Drive
Suite 300
Oak Brook, Illinois 60523
(630) 368-2900

(Address and telephone number of principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Common Shares of Beneficial Interest, $.01 par value per share

9 3/4% Series A Cumulative Redeemable Preferred Shares
of Beneficial Interest, $.01 par value per share
(Liquidation Preference $25.00 per share)

Name of each exchange on which registered

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

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. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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 or any amendment to this
Form 10-K. / /

As of March 2, 1999, the aggregate market value of common shares of
beneficial interest held by non-affiliates of the registrant was $182,550,665.

The number of the registrant's common shares of beneficial interest, $.01
par value per share, outstanding as of March 2, 1999 was 16,491,794.

Documents Incorporated by Reference:

Part III incorporates by reference the Registrant's Proxy Statement related to
the Annual Meeting of Shareholders to be held May 19, 1999.

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<PAGE>
GREAT LAKES REIT
FORM 10-K ANNUAL REPORT--1998
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C> <C> <C>
PART I
Item 1. Business.......................................................................... 3
Item 2. Properties........................................................................ 5
Item 3. Legal Proceedings................................................................. 9
Item 4. Submission of Matters to a Vote of Security Holders............................... 9
Item 4A. Executive officers of the Registrant

PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder
Matters......................................................................... 9
Item 6. Selected Financial Data........................................................... 11
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................... 13
Item 7A. Market Risks...................................................................... 18
Item 8. Financial Statements and Supplementary Data....................................... 19
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure...................................................................... 19

PART III (Incorporated by reference)
Item 10. Directors and Executive Officers of the Registrant................................ 19
Item 11. Executive Compensation............................................................ 19
Item 12. Security Ownership of Certain Beneficial Owners and Management.................... 20
Item 13. Certain Relationships and Related Transactions.................................... 20

PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K................... 20

Signatures................................................................................................... 23

Index to Financial Statements................................................................................ F-1
</TABLE>

2
<PAGE>
PART I

ITEM 1. BUSINESS.

GENERAL

Great Lakes REIT, a Maryland real estate investment trust that is the
successor to a business that began operations in 1992 (the "Company"), is a
fully integrated, self-administered and self-managed real estate company. As of
December 31, 1998, the Company owned and operated 40 properties (the
"Properties") in the Chicago, Milwaukee, Minneapolis, Detroit, Columbus, Denver
and Cincinnati areas (the "Current Markets"). The Properties contain
approximately 5.2 million rentable square feet leased to approximately 550
tenants with a weighted average occupancy rate of approximately 94.8% as of
December 31, 1998. The Company has elected to be treated for federal income tax
purposes as a real estate investment trust ("REIT"). The Company conducts
substantially all of its operations through Great Lakes REIT, L.P. (the
"Operating Partnership"), in which the Company is the sole general partner. All
references to the "Company" in this Form 10-K include the Company and the
Operating Partnership unless the context otherwise requires.

BUSINESS STRATEGY

The Company's primary business strategy is to acquire well-located,
underperforming suburban office properties generally located within a 500 mile
radius of metropolitan Chicago (the "Midwest Region") at attractive yields and
to increase cash flow and property value by implementing a comprehensive
operating strategy. The Company's operating strategy includes: (i) investment in
value-enhancing renovation and refurbishment programs; (ii) aggressive leasing
efforts; (iii) reduction and containment of operating costs; and (iv) a strong
emphasis on tenant services and satisfaction. The Company seeks to establish
itself as one of the suburban office property owner/operators of choice in the
markets it serves and to maximize tenant retention.

The Company continues to evaluate certain markets outside the Midwest
Region. In the event an appropriate acquisition opportunity is identified that
is consistent with the other elements of the Company's primary business
strategy, the Company may acquire properties in markets outside the Midwest
Region. In addition, the Company may from time to time consider acquiring
properties located in select urban or central business district areas. In
conjunction with this strategy, the Company purchased assets in suburban Denver
and in the central business districts of Milwaukee and Columbus in 1998.

Although the Company will continue to focus on acquiring attractive
properties as it implements its primary business strategy, the Company intends
to pursue limited new property development opportunities that are otherwise
consistent with the Company's overall business strategy. In 1998, the Company
became involved in the development of a 96,000 square foot building in the
Milwaukee suburb of Pewaukee, agreeing to purchase the to-be-built property for
$11.4 million. The Company anticipates that the project will be completed in
June 1999. The Company also intends to enhance its leasing flexibility by
offering build-to-suit development options to current and prospective tenants
who require space that is otherwise unavailable in a particular market. In
addition, the Company will continue to pursue the redevelopment of older
properties in attractive locations, such as its 777 Eisenhower, Ann Arbor,
Michigan property.

As part of its goal of maximizing shareholder value, the Company will engage
in strategic dispositions of select Properties. The Company typically will seek
to dispose of Properties when one or more of the following conditions is
present: (i) the market price for a Property is at or near replacement cost;
(ii) a Property has high occupancy and there is limited potential to increase
cash flow and property value within a reasonable period; (iii) the Company
believes that its capital can be redeployed more productively; and (iv)
ownership of the Property is no longer consistent with the Company's business
strategy. In this regard, the Company has commenced marketing efforts with
respect to the possible disposition of six Properties comprising 430,395 square
feet, or 8.2% of the total square footage of the Company's portfolio.

3
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FINANCING STRATEGY

The Company seeks to maintain a well-balanced, conservative and flexible
capital structure by: (i) currently targeting a maximum ratio of long-term debt
to total market capitalization in the range of 50%; (ii) extending and
sequencing the maturity dates of its debt; (iii) focusing on borrowing at fixed
rates; (iv) pursuing debt financings and refinancings on an unsecured basis; and
(v) maintaining relatively conservative debt service and fixed charge coverage
ratios. In addition, as discussed under Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," the Company has a
$150 million unsecured credit facility that is generally used for short-term
funding of acquisition of additional properties and for working capital
requirements. The Company's debt to total market capitalization ratio (total
market capitalization is defined as the total market value of all outstanding
Common and Preferred Shares and units of limited partnership interest in the
Operating Partnership owned by non-affiliates plus outstanding indebtedness) at
March 1, 1999 was 39.9%.

COMPETITION

All of the Properties are located in competitive markets. The properties
with which the Company competes for tenants are owned by institutional
investors, other REITs or local real estate operators, however, no single
competitor or small group of competitors is dominant in any of the Current
Markets. Changes in the supply of and demand for rental properties with
characteristics similar to those of the Properties may adversely affect rental
rates or the Company's ability to lease space at the Properties or other newly
acquired properties. In addition, the Company may be competing with other owners
and operators that have greater financial resources and more experience than the
Company.

INSURANCE

The Company carries comprehensive liability, fire, extended coverage and
rental loss insurance covering all of the Properties, with policy specifications
and insured limits that the Company believes are adequate and appropriate under
the circumstances. There are, however, certain types of losses that are not
generally insured because they are either uninsurable or not economically
feasible to insure. Should an uninsured loss or a loss in excess of insured
limits occur, the Company could lose its capital invested in any of the
Properties, as well as the anticipated future revenues from such Property and,
in the case of recourse debt, the Company would remain obligated for any
mortgage debt or other financial obligations related to such Property. Any such
loss would adversely affect the Company. Moreover, as a general partner of the
Operating Partnership, the Company will generally be liable for any of the
Operating Partnership's unsatisfied obligations other than non-recourse
obligations. The Company believes that the Properties are adequately insured;
however, no assurance can be given that material losses in excess of insurance
proceeds will not occur in the future.

ENVIRONMENTAL REGULATIONS

Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property and may be held liable to a governmental
entity or to third parties for property damage and for investigation and
clean-up costs incurred by such parties in connection with the contamination.
Such laws typically impose clean-up responsibility and liability without regard
to whether the owner knew of or caused the presence of the contaminants, and the
liability under such laws has been interpreted to be joint and several unless
the harm is divisible and there is a reasonable basis for allocation of
responsibility. The costs of investigation, remediation or removal of such
substances may be substantial, and the presence of such substances, or the
failure to properly remediate the contamination on such property, may adversely
affect the owner's ability to sell or rent such property or to borrow using such
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances at a disposal or treatment facility also may be
liable for the costs of removal or remediation of a release of hazardous or
toxic substances at such disposal or treatment facility, whether or not such
facility is owned or operated by such person. In addition, some environmental
laws create a lien

4
<PAGE>
on the contaminated site in favor of the government for damages and costs
incurred in connection with the contamination. Finally, the owner of a site may
be subject to common law claims by third parties based on damages and costs
resulting from environmental contamination emanating from such site.

During the last three years, independent environmental consultants have
conducted or updated Phase I Environmental Assessments ("Phase I Assessments")
at each of the Properties. In addition, a limited-scope Phase II Assessment
("Phase II Assessment") has been conducted at the University Office Plaza
property (the Phase I Assessments and the Phase II Assessment are collectively
referred to as the "Environmental Assessments"). The Phase I Assessments have
included, among other things, a visual inspection of the Properties and the
surrounding area and a review of relevant state, federal and historical
documents. Except for the Phase II Assessment and certain limited sampling in
connection with underground tank and/or piping removals at the Arlington Ridge
Service Center and One Park Plaza properties, no invasive techniques such as
soil or groundwater sampling were performed at any of the Properties. The
Company's Environmental Assessments of the Properties have not revealed any
condition giving rise to an environmental liability that the Company believes
would have a material adverse effect on the Company's business, assets or
results of operations, taken as a whole, nor is the Company otherwise aware of
any such condition. There can be no assurance, however, that the Company's
Environmental Assessments would reveal all conditions giving rise to
environmental liabilities. Moreover, there can be no assurance that (i) future
laws, ordinances or regulations will not impose any material environmental
liability or (ii) the current environmental condition of the Properties will not
be affected by tenants, by the condition of land or operations in the vicinity
of the Properties (such as the presence of underground storage tanks), or by
third parties unrelated to the Company.

OTHER MATTERS

The Company's operations are not dependent on a single or few customers; no
single customer accounts for more than 5% of the Company's total revenue. The
Company's operations are not subject to significant seasonal fluctuations. As of
December 31, 1998, the Company employed 77 persons, none of whom is represented
by a collective bargaining unit.

For additional information about the Company's investments and operations,
see Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and Item 8, "Financial Statements and Supplementary
Data." For additional information about the Company's business segments, see
Item 8, "Financial Statements and Supplementary Data."

ITEM 2--PROPERTIES

GENERAL

As of December 31, 1998, the Company owned 40 Properties containing
approximately 5.2 million square feet. The Properties consist primarily of Class
A and Class B suburban office properties, which range in size form approximately
15,000 to 375,000 rentable square feet. The Properties consist of 32 suburban
office properties, two central business district office buildings, 1 light
industrial distribution facility and 5 office/service centers (generally
single-story buildings with both finished office and unfinished storage area).
The 40 Properties are generally located in the suburban areas of Chicago (19),
Milwaukee (6), Minneapolis (3), Detroit (5), Columbus (4), Denver (2) and
Cincinnati (1). Many of the Properties offer amenities, including indoor and
outdoor parking, loading dock facilities, on-site property management, in-house
conference facilities and lounge areas with food and beverage service.

Management believes that the location and quality of construction of the
Properties, as well as the Company's reputation for providing superior tenant
service, enable the Company to attract and retain a diverse tenant base. As of
December 31, 1998, the Properties were leased to more than 550 tenants, no
single tenant accounted for more than 5% of the aggregate annualized base rent
of the Company's portfolio and only 20 tenants individually represented more
than 1% of such aggregate Annualized Base Rent.

5
<PAGE>
The Company holds fee simple title to each of the Properties except for the
Columbus, Ohio office property. The following table sets forth certain of the
information as of December 31, 1998 regarding the Properties.
<TABLE>
<CAPTION>
PROPERTY OWNERSHIP COMPANY YEAR DATE
PROPERTY LOCATION TYPE INTEREST OWNERSHIP % BUILT ACQUIRED
- ----------------------------------- -------------------- --------------- ----------------- ----- ---------
<S> <C> <C> <C> <C> <C>
CHICAGO AREA

1900 East Golf Road
Schaumburg, IL..................... Multi-story Office Fee 100 % 1980 Dec-96

1750 East Golf Road
Schaumburg, IL..................... Multi-story Office Fee 100 % 1985 Sep-97

160-185 Hansen Court
Wood Dale, IL...................... Single story Fee 100 % 1986 Jan-94
Office/Office
service

3455, 3550, 3555 Salt Creek
Arlington Heights, IL.............. Single story Fee 100 % 1984 Oct-97
Office/Office
service

601 Campus Drive
Arlington Heights, IL.............. Single story Fee 100 % 1987 May-93
Office/Office
service

1251 Plum Grove Road
Schaumburg, IL..................... Single story Office Fee 100 % 1986 Jan-96

1011 Touhy Avenue
Des Plaines, IL.................... Multi-story Office Fee 100 % 1978 Dec-93

2800 River Road
Des Plaines, IL.................... Multi-story Office Fee 100 % 1983 Feb-95

1660 Feehanville Drive
Mount Prospect, IL................. Multi-story Office Fee 100 % 1989 Aug-95

565 Lakeview Parkway
Vernon Hills, IL................... Single story Office Fee 100 % 1991 Dec-95

175 Hawthorn Parkway
Vernon Hills, IL................... Multi-story Office Fee 100 % 1987 Sep-94

3400 Dundee Road
Northbrook, IL..................... Multi-story Office Fee 100 % 1986 Oct-93

3010 & 3020 Woodcreek Dr
Downers Grove, IL.................. Single story Fee 100 % 1986 Nov-96
Office/Office
service

823 Commerce Drive
Oak Brook, IL...................... Multi-story Office Fee 100 % 1969 Nov-95

1675 Holmes Road
Elgin, IL.......................... Industrial Fee 100 % 1990 Feb-97

16601 S. Kedzie Avenue
Markham, IL........................ Single story Office Fee 100 % 1984 Feb-97

3030 Warrenville Road
Lisle, IL.......................... Multi-story Office Fee 100 % 1988 Sep-98

191 Waukegan Road
Northfield, IL..................... Multi-story Office Fee 100 % 1983 Sep-98

MILWAUKEE AREA

11270 W. Park Place
Milwaukee, WI...................... Multi-story Office Fee 100 % 1984 Sep-95

11925 W. Lake Park Drive
Milwaukee, WI...................... Single story Office Fee 100 % 1989 Jun-93

2514 S. 102nd Street &
10150 W. National Av
West Allis, WI..................... Multi-story Office Fee 100 % 1987 Nov-96

150, 175, 250 Patrick Blvd.
Brookfield, WI..................... Single story Fee 100 % 1987 Jun-94
Office/Office
service

<CAPTION>
LAND AREA SQUARE OCCUPANCY ENCUMBRANCE
PROPERTY LOCATION IN ACRES FOOTAGE 12/31/98 (000'S OMITTED)
- ----------------------------------- --------------- --------- ------------- ---------------
<S> <C> <C> <C> <C>
CHICAGO AREA
1900 East Golf Road
Schaumburg, IL..................... 12.9 265,423 94.6% --
1750 East Golf Road
Schaumburg, IL..................... 7.7 213,369 97.6% --
160-185 Hansen Court
Wood Dale, IL...................... 10.6 113,911 100.0% --
3455, 3550, 3555 Salt Creek
Arlington Heights, IL.............. 8.7 97,910 83.8% --
601 Campus Drive
Arlington Heights, IL.............. 6.0 96,219 98.0% (1)
1251 Plum Grove Road
Schaumburg, IL..................... 3.2 43,338 100.0% --
1011 Touhy Avenue
Des Plaines, IL.................... 5.3 153,777 85.3% --
2800 River Road
Des Plaines, IL.................... 2.0 99,732 100.0% --
1660 Feehanville Drive
Mount Prospect, IL................. 7.3 85,487 100.0% --
565 Lakeview Parkway
Vernon Hills, IL................... 7.1 85,552 100.0% --
175 Hawthorn Parkway
Vernon Hills, IL................... 4.6 84,104 89.0% (1)
3400 Dundee Road
Northbrook, IL..................... 2.6 74,884 84.4% (1)
3010 & 3020 Woodcreek Dr
Downers Grove, IL.................. 8.8 126,911 96.2% (1)
823 Commerce Drive
Oak Brook, IL...................... 2.6 45,098 100.0% --
1675 Holmes Road
Elgin, IL.......................... 5.5 101,286 100.0% $ 2,101
16601 S. Kedzie Avenue
Markham, IL........................ 1.5 15,000 55.3% --
3030 Warrenville Road
Lisle, IL.......................... 15.8 149,791 99.7% --
191 Waukegan Road
Northfield, IL..................... 3.5 61,925 95.7% --
MILWAUKEE AREA
11270 W. Park Place
Milwaukee, WI...................... 7.9 197,474 100.0% (1)
11925 W. Lake Park Drive
Milwaukee, WI...................... 3.4 36,069 100.0% (1)
2514 S. 102nd Street &
10150 W. National Av
West Allis, WI..................... 6.8 121,620 85.2% (1)
150, 175, 250 Patrick Blvd.
Brookfield, WI..................... 12.0 117,210 82.4% $ 3,177
</TABLE>

6
<PAGE>
<TABLE>
<CAPTION>
PROPERTY OWNERSHIP COMPANY YEAR DATE
PROPERTY LOCATION TYPE INTEREST OWNERSHIP % BUILT ACQUIRED
- ----------------------------------- -------------------- --------------- ----------------- ----- ---------
<S> <C> <C> <C> <C> <C>
375 Bishop's Way
Brookfield, WI..................... Multi-story Office Fee 100 % 1987 Apr-97

111 East Kilbourn Avenue
Milwaukee, WI...................... Multi-story Office Fee 100 % 1988 Apr-98

SUBURBAN
MINNEAPOLIS/ST. PAUL AREA

2550 University Avenue W
St. Paul, MN....................... Multi-story Office Fee 100 % 1916 Dec-96

2221 University Avenue SE
Minneapolis, MN.................... Multi-story Office Fee 100 % 1979 May-95

2550 University Avenue W
St. Paul, MN....................... Multi-story Office Fee 100 % 1916 Jul-98

DETROIT AREA

777 East Eisenhower Pkwy.
Ann Arbor, MI...................... Multi-story Office Fee 100 % 1975 Dec-97

32255 Northwestern Highway
Farmington Hills, MI............... Multi-story Office Fee 100 % 1986 Dec-97

1301 W. Long Lake Road
Troy, MI........................... Multi-story Office Fee 100 % 1988 Nov-96

No. 40 OakHollow
Southfield, MI..................... Multi-story Office Fee 100 % 1989 Dec-96

24800 Denso Drive
Southfield, MI..................... Multi-story Office Fee 100 % 1987 Aug-95

COLUMBUS AREA

655 Metro Place South
Dublin, OH......................... Multi-story Office Fee 100 % 1986 Sep-97

4860-5000 Blazer Mem. Pky.
Dublin, OH......................... Single story Office Fee 100 % 1986 Sep-96

425 Metro Place North
Dublin, OH......................... Multi-story Office Fee 100 % 1982 Sep-97

175 South Third Street
Columbus, OH....................... Multi-story Office (2) 100 % 1981 Jan-98

CINCINNATI AREA

30 Merchant Street
Springdale, OH..................... Multi-story Office Fee 100 % 1988 Apr-96

DENVER AREA

116 Inverness Drive East
Englewood, CO...................... Multi-story Office Fee 100 % 1984 May-98

183 Inverness Drive West
Englewood, CO...................... Multi-story Office Fee 100 % 1982 May-98

Totals.............................

<CAPTION>
LAND AREA SQUARE OCCUPANCY ENCUMBRANCE
PROPERTY LOCATION IN ACRES FOOTAGE 12/31/98 (000'S OMITTED)
- ----------------------------------- --------------- --------- ------------- ---------------
<S> <C> <C> <C> <C>
375 Bishop's Way
Brookfield, WI..................... 4.1 53,829 96.4% --
111 East Kilbourn Avenue
Milwaukee, WI...................... 0.6 373,842 89.1% --
SUBURBAN
MINNEAPOLIS/ST. PAUL AREA
2550 University Avenue W
St. Paul, MN....................... 4.4 200,114 97.7% --
2221 University Avenue SE
Minneapolis, MN.................... 2.8 97,660 100.0% $ 4,800
2550 University Avenue W
St. Paul, MN....................... 2.2 120,734 92.5% --
DETROIT AREA
777 East Eisenhower Pkwy.
Ann Arbor, MI...................... 23.6 274,025 96.5% --
32255 Northwestern Highway
Farmington Hills, MI............... 12.9 230,318 99.3% $ 11,942
1301 W. Long Lake Road
Troy, MI........................... 11.5 170,591 100.0% (1)
No. 40 OakHollow
Southfield, MI..................... 5.7 81,088 98.3% (1)
24800 Denso Drive
Southfield, MI..................... 10.5 79,546 97.8% (1)
COLUMBUS AREA
655 Metro Place South
Dublin, OH......................... 15.0 215,599 88.8% --
4860-5000 Blazer Mem. Pky.
Dublin, OH......................... 13.7 124,929 87.9% --
425 Metro Place North
Dublin, OH......................... 6.3 101,679 96.3% --
175 South Third Street
Columbus, OH....................... (2) 196,088 87.5% --
CINCINNATI AREA
30 Merchant Street
Springdale, OH..................... 5.9 95,910 100.0% --
DENVER AREA
116 Inverness Drive East
Englewood, CO...................... 7.4 204,998 100.0% 12,312
183 Inverness Drive West
Englewood, CO...................... 11.8 183,895 100.0% --
Totals............................. 5,232,435 94.8% $ 34,332
--------- ----- -------
--------- ----- -------
</TABLE>

- ----------------------------------

Footnotes: (dollars in thousands)

(1) These properties are pledged as security for a $75,000 mortgage loan.

(2) The land beneath this property is subject to a land lease expiring November
30, 2044 with one 15-year extension option. Annual rental payments are $50.

7
<PAGE>
LEASES

The Company's leases are typically structured for terms in the range of
three to seven years. The Company's leases are a mixture of net leases (whereby
tenants pay their pro rata share of real estate tax and operating expenses) and
full service, gross leases under which tenants typically pay for all real estate
tax and operating expenses above those for an established base year or expense
stop. Leases on a significant portion of the rentable square feet in the
Company's portfolio are net leases that were in existence upon the Company's
acquisition of the Properties. However, whether structured as net leases or
gross leases with base year or expense stop expense reimbursement clauses,
virtually all leases entered into by the Company require tenants to reimburse
the Company for the tenant's pro-rata share of real estate tax and operating
expense increases.

Leases often contain provisions permitting tenants to renew at prevailing
market rates. Under the Company's leases, the Company is generally responsible
for structural repairs and other capitalized costs. Certain leases contain
provisions, which permit the tenant to terminate its lease upon written notice
to the Company, subject to the tenant's obligation to pay a termination penalty.
Such termination penalties are generally negotiated with a tenant when a lease
is executed and are usually calculated to compensate the Company for unamortized
tenant improvements and leasing commissions at the termination date, and, in
certain instances, for rent on the space for a period of months after the
termination date.

LEASE DISTRIBUTIONS. The following table sets forth information relating to
the distribution of the Company's leases based on rentable square feet under
lease, as of December 31, 1998.

