GREAT LAKES REIT INC, S-11, 1997-02-28

GREAT LAKES REIT INC
S-11, 1997-02-28
REAL ESTATE

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 1997

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM S-11

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

GREAT LAKES REIT, INC.
(Exact Name of Registrant as Specified in its Governing Instruments)
------------------------

823 COMMERCE DRIVE, SUITE 300
OAK BROOK, ILLINOIS 60521
(630) 368-2900
(Address and phone number of principal executive offices)
------------------------

RICHARD L. RASLEY
EXECUTIVE VICE PRESIDENT,
SECRETARY AND GENERAL COUNSEL
GREAT LAKES REIT, INC.
823 COMMERCE DRIVE, SUITE 300
OAK BROOK, ILLINOIS 60521
(630) 368-2900
(Name, address and phone number of Agent for Service)
------------------------

Copies to:

David J. Lowery Robert E. King, Jr.
Timothy J. Melton Rogers & Wells
Jones, Day, Reavis & Pogue 200 Park Avenue
77 West Wacker Drive New York, New York 10166
Chicago, Illinois 60601-1692 (212) 878-8000
(312) 782-3939

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

APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share 6,555,000 $17.00 $111,435,000 $33,769
</TABLE>

(1) Includes 855,000 shares that the Underwriters have the option to purchase
solely to cover overallotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933 and based upon a
bona fide estimate of the maximum offering price.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION, DATED FEBRUARY 28, 1997 [LOGO]

5,700,000 SHARES
GREAT LAKES REIT, INC.
COMMON STOCK
---------------------

All of the shares of the Company's common stock (the "Common Stock") offered
hereby are being sold by the Company. To assist the Company in complying with
certain federal income tax requirements applicable to real estate investment
trusts ("REITs"), the Company's charter and bylaws contain certain restrictions
relating to the ownership and transfer of the Common Stock, including redemption
under certain circumstances. See "Capital Stock--Restrictions on Transfer."

Prior to the Offering, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be between
$15.00 and $17.00 per share. See "Underwriting" for information relating to the
factors to be considered in determining the initial public offering price. The
Company intends to apply for listing of the Common Stock on the New York Stock
Exchange.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK, INCLUDING:

- - Concentration of the Properties in the Midwest Region, particularly the
Chicago area, which increases the risk of the Company being adversely affected
by a downturn in the Midwest Region or Chicago area economies or suburban
office markets;

- - Real estate investment and property management risks, such as the need to
renew leases or relet space upon lease expirations, the instability of cash
flows and changes in the value of suburban office properties owned by the
Company due to economic and other conditions;

- - The lack of operating history of the Properties under the Company's management
(a number of the Properties have been owned for less than one year);

- - The possibility that the Company may not be able to refinance outstanding debt
upon maturity and that indebtedness might be refinanced on less favorable
terms; and the lack of limitations in the Company's organizational documents
on the amount of indebtedness which the Company may incur; and

- - Possible adverse effect on the market price of the Common Stock due to sales
of a substantial number of immediately transferable shares of currently
outstanding Common Stock, or the perception that such sales could occur.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
Underwriting
Price to Discounts Proceeds to
Public and Commissions(1) Company(2)
<S> <C> <C> <C>
Per Share......................................... $ $ $
Total(3).......................................... $ $ $
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting estimated expenses of $1,600,000 payable by the Company.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
855,000 additional shares of Common Stock on the same terms and conditions
as set forth above solely to cover overallotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
--------------------------

The shares of Common Stock offered by this Prospectus are offered by the
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and their counsel Rogers & Wells and to certain further conditions. It is
expected that delivery of the shares will be made at the offices of Lehman
Brothers Inc., New York, New York on or about , 1997.
--------------------------

LEHMAN BROTHERS

A.G. EDWARDS & SONS, INC.

SMITH BARNEY INC.

EVEREN SECURITIES, INC.
--------------------------

, 1997
<PAGE>
GRAPHICS

1. Pictures of:

<TABLE>
<S> <C>
- - 823 Commerce Drive--Before Renovation - Centennial Center
- - 823 Commerce Drive--After Renovation - Kensington Corporate Center
- - One Hawthorn Place - Long Lake Crossings
- - 1011 East Touhy Avenue - Court International II--Interior
- - Park Place VII--Interior - Court International II--Exterior
- - Park Place VII--Exterior - One Park Plaza
- - Princeton Hill Corporate Center--Interior
- - Princeton Hill Corporate Center--Exterior
- - 2800 River Road
</TABLE>

2. Maps of:

- Great Lakes Region with markets identified

- Close-up of Chicago area identifying Properties

3. Great Lakes REIT, Inc. logo

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
PROSPECTUS SUMMARY..................... 1
The Company.......................... 1
Recent Developments.................. 2
Risk Factors......................... 3
Business and Growth Strategies....... 4
The Properties....................... 6
Structure of the Company............. 7
The Offering......................... 8
Summary Selected Condensed Financial
and Operating Information.......... 8

RISK FACTORS........................... 11
Concentration of Properties in
Midwest Region..................... 11
Risk that the Company May Be Unable
to Retain Tenants or Rent Space
Upon Lease Expirations............. 11
Risks Associated with the Recent
Acquisition of Many of the
Properties; Lack of Operating
History............................ 11
Real Estate Financing Risks.......... 11
Real Estate Investment Risks......... 12
Risks of Acquisition, Renovation and
Development Activities............. 13
Effect of Shares Available for Future
Sale on Common Stock Price......... 14
Dependence on Key Personnel.......... 14
No Limitation on Debt................ 14
Changes in Policies Without
Stockholder Approval............... 15
Adverse Consequences of Failure to
Qualify as a REIT; Other Tax
Liabilities........................ 15
Effect of REIT Distribution
Requirements....................... 16
Failure of Operating Partnership to
Qualify as a Partnership for
Federal Income Tax Purposes........ 16
Price to be Paid for Common Stock May
Exceed Its Fair Market Value....... 16
Limits on Changes in Control......... 17
Possible Losses Not Covered By
Insurance.......................... 18
Possible Environmental Liabilities... 18
Immediate and Substantial Dilution... 19
Effect of Market Interest Rates on
Price of Common Stock.............. 19

THE COMPANY............................ 20

BUSINESS AND GROWTH STRATEGIES......... 22

USE OF PROCEEDS........................ 27

DISTRIBUTIONS.......................... 28

CAPITALIZATION......................... 29

SELECTED FINANCIAL AND OPERATING
DATA................................. 30

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS........................... 33

BUSINESS AND PROPERTIES................ 39
General.............................. 39
Properties........................... 40
Tenants.............................. 41
Leases............................... 41
Historical Lease Renewals............ 49
Historical Tenant Improvements and
Leasing Commissions................ 50
Historical Capital Expenditures...... 51
Historical Occupancy................. 51

THE MIDWEST REGION SUBURBAN OFFICE
MARKETS AND PROPERTIES............... 52
The Suburban Chicago Office Market
and Properties..................... 52
The Suburban Milwaukee Office Market
and Properties..................... 57
The Suburban Minneapolis Office
Market and Properties.............. 59
The Suburban Detroit Office Market
and Properties..................... 61
The Suburban Columbus Office Market
and Property....................... 64
The Suburban Cincinnati Office Market
and Property....................... 66
Competition.......................... 68
Insurance............................ 68
Environmental Regulations............ 68
Legal Proceedings.................... 69
Employees............................ 69

MANAGEMENT............................. 70
Executive Officers and Directors..... 70
Committees of the Board of
Directors.......................... 72
Compensation of Directors............ 73
</TABLE>

i
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<TABLE>
<S> <C>
Executive Compensation............... 73
Stock Option Plans................... 75
Change in Control Agreements......... 77
Limited Purpose Employee Loan
Program............................ 78
Limitation of Liability and
Indemnification.................... 78
Compensation Committee Interlocks and
Insider Participation.............. 79

POLICIES WITH RESPECT TO CERTAIN
ACTIVITIES........................... 80
Investment Policies.................. 80
Dispositions......................... 81
Financing Policies................... 81
Conflict of Interest Policies........ 82
Policies with Respect to Other
Activities......................... 82

CERTAIN TRANSACTIONS................... 83
Advisor Relationship................. 83
Management Loans..................... 83
Transactions with EVEREN............. 83
IPO Consultant Arrangement........... 84
Rights to Nominate Directors......... 84
Registration Rights.................. 84

PARTNERSHIP AGREEMENT.................. 85
General.............................. 85
Management........................... 85
Financing............................ 85
Transferability of Interests......... 86
Redemption/Exchange Rights........... 86
Tax Matters.......................... 86
Operations........................... 87
Term................................. 87
Fiduciary Duty....................... 87
Indemnification...................... 87

PRINCIPAL STOCKHOLDERS................. 88

CAPITAL STOCK OF THE COMPANY........... 90
General.............................. 90
Common Stock......................... 90
Preferred Stock...................... 91
Restrictions on Transfer............. 91
Transfer Agent and Registrar......... 94

CERTAIN PROVISIONS OF MARYLAND LAW AND
THE COMPANY'S CHARTER AND BYLAWS..... 95
Removal of Directors................. 95
Business Combinations................ 95
Control Share Acquisitions........... 95
Amendment to the Charter............. 96
Dissolution of the Company........... 96
Advance Notice of Director
Nominations and New Business....... 96
Anti-takeover Effect of Certain
Provisions of Maryland Law and of
the Charter and Bylaws............. 96

SHARES AVAILABLE FOR FUTURE SALE....... 97
General.............................. 97
Registration Rights.................. 98

CERTAIN FEDERAL INCOME TAX
CONSIDERATIONS....................... 98
General.............................. 99
Taxation of the Company.............. 99
Requirements for Qualification....... 100
Failure to Qualify................... 105
Taxation of Taxable U.S.
Stockholders....................... 105
Backup Withholding................... 106
Taxation of Tax-Exempt
Stockholders....................... 107
Taxation of Non-U.S. Stockholders.... 107
Tax Aspects of the Company's
Investment in the Operating
Partnership........................ 110
Partnership Classification........... 111
Income Taxation of the Operating
Partnership and Its Partners....... 112
Other Tax Considerations............. 114

ERISA CONSIDERATIONS................... 115
Employment Benefit Plans,
Tax-Qualified Pension, Profit
Sharing or Stock Bonus Plans and
IRAs............................... 115
Status of the Company and the
Operating Partnership under
ERISA.............................. 116

UNDERWRITING........................... 118

EXPERTS................................ 119

LEGAL MATTERS.......................... 119

AVAILABLE INFORMATION.................. 120

GLOSSARY............................... 121

INDEX TO FINANCIAL STATEMENTS.......... F-1
</TABLE>

ii
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
UNLESS INDICATED OTHERWISE, THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES
THAT THE INITIAL PUBLIC OFFERING PRICE IS $16.00 PER SHARE (THE MIDPOINT OF THE
PRICE RANGE SET FORTH ON THE COVER PAGE OF THIS PROSPECTUS) AND THE
UNDERWRITERS' OVERALLOTMENT OPTION IS NOT EXERCISED. ALTHOUGH THE COMPANY AND
GREAT LAKES REIT, L.P. (THE "OPERATING PARTNERSHIP") ARE SEPARATE ENTITIES,
UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES IN THIS PROSPECTUS TO THE
"COMPANY" REFER TO THE COMPANY AND THE OPERATING PARTNERSHIP, COLLECTIVELY.
UNLESS INDICATED OTHERWISE, WHENEVER REFERENCE IS MADE IN THIS PROSPECTUS TO A
PERCENTAGE, AN AVERAGE OR A WEIGHTED AVERAGE OCCUPANCY OR VACANCY RATE OR OTHER
CALCULATION WITH RESPECT TO THE PROPERTIES, SUCH CALCULATION REPRESENTS AN
APPROXIMATION BASED ON THE TOTAL RENTABLE SQUARE FOOTAGE OF THE PROPERTIES. SEE
"GLOSSARY" FOR THE DEFINITIONS OF CERTAIN TERMS USED IN THIS PROSPECTUS.

THE COMPANY

Great Lakes REIT, Inc. (the "Company") is a fully integrated,
self-administered and self-managed real estate company focused on acquiring,
renovating, owning and operating suburban office properties located within an
approximate 500-mile radius of metropolitan Chicago (the "Midwest Region"). The
Company currently owns and operates 27 properties (the "Properties") in suburban
Chicago, Milwaukee, Minneapolis, Detroit, Columbus and Cincinnati (the "Current
Markets"). The Properties contain approximately 2.8 million rentable square feet
leased to approximately 320 tenants. As of December 31, 1996, the Properties had
a weighted average occupancy rate of approximately 92%. The Company believes
that it is one of the largest REIT owners of suburban office space in the
Midwest Region. Its five executive officers have an average of 17 years of
experience in the real estate industry. The Company, which has elected to be
treated for federal income tax purposes as a real estate investment trust
("REIT"), is a reporting company under the Securities Exchange Act of 1934.

The Company's primary business strategy is to acquire well-located,
underperforming suburban office properties in the Midwest Region and to increase
cash flow and property value by implementing a comprehensive value-added
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. This strategy is intended to
establish the Company as one of the suburban office owner/operators of choice in
the markets it serves and to maximize tenant retention. The Company's commitment
to tenant satisfaction and retention is evidenced by its retention rate of
approximately 85% (based on 264,530 square feet renewed) from January 1, 1993 to
December 31, 1996. In addition, the Company believes it has been successful in
implementing its operating strategy as evidenced by increased occupancy rates
and rental income at the Properties. The following table sets forth certain
information for the 17 Properties owned by the Company and acquired prior to
June 30, 1996(1):

<TABLE>
<CAPTION>
AT AT
ACQUISITION DECEMBER 31, 1996
------------- -------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Weighted Average Occupancy Rate................................. 75% 90%
Annualized Net Operating Income................................. $ 8.4 $ 13.0
Acquisition Cost................................................ $ 87.5 --
Adjusted Acquisition Yield(2)................................... 9.6% --
Investment Cost................................................. -- $ 98.5
Adjusted Investment Yield....................................... -- 13.2%
</TABLE>

- --------------------------
(1) For definitions of the terms used herein see "Glossary."

(2) Adjusted Acquisition Yield includes the effect of three
Properties with Adjusted Acquisition Yields of 0%. Excluding
these Properties, the Adjusted Acquisition Yield was 10.7% and
the Adjusted Investment Yield at December 31, 1996 was 13.5%.

1
<PAGE>
The Company generally focuses on acquiring properties that have less than
250,000 rentable square feet and are available at purchase prices below $20
million. Management believes that assets of this size are too small to be
efficiently acquired by most institutional and public sector buyers and, as a
result, competition for these properties is primarily limited to privately-held
real estate companies and private single-purpose entities. The Company's
acquisition activities during the last 12 months demonstrate the Company's
ability to make acquisitions consistent with its investment objectives. Since
July 1, 1996, the Company has acquired ten Properties at an aggregate
Acquisition Cost of $97.0 million. As a public company with access to the
capital markets, the Company believes that it will have the resources to take
advantage of additional acquisition opportunities that exist in the Midwest
Region. Upon the completion of the Offering, the Company's Total Debt to Total
Market Capitalization Ratio will be approximately 3.1%, and the Company will
have no debt outstanding under its $75 million secured credit facility (the
"Credit Facility") with The First National Bank of Boston, as Agent.

The Company believes that certain economic fundamentals in the Current
Markets and certain other markets within the Midwest Region provide an
attractive environment for owning, acquiring and operating suburban office
properties. CBC/Torto Wheaton Research indicates that, since 1992, absorption
has generally exceeded the rate of new construction of suburban office
properties in the Current Markets. The Company believes that this positive net
absorption has caused, and will continue to cause, a decline in vacancy rates
and an increase in rental rates in the Current Markets. For example, CBC/Torto
Wheaton Research indicates that the Chicago suburban office market is expected
to absorb office space at a rate of 1.4 million rentable square feet per annum
for the next two years, which exceeds the estimated annual completion rate of
577,000 rentable square feet per annum over the same period. In addition to
positive net absorption, the Company believes that office employment growth is a
key demand generator for office occupancy and rental rates. CBC/Torto Wheaton
Research (covering each of the Current Markets other than Milwaukee) indicates
that total office employment (which includes both downtown and suburban markets)
has grown and is expected to continue to grow over the next ten years. For
example, in the Chicago area, total office employment increased at a rate of
2.7% per annum and 2.4% over the last ten and one year periods, respectively.
Total office employment in the Chicago area is expected to continue to grow at a
rate of 2.7%.

RECENT DEVELOPMENTS

PROPERTY ACQUISITIONS AND DISPOSITIONS

- ACQUISITIONS. Since July 1, 1996, the Company acquired ten Properties
with approximately 1.2 million rentable square feet, at an aggregate
Acquisition Cost of $97.0 million. The Adjusted Acquisition Yield for
these Properties was 10.7%.

- DISPOSITIONS. In the fourth quarter of 1996, the Company disposed of two
properties for a total sales price of $12.1 million, which properties had
a weighted average holding period of 19 months. As a result of the
Company's value-added operating strategy, the weighted average occupancy
rate at these properties increased from 90.4% to 99.4% during the
Company's ownership. The total sales price of $12.1 million reflected a
36% increase over the Company's aggregate Acquisition Cost of these
properties. Both properties were sold on a tax-deferred basis using
like-kind exchanges.

PROPERTY MANAGEMENT

Through intensive management of its Properties, the Company achieved the
following:

- VACANT SPACE LEASE-UP. The Company leased approximately 212,000 square
feet of vacant space during 1996 bringing the weighted average occupancy
rate for the portfolio to approximately 92% as of December 31, 1996. The
Company's aggressive leasing program was particularly evident in two
Properties, Princeton Hill Corporate Center and Two Marriott Drive, which
were purchased in 1996

2
<PAGE>
with occupancies of 31% and 0%, respectively. As a result of the Company's
aggressive leasing activities, these Properties were both 100% occupied as
of December 31, 1996.

- LEASE RENEWALS. The Company renewed 26 leases totalling 118,142 square
feet of the 139,615 square feet that expired in 1996, resulting in an
overall tenant retention rate of approximately 85%. Renewal rents relating
to such leases increased on a weighted average basis by approximately
3.0%.

- PROPERTY RENOVATIONS. The Company completed a $3.0 million renovation of
823 Commerce Drive. Occupancy at this Property increased from 36% at
acquisition in November 1995 to 100% currently.

FINANCINGS

- INSTITUTIONAL PRIVATE PLACEMENT. During 1996, the Company sold
approximately 3.9 million shares of Common Stock to six institutional
investors in a private placement that raised net proceeds of approximately
$47.4 million. As of December 31, 1996, approximately 8.8 million shares
of Common Stock were outstanding, of which 44% were owned by institutional
investors, including affiliates of Morgan Stanley Asset Management Inc.,
Wellsford Karpf Zarrilli Ventures, L.L.C., Fortis Benefits Insurance
Company and an affiliate of The Northwestern Mutual Life Insurance
Company.

- CREDIT FACILITY. In December 1996, the Company expanded and extended its
Credit Facility, increasing the maximum amount available to $75 million.
Borrowings under the Credit Facility bear interest at a rate of LIBOR plus
1.65%. Upon the completion of the Offering, the full amount of the Credit
Facility is expected to be available and the interest rate will be reduced
to LIBOR plus 1.5%.

RECENT OPERATING RESULTS AND DISTRIBUTIONS

- The Company realized net operating income growth in 1996 of 14.0% from the
eight Properties that the Company owned during all of 1995 and 1996, as
net operating income from such Properties increased from $5.0 million in
1995 to $5.7 million in 1996.

- The Company made quarterly distributions to stockholders of $0.30 per
share with respect to each of the fiscal quarters of 1996.

RISK FACTORS

An investment in the Common Stock involves various risks, and prospective
investors should carefully consider the matters discussed under "Risk Factors"
prior to an investment in the Company. Such risks include, among others:

- concentration of the Properties in the Midwest Region, particularly the
Chicago area, which increases the risk of the Company being adversely
affected by a downturn in the Midwest Region or Chicago area economies or
suburban office markets;

- real estate investment and property management risks, such as the need to
renew leases or relet space upon lease expirations and, at times, to pay
renovation and reletting costs in connection therewith; the effect of
economic and other conditions on office property cash flow and values; the
ability of tenants to make lease payments; the ability of a property to
generate revenue sufficient to meet operating expenses, including future
debt service; and the illiquidity of real estate investments, all of which
may adversely affect the Company's ability to make distributions to
stockholders;

- the lack of operating history of the Properties under the Company's
management (a number of the Properties have been owned by the Company for
less than one year);

3
<PAGE>
- the possibility that the Company may not be able to refinance outstanding
indebtedness upon maturity, that indebtedness might be refinanced on less
favorable terms, and that interest rates might increase on the Company's
variable rate indebtedness (including indebtedness under the Credit
Facility); and the lack of limitations in the Company's organizational
documents on the amount of indebtedness that the Company may incur;

- possible adverse effect on the market price of the Common Stock due to
sales of a substantial number of immediately transferable shares of
currently outstanding Common Stock, or the perception that such sales
could occur;

- taxation of the Company as a regular corporation if it fails to qualify as
a REIT, taxation of the Operating Partnership as a corporation if it fails
to qualify as a partnership and the resulting decrease in cash available
for distribution to stockholders;

- the possibility that the Board of Directors may amend or revise its
investment, financing, borrowing and conflicts of interest policies
without a vote of the Company's stockholders;

- dependence on certain key personnel; and

- the possibility that the market value of the Common Stock may exceed the
fair market value of the Company's assets.

BUSINESS AND GROWTH STRATEGIES

BUSINESS STRATEGIES

- Experienced management team averaging over 17 years of real estate
experience

- Focus on suburban office properties in the Midwest Region

- Fully integrated organization with capabilities in all aspects of property
ownership and management

- Economies of scale and leasing flexibilities associated with owning and
managing a sizeable portfolio of suburban office properties

INTERNAL GROWTH

The Company believes that opportunities exist to increase cash flow from its
existing portfolio and that such opportunities will be enhanced as the suburban
office markets in the Midwest Region continue to improve. The Company intends to
pursue internal growth by (i) realizing fixed contractual base rental increases
(leases covering 68% of the total rentable square footage provide for future
fixed contractual rent increases); (ii) re-leasing expiring leases at increasing
market rents, which are expected to result from increased demand for and
decreased supply of available space in the Midwest Region; (iii) continuing to
maintain and improve occupancy rates through active management and aggressive
leasing; and (iv) controlling operating expenses through the continued
implementation of cost control management systems.

4
<PAGE>
EXTERNAL GROWTH

Based on its own historical activities and its knowledge of the Midwest
Region, the Company believes that opportunities continue to exist to acquire
suburban office properties that: (i) provide attractive initial yields with
potential for growth in cash flow; (ii) are in desirable locations within
submarkets in the Midwest Region that exhibit strong office employment growth;
(iii) have purchase prices that represent a significant discount to replacement
cost; and (iv) are underperforming or need renovation, thereby providing
opportunities for the Company to increase the cash flow and value of such
properties through active management, rehabilitation and aggressive leasing.

The Company believes that the current and forecasted trends affecting the
Current Markets have created and will continue to create a favorable economic
environment in the suburban office markets because of the stable supply of
quality suburban office space in the Current Markets, upward occupancy and
rental rates and a pattern of residential relocation from urban to suburban
areas.

The Company believes it has certain competitive advantages that enhance its
ability to identify and capitalize on acquisition opportunities, including: (i)
management's significant local market experience with, and knowledge of,
properties, submarkets and potential tenants within the Midwest Region; (ii)
management's long-standing relationships with tenants, real estate brokers and
institutional and other owners of commercial real estate in the Midwest Region;
(iii) the Company's fully integrated real estate operations, which allow it to
quickly evaluate and respond to acquisition opportunities; (iv) its ability to
access relatively low-cost financing through the capital markets; (v) its
ability to acquire properties on a tax-deferred basis using OP Units as
consideration; and (vi) management's reputation as an experienced purchaser of
suburban office properties in the Midwest Region with the ability to execute
transactions in an efficient and timely manner.

FINANCING POLICIES

The Company intends to utilize a number of sources of capital for future
acquisitions and capital improvements, including undistributed cash flow,
borrowings under the Credit Facility, issuance of debt or equity securities and
bank or institutional borrowings. The Company's current policy limits its Total
Debt to Total Market Capitalization Ratio to no more than 50%; however, the
Company's organizational documents do not limit the amount of indebtedness that
the Company may incur. Upon the completion of the Offering and the application
of the net proceeds therefrom, the Company's Total Debt to Total Market
Capitalization Ratio will be approximately 3.1%.

5
<PAGE>
THE PROPERTIES

The Company owns 27 Properties containing approximately 2.8 million rentable
square feet. The Properties consist primarily of Class A and Class B suburban
office properties and range in size from approximately 15,000 to 260,000
rentable square feet. The Company believes that the Properties are well-
maintained and are in desirable locations within established business
communities.

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, 1996, the Properties were leased to approximately 320 tenants, no
single tenant accounted for more than 3.2% 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. Over 60% of the occupied space
is leased to tenants that occupy 10,000 square feet or more. Leases covering 68%
of the total rentable square footage provide for future fixed contractual rent
increases.

The Company or the Operating Partnership holds fee simple title to each of
the Properties. The following table sets forth certain information as of January
1, 1997 regarding the Properties:

<TABLE>
<CAPTION>
PERCENTAGE ANNUAL NET
OF TOTAL EFFECTIVE ANNUALIZED
PORTFOLIO RENT PER BASE RENT
APPROXIMATE RENTABLE LEASED PER LEASED
YEAR BUILT/ RENTABLE SQUARE PERCENT SQUARE SQUARE
SUBMARKET/PROPERTY LOCATION RENOVATED SQUARE FEET FEET LEASED FOOT(1) FOOT(2)
- -------------------------------- ----------------- ----------- ----------- ---------- ------- ---------- ----------
SUBURBAN CHICAGO
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Centennial Center............... Schaumburg 1980/1993 259,730 9.3% 95.2% $ 8.64(3) $ 7.98(3)
Highpoint Business Center....... Wood Dale 1986 113,911 4.1% 88.3% 9.34(3) 10.19(3)
Arlington Ridge Service
Center........................ Arlington Heights 1987 96,219 3.4% 87.4% 11.55 12.46
1251 Plum Grove Road............ Schaumburg 1986/1996 43,301 1.5% 43.1% 11.40(3) 11.63(3)
1011 East Touhy Avenue.......... Des Plaines 1978/1995 155,657 5.6% 91.1% 15.56 16.30
2800 River Road................. Des Plaines 1983 100,527 3.6% 76.5% 15.50 16.30
Kensington Corporate Center..... Mount Prospect 1989 85,874 3.1% 77.3% 11.92(3) 11.92(3)
565 Lakeview Parkway............ Vernon Hills 1991 84,808 3.0% 68.4% 10.84(3) 10.65(3)
One Hawthorn Place.............. Vernon Hills 1987 84,065 3.0% 91.5% 15.54 17.46
Two Marriott Drive.............. Lincolnshire 1985 41,500 1.5% 100.0% 9.17(3) 8.13(3)
3400 Corporate Center........... Northbrook 1986 74,884 2.7% 100.0% 15.75 16.63
3010 and 3020 Woodcreek Drive... Downers Grove 1985-86 127,713 4.6% 92.5% 11.52 11.33
823 Commerce Drive.............. Oak Brook 1969/1996 45,162 1.6% 80.9% 16.71 17.03
1675 Holmes Road................ Elgin 1990 101,286 3.6% 100.0% 4.67(3) 4.67(3)
Court Office Center............. Markham 1984 15,000 0.5% 100.0% 14.94 14.94
Subtotal/Weighted Average..... 1,429,637 51.1% 88.0%

SUBURBAN MILWAUKEE
- --------------------------------
One Park Plaza.................. Milwaukee 1984 197,122 7.0% 94.8% 12.35(3) 11.72(3)
Park Place VII.................. Milwaukee 1989 36,069 1.3% 100.0% 16.15 16.69
Lincoln Center II and III....... West Allis 1984-87 121,508 4.3% 96.1% 15.36 14.71
Brookfield Lakes Corporate
Center........................ Brookfield 1987 117,615 4.2% 98.4% 10.07(3) 11.01(3)
Subtotal/Weighted Average..... 472,314 16.8% 96.5%

SUBURBAN MINNEAPOLIS
- --------------------------------
Court International II.......... St. Paul 1916/1985 199,670 7.1% 95.5% 10.60(3) 10.03(3)
University Office Plaza......... Minneapolis 1979/1997 97,658 3.5% 100.0% 11.97(3) 12.04(3)
11100 Hampshire Avenue.......... Bloomington 1980 50,625 1.8% 100.0% 4.33(3) 4.33(3)
Subtotal/Weighted Average..... 347,953 12.4% 97.4%

SUBURBAN DETROIT
- --------------------------------
Long Lake Crossings............. Troy 1988 169,959 6.1% 91.4% $18.59 $17.87
40 Oak Hollow................... Southfield 1989 80,281 2.9% 97.3% 16.06 15.50
Oak Hollow Gateway.............. Southfield 1987 79,546 2.8% 98.2% 14.56 15.45
Subtotal/Weighted Average..... 329,786 11.8% 94.5%
</TABLE>

6
<PAGE>

SUBURBAN CINCINNATI
- --------------------------------
Princeton Hill Corporate
Center........................ Springdale 1988 95,910 3.4% 100.0% 10.31(3) 11.02(3)

Total/Weighted Average.......................................... 2,800,529 100.0% 92.3%
Weighted Average Rent Per Leased Square Foot - All Leases............................................ $12.09 $12.14
Weighted Average Rent Per Leased Square Foot - Gross Leases (4)...................................... $15.84 $16.21
Weighted Average Rent Per Leased Square Foot - Net Leases (5)........................................ $ 9.51 $ 9.32
</TABLE>

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

(1) Annualized Net Effective Rent is calculated by dividing the remaining lease
payments under the lease by the number of months remaining under the lease
and multiplying the result by 12; the foregoing amount is then reduced by
the unamortized portion (at January 1, 1997) of any leasing commissions or
tenant improvements paid by the Company, or any such amounts payable by the
Company after January 1, 1997. Annual Net Effective Rent excludes historical
capital expenditures, which have averaged $0.15 per square foot annually
between January 1, 1993 and December 31, 1996.

(2) Annualized Base Rent is the monthly contractual base rent under existing
leases as of January 1, 1997, multiplied by 12.

(3) The leases for substantially all rentable square feet at this Property are
net leases.

(4) The Weighted Average Rent Per Leased Square Foot is calculated based only
upon rent received from tenants under full service gross leases and modified
gross leases with expense stops, which represent 41% of the rentable square
feet of the portfolio.

(5) The Weighted Average Rent Per Leased Square Foot is calculated based only
upon rent received from tenants under net leases, which represent 59% of the
rentable square feet of the portfolio.

STRUCTURE OF THE COMPANY

In 1996, the Company organized the Operating Partnership and transferred 17
of the Properties to the Operating Partnership. The Company intends to transfer
its remaining Properties to the Operating Partnership after receipt of necessary
consents from mortgage lenders or repayment of amounts owed under the related
mortgages. These transfers are expected to occur within 60 days after the
closing of the Offering. As the sole general partner of the Operating
Partnership, the Company has exclusive power to manage and conduct the business
of the Operating Partnership, subject to certain limited exceptions. See
"Partnership Agreement."

Effective April 1, 1996, the Company became a self-administered and
self-managed REIT upon the consummation of the merger (the "Merger") of the
Company with Equity Partners, Ltd. (the "Advisor"). Prior to the Merger, the
Advisor provided services to the Company relating to the selection, purchase,
financing and operation of the Company's properties. Certain executive officers
and other employees of the Company were previously employed by the Advisor and
owned a substantial interest in the Advisor. See "Management" and "Certain
Transactions--Advisor Relationship."

7
<PAGE>
THE OFFERING

All of the shares of Common Stock being offered in the Offering are being
offered by the Company.

<TABLE>
<CAPTION>
<S> <C>
Common Stock Offered by the Company......................... 5,700,000 shares

Common Stock Outstanding After the Offering (1)............. 14,662,090 shares

Use of Proceeds............................................. Repayment of certain
outstanding indebtedness,
working capital and general
corporate purposes. See "Use
of Proceeds."

New York Stock Exchange Symbol.............................. " "
</TABLE>

- ------------------------
(1) Assumes the issuance of 24,050 shares of Common Stock in exchange for all
outstanding limited partnership interests in the Operating Partnership ("OP
Units") other than those interests held by the Company. See "Partnership
Agreement." Excludes 592,203 shares of Common Stock issuable upon the
exercise of stock options outstanding as of February 15, 1997 with a
weighted average exercise price of $11.69.

SUMMARY SELECTED CONDENSED FINANCIAL AND OPERATING INFORMATION

The following sets forth summary selected condensed financial and operating
information for the Company (i) on a historical basis for each of the periods
and dates indicated and (ii) on a pro forma basis as of and for the year ended
December 31, 1996. The following information should be read in conjunction with
the financial statements and notes thereto of the Company included elsewhere in
this Prospectus. The historical financial and operating information for the
Company as of and for the years ended December 31, 1996, 1995 and 1994 has been
derived from the Company's historical financial statements audited by Ernst &
Young LLP, independent auditors, whose report with respect thereto is included
elsewhere in this Prospectus.

The unaudited selected condensed pro forma income statement and operating
data for the year ended December 31, 1996 are presented as if the acquisition
and disposition of properties subsequent to December 31, 1995, the Company's
private equity offering in 1996, the Merger and the Offering and the application
of the net proceeds therefrom had all occurred as of January 1, 1996. The
unaudited selected condensed pro forma balance sheet data as of December 31,
1996 is presented as if the acquisition of Properties subsequent to December 31,
1996 and the Offering had occurred as of that date. The pro forma information is
based upon certain assumptions that are included in the notes to the
consolidated pro forma financial statements included elsewhere in this
Prospectus. The pro forma financial information is unaudited and is not
necessarily indicative of what the financial position and results of operations
of the Company would have been as of the dates and for the periods indicated,
nor does it purport to represent or project the financial position or results of
operations for future periods.

8
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
PRO FORMA(1) HISTORICAL
------------ -----------------------------------
1996 1996 1995 1994
------------ ------------ -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue
Rental................................ $ 29,610 $ 20,250 $ 12,410 $ 6,647
Reimbursements........................ 8,874 4,814 2,355 884
Interest and other.................... 646 168 201 51
------------ ------------ -------- --------
Total revenue....................... 39,130 25,232 14,966 7,582
------------ ------------ -------- --------
Expenses:
Real estate taxes..................... 6,787 3,954 2,625 1,418
Other property operating.............. 10,389 6,549 3,967 1,944
General and administrative............ 2,378 2,242 923 561
Interest.............................. 397 3,778 2,296 911
Depreciation and amortization......... 5,582 3,977 1,955 761
Contract termination.................. -- 1,273 -- --
------------ ------------ -------- --------
Total expenses...................... 25,533 21,773 11,766 5,595
------------ ------------ -------- --------
Income before gain on sale of
properties............................. 13,597 3,459 3,200 1,987
Gain on sale of properties.............. -- 3,140 -- --
------------ ------------ -------- --------
Net income.............................. $ 13,597 $ 6,599 $ 3,200 $ 1,987
------------ ------------ -------- --------
------------ ------------ -------- --------
Net income per common share and common
share equivalents...................... $ 0.92 $ 1.11 $ 0.88 $ 0.96
------------ ------------ -------- --------
------------ ------------ -------- --------
Weighted average common share and common
share equivalents...................... 14,723 5,927 3,650 2,070

DECEMBER 31,
--------------------------------------------------
PRO FORMA(1) HISTORICAL
------------ -----------------------------------
1996 1996 1995 1994
------------ ------------ -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Properties--net of accumulated
depreciation........................... $189,131 $ 184,122 $ 91,858 $ 37,234
Total assets............................ 199,088 192,899 98,978 42,522
Total long-term debt.................... 7,472 86,111 48,307 15,955
Total liabilities....................... 19,479 97,554 54,013 18,460
Stockholders' equity.................... 179,609 95,345 44,965 24,062
<CAPTION>

YEAR ENDED DECEMBER 31,
--------------------------------------------------
PRO FORMA(1) HISTORICAL
------------ -----------------------------------
1996 1996 1995 1994
------------ ------------ -------- --------
(IN THOUSANDS, EXCEPT PER SHARE
AND PROPERTY DATA)
<S> <C> <C> <C> <C>
OPERATING DATA:
EBITDA(2)............................... $ 19,579 $ 12,487(3) $ 7,451 $ 3,659
Funds from Operations(4):
Net income............................ $ 13,597 $ 6,599 $ 3,200 $ 1,987
Gain on sale of properties............ (3,140)
Depreciation and amortization......... 5,379 5,047(5) 1,824 718
------------ ------------ -------- --------
Funds from Operations................. 18,976 8,506 5,024 2,705
Distributions per share................. $ -- $ 1.20 $ 1.13 $ 0.96
Cash flows from operating activities.... -- 12,828 5,650 1,977
Cash flows from investing activities.... -- (91,211) (51,650) (20,493)
Cash flows from financing activities.... -- 78,768 44,626 17,420
Number of properties owned at period
end.................................... 27 25 16 9
Aggregate square feet of properties
owned at period end (in 000s).......... 2,800 2,684 1,529 758
Occupancy at period end of properties
owned at period end.................... -- 92% 86% 84%
</TABLE>

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

(1) Pro forma information does not reflect an insignificant (less than 0.02%)
minority interest attributable to OP Units held by third parties.

9
<PAGE>
(2) 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.

(3) Excludes a nonrecurring charge of $1,273 for contract termination costs
related to termination of arrangements with the Advisor in connection with
the Merger.

(4) 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.

(5) Represents depreciation and amortization of $3,774 and a nonrecurring charge
of $1,273 for contract termination costs related to termination of
arrangements with the Advisor in connection with the Merger.

10
<PAGE>
RISK FACTORS

An investment in the Common Stock involves various risks. Prospective
investors should carefully consider the following information in conjunction
with the other information contained in this Prospectus before making a decision
to purchase Common Stock in the Offering.

CONCENTRATION OF PROPERTIES IN MIDWEST REGION

All of the Company's 27 Properties are located in the Midwest Region,
including 15 Properties located in the suburban Chicago, Illinois area. Like
other real estate markets, these commercial real estate markets have experienced
economic downturns in the past, and future declines in any of these economies or
real estate markets could adversely affect the Company's funds available for
distribution to stockholders. The Company's financial performance and its
ability to make distributions to stockholders are therefore dependent on the
economic conditions in the Midwest Region, particularly in the Chicago area. The
Company's revenues and the value of its Properties may be affected by a number
of factors, including local economic conditions (which may be adversely impacted
by business layoffs or downsizing, industry slowdowns, changing demographics and
other factors) and local real estate conditions (such as oversupply of or
reduced demand for office, industrial and other competing commercial
properties). There can be no assurance that the economies of the Midwest Region
or the Chicago area will continue to grow or that any future growth will meet
historical growth rates.

RISK THAT THE COMPANY MAY BE UNABLE TO RETAIN TENANTS OR RENT SPACE UPON LEASE
EXPIRATIONS

The Company will be subject to the risks that upon expiration, leases may
not be renewed, the space may not be relet or the terms of renewal or reletting
(including the cost of required renovations) may be less favorable than the
expired lease terms. Leases on a total of approximately 15.1%, 19.2% and 10.8%
of the occupied rentable square feet of the Properties will expire in 1997, 1998
and 1999, respectively. If the Company is unable to promptly relet or renew
leases for all or a substantial portion of this space or if the rental rates
upon such renewal or reletting are significantly lower than expected, the
Company's cash flow and ability to make distributions to stockholders could be
adversely affected.

RISKS ASSOCIATED WITH THE RECENT ACQUISITION OF MANY OF THE PROPERTIES; LACK OF
OPERATING HISTORY

All of the Properties have been under the Company's management for less than
five years and 12 of the Properties have been acquired since January 1, 1996.
The most recently acquired Properties may have characteristics or deficiencies
unknown to the Company that may impact their value or revenue potential. It is
also possible that the operating performance of the most recently acquired
Properties may decline under the Company's management.

The Company is currently experiencing a period of rapid growth. As the
Company acquires additional properties, the Company will be subject to risks
associated with managing new properties, including lease-up and tenant
retention. In addition, the Company's ability to manage its growth effectively
will require it to successfully integrate its new acquisitions into its existing
management structure. No assurances can be given that the Company will be able
to successfully integrate such properties or effectively manage additional
properties, or that newly acquired properties will perform as expected.

REAL ESTATE FINANCING RISKS

INABILITY TO REPAY OR REFINANCE INDEBTEDNESS AT MATURITY. The Company will
be subject to risks normally associated with debt financing, including the risk
that the Company's cash flow will be insufficient to meet required payments of
principal and interest, the risk that any indebtedness will not be able to be
refinanced or that the terms of any such refinancing will be less favorable than
the terms of the expiring indebtedness.

11
<PAGE>
POTENTIAL EFFECT OF RISING INTEREST RATES ON COMPANY'S VARIABLE RATE
DEBT. Advances under the Credit Facility bear interest at variable rates and
the indebtedness under existing lines of credit and certain mortgage notes are
subject to periodic adjustments based on the then current market interest rates.
In addition, the Company may incur other variable rate indebtedness in the
future. Increases in interest rates on such indebtedness would increase the
Company's interest expense, which could adversely affect the Company's cash flow
and amounts available for distribution to stockholders. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

REAL ESTATE INVESTMENT RISKS

REAL ESTATE OWNERSHIP RISKS. Real property investments are subject to
varying degrees of risk. The yields available from equity investments in real
estate depend in large part on the amount of revenue generated and expenses
incurred. If the Company's real properties do not generate revenue sufficient to
meet operating expenses, including debt service, tenant improvements, leasing
commissions and other capital expenditures, the Company may have to borrow
additional amounts to cover fixed costs and the Company's cash flow and ability
to make distributions to its stockholders would be adversely affected. The
Company's revenue and the value of its Properties may be adversely affected by a
number of factors, including the national economic climate; the local economic
climate; local real estate conditions; the perceptions of prospective tenants of
the attractiveness of its Properties; the ability of the Company to manage and
maintain its real properties and secure adequate insurance; and increased
operating costs (including real estate taxes and utilities). In addition, real
estate values and income from properties are also affected by such factors as
applicable laws, including tax and environmental laws, interest rate levels and
the availability of capital.

ILLIQUIDITY OF REAL ESTATE. Equity real estate investments are relatively
illiquid. Such illiquidity will tend to limit the ability of the Company to vary
its portfolio promptly in response to changes in economic or other conditions.
In addition, the Code limits a REIT's ability to sell properties held for fewer
than four years. This limitation may adversely affect the Company's ability to
sell properties.

IMPACT OF COMPETITION ON OCCUPANCY LEVELS AND RENTS CHARGED. Numerous
office properties compete with the Properties in attracting tenants to lease
space. Some of the competing properties may be newer, better located or owned by
parties better capitalized than the Company. An increase in the number of
competitive commercial properties in a particular area could have a material
adverse effect on (i) the ability to lease space in the Properties (or in newly
acquired or developed properties) and (ii) the rents charged.

POTENTIAL INCREASES IN CERTAIN TAXES AND REGULATORY COMPLIANCE
COSTS. Because increases in income, service or transfer taxes are generally not
passed through to tenants under leases, such increases may adversely affect the
Company's cash flow and its ability to make distributions to stockholders. The
Properties are also subject to various federal, state and local regulatory
requirements, such as requirements of the Americans with Disabilities Act (the
"ADA"), which requires all public accommodations and commercial facilities to
meet certain federal requirements related to access and use by disabled persons,
and state and local fire and life safety requirements. Compliance with the ADA
requirements could require removal of access barriers. Failure to comply with
all applicable regulatory requirements could result in the imposition of fines
by governmental authorities or awards of damages to private litigants. The
Company believes that the Properties are currently in substantial compliance
with all such regulatory requirements. However, there can be no assurance that
these requirements will not be changed or that new requirements will not be
imposed which would require significant unanticipated expenditures by the
Company that could have an adverse effect on the Company's cash flow and
distributions to stockholders.

IMPACT OF FINANCIAL CONDITION AND SOLVENCY OF TENANTS ON COMPANY'S CASH
FLOW. At any time, a tenant of the Properties may seek the protection of the
bankruptcy laws, which could result in rejection and termination of such
tenant's lease and thereby cause a reduction in cash flow available for
distribution by

12
<PAGE>
the Company. Although the Company has not experienced material losses from
tenant bankruptcies, no assurance can be given that tenants will not file for
bankruptcy protection in the future or, if any tenants file, that they will
affirm their leases and continue to make rental payments in a timely manner. In
addition, a tenant from time to time may experience a downturn in its business
which may weaken its financial condition and result in a failure to make rental
payments when due. If tenant leases are not affirmed following bankruptcy or if
a tenant's financial condition weakens, the Company's revenues and cash flows
may be adversely affected.

RISKS OF ACQUISITION, RENOVATION AND DEVELOPMENT ACTIVITIES

The Company intends to continue acquiring office properties. See "Business
and Growth Strategies-- Business Strategies." Acquisitions of office properties
entail risks that such investments will fail to perform in accordance with
expectations. Estimates of renovation costs and costs of improvements to bring
an acquired property up to standards established for the market position
intended for that property may prove inaccurate. In addition, there are general
investment risks associated with any new real estate investment.

The Company may renovate and/or expand its Properties from time to time.
Renovation and expansion projects generally require expenditure of capital as
well as various government and other approvals, the receipt of which cannot be
assured. While policies with respect to renovation and expansion activities are
intended to limit some of the risks otherwise associated with such activities,
the Company would nevertheless incur certain risks, including expenditures of
funds on, and devotion of management's time to, projects which may not be
completed.

The Company anticipates that future acquisitions and renovations will be
financed through a combination of advances under the Credit Facility, other
forms of secured or unsecured financing and issuance of OP Units. If new
projects are financed through construction loans, there is a risk that, upon
completion of construction, permanent financing for these properties may not be
available or may be available only on disadvantageous terms.

While the Company has generally limited its acquisition, renovation,
management and leasing business primarily to the Midwest Region, it is possible
that the Company will in the future expand its business to new geographic
markets. The Company will not initially possess the same level of familiarity
with new markets outside of the Midwest Region, which could adversely affect its
ability to acquire, develop, manage or lease properties in any new markets.

Changing market conditions, including competition from other purchasers of
properties similar to the Properties, may diminish the Company's opportunities
for attractive acquisitions.

The Company also intends to review from time to time the possibility of
developing and constructing office buildings and other commercial properties in
accordance with the Company's development policies. See "Business and Growth
Strategies--Business Strategies." Risks associated with the Company's
development and construction activities may include: abandonment of development
opportunities; construction costs of a property exceeding original estimates,
possibly making the property uneconomical; occupancy rates and rents at a newly
completed property which are not sufficient to make the property profitable; the
unavailability of financing on favorable terms for development of a property;
and an inability to complete construction and lease-up on schedule, resulting in
increased debt service expense and construction costs. In addition, new
development activities, regardless of whether they would ultimately be
successful, typically require a substantial portion of management's time and
attention. Development activities would also be subject to risks relating to the
inability to obtain, or delays in obtaining, all necessary zoning, land-use,
building, occupancy, and other required governmental permits and authorizations.

13
<PAGE>
EFFECT OF SHARES AVAILABLE FOR FUTURE SALE ON COMMON STOCK PRICE

Sales of a substantial number of currently outstanding shares of Common
Stock, or the perception that such sales could occur, could adversely affect
prevailing market prices of the Common Stock. The shares of Common Stock
outstanding prior to the Offering and shares of Common Stock issuable in
exchange for OP Units will be eligible for sale in the public market at various
times in the future. Upon the completion of the Offering, there will be
14,662,090 shares of Common Stock outstanding, including 24,050 shares issuable
in exchange for OP Units, of which an aggregate of 8,962,090 shares will be
"restricted" shares (the "Restricted Shares") under the Securities Act of 1933
(the "Securities Act"). As of the date hereof, approximately 4.6 million
Restricted Shares are eligible for sale in the public market pursuant to Rule
144 promulgated under the Securities Act, of which approximately 1.9 million
shares are subject to certain volume and other resale restrictions pursuant to
Rule 144. See "Shares Available for Future Sale--General." Approximately
of such shares will be subject to lock-up agreements between the Underwriters
and the officers and directors of the Company and certain other holders of the
Common Stock, for a period of days after the date hereof. Lehman Brothers
may, in its discretion and at any time without notice, release all or any
portion of the securities subject to lock-up agreements. The Company is required
to use its best efforts to register at its expense an aggregate of 3,867,000
shares of Common Stock under the Securities Act by the 180th day following the
closing of the Offering. See "Shares Available for Future Sale--Registration
Rights." No prediction can be made regarding the effect that future sales of
Common Stock will have on the market prices of shares.

DEPENDENCE ON KEY PERSONNEL

The Company is dependent on the efforts of its executive officers,
particularly Richard A. May, the Company's Chief Executive Officer, and Richard
L. Rasley, the Company's Executive Vice President. The loss of their services
could have a material adverse effect on the Company's operations, financial
condition and results of operations. In addition, it will be an event of default
under the Credit Facility if (i) Messrs. May and Rasley fail to own, in the
aggregate, 1% or more of the outstanding shares of Common Stock or (ii) either
of them ceases to be employed by the Company in their respective current
positions and is not replaced within six months by a suitable successor. See
"Management."

NO LIMITATION ON DEBT

Upon the completion of the Offering, the Company's Total Debt to Total
Market Capitalization Ratio will be approximately 3.1% (2.9% if the
Underwriters' overallotment option is exercised in full). The Company currently
has a policy of incurring debt only if upon such incurrence the Total Debt to
Total Market Capitalization Ratio would be 50% or less, but the organizational
documents of the Company do not contain any limitation on the amount of
indebtedness the Company may incur. Accordingly, the Board of Directors could
alter or eliminate that policy at any time. If that policy was changed, the
Company could become more highly leveraged, resulting in increased debt service
costs that could adversely affect the Company's cash flow and, consequently, the
amount available for distribution to stockholders and could increase the risk of
default on the Company's indebtedness.

The Company has established its debt policy relative to its Total Debt to
Total Market Capitalization Ratio rather than relative to the book value of its
assets. The Company has used total market capitalization because it believes
that the book value of its assets (which to a large extent is the depreciated
original cost of real property, the Company's primary tangible assets) does not
accurately reflect its ability to borrow and to meet debt service requirements.
The market capitalization of the Company, however, is more variable than book
value, and does not necessarily reflect the fair market value of the underlying
assets of the Company. The Company also will consider factors other than market
capitalization in making decisions regarding the incurrence of indebtedness,
such as the purchase price of properties to be acquired with debt financing, the
estimated market value of its Properties upon refinancing and the ability of
particular Properties and the Company as a whole to generate cash flow to cover
expected debt service costs.

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<PAGE>
CHANGES IN POLICIES WITHOUT STOCKHOLDER APPROVAL

The Company's investment, financing, borrowing, distribution and conflicts
of interest policies and its policies with respect to all other activities will
be determined by the Board of Directors. Although the Board of Directors has no
present intention to do so, it can amend, revise or eliminate these policies at
any time and from time to time at its discretion without a vote of the
stockholders. A change in any of these policies could adversely affect the
Company's financial condition or results of operations or the market price of
the Common Stock.

ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT; OTHER TAX LIABILITIES

TAX LIABILITIES AS A CONSEQUENCE OF FAILURE TO QUALIFY AS A REIT. The
Company elected to be taxed as a REIT under Sections 856 through 860 of the
Code, commencing with its taxable year ended December 31, 1993, and the Company
believes that it has been organized and has operated in such a manner so as to
qualify as a REIT for federal income tax purposes. Although the Company believes
that it will remain organized and will continue to operate so as to qualify as a
REIT, no assurance can be given that the Company has so qualified or will be
able to remain so qualified. Qualification as a REIT involves the satisfaction
of numerous requirements (in certain instances, on an annual and quarterly
basis) set forth in highly technical and complex Code provisions for which there
are only limited judicial and administrative interpretations, and may be
affected by various factual matters and circumstances not entirely within the
Company's control. In the case of a REIT, such as the Company, that holds
substantially all of its assets in partnership form, the complexity of these
Code provisions and the applicable Treasury Regulations that have been
promulgated thereunder is even greater. Further, no assurance can be given that
future legislation, new Treasury Regulations, administrative interpretations or
court decisions will not significantly change the tax laws with respect to
qualification as a REIT or the federal income tax consequences of such
qualification. The Company, however, is not aware of any pending proposal to
amend the tax laws that would materially and adversely affect its ability to
operate in such a manner so as to qualify as a REIT. The Company is relying on
the opinion of Jones, Day, Reavis & Pogue, special counsel to the Company,
regarding various issues affecting the Company's ability to continue to qualify
as a REIT. See "Certain Federal Income Tax Considerations--General." Such legal
opinion is based on various assumptions and factual representations made by the
Company regarding its ability to continue to meet the numerous requirements for
qualification as a REIT, and no assurance can be given that the Company's actual
operating results will enable it to satisfy these requirements. Investors should
be aware, however, that an opinion of counsel is not binding on the IRS or any
court.

If the Company were to fail to qualify as a REIT with respect to any taxable
year, the Company would not be allowed a deduction in computing its taxable
income for amounts distributed to its stockholders, and would be subject to
federal income tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates. As a result, any net earnings of the
Company available for investment or distribution to stockholders would be
reduced for the year or years involved because of the additional tax liability
of the Company, and distributions to stockholders would no longer be required to
be made. Moreover, unless entitled to relief under certain statutory provisions,
the Company would also be ineligible for qualification as a REIT for the four
taxable years following the year during which such qualification was lost. See
"Certain Federal Income Tax Considerations--Failure to Qualify." Although the
Company believes it has operated and currently intends to operate in a manner
designed to allow it to continue to qualify as a REIT, future economic, market,
legal, tax or other considerations may cause it to determine that it is in the
best interests of the Company and its stockholders to revoke the REIT election.

OTHER TAX LIABILITIES. Even if the Company continues to qualify for and
maintains its REIT status, it may be subject to certain federal, state and local
taxes on its income and property. See "Certain Federal Income Tax
Considerations--Taxation of the Company."

