SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
[X] Current Report Pursuant to Section 13 OR
15(d) of the Securities Exchange Act of
1934
November 24, 1999
(Date of Report)
Commission file number: 1-14307
Great Lakes REIT
(Exact name of Registrant as specified in its Charter)
Maryland 36-4238056
(State or other jurisdiction (I.R.S. Employer identification no.)
of incorporation organization)
823 Commerce Drive, Suite 300, Oak Brook, IL
60523 (Address of principal executive offices)
(Zip Code)
(630) 368 - 2900
(Registrant's telephone number, including area code)
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 / /
<PAGE>
Item 5. OTHER MATTERS
On May 11, 1999, Great Lakes REIT through Great Lakes REIT, L.P. (collectively
the "Company") acquired Burlington Office Center located in Ann Arbor, Michigan
from an unaffiliated third party for approximately $20,300,000, including
$600,000 for capital reserves. Funds for the purchase came from a borrowing
under the Company's unsecured line of credit and the net disposition proceeds
from the sale of 1675 Holmes Road, Elgin, Illinois.
On September 1, 1998, the Company acquired Lisle Executive Center located in
Lisle, Illinois from an unaffiliated third party for approximately $18,200,000.
Funds for the purchase came from a borrowing under the Company's unsecured line
of credit.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The pro forma financial statements are attached as Exhibit A.
The financial statements for Lisle Executive Center are attached as Exhibit B.
The financial statements for the Burlington Office Center are attached as
Exhibit C.
The consent of Ernst & Young LLP is filed as Exhibit D.
No information is required under Items 1,2,3,4, and 6, and these items have
therefore been omitted.
By: /s/ James Hicks
James Hicks, Chief Financial Officer and Treasurer
<PAGE>
<TABLE>
<CAPTION>
Exhibit A
Great Lakes REIT
Consolidated Pro Forma Statement of Income(unaudited)
For the Year Ended December 31, 1998
(Dollars in Thousands, except per share data)
12/31/98 Lisle Burlington Pro Forma
As Reported (1) Acquisition (2) Acquisition (2) 12/31/98
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues
Rental $ 62,527 1,501 2,691 $ 66,719
Reimbursements 17,141 301 320 17,762
Interest and other 1,230 26 24 1,280
----------------------------------------------------------------------------
Total revenues 80,898 1,828 3,035 85,761
----------------------------------------------------------------------------
Expenses
Real estate taxes 12,634 253 465 13,352
Other property operating 21,018 469 853 22,340
General and administrative 4,958 4,958
Interest 12,339 795 (3) 1,136 (3) 14,270
Depreciation and amortization 13,092 235 (4) 411 (4) 13,738
----------------------------------------------------------------------------
Total expenses 64,041 1,752 2,865 68,658
----------------------------------------------------------------------------
Income before gain on sale of properties 16,857 76 170 17,103
Gain on sale of properties
----------------------------------------------------------------------------
Income before allocation to minority interests 16,857 76 170 17,103
Minority interests 61 61
----------------------------------------------------------------------------
Net income 16,796 76 170 17,042
Income allocated to preferred shares 163 163
----------------------------------------------------------------------------
Net income applicable to common shares $ 16,633 76 170 $ 16,879
============================================================================
Earnings per common share - basic $ 0.99 $ 1.01
=============== ================
Weighted average common shares outstanding - basic 16,793,410 16,793,410
=============== ================
Diluted earnings per common share $ 0.98 $ 0.99
=============== ================
Weighted average common shares outstanding - diluted 16,974,311 16,974,311
=============== ================
</TABLE>
See accompanying notes to pro forma consolidated statement of income
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. Represents the historical results of the Company.
2. Represents the unaudited historical results of operations of Lisle
Executive Center from January 1, 1998 to September 1, 1998 and Burlington
Office Center for calendar 1998.
3. Interest expense ($795) for Lisle Executive Center is computed on the
amount borrowed ($17,750) on the Company's unsecured line of credit to
acquire the property for the period January 1, 1998 to September 1, 1998 at
6.72% per annum, the average interest rate for the period.
Interest expense ($1,136) for Burlington Office Center is computed on the
amount borrowed ($16,900) on the Company's unsecured line of credit to
acquire the property for the period January 1, 1998 to December 31, 1998 at
6.72% per annum, the average interest rate for the period.
4. Depreciation is computed on a straight-line basis over 40 years for the
period January 1, 1998 to September 1, 1998 based on the purchase price
paid by the Company for Lisle Executive Center.
Depreciation is computed on a straight-line basis over 40 years for the
period January 1, 1998 to December 31, 1998 based on the purchase price
paid by the Company for Burlington Office Center.