<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
OF AGGREGATE ANNUALIZED OF AGGREGATE
PORTFOLIO BASE RENT PORTFOLIO
SQUARE FEET LEASED (000'S ANNUALIZED
UNDER LEASE SQUARE FEET OMITTED) BASE RENT
- ---------------------- --------------- -------------- -------------------
<S> <C> <C> <C>
2,500 or Less......... 5.66% $ 4,870 7.21%
2,501 - 5,000......... 10.27% 7,968 11.80%
5,001 - 7,500......... 10.67% 7,063 10.46%
7,501 - 10,000........ 6.90% 4,706 6.97%
10,001 - 20,000....... 17.05% 11,082 16.41%
20,001 - 40,000....... 19.04% 12,466 18.46%
40,001 +.............. 30.42% 19,381 28.70%
100.00% $ 67,536 100.00%
</TABLE>

LEASE EXPIRATIONS--PORTFOLIO TOTAL. The following table sets forth a
summary schedule of the lease expirations for the Properties for leases in place
as of December 31, 1998, assuming that none of the tenants exercise renewal
options or termination rights, if any, at or prior to the scheduled expirations.

<TABLE>
<CAPTION>
PERCENTAGE
SQUARE OF ANNUALIZED BASE
FOOTAGE TOTAL RENT OF EXPIRING PERCENTAGE OF
YEAR OF OF LEASED LEASES (000'S TOTAL
LEASE EXPIRING SQUARE OMITTED) ANNUALIZED
EXPIRATION LEASES FOOTAGE AT 12/31/98 BASE RENT
- ----------- --------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C>
1999..... 558,949 11.51% $ 8,095 11.99%
2000..... 857,775 17.66% 12,274 18.17%
2001..... 981,936 20.22% 11,648 17.25%
2002..... 839,905 17.30% 12,041 17.83%
2003..... 824,773 16.98% 13,703 20.29%
2004..... 292,244 6.02% 3,841 5.69%
2005..... 94,200 1.94% 988 1.46%
2006..... 109,927 2.26% 1,189 1.76%
2007..... 112,523 2.32% 1,554 2.30%
2008..... 146,759 3.02% 1,795 2.66%
2009..... 37,131 0.76% 408 0.60%

4,856,122 100.00% $ 67,536 100.00%
</TABLE>

8
<PAGE>
The following table combines certain historical information regarding tenants at
the Properties who renewed an existing lease at or prior to the expiration of
the existing lease:

<TABLE>
<CAPTION>
TOTAL/
WEIGHTED
AVERAGE
1993 1994 1995 1996 1997 1998 1993-1998
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Number of leases expired
during calendar year(1)............. 3 7 25 34 85 108 262
Number of leases renewed.............. 3 4 18 26 53 65 169
Percentage of leases renewed.......... 100% 57% 72% 76% 62% 60% 65%
Aggregate rentable square footage
of expiring leases(1)............... 54,157 26,716 92,205 139,615 347,150 703,759 1,363,602
Aggregate rentable square footage
of lease renewals................... 54,157 19,645 72,586 118,142 175,247 410,752 850,529
Percentage of expiring rentable
square footage renewed.............. 100% 74% 79% 85% 50% 58% 62%
</TABLE>

- ------------------------

(1) The aggregate rentable square footage of expiring leases excludes those
leases for tenants moving out where the Company believes the decision to
vacate was made prior to the Company's acquisition of the property.

ITEM 3--LEGAL PROCEEDINGS

As of March 2, 1999, the Company was not a party to any material legal
proceedings.

ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to shareholders during the fourth quarter of the
fiscal year ended December 31, 1998.

ITEM 4A--EXECUTIVE OFFICERS OF THE REGISTRANT

The Company's executive officers are elected annually and, subject to the
terms of any applicable employment agreements, serve at the pleasure of the
Company's Board of Trustees. The following table sets forth certain information
with respect to the executive officers of the Company:

<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION AND OFFICES WITH THE COMPANY
- -------------------------------------------------- --- --------------------------------------------------
<S> <C> <C>

Richard A. May 54 Chief Executive Officer and Chairman of the Board
of Trustees

Patrick R. Hunt 45 President, Chief Operating Officer and Trustee

Richard L. Rasley 42 Executive Vice President, Secretary, Co-General
Counsel

James Hicks 43 Chief Financial Officer and Treasurer

Raymond M. Braun 39 Chief Investment Officer

Kim S. Mills 50 Senior Vice President--Leasing

Edith M. Scurto 33 Senior Vice President--Property Management
</TABLE>

Richard A. May. Mr. May co-founded the Company in 1992 and has served as
principal executive officer and as Chairman of the Board of Trustees of the
Company since its inception. Mr. May is currently

9
<PAGE>
the Chairman of the Board, and Chief Executive Officer of the Company. In 1986,
Mr. May co-founded Equity Partners Ltd. ("the Advisor") and from 1987 until
April 1, 1996, Mr. May was an officer and shareholder of the Advisor. Mr. May is
a licensed real estate broker in the States of Illinois and Indiana and holds
several inactive National Association of Securities Dealers, Inc. ("NASD")
licenses. He is also a member of National Association of Real Estate Investment
Trusts ("NAREIT"). Mr. May received his Bachelor's Degree in mechanical
engineering from the University of Illinois and received his M.B.A. degree from
The University of Chicago.

Patrick R. Hunt. Mr. Hunt, President, Chief Operating Officer and Trustee,
joined the Company in August 1997 and has general supervisory responsibility for
Company operating activities. From 1983 until August 1997, Mr. Hunt was employed
by LaSalle Partners, Incorporated ("LaSalle Partners") a Chicago-based provider
of international real estate services. Mr. Hunt served as a managing director of
LaSalle Partners from 1996 until August 1997. Mr. Hunt is a member of the
Pension Real Estate Association and NAREIT. He received his Bachelor's Degree
from Northwestern University and his M.B.A. degree from The University of
Chicago.

Richard L. Rasley. Mr. Rasley co-founded the Company in 1992 and has served
as Secretary of the Company since its inception. Mr. Rasley is currently the
Executive Vice President, Co-General Counsel and Secretary of the Company and
has general supervisory responsibility for administrative and legal matters.
From 1987 until April l, 1996, Mr. Rasley was an officer and shareholder of the
Advisor. Mr. Rasley is a Certified Public Accountant, holds several inactive
NASD licenses, and is a member of the Illinois Bar and NAREIT. Mr. Rasley
received his Bachelor's Degree from the University of Iowa and received his
M.B.A. and J.D. degrees from the University of Illinois.

James Hicks. Mr. Hicks, Chief Financial Officer and Treasurer of the
Company, joined the Advisor in 1994 and currently has general supervisory
responsibility for the finance and accounting activities of the Company. From
1989 to 1993, Mr. Hicks was employed by JMB Institutional Realty Corporation,
which was a real estate adviser to pension funds and other institutional
investors, as a vice president of portfolio management with responsibility for
overall asset management of a portfolio of international and domestic commercial
real estate properties. He received his Bachelor's Degree in Accounting and
Mathematics from Augustana College and his M.B.A. degree from Northwestern
University. Mr. Hicks is a Certified Public Accountant and is a member of the
Illinois CPA Society and American Institute of Certified Public Accountants.

Raymond M. Braun. Mr. Braun, Chief Investment Officer, joined the Advisor in
May 1990 and currently has primary responsibility for all of the Company's real
estate acquisition activities. Prior to joining the Advisor, Mr. Braun was
employed from 1986 to 1990 by The Balcor Company, a major real estate investment
company involved in all aspects of real estate including development,
management, syndication and mortgage lending. Mr. Braun received his Bachelor's
Degree from the University of Illinois. Mr. Braun is a member of the National
Association of Industrial and Office Park Realtors.

Kim S. Mills. Mr. Mills, Senior Vice President-Leasing, joined the Advisor
in January 1996. Mr. Mills has primary responsibility for all of the Company's
leasing activities. Prior to joining the Advisor, Mr. Mills was employed by
Simon Property Group REIT, a commercial property REIT, from 1992 to 1995 as a
regional manager with responsibility for overall portfolio management of high
rise office buildings totaling over four million square feet. Mr. Mills received
his Bachelor's Degree from Ohio Northern University and has a Real Property
Administrator designation from the Building Owners and Managers Association.

Edith M. Scurto. Ms. Scurto, Senior Vice President-Property Management,
joined the Advisor in December 1984. In August 1987, she was given
responsibility for the firm's property management activities. Since that date
she has individually managed or overseen the management of all of the Advisor's
and the Company's properties, and has been involved with virtually every aspect
of property management, reporting, improvement and maintenance. In December
1997, Ms. Scurto became the Company's Senior Vice President- Property
Management. Ms. Scurto currently oversees the management of all of the

10
<PAGE>
Company's properties. Ms. Scurto is a current member of the Institute of Real
Estate Management, maintains an Illinois Real Estate Sales Person License and is
a Certified Property Manager.

PART II

ITEM 5--MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

The Company's common shares of beneficial interest, $.01 par value per
share, (the "Common Shares") are listed on the New York Stock Exchange (the
"NYSE") under the symbol "GL."

As of March 2, 1999, there were approximately 370 holders of record of the
Common Shares, which excludes beneficial owners of shares registered in nominee
or street name.

The table below sets forth for the periods indicated, the reported high and
low sale prices of the Common Shares on the NYSE Composite Tape and the
quarterly dividends per share paid by the Company on such shares. May 8, 1997
was the first day the Common Shares were listed on the NYSE. Prior to May 8,
1997, there was no established trading market for the Common Shares.

High................ 20 3/16 19 1/2 18 1/2 16 5/8 High................ n/a 16 7/16 19 7/16 19 5/16

Low................. 18 1/4 15 5/8 14 3/16 15 1/8 Low................. n/a 15 3/8 16 18 1/8

Dividend............ $.30 $.30 $.32 $.32 Dividend............ $.30 $.30 $.30 $.30
</TABLE>

The Company, in order to qualify as a REIT under the Code, is required to
make distributions (other than capital gain distributions) to its shareholders
with respect to each taxable year in amounts at least equal to (i) the sum of
(A) 95% of its "REIT taxable income" (computed without regard to the dividends
paid deduction and its net capital gain) and (B) 95% of the net income (after
tax), if any, from foreclosure property, minus (ii) the sum of certain items of
non-cash income. The Company's distribution strategy is to distribute what it
believes is a conservative percentage of its cash flow, permitting the Company
to retain funds for capital improvements and other investments while funding its
distributions.

For federal income tax purposes, distributions may consist of ordinary
income dividends, nontaxable return of capital, capital gains or a combination
thereof. Distributions in excess of the Company's current and accumulated
earnings and profits (calculated for tax purposes) will constitute a nontaxable
return of capital rather than a dividend and will reduce the shareholder's basis
in his or her Common Shares for tax purposes. To the extent that a distribution
exceeds both the Company's current and accumulated earnings and profits and the
shareholder's basis in his or her shares, the amount of such excess will
generally be treated as gain from the sale or exchange of that shareholder's
shares. The Company annually notifies stockholders of the taxability of
distributions paid during the preceding year. The following table sets forth the
taxability of distributions paid in 1998, 1997 and 1996:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Ordinary income........................................... 87.1% 88.4% 88.3%
Non-taxable return of capital............................. 12.9% 11.6% 11.7%
--- --- ---
Total..................................................... 100% 100% 100%
--- --- ---
--- --- ---
</TABLE>

11
<PAGE>
RECENT SALES OF UNREGISTERED SECURITIES

The following table is a summary of certain information relating to all
securities of the Company sold by the Company during the period covered by this
Report on Form 10-K that were not registered under the Securities Act:

<TABLE>
<CAPTION>
TOTAL SHARES ISSUANCE
AND UNITS PROCEEDS
TYPE OF SECURITY SOLD OFFERING PERIOD SOLD (000'S OMITTED) COSTS
- ---------------------------------------- ----------------- ------------- --------------- -----
<S> <C> <C> <C> <C>
Operating Partnership Units(1).......... 48,447 $ 887 --
Common Shares(2)........................ December 31, 1998 6,044 $ 66 --
</TABLE>

- ------------------------

(1) On May 22, 1998, the Company issued 48,447 units in the Operating
Partnership in connection with the acquisition by the Company of the Denver
properties. The Company sold such securities pursuant to the exemption from
the registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), provided by Section 4(2) thereof, including in reliance
upon the exemption provided by Regulation D thereunder to "accredited
investors" in those states in which it was authorized to do so. There was no
underwriter involved in such sale of securities.

(2) During the quarter ended December 31, 1998, the Company issued 6,044 Common
Shares pursuant to the exercise of outstanding share options. These shares
were issued to the optionholders pursuant to exemptions from the
registration requirements of the Securities Act provided by Section 4(2)
thereof or Rule 701 thereunder.

12
<PAGE>
ITEM 6--SELECTED FINANCIAL DATA

The following sets forth selected financial and operating information for
the Company for each of the periods and dates indicated. The following
information should be read in conjunction with the financial statements and
notes thereto of the Company included elsewhere in this report. The selected
historical financial and operating information for the Company at December 31,
1998 and 1997, and for each of the three years in the period ended December 31,
1998 has been derived from the Company's financial statements audited by Ernst &
Young LLP, independent auditors, whose report with respect thereto is included
elsewhere in this report. The selected financial and operating information for
the Company at December 31, 1996, 1995, and 1994 and for the years ended
December 31, 1995, and 1994 has been derived from the Company's audited
financial statements.

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(UNAUDITED)
HISTORICAL
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue
Rental........................................ $ 62,527 $ 36,231 $ 20,249 $ 12,410 $ 6,647
Reimbursement................................. 17,141 10,688 4,814 2,355 884
Interest and other............................ 1,230 744 169 201 52
--------- --------- --------- --------- ---------
Total revenue............................... 80,898 47,663 25,232 14,966 7,583
--------- --------- --------- --------- ---------
Expenses:
Real estate taxes............................. 12,634 7,702 3,954 2,625 1,418
Other property operating...................... 21,018 11,958 6,548 3,967 1,944
General and administrative.................... 4,958 3,379 2,242 923 561
Interest...................................... 12,339 4,308 3,778 2,296 911
Depreciation and amortization................. 13,092 8,200 4,001 1,955 761
--------- --------- --------- --------- ---------
Total expenses.............................. 64,041 35,547 20,523 11,766 5,595
--------- --------- --------- --------- ---------
Income before gain on sale of properties........ 16,857 12,116 4,709 3,200 1,988
Gain on sale of properties...................... 3,140
--------- --------- --------- --------- ---------
Income before allocation to minority
interests..................................... 16,857 12,116 7,849 3,200 1,988
Minority interests.............................. 61 11
--------- --------- --------- --------- ---------
Net income...................................... 16,796 12,105 7,849 3,200 1,988
Income allocated to preferred shareholders...... 163
--------- --------- --------- --------- ---------
Net income applicable to common shares.......... $ 16,633 $ 12,105 $ 7,849 $ 3,200 $ 1,988
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Earnings per common share-basic................. $ 0.99 $ 0.92 $ 1.33 $ 0.89 $ 0.97
Weighted average common shares outstanding-
basic......................................... 16,793 13,140 5,885 3,605 2,043
Diluted earnings per common share............... $ 0.98 $ 0.91 $ 1.32 $ 0.88 $ 0.96
Weighted average common shares outstanding-
diluted....................................... 16,974 13,305 5,927 3,650 2,070
Balance Sheet Data (end of period):
Properties--net of accumulated depreciation..... $ 426,862 $ 285,941 $ 184,122 $ 91,858 $ 37,234
Total assets.................................... $ 443,689 $ 297,137 $ 194,149 $ 98,978 $ 42,522
Total long-term debt............................ $ 193,623 $ 95,098 $ 86,111 $ 48,307 $ 15,955
Total liabilities............................... $ 213,437 $ 109,732 $ 97,554 $ 54,013 $ 18,460
Shareholders' equity............................ $ 229,087 $ 187,092 $ 96,595 $ 44,965 $ 24,062
Operating Data:
EBITDA(1)....................................... $ 42,064 $ 24,613 $ 12,487 $ 7,451 $ 3,660
Funds from Operations(2):
Net income applicable to common shares........ $ 16,633 $ 12,105 $ 7,849 $ 3,200 $ 1,988
Gain on sale of properties.................... (3,140)
Depreciation and amortization................. 12,360 7,102 3,741 1,824 718
Loan prepayment costs......................... 644
--------- --------- --------- --------- ---------
Funds from Operations......................... $ 28,993 $ 19,851 $ 8,450 $ 5,024 $ 2,706
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

11
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
(UNAUDITED)
HISTORICAL
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Cash dividends per common share................. $ 1.24 $ 1.20 $ 1.20 $ 1.13 $ 0.96
Cash flows from operating activities............ $ 30,332 $ 21,429 $ 12,828 $ 5,650 $ 1,977
Cash flows from investing activities............ $(139,052) $(104,057) $ (91,646) $ (51,650) $ (20,493)
Cash flows from financing activities............ $ 109,749 $ 82,377 $ 79,203 $ 44,626 $ 17,420
Number of properties owned at period end........ 40 34 25 16 9
Aggregate square feet of properties owned at
period end.................................... 5,232 3,988 2,684 1,529 758
Occupancy at period end of properties owned at
period end.................................... 95% 93% 92% 86% 84%
</TABLE>

- --------------------------

(1) EBITDA is defined as net income before interest, gain on sale of properties,
taxes, depreciation and amortization expenses. Because of the Company's REIT
status, the Company does not pay income taxes. EBITDA should not be
considered as an alternative to net income (determined in accordance with
GAAP) as an indicator of the Company's financial performance or to cash flow
from operating activities (determined in accordance with GAAP) as a measure
of the Company's liquidity, nor is it indicative of funds available to fund
the Company's cash needs, including its ability to make distributions.

(2) The White Paper on Funds From Operations approved by the Board of Governors
of the National Association of Real Estate Investment Trusts ("NAREIT") in
March 1995 (the "White Paper") defines Funds from Operations as net income
(loss) (computed in accordance with GAAP), excluding gains (or losses) from
debt restructuring and sales of property, plus real estate related
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. Management considers Funds from Operations
an appropriate measure of performance of an equity REIT because it is
predicated on cash flow analyses. The Company computes Funds from Operations
in accordance with standards established by the White Paper which may differ
from the methodology for calculating Funds from Operations utilized by other
equity REITs and, accordingly, may not be comparable to such other REITs.
Funds from Operations should not be considered as an alternative to net
income (determined in accordance with GAAP) as an indicator of the Company's
financial performance or to cash flow from operating activities (determined
in accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including
its ability to make distributions.

12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (DOLLARS IN THOUSANDS)

RESULTS OF OPERATIONS

1998 COMPARED TO 1997

The changes in the income statement in 1998 to 1997 are as follows:

<TABLE>
<CAPTION>
INCREASE
(DECREASE)
------------------
<S> <C>
Rental and reimbursements................................................. $ 32,749
Interest and other........................................................ 486
-------
Total revenues.......................................................... 33,235
-------
Real estate taxes......................................................... 4,932
Other property operating.................................................. 9,060
General and administrative................................................ 1,579
Interest.................................................................. 8,031
Depreciation and amortization............................................. 4,892
-------
Total expenses............................................................ 28,494
-------
Income before gain on sale of properties.................................. 4,741
Minority interests........................................................ (50)
-------
Net income................................................................ 4,691
Income allocated to preferred shares...................................... (163)
-------
Net income applicable to common shares.................................... $ 4,528
-------
-------
</TABLE>

During 1998, the Company acquired six properties. The operating results of
these properties have been included in the Company's financial statements from
the dates of their respective acquisitions. In 1997, the Company acquired nine
properties, and in 1998 a full year of operations of these properties has been
included in the Company's financial statements. In analyzing the 1998 operating
results of the Company, the changes in rental and reimbursement income, real
estate taxes, and other property operating expenses from 1997 are due
principally to: (i) the addition of operating results from properties acquired
in 1998 from the dates of their respective acquisitions, (ii) the addition of a
full year's operating results in 1998 of properties acquired in 1997 compared to
the partial year's operating results from the dates of their respective
acquisitions in 1997 and (iii) improved operations of properties during 1998
compared to 1997. A summary of these changes as they impact rental and
reimbursement income, real estate taxes and other property operating expenses
for 1998 follows:

<TABLE>
<CAPTION>
RENTAL AND OTHER PROPERTY
REIMBURSEMENT REAL ESTATE OPERATING
INCOME TAXES EXPENSES
-------------- ----------- ---------------
<S> <C> <C> <C>
Increase due to 1998 acquisitions............... $ 14,991 $ 2,023 $ 4,673
Increase due to inclusion of full year of
properties acquired in 1997................... 15,383 2,525 4,256
Property dispositions in 1998................... (179) (15) (25)
Improved operations in 1998 compared to 1997.... 2,554 399 156
------- ----------- ------
$ 32,949 $ 4,932 $ 9,060
------- ----------- ------
------- ----------- ------
</TABLE>

13
<PAGE>
Interest expense increased by $8,031 in 1998 compared to 1997 as the Company
had increased amounts of outstanding indebtedness during 1998 compared with
1997. This indebtedness was incurred to finance the acquisition of properties
acquired during 1998.

General and administrative expenses increased by $1,579 due to one-time
costs associated with the conversion to a trust ($307), non-recurring costs
associated with acquisitions not completed ($56), legal fees associated with
acquisitions not completed ($51), increased compensation costs in 1998 ($820),
increases in costs associated with shareholder relations ($150) and increases in
other costs due to the increased size of the company ($195).

Depreciation and amortization increased in 1998 by $4,892 as the Company
incurred these expenses on 40 properties as of December 31, 1998 as compared to
34 properties as of December 31, 1997.

1997 COMPARED TO 1996

The changes in the income statement items in 1997 compared to 1996 are as
follows:

<TABLE>
<CAPTION>
INCREASE
(DECREASE)
------------------
<S> <C>
Rental and reimbursements................................................. $ 21,856
Interest and other........................................................ 575
-------
Total revenues.......................................................... 22,431
-------
Real estate taxes......................................................... 3,748
Other property operating.................................................. 5,410
General and administrative................................................ 1,137
Interest.................................................................. 530
Depreciation and amortization............................................. 4,199
-------
Total expenses............................................................ 15,024
-------
Income before gain on sale of properties and allocation to minority
interests............................................................... 7,407
Gain on sale of properties................................................ (3,140)
Minority interests........................................................ (11)
-------
Net income................................................................ $ 4,256
-------
-------
</TABLE>

During 1997, the Company acquired nine properties. The operating results of
these properties have been included in the Company's financial statements from
the dates of their respective acquisitions. In 1996, the Company acquired ten
properties, and in 1997 a full year of operations of these properties has been
included in the Company's financial statements. In analyzing the 1997 operating
results of the Company, the changes in rental income, real estate taxes, and
other property operating expenses from 1996 are due principally to: (i) the
addition of operating results from properties acquired in 1997 from the dates of
their respective acquisitions, (ii) the addition of a full year's operating
results in 1997 of properties acquired in 1996 compared to the partial year's
operating results from the dates of their respective acquisitions in 1996 and
(iii) improved operations of properties during 1997 compared to 1996. A summary

14
<PAGE>
of these changes as they impact rental and reimbursement income, real estate
taxes and other property operating expenses for 1997 follows:

<TABLE>
<CAPTION>
RENTAL AND OTHER PROPERTY
REIMBURSEMENT REAL ESTATE OPERATING
INCOME TAXES EXPENSES
-------------- ----------- ---------------
<S> <C> <C> <C>
Increase due to 1997 acquisitions............... $ 4,315 $ 743 $ 1,032
Increase due to inclusion of full year of
properties acquired in 1996................... 17,717 2,957 4,280
Property dispositions in 1996................... (1,695) (160) (446)
Improved operations in 1997 compared to 1996.... 1,519 208 544
------- ----------- ------
$ 21,856 $ 3,748 $ 5,410
------- ----------- ------
------- ----------- ------
</TABLE>

Interest expense increased by $530 in 1997 compared to 1996 as the Company
increased amounts of outstanding short-term indebtedness during 1997 compared
with 1996. This indebtedness was incurred to finance the acquisition of
properties acquired in 1997.