15
<PAGE>
EFFECT OF REIT DISTRIBUTION REQUIREMENTS

To maintain its status as a REIT for federal income tax purposes, the
Company generally will be required each year to distribute to its stockholders
at least 95% of its taxable income (excluding any net capital gain and after
certain adjustments). In addition, the Company will be subject to a 4%
nondeductible excise tax on the amount, if any, by which certain distributions
paid by it with respect to any calendar year are less than the sum of 85% of its
ordinary income for such year plus 95% of its capital gain net income for such
year plus 100% of its undistributed income from prior taxable years.

The Company intends to make distributions to its stockholders to comply with
the 95% distribution requirement of the Code and to avoid the nondeductible
excise tax described above. The Company anticipates that cash flow from
operations, including its share of distributions from the Operating Partnership,
will be sufficient to enable it to pay its operating expenses and meet the
distribution requirements of a REIT, but no assurance can be given that this
will be the case. In addition, differences in timing between (i) the actual
receipt of income and the actual payment of expenses and (ii) the inclusion of
such income and the deduction of such expenses in arriving at taxable income of
the Company could leave the Company without sufficient cash to enable it to meet
the REIT distribution requirements. Accordingly, the Company could be required
to borrow funds or liquidate investments on adverse terms to comply with such
requirements. The requirement to distribute a substantial portion of the
Company's taxable income could also cause the Company to have to distribute
amounts that would otherwise be spent on future acquisitions, unanticipated
capital expenditures or repayment of debt, which would require additional
borrowings or sales of assets to fund the costs of such items and could restrict
the Company's ability to expand at the same pace as it has historically or at a
pace necessary to remain competitive.

FAILURE OF OPERATING PARTNERSHIP TO QUALIFY AS A PARTNERSHIP FOR FEDERAL INCOME
TAX PURPOSES

The Company believes that the Operating Partnership has been organized as a
partnership and qualifies for treatment as such for federal income tax purposes.
If the Operating Partnership failed to qualify as a partnership for federal
income tax purposes and were instead taxable as a corporation, the Company would
cease to qualify as a REIT because of its inability to satisfy the REIT asset
tests and possibly the income tests (as set forth in the Code), and the
Operating Partnership would be subject to federal income tax (including any
applicable minimum tax) on its taxable income at regular corporate rates. The
imposition of a corporate tax on the Operating Partnership would also reduce the
amount of cash available for distribution to the Company and its stockholders.
See "Certain Federal Income Tax Considerations--Failure to Qualify" and "--Tax
Aspects of the Company's Investment in the Operating Partnership."

PRICE TO BE PAID FOR COMMON STOCK MAY EXCEED ITS FAIR MARKET VALUE

Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that an active trading market will develop or be
sustained or that shares of Common Stock will be resold at or above the initial
public offering price. The initial public offering price has been determined
through negotiations between the Company and the Underwriters based upon
expected results of operations of the Company and the other factors discussed
under "Underwriting," rather than an asset-by-asset valuation based on
historical cost or current market value. In determining the initial public
offering price of the Common Stock, certain assumptions were made concerning the
estimated revenue to be derived from the Properties. The market value of the
Common Stock could be substantially affected by general market conditions,
including changes in interest rates. Moreover, numerous other factors, such as
governmental regulatory action and changes in tax laws, could have a significant
impact on the future market price of the Common Stock. As a result, the amount
paid for Common Stock may in fact exceed the fair market value of such Common
Stock.

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<PAGE>
LIMITS ON CHANGES IN CONTROL

Certain provisions of the Charter and Bylaws of the Company (the "Bylaws")
may have the effect of delaying, deferring or preventing a third party from
making an acquisition proposal for the Company and may therefore inhibit a
change in control of the Company or other transaction that might be in the best
interests of the stockholders. For example, such provisions may (i) deter tender
offers for the Common Stock, which offers may be attractive to stockholders or
(ii) deter purchases of large blocks of Common Stock, thereby limiting the
opportunity for stockholders to receive a premium for their Common Stock over
then-prevailing market prices. See "Capital Stock of the Company" and "Certain
Provisions of Maryland Law and the Company's Charter and Bylaws." These
provisions include the following:

LIMITS ON OWNERSHIP OF COMMON STOCK. For the Company to maintain its
qualification as a REIT for federal income tax purposes, not more than 50% in
value of the outstanding shares of stock of the Company may be owned, actually
or constructively (under the applicable attribution rules of the Code), by five
or fewer individuals (as defined in the Code to include certain tax-exempt
entities other than, in general, qualified domestic pension funds) at any time
during the last half of any taxable year of the Company (the "five or fewer
requirement"). In addition, if the Company, or an actual or constructive owner
of 10% or more of the Company, actually or constructively (under the applicable
attribution rules of the Code) owns 10% or more of a tenant of the Company (or a
tenant of any partnership in which the Company is a partner), the rent received
by the Company (either directly or through any such partnership) from such
tenant will not be qualifying income for purposes of the REIT gross income tests
of the Code. See "Certain Federal Income Tax Considerations--Requirements for
Qualification."

The Charter and Bylaws of the Company contain certain restrictions,
described below, on the ownership and transfer of the Common Stock which are
intended to prevent concentration of stock ownership and thus to protect the
Company against the risk of losing REIT status. These restrictions, however, do
not ensure that the Company will be able to satisfy the "five or fewer
requirement" or the REIT gross income tests primarily because the provisions in
the Charter do not operate automatically to void any attempted transfer,
acquisition or ownership of shares of Common Stock of the Company that would
result in the disqualification of the Company as a REIT, but instead require the
Company's Board of Directors to take action to prohibit or deem to be null and
void any such attempted transfer, acquisition or ownership of shares of Common
Stock or to purchase or redeem any such shares of Common Stock. Once the shares
of Common Stock become publicly traded, the Board of Directors may not become
aware of attempted transfers, acquisitions or ownership of Common Stock that
would cause the Company to fail to qualify as a REIT until well after such
transfers, acquisitions or ownership have occurred, if at all. Moreover, as
discussed below, the restrictions on transferability contained in the Bylaws may
not be enforceable against current holders of Common Stock. If the Company were
to fail to qualify as a REIT for any taxable year, the Company would not be
allowed a deduction in computing its taxable income for amounts distributed to
its stockholders, and would be subject to federal income tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. See "Risk Factors-- Adverse Consequences of Failure to Qualify as a REIT;
Other Tax Liabilities," "Certain Federal Income Tax Considerations--Taxation of
the Company," "--Requirements for Qualification" and "--Failure to Qualify."

The Charter authorizes the Board of Directors to take such actions as are
necessary or advisable to preserve its qualification as a REIT and to refuse to
permit any proposed transfer or purchase of shares of Common Stock or shares of
the Company's preferred stock with voting rights (collectively, "Voting Shares")
which, in the opinion of the Board of Directors, would jeopardize the status of
the Company as a REIT under the Code. The Bylaws limit any person from acquiring
actual or constructive ownership of more than 9.9% (the "Aggregate Stock
Ownership Limit") in value of the outstanding shares of stock of the Company.
The Board of Directors, in its sole discretion, may exempt a proposed transferee
from the Aggregate Stock Ownership Limit. However, the Board of Directors may
not grant an exemption from the Aggregate Stock Ownership Limit to any proposed
transferee whose actual or constructive ownership of

17
<PAGE>
more than 9.9% in value of the outstanding shares of stock of the Company would
result in the termination of the Company's status as a REIT under the Code. See
"Capital Stock of the Company--Restrictions on Transfer." These restrictions on
transferability and ownership will not apply if the Board of Directors
determines that it is no longer in the best interests of the Company to continue
to qualify as a REIT under the Code. The Bylaw provisions described above may be
amended at any time by the Board of Directors. There can be no assurance that
the Board of Directors will not revise or eliminate this policy in a manner
which could have an adverse affect on the Company's REIT qualification. In
addition, because certain of the above-described restrictions on ownership and
transferability are contained in the Bylaws rather than the Charter, it is
possible that such restrictions may not be enforceable against current holders
of the Common Stock. As a result, the Company may not be able to enforce certain
of the above-described remedies that are intended to protect the Company's
status as a REIT under the Code. At its next meeting of stockholders, the
Company intends to submit a proposal to its stockholders to amend the Charter to
include in the Charter the restrictions on ownership and transfer of shares of
its stock currently in the Bylaws. The Aggregate Stock Ownership Limit may
delay, defer or prevent a transaction or a change in control of the Company that
might involve a premium price for the Common Stock or otherwise be in the best
interest of the stockholders. See "Capital Stock of the Company--Restrictions on
Transfer."

ISSUANCE OF ADDITIONAL STOCK. The Charter authorizes the Board of Directors
to issue authorized but unissued shares of Common Stock or Preferred Stock and
to classify or reclassify any unissued shares of Preferred Stock and to set the
designations and relative rights, preferences, qualifications, limitations or
restrictions of such shares. Because the Board of Directors has the power to
establish the terms of each class or series of Preferred Stock, it may afford
the holders in any series or class of Preferred Stock preferences as to
dividends and liquidation, special voting powers and other rights that would be
senior to the rights of holders of Common Stock. To date, the Board of Directors
has so designated 210,128 shares of Class A Convertible Preferred Stock.
However, such shares of Class A Convertible Preferred Stock will be cancelled
and reclassified as authorized but unissued shares of Preferred Stock upon the
completion of the Offering. Although the Board of Directors has no such
intention at the present time, it could establish a series of Preferred Stock or
issue additional shares of Common Stock that could have the effect of delaying,
deferring or preventing a transaction or a change in control of the Company that
might involve a premium price for the Common Stock or otherwise be in the best
interest of the stockholders. See "Capital Stock of the Company--Preferred
Stock."

POSSIBLE LOSSES NOT COVERED BY 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 it is not economically feasible to insure against such
losses. Should an uninsured loss or a loss in excess of insured limits occur,
the Company could lose its capital invested in the Property, as well as the
anticipated future revenue from the Property and, in the case of debt with
recourse to the Company, would remain obligated for any mortgage debt or other
financial obligations related to the Property. Any such loss would materially
adversely affect the Company.

POSSIBLE ENVIRONMENTAL LIABILITIES

18
<PAGE>
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 properly to 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 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 year, 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.

DILUTION

The pro forma net tangible book value per share of the assets of the Company
after the Offering will be less than the initial per share public offering price
of the Common Stock in the Offering. Accordingly, purchasers of the Common Stock
offered hereby will experience dilution of $3.85 per share in the net tangible
book value of the Common Stock from the initial public offering price.

EFFECT OF MARKET INTEREST RATES ON PRICE OF COMMON STOCK

One of the factors that will influence the market price of the Common Stock
in public markets will be the distribution rate on the Common Stock. To the
extent distribution rates do not increase sufficiently in response to increasing
market interest rates, such an increase in interest rates may adversely affect
the market price of the Common Stock.

19
<PAGE>
THE COMPANY

The Company is a fully integrated, self-administered and self-managed real
estate company focused on acquiring, renovating, owning and operating suburban
office properties located within the Midwest Region. The Company currently owns
and operates 27 Properties in suburban Chicago, Milwaukee, Minneapolis, Detroit,
Columbus and Cincinnati. The Properties contain approximately 2.8 million
rentable square feet leased to approximately 320 tenants. As of December 31,
1996, the Properties had a weighted average occupancy rate of approximately 92%.
The Company believes that it is one of the largest REIT owners of suburban
office space in the Midwest Region. Its five executive officers have an average
of 17 years experience in the real estate industry. The Company, which has
elected to be treated for federal income tax purposes as a REIT, is a reporting
company under the Securities Exchange Act of 1934.

[Pie chart that shows the percentage of rentable square feet of the
Properties located in each of the Current Markets with the following
percentages: Chicago = 51%; Cincinnati = 3%; Columbus =5%; Detroit = 12%;
Milwaukee = 17%; and Minnesota = 17%.]

The Company's primary business strategy is to acquire well-located,
underperforming suburban office properties in 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. This value-added
operating strategy is intended to establish the Company as one of the suburban
office owner/operators of choice in the markets it serves and to maximize tenant
retention. The Company's commitment to tenant satisfaction and retention is
evidenced by its retention rate of approximately 85% (based on 264,530 square
feet renewed) from January 1, 1993 to December 31, 1996. In addition, the
Company believes it has been successful in implementing its operating strategy
as evidenced by increased occupancy rates and rental income at the Properties.
The following table sets forth certain information for the 17 Properties owned
by the Company and acquired prior to June 30, 1996:

<TABLE>
<CAPTION>
AT AT
ACQUISITION DECEMBER 31, 1996
------------- ---------------------
(DOLLARS IN MILLIONS)
<S> <C> <C>
Weighted Average Occupancy Rate............................... 75% 90%
Annualized Net Operating Income............................... $ 8.4 $ 13.0
Acquisition Cost.............................................. $ 87.5 --
Adjusted Acquisition Yield(1)................................. 9.6% --
Investment Cost............................................... -- $ 98.5
Adjusted Investment Yield..................................... -- 13.2%
</TABLE>

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

(1) Adjusted Acquisition Yield includes the effect of three Properties with
Adjusted Acquisition Yields of 0%. Excluding these Properties, the Adjusted
Acquisition Yield was 10.7% and the Adjusted Investment Yield at December
31, 1996 was 13.5%.

The Company generally focuses on acquiring properties that have less than
250,000 rentable square feet and are available at purchase prices below $20
million. Management believes that assets of this size are too small to be
efficiently acquired by most institutional and public sector buyers; as a
result, competition for these properties is primarily limited to privately-held
real estate companies and private single-purpose entities. The Company's recent
acquisition activities demonstrate the Company's ability to make acquisitions
consistent with its investment objectives. Since July 1, 1996, the Company has
acquired ten Properties at an aggregate Acquisition Cost of $97.0 million. As a
public company with access to the capital markets, the Company believes that it
will have the resources to take advantage of many acquisition opportunities that
exist in the Midwest Region. Upon the completion of the Offering, the Company's
Total Debt to Total Market Capitalization Ratio will be approximately 3.1%, and
the Company will have no debt outstanding under the Credit Facility.

20
<PAGE>
The Company believes that the economic fundamentals in the Current Markets
and certain other markets within the Midwest Region provide an attractive
environment for owning, acquiring and operating suburban office properties.
Since 1990, there has been limited construction of suburban office properties in
the Midwest Region. The Company believes that the limited supply of new suburban
office properties, together with the increased demand caused by a growing
economy, will continue to result in increased occupancies and rental rates for
suburban office space in the Midwest Region.

COMPETITIVE ADVANTAGES

The Company believes it enjoys certain competitive advantages in pursuing
its business and growth strategies.

- EXPERIENCED MANAGEMENT TEAM. The Company's five executive officers have an
average of 17 years of real estate experience, primarily in suburban
office properties located in the Midwest Region. Management's market
knowledge and long-standing relationships with tenants, brokers and
institutions lead to numerous investment and leasing opportunities.

- FOCUS ON SUBURBAN OFFICE PROPERTIES IN THE MIDWEST REGION. The Company's
geographic and property-specific focus enables the Company to rapidly
review and respond to acquisition opportunities as well as to anticipate
and efficiently address the needs of existing and prospective tenants,
resulting in favorable lease renewals, tenant expansions and new
acquisition opportunities.

- FULLY INTEGRATED ORGANIZATION. The Company utilizes an integrated approach
to acquisition, management, leasing and renovation activities. This
approach allows the Company to offer a full range of alternatives
(including expansions and redevelopment of existing facilities,
acquisitions and build-to-suit projects) to satisfy the space needs of
existing and prospective tenants.

- ACCESS TO CAPITAL. Upon the completion of the Offering, the Company will
have $75 million available under the Credit Facility to fund additional
acquisitions and operations and will have a Total Debt to Total Market
Capitalization Ratio of 3.1%.

ORGANIZATION

The Company is a Maryland corporation, its principal executive offices are
located at 823 Commerce Drive, Oak Brook, Illinois 60521, and its telephone
number is (630) 368-2900. The Company is organized into four functional areas
with each such area being managed by a vice president or more senior member of
the Company's management, and, ultimately, the Company's President and Chief
Executive Officer, Richard A. May. The responsibilities of the four functional
areas are summarized below.

ACQUISITIONS AND DISPOSITIONS. The acquisition and disposition area, headed
by Raymond M. Braun, is responsible for all of the Company's acquisition and
disposition activities, including identifying and analyzing prospective
acquisitions, supervising third-party due diligence contractors, conducting the
Company's purchase and sale negotiations and reviewing offers to purchase the
Company's Properties.

ASSET AND PROPERTY MANAGEMENT. The asset and property management area,
headed by Kim S. Mills, is responsible for all of the Company's leasing
activities, including communicating and negotiating with existing and
prospective tenants, coordinating with outside leasing agents and developing
leasing strategies, as well as the Company's property management activities,
which include maintaining the physical properties and ensuring tenant
satisfaction.

FINANCE. The finance area, headed by James Hicks, is responsible for the
Company's financial matters, including internal accounting and recordkeeping,
cash management, oversight of the Company's indebtedness, projections and
employee benefits.

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<PAGE>
ADMINISTRATION AND LEGAL. The administrative and legal area, headed by
Richard L. Rasley, is responsible for all legal matters, including those related
to: acquisitions, leasing, property management and dispositions, and ongoing
reporting matters as well as all administrative matters, including personnel,
internal management and investor relations.

BUSINESS AND GROWTH STRATEGIES

The Company's primary business objectives are to maximize cash flow per
share and to enhance the value of its portfolio in order to maximize total
return to its stockholders. The Company believes it can achieve these objectives
by continuing to implement its business strategies and capitalizing on the
internal and external growth opportunities described below. The Company also
believes, based on its evaluation of market conditions, that a number of factors
will enhance its ability to achieve its business objectives, including
opportunities to maximize occupancy rates, rental rates and overall portfolio
value. These factors include the continuing economic improvement in the Midwest
Region as well as the limited construction of new suburban office properties in
the Midwest Region, due to the cost to develop such properties relative to their
current acquisition prices.

BUSINESS STRATEGIES

Based on its historical activities and its knowledge of the local
marketplace, the Company believes that the Midwest Region offers opportunities
for companies that are well-capitalized, experienced owners of real estate with
extensive local market expertise. In addition, based on this experience and
knowledge, the Company believes that having publicly traded securities will
enhance its access to capital, thereby allowing it to take advantage of
opportunities to acquire additional suburban office properties at attractive
prices and develop office properties, when feasible, at attractive returns. The
Company implements its business strategies by: (i) emphasizing tenant
satisfaction and retention and employing intensive property marketing programs;
(ii) utilizing an integrated approach to acquisition, management, leasing and
renovation activities that is designed to coordinate decision-making and enhance
responsiveness to market opportunities and tenant needs; and (iii) continuing to
implement cost control management and systems that capitalize on economies of
scale arising from the size and location of the Company's portfolio. The Company
believes that the implementation of these operating practices has led to the
increased occupancy rates and rental revenue of its existing portfolio.

AGGRESSIVE LEASING. The Company implements an aggressive leasing strategy
based on its knowledge of the Current Markets and its tenants' needs. The
Company's relationships with the tenant and brokerage communities provide the
Company with information to enhance its leasing and marketing efforts. The
Company's policies of maintaining communications, delivering a high level of
service and offering leasing flexibility provide existing tenants greater
control over existing space and future space planning and serve to enhance
tenant retention.

As part of this aggressive leasing strategy, property-specific marketing
plans are prepared at the time of acquisition and are constantly monitored and
updated to pro-actively position each Property within its respective market. The
Company enhances its leasing efforts by retaining leasing brokers that are
specifically selected for their market knowledge, tenant relationships and
historic ability to generate leases. This strategy enables the Company to
attract and lease office space to a greater number of tenants by

22
<PAGE>
improving the Company's visibility in the tenant community. The Company believes
its broad-based market presence in certain Current Markets provides a wide
variety of Class A and Class B space alternatives for prospective tenants and
existing tenants whose facility requirements evolve as their businesses grow.

As part of its leasing strategy, the Company reviews the financial
statements and other financial information of prospective tenants to assess
their creditworthiness as compared to the rents required to be paid under the
tenants' leases and the aggregate dollar investment required by the Company for
tenant improvements and leasing commissions. The Company may require credit
enhancement from tenants in the form of increased security deposits, letters of
credit, and personal or corporate guarantees of lease obligations.

ACTIVE PROPERTY MANAGEMENT. The Company believes that active property
management is a critical aspect of the Company's activities, and it is the
objective of management to intensely manage its Properties to provide a high
level of service and maximum flexibility to the Company's tenants. The Company
currently employs 15 individuals in its property management division, including
Edith Scurto, Vice President of Property Management and a Certified Property
Manager who has been in the industry for approximately ten years. The Company
employs six property managers, primarily located at the Properties, and eight
maintenance personnel.

INTEGRATED DECISION-MAKING AND RESPONSIVENESS. In addition to the location
and quality of its Properties, management generally credits its ability to
maintain its Properties at above-average market occupancy levels to the
coordination of its decision-making team. Acquisition, renovation and leasing
activities are coordinated to enhance responsiveness to market opportunities and
tenant needs. The acquisition, leasing and renovation teams work closely with
the Company's senior management from the initial meeting with prospective
tenants or sellers through the negotiation process. This integrated approach
permits the Company to analyze the economic terms and costs (including tenant
build-out and retrofitting costs) for each lease on a timely and efficient basis
throughout lease negotiations. With respect to acquisitions, the Company can
quickly analyze the costs of upgrades and lease-up potential. The Company is
able to commit to leasing and acquisition terms quickly, facilitating timely
transaction execution and build-out of tenant space, and minimizing lost income
from lease rollovers.

ECONOMIES OF SCALE AND LEASING FLEXIBILITIES. The Company seeks to enhance
portfolio value by lowering total operating costs and expenses compared to
single-site ownership and management and by capitalizing on its ability to offer
a range of leasing options in certain markets. The Company also strives to
minimize overhead by controlling general and administrative expenses.

GROWTH STRATEGIES

INTERNAL GROWTH. The Company believes that opportunities exist to increase
cash flow from its existing portfolio and that such opportunities will be
enhanced as the suburban office markets in the Midwest Region continue to
improve. The Company intends to pursue internal growth by (i) realizing fixed
contractual base rental increases; (ii) re-leasing expiring leases at increasing
market rents which are expected to result from increased demand for and
decreased supply of available space in the Midwest Region; (iii) continuing to
maintain and improve occupancy rates through active management and aggressive
leasing; and (iv) continuing to control operating expenses through the
implementation of cost control management and systems.

CONTRACTUAL BASE RENTAL INCREASES. The Company expects to achieve growth in
cash flow through leases which contain provisions for fixed contractual rental
increases. As of January 1, 1997, leases covering 68% of the total rentable
square footage provide for future fixed contractual rental increases. In 1996,
the contractual increases in base rents under leases at the Properties totaled
approximately $437,000 and, for 1997, such increases are expected to total
approximately $750,000.

23
<PAGE>
RE-LEASING EXPIRING LEASES TO INCREASING MARKET RENTS. Many of the
Company's tenants entered into leases at favorable rental rates, compared to the
current prevailing market rates, at times when the market for suburban office
space was depressed and when the Company did not own the Property. As a result,
as those leases expire, the Company believes that it will be able to re-lease
the space at higher effective rental rates.

MAINTAINING AND IMPROVING OCCUPANCY RATES. The Company believes that it has
been successful in attracting, expanding and retaining a diverse tenant base by
actively managing its Properties with an emphasis on tenant retention and
satisfaction. The Company strives to be responsive to the needs of individual
tenants through its on-site professional management staff and by providing
tenants with leasing alternatives within the Company's portfolio to accommodate
their changing space requirements. The Company's success in maintaining and
improving occupancy rates is demonstrated, in part, by the number of existing
tenants which have renewed or released their space, leased additional space to
support their expansion needs or moved to other space within the Company's
portfolio. The Company has achieved a tenant retention rate of approximately 85%
(based on square feet renewed) from January 1, 1993 through December 31, 1996.
See "Business and Properties--Historic Lease Renewals." The Company also seeks
to improve occupancies by aggressively marketing available space within its
portfolio. As of December 31, 1996, the Properties had a weighted average
occupancy rate of 92% compared to 86.3% as of December 31, 1995 (or, for
Properties acquired during 1996, the date of acquisition).

EXTERNAL GROWTH. Based on its historical activities and its knowledge of
the Midwest Region, the Company believes that opportunities continue to exist to
acquire additional office properties in the Midwest Region that: (i) provide
attractive initial yields with potential for growth in cash flow; (ii) are in
desirable locations within submarkets in the Midwest Region that exhibit strong
growth characteristics; (iii) have purchase prices that represent a significant
discount to replacement cost; and (iv) are underperforming or need renovation,
thereby providing opportunities for the Company to increase the cash flow and
value of such properties through active management, rehabilitation and
aggressive leasing.

ACQUISITION STRATEGY. The Company's primary strategy is to acquire
well-located, well-constructed suburban office properties containing 250,000
square feet or less that are less than 15 years old with purchase prices of less
than $20 million. The Company believes that most institutional and public-sector
buyers have tended to focus their acquisition activities on substantially larger
properties in terms of square footage and purchase price. As a result of the
purchasing bias of these institutional and public-sector buyers, the Company has
encountered few well-capitalized competitors for the Company's target properties
in its target markets. The Company believes it has been able to achieve more
favorable pricing because it has been able to contract for the purchase of
properties without financing and other contingencies that are generally required
by less well-capitalized local buyers of these property types. In addition, the
Company has established a long and successful track record and reputation for
closing on properties it has contracted to purchase.

The Company believes that attractive opportunities exist to acquire
well-located suburban office properties in the Midwest Region at a discount to
replacement cost. Each acquisition opportunity is reviewed to evaluate whether
it meets one or more of the following criteria: (i) potential for higher
occupancy levels and/or rents as well as for lower turnover and/or operating
expenses; (ii) ability to generate returns in excess of the Company's weighted
average cost of capital, taking into account the estimated costs associated with
tenant turnover (I.E., tenant improvements, leasing commissions and the loss of
income due to vacancy) and property rehabilitation; and (iii) availability for
purchase at a price at or below estimated replacement cost. The Company intends
to focus its investment activities on properties that are in one or more of the
following categories:

- UNDER-MANAGED PROPERTIES: properties that have below market rents and/or
occupancies. For example, Princeton Hill Corporate Center, a Class A
office building in Springdale, Ohio, was acquired on April 17, 1996. At
the time, the occupancy was 31%. Within 41 days of taking title, the
Company

24
<PAGE>
identified and signed a tenant, and leased the entire unleased portion of
the building. As a result, the Property generates Net Operating Income of
approximately $1.1 million per year with a total Investment Cost as of
December 31, 1996 of approximately $7.7 million.

- YIELD-ORIENTED ACQUISITIONS: properties purchased below estimated
replacement cost at attractive yields. For example, in December 1996 the
Company completed the acquisition of 40 Oak Hollow, a three-story building
located in Southfield, Michigan, which is currently 97.3% occupied. The
Acquisition Cost of the Property was $91 per square foot while the
Company's estimated replacement cost is $133 per square foot. The Adjusted
Acquisition Yield for the 40 Oak Hollow property was 11.8%.

- REDEVELOPMENT OR RENOVATION OPPORTUNITIES: well-located and fundamentally
sound properties that may require physical renovation or cosmetic
improvement to achieve their full potential performance. The Company
recently completed a $3.0 million renovation of 823 Commerce Drive in Oak
Brook, Illinois, which was 36% occupied at acquisition in November 1995.
The Property is currently 100% occupied.

- OPPORTUNISTIC INVESTMENTS: opportunities to acquire under-valued assets
using the Company's local market knowledge and expertise. For example, in
August 1995 the Company purchased 10 Oak Hollow in Southfield, Michigan at
a purchase price of $6.9 million, which reflected the pending vacancy of
the entire second floor of the building. However, the Company was aware of
a tenant in a nearby non-Company owned property which was in need of
expansion space. The Company ultimately sold 10 Oak Hollow to that tenant
for $9.3 million 14 months after its purchase of the Property. The Company
used the proceeds from the sale to acquire an additional property
utilizing a like-kind exchange, thereby achieving tax deferral of the
gain. In addition to realizing a profit on the sale, the Company continues
to manage 10 Oak Hollow and, as leases expire and the new owner takes over
space for its own use, the Company may have the opportunity to re-locate
displaced tenants to the two Company-owned Properties located within the
same campus if any vacancies exist at that time.

The Company believes that it possesses a competitive advantage in
identifying and capitalizing on acquisition opportunities for targeted office
properties due to (i) its broad-based market presence in certain of the Current
Markets, (ii) the experience of its management team; (iii) its conservative
capital structure and its available liquidity, including amounts available under
the Credit Facility; and (iv) its strong relationships with certain of the
region's institutional property owners and investment real estate brokers.

DISPOSITION STRATEGY. The Company also seeks to enhance stockholder value
through the strategic disposition of its Properties. The Company will consider
disposing of Properties on a tax-deferred basis and re-deploying any proceeds
from sales into properties with higher yield potential. Generally, the Company
seeks to dispose of its Properties when one or more of the following conditions
apply: (i) market prices are at or near replacement cost; (ii) occupancy is high
and the potential to increase cash flow and property value within a reasonable
period is limited; (iii) the Company believes the capital received can be more
efficiently redeployed; or (iv) ownership of the Property is no longer
consistent with the Company's ownership strategies.
In the fourth quarter of 1996, the Company sold two properties, 830 West End
Court in Vernon Hills, Illinois and 10 Oak Hollow in Southfield, Michigan,
aggregating approximately 110,000 square feet. The Company's weighted average
holding period for the two properties was approximately 19 months. As a result
of the Company's value-added operating strategy during the time the Company
owned these properties, the weighted average occupancy rate increased from 90.4%
to 99.4%. The total sale price of $12.1 million reflected a 36% increase over
the Company's aggregate Acquisition Cost of these properties. Both properties
were sold on a tax-deferred basis using like-kind exchanges.

25
<PAGE>
FINANCING STRATEGY. The Company seeks to maintain a well-balanced,
conservative and flexible capital structure by: (i) targeting a Total Debt to
Total Market Capitalization Ratio of no greater than 50%; and (ii) limiting the
use of the Credit Facility to short term financing of acquisitions and working
capital requirements.

Upon the completion of the Offering, the Company will have no debt
outstanding under the Credit Facility and will have the capacity to borrow the
full amount available under the Credit Facility. The Company is currently
negotiating to expand the borrowing capacity under the Credit Facility from $75
million to $100 million; however, the Company does not expect to consummate any
such increase until it determines such additional capacity is needed.

DEVELOPMENT. The Company intends to enhance its leasing flexibility by
providing build-to-suit development to accommodate current and prospective
tenants requiring space that is otherwise unavailable in the marketplace. The
Company will also continue its redevelopment activities of older buildings which
have desirable locations.

26
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the Offering, after deducting
underwriting discounts and commissions and the estimated expenses of the
Offering, are estimated to be approximately $83.7 million. The net proceeds of
the Offering will be used by the Company as follows: approximately $63.8 million
for repayment of all amounts outstanding under the Credit Facility,
approximately $17.8 million for repayment of other indebtedness, including
mortgage debt on the Properties (including approximately $600,000 in related
prepayment penalties), and the remaining net proceeds will be used for working
capital and other corporate purposes. Borrowings under the Credit Facility
during 1996 were used to fund acquisitions of Properties and general working
capital requirements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

The Company expects to use the additional net proceeds from any exercise of
the Underwriters' overallotment option (which would be approximately $13.2
million if the option is exercised in full) to acquire additional suburban
office properties and for working capital.

Pending the application of net proceeds from the Offering, the Company will
invest such net proceeds in interest-bearing accounts and short-term,
interest-bearing securities in accordance with the requirements for
qualification as a REIT for federal income tax purposes.

Amounts under the Credit Facility bear interest at LIBOR plus 1.65% (7.025%
at March 1, 1997) and mature in April 1998. Upon the completion of the Offering,
amounts under the Credit Facility will bear interest at LIBOR plus 1.50%. The
weighted average interest rate on the other indebtedness to be repaid with the
net proceeds from the Offering (which amounts are secured by or otherwise relate
to certain of the Properties) is 8.50% per annum and, as of February 28, 1997,
the weighted average maturity date of such indebtedness was 8.2 years.

27
<PAGE>
DISTRIBUTIONS

During the past three years, the Company has made quarterly distributions
with respect to its Common Stock, as follows:

<TABLE>
<CAPTION>
DISTRIBUTIONS
CALENDAR PERIOD PER SHARE
- ------------------------------------------------------------------------------------------ -------------
<S> <C>
1994:
First Quarter........................................................................... $ 0.20
Second Quarter.......................................................................... $ 0.23
Third Quarter........................................................................... $ 0.26
Fourth Quarter.......................................................................... $ 0.27
1995:
First Quarter........................................................................... $ 0.27
Second Quarter.......................................................................... $ 0.27
Third Quarter........................................................................... $ 0.29
Fourth Quarter.......................................................................... $ 0.30
1996:
First Quarter........................................................................... $ 0.30
Second Quarter.......................................................................... $ 0.30
Third Quarter........................................................................... $ 0.30
Fourth Quarter.......................................................................... $ 0.30
</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 stockholders
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 stockholder's basis
in his or her shares of Common Stock for tax purposes. To the extent that a
distribution exceeds both the Company's current and accumulated earnings and
profits and the stockholder'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
stockholder's shares. For further discussion of the tax treatment of
distributions to holders of Common Stock, see "Certain Federal Income Tax
Considerations--Taxation of Taxable U.S. Stockholders" and "--Taxation of
Non-U.S. Stockholders." 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 1996, 1995 and 1994:

<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Ordinary income......................................................... 88.3% 87.4% 93.0%
Non-taxable return of capital........................................... 11.7% 12.6% 7.0%
----- ----- -----
Total................................................................... 100.0% 100.0% 100.0%
----- ----- -----
----- ----- -----
</TABLE>

28
<PAGE>
CAPITALIZATION

The following table sets forth the historical capitalization of the Company
and the capitalization of the Company as of December 31, 1996, as adjusted to
give effect to (i) the acquisition of Properties subsequent to December 31, 1996
and (ii) the Offering and the application of the net proceeds therefrom as set
forth under "Use of Proceeds." The information set forth in the table should be
read in connection with the financial statements and notes thereto, the pro
forma financial information and notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources" included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long-term Debt:
Credit facility........................................................................ $ 63,802 $ --
Mortgage debt.......................................................................... 17,074 2,237
Bonds.................................................................................. 5,235 5,235
---------- -----------
Total long-term debt................................................................. 86,111 7,472
---------- -----------
Stockholders' equity(1):
Preferred Stock, $.01 par value per share, 10,000,000 shares authorized; 210,128 shares
and no shares issued and outstanding, historical and as adjusted, respectively(2).... 2 --
Common Stock, $.01 par value per share; 20,000,000 shares authorized; 8,810,484 shares
and 14,510,484 shares issued and outstanding, historical and as adjusted,
respectively......................................................................... 88 146
Additional paid-in capital............................................................. 98,096 183,247
Distributions in excess of accumulated earnings........................................ (1,073) (2,016)
Employee stock loans................................................................... (1,247) (1,247)
Other.................................................................................. (521) (521)
---------- -----------
Total stockholders' equity........................................................... 95,345 179,609
---------- -----------
Total Capitalization............................................................... $ 181,456 $ 187,081
---------- -----------
---------- -----------
</TABLE>

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

(1) As adjusted information does not reflect the effect of an insignificant
(less than 1%) minority interest attributable to OP Units held by third
parties.

(2) Pursuant to the terms of the outstanding shares of Preferred Stock, such
shares will be cancelled automatically upon consummation of the Offering and
will become authorized but unissued shares of Preferred Stock.

29
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA

The following sets forth selected financial and operating information for
the Company (i) on a historical basis for each of the periods and dates
indicated and (ii) on a pro forma basis as of and for the year ended December
31, 1996. The following information should be read in conjunction with the
financial statements and notes thereto of the Company included elsewhere in this
Prospectus. The selected historical financial and operating information for the
Company as of December 31, 1996, 1995 and 1994, and for each of the three years
in the period ended December 31, 1996 has been derived from the Company's
historical financial statements audited by Ernst & Young LLP, independent
auditors, whose report with respect thereto is included elsewhere in this
Prospectus. The selected historical financial and operating information for the
Company as of December 31, 1993 and 1992 and for the period June 22, 1992 to
December 31, 1992 has been derived from the Company's historical audited
financial statements.

The unaudited selected condensed pro forma income statement and operating
data for the year ended December 31, 1996 are presented as if the acquisition
and disposition of properties subsequent to December 31, 1995, the Company's
private equity offering in 1996, the Merger, and the Offering and the
application of the net proceeds therefrom had all occurred as of January 1,
1996. The unaudited selected condensed pro forma balance sheet data as of
December 31, 1996 is presented as if the acquisition of Properties subsequent to
December 31, 1996 and the Offering had occurred as of such date. The pro forma
information is based upon certain assumptions that are included in the notes to
the pro forma financial statements included elsewhere in this Prospectus. The
pro forma financial information is unaudited and is not necessarily indicative
of what the financial position and results of operations of the Company would
have been as of the dates and for the periods indicated, nor does it purport to
represent or project the financial position or results of operations for future
periods.

30
<PAGE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
PRO FORMA(1) HISTORICAL
------------- ---------------------------------------------------------
1996 1996 1995 1994 1993 1992(2)
------------- ----------- --------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue
Rental...................................... $ 29,610 $ 20,250 $ 12,410 $ 6,647 $ 1,230 $ --
Reimbursement............................... 8,874 4,814 2,355 884 --
Interest.................................... 646 168 201 51 63 16
------------- ----------- --------- --------- --------- -----------
Total revenue............................. 39,130 25,232 14,966 7,582 1,293 16
------------- ----------- --------- --------- --------- -----------

Expenses:
Real estate taxes........................... 6,787 3,954 2,625 1,418 292
Other property operating.................... 10,389 6,549 3,967 1,944 181
General and administrative.................. 2,378 2,242 923 561 177 10
Interest.................................... 397 3,778 2,296 911 73
Depreciation and amortization............... 5,582 3,977 1,955 761 160
Contract termination........................ -- 1,273 -- -- -- --
------------- ----------- --------- --------- --------- -----------
Total expenses............................ 25,533 21,773 11,766 5,595 883 10
------------- ----------- --------- --------- --------- -----------
Income before gain or sale of properties...... 13,597 3,459 3,200 1,987 410 6
Gain on sale of properties.................... -- 3,140 -- -- --
------------- ----------- --------- --------- --------- -----------
Net income.................................... $ 13,597 $ 6,599 $ 3,200 $ 1,987 $ 410 $ 6
------------- ----------- --------- --------- --------- -----------
------------- ----------- --------- --------- --------- -----------
Net income per common share and common share
equivalent.................................. $ 0.92 $ 1.11 $ 0.88 $ 0.96 $ 0.38 $ 0.02
------------- ----------- --------- --------- --------- -----------
------------- ----------- --------- --------- --------- -----------
Weighted average common share and common share
equivalent.................................. 14,723 5,927 3,650 2,070 1,081 316

BALANCE SHEET DATA (END OF PERIOD):
Properties--net of accumulated depreciation... $ 189,131 $ 184,122 $ 91,858 $ 37,234 $ 17,409 $ --
Total assets.................................. $ 199,088 $ 192,899 $ 98,978 $ 42,522 $ 21,919 $ 2,784
Total long-term debt.......................... $ 7,472 $ 86,111 $ 48,307 $ 15,955 $ 3,777 $ --
Total liabilities............................. $ 19,479 $ 97,554 $ 54,013 $ 18,460 $ 5,420 $ 3
Stockholders' equity.......................... $ 179,609 $ 95,345 $ 44,965 $ 24,062 $ 16,498 $ 2,781

OPERATING DATA:
EBITDA(3)..................................... $ 19,579 $ 12,487(4) $ 7,451 $ 3,659 $ 643 $ 6
Funds from Operations(5):
Net income.................................. $ 13,597 $ 6,599 $ 3,200 $ 1,987 $ 410 $ 6
Gain on sale of properties.................. (3,140)
Depreciation and amortization............... 5,379 5,047(6) 1,824 718 161 --
------------- ----------- --------- --------- --------- -----------
Funds from Operations....................... 18,976 8,506 5,024 2,705 571 6
Cash dividends per share...................... $ -- $ 1.20 $ 1.13 $ 0.96 $ 0.47 $ --
Cash flows from operating activities.......... -- 12,828 5,650 1,977 1,569 9
Cash flows from investing activities.......... -- (91,211) (51,650) (20,493) (17,558) (45)
Cash flows from financing activities.......... -- 78,768 44,626 17,420 17,021 2,776
Number of properties owned at period end...... 27 25 16 9 6 --
Aggregate square feet of properties owned at
period end.................................. 2,800 2,684 1,529 758 441 --
Occupancy at period end of properties owned at
period end.................................. -- 92% 86% 84% 78% --
</TABLE>

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

(1) Pro forma information does not reflect an insignificant (less than 0.02%)
minority interest attributable to OP Units held by third parties.

(2) Represents the period from June 22, 1992 (the date of the Company's
inception) to December 31, 1992.

(3) 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

31
<PAGE>
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.

(4) Excludes a nonrecurring charge of $1,273 for contract termination charges
related to termination of arrangements with the Advisor in connection with
the Merger.

(5) 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.

(6) Represents depreciation and amortization of $3,774 and a nonrecurring charge
of $1,273 for contract termination costs related to termination of
arrangements with the Advisor in connection with the Merger.

32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RECENT EVENTS

Since July 1, 1996, the Company acquired ten Properties at an aggregate
Acquisition Cost of $97.0 million. In addition, in the fourth quarter of 1996,
the Company disposed of two properties, with a weighted average holding period
of 19 months, in tax-deferred transactions. The total sales price of $12.1
million represented a 36% increase over the aggregate Investment Cost of these
properties.

On April 1, 1996, the Advisor was merged into the Company in exchange for
100,000 shares of Common Stock. Pursuant to several agreements between the
Advisor and the Company, the Advisor had provided various services to the
Company, including administrative and management services relating to the
Company's day-to-day operations, day-to-day property management services and
various support services. Concurrent with the Merger, the agreements relating to
the provision of these services were effectively terminated, and the Company
incurred nonrecurring contract termination expenses aggregating $1.3 million
attributable to the costs associated with these agreements. These expenses are
reflected as contract termination costs in the Company's income statement for
the year ended December 31, 1996.

During 1996, the Company issued approximately 3.9 million shares of Common
Stock in a private placement to six institutional investors, raising net
proceeds of approximately $47.4 million. These proceeds were used to acquire
Properties and to repay indebtedness. In addition, the Company entered into the
Credit Facility, which amended and restated the Company's prior bank credit
facility. Among other things, this amendment increased the maximum borrowing
limit under the Credit Facility from $50 million to $75 million.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1996 COMPARED TO 1995. The Company had two
significant nonrecurring transactions in 1996. In connection with the Merger
with its Advisor, the Company incurred $1.3 million in contract termination
expense in 1996. Income before gains on sales of properties would have increased
by $1,533,000 rather than the $260,000 reported in 1996 due to this one-time
charge. The Company sold two properties in 1996 resulting in a gain on sale of
$3,140,000. The Company would have reported net income of $4,733,000 had these
two nonrecurring items not occurred in 1996, an increase of $1,533,000 over 1995
net income of $3,200,000 (a 48% increase). The changes in the income statement
items in 1996 compared to 1995 are as follows:

<TABLE>
<CAPTION>
INCREASE
(DECREASE)
------------------
<S> <C>
Rents and reimbursements............................................................ $ 10,299,000
Interest and other.................................................................. (33,000)
------------------
Total revenues.................................................................. 10,266,000
------------------
Real estate taxes................................................................... 1,330,000
Other property operating............................................................ 2,581,000
General and administrative.......................................................... 1,319,000
Interest............................................................................ 1,482,000
Depreciation and amortization....................................................... 2,022,000
Contract termination................................................................ 1,273,000
------------------
Total expenses.................................................................. 10,007,000
------------------
Income before gain on sale of properties........................................ 259,000
Gain on sale of properties...................................................... 3,140,000
------------------

Net income...................................................................... $ 3,399,000
------------------
------------------
</TABLE>

33
<PAGE>
In analyzing the operating results for the year ended December 31, 1996, the
increases in rental income, real estate taxes and other property operating
expenses (which include management fees (through the date of the Merger),
repairs and maintenance, janitorial and other services related to the operation
of the Properties) compared to 1995 are due principally to three factors: (i)
the addition of operating results from properties acquired in 1996 from the
dates of their respective acquisitions, (ii) an additional year of operating
results attributable to properties acquired in 1995 compared to the partial
period of operating results from the dates of their respective acquisitions in
1995 and (iii) improved operations of properties during 1996 compared to 1995.

During the year ended December 31, 1996, the Company acquired 12 properties.
The operating results of these properties have been included in the Company's
financial statements from the date of their acquisition. In 1995, the Company
acquired seven properties, and in 1996 a full year of operations of these
properties has been included in the Company's financial statements.

A summary of these changes as they impact rental income, real estate taxes
and other property operating expenses for 1996 follows:

<TABLE>
<CAPTION>
RENTAL AND OTHER PROPERTY
REIMBURSEMENT REAL ESTATE OPERATING
INCOME TAXES EXPENSES
-------------- -------------- --------------
<S> <C> <C> <C>
Increase due to 1996 acquisitions...................... $ 3,392,000 $ 462,000 $ 940,000
Increase due to inclusion of results of properties
acquired during 1995.................................. 5,413,000 1,040,000 1,220,000
Increase due to operations of properties sold in
1996.................................................. 801,000 58,000 239,000
1996 operations compared to 1995 for properties
owned at 12/31/95..................................... 693,000 (230,000) 182,000
-------------- -------------- --------------
Total increase in 1996................................. $ 10,299,000 $ 1,330,000 $ 2,581,000
-------------- -------------- --------------
-------------- -------------- --------------
</TABLE>

Interest expense during the year ended December 31, 1996 increased by
$1,482,000 as the Company had greater amounts of long and short-term debt
outstanding in 1996. This debt was used to finance the acquisition of properties
acquired in 1995 and 1996.

General and administrative expenses increased by $1,319,000 due to the
increase in the size of the Company ($875,000), increased audit and legal fees
($174,000), increased directors fees ($41,000), and the increase in amortization
of deferred compensation ($229,000).

Depreciation and amortization increased in 1996 by $2,022,000 as the Company
incurred these expenses on 25 properties in 1996 compared to 16 properties in
1995.

In connection with the Merger, all contracts between the Advisor and the
Company were transferred to the Company. As these contracts are effectively
terminated, the costs assigned to the contracts ($1.3 million) have been charged
to contract termination expense in the year ended December 31, 1996.

34
<PAGE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO 1994. The changes in the income
statement items in 1995 compared to 1994 are as follows:

<TABLE>
<CAPTION>
INCREASE
(DECREASE)
------------------
<S> <C>
Rents and reimbursements............................................................ $ 7,234,000
Interest............................................................................ 149,000
------------------
Total revenues.................................................................. 7,383,000
------------------

Real estate taxes................................................................... 1,207,000
Other property operating............................................................ 2,024,000
General and administrative.......................................................... 362,000
Interest............................................................................ 1,385,000
Depreciation and amortization....................................................... 1,193,000
------------------
Total expenses.................................................................. 6,171,000
------------------
Net income...................................................................... $ 1,212,000
------------------
------------------
</TABLE>

During 1995, the Company acquired seven properties. The operating results of
these properties have been included in the Company's financial statements from
the dates of their respective acquisitions. In 1994, the Company acquired three
properties, and in 1995 a full year of operations of these properties has been
included in the Company's financial statements as compared to the operating
results of these three properties only from the respective dates of their
acquisitions in 1994. In analyzing the 1995 operating results of the Company,
the changes in rental income, real estate taxes, and other property operating
expenses from 1994 are due principally to: (i) the addition of operating results
from properties acquired during 1995 from the dates of their respective
acquisitions; (ii) the addition of a full year's operating results in 1995 of
properties acquired in 1994 compared to the partial year's operating results
from the dates of their respective acquisitions in 1994 and (iii) improved
operations of properties during 1995 compared to 1994. A summary of the changes
as they impact rental income, real estate taxes and other property operating
expenses for the 1995 period follows:

<TABLE>
<CAPTION>
RENTAL AND OTHER PROPERTY
REIMBURSEMENT REAL ESTATE OPERATING
INCOME TAXES EXPENSES
-------------- ------------ --------------
<S> <C> <C> <C>
Increase due to 1995 property acquisitions............... $ 4,744,000 $ 1,000,000 $ 1,413,000
Increase due to inclusion of results for properties
acquired in 1994....................................... 1,603,000 177,000 535,000
1995 operations compared to 1994 for properties owned at
12/31/94............................................... 887,000 30,000 76,000
-------------- ------------ --------------
Total increase in 1995................................... $ 7,234,000 $ 1,207,000 $ 2,024,000
-------------- ------------ --------------
-------------- ------------ --------------
</TABLE>

Interest expense increased by $1,385,000 in 1995 compared to 1994 as the
Company increased its short and long-term mortgage debt to partially finance the
acquisition of investment properties in 1995. Depreciation and amortization
increased by $1,193,000 as the Company incurred depreciation and amortization
expense on 16 properties in 1995, as compared to nine properties in 1994.
General and administrative expenses increased by $362,000 due to increased
advisory fees paid to the Advisor ($314,000) and increased professional fees
($48,000).

35
<PAGE>
YEAR ENDED DECEMBER 31, 1994 COMPARED TO 1993. The changes in the income
statement items in 1994 compared to 1993 were as follows:

<TABLE>
<CAPTION>
INCREASE
(DECREASE)
------------------
<S> <C>
Rents and reimbursements............................................................ $ 6,301,000
Interest............................................................................ (12,000)
------------------
Total revenues.................................................................... 6,289,000
------------------
Real estate taxes................................................................... 1,126,000
Other property operating expenses................................................... 1,762,000
General and administrative.......................................................... 384,000
Interest............................................................................ 838,000
Depreciation and amortization....................................................... 601,000
------------------
Total expenses.................................................................... 4,711,000
------------------
Net income........................................................................ $ 1,578,000
------------------
------------------
</TABLE>

During 1994 and 1993, the Company acquired three and six properties,
respectively. The operating results of those properties are presented in the
Company's financial statements from the dates of their respective acquisition.
Operating results of properties acquired in 1993 are included in the 1994
financial statements for the entire year as compared with operating results only
from the dates of their acquisition in 1993. The changes in rental income, real
estate taxes and other property operating expenses are due principally to: (i)
the addition of operating results from properties acquired in 1994 from the
dates of their respective acquisitions; (ii) the addition of a full year's
operating results in 1994 of properties acquired during 1993 compared to the
partial year's operating results from the dates of their respective acquisitions
in 1993; and (iii) improved operating results in 1994 for the properties
acquired in 1993 due to increased leasing levels at such Properties.

A summary of these changes as they impact rental income, real estate taxes
and property operating expenses for the 1994 period follows:

<TABLE>
<CAPTION>
RENTAL AND OTHER PROPERTY
REIMBURSEMENT REAL ESTATE OPERATING
INCOME TAXES EXPENSES
-------------- ------------ --------------
<S> <C> <C> <C>
Increase due to 1994 property acquisitions............... $ 1,872,000 $ 237,000 $ 502,000
Increase due to inclusion of results for properties
acquired in 1993....................................... 4,078,000 1,010,000 1,080,000
1994 operations compared to 1993 for properties owned at
12/31/93............................................... 351,000 (121,000) 180,000
-------------- ------------ --------------
Total increase in 1994................................... $ 6,301,000 $ 1,126,000 $ 1,762,000
-------------- ------------ --------------
-------------- ------------ --------------
</TABLE>

Interest expense during 1994 increased by $838,000 as the Company had
financed a portion of the purchase prices of eight properties as of December 31,
1994, compared to three properties as of December 31, 1993. Depreciation and
amortization increased by $601,000 as the Company incurred depreciation and
amortization on nine properties in 1994 compared to six properties in 1993.
General and administrative expenses increased by $384,000 due to increased
professional fees ($154,000) and the advisory fee paid to the Advisor
($230,000), each of which were a consequence of the growth in the size of the
Company in 1994.

LIQUIDITY AND CAPITAL RESOURCES

After giving effect to the completion of the Offering and the application of
the net proceeds therefrom, the Company expects that its total debt will be
reduced by approximately $80.9 million compared to the Company's total debt as
of December 31, 1996. The total debt, excluding payables and

36
<PAGE>
accrued expenses, is expected to be approximately $7.5 million after the
Offering, compared to $86.1 million as of December 31, 1996. The Company expects
that its outstanding debt after the Offering, excluding payables and accrued
expenses, will consist principally of mortgage indebtedness on certain
Properties. As a result, the Company's Total Debt to Total Market Capitalization
Ratio is expected to be 3.1% (3.0% if the Underwriters' overallotment option is
exercised in full).

The Company's capital expenditures have increased from $51,000 in 1994 to
$345,000 in 1996. Capital expenditures represent spending for improvements or
replacement of building and common area components including: roofs, heating and
air conditioning systems, elevators, mechanical systems and parking lots which
are not expensed on an annual basis. Amounts attributable to capital
improvements that are anticipated by the Company at the time of acquisition of a
particular property are generally included in Acquisition Costs. As a result,
capital expenditures for a particular property typically increase after the
first year of the Company's ownership. The Company expects that the amount of
its capital expenditures in the next several years will increase due to an
increase in the number and size of the Company's property acquisitions and the
age and general character of those acquisitions.

After the Offering, the Company expects that it will have $75 million
available and no amounts outstanding under its Credit Facility. The interest
rate on borrowings under the Credit Facility will decrease to LIBOR plus 1.50%
after the Offering. In addition, the Company is negotiating to increase the
maximum amount available under the Credit Facility to $100 million; however, the
Company does not expect to consummate such an increase until the Company
anticipates that such additional amounts will be needed. The Company anticipates
that the Credit Facility will be used primarily to acquire additional properties
and for general working capital purposes. The Credit Facility contains financial
covenants including requirements for a minimum tangible net worth, maximum
liabilities to asset values, debt service coverage and property operating net
income (all calculated in accordance with the Credit Facility). The Credit
Facility also contains restrictions on, among other things, indebtedness,
investments, distributions, liens, mergers and development activities of the
Company. The Company also has a $5 million revolving credit facility with The
American National Bank and Trust Company of Chicago that expires in June 1997
and under which no amounts are outstanding.