<PAGE>
<TABLE>
<CAPTION>
Great Lakes REIT
Consolidated Pro Forma Statement of Income (Unaudited)
For the Nine Months Ended September 30, 1999
(Dollars in Thousands, except per share data)
9/30/99 Burlington Pro Forma
As Reported (1) Acquisition (2) 9/30/99
<S> <C> <C> <C> <C> <C>
Revenues
Rental $ 54,864 1,083 $ 55,947
Reimbursements 15,081 125 15,206
Interest and other 996 9 1,005
-----------------------------------------------------
Total revenues 70,941 1,217 72,158
-----------------------------------------------------
Expenses
Real estate taxes 11,828 168 11,996
Other property operating 18,377 304 18,681
General and administrative 3,424 3,424
Interest 10,349 389 (3) 10,738
Depreciation and amortization 11,812 154 (4) 11,966
-----------------------------------------------------
Total expenses 55,790 1,015 56,805
-----------------------------------------------------
Income before gain on sale of properties 15,151 202 15,353
Gain on sale of properties 8,061 8,061
-----------------------------------------------------
Income before allocation to minority interests 23,212 23,414
Minority interests 79 79
-----------------------------------------------------
Net income 23,133 23,335
Income allocated to preferred shares 2,742 2,742
-----------------------------------------------------
Net income applicable to common shares $ 20,391 $ 20,593
=====================================================
Earnings per common share - basic $ 1.23 $ 1.25
============== ===============
Weighted average common shares outstanding - basic 16,529,085 16,529,085
============== ===============
Diluted earnings per common share $ 1.23 $ 1.24
============== ===============
Weighted average common shares outstanding - diluted 16,609,017 16,609,017
============== ===============
</TABLE>
See accompanying notes to pro forma consolidated statement of income
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. Represents the historical results of the Company.
2. Represents the unaudited historical results of operations of Burlington
Office Center for the period January 1, 1999 to May 11, 1999.
3. Interest expense for Burlington Office Center ($389) is computed on the
amount borrowed ($16,900) on the Company's unsecured line of credit to
acquire the property for the period January 1, 1999 to May 11, 1999 at
6.37% per annum, the average interest rate during the period.
4. Depreciation is computed on a straight-line basis over 40 years for the
period January 1, 1999 to May 11, 1999 based on the purchase price paid by
the Company for Burlington Office Center.
<PAGE>
Exhibit B
Statements of Revenue and Certain Expenses
Lisle Executive Center
Year Ended December 31, 1997
with Report of Independent Auditors
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Great Lakes REIT
We have audited the accompanying Statement of Revenue and Certain Expenses of
Lisle Executive Center (the Property) for the year ended December 31, 1997. This
Statement of Revenue and Certain Expenses is the responsibility of the
Property's management. Our responsibility is to express an opinion on the
Statement of Revenue and Certain Expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Statement of Revenue and Certain Expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Statement of Revenue and Certain
Expenses. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the Statement of Revenue and Certain Expenses. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying Statement of Revenue and Certain Expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission, for inclusion in the Current Report on Form 8-K of Great
Lakes REIT as described in Note 2, and is not intended to be a complete
presentation of the Property's revenue and expenses.
In our opinion, the Statement of Revenue and Certain Expenses referred to above
presents fairly, in all material respects, the revenue and certain expenses
described in Note 2 of the Property for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
October 1, 1998
<PAGE>
Lisle Executive Center
Statements of Revenue and Certain Expenses
January 1, 1998
through
Year ended September 1, 1998
December 31, 1997 (Unaudited)
----------------- -----------
Revenue
Base rents $2,574,401 $1,501,081
Tenant reimbursements 397,228 300,913
Other income 34,675 25,973
----------------- -----------------
Total revenue 3,006,304 1,827,967
----------------- -----------------
Expenses
Real estate taxes 318,136 253,038
General operating 125,706 122,362
Utilities 226,176 125,632
Cleaning and landscaping 207,542 145,256
Repairs and maintenance 67,985 21,726
Management fee 87,917 53,694
----------------- -----------------
Total expenses 1,033,462 721,708
----------------- -----------------
Revenue in excess of certain expenses $1,972,842 $1,106,259
================= =================
See Accompanying Notes.
<PAGE>
Lisle Executive Center
Notes to Statements of Revenue and Certain Expenses
1. BUSINESS
The accompanying Statements of Revenue and Certain Expenses relate to the
operations of Lisle Executive Center (the Property), a six-story office building
located in Lisle, Illinois. The Property was acquired on September 1, 1998 by a
partnership controlled by Great Lakes REIT (Great Lakes).
At September 1, 1998 and December 31, 1997, the Property was 89% leased with
sixteen and seventeen tenants, respectively. At September 1, 1998 and December
31, 1997, two tenants and three tenants accounted for approximately 54% and 57%
of base rents, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Statements of Revenue and Certain Expenses were prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission, for inclusion in the Current Report on Form 8-K of Great
Lakes. The statements are not representative of the actual operations of the
Property for the periods presented nor indicative of future operations as
certain expenses, primarily depreciation and amortization, which may not be
comparable to the expenses expected to be incurred by Great Lakes in future
operations of the Property, have been excluded.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the Statements of Revenue and Certain Expenses in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the Statements of
Revenue and Certain Expenses. Actual results could differ from those estimates.