General and administrative expenses increased by $1,137 due to an increase
in compensation costs as the Company hired additional employees in 1997 ($735),
one-time costs associated with the hiring of the Company's president ($191),
increased franchise taxes ($80), and increased administrative costs related to
the increase in employees ($131).

Depreciation and amortization increased in 1997 by $4,199 as the Company
incurred these expenses on 34 properties as of December 31, 1997 as compared to
25 properties as of December 31, 1996.

Gain on sale decreased by $3,140, as the Company did not sell any properties
in 1997 as compared to two dispositions in 1996.

FORWARD-LOOKING STATEMENTS

Certain statements in this document constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, and the Company intends that such
"forward-looking statements" be subject to the safe harbors created thereby. The
words "believe", "expect" and "anticipate" and similar expressions identify
forward-looking statements. These forward-looking statements reflect the
Company's current views with respect to future events and financial performance,
but are subject to many uncertainties and factors relating to the Company's
operations and business environment that may cause the actual results of the
Company to be materially different from any future results expressed or implied
by such forward-looking statements. Examples of such uncertainties include, but
are not limited to, changes in interest rates, increased competition for
acquisition of new properties, unanticipated expenses and delays in acquiring
properties or increasing occupancy rates and regional economic and business
conditions.

LIQUIDITY AND CAPITAL RESOURCES

The Company expects to meet its short-term liquidity requirements
principally through its working capital and net cash provided by operating
activities. The Company considers its cash provided by operating activities to
be adequate to meet operating requirements and to fund the payment of dividends
in order to comply with certain federal income tax requirements applicable to
real estate investment trusts ("REITs").

The Company expects to meet its liquidity requirements for property
acquisitions and significant capital improvements through additional borrowings
on its existing $150,000 unsecured line of credit, which matures in April 2001.

15
<PAGE>
In 1998 the Company completed approximately $142,000 of property
acquisitions. The ability of the Company to continue to make acquisitions at
this pace is predicated upon the Company's ability to access the public and
private equity and debt markets at acceptable prices and rates. In light of the
recent market pricing of the Company's common shares, the Company expects its
acquisition activity will be reduced.

The Company expects to meet its long-term liquidity requirements (such as
scheduled mortgage debt maturities, property acquisitions, and significant
capital improvements) through long-term collateralized and uncollateralized
borrowings, the issuance of debt or additional equity securities in the Company,
and targeted property dispositions.

Pursuant to its previously announced share repurchase program, the Company
has purchased (as of December 31, 1998) 721,400 of its common shares at a cost
of $10,931. Funds for the purchases came from borrowings on its unsecured line
of credit and working capital.

On July 17, 1998, the Company's Board of Trustees approved a plan to sell
six properties. These properties include five office properties and one
industrial building. The specific properties, all in suburban Chicago, are:

<TABLE>
<CAPTION>
PROPERTY LOCATION
- -------------------------------------------------------------------------- ------------------
<S> <C>
565 Lakeview Parkway...................................................... Vernon Hills
2800 River Road........................................................... Des Plaines
1251 Plum Grove Road...................................................... Schaumburg
Kensington Corporate Center............................................... Mount Prospect
Court Office Center....................................................... Markham
1675 Holmes Road.......................................................... Elgin
</TABLE>

The Company expects to generate proceeds from the sale of these assets in
the range of $30,000 to $35,000, and formally commenced marketing efforts in
September 1998. These proposed dispositions are consistent with the Company's
strategy to seek to enhance shareholder value in part through strategic
dispositions. The Company currently plans to use the proceeds from the sale to
reduce outstanding balance of its unsecured credit facility, to acquire
additional investment properties, and for working capital.

At December 31, 1998, the Company has committed to fund $4,200 for the
renovation of its Ann Arbor, Michigan property. The Company also has committed
to acquire, upon completion, an office building under construction in Pewaukee,
Wisconsin for a maximum contract price of $11,400. The Company expects to close
this acquisition in November 1999. At December 31, 1998, the Company had
approximately $65,700 available to borrow on its unsecured credit facility.

In June 1998, the Financial Accounting Standards Board issued Statement No.
133, Accounting for Derivative Instruments and Hedging Activities, which is
required to be adopted in years beginning after June 15, 1999. Because of the
Company's minimal use of derivatives, management does not anticipate that the
adoption of the new Statement will have a significant effect on earnings or the
financial position of the Company.

YEAR 2000 ISSUES AND STATUS

The Company recognizes the importance of the Year 2000 issues and has
initiated a program of evaluation, remediating and testing the systems and
equipment serving its businesses for Year 2000 readiness. The Company is also
assessing the readiness of external parties, including its suppliers, vendors,
bankers, insurers and other service providers as well as its tenants. The
evaluation phase is intended to determine the readiness of internal systems and
equipment as well as the readiness of third parties. The remediation phase
includes computer software, hardware and operating equipment as well as
identifying solutions to possible third party noncompliance. The testing phase
includes integrated testing of all systems which are modified.

16
<PAGE>
Amounts incurred to date for remediation costs have not been material. The
current status of the Company's state of readiness and expected completion dates
for evaluation, remediation and testing related to Year 2000 issues are
summarized below:

FINANCIAL SOFTWARE: The evaluation of its financial software is 100%
complete and since the Company believes this software is Year 2000 compliant, no
remediation is required. The Company has not yet tested whether the financial
items are in fact Year 2000 compliant but expects to begin such testing in the
second quarter of 1999. Costs associated with the testing phase will not be
material.

NETWORKING SOFTWARE: The Company operates its internal computer network on
a product that is not Year 2000 compliant. The Company has ordered an upgrade to
this product as well as the necessary hardware to compliment the software
upgrade. The Company initiated training of its employees for this software
upgrade in the third quarter of 1998. The software and hardware upgrade is
expected to be installed and tested during the first quarter of 1999. Total
costs associated with this effort are anticipated to be $50 (including $15 for
the hardware).

BUILDING SYSTEMS: Building systems include heating and air-conditioning
control systems, elevator operating software, building security systems,
telephone systems, and alarm monitoring systems. The Company has contacted all
its vendors related to these systems in order to evaluate Year 2000 issues with
respect to embedded technology related to these building systems. The Company
has requested that its vendors for these systems indicate their compliance with
Year 2000 issues. Most vendors have been reluctant to disclose their readiness
to Year 2000 issues.

The Company has identified several building systems that need to be upgraded
in its properties for Year 2000 issues. Total costs for the upgrades, which are
expected to occur in 1999, are expected to be $250.

TENANTS: The Company is developing a plan to contact its tenants in inquire
as to whether the tenant's accounts payable systems will be able make required
payments for the Year 2000 on a timely basis. The Company expects to complete
its evaluation of this issue by June 1999 and to develop contingency plans, if
necessary, beginning in July of 1999.

The Company believes that in the most likely, worst case scenario, internal
remediation and testing of financial and networking technology systems and
building systems will be completed as indicated above and will have minimal
unfavorable impact on the results of operations and financial condition. If any
or all of these efforts are delayed, there could be disruption of the financial,
networking, and building systems. Critical third party vendors, suppliers and
service providers have been contacted to evaluate their Year 2000 readiness.
However, external parties providing materials and services to the Company have
been reluctant to fully disclose information about their readiness. Accordingly,
the Company cannot be assured there will be no disruption of operations because
of vendors and service providers who are not fully Year 2000 compliant.
Contingency plans will be developed, where necessary, as part of the remediation
phases indicated above, to provide a continued supply of building services. The
Company is developing a plan to contact significant tenants to determine their
compliance with Year 2000 issues. However, the Company has not completed these
evaluations and cannot determine whether there are vendors, suppliers and
tenants who will not be compliant on a timely basis or whether the failure of
any of these entities to become compliant could have a material adverse effect
on its business, consolidated results of operations and consolidated financial
position.

STATEMENTS OF CASH FLOWS

1998 COMPARED TO 1997

Cash provided by operating activities increased by $8,903, as the Company
owned 40 properties during 1998 as compared to 34 properties during 1997.

17
<PAGE>
Cash used by investing activities increased by $34,995 primarily as
properties purchased increased by $31,165 and property additions increased by
$5,440.

Cash provided by financing activities increased by $27,372 million primarily
as net proceeds from share sales decreased by $36,275, distributions increased
by $4,235, purchase of treasury shares increased by $10,931, and the proceeds
from bank and mortgage loans (net of repayments) increased by $80,093.

1997 COMPARED TO 1996

Cash provided by operating activities increased by $8,601, as the Company
owned 34 properties during 1997 compared to 25 properties during 1996.

Cash used by investing activities increased by $12,411 primarily as the
Company had property sales proceeds of $11,707 in 1996 compared to none in 1997.

Cash provided by financing activities increased by $3,174 as net proceeds
from share sales increased by $44,039, proceeds from loans increased by $60,876,
repayments of loans increased by $92,683, distributions paid increased by
$9,897, and payment of deferred financing costs decreased by $724.

ITEM 7(A)--MARKET RISK (DOLLARS IN THOUSANDS)

The Company's interest income is sensitive to changes in the general levels
of U.S. short-term interest rates.

The Company's interest expense is sensitive to changes in the general level
of U.S. short-term and long-term interest rates as the Company has outstanding
indebtedness at fixed and variable rates.

The Company's variable rate debt bears interest at LIBOR plus 1% to 1.3% per
annum depending on overall Company leverage. Increases in LIBOR rates would
increase the Company's interest expense and reduce its cash flow. Conversely,
declines in LIBOR rates would decrease its interest expense and increase its
cash flow. At December 31, 1998, the Company has not hedged (i.e. fixed the
interest rate) on its variable rate debt. The Company may, in the future, enter
into interest rate swaps, interest rate caps, or other derivative financial
instruments to fix interest rates on its variable rate debt. The Company
generally operates with variable rate debt representing less than 50% of total
long-term debt.

At December 31, 1998, the Company had $104,532 of fixed rate debt
outstanding at an average rate of 6.92%. If the general level of interest rates
in the United States were to fall, the Company would not likely have the
opportunity to refinance this fixed rate debt at lower interest rates due to
prepayment restrictions and penalties on its fixed rate debt.

In general, the Company believes long-term fixed rate debt is preferable as
a financing vehicle for its operations due to the long-term fixed contractual
rental income the Company receives from its tenants. As a result, the Company
has 54% of its long-term debt outstanding at December 31, 1998 at fixed rates.
The Company may, as market conditions warrant, enter into additional fixed rate
long-term debt instruments on either a secured or unsecured basis.

18
<PAGE>
A tabular presentation of interest rate sensitivity is as follows:

INTEREST RATE SENSITIVITY
PRINCIPAL AMOUNT BY EXPECTED MATURITY
AVERAGE INTEREST RATE

<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 THEREAFTER
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Liabilities:
Fixed Rate
Mortgage loans payable.......................... $ 2,390 $ 2,566 $ 2,749 $ 2,947 $ 13,964 $ 79,916
Average interest rate........................... 7.00% 7.00% 7.01% 7.01% 7.06% 6.97%
Variable Rate
Bank loan payable............................... $ 84,291
Average interest rate(1)
Bonds payable................................... $ 250 280 310 340 375 3,245
Average interest rate........................... (2) (2) (2) (2) (2) (2)
</TABLE>

- ------------------------

(1) The current interest rate on this debt is LIBOR + 1.3%.

(2) The interest rate on the bonds payable is reset weekly. After factoring in
credit enhancement costs for the bonds, the average interest rate in 1998
was 5.3%.

ITEM 8--FINANCIAL STATEMENTS

The financial statements and supplementary data required by Regulation S-X
are included in this Report on Form 10-K commencing on Page F-1.

ITEM 9--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None

PART III

ITEM 10--TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding trustees of the Company will be set forth under the
caption "Election of Trustees" in the Company's proxy statement related to the
Company's 1999 annual meeting of shareholders (the "Proxy Statement") and is
incorporated herein by reference. Information regarding executive officers of
the Company is included as Item 4A of Part I as required by Instruction 3 of
Item 401(b) of Regulation S-K. Information required by Item 405 of Regulation
S-K will be set forth under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Proxy Statement and is incorporated herein by
reference.

ITEM 11--EXECUTIVE COMPENSATION.

Information required by this item will be set forth under the caption
"Executive Compensation" in the Proxy Statement and, except for the information
under the captions "Executive Compensation--Compensation Committee Report on
Executive Compensation" and "Executive Compensation--Performance Graph," is
incorporated herein by reference.

19
<PAGE>
ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Information required by this item will be set forth under the caption
"Security Ownership of Certain Beneficial Owners and Management" in the Proxy
Statement and is incorporated herein by reference.

ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information regarding any disclosable relationships and related transactions
of directors and executive officers will be set forth under the caption "Certain
Relationships and Related Transactions" in the Proxy Statement and is
incorporated herein by reference.

PART IV

ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) 1. See Index to Financial Statements.

2. See Index to Financial Statements.

All other schedules are not submitted because the required criteria have
not been met, or because the required information is included in the
consolidated financial statements or notes thereto.

3. Exhibits:

3.2 Articles Supplementary regarding the Company's 9 3/4% Cumulative Redeemable Preferred Shares of
Beneficial Interest, $.01 par value per share (the "Series A Preferred Shares"), as filed with the
Maryland State Department of Assessments and Taxation on December 17, 1998 (incorporated by reference to
Exhibit 1 to the Company's Form 8-A Registration Statement (File No. 1-14307) filed with the Securities
and Exchange Commission on December 16, 1998 (the "December 1998 8-A")).

3.3 Bylaws of the Company (incorporated by reference to Appendix C to the Proxy Statement/ Prospectus that
is part of the S-4).

4.1 Specimen of certificate representing the Company's Common Shares of Beneficial Interest, $.01 par value
per share (incorporated by reference to Exhibit 4.2 in the Company's Form 8-A Registration Statement
filed with the Securities and Exchange Commission on July 16, 1998).

4.2 Specimen of certificate representing the Series A Preferred Shares (incorporated by reference to Exhibit
4 to the December 1998 8-A).

4.3 Unsecured Revolving Credit Agreement dated April 6, 1998 with Bank of America National Trust and Savings
Association, as lender and administrative agent, The First National Bank of Chicago, as lender and
documentation agent, Dresdner Bank AG, New York and Grand Cayman branches, as lender and co-agent, U.S.
Bank National Association, as lender and co-agent, and LaSalle National Bank, as lender and co-agent
(the "Unsecured Revolving Credit Agreement") (incorporated by reference to Exhibit 10.1 to the Company's
Current Report on Form 8-K dated April 17, 1998 filed with the Securities and Exchange Commission on
April 20, 1998)).
</TABLE>

20
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
4.4 First Amendment to the Unsecured Revolving Credit Agreement, dated June 19, 1998.

4.5 Second Amendment to the Unsecured Revolving Credit Agreement, dated December 16, 1998.

4.6 Loan Agreement, dated December 1, 1998, between the Company and AUSA Life Insurance Company, Inc.,
(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission on December 9, 1998).

10.1 Amended and Restated Agreement of Limited Partnership of Great Lakes REIT, L.P., dated December 27, 1996
(the "Partnership Agreement") (incorporated by reference to Exhibit 5 to the Company's Current Report on
Form 8-K dated January 14, 1997).

10.2 First Amendment to the Partnership Agreement dated February 6, 1997 (incorporated by reference to
Exhibit 10.3 to the Company's Registration Statement on Form S-11 (File No. 333-22619) (the "S-11")).

10.3 Second Amendment to the Partnership Agreement, dated February 10, 1997.

10.4 Third Amendment to the Partnership Agreement, dated May 22, 1998.

10.5 Fourth Amendment to the Partnership Agreement, dated December 23, 1998 (incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K dated December 23, 1998).

*10.6 1997 Equity and Performance Incentive Plan (the "Employee Plan")(incorporated by reference to Exhibit
4.4 to the Company's Post-Effective Amendment No.1 to Form S-8 Registration Statement (File No.
333-56619)).

*10.7 Form of Option Agreement for use in connection with options granted under the Employee Plan; Richard A.
May, Patrick R. Hunt, Richard L. Rasley, James Hicks, and Raymond Braun entered into agreements in 1998
that evidenced an option to purchase 34,700, 31,950, 19,450, 19,450, and 19,450 Common Shares,
respectively.

*10.8 Amended and Restated Option Plan for Independent Trustees (the "Trustee Plan") dated July 2, 1992, as
amended.")(incorporated by reference to Exhibit 4.4 to the Company's Post-Effective Amendment No.1 to
Form S-8 Registration Statement (File No. 333-56617)).

*10.9 Form of Non-Qualified Stock Option Certificate for use in connection with options granted under the
Trustee Plan; James J. Brinkerhoff, Daniel E. Josephs, Daniel P. Kearney, Edward Lowenthal and Donald E.
Phillips were each issued certificates dated December 31, 1998 that evidenced an option to purchase
5,000 Common Shares.

*10.10 Form of Employment Agreement dated July 17, 1998 for Richard A. May and Patrick R. Hunt (incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1998).

*10.11 Form of Employment Agreement dated July 17, 1998 for Raymond M. Braun, James Hicks and Richard L. Rasley
(incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998).

*10.12 Form of Change in Control Agreement dated July 17, 1998 for Kim S. Mills and Edith M. Scurto
(incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998).

*10.13 Limited Purpose Employee Loan Program of the Company (incorporated by reference to Exhibit 10.61 to the
Company's Form 10/A Registration Statement filed with the Securities and Exchange Commission on January
9, 1997).
</TABLE>

21
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- --------- --------------------------------------------------------------------------------------------------------
<C> <S>
*10.14 Form of Limited Purpose Employee Loan Program Promissory Note for use in connection with limited purpose
employee loans. Richard A. May, Patrick R. Hunt, Richard L. Rasley and James Hicks borrowed $2,832,756,
$1,274,648, $1,264,000 and $52,000, respectively, during 1998.

10.15 Indemnification Escrow Agreement dated April 1, 1996 between the Company, Richard A. May, Richard L.
Rasley, Tim A. Grodrian and American National Bank and Trust Company of Chicago (incorporated by
reference to Exhibit 10.8 to the Company's Form 10 Registration Statement filed with the Commission on
April 26, 1996).

*10.16 Restricted Stock Agreement dated May 1, 1996 between the Company and Raymond Braun (incorporated by
reference to Exhibit 10.8.6 to the S-11).

21.1 Subsidiaries of the Company

23.1 Consent of Independent Auditors

24.1 Power of Attorney (set forth on the signature page hereof).

27.1 Financial Data Schedule
</TABLE>

* Notes Management contract or compensation plan or arrangement.

- ------------------------

(b) Reports on Form 8-K:

During the fourth quarter ended December 31, 1998, the Company filed the
following reports on Form 8-K.

Report on Form 8-K dated December 9, 1998 reporting the following item:

Item 5. Other Events

Report on Form 8-K dated December 23, 1998 reporting the following item:

Item 5. Other Events

22
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Chicago, State of Illinois on the 18th day of March, 1999.

<TABLE>
<S> <C> <C>
GREAT LAKES REIT, INC.

By: /s/ RICHARD A. MAY
-----------------------------------------
Richard A. May
CHAIRMAN OF THE BOARD OF DIRECTORS AND
CHIEF EXECUTIVE OFFICER
</TABLE>

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated and on the 18th day of March, 1999.

<TABLE>
<CAPTION>
TITLE
--------------------------

<C> <S>
Chairman of the Board of
/s/ RICHARD A. MAY Directors and Chief
- ------------------------------ Executive Officer
Richard A. May (Principal Executive
Officer)

/s/ RICHARD L. RASLEY Executive Vice President,
- ------------------------------ Secretary and Co-General
Richard L. Rasley Counsel

Senior Vice
President-Finance, Chief
/s/ JAMES HICKS Financial Officer and
- ------------------------------ Treasurer (Principal
James Hicks Financial Officer and
Principal Accounting
Officer)

/s/ JAMES J. BRINKERHOFF
- ------------------------------ Director
James J. Brinkerhoff

/s/ DANIEL E. JOSEPHS
- ------------------------------ Director
Daniel E. Josephs

/s/ DANIEL P. KEARNEY
- ------------------------------ Director
Daniel P. Kearney

/s/ EDWARD LOWENTHAL
- ------------------------------ Director
Edward Lowenthal

/s/ DONALD E. PHILLIPS
- ------------------------------ Director
Donald E. Phillips
</TABLE>

23
<PAGE>
GREAT LAKES REIT
INDEX TO FINANCIAL STATEMENTS
(ITEM 14(A))

<TABLE>
<S> <C>
Financial Statements

Report of Independent Auditors................................................ F-2

Consolidated Balance Sheets as of December 31, 1998 and 1997.................. F-3

Consolidated Statements of Income for the years ended December 31, 1998, 1997
and 1996...................................................................... F4

Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 1998, 1997 and 1996.............................................. F-5

Consolidated Statements of Cash Flows for the years ended December 31, 1998,
1997 and 1996................................................................. F-6

Notes to Consolidated Financial Statements.................................... F-7

Financial Statement Schedules

Schedule III--Real Estate and Accumulated Depreciation as of December 31,
1998.......................................................................... S-1
</TABLE>

Schedules, other than as listed above, are omitted for the reason that they are
not applicable or equivalent information has been included elsewhere herein.