The Company expects to meet its short-term liquidity requirements after the
Offering generally through its available working capital and net cash provided
by operations. The Company believes that its net cash provided by operations
will be sufficient to allow the Company to make any distributions necessary to
enable the Company to continue to qualify as a REIT under the Code. The Company
also believes that the foregoing sources of liquidity will be sufficient to fund
its short-term liquidity needs for the foreseeable future, including capital
expenditures, tenant improvements and leasing commissions.

The Company expects to meet certain long-term liquidity requirements such as
property acquisitions, scheduled debt maturities, renovations, expansions and
other non-recurring capital improvements through long-term secured and unsecured
indebtedness and the issuance of additional equity securities. The Company also
expects to use funds available under the Credit Facility to fund acquisitions,
development activities and capital improvements on an interim basis.

STATEMENTS OF CASH FLOWS

YEAR ENDED DECEMBER 31, 1996 COMPARED TO 1995. Cash flows from operating
activities increased by $7.2 million as the Company owned 25 properties during
1996 compared to 16 properties during 1995.

Cash used by investing activities increased by $39.6 million in 1996
compared to 1995 as the Company acquired 12 properties during 1996 compared to
seven properties in 1995.

Cash provided by financing activities increased by $34.1 million as proceeds
from equity offerings increased by $28.6 million, proceeds from bank and
mortgage loans increased by $12.0 million, dividends

37
<PAGE>
paid increased by $3.4 million, dividends reinvested decreased by $2.6 million
and cash provided by other items declined by $0.5 million.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO 1994. Cash flows from operating
activities increased by $3.7 million in 1995 compared to 1994 as the Company
owned 16 properties in 1995 compared to nine properties in 1994.

Cash flows used by investing activities increased by $31.2 million in 1995
compared to 1994 as the Company acquired seven properties in 1995 compared to
three properties in 1994. Cash flows from financing activities increased by
$27.2 million in 1995 compared to 1994 as the Company raised $18.8 million
through the private placement of Common Stock in 1995 compared to $6 million in
1994. In addition, the Company's borrowings increased by $15 million in 1995.

38
<PAGE>
BUSINESS AND PROPERTIES

GENERAL

The Company owns 27 Properties containing approximately 2.8 million square
feet. The Properties consist primarily of Class A and Class B suburban office
properties, which range in size from approximately 15,000 to 260,000 rentable
square feet. The Properties consist of 20 suburban office properties, two light
industrial distribution facilities and five office/service centers (generally
single-story buildings with both finished office and unfinished storage area).
The 27 Properties are located in the suburban areas of Chicago (15), Milwaukee
(4), Minneapolis (3), Detroit (3), Columbus (1) 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.

The Company or the Operating Partnership holds fee simple title to each of
the Properties. Upon the completion of the Offering, 21 of the Properties will
secure indebtedness, including indebtedness under the Credit Facility, and six
of the Properties will be unencumbered.

39
<PAGE>
PROPERTIES

The following table sets forth certain information regarding each of the
Properties as of January 1, 1997:
<TABLE>
<CAPTION>
PERCENTAGE ANNUAL NET
OF TOTAL PERCENTAGE EFFECTIVE ANNUALIZED
PORTFOLIO OF RENT PER BASE RENT
APPROXIMATE RENTABLE ANNUALIZED PORTFOLIO NUMBER LEASED PER LEASED
YEAR BUILT/ RENTABLE SQUARE PERCENT BASE RENT ANNUALIZED OF SQUARE SQUARE
SUBMARKET/PROPERTY LOCATION RENOVATED SQUARE FEET FEET LEASED ($000S)(2) BASE RENT LEASES FOOT(1) FOOT(2)
- -------------------- ----------- ----------- ----------- --------- ------- ---------- --------- ------ ---------- ----------
SUBURBAN CHICAGO
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Centennial Center... Schaumburg 1980/1993 259,730 9.3% 95.2% $ 1,973 6.3% 17 $8.64(3) $7.98(3)
Highpoint Business
Center............ Wood Dale 1986 113,911 4.1 88.3 1,026 3.3 11 9.34(3) 10.19(3)
Arlington Ridge Arlington
Service Center.... Heights 1987 96,219 3.4 87.4 1,047 3.3 5 11.55 12.46
1251 Plum Grove
Road.............. Schaumburg 1986/1996 43,301 1.5 43.1 217 0.7 4 11.40(3) 11.63(3)
1011 East Touhy
Avenue............ Des Plaines 1978/1995 155,657 5.6 91.1 2,311 7.4 31 15.56 16.30
2800 River Road..... Des Plaines 1983 100,527 3.6 76.5 1,253 4.0 18 15.50 16.30
Kensington Corporate Mount
Center............ Prospect 1989 85,874 3.1 77.3 792 2.5 1 11.92(3) 11.92(3)
565 Lakeview Vernon
Parkway........... Hills 1991 84,808 3.0 68.4 618 2.0 4 10.84(3) 10.65(3)
One Hawthorn Vernon
Place............. Hills 1987 84,065 3.0 91.5 1,344 4.3 25 15.54 17.46
Two Marriott
Drive............. Lincolnshire 1985 41,500 1.5 100.0 337 1.1 1 9.17(3) 8.13(3)
3400 Corporate
Center............ Northbrook 1986 74,884 2.7 100.0 1,246 4.0 24 15.75 16.63
3010 and 3020 Downers
Woodcreek Drive... Grove 1985-1986 127,713 4.6 92.5 1,339 4.2 13 11.52 11.33
823 Commerce
Drive............. Oak Brook 1969/1996 45,162 1.6 80.9 622 2.0 3 16.71 17.03
1675 Holmes Road.... Elgin 1990 101,286 3.6 100.0 473 1.5 3 4.67(3) 4.67(3)
Court Office
Center............ Markham 1984 15,000 0.5 100.0 224 0.7 5 14.94 14.94
Subtotal/Weighted
Average........... 1,429,637 51.1% 88.0% 14,822 47.3% 165

<CAPTION>
SUBURBAN MILWAUKEE
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
One Park Plaza...... Milwaukee 1984 197,122 7.0% 94.8% 2,191 7.0% 23 12.35(3) 11.72(3)
Park Place VII...... Milwaukee 1989 36,069 1.3 100.0 602 1.9 4 16.15 16.69
Lincoln Center II &
III............... West Allis 1984-1987 121,508 4.3 96.1 1,718 5.4 21 15.36 14.71
Brookfield Lakes
Corporate
Center............ Brookfield 1987 117,615 4.2 98.4 1,275 4.1 18 10.07(3) 11.01(3)
Subtotal/Weighted
Average........... 472,314 16.8% 96.5% 5,786 18.4% 66
<CAPTION>
SUBURBAN MINNEAPOLIS
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Court International
II................ St. Paul 1916/1985 199,670 7.1% 95.5% 1,913 6.1% 30 10.60(3) 10.03(3)
University Office
Plaza............. Minneapolis 1979/1997 97,658 3.5 100.0 1,176 3.7 9 11.97(3) 12.04(3)
11100 Hampshire
Avenue............ Bloomington 1980 50,625 1.8 100.0 219 0.7 1 4.33(3) 4.33(3)
Subtotal/Weighted
Average........... 347,953 12.4% 97.4% 3,308 10.5% 40
<CAPTION>
SUBURBAN DETROIT
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Long Lake
Crossings......... Troy 1988 169,959 6.1% 91.4% 2,776 8.8% 27 18.59 17.87
40 Oak Hollow....... Southfield 1989 80,281 2.9 97.3 1,211 3.9 10 16.06 15.50
Oak Hollow
Gateway........... Southfield 1987 79,546 2.8 98.2 1,206 3.8 11 14.56 15.45
Subtotal/Weighted
Average........... 329,786 11.8% 94.5% 5,193 16.5% 48
<CAPTION>
SUBURBAN COLUMBUS
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Dublin Techmart..... Dublin 1986 124,929 4.5% 100.0% 1,211 3.9% 14 9.84(3) 9.70(3)
<CAPTION>
SUBURBAN CINCINNATI
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Princeton Hill
Corporate
Center............ Springdale 1988 95,910 3.4% 100.0% 1,057 3.4% 4 10.31(3) 11.02(3)
Total/Weighted Average...................... 2,800,529 100.0% 92.3% $31,377 100.0% 337
Weighted Average Rent Per Leased Square Foot - All Leases................................................... $12.09 $12.14
Weighted Average Rent Per Leased Square Foot - Gross Leases (4)............................................. $15.84 $16.21
Weighted Average Rent Per Leased Square Foot - Net Leases (5)............................................... $9.51 $9.32
</TABLE>

- ----------------------------------
(1) Annualized Net Effective Rent is calculated by dividing the remaining lease
payments under the lease by the number of months remaining under the lease
and multiplying the result by 12; the foregoing amount is then reduced by
the unamortized portion (at January 1, 1997) of any leasing commissions or
tenant improvements paid by the Company, or any such amounts payable by the
Company after January 1, 1997. Annualized Net Effective Rent excludes
historical capital expenditures, which have averaged $0.15 per square foot
annually between January 1, 1993 and December 31, 1996.

(2) Annualized Base Rent is the monthly contractual base rent as of January 1,
1997 under existing leases, multiplied by 12.

(3) The leases for substantially all rentable square feet at this Property are
net leases.

(5) The Weighted Average Rent Per Leased Square Foot is calculated based only
upon rent received from tenants under net leases, which represent 59% of the
rentable square feet of the portfolio.

40
<PAGE>
TENANTS

The Properties are leased to over 320 tenants which are engaged in a variety
of regional, national and international businesses, including healthcare
providers such as Health Partners, United Healthcare, CNR Health Inc. and Health
Direct, Inc., insurance companies such as Metropolitan Life, Community Insurance
Co., Employers Insurance of Wausau and St. Paul Fire and Marine, and high-tech
firms such as Aksys, Ltd., Bay Networks and WorldCom, Inc.

TENANT DIVERSIFICATION. The following table sets forth information
regarding the Company's leases with its 20 largest tenants based upon Annualized
Base Rent as of January 1, 1997:

<TABLE>
<CAPTION>
PERCENTAGE
OF PERCENTAGE
AGGREGATE AGGREGATE OF
REMAINING ANNUALIZED PORTFOLIO RENTABLE AGGREGATE
NUMBER OF LEASE TERM IN BASE RENTS ANNUALIZED SQUARE RENTABLE
LEASES MONTHS (000S) BASE RENT FEET SQUARE FEET
------------- ------------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Metropolitan Life Insurance Company............... 3 19 $ 984 3.14% 83,511 3.23%
Health Partners................................... 1 49 981 3.13% 82,817 3.20%
United HealthCare Services of Minnesota, Inc...... 1 66 795 2.53% 105,949 4.10%
Community Insurance Company....................... 1 53 747 2.38% 68,573 2.65%
American Honda Motor Company, Inc................. 2 41 606 1.93% 50,062 1.94%
Employers Insurance of Wausau..................... 1 106 601 1.92% 48,798 1.89%
Howard Needles Tammen & Bergendoff................ 1 47 586 1.87% 33,177 1.28%
St. Paul Fire and Marine Insurance Company........ 1 19 577 1.84% 27,091 1.05%
Interim Technology................................ 2 39 509 1.62% 30,448 1.18%
Health Direct, Inc................................ 3 6 436 1.39% 29,490 1.14%
A.O. Smith Corporation............................ 2 105 406 1.29% 51,012 1.97%
CNR HEALTH, INC................................... 1 75 398 1.27% 30,550 1.18%
Crawford & Company................................ 1 43 396 1.26% 58,100 2.25%
Sisters of The Sorrowful Mother Ministry
Corporation...................................... 1 53 374 1.19% 22,987 0.89%
Midwest Re-employment Consultants, Inc............ 1 8 374 1.19% 19,789 0.77%
Walsh College of Accountancy and Business
Administration................................... 1 20 372 1.19% 20,836 0.81%
Aksys, Ltd........................................ 1 116 338 1.08% 41,500 1.61%
Bay Networks, Inc................................. 1 51 326 1.04% 20,532 0.79%
WorldCom, Inc..................................... 1 55 309 0.98% 18,700 0.72%
The Lutheran General Medical Group, S.C........... 1 65 300 0.96% 19,239 0.74%
Total/Weighted Average............................ 27 54(1) $ 10,415 33.19% 863,161 33.39%
</TABLE>

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

(1) Weighted average calculation based on aggregate rentable square footage
leased by each tenant.

LEASES

The Company's leases are typically structured for terms of five 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

41
<PAGE>
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. 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 January 1, 1997.

<TABLE>
<CAPTION>
PERCENT OF PERCENTAGE
AGGREGATE OF AGGREGATE
PORTFOLIO ANNUALIZED PORTFOLIO
SQUARE FEET NUMBER OF LEASED BASE RENT ANNUALIZED
UNDER LEASE LEASES SQUARE FEET (000S) BASE RENT
- ------------------------------------------------------ ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
2,500 or Less......................................... 116 6.59% $ 2,532 8.07%
2,501 - 5,000......................................... 85 11.92% 4,252 13.55%
5,001 - 7,500......................................... 46 10.96% 3,693 11.77%
7,501 - 10,000........................................ 26 8.85% 2,869 9.14%
10,001 - 20,000....................................... 37 20.20% 6,925 22.07%
20,001 - 40,000....................................... 16 15.68% 5,137 16.37%
40,001 +.............................................. 11 25.80% 5,969 19.03%
--- ----------- ----------- ------
Total............................................... 337 100.00% $ 31,377 100.00%
--- ----------- ----------- ------
--- ----------- ----------- ------
</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 January 1, 1997, assuming that none of the tenants exercises renewal
options or termination rights, if any, at or prior to the scheduled expirations.

<TABLE>
<CAPTION>
ANNUALIZED
BASE RENT OF PERCENTAGE OF
SQUARE PERCENTAGE OF EXPIRING TOTAL
NUMBER OF FOOTAGE OF TOTAL LEASED LEASES ANNUALIZED BASE
YEAR OF LEASE LEASES EXPIRING SQUARE FEET OF (000S) AT RENT OF
EXPIRATION EXPIRING LEASES EXPIRING LEASES 1/1/97 EXPIRING LEASES
- ---------------------------- ------------- ---------- ----------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
1997........................ 76 389,961 15.09% $ 4,569 14.56%
1998........................ 61 496,525 19.21% 5,967 19.02%
1999........................ 57 279,262 10.80% 3,568 11.37%
2000........................ 61 389,997 15.09% 5,355 17.07%
2001........................ 51 494,435 19.12% 6,535 20.83%
2002........................ 16 271,420 10.50% 2,508 7.99%
2003........................ 5 53,089 2.05% 767 2.44%
2004........................ 4 35,658 1.38% 403 1.29%
2005........................ 3 76,968 2.98% 694 2.21%
2006........................ 3 97,634 3.78% 1,011 3.22%
--- ---------- -------- ------------ ---------------
Total..................... 337 2,584,949 100.00% $ 31,377 100.00%
--- ---------- -------- ------------ ---------------
--- ---------- -------- ------------ ---------------
</TABLE>

42
<PAGE>
LEASE EXPIRATIONS--PROPERTY BY PROPERTY. The following table sets forth
detailed lease expiration information for each of the Properties for leases in
place as of January 1, 1997, assuming that none of the tenants exercise renewal
options or termination rights, if any, at or prior to the scheduled expirations.
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION
----------------------------------------------------------------------------
PROPERTY 1997 1998 1999 2000 2001 2002
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
SUBURBAN CHICAGO
CENTENNIAL CENTER

Square Footage of Expiring Leases.............. 38,229 4,406 2,973 13,646 19,056 166,515
Percentage of Total Leased Sq. Ft.............. 15.47% 1.78% 1.20% 5.52% 7.71% 67.37%
Annualized Base Rent of Expiring Leases........ $ 346,384 $ 50,272 $ 30,102 $ 83,514 $ 178,687 $1,273,150
Percentage of Total Annualized Base Rent....... 17.56% 2.55% 1.53% 4.23% 9.06% 64.53%
Number of Leases Expiring...................... 3 1 2 1 4 5
Annual base rent per square foot of expiring
leases....................................... $ 9.06 $ 11.41 $ 10.13 $ 6.12 $ 9.38 $ 7.65

1675 HOLMES ROAD

Square Footage of Expiring Leases.............. 101,286
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 473,063
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 3
Annual base rent per square foot of expiring
leases....................................... $ 4.67

ARLINGTON RIDGE SERVICE CENTER

Square Footage of Expiring Leases.............. 61,980
Percentage of Total Leased Sq. Ft.............. 73.72%
Annualized Base Rent of Expiring Leases........ $ 771,166
Percentage of Total Annualized Base Rent....... 73.63%
Number of Leases Expiring...................... 3
Annual base rent per square foot of expiring
leases....................................... $ 12.44

1251 PLUM GROVE ROAD

Square Footage of Expiring Leases.............. 5,085 9,195 4,373
Percentage of Total Leased Sq. Ft.............. 27.26% 49.30% 23.44%
Annualized Base Rent of Expiring Leases........ $ 43,223 $ 114,711 $ 59,036
Percentage of Total Annualized Base Rent....... 19.92% 52.87% 27.21%
Number of Leases Expiring...................... 1 2 1
Annual base rent per square foot of expiring
leases....................................... $ 8.50 $ 12.48 $ 13.50

<CAPTION>
PROPERTY 2003 2004 2005 2006 TOTAL
- ------------------------------------------------- ---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
SUBURBAN CHICAGO
CENTENNIAL CENTER
Square Footage of Expiring Leases.............. 2,357 247,182
Percentage of Total Leased Sq. Ft.............. 0.95% 100.00%
Annualized Base Rent of Expiring Leases........ $ 10,607 $ 1,972,716
Percentage of Total Annualized Base Rent....... 0.54% 100.00%
Number of Leases Expiring...................... 1 17
Annual base rent per square foot of expiring
leases....................................... $ 4.50
1675 HOLMES ROAD
Square Footage of Expiring Leases.............. 101,286
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 473,063
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 3
Annual base rent per square foot of expiring
leases.......................................
ARLINGTON RIDGE SERVICE CENTER
Square Footage of Expiring Leases.............. 22,097 84,077
Percentage of Total Leased Sq. Ft.............. 26.28% 100.00%
Annualized Base Rent of Expiring Leases........ $ 276,248 $ 1,047,414
Percentage of Total Annualized Base Rent....... 26.37% 100.00%
Number of Leases Expiring...................... 2 5
Annual base rent per square foot of expiring
leases....................................... $ 12.50
1251 PLUM GROVE ROAD
Square Footage of Expiring Leases.............. 18,653
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 216,970
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 4
Annual base rent per square foot of expiring
leases.......................................
</TABLE>

43
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION
----------------------------------------------------------------------------
PROPERTY 1997 1998 1999 2000 2001 2002
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1011 EAST TOUHY AVENUE

Square Footage of Expiring Leases.............. 55,260 9,472 9,355 6,132 22,108 19,239
Percentage of Total Leased Sq. Ft.............. 38.98% 6.68% 6.60% 4.33% 15.59% 13.57%
Annualized Base Rent of Expiring Leases........ $ 855,681 $ 189,160 $ 139,345 $ 89,129 $ 378,328 $ 299,698
Percentage of Total Annualized Base Rent....... 37.03% 8.19% 6.03% 3.86% 16.37% 12.96%
Number of Leases Expiring...................... 14 3 5 1 5 1
Annual base rent per square foot of expiring
leases....................................... $ 15.48 $ 19.97 $ 14.90 $ 14.54 $ 17.11 $ 15.58

HIGHPOINT BUSINESS CENTER

Square Footage of Expiring Leases.............. 41,535 9,628 3,376 2,958 16,935
Percentage of Total Leased Sq. Ft.............. 41.28% 9.57% 3.36% 2.94% 16.83%
Annualized Base Rent of Expiring Leases........ $ 427,557 $ 105,234 $ 43,888 $ 26,659 $ 178,664
Percentage of Total Annualized Base Rent....... 41.68% 10.26% 4.28% 2.60% 17.42%
Number of Leases Expiring...................... 5 1 1 1 1
Annual base rent per square foot of expiring
leases....................................... $ 10.29 $ 10.93 $ 13.00 $ 9.01 $ 10.55

2800 RIVER ROAD

Square Footage of Expiring Leases.............. 12,837 1,341 15,446 11,551 35,696
Percentage of Total Leased Sq. Ft.............. 16.70% 1.74% 20.09% 15.03% 46.44%
Annualized Base Rent of Expiring Leases........ $ 188,829 $ 24,138 $ 275,133 $ 190,854 $ 573,725
Percentage of Total Annualized Base Rent....... 15.07% 1.93% 21.96% 15.24% 45.80%
Number of Leases Expiring...................... 4 1 3 5 5
Annual base rent per square foot of expiring
leases....................................... $ 14.71 $ 18.00 $ 17.81 $ 16.52 $ 16.07

KENSINGTON CORPORATE CENTER

Square Footage of Expiring Leases.............. 66,419
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 791,886
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 1
Annual base rent per square foot of expiring
leases....................................... $ 11.92

3010 AND 3020 WOODCREEK DRIVE

Square Footage of Expiring Leases.............. 12,351 15,323 17,107 29,668 43,741
Percentage of Total Leased Sq. Ft.............. 10.45% 12.96% 14.47% 25.10% 37.02%
Annualized Base Rent of Expiring Leases........ $ 154,681 $ 220,365 $ 159,625 $ 292,908 $ 511,420
Percentage of Total Annualized Base Rent....... 11.55% 16.46% 11.92% 21.88% 38.19%
Number of Leases Expiring...................... 3 2 2 3 3
Annual base rent per square foot of expiring
leases....................................... $ 12.52 $ 14.38 $ 9.33 $ 9.87 $ 11.69

<CAPTION>
PROPERTY 2003 2004 2005 2006 TOTAL
- ------------------------------------------------- ---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1011 EAST TOUHY AVENUE
Square Footage of Expiring Leases.............. 12,867 7,336 141,769
Percentage of Total Leased Sq. Ft.............. 9.08% 5.17% 100.00%
Annualized Base Rent of Expiring Leases........ $ 234,823 $ 124,712 $ 2,310,876
Percentage of Total Annualized Base Rent....... 10.16% 5.40% 100.00%
Number of Leases Expiring...................... 1 1 31
Annual base rent per square foot of expiring
leases....................................... $ 18.25 $ 17.00
HIGHPOINT BUSINESS CENTER
Square Footage of Expiring Leases.............. 7,939 18,241 100,612
Percentage of Total Leased Sq. Ft.............. 7.89% 18.13% 100.00%
Annualized Base Rent of Expiring Leases........ $ 79,239 $ 164,397 $ 1,025,638
Percentage of Total Annualized Base Rent....... 7.73% 16.03% 100.00%
Number of Leases Expiring...................... 1 1 11
Annual base rent per square foot of expiring
leases....................................... $ 9.98 $ 9.01
2800 RIVER ROAD
Square Footage of Expiring Leases.............. 76,871
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 1,252,679
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 18
Annual base rent per square foot of expiring
leases.......................................
KENSINGTON CORPORATE CENTER
Square Footage of Expiring Leases.............. 66,419
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 791,886
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 1
Annual base rent per square foot of expiring
leases.......................................
3010 AND 3020 WOODCREEK DRIVE
Square Footage of Expiring Leases.............. 118,190
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 1,338,999
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 13
Annual base rent per square foot of expiring
leases.......................................
</TABLE>

44
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION
----------------------------------------------------------------------------
PROPERTY 1997 1998 1999 2000 2001 2002
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
823 COMMERCE DRIVE

Square Footage of Expiring Leases.............. 14,026 22,515
Percentage of Total Leased Sq. Ft.............. 38.38% 61.62%
Annualized Base Rent of Expiring Leases........ $ 203,377 $ 418,779
Percentage of Total Annualized Base Rent....... 32.69% 67.31%
Number of Leases Expiring...................... 1 2
Annual base rent per square foot of expiring
leases....................................... $ 14.50 $ 18.60

565 LAKEVIEW PARKWAY

Square Footage of Expiring Leases.............. 28,223 8,942 17,133
Percentage of Total Leased Sq. Ft.............. 48.65% 15.42% 29.54%
Annualized Base Rent of Expiring Leases........ $ 284,206 $ 101,134 $ 164,820
Percentage of Total Annualized Base Rent....... 46.00% 16.37% 26.68%
Number of Leases Expiring...................... 1 1 1
Annual base rent per square foot of expiring
leases....................................... $ 10.07 $ 11.31 $ 9.62

ONE HAWTHORN PLACE

Square Footage of Expiring Leases.............. 17,469 13,053 19,889 17,658 6,039 2,822
Percentage of Total Leased Sq. Ft.............. 22.71% 16.97% 25.85% 22.95% 7.85% 3.67%
Annualized Base Rent of Expiring Leases........ $ 297,669 $ 233,587 $ 335,568 $ 314,934 $ 108,137 $ 53,619
Percentage of Total Annualized Base Rent....... 22.16% 17.39% 24.97% 23.44% 8.05% 3.99%
Number of Leases Expiring...................... 9 5 4 3 3 1
Annual base rent per square foot of expiring
leases....................................... $ 17.04 $ 17.90 $ 16.87 $ 17.84 $ 17.91 $ 19.00

3400 CORPORATE CENTER

Square Footage of Expiring Leases.............. 2,716 17,867 20,349 16,140 8,655 3,535
Percentage of Total Leased Sq. Ft.............. 3.63% 23.86% 27.17% 21.55% 11.56% 4.72%
Annualized Base Rent of Expiring Leases........ $ 29,187 $ 320,869 $ 401,225 $ 287,464 $ 107,124 $ 51,967
Percentage of Total Annualized Base Rent....... 2.34% 25.76% 32.22% 23.08% 8.60% 4.17%
Number of Leases Expiring...................... 2 7 3 7 3 1
Annual base rent per square foot of expiring
leases....................................... $ 10.75 $ 17.96 $ 19.72 $ 17.81 $ 12.38 $ 14.70

TWO MARRIOTT DRIVE

Square Footage of Expiring Leases..............
Percentage of Total Leased Sq. Ft..............
Annualized Base Rent of Expiring Leases........
Percentage of Total Annualized Base Rent.......
Number of Leases Expiring......................
Annual base rent per square foot of expiring
leases.......................................

PROPERTY 2003 2004 2005 2006 TOTAL
- ------------------------------------------------- ---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
823 COMMERCE DRIVE
Square Footage of Expiring Leases.............. 36,541
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 622,156
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 3
Annual base rent per square foot of expiring
leases.......................................
565 LAKEVIEW PARKWAY
Square Footage of Expiring Leases.............. 3,704 58,002
Percentage of Total Leased Sq. Ft.............. 6.39% 100.00%
Annualized Base Rent of Expiring Leases........ $ 67,654 $ 617,814
Percentage of Total Annualized Base Rent....... 10.95% 100.00%
Number of Leases Expiring...................... 1 4
Annual base rent per square foot of expiring
leases....................................... $ 18.27
ONE HAWTHORN PLACE
Square Footage of Expiring Leases.............. 76,930
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 1,343,514
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 25
Annual base rent per square foot of expiring
leases.......................................
3400 CORPORATE CENTER
Square Footage of Expiring Leases.............. 5,622 74,884
Percentage of Total Leased Sq. Ft.............. 7.51% 100.00%
Annualized Base Rent of Expiring Leases........ $ 47,715 $ 1,245,551
Percentage of Total Annualized Base Rent....... 3.83% 100.00%
Number of Leases Expiring...................... 1 24
Annual base rent per square foot of expiring
leases....................................... $ 8.49
TWO MARRIOTT DRIVE
Square Footage of Expiring Leases.............. 41,500 41,500
Percentage of Total Leased Sq. Ft.............. 100.00% 100.00%
Annualized Base Rent of Expiring Leases........ $ 337,500 $ 337,500
Percentage of Total Annualized Base Rent....... 100.00% 100.00%
Number of Leases Expiring...................... 1 1
Annual base rent per square foot of expiring
leases....................................... $ 8.13
</TABLE>

45
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION
----------------------------------------------------------------------------
PROPERTY 1997 1998 1999 2000 2001 2002
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
COURT OFFICE CENTER

Square Footage of Expiring Leases.............. 2,385 12,615
Percentage of Total Leased Sq. Ft.............. 15.90% 84.10%
Annualized Base Rent of Expiring Leases........ $ 33,716 $ 190,427
Percentage of Total Annualized Base Rent....... 15.04% 84.96%
Number of Leases Expiring...................... 2 3
Annual base rent per square foot of expiring
leases....................................... $ 14.14 $ 15.10

SUBURBAN MILWAUKEE
ONE PARK PLAZA

Square Footage of Expiring Leases.............. 5,797 12,361 23,053 35,482 11,162 16
Percentage of Total Leased Sq. Ft.............. 3.10% 6.61% 12.33% 18.98% 5.97% 0.01%
Annualized Base Rent of Expiring Leases........ $ 94,790 $ 133,707 $ 269,122 $ 608,742 $ 136,810 $ 300
Percentage of Total Annualized Base Rent....... 4.33% 6.10% 12.28% 27.78% 6.24% 0.01%
Number of Leases Expiring...................... 3 5 7 3 2 1
Annual base rent per square foot of expiring
leases....................................... $ 16.35 $ 10.82 $ 11.67 $ 17.16 $ 12.26 $ 18.75

PARK PLACE VII

Square Footage of Expiring Leases.............. 4,013 9,069 22,987
Percentage of Total Leased Sq. Ft.............. 11.13% 25.14% 63.73%
Annualized Base Rent of Expiring Leases........ $ 71,752 $ 156,380 $ 373,769
Percentage of Total Annualized Base Rent....... 11.92% 25.98% 62.10%
Number of Leases Expiring...................... 1 2 1
Annual base rent per square foot of expiring
leases....................................... $ 17.88 $ 17.24 $ 16.26

LINCOLN CENTER II & III

Square Footage of Expiring Leases.............. 8,892 27,106 10,776 19,762 11,243
Percentage of Total Leased Sq. Ft.............. 7.61% 23.21% 9.23% 16.92% 9.63%
Annualized Base Rent of Expiring Leases........ $ 132,669 $ 417,040 $ 169,788 $ 300,978 $ 168,060
Percentage of Total Annualized Base Rent....... 7.72% 24.29% 9.88% 17.52% 9.78%
Number of Leases Expiring...................... 4 5 5 3 2
Annual base rent per square foot of expiring
leases....................................... $ 14.92 $ 15.39 $ 15.76 $ 15.23 $ 14.95

BROOKFIELD LAKES CORPORATE CENTER

Square Footage of Expiring Leases.............. 7,762 23,966 39,820 20,588 14,358 9,277
Percentage of Total Leased Sq. Ft.............. 6.70% 20.70% 34.41% 17.78% 12.40% 8.01%
Annualized Base Rent of Expiring Leases........ $ 103,413 $ 286,412 $ 382,213 $ 216,323 $ 205,683 $ 80,895
Percentage of Total Annualized Base Rent....... 8.11% 22.46% 29.98% 16.97% 16.13% 6.35%
Number of Leases Expiring...................... 2 3 5 4 3 1
Annual base rent per square foot of expiring
leases....................................... $ 13.32 $ 11.95 $ 9.60 $ 10.51 $ 14.33 $ 8.72

<CAPTION>
PROPERTY 2003 2004 2005 2006 TOTAL
- ------------------------------------------------- ---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
COURT OFFICE CENTER
Square Footage of Expiring Leases.............. 15,000
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 224,143
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 5
Annual base rent per square foot of expiring
leases.......................................
SUBURBAN MILWAUKEE
ONE PARK PLAZA
Square Footage of Expiring Leases.............. 50,262 48,798 186,931
Percentage of Total Leased Sq. Ft.............. 26.90% 26.10% 100.00%
Annualized Base Rent of Expiring Leases........ $ 398,591 $ 548,978 $ 2,191,040
Percentage of Total Annualized Base Rent....... 18.19% 25.07% 100.00%
Number of Leases Expiring...................... 1 1 23
Annual base rent per square foot of expiring
leases....................................... $ 7.93 $ 11.25
PARK PLACE VII
Square Footage of Expiring Leases.............. 36,069
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 601,901
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 4
Annual base rent per square foot of expiring
leases.......................................
LINCOLN CENTER II & III
Square Footage of Expiring Leases.............. 30,550 8,465 116,794
Percentage of Total Leased Sq. Ft.............. 26.15% 7.25% 100.00%
Annualized Base Rent of Expiring Leases........ $ 398,067 $ 131,208 $ 1,717,810
Percentage of Total Annualized Base Rent....... 23.17% 7.64% 100.00%
Number of Leases Expiring...................... 1 1 21
Annual base rent per square foot of expiring
leases....................................... $ 13.03 $ 15.50
BROOKFIELD LAKES CORPORATE CENTER
Square Footage of Expiring Leases.............. 115,771
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 1,274,939
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 18
Annual base rent per square foot of expiring
leases.......................................
</TABLE>

46
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION
----------------------------------------------------------------------------
PROPERTY 1997 1998 1999 2000 2001 2002
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
SUBURBAN MINNEAPOLIS
COURT INTERNATIONAL II

Square Footage of Expiring Leases.............. 18,423 27,601 69,910 26,678 41,381 6,754
Percentage of Total Leased Sq. Ft.............. 9.66% 14.47% 36.65% 13.99% 21.69% 3.54%
Annualized Base Rent of Expiring Leases........ $ 148,946 $ 325,757 $ 669,884 $ 251,721 $ 443,852 $ 72,600
Percentage of Total Annualized Base Rent....... 7.79% 17.03% 35.02% 13.16% 23.20% 3.80%
Number of Leases Expiring...................... 5 3 9 5 7 1
Annual base rent per square foot of expiring
leases....................................... $ 8.08 $ 11.80 $ 9.58 $ 9.44 $ 10.73 $ 10.75

UNIVERSITY OFFICE PLAZA

Square Footage of Expiring Leases.............. 9,967 3,437 1,437 82,817
Percentage of Total Leased Sq. Ft.............. 10.21% 3.52% 1.47% 84.80%
Annualized Base Rent of Expiring Leases........ $ 103,005 $ 73,464 $ 18,268 $ 981,392
Percentage of Total Annualized Base Rent....... 8.76% 6.25% 1.55% 83.44%
Number of Leases Expiring...................... 6 1 1 1
Annual base rent per square foot of expiring
leases....................................... $ 10.33 $ 21.37 $ 12.71 $ 11.85

11100 HAMPSHIRE AVENUE

Square Footage of Expiring Leases.............. 50,625
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 219,357
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 1
Annual base rent per square foot of expiring
leases....................................... $ 4.33

SUBURBAN DETROIT
LONG LAKE CROSSING

Square Footage of Expiring Leases.............. 10,176 66,781 13,583 35,315 28,627 917
Percentage of Total Leased Sq. Ft.............. 6.55% 42.97% 8.74% 22.73% 18.42% 0.59%
Annualized Base Rent of Expiring Leases........ $ 158,132 $1,269,838 $ 227,720 $ 639,178 $ 465,552 $ 16,047
Percentage of Total Annualized Base Rent....... 5.70% 45.73% 8.20% 23.02% 16.77% 0.58%
Number of Leases Expiring...................... 4 9 3 6 4 1
Annual base rent per square foot of expiring
leases....................................... $ 15.54 $ 19.01 $ 16.77 $ 18.10 $ 16.26 $ 17.50

<CAPTION>
PROPERTY 2003 2004 2005 2006 TOTAL
- ------------------------------------------------- ---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
SUBURBAN MINNEAPOLIS
COURT INTERNATIONAL II
Square Footage of Expiring Leases.............. 190,747
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 1,912,760
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 30
Annual base rent per square foot of expiring
leases.......................................
UNIVERSITY OFFICE PLAZA
Square Footage of Expiring Leases.............. 97,658
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 1,176,129
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 9
Annual base rent per square foot of expiring
leases.......................................
11100 HAMPSHIRE AVENUE
Square Footage of Expiring Leases.............. 50,625
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 219,357
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 1
Annual base rent per square foot of expiring
leases.......................................
SUBURBAN DETROIT
LONG LAKE CROSSING
Square Footage of Expiring Leases.............. 155,399
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 2,776,467
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 27
Annual base rent per square foot of expiring
leases.......................................
</TABLE>

47
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION
----------------------------------------------------------------------------
PROPERTY 1997 1998 1999 2000 2001 2002
- ------------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
40 OAK HOLLOW

Square Footage of Expiring Leases.............. 27,361 20,788 4,913 21,448
Percentage of Total Leased Sq. Ft.............. 35.03% 26.61% 6.29% 27.45%
Annualized Base Rent of Expiring Leases........ $ 485,731 $ 317,962 $ 84,749 $ 266,572
Percentage of Total Annualized Base Rent....... 40.11% 26.26% 7.00% 22.01%
Number of Leases Expiring...................... 3 3 1 2
Annual base rent per square foot of expiring
leases....................................... $ 17.75 $ 15.30 $ 17.25 $ 12.43

OAK HOLLOW GATEWAY

Square Footage of Expiring Leases.............. 15,294 3,019 3,613 27,095 29,058
Percentage of Total Leased Sq. Ft.............. 19.59% 3.87% 4.63% 34.70% 37.21%
Annualized Base Rent of Expiring Leases........ $ 256,023 $ 46,794 $ 57,808 $ 417,598 $ 428,147
Percentage of Total Annualized Base Rent....... 21.22% 3.88% 4.79% 34.62% 35.49%
Number of Leases Expiring...................... 2 1 2 4 2
Annual base rent per square foot of expiring
leases....................................... $ 16.74 $ 15.50 $ 16.00 $ 15.41 $ 14.73

SUBURBAN COLUMBUS
DUBLIN TECHMART

Square Footage of Expiring Leases.............. 19,574 61,605 4,442 15,346 23,962
Percentage of Total Leased Sq. Ft.............. 15.67% 49.31% 3.56% 12.28% 19.18%
Annualized Base Rent of Expiring Leases........ $ 205,527 $ 594,341 $ 43,087 $ 154,648 $ 213,988
Percentage of Total Annualized Base Rent....... 16.96% 49.06% 3.56% 12.76% 17.66%
Number of Leases Expiring...................... 2 6 1 4 1
Annual base rent per square foot of expiring
leases....................................... $ 10.50 $ 9.65 $ 9.70 $ 10.08 $ 8.93

SUBURBAN CINCINNATI
PRINCETON HILL CORPORATE CENTER

Square Footage of Expiring Leases.............. 8,633 18,704 68,573
Percentage of Total Leased Sq. Ft.............. 9.00% 19.50% 71.50%
Annualized Base Rent of Expiring Leases........ $ 93,236 $ 216,203 $ 747,446
Percentage of Total Annualized Base Rent....... 8.82% 20.46% 70.72%
Number of Leases Expiring...................... 1 2 1
Annual base rent per square foot of expiring
leases....................................... $ 10.80 $ 11.56 $ 10.90

PORTFOLIO TOTALS

Square Footage of Expiring Leases.............. 389,961 496,525 279,262 389,997 494,435 271,420
Percentage of Total Leased Sq. Ft.............. 15.09% 19.21% 10.80% 15.09% 19.13% 10.50%
Annualized Base Rent of Expiring Leases........ $4,568,726 $5,967,251 $3,567,821 $5,354,629 $6,535,516 $2,507,500
Percentage of Total Annualized Base Rent....... 14.56% 19.02% 11.37% 17.07% 20.83% 7.99%
Number of Leases Expiring...................... 76 61 57 61 51 16

PROPERTY 2003 2004 2005 2006 TOTAL
- ------------------------------------------------- ---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
40 OAK HOLLOW
Square Footage of Expiring Leases.............. 3,611 78,121
Percentage of Total Leased Sq. Ft.............. 4.62% 100.00%
Annualized Base Rent of Expiring Leases........ $ 55,971 $ 1,210,985
Percentage of Total Annualized Base Rent....... 4.62% 100.00%
Number of Leases Expiring...................... 1 10
Annual base rent per square foot of expiring
leases....................................... $ 15.50
OAK HOLLOW GATEWAY
Square Footage of Expiring Leases.............. 78,079
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 1,206,370
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 11
Annual base rent per square foot of expiring
leases.......................................
SUBURBAN COLUMBUS
DUBLIN TECHMART
Square Footage of Expiring Leases.............. 124,929
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 1,211,591
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 14
Annual base rent per square foot of expiring
leases.......................................
SUBURBAN CINCINNATI
PRINCETON HILL CORPORATE CENTER
Square Footage of Expiring Leases.............. 95,910
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $ 1,056,885
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 4
Annual base rent per square foot of expiring
leases.......................................
PORTFOLIO TOTALS
Square Footage of Expiring Leases.............. 53,089 35,658 76,968 97,634 2,584,949
Percentage of Total Leased Sq. Ft.............. 2.05% 1.38% 2.98% 3.78% 100.00%
Annualized Base Rent of Expiring Leases........ $ 767,122 $ 403,202 $ 694,196 $1,011,190 $31,377,153
Percentage of Total Annualized Base Rent....... 2.44% 1.29% 2.21% 3.22% 100.00%
Number of Leases Expiring...................... 5 4 3 3 341
</TABLE>

48
<PAGE>
HISTORIC LEASE RENEWALS

The following table sets forth 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 1993 - 1996
--------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
Number of leases expired during calendar year............. 3 7 25 34 69
Number of leases renewed.................................. 3 4 18 26 51
Percentage of leases renewed.............................. 100% 57% 72% 76% 74%
Aggregate rentable square footage of expiring leases(1)... 54,157 26,716 92,205 139,615 312,693
Aggregate rentable square footage of lease renewals....... 54,157 19,645 72,586 118,142 264,530
Percentage of expiring rentable square footage renewed.... 100% 74% 79% 85% 85%
</TABLE>

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

(1) The aggregate rentable square feet of expiring leases excludes the square
feet for tenants where the tenant had vacated the Property prior to the
Company's acquisition date or disclosed plans in the Company's tenant due
diligence to move from the Property within twelve months of the Company's
acquisition date.

49
<PAGE>
HISTORICAL TENANT IMPROVEMENTS AND LEASING COMMISSIONS

The following table sets forth certain historical information regarding
tenant improvement ("TI") and leasing commission ("LC") costs for tenants at the
Properties. Based on square footage, the majority of the leases signed relate to
renewals and re-tenanted space (96.7%), while leases signed relating to
unfinished space comprised 3.3%. As of January 1, 1996, unfinished space
remaining at the Properties is less than 1.2% of the aggregate rentable square
footage of the Properties. Re-tenanted space includes rentable space that was
vacant at the time of acquisition by the Company, but had been occupied by a
tenant at some point prior to such date.

<TABLE>
<CAPTION>
TOTAL/WEIGHTED
AVERAGE
1993 1994 1995 1996 1993 - 1996
--------- --------- --------- --------- -------------
<S> <C> <C> <C> <C> <C>
RENEWALS

Number of leases....................................... 3 4 18 26 51
Square feet of renewals................................ 54,157 19,645 72,586 118,142 264,530

TI per square foot..................................... $ 1.40 $ 1.56 $ 1.70 $ 3.80 $ 2.57
LC per square foot..................................... $ 2.01 $ 0.82 $ 1.95 $ 1.30 $ 1.59
--------- --------- --------- --------- -------------
Total TI and LC per square foot........................ $ 3.41 $ 2.38 $ 3.65 $ 5.10 $ 4.16
--------- --------- --------- --------- -------------
--------- --------- --------- --------- -------------

RE-TENANTED SPACE

Number of leases....................................... 4 23 34 35 96
Square feet of re-tenanted space....................... 12,491 92,826 126,090 211,620 443,027

TI per square foot..................................... $ 13.03 $ 11.57 $ 12.91 $ 10.94 $ 11.69
LC per square foot..................................... $ 2.97 $ 3.02 $ 3.08 $ 4.72 $ 3.85
--------- --------- --------- --------- -------------
Total TI and LC per square foot........................ $ 16.00 $ 14.59 $ 15.99 $ 15.66 $ 15.54
--------- --------- --------- --------- -------------
--------- --------- --------- --------- -------------

UNFINISHED SPACE

Number of leases....................................... -- 2 -- 1 3
Square feet of unfinished space........................ -- 16,378 -- 6,093 22,471

TI per square foot..................................... -- $ 38.43 -- $ 24.57 $ 34.67
LC per square foot..................................... -- $ 4.79 -- $ 5.12 $ 4.88
--------- --------- -------------
Total TI and LC per square foot........................ -- $ 43.22 -- $ 29.69 $ 39.55
--------- --------- -------------
--------- --------- -------------
</TABLE>

50
<PAGE>
HISTORICAL CAPITAL EXPENDITURES

The following table sets forth information relating to the historical
capital expenditures of the Company's properties:

<TABLE>
<CAPTION>
1993 1994 1995 1996
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
Number of Properties(1)...................................... 5 8 15 25
Number of Square Feet(1)..................................... 413,454 729,045 1,419,742 2,684,243
Capital Expenditures Incurred................................ $ 2,178 $ 51,095 $ 174,179 $ 355,927
Weighted Average Capital Expenditures per square foot(2)..... $ 0.01 $ 0.07 $ 0.16 $ 0.19
Four Year Weighted Average per square foot................... $ 0.15
</TABLE>

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

(1) Represents the actual number of properties owned and rentable square feet
therein for properties owned as of December 31 for the applicable year.

(2) Average capital expenditures per square foot are computed by dividing
Capital Expenditures Incurred by the weighted average number of square feet
owned during the year.

HISTORICAL OCCUPANCY

The table below sets forth the weighted average occupancy rates, based on
square feet leased, of the properties owned by the Company at the indicated
dates:

<TABLE>
<CAPTION>
APPROXIMATE PERCENTAGE OF
AGGREGATE RENTABLE RENTABLE SQUARE
DATE SQUARE FEET OWNED FEET OCCUPIED
- ----------------------------------------------------------------------------- ------------------ -----------------
<S> <C> <C>
December 31, 1993............................................................ 413,454 78%
June 30, 1994................................................................ 644,980 78%
December 31, 1994............................................................ 729,045 84%
June 30, 1995................................................................ 927,230 87%
December 31, 1995............................................................ 1,419,742 86%
June 30, 1996................................................................ 1,558,953 88%
December 31, 1996............................................................ 2,684,243 92%
</TABLE>

51
<PAGE>
THE MIDWEST REGION SUBURBAN OFFICE MARKETS AND PROPERTIES

The Company has targeted the Midwest Region as its primary geographic focus
and currently owns office properties in the suburban markets of Chicago,
Detroit, Minneapolis, Columbus, Cincinnati and Milwaukee. The Company believes
that the economic fundamentals of the Midwest Region are favorable for continued
strength in the suburban office market. According to the United States
Department of Commerce, the midwestern United States (which includes, among
other markets, all of the Current Markets except Minneapolis) accounted for $1.6
trillion in gross product in 1994 (the last year for which census information is
available). This amount represented approximately one-third of the nation's
economic activity and was produced by 1.8 million industrial and commercial
firms serving a residential population of 78 million. The midwestern United
States, once considered an economic "rust belt," has staged an economic recovery
and, according to published sources, has become a "growth belt" that is well-
positioned for continued economic expansion in the nation. The Company believes
that current and forecasted trends affecting the Current Markets have created
and will continue to create a favorable economic environment in the suburban
office markets. First, the Company believes that the supply of quality suburban
office space of the type on which the Company focuses has stabilized and is
unlikely to increase significantly over the short term, in part because large
scale development of new quality suburban office space is not economically
feasible based on the rental rates currently available in the Current Markets
indicated in the CBC/Torto Wheaton Research. Second, the recent economic
restructuring of many of the primary suburban office space users in the Current
Markets has resulted in increasing demand for suburban office space. Third,
demand for quality suburban office space relative to the level of supply has led
to higher occupancy rates and a trend towards higher rental rates that are
capable of being supported in the Current Markets. Finally, patterns of
residential relocation from urban to suburban areas due in part to the public
perception of greater personal security and the availability of greater
recreational and residential amenities in suburban areas coupled with a
heightened preference for living in close proximity to work and employers'
resultant access to broader, more skilled local labor force have fueled growth
of suburban office property demand. The Company believes that these factors, as
well as the economic statistics mentioned herein, suggest a general
strengthening of the economies in the Midwest Region in general and the Current
Markets in particular. Given the quality of its Properties, the Company believes
that it is competitively positioned to capitalize on these economic and
demographic trends and the resulting increase in demand for suburban office
space.

THE SUBURBAN CHICAGO OFFICE MARKET AND PROPERTIES

Chicago is experiencing strong fundamental economic growth. Of the 112
metropolitan statistical areas covered by the LaSalle Partners Regional Economic
Growth Index (the "LaSalle Index"), Chicago ranks fourth in the nation for 1996
for overall regional economic growth, and ranked second in the nation in 1995.
In addition, Regional Financial Associates ("RFA") indicated an average
four-year increase in gross metropolitan product of 3%, of total employment of
over 2.1%, of personal income of over 5.1%, in each case for 1993 to 1996, and a
four-year decrease in unemployment from 7.1% in 1993 to 4.9% in 1996. RFA
attributes the economic strength of Chicago to its economic diversity, excellent
transportation network, high per-capital income, a strong technology sector and
growing international trade.

Chicago's economic strength has fueled steady growth in the suburban office
market. According to CB Commercial's June 30, 1996 CBC/Torto Wheaton Research
for Chicago, Illinois (the "Chicago Market Study"), the Chicago suburban office
market (the "Chicago Market"), which contains an inventory of approximately 78.7
million net rentable square feet located in the eight submarkets of Lake County,
Lake Shore, North Suburbs, O'Hare, Oak Brook, Schaumburg, South Suburbs and West
Cook is currently experiencing a vacancy rate of approximately 12.0%, down from
approximately 19.3% in 1992. The decline in vacancy rates is partly attributable
to Chicago's overall suburban office absorption rate, which is expected to
average approximately 1.4 million rentable square feet per annum for the next
two years, and partly attributable to the scarcity of new construction in the
suburban office markets, which is expected to

52
<PAGE>
average only 577,000 rentable square feet per annum over the next two years. The
Company believes that the excess demand caused by such high absorption rates
over new construction will continue to put downward pressure on vacancy rates
and upward pressure on rental rates.

BAR GRAPH COMPARING NET ABSORPTION AND COMPLETIONS IN THE CHICAGO MARKET FOR THE
FOLLOWING PERIODS:

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
NET ABSORPTION VS. COMPLETIONS (1)
<S> <C> <C>
Rentable Square Feet (000's)
Completions Net Absorption
1992 70 211
1993 298 1627
1994 55 2041
1995 0 2492
1996 mid-year 156 46
2-year forecast 577 1419
(1) Source: CBC/Torto Wheaton Research
</TABLE>

LINE GRAPH ILLUSTRATING THE SUBURBAN OFFICE VACANCY RATES IN THE CHICAGO MARKET
FOR THE FOLLOWING PERIODS:

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
CHICAGO SUBURBAN OFFICE VACANCY RATES
(1)
<S> <C>
Vacancy Rate %
1992 19.3
18.4
1993 17.5
16.25
1994 15.0
13.4
1995 11.8
1996 mid-year 12
10.85
1997 mid-year Torto/Wheaton forecast 9.7
9.7
1998 mid-year Torto/Wheaton forecast 9.7
(1) Source: CBC/Torto Wheaton Research
</TABLE>

In addition to strong growth indicators for the Chicago suburban office
submarkets, RFA has estimated that Chicago will continue to benefit from a
highly diverse economy, which includes employers such as Sears, Roebuck &
Company, Arthur Anderson LLP, United Airlines, Inc., Jewel Food Stores, Inc.,
Motorola, Inc. and Ameritech Corporation, and from an excellent transportation
network, high per-capita income (17.3% above the U.S. average), strength in the
high-tech sector and growing international trade.

53
<PAGE>
PROPERTIES LOCATED IN THE CHICAGO MARKET

MAP OF THE CHICAGO AREA SHOWING THE LOCATION
OF THE PROPERTIES IN THE CHICAGO MARKET

SCHAUMBURG SUBMARKET: The following four Properties are located in the
Schaumburg submarket. According to the Chicago Market Study, the office market
vacancy rate for the Schaumburg submarket was 14.5% as of June 30, 1996 compared
with an average vacancy rate for such submarket of 19.0% per annum for the
four-year period beginning January 1, 1992 and ending December 31, 1995. The
Chicago Market Study indicates a two-year forecasted vacancy rate for the
Schaumburg submarket of 12.0%.

CENTENNIAL CENTER. Constructed in 1980 and purchased by the Company in
December 1996, this Property is located near both Interstates 290 and 90. The
building is a thirteen-story structure containing a two-story main lobby fitted
with imported Italian marble walls and terrazzo flooring. In addition, the
Property is linked by an enclosed glass skybridge walkway to the adjacent Hyatt
Regency Woodfield hotel. The Woodfield Mall, a 2.7 million square foot super
regional mall anchored by Nordstrom, Lord and Taylor, Marshall Field, JC Penney
and Sears, is located directly across the street from the Property. As of
January 1, 1997, the Property was 95.2% leased and generated an Annualized Base
Rent per leased square foot of $7.98 (primarily on a net basis). The Property's
primary tenant is United HealthCare Services of Minnesota, Inc., which leases
40.8% of the Property.

HIGHPOINT BUSINESS CENTER. Constructed in 1986 and purchased by the Company
in 1994, this Property was acquired from a major U.S. life insurance company.
The Property consists of five single-story masonry office/service center
buildings. From the date of purchase to January 1, 1997, the Company increased
occupancy from approximately 60.4% to 88.3%; as of January 1, 1997, the Property
generated an Annualized Base Rent per leased square foot of $10.19 (primarily on
a net basis). The Property's primary tenants are The Sales Force Companies,
Inc., which leases 16.0% of the Property, and AGIE, USA Ltd., which leases 14.9%
of the Property.

ARLINGTON RIDGE SERVICE CENTER. Constructed in 1987 and purchased by the
Company in 1993, this Property was acquired from a major U.S. bank. The property
is located near State Highway 53. The building is a single-story structure with
a decorative masonry exterior. From the date of purchase to January 1, 1997, the
Company increased occupancy from approximately 64% to 87.4%; as of January 1,
1997, the Property generated an Annualized Base Rent per leased square foot of
$12.46 (primarily on a gross basis). The Property's primary tenant is American
Honda Motor Company, Inc., which leases 41.7% of the Property.

1251 PLUM GROVE ROAD. Constructed in 1986 and purchased by the Company in
1996, this Property was acquired from a local developer. The Property is located
one mile west of Woodfield Mall in the city of Schaumburg, Illinois. The
Property is a single-story building that contains central skylit lobbies and
several individual exterior entranceways and surrounds an extensively
landscaped, glass-walled courtyard. As of January 1, 1997, the Property
generated an Annualized Base Rent per leased square foot of $11.63 (primarily on
a gross basis). The Property's primary tenants are Vanguard Management
Corporation, which leases 14.1% of the Property, and State Farm Mutual
Automobile Insurance Company, which leases 11.7% of the Property.