Unaudited Interim Statement
In the opinion of management, the interim financial statement reflects all
adjustments necessary for fair presentation of the results of the interim
period. All adjustments are of a normal, recurring nature.
3. RENTALS
The Property has entered into tenant leases that provide for tenants to share in
the operating expenses and real estate taxes in relation to their pro rata
basis, as defined.
4. MANAGEMENT AGREEMENT
During the periods from January 1, 1998 to September 1, 1998 and from January 1,
1997 to December 31, 1997, the Property was managed by a third-party management
company. The management agreement provided for management fees based on a flat
rate of 3% of gross monthly receipts, as defined.
<PAGE>
Exhibit C
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
BURLINGTON OFFICE CENTER
Year Ended December 31, 1998
with Report of Independent Auditors
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Great Lakes REIT
We have audited the accompanying Statement of Revenue and Certain Expenses of
Burlington Office Center (the Property) for the year ended December 31, 1998.
The Statement of Revenue and Certain Expenses is the responsibility of the
Property's management. Our responsibility is to express an opinion on the
Statement of Revenue and Certain Expenses based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the Statement of Revenue and Certain Expenses is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the Statement of Revenue and Certain
Expenses. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the Statement of Revenue and Certain Expenses. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying Statement of Revenue and Certain Expenses was prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission, for inclusion in the Current Report on Form 8-K of Great
Lakes REIT as described in Note 2, and is not intended to be a complete
presentation of the Property's revenue and expenses.
In our opinion, the Statement of Revenue and Certain Expenses referred to above
presents fairly, in all material respects, the revenue and certain expenses
described in Note 2 of the Property for the year ended December 31, 1998, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
September 24, 1999
<PAGE>
BURLINGTON OFFICE CENTER
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
January 1, 1999
Year ended through
December 31, May 11, 1999
1998 (Unaudited)
---------------- ---------------
REVENUE
Base rents $2,691,033 $1,082,702
Tenant reimbursements 319,917 125,115
Other income 23,595 9,371
---------------- ---------------
Total revenue 3,034,545 1,217,188
---------------- ---------------
EXPENSES
Real estate taxes 465,127 168,015
General operating 115,797 71,654
Utilities 268,187 73,085
Cleaning 147,978 66,556
Repairs and maintenance 197,658 36,136
Management fee 123,546 56,098
---------------- ---------------
Total expenses 1,318,293 471,544
---------------- ---------------
Revenue in excess of certain expenses $1,716,252 $745,644
================ ===============
See Accompanying Notes.
<PAGE>
BURLINGTON OFFICE CENTER
NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
1. BUSINESS
The accompanying Statements of Revenue and Certain Expenses relate to the
operations of Burlington Office Center (the Property), a three building office
park located in Ann Arbor, Michigan. The Property was acquired on May 11, 1999
by a partnership controlled by Great Lakes REIT (Great Lakes).
At May 11, 1999 and December 31, 1998, the Property was 92% and 95% leased with
thirty-four and thirty-five tenants, respectively. At May 11, 1999 and December
31, 1998, three tenants and two tenants accounted for approximately 41% and 26%
of base rents, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying Statements of Revenue and Certain Expenses were prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission, for inclusion in the Current Report on Form 8-K of Great
Lakes. The statements are not representative of the actual operations of the
Property for the periods presented nor indicative of future operations as
certain expenses, primarily depreciation and amortization, which may not be
comparable to the expenses expected to be incurred by Great Lakes in future
operations of the Property, have been excluded.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the Statements of Revenue and Certain Expenses in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the Statements of
Revenue and Certain Expenses. Actual results could differ from those estimates.
Unaudited Interim Statement
In the opinion of management, the interim financial statement reflects all
adjustments necessary for fair presentation of the results of the interim
period. All adjustments are of a normal, recurring nature.
3. RENTALS
The Property has entered into tenant leases that provide for tenants to share in
the operating expenses and real estate taxes in relation to their pro rata
basis, as defined.
4. MANAGEMENT AGREEMENT
During the periods from January 1, 1999 to May 11, 1999 and from January 1, 1998
to December 31, 1998, the Property was managed by a third-party management
company. The management agreement provided for management fees based on a flat
rate of 4% of gross monthly receipts, as defined.
5. RELATED PARTY TRANSACTIONS
For the period from January 1, 1999 through May 11, 1999 and for the year ended
December 31, 1998, the Property paid insurance premiums to an affiliate in the
amount of $10,750 and $7,679, respectively.
<PAGE>
Exhibit D
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 September 24, 1999, with
respect to the financial statements of Burlington Office Center included in the
Current Report (Form 8-K) for the year ended December 31, 1998.
Ernst & Young LLP
Chicago, Illinois
November 24, 1999