F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders

Great Lakes REIT

We have audited the accompanying consolidated balance sheets of Great Lakes
REIT as of December 31, 1998 and 1997 and the related consolidated statements of
income, changes in shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1998. Our audit also included the
financial statement schedule listed in the index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Great Lakes
REIT at December 31, 1998 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

Ernst & Young LLP

Chicago, Illinois
January 29, 1999

F-2
<PAGE>
GREAT LAKES REIT
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Properties:
Land...................................................................................... $ 60,960 $ 46,044
Buildings, improvements, and equipment.................................................... 388,068 251,353
---------- ----------
449,028 297,397
Less accumulated depreciation............................................................. 22,166 11,456
---------- ----------
426,862 285,941
Cash and cash equivalents................................................................. 2,466 1,437
Real estate tax escrows................................................................... 619 332
Rents receivable.......................................................................... 5,021 3,279
Deferred financing and leasing costs, net of accumulated amortization..................... 6,067 3,444
Goodwill, net of accumulated amortization................................................. 1,284 1,359
Other assets.............................................................................. 1,370 1,345
---------- ----------
Total assets.............................................................................. $ 443,689 $ 297,137
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank loan payable......................................................................... $ 84,291 $ 72,500
Mortgage loans payable.................................................................... 104,532 17,568
Bonds payable............................................................................. 4,800 5,030
Accounts payable and accrued liabilities.................................................. 4,338 3,151
Accrued real estate taxes................................................................. 11,149 7,777
Prepaid rent.............................................................................. 3,220 2,781
Security deposits......................................................................... 1,107 925
---------- ----------
Total liabilities......................................................................... 213,437 109,732
---------- ----------
Minority interests........................................................................ 1,165 313
---------- ----------
Commitments and contingencies
Preferred shares of beneficial interest ($0.01 par value, 10,000,000 shares authorized;
1,500,000 9 3/4% Series A Cumulative Redeemable shares, with a $25.00 per share
Liquidation Preference, issued and outstanding in 1998)................................. 37,500
Common shares of beneficial interest ($0.01 par value, 60,000,000 shares authorized;
17,513,578 and 15,862,811 shares issued in 1998 and 1997, respectively)................. 175 159
Paid-in-capital........................................................................... 223,414 196,431
Retained earnings (deficit)............................................................... (8,790) (4,501)
Employee share loans...................................................................... (11,967) (4,654)
Deferred compensation..................................................................... (44) (73)
Treasury shares, at cost (743,184 and 21,784 shares in 1998 and 1997, respectively)....... (11,201) (270)
---------- ----------
Total shareholders' equity................................................................ 229,087 187,092
---------- ----------
Total liabilities and shareholders' equity................................................ $ 443,689 $ 297,137
---------- ----------
---------- ----------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE>
GREAT LAKES REIT

CONSOLIDATED STATEMENTS OF INCOME

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1998 1997 1996
------------- ------------- ------------
<S> <C> <C> <C>
REVENUES:
Rental............................................................... $ 62,527 $ 36,231 $ 20,249
Reimbursements....................................................... 17,141 10,688 4,814
Interest and other................................................... 1,230 744 169
------------- ------------- ------------
Total revenues....................................................... 80,898 47,663 25,232
------------- ------------- ------------
EXPENSES:
Real estate taxes.................................................... 12,634 7,702 3,954
Other property operating............................................. 21,018 11,958 6,548
General and administrative........................................... 4,958 3,379 2,242
Interest............................................................. 12,339 4,308 3,778
Depreciation and amortization........................................ 13,092 8,200 4,001
------------- ------------- ------------
Total expenses....................................................... 64,041 35,547 20,523
------------- ------------- ------------
Income before gain on sale of properties............................. 16,857 12,116 4,709
Gain on sale of properties........................................... 3,140
------------- ------------- ------------
Income before allocation to minority interests....................... 16,857 12,116 7,849
Minority interests................................................... 61 11
------------- ------------- ------------
Net income........................................................... 16,796 12,105 7,849
Income allocated to preferred shares................................. 163
------------- ------------- ------------
Net income applicable to common shares............................... $ 16,633 $ 12,105 $ 7,849
------------- ------------- ------------
------------- ------------- ------------
Earnings per common share--basic..................................... $ 0.99 $ 0.92 $ 1.33
------------- ------------- ------------
------------- ------------- ------------
Weighted average common shares outstanding--basic.................... 16,793,410 13,140,124 5,884,708
------------- ------------- ------------
------------- ------------- ------------
Diluted earnings per common share.................................... $ 0.98 $ 0.91 $ 1.32
------------- ------------- ------------
------------- ------------- ------------
Weighted average common shares outstanding--diluted.................. 16,974,311 13,304,540 5,927,208
------------- ------------- ------------
------------- ------------- ------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>
GREAT LAKES REIT

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
PREFERRED SHARES
Balance at beginning of period............................................... $ $ 2 $
Cancellation of preferred shares............................................. (2) --
Proceeds from the sale of preferred shares................................... 37,500 2
---------- ---------- ---------
Balance at end of period..................................................... 37,500 2
---------- ---------- ---------
COMMON SHARES
Balance at beginning of period............................................... 159 88 45
Net proceeds from the sale of common shares.................................. 11 66 39
Exercise of share options.................................................... 5 4 3
Restricted share awards......................................................
Issuance of shares for acquisitions.......................................... 1 1
---------- ---------- ---------
Balance at end of period..................................................... 175 159 88
---------- ---------- ---------
PAID-IN CAPITAL
Balance at beginning of period............................................... 196,431 98,096 45,861
Net proceeds from the sale of common shares.................................. 21,009 92,940 47,378
Preferred share offering costs............................................... (1,349)
Exercise of common share options............................................. 7,323 3,860 3,247
Restricted common share awards............................................... 480
Issuance of common shares for acquisitions................................... 1,535 1,130
---------- ---------- ---------
Balance at end of period..................................................... 223,414 196,431 98,096
---------- ---------- ---------
RETAINED EARNINGS (DEFICIT)
Balance at beginning of period............................................... (4,501) 177 (786)
Net income................................................................... 16,796 12,105 7,849
Distributions/dividends...................................................... (21,085) (16,783) (6,886)
---------- ---------- ---------
Balance at end of period..................................................... (8,790) (4,501) 177
---------- ---------- ---------
EMPLOYEE SHARE LOANS
Balance at beginning of period............................................... (4,654) (1,247)
Exercise of common share options............................................. (7,313) (3,407) (1,247)
---------- ---------- ---------
Balance at end of period..................................................... (11,967) (4,654) (1,247)
---------- ---------- ---------
DEFERRED COMPENSATION
Balance at beginning of period............................................... (73) (251)
Restricted common share award................................................ (480)
Amortization of deferred compensation........................................ 29 178 229
---------- ---------- ---------
Balance at end of period..................................................... (44) (73) (251)
---------- ---------- ---------
TREASURY SHARES
Balance at beginning of period............................................... (270) (270) (155)
Purchase of treasury shares.................................................. (10,931) (115)
---------- ---------- ---------
Balance at end of period..................................................... (11,201) (270) (270)
---------- ---------- ---------
TOTAL SHAREHOLDERS' EQUITY................................................... $ 229,087 $ 187,092 $ 96,595
---------- ---------- ---------
---------- ---------- ---------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>
GREAT LAKES REIT

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
---------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income...................................................................... $ 16,796 $ 12,105 $ 7,849
Adjustments to reconcile net income to cash flows from operating activities:
Depreciation and amortization................................................. 13,092 8,200 4,001
Gain on sale of properties.................................................... (3,140)
Other non cash items.......................................................... 90 178 229
Net changes in assets and liabilities:
Rents receivable.............................................................. (1,742) (1,148) (847)
Real estate tax escrows and other assets...................................... (312) 421 294
Accounts payable, accrued expenses and other liabilities...................... 1,645 1,151 3,513
Accrued real estate taxes..................................................... 3,372 2,354 2,223
Payment of deferred leasing costs............................................. (2,609) (1,832) (1,294)
---------- ---------- ---------
Net cash provided by operating activities....................................... 30,332 21,429 12,828
---------- ---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of properties.......................................................... (128,923) (97,758) (97,563)
Additions to buildings, improvements and equipment.............................. (11,439) (5,999) (6,305)
Proceeds from property sales, net............................................... 11,707
Other investing activities...................................................... 1,310 (300) 515
---------- ---------- ---------
Net cash used by investing activities........................................... (139,052) (104,057) (91,646)
---------- ---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common and preferred shares............................... 60,000 101,603 50,271
Payment of share offering costs................................................. (2,829) (8,599) (2,852)
Proceeds from exercise of share options......................................... 15 457 2,003
Proceeds from bank and mortgage loans payable................................... 264,035 100,425 39,549
Distributions / dividends....................................................... (20,922) (16,783) (6,886)
Distributions to minority interests............................................. (96)
Purchase of treasury shares..................................................... (10,931) (115)
Payment of bank and mortgage loans and bonds.................................... (177,945) (94,428) (1,745)
Payment of deferred financing costs............................................. (1,578) (298) (1,022)
---------- ---------- ---------
Net cash provided by financing activities....................................... 109,749 82,377 79,203
---------- ---------- ---------
Net increase (decrease) in cash and cash equivalents............................ 1,029 (251) 385
Cash and cash equivalents, beginning of year.................................... 1,437 1,688 1,303
---------- ---------- ---------
Cash and cash equivalents, end of year.......................................... $ 2,466 $ 1,437 $ 1,688
---------- ---------- ---------
---------- ---------- ---------
Supplemental disclosure of cash flow:
Interest paid................................................................... $ 12,165 $ 4,136 $ 3,542
---------- ---------- ---------
---------- ---------- ---------

Non cash financing transactions:
Issuance of common shares for acquisition of Advisor............................ $ 1,350
---------- ---------- ---------
---------- ---------- ---------
Restricted common share awards.................................................. $ 480
---------- ---------- ---------
---------- ---------- ---------
Employee share loans............................................................ $ 7,313 $ 3,407 $ 1,247
---------- ---------- ---------
---------- ---------- ---------
Issuance of common shares and units to acquire properties....................... $ 887 $ 1,536
---------- ---------- ---------
---------- ---------- ---------
Mortgages assumed to acquire properties......................................... $ 12,435 $ 2,989
---------- ---------- ---------
---------- ---------- ---------
Preferred dividends payable..................................................... $ 163
---------- ---------- ---------
---------- ---------- ---------
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF ACTIVITIES

Great Lakes REIT, (the "Company"), was formed in 1992 to invest in
income-producing real property. In 1998, the Company changed its form of
organization from a Maryland corporation to a Maryland real estate investment
trust. The principal business of the Company is the ownership, management,
leasing, renovation and acquisition of suburban office and industrial properties
primarily located in the Midwest. At December 31, 1998, the Company owned and
operated 40 properties primarily located in suburban areas of Chicago, Detroit,
Milwaukee, Denver, Cincinnati, Columbus and Minneapolis. The Company leases
office and industrial space to over 550 tenants in a variety of businesses.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly- owned subsidiaries and controlled partnership. Intercompany
accounts and transactions have been eliminated in consolidation.

PROPERTIES

Costs incurred for the acquisition, development, construction and
improvement of properties are capitalized. Certain costs of yet-to-be acquired
properties, including deposits and professional fees, are capitalized as other
assets. These costs are subsequently capitalized as property acquisition costs
or charged to expense when it becomes apparent that acquisition of a particular
property is not probable. Maintenance and repairs are charged to expense when
incurred.

Depreciation of buildings is computed using the straight-line method over
the estimated useful lives of the assets, generally 40 years. Depreciation of
tenant improvements is computed using the straight-line method over the shorter
of the lease term or useful life. For the years ended December 31, 1998, 1997
and 1996, depreciation expense amounted to $11,453, $6,463, and $3,169,
respectively.

The Company recognizes impairment losses for its properties when indicators
of impairment are present and a property's expected undiscounted cash flows are
not sufficient to recover the property's carrying amount.

DEFERRED COSTS

Deferred costs consist principally of financing fees and leasing commissions
that are amortized over the terms of the respective agreements.

REVENUE RECOGNITION

Minimum rentals are recognized on a straight-line basis over the term of the
related leases. Deferred rents receivable at December 31, 1998 was $4,437.
Additional rents from expense reimbursements for common area maintenance
expenses and real estate taxes are recognized in the period in which the related
expenses are incurred.

F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. At December 31, 1998
and 1997, the Company had $2,449 and $1,412, respectively, in a money market
fund.

INCOME TAXES

The Company has elected to be treated as a real estate investment trust
("REIT") under the applicable provisions of the Internal Revenue Code of 1986,
as amended. In order to qualify as a REIT, the Company is required to distribute
to shareholders at least 95% of its taxable income and to meet certain asset and
income tests as well as certain other requirements. Accordingly, no provision
for income taxes has been reflected in the financial statements.

As of December 31, 1998, properties, rents receivable, goodwill and prepaid
rent have a federal income tax basis of approximately $432,625, $584, $-0- and
$-0-, respectively.

SHARE OPTIONS

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25), in accounting for its
options on common shares. Under APB 25, no compensation expense is recognized
because the exercise price of the Company's employee share options equals or
exceeds the market price of the underlying shares at the date of grant.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company discloses information concerning the fair value of financial
instruments for which it is practical to estimate such fair values. The carrying
amounts reported for cash and cash equivalents in the accompanying consolidated
balance sheets approximate its fair value. The carrying amount of the Company's
long-term debt approximates its fair value at December 31, 1998 and 1997 based
upon (a) the fixed interest rates on mortgage loans payable are comparable to
interest rates offered in the market as of the respective balance sheet dates
and (b) the variable interest rate debt has terms comparable to those currently
offered.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

RECLASSIFICATIONS

Certain accounts in 1997 have been reclassified to conform with the 1998
presentation. Such reclassifications did not effect the results of operations.

F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

2. DEFERRED COSTS

Deferred costs consisted of the following at December 31, 1998 and 1997:

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Deferred financing costs................................................... $ 3,017 $ 1,439
Deferred leasing costs..................................................... 6,499 4,072
--------- ---------
9,516 5,511
Less accumulated amortization.............................................. 3,449 2,067
--------- ---------
$ 6,067 $ 3,444
--------- ---------
--------- ---------
</TABLE>

During the years ended December 31, 1998, 1997 and 1996, amortization of
financing costs was $574, $1,099, and $427, respectively, and amortization of
leasing costs was $990, $563, and $348, respectively.

3. LONG-TERM DEBT

Mortgage loans payable aggregated $104,532 and $17,568 at December 31, 1998
and 1997, respectively. The mortgage loans payable requires monthly payments of
principal and interest. Interest rates at December 31, 1998, ranged from 6.83%
to 8.95%.

The Company has obtained a bank letter of credit to secure repayment of the
bonds payable in an amount of approximately $4,900. The Company has guaranteed
repayment of the letter of credit to the issuing bank as well as granted the
issuing bank a first mortgage on the property. The interest rate on the bonds
(4.1% per annum at December 31, 1998) is reset weekly by the bond placement
agent.

The Company has a $150,000 unsecured bank credit facility with a maturity
date of April 2001. The unsecured credit facility bears interest at LIBOR plus
1.0% to 1.3% depending on overall company leverage (6.8625% at December 31,
1998).

The following is a summary of principal maturities of mortgage loans, bank
loan and bonds payable:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
- ------------------------------------------------------------------------- ---------
<S> <C>
1999..................................................................... $ 2,640
2000..................................................................... 2,846
2001..................................................................... 87,350
2002..................................................................... 3,288
2003..................................................................... 14,340
Thereafter............................................................... 83,159
</TABLE>

At December 31, 1998, properties with a carrying amount of approximately
$144,000 were pledged as collateral under the various debt agreements.

4. SHARE OPTIONS

The Company has a share option plan that provides for the granting of
options on common shares to non-employee directors. At December 31, 1998,
options on 105,590 shares were available for future grant.

In 1997, the Company adopted the 1997 Equity and Performance Incentive Plan
(the "1997 Plan") which superseded the Company's prior plan. The 1997 Plan
provides that 2,250,000 common shares of

F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

4. SHARE OPTIONS (CONTINUED)
beneficial interest were reserved for issue to key employees. At December 31,
1998, 573,100 shares were available for future grant under the 1997 Plan.

For options granted in 1998, 1997 and 1996, the exercise prices at the dates
of grant were equal to or greater than the fair value of the Company's shares.

A summary of the Company's share option activity and related information for
the years ended December 31, 1998, 1997 and 1996 is as follows:

<TABLE>
<CAPTION>
WTD. AVG. PRICE PER
SHARES SHARE
---------- -----------------------
<S> <C> <C>
Balance 1/1/96.............................................................. 735,576 $ 11.02
Granted..................................................................... 170,424 $ 12.76
Exercised................................................................... 304,372 $ 10.68
----------
Outstanding at 1/1/97....................................................... 601,628 $ 11.69
Granted..................................................................... 1,343,000 $ 16.52
Exercised................................................................... 370,725 $ 11.30
----------
Outstanding at 1/1/98....................................................... 1,573,903 $ 15.91
Granted..................................................................... 289,900 $ 16.21
Exercised................................................................... 472,358 $ 15.78
Cancelled................................................................... 3,000 $ 16.00
----------
Outstanding at 12/31/98..................................................... 1,388,445 $ 16.03
Exercisable at 12/31/96..................................................... 507,628 $ 11.45
Exercisable at 12/31/97..................................................... 779,847 $ 15.29
Exercisable at 12/31/98..................................................... 1,104,010 $ 15.84
</TABLE>

The weighted average fair value of options granted in 1998 where the share
price equals the exercise price is $3.08. The weighted average fair value of the
options granted in 1997 where the share price equals the exercise price is
$3.18. The weighted average fair value of options granted in 1997 where the
share price is less than the exercise price is $1.43. The weighted average fair
value of options granted in 1996 where the share price equals the exercise price
is $0.13 per share. The weighted average life of options outstanding at December
31, 1998, was 8.34 years.

Pro forma information regarding net income and earnings per share is
required by FASB Statement 123 "Accounting for Stock-Based Compensation," and
has been determined as if the Company had accounted for its employee share
options under the fair value method of that Statement. The fair value for
options issued in 1998 was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1998:
risk-free interest rate of 5.00%; dividend yields of 7.88% to 8.11%; volatility
factors of the expected market price of the common shares of 0.394%; and a
weighted-average expected life of the options of five years. The fair value of
options issued in 1997 was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions for 1997:
risk-free interest rate of 5.75%; dividend yields of 6.17% to 7.5%; volatility
factors of the expected market price of the common shares of 0.341%; and a
weighted-average expected life of the options of three years.

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models

F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

4. SHARE OPTIONS (CONTINUED)
require the input of highly subjective assumptions including the expected stock
price volatility. Because the Company's employee share options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
share options.

The effects on 1998 and 1997 pro forma net income and pro forma earnings per
common share, both basic and diluted, of amortizing to expense the estimated
fair value of share options are not necessarily representative of the effects on
net income to be reported in future years due to such things as the vesting
period of the share options, and the potential for issuance of additional share
options in future years.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
unaudited pro forma information follows for the years ended December 31, 1998
and 1997:

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Pro forma net income.................................................... $ 15,902 $ 10,568
Pro forma basic earnings per common share............................... $ .95 $ 0.80
Pro forma diluted earnings per common share............................. $ .94 $ 0.79
</TABLE>

The Company has a limited purpose employee loan program whereby employees
may borrow a portion of the cost of exercising options on common shares held by
the employee. Such loans bear interest at the Company's cost of funds payable
quarterly, are recourse to the employees, have a term of five years provided the
employee remains employed by the Company, and are secured by a pledge of the
common shares acquired by the employee through this program. As of December 31,
1998, employees had acquired approximately 819,000 common shares through this
program with outstanding loan amounts of $11,967 due the Company. Such amount is
reflected as a reduction of shareholders' equity until the loans are repaid.

5. SHARE OFFERINGS

In December 1998, the Company sold 1.5 million shares of Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest. Net proceeds of
approximately $36,200 were used to repay a portion of its unsecured credit
facility.

In April 1998, the Company sold 1,184,211 common shares to a newly formed
unit investment trust. Net proceeds of approximately $21,000 were used to repay
a portion of its unsecured credit facility.

In May 1997, the Company closed the initial public offering of its common
shares. The Company sold 6.55 million common shares at the price of $15.50 per
share including shares issued upon exercise of the underwriter's over allotment
option. Net proceeds to the Company were approximately $93,000, substantially
all of which was used to repay its bank lines of credit and other indebtedness
including certain mortgage debt on the Company's properties.

In February 1997, the Company issued 118,134 common shares with a total
value at issuance of $1,536 in connection with the acquisition of the Markham,
Illinois and Elgin, Illinois properties.

F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

5. SHARE OFFERINGS (CONTINUED)
In 1996, the Company sold 3,867,000 shares of common shares at $13 per share
and issued 210,128 shares of Class A Convertible Preferred Shares. The Company
received proceeds of approximately $47,400 (net of offering costs of $2,852)
from the sale of these shares. The Class A Convertible Preferred Shares were
canceled in 1997.

In 1996, the Company issued 100,000 common shares valued at $1,350 in
connection with the acquisition of Equity Partners Ltd. (the "Advisor"). Two
officers of the Company were owners of the Advisor.

6. LEASES

The Company leases office and industrial properties to tenants under
noncancellable operating leases that expire at various dates through 2008. The
lease agreements typically provide for a specific monthly payment plus
reimbursement of certain operating expenses. The following is a summary of
minimum future rental revenue under noncancellable operating leases:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
- ------------------------------------------------------------ ----------
<S> <C>
1999........................................................ $ 66,120
2000........................................................ 56,858
2001........................................................ 43,792
2002........................................................ 33,100
2003........................................................ 20,121
Thereafter.................................................. 29,478
----------
$ 249,469
----------
----------
</TABLE>

Minimum future rentals do not include amounts that are received from tenants
as a reimbursement of property operating expenses.

7. DISTRIBUTIONS

The Company declared periodic distributions of $20,922, $16,783, and $6,886,
to common shareholders of record during the calendar years 1998, 1997 and 1996,
respectively. The Company has determined the common shareholders' treatment for
Federal income tax purposes to be as follows:

<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Ordinary income............................................... $ 18,217 $ 14,848 $ 6,078
Return of capital............................................. 2,705 1,935 808
--------- --------- ---------
Total......................................................... $ 20,922 $ 16,783 $ 6,886
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

8. PROPERTY ACQUISITIONS

The following properties were acquired in 1998 and 1997 and the results of
their operations are included in the consolidated statements of income from
their respective dates of acquisition.

<TABLE>
<CAPTION>
TOTAL ACQUISITION
PRICE
DATE --------------------
LOCATION ACQUIRED 1998 1997
- ------------------------------------------------------ --------- --------- ---------
<S> <C> <C> <C>
Columbus, Ohio........................................ 1/7/98 $ 21,949

Milwaukee Center
Milwaukee, WI......................................... 4/15/98 46,794

116 Inverness
Englewood, CO......................................... 5/22/98 20,967

183 Inverness
Englewood, CO......................................... 5/22/98 20,168

Court International I
St. Paul, MN.......................................... 7/30/98 9,772

Lisle, Illinois....................................... 9/1/98 18,087

Northfield, Illinois.................................. 9/24/98 4,508

Markham, IL........................................... 2/10/97 $ 1,263

Elgin, IL............................................. 2/10/97 3,816

375 Bishop's Way
Brookfield, WI........................................ 4/18/97 4,961

1750 East Golf Road
Schaumburg, IL........................................ 9/01/97 19,832

425 Metro Place North
Dublin, OH............................................ 9/30/97 7,159

655 Metro Place South
Dublin, OH............................................ 9/30/97 19,640

3455, 3550, 3555 Salt Creek Lane
Arlington Heights, IL................................. 10/10/97 5,177

Farmington Hills, MI.................................. 12/10/97 23,828

Ann Arbor, MI......................................... 12/17/97 16,608
</TABLE>

9. SEGMENT INFORMATION

The Company has three reportable segments distinguished by property type.
The property types are office, with 87% (as measured by square feet) of the
Company's overall portfolio, office/service center (11%), and industrial (2%),
and are principally located in the Midwest. As of December 31, 1998, the
properties were leased to more than 550 tenants, no single tenant accounted for
more than 5% of the

F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

9. SEGMENT INFORMATION (CONTINUED)
aggregate annualized base rent of the Company's portfolio and only 20 tenants
individually represented more than 1% of such aggregate annualized base rent.