O'HARE SUBMARKET: The following three Properties are located in the O'Hare
submarket. According to the Chicago Market Study, the office market vacancy rate
for the O'Hare submarket was 15.2% as of June 30, 1996 compared with an average
vacancy rate for such submarket of 18.5% per annum for the four-year period
beginning January 1, 1992 and ending December 31, 1995. The Chicago Market Study
indicates a two-year forecasted vacancy rate for the O'Hare submarket of 11.7%.

1011 EAST TOUHY AVENUE. Constructed in 1978 and purchased by the Company in
1993, this Property was acquired from an offshore bank. The Property is located
near Interstates 90 and 294, which provide

54
<PAGE>
access to both Chicago/O'Hare International Airport and downtown Chicago. The
five-story building's interior common areas were renovated in 1995 and feature a
three-story atrium accented with marble and landscaped with greenery and a
fountain. Amenities include a full-service deli, a travel agency and a
conference room available for tenant use. From the date of purchase to January
1, 1997, the Company increased occupancy from approximately 75.6% to 91.1%; as
of January 1, 1997, the Property generated an Annualized Base Rent per leased
square foot of $16.30 (primarily on a gross basis). The Property's primary
tenants are Health Direct, Inc., which leases 18.9% of the Property, and The
Lutheran General Medical Group, S.C., which leases 12.4% of the Property.

2800 RIVER ROAD. Constructed in 1983 and purchased by the Company in 1995,
this Property was acquired from a major pension fund. The Property is located
near both Interstates 90 and 294, which provide convenient access to both
Chicago/O'Hare International Airport and downtown Chicago. The four-story
building offers excellent visibility from Interstate 294, contains a four-story
atrium with marble finishes and provides parking in both a three-story deck and
an underground, heated garage. As of January 1, 1997, the Property was 76.5%
occupied and generated an Annualized Base Rent per leased square foot of $16.30
(primarily on a gross basis). The Property's primary tenants are WorldCom, Inc.,
which leases 18.6% of the Property, and Polygram Group Distribution, Inc., which
leases 11.3% of the Property.

KENSINGTON CORPORATE CENTER. Constructed in 1989 and purchased by the
Company in 1995, this Property was acquired from a national real estate
developer and general contractor. The building is a four-story structure clad in
two sizes of ironspot face brick. As of January 1, 1997, the Property was 77.3%
occupied and generated an Annualized Base Rent per leased square foot of $11.92
(primarily on a net basis). The Property's tenant is Metropolitan Life Insurance
Company, which leases 77.3% of the Property.

LAKE COUNTY SUBMARKET: The following three Properties are located in the
Lake County submarket. According to the Chicago Market Study, the office market
vacancy rate for the Lake County submarket was 9.5% as of June 30, 1996 compared
with an average vacancy rate for such submarket of 11.9% per annum for the
four-year period beginning January 1, 1992 and ending December 31, 1995. The
Chicago Market Study indicates a two-year forecasted vacancy rate for the Lake
County submarket of 9.5%.

565 LAKEVIEW PARKWAY. Constructed in 1991 and purchased by the Company in
1995, this Property was acquired from a major U.S. bank. The Property, a
single-story structure, is accessible from Interstate 94 and is located near
Hawthorn Center, a 1.1 million square foot regional mall. The Property is also
located one-half mile from a recently planned 2,200 unit upscale residential
development. In 1996, the Company expanded the Property's parking lot from 253
to 373 spaces to accommodate tenants with a high employee density. As of January
1, 1997, the Property was 68.4% occupied and generated an Annualized Base Rent
per leased square foot of $10.65 (primarily on a net basis). The Property's
primary tenants are PNC Mortgage Corp. of America, which leases 33.3% of the
Property, and Sparkling Spring Mineral Water Co., which leases 20.2% of the
Property.

ONE HAWTHORN PLACE. Constructed in 1987 and purchased by the Company in
1994, this Property was acquired from the development arm of a national
construction company. The four-story Property is located near Hawthorn Center, a
1.1 million square foot regional mall, and along Route 60, a major east-west
artery, and is near Interstate 94. Numerous restaurants and retail shops are
located within one half mile of the Property. Designed by noted architect Helmut
Jahn, the building includes a central four story core flanked by two three-story
wings. From the date of purchase to January 1, 1997, the Company increased
occupancy from approximately 79% to 91.5%; as of January 1, 1997, the Property
generated an Annualized Base Rent per leased square foot of $17.46 (primarily on
a gross basis). The Property's primary tenant is Association of Legal
Administrators, which leases 10.0% of the Property.

TWO MARRIOTT DRIVE. Constructed in 1985 and purchased by the Company in
1996, the Property has easy access to Interstate 94 via a four-way interchange
at State Route 22. The building is a single-story steel

55
<PAGE>
frame structure with precast concrete panels. As of January 1, 1997, the
Property was 100% occupied and generated an Annualized Base Rent per leased
square foot of $8.13 (primarily on a net basis). The Property is 100% leased to
Aksys, Ltd.

NORTH SUBURBS SUBMARKET: The following Property is located in the North
Suburbs submarket. According to the Chicago Market Study, the office market
vacancy rate for the North Suburbs submarket was 8.1% as of June 30, 1996
compared with an average vacancy rate for such submarket of 12.9% per annum for
the four-year period beginning January 1, 1992 and ending December 31, 1995. The
Chicago Market Study indicates a two-year forecasted vacancy rate for the North
Suburbs submarket of 6.0%.

3400 CORPORATE CENTER. Constructed in 1986 and purchased by the Company in
1993, this Property was acquired from a major U.S. life insurance company, which
had foreclosed on the property in late 1992. The three-story building is
steel-framed with concrete spandrel panels and bronze-tinted reflective glass.
It features a two-story atrium with polished granite walls. From the date of
purchase to January 1, 1997, the Company increased occupancy from 62.8% to 100%;
as of January 1, 1997, the Property generated an Annualized Base Rent per leased
square foot of $16.63 (primarily on a gross basis). The Property's primary
tenants are Medical Business Consultants Inc., which leases 16.8% of the
Property, and North American Special Risk Associates, Inc., which leases 13.1%
of the Property.

OAK BROOK SUBMARKET: The following two Properties are located in the Oak
Brook submarket. According to the Chicago Market Study, the office market
vacancy rate for the Oak Brook submarket was 10.2% as of June 30, 1996 compared
with an average annual vacancy rate for such submarket of 14.0% per annum for
the four-year period beginning January 1, 1992 and ending December 31, 1995. The
Chicago Market Study indicates a two-year forecasted vacancy rate for the Oak
Brook submarket of 8.0%.

3010 AND 3020 WOODCREEK DRIVE. Constructed in 1985 and 1986, respectively,
these two single-story buildings were purchased by the Company in 1996 from a
major U.S. bank. The Property is located near Interstates 355, 294 and 88, which
provide convenient access to the metropolitan area. 3010 Woodcreek Drive is an
office/service center, containing four rear loading docks. 3020 Woodcreek Drive
is finished with office space and has common area corridors and a small atrium
with interior landscaping and skylights. As of January 1, 1997, the Property was
92.5% occupied and generated an Annualized Base Rent per leased square foot of
$11.33 (primarily on a gross basis). The Property's primary tenants are
Stralfors International, Inc, which leases 16.2% of the Property, Marriott
Corporation, which leases 12.0% of the Property, and Minolta Business Systems,
Inc., which leases 11.4% of the Property.

823 COMMERCE DRIVE. Constructed in 1969 and purchased by the Company in
1995, the Property is located near Interstates 88 and 294, which provide access
both to Chicago/O'Hare International Airport and downtown Chicago. The
three-story building is visible from the East-West Tollway (Interstate 88) and
is located one-quarter mile east of Oak Brook Center, a 2.1 million square foot,
upscale regional mall. The Property's interior and exterior were completely
renovated in 1996. As of January 1, 1997, the Property was 80.9% occupied and
generated an Annualized Base Rent per leased square foot of $17.03 (primarily on
a gross basis). In addition, as of January 1, 1997, a lease had been signed for
the remaining space. The Property's primary tenant is Interim Technology, which
recently signed a lease that will expand its occupancy to 67.4% of the Property.

The following two Properties are also located in the Chicago Market.

1675 HOLMES ROAD. Constructed in 1990 and purchased by the Company in
February 1997, this Property is located in the Jaynes Industrial Park in
northwest suburban Elgin. The Jaynes Industrial Park is a 70-acre project near
the intersection of Interstate 90 and Randall Road. The building is a
single-story office/warehouse structure with a concrete exterior. Ceiling
heights are 24 feet clear and each tenant suite is equipped with an individual,
tenant-controlled HVAC system. As of January 1, 1997, the Property was 100%
occupied and generated an Annualized Base Rent per leased square foot of $4.67
(primarily on a

56
<PAGE>
gross basis). The Property's primary tenant is Seigle's Home & Building Centers,
Inc., which leases 50.0% of the Property.

COURT OFFICE CENTER. Constructed in 1984 and purchased by the Company in
February 1997, this Property lies adjacent to the Cook County Courthouse in
south suburban Markham. Located one block from the 167th Street interchange with
Interstate 80 and a short drive from Interstates 294 and 57, the Property
consists of two single-story office buildings. Each structure features brick
exterior walls and wood casement windows. As of January 1, 1997, the Property
was 100% occupied and generated an Annualized Base Rent per leased square foot
of $14.94 (primarily on a gross basis). According to the Chicago Market Study,
the Property is located in the South Suburbs submarket, where the office market
vacancy rate was 13.2% as of June 30, 1996 compared with an average vacancy rate
for the submarket of 16.4% per annum for the four-year period beginning January
1, 1992 and ending December 31, 1995. The Chicago Market Study indicates a
two-year forecasted vacancy rate for the South Suburbs submarket of 9.5%. The
Property's primary tenants are South Suburban Medical Associates, S.C., which
leases 39.4% of the Property, and Childrens Home, which leases 39.4% of the
Property.

THE SUBURBAN MILWAUKEE OFFICE MARKET AND PROPERTIES

According to RFA, Milwaukee's economic climate is expected to continue to
improve based in large part on the area's low cost of doing business, strong
exposure to the auto and farm equipment industries during a period of rising
demand in that sector, and above-average industrial diversity. The Milwaukee
area's leading employers include The Northwestern Mutual Life Insurance Company
and Harley-Davidson Inc. According to The Polacheck Company's 1997 edition of
the Market Survey for Milwaukee, Wisconsin (the "Milwaukee Market Study"), the
Milwaukee suburban office market (the "Milwaukee Market") has seen a slow but
stable recovery over the past several years with no new construction in the
downtown area and minimal suburban construction (mostly construction with anchor
tenants). According to the Milwaukee Market Study the suburban area is slowly
turning into a landlord's market with a stable profitable suburban office market
expected to continue for the foreseeable future. The Milwaukee Market contains
an inventory of approximately 306 office buildings containing approximately 13.6
million net rentable square feet located in the six submarkets of Mayfair,
Bishop's Woods, Brookfield Square, West Allis/ Southwest, North/Park Place and
Waukesha. According to the Milwaukee Market Study, the vacancy rate for suburban
office space was approximately 17.0%. The Company's Properties in the Milwaukee
Market are located in the West Allis/Southwest, Brookfield Square and North/Park
Place submarkets where vacancy rates for properties similar to the Company's
Properties are approximately 0%, 9.8% and 10.0%, respectively, well below the
average vacancy rate for suburban office space in the Milwaukee Market.

PROPERTIES LOCATED IN THE MILWAUKEE MARKET

MAP OF THE MILWAUKEE AREA SHOWING THE LOCATION
OF THE PROPERTIES IN THE MILWAUKEE MARKET

ONE PARK PLAZA. Constructed in 1984 and purchased by the Company in 1995,
this Property was acquired from a major U.S. life insurance company. The
Property is located at the intersection of US 41 and US 45, which each provide
access to the metropolitan Milwaukee area. It is situated within the 305-acre
Park Place development, which features a fountained seven-acre lake, an outdoor
plaza amphitheater, walking path, tennis and basketball courts. The exterior of
this twelve-story building is polished granite on the first two floors, and
reflective glass in aluminum frames on the remaining floors. The Property also
features a two-story parking deck, on-site banking, a deli/restaurant, and
postal and overnight express delivery stations. From the date of purchase to
January 1, 1997, the Company increased occupancy from approximately 93.1% to
94.8%; as of January 1, 1997, the Property generated an Annualized Base Rent per
leased square foot of $11.72 (primarily on a gross basis). The Property's
primary tenants are Employers Insurance of Wausau, which leases 26.2% of the
Property, and A.O. Smith Corporation, which leases 25.9% of the Property.
According to the Milwaukee Market Study, the Property

57
<PAGE>
is located in the North/Park Place submarket, where the office market vacancy
rate for similar properties was 10.0% as of January 1997.

PARK PLACE VII. Constructed in 1989 and purchased by the Company in 1993,
this Property was acquired from the Resolution Trust Corporation. The Property
is located in a 305-acre commercial development that features three lakes, an
outdoor plaza amphitheater, jogging paths and tennis courts. The building is a
single-story structure with a decorative masonry exterior. From the date of
purchase to January 1, 1997, the Company increased occupancy from approximately
82.2% to 100%; as of January 1, 1997, the Property generated an Annualized Base
Rent per leased square foot of $16.69 (primarily on a gross basis). The
Property's primary tenant is Sisters of the Sorrowful Mother Ministry
Corporation, which leases 63.7% of the Property. According to the Milwaukee
Market Study, the Property is located in the North/Park Place submarket, where
the office market vacancy rate for similar properties was 10.0% as of January
1997.

LINCOLN CENTER II AND III. Constructed in 1984 and 1987, respectively,
these two three-story buildings were purchased by the Company in 1996 from a
national pension fund. The Property is located in the city of West Allis, a
western suburb of Milwaukee, is visible from Interstate 894 and is adjacent to a
full interchange at National Avenue. The surrounding area contains an abundance
of retail and restaurant services. Both structures have precast aggregate
exteriors. As of January 1, 1997, the Property was 96.1% occupied and generated
an Annualized Base Rent per leased square foot of $14.71 (primarily on a gross
basis). The Property's primary tenant is CNR HEALTH, INC., which leases 25.1% of
the Property. According to the Milwaukee Market Study, the Property is located
in the West Allis/Southwest submarket, where the office market vacancy rate for
similar properties was 0.0% as of January 1997.

BROOKFIELD LAKES. Constructed in 1987 and purchased by the Company in 1994,
this Property was acquired from a major U.S. life insurance company. The
Property is located within Brookfield Lakes Corporate Center, an office park
that includes five lakes, extensive landscaping, jogging trails, a hotel/ health
club, a bank, child care facilities, restaurants and other retail facilities.
The Property consists of two single-story office structures and one single-story
service center that offers loading/staging areas. All three buildings have
decorative masonry exteriors. From the date of purchase to January 1, 1997, the
Company increased occupancy from approximately 69.2% to 98.4%; as of January 1,
1997, the Property generated an Annualized Base Rent per leased square foot of
$11.01 (primarily on a net basis). The Property's primary tenants are
Hewlett-Packard Company, which leases 19.5% of the Property, and Digital
Equipment Corporation, which leases 13.0% of the Property. According to the
Milwaukee Market Study, the Property is located in the Brookfield Square
submarket, where the office market vacancy rate for similar properties was 9.8%
as of January 1997.

THE SUBURBAN MINNEAPOLIS OFFICE MARKET AND PROPERTIES

Minneapolis is also experiencing strong economic growth. According to the
LaSalle Index, Minneapolis ranks 18th in economic growth out of 112 cities and,
according to RFA, has been a premier growth area in the midwestern United States
for the last five years. RFA estimates that the area will continue to enjoy a
healthy economy, with employment expanding at a 1.7% year over year pace, and
unemployment holding steady at just under 3.0% and is expected to be just over
3.0% for 1997. Minneapolis also enjoys a diverse economic base that includes
leading employers such as the University of Minnesota, Dayton Hudson
Corporation, 3M Company, General Mills Inc. and Northwest Airlines Corporation.
The Minneapolis area is also experiencing a steadily improving suburban office
market. According to CB Commercial's June 30, 1996 CBC/Torto Wheaton Research
for Minneapolis/St. Paul, Minnesota (the "Minneapolis Market Study"), the
Minneapolis/St. Paul suburban office market (the "Minneapolis Market") contained
an inventory of approximately 24.7 million net rentable square feet located in
the six submarkets of Burnsville/Eagan/Apple Valley, I-394, I-494, Midway,
Northwest Area and Suburban St. Paul. According to the Minneapolis Market Study,
the vacancy rate for suburban office space was approximately 6.1%. Although the
Minneapolis Market Study indicates that estimated annual average absorption for
the suburban Minneapolis office submarkets for the next two years (909,000
rentable square feet) will be

58
<PAGE>
slightly lower than the estimated annual completions for the next two years
(919,000 rentable square feet), the forecasted two year vacancy rate for the
submarkets is 5.8%, which should continue to contribute to rising rental rates.

59
<PAGE>
BAR GRAPH COMPARING NET ABSORPTION AND COMPLETIONS IN THE MINNEAPOLIS MARKET FOR
THE FOLLOWING PERIODS:

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
NET ABSORPTION VS. COMPLETIONS (1)
<S> <C> <C>
Rentable Square Feet (000's)
Completions Net Absorption
1992 0 919
1993 0 1302
1994 0 544
1995 0 599
1996 mid-year 0 282
2-year forecast 919 909
(1) Source: CBC/Torto Wheaton Research
</TABLE>

LINE GRAPH ILLUSTRATING THE SUBURBAN OFFICE VACANCY RATES IN THE MINNEAPOLIS
MARKET FOR THE FOLLOWING PERIODS:

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
MINNEAPOLIS SUBURBAN OFFICE VACANCY RATES
(1)
<S> <C>
Vacancy Rate %
1992 17.1
14.45
1993 11.8
10.7
1994 9.6
8.45
1995 7.3
1996 mid-year 6.1
5.95
1997 mid-year Torto/Wheaton forecast 5.8
5.8
1998 mid-year Torto/Wheaton forecast 5.8
(1) Source: CBC/Torto Wheaton Research
</TABLE>

PROPERTIES LOCATED IN THE MINNEAPOLIS MARKET

[MAP OF THE MINNEAPOLIS AREA SHOWING THE LOCATION OF THE PROPERTIES IN THE
MINNEAPOLIS MARKET]

COURT INTERNATIONAL II. Constructed in 1916 and completely redeveloped and
renovated in 1985, this Property was acquired by the Company in December 1996.
The Property is located alongside State Highway 280 and University Avenue in the
"Midway District" between the central business districts of Minneapolis and St.
Paul. Interstates 94 and 35 West are both in close proximity. The building is a
four-story structure that is divided vertically and horizontally. The Property,
Court II, comprises the entire basement and first floor of the building, plus
the southern "half" of floors two, three and four. The building has a glass,
stone and brick exterior and provides parking in both adjacent two-level decks
and a basement garage. As of January 1, 1997, the Property was 95.5% occupied
and generated an Annualized Base Rent per leased square foot of $10.03
(primarily on a net basis). The Property's primary tenants are University
Affiliated Familiy Physicians University of Minnesota, P.A., which leases 16.5%
of the Property,

60
<PAGE>
and AmeriData Consulting, Inc., which leases 11.3% of the Property. According to
the Minneapolis Market Study, the Property is located in the Midway submarket,
where the office market vacancy rate was 10.6% as of June 30, 1996 compared with
an average vacancy rate for such submarket of 18.3% per annum for the four-year
period beginning January 1, 1992 and ending December 31, 1995. The Minneapolis
Market Study indicates a two-year forecasted vacancy rate for the Midway
submarket of 8.6%.

UNIVERSITY OFFICE PLAZA. Constructed in 1979 and purchased by the Company
in 1995, this Property was acquired from a limited partnership, the general
partner of which is comprised of several healthcare-related associations. The
Property is located on an established commercial artery in close proximity to
the University of Minnesota, Minneapolis campus, and the University of Minnesota
Hospital. It is situated two miles east of downtown Minneapolis and Interstate
35 West and one mile north of Interstate 94. The building is a four-story
structure with a brick and mirrored glass exterior. As of January 1, 1997, the
Property was 100% occupied and generated an Annualized Base Rent per leased
square foot of $12.04 (primarily on a net basis). The Property's primary tenant
is Health Partners, which leases 84.8% of the Property. According to the
Minneapolis Market Study, the Property is located in the Midway submarket, where
the office market vacancy rate was 10.6% as of June 30, 1996 compared with an
average vacancy rate for such submarket of 18.3% per annum for the four-year
period beginning January 1, 1992 and ending December 31, 1995. The Minneapolis
Market Study indicates a two-year forecasted vacancy rate for the Midway
submarket of 8.6%.

11100 HAMPSHIRE AVENUE. Constructed in 1980 and purchased by the Company in
1993, this industrial Property was acquired from a major U.S. life insurance
company. The Property is located in Bloomington with access to Interstate 494, a
major highway within the Minneapolis-St. Paul metropolitan area. The building
consists of a single-story warehouse component and a two-story office facility.
From the date of purchase to January 1, 1997, the Company increased occupancy
from approximately 91.4% to 100%; as of January 1, 1997, the Property generated
an Annual Base Rent per leased square foot of $4.33 (primarily on a net basis).
The Property is 100% leased to Roadway Package System, Inc. According to the
Minneapolis Market Study, the Property is located in the Southwest submarket,
where the industrial market vacancy rate was 4.0% as of June 30, 1996 compared
with an average vacancy rate for such submarket of 5.6% per annum for the
four-year period beginning January 1, 1992 and ending December 31, 1995. The
Minneapolis Market Study indicates a two-year forecasted vacancy rate for the
Southwest submarket of 5.0% as of June 30, 1996. This Property has been listed
for sale by the Company.

THE SUBURBAN DETROIT OFFICE MARKET AND PROPERTIES

Detroit's economic performance, 26th out of 112 in the nation in economic
growth according to the LaSalle Index, has and is expected to continue to lead
the region. RFA indicates that Detroit's year over year job growth pace of 3.6%
is much higher than the national average, and, according to CBC Torto Wheaton,
growth in overall office employment for the Detroit region exceeds 7%. In
addition, the Detroit area is experiencing a twenty-five year low in
unemployment. Detroit's strong economic performance has pushed the vacancy rate
for suburban office space from 20% in 1992 to a mid-year 1996 level of 11%.
According to CB Commercial's June 30, 1996 CBC/Torto Wheaton Research for
Detroit, Michigan (the "Detroit Market Study"), the Detroit suburban office
market (the "Detroit Market") contains an inventory of approximately 47.8
million net rentable square feet located in the nine identifiable submarkets of
Ann Arbor, Birmingham/Bloomfield Hills, Dearborn, I-275 Corridor, Macomb County,
Rochester/Rochester Hills, Southfield/Bingham Farms and Troy/Auburn Hills or
located in unidentified suburban Detroit submarkets. The Detroit Market Study
also indicates that estimated annual average absorption for the suburban Detroit
office submarkets for the next two years will equal approximately 1.6 million
rentable square feet compared to an estimated annual new construction for the
next two years in the same submarkets of approximately 582,000 rentable square
feet resulting in annual excess demand that will average over one million
rentable square feet. The Company believes that the excess demand caused by

61
<PAGE>
such high absorption rates over new construction will continue to put downward
pressure on vacancy rates and upward pressure on rental rates.

BAR GRAPH COMPARING NET ABSORPTION AND COMPLETIONS IN THE DETROIT MARKET FOR THE
FOLLOWING PERIODS:

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
NET ABSORPTIONS VS. COMPLETIONS (1)
<S> <C> <C>
Rentable Square Feet (000's)
Completions Net Absorption
1992 540 639
1993 140 738
1994 26 1749
1995 79 1130
1996 mid-year 53 942
2-year forecast 582 1641
(1) Source: CBC/Torto Wheaton Research
</TABLE>

LINE GRAPH ILLUSTRATING THE SUBURBAN OFFICE VACANCY RATES IN THE DETROIT MARKET
FOR THE FOLLOWING PERIODS:

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
DETROIT SUBURBAN OFFICE VACANCY RATES
(1)
<S> <C>
Vacancy Rate %
1992 20
19.29
1993 18.58
16.79
1994 15
13.9
1995 12.8
1996 mid-year 11
8.7
1997 mid-year Torto/Wheaton forecast 6.4
6.4
1998 mid-year Torto/Wheaton forecast 6.4
(1) Source: CBC/Torto Wheaton Research
</TABLE>

PROPERTIES LOCATED IN THE DETROIT MARKET
MAP OF THE DETROIT AREA SHOWING THE LOCATION
OF THE PROPERTIES IN THE DETROIT MARKET

LONG LAKE CROSSING. Constructed in 1988 and purchased by the Company in
1996, the Property is located near Interstate 75 and is easily accessible from
downtown Detroit. The building is a three-story structure with a polished
granite and wood-paneled main lobby. Both outdoor and heated indoor parking are
available. As of January 1, 1997, the Property was 91.4% occupied and generated
an Annualized Base Rent per leased square foot of $17.87 (primarily on a gross
basis). According to the Detroit Market Study, the Property is located in the
Troy/Auburn Hills submarket, where the office market vacancy rate was 9.3% as of
June 30, 1996 compared with an average vacancy rate for such submarket of 15.1%
per annum for the four-year period beginning January 1, 1992 and ending December
31, 1995. The Detroit Market Study indicates a two-year forecasted vacancy rate
for the Troy/Auburn Hills submarket of 4.0%. The Property's primary tenants are
St. Paul Fire and Marine Insurance Company, which leases 15.9% of the Property,
and Walsh College of Accountancy and Business Administration, which leases 12.3%
of the Property.

62
<PAGE>
40 OAK HOLLOW. Constructed in 1989 and purchased by the Company in December
1996, this Property was acquired from a major U.S. life insurance company. Like
the Oak Hollow Gateway building, this Property is located in Southfield,
Michigan, within one mile of metropolitan Detroit's primary freeway hub,
providing access to Interstate 696, US 10 and Northwestern Highway. The
Property, a three-story structure with a polished granite lobby and oak and
brass accents, lies within the Oak Hollow Corporate Campus, an award winning
office park located in the area's only natural wood setting. As of January 1,
1997, the property was 97.3% occupied and generated an Annualized Base Rent per
leased square foot of $15.50 (primarily on a gross basis). The Property's
primary tenants are Midwest Re-employment Consultants, Inc., which leases 24.6%
of the Property, and Hygrade Food Products Associates, which leases 20.0% of the
Property. According to the Detroit Market Study, the Property is located in the
Southfield/Bingham Farms submarket, where the office market vacancy rate was
12.7% as of June 30, 1996, compared with an average vacancy rate for the
submarket of 22.1% per annum for the four-year period beginning January 1, 1992
and ending December 31, 1995. The Detroit Market Study indicates a two-year
forecasted vacancy rate for the Southfield/Bingham Farms submarket of 6.0%.

OAK HOLLOW GATEWAY. Constructed in 1987 and purchased by the Company in
1995, this Property was acquired from a major U.S. life insurance company. The
Property is located in Southfield, Michigan, within one mile of metropolitan
Detroit's primary freeway hub, providing access to Interstate 696, US 10 and
Northwestern Highway. The Property, a three-story structure with an atrium
accented by marble, lies within the Oak Hollow Corporate Campus, an award
winning office park located in the area's only natural wood setting. From the
date of purchase to January 1, 1997, the Company increased occupancy from
approximately 83.1% to 98.2%; as of January 1, 1997, the Company receives an
Annualized Base Rent per leased square foot of $15.45 (primarily on a gross
basis). The Property's primary tenants are Bay Networks, Inc., which leases
25.8% of the Property, and Lucent Technologies, Inc., which leases 20.8% of the
Property. According to the Detroit Market Study, the Property is located in the
Southfield/Bingham Farms submarket, where the office market vacancy rate was
12.7% as of June 30, 1996 compared with an average vacancy rate for such
submarket of 22.1% per annum for the four-year period beginning January 1, 1992
and ending December 31, 1995. The Detroit Market Study indicates a two-year
forecasted vacancy rate for the Southfield/Bingham Farms submarket of 6.0%.

THE SUBURBAN COLUMBUS OFFICE MARKET AND PROPERTY

RFA estimates that Columbus is the fastest growing economy in Ohio, and
growth in the area is expected to continue. Columbus enjoys a highly diverse
economy, stable employers such as The Ohio State University, low employment
volatility and good population trends. According to CBC/Torto Wheaton, Columbus
is also experiencing strong overall office employment growth of 4.8%, which the
Company believes has contributed to the decline in vacancy rates for suburban
office from 13.1% in 1992 to a mid-year 1996 level of 7.2%. According to CB
Commercial's June 30, 1996 CBC/Torto Wheaton Research for Columbus, Ohio (the
"Columbus Market Study"), the Columbus suburban office market (the "Columbus
Market") contained an inventory of approximately 9.6 million net rentable square
feet. The Columbus Market Study also indicates that the suburban Columbus office
market will remain tight, with vacancy rates expected to average 7.7% over the
next two years and estimated annual average absorption for suburban office space
for the next two years equalling 705,000 rentable square feet compared to
estimated annual completion over the next two years equalling 786,000 rentable
square feet.

BAR GRAPH COMPARING NET ABSORPTION AND COMPLETIONS IN THE COLUMBUS MARKET FOR
THE FOLLOWING PERIODS:

63
<PAGE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
NET ABSORPTION VS. COMPLETIONS (1)
<S> <C> <C>
Rentable Square Feet (000's)
Completions Net Absorption
1992 143 367
1993 101 420
1994 50 175
1995 328 245
1996 mid-year 40 181
2-year forecast 786 705
(1) Source: CBC/Torto Wheaton Research
</TABLE>

LINE GRAPH ILLUSTRATING THE SUBURBAN OFFICE VACANCY RATES IN THE COLUMBUS MARKET
FOR THE FOLLOWING PERIODS:

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
COLUMBUS SUBURBAN OFFICE VACANCY RATES (1)
<S> <C>
Vacancy Rate %
1992 13.1
11.3
1993 9.5
8.85
1994 8.2
8.45
1995 8.7
1996 mid-year 7.2
7.45
1997 mid-year Torto/Wheaton forecast 7.7
7.7
1998 mid-year Torto/Wheaton forecast 7.7
(1) Source: CBC/Torto Wheaton Research
</TABLE>

PROPERTY LOCATED IN THE COLUMBUS MARKET
MAP OF THE COLUMBUS AREA SHOWING THE LOCATION
OF THE PROPERTIES IN THE COLUMBUS MARKET

DUBLIN TECHMART. Constructed in 1986 and purchased by the Company in 1996,
this Property was acquired from a major bank. The Property is located in Dublin,
Ohio, situated 15 miles northwest of Columbus' Central Business District, and is
easily accessible from both Interstate 270 and Route 161. The Property is
comprised of three single-story structures with identical brick veneer, tinted
glass and polished steel exteriors. Each structure offers separate exterior
entrances to individual tenant spaces. As of January 1, 1997, the Property was
100% occupied with an Annualized Base Rent per leased square foot of $9.70
(primarily on a net basis). The Property's primary tenants are Motoman, Inc.,
which leases 19.2% of the Property, and United States Fidelity and Guaranty
Company, which leases 17.2% of the Property. According to the Columbus Market
Study, the Property is located in the suburban Columbus submarket, where the
office market vacancy rate was 7.2% as of June 30, 1996 compared with an average
vacancy rate for such submarket of 9.9% per annum for the four-year period
beginning January 1, 1992 and ending December 31, 1995. The Columbus Market
Study indicates a two-year forecasted vacancy rate for the suburban Columbus
submarket of 7.7%.

64
<PAGE>
THE SUBURBAN CINCINNATI OFFICE MARKET AND PROPERTY

Cincinnati is also enjoying economic expansion, with an unemployment rate of
3.8%, a six-year low, and a labor force growth rate of 2.0%. In addition,
CBC/Torto Wheaton estimates that overall office employment is growing at a rate
of 5.0%, which growth is expected to continue. Cincinnati's economic growth has
contributed to the decline in vacancy rates for suburban office from 18.9% in
1992 to a mid-year 1996 level of 11.4%. According to CB Commercial's June 30,
1996 CBC/Torto Wheaton Research for Cincinnati, Ohio (the "Cincinnati Market
Study"), the Cincinnati suburban office market (the "Cincinnati Market")
contained an inventory of approximately 12.4 million net rentable square feet
located in the seven submarkets of Blue Ash, CBD Periphery, Central, East, I-71
Corridor, North Kentucky and Tri-County. The Cincinnati Market Study also
indicates that estimated annual average absorption for the suburban Cincinnati
office market for the next two years will equal approximately 429,000 rentable
square feet compared to an estimated annual supply for the next two years in the
same submarkets of approximately 340,000 rentable square feet resulting in
annual excess demand that will average 89,000 rentable square feet.

BAR GRAPH COMPARING NET ABSORPTIONS AND COMPLETIONS IN THE CINCINNATI FOR THE
FOLLOWING PERIODS:

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
NET ABSORPTION VS. COMPLETIONS (1)
<S> <C> <C>
Rentable Square Feet (000's)
Completions Net Absorption
1992 30 314
1993 0 234
1994 80 452
1995 27 107
1996 mid-year 0 236
2-year forecast 340 429
(1) Source: CBC/Torto Wheaton Research
</TABLE>

LINE GRAPH ILLUSTRATING SUBURBAN OFFICE VACANCY RATES IN THE CINCINNATI MARKET
FOR THE FOLLOWING PERIODS:

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
CINCINNATI SUBURBAN OFFICE VACANCY RATES
(1)
<S> <C>
Vacancy Rate %
1992 18.9
18
1993 17.1
15.5
1994 13.9
13.6
1995 13.3
1996 mid-year 11.4
10.4
1997 mid-year Torto/Wheaton forecast 9.4
9.4
1998 mid-year Torto/Wheaton forecast 9.4
(1) Source: CBC/Torto Wheaton Research
</TABLE>

65
<PAGE>
PROPERTY LOCATED IN THE CINCINNATI MARKET
MAP OF THE CINCINNATI AREA SHOWING THE LOCATION
OF THE PROPERTIES IN THE CINCINNATI MARKET

PRINCETON HILL CORPORATE CENTER. Constructed in 1988 and purchased by the
Company in 1996, this Property was acquired from a consortium that included a
regional bank. The Property is located in the city of Springdale, Ohio,
approximately 20 minutes from downtown Cincinnati. Situated in the 24 acre
Princeton Hill office park, it is located one quarter mile from a 1.3 million
square foot regional shopping mall and five minutes from the intersection of
Interstate 275 and State Route 747. The three-story building has a polished
granite and reflective glass exterior and features a three-story tiered-balcony
lobby. From the date of purchase to January 1, 1997, the Company increased
occupancy from approximately 31.7% to 100%; as of January 1, 1997, the Property
generated an Annualized Base Rent per leased square foot of $11.02 (primarily on
a net basis). The Property's primary tenant is Community Insurance Company,
which leases 71.5% of the Property. According to the Cincinnati Market Study,
the Property is located in the Tri-County submarket, where the office market
vacancy rate was 7.4% as of June 30, 1996 compared with an average vacancy rate
for such submarket of 16.0% per annum for the four-year period beginning January
1, 1992 and ending December 31, 1995. The Cincinnati Market Study indicates a
two-year forecasted vacancy rate for the Tri-County submarket of 8.6%.

COMPETITION

The Company may be competing with other owners and developers that have
greater resources and more experience than the Company. In addition, an increase
in the number of competitive properties in any particular market in which the
Properties are located could have a material adverse effect on (i) the Company's
ability to lease space at the Properties or any newly-acquired property and (ii)
the rents charged at the Properties. However, the Company believes that (i) the
Offering, (ii) the Credit Facility and (iii) its ability as a public company to
raise funds through the capital markets during periods when conventional sources
of financing may be unavailable or prohibitively expensive will provide the
Company with substantial competitive advantages. Moreover, the Company believes
that the number of real estate developers has decreased as a result of the
recessionary market conditions and tight credit markets during the early 1990s
and the reluctance on the part of more conventional financing sources to fund
acquisition projects.

INSURANCE

The Company carries comprehensive liability, fire, extended coverage, rental
loss and environmental 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 properly to 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

66
<PAGE>
not such facility is owned or operated by such person. In addition, some
environmental laws create a lien 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 year, 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.

LEGAL PROCEEDINGS

As of December 31, 1996, the Company was not a party to any material legal
proceedings.

EMPLOYEES

As of December 31, 1996, the Company had 34 employees, none of whom is
represented by a collective bargaining unit.

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<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The Board of Directors of the Company consists of seven directors, all of
whom are elected for one-year terms at each annual meeting of stockholders. The
Bylaws require that a majority of the Board of Directors be comprised of persons
who are not officers or employees of the Company (each such person serving on
the Board of Directors being an "Independent Director"). Holders of shares of
Common Stock have no right to cumulative voting in the election of directors.
Consequently, at each annual meeting, a majority of the stockholders will be
able to elect all of the directors. The Company's executive officers are elected
annually by the Board of Directors; however, they may be removed at any time by
the Board of Directors.

The following table sets forth certain information with respect to the
executive officers and directors of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------- --- --------------------------------------------------
<S> <C> <C>
Richard A. May 52 Chairman of the Board, President and Chief
Executive Officer

Richard L. Rasley 40 Executive Vice President, Secretary, General
Counsel and Director

James Hicks 41 Senior Vice President--Finance, Chief Financial
Officer and Treasurer

Raymond M. Braun 37 Senior Vice President--Acquisitions

Kim S. Mills 48 Senior Vice President--Asset Management and
Leasing

James J. Brinkerhoff 46 Director

Daniel E. Josephs 65 Director

Edward Lowenthal 52 Director

Donald E. Phillips 64 Director

Walter H. Teninga 69 Director
</TABLE>

RICHARD A. MAY. Mr. May co-founded the Company in 1992 and has served as
Chairman and President of the Company and as a member of the Board of Directors
since its inception. Mr. May is currently the Chairman of the Board, President
and Chief Executive Officer of the Company. In 1986, Mr. May co-founded the
Advisor and, from 1987 until April 1, 1996, Mr. May was an officer and
shareholder of the Advisor. See "Certain Transactions." Mr. May is a licensed
real estate broker in the States of Illinois and Indiana and holds several
inactive NASD licenses. He is also a member of 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.

RICHARD L. RASLEY. Mr. Rasley co-founded the Company in 1992 and has served
as Secretary of the Company and a member of the Board of Directors since its
inception. Mr. Rasley is currently the Executive Vice President, 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 prior to April l, 1996. See "Certain
Transactions." 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 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

70
<PAGE>
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 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 joined the Advisor in January 1996. Mr. Mills has
primary responsibility for all of the Company's asset management, property
management and leasing activities. Prior to joining the Advisor, Mr. Mills was
employed by Simon Property Group, a commercial property REIT, from 1992 to 1995
as a regional manager with responsibility for overall portfolio management of
high rise office buildings totalling 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.

JAMES J. BRINKERHOFF. Mr. Brinkerhoff has served as a member of the Board
of Directors since August 1996. Mr. Brinkerhoff was appointed to the Board of
Directors pursuant to Fortis Benefits Insurance Company's right to nominate one
director under the Stock Purchase Agreement. Mr. Brinkerhoff is Senior Vice
President, Real Estate, of Fortis Advisers, Inc. ("Fortis Advisers"), the New
York-based investment management arm of Fortis, Inc. Prior to joining Fortis
Advisers in 1994, he was Senior Vice President and Portfolio Manager with
Aldrich, Eastman & Waltch, responsible for managing the United States Real
Estate Portfolio of the Church Commissioners for England. From 1983 to 1993, he
was an officer and partner of Chesterton International, a London-based real
estate adviser, where he was responsible for the creation and management of the
Church Commissioners' United States Real Estate Portfolio. Mr. Brinkerhoff
received his M.B.A. degree from the Wharton School, University of Pennsylvania,
and his Bachelor's Degree from Boston University. He is a full member of the
Urban Land Institute.

DANIEL E. JOSEPHS. Mr. Josephs has served as a member of the Board of
Directors since March 1993. Mr. Josephs is currently an independent business
consultant. From 1985 through 1995, Mr. Josephs served as the President, Chief
Operating Officer and Director of Dominick's Finer Foods of Northlake, Illinois,
a major Chicago-area retail grocery company. Mr. Josephs currently serves on the
Board of Directors of Grand Union Company, a regional grocery firm and the Board
of Directors of Options for People, Inc., a Chicago-area non-profit concern. Mr.
Josephs received his Bachelor's Degree from Northwestern University and received
his M.B.A. degree from The University of Chicago.

EDWARD LOWENTHAL. Mr. Lowenthal has served as a member of the Board of
Directors since August 1996. Mr. Lowenthal was nominated to the Board of
Directors pursuant to Wellsford Karpf Zarrilli Ventures, L.L.C.'s right to
appoint one director under the Stock Purchase Agreement. Mr. Lowenthal is a
Founder, Director and President of Wellsford Residential Property Trust ("WRP"),
a NYSE-listed multi-family REIT. On January 17, 1997, Equity Residential
Properties Trust ("Equity Residential"), a publicly traded apartment properties
REIT, announced that it had agreed to acquire WRP and that such acquisition was
expected to be completed by May 1997, subject to shareholder approval. Upon
completion of Equity Residential's acquisition of WRP, it is expected that Mr.
Lowenthal will (i) join the Board of Directors of Equity Residential and (ii)
serve as President of Wellsford Real Properties, Inc., a newly formed real
estate investment company. Mr. Lowenthal is a member of the Executive Committee
and Board of Governors of NAREIT and was Co-chair of its 1993 Annual Meeting.
Mr. Lowenthal currently

71
<PAGE>
serves as a member of the Boards of Directors of Omega Healthcare Investors,
Inc., an investment company and Corporate Renaissance Partners, a securities
mutual fund. Mr. Lowenthal is also a member of the Board of Trustees of
Corporate Realty Income Trust, a REIT that invests in triple-net leased
commercial and industrial properties. He received his Bachelor's Degree from
Case Western Reserve University and received his J.D. degree from Georgetown
University Law Center.

DONALD E. PHILLIPS. Mr. Phillips has served as a member of the Board of
Directors since September 1992. Mr. Phillips is currently retired. From 1960
until 1980, Mr. Phillips served as a corporate executive in a variety of
capacities for International Minerals & Chemicals Corporation of Northbrook,
Illinois and, from 1976 to 1980, he was Group President & CEO of IMC Industry
Group, Inc. ("IMC"), a chemical and minerals firm. From 1980 until 1988, he
served as Group President & CEO of Pitman Moore, Inc., then a wholly owned
subsidiary of IMC. Mr. Phillips presently serves as Chairman of the Board of
Directors of Synbiotics Corporation of Rancho Bernardo, California, a
manufacturer and distributor of veterinary devices and products. Mr. Phillips is
also a member of the Board of Directors of Potash Corporation of Saskatchewan,
Canada, a miner and distributer of minerals for agricultural application. Mr.
Phillips received his Bachelor's Degree from Mississippi College and received
his M.B.A. degree from the University of Mississippi. He is also a graduate of
the Executive Program in Business Administration in the Graduate School of
Business, Columbia University and he is a recipient of an Honorary Doctor of
Laws degree from Mississippi College.

WALTER H. TENINGA. Mr. Teninga has served as a member of the Board of
Directors since September 1992. From 1991 to 1993, Mr. Teninga served as the
President and Chief Executive Officer of American Club Stores, Inc., a wholly
owned subsidiary of American Stores Company, a grocery and food retail business.
Prior to 1991, Mr. Teninga served as Chairman, Chief Executive Officer and
Director of the Warehouse Club, a wholesale cash-and-carry warehouse business
that he founded in 1982. Mr. Teninga is currently a member of the Board of
Directors of Developers Diversified Realty Corporation, a NYSE-listed real
estate investment trust and Solo Serve Corporation, an off-price apparel
retailer. Mr. Teninga received his Bachelor's Degree from the University of
Michigan and his M.B.A. degree from Michigan State University.

COMMITTEES OF THE BOARD OF DIRECTORS

GENERAL. The Board of Directors may appoint from its members committees
comprised of not less than two directors, a majority of whom will also be
Independent Directors and delegate to such committees any of the powers of the
Board of Directors, except as prohibited by law. Currently, there are two
standing committees: the Audit Committee and the Compensation Committee.

AUDIT COMMITTEE. The Audit Committee was established by the Board of
Directors in 1993 and is responsible for making recommendations concerning the
engagement of independent public accountants, reviewing with the independent
accountants the plans and results of the audit engagement, approving
professional services provided by the independent public accountants,
considering the range of audit and non-audit professional fees and reviewing
with the independent accountants and management the adequacy of the Company's
internal accounting controls. The Audit Committee will be comprised of two or
more Independent Directors. The current members of the Audit Committee are
Messrs. Josephs (Chairman), Brinkerhoff and Teninga.

COMPENSATION COMMITTEE. The Compensation Committee was established by the
Board of Directors in 1995 and is responsible for establishing remuneration
levels for executive officers of the Company and administering the Company's
Stock Incentive Plan and any other incentive programs. The Compensation
Committee will be comprised of three or more Independent Directors. The
Compensation Committee currently consists of Messrs. Phillips (Chairman),
Josephs, Lowenthal and Teninga.

72
<PAGE>
COMPENSATION OF DIRECTORS

Independent Directors receive an annual retainer fee of $10,000 plus fees of
$1,000 for each day on which they attend a meeting of the Board of Directors,
$500 for each day on which they attend a meeting of a Committee of the Board of
Directors and $250 for each day in which they participate telephonically in a
meeting of the Board of Directors or a Committee thereof. The Company reimburses
each director for expenses incurred in attending meetings. In addition,
Independent Directors are currently eligible to be granted options to acquire up
to 5,000 shares of Common Stock under the Stock Option Plan for Independent
Directors and Brokers (the "Directors Plan") at the Company's Net Asset Value as
determined by the Board of Directors as of the end of each fiscal year. As
compensation for services performed during 1996, each of Messrs. Brinkerhoff,
Josephs, Lowenthal, Phillips and Teninga received an option to purchase 5,000
shares of Common Stock at an exercise price of $13.00 per share. Mr. Brinkerhoff
assigned his stock option to Fortis Benefits Insurance Company. Such options
were exercisable when granted and will expire on December 31, 2006 or six months
after a director is removed by the stockholders for cause pursuant to the
Bylaws.

During the period of 30 days after any "change in control," a person
entitled to exercise an option granted under the Directors Plan may elect to
require the Company to purchase all or any portion of such option at a purchase
price equal to the difference between the fair market value and the option
exercise price. For purposes of the Directors Plan, a "change in control" means
(i) certain consolidations or mergers of the Company, (ii) certain sales of all
or substantially all of the assets of the Company, (iii) the filing of a
Schedule 13D or Schedule 14D-1 under the Exchange Act disclosing that any person
had become the beneficial owner of 20% or more of the issued and outstanding
shares of voting securities of the Company or (iv) during any period of two
consecutive years, individuals who at the beginning of any such period
constitute the Board of Directors cease for any reason to constitute at least a
majority thereof unless the election, or the nomination for election by the
Company's stockholders, of each new member of the Board of Directors was
approved by a vote of at least two-thirds of the members of the Board of
Directors then still in office at the beginning of any such period.

EXECUTIVE COMPENSATION

Until April 1, 1996, the Company had no employees and all services were
provided by the Advisor pursuant to various fee-for-service agreements. The
table below sets forth the summary compensation of the Chief Executive Officer
and the four other most highly paid executive officers of the Company (the
"Named Executive Officers") based on the aggregate compensation paid to such
officers in 1996 (i) by the Company for the period beginning on April 1, 1996
and (ii) by the Advisor for the period from January 1, 1996 to April 1, 1996 and
for the years ended December 31, 1994 and 1995. In addition, all of the 1995
options to purchase Common Stock and a portion of the 1996 options to purchase
Common Stock held by

73
<PAGE>
the Named Executive Officers were granted to the Advisor pursuant to various
services agreements and the Advisor then transferred such options to its
employees pursuant to the Advisor Plan.

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
------------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
-------------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($)(1) BONUS($) AWARDS($)(2) OPTIONS(#)(3) COMPENSATION($)(4)
- ------------------------------- --------- ------------- ----------- ------------- --------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Richard A. May 1996 180,000 72,000 -- 49,578 4,038
Chairman 1995 150,000 15,000 -- 229,568 4,432
1994 128,750 15,000 -- -- 4,432

Richard L. Rasley 1996 115,000 34,500 102,852 20,785 4,007
Executive Vice President 1995 100,000 10,000 -- 86,310 4,438
1994 93,133 17,300 -- -- 4,352

Raymond M. Braun 1996 105,000 36,750 222,852 18,800 4,224
Senior Vice President-- 1995 86,875 9,000 -- 36,300 4,421
Acquisitions 1994 70,333 13,000 -- -- 4,525

James Hicks 1996 100,000 30,000 51,532 14,800 4,213
Senior Vice President, 1995 86,875 9,000 -- 18,200 4,421
Chief Financial Officer 1994 47,470 4,850 -- -- 2,278

Kim S. Mills 1996 100,000 30,000 -- 12,000 255
Senior Vice President--Asset
Management (5)
</TABLE>

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

(1) The salary information for 1996 represents the individual's salary
compensation for the period from January 1, 1996 to April 1, 1996 as paid by
the Advisor and for the period from April 1, 1996 to December 31, 1996 as
paid by the Company.

(2) Effective April 1, 1996 and in connection with the Merger, Messrs. Rasley,
Braun and Hicks received 8,571, 8,571 and 4,286 restricted shares of Common
Stock, respectively, as an inducement to accept employment with the Company.
Effective May 1, 1996, Mr. Braun received an additional 10,000 restricted
shares as an inducement to remain employed with the Company. Such restricted
shares were valued at prices equal to the fair market value on the dates of
grant, which in all cases was deemed to be $12.00 (the Net Asset Value as of
such date). As of December 31, 1996, the number of restricted shares of
Common Stock held by Messrs. Rasley, Braun and Hicks was 8,571, 18,571 and
4,286, respectively. As of December 31, 1996, the value of the restricted
shares held by Messrs. Rasley, Braun and Hicks was $111,423, $241,423 and
$55,718, respectively (based upon a Net Asset Value of $13.00). Dividends
will be paid on all restricted shares held by Messrs. Rasley, Hicks and
Braun. On April 1, 1997, the restrictions will lapse with respect to 4,286
restricted shares held by Messrs. Rasley and Braun and with respect to 2,143
restricted shares held by Mr. Hicks. On April 1, 1998 and provided that the
recipient is still employed by the Company, the restrictions will lapse with
respect to the remaining restricted shares held by Messrs. Rasley and Hicks
and with respect to 4,285 restricted shares held by Mr. Braun.
Notwithstanding anything to the contrary contained in this note (3), the
restrictions with respect to all restricted shares held by Messrs. Rasley
and Hicks and with respect to 8,571 restricted shares held by Mr. Braun will
lapse upon the earlier of (i) the employee's death, (ii) the employee's
total and permanent disability, (iii) the completion of the Offering or (iv)
the dismissal of the employee other than for cause.

(3) Options granted during 1996 were issued at exercise prices equal to the fair
market value on the dates of grant, which was the Net Asset Value as of such
date. Options granted during 1995 and options to purchase 17,578, 6,785,
2,800 and 2,800 shares of Common Stock deemed to have been granted to
Messrs. May, Rasley, Braun and Hicks, respectively, in 1996 represent
Advisor Options that were assigned to such individuals by the Advisor during
1995 from a pool of options that had been granted to the Advisor by the
Company pursuant to service agreements at various times during the period
from the Company's incorporation through December 31, 1995. Advisor Options
were exercisable on the date of grant. Options granted under the 1996 Option
Plan expire upon the earliest of (i) September 24, 2006, (ii) one year after
the termination of the optionee for death or disability or (iii) three
months after the termination of the optionee for cause. Options granted
under the 1996 Option Plan become exercisable at the rate of one-third of
the shares covered thereby on September 24 in each of 1997, 1998 and 1999.
See "--Stock Option Plans."

(4) These amounts represent group life and health insurance premiums paid by the
Advisor (for 1995) and the Advisor and Company (for 1996).

(5) Mr. Mills became an employee of the Advisor in January 1996; therefore, no
information is presented for 1994 or 1995.

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<PAGE>
STOCK OPTION PLANS

1996 INCENTIVE STOCK OPTION PLAN

The Company has adopted the 1996 Incentive Stock Option Plan (the "1996
Option Plan") for the purpose of attracting and retaining certain key employees.
The 1996 Option Plan is administered by the Compensation Committee and provides
for the granting of options with respect to up to 500,000 shares of Common Stock
to executives or other key employees of the Company. Options may be granted in
the form of "incentive stock options," as defined in Section 422 of the Code, or
non-statutory stock options and are exercisable for up to ten years following
the date of grant (five years in certain cases involving incentive stock
options). The exercise price and other terms, including vesting provisions, of
each option will be set by the Compensation Committee; provided, however, that
in no event will the price per share be less than the fair market value of the
Common Stock on the date of grant, or 110% of the fair market value of the
Common Stock on the date of grant if the option is granted to an individual who
at the time the option is granted owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or its parent
or subsidiary; provided further that no option can vest until the first
anniversary of the date of grant. Vested options granted under the 1996 Option
Plan expire the earlier of (i) ten years from the date of grant (five years in
certain cases involving incentive stock options), (ii) one year after the
termination of the optionee for death or disability or (iii) three months after
the termination of the optionee for cause.

Effective September 24, 1996, 94,000 options were granted under the 1996
Option Plan. See "--Executive Compensation." Such options become exercisable at
the rate of one-third of the shares covered thereby on September 24 in each of
1997, 1998 and 1999.

STOCK OPTION PLAN FOR INDEPENDENT DIRECTORS AND BROKERS

Options to purchase Common Stock are granted to Independent Directors under
the Directors Plan. See "--Compensation of Directors."

ADVISOR STOCK OPTION PLAN

Effective July 2, 1992, the Company adopted the Advisor Stock Option Plan
(the "Advisor Plan") pursuant to which the Advisor was granted options to
purchase Common Stock ("Advisor Options"), which the Advisor could transfer to
key employees or affiliates of the Advisor. All Advisor Options have an exercise
price at least equal to the fair market value of the Common Stock on the date of
grant and terminate ten years after the date of grant. In connection with the
merger of the Company and the Advisor, the Advisor Plan was terminated effective
April 1, 1996, subject to the rights of holders of Advisor Options prior to the
termination of the Advisor Plan.

During the period of 30 days after any "change in control," a person
entitled to exercise an option granted under the Advisor Plan may elect to
require the Company to purchase all or any portion of such option at a purchase
price equal to the difference between the fair market value and the option
exercise price. For purposes of the Advisor Plan, a "change in control" means
(i) certain consolidations or mergers of the Company, (ii) certain sales of all
or substantially all of the assets of the Company, (iii) the filing of a
Schedule 13D or Schedule 14D-1 under the Exchange Act disclosing that any person
has become the beneficial owner of 20% or more of the issued and outstanding
shares of voting securities of the Company or (iv) during any period of two
consecutive years, individuals who at the beginning of any such period
constitute the Board of Directors cease for any reason to constitute at least a
majority thereof unless the election, or the nomination for election by the
Company's stockholders, of each new member of the Board of Directors was
approved by a vote of at least two-thirds of the members of the Board of
Directors then still in office at the beginning of any such period.

75
<PAGE>
Under the Advisor Plan, the Advisor was granted annually options to purchase
Common Stock equal to 1% of the average total outstanding shares for each 1%
that the Operations Yield (as defined in the Advisory Agreement) exceeded 10%.
Options granted under the Advisor Plan were exercisable on the date of grant.
For the three months ended March 31, 1996, the Advisor was granted options to
purchase 41,424 shares of Common Stock at an exercise price of $12.00 per share.
These options expire March 31, 2006. The Advisor has assigned a total of 29,963
of these options to Messrs. May, Rasley, Braun and Hicks. For the year ended
December 31, 1995, the Advisor was granted (i) options to purchase 143,777
shares of Common Stock at an exercise price of $12.00 per share and an
expiration date of December 31, 2005, (ii) options to purchase 77,949 shares of
Common Stock at an exercise price of $12.25 per share and an expiration date of
June 30, 2000 and (iii) options to purchase 20,783 shares of Common Stock at an
exercise price of $13.50 per share and an expiration date of December 31, 2000.
The Advisor assigned a total of 180,397 of these options to Messrs. May, Rasley,
Braun and Hicks. For the year ended December 31, 1994, the Advisor was granted
options to purchase 60,150 shares of Common Stock at an exercise price of $10.75
per share and an expiration date of December 31, 2004. The Advisor assigned a
total of 44,887 of these options to Messrs. May, Rasley, Braun and Hicks. See
"--Executive Compensation."

The following tables set forth certain information regarding stock options
granted to and exercised by the Named Executive Officers during 1996 and the
stock options held by them as of December 31, 1996:

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL IN GRANTS
--------------------------------------------------- POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED YEAR ($/SH) DATE 5%($)(3) 10%($)(3)
- ------------------------------------------ ------------ ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard A. May............................ 17,578(1) 12.98% $ 12.00 3/31/06 $ 132,657 $ 336,178
32,000(2) 23.63% 13.00 9/24/06 261,620 662,997

Richard L. Rasley......................... 6,785(1) 5.01% 12.00 3/31/06 51,205 129,763
14,000(2) 10.34% 13.00 9/24/06 114,459 290,061

Raymond M. Braun.......................... 2,800(1) 2.07% 12.00 3/31/06 21,131 53,550
16,000(2) 11.81% 13.00 9/24/06 130,810 331,498

James Hicks............................... 2,800(1) 2.07% 12.00 3/31/06 21,131 53,550
12,000(2) 8.86% 13.00 9/24/06 98,108 248,624

Kim S. Mills.............................. 12,000(2) 8.86% 13.00 9/24/06 98,108 248,624
</TABLE>

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

(1) Options were assigned under the Advisor Plan and vested on March 31, 1996,
the date of grant.

(2) Options were granted under the 1996 Option Plan and become exercisable at
the rate of one-third of the shares covered thereby on September 24 in each
of 1997, 1998 and 1999.

(3) Assumed annual rates of stock price appreciation for illustrative purposes
only as required by the rules of the SEC. The actual price of Common Stock
will vary from time to time based upon market factors and the Company's
financial performance. No assurance can be given that such rates will be
achieved.

76
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT FISCAL
AT FISCAL YEAR- END(#) YEAR-END($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED UNEXERCISABLE UNEXERCISABLE(1)
- ---------------------------------------- --------------- ---------- --------------------- -------------------
<S> <C> <C> <C> <C>
Richard A. May.......................... 192,437 $ 415,754 54,508/32,000 $ 37,023/0
Richard L. Rasley....................... 0 0 93,095/14,000 $ 175,031/0
Raymond M. Braun........................ 8,075 $ 24,975 31,025/16,000 $ 48,525/0
James Hicks............................. 13,400 $ 16,000 7,600/12,000 $ 4,825/0
Kim S. Mills............................ 0 0 0/12,000 0/0
</TABLE>

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

(1) Value was calculated by subtracting the exercise price from the Net Asset
Value as of December 31, 1996.

CHANGE IN CONTROL AGREEMENTS

The Company has entered into change in control agreements with Messrs. May,
Rasley, Braun, Hicks and Mills providing for the payment of specified benefits
under the circumstances described below after a "change in control." If a
"change in control" occurs, the executive will receive an amount equal to two
times the sum of his base salary plus two times the amount that would otherwise
be earned under certain existing executive compensation plans and arrangements
if within the period commencing on the date of a "change in control" and ending
on the last day of the month in which occurs the second anniversary of the
"change in control" of the Company (the "Employment Period"), the executive's
employment with the Company is terminated (a "Termination") other than for
death, disability or "cause" or termination by the executive for "good reason,"
defined as (i) the executive's resignation or retirement is requested by the
Company other than for cause; (ii) any significant change in the nature or scope
of the executive's duties or level of authority and responsibility; (iii) any
reduction in the executive's applicable total compensation or benefits other
than a reduction in compensation or benefits applicable to substantially all of
the Company's employees; (iv) a breach by the Company of any other material
provision of the change in control agreement; or (v) a reasonable determination
by the executive that, as a result of a change in control of the Company and a
change in circumstances thereafter significantly affecting the executive's
position, the executive is unable to exercise the prior level of the executive
authority and responsibility. A "change in control" is deemed to occur under the
change in control agreements if (i) any person other than certain "excluded
persons" becomes the beneficial owner of 50% or more of the Company's
outstanding Common Stock (a "50% Beneficial Owner"), (ii) during any
twenty-four-month period, individuals who at the beginning of such period
constitute the Board of Directors (the "Incumbent Board") cease for any reason
to constitute at least a majority of the Board of Directors; PROVIDED, HOWEVER,
that any individual becoming a director during such period whose election, or
nomination for election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding for this purpose any such individual whose initial assumption of
office is in connection with an actual or threatened contest for the election of
directors (as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act, or any successor rule) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than the
Board of Directors, (iii) certain consolidations or mergers of the Company or
(iv) certain sales, leases, exchanges or other transfers of all, or
substantially all, of the assets of the Company. An executive subject to a
Termination will be subject to a non-competition agreement for the Employment
Period.

77
<PAGE>
LIMITED PURPOSE EMPLOYEE LOAN PROGRAM

The Company has established the Limited Purpose Employee Loan Program (the
"Employee Loan Program") for the purpose of attracting and retaining certain key
employees by facilitating their ability to exercise options to purchase Common
Stock. Under the Employee Loan Program, the Compensation Committee may authorize
the Company to make loans and loan guarantees to, or for the benefit of, any
employee of the Company to whom options to purchase Common Stock have been
granted. Under the Employee Loan Program, employees may borrow up to 90% of the
cost of exercising stock options held by the employee. Such loans bear interest
at the interest rate for borrowings under the Credit Facility, are recourse to
the employees and are secured by a pledge of the stock acquired by the employee
through this program. The loan expires on the earlier of the fifth anniversary
of the loan date and the date such employee's employment with the Company
ceases. As of December 31, 1996, employees had acquired an aggregate of 119,892
shares of Common Stock through this program with aggregate outstanding loan
amounts of $1.2 million due the Company. Such amount is reflected as a reduction
of stockholders' equity until the loans are repaid. Richard A. May, Chairman of
the Board, President and Chief Executive Officer of the Company, borrowed
$1,067,764 under the Employee Loan Program, all of which was outstanding at
December 31, 1996. See "Certain Transactions--Management Loans."

LIMITATION OF LIABILITY AND INDEMNIFICATION

As permitted by the MGCL, the Charter limits the liability of the Company's
directors and officers to the Company and its stockholders for money damages
except for liability resulting from (a) actual receipt of an improper benefit or
profit in money, property or services or (b) active and deliberate dishonesty
established by a final judgment as being material to the cause of action.

The Charter obligates the Company to indemnify the directors and officers
(and former directors and officers) of the Company to the fullest extent
permitted by the MGCL. The Bylaws obligate the Company, to the maximum extent
permitted by Maryland law, to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (a) any present or
former director or officer who is made a party to the proceeding by reason of
such director or officer's service in that capacity or (b) any individual who,
while a director of the Company and at the request of the Company, serves or has
served another corporation, real estate investment trust, partnership, joint
venture, trust, employee benefit plan or any other enterprise as a director,
officer, partner or trustee of such corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or other enterprise and
who is made a party to the proceeding by reason of his service in that capacity.
The Charter and Bylaws also permit the Company to indemnify and advance expenses
to any person who served a predecessor of the Company in any of the capacities
described above and to any employee or agent of the Company or a predecessor of
the Company.

The MGCL requires a corporation (unless its charter provides otherwise,
which the Charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which such director or officer is made a party by reason of his service in that
capacity. The MGCL permits a corporation to indemnify its present and former
directors and officers, among others, against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
any proceeding to which they may be made a party by reason of their service in
those or other capacities unless it is established that (a) the act or omission
of the director or officer was material to the matter giving rise to the
proceeding and (i) was committed in bad faith or (ii) was the result of active
and deliberate dishonesty, (b) the director or officer actually received an
improper personal benefit in money, property or services or (c) in the case of
any criminal proceeding, the director or officer had reasonable cause to believe
that the act or omission was unlawful. However, under the MGCL, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation. In addition, the MGCL requires the Company, as a
condition to advancing expenses, to obtain (a) a written affirmation by the
director or officer of his good faith belief that such director or officer has
met the

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standard of conduct necessary for indemnification by the Company as authorized
by the Bylaws and (b) a written statement by or on the behalf of the director or
officer to repay the amount paid or reimbursed by the Company if it shall
ultimately be determined that the standard of conduct was not met.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee currently consists of Messrs. Phillips
(Chairman), Josephs, Lowenthal and Teninga. None of the members of the
Compensation Committee is or has ever been an officer or employee of the Company
or had any other relationship with the Company, except as member of the Board of
Directors and as stockholder.

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POLICIES WITH RESPECT TO CERTAIN ACTIVITIES

The following is a discussion of certain investment, financing and other
policies of the Company. These policies have been determined by the Company's
Board of Directors and may be amended or revised from time to time by the Board
of Directors without a vote of the stockholders, except that (i) on and after
the date all of the Properties are either transferred to the Operating
Partnership or disposed of by the Company (the "Transfer Date"), the Company
cannot change its policy of holding its assets and conducting its business only
through the Operating Partnership and its affiliates without the consent of the
holders of a majority of the outstanding OP Units as provided in the Partnership
Agreement and (ii) the Company will not voluntarily relinquish its REIT status
without a vote of the stockholders.

INVESTMENT POLICIES

INVESTMENT IN REAL ESTATE OR INTERESTS IN REAL ESTATE. On and after the
Transfer Date, the Company will conduct all of its investment activities through
the Operating Partnership and its affiliates. The Company's investment
objectives are to provide quarterly cash distributions and achieve long-term
capital appreciation through increases in the value of the Company. For a
discussion of the Properties and the Company's acquisition and other strategic
objectives, see "Business and Properties" and "Business and Growth Strategies."

The Company expects to pursue its investment objectives primarily through
the direct ownership by the Operating Partnership of the Properties and other
acquired properties. The Company currently intends to invest primarily in
existing improved properties but may, if market conditions warrant, invest in
development projects as well. Furthermore, the Company currently intends to
invest in or develop commercial properties in the Midwest Region. However,
future investment or development activities will not be limited to any
geographic area or product type or to a specified percentage of the Company's
assets. While the Company may diversify in terms of property locations, size and
market, the Company does not have any limit on the amount or percentage of its
assets that may be invested in any one property or any one geographic area. The
Company intends to engage in such future investment or development activities in
a manner which is consistent with the maintenance of its status as a REIT for
federal income tax purposes. In addition, the Company may purchase or lease
income-producing commercial and other types of properties for long-term
investment, expand and improve the real estate presently owned or other
properties purchased, or sell such real estate properties, in whole or in part,
when circumstances warrant.

The Company may also participate with third parties in property ownership,
through joint ventures or other types of co-ownership. Such investments may
permit the Company to own interests in larger assets without unduly restricting
diversification and, therefore, add flexibility in structuring its portfolio.
The Company currently does not have any plans to invest in joint ventures or
partnerships with affiliates or promoters of the Company. The Company will not,
however, enter into a joint venture or partnership to make an investment that
would not otherwise meet its investment policies.

Equity investments may be subject to existing mortgage financing and other
indebtedness or such financing or indebtedness as may be incurred in connection
with acquiring or refinancing these investments. Debt service on such financing
or indebtedness will have a priority over any distributions with respect to the
Common Stock. Investments are also subject to the Company's policy not to be
treated as an investment company under the Investment Company Act of 1940, as
amended (the "1940 Act").

INVESTMENTS IN REAL ESTATE MORTGAGES. While the Company's current portfolio
consists of, and the Company's business objectives emphasize, equity investments
in commercial real estate, the Company may, in the discretion of the Board of
Directors, invest in mortgages and deeds of trust, consistent with the Company's
continued qualification as a REIT for federal income tax purposes, including
participating or convertible mortgages if the Company concludes that it may
benefit from the cash flow or any appreciation in value of the property.
Investments in real estate mortgages run the risk that one or more borrowers may

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default under such mortgages and that the collateral securing such mortgages may
not be sufficient to enable the Company to recoup its full investment.

SECURITIES OR INTERESTS IN PERSONS PRIMARILY ENGAGED IN REAL ESTATE
ACTIVITIES AND OTHER ISSUERS. Subject to the requirements of the gross income
and asset tests necessary for continued qualification as a REIT for federal
income tax purposes, the Company also may invest in securities of other REITs,
other entities engaged in real estate activities or securities of other issuers,
including for the purpose of exercising control over such entities.

DISPOSITIONS

Management conducts periodic reviews of the Company's portfolio and the
Company reserves the right to dispose of additional Properties if the Board of
Directors determines that such action would be in the best interests of the
Company. The Property located at 11100 Hampshire Avenue, Bloomington, Minnesota,
has been listed for sale by the Company.

FINANCING POLICIES

As a general policy, the Company intends to limit its total consolidated
indebtedness incurred so that at the time any debt is incurred, the Company's
Total Debt to Total Market Capitalization Ratio does not exceed 50%. Upon the
completion of the Offering, the Total Debt to Total Market Capitalization Ratio
of the Company will be approximately 3.1% (2.9% if the Underwriters'
overallotment option is exercised in full). The Charter and Bylaws do not,
however, limit the amount or percentage of indebtedness that the Company may
incur. In addition, the Company may from time to time modify its debt policy in
the light of current economic conditions, relative costs of debt and equity
capital, market values of its Properties, general conditions in the market for
debt and equity securities, fluctuations in the market price of its Common
Stock, growth and acquisition opportunities and other factors. Accordingly, the
Company may increase or decrease its Total Debt to Total Market Capitalization
Ratio beyond the limits described above. If these policies were changed, the
Company could become more highly leveraged, resulting in an increased risk of
default on its obligations and a related increase in debt service requirements
that could adversely affect the financial condition and results of operations of
the Company and the Company's ability to make distributions to stockholders.

The Company has established its debt policy relative to the total market
capitalization of the Company computed at the time the debt is incurred, rather
than relative to the book value of such assets because it believes that the book
value of its assets (which to a large extent is the depreciated value of real
property, the Company's primary tangible asset) does not accurately reflect its
ability to borrow and to meet debt service requirements. Total market
capitalization, however, is subject to greater fluctuation than book value and
does not necessarily reflect the fair market value of the underlying assets of
the Company at all times. Moreover, due to fluctuations in the value of the
Company's portfolio of Properties over time, and since any measurement of the
Company's total consolidated indebtedness to total market capitalization is made
only at the time debt is incurred, the Total Debt to Total Market Capitalization
Ratio could exceed the 50% level.

The Company has not established any limit on the number or amount of
mortgages that may be placed on any single Property or on its portfolio as a
whole.

Although the Company will consider factors other than total market
capitalization in making decisions regarding the incurrence of debt (such as the
purchase price of properties to be acquired with debt financing, the estimated
market value of properties upon refinancing and the ability of particular
properties and the Company as a whole to generate sufficient cash flow to cover
expected debt service), there can be no assurance that the Company's Total Debt
to Total Market Capitalization Ratio, or any other measure of asset value, at
the time the debt is incurred or at any other time, will be consistent with any
particular level of distributions to stockholders. See "Risk Factors--No
Limitation on Debt" and

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"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

CONFLICT OF INTEREST POLICIES

The Company's Board of Directors is subject to certain provisions of
Maryland law, which are designed to eliminate or minimize certain potential
conflicts of interest. However, there can be no assurance that these policies
will be successful in eliminating the influence of such conflicts in all
circumstances and if they are not successful, decisions could be made that might
fail to reflect fully the interests of all stockholders.

The Company has adopted a policy that, without the approval of a majority of
the directors who are not also employees of the Company, it will not (i) acquire
from or sell to any director, officer or employee of the Company, or any entity
in which a director, officer or employee of the Company beneficially owns more
than a 1% interest, or acquire from or sell to any affiliate of any of the
foregoing, any of the assets or other property of the Company, (ii) make any
loan to or borrow from any of the foregoing persons (except pursuant to the
Employee Loan Program) or (iii) engage in any other transaction with any of the
foregoing persons.

Under Maryland law, each director will be subject to restrictions on
misappropriation of corporate opportunities. In addition, under Maryland law, a
contract or other transaction between the Company and a director or between the
Company and any other corporation or other entity in which a director of the
Company is a director or has a material financial interest is not void or
voidable solely on the grounds of (i) such common directorship or interest, (ii)
the presence of such director at the meeting at which the contract or
transaction is authorized, approved or ratified or (iii) the counting of such
director's vote in favor thereof if (a) the common directorship or interest is
disclosed or known to the Board of Directors, the committee thereof or the
disinterested stockholder as the case may be, and the transaction or contract is
authorized, approved or ratified by the Board of Directors or a duly authorized
committee thereof, by the affirmative vote of a majority of disinterested
directors, even if the disinterested directors constitute less than a quorum, or
by a majority of the votes cast by disinterested stockholders or (b) the
transaction or contract is fair and reasonable to the Company.

POLICIES WITH RESPECT TO OTHER ACTIVITIES

The Company has authority to offer Common Stock, Preferred Stock or options
to purchase stock in exchange for property and to repurchase or otherwise
acquire its Common Stock or other securities in the open market or otherwise and
may engage in such activities in the future. As described under "Partnership
Agreement--Redemption/Exchange Rights," the Company expects (but is not
obligated) to issue Common Stock to holders of OP Units in the Operating
Partnership upon exercise of their redemption rights. The Board of Directors has
no present intention to cause the Company to repurchase any Common Stock. The
Company may issue Preferred Stock from time to time, in one or more series, as
authorized by the Board of Directors without the need for stockholder approval.
See "Capital Stock of the Company-- Preferred Stock." The Company has not
engaged in trading, underwriting or agency distribution or sale of securities of
other issuers other than the Operating Partnership, nor has the Company invested
in the securities of other issuers other than the Operating Partnership for the
purposes of exercising control, and does not currently intend to do so. At all
times, the Company intends to make investments in such a manner so as to
maintain its qualification as a REIT for federal income tax purposes, unless
because of circumstances or changes in the Code (or the Treasury Regulations),
the Board of Directors determines that it is no longer in the best interest of
the Company to qualify as a REIT; provided, however, that the Company will not
voluntarily relinquish its REIT status without a vote of the stockholders. Other
than pursuant to the Employee Loan Program, the Company has not made any loans
to third parties, although it may in the future make loans to third parties,
including, without limitation, to joint ventures in which it

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participates. The Company intends to make investments in such a way that it will
not be treated as an investment company under the 1940 Act.

CERTAIN TRANSACTIONS

ADVISOR RELATIONSHIP

Effective April 1, 1996, the Company became a self-administered REIT upon
the consummation of the merger (the "Merger") of Equity Partners, Ltd. (the
"Advisor") with and into the Company in exchange for 100,000 shares of Common
Stock. Messrs. May and Rasley, who are directors and executive officers of the
Company, owned 70.5% of the outstanding shares of Common Stock of the Advisor
and received 58,830 and 11,760 shares of Common Stock, respectively, in the
Merger. In connection with the Merger, EVEREN Securities, Inc. ("EVEREN")
rendered an opinion that the Merger was fair, from a financial point of view, to
the Company. The Merger was approved by the members of the Board of Directors
who were not also employees of the Company, affiliates of the Advisor or
employees of EVEREN. The Merger was approved by the Company's stockholders at a
special meeting of stockholders held on February 27, 1996.

From the Company's incorporation until the completion of the Merger, the
Advisor provided various services to the Company pursuant to an Advisory
Agreement dated July 2, 1992 as restated July 1, 1994, relating to the
selection, purchase, financing and operation of the Company's properties (the
"Advisory Agreement"), and pursuant to other agreements regarding property
management and offering administration activities. The Advisory Agreement and
the other agreements obligated the Advisor to manage and conduct the Company's
day-to-day operations in consideration for certain fees which were based in part
on the Company's funds from operations. Under the terms of the Advisory
Agreement and other agreements, the Advisor was paid $566,320, $791,103 and
$2,139,826 in 1993, 1994 and 1995, respectively, and $795,932 in 1996 prior to
the Merger. The Advisor also received Advisor Options under the Advisor Plan.
See "Management--Stock Option Plans."

In connection with the Merger, the shareholders of the Advisor received
100,000 shares of Common Stock, 15,000 of which were placed in escrow to secure
the indemnification obligations of the shareholders of the Advisor (the
"Indemnification Shares"). Indemnification Shares that are not applied to
indemnifiable damages will be distributed to the shareholders of the Advisor
upon the later of (a) April 1, 2001 or (b) the expiration of the last applicable
statute of limitations within which tax-based claims can be made. In addition,
certain employees of the Advisor received restricted shares of Common Stock as
an inducement to accept employment with the Company, including 8,571, 8,571 and
4,286 restricted shares of Common Stock issued to Messrs. Rasley, Braun and
Hicks, respectively. The restrictions on these shares lapse upon the completion
of the Offering. In addition, effective May 1, 1996, Mr. Braun received an
additional 10,000 restricted shares of Common Stock that vest in equal annual
installments on May 1 of each of the years 1999 through 2002 provided that Mr.
Braun is then employed by the Company.

MANAGEMENT LOANS

Pursuant to the terms of the Company's Employee Loan Program, Mr. May
borrowed $1,067,764 million in 1996, the proceeds of which were used, together
with other funds supplied by Mr. May, to pay the exercise price for options
covering 102,064 shares of Common Stock. Mr. Braun borrowed $71,325 in 1997, the
proceeds of which were used to pay the exercise price for options covering 7,925
shares of Common Stock. Such loans bear interest at the interest rate for
borrowings under the Credit Facility and are payable quarterly. See
"Management--Limited Purpose Employee Loan Program."

TRANSACTIONS WITH EVEREN

In connection with rendering a fairness opinion with respect to the Merger,
EVEREN received a fee of $200,000 in 1996. The Company also agreed to reimburse
EVEREN for its reasonable out-of-pocket

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expenses (approximately $19,500), including the reasonable fees and expenses of
EVEREN's counsel, and to indemnify EVEREN for certain liabilities to which it
may be subject in connection with its engagement. The Company also retained
EVEREN to act as agent for the private placement of shares of Common Stock
effected pursuant to the Stock Purchase Agreement. In connection with that
private placement EVEREN received a placement agent fee and expense
reimbursements aggregating $2.2 million. Jon K. Haahr, a Managing Director of
EVEREN, was a member of the Board of Directors at the time EVEREN was engaged by
the Company to provide the fairness opinion and act as agent with respect to the
private placement of Common Stock. Mr. Haahr declined to stand for re-election
as a director when his term expired effective September 24, 1996.

IPO CONSULTANT ARRANGEMENT

Beginning in December 1996, the Company retained Karpf, Zarrilli & Co.
Incorporated ("Karpf Zarrilli") as a consultant in connection with certain
matters related to the Offering. In its capacity as consultant, the Company will
pay Karpf Zarrilli up to $25,000 per month, plus reasonable expenses, during the
pendency of the Offering. Steven A. Karpf and Frederick P. Zarrilli are (i)
Principals of Karpf Zarrilli and (ii) members of Wellsford Karpf Zarrilli
Ventures, L.L.C. ("WKZV"). WKZV is the beneficial owner of 1,054,339 shares of
Common Stock and has certain registration rights with respect to such shares of
Common Stock. WKZV also has the right to designate one individual to be
nominated as a member of the Board of Directors under certain circumstances. See
"Management--Executive Officers and Directors," "--Rights to Nominate
Directors," "--Registration Rights" and "Principal Stockholders."

RIGHTS TO NOMINATE DIRECTORS

Pursuant to the Stock Purchase Agreement, for so long as they own at least
750,000 shares of Common Stock or 5% of the issued and outstanding shares of
Common Stock, each of (i) Fortis Benefits Insurance Company ("Fortis"), (ii)
Morgan Stanley Institutional Fund, Inc. and Morgan Stanley SICAV Subsidiary S.A.
(collectively, "Morgan Stanley") and (iii) WKZV is entitled to designate one
individual to be nominated as a member of the Board of Directors. As a result of
this agreement, Messrs. Brinkerhoff and Lowenthal were nominated by Fortis and
WKZV, respectively, and joined the Board of Directors effective August 20, 1996.
They were each renominated and elected to serve as directors for a one-year term
by the stockholders at the Company's annual meeting of stockholders that was
held on September 24, 1996. See "Management--Compensation of Directors." These
rights will terminate upon the completion of the Offering.

REGISTRATION RIGHTS

Pursuant to the Registration Rights Agreement among the Company and the
Institutional Investors, who include certain principal stockholders of the
Company, the Company has granted the Institutional Investors certain
registration rights with respect to the 3,867,000 shares of Common Stock
acquired by them pursuant to the Stock Purchase Agreement. See "Principal
Stockholders" and "Shares Available for Future Sale--Registration Rights."

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PARTNERSHIP AGREEMENT

THE FOLLOWING SUMMARY OF THE MATERIAL PROVISIONS OF THE PARTNERSHIP
AGREEMENT, INCLUDING THE DESCRIPTIONS OF CERTAIN PROVISIONS SET FORTH ELSEWHERE
IN THIS PROSPECTUS, DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PARTNERSHIP AGREEMENT, WHICH IS
FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A
PART. SEE "AVAILABLE INFORMATION." CAPITALIZED TERMS USED IN THE FOLLOWING
SUMMARY OF THE PARTNERSHIP AGREEMENT THAT ARE NOT OTHERWISE DEFINED HEREIN HAVE
THE MEANINGS ASSIGNED TO SUCH TERMS IN THE PARTNERSHIP AGREEMENT.

GENERAL

The Operating Partnership is organized as a Delaware limited partnership
pursuant to the terms of the Partnership Agreement. As of February 28, 1997, the
Company owned 99.9% of the OP Units. The Company is the sole general partner of
the Operating Partnership. The percentage ownership interests in the Operating
Partnership will be adjusted from time to time to reflect accurately
redemptions, the issuance of additional OP Units or similar events. Pursuant to
the initial capitalization of the Operating Partnership, the Company contributed
real property and cash in exchange for its OP Units. The OP Units held by
holders other than the Company were issued in exchange for the acquisition by
the Operating Partnership of the Court Office Center and 1675 Holmes Road
Properties.

OP Units are fractional, undivided interests in the Operating Partnership
other than Preferred Units. Preferred Units are interests that entitle the
holder to share in profits and losses on a limited basis but do not entitle the
holder to participate in the management of the Operating Partnership or to
consent to or approve any action that is not required by law. See "--Financing."

As general partner of the Operating Partnership, the Company may cause the
Operating Partnership to issue such additional OP Units as are in the best
interests of the Operating Partnership and to admit any person as a partner in
exchange for the contribution by such person of cash and/or property which the
Company in its sole discretion determines is desirable to further the purposes
of the Operating Partnership.

MANAGEMENT

Generally, pursuant to the Partnership Agreement, the Company, as the sole
general partner of the Operating Partnership, will have full, exclusive and
complete responsibility for and discretion in the management and control of the
Operating Partnership, subject to certain limited exceptions. The Company will
be reimbursed on a monthly basis for all expenses it incurs relating to the
ownership and operation of the properties held by the Operating Partnership,
including compensation and other administrative expenses incurred in connection
with accounting, administrative, legal and other services rendered to the
Operating Partnership. The limited partners of the Operating Partnership will
have no authority in such capacity to transact business for, or participate in
the management activities or decisions of, the Operating Partnership. The
limited partners may not remove the Company as general partner.

FINANCING

The Operating Partnership can obtain funds necessary to meet its needs,
obligations and requirements, and to provide for working capital or to repay
indebtedness, from either an affiliate or a third party, in the manner and
amount as the Company determines to be in the best interests of the Operating
Partnership. Any such financing may be convertible in whole or in part into
additional OP Units and may be secured or unsecured and may be issued through
public offerings or private placements. If the Operating Partnership does not
borrow all required funds, the Company may itself borrow such funds and lend
such funds to the Operating Partnership on the same terms or may raise such
funds in any other manner (including an issuance of shares of Common Stock or
Preferred Stock). If the Company sells shares of Common Stock to raise such
funds, the Company shall contribute to the Operating Partnership

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as an additional capital contribution the amount of the required funds so raised
and additional OP Units will be issued to the Company.

If the Company sells shares of Preferred Stock to raise such funds, the
Company shall either contribute such funds as an additional capital contribution
or lend such funds to the Operating Partnership pursuant to the terms of the
Partnership Agreement. If such funds are contributed, the Operating Partnership
will issue to the Company Preferred Units having economic terms (including
dividend, redemption, conversion and distribution rights) substantially similar
to the terms of the Preferred Stock issued by the Company to raise such funds.
If the required funds are loaned to the Operating Partnership, such loan will be
on economic terms similar to the Preferred Stock issued by the Company to raise
such funds (E.G., interest payments on the advance will equal dividend payments
on the Preferred Stock).

The Operating Partnership will pay all expenses of the Company incurred in
connection with any capital raising transactions undertaken by the Company for
funds that are contributed to the Operating Partnership. The Company is required
to contribute cash or property to the Operating Partnership from time to time so
that it will always own at least 1% of all partnership interests in the
Operating Partnership and the balance in its general partner capital account
will always be at least 1% of the total capital account balances of all partners
of the Operating Partnership.

TRANSFERABILITY OF INTERESTS

The Company may not transfer all or any part of its general partner interest
in the Operating Partnership, without the consent of limited partners holding a
majority of the OP Units held by all limited partners (including the Company and
its affiliates) unless the Company is transferring its interest to a
wholly-owned Qualified REIT Subsidiary. Without the consent of the Company,
limited partners may not transfer their limited partner interests in the
Operating Partnership, other than transfers (i) (whether outright or in trust)
to members of such holder's immediate family; (ii) to an affiliate of such
holder or to another holder of limited partner interests; (iii) pursuant to an
exercise of redemption rights described below; or (iv) in the form of a pledge
to secure bona fide indebtedness to institutional lenders.

The Operating Partnership may not engage in any merger, consolidation or
other combination with or into another person, unless such transaction has been
approved by limited partners (including the Company and its affiliates) holding
a majority of the OP Units held by all limited partners and the required
consent, if any, of the holders of Preferred Units. At the completion of the
Offering, the Company will hold in excess of 90% of the OP Units held by limited
partners and no Preferred Units will be outstanding.

REDEMPTION/EXCHANGE RIGHTS

Limited partners (other than the Company) have the right to require the
Operating Partnership to redeem part or all of their OP Units for cash (based
upon the fair market value of the number of shares of Common Stock which the
Company would be required to deliver in exchange for such OP Units if it so
elected). Once a limited partner exercises such rights, the Company may, in its
discretion, deliver to such limited partner shares of Common Stock having a fair
market value equal to such cash amount in lieu of cash and in exchange for such
OP Units. This redemption right may be exercised by limited partners from time
to time, in whole or in part, subject to the limitations that such right may not
be exercised until the earlier of (i) the expiration of one year following the
consummation of the Offering or (ii) December 31, 1999. With each such
redemption or exchange, the Company's percentage ownership interest in the
Operating Partnership will increase.

TAX MATTERS

Pursuant to the Partnership Agreement, the Company will be the "tax matters
partner" of the Operating Partnership for federal income tax purposes within the
meaning of Code Section 6231(a)(7) and, as such, will have all rights and
authority as a "tax matters partner" under the Partnership Agreement.

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Accordingly, the Company will have authority to make tax elections under the
Code on behalf of the Operating Partnership.

OPERATIONS

The Partnership Agreement (i) requires that the Operating Partnership be
operated in a manner that will enable the Company to satisfy the requirements
for qualifying as a REIT for federal income tax purposes and to avoid being
subject to any federal income or excise tax liability and (ii) provides that all
or a portion of the Available Cash Flow of the Operating Partnership will be
distributed from time to time (but at least quarterly) as determined by the
Company, in its sole discretion, pro rata in accordance with each partner's
percentage interests. Beginning immediately after all of the Properties have
been either disposed of by the Company or transferred to the Operating
Partnership, the Company is required to conduct all of its business activities
through the Operating Partnership and its subsidiaries.

TERM

The Operating Partnership will continue until December 31, 2046 unless
dissolved sooner upon the first to occur of: (i) a written election to dissolve
made by the Company with the consent of limited partners holding 75% of the OP
Units held by all limited partners, (ii) the entry of a final non-appealable
decree of judicial dissolution, or (iii) the Company's ceasing to be the general
partner of the Operating Partnership as a result of, among other reasons, its
withdrawal, bankruptcy or dissolution unless (a) the Company transfers its
interest to a Qualified REIT Subsidiary pursuant to the transfer provisions
described above or (b) within 90 days after such event, limited partners holding
more than 50% of the OP Units held by all limited partners as a class elect to
continue the Operating Partnership and appoint a new general partner.

FIDUCIARY DUTY

The Partnership Agreement provides that in the event of any conflict between
the interests of the stockholders of the Company and the interests of the
limited partners of the Operating Partnership, the Company in its capacity as
general partner of the Operating Partnership shall discharge its fiduciary duty
to the limited partners by acting in the best interests of the Company's
stockholders.

INDEMNIFICATION

To the extent permitted by law, the Partnership Agreement provides for
indemnification of and the advance of expenses to the Company and its Affiliates
and any officers, directors, agents, contractors, employees thereof
(collectively, the "Indemnitee") from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including reasonable legal
fees and expenses), judgments, fines, settlements and other amounts arising from
any and all claims, demands, actions, suits or proceedings (including
arbitration and mediation proceedings), civil, criminal, administrative or
investigative, that relate, directly or indirectly, to the formation, business
or operations of the Operating Partnership in which any Indemnitee may be
involved, or is threatened to be involved, as a party, witness or otherwise, by
reason of the fact that such person was made a party to a proceeding by reason
of status as an Indemnitee, or his or its liabilities, pursuant to a loan
guarantee or otherwise, for any indebtedness of the Operating Partnership or any
subsidiary of the Operating Partnership (or which it has assumed or taken assets
subject to) whether or not the same shall proceed to judgment or be settled or
otherwise be brought to a conclusion, except only if and to the extent that it
is finally adjudicated that the act or omission of the Indemnitee was material
to the matter giving rise to the proceeding and was committed with fraud, gross
negligence or willful misconduct.

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of Common Stock as of January 31, 1997 by (i) each director, (ii) each
of the Named Executive Officers, (iii) all directors and executive officers of
the Company as a group and (iv) each other person who is known by the Company to
be the beneficial owner of 5% or more of the then outstanding shares of Common
Stock. Except as indicated below, all such shares of Common Stock are owned
directly.

<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE PERCENTAGE
COMMON STOCK AS OF AFTER
BENEFICIALLY JANUARY 31, THE
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(2) 1997 OFFERING
- ------------------------------------------------------------- -------------------- --------------- -----------
<S> <C> <C> <C>
Fortis Benefits Insurance Company(3)(4)...................... 1,005,000(5) 11.40% 6.85%
One Chase Manhattan Plaza
41st Floor
New York, New York 10005
Morgan Stanley Asset Management Inc.(3)(4)................... 1,005,000(6) 11.40% 6.85%
1221 Avenue of the Americas
21st Floor
New York, New York 10020
Wellsford Karpf Zarrilli Ventures, L.L.C.(3)(4).............. 1,000,000 11.35% 6.82%
201 Hamilton Road
Ridgewood, New Jersey 07450
Logan, Inc.(4)............................................... 482,000 5.75% 3.29%
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Raymond M. Braun(7).......................................... 57,671 * *
James J. Brinkerhoff......................................... -- -- --
James Hicks(8)............................................... 26,286 * *
Daniel E. Josephs(9)......................................... 64,856 * *
Edward Lowenthal(10)......................................... 1,005,000 11.40% 6.85%
Richard A. May(11)........................................... 320,781 3.62% 2.18%
Kim S. Mills................................................. -- -- --
Donald E. Phillips(12)....................................... 43,981 * *
Richard L. Rasley(13)........................................ 115,115 1.29% *
Walter H. Teninga(14)........................................ 44,424 * *
All directors and executive officers as a group
(10 persons)(15)........................................... 1,683,114 18.61% 11.31%
</TABLE>

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

* Less than 1%

(1) Except as otherwise noted, the address for each of the persons listed is 823
Commerce Drive, Oak Brook, Illinois 60521.

(2) Except as otherwise noted, all persons have sole voting and investment power
with respect to their shares.

(3) Based on the most recent Schedule 13D on file with the SEC, except as
discussed in footnote (4) below.

(4) The Number of Shares of Common Stock Beneficially Owned excludes (i) 54,339
shares of Common Stock held by each of Fortis Benefits Insurance Company
("Fortis"), Morgan Stanley Asset Management Inc. ("MSAM") and Wellsford
Karpf Zarrilli Ventures, L.L.C. ("WKZV") and (ii) 26,191 shares

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<PAGE>
of Common Stock held by Logan, Inc. that are issuable pursuant to the
conversion of outstanding shares of Preferred Stock. Upon the completion of
the Offering, all of the Company's outstanding Preferred Stock will be
cancelled.

(5) Includes options exercisable within 60 days to purchase 5,000 shares of
Common Stock, which options were granted to Mr. Brinkerhoff as director
compensation and assigned by Mr. Brinkerhoff to Fortis.

(6) As reported in Amendment No. 2 to a Schedule 13D filed by MSAM on December
2, 1996, (i) MSAM has shared voting power as to 1,054,339 shares of Common
Stock and shared dispositive power as to 1,054,339 shares of Common Stock,
(ii) Morgan Stanley Institutional Fund, Inc. ("MSIF") has shared voting
power as to 643,150 shares of Common Stock and shared dispositive power as
to 643,150 shares of Common Stock, (iii) Morgan Stanley SICAV Subsidiary
S.A. (the "SICAV Subsidiary") has shared voting power as to 411,189 shares
of Common Stock and shared dispositive power as to 411,189 shares and (iv)
Morgan Stanley Group Inc. has shared voting power as to 1,054,339 shares of
Common Stock and shared dispositive power as to 1,054,339 shares of Common
Stock. MSAM acts as investment adviser to MSIF and the SICAV Subsidiary.
Includes options exercisable within 60 days to purchase 5,000 shares of
Common Stock, which options were granted to a former director as director
compensation and assigned to MSAM.

(7) Includes options exercisable within 60 days to purchase 23,100 shares of
Common Stock.

(8) Includes options exercisable within 60 days to purchase 7,600 shares of
Common Stock.

(9) Includes options exercisable within 60 days to purchase 14,000 shares of
Common Stock.

(10) Mr. Lowenthal is a member of WKZV and may be deemed to beneficially own the
1,000,000 shares of Common Stock that are beneficially owned by WKZV. Mr.
Lowenthal disclaims beneficial ownership of all but 19,231 of such shares.
Includes options exercisable within 60 days to purchase 5,000 shares of
Common Stock.

(11) Includes options exercisable within 60 days to purchase 54,509 shares of
Common Stock and Indemnification Shares held in escrow pursuant to the terms
of the Merger. See "Certain Transactions--Advisor Relationship."

(12) Includes options exercisable within 60 days to purchase 8,000 shares of
Common Stock.

(13) Includes options exercisable within 60 days to purchase 93,095 shares of
Common Stock and Indemnification Shares held in escrow pursuant to the terms
of the Merger. See "Certain Transactions--Advisor Relationship."

(14) Includes options exercisable within 60 days to purchase 15,000 shares of
Common Stock. Also includes 13,952 shares owned by Mr. Teninga's spouse.

(15) Includes options exercisable within 60 days to purchase an aggregate of
220,304 shares of Common Stock.

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<PAGE>
CAPITAL STOCK OF THE COMPANY

THE FOLLOWING SUMMARY OF THE MATERIAL TERMS OF THE STOCK OF THE COMPANY DOES
NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE CHARTER AND BYLAWS, COPIES OF WHICH ARE EXHIBITS TO THE
REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART. SEE "AVAILABLE
INFORMATION."

GENERAL

The Charter provides that the Company may issue up to 20,000,000 shares of
Common Stock, $.01 par value per share ("Common Stock"), and 10,000,000 shares
of Preferred Stock, $.01 par value per share ("Preferred Stock"). As of January
31, 1997, after giving effect to the Offering, approximately 14,662,090 shares
of Common Stock will be issued and outstanding and no shares of Preferred Stock
will be issued and outstanding. In connection with the Offering, all 210,128
issued and outstanding shares of Class A Convertible Preferred Stock, $.01 par
value per share, of the Company ("Class A Preferred Stock") currently
outstanding will be cancelled and will become authorized and unissued shares of
Preferred Stock. At the next annual meeting of stockholders, the Company intends
to submit proposals to its stockholders seeking to amend the Charter to (i)
increase the amount of Common Stock that it is authorized to issue under the
Charter and (ii) include in the Charter certain restrictions on the ownership
and transfer of the stock of the Company similar to the restrictions on
ownership and transfer currently in the Bylaws. Under Maryland law, stockholders
generally are not liable for a corporation's debts or obligations. As of January
31, 1997, there were approximately 630 holders of record of Common Stock and 6
holders of record of Class A Preferred Stock.

COMMON STOCK

All shares of Common Stock offered hereby will be duly authorized, fully
paid and nonassessable. Subject to the preferential rights of any other shares
or series of stock and to the provisions of the Charter and Bylaws restricting
ownership and transfer of the Company's stock, holders of shares of Common Stock
are entitled to receive dividends on such stock if, as and when authorized and
declared by the Board of Directors out of assets legally available therefor and
to share ratably in the assets of the Company legally available for distribution
to its stockholders in the event of its liquidation, dissolution or winding up
after payment of or adequate provision for all known debts and liabilities of
the Company.

Subject to the provisions of the Charter and Bylaws restricting ownership
and transfer of the Company's stock, each outstanding share of Common Stock
entitles the holder to one vote on all matters submitted to a vote of
stockholders, including the election of directors and, except as provided with
respect to any other class or series of stock, the holders of such shares will
possess the exclusive voting power. There is no cumulative voting in the
election of directors, which means that the holders of a majority of the
outstanding shares of Common Stock can elect all of the directors then standing
for election and the holders of the remaining shares will not be able to elect
any directors.

Holders of shares of Common Stock have no preference, conversion, exchange,
sinking fund, redemption or appraisal rights and have no preemptive rights to
subscribe for any securities of the Company. Subject to the provisions of the
Charter and Bylaws restricting ownership and transfer of the Company's stock,
shares of Common Stock will have equal dividend, liquidation and other rights.

Under the MGCL, a Maryland corporation generally cannot dissolve, amend its
charter, merge, sell all or substantially all of its assets, engage in a share
exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of stockholders holding at
least two-thirds of the shares entitled to vote on the matter unless a lesser
percentage (but not less than a majority of all of the votes entitled to be cast
on the matter) is set forth in the corporation's charter. The Charter provides
that any provision of the MGCL requiring stockholder approval shall be satisfied
by the affirmative vote of stockholders holding a majority of all of the votes
entitled to be cast on the matter.

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PREFERRED STOCK

The Charter authorizes the Board of Directors to classify any unissued
shares of Preferred Stock and to reclassify any previously classified but
unissued shares of any series of which no shares have been issued. Prior to
issuance of shares of each series, the Board is required by the MGCL and the
Charter to set, subject to the provisions of the Charter regarding restriction
on transfer of stock, the terms, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption for each such series. To
date, the Board of Directors has so fixed only the Class A Preferred Stock, all
of which shall be cancelled effective upon the completion of the Offering. The
Board could authorize the issuance of additional shares of Preferred Stock with
terms and conditions that could have the effect of delaying, deferring or
preventing a transaction or a change in control of the Company that might
involve a premium price for holders of Common Stock or otherwise be in their
best interest. Upon the completion of the Offering and cancellation of shares of
Class A Preferred Stock, all shares of Class A Preferred Stock will be
reclassified as authorized but unissued shares of Preferred Stock and no shares
of Preferred Stock will be outstanding and the Company has no present plans to
issue any Preferred Stock.

RESTRICTIONS ON TRANSFER

For the Company to qualify as a REIT under the Code, its shares of stock
must be beneficially owned by 100 or more persons during at least 335 days of
any taxable year of the Company of twelve months or during a proportionate part
of a shorter taxable year. In addition, not more than 50% in value of the
outstanding shares of stock of the Company may be owned, actually or
constructively (under the applicable attribution rules of the Code), by five or
fewer individuals (as defined in the Code to include certain tax-exempt entities
other than, in general, qualified domestic pension funds) at any time during the
last half of any taxable year of the Company (the "five or fewer requirement").
Moreover, if the Company, or an actual or constructive owner of 10% or more of
the Company, actually or constructively (under the applicable attribution rules
of the Code) owns 10% or more of a tenant of the Company (or a tenant of any
partnership in which the Company is a partner), the rent received by the Company
(either directly or through any such partnership) from such tenant will not be
qualifying income for purposes of the REIT gross income tests of the Code. See
"Certain Federal Income Tax Considerations--Requirements for Qualification."

Because the Board of Directors believes it is at present essential for the
Company to qualify as a REIT under the Code, the Charter authorizes the Board of
Directors to take such actions as are necessary or advisable to preserve its
qualification as a REIT and to refuse to permit any proposed transfer or
purchase of Voting Shares that, in the opinion of the Board of Directors, would
jeopardize the status of the Company as a REIT under the Code, and the Bylaws,
subject to certain exceptions, contain certain restrictions on the number of
shares of stock of the Company that a person may own. The Bylaws prohibit any
person from acquiring or holding, actually or constructively, shares of stock
representing more than 9.9% in value of the aggregate outstanding shares of
stock of the Company (the "Aggregate Stock Ownership Limit").

The Company's Board of Directors, in its sole discretion, may exempt a
person from the Aggregate Stock Ownership Limit (an "Excepted Holder"). However,
the Board may not grant such an exemption to any person whose actual or
constructive ownership of more than 9.9% in value of the outstanding shares of
stock of the Company would result in the Company failing to satisfy the "five or
fewer requirement" or otherwise failing to qualify as a REIT under the Code. In
order to be considered by the Board as an Excepted Holder, a person also must
not own actually or constructively an interest in a tenant of the Company (or a
tenant of any entity owned or controlled by the Company) that would cause the
Company to own actually or constructively more than a 9.9% interest in such a
tenant. The person seeking an exemption must represent to the satisfaction of
the Board that it will not violate the two aforementioned restrictions. The
person also must agree that any violation or attempted violation of any of the
foregoing

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restrictions will result in the automatic transfer of the shares of stock
causing such violation to the Trust (as defined below). The Board of Directors
may require a ruling from the Internal Revenue Service or an opinion of counsel,
in either case in form and substance satisfactory to the Board of Directors in
its sole discretion, in order to determine or ensure the Company's status as a
REIT under the Code.

The Bylaws further prohibit (a) any person from actually or constructively
owning shares of stock of the Company that would result in the Company failing
to satisfy the "five or fewer requirement" or would otherwise cause the Company
to fail to qualify as a REIT under the Code and (b) any person from transferring
shares of stock of the Company if such transfer would result in shares of stock
of the Company being owned by fewer than 100 persons. Any person who acquires or
attempts or intends to acquire actual or constructive ownership of shares of
stock of the Company that will or may violate any of the foregoing restrictions
on transferability and ownership, or any person who would have owned shares of
stock of the Company that were instead transferred to the Trust is required to
give notice immediately to the Company and provide the Company with such other
information as the Company may request in order to determine the effect of such
transfer on the Company's status as a REIT under the Code. The foregoing
restrictions on transferability and ownership will not apply if the Board of
Directors determines that it is no longer in the best interests of the Company
to continue to qualify as a REIT under the Code.

Under the Bylaws, if any transfer of shares of stock of the Company occurs
that, if effective, would result in any person actually or constructively owning
shares of stock of the Company in excess or in violation of the above transfer
or ownership limitations (a "Prohibited Owner"), then that number of shares of
stock of the Company the actual or constructive ownership of which otherwise
would cause such person to violate such limitations (rounded to the nearest
whole share) shall be automatically transferred to a trust (the "Trust") for the
exclusive benefit of one or more charitable beneficiaries (the "Charitable
Beneficiary"), and the Prohibited Owner shall not acquire any rights in such
shares. Such automatic transfer shall be deemed to be effective as of the close
of business on the Business Day (as defined in the Bylaws) prior to the date of
such violative transfer. Shares of stock held in the Trust shall be considered
issued and outstanding shares of stock of the Company. The Prohibited Owner
shall not benefit economically from ownership of any shares of stock held in the
Trust, shall have no rights to dividends and shall not possess any rights to
vote or other rights attributable to the shares of stock held in the Trust. The
trustee of the Trust (the "Trustee") shall have all voting rights and rights to
dividends or other distributions with respect to shares of stock held in the
Trust, which rights shall be exercised for the exclusive benefit of the
Charitable Beneficiary. Any dividend or other distribution paid prior to the
discovery by the Company that shares of stock have been transferred to the
Trustee shall be paid by the recipient of such dividend or distribution to the
Trustee upon demand, and any dividend or other distribution authorized but
unpaid shall be paid when due to the Trustee. Any dividend or distribution so
paid to the Trustee shall be held in trust for the Charitable Beneficiary. The
Prohibited Owner shall have no voting rights with respect to shares of stock
held in the Trust and, subject to Maryland law, effective as of the date that
such shares of stock have been transferred to the Trust, the Trustee shall have
the authority (at the Trustee's sole discretion) (i) to rescind as void any vote
cast by a Prohibited Owner prior to the discovery by the Company that such
shares have been transferred to the Trust and (ii) to recast such vote in
accordance with the desires of the Trustee acting for the benefit of the
Charitable Beneficiary. However, if the Company has already taken irreversible
corporate action, then the Trustee shall not have the authority to rescind and
recast such vote.

Within 20 days of receiving notice from the Company that shares of stock of
the Company have been transferred to the Trust, the Trustee shall sell the
shares of stock held in the Trust to a person, designated by the Trustee, whose
ownership of the shares will not violate the ownership limitations set forth in
the Company's Charter. Upon such sale, the interest of the Charitable
Beneficiary in the shares sold shall terminate and the Trustee shall distribute
the net proceeds of the sale to the Prohibited Owner and to the Charitable
Beneficiary as follows. The Prohibited Owner shall receive the lesser of (i) the
price paid by the Prohibited Owner for the shares or, if the Prohibited Owner
did not give value for the shares in connection

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with the event causing the shares to be held in the Trust (E.G., a gift, devise
or other such transaction), the Market Price (as defined in the Bylaws) of such
shares on the day of the event causing the shares to be held in the Trust and
(ii) the price per share received by the Trustee from the sale or other
disposition of the shares held in the Trust. Any net sale proceeds in excess of
the amount payable to the Prohibited Owner shall be paid immediately to the
Charitable Beneficiary. If, prior to the discovery by the Company that shares of
stock have been transferred to the Trust, such shares are sold by a Prohibited
Owner, then (i) such shares shall be deemed to have been sold on behalf of the
Trust and (ii) to the extent that the Prohibited Owner received an amount for
such shares that exceeds the amount that such Prohibited Owner was entitled to
receive pursuant to the aforementioned requirement, such excess shall be paid to
the Trustee upon demand.

In addition, the Charter authorizes the Board of Directors, by notice to a
holder of Voting Shares, to purchase or redeem any or all Voting Shares held by
such holder which, in the opinion of the Board of Directors, will jeopardize the
status of the Company as a REIT. The purchase price for any Voting Shares called
for purchase or redemption pursuant to this provision of the Charter shall be
equal to the fair market value of the Voting Shares, which shall be conclusively
deemed to be the closing sale price for such Voting Shares on the national
securities exchange on which the Voting Shares are listed, if the Voting Shares
are listed on only one national securities exchange, on the last business day
immediately preceding the day on which notice of such purchase or redemption is
sent.

If any provision of the Charter or Bylaws restricting ownership and transfer
of the Company's stock is determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then the transferee of such Voting
Shares, options, warrants or securities convertible into Voting Shares shall be
deemed, at the option of the Company, to have acted as agent on behalf of the
Company in acquiring such Voting Shares and to hold such Voting Shares on behalf
of the Company. Notwithstanding any other provision of the Charter or Bylaws to
the contrary, to the full extent permitted by law, whenever it is deemed by the
Board of Directors to be reasonably necessary to protect the status of the
Company as a REIT under the Code, a purported acquisition by any person of
Voting Shares which would result in the disqualification of the Company as a
REIT shall be null and void.