The Company evaluates performance and allocates resources based on property
revenues (rental and reimbursement income) less property operating expenses and
real estate taxes to arrive at net operating income--a widely recognized
industry measure of a property's performance.

Following is a summary report of segment information for the years ended
December 31, 1998, 1997 and 1996.

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
----------------------------------
<S> <C> <C> <C>
1998 1997 1996
---------- ---------- ----------
Revenues
Office................................................... $ 70,479 $ 39,413 $ 20,524
Office/service center.................................... 6,972 5,939 3,627
Industrial............................................... 342 644 221
Deferred rental revenues................................. 1,875 923 692
Interest and other....................................... 1,230 744 168
---------- ---------- ----------
Total.................................................. $ 80,898 $ 47,663 $ 25,232
---------- ---------- ----------
---------- ---------- ----------
Net operating income
Office................................................... $ 39,149 $ 21,671 $ 11,041
Office/service center.................................... 4,771 4,167 2,610
Industrial............................................... 221 498 219
---------- ---------- ----------
Total.................................................. $ 44,141 $ 26,336 $ 13,870
---------- ---------- ----------
---------- ---------- ----------
Depreciation and amortization
Office................................................... $ 11,263 $ 6,155 $ 2,982
Office/service center.................................... 1,105 1,048 601
Industrial............................................... 88 132 35
Other.................................................... 636 865 383
---------- ---------- ----------
Total.................................................. $ 13,092 $ 8,200 $ 4,001
---------- ---------- ----------
---------- ---------- ----------
Interest expense
Office................................................... $ 10,902 $ 3,226 $ 2,853
Office/service center.................................... 1,218 799 821
Industrial............................................... 219 283 104
---------- ---------- ----------
Total.................................................. $ 12,339 $ 4,308 $ 3,778
---------- ---------- ----------
---------- ---------- ----------
Additions to properties
Office................................................... $ 152,790 $ 97,458 $ 89,259
Office/service center.................................... 760 6,917 14,367
Industrial............................................... 36 3,838 0
Other.................................................... 84 69 243
---------- ---------- ----------
Total.................................................. $ 153,670 $ 108,282 $ 103,869
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

9. SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
----------------------------------
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Income before gain on sale of properties
Office................................................... $ 16,984 $ 12,290 $ 5,206
Office/service center.................................... 2,448 2,320 1,188
Industrial............................................... (86) 83 80
Deferred rental revenues................................. 1,875 923 692
Interest and other income................................ 1,230 744 168
General and administrative............................... (4,958) (3,379) (2,242)
Other depreciation....................................... (636) (865) (383)
---------- ---------- ----------
Income before gains on sales of properties............. $ 16,857 $ 12,116 $ 4,709
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

Following is a summary of segment assets at December 31, 1998 and 1997.

<TABLE>
<CAPTION>
AS OF DECEMBER 31
----------------------
<S> <C> <C>
1998 1997
---------- ----------
Assets
Office................................................................ $ 394,607 $ 251,221
Office/service center................................................. 31,841 31,978
Industrial............................................................ 3,949 5,199
Other................................................................. 13,292 8,739
---------- ----------
Total................................................................. $ 443,689 $ 297,137
---------- ----------
---------- ----------
</TABLE>

10. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings
per common share:

<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ----------
<S> <C> <C> <C>
Numerator:
Net income allocable to common shareholders.............................. $ 16,633 $ 12,105 $ 7,849
Numerator for basic earnings per common share............................ 16,633 12,105 7,849
Minority interests....................................................... 61 11
------------ ------------ ----------
Numerator for diluted earnings per common share.......................... $ 16,694 $ 12,116 $ 7,849
------------ ------------ ----------
------------ ------------ ----------
Denominator:
Denominator for basic earnings per common share
Weighted average shares.................................................. 16,793,410 13,140,124 5,884,708
Effect of dilutive securities
Convertible operating partnership units.................................. 72,497 24,050
Employee share options................................................... 108,404 140,366 42,500
------------ ------------ ----------
Denominator for diluted earnings per common share........................ 16,974,311 13,304,540 5,927,208
------------ ------------ ----------
------------ ------------ ----------
Basic earnings per common share.......................................... $ 0.99 $ 0.92 $ 1.33
------------ ------------ ----------
------------ ------------ ----------
Diluted earnings per common share........................................ $ 0.98 $ 0.91 $ 1.32
------------ ------------ ----------
------------ ------------ ----------
</TABLE>

F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

11. QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
3/31/98 6/30/98 9/30/98 12/31/98
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues......................................... $ 16,803 $ 19,490 $ 21,459 $ 23,146
Net income applicable to common shares........... $ 3,968 $ 4,161 $ 4,248 $ 4,256
Basic earnings per common share.................. $ 0.25 $ 0.24 $ 0.25 $ 0.25
Diluted earnings per common share................ $ 0.25 $ 0.24 $ 0.24 $ 0.25

3/31/97 6/30/97 9/30/97 12/31/97
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues......................................... $ 10,643 $ 11,074 $ 11,817 $ 14,129
Net income applicable to common shares........... $ 1,809 $ 2,304 $ 4,115 $ 3,877
Basic earnings per common share.................. $ 0.20 $ 0.19 $ 0.26 $ 0.25
Diluted earnings per common share................ $ 0.20 $ 0.18 $ 0.26 $ 0.24
</TABLE>

12. PRO FORMA INFORMATION (UNAUDITED)

The following unaudited pro forma summary presents information as if the
Company's property acquisitions, property dispositions, and sales of common and
preferred shares through December 31, 1998 had occurred at the beginning of each
year. The pro forma information is provided for informational purposes only. It
is based on historical information and does not necessarily reflect the actual
results that would have occurred nor is it necessarily indicative of future
results of operations of the Company.

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Total revenue........................................................... $ 89,068 $ 85,347
Net income applicable to common shares.................................. $ 15,757 $ 14,989
Basic earnings per common share......................................... $ 0.94 $ 0.89
Diluted earnings per common share....................................... $ 0.93 $ 0.88
</TABLE>

F-16
<PAGE>
SCHEDULE III--
REAL ESTATE AND ACCUMULATED DEPRECIATION

(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COSTS CAPITALIZED SUBSEQUENT
GROSS AMOUNT AT WHICH
SUBSEQUENT TO ACQUISITION CARRIED AT DECEMBER 31,
INITIAL COST TO THE COMPANY 1998
--------------------------------------- ---------------------------- ------------------------
(000'S OMITTED) (000'S OMITTED) (000'S OMITTED)
BUILDINGS & BUILDINGS & BUILDINGS &
ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS LAND IMPROVEMENTS
------------- --------- ------------- ----- --------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
1900 East Golf Road -- $ 3,800 $ 20,212 -- $ 1,549 $ 3,800 $ 21,761
Schaumburg, IL
1750 East Golf Road -- $ 2,300 $ 17,532 $ 498 $ 2,300 $ 18,105
Schaumburg, IL
160-185 Hansen Court -- $ 2,100 $ 3,210 -- $ 1,461 $ 2,100 $ 4,671
Wood Dale, IL
3455, 3550, 3555 Salt Creek
Lane -- $ 850 $ 4,327 $ 28 $ 850 $ 4,361
Arlington Heights, IL
601 Campus Drive (B) $ 900 $ 2,264 -- $ 1,060 $ 900 $ 3,324
Arlington Heights, IL
1251 Plum Grove Road -- $ 373 $ 708 -- $ 587 $ 373 $ 1,295
Schaumburg, IL
1011 Touhy Avenue -- $ 720 $ 3,932 -- $ 2,742 $ 720 $ 6,674
Des Plaines, IL
2800 River Road -- $ 1,300 $ 3,461 -- $ 805 $ 1,300 $ 4,266
Des Plaines, IL
1660 Feehanville Drive -- $ 1,100 $ 4,303 -- $ 595 $ 1,100 $ 4,899
Mount Prospect, IL
565 Lakeview Parkway -- $ 1,300 $ 3,582 -- $ 913 $ 1,300 $ 4,497
Vernon Hills, IL
175 Hawthorn Parkway (B) $ 1,600 $ 4,721 -- $ 1,131 $ 1,600 $ 5,852
Vernon Hills, IL
Two Marriott Drive (B) $ 610 $ 2,230 -- $ 28 $ 610 $ 2,258
Lincolnshire, IL
3400 Dundee Road (B) $ 607 $ 3,476 -- $ 567 $ 607 $ 4,043
Northbrook, IL
3010 & 3020 Wood Creek Drive (B) $ 2,385 $ 6,988 -- $ 196 $ 2,385 $ 7,184
Downers Grove, IL
823 Commerce Drive -- $ 500 $ 1,261 -- $ 3,264 $ 500 $ 4,526
Oak Brook, IL
1675 Holmes Road $ 2,101 $ 843 $ 2,974 $ 36 $ 843 $ 3,010
Elgin, IL
16601 S. Kedzie Avenue -- $ 132 $ 1,130 $ 40 $ 132 $ 1,170
Markham, IL
3030 Warrenville Road -- $ 4,300 $ 13,787 $ 221 $ 4,300 $ 14,008
Lisle, IL
191 Waukegan Road -- $ 1,220 $ 3,288 $ 0 $ 1,220 $ 3,288
Northfield, IL
11270 W. Park Place (B) $ 940 $ 14,736 -- $ 558 $ 940 $ 15,292
Milwaukee, WI
11925 W. Lake Park Drive (B) $ 319 $ 1,819 -- $ 283 $ 319 $ 2,102
Milwaukee, WI
2514 S. 102nd Street & 10150 (B) $ 975 $ 7,020 -- $ 505 $ 975 $ 7,525
W. National Avenue
West Allis, WI
150, 175, 250 Patrick Blvd. $ 3,177 $ 2,600 $ 3,965 -- $ 853 $ 2,600 $ 4,820
Brookfield, WI
375 Bishop's Way -- $ 600 $ 4,361 -- $ 91 $ 600 $ 4,452
Brookfield, WI
111 East Kilbourn Avenue -- $ 2,176 $ 44,618 $ 232 $ 2,176 $ 44,850
Milwaukee, WI
2550 University Avenue West -- $ 850 $ 13,477 -- $ 214 $ 850 $ 13,691
St. Paul, MN
2221 University Avenue SE $ 4,800 $ 1,100 $ 7,090 -- $ 172 $ 1,100 $ 7,262
Minneapolis, MN
2550 University Avenue West -- $ 430 $ 9,343 -- $ 0 $ 430 $ 9,343
St. Paul, MN
777 East Eisenhower Parkway -- $ 4,000 $ 12,608 $ 1,919 $ 4,000 $ 14,583
Ann Arbor, MI
32255 Northwestern Highway $ 11,942 $ 3,700 $ 20,128 $ 1,044 $ 3,700 $ 21,846
Farmington Hills, MI

<CAPTION>
ACCUMULATED DATE METHOD OF
TOTAL DEPRECIATION ACQUIRED DEPRECIATION
--------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
1900 East Golf Road $ 25,561 $ 1,238 Dec-96 (A)
Schaumburg, IL
1750 East Golf Road $ 20,405 $ 651 Sep-97 (A)
Schaumburg, IL
160-185 Hansen Court $ 6,771 $ 821 Jan-94 (A)
Wood Dale, IL
3455, 3550, 3555 Salt Creek
Lane $ 5,211 $ 131 Oct-97 (A)
Arlington Heights, IL
601 Campus Drive $ 4,224 $ 824 May-93 (A)
Arlington Heights, IL
1251 Plum Grove Road $ 1,668 $ 188 Jan-96 (A)
Schaumburg, IL
1011 Touhy Avenue $ 7,394 $ 1,031 Dec-93 (A)
Des Plaines, IL
2800 River Road $ 5,566 $ 704 Feb-95 (A)
Des Plaines, IL
1660 Feehanville Drive $ 5,999 $ 462 Aug-95 (A)
Mount Prospect, IL
565 Lakeview Parkway $ 5,797 $ 441 Dec-95 (A)
Vernon Hills, IL
175 Hawthorn Parkway $ 7,452 $ 1,082 Sep-94 (A)
Vernon Hills, IL
Two Marriott Drive $ 2,868 $ 138 Jul-96 (A)
Lincolnshire, IL
3400 Dundee Road $ 4,650 $ 769 Oct-93 (A)
Northbrook, IL
3010 & 3020 Wood Creek Drive $ 9,569 $ 403 Nov-96 (A)
Downers Grove, IL
823 Commerce Drive $ 5,026 $ 610 Nov-95 (A)
Oak Brook, IL
1675 Holmes Road $ 3,853 $ 141 Feb-97 (A)
Elgin, IL
16601 S. Kedzie Avenue $ 1,302 $ 146 Feb-97 (A)
Markham, IL
3030 Warrenville Road $ 18,308 $ 111 Sep-98 (A)
Lisle, IL
191 Waukegan Road $ 4,508 $ 24 Sep-98 (A)
Northfield, IL
11270 W. Park Place $ 16,232 $ 1,430 Sep-95 (A)
Milwaukee, WI
11925 W. Lake Park Drive $ 2,421 $ 400 Jun-93 (A)
Milwaukee, WI
2514 S. 102nd Street & 10150 $ 8,500 $ 437 Nov-96 (A)
W. National Avenue
West Allis, WI
150, 175, 250 Patrick Blvd. $ 7,420 $ 925 Jun-94 (A)
Brookfield, WI
375 Bishop's Way $ 5,052 $ 199 Apr-97 (A)
Brookfield, WI
111 East Kilbourn Avenue $ 47,026 $ 804 Apr-98 (A)
Milwaukee, WI
2550 University Avenue West $ 14,541 $ 732 Dec-96 (A)
St. Paul, MN
2221 University Avenue SE $ 8,362 $ 659 May-95 (A)
Minneapolis, MN
2550 University Avenue West $ 9,773 $ 107 Jul-98 (A)
St. Paul, MN
777 East Eisenhower Parkway $ 18,583 $ 346 Dec-97 (A)
Ann Arbor, MI
32255 Northwestern Highway $ 25,546 $ 633 Dec-97 (A)
Farmington Hills, MI
</TABLE>

S-1
<PAGE>
SCHEDULE III--
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)

ACCUMULATED DATE METHOD OF
TOTAL DEPRECIATION ACQUIRED DEPRECIATION
--------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
1301 W. Long Lake Road $ 17,254 $ 945 Nov-96 (A)
Troy, MI
No. 40 OakHollow $ 7,656 $ 375 Dec-96 (A)
Southfield, MI
24800 Denso Drive $ 6,761 $ 765 Aug-95 (A)
Southfield, MI
655 Metro Place South $ 20,202 $ 661 Sep-97 (A)
Dublin, OH
4860-5000 Blazer Memorial Pkwy $ 8,754 $ 419 Sep-96 (A)
Dublin, OH
425 Metro Place North $ 7,511 $ 256 Sep-97 (A)
Dublin, OH
175 South Third Street $ 22,159 $ 539 Jan-98 (A)
Columbus, OH
30 Merchant Street $ 7,294 $ 854 Apr-96 (A)
Springdale, OH
116 Inverness Drive East $ 21,210 $ 297 May-98 (A)
Englewood, CO
183 Inverness Drive West $ 20,168 $ 253 May-98 (A)
Englewood, CO
Totals $ 448,557 $ 21,951
</TABLE>

- ------------------------

(A) Depreciation of buildings is computed over a 15 to 40 year life on a
straight line basis. Tenant improvements are depreciated over the shorter of
the estimated useful life of the improvements or the term of the lease.

(B) These properties are pledged as security for a $75,000 mortgage loan.

(C) At December 31, 1998, the aggregate cost of land, buildings & improvements
for Federal income tax purposes was approximately $447,170.

Real Estate Owned:

<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Balance beginning of year................................ $ 297,010 $ 189,114 $ 94,266
Property acquisitions.................................... 142,115 102,283 97,563
Additions................................................ 11,471 5,613 6,136
Disposals................................................ 2,039 -- 8,851
---------- ---------- ----------
Balance end of year...................................... $ 448,557 $ 297,010 $ 189,114
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

Accumulated Depreciation:

<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Balance beginning of year................................ $ 11,314 $ 5,240 $ 2,462
Depreciation expense..................................... 11,371 6,074 3,120
Retirements.............................................. -- -- --
Disposals................................................ 734 -- 342
---------- ---------- ----------
Balance end of year...................................... $ 21,951 $ 11,314 $ 5,240
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

S-2
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED
DECEMBER 31, 1998
GREAT LAKES REIT
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
3.1 Amended and Restated Declaration of Trust of the Company as filed with the Maryland State Department of
Assessments and Taxation on July 27, 1998 (incorporated by reference to Appendix B to the Proxy
Statement/Prospectus that is part of the Company's Registration Statement on Form S-4 (File No.
333-56167) (the "S-4")).
3.2 Articles Supplementary regarding the Company's 9 3/4% Cumulative Redeemable Preferred Shares of
Beneficial Interest, $.01 par value per share (the "Series A Preferred Shares"), as filed with the
Maryland State Department of Assessments and Taxation on December 17, 1998 (incorporated by reference
to Exhibit 1 to the Company's Form 8-A Registration Statement (File No. 1-14307) filed with the
Securities and Exchange Commission on December 16, 1998 (the "December 1998 8-A")).
3.3 Bylaws of the Company (incorporated by reference to Appendix C to the Proxy Statement/ Prospectus that
is part of the S-4).
4.1 Specimen of certificate representing the Company's Common Shares of Beneficial Interest, $.01 par value
per share (incorporated by reference to Exhibit 4.2 in the Company's Form 8-A Registration Statement
filed with the Securities and Exchange Commission on July 16, 1998).
4.2 Specimen of certificate representing the Series A Preferred Shares (incorporated by reference to Exhibit
4 to the December 1998 8-A).
4.3 Unsecured Revolving Credit Agreement dated April 6, 1998 with Bank of America National Trust and Savings
Association, as lender and administrative agent, The First National Bank of Chicago, as lender and
documentation agent, Dresdner Bank AG, New York and Grand Cayman branches, as lender and co-agent,
U.S. Bank National Association, as lender and co-agent, and LaSalle National Bank, as lender and
co-agent (the "Unsecured Revolving Credit Agreement") (incorporated by reference to Exhibit 10.1 to
the Company's Current Report on Form 8-K dated April 17, 1998 filed with the Securities and Exchange
Commission on April 20, 1998)).
4.4 First Amendment to the Unsecured Revolving Credit Agreement, dated June 19, 1998.
4.5 Second Amendment to the Unsecured Revolving Credit Agreement, dated December 16, 1998.
4.6 Loan Agreement, dated December 1, 1998, between the Company and AUSA Life Insurance Company, Inc.,
(incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission on December 9, 1998).
10.1 Amended and Restated Agreement of Limited Partnership of Great Lakes REIT, L.P., dated December 27, 1996
(the "Partnership Agreement") (incorporated by reference to Exhibit 5 to the Company's Current Report
on Form 8-K dated January 14, 1997).
10.2 First Amendment to the Partnership Agreement dated February 6, 1997 (incorporated by reference to
Exhibit 10.3 to the Company's Registration Statement on Form S-11 (File No. 333-22619) (the "S-11")).
10.3 Second Amendment to the Partnership Agreement, dated February 10, 1997.
10.4 Third Amendment to the Partnership Agreement, dated May 22, 1998.
10.5 Fourth Amendment to the Partnership Agreement, dated December 23, 1998 (incorporated by reference to
Exhibit 10.1 to the Company's Current Report on Form 8-K dated December 23, 1998).
*10.6 1997 Equity and Performance Incentive Plan (the "Employee Plan")(incorporated by reference to Exhibit
4.4 to the Company's Post-Effective Amendment No.1 to Form S-8 Registration Statement (File No.
333-56619)).
*10.7 Form of Option Agreement for use in connection with options granted under the Employee Plan; Richard A.
May, Patrick R. Hunt, Richard L. Rasley, James Hicks, and Raymond Braun entered into agreements in
1998 that evidenced an option to purchase 34,700, 31,950, 19,450, 19,450, and 19,450 Common Shares,
respectively.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
*10.8 Amended and Restated Option Plan for Independent Trustees (the "Trustee Plan") dated July 2, 1992, as
amended.")(incorporated by reference to Exhibit 4.4 to the Company's Post-Effective Amendment No.1 to
Form S-8 Registration Statement (File No. 333-56617)).
*10.9 Form of Non-Qualified Stock Option Certificate for use in connection with options granted under the
Trustee Plan; James J. Brinkerhoff, Daniel E. Josephs, Daniel P. Kearney, Edward Lowenthal and Donald
E. Phillips were each issued certificates dated December 31, 1998 that evidenced an option to purchase
5,000 Common Shares.
*10.10 Form of Employment Agreement dated July 17, 1998 for Richard A. May and Patrick R. Hunt (incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998).
*10.11 Form of Employment Agreement dated July 17, 1998 for Raymond M. Braun, James Hicks and Richard L. Rasley
(incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998).
*10.12 Form of Change in Control Agreement dated July 17, 1998 for Kim S. Mills and Edith M. Scurto
(incorporated by reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998).
*10.13 Limited Purpose Employee Loan Program of the Company (incorporated by reference to Exhibit 10.61 to the
Company's Form 10/A Registration Statement filed with the Securities and Exchange Commission on
January 9, 1997).
*10.14 Form of Limited Purpose Employee Loan Program Promissory Note for use in connection with limited purpose
employee loans. Richard A. May, Patrick R. Hunt, Richard L. Rasley and James Hicks borrowed
$2,832,756, $1,274,648, $1,264,000 and $52,000, respectively, during 1998.
10.15 Indemnification Escrow Agreement dated April 1, 1996 between the Company, Richard A. May, Richard L.
Rasley, Tim A. Grodrian and American National Bank and Trust Company of Chicago (incorporated by
reference to Exhibit 10.8 to the Company's Form 10 Registration Statement filed with the Commission on
April 26, 1996).
*10.16 Restricted Stock Agreement dated May 1, 1996 between the Company and Raymond Braun (incorporated by
reference to Exhibit 10.8.6 to the S-11).
21.1 Subsidiaries of the Company
23.1 Consent of Independent Auditors
24.2 Power of Attorney (set forth on the signature page hereof).
27.1 Financial Data Schedule
</TABLE>

* Notes Management contract or compensation plan or arrangement.

- ------------------------

(b) Reports on Form 8-K:

During the fourth quarter ended December 31, 1998, the Company filed the
following reports on Form 8-K.

Report on Form 8-K dated December 9, 1998 reporting the following item:

Item 5. Other Events

Report on Form 8-K dated December 23, 1998 reporting the following item:

Item 5. Other Events

<PAGE>

EXHIBIT 4.4

FIRST AMENDMENT TO UNSECURED
REVOLVING CREDIT AGREEMENT

This FIRST AMENDMENT TO UNSECURED REVOLVING CREDIT AGREEMENT (this
"Amendment") is made as of this 19th day of June, 1998 by and among GREAT LAKES
REIT, L.P., a Delaware limited partnership ("Borrower"), BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION ("Bank of America"), individually and as
Administrative Agent, THE FIRST NATIONAL BANK OF CHICAGO ("First Chicago"),
individually and as Documentation Agent, DRESDNER BANK AG, NEW YORK AND GRAND
CAYMAN BRANCHES ("Dresdner"), U. S. BANK NATIONAL ASSOCIATION ("US Bank") and
LASALLE NATIONAL BANK ("LaSalle").