The restrictions on the ownership and transfer of the outstanding shares of
Common Stock contained in the Charter and Bylaws do not ensure, however, that
the Company will be able to satisfy the "five or fewer requirement" or the REIT
gross income tests primarily because the provisions in the Charter do not
operate automatically to void any attempted transfer, acquisition or ownership
of shares of Common Stock of the Company that would result in the
disqualification of the Company as a REIT, but instead require the Board of
Directors to take action to (i) prohibit or deem to be null and void such
attempted transfer, acquisition or ownership of shares of Common Stock or (ii)
purchase or redeem any such shares of Common Stock. Once the shares of Common
Stock become publicly traded, the Board of Directors may not become aware of
attempted transfers, acquisitions or ownership of Common Stock that would cause
the Company to fail to qualify as a REIT until well after such transfers,
acquisitions or ownership have occurred, if at all. Moreover, the restrictions
on ownership and transferability contained in the Bylaws may not be enforceable
against current holders of the Common Stock. As a result, the Company may not be
able to enforce certain of the above-described remedies that are intended to
protect the Company's status as a REIT under the Code. If the Company were to
fail to qualify as a REIT with respect to any taxable year, the Company (i)
would not be allowed a deduction in computing its taxable income for amounts
distributed to its stockholders and (ii) would be subject to federal income tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. See "Risk Factors--Adverse Consequences of Failure to
Qualify as a REIT; Other Tax Liabilities" and "Certain Federal Income Tax
Considerations--Taxation of the Company," "--Requirements for Qualification" and
"--Failure to Qualify."

All certificates representing shares of Common Stock and Preferred Stock
will bear a legend referring to the restrictions described above.

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Under the Bylaws, every owner of record of more than 5% (or such lower
percentage as may be required by the Code or the regulations promulgated
thereunder) of all classes or series of the Company's capital stock, including
shares of Common Stock, is required to give written notice to the Company, no
later than January 30 of each year, stating the name and address of the actual
owner of such shares, the number of shares of each class and series of stock of
the Company that such actual owner actually or constructively (under the
applicable attribution rules of the Code) owns and a description of the manner
in which such shares are held. Each such owner shall provide to the Company such
additional information as the Company may request in order to determine the
effect, if any, of such actual ownership on the Company's status as a REIT under
the Code and to ensure compliance with the Aggregate Stock Ownership Limit. In
addition, each stockholder shall upon demand be required to provide to the
Company such information as the Board of Directors may deem appropriate or
necessary in order to determine the Company's status as a REIT under the Code
and to comply with the requirements of any taxing authority or governmental
authority or to determine such compliance.

At the next annual meeting of stockholders, the Company intends to submit a
proposal to its stockholders seeking to amend its Charter to contain
restrictions on ownership and transfer of shares of its stock that are similar
to those currently in the Bylaws.

These ownership limits could delay, defer or prevent a transaction or a
change in control of the Company that might involve a premium price for the
Common Stock or otherwise be in the best interest of the stockholders.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Gemisys
Corporation.

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CERTAIN PROVISIONS OF MARYLAND LAW
AND THE COMPANY'S CHARTER AND BYLAWS

THE FOLLOWING SUMMARY OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE
CHARTER AND BYLAWS OF THE COMPANY DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT
TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO MARYLAND LAW AND THE CHARTER
AND BYLAWS OF THE COMPANY, COPIES OF WHICH ARE EXHIBITS TO THE REGISTRATION
STATEMENT OF WHICH THIS PROSPECTUS IS A PART. SEE "AVAILABLE INFORMATION."

REMOVAL OF DIRECTORS

Pursuant to the Charter, a director may be removed with or without cause by
the affirmative vote of a majority of all the votes entitled to be cast in the
election of directors. This provision, when coupled with the provision in the
Bylaws authorizing the Board of Directors to fill vacant directorships,
precludes stockholders from removing incumbent directors except upon a
substantial affirmative vote and filling the vacancies created by such removal
with their own nominees.

BUSINESS COMBINATIONS

Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer or
issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns ten percent or more of the
voting power of the corporation's shares or an affiliate of the corporation who,
at any time within the two-year period prior to the date in question, was the
beneficial owner of ten percent or more of the voting power of the
then-outstanding voting stock of the corporation (an "Interested Stockholder")
or an affiliate of such an Interested Stockholder are prohibited for five years
after the most recent date on which the Interested Stockholder becomes an
Interested Stockholder. Thereafter, any such business combination generally must
be recommended by the board of directors of such corporation and approved by two
super-majority votes of the stockholders. These provisions of the MGCL do not
apply, however, to business combinations that are approved or exempted by the
board of directors of the corporation prior to the time that the Interested
Stockholder becomes an Interested Stockholder. As permitted by the statute, the
Charter provides that the Company shall not be governed by the business
combination provision of the MGCL and, consequently, the five-year prohibition
and the super-majority vote requirements will not apply to business combinations
between any Interested Stockholder and the Company. As a result, the Company may
be able to enter into business combinations with any Interested Stockholder in
the future without compliance with the super-majority vote requirements and the
other provisions of the statute. Although the Company currently has no intention
of doing so, there can be no assurance that this charter provision will not be
amended or eliminated in the future.

CONTROL SHARE ACQUISITIONS

The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares of stock owned by the acquiror, by officers or by directors who
are employees of the corporation. "Control Shares" are voting shares of stock
which, if aggregated with all other such shares of stock previously acquired by
the acquiror or in respect of which the acquiror is able to exercise or direct
the exercise of voting power (except solely by virtue of a revocable proxy),
would entitle the acquiror to exercise voting power in electing directors within
one of the following ranges of voting power: (i) one-fifth or more but less than
one-third, (ii) one-third or more but less than a majority or (iii) a majority
or more of all voting power. Control shares do not include shares the acquiring
person is then entitled to vote as a result of having previously obtained
stockholder approval. A "control share acquisition" means the acquisition of
control shares, subject to certain exceptions.

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The control share acquisition statute does not apply (a) to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to
the transaction or (b) to acquisitions approved or exempted by the charter or
bylaws of the corporation.

The Charter provides that the Company and its shares of stock shall not be
governed by the control share acquisition statute. Although the Company
currently has no intention of doing so, there can be no assurance that such
provision will not be amended or eliminated at any time in the future.

AMENDMENT TO THE CHARTER

As permitted by the MGCL, the Charter provides that it may be amended by the
affirmative vote of the holders of a majority of all of the votes entitled to be
cast on the matter.

DISSOLUTION OF THE COMPANY

As permitted by the MGCL, the Charter provides that the dissolution of the
Company must be approved by the affirmative vote of the holders of not less than
a majority of all of the votes entitled to be cast on the matter. Under the
MGCL, dissolution of a Maryland corporation does not have to be approved by each
class of stock of the corporation outstanding at the time of dissolution.

ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS

The Bylaws of the Company provide that (a) with respect to an annual meeting
of stockholders, nominations of persons for election to the Board of Directors
and the proposal of business to be considered by stockholders may be made only
(i) pursuant to the Company's notice of the meeting, (ii) by the Board of
Directors or (iii) by a stockholder who is entitled to vote at the meeting and
has complied with the advance notice procedures set forth in the Bylaws and (b)
with respect to special meetings of stockholders, only the business specified in
the Company's notice of meeting may be brought before the meeting of
stockholders and nominations of persons for election to the Board of Directors
may be made only (i) pursuant to the Company's notice of the meeting, (ii) by
the Board of Directors or (iii) provided that the Board of Directors has
determined that directors shall be elected at such meeting, by a stockholder who
is entitled to vote at the meeting and has complied with the advance notice
provisions set forth in the Bylaws. To be timely, a stockholder's notice with
respect to an annual meeting generally must be delivered to the secretary at the
principal executive offices of the Company not later than the close of business
on the 60th day nor earlier than the close of business on the 90th day prior to
the first anniversary of the preceding year's annual meeting. A stockholder's
nomination of a person for election to the Board of Directors at a special
meeting must be delivered to the secretary at the principal executive offices of
the Company not later than the close of business on the 60th day prior to such
special meeting and not earlier than the close of business on the later of the
90th day prior to such special meeting or the tenth day following the day on
which public announcement is first made of the date of the special meeting and
of the nominees proposed by the Board of Directors to be elected at such
meeting.

ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE CHARTER
AND BYLAWS

The business combination provisions and the control share acquisition
provisions of the MGCL (if the applicable exemptive provisions in the Charter
are rescinded), the provisions of the Charter on removal of directors and the
advance notice provisions of the Bylaws could delay, defer or prevent a
transaction or a change in control of the Company that might involve a premium
price for holders of Common Stock or otherwise be in their best interest.

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SHARES AVAILABLE FOR FUTURE SALE

GENERAL

As of January 31, 1997, after giving effect to the Offering, the Company
will have issued and outstanding approximately 14,662,090 shares of Common Stock
(15,517,090 shares if the Underwriters' overallotment option is exercised in
full), including, 24,050 shares of Common Stock that are reserved for issuance
upon the possible exchange for OP Units. The shares of Common Stock issued in
the Offering will be freely tradeable by persons other than "affiliates" of the
Company without restriction under the Securities Act, subject to certain
provisions of the Charter. See "Capital Stock--Restrictions on Transfer." The
shares of Common Stock (i) that were outstanding immediately prior to the
completion of the Offering and (ii) that may be acquired by any person in
exchange for OP Units (collectively, the "Restricted Shares") are "restricted
securities" within the meaning of Rule 144 promulgated under the Securities Act
("Rule 144") and may not be sold in the absence of registration under the
Securities Act unless an exemption from registration is available, including
exemptions contained in Rule 144. As described below under "--Registration
Rights," the Company has granted registration rights covering an aggregate of
3,867,000 of the Restricted Shares.

In general, under Rule 144, if one year has elapsed since the later of the
date of acquisition of Restricted Shares from the Company or any "affiliate" of
the Company, as that term is defined under the Securities Act, the acquiror or
subsequent holder thereof is entitled to sell within any three-month period a
number of shares that does not exceed the greater of 1% of the number of then
outstanding shares of Common Stock or the average weekly trading volume of the
Common Stock during the four calendar weeks preceding the date on which notice
of the sale is filed with the SEC. Sales under Rule 144 are also subject to
certain manner of sales provisions, notice requirements and the availability of
current public information about the Company. If two years have elapsed since
the date of acquisition of Restricted Shares from the Company or any "affiliate"
of the Company, and the acquiror or subsequent holder thereof is deemed not to
have been an "affiliate" of the Company at any time during the 90 days preceding
a sale, such person is entitled to sell such shares in the public market under
Rule 144(k) without regard to the volume limitations, manner of sale provisions,
notice requirements and the availability of current public information
requirements. As of the date of this Prospectus, approximately 2.7 million
Restricted Shares are eligible for sale under Rule 144(k), of which
approximately shares are subject to "lock-up" agreements with the
Underwriters. Approximately 1.9 million additional Restricted Shares are
eligible for sale subject to compliance with volume limitations and other
requirements under Rule 144, of which approximately are subject to
"lock-up" agreements with the Underwriters. See "Underwriting."

As of January 31, 1997, the Company has issued options to purchase
approximately 731,253 shares of Common Stock to directors, executive officers,
certain key employees and other third parties and has reserved 556,590
additional shares for future issuance under the Stock Option Plans. Within one
year following consummation of the Offering, the Company expects to file a
Registration Statement on Form S-8 with the SEC with respect to the shares of
Common Stock issuable under the Stock Option Plans, which shares may be resold
without restriction, unless held by affiliates. Approximately shares
issuable upon exercise of outstanding options will be subject to the terms of
the lock-up agreements described above.

Prior to the Offering, there has been no public market for the Common Stock.
Trading of the Common Stock on the NYSE is expected to commence immediately upon
the completion of the Offering. No prediction can be made as to the effect, if
any, that future sales of shares of Common Stock, or the availability of shares
of Common Stock for future sale, will have on the market price prevailing from
time to time. Sales of substantial amounts of Common Stock (including shares
issued upon the exercise of outstanding stock options), or the perception that
such sales occur, could adversely affect prevailing market prices of the Common
Stock. See "Risk Factors--Effect of Shares Available for Future Sale on Common
Stock Price" and "Partnership Agreement--Transferability of Interests."

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REGISTRATION RIGHTS

Pursuant to the Registration Rights Agreement, the Company has granted the
Institutional Investors certain registration rights with respect to the
3,867,000 shares of Common Stock acquired by them pursuant to the Stock Purchase
Agreement (collectively, the "Registrable Shares"). The following summary of
certain material provisions of the Registration Rights Agreement is qualified in
its entirety by reference to the Registration Rights Agreement, a copy of which
is filed as an exhibit to the Registration Statement of which this Prospectus
forms a part. See "Available Information."

Subject to certain terms and conditions, the Registration Rights Agreement
provides that not later than the 180th day after the closing of the Offering,
the Company is obligated at its expense to use its best efforts to cause a
registration statement covering the Registrable Shares to become effective. The
Company is obligated to use its best efforts, subject to any Permitted
Interruption (as defined in the Registration Rights Agreement), to cause such
registration statement to remain effective until the earlier of (i) the date on
which all Registrable Shares have been sold under such registration statement
and (ii) the later of (A) the date that is 12 months after such registration
statement becomes effective and (B) the date that all Registrable Shares are
freely transferable pursuant to Rule 144(k) or any successor rule of the rules
and regulations promulgated under the Securities Act (assuming for purposes of
calculating such period that no holder of Registrable Shares is an affiliate of
the Company) in any case, as extended by the period of any Permitted
Interruption.

The Registration Rights Agreement also provides that if the Company proposes
to register its Common Stock under the Securities Act on any Registration
Statement covering such Common Stock, the holders of Registrable Shares are
entitled to have their shares included in such Registration Statement on a pro
rata basis at the Company's expense, subject to certain other terms and
conditions set forth in the Registration Rights Agreement.

CERTAIN FEDERAL INCOME TAX CONSIDERATIONS

The following summary of the taxation of the Company and the material
federal income tax considerations that may be relevant to a prospective holder
of shares of Common Stock is for general information only and does not
constitute tax advice. The summary sets forth the federal income tax
consequences that are likely to be material to a holder of shares of Common
Stock and has been prepared by Jones, Day, Reavis & Pogue, special counsel to
the Company. The tax treatment of a holder of shares of Common Stock will vary
depending upon the holder's particular situation, and the discussion contained
herein does not purport to address all aspects of federal income taxation that
may be relevant to particular holders in light of their personal investment or
tax circumstances, or to certain types of holders (including insurance
companies, tax-exempt entities, financial institutions, broker-dealers in
securities or currencies or persons that hold shares of Common Stock that are a
hedge or that are hedged against currency risks or that are part of a straddle
or conversion transaction) subject to special treatment under the federal income
tax laws. The discussion further assumes that shares of Common Stock will be
held as capital assets by the holders thereof. Moreover, the discussion below
does not consider the effect of any foreign, state, local or other tax laws that
may be applicable to a prospective holder of shares of Common Stock.

The statements in this discussion and the opinion of Jones, Day, Reavis &
Pogue set forth below are based on the provisions of the Code, existing,
temporary, and proposed Treasury Regulations promulgated thereunder, the
legislative history of the Code, administrative rulings and practices of the
Internal Revenue Service ("IRS"), and judicial decisions, all as in effect on
the date of this Prospectus. No assurance can be given that future legislative,
judicial, or administrative actions or decisions, which may be retroactive in
effect, will not affect the accuracy of any statements in this Prospectus with
respect to transactions entered into or contemplated prior to the effective date
of such changes. As used in this section, the term "Company" refers solely to
Great Lakes REIT, Inc., and does not include the Operating Partnership.

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EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE,
OWNERSHIP, AND SALE OF SHARES OF COMMON STOCK, INCLUDING THE FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP AND SALE
AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.

GENERAL

The Company elected to be taxed as a REIT commencing with its taxable year
ended December 31, 1993, and the Company believes that, commencing with its
taxable year ended December 31, 1993, it has been organized and has operated in
such a manner so as to qualify for taxation as a REIT under Sections 856 through
860 of the Code and the applicable Treasury Regulations promulgated thereunder,
which together set forth the requirements for qualifying as a REIT (the "REIT
Requirements"). The Company intends to remain organized and to continue to
operate in such a manner so as to qualify for taxation as a REIT for federal
income tax purposes in the future, but no assurance can be given that the
Company will remain so qualified.

The REIT Requirements (i.e., the Code sections and Treasury Regulations
relating to the federal income tax treatment of REITs and their stockholders)
are highly technical and complex. The following discussion sets forth only the
material aspects of those provisions. This summary is qualified in its entirety
by the applicable Code sections, Treasury Regulations promulgated thereunder,
and administrative and judicial interpretations thereof.

Jones, Day, Reavis & Pogue has acted as special counsel to the Company in
connection with the Offering. In the opinion of Jones, Day, Reavis & Pogue,
commencing with the Company's taxable year ended December 31, 1993, the Company
has been organized and operated in conformity with the requirements for
qualification and taxation as a REIT under the Code, and the Company's proposed
method of operation will enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code for its subsequent taxable
years. Investors should be aware, however, that opinions of counsel are not
binding upon the IRS or any court. It must also be emphasized that the opinion
of Jones, Day, Reavis & Pogue is based upon various assumptions and certain
representations made by the Company as to factual matters relating to the
organization and operation of the Company and the Operating Partnership and to
their business and properties as set forth in this Prospectus. Moreover, the
Company's continued qualification and taxation as a REIT depends upon the
Company's continuing ability to meet (through, among other things, actual annual
operating results, asset ownership, distribution levels and diversity of stock
ownership) the various qualification tests imposed by the Code discussed below.
Jones, Day, Reavis & Pogue will not review the Company's compliance with these
tests on an ongoing basis. Accordingly, no assurance can be given that the
actual results of the Company's operations for any particular taxable year will
satisfy the requirements for qualification and taxation as a REIT. See
"--Failure to Qualify".

TAXATION OF THE COMPANY

As a REIT, the Company generally is not subject to federal corporate income
tax on that portion of its net income that is currently distributed to its
stockholders. This treatment substantially eliminates the federal "double
taxation" on earnings (once at the corporate level and once again at the
stockholder level) that generally results from an investment in a regular
corporation. Even if, however, the Company continues to qualify for taxation as
a REIT, it will be subject to federal income tax in certain circumstances as
follows. First, the Company will be taxed at regular corporate rates on any
undistributed "REIT taxable income," including undistributed net capital gains.
Second, under certain circumstances, the Company may be subject to the corporate
"alternative minimum tax" on its items of tax preference, if any. Third, if the
Company has (i) net income from the sale or other disposition of "foreclosure
property" which is held primarily for sale to customers in the ordinary course
of business or (ii) other non-qualifying income from

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foreclosure property, the Company will be subject to tax on such income at the
highest regular corporate rate. Fourth, if the Company has net income from
"prohibited transactions" (which are, in general, certain sales or other
dispositions of property, other than foreclosure property, held primarily for
sale to customers in the ordinary course of business), such income will be
subject to a 100% tax. Fifth, if the Company should fail to satisfy the 75%
gross income test or the 95% gross income test (as discussed below), but has
nonetheless maintained its qualification as a REIT because certain other
requirements have been met, the Company will be subject to a 100% tax on an
amount equal to (i) the gross income attributable to the greater of the amount
by which the Company fails the 75% or the 95% test, multiplied by (ii) a
fraction intended to reflect the Company's profitability. Sixth, if the Company
should fail to distribute during each calendar year at least the sum of (i) 85%
of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain net
income for such year, and (iii) any undistributed taxable income from prior
years, the Company will be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. Seventh, if during
the 10-year period (the "Recognition Period") beginning on the first day of the
taxable year for which the Company qualified as a REIT, the Company recognizes
gain on the disposition of any asset held by the Company as of the beginning of
the Recognition Period, then, to the extent of the excess of (i) the fair market
value of such asset as of the beginning of the Recognition Period, over (ii) the
Company's adjusted basis in such asset as of the beginning of such Recognition
Period (the "Built-In Gain"), such gain will be subject to tax at the highest
regular corporate rate; provided, however, that the Company shall not be subject
to tax on recognized Built-In Gain with respect to assets held as of the first
day of the Recognition Period to the extent that the aggregate amount of such
recognized Built-In Gain exceeds the net aggregate amount of the Company's
unrealized Built-In Gain (i.e., aggregate unrealized gains less aggregate
unrealized losses) with respect to such assets as of the first day of the
Recognition Period. Eighth, if the Company acquires any asset from any
corporation which is or has been a C Corporation (i.e., generally a corporation
subject to full corporate-level tax) in certain transactions in which the basis
of the asset in the hands of the Company is determined by reference to the basis
of the asset (or any other property) in the hands of the C corporation, and the
Company subsequently recognizes gain on the disposition of such asset during the
Recognition Period beginning on the date on which the asset was acquired by the
Company, then the Built-In Gain with respect to such asset will be subject to
tax at the highest regular corporate rate.

REQUIREMENTS FOR QUALIFICATION

ORGANIZATIONAL REQUIREMENTS. The Code defines a REIT as a corporation,
trust, or association (i) which is managed by one or more trustees or directors;
(ii) the beneficial ownership of which is evidenced by transferable shares or by
transferable certificates of beneficial interest; (iii) which would be taxable
as a domestic corporation but for compliance with the REIT Requirements; (iv)
which is neither a financial institution nor an insurance company subject to
certain special provisions of the Code; (v) the beneficial ownership of which is
held by 100 or more persons; (vi) at any time during the last half of each
taxable year, not more than 50% in value of the outstanding stock of which is
owned, directly or constructively (through the application of certain
attribution rules of the Code), by or for five or fewer individuals (as defined
in the Code to include certain tax-exempt entities other than, in general,
qualified domestic pension funds); (vii) complies with certain recordkeeping
requirements of the Code and the Treasury Regulations promulgated thereunder;
and (viii) which meets certain other tests, described below, regarding the
nature of its income and assets. The Code provides that conditions (i) through
(iv), inclusive, must be met during the entire taxable year and that condition
(v) must be met during at least 335 days of a taxable year of 12 months, or
during a proportionate part of a taxable year of less than 12 months. Conditions
(v) and (vi), however, do not apply until after the first taxable year for which
an election is made to be taxed as a REIT.

The Company believes that it has satisfied the conditions set forth above
for each of its taxable years commencing with the taxable year ended December
31, 1993, and that it will continue to do so. With respect to the stock
ownership requirements described in (v) and (vi) above, the Company's Charter
and

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Bylaws provide for restrictions on the ownership and transfer of the Company's
shares of Common Stock that are intended to assist the Company in continuing to
satisfy these requirements. Such ownership and transfer restrictions are
described above under the heading "Capital Stock of the Company--Restrictions on
Transfer." It should be emphasized that these restrictions do not ensure that
the Company will, in all cases, be able to satisfy the stock ownership
requirements described above primarily because the provisions in the Charter do
not operate automatically to void any attempted transfer, acquisition or
ownership of shares of Common Stock of the Company that would result in the
disqualification of the Company as a REIT, but instead require the Company's
Board of Directors to take action to prohibit or deem to be null and void any
such attempted transfer, acquisition or ownership of shares of Common Stock or
to purchase or redeem any such shares of Common Stock. Once the shares of Common
Stock of the Company become publicly traded, the Board of Directors may not
become aware of attempted transfers, acquisitions or ownership of Common Stock
that would cause the Company to fail to qualify as a REIT until well after such
transfers, acquisitions or ownership have occurred, if at all. Moreover, the
restrictions on ownership and transferability contained in the Bylaws may not be
enforceable against current holders of Common Stock. If the Company fails to
satisfy the stock ownership requirements, the Company's status as a REIT will
terminate, and the Company will not be able to prevent such termination. See
"--Failure to Qualify."

QUALIFIED REIT SUBSIDIARIES. The Company has a number of wholly owned
subsidiaries. Section 856(i) of the Code provides that a corporation that is a
"qualified REIT subsidiary" will not be treated as a separate corporation, and
all assets, liabilities and items of income, deduction and credit of a
"qualified REIT subsidiary" will be treated as assets, liabilities and items (as
the case may be) of the REIT. Thus, in applying the requirements described
herein, the Company's "qualified REIT subsidiaries" will be ignored, and all
assets, liabilities and items of income, deduction and credit of such
subsidiaries will be treated as assets, liabilities and items (as the case may
be) of the Company. The Company believes that all of its wholly-owned
subsidiaries are "qualified REIT subsidiaries."

OWNERSHIP OF A PARTNERSHIP INTEREST. In the case of a REIT that is a
partner in a partnership, Treasury Regulations provide that the REIT will be
deemed to own its proportionate share of the assets of the partnership and will
be deemed to be entitled to the income of the partnership attributable to such
proportionate share. In addition, the character of the assets and gross income
of the partnership retain the same character in the hands of the REIT for
purposes of the REIT Requirements, including satisfying the gross income tests
and the asset tests. Accordingly, the Company's proportionate share of the
assets, liabilities and items of income of the Operating Partnership and any
other partnership in which the Company may be a direct or indirect partner in
the future will be treated as assets, liabilities and items of income of the
Company for purposes of applying the REIT Requirements, provided that the
Operating Partnership and any other such partnerships are treated as
partnerships for federal income tax purposes. See "--Partnership
Classification."

GROSS INCOME TESTS. To maintain its qualification as a REIT, the Company
must satisfy three gross income requirements annually. First, at least 75% of
the Company's gross income (excluding gross income from prohibited transactions)
for each taxable year must be derived directly or indirectly from investments
relating directly to real property or mortgages on real property (including
"rents from real property," which term generally includes expenses of the
Company that are paid or reimbursed by tenants, and, in certain circumstances,
interest) or from certain types of temporary investments. Second, at least 95%
of the Company's gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived from such real property
investments and from dividends, interest, and gain from the sale or other
disposition of stock or securities or from any combination of the foregoing.
Third, short-term gain from the sale or other disposition of stock or
securities, gain from prohibited transactions, and gain from the sale or other
disposition of real property held for less than four years (apart from
involuntary conversions and sales of foreclosure property) must represent less
than 30% of the Company's gross income (including gross income from prohibited
transactions) for each taxable year.

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For purposes of satisfying the 75% and 95% gross income tests described
above, rents received by the Company from a tenant will qualify as "rents from
real property" only if several conditions are met. First, the amount of rent
must not be based in whole or in part on the income or profits derived by any
person from such property. However, an amount received or accrued generally will
not be excluded from the term "rents from real property" solely by reason of
being based on a fixed percentage or percentages of receipts or sales. Second,
the Code provides that rents received from a tenant will not qualify as "rents
from real property" in satisfying the gross income tests if the Company, or an
actual or constructive owner of 10% or more of the Company, actually or
constructively owns a 10% or greater interest in such tenant (a "Related Party
Tenant"). Third, if rent attributable to personal property leased in connection
with a lease of real property is greater than 15% of the total rent received
under the lease, then the portion of rent attributable to such personal property
will not qualify as "rents from real property." Finally, for rents received to
qualify as "rents from real property," the Company generally must not operate or
manage the property or furnish or render services to the tenants of such
property, other than through an independent contractor that is adequately
compensated and from whom the REIT derives no revenue. The Company may, however,
directly perform certain services that are "usually or customarily rendered" in
connection with the rental of space for occupancy only and are not otherwise
considered "rendered to the occupant" of the property. The Company has
represented that it has not and will not in the future (i) charge rent for any
property that is based in whole or in part on the income or profits of any
person (except by reason of being based on a percentage of receipts or sales, as
described above), (ii) rent any property to a Related Party Tenant (unless the
Board of Directors determines in its discretion that the rent received from such
Related Party Tenant is not material and will not jeopardize the Company's
status as a REIT), or (iii) derive rental income attributable to personal
property (other than personal property leased in connection with the lease of
real property, the amount of which is less than 15% of the total rent received
under the lease).

The Company has performed and will in the future perform certain services
with respect to the Properties for certain of its tenants. The Company believes
that the services it provides to tenants are usually and customarily rendered in
the geographic market of the Properties in connection with the rental of space
for occupancy only, and, accordingly, that the provision of such services has
not caused, and will not in the future cause, the rents received with respect to
the Properties to fail to qualify as "rents from real property" for purposes of
the 75% and 95% gross income tests described above. In the case of any services
provided to tenants that are not "usual and customary," the Company has
represented that it has employed and intends to continue to employ qualifying
independent contractors to provide such services.

The Company has received and will in the future receive fees for services,
or payments in the form of reimbursements for expenses incurred in the
performance of services, in either case provided to the Operating Partnership.
Although the law is not entirely clear, because the Company has a significant
capital interest directly and indirectly in the Operating Partnership, the
amount of such fees and reimbursements that is apportioned to the capital
interest of the Company in the Operating Partnership should not be treated as a
separate item of income and should be disregarded for purposes of the 75% and
95% gross income tests. The amount of such fees and reimbursements, on the other
hand, that is apportioned to the capital interests of other partners in the
Operating Partnership will generally result in nonqualifying income to the
Company under the 75% and 95% gross income tests. In addition, the Company has
received and will continue in the future to receive a de minimis amount of
management fees in exchange for the performance of certain services with respect
to properties that are owned entirely by third parties. All such third-party
management fees will constitute nonqualifying income for purposes of the 75% and
95% gross income tests.

The Company believes that the aggregate amount of nonqualifying income
(including such fees and reimbursements) in any taxable year has not exceeded
and will not in the years immediately following the Offering exceed the limits
on non-qualifying income under the 75% or 95% gross income tests. The Company
intends to carefully monitor its compliance with the 75% and 95% gross income
tests. Should the

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potential amount of non-qualifying income of the Company in the future create a
risk as to the qualification of the Company as a REIT, the Company intends to
take action to avoid non-qualification as a REIT.

The Company believes that it has satisfied the three gross income tests for
each of its taxable years commencing with the taxable year ended December 31,
1993, and intends to operate in a manner that will enable it to continue to
satisfy these tests in the future.

If the Company fails to satisfy one or both of the 75% or the 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Code.
These relief provisions will generally be available if (i) the Company's failure
to meet such test(s) was due to reasonable cause and not due to willful neglect,
(ii) the Company attaches a schedule of the sources of its income to its federal
income tax return for such taxable year, and (iii) any incorrect information on
the schedule was not due to fraud with intent to evade tax. It is not possible,
however, to state whether, in all circumstances, the Company would be entitled
to the benefit of these relief provisions. For example, if the Company fails to
satisfy the gross income tests because non-qualifying income that the Company
intentionally earns exceeds the limits on such income, the IRS could conclude
that the Company's failure to satisfy the tests was not due to reasonable cause.
If these relief provisions were inapplicable to a particular set of
circumstances involving the Company, the Company would cease to qualify as a
REIT. As discussed above in "--Taxation of the Company," even if these relief
provisions apply, a 100% tax will still be imposed on the greater of the amount
by which the Company failed the 75% or the 95% test, multiplied by a fraction
intended to reflect the Company's profitability. No similar mitigation provision
applies to provide relief if the Company fails to satisfy the 30% income test,
and in such case, the Company will cease to qualify as a REIT. See "--Failure to
Qualify."

ASSET TESTS. The Company, at the close of each quarter of its taxable year,
must also satisfy three tests relating to the nature of its assets. First, at
least 75% of the value of the Company's total assets must be represented by real
estate assets (including (i) its allocable share of real estate assets held by
partnerships in which the Company or one of its qualified REIT subsidiaries owns
an interest and (ii) stock or debt instruments purchased with the proceeds of a
stock offering or long-term (at least five years) debt offering of the Company
and held for not more than one year following the receipt by the Company of such
proceeds), cash, cash items and government securities. Second, not more than 25%
of the Company's total assets may be represented by securities other than those
in the 75% asset class. Third, of the investments included in the 25% asset
class, the value of any one issuer's securities owned by the Company may not
exceed 5% of the value of the Company's total assets and the Company may not own
more than 10% of any one issuer's outstanding voting securities (except for
interests in the Operating Partnership, any other partnership in which the
Company may or may be deemed to be a direct or indirect partner in the future,
and any qualified REIT subsidiary of the Company).

For purposes of the three asset tests, the Company is deemed to own its
proportionate share of the assets of the Operating Partnership and any other
partnership in which the Company may or may be deemed to be a direct or indirect
partner in the future and 100% of the assets of each of its qualified REIT
subsidiaries. The Company's ownership interests in those entities are
disregarded.

After initially meeting the asset tests at the close of any quarter, the
Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset values.
If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter (including as a result of the
Company increasing its interest in the Operating Partnership), the failure can
be cured by disposition of sufficient nonqualifying assets within 30 days after
the close of that quarter. The Company believes that it has satisfied the
requirements of the three asset tests described above for all relevant periods
commencing with its taxable year ended December 31, 1993. The Company has
further represented that it has maintained and intends to continue to maintain
adequate records of the value of its assets to ensure compliance with the asset
tests and to take such other actions within 30 days

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after the close of any quarter as may be required to cure any noncompliance. If
the Company fails to cure noncompliance with the asset tests within such time
period, the Company would cease to qualify as a REIT.

ANNUAL DISTRIBUTION REQUIREMENTS. To maintain its qualification as a REIT,
the Company is required to distribute dividends (other than capital gain
dividends) to its stockholders each year in an amount at least equal to (i) the
sum of (A) 95% of the Company's "REIT taxable income" (computed without regard
to the dividends paid deduction and the Company's net capital gain) plus (B) 95%
of the net income (after tax), if any, from foreclosure property, minus (ii) the
sum of certain items of non-cash income. In addition, if the Company disposes of
any asset during its Recognition Period, the Company will be required to
distribute at least 95% of the Built-in Gain (after tax), if any, recognized on
the disposition of such asset. Such distributions must be paid in the taxable
year to which they relate, or in the following taxable year if declared before
the Company timely files its federal income tax return for such year and if paid
on or before the first regular dividend payment after such declaration.

To the extent that the Company does not distribute all of its net capital
gain or distributes at least 95%, but less than 100%, of its "REIT taxable
income," as adjusted, it will be subject to tax on the undistributed amounts at
regular ordinary or capital gains corporate tax rates, as the case may be.
Furthermore, if the Company should fail to distribute during each calendar year
at least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95%
of its REIT capital gain net income for such year, plus (iii) any undistributed
taxable income from prior years, the Company will be subject to a 4% excise tax
on the excess of such required distribution over the amounts actually
distributed.

The Company believes that it has made timely distributions sufficient to
satisfy all of the annual distribution requirements for each of its taxable
years commencing with the taxable year ended December 31, 1993, and intends to
continue to do so. In this regard, the Partnership Agreement requires the
Company, as general partner, to use its best efforts to cause the Operating
Partnership to distribute to its partners an amount sufficient to permit the
Company to meet these distribution requirements. It is expected that the
Company's REIT taxable income will be less than its cash flow due to the
allowance of depreciation and other non-cash charges in computing REIT taxable
income. Accordingly, the Company anticipates that it will generally have
sufficient cash or liquid assets to enable it to satisfy the distribution
requirements described above. It is possible, however, that the Company, from
time to time, may not have sufficient cash or other liquid assets to meet the
95% distribution requirement due to the insufficiency of cash flow from the
Operating Partnership in a particular year or to timing differences between the
actual receipt of income and actual payment of deductible expenses, on the one
hand, and the inclusion of such income and deduction of such expenses in
computing the Company's "REIT taxable income," on the other hand. In the event
that such an insufficiency or such timing differences occur, in order to meet
the 95% distribution requirement, the Company may find it necessary to cause the
Operating Partnership to arrange for short-term, or possibly long-term,
borrowings or to pay dividends in the form of taxable stock dividends.

Under certain circumstances, the Company may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in the Company's deduction
for dividends paid for the earlier year. Thus, the Company may be able to avoid
being taxed on amounts distributed as deficiency dividends; however, the Company
will be required to pay interest based upon the amount of any deduction taken
for deficiency dividends.

RECORDKEEPING REQUIREMENTS. Pursuant to applicable Treasury Regulations, to
continue to qualify for taxation as a REIT, the Company must maintain certain
records and request on an annual basis certain information from its stockholders
of record designed to disclose the actual owners of its outstanding shares of
Common Stock. The Company has represented that it has complied with these
recordkeeping requirements and intends to continue to comply with such
requirements in the future.

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PARTNERSHIP ANTI-ABUSE RULES. Treasury Regulations have been promulgated
under the partnership provisions of the Code that permit the IRS to
recharacterize transactions involving partnerships that purport to create tax
advantages that are inconsistent with the intent of the partnership provisions
of the Code. The scope and intended application of these Treasury Regulations
are unclear. Nonetheless, although the matter is not free from doubt, Jones,
Day, Reavis & Pogue believes that these Treasury Regulations do not adversely
affect the Company's ability to qualify as a REIT.

PENALTY TAX ON PROHIBITED TRANSACTIONS. Any gain realized by the Company on
the sale of any property held as inventory or other property held primarily for
sale to customers in the ordinary course of business (including the Company's
share of any such gain realized by the Operating Partnership) will be treated as
income from a prohibited transaction that is subject to a 100% penalty tax. Such
prohibited transaction income may also have an adverse effect upon the Company's
ability to satisfy the income tests for qualification as a REIT. Under existing
law, whether property is held as inventory or primarily for sale to customers in
the ordinary course of a trade or business is a question of fact that depends on
all the facts and circumstances with respect to the particular transaction. The
Operating Partnership intends to hold the Properties for investment with a view
to long-term appreciation, to engage in the business of acquiring, developing,
owning, and operating the Properties (and other properties) and to make such
occasional sales of the Properties as are consistent with such investment
objectives. Based upon such investment objectives, the Company believes that in
general the Properties should not be considered inventory or other property held
primarily for sale to customers in the ordinary course of a trade or business
and that the amount of income from prohibited transactions, if any, will not be
material. There can be no assurance, however, that the IRS might not contend
that one or more of such sales is subject to the 100% penalty tax. See "--
Requirements for Qualification."

FAILURE TO QUALIFY

If the Company fails to qualify for taxation as a REIT in any taxable year
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in which the
Company fails to qualify as a REIT will not be required to be made and, if made,
will not be deductible by the Company. As a result, the Company's failure to
qualify as a REIT will reduce the cash available for distribution by the Company
to its stockholders. In addition, if the Company fails to qualify as a REIT, all
distributions to the Company's stockholders will be taxable as ordinary income
dividends to the extent of the Company's then current and accumulated earnings
and profits, and, subject to certain limitations in the Code, corporate
distributees may be eligible for the dividends-received deduction. Unless
entitled to relief under specific statutory provisions, the Company also will be
ineligible for qualification as a REIT for the four taxable years following the
year during which such qualification was lost. It is not possible to determine
whether the Company would be entitled to such statutory relief in all
circumstances.

TAXATION OF TAXABLE U.S. STOCKHOLDERS

As used herein, the term "U.S. Stockholder" means a holder of shares of
Common Stock who (for United States federal income tax purposes) is (i) a
citizen or resident of the United States, (ii) a corporation, partnership, or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) an estate or trust the income of
which is subject to United States federal income taxation regardless of its
source.

As long as the Company qualifies as a REIT, distributions made by the
Company out of its current or accumulated earnings and profits (and not
designated as capital gain dividends) will constitute dividends taxable to its
taxable U.S. Stockholders as ordinary income. Such distributions will not be
eligible for the dividends-received deduction in the case of U.S. Stockholders
that are corporations.

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Distributions made by the Company that are properly designated by the
Company as capital gain dividends will be taxable to taxable U.S. Stockholders
as long-term capital gains (to the extent that they do not exceed the Company's
actual net capital gain for the taxable year) without regard to the period for
which a U.S. Stockholder has held his shares of Common Stock. U.S. Stockholders
that are corporations will not be eligible for the dividends-received deduction
with respect to such dividends and, further, may be required to treat up to 20%
of certain capital gain dividends as ordinary income.

To the extent that the Company makes distributions (not designated as
capital gain dividends) in excess of its current and accumulated earnings and
profits, such distributions will be treated first as a tax-free return of
capital to each U.S. Stockholder, reducing the adjusted basis which such U.S.
Stockholder has in his or her shares of Common Stock for tax purposes by the
amount of such distribution (but not below zero), with distributions in excess
of a U.S. Stockholder's adjusted basis in his or her shares taxable as capital
gains (provided that the shares have been held as a capital asset). Dividends
declared by the Company in October, November, or December of any year and
payable to a stockholder of record on a specified date in any such month shall
be treated as both paid by the Company and received by the stockholder on
December 31 of such year, provided that the dividend is actually paid by the
Company on or before January 31 of the following calendar year. Stockholders may
not include in their own income tax returns any net operating losses or capital
losses of the Company.

Distributions made by the Company and gain arising from the sale or exchange
by a U.S. Stockholder of shares of Common Stock will not be treated as passive
activity income, and, as a result, U.S. Stockholders generally will not be able
to apply any "passive losses" against such income or gain. Distributions made by
the Company (to the extent they do not constitute a return of capital) generally
will be treated as investment income for purposes of computing the investment
interest deduction limitation. Gain arising from the sale or other disposition
of shares of Common Stock, however, will not be treated as investment income
unless the U.S. Stockholder elects to reduce the amount of his or her total net
capital gain eligible for the 28% maximum capital gains rate by the amount of
such gain with respect to the shares.

Upon any sale or other disposition of shares of Common Stock, a U.S.
Stockholder will recognize gain or loss for federal income tax purposes in an
amount equal to the difference between (i) the amount of cash and the fair
market value of any property received on such sale or other disposition, and
(ii) the holder's adjusted basis in such shares of Common Stock for tax
purposes. Such gain or loss will be capital gain or loss if the shares of Common
Stock have been held by the U.S. Stockholder as a capital asset, and will be
long-term gain or loss if such shares have been held for more than one year. In
general, any loss recognized by a U.S. Stockholder upon the sale or other
disposition of shares of Common Stock that have been held for six months or less
(after applying certain holding period rules) will be treated as a long-term
capital loss, to the extent of distributions received by such U.S. Stockholder
from the Company which were required to be treated as long-term capital gains.

BACKUP WITHHOLDING

The Company will report to its U.S. Stockholders and the IRS the amount of
dividends paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, a stockholder may be subject to backup
withholding at the rate of 31% with respect to dividends paid unless such holder
(a) is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact, or (b) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with applicable requirements of the backup withholding rules.
A U.S. Stockholder that does not provide the Company with his or her correct
taxpayer identification number may also be subject to penalties imposed by the
IRS. Any amount paid as backup withholding will be creditable against the
stockholder's income tax liability. In addition, the Company may be required to
withhold a portion of capital gain distributions to any stockholders who fail to
certify their non-foreign status to the Company. See "--Taxation of Non-U.S.
Stockholders."

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TAXATION OF TAX-EXEMPT STOCKHOLDERS

The IRS has issued a published revenue ruling in which it held that amounts
distributed by a REIT to a tax-exempt employees' pension trust do not constitute
unrelated business taxable income ("UBTI"). Based on that ruling and the
analysis contained therein, distributions made by the Company to, as well as
gain from the sale or other disposition of shares of Common Stock by, a U.S.
Stockholder that is a tax-exempt entity (such as an individual retirement
account ("IRA") or a 401(k) plan, but excluding certain types of tax-exempt
entities dealt with below) should not constitute UBTI unless such tax-exempt
U.S. Stockholder has financed the acquisition of its shares of Common Stock with
"acquisition indebtedness" and the shares are thus treated as "debt financed
property" within the meaning of the Code, or such shares are used in an
unrelated trade or business conducted by such tax-exempt stockholder.

Special rules apply to tax-exempt U.S. Stockholders that are social clubs,
voluntary employee benefit associations, supplemental unemployment benefit
trusts, and qualified group legal services plans exempt from federal income
taxation under Sections 501(c)(7), (c)(9), (c)(17) and (c)(20), respectively, of
the Code. In the case of these tax-exempt U.S. Stockholders, distributions made
by the Company and gain from the sale or other disposition of shares of Common
Stock will generally constitute UBTI unless the tax-exempt stockholder is able
properly to deduct amounts set aside or placed in reserve for certain purposes
so as to offset the income and gain generated by its investment in shares of
Common Stock. Such prospective tax-exempt investors should consult their own tax
advisors concerning these "set aside" and reserve requirements.

Special rules also apply to certain tax-exempt pension trusts (including
401(k) plans but excluding IRAs or government pension plans) that own more than
10% (by value) of the interests in a "pension-held REIT" at any time during a
taxable year. Such a pension trust must treat a certain percentage of all
distributions received from the REIT during the year as UBTI. The percentage is
equal to the ratio of the REIT's gross income (less direct expenses related
thereto) derived from the conduct of unrelated trades or businesses determined
as if the REIT were itself a tax-exempt pension trust, to the REIT's gross
income (less direct expenses related thereto) from all sources. The special
rules will not apply to require a pension trust to recharacterize a portion of
its distributions received from the REIT as UBTI unless the percentage computed
is at least 5%.

A REIT will be treated as a "pension-held REIT" only if the REIT is
predominantly held by tax-exempt pension trusts and if the REIT would otherwise
fail to satisfy the "five or fewer" stock ownership requirements discussed
above, see "--Requirements for Qualification--Organizational Requirements," if
the stock of the REIT held by such tax-exempt pension trusts were not treated
(under Section 856(h)(3) of the Code) as being held directly by their respective
beneficiaries (instead of by the trusts themselves). A REIT is predominantly
held by tax-exempt pension trusts if at least one tax-exempt pension trust holds
more than 25% (by value) of the interests in the REIT, or if one or more
tax-exempt pension trusts (each of which owns more than 10% (by value) of the
interests in the REIT) own in the aggregate more than 50% (by value) of the
interests in the REIT. The provisions requiring tax-exempt pension trusts to
treat a portion of distributions received from a REIT as UBTI will not apply to
the Company if it is able to satisfy the "five or fewer" stock ownership
requirement without relying upon the "look-through" exception for tax-exempt
pension trusts. The Company does not expect to be classified as a "pension-held
REIT." Because, however, the shares of Common Stock will be publicly traded, no
assurance can be given that the Company will not in fact qualify as a
"pension-held REIT" in the future.

TAXATION OF NON-U.S. STOCKHOLDERS

The rules governing United States federal income taxation of the ownership
and disposition of shares of Common Stock by persons that are, for purposes of
such taxation, nonresident alien individuals, foreign corporations, foreign
partnerships or foreign estates or trusts (collectively, "Non-U.S.
Stockholders") are highly complex, and no attempt is made herein to provide more
than a brief summary of such rules.

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Accordingly, the discussion does not address all aspects of United States
federal income tax and does not address state, local or foreign tax consequences
that may be relevant to a Non-U.S. Stockholder in light of its particular
circumstances. Prospective Non-U.S. Stockholders should consult with their own
tax advisers to determine the impact of federal, state, local and foreign income
tax laws on an investment in shares of Common Stock, including any reporting
requirements.

In general, Non-U.S. Stockholders will be subject to regular United States
federal income taxation with respect to their investment in shares of Common
Stock in the same manner as a U.S. Stockholder (i.e., at graduated rates on a
net basis, after allowance of deductions) if such investment is "effectively
connected" with the conduct by such Non-U.S. Stockholder of a trade or business
in the United States. A Non-U.S. Stockholder that is a corporation and that
receives income with respect to its investment in shares of Common Stock that is
(or is treated as) "effectively connected" with the conduct of a trade or
business in the United States may also be subject to the 30% branch profits tax
imposed under Section 884 of the Code, which is payable in addition to the
regular United States corporate income tax. The following discussion addresses
only the United States federal income taxation of Non-U.S. Stockholders whose
investment in shares of Common Stock is not "effectively connected" with the
conduct of a trade or business in the United States. Prospective investors whose
investment in shares of Common Stock may be "effectively connected" with the
conduct of a United States trade or business should consult their own tax
advisors as to the tax consequences thereof.

DISTRIBUTIONS. Distributions made by the Company to a Non-U.S. Stockholder
that are neither attributable to gain from the sale or exchange by the Company
of United States real property interests nor designated by the Company as
capital gains dividends will be treated as ordinary income dividends to the
extent that they are made out of current or accumulated earnings and profits of
the Company. Generally, such distributions will be subject to withholding of
United States federal income tax on a gross basis (that is, without allowance of
deductions) at a 30% rate or such reduced rate as may be specified by an
applicable income tax treaty. Under certain treaties, however, reduced
withholding rates generally applicable to dividends do not apply to dividends
paid by a REIT, such as the Company.

Pursuant to current Treasury Regulations, dividends paid to an address in a
country outside the United States are generally presumed to be paid to a
resident of such country for purposes of determining the applicability of
withholding discussed above and the availability of a reduced tax treaty rate.
Under proposed Treasury Regulations, not currently in effect, however, a
Non-U.S. Stockholder who wishes to claim the benefit of an applicable treaty
rate would be required to satisfy certain certification and other requirements.

Distributions made by the Company in excess of its current and accumulated
earnings and profits will not be taxable to a Non-U.S. Stockholder to the extent
that they do not exceed the adjusted basis that the stockholder has in his or
her shares of Common Stock, but instead will reduce the adjusted basis of such
stock (but not below zero). To the extent that such distributions exceed the
adjusted basis that a Non-U.S. Stockholder has in his or her shares of Common
Stock for tax purposes, the amount of such excess will be treated as gain from
the sale or exchange of such shares, the tax treatment of which is described
below.

For withholding tax purposes, the Company is currently required to treat all
distributions as if made out of its current or accumulated earnings and profits
and thus intends to withhold at the rate of 30% (or a reduced treaty rate if
applicable) on the amount of any distribution (other than distributions
designated as capital gain dividends discussed below) made to a Non-U.S.
Stockholder. Under proposed Treasury Regulations, not currently in effect, the
Company would not be required to withhold at the 30% rate on distributions (or
portions thereof) it reasonably estimated to be in excess of the Company's
current and accumulated earnings and profits. Instead, however, as a result of a
legislative change made by the Small Business Job Protection Act of 1996,
effective for distributions after August 20, 1996, the withholding requirements
of the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA") would
apply to any distributions made by the Company to Non-U.S. Stockholders in
excess of the Company's current and

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accumulated earnings and profits. Accordingly, if the Company were no longer
required to withhold at the 30% rate on such distributions, it would be required
to withhold tax under FIRPTA equal to 10% of the amount realized by each
Non-U.S. Stockholder with respect to any such distribution, including a
distribution made to a Non-U.S. Stockholder in excess of the Company's current
and accumulated earnings and profits but that did not exceed the Non-U.S.
Stockholder's adjusted basis in his or her shares of Common Stock for tax
purposes and thus did not give rise to any United States tax. In any case, a
Non-U.S. Stockholder may seek a refund from the IRS of any amount withheld if it
is subsequently determined that such distribution was, in fact, in excess of the
Company's then current and accumulated earnings and profits and the amount
withheld exceeded the Non-U.S. Stockholder's United States tax liability, if
any, with respect to the distribution.

Distributions made by the Company to a Non-U.S. Stockholder that are
designated by the Company at the time of distribution as capital gain dividends
(other than those arising from the sale or other disposition of a United States
real property interest) generally will not be subject to United States federal
income taxation unless the Non-U.S. Stockholder is a nonresident alien
individual who is present in the United States for 183 days or more during the
taxable year and has a "tax home" in the United States, in which case the
nonresident alien individual will be subject to a 30% withholding tax on the
amount of such individual's gain.

Distributions made by the Company to a Non-U.S. Stockholder that are
attributable to gain from the sale or exchange by the Company of United States
real property interests will be taxed to the Non-U.S. Stockholder under FIRPTA.
Under FIRPTA, such distributions are taxed to a Non-U.S. Stockholder as if such
distributions were gains "effectively connected" with the conduct by such
stockholder of a trade or business in the United States. Accordingly, a Non-U.S.
Stockholder will be taxed on such distributions at the same capital gains rates
applicable to U.S. Stockholders (subject to any applicable alternative minimum
tax and a special alternative minimum tax in the case of non-resident alien
individuals), without regard to whether such distributions are designated by the
Company as capital gain dividends. Distributions subject to FIRPTA also may be
subject to the 30% branch profits tax discussed above in the case of a corporate
Non-U.S. Stockholder that is not entitled to treaty relief or exemption.

The Company will be required to withhold tax from any distribution to a
Non-U.S. Stockholder that could be designated by the Company as a capital gain
dividend in an amount equal to 35% of the gross distribution. The amount of tax
withheld is fully creditable against the Non-U.S. Stockholder's FIRPTA tax
liability, and if such amount exceeds the Non-U.S. Stockholder's federal income
tax liability for the applicable taxable year, the Non-U.S. Stockholder may seek
a refund of the excess from the IRS. In addition, if the Company designates
prior distributions as capital gain dividends, subsequent distributions, up to
the amount of such prior distributions, will be treated as capital gain
dividends for purposes of withholding.

SALE OF COMMON STOCK. Gain recognized by a Non-U.S. Stockholder upon the
sale or exchange of shares of Common Stock generally will not be subject to
United States taxation unless such shares constitute a "United States real
property interest" within the meaning of FIRPTA. The shares of Common Stock will
not constitute a "United States real property interest" so long as the Company
is a "domestically controlled REIT." A "domestically controlled REIT" is a REIT
in which at all times during a specified testing period less than 50% in value
of its stock is held directly or indirectly by Non-U.S. Stockholders. The
Company believes that at the closing of the Offering it will be a "domestically
controlled REIT," and therefore that the sale of shares of Common Stock will not
be subject to taxation under FIRPTA. Because, however, the shares of Common
Stock will be publicly traded, no assurance can be given that the Company will
continue to be a "domestically-controlled REIT" in the future. Notwithstanding
the foregoing, gain from the sale or exchange of shares of Common Stock not
otherwise subject to FIRPTA will be taxable to a Non-U.S. Stockholder if the
Non-U.S. Stockholder is a nonresident alien individual who is present in the
United States for 183 days or more during the taxable year and has a "tax home"
in the United States. In

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such case, the nonresident alien individual will be subject to a 30% United
States withholding tax on the amount of such individual's gain.

If the Company does not qualify as or ceases to be a
"domestically-controlled REIT," whether gain arising from the sale or exchange
by a Non-U.S. Stockholder of shares of Common Stock would be subject to United
States taxation under FIRPTA as a sale of a "United States real property
interest" will depend on whether the shares are "regularly traded" (as defined
by applicable Treasury Regulations) on an established securities market (e.g.,
the New York Stock Exchange on which the Common Stock will be traded) and on the
size of the selling Non-U.S. Stockholder's interest in the Company. If gain on
the sale or exchange of shares of Common Stock were subject to taxation under
FIRPTA, the Non-U.S. Stockholder would be subject to regular United States
income tax with respect to such gain in the same manner as a U.S. Stockholder
(as well as to any applicable alternative minimum tax, a special alternative
minimum tax in the case of nonresident alien individuals and the possible
application of the 30% branch profits tax in the case of foreign corporations),
and the purchaser of the stock would be required to withhold and remit to the
IRS 10% of the gross purchase price.

BACKUP WITHHOLDING TAX AND INFORMATION REPORTING. Backup withholding tax
(which generally is a withholding tax imposed at the rate of 31% on certain
payments to persons that fail to furnish certain information under the United
States information reporting requirements) and information reporting generally
will not apply to distributions paid to Non-U.S. Stockholders outside the United
States that are treated as (i) dividends subject to the 30% (or reduced treaty
rate) withholding tax discussed above, (ii) capital gains dividends or (iii)
distributions attributable to gain from the sale or exchange by the Company of
United States real property interests. As a general matter, backup withholding
and information reporting will not apply to a payment of the proceeds of a sale
of shares of Common Stock by or through a foreign office of a foreign broker.
Information reporting (but not backup withholding) will apply, however, to a
payment of the proceeds of a sale of shares of Common Stock by or through a
foreign office of a broker that (a) is a United States person, (b) derives 50%
or more of its gross income for certain periods from the conduct of a trade or
business in the United States or (c) is a "controlled foreign corporation"
(generally, a foreign corporation controlled by United States stockholders) for
United States federal income tax purposes, unless the broker has documentary
evidence in its records that the holder is a Non-U.S. Stockholder and certain
other conditions are met, or the stockholder otherwise establishes an exemption.
A payment to or through a United States office of a broker of the proceeds of a
sale of shares of Common Stock is subject to both backup withholding and
information reporting unless the stockholder certifies under penalties of
perjury that the stockholder is a Non-U.S. Stockholder, or otherwise establishes
an exemption. A Non-U.S. Stockholder may obtain a refund of any amounts withheld
under the backup withholding rules by filing an appropriate claim for refund
with the IRS.

Proposed Treasury Regulations have been recently issued with respect to the
backup withholding and information reporting rules discussed above. In general,
the proposed Treasury Regulations do not alter the substantive withholding and
information reporting requirements but unify current certification procedures
and forms and clarify and modify reliance standards. If finalized in their
current form, the proposed Treasury Regulations would generally be effective for
payments made after December 31, 1997, subject to certain transition rules.

ESTATE TAX. Shares of Common Stock owned by an individual who is not a
citizen or resident of the United States (as determined for purposes of U.S.
federal estate tax law) at the time of death generally will be includible in
such individual's gross estate for federal estate tax purposes unless an
applicable estate tax treaty provides otherwise.

TAX ASPECTS OF THE COMPANY'S INVESTMENT IN THE OPERATING PARTNERSHIP

The Company holds direct and indirect interests in the Operating
Partnership. The following discussion summarizes certain federal income tax
considerations applicable solely to the Company's

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investment in the Operating Partnership. The discussion does not address state
or local tax laws or any federal tax laws other than income tax laws.

PARTNERSHIP CLASSIFICATION

The Company has not requested, and does not intend to request, a ruling from
the IRS that the Operating Partnership will be classified as a partnership for
federal income tax purposes. Instead, Jones, Day, Reavis & Pogue is of the
opinion, based on certain factual assumptions and representations made by the
Company as the general partner of the Operating Partnership, that the Operating
Partnership has been and will continue to be treated as a partnership for
federal income tax purposes and not as an association taxable as a corporation
or a publicly traded partnership. Unlike an IRS ruling, however, an opinion of
counsel is not binding on the IRS, and no assurance can be given that the IRS
will not challenge the status of the Operating Partnership as a partnership for
federal income tax purposes.

If for any reason the Operating Partnership were taxable as a corporation
rather than a partnership for federal income tax purposes, the character of the
Company's assets and items of gross income would change, and, as a result, the
Company would most likely be unable to satisfy the gross income and asset tests,
which would thus prevent the Company from qualifying as a REIT. See
"--Requirements for Qualification--Gross Income Tests, Asset Tests" and
"--Failure to Qualify." In addition, any change in the status of the Operating
Partnership for tax purposes might be treated as a taxable event, in which case
the Company could incur a tax liability without any related cash distribution
from the Operating Partnership. Further, if the Operating Partnership were to be
treated as an association taxable as a corporation, items of income, gain,
deduction and credit of the Operating Partnership would not pass through to its
partners, including the Company; instead, the Operating Partnership would be
taxable as a corporation, subject to entity-level taxation on its net income at
regular corporate tax rates. The partners of the Operating Partnership would be
treated for federal income tax purposes as stockholders, with distributions to
such partners being characterized as dividends.

The opinion of Jones, Day, Reavis & Pogue is based, in part, on Treasury
Regulations recently issued in final form governing the classification of a
business entity as a partnership or an association taxable as a corporation for
federal income tax purposes (the "Final Classification Regulations"). The Final
Classification Regulations are effective as of January 1, 1997, and replace the
former four-factor test used to distinguish partnerships from corporations for
tax purposes. In general, under the Final Classification Regulations, a U.S.
business entity that has at least two members and that is not organized under a
state or federal statute as a corporation, is not described under a state
statute as a joint-stock company or joint-stock association and does not meet
certain other narrow definitions set forth therein (an "eligible entity"), may
elect to be classified as either a partnership or an association taxable as a
corporation. The Final Classification Regulations also provide for a "default"
classification for an eligible entity that fails to file a classification
election. Under the "default" classification, such an entity will be classified
as a partnership if it has two or more members.

The classification of the Operating Partnership is governed entirely by the
Final Classification Regulations. Although the Operating Partnership was in
existence for state law purposes prior to January 1, 1997, it was not first
treated for federal income tax purposes as an entity separate from the Company
until after that date. Under the Final Classification Regulations, the Operating
Partnership will constitute an eligible entity and intends to elect to be
classified as a partnership. Moreover, even if the Operating Partnership failed
to file an election to be classified as a partnership, the Operating
Partnership, as an eligible entity, would be so classified under the default
classification provisions of the Final Classification Regulations so long as it
did not file an election to be classified as an association taxable as a
corporation.

Notwithstanding the classification of a business entity formed as a
partnership under the Final Classification Regulations, such an entity will
nonetheless be treated as a corporation for federal income

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tax purposes if it is a "publicly traded partnership." A publicly traded
partnership is generally a partnership the interests in which are either traded
on an established securities market or readily tradable on a secondary market
(or the substantial equivalent thereof). A publicly traded partnership will be
treated as a corporation for federal income tax purposes unless at least 90% of
such partnership's gross income for a taxable year consists of "qualifying
income" under Section 7704(d) of the Code, which generally includes any income
that is qualifying income for purposes of the 95% gross income test applicable
to a REIT (the "90% Passive Income Exception"). See "--Requirements for
Qualification--Gross Income Tests."

Recently issued Treasury Regulations effective for taxable years beginning
after December 31, 1995 provide limited safe harbors from the definition of a
publicly traded partnership. Pursuant to one such safe harbor (the "Private
Placement Exception"), interests in a partnership will not be treated as readily
tradable on a secondary market or the substantial equivalent thereof if (i) all
interests in the partnership were issued in a transaction (or transactions) that
was not required to be registered under the Securities Act of 1933, and (ii) the
partnership does not have more than 100 partners at any time during the
partnership's taxable year. In determining the number of partners in a
partnership, a person owning an interest in a flow-through entity (i.e., a
partnership, grantor trust or S corporation) that in turn owns an interest in a
partnership will be treated as a partner in such partnership for purposes of the
100 partner rule only if (i) substantially all of the value of the owner's
interest in the flow-through entity is attributable to the flow-through entity's
interest in the partnership, and (ii) a principal purpose of the use of the
tiered arrangement is to permit the partnership to satisfy the 100-partner
limitation. Because no interests in the Operating Partnership have been or are
traded on an established securities market and because the Operating Partnership
should not be treated as having more than 100 partners, the Company believes
that the Operating Partnership presently qualifies for the Private Placement
Exception. The Operating Partnership intends to monitor closely its compliance
with the Private Placement Exception to ensure that it remains applicable. Even
if, however, the Operating Partnership were considered to be a publicly traded
partnership because it was deemed to have more than 100 partners, the Operating
Partnership would not be treated as a corporation for federal income tax
purposes if it otherwise qualified for the 90% Passive Income Exception from
such treatment.

INCOME TAXATION OF THE OPERATING PARTNERSHIP AND ITS PARTNERS

PARTNERS, NOT PARTNERSHIP, SUBJECT TO TAX. A partnership is not a separate
taxable entity for federal income tax purposes. Rather, partners are allocated
their proportionate share of the items of income, gain, loss, deduction and
credit of the partnership, and are potentially subject to tax thereon, without
regard to whether the partners receive any distributions from the partnership.
The Company will be required to take into account its allocable share of the
foregoing items of the Operating Partnership for purposes of the various REIT
income tests and in the computation of its "REIT taxable income." See
"--Requirements for Qualification--Gross Income Tests."

PARTNERSHIP ALLOCATIONS. Although a partnership agreement will generally
determine the allocation of a partnership's income and losses among the
partners, such allocations will be disregarded for tax purposes under Section
704(b) of the Code if they do not comply with the provisions of Section 704(b)
and the Treasury Regulations promulgated thereunder. If an allocation is not
recognized for federal income tax purposes, the item subject to the allocation
will be reallocated in accordance with the partners' interests in the
partnership, which will be determined by taking into account all of the facts
and circumstances relating to the economic arrangement of the partners with
respect to such item. The allocations of taxable income and loss contained in
the Partnership Agreement are intended to comply with the requirements of
Section 704(b) of the Code and the Treasury Regulations promulgated thereunder.

TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES. Pursuant to Section 704(c)
of the Code, income, gain, loss, and deduction attributable to appreciated or
depreciated property that is contributed to a partnership in exchange for an
interest in the partnership must be allocated for federal income tax purposes in
a manner such that the contributing partner is charged with, or benefits from,
respectively, the unrealized

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<PAGE>
gain or unrealized loss associated with the property at the time of the
contribution. The amount of such unrealized gain or unrealized loss is generally
equal to the difference between the fair market value of the contributed
property at the time of contribution and the adjusted basis of such property for
tax purposes at the time of contribution. Such allocations are solely for
federal income tax purposes and do not affect the book capital accounts or other
economic or legal arrangements among the partners. The Operating Partnership was
formed by way of contributions of appreciated property (including the
Properties). Consequently the Partnership Agreement requires allocations of
income, gain, loss, and deduction attributable to such contributed properties to
be made in a manner that is consistent with Section 704(c) of the Code.

In general, Section 704(c) of the Code will cause the Company and other
Limited Partners of the Operating Partnership contributing Properties to the
Operating Partnership with fair market values in excess of their adjusted bases
for federal income tax purposes to be allocated solely for tax purposes lower
amounts of annual depreciation deductions and increased taxable income and gain
on the sale of those Properties than would ordinarily be the case for economic
or book purposes. These allocations may cause the Company to recognize taxable
income in excess of cash proceeds, which might adversely affect the Company's
ability to comply with the REIT distribution requirements. See "--Taxation of
the Company-- Annual Distribution Requirements."

The foregoing principles may also affect the calculation of the Company's
earnings and profits for purposes of determining the portion of the Company's
distributions that is taxable as a dividend. See "--Taxation of Taxable U.S.
Stockholders." The application of these rules over time may result in a higher
portion of the Company's distributions being taxed as a dividend than would have
been the case had the Operating Partnership purchased the Properties for cash.

BASIS IN PARTNERSHIP INTEREST. The Company's adjusted basis in its
partnership interest in the Operating Partnership for tax purposes generally (i)
will be equal to the amount of cash and the basis of any other property
contributed to the Operating Partnership by the Company, (ii) will be increased
by (A) the Company's allocable share of the Operating Partnership's income and
(B) the Company's allocable share of indebtedness of the Operating Partnership,
and (iii) will be reduced, but not below zero, by (A) the Company's allocable
share of the Operating Partnership's losses and (B) the amount of cash and the
basis of any other property distributed by the Operating Partnership to the
Company, including any constructive cash distributions resulting from a
reduction in the Company's allocable share of indebtedness of the Operating
Partnership.

If the allocation of the Company's distributive share of the Operating
Partnership's losses exceeds the adjusted basis of the Company's partnership
interest in the Operating Partnership for tax purposes, the recognition of such
excess loss will be deferred until such time and to the extent that the Company
has adjusted tax basis in its interest in the Operating Partnership. To the
extent that the Operating Partnership's distributions, or any decrease in the
Company's share of the indebtedness of the Operating Partnership (each such
decrease being considered a constructive cash distribution to the Company),
would reduce Company's adjusted tax basis, such excess distributions (including
such constructive distributions) would constitute taxable income to the Company.
Such taxable income will normally be characterized as a capital gain, and if the
Company's interest in the Operating Partnership has been held for longer than
the long-term capital gain holding period (currently one year), such
distributions and constructive distributions will constitute long-term capital
gain.

SALE OF THE PROPERTIES. Generally, any gain realized by the Operating
Partnership on the sale of property that it has held for more than one year will
be long-term capital gain, except for any portion of such gain that is treated
as depreciation or cost recovery recapture.

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<PAGE>
OTHER TAX CONSIDERATIONS

POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING TAX
CONSEQUENCES. Prospective stockholders should recognize that the present
federal income tax treatment of the Company may be modified by future
legislative, judicial or administrative actions or decisions at any time, which
may or may not be retroactive in effect. As a result, any such action or
decision could affect investments and commitments previously made. The rules
dealing with federal income taxation are constantly under review by persons
involved in the legislative process and by the IRS and the Treasury Department,
resulting in statutory changes as well as the promulgation of new, or revisions
to existing, Treasury Regulations and revised interpretations of established
concepts. No prediction can be made as to the likelihood of the passage of any
new tax legislation or other provisions that could either directly or indirectly
affect the Company or its stockholders. Accordingly, it is always possible that
revisions in federal income tax laws and interpretations thereof could adversely
affect the tax consequences of an investment in shares of Common Stock.

STATE AND LOCAL TAXES. The Company, the Operating Partnership and its
stockholders may be subject to state or local taxation in various state or local
jurisdictions, including those in which it or they transact business or reside.
The state and local tax treatment of the Company and its stockholders may not
conform to the federal income consequences discussed above. Consequently,
prospective stockholders should consult their own tax advisors regarding the
effect of state and local tax laws on an investment in shares of Common Stock.

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ERISA CONSIDERATIONS

THE FOLLOWING IS A SUMMARY OF MATERIAL CONSIDERATIONS ARISING UNDER ERISA
AND THE PROHIBITED TRANSACTIONS PROVISIONS OF SECTION 4975 OF THE CODE THAT MAY
BE RELEVANT TO A PROSPECTIVE PURCHASER (INCLUDING WITH RESPECT TO THE DISCUSSION
CONTAINED IN "--STATUS OF THE COMPANY AND THE OPERATING PARTNERSHIP UNDER
ERISA," TO A PROSPECTIVE PURCHASER, WHETHER OR NOT IT IS AN EMPLOYEE BENEFIT
PLAN SUBJECT TO ERISA, ANOTHER TAX-QUALIFIED PENSION, PROFIT SHARING OR STOCK
BONUS PLAN, OR AN INDIVIDUAL RETIREMENT ACCOUNT OR ANNUITY ("IRA")). THE
DISCUSSION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF ERISA OR SECTION 4975 OF
THE CODE THAT MAY BE RELEVANT TO PARTICULAR PROSPECTIVE PURCHASERS (INCLUDING
EMPLOYEE BENEFIT PLANS SUBJECT TO ERISA, OTHER TAX-QUALIFIED PLANS AND IRAS) OR
MATERIAL CONSIDERATIONS RELATING TO PROSPECTIVE PURCHASERS THAT ARE GOVERNMENTAL
PLANS, CHURCH PLANS OR OTHER EMPLOYEE BENEFIT PLANS THAT ARE EXEMPT FROM ERISA
OR SECTION 4975 OF THE CODE BUT THAT MAY BE SUBJECT TO STATE LAW REQUIREMENTS IN
LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.

A FIDUCIARY MAKING THE DECISION TO INVEST IN SHARES OF THE COMMON STOCK ON
BEHALF OF A PROSPECTIVE PURCHASER WHICH IS AN EMPLOYEE BENEFIT PLAN SUBJECT TO
ERISA, A TAX-QUALIFIED PENSION, PROFIT SHARING OR STOCK BONUS PLAN, AN IRA, A
CHURCH PLAN OR A GOVERNMENTAL PLAN IS ADVISED TO CONSULT ITS OWN LEGAL ADVISOR
REGARDING THE SPECIFIC CONSIDERATIONS ARISING UNDER ERISA, SECTION 4975 OF THE
CODE, AND STATE LAW WITH RESPECT TO THE PURCHASE, OWNERSHIP, OR SALE OF SHARES
OF THE COMMON STOCK BY SUCH PLAN OR IRA.

EMPLOYMENT BENEFIT PLANS, TAX-QUALIFIED PENSION, PROFIT SHARING OR STOCK BONUS
PLANS AND IRAS

Each fiduciary of an employee benefit plan subject to ERISA (an "ERISA
Plan") should carefully consider whether an investment in the Common Stock is
consistent with its fiduciary responsibilities under ERISA. In particular, the
fiduciary requirements of Part 4 of Title I of ERISA require an ERISA Plan's
investments to be (i) prudent and in the interests of the participants and
beneficiaries of the ERISA Plan, (ii) diversified in order to minimize the risk
of large losses, unless it is clearly prudent not to do so and (iii) authorized
under the terms of the governing documents of the ERISA Plan. In addition, a
fiduciary of an ERISA Plan should not cause or permit the plan to enter into
transactions prohibited under Section 406 of ERISA or Section 4975 of the Code.
In determining whether an investment in the Common Stock is prudent for purposes
of ERISA, the appropriate fiduciary of an ERISA Plan should consider all of the
facts and circumstances, including whether the investment is reasonably
designed, as a part of the ERISA Plan's investment portfolio for which the
fiduciary has responsibility, to meet the objectives of the ERISA Plan, taking
into consideration the risk of loss and opportunity for gain (or other return)
from the investment, the diversification, cash flow and funding requirements of
the ERISA Plan, and the liquidity and current return of the ERISA Plan's
investment portfolio. A fiduciary should also take into account the nature of
the Company's business, the length of the Company's operating history, the terms
of the Management Agreements, the fact that certain investment properties may
not have been identified yet, other matters described under "Risk Factors" and
the possibility of UBTI. See "Certain Federal Income Tax
Considerations--Taxation of Taxable U.S. Stockholders."

The fiduciary of an ERISA Plan or of an IRA or a qualified pension, profit
sharing or stock bonus plan that is not subject to ERISA (a "Non-ERISA Plan")
but that is subject to Section 4975 of the Code ("Other Plans") and,
accordingly, such fiduciary should ensure that the purchase of Common Stock will
not constitute a non-exempt prohibited transaction under ERISA or the Code. In
addition, fiduciaries of governmental plans and certain church plans that are
exempt from taxation under Sections 401(a) and 501(a) of the Code should ensure
that the purchase of Common Stock will not constitute a prohibited transaction
under Section 503 of the Code and any applicable state or local law.

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STATUS OF THE COMPANY AND THE OPERATING PARTNERSHIP UNDER ERISA

THE FOLLOWING SECTION DISCUSSES CERTAIN PRINCIPLES THAT APPLY IN DETERMINING
WHETHER THE FIDUCIARY REQUIREMENTS OF ERISA AND THE PROHIBITED TRANSACTION
PROVISIONS OF ERISA AND THE CODE APPLY TO AN ENTITY BECAUSE ONE OR MORE
INVESTORS IN THE ENTITY'S EQUITY INTERESTS IS AN ERISA PLAN OR OTHER PLAN. AN
ERISA PLAN FIDUCIARY SHOULD ALSO CONSIDER, AMONG OTHER THINGS, THE RELEVANCE OF
THESE PRINCIPLES TO ERISA'S PROHIBITION ON IMPROPER DELEGATION OF CONTROL OVER
OR RESPONSIBILITY FOR "PLAN ASSETS" AND ERISA'S IMPOSITION OF CO-FIDUCIARY
LIABILITY ON A FIDUCIARY WHO PARTICIPATES IN, PERMITS (BY ACTION OR INACTION)
THE OCCURRENCE OF, OR FAILS TO REMEDY A KNOWN BREACH BY ANOTHER FIDUCIARY.

If the assets of the Company are deemed to be assets of an ERISA Plan or
Other Plan ("plan assets"), (i) the prudence standards and other provisions of
Part 4 of Title I of ERISA (in the case of an ERISA Plan) and the prohibited
transaction provisions of ERISA (in the case of an ERISA Plan) and the Code
would be applicable to any transactions involving the Company's assets and (ii)
persons who exercise any authority or control over the Company's assets, or who
provide investment advice to the Company, would be (for purposes of ERISA and
the Code) fiduciaries of ERISA Plans and Other Plans that acquire Common Stock.
The Department of Labor (the "DOL"), which has certain administrative
responsibility over ERISA Plans and Other Plans, has issued a regulation
defining plan assets for certain purposes (the "DOL Regulation"). The DOL
Regulation generally provides that when an ERISA Plan acquires a security that
is an equity interest in an entity and that security is neither a
"publicly-offered security" nor a security issued by an investment company
registered under the 1940 Act, the assets of the ERISA Plan include both the
equity interest and an undivided interest in each of the underlying assets of
the entity, unless it is established either that the entity is an "operating
company" (as defined in the DOL Regulation) or that equity participation in the
entity by "benefit plan investors" is not "significant." "Benefit plan
investors" are ERISA Plans, Other Plans, other employee benefit plans (whether
or not subject to ERISA or Section 4975 of the Code) and any entity whose
underlying assets include plan assets under the DOL Regulations.

The DOL Regulation defines a "publicly-offered security" as a security that
is "widely held," "freely transferable" and either part of a class of securities
registered under the Exchange Act, or sold pursuant to an effective registration
statement under the Securities Act (provided the securities are registered under
the Exchange Act within 120 days, or such later time as may be allowed by the
SEC (the "registration period"), after the end of the fiscal year of the issuer
during which the offering occurred). The Common Stock is being sold in an
offering registered under the Securities Act. In addition, the Common Stock has
been registered under the Exchange Act.

The DOL Regulation provides that a security is "widely-held" only if it is
part of a class of securities that is owned by 100 or more investors independent
of the issuer and of one another. A security will not fail to be "widely held"
because the number of independent investors falls below 100 subsequent to the
initial public offering as a result of events beyond the issuer's control. The
Company expects the Common Stock to be "widely held" upon the completion of the
Offering.

The DOL Regulation provides that whether a security is "freely transferable"
is a factual question to be determined on the basis of all relevant facts and
circumstances. The DOL Regulation further provides that where a security is part
of an offering in which the minimum investment is $10,000 or less, certain
restrictions ordinarily will not, alone or in combination, affect a finding that
such securities are "freely transferable." The Offering will not impose a
minimum investment requirement. The restrictions on transfer enumerated in the
DOL Regulation as ordinarily not affecting a finding that the securities are
"freely transferable" include: (i) any restriction on or prohibition against any
transfer or assignment that would result in a termination or reclassification of
the Company for federal or state tax purposes, or that would otherwise violate
any state or federal law or court order, (ii) any requirement that advance
notice of a transfer or assignment be given to the Company, (iii) any
requirement that either the transferor or transferee, or both, execute
documentation setting forth representations as to compliance with any

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restrictions on transfer that are among those enumerated in the DOL Regulation
as not affecting free transferability, (iv) any administrative procedure that
establishes an effective date, or an event (such as the completion of the
Offering) prior to which a transfer or assignment will not be effective, (v) any
prohibition against transfer or assignment to an ineligible or unsuitable
investor, and (vi) any limitation or restriction on transfer or assignment that
is not imposed by the issuer or a person acting on behalf of the issuer. The
Company believes that the restrictions imposed under the Charter on the transfer
of Common Stock are of the type of restrictions on transfer generally permitted
under the DOL Regulation or are not otherwise material and should not result in
the failure of the Common Stock to be "freely transferable" within the meaning
of the DOL Regulation. See "Capital Stock--Restrictions on Transfer." The
Company also believes that certain restrictions on transfer that derive from the
securities laws, from contractual arrangements with the Underwriters in
connection with the Offering and from certain other provisions should not result
in the failure of the Common Stock to be "freely transferable." See
"Underwriting" and "Certain Provisions of Maryland Law and the Company's Charter
and Bylaws." Furthermore, the Company is not aware of any other facts or
circumstances limiting the transferability of the Common Stock that are not
included among those enumerated as not affecting their free transferability
under the DOL Regulation, and the Company does not expect to impose in the
future (or to permit any person to impose on its behalf) any other limitations
or restrictions on transfer that would not be among the enumerated permissible
limitations or restrictions.

Assuming that the Common Stock will be "widely held" and that no facts and
circumstances other than those referred to in the preceding paragraph exist that
restrict transferability of the Common Stock, the Company believes that the
Common Stock should constitute a "publicly-offered security" and, therefore,
that the assets of the Company should not be deemed to include the assets of any
ERISA Plan that invests in the Common Stock. However, because of the factual
nature of the legal issues involved, the Company can offer no assurances in this
regard.

The DOL Regulation will also apply in determining whether the assets of the
Operating Partnership will be deemed to include plan assets. The partnership
interests in the Operating Partnership will not be publicly offered securities.
Nevertheless, if the Common Stock constitutes publicly offered securities, the
Company believes that the indirect investment in the Operating Partnership by
ERISA Plans or Other Plans through their ownership of the Common Stock will not
cause the assets of the Operating Partnership to be treated as plan assets.

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UNDERWRITING

The underwriters of the Offering (the "Underwriters"), for whom Lehman
Brothers Inc., A.G. Edwards & Sons, Inc., Smith Barney Inc., and EVEREN
Securities, Inc. are acting as representatives (the "Representatives"), have
severally agreed, subject to the conditions contained in the Underwriting
Agreement (the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part), to purchase from the Company
and the Company has agreed to sell to each Underwriter, the aggregate number of
shares of Common Stock set forth opposite the name of each such Underwriter.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ------------------------------------------------------------------------------------------- ----------
<S> <C>
Lehman Brothers Inc........................................................................
A.G. Edwards & Sons, Inc...................................................................
Smith Barney Inc...........................................................................
EVEREN Securities, Inc.....................................................................

----------
TOTAL................................................................................ 5,700,000
----------
----------
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to certain
conditions, and that if any of the shares of Common Stock are purchased by the
Underwriters pursuant to the Underwriting Agreement, all of the shares agreed to
be purchased by the Underwriters under the Underwriting Agreement must be so
purchased.

The Company has been advised that the Underwriters propose to offer shares
of Common Stock directly to the public initially at the public offering price
set forth on the cover page of this Prospectus, and to certain selected dealers
who may include the Underwriters at such public offering price less a selling
concession not in excess of $ per share. The selected dealers may reallow
a concession not in excess of $ per share to certain brokers or dealers.
After the Offering, the public offering price, the concession to selected
dealers and the reallowance may be changed by the Representatives.

The Company has agreed that it will not, without the prior written consent
of Lehman Brothers Inc., offer for sale, contract to sell, sell or otherwise
dispose of, directly or indirectly, any shares of Common Stock (other than
shares offered hereby, shares issued pursuant to the Stock Option Plans and any
OP Units or shares of Common Stock that may be issued in connection with any
acquisition of a property), or sell or grant options, rights or warrants with
respect to any shares of Common Stock (other than the grant of options pursuant
to the Stock Option Plans), for a period of days after the date of this
Prospectus. Each of the directors and officers of the Company and certain other
holders of the Common Stock have entered into agreements with the Underwriters
providing that, subject to certain exceptions, such individuals will not sell
any shares of Common Stock or OP Units for a period of days after the date of
this Prospectus without the prior written consent of Lehman Brothers Inc.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
the payments they may be required to make in respect thereto.

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The Company has granted to the Underwriters an option to purchase up to an
additional 855,000 shares of Common Stock, at the public offering price, less
the aggregate underwriting discounts and commissions, shown on the cover page of
this Prospectus, solely to cover overallotments, if any. Such option may be
exercised at any time within 30 days after the date of the Underwriting
Agreement. To the extent that such option is exercised, each Underwriter will be
committed, subject to certain conditions, to purchase a number of the additional
shares of Common Stock proportionate to such Underwriter's initial commitment as
indicated in the preceding table.

Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price will be determined through negotiations
between the Company and the Representatives. Among the factors to be considered
in such negotiations, in addition to prevailing market conditions, are
distribution rates and financial characteristics of publicly traded REITs that
the Company and the Representatives believe to be comparable to the Company, the
expected results of operations of the Company (which are based on the results of
operations of the Properties in recent periods), estimates of future business
potential and earnings prospects of the Company as a whole and the current state
of the real estate market in the Company's primary markets and the economy as a
whole. The initial price per share to the public set forth on the cover page of
this Prospectus should not, however, be considered an indication of the actual
value of the Common Stock. Such price is subject to change as a result of market
conditions and other factors. The Company intends to apply to list the Common
Stock on the New York Stock Exchange under the symbol " ."

Certain of the Underwriters and their affiliates have from time to time
performed, and may continue to perform in the future, various investment banking
and other services for the Company, for which customary compensation has been
and may in the future be received. See "Certain Transactions-- Transactions with
EVEREN."

The Underwriters do not intend to confirm sales of Common Stock to any
account over which they exercise discretionary authority.

The Underwriters have reserved for sale at the public offering price up to
100,000 shares of Common Stock to directors, officers, employees and consultants
of the Company, their business affiliates and related parties who have expressed
an interest in purchasing shares. The number of shares available for sale to the
general public will be reduced to the extent such persons purchase the reserved
shares. Any reserved shares not so purchased will be offered by the Underwriters
to the general public on the same basis as the others have been offered hereby.

EXPERTS

The consolidated financial statements of Great Lakes REIT, Inc. as of
December 31, 1996 and 1995 and for each of the three years in the period ended
December 31, 1996, the statements of revenues and certain expenses for Court
International II, Woodcreek I and II, Long Lake Crossing, Lincoln Center II &
III, 40 Oak Hollow, Centennial Center, Dublin Techmart and Princeton Hill
Corporate Center all appearing in this Prospectus and Registration Statement,
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon appearing elsewhere herein, and are included in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.

LEGAL MATTERS

Certain legal matters will be passed upon for the Company by Jones, Day,
Reavis & Pogue and certain matters of Maryland law, including the validity of
the shares of Common Stock offered hereby, will be passed upon for the Company
by Ballard Spahr Andrews & Ingersoll. In addition, the description of federal
income tax consequences contained in this Prospectus under the heading "Certain
Federal Income Tax Considerations" is based upon the opinion of Jones, Day,
Reavis & Pogue. Certain legal matters will

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<PAGE>
be passed upon for the Underwriters by Rogers & Wells. Jones, Day, Reavis &
Pogue and Rogers & Wells will rely upon the opinion of Ballard Spahr Andrews &
Ingersoll as to matters of Maryland law.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the SEC. Such reports, proxy statements and information filed
by the Company with the SEC pursuant to the informational requirements of the
Exchange Act may be inspected and copied at the public reference facilities
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the SEC's regional offices located at Seven World Trade Center,
13th Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. The SEC maintains a website at http://www.sec.gov
containing reports, proxy and information statements and other information
regarding registrants, including the Company, that file electronically with the
SEC. In addition, the Common Stock will be listed on the NYSE and similar
information concerning the Company can be inspected and copied at the offices of
the NYSE, 20 Broad Street, New York, New York 10005.

The Company has filed with the SEC a registration statement (the
"Registration Statement," which term shall include any amendments thereto) on
Form S-11 under the Securities Act, with respect to the shares of Common Stock
offered hereby. This Prospectus does not contain all the information set forth
in the Registration Statement and the exhibits and schedules thereto, certain
parts of which are omitted in accordance with the rules and regulations of the
SEC. Statements contained in this Prospectus as to the content of any contract
or other document are not necessarily complete, and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference and the exhibits and schedules hereto. For further
information, reference is hereby made to the Registration Statement and the
exhibits and schedules thereto.

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GLOSSARY

Unless the context otherwise requires, the following capitalized terms shall
have the meanings set forth below for the purposes of this Prospectus:

"1996 OPTION PLAN" means the 1996 Incentive Stock Option Plan of the
Company.

"ACQUISITION COST" means, as of the date of acquisition of a Property, the
aggregate acquisition cost of a Property, including the applicable purchase
price amount, closing costs, tenant improvements, leasing commissions and
capital expenditures.

"ADJUSTED ACQUISITION YIELD" means the Annualized Net Operating Income at
Acquisition of a Property divided by the Acquisition Cost of the Property.

"ADJUSTED INVESTMENT YIELD" means the Annualized Net Operating Income at
December 31, 1996 of a Property divided by the Investment Cost.

"ADVISOR" means Equity Partners, Ltd., an Illinois corporation.

"ADVISOR PLAN" means the Advisor's Stock Option Plan dated July 2, 1992.

"AFFILIATES" means with respect to any individual or entity, any other
individual or entity directly or indirectly controlling, controlled by or under
common control with such individual or entity.

"AGGREGATE STOCK OWNERSHIP LIMIT" means the provisions of the Bylaws that
prohibit any person from acquiring or holding, directly or indirectly, shares of
stock in excess of 9.9% in value of the aggregate of the outstanding shares of
the stock of the Company.

"ANNUALIZED BASE RENT" means the monthly contractual base rent under the
applicable lease(s) (e.g., relating to a tenant, a Property or all of the
Properties, as applicable) as of a specified date multiplied by 12.

"ANNUALIZED NET OPERATING INCOME AT ACQUISITION" means (i) in the case of
Properties owned by the Company and acquired prior to June 30, 1996, the net
operating income of the Property for the first full calendar quarter of
ownership by the Company multiplied by four; and (ii) in the case of Properties
owned by the Company and acquired after June 30, 1996, the rental income from
the Property for the first full month of ownership by the Company multiplied by
12, and less property operating expenses for such Property for the year ended
December 31, 1996.

"ANNUALIZED NET OPERATING INCOME AT DECEMBER 31, 1996" means the net
operating income of the Property for the quarter ended December 31, 1996
multiplied by four.

"BOARD OF DIRECTORS" means the board of directors of the Company.

"BOOK-TAX DIFFERENCE" means the difference between the fair market value of
contributed property at the time of contribution and the adjusted tax basis of
such property at such time.

"BUILT-IN GAIN" means any asset acquired by the Company from a corporation
which is or has been a C corporation.

"BYLAWS" means the bylaws of the Company.

"CHARTER" means the charter of the Company.

"CHICAGO MARKET" means the Chicago, Illinois suburban office market.

121
<PAGE>
"CHICAGO MARKET STUDY" refers to CB Commercial's mid-year 1996 CBC/Torto
Wheaton Research for Chicago, Illinois.

"CINCINNATI MARKET" means the Cincinnati, Ohio suburban office market.

"CINCINNATI MARKET STUDY" refers to CB Commercial's mid-year 1996 CBC/Torto
Wheaton Research for Cincinnati, Ohio.

"CLASS A PREFERRED STOCK" means Class A Convertible Preferred Stock, $.01
par value per share.

"CODE" means the Internal Revenue Code of 1986, as amended.

"COLUMBUS MARKET" means the Columbus, Ohio suburban office market.

"COLUMBUS MARKET STUDY" refers to CB Commercial's mid-year 1996 CBC/Torto
Wheaton Research for Columbus, Ohio.

"COMMON STOCK" means shares of the Company's Common Stock, $.01 par value
per share.

"COMPANY" means Great Lakes REIT, Inc., a Maryland corporation. While the
Company and the Operating Partnership are separate entities, for ease of
reference and unless the context otherwise requires, all references in this
Prospectus to the "Company" refer to the Company and the Operating Partnership.

"CONTROLLED FOREIGN CORPORATION" means generally a foreign corporation
controlled by United States stockholders.

"CREDIT FACILITY" means the Amended and Restated Credit Agreement dated
December 27, 1996, as amended as of March 1, 1997, among the Operating
Partnership, the Company and The First National Bank of Boston and Bank of
America Illinois and First Bank National Association and Other Banks Which May
Become Party to the Agreement and The First National Bank of Boston, as Agent.

"DETROIT MARKET" means the Detroit, Michigan suburban office market.

"DETROIT MARKET STUDY" refers to CB Commercial's mid-year 1996 CBC/Torto
Wheaton Research for Detroit, Michigan.

"DIRECTORS PLAN" means the Stock Option Plan for Independent Directors and
Brokers dated July 2, 1992 as amended July 15, 1994.

"DOMESTICALLY CONTROLLED REIT" means a REIT in which at all times during a
specified testing period less than 50% in value of its stock is held directly or
indirectly by Non-U.S. Stockholders.

"EMPLOYEE LOAN PROGRAM" means the Great Lakes REIT, Inc. Limited Purpose
Loan Program.

"ENVIRONMENTAL ASSESSMENTS" means Phase I and Phase II environmental
Assessments combined.

"ENVIRONMENTAL LAWS" means the various federal, state and local laws,
ordinances and regulations relating to the protection of the environment.

"EXCEPTED HOLDER" means a holder of Common Stock that Board of Directors, in
its sole discretion, exempts from the Aggregate Stock Ownership Limit.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

"FIRPTA" means the Foreign Investment in Real Property Tax Act of 1980.

122
<PAGE>
"FIVE OR FEWER REQUIREMENT" means the requirement of Section 856(h) of the
Code that not more than 50% in value of the outstanding shares of Common Stock
may be owned, actually or constructively, by five or fewer individuals at any
time during the last half of any taxable year of the Company.

"FORTIS" means Fortis Benefits Insurance Company.

"GAAP" means generally accepted accounting principles.

"INDEMNIFICATION SHARES" refers to the 15,000 shares of Common Stock placed
in escrow to secure the indemnification obligations of the shareholders of the
Advisor.

"INSTITUTIONAL INVESTORS" means Fortis; MSIF; the SICAV Subsidiary; WKZV;
Logan, Inc.; and Pension Trust Account No. 104972 Held by Bankers Trust Company
as Trustee.

"INTERESTED STOCKHOLDER" means any person who beneficially owns ten percent
or more of the voting power of a corporation's shares.

"INVESTMENT COST" means as of December 31, 1996, the aggregate investment
cost of a Property, including the applicable purchase price amount, closing
costs, tenant improvements, leasing commissions and capital expenditures less
any applicable depreciation and amortization of tenant improvements, leasing
commissions and capital expenditures.

"IRA" means an individual retirement account or annuity.

"IRS" means the Internal Revenue Service.

"MGCL" means the Maryland General Corporation Law, as amended.

"MSAM" means Morgan Stanley Asset Management Inc.

"MSIF" means Morgan Stanley Institutional Fund, Inc.--U.S. Real Estate
Portfolio.

"MERGER" means the merger of the Advisor with and into the Company,
effective April 1, 1996.

"MILWAUKEE MARKET" means the Milwaukee, Wisconsin suburban office market.

"MILWAUKEE MARKET STUDY" refers to Polacheck's mid-year 1996 CBC/Torto
Wheaton Research for Milwaukee, Wisconsin.

"MINNEAPOLIS MARKET" means the Minneapolis, Minnesota suburban office
market.

"MINNEAPOLIS MARKET STUDY" refers to CB Commercial's mid-year 1996 CBC/Torto
Wheaton Research for Minneapolis, Minnesota.

"NAMED EXECUTIVE OFFICERS" means the Chief Executive Officer and the four
other most highly paid executive officers of the company.

"NAREIT" means the National Association of Real Estate Investment Trusts.

"NET ASSET VALUE" means the net asset value of the Common Stock as
determined by the Board of Directors from time to time.

"NON-U.S. STOCKHOLDERS" means the persons that are, for purposes of United
States federal income taxation, nonresident alien individuals, foreign
corporations, foreign partnerships or foreign estates or trusts.

"NYSE" means the New York Stock Exchange, Inc.

123
<PAGE>
"OFFERING" means the Offering of shares of Common Stock of the Company
pursuant to and as described in this Prospectus.

"OPERATING PARTNERSHIP" means Great Lakes REIT, L.P., a Delaware limited
partnership.

"OP UNITS" means the limited and general partner interests in the Operating
Partnership.

"PARTNERSHIP AGREEMENT" means the Amended and Restated Agreement of Limited
Partnership of the Operating Partnership.

"PREFERRED STOCK" means shares of the Company's Preferred Stock, par value
$.01 per share.

"PROHIBITED OWNER" means the person or entity holding record title to shares
of the Company in excess of the Ownership Limit.

"PROHIBITED TRANSFEREE" means any transfer of Common Stock of the Company
whereby the purported transfer would result in any person violating the
Ownership Limit.

"PROPERTIES" means the 27 office properties referred to herein that comprise
the Company's portfolio of Midwest office properties.

"RFA" means Regional Financial Associates.

"RECOGNITION PERIOD" means the ten-year period beginning on the date a
Built-In Gain Asset is acquired by the Company.

"REGISTRABLE SHARES" means the 3,867,000 shares of Common Stock acquired by
the Institutional Investors pursuant to the Stock Purchase Agreement.

"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of August 20, 1996 by and among the Company and the Institutional
Investors.

"REIT" means real estate investment trust as defined by Sections 856 through
860 of the Code and applicable Treasury Regulations.

"RELATED PARTY TENANT" means a tenant actually or constructively owned 10%
or more by the REIT or an owner of 10% or more of the REIT.

"REPRESENTATIVES" means Lehman Brothers Inc., A.G. Edwards & Sons, Inc.,
Smith Barney Inc. and EVEREN Securities, Inc.

"RESTRICTED SHARES" means the shares of Common Stock (i) that were
outstanding immediately prior to the completion of the Offering and (ii) that
may be acquired by any person in exchange for OP Units, all of which are
"restricted securities" within the meaning of Rule 144.

"RULE 144" means Rule 144 promulgated under the Securities Act.

"SEC" means the Securities and Exchange Commission or any successor agency
thereto.

"SECURITIES ACT" means the Securities Act of 1933, as amended.

"SICAV SUBSIDIARY" means Morgan Stanley SICAV Subsidiary, S.A.

"STOCK OPTION PLANS" means the Advisor Plan, the Directors Plan and the 1996
Option Plan.

"STOCK PURCHASE AGREEMENT" means the Stock Purchase Agreement dated as of
August 20, 1996 by and among the Company and the Institutional Investors.

124
<PAGE>
"TOTAL DEBT TO TOTAL MARKET CAPITALIZATION RATIO" means as of any particular
date, the ratio of (i) the Company's total indebtedness to (ii) the total market
capitalization plus the Company's total indebtedness.

"TRUST" means the vehicle to hold those shares of the stock of the Company
the beneficial or constructive ownership of which otherwise would cause such
person to violate certain limitations.

"UBTI" means unrelated business taxable income.

"UNDERWRITERS" means the underwriters of the Offering for whom Lehman
Brothers Inc., A.G. Edwards & Sons, Inc., Smith Barney Inc. and EVEREN
Securities, Inc. are acting as Representatives.

"U.S. STOCKHOLDER" means a holder of shares of Common Stock who (for United
States federal income tax purposes) (i) is a citizen or resident of the United
States, (ii) is a corporation, partnership, or other entity created or organized
in or under the laws of the United States or of any political subdivision
thereof, or (iii) is an estate or trust the income of which is subject to United
States federal income taxation regardless of its source.

"VOTING SHARES" means shares of Common Stock and shares of Preferred Stock
with voting rights.

"WHITE PAPER" means the White Paper on Funds from Operations approved by the
Board of Governors of the NAREIT in March of 1995.

125
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
GREAT LAKES REIT, INC.
Consolidated Pro Forma Financial Statements (Unaudited):................................................. F-3
Consolidated Pro Forma Balance Sheet as of December 31, 1996........................................... F-4
Notes to Consolidated Pro Forma Balance Sheet.......................................................... F-5
Consolidated Pro Forma Statement of Income for the Year Ended December 31, 1996........................ F-6
Notes to Consolidated Pro Forma Statement of Income.................................................... F-7

Historical:
Report of Independent Auditors......................................................................... F-9
Consolidated Balance Sheets as of December 31, 1996 and 1995........................................... F-10
Consolidated Statements of Income for the Years Ended December 31, 1996, 1995 and 1994................. F-11
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended December 31, 1996, 1995
and 1994.............................................................................................. F-12
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994............. F-13
Notes to Consolidated Financial Statements............................................................. F-14

COURT INTERNATIONAL II
Report of Independent Auditors........................................................................... F-23
Statements of Revenue and Certain Expenses for the period from January 1, 1996 to December 13, 1996 and
for the year ended December 31, 1995................................................................... F-24
Notes to Combined Statements of Revenue and Certain Expenses............................................. F-25

WOODCREEK I AND II
Report of Independent Auditors........................................................................... F-26
Combined Statements of Revenue and Certain Expenses for the ten months ended October 31, 1996 and the
year ended December 31, 1995........................................................................... F-27
Notes to Combined Statements of Revenue and Certain Expenses............................................. F-28

LONG LAKE CROSSING
Report of Independent Auditors........................................................................... F-29
Statements of Revenue and Certain Expenses for the period from January 1, 1996 to November 22, 1996 and
the year ended December 31, 1995....................................................................... F-30
Notes to Statements of Revenue and Certain Expenses...................................................... F-31

LINCOLN CENTER II & III
Report of Independent Auditors........................................................................... F-32
Combined Statements of Revenue and Certain Expenses for the period from January 1, 1996 to November 8,
1996 and the year ended December 31, 1995.............................................................. F-33
Notes to Combined Statements of Revenue and Certain Expenses............................................. F-34

40 OAK HOLLOW
Report of Independent Auditors........................................................................... F-35
Statement of Revenue and Certain Expenses for the period from March 19, 1996 to December 20, 1996........ F-36
Notes to Statement of Revenue and Certain Expenses....................................................... F-37
</TABLE>

F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
CENTENNIAL CENTER
Report of Independent Auditors........................................................................... F-38
Statements of Revenue and Certain Expenses for the period from January 1, 1996 to December 27, 1996 and
the year ended December 31, 1995....................................................................... F-39
Notes to Statements of Revenue and Certain Expenses...................................................... F-39

DUBLIN TECHMART
Report of Independent Auditors........................................................................... F-41
Statements of Revenue and Certain Expenses for the period from January 1, 1996 to September 25, 1996
(unaudited) and the year ended December 31, 1995....................................................... F-42
Notes to Statements of Revenue and Certain Expenses...................................................... F-43

PRINCETON HILL CORPORATE CENTER
Report of Independent Auditors........................................................................... F-44
Statements of Revenue and Certain Expenses for the period from January 1, 1996 to April 17, 1996 and the
year ended December 31, 1995........................................................................... F-45
Notes to Statements of Revenue and Certain Expenses...................................................... F-46
</TABLE>

F-2
<PAGE>
GREAT LAKES REIT, INC.

PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The unaudited consolidated pro forma balance sheet as of December 31, 1996
is presented as if the acquisition of properties subsequent to December 31, 1996
and the Offering had occurred as of that date. The unaudited consolidated pro
forma statement of income for the year ended December 31, 1996 is presented as
if the acquisition and disposition of properties subsequent to December 31,
1995, the Company's private equity offering in 1996, the Merger and the Offering
had all occurred as of January 1, 1996.

The pro forma financial statements are not necessarily indicative of what
the Company's financial position or result of operations would have been
assuming the above events actually occurred as of the dates indicated, nor do
they purport to project the Company's financial position or results of
operations at any future date or for any future period.

F-3
<PAGE>
GREAT LAKES REIT, INC.

CONSOLIDATED PRO FORMA BALANCE SHEET

AS OF DECEMBER 31, 1996

(UNAUDITED)

ASSETS

<TABLE>
<CAPTION>
PROPERTY 1997 COMPANY PRO
HISTORICAL(1) ACQUISITIONS(2) OFFERING(3) FORMA
-------------- -------------- -------------- --------------

<S> <C> <C> <C> <C>
Properties:
Land............................................ $ 31,529,000 $ 971,765 $ 32,500,765
Buildings, improvements, and equipment.......... 157,902,629 4,037,230 161,939,859
Less accumulated depreciation................... 5,309,666 5,309,666
-------------- -------------- -------------- --------------
184,121,963 5,008,995 189,130,958
Cash and cash equivalents....................... 1,688,173 5,627 $ 1,424,353 3,118,153
Real estate tax escrows......................... 1,065,182 91,215 1,156,397
Rents receivable................................ 2,130,935 162 2,131,097
Deferred costs.................................. 2,976,902 (341,115) 2,635,787
Other assets.................................... 915,900 915,900
-------------- -------------- -------------- --------------
Total assets.................................... $ 192,899,055 $ 5,105,999 $ 1,083,238 $ 199,088,292
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Bank loan payable............................... $ 63,802,368 $ (63,802,368)
Mortgage loans payable.......................... 17,073,979 $ 3,005,968 (17,842,803) 2,237,144
Bonds payable................................... 5,235,000 5,235,000
Accounts payable and accrued liabilities........ 4,153,800 564,288 4,718,088
Accrued real estate taxes....................... 5,423,160 5,423,160
Prepaid rent.................................... 1,170,101 1,170,101
Security deposits............................... 695,570 695,570
-------------- -------------- -------------- --------------
Total liabilities............................... 97,553,978 3,570,256 (81,645,171) 19,479,063
-------------- -------------- -------------- --------------
Commitments and contingencies:
Preferred stock................................. 2,101 (2,101)
Common stock.................................... 88,323 1,181 57,000 146,504
Paid-in-capital................................. 98,096,085 1,534,562 83,617,101 183,247,748
Distributions in excess of accumulated
earnings...................................... (1,072,507) (943,591) (2,016,098)
Employee stock loans............................ (1,247,351) (1,247,351)
Deferred compensation........................... (251,335) (251,335)
Treasury stock.................................. (270,239) (270,239)
-------------- -------------- -------------- --------------
Total stockholders' equity...................... 95,345,077 1,535,743 82,728,409 179,609,229
-------------- -------------- -------------- --------------
Total liabilities and stockholders' equity...... $ 192,899,055 $ 5,105,999 $ 1,083,238 $ 199,088,292
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>

See accompanying notes to Consolidated Pro Forma Balance Sheet.

F-4
<PAGE>
GREAT LAKES REIT, INC.

NOTES TO CONSOLIDATED PRO FORMA BALANCE SHEET

(UNAUDITED)

1. Represents the historical consolidated financial position of the Company at
December 31, 1996.

2. Represents allocation of the acquisition prices paid for the Court Office
Center ($1,173,376) and 1675 Holmes Road ($3,835,619) Properties acquired
subsequent to December 31, 1996. The purchases were funded by the issuance
of 118,134 shares of Common Stock, 24,050 OP Units, and cash payments of
$24,330, plus assumption of long-term debt of the properties of $3,005,968.
The minority interest created by the issuance of 24,050 OP Units ($312,655)
is classified as accounts payable and accrued liabilities in the
accompanying consolidated pro forma balance sheet due to the immaterial
amount of this minority interest.

3. The Company anticipates selling 5,700,000 shares of Common Stock at $16 per
share for gross proceeds from the Offering of $91,200,000. Net proceeds
after offering costs are estimated to be $83,672,000. The consolidated pro
forma balance sheet reflects the following results from the Offering:

<TABLE>
<CAPTION>
1997
OFFERING
-------------
<S> <C>
Net Cash and cash equivalents received after payments of debt and offering
costs........................................................................ $ 1,424,353
-------------
-------------
Deferred financing costs written off related to long term debt repaid.......... $ (341,115)
-------------
-------------
Repayment of bank loan......................................................... $ 63,802,368
-------------
-------------
Repayment of long-term debt.................................................... $ 17,842,803
-------------
-------------
Par value of Common Stock issued ($.01 per share).............................. $ 57,000
-------------
-------------
Preferred stock reclassified to paid in capital upon cancellation.............. $ (2,101)
-------------
-------------
Additional paid in capital for share issuance.................................. $ 91,143,000
Cancellation of Preferred Stock................................................ 2,101
Offering costs................................................................. (7,528,000)
-------------
$ 83,617,101
-------------
-------------
Distributions in excess of accumulated earnings:
Prepayment penalties related to retirement of long-term debt................. $ (602,476)
Write off of deferred financing costs on long-term debt retired.............. (341,115)
-------------
$ (943,591)
-------------
-------------
</TABLE>

4. The transfer of the Properties to the Operating Partnership will have no
impact on the consolidated pro forma balance sheet presented here.

F-5
<PAGE>
GREAT LAKES REIT, INC.

CONSOLIDATED PRO FORMA STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 1996

(UNAUDITED)

<TABLE>
<CAPTION>
PRO FORMA COMPANY
HISTORICAL(1) ADVISOR(1) ACQUISITIONS(2) DISPOSITIONS(3) ADJUSTMENTS PRO FORMA
------------- ---------- --------------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Rental.......................... $ 20,249,565 $10,883,293 $(1,522,795) $29,610,063
Reimbursements.................. 4,814,005 4,232,907 (172,833) 8,874,079
Interest and other.............. 168,739 $ 567,620 472,579 $ (562,847)(4) 646,091
------------- ---------- --------------- --------------- --------------- -----------
Total revenues.................. 25,232,309 567,620 15,588,779 (1,695,628) (562,847) 39,130,233
------------- ---------- --------------- --------------- --------------- -----------

Expenses
Real estate taxes............... 3,954,144 2,993,384 (160,166) 6,787,362
Other property operating........ 6,548,057 144,436 4,363,951 (449,311) (217,971)(5) 10,389,162
General and administrative...... 2,242,165 339,220 (203,697)(5) 2,377,688
Interest........................ 3,778,065 267,113 (105,902) (3,542,246)(7) 397,030
Depreciation and amortization... 3,977,256 1,867,074 (221,246) (41,215)(6) 5,581,869
Contract termination 1,273,307 (1,273,307)(8)
------------- ---------- --------------- --------------- --------------- -----------
Total expenses.................. 21,772,994 483,656 9,491,522 (936,625) (5,278,436) 25,533,111
------------- ---------- --------------- --------------- --------------- -----------
Income before gain on sale of
properties.................... 3,459,315 83,964 6,097,257 (759,003) 4,715,589 13,597,122
Gain on sale of properties...... 3,139,892 (3,139,892)(9)
------------- ---------- --------------- --------------- --------------- -----------
Net income...................... $ 6,599,207 $ 83,964 $ 6,097,257 $ (759,003) $ 1,575,697 $13,597,122
------------- ---------- --------------- --------------- --------------- -----------
------------- ---------- --------------- --------------- --------------- -----------
Earnings per common share and
common share equivalent....... $ 1.11 $ 0.92
------------- -----------
------------- -----------
Weighted average number of
common shares and common share
equivalents outstanding....... 5,927,208 14,723,090
------------- -----------
------------- -----------
</TABLE>

See accompanying notes to Consolidated Pro Forma Statement of Income.