A. Borrower, Bank of America, First Chicago, Dresdner, US Bank and
LaSalle are parties to an Unsecured Revolving Credit Agreement dated as of April
6, 1998 (the "Original Credit Agreement"). All capitalized terms used in this
Amendment and not otherwise defined herein shall have the meanings ascribed to
such terms in the Original Credit Agreement.

B. Pursuant to the terms of the Original Credit Agreement, the Lenders
agreed to provide Borrower with a revolving credit facility in an aggregate
principle amount of up to $150,000,000. The parties hereto desire to amend the
Original Credit Agreement in order to, among other things, modify certain
financial covenants contained therein.

NOW, THEREFORE, in consideration of the foregoing Recitals and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

AGREEMENTS

1. The foregoing Recitals to this Amendment are hereby incorporated into
and made a part of this Amendment.

2. From and after the Effective Date, as defined below, the undersigned
agree that if Borrower falls out of compliance with the Pre-existing Covenants,
as defined below, then commencing as of the date the first such non-compliance
occurs and continuing only until the earlier of (i) 180 days after the Effective
Date, and (ii) the date on which Borrower comes back into compliance with both
(a) Consolidated Total Indebtedness is less than or equal to 50% of the Gross
Asset Value, and (b) Consolidated Unsecured Debt is less than or equal to 50% of
the Value of Unencumbered Assets (such covenants being referred to jointly, as
the "Pre-existing Covenants"):

a) Section 7.2 of the Original Credit Agreement shall be deemed to
have been deleted in its entirety and replaced with the following:

"7.2 MAXIMUM CONSOLIDATED LEVERAGE RATIO. As

<PAGE>

of the end of any fiscal quarter, permit Consolidated Total
Indebtedness to exceed 55% of The Gross Asset Value."

b) Section 7.5 of the Original Credit Agreement shall be deemed to
have been deleted in its entirety and replace with the following:

"7.5 MAXIMUM UNENCUMBERED ASSET COVERAGE RATIO. As of the end of
any fiscal quarter, permit Consolidated Unsecured Debt to exceed
55% of the Value of Unencumbered Assets."

From and after the earlier of (a) 180 days after the Effective Date, and (b) the
date on which Borrower comes back into compliance with the Pre-existing
Covenants, all of the provisions of this Section 2 shall be automatically null
and void.

3. The "Effective Date" shall be the date on which all of the following
conditions shall have been fulfilled (or waived by the Lenders):

a) no Default or Event of Default then exists;

b) Borrower shall have executed and delivered, or caused to be
executed and delivered, to Administrative Agent (i) a certificate
dated as of the Effective Date signed by Borrower and Great Lakes
REIT, Inc. ("General Partner") representing and warranting that (w)
the Loan Documents are then in full force and effect and that, to the
best of their knowledge, Borrower and General Partner then have no
defenses or offsets to, or claims or counterclaims relating to, their
obligations under the Loan Documents; (x) each of the representations
and warranties contained in the Original Credit Agreement are true and
correct, as and to the extent set forth in the Original Credit
Agreement, (y) no Default or Event of Default has occurred and is
continuing under the Loan Documents; and (z) no change in the
financial condition of Borrower or the General Partner that would have
a Material Adverse Effect has occurred since December 31, 1997; (ii) a
certificate or certificates dated as of the Effective Date signed by a
Qualified Officer of Borrower and each Guarantor that no changes have
been made to the organizational documents or incumbency certificate of
the Borrower or such Guarantor since the date of the Original Credit
Agreement (or attaching certified copies of such changes); and (iii)
opinions of counsel regarding the due authorization and enforceability
of this Amendment and each Amendment to Guaranty, together with
supporting resolutions and other evidence of authority, all
satisfactory to the Administrative Agent;

<PAGE>

c) Each Guarantor shall have executed and delivered to
Administrative Agent a First Amendment to Guaranty in the form
attached hereto as EXHIBIT A.

d) Borrower shall have paid to Administrative Agent the fees
specified in the side letter of even date herewith between Borrower
and Administrative Agent.

If the Effective Date has not occurred by June 30, 1998, either Borrower or
Administrative Agent may elect to terminate this Amendment whereupon this
Amendment and all First Amendments to Guaranty shall have no further force or
effect and the Original Credit Agreement and Guaranties shall continue as if
such amendments have not been executed.

4. From and after the Effective Date, and continuing only until the
earlier of (i) 180 days after the Effective Date, and (ii) the date on which
Borrower comes into compliance with the Pre-existing Covenants, Section 2.6 of
the Original Credit Agreement shall be amended by deleting the table contained
therein in its entirety, and replacing such table with the following table:

- --------------------------------------------------------------------------------
APPLICABLE APPLICABLE
MARGIN-LIBOR MARGIN-BASE
LEVERAGE RATIO ADVANCES RATE ADVANCES
- --------------------------------------------------------------------------------
<S> <C> <C>
less than or equal to 35% 1 percent 0 percent
- --------------------------------------------------------------------------------
greater than 35% but less than 1.15 percent 0 percent
or equal to 45%
- --------------------------------------------------------------------------------
greater than 45%, but less 1.30 percent .15 percent
than or equal to 50%
- --------------------------------------------------------------------------------
greater than 50%, but not to 1.45 percent .20 percent
exceed 55%
- --------------------------------------------------------------------------------

</TABLE>

5. Except as specifically modified hereby, the Original Credit Agreement
is and remains unmodified and in full force and effect and is hereby ratified
and confirmed. All references in the Loan Documents to the "Agreement," the
"Credit Agreement" or the "Revolving Credit Agreement" henceforth shall be
deemed to refer to the Original Credit Agreement as amended by this Amendment.
Borrower hereby remakes as of the date hereof and as of the Effective Date each
of its representations and warranties contained in the Original Credit Agreement
(including, without limitation, those contained in Article VI thereof).

<PAGE>

6. This Amendment may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Amendment by signing any such counterpart. This
Amendment shall be construed in accordance with the internal laws (and not the
law of conflicts) of the State of Illinois, but given effect to federal laws
applicable to national banks. This Amendment shall be effective when it has
been executed by Borrower, Administrative Agent and each other Lender, and each
Party has notified Administrative Agent by telecopy or telephone that it has
taken such action.

IN WITNESS WHEREOF, the Borrower the Lenders and the Administrative Agent
have executed this Amendment as of the date first above written.

GREAT LAKES REIT, L.P.

By: Great Lakes REIT, Inc., its General Partner

By:______________________________________
Print Name:_______________________________
Title:____________________________________

823 Commerce Drive
Suite 300
Oak Brook, IL 60523
Attention: James Hicks
Telephone: (630) 368-2914
Commitments: Facsimile: (630) 368-2929
- -----------
$30,000,000 BANK OF AMERICA NATIONAL TRUST
- ----------- AND SAVINGS ASSOCIATION, individually and as
20% of Aggregate Administrative Agent
Commitment

By:____________________________________
Print Name:_____________________________
Title:__________________________________

Commercial Real Estate Services
231 South LaSalle Street, 12th Floor
Chicago, IL 60697
Attention: Daniel G. Walsh
Telephone: (312) 828-5087
Facsimile: (312) 974-4970

<PAGE>

$30,000,000 THE FIRST NATIONAL BANK OF CHICAGO,
- ----------- individually and as Documentation Agent
20% of Aggregate
Commitment
By:_________________________________
Print Name:__________________________
Its:_________________________________

One First National Plaza
Chicago, IL 60670
Attention: Michael Parisi
Telephone: (312) 732-5067
Facsimile: (312) 732-1117

$30,000,000 DRESDNER BANK AG, NEW YORK AND
- ----------- GRAND CAYMAN BRANCHES
20% of Aggregate
Commitment
By:_________________________________
Print Name:__________________________
Its:_________________________________

190 South LaSalle Street, Suite 2700
Chicago, IL 6000603
Attention: Jim Blessing
Telephone: (312) 444-1318
Facsimile: (312) 444-1301

$30,000,000 U. S. BANK NATIONAL ASSOCIATION
- -----------
20% of Aggregate
Commitment By:_________________________________
Commitment Print Name:__________________________
Its:_________________________________

701 Lee Street
Des Plaines, IL 60016
Attention: James J. West
Telephone: (847) 390-5612
Telecopy: (847) 390-5699

<PAGE>

$30,000,000 LASALLE NATIONAL BANK
- -----------
20% of Aggregate
Commitment By:________________________________
Commitment Print Name:_________________________
Its:________________________________

135 South LaSalle Street
Chicago, IL 60603
Attention: John C. Hein
Telephone: (312) 904-8620
Telecopy: (312) 904-6467

<PAGE>

EXHIBIT 4.5

SECOND AMENDMENT TO UNSECURED
REVOLVING CREDIT AGREEMENT

This SECOND AMENDMENT TO UNSECURED REVOLVING CREDIT AGREEMENT (this "Second
Amendment") is made as of the 16th day of December, 1998 by and among GREAT
LAKES REIT, L.P., a Delaware limited partnership ("Borrower"), BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION ("Bank of America"), individually and as
Administrative Agent, THE FIRST NATIONAL BANK OF CHICAGO ("First Chicago"),
individually and as Documentation Agent, DRESDNER BANK AG, NEW YORK AND GRAND
CAYMAN BRANCHES ("Dresdner"), U. S. BANK NATIONAL ASSOCIATION ("US Bank") and
LASALLE NATIONAL BANK ("LaSalle").

A. Borrower, Bank of America, First Chicago, Dresdner, US Bank and
LaSalle are parties to an Unsecured Revolving Credit Agreement dated as of April
6, 1998 (the "Original Credit Agreement"). Borrower, Bank of America, First
Chicago, Dresdner, US Bank and LaSalle are also parties to that certain First
Amendment to Unsecured Revolving Credit Agreement (the "First Amendment") (the
Original Credit Agreement and the First Amendment shall be collectively referred
to herein as the "Agreement"). All capitalized terms used in this Second
Amendment and not otherwise defined herein shall have the meanings ascribed to
such terms in the Agreement.

B. The parties hereto desire to amend the First Amendment in order to,
among other things, modify certain financial covenants contained therein.

AGREEMENTS

1. The foregoing Recitals to this Second Amendment are hereby
incorporated into and made a part of this Second Amendment.

2. Section 2 of the First Amendment is hereby deleted in its entirety and
replaced with the following: "From and after the Effective Date, as defined
below, the undersigned agree that if Borrower falls out of compliance with the
Pre-existing Covenants, as defined below, then commencing as of the date the
first such non-compliance occurs and continuing only until the earlier of (i)
March 24, 1999, and (ii) the date on which Borrower comes back into compliance
with both (a) Consolidated Total Indebtedness is less than or equal to 50% of
the Gross Asset Value, and (b) Consolidated Unsecured Debt is less than or equal
to 50% of the Value of Unencumbered Assets (such covenants being referred to
jointly, as the "Pre-existing Covenants"):

<PAGE>

a) Section 7.2 of the Original Credit Agreement shall be deemed to
have been deleted in its entirety and replaced with the following:

"7.2 MAXIMUM CONSOLIDATED LEVERAGE RATIO. As
of the end of any fiscal quarter, permit Consolidated
Total Indebtedness to exceed 55% of the Gross
Asset Value."

b) Section 7.5 of the Original Credit Agreement shall be deemed to
have been deleted in its entirety and replaced with the following:

"7.5 MAXIMUM UNENCUMBERED ASSET COVERAGE
RATIO. As of the end of any fiscal quarter, permit
Consolidated Unsecured Debt to exceed 55% of
The Value of Unencumbered Assets."

From and after the earlier of (a) March 24, 1999, and (b) the date on which
Borrower comes back into compliance with the Pre-existing Covenants, all of the
provisions of this Section 2 shall be automatically null and void."

3. Except as specifically modified hereby, the Agreement is and remains
unmodified and in full force and effect and is hereby ratified and confirmed.
All references in the Loan Documents to the "Agreement," the "Credit Agreement"
or the "Revolving Credit Agreement" henceforth shall be deemed to refer to the
Agreement as amended by this Second Amendment. Borrower hereby remakes as of
the date hereof and as of the Effective Date each of its representations and
warranties contained in the Agreement (including, without limitation, those
contained in Article VI of the Original Credit Agreement thereof).

4. Borrower shall pay to the Agent for the account of the Lenders a fee
of $75,000.00 on account of this Second Amendment, payable as follows:
$25,000,00 simultaneously with the execution of this Second Amendment;
$25,000.00 on or before January 15, 1999; and $25,000.00 on or before February
15, 1999. Notwithstanding the foregoing, in the event Borrower comes back into
compliance with the Pre-existing Covenants, then any portion of the fee not yet
due and payable as of the date of such compliance of the Pre-existing Covenants,
shall be forever waived.

5. This Second Amendment may be executed in any number of counterparts,
all of which taken together shall constitute one agreement, and any of the
parties hereto may execute this Second Amendment by signing any such
counterpart. This Second Amendment shall be construed in accordance with the
internal laws (and not the law of conflicts) of the State of Illinois, but
giving effect to federal laws applicable to national banks. This Second
Amendment shall be effective when it has been executed by Borrower and the
Majority Lenders, and each Party has notified Administrative Agent by telecopy
or telephone that it has taken such action.

<PAGE>

IN WITNESS WHEREOF, the Borrower the Lenders and the Administrative Agent
have executed this Second Amendment as of the date first above written.

GREAT LAKES REIT, L.P.

By: Great Lakes REIT, Inc., its General Partner

By:
---------------------------------------------
Print Name:
--------------------------------------
Title:
-------------------------------------------

823 Commerce Drive
Suite 300
Oak Brook, IL 60523
Attention: James Hicks
Telephone: (630) 368-2914
Commitments: Facsimile: (630) 368-2929
- -----------

$30,000,000 BANK OF AMERICA NATIONAL TRUST
- ----------- AND SAVINGS ASSOCIATION, individually and as
20% of Aggregate Administrative Agent
Commitment

By:
---------------------------------------------
Print Name:
--------------------------------------
Title:
-------------------------------------------

Commercial Real Estate Services
231 South LaSalle Street, 12th Floor
Chicago, IL 60697
Attention: Daniel G. Walsh
Telephone: (312) 828-5087
Facsimile: (312) 974-4970

<PAGE>

$30,000,000 THE FIRST NATIONAL BANK OF CHICAGO,
- ----------- individually and as Documentation Agent
20% of Aggregate
Commitment
By:
---------------------------------------------
Print Name:
--------------------------------------
Its:
---------------------------------------------

One First National Plaza
Chicago, IL 60670
Attention: Lynn Braun
Telephone: (312) 732-3827
Facsimile: (312) 732-1117

$30,000,000 DRESDNER BANK AG, NEW YORK AND
- ----------- GRAND CAYMAN BRANCHES
20% of Aggregate
Commitment
By:
---------------------------------------------
Print Name:
--------------------------------------
Its:
---------------------------------------------

190 South LaSalle Street, Suite 2700
Chicago, IL 6000603
Attention: Jim Blessing
Telephone: (312) 444-1318
Facsimile: (312) 444-1301

$30,000,000 U. S. BANK NATIONAL ASSOCIATION
- -----------
20% of Aggregate
Commitment By:
Commitment ---------------------------------------------
Print Name:
--------------------------------------
Its:
---------------------------------------------

701 Lee Street
Des Plaines, IL 60016
Attention: James J. West
Telephone: (847) 390-5612
Telecopy: (847) 390-5699

$30,000,000 LASALLE NATIONAL BANK
- -----------
20% of Aggregate
Commitment By:
Commitment ---------------------------------------------
Print Name:
--------------------------------------
Its:
---------------------------------------------

135 South LaSalle Street
Chicago, IL 60603
Attention: John C. Hein
Telephone: (312) 904-8620
Telecopy: (312) 904-6467

<PAGE>

EXHIBIT 10.3
SECOND AMENDMENT TO THE
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF GREAT LAKES REIT, L.P.

This Second Amendment to the Amended and Restated Agreement of Limited
Partnership of Great Lakes REIT, L.P. (the "Second Amendment") is made and
entered into as of the 10th day of February, 1997 by Great Lakes REIT, Inc., a
Maryland corporation ("GLREIT").

RECITALS:

WHEREAS, GLREIT is the sole general partner of a Delaware limited
partnership known as Great Lakes REIT, L.P. (the "Partnership"), the business
and affairs of which are conducted in accordance with the terms and conditions
of a certain Agreement of Limited Partnership dated September 27, 1996, as
amended and restated by the Amended and Restated Agreement of Limited
Partnership dated as of December 19, 1996, and the First Amendment to the
Amended and Restated Agreement of Limited Partnership of Great Lakes REIT, L.P.
dated February 6, 1997 (collectively the "Partnership Agreement"); and

WHEREAS, Section 13.1(b)(ii) of the Partnership Agreement expressly
provides, that GLREIT, the general partner of the Partnership shall amend the
Partnership Agreement to reflect the admission of Partners in conformance with
the Partnership Agreement; and

WHEREAS, the certain unitholders of JMG Court Office Center Limited
Partnership ("COC"), JMG Elgin Industrial Limited Partnership ("Elgin LP") and
the Elgin Industrial Joint Venture ("Elgin JV") listed in Exhibit A attached
hereto (the "Accepting Partners") have accepted the Exchange Offer dated January
24, 1997 pursuant to which the Partnership offered Limited Partnership Units in
the Partnership in consideration for units in COC, Elgin LP and Elgin JV; and

WHEREAS, GLREIT as general partner of the Partnership desires to amend the
Partnership Agreement to reflect the addition of the Accepting Partners to the
Partnership as new Limited Partners and to revise the percentage interests of
the Partners to reflect the new interests; and

NOW THEREFORE, the parties hereto hereby agree as follows:

1. The Accepting Partners identified in Exhibit A attached hereto are
hereby added to the Partnership as new Limited Partners and the
Percentage Interests of the Partners are hereby revised as noted in
Exhibit A attached.

2. The date of this Second Amendment shall be the effective date of the
transfer to the Partnership of the remainder of the properties

<PAGE>

owned by GLREIT as of December 31, 1996, so long as GLREIT completes
the transfer no later than September 31, 1997. Notwithstanding that
title to such assets may remain in the name of GLREIT, so long as such
transfer is completed by the date noted above, all of the economic
consequences of the operation of such properties shall, subject to the
claims and restrictions of any secured lender, benefit and reside with
the Partnership for the period from the date of this Second Amendment
to the transfer date.

3. Except as set forth above, no other provision of the Partnership
Agreement shall be affected, amended or modified except to the extent
necessary to conform to the above amendment. Unless defined herein
all capitalized terms used in this Second Amendment shall have the
definition provided in the Partnership Agreement.

4. This Second Amendment has been proposed by GLREIT, in its capacity as
the General Partner of the Partnership in accordance with the
provisions of Section 13.1(b)(ii) of the Partnership Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment
as of the date and year first above written.

GREAT LAKES REIT, INC.

By: James Hicks
------------------------
James Hicks
Its: Vice President

<PAGE>

EXHIBIT A TO THE
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
GREAT LAKES REIT, L.P.

Effective Date: February 10,1997

Partnership Preferred Percentage
Name and Address Capital Contribution Units Units Interest
- ---------------- -------------------- ------- ------- --------
<S> <C> <C> <C> <C>
GENERAL PARTNER:

Great Lakes REIT, Inc. Real estate and cash 2,855,425.5 68,116.7 49.9923%
823 Commerce Drive
Oak Brook, IL 60523

LIMITED PARTNERS:

GLR No. 3 Cash 881 0 0.0154%
823 Commerce Drive
Oak Brook, IL 60523

Great Lakes REIT, Inc. Real estate and cash 2,855,425.5 68,116.7 49.9923%
823 Commerce Drive
Oak Brook, IL 60521

</TABLE>

JMG COURT OFFICE CENTER
LIMITED PARTNERSHIP
UNITS OR CASH TO BE
EXCHANGED FOR INTERESTS:

- --------------------------------------------------------------------------------
<S> <C>
Barz, Dale C. 523.150
May, Diane E. 523.150
Beemsterboer, Francine 523.150
Cole, Richard G. Trust 4,185.200
Grodrian, Tim A. 261.575
Guckien, John V. Trust 2,092.600
Hutson, Sandra L. Trust 2,092.600
Janus, Wayne M. Trust 2,092.600
Meulemans, Sandra J. 1,150.930
Milczarek, Alex 2,092.600
Saslow, Judy A. 2,092.600
Shworles, Helen E.D. 2,092.600

<PAGE>

Spandikow, Mark S. & Donna 1,046.300

</TABLE>

JMG FOX VALLEY LIMITED
PARTNERS

LIMITED PARTNERS
- ---------------------------
<S> <C> <C>
Bergold, Roy T., Jr. Fox Valley LP Units 1,428.865
Bialek, Thaddeus R. Trust Fox Valley LP Units 1,714.638
Broffman, Morton H. Fox Valley LP Units 1,714.638
Calandra, Patricia M. Fox Valley LP Units 5,715.462
Cascino, Anthony E. Fox Valley LP Units 2,857.731
Clark, W.H. Fox Valley LP Units 5,715.462
DeHaan, Sharon Fox Valley LP Units 1,428.865
Grodrian, Tim A. Fox Valley LP Units 285.773
Hutson, Richard W. Trust Fox Valley LP Units 3,715.050
Kennedy, Walker, Jr. & Diane W. Fox Valley LP Units 857.319
Knowles, Nancy W. Trust Fox Valley LP Units 28,577.308
Krohn, Karen A. Loving Trust Fox Valley LP Units 1,428.865
Lenon, Richard A. Trust Fox Valley LP Units 2,857.731
Mar, Donald Y. & Jana T. Fox Valley LP Units 1,143.092
Moen, Timothy P. Fox Valley LP Units 857.319
Saslow, Judy A. Fox Valley LP Units 4,286.596
Shworles, Helen E.D. Fox Valley LP Units 5,715.462
Slattery, Anastasia M. & William E. Fox Valley LP Units 857.319
Zoldan, Jack S. Fox Valley LP Units 1,428.865

</TABLE>

<TABLE>
<S> <C> <C>
Cole, Richard G. Elgin Indust. JV Units 24,778.969
FCL Mackey Elgin Indust. JV Units 24,050.031

</TABLE>

<PAGE>

EXHIBIT 10.4

THIRD AMENDMENT TO THE
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF GREAT LAKES REIT, L.P.

This Third Amendment to the Amended and Restated Agreement of Limited
Partnership of Great Lakes REIT, L.P. (the "Third Amendment") is made and
entered into as of the 22nd day of May, 1998 by Great Lakes REIT, Inc., a
Maryland corporation ("GLREIT").

RECITALS:

WHEREAS, GLREIT is the sole general partner of a Delaware limited
partnership known as Great Lakes REIT, L.P. (the "Partnership"), the business
and affairs of which are conducted in accordance with the terms and conditions
of a certain Agreement of Limited Partnership dated September 27, 1996, as
amended and restated by the Amended and Restated Agreement of Limited
Partnership dated as of December 19, 1996, the First Amendment to the Amended
and Restated Agreement of Limited Partnership of Great Lakes REIT, L.P. dated
February 6, 1997 (collectively the "Partnership Agreement"); and the Second
Amendment to the Amended and Restated Agreement of Limited Partnership of Great
Lakes REIT, L.P. dated February 10, 1997 (collectively the "Partnership
Agreement");

WHEREAS, the individuals listed in Exhibit A attached hereto (the
"Contributing Partners") have contributed interests in certain real estate to
the Partnership in consideration for Limited Partnership interests; and

WHEREAS, GLREIT as general partner of the Partnership desires to amend the
Partnership Agreement to reflect the addition of the Contributing Partners to
the Partnership as new Limited Partners and to revise the percentage interests
of the Partners to reflect the new interests;

NOW THEREFORE, the parties hereto hereby agree as follows:

5. The Contributing Partners identified in Exhibit A attached hereto are
hereby added to the Partnership as new Limited Partners and the
Percentage Interests of the Partners are hereby revised as noted in
Exhibit A attached.

<PAGE>

6. Except as set forth above, no other provision of the Partnership
Agreement shall be affected, amended or modified except to the extent
necessary to conform to the above amendment. Unless defined herein
all capitalized terms used herein shall have the definition provided
in the Partnership Agreement.

7. The foregoing amendment has been proposed by GLREIT, in its capacity
as the General Partner of the Partnership in accordance with the
provisions of Section 13.1(b)(ii) of the Partnership Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Third Amendment
as of the date and year first above written.

GREAT LAKES REIT, INC.

By: James Hicks
-----------------------------------
James Hicks
Its: Vice President

<PAGE>

EXHIBIT A TO THE
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
GREAT LAKES REIT, L.P.

EFFECTIVE DATE: May 22, 1998

Partnership Preferred Percentage
Name and Address Capital Contribution Units Units Interest
---------------- -------------------- ----------- --------- ----------
<S> <C> <C> <C> <C>
GENERAL PARTNER:

Great Lakes REIT, Inc. Real estate and cash 8,652,368.5 49.7889%
823 Commerce Drive
Oak Brook, IL 60523

LIMITED PARTNERS:

Great Lakes REIT, Inc. Real estate and cash 8,652,368.5 49.7889%
823 Commerce Drive
Oak Brook, IL 60521
GLR No. 3 Cash 881 0.0051%
823 Commerce Drive
Oak Brook, IL 60523
FCL Mackey Elgin Indust. JV Units 24,050 0.1384%
George F. Beardsley Real estate (Inverness) 16,149 0.0929%
Clay L. Boelz Real estate (Inverness) 16,149 0.0929%
John F. O'Meara Real estate (Inverness) 16,149 0.0929%
------ -------
Total: 17,378,115 100.0000%
</TABLE>

<PAGE>

EXHIBIT 10.5

FOURTH AMENDMENT TO THE
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF GREAT LAKES REIT, L.P.

This Fourth Amendment to the Amended and Restated Agreement of Limited
Partnership of Great Lakes REIT, L.P., a Delaware limited partnership (the
"Partnership"), is made and entered into as of the 23rd day of December, 1998 by
Great Lakes REIT, a Maryland real estate investment trust ("GLREIT").

RECITALS:

WHEREAS, GLREIT is the sole general partner of the Partnership, the
business and affairs of which are conducted in accordance with the terms and
conditions of the Agreement of Limited Partnership of the Partnership dated
September 27, 1996, as amended and restated by the Amended and Restated
Agreement of Limited Partnership dated as of December 19, 1996 and as further
amended by the First Amendment to the Amended and Restated Agreement of Limited
Partnership of the Partnership dated February 6, 1997, the Second Amendment to
the Amended and Restated Agreement of Limited Partnership of the Partnership
dated February 10, 1997 and the Third Amendment to the Amended and Restated
Agreement of Limited Partnership of the Partnership dated May 22, 1998
(collectively, the "Partnership Agreement"); and

WHEREAS, Sections 4.2(c) and 13.1(b)(iii) of the Partnership Agreement
expressly provide that the General Partner shall amend the Partnership Agreement
to set forth the designations, rights, powers and duties, and preferences of the
Preferred Units in one or more Preferred Unit Designations without the consent
of the Limited Partners; and

WHEREAS, the Partnership Agreement provides that a holder of such Preferred
Units shall have such rights to the allocations of Profits and Losses as
specified in Article VI of the Partnership Agreement and to distributions
pursuant to Section 5.1 of the Partnership Agreement; and

WHEREAS, in connection with GL REIT's issuance and sale on the date
hereof of 1,500,000 9 3/4% Series A Cumulative Redeemable Preferred Shares of
Beneficial Interest, $.01 par value per share ("Series A Preferred Shares"),
and GL REIT's contribution to the Partnership of the Required Funds obtained
from the issuance and sale of the Series A Preferred Shares, the Partnership
hereby assumes the expenses (including the applicable underwriter discounts)
incurred by GLREIT in connection with raising such Required Funds and issues
to GLREIT Preferred Units to reflect GL REIT's contribution of such funds,
which Preferred Units have the economic rights, including, distribution,
redemption and conversion rights and sinking funds provisions, set forth
herein; and

<PAGE>

WHEREAS, GLREIT, as the sole general partner of the Partnership, desires to
amend the Partnership Agreement to reflect the issuance of the Series A
Preferred Units and to set forth the applicable designation, rights, powers,
duties and preferences thereof;

NOW THEREFORE, the Partnership Agreement shall be amended as follows:

1. A series of Preferred Units, designated the 9 3/4% Series A Cumulative
Redeemable Preferred Units (the "Series A Preferred Units"), is hereby
established. The number of authorized Series A Preferred Units is
1,500,000.

2. The Required Funds obtained from the sale of the Series A Preferred
Shares shall be contributed to the Partnership as Contributed Funds.

3. The Series A Preferred Units shall, with respect to distribution
rights and rights upon liquidation, dissolution or winding up of the
Partnership, rank (a) senior to all classes or series of Partnership
Units, and to all Units issued by the Partnership ranking junior to
such Series A Preferred Units; (b) on a parity with all other Units
issued by the Partnership, the terms of which specifically provide
that such equity securities rank on a parity with the Series A
Preferred Units; and (c) junior to all Units issued by the
Partnership, the terms of which specifically provide that such equity
securities rank senior to the Series A Preferred Units.

4. DISTRIBUTIONS. Section 5.1 of the Partnership agreement is hereby
amended to incorporate the following distribution provisions relating
to the Series A Preferred Units:

a. Holders of the then outstanding Series A Preferred Units shall be entitled
to receive, when and as authorized by the General Partner, out of Available
Cash Flow, cumulative preferential cash distributions at the rate of 9 3/4%
of the $25.00 liquidation preference per annum (equivalent to a fixed
annual amount of $2.4375 per Series A Preferred Unit). Such distributions
shall be cumulative from the first date on which any Series A Preferred
Units are issued and shall be payable quarterly in arrears on or before
March 1, June 1, September 1 and December 1 of each year or, if not a
business day, the next succeeding business day (each, a "Series A
Partnership Distribution Payment Date"). The first distribution, which
will be paid on March 1, 1999, will cover the period from the date of
issuance of the Series A Preferred Units to March 1, 1999. Such
distribution and any distribution payable on the Series A Preferred Units
for any partial distribution period will be computed on the basis of a
360-day year consisting of twelve 30-day months. Distributions will be
payable to holders of record as they appear in the records of the
Partnership at the close of business on the applicable record date, which
shall be the fifteenth day of the calendar month immediately preceding the
calendar month in which the applicable Series A Partnership Distribution
Payment Date falls or on such other date designated by the General Partner
as the record date for the payment of distributions on the Series A
Preferred Shares that is not more than 30 nor less than 10 days prior to
such

<PAGE>

Partnership Distribution Payment Date (each, a "Series A Partnership Record
Date").

b. No distributions on Series A Preferred Units shall be authorized by the
General Partner or paid or set apart for payment by the General Partner at
such time as the terms and provisions of any agreement of the Partnership,
including any agreement relating to its indebtedness, prohibits such
authorization, payment or setting apart for payment or provides that such
authorization, payment or setting apart for payment would constitute a
breach thereof or a default thereunder, or if such authorization or payment
shall be restricted or prohibited by law.

c. Notwithstanding the foregoing, distributions on the Series A Preferred
Units shall accrue whether or not the terms and provisions set forth in
Paragraph 4.b. hereof at any time prohibit the current payment of
distributions, whether or not the Partnership has Available Cash Flow,
whether or not there are funds legally available for the payment of such
distributions and whether or not such distributions are declared. Accrued
but unpaid distributions on the Series A Preferred Units will accumulate as
of the Series A Partnership Distribution Payment Date on which they first
become payable.

d. Except as provided in Paragraph 4.e. below, no distributions will be
declared or paid or set apart for payment on any Partnership Units or any
other series of Preferred Units ranking, as to distributions, on a parity
with or junior to the Series A Preferred Units (other than a distribution
in the Partnership Units or in any other class of Units ranking junior to
the Series A Preferred Units as to distributions and upon liquidation) for
any period unless full cumulative distributions have been or
contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for such payment on the Series A
Preferred Units for all past distribution periods and the then current
distribution period.

e. When distributions are not paid in full (and a sum sufficient for such full
payment is not so set apart) upon the Series A Preferred Units and any
other series of Preferred Units ranking on a parity as to distributions
with the Series A Preferred Units, all distributions declared upon the
Series A Preferred Units and any other series of Preferred Units ranking on
a parity as to distributions with the Series A Preferred Units shall be
declared pro rata so that the amount of distributions declared per Series A
Preferred Units and such other series of Preferred Units shall in all cases
bear to each other the same ratio that accrued distributions per Series A
Preferred Units and such other series of Preferred Units (which shall not
include any accrual in respect of unpaid distributions for prior
distribution periods if such Preferred Units do not have a cumulative
distribution) bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any distribution payment or
payments on Series A Preferred Units that may be in arrears.

<PAGE>

f. Except as provided in the immediately preceding paragraph, unless full
cumulative distributions on the Series A Preferred Units have been or
contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for payment for all past distribution
periods and the then current distribution period, no distributions (other
than in Partnership Units or other Units ranking junior to the Series A
Preferred Units as to distributions and upon liquidation) shall be declared
or paid or set aside for payment, nor shall any other distribution be
declared or made, upon the Partnership Units or any other Units of the
Partnership ranking junior to or on a parity with the Series A Preferred
Units as to distributions or upon liquidation, nor shall any Partnership
Units, or any other Units of the Partnership ranking junior to or on a
parity with the Series A Preferred Units as to distributions or upon
liquidation be redeemed, purchased or otherwise acquired for any
consideration (or any monies be paid to or made available for a sinking
fund for the redemption of any such shares) by the Partnership (except by
conversion into or exchange for other Units of the Partnership ranking
junior to the Series A Preferred Units as to distributions and upon
liquidation)

g. Holders of the Series A Preferred Units shall not be entitled to any
distribution, whether payable in cash, property or shares in excess of full
cumulative distributions on the Series A Preferred Units as described
above. Any distribution payment made on the Series A Preferred Units shall
first be credited against the earliest accrued but unpaid distribution due
with respect to such shares that remains payable.

5. LIQUIDATION PREFERENCE.

a. Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Partnership, the holders of Series A Preferred Units
then outstanding are entitled to be paid out of the assets of the
Partnership legally available for distribution to its unitholders a
liquidation preference of $25.00 per share, plus an amount equal to any
accrued and unpaid distributions to the date of payment, before any
distribution of assets is made to holders of Partnership Units or any other
class or series of Units of the Partnership that ranks junior to the Series
A Preferred Units as to liquidation rights.

b. In the event that, upon such voluntary or involuntary liquidation,
dissolution or winding up, the available assets of the Partnership are
insufficient to pay the amount of the liquidating distributions on all
outstanding Series A Preferred Units and the corresponding amounts payable
on all shares of other classes or series of Units of the Partnership
ranking on a parity with the Series A Preferred Units in the distribution
of assets, then the holders of the Series A Preferred Units and all other
such classes or series of Units shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions
to which they would otherwise be respectively entitled.

c. After payment of the full amount of the liquidating distributions to which
they are entitled, the holders of Series A Preferred Units will have no
right or claim to any

<PAGE>

of the remaining assets of the Partnership.

d. Written notice of any such liquidation, dissolution or winding up of the
Partnership, stating the payment date or dates when, and the place or
places where, the amounts distributable in such circumstances shall be
payable, shall be given by first class mail, postage pre-paid, not less
than 30 nor more than 60 days prior to the payment date stated therein, to
each record holder of the Series A Preferred Units (other than the General
Partner) at the respective addresses of such holders as the same shall
appear on the unit transfer records of the Partnership.

e. In determining whether a distribution (other than upon voluntary or
involuntary liquidation), by distribution, redemption or other acquisition
of units of the Partnership or otherwise, is permitted under Delaware law,
amounts that would be needed, if the Partnership were to be dissolved at
the time of the distribution, to satisfy the preferential rights upon
dissolution of holders of Series A Preferred Units will not be added to the
Partnership's total liabilities.

6. REDEMPTION.

a. RIGHT OF OPTIONAL REDEMPTION. The Series A Preferred Units are
not redeemable prior to December 16, 2003. On and after
December 16, 2003, the Partnership, at its option and upon not
less than 30 nor more than 60 days written notice, may redeem the
Series A Preferred Units, in whole or in part, at any time or
from time to time, for cash at a redemption price of $25.00 per
Series A Preferred Unit, plus all accrued and unpaid
distributions thereon to the date fixed for redemption (except as
provided in Section 5(c) below), without interest. If less than
all of the outstanding Series A Preferred Units are to be
redeemed, the Series A Preferred Units to be redeemed shall be
selected pro rata (as nearly as may be practicable without
creating fractional units) or by any other equitable method
determined by the Partnership.

<PAGE>

b. LIMITATIONS ON REDEMPTION.

i. The redemption price of the Series A Preferred Units (other
than the portion thereof consisting of accrued and unpaid
distributions) is payable solely out of the contribution to
the Partnership by GLREIT of the sale proceeds of other
shares of beneficial interest of GLREIT, which may include
other series of Preferred Shares, and from no other source.
For purposes of the preceding sentence, "shares of
beneficial interest" means any equity securities (including
Common Shares and Preferred Shares), shares, interest,
participation or other ownership interests (however
designated) and any rights (other than debt securities
convertible into or exchangeable for equity securities) or
options to purchase any of the foregoing.

ii. Unless full cumulative distributions on all Series A
Preferred Units shall have been or contemporaneously are
declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past
distribution periods and the then current distribution
period, no Series A Preferred Units shall be redeemed unless
all outstanding Series A Preferred Units are simultaneously
redeemed, and the Partnership shall not redeem any Series A
Preferred Units (except by exchange for Units of the
Partnership ranking junior to the Series A Preferred Units
as to distributions and upon liquidation); PROVIDED,
HOWEVER, that the foregoing will not prevent the redemption
of Series A Preferred Units pursuant to a purchase or
exchange offer made on the same terms to holders of all
outstanding Series A Preferred Units.

c. RIGHTS TO DISTRIBUTIONS ON SHARES CALLED FOR REDEMPTION.
Immediately prior to any redemption of Series A Preferred Units,
the Partnership shall pay, in cash, any accumulated and unpaid
distributions through the redemption date, unless a redemption
date falls after a Series A Partnership Record Date and prior to
the corresponding Series A Partnership Distribution Payment Date,
in which case each holder of Series A Preferred Units at the
close of business on such Series A Partnership Record Date shall
be entitled to the distribution payable on such shares on the
corresponding Series A Partnership Distribution Payment Date
notwithstanding the redemption of such shares before such Series
A Partnership Distribution Payment Date. Except as provided
above, the Partnership will make no payment or allowance for
unpaid distributions, whether or not in arrears, on Series A
Preferred Units that are redeemed.

<PAGE>

d. PROCEDURES FOR REDEMPTION.

i. Notice of redemption will be mailed by the Partnership,
postage prepaid, not less than 30 nor more than 60 days
prior to the redemption date, addressed to the respective
holders of record of the Series A Preferred Units (other
than the General Partner) to be redeemed at their respective
addresses as they appear on the unit transfer records of the
Partnership. No failure to give such notice or any defect
therein or in the mailing thereof shall affect the validity
of the proceedings for the redemption of any Series A
Preferred Units except as to the holder to whom notice was
defective or not given.

ii. Such notice shall state: (A) the redemption date; (B) the
redemption price; (C) the number of Series A Preferred Units
to be redeemed; (D) the place or places where the Series A
Preferred Units are to be surrendered for payment of the
redemption price; and (E) that distributions on the units to
be redeemed will cease to accrue on such redemption date.
If less than all of the Series A Preferred Units held by any
holder are to be redeemed, the notice mailed to such holder
shall also specify the number of Series A Preferred Units
held by such holder to be redeemed.

iii. If notice of redemption of any Series A Preferred Units has
been given and if the funds necessary for such redemption
have been set aside by the Partnership in trust for the
benefit of the holders of any Series A Preferred Units so
called for redemption, then from and after the redemption
date distributions will cease to accrue on such Series A
Preferred Units, such Series A Preferred Units shall no
longer be deemed outstanding and all rights of the holders
of such units will terminate, except the right to receive
the redemption price. Holders of Series A Preferred Units
to be redeemed shall surrender such Series A Preferred Units
at the place designated in such notice and, upon surrender
in accordance with said notice of the certificates
evidencing Series A Preferred Units so redeemed (properly
endorsed or assigned for transfer, if the Partnership shall
so require and the notice shall so state), such Series A
Preferred Units shall be redeemed by the Partnership at the
redemption price plus any accrued and unpaid distributions
payable upon such redemption. In case less than all the
Series A Preferred Units evidenced by any such certificate
are redeemed, a new certificate or certificates shall be
issued

<PAGE>

evidencing any unredeemed Series A Preferred Units without
cost to the holder thereof.

iv. The deposit of funds with a bank or trust corporation for
the purpose of redeeming Series A Preferred Units shall be
irrevocable except that:

(A) the Partnership shall be entitled to receive from such
bank or trust corporation the interest or other
earnings, if any, earned on any money so deposited in
trust, and the holders of any shares redeemed shall
have no claim to such interest or other earnings; and

(B) any balance of monies so deposited by the Partnership
and unclaimed by the holders of the Series A Preferred
Units entitled thereto at the expiration of two years
from the applicable redemption dates shall be repaid,
together with any interest or other earnings thereon,
to the Partnership, and after any such repayment, the
holders of the shares entitled to the funds so repaid
to the Partnership shall look only to the Partnership
for payment without interest or other earnings.

7. The Series A Preferred Units are not convertible into or exchangeable
for any other property or securities of the Partnership.

8. Except as set forth above, no other provision of the Partnership
Agreement shall be affected, amended or modified except to the extent necessary
to conform to the above amendment. Unless defined herein, all capitalized terms
used herein shall have the definitions provided to such terms in the Partnership
Agreement.

9. The foregoing amendment has been approved by GLREIT, in its capacity
as the General Partner of the Partnership without the consent of the Limited
Partners, in accordance with the provisions of Section 13.1 of the Partnership
Agreement.

[Signature Page Follows]

<PAGE>

IN WITNESS WHEREOF, GLREIT has executed this Fourth Amendment to the
Partnership Agreement as of the date first above written.

GREAT LAKES REIT

By: James Hicks
------------------------------
Name: James Hicks
Title: Senior Vice President

<PAGE>

EXHIBIT 10.7

SHARE PURCHASE OPTION AGREEMENT

This Share Purchase Option Agreement ("Agreement") is entered into as of
the 18th day of November, 1998 between Great Lakes REIT, ("GLR"), a Maryland
real estate investment trust whose principal place of business is Oak Brook,
Illinois, and ________ ("Employee").

W I T N E S S E T H:

WHEREAS, on November 18, 1998 the Compensation Committee of the Board of
Trustees acting on behalf of the Board of Trustees approved the grant of share
purchase options to certain GLR employees, and

WHEREAS, on February 4, 1999 the Board of Trustees reaffirmed the November
18, 1998 grant and specified the grant of certain share purchase options to
Employee as of November 18, 1998, and

WHEREAS, certain share purchase options granted pursuant to the Incentive
Plan are intended to qualify as "Incentive Stock Options"; and

WHEREAS, GLR desires to compensate Employee by granting an option under the
Incentive Plan to purchase certain GLR common shares of beneficial interest in
order to provide Employee with an added incentive to increase the financial well
being of GLR; and

WHEREAS, Employee is a key employee of GLR or one of its subsidiaries;

NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties agree as follows:

1. GRANT OF OPTION. GLR hereby grants to Employee an option ("Option") to
purchase up to _________ common shares of beneficial interest, $.01 par value
("Common Shares"), to be issued as fully paid and non-assessable upon the
exercise hereof and payment therefor, during the following periods and subject
to the following conditions:

(a) During the period commencing November 18, 1999 (12 months from
the date of grant) and terminating November 17, 2008 (ten years from the date of
the grant), Employee may exercise the Option to purchase up to ________ (one
third) of the Common Shares covered by the Option;

(b) During the period commencing November 18, 2000 (twenty-four
months from the date of the grant) and terminating November 17, 2008 (ten years
from the date of the grant), Employee may exercise the Option to purchase up to
an additional ________ (one third) of the Common Shares covered by the Option;
and

<PAGE>

(c) During the period commencing November 18, 2001 (thirty-six months
from the date of the grant) and terminating November 17, 2008 (ten years from
the date of the grant), Employee may exercise the Option to purchase up to an
additional ________ (one third) of the Common Shares covered by the Option; and

(d) Of the _______ Common Shares identified in paragraph 1(a) no
shares shall be treated as subject to an Incentive Stock Option, and _______
shares shall be subject to a non-qualified option. Of the _______ Common Shares
identified in paragraph 1(b) ______ shares shall be treated as subject to an
Incentive Stock Option, and ________ Common Shares shall be subject to a non-
qualified option. Of the _______ Common Shares identified in paragraph 1(c)
________ shares shall be treated as subject to an Incentive Stock Option, and
______ Common Shares shall be subject to a non-qualified option

Notwithstanding anything herein to the contrary, and except as provided in
paragraph 4 hereof, the Option and all rights granted herein shall terminate and
become null and void upon the expiration of ten years from the date of the grant
(such period is hereinafter referred to as the "Term").

2. EXERCISE OF OPTION. The Option may be exercised by written notice
delivered to the Secretary of GLR at the GLR principal offices, stating that
Employee desires to exercise the Option and stating further the number of Common
Shares with respect to which the Option is being exercised. In no case may the
Option be exercised for a fraction of a Common Share. The purchase price of the
Common Shares with respect to which the Option is being exercised shall be paid
(i) in cash, or (ii) at the discretion of GLR, by delivering Common Shares
already owned by Employee, or (iii) a combination of (i) and (ii), and shall be
paid in full within three (3) business days after delivery of the Notice of
Exercise. Promptly after receipt of the Notice of Exercise and payment, GLR, or
its transfer agent, shall deliver to Employee a certificate representing the
Common Shares purchased. If any law or regulation requires GLR to take any
action with respect to the Common Shares, then the date for the delivery of such
Common Shares shall be extended for the period necessary to take such action.

3. OPTION PRICE. The option price of the Common Shares shall be $16.25
per share, which price is not less than 100% of the fair market value of GLR's
Common Shares on the date of the grant.

4. CONDITIONS UPON RIGHT TO EXERCISE.

(a) EMPLOYMENT AT TIME OF EXERCISE. Except as provided in paragraph
4(b), below, at the time of any exercise of the Option, Employee must be an
employee of GLR or its subsidiary.

(b) TERMINATION OF EMPLOYMENT.

(i) GENERAL. All of the unexercised rights of Employee under
the Option shall lapse if Employee's employment with GLR or a subsidiary is
terminated for any

<PAGE>

reason, except for leaves of absence approved in writing by the President of
GLR, or if such employment is terminated by reason of Employee's permanent total
disability, retirement or death, as described below. If Employee's employment
is terminated for any reason other than Employee's permanent total disability,
retirement or death, the vested portion of the Option which may be exercised
pursuant to Section 1 hereof may be exercised by Employee at any time or times
in whole or in part during the three-month period after such termination to the
extent such three-month period is included in the remainder of the Term.

(ii) DISABILITY. If the employment of Employee with GLR or a
subsidiary is terminated by reason of Employee's permanent total disability and
Employee has been in the employ of either GLR or a subsidiary continuously from
the date hereof until such termination (except for leaves of absence approved in
writing by the President of GLR), the vested portion of the Option pursuant to
Section 1 hereof may be exercised by Employee at any time or times in whole or
in part during the one year period after such termination, to the extent such
one year period is included in the remainder of the Term.

(iii) RETIREMENT. If the employment of Employee with GLR or a
subsidiary is terminated by reason of Employee's retirement and Employee has
been in the employ of either GLR or a subsidiary continuously from the date
hereof until such retirement (except for leaves of absence approved in writing
by the President of GLR), the vested portion of the Option pursuant to Section 1
hereof may be exercised by Employee at any time or times in whole or in part
during the three-month period after such retirement to the extent that such
three-month period is included in the remainder of the Term.

(iv) DEATH. If the employment of Employee with GLR or a
subsidiary is terminated by reason of Employee's death and Employee has been in
the employ of either GLR or a subsidiary continuously from the date hereof until
Employee's death (except for leaves of absence approved in writing by the
President of GLR), the vested portion of the Option pursuant to Section 1 hereof
may be exercised by the legal representative of Employee, or by such of her
heirs, legatees or beneficiaries to whom the Option devolves, at any time or
times in whole or in part during the one year period from the date of death of
Employee, to the extent that such one year period is included in the remainder
of the Term.

(c) CHANGE IN CONTROL. In the event of a change in control of GLR,
as defined herein, Employee shall have the right to exercise this Option to
purchase all of the Common Shares subject to this Option Agreement immediately,
notwithstanding the provisions of paragraph 1. For purposes of this Agreement,
a change in control of GLR shall mean any of the following events:

(i) GLR is merged or consolidated or reorganized into or with
another corporation or other legal person, and as a result of such merger,
consolidation or reorganization less than a majority of the combined voting
power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
GLR Common Shares (as defined in the Incentive Plan) immediately prior to such
transaction;

<PAGE>

(ii) GLR sells or otherwise transfers all or substantially all
of its assets to any other corporation or other legal person, and less than a
majority of the combined voting power of the then-outstanding securities of such
corporation or person immediately after such sale or transfer is held in the
aggregate by the holders of GLR Common Shares immediately prior to such sale or
transfer;

(iii) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended, disclosing that any person (as the
term "Person" is used in Section 13(d)(3) or Section 14(d)(2) of the Securities
Exchange Act of 1934, as amended) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Securities Exchange Act of 1934, as amended) of
securities representing 20% or more of the Voting Power (as defined in the
Incentive Plan);

(iv) GLR files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934, as
amended, disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a change in control of GLR has or
may have occurred or will or may occur in the future pursuant to any then-
existing contract or transaction; or

(v) If during any period of two consecutive years, individuals
who at the beginning of any such period constitute the Trustees of GLR cease for
any reason to constitute at least a majority thereof, unless the election, or
the nomination for election by GLR's shareholders, of each Trustee of GLR first
elected during such period was approved by a vote of at least two-thirds of the
Trustees of GLR then still in office who were Trustees of GLR at the beginning
of any such period.

5. ADDITIONAL LIMITS ON RIGHT TO EXERCISE. If at any time the Board of
Trustees of GLR shall determine, in its discretion, that the listing,
registration or qualification of the Option or the Common Shares issuable or
transferable upon exercise of the Option upon any securities exchange or under
any state or federal law, or that the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with, the granting of the Option or in connection with the issuance or transfer
of Common Shares thereunder, the Option may not be exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Board of
Trustees of GLR. Unless at the time of any exercise of the Option there is, in
the opinion of GLR's counsel, a valid and effective registration statement under
the Securities Act of 1933, as amended, and an appropriate qualification and
registration under applicable state securities law, relating to the Common
Shares, Employee hereby agrees, upon exercise of the Option, to give a
representation that she is acquiring the Common Shares for her own account for
investment and not with a view to, or for sale in connection with, the resale or
distribution of any such Common Shares and shall give such other representations
and covenants to GLR as may, in the opinion of its counsel, be required. In the
event that any Common Shares issued is not registered, then Employee hereby
agrees that stop transfer instructions shall be issued to GLR's transfer agents
until such time as the Common Shares is registered and that the certificate
representing the Common Shares shall bear the following restrictive legend:

<PAGE>

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("ACT") AND MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM
UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE COMPANY THAT
REGISTRATION IS NOT REQUIRED.

6. NON-TRANSFERABILITY OF OPTION. The Option shall not be transferable
except, (i) to one or more trusts established solely for the benefit of one or
more members of the Employee's family or to one or more partnerships in which
the only partners are members of the Employee's family or to another entity
established by Employee for estate planning purposes, or (ii) by will or the
laws of descent and distribution. Employee or his/her assignee shall provide
the Company written notice of any such transfer, and any such transfer shall not
effect the conditions of the exercise of the Option except as otherwise noted
herein. During the lifetime of Employee the Option may be exercised only by
Employee or her legal representative if the Employee is disabled.

7. SHAREHOLDER RIGHTS AND ADJUSTMENTS TO COMMON SHARES. Employee shall
have no rights as a shareholder with respect to any Common Shares issuable or
transferable upon exercise of the Option until the date of issuance of a share
certificate to him for such Common Shares. Except as hereinafter provided, no
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such share certificate is issued and all
adjustments to the Common Shares by reason of a stock/share dividend, merger,
consolidation or otherwise, shall be made in accordance with the terms of the
Incentive Plan.

This Agreement shall not affect in any way the right or power of GLR to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure or to merge, consolidate, dissolve, liquidate, sell or
transfer all or any part of its business or assets. As noted in the Incentive
Plan, in the event the Company completes such a transaction to merge,
consolidate, dissolve, liquidate, sell or transfer all or any part of its
business or assets the Board of Trustees of GLR may, in its sole discretion,
provide adjustments to the number or kind of shares covered by the Options
granted hereunder.

8. TAX WITHHOLDING. GLR shall have the power to withhold, or require an
Employee or other person or entity receiving Common Shares under this Agreement
to remit to GLR an amount sufficient to satisfy federal, state, and local
withholding tax requirements on any Common Shares issued under this Agreement,
and GLR may defer issuance of Common Shares until such requirements are
satisfied. The Employee may elect (i) to have Common Shares otherwise issuable
under this Agreement withheld by GLR, or (ii) to deliver to GLR previously
acquired Common Shares, in each case have a Fair Market Value sufficient to
satisfy all or part of the Employee's (or other Common Shares recipient's)
estimated total federal, state and local tax obligation associated with the
transaction.

<PAGE>

9. PREMATURE DISPOSITION. If Employee disposes of Common Shares acquired
on the exercise of the Incentive Stock Options by sale or exchange either within
two (2) years after the date of the grant, or within one (1) year after the
acquisition of such Common Shares, Employee shall notify GLR of such disposition
and of the amount realized upon such disposition.

10. SUCCESSORS AND ASSIGNS. The Option shall be binding in accordance with
its terms upon any successors of GLR and upon the heirs, executors,
administrators and successors of Employee.

11. GOVERNING LAW. This Agreement and the Option shall be governed by and
construed in accordance with the laws of the State of Illinois relating to
contracts made and to be performed in that State.

IN WITNESS WHEREOF, GLR and Employee have executed this Agreement as of the
day and year first above written.

GREAT LAKES REIT

By:
-----------------------------------------------------------------
Its:
-----------------------------------------------------------------

EMPLOYEE

-----------------------------------

<PAGE>

EXHIBIT 10.9

GREAT LAKES REIT
NON-QUALIFIED OPTION CERTIFICATE / INDEPENDENT TRUSTEE

This is to certify that on this 31st day of December, 1998, Great Lakes
REIT, a Maryland real estate investment trust (the "Company"), pursuant to the
amended and restated Great Lakes REIT Option Plan for Independent Trustees (the
"Plan"), hereby grants to Daniel E. Josephs (the "Trustee") an option to
purchase Five Thousand (5,000) common shares of beneficial interest, par value
$.01 per share ("Common Shares"), in the Company upon the terms and conditions
set forth herein. The Trustee and other individuals to whom an option or any
portion thereof has been granted or transferred hereunder may be referred to
herein as the "Optionholder" as necessary.

1. The purchase price, payable upon exercise of the option, shall be
Fifteen and 77.5/100 Dollars ($15.775) per share, subject to adjustment as
provided in paragraph 6 below.

2. The exercise of the option shall be subject to the following
conditions:

(a) The option shall become exercisable with respect to the total
number of shares subject to the option immediately after the date of the grant.
The Board administering the Plan may in its discretion accelerate the
exercisability of the option subject to such terms and conditions as it deems
necessary and appropriate. All or any part of the shares with respect to which
the right to purchase has accrued may be purchased at the time of such accrual
or at any time or times thereafter during the option period.

(b) The option may be exercised by giving written notice to the
Company, attention of the Secretary, specifying the number of shares to be
purchased, accompanied by the full purchase price for the shares to be purchased
either in cash or by check or by Common Shares or by a combination of such
methods of payment. At the time of any exercise of the option, the Company may,
if it shall determine it necessary or desirable for any reason, require the
Optionholder (or his heirs, legatees or legal representative, as the case may
be) as a condition upon the exercise thereof, to deliver to the Company a
written representation of present intention to purchase the shares for
investment and not for distribution. In the event such representation is
required to be delivered, an appropriate legend may be placed upon each
certificate delivered to the Optionholder upon his exercise of part or all of
the option and a stop transfer order may be placed with the Company's transfer
agent. The option shall also be subject to the requirement that, if at any time
the Company determines, in its discretion, that the listing, registration or
qualification of the shares subject to the option upon any securities exchange
or under any state or Federal law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a condition of, or in
connection with, the issue or purchase of shares thereunder, the option may not
be exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company.

3. The term of the option is ten (10) years, but is subject to earlier
expiration as provided in paragraph 5. The option thus is not exercisable to
any extent after the expiration of

<PAGE>

ten (10) years from the date of this option certificate, or after any earlier
expiration date that may be applicable under the terms of paragraph 5, unless
the Board extends the term of the option for such additional period as the
Board, in its discretion, determines, provided that in no event shall the
aggregate option period, including the original term of the option and any
extensions thereof, exceed ten (10) years.

4. The options shall not be transferable except: (i) to an Independent
Trustee's employer or an affiliate of such employer, (ii) to one or more trusts
established solely for the benefit of one or more members of the Independent
Trustee's family or to one or more partnerships in which the only partners are
members of the Independent Trustee's family or (iii) by will or the laws of
descent and distribution. An Independent Trustee or his/her assignee shall
provide the Company written notice of any such transfer, and any such transfer
shall not effect the conditions of the exercise of the Option except as
otherwise noted herein or in the Plan.

5. In the event the Trustee is removed by a vote of the shareholders "for
cause" under the Company's Amended and Restated Declaration of Trust and Bylaws
the term of any option granted hereunder shall toll, and all rights to purchase
shares pursuant thereto must be exercised within six months from the termination
date.

6. The number of shares subject to the option shall be adjusted as
follows: (a) in the event that the Company's outstanding number of Common Shares
is changed by any share dividend, share split or combination of shares, the
number of shares subject to the option shall be proportionately adjusted; (b) in
the event of any merger, consolidation or reorganization of the Company with any
other trust, corporation or corporations, there shall be substituted on an
equitable basis as determined by the Board for each Common Share then subject to
the option, the number and kind of shares of stock or other securities to which
the holders of beneficial interest of the Company will be entitled pursuant to
the transaction; and (c) in the event of any other relevant change in the
capitalization of the Company, the Board shall provide for an equitable
adjustment in the number of shares of beneficial interest then subject to the
option. In the event of such adjustment, the purchase price per share shall be
proportionately adjusted.

7. Notwithstanding any other provisions in the Plan, during the period of
thirty (30) days after any "change in control," each Optionholder shall have the
right to require the Company to purchase from him any option granted under the
Plan and held by him at a purchase price equal to (a) the excess of the "Fair
Market Value" (as defined in the Plan) per share over the option price (b)
multiplied by the number of option shares specified by him for purchase in a
written notice to the Company, attention of the Secretary. The amount payable
to each Optionholder by the Company shall be in cash or by certified check and
shall be reduced by any taxes required to be withheld.

8. The granting of this option shall not modify in any way the terms and
conditions of the Trustee Agreement (if any).

9. The Optionholder(s) shall not have any rights of shareholders with
respect to the shares of beneficial interest subject to the option until such
shares of beneficial interest are actually issued upon exercise of the option.

<PAGE>

IN WITNESS WHEREOF, this instrument has been executed by the duly
authorized officer of the Company on the date above written.

Great Lakes REIT

By: , Secretary
---------------------------
Richard L. Rasley

<PAGE>

GREAT LAKES REIT
NON-QUALIFIED OPTION CERTIFICATE / INDEPENDENT TRUSTEE

This is to certify that on this 31st day of December, 1998, Great Lakes
REIT, a Maryland real estate investment trust (the "Company"), pursuant to the
amended and restated Great Lakes REIT Option Plan for Independent Trustees (the
"Plan"), hereby grants to Daniel P. Kearney (the "Trustee") an option to
purchase Five Thousand (5,000) common shares of beneficial interest, par value
$.01 per share ("Common Shares"), in the Company upon the terms and conditions
set forth herein. The Trustee and other individuals to whom an option or any
portion thereof has been granted or transferred hereunder may be referred to
herein as the "Optionholder" as necessary.

1. The purchase price, payable upon exercise of the option, shall be
Fifteen and 77.5/100 Dollars ($15.775) per share, subject to adjustment as
provided in paragraph 6 below.

2. The exercise of the option shall be subject to the following
conditions:

3. The term of the option is ten (10) years, but is subject to earlier
expiration as provided in paragraph 5. The option thus is not exercisable to
any extent after the expiration of ten (10) years from the date of this option
certificate, or after any earlier expiration date that may

<PAGE>

be applicable under the terms of paragraph 5, unless the Board extends the term
of the option for such additional period as the Board, in its discretion,
determines, provided that in no event shall the aggregate option period,
including the original term of the option and any extensions thereof, exceed ten
(10) years.

8. The granting of this option shall not modify in any way the terms and
conditions of the Trustee Agreement (if any).

<PAGE>

IN WITNESS WHEREOF, this instrument has been executed by the duly
authorized officer of the Company on the date above written.

Great Lakes REIT

By: , Secretary
--------------------------
Richard L. Rasley

<PAGE>

GREAT LAKES REIT
NON-QUALIFIED OPTION CERTIFICATE / INDEPENDENT TRUSTEE

This is to certify that on this 31st day of December, 1998, Great Lakes
REIT, a Maryland real estate investment trust (the "Company"), pursuant to the
amended and restated Great Lakes REIT Option Plan for Independent Trustees (the
"Plan"), hereby grants to Edward Lowenthal (the "Trustee") an option to purchase
Five Thousand (5,000) common shares of beneficial interest, par value $.01 per
share ("Common Shares"), in the Company upon the terms and conditions set forth
herein. The Trustee and other individuals to whom an option or any portion
thereof has been granted or transferred hereunder may be referred to herein as
the "Optionholder" as necessary.

1. The purchase price, payable upon exercise of the option, shall be
Fifteen and 77.5/100 Dollars ($15.775) per share, subject to adjustment as
provided in paragraph 6 below.

2. The exercise of the option shall be subject to the following
conditions:

<PAGE>

8. The granting of this option shall not modify in any way the terms and
conditions of the Trustee Agreement (if any).

<PAGE>

IN WITNESS WHEREOF, this instrument has been executed by the duly
authorized officer of the Company on the date above written.

Great Lakes REIT

By: , Secretary
--------------------------
Richard L. Rasley

<PAGE>

GREAT LAKES REIT
NON-QUALIFIED OPTION CERTIFICATE / INDEPENDENT TRUSTEE

This is to certify that on this 31st day of December, 1998, Great Lakes
REIT, a Maryland real estate investment trust (the "Company"), pursuant to the
amended and restated Great Lakes REIT Option Plan for Independent Trustees (the
"Plan"), hereby grants to Donald E. Phillips (the "Trustee") an option to
purchase Five Thousand (5,000) common shares of beneficial interest, par value
$.01 per share ("Common Shares"), in the Company upon the terms and conditions
set forth herein. The Trustee and other individuals to whom an option or any
portion thereof has been granted or transferred hereunder may be referred to
herein as the "Optionholder" as necessary.

1. The purchase price, payable upon exercise of the option, shall be
Fifteen and 77.5/100 Dollars ($15.775) per share, subject to adjustment as
provided in paragraph 6 below.

2. The exercise of the option shall be subject to the following
conditions:

<PAGE>

8. The granting of this option shall not modify in any way the terms and
conditions of the Trustee Agreement (if any).

<PAGE>

IN WITNESS WHEREOF, this instrument has been executed by the duly
authorized officer of the Company on the date above written.

Great Lakes REIT

By: , Secretary
--------------------------
Richard L. Rasley

<PAGE>

GREAT LAKES REIT
NON-QUALIFIED OPTION CERTIFICATE / INDEPENDENT TRUSTEE

This is to certify that on this 31st day of December, 1998, Great Lakes
REIT, a Maryland real estate investment trust (the "Company"), pursuant to the
amended and restated Great Lakes REIT Option Plan for Independent Trustees (the
"Plan"), hereby grants to ______________ (the "Trustee") an option to purchase
Five Thousand (5,000) common shares of beneficial interest, par value $.01 per
share ("Common Shares"), in the Company upon the terms and conditions set forth
herein. The Trustee and other individuals to whom an option or any portion
thereof has been granted or transferred hereunder may be referred to herein as
the "Optionholder" as necessary.

1. The purchase price, payable upon exercise of the option, shall be
Fifteen and 77.5/100 Dollars ($15.775) per share, subject to adjustment as
provided in paragraph 6 below.

2. The exercise of the option shall be subject to the following
conditions:

<PAGE>

8. The granting of this option shall not modify in any way the terms and
conditions of the Trustee Agreement (if any).

<PAGE>

IN WITNESS WHEREOF, this instrument has been executed by the duly
authorized officer of the Company on the date above written.

Great Lakes REIT

By: , Secretary
--------------------------
Richard L. Rasley

<PAGE>

EXHIBIT 10.14

GREAT LAKES REIT
LIMITED PURPOSE EMPLOYEE LOAN PROGRAM
PROMISSORY NOTE

$ Date
------------------------ -------------

_____________ ("Maker") in consideration of the receipt of $_____________
from Great Lakes REIT ("GLR") promises to pay to the order of GLR and its
successors and assigns, the sum _________________ and 00/100 Dollars
($__________.00) on____________, together with interest on the outstanding
principal balance on the tenth (10th) day of each calendar quarter, at a per
annum rate which is the sum of the rate GLR pays on its borrowed funds from its
principal lender, such interest rate being adjusted quarterly.

All sums due pursuant to this Note shall become due and payable on earlier
of: (1) the date sixty (60) days following the day the Maker ceases to be an
employee of GLR; or (2) the date specified in the first paragraph of this Note.
Payment of the principal, interest and any related costs of collection is
secured by a pledge of the Maker's shares of GLR Common Shares of Beneficial
Interest.

No delay on the part of GLR in the exercise of any power or right under
this Note, or under any other instrument executed pursuant hereto, shall operate
as a waiver thereof, nor shall a single or partial exercise of any such power or
right preclude any other or further exercise thereof or the exercise of any
other right or power hereunder.

All payments hereunder shall be applied first to interest on the unpaid
balance at the rate herein specified and then to principal.

All payments of principal and interest on this Note shall be payable in
lawful money of the United States of America. Principal and interest shall be
paid to GLR at its principal office in Illinois, or at such other place as the
holder of this Note may designate in writing to the undersigned. This Note may
be prepaid in whole or in part at any time or from time to time without premium
or penalty.

Presentment for payment, notice of dishonor, protest and notice of protest
are hereby waived. Maker will pay all reasonable attorneys' fees and other
costs of collection incurred by GLR to collect any unpaid sums due and owing
pursuant to this Note.

This Note shall be binding upon the Maker and his/her successors and
assigns.

By:
------------------------------
Maker

<PAGE>

EXHIBIT 21.1

SUBSIDIARIES OF THE COMPANY

Great Lakes REIT, L.P. a Delaware limited partnership.

GLR No. 1, Inc. an Illinois corporation.

GLR No. 2, Inc. an Illinois corporation.

GLR No. 3, a Maryland real estate investment trust.

<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements Form
S-3 No. 333-40129, Form S-3 No. 333-49499, Form S-8 NO. 333-56617 and Form S-8
No. 333-56619 of Great Lakes REIT of our report dated January 29, 1999, with
respect to the consolidated financial statements and schedule of Great Lakes
REIT included in the Annual Report (Form 10-K) for the year ended December 31,
1998.

Ernst & Young LLP

Chicago, Illinois
March 18, 1999

<PAGE>

EXHIBIT 24.1

POWER OF ATTORNEY

The undersigned, as a trustee of Great Lakes REIT, Inc. (the "Company"),
does hereby constitute and appoint Richard A. May, Richard L. Rasley and James
Hicks, and each of them, as his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998 and any and all amendments
hereto, and to file the same, with exhibits and schedules thereto, and other
documents therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact, full power and authority to do and perform each and every
act and thing necessary or desirable to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, thereby
ratifying and confirming all that said attorney-in-fact, or his substitute, may
lawfully do or cause to be done by virtue hereof.

IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of March,
1999.

/s/ James J. Brinkerhoff
------------------------
James J. Brinkerhoff

/s/ Daniel E. Josephs
------------------------
Daniel E. Josephs

/s/ Edward Lowenthal
------------------------
Edward Lowenthal

/s/ Daniel P. Kearney
--------------------------
Daniel P. Kearney

/s/ Donald E. Phillips
------------------------
Donald E. Phillips

<PAGE>
<ARTICLE> 5

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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
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