F-6
<PAGE>
GREAT LAKES REIT, INC.

NOTES TO CONSOLIDATED PRO FORMA STATEMENT OF INCOME

(UNAUDITED)

1. Represents the historical operations of the Company and the Advisor for the
period described. See Note 5 of Notes to Consolidated Financial Statements
regarding the acquisition of the Advisor.

2. Represents the historical operations of properties acquired subsequent to
December 31, 1995 as if the properties were acquired by the Company at the
beginning of 1996. Depreciation is computed on a straight-line basis over 40
years based on the purchase price paid by the Company for the properties.
Additionally, based on preacquisition discussions with local assessors and
tax counsel, the Company has concluded that no adjustment to historical real
estate taxes is appropriate. See Note 10 of Notes to Consolidated Financial
Statements for details of the properties acquired during 1996. Subsequent to
December 31, 1996, the Company acquired two additional properties as
described in Note 2 to the Consolidated Pro Forma Balance Sheet.

3. Represents the actual historical results of the properties sold in 1996 for
the period prior to disposition. See Note 11 of Notes to Consolidated
Financial Statements for details of 1996 property disposals.

4. As more fully described in Note 5 to the Consolidated Financial Statements,
on April 1, 1996, the Company acquired all of the outstanding shares of the
Advisor in exchange for 100,000 shares of the Common Stock. Income earned in
1996 by the Advisor from the Company prior to the Merger is eliminated from
the pro forma income statements:

<TABLE>
<S> <C>
Acquisition fees.................................................. $ 15,750
Advisory fees..................................................... 203,697
Property management fees.......................................... 217,971
Construction fees................................................. 107,717
Other............................................................. 17,712
---------
$ 562,847
---------
---------
</TABLE>

Amounts not eliminated represent income earned by the Advisor from third
parties which would have been earned by the Company had the Merger occurred
at the beginning of 1996.

5. Expenses incurred by the Company which were paid to the Advisor prior to the
Merger are eliminated from the pro forma income statement:

<TABLE>
<CAPTION>
1996
----------
<S> <C>
Other property operating expenses:
Property management fees........................................................ $ 217,971
----------
----------
General and administrative costs:
Advisory fees................................................................... $ 203,697
----------
----------
</TABLE>

As a consequence of this elimination, the accompanying consolidated pro
forma statement of income includes the property operating and general and
administrative expenses of the Advisor for the period prior to the Merger.

6. Acquisition, construction, and certain other fees paid by the Company to the
Advisor were capitalized by the Company into buildings and improvements. If
the Merger had occurred on January 1, 1996, these fees would not have been
incurred and depreciation and amortization expenses would have decreased by
$8,441 in 1996. Costs incurred by the Advisor for acquisition and
construction activities

F-7
<PAGE>
GREAT LAKES REIT, INC.

NOTES TO CONSOLIDATED PRO FORMA STATEMENT OF INCOME (CONTINUED)

(UNAUDITED)

during 1996 are primarily salary costs and are reflected as general and
administrative expenses in the historical operations of the Advisor.

Goodwill amortization is increased by $10,786 in 1996 as the Merger is
assumed to have occurred on January 1, 1996 in this consolidated pro forma
statement of income.

Amortization of deferred financing costs is reduced by $43,560 in 1996 as
the deferred financing costs on long-term debt retired with the proceeds of
the Offering are assumed to be written off as of January 1, 1996.

7. Interest expense in 1996 is decreased by $3,542,246 which represents the
interest expense incurred by the Company on the Credit Facility and the
long-term debt retired with the proceeds of the Offering.

8. The Consolidated Pro Forma Statement of Income excludes the contract
termination expenses of $1,273,307 incurred in connection with the Merger.
See Note 5 to the Notes to Consolidated Financial Statements.

9. The Consolidated Pro Forma Statement of Income excludes gains on sale of
properties of $3,139,892.

10. The transfer of the Company's properties to the Operating Partnership would
have had no effect on this Consolidated Pro Forma Statement of Income.

F-8
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Great Lakes REIT, Inc.

We have audited the accompanying consolidated balance sheets of Great Lakes
REIT, Inc. as of December 31, 1996 and 1995 and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements 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, Inc. at December 31, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.

Ernst & Young LLP

Chicago, Illinois
January 28, 1997

F-9
<PAGE>
GREAT LAKES REIT, INC

CONSOLIDATED BALANCE SHEETS

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1996 1995
-------------- -------------
<S> <C> <C>
Properties:
Land.............................................................................. $ 31,529,000 $ 18,673,750
Buildings, improvements, and equipment............................................ 157,902,629 75,667,086
-------------- -------------
189,431,629 94,340,836
Less accumulated depreciation..................................................... 5,309,666 2,482,844
-------------- -------------
184,121,963 91,857,992
Cash and cash equivalents......................................................... 1,688,173 1,302,728
Real estate tax escrows........................................................... 1,065,182 1,424,159
Rents receivable.................................................................. 2,130,935 1,284,316
Deferred financing and leasing costs, net of accumulated amortization............. 2,976,902 1,492,149
Other assets...................................................................... 915,900 1,617,092
-------------- -------------
Total assets...................................................................... $ 192,899,055 $ 98,978,436
-------------- -------------
-------------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Bank loan payable................................................................. $ 63,802,368 $ 24,253,148
Mortgage loans payable............................................................ 17,073,979 18,634,022
Bonds payable..................................................................... 5,235,000 5,420,000
Accounts payable and accrued liabilities.......................................... 4,153,800 1,128,692
Accrued real estate taxes......................................................... 5,423,160 3,200,570
Prepaid rent...................................................................... 1,170,101 469,763
Security deposits................................................................. 695,570 402,480
Distributions/dividends payable................................................... 504,564
-------------- -------------
Total liabilities................................................................. 97,553,978 54,013,239
-------------- -------------

Commitments and Contingencies:
Preferred Stock ($.01 par value per share, 10,000,000 authorized, 210,128
issued)......................................................................... 2,101
Common Stock ($.01 par value per share, 20,000,000 authorized; 8,832,268 and
4,520,896 shares issued in 1996 and 1995, respectively)......................... 88,323 45,209
Paid-in-capital................................................................... 98,096,085 45,861,352
Distributions in excess of accumulated earnings................................... (1,072,507) (785,953)
Employee stock loans.............................................................. (1,247,351)
Deferred compensation............................................................. (251,335)
Treasury stock, at cost (21,784 and 12,951 shares in 1996 and 1995,
respectively)................................................................... (270,239) (155,411)
-------------- -------------
Total stockholders' equity........................................................ 95,345,077 44,965,197
-------------- -------------
Total liabilities and stockholders' equity........................................ $ 192,899,055 $ 98,978,436
-------------- -------------
-------------- -------------
</TABLE>

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

F-10
<PAGE>
GREAT LAKES REIT, INC.
CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994
------------- ------------- ------------
<S> <C> <C> <C>
Revenues
Rental............................................................. $ 20,249,565 $ 12,410,510 $ 6,647,362
Reimbursements..................................................... 4,814,005 2,354,598 884,073
Interest and other................................................. 168,739 200,818 51,404
------------- ------------- ------------
Total revenues....................................................... 25,232,309 14,965,926 7,582,839
------------- ------------- ------------
Expenses
Real estate taxes.................................................. 3,954,144 2,624,588 1,417,679
Other property operating (including $217,971, $564,369 and $273,671
of property management fees paid to affiliates in 1996, 1995 and
1994, respectively).............................................. 6,548,057 3,967,543 1,943,584
General and administrative (including $203,697, $608,612 and
$294,530 of advisory fees paid to affiliates in 1996, 1995 and
1994, respectively).............................................. 2,242,165 922,652 561,124
Interest........................................................... 3,778,065 2,296,457 911,381
Depreciation and amortization...................................... 3,977,256 1,954,885 761,284
Contract termination............................................... 1,273,307
------------- ------------- ------------
Total expenses....................................................... 21,772,994 11,766,125 5,595,052
------------- ------------- ------------
Income before gain on sale of properties............................. 3,459,315 3,199,801 1,987,787
Gain on sale of properties........................................... 3,139,892
------------- ------------- ------------
Net income........................................................... $ 6,599,207 $ 3,199,801 $ 1,987,787
------------- ------------- ------------
------------- ------------- ------------
Earnings per common share and common share equivalent................ $ 1.11 $ 0.88 $ 0.96
------------- ------------- ------------
------------- ------------- ------------
Weighted average number of common shares and common share equivalents
outstanding........................................................ 5,927,208 3,650,133 2,070,221
------------- ------------- ------------
------------- ------------- ------------
</TABLE>

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

F-11
<PAGE>
GREAT LAKES REIT, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
DISTRIBUTIONS
PREFERRED STOCK COMMON STOCK IN EXCESS
-------------------- --------------------- OF
SHARES SHARES PAID IN ACCUMULATED EMPLOYEE DEFERRED
OUTSTANDING AMOUNT OUTSTANDING AMOUNT CAPITAL EARNINGS STOCK LOANS COMPENSATION
----------- ------ ----------- ------- ------------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at 1/1/94... 1,839,352 $18,394 $16,632,663 $ (152,649 )
Net proceeds from
the sale of common
stock.............. 580,043 5,800 5,963,812
Net income.......... 1,987,787
Distributions ($0.96
per share)......... (1,920,436 )
Distributions
reinvested......... 142,023 1,420 1,525,331
----------- ------ ----------- ------- ------------- ----------- ----------- ------------
Balance at
12/31/94........... 2,561,418 25,614 24,121,806 (85,298 )
Net proceeds from
the sale of common
stock.............. 1,698,610 16,986 18,810,244
Exercise of stock
options............ 32,410 324 322,571
Net income.......... 3,199,801
Distributions ($1.13
per share)......... (3,900,456 )
Distributions
reinvested......... 228,458 2,285 2,606,731
Purchase of treasury
stock.............. (12,951)
----------- ------ ----------- ------- ------------- ----------- ----------- ------------
Balance at
12/31/95........... 4,507,945 45,209 45,861,352 (785,953 )
Net proceeds from
the sale of stock.. 210,128 2,101 3,867,000 38,670 47,378,490
Exercise of stock
options............ 304,372 3,044 3,247,071 (1,247,351 )
Net income.......... 6,599,207
Distributions ($1.20
per share)......... (6,885,761 )
Issuance of shares
in acquisition of
Advisor, net of
issuance costs of
$219,428........... 100,000 1,000 1,129,572
Restricted stock
awards............. 40,000 400 479,600 (480,000)
Purchase of treasury
stock.............. (8,833)
Amortization of
deferred
compensation....... 228,665
----------- ------ ----------- ------- ------------- ----------- ----------- ------------
Balance at
12/31/96........... 210,128 $2,101 8,810,484 $88,323 $98,096,085 $(1,072,507) $(1,247,351) $(251,335)
----------- ------ ----------- ------- ------------- ----------- ----------- ------------
----------- ------ ----------- ------- ------------- ----------- ----------- ------------

TOTAL
TREASURY STOCKHOLDERS'
STOCK EQUITY
--------- -------------
<S> <C> <C>
Balance at 1/1/94... $16,498,408
Net proceeds from
the sale of common
stock.............. 5,969,612
Net income.......... 1,987,787
Distributions ($0.96
per share)......... (1,920,436)
Distributions
reinvested......... 1,526,751
--------- -------------
Balance at
12/31/94........... 24,062,122
Net proceeds from
the sale of common
stock.............. 18,827,230
Exercise of stock
options............ 322,895
Net income.......... 3,199,801
Distributions ($1.13
per share)......... (3,900,456)
Distributions
reinvested......... 2,609,016
Purchase of treasury
stock.............. (155,411) (155,411)
--------- -------------
Balance at
12/31/95........... (155,411) 44,965,197
Net proceeds from
the sale of stock.. 47,419,261
Exercise of stock
options............ 2,002,764
Net income.......... 6,599,207
Distributions ($1.20
per share)......... (6,885,761)
Issuance of shares
in acquisition of
Advisor, net of
issuance costs of
$219,428........... 1,130,572
Restricted stock
awards............. 0
Purchase of treasury
stock.............. (114,828) (114,828)
Amortization of
deferred
compensation....... 228,665
--------- -------------
Balance at
12/31/96........... $(270,239) $95,345,077
--------- -------------
--------- -------------
</TABLE>

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

F-12
<PAGE>
GREAT LAKES REIT, INC.
STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income........................................ $ 6,599,207 $ 3,199,801 $ 1,987,787
Adjustments to reconcile net income to cash flows
from operating activities:
Depreciation and amortization................... 3,977,256 1,954,885 761,284
Contract termination costs...................... 1,273,307
Amortization of deferred compensation........... 228,665
Gain on sale of properties...................... (3,139,892)
Net changes in assets and liabilities:
Rents receivable................................ (846,619) (714,156) (499,425)
Real estate tax escrows......................... 358,977 (489,937) (703,972)
Other assets.................................... (65,441) (563,333) 80,761
Accounts payable and accrued expenses........... 3,025,108 657,258 353,534
Accrued real estate taxes....................... 2,222,590 1,699,512 411,604
Payment of deferred leasing costs............... (1,293,616) (561,373) (454,215)
Other liabilities............................... 488,864 466,850 39,941
----------- ----------- -----------
Net cash provided by operating activities......... 12,828,406 5,649,507 1,977,299
----------- ----------- -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of properties............................ (97,563,034) (47,838,629) (18,196,369)
Additions to buildings, improvements and
equipment.................................... (6,305,673) (2,861,135) (2,296,522)
Proceeds from property sales, net................. 11,707,438
Decrease (increase) in earnest money deposits..... 950,000 (950,000)
----------- ----------- -----------
Net cash used by investing activities............. (91,211,269) (51,649,764) (20,492,891)
----------- ----------- -----------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of preferred stock............. 2,101
Proceeds from sale of common stock................ 50,268,899 20,628,232 6,734,492
Payment of stock offering costs................... (2,851,739) (1,801,002) (764,880)
Proceeds from exercise of stock options........... 2,002,764 322,895
Proceeds from bank and mortgage loans payable..... 39,549,220 27,503,148 12,500,000
Distributions/dividends........................... (6,885,761) (3,523,211) (1,863,438)
Distributions/dividends reinvested................ 2,609,016 1,526,751
Purchase of treasury stock........................ (114,828) (155,411)
Payment of mortgage notes and bonds............... (1,745,043) (740,996) (322,170)
Payment of deferred financing costs............... (1,022,151) (216,280) (390,868)
Acquisition of Advisor............................ (435,154)
----------- ----------- -----------
Net cash provided by financing activities......... 78,768,308 44,626,391 17,419,887
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents.................................. 385,445 (1,373,866) (1,095,705)
Cash and cash equivalents, beginning of year...... 1,302,728 2,676,594 3,772,299
----------- ----------- -----------
Cash and cash equivalents, end of year............ $ 1,688,173 $ 1,302,728 $ 2,676,594
----------- ----------- -----------
----------- ----------- -----------
Supplemental disclosure of cash flow:
Interest paid..................................... $ 3,542,064 $ 2,311,568 $ 896,270
----------- ----------- -----------
----------- ----------- -----------
Non cash financing transactions:
Bonds payable assumed with purchase of property... $ 5,590,000
-----------
-----------
Issuance of shares to acquire Advisor............. $ 1,350,000
-----------
-----------
Restricted stock awards........................... $ 480,000
-----------
-----------
Employee stock loans.............................. $ 1,247,351
-----------
-----------
</TABLE>

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

F-13
<PAGE>
GREAT LAKES REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF ACTIVITIES

Great Lakes REIT, Inc. (the "Company"), a Maryland corporation, was formed
on June 22, 1992 to invest in income-producing real property. The principal
business of the Company is the ownership, management, leasing, renovation and
acquisition of suburban office and industrial properties located in the Midwest.
At December 31, 1996, the Company owned and operated 25 properties located in
suburban areas of Chicago, Detroit, Milwaukee, Cincinnati, Columbus and
Minneapolis. The Company leases office and industrial space to approximately 320
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 partnership, each of which was formed in
1996. Significant 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, 1996, 1995
and 1994 depreciation expense amounted to $3,169,182, $1,665,730 and $667,509
respectively.

Properties are carried at cost, which is not in excess of net realizable
value. 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
which 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. 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.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. At December
31, 1996 and 1995, the Company had $418,528 and $1,300,265, respectively, in a
money market fund.

F-14
<PAGE>
GREAT LAKES REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 stockholders 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, 1996, properties, rents receivable and prepaid rent have
a federal income tax basis of $182,530,510, $491,921 and $0, respectively. The
contract termination costs of $1,273,307, expensed in the accompanying
consolidated statement of income, have not been expensed for federal income tax
purposes.

STOCK 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
stock options. Under APB 25, no compensation expense is recognized because the
exercise price of the Company's employee stock options equals the market price
of the underlying stock 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, 1996 and 1995 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 rates on other long-term debt.

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.

RECLASSIFICATION

Certain reclassifications have been made to the 1995 and 1994 financial
statements to conform to the 1996 presentation. Such reclassifications did not
affect the results of operations.

F-15
<PAGE>
GREAT LAKES REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. DEFERRED COSTS

Deferred costs consisted of the following at December 31, 1996 and 1995:

<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Deferred financing costs.................................... $ 1,526,503 $ 739,773
Deferred leasing costs...................................... 2,345,455 1,146,076
------------ ------------
3,871,958 1,885,849
Less accumulated amortization............................... 895,056 393,700
------------ ------------
$ 2,976,902 $ 1,492,149
------------ ------------
------------ ------------
</TABLE>

During the years ended December 31, 1996, 1995 and 1994 amortization of
financing costs was $427,375, $130,500 and $33,744, respectively, and
amortization of leasing costs was $348,340, $158,655, and $60,031, respectively.

3. LONG-TERM DEBT

Mortgage loans payable aggregated $17,073,979 and $18,634,022 at December
31, 1996 and 1995, respectively. The mortgage loans payable require monthly
payments of principal and interest and mature at various dates through 2009.
Interest rates at December 31, 1996 ranged from 7.875% to 8.95%.

In 1995 the Company acquired an office building located in Minneapolis,
Minnesota subject to Variable Rate Demand Commercial Development Revenue Bonds
(the "Bonds") issued by the City of Minneapolis with an outstanding principal
amount of $5,235,000 and $5,420,000 at December 31, 1996 and 1995, respectively.
The Company has obtained a bank letter of credit to secure repayment of the
Bonds in an amount of approximately $5.3 million. 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
(4.3% per annum at December 31, 1996) is reset weekly by the bond placement
agent. The Bonds mature June 1, 2009 and require the Company to make annual
principal payments on June 1 of each year at a stipulated amount so that the
Bonds will be fully retired on June 1, 2009.

As of December 31, 1996 the following is a summary of principal maturities
of mortgage notes and bonds payable over the next five years:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- -------------------------------------------------------------------------------- ------------
<S> <C>
1997............................................................................ $ 855,847
1998............................................................................ 937,395
1999............................................................................ 1,018,869
2000............................................................................ 3,933,600
2001............................................................................ 1,116,792
</TABLE>

The Company has obtained credit facilities from banks aggregating $80
million at December 31, 1996. The borrowings under the credit facilities are
limited by certain loan-to-value covenants related to the Company's properties.
At December 31, 1996, amounts outstanding were $63,802,368 on the $75 million
secured bank credit facility (the "Credit Facility") with the First National
Bank of Boston, as Agent and none on the $5 million credit facility (the "ANB
Facility") with The American National Bank and Trust Company of Chicago.
Interest accrues on the Credit Facility at LIBOR plus 1.875% per annum (7.543%
at

F-16
<PAGE>
GREAT LAKES REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. LONG-TERM DEBT (CONTINUED)
December 31, 1996). Interest accrues on the ANB Facility at prime plus 0.5% per
annum. The amounts outstanding at December 31, 1996 are due April 12, 1998.

At December 31, 1996, properties with a carrying amount of approximately
$182.7 million were pledged as collateral under the various debt agreements.

4. DIVIDEND REINVESTMENT AND SHARE REDEMPTION PLANS

Until December 31, 1995 the Company maintained a dividend reinvestment plan
whereby shareholders were able to reinvest dividends and receive additional
shares of the Company's Common Stock, $.01 par value per share (the "Common
Stock") priced at the Net Asset Value per share, as defined in the dividend
reinvestment plan, as set by the Board of Directors. Subsequent to December 31,
1995, the Company suspended the dividend reinvestment plan.

Shareholders have the right to redeem their shares of Common Stock at the
then Net Asset Value per share (as defined in the plan) subject to approval of
the Board of Directors and certain other limitations. As of December 31, 1996,
the aggregate amount subject to share redemptions was approximately $4.5
million. During the years ended December 31, 1996 and 1995, 8,833 and 12,951
shares were redeemed at a cost of $114,828 and $155,411, respectively.

5. RELATED PARTIES

On April 1, 1996, the Company acquired all the outstanding shares of Equity
Partners Ltd. (the "Advisor") in exchange for 100,000 shares of Common Stock
(the "Merger"). The Merger has been accounted for as a purchase. Of the total
purchase price of $1,565,726, $1,273,307 was assigned to the contracts between
the Advisor and the Company, $76,693 to the net tangible assets of the Advisor
acquired by the Company, and $215,726 to goodwill. As the contracts between the
Advisor and the Company were terminated as a result of the Merger, the amount
allocated to the contracts has been charged to contract termination expense in
the income statement for the year ended December 31, 1996. Goodwill amortization
is computed on a straight-line basis over a five year period. As of April 1,
1996, the Company employed the employees of the Advisor and is now self-managed
and self-advised. Certain employees of the Advisor have received 40,000
restricted shares of Common Stock. Certain restricted shares (30,000 shares)
vest to the recipients in equal amounts on April 1, 1997 and April 1, 1998
provided the recipients are still employed by the Company. The other restricted
shares (10,000 shares) vest 25% on May 1, 1999 and 25% on May 1 of the next
three years (2000-2002) provided the recipient is still employed by the Company.
The fair value of the restricted shares at the dates of grant ($480,000) was
deferred and is being recognized as compensation expense over the vesting
periods.

F-17
<PAGE>
GREAT LAKES REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. RELATED PARTIES (CONTINUED)
Pursuant to various advisory and management agreements, the following fees
were incurred with respect to the Advisor, or affiliates prior to the Merger.
Two directors of the Company were shareholders of the Advisor.

<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Property acquisition fees.......................................... $ 15,750 $ 787,256 $ 93,045
Stock offering fees................................................ -- 131,747 42,551
Stock selling commissions(a)....................................... -- 217,046 67,065
Advisory fees(b)................................................... 203,697 608,612 294,530
Property management fees(b)........................................ 217,971 564,369 273,671
Construction management fees....................................... 107,717 73,549 67,525
Other, primarily legal fees........................................ 17,712 30,703 19,781
</TABLE>

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

(a) Selling commissions were paid to owners and/or employees of the Advisor who
are registered representatives.

(b) Advisory fees are classified as general and administrative expenses in these
financial statements. Property management fees are classified as property
operating expenses in these financial statements.

Certain computer hardware and software owned by the Company was leased to
the Advisor under a five year lease which would have expired April 1, 1999.
Semi-annual rental payments of $9,103 were made to the Company from the Advisor
until the lease agreement was terminated on the date of the Merger.

6. STOCK OPTIONS

The Company had two stock option plans, the Plan for Independent Directors
and Brokers (the "Directors Plan"), and the Advisor Stock Option Plan (the
"Advisor Plan"). Under the plans, options have been granted to purchase shares
of Common Stock at values which have been determined to be fair market value on
the date of grant. In connection with the acquisition of the Advisor, the
Advisor Plan was canceled, and currently options under the Directors Plan are
only granted to non-employee Directors. At December 31, 1996 options on 155,590
shares were available for future grant.

In September, 1996, the Company adopted the 1996 Incentive Stock Option Plan
(the "1996 Option Plan"), which authorizes the issuance of up to 500,000 shares
of the Company's common stock to key employees. In September 1996, options on
94,000 shares were granted to certain employees under the 1996 Plan. At December
31, 1996, options on 406,000 shares are available for future grant under this
plan. The exercise price of options granted in 1996 under the 1996 Option Plan
is $13 per share, the fair value of the Common Stock as determined by the Board
of Directors at the date of grant. Accordingly, no compensation expense has been
recognized for the year ended December 31, 1996. These options have a term of
ten years and vest in equal installments over a three year period commencing on
the first anniversary date of the grant.

F-18
<PAGE>
GREAT LAKES REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. STOCK OPTIONS (CONTINUED)
A summary of the Company's stock option activity and related information for
the years ended December 31, 1996, 1995 and 1994 is as follows:

<TABLE>
<CAPTION>
1996 1995 1994
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
1996 EXERCISE 1995 EXERCISE 1994 EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance 1/1........................... 735,576 $ 11.02 451,129 $ 10.10 375,979 $ 9.96
Granted............................... 170,424 $ 12.76 316,857 $ 12.24 75,150 $ 10.75
Exercised............................. 304,372 $ 10.68 32,410 $ 9.96
--------- ----------- --------- ----------- --------- -----------
Balance 12/31......................... 601,628 $ 11.69 735,576 $ 11.02 451,129 $ 10.10
--------- ----------- --------- ----------- --------- -----------
--------- ----------- --------- ----------- --------- -----------
Exercisable........................... 507,628 $ 11.45 735,576 $ 11.02 451,129 $ 10.10
--------- ----------- --------- ----------- --------- -----------
--------- ----------- --------- ----------- --------- -----------
</TABLE>

The weighted average fair value of options granted in 1996 where the stock
price equals the exercise price is $0.13 per share. The weighted average fair
value of options granted in 1995 where the stock price equals the exercise price
at date of grant is $0.12 per share. The weighted average fair value of options
granted in 1995 where the stock price is less than the exercise price at the
date of grant is $0.02 per share. The weighted average life of options
outstanding at December 31, 1996 was 5.81 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 stock
options under the fair value method of that Statement. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for 1993 to 1996:
risk-free interest rates of 6%; dividend yields of 9%; volatility factors of the
expected market price of the Common Stock of 0.8%; and a weighted-average
expected life of the options of 5 years.

The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock 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 stock options.

The effects on 1996 and 1995 pro forma net income and pro forma earnings per
common share and common share equivalent of amortizing to expense the estimated
fair value of stock 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 stock options, and the potential for issuance of additional stock
options in future years.

F-19
<PAGE>
GREAT LAKES REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. STOCK OPTIONS (CONTINUED)
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
Pro forma information follows for the years ended December 31, 1996 and 1995:

<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Pro forma net income.............................................. $ 6,588,940 $ 3,178,067
Pro forma earnings per common share and common share equivalent... $ 1.11 $ 0.87
</TABLE>

In September 1996, the Company adopted a limited purpose employee loan
program whereby employees may borrow up to 90% of the cost of exercising stock
options held by the employee. Such loans bear interest at LIBOR plus 2.375% per
annum 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 Stock acquired by the employee through this program. As
of December 31, 1996, employees had acquired 119,892 shares through this program
with outstanding loan amounts of $1,247,351 due the Company. Such amount is
reflected as a reduction of stockholders' equity until the loans are repaid.

7. STOCK OFFERING

In 1996, the Company sold 3,867,000 shares of Common Stock at $13 per share
and issued 210,128 shares of Class A Convertible Preferred Stock (the "Preferred
Shares"). The Company received proceeds of $47.4 million (net of offering costs
of $2,851,739) from the sale of these shares. The Preferred Shares carry no
dividend or voting rights, and shall be converted to Common Stock on a
one-for-one basis or canceled, depending on the Company's attainment of certain
objectives related to the timing, pricing and size of a public offering of
additional Common Stock by September 30, 1998.

8. LEASES

The Company leases office and industrial properties to tenants under
noncancelable operating leases that expire at various dates through 2006. 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 noncancelable operating leases:

<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------------------------------------------------------------------------
<S> <C>
1997.......................................................................... $ 29,196,272
1998.......................................................................... 24,997,815
1999.......................................................................... 20,416,268
2000.......................................................................... 16,232,073
2001.......................................................................... 9,624,788
Thereafter.................................................................... 13,094,436
--------------
$ 113,561,652
--------------
--------------
</TABLE>

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

F-20
<PAGE>
GREAT LAKES REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. DISTRIBUTIONS

The Company declared periodic distributions of $6,885,761, $3,900,456 and
$1,920,436 to stockholders of record during the calendar years 1996, 1995 and
1994, respectively. Of the $3,900,456 and $1,920,436 of distributions for 1995
and 1994, $504,564 and $127,319 were paid in January of the next calendar year,
respectively. The Company has determined the stockholders' treatment for Federal
income tax purposes to be as follows:

<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Ordinary income..................................... $ 6,078,061 $ 3,410,249 $ 1,785,429
Return of capital................................... 807,700 490,207 135,007
------------ ------------ ------------
Total............................................... $ 6,885,761 $ 3,900,456 $ 1,920,436
------------ ------------ ------------
------------ ------------ ------------
</TABLE>

F-21
<PAGE>
GREAT LAKES REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. PROPERTY ACQUISITIONS

The following properties were acquired in 1996 and 1995 and the results of
their operations are included in the statements of income from their respective
dates of acquisition.

<TABLE>
<CAPTION>
TOTAL ACQUISITION PRICE
----------------------------
LOCATION DATE ACQUIRED 1996 1995
- -------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
2800 River Rd.
Des Plaines, IL 02/09/95 $ 4,761,053

Minneapolis, MN 05/04/95 8,190,374

Mt. Prospect, IL 08/22/95 5,402,526

10 Oak Hollow & Gateway
Southfield, MI 08/29/95 12,756,163

One Park Plaza
Milwaukee, WI 09/29/95 15,675,908

Oak Brook, IL 11/28/95 1,760,930

565 Lakeview Pkwy.
Vernon Hills, IL 12/27/95 4,881,675

1251 Plum Grove Rd.
Schaumburg, IL 01/01/96 $ 1,080,911

Springdale, OH 04/17/96 6,145,650

Lincolnshire, IL 07/24/96 2,840,378

Dublin, OH 09/25/96 8,382,268

Downers Grove, IL 11/01/96 9,373,393

West Allis, WI 11/08/96 7,994,581

Troy, MI 11/22/96 16,100,416

St. Paul, MN 12/13/96 14,327,418

40 Oak Hollow
Southfield, MI 12/18/96 7,306,200

Centennial Center
Schaumburg, IL 12/27/96 24,011,819
</TABLE>

11. PROPERTY DISPOSITIONS

In October 1996, the Company sold for cash its property located at 10 Oak
Hollow, Southfield, Michigan for a contract price of $9,300,000 (less selling
costs of approximately $278,771) resulting in a gain on sale of $2,273,800. The
proceeds from the sale were invested in the Downers Grove, Illinois property
(see Note 10) via a tax-deferred exchange.

In December 1996, the Company sold for cash its property located at 830 West
End Court in Vernon Hills, Illinois for a contract price of $2,778,000 (less
selling costs of approximately $91,791) resulting in a gain on sale of $866,092.
Long term debt in an amount of $926,051 was retired concurrent with the sale.
The proceeds from the sale were invested in the St. Paul, Minnesota property
(see Note 10) via a tax-deferred exchange.

F-22
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Great Lakes REIT, Inc.

We have audited the Statements of Revenue and Certain Expenses of Court
International II (the Property) for the period from January 1, 1996 to December
13, 1996 and for the year ended December 31, 1995. The Statements of Revenue and
Certain Expenses are the responsibility of the Property's management. Our
responsibility is to express an opinion on the Statements of Revenue and Certain
Expenses 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 Statements of Revenue and Certain
Expenses are free from material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures made in the
Statements 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 Statements of Revenue and Certain
Expenses. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the Statements of Revenue and Certain Expenses referred to
above present fairly, in all material respects, the revenue and certain expenses
of the Property described in Note 2 for the period from January 1, 1996 to
December 13, 1996 and for the year ended December 31, 1995, in conformity with
generally accepted accounting principles.

ERNST & YOUNG LLP

Chicago, Illinois
December 18, 1996

F-23
<PAGE>
COURT INTERNATIONAL II

STATEMENTS OF REVENUE AND CERTAIN EXPENSES

<TABLE>
<CAPTION>
JANUARY 1, 1996 YEAR ENDED
TO DECEMBER 13, DECEMBER 31,
1996 1995
--------------- ------------
<S> <C> <C>
REVENUE
Base rents........................................................................ $ 1,582,702 $1,468,430
Tenant reimbursements............................................................. 1,145,017 1,052,313
Other income...................................................................... 242,972 282,029
--------------- ------------
Total revenue..................................................................... 2,970,691 2,802,772

EXPENSES
Real estate taxes................................................................. 417,735 433,500
General operating................................................................. 214,401 241,413
Utilities......................................................................... 245,101 259,420
Cleaning and landscaping.......................................................... 292,394 272,751
Repairs and maintenance........................................................... 120,834 158,786
Management fee.................................................................... 72,257 65,290
Insurance......................................................................... 33,349 44,016
--------------- ------------
Total expenses.................................................................... 1,396,071 1,475,176
--------------- ------------
Revenue in excess of certain expenses............................................. $ 1,574,620 $1,327,596
--------------- ------------
--------------- ------------
</TABLE>

See accompanying notes.

F-24
<PAGE>
COURT INTERNATIONAL II

NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES

NOTE 1 BUSINESS

The accompanying Statements of Revenue and Certain Expenses relate to the
operations of Court International II (the Property), a portion of a four-story
office building property located in St. Paul, Minnesota. The Property was
acquired on December 13, 1996, by Great Lakes REIT, Inc. (Great Lakes).

As of December 13, 1996 and December 31, 1995, the Property had thirty-three
and twenty-eight tenants, respectively. One tenant (U.A.F.P.) accounted for
approximately 15% and 16% of total revenue at December 13, 1996 and December 31,
1995, respectively.

NOTE 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 registration statement on Form S-11
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 in the period in which it is earned. 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 reported amounts of revenue and
expenses during the reporting period. Actual results could differ from these
estimates.

NOTE 3 RENTALS

Leases at the Property provide for tenants to share in the operating
expenses and real estate taxes in relation to their pro rata share as defined.

NOTE 4 MANAGEMENT AGREEMENT

During the period from January 1, 1996 to December 13, 1996 and for the year
ended December 31, 1995, the Property was managed by a third-party management
company. The management agreement provided for a monthly fee equal to the
greater of 2.5% of gross monthly rent or $2,850.

F-25
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Great Lakes REIT, Inc.

We have audited the accompanying Combined Statements of Revenue and Certain
Expenses of Woodcreek I and II (the Properties) for the ten months ended October
31, 1996 and the year ended December 31, 1995. The Combined Statements of
Revenue and Certain Expenses are the responsibility of the Properties'
management. Our responsibility is to express an opinion on the Combined
Statements of Revenue and Certain Expenses 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 Combined Statements of Revenue and
Certain Expenses are free from material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures made
in the Combined Statements 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 Combined
Statements of Revenue and Certain Expenses. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the Combined Statements of Revenue and Certain Expenses
referred to above present fairly, in all material respects, the combined revenue
and certain expenses of the Properties described in Note 2 for the ten months
ended October 31, 1996 and the year ended December 31, 1995, in conformity with
generally accepted accounting principles.

ERNST & YOUNG LLP

Chicago, Illinois
December 13, 1996

F-26
<PAGE>
WOODCREEK I AND II
COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES

<TABLE>
<CAPTION>
TEN MONTHS
ENDED YEAR ENDED
OCTOBER 31, DECEMBER 31,
1996 1995
----------- ------------
<S> <C> <C>
REVENUE
Base rents............................................................................. $ 911,872 $ 955,262
Tenant reimbursements.................................................................. 35,788 24,405
Other income........................................................................... 8,778 10,808
----------- ------------
Total revenue.......................................................................... 956,438 990,475

EXPENSES
Real estate taxes...................................................................... 132,227 152,839
General operating...................................................................... 23,050 10,278
Utilities.............................................................................. 26,060 31,305
Cleaning and landscaping............................................................... 26,347 31,820
Repairs and maintenance................................................................ 11,625 9,562
Management fee......................................................................... 30,918 38,250
Insurance.............................................................................. 2,575 2,235
----------- ------------
Total expenses......................................................................... 252,802 276,289
----------- ------------
Revenue in excess of certain expenses.................................................. $ 703,636 $ 714,186
----------- ------------
----------- ------------
</TABLE>

See accompanying notes.

F-27
<PAGE>
WOODCREEK I AND II
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES

NOTE 1 BUSINESS

The accompanying Combined Statements of Revenue and Certain Expenses relate
to the operations of Woodcreek I and II (the Properties). The Properties were
acquired on November 1, 1996, by Great Lakes REIT, Inc. (Great Lakes).

As of October 31, 1996 and December 31, 1995, the Properties had fourteen
tenants and thirteen tenants, respectively. Two tenants (Marriot Corporation and
Edge Systems) accounted for approximately 38% of the total revenue at October
31, 1996. One tenant (Marriot Corporation) accounted for approximately 23% of
the total revenue at December 31, 1995.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying Combined 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 registration statement
on Form S-11 of Great Lakes. These statements are not representative of the
actual operations of the Properties 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 Properties, have been excluded.

REVENUE AND EXPENSE RECOGNITION

Revenue is recognized in the period in which it is earned. Expenses are
recognized in the period in which they are incurred.

USE OF ESTIMATES

The preparation of the Combined Statements of Revenue and Certain Expenses
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from these
estimates.

NOTE 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 share as defined.

NOTE 4 MANAGEMENT AGREEMENT

During the year ended December 31, 1995 and October 31, 1996, the Properties
were managed by a third-party management company. The management agreement
provided for an annual fee of 4% and 5% of base rental operating receipts less
tenant expense stops, as defined in tenant leases, at Woodcreek I and II,
respectively.

F-28
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Great Lakes REIT, Inc.

We have audited the accompanying Statements of Revenue and Certain Expenses
of Long Lake Crossing (the Property) for the period from January 1, 1996 to
November 22, 1996 and the year ended December 31, 1995. The Statements of
Revenue and Certain Expenses are the responsibility of the Property's
management. Our responsibility is to express an opinion on the Statements of
Revenue and Certain Expenses 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 Statements of Revenue and Certain
Expenses are free from material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures made in the
Statements 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 Statements of Revenue and Certain
Expenses. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the Statements of Revenue and Certain Expenses referred to
above present fairly, in all material respects, the revenue and certain expenses
of the Property described in Note 2 for the period from January 1, 1996 to
November 22, 1996 and the year ended December 31, 1995, in conformity with
generally accepted accounting principles.

ERNST & YOUNG LLP

Chicago, Illinois
December 27, 1996

F-29
<PAGE>
LONG LAKE CROSSING

STATEMENTS OF REVENUE AND CERTAIN EXPENSES

<TABLE>
<CAPTION>
JANUARY 1, 1996 YEAR ENDED
TO NOVEMBER 22, DECEMBER 31,
1996 1995
--------------- ------------
<S> <C> <C>
REVENUE
Base rents........................................................................ $ 2,269,745 $2,519,925
Tenant reimbursements............................................................. 167,721 152,633
Other income...................................................................... 65,876 42,392
--------------- ------------
Total revenue..................................................................... 2,503,342 2,714,950

EXPENSES
Real estate taxes................................................................. 303,440 340,696
Contract Services................................................................. 178,172 164,876
Utilities......................................................................... 277,635 300,855
Repairs and maintenance........................................................... 92,496 106,083
Management fee.................................................................... 48,684 51,582
Insurance......................................................................... 23,689 25,788
Other............................................................................. 18,008 12,562
--------------- ------------
Total expenses.................................................................... 942,124 1,002,442
--------------- ------------
Revenue in excess of certain expenses............................................. $ 1,561,218 $1,712,508
--------------- ------------
--------------- ------------
</TABLE>

See accompanying notes.

F-30
<PAGE>
LONG LAKE CROSSING

NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES

NOTE 1 BUSINESS

The accompanying Statements of Revenue and Certain Expenses relate to the
operations of Long Lake Crossing (the Property). The Property was acquired on
November 22, 1996, by Great Lakes REIT, L.P. (Great Lakes).

As of November 22, 1996 and December 31, 1995, the Property had twenty-eight
tenants. Two tenants (Walsh College of Business and St. Paul Fire & Marine
Insurance) accounted for approximately 33% of base rents at November 22, 1996
and December 31, 1995.

NOTE 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 registration statement on Form S-11
of Great Lakes REIT, Inc. The statement is 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 in the period in which it is earned. Expenses are
recognized in the period in which they are incurred.

USE OF ESTIMATES

NOTE 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 share as defined.

NOTE 4 MANAGEMENT AGREEMENT

During the year ended December 31, 1995 and the period ended November 22,
1996, the Property was managed by a third-party management company. The
management agreement provided for a fee of 2% of gross monthly rent.

F-31
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Great Lakes REIT, Inc.

We have audited the accompanying Combined Statements of Revenue and Certain
Expenses of Lincoln Center II & III (the Property) for the period from January
1, 1996 to November 8, 1996 and the year ended December 31, 1995. The Combined
Statements of Revenue and Certain Expenses are the responsibility of the
Property's management. Our responsibility is to express an opinion on the
Combined Statements of Revenue and Certain Expenses 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 Combined Statements of Revenue and
Certain Expenses are free from material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures made
in the Combined Statements 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 Combined
Statements of Revenue and Certain Expenses. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the Combined Statements of Revenue and Certain Expenses
referred to above present fairly, in all material respects, the combined revenue
and certain expenses of the Property described in Note 2 for the period from
January 1, 1996 to November 8, 1996 and the year ended December 31, 1995, in
conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Chicago, Illinois
December 27, 1996

F-32
<PAGE>
LINCOLN CENTER II & III

COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES

<TABLE>
<CAPTION>
JANUARY 1, 1996 YEAR ENDED
TO NOVEMBER 8, DECEMBER 31,
1996 1995
--------------- ------------
<S> <C> <C>
REVENUE
Base rents........................................................................ $ 1,455,199 $1,356,954
Tenant reimbursements............................................................. 25,028 72,115
Other income...................................................................... 27,872 15,727
--------------- ------------
Total revenue..................................................................... 1,508,099 1,444,796

EXPENSES
Real estate taxes................................................................. 229,909 256,155
Contract Services................................................................. 170,615 186,996
Utilities......................................................................... 142,098 146,526
Repairs and maintenance........................................................... 77,154 79,260
Management fee.................................................................... 60,063 54,866
Insurance......................................................................... 9,215 12,597
Other............................................................................. 3,708 58,452
--------------- ------------
Total expenses.................................................................... 692,762 794,852
--------------- ------------
Revenue in excess of certain expenses............................................. $ 815,337 $ 649,944
--------------- ------------
--------------- ------------
</TABLE>

See accompanying notes.

F-33
<PAGE>
LINCOLN CENTER II & III
NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES

NOTE 1 BUSINESS

The accompanying Combined Statements of Revenue and Certain Expenses relate
to the operations of Lincoln Center II & III (the Property). The Property was
acquired on November 8, 1996, by Great Lakes REIT, L.P. (Great Lakes).

As of November 8, 1996 and December 31, 1995, the Property had twenty-one
tenants and twenty-two tenants, respectively. Three tenants (CNR Health, First
Health and Radian) accounted for approximately 49% of base rents at November 8,
1996 and two tenants (First Health and Superior Environmental) accounted for
approximately 25% of base rents at December 31, 1995.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying Combined 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 registration statement
on Form S-11 of Great Lakes REIT, Inc. The statements are not representative of
the actual operations of the Property for the period 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 in the period in which it is earned. Expenses are
recognized in the period in which they are incurred.

USE OF ESTIMATES

The preparation of the Combined Statements of Revenue and Certain Expenses
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of revenue
and expenses during the reporting periods. Actual results could differ from
these estimates.

NOTE 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 share as defined.

NOTE 4 MANAGEMENT AGREEMENT

During the year ended December 31, 1995 and the period ended November 8,
1996, the Property was managed by a third-party management company. The
management agreement provided for a fee of 4% of gross monthly rent.

F-34
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Great Lakes REIT, Inc.

We have audited the Statement of Revenue and Certain Expenses of 40 Oak
Hollow (the Property) for the period from March 19, 1996 to December 20, 1996.
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 from material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures made in the Statement of
Revenue and Certain Expenses. An audit also includes assessing the basis of
accounting used and the 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.

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 for the period from March 19, 1996 to December 20,
1996, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Chicago, Illinois
January 23, 1997

F-35
<PAGE>
40 OAK HOLLOW

STATEMENT OF REVENUE AND CERTAIN EXPENSES

<TABLE>
<CAPTION>
MARCH 19, 1996
TO DECEMBER 20,
1996
---------------
<S> <C>
REVENUE
Base rents....................................................................................... $ 884,069
Tenant reimbursements............................................................................ 177,748
---------------
Total revenue.................................................................................... 1,061,817

EXPENSES
Real estate taxes................................................................................ 125,132
General operating................................................................................ 42,947
Utilities........................................................................................ 124,645
Cleaning and landscaping......................................................................... 82,185
Repairs and maintenance.......................................................................... 69,597
Insurance........................................................................................ 7,758
Management fee................................................................................... 14,134
---------------
Total expenses................................................................................... 466,398
---------------
Revenue in excess of certain expenses............................................................ $ 595,419
---------------
---------------
</TABLE>

See accompanying notes.

F-36
<PAGE>
40 OAK HOLLOW

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

NOTE 1 BUSINESS

The accompanying Statement of Revenue and Certain Expenses relates to the
operations of 40 Oak Hollow (the Property). The Property was acquired on
December 20, 1996, by Great Lakes REIT, Inc. (Great Lakes). The Property was
previously owned by Metropolitan Life Insurance Company which had acquired it on
March 19, 1996.

As of December 20, 1996, the Property had ten tenants.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

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 registration statement on Form S-11 of
Great Lakes. The statement is not representative of the actual operations of the
Property for the period 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 in the period in which it is earned. Expenses are
recognized in the period in which they are incurred.

USE OF ESTIMATES

The preparation of the Statement of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from these
estimates.

NOTE 3 RENTALS

The Property has entered into tenant leases that provide for tenants to
share in increases in operating expenses and real estate taxes in excess of base
amounts, as defined.

Approximately 29%, 17%, and 13% of the base rent recognized during the
period March 19, 1996 to December 20, 1996, related to the Midwest Re-Employment
Consultants, Inc., Sun Life Assurance Company of Canada, and Hygrade Food
Products Associates, respectively.

NOTE 4 MANAGEMENT AGREEMENT

During the period from March 19, 1996 to December 20, 1996, the Property was
managed by a third-party management company. The management agreement provided
for an annual fee of 1.5% of gross operating receipts.

F-37
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Great Lakes REIT, Inc.

We have audited the Statements of Revenues and Certain Expenses of
Centennial Center (the Property) for the period from January 1, 1996 to December
27, 1996 and the year ended December 31, 1995. The Statements of Revenue and
Certain Expenses are the responsibility of the Property's management. Our
responsibility is to express an opinion on the Statements of Revenue and Certain
Expenses 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 Statements of Revenue and Certain
Expenses are free from material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures made in the
Statements 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 Statements of Revenue and Certain
Expenses. We believe that our audits provide a reasonable basis for our opinion.

The accompanying Statements of Revenues 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 registration statement on Form S-11
of Great Lakes REIT, Inc. as described in Note 2 and are not intended to be a
complete presentation of the Property's revenue and expenses.

In our opinion, the Statements of Revenues and Certain Expenses referred to
above presents fairly, in all material respects, the revenue and certain
expenses described in Note 2 for the period from January 1, 1996 to December 27,
1996 and the year ended December 31, 1995, in conformity with generally accepted
accounting principles.

ERNST & YOUNG LLP

Chicago, Illinois
January 10, 1997

F-38
<PAGE>
CENTENNIAL CENTER

STATEMENTS OF REVENUE AND CERTAIN EXPENSES

<TABLE>
<CAPTION>
JANUARY 1, 1996 YEAR ENDED
TO DECEMBER 27, DECEMBER 31,
1996 1995
--------------- ------------
<S> <C> <C>
REVENUE
Base rents........................................................................ $ 1,851,893 $1,924,251
Tenant reimbursements............................................................. 2,229,351 2,147,287
Other income...................................................................... 126,054 86,786
--------------- ------------
Total revenue..................................................................... 4,207,298 4,158,324

EXPENSES
Real estate taxes................................................................. 1,437,064 1,384,046
General operating................................................................. 182,502 128,580
Utilities......................................................................... 276,459 284,434
Cleaning and landscaping.......................................................... 423,437 401,636
Repairs and maintenance........................................................... 279,191 265,113
Management fee.................................................................... 62,753 149,311
Insurance......................................................................... 35,566 42,229
--------------- ------------
Total expenses.................................................................... 2,696,972 2,655,349
--------------- ------------
Revenue in excess of certain expenses............................................. $ 1,510,326 $1,502,975
--------------- ------------
--------------- ------------
</TABLE>

See accompanying notes.

F-39
<PAGE>
CENTENNIAL CENTER

NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES

NOTE 1 BUSINESS

The accompanying Statements of Revenue and Certain Expenses relate to the
operations of Centennial Center (the Property). The Property was acquired on
December 27, 1996, by Great Lakes REIT, Inc. (Great Lakes).

As of December 27, 1996 and December 31, 1995, the Property had eighteen and
sixteen tenants, respectively. Three tenants (United Health Care Group, Crawford
& Company, and Metropolitan Life Insurance) account for approximately 72% of
total revenue in 1996 and two tenants (Metropolitan Life Insurance and Crawford
& Company) account for approximately 62% of total revenue on 1995.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

REVENUE AND EXPENSE RECOGNITION

Revenue is recognized in the period in which it is earned. Expenses are
recognized in the period in which they are incurred.

USE OF ESTIMATES

NOTE 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 share as defined.

NOTE 4 MANAGEMENT AGREEMENT

During the period from January 1, 1996 to December 27, 1996 and the year
ended December 31, 1995, the Property was managed by a third-party management
company. The management agreement provided for a fee of 5% of gross receipts
collected per year through August 15, 1995 (managment company paid employee
salaries), and 1.5% of gross receipts collected per year thereafter (property
paid employee salaries).

F-40
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Great Lakes REIT, Inc.

We have audited the accompanying Statement of Revenue and Certain Expenses
of Dublin Techmart (the Property) for the year ended December 31, 1995. 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 from material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures made 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.

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 for the year ended December 31, 1995, in conformity
with generally accepted accounting principles.

ERNST & YOUNG LLP

Chicago, Illinois
October 31, 1996

F-41
<PAGE>
DUBLIN TECHMART

STATEMENTS OF REVENUE AND CERTAIN EXPENSES

<TABLE>
<CAPTION>
YEAR ENDED
JANUARY 1, 1996 TO DECEMBER 31,
SEPTEMBER 25, 1996 1995
------------------ ------------
(UNAUDITED)
<S> <C> <C>
REVENUE
Base rents........................................ $ 862,764 $1,084,535
Tenant reimbursements............................. 321,277 383,353
Other income...................................... 1,023 923
------------------ ------------
Total revenue..................................... 1,185,064 1,468,811

EXPENSES
Real estate taxes................................. 135,942 212,201
General operating................................. 50,541 36,484
Utilities......................................... 64,600 63,594
Cleaning and landscaping.......................... 19,129 29,211
Repairs and maintenance........................... 43,786 62,130
Management fee.................................... 49,500 66,000
Insurance......................................... 9,510 7,646
------------------ ------------
Total expenses.................................... 373,008 477,266
------------------ ------------
Revenue in excess of certain expenses............. $ 812,056 $ 991,545
------------------ ------------
------------------ ------------
</TABLE>

See accompanying notes.

F-42
<PAGE>
DUBLIN TECHMART

NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES

NOTE 1 BUSINESS

The accompanying Statements of Revenue and Certain Expenses relate to the
operations of Dublin Techmart (the Property). The Property was acquired on
September 25, 1996, by Great Lakes REIT, Inc. (Great Lakes).

As of December 31, 1995, the Property had thirteen tenants. Four tenants
(USF&G Company, Dublin Office Suites, Sterling Software, and Yaskawa Electric)
account for approximately 63% of base rents.

NOTE 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 registration statement on Form S-11
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, amortization and net interest expense,
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 in the period in which it is earned. Expenses are
recognized in the period in which they are incurred.

USE OF ESTIMATES

NOTE 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 share as defined.

NOTE 4 MANAGEMENT AGREEMENT

During the year ended December 31, 1995, the Property was managed by a
third-party management company. The management agreement provided for a flat fee
of $5,500 per month.

F-43
<PAGE>
REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Great Lakes REIT, Inc.

We have audited the Statements of Revenues and Certain Expenses of Princeton
Hill Corporate Center (the Property) for the period from January 1, 1996 to
April 17, 1996 and the year ended December 31, 1995. The Statements of Revenue
and Certain Expenses are the responsibility of the Property's management. Our
responsibility is to express an opinion on the Statements of Revenue and Certain
Expenses based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the Statements of Revenue and Certain
Expenses are free from material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures made in the
Statements 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 Statements of Revenue and Certain
Expenses. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the Statements of Revenues and Certain Expenses referred to
above presents fairly, in all material respects, the revenue and certain
expenses described in Note 2 for the period from January 1, 1996 to April 17,
1996 and the year ended December 31, 1995, in conformity with generally accepted
accounting principles.

ERNST & YOUNG LLP

Chicago, Illinois
January 14, 1997

F-44
<PAGE>
PRINCETON HILL CORPORATE CENTER

STATEMENTS OF REVENUE AND CERTAIN EXPENSES

<TABLE>
<CAPTION>
JANUARY 1,
1996 YEAR ENDED
TO DECEMBER 31,
APRIL 17, 1996 1995
-------------- ------------
<S> <C> <C>
REVENUE
Base rents......................................................................... $ 100,089 $ 251,512
Tenant reimbursements.............................................................. 49,576 116,890
Other income....................................................................... 4 10
-------------- ------------
Total revenue...................................................................... 149,669 368,412

EXPENSES
Real estate taxes.................................................................. 34,069 111,246
Contract Services.................................................................. 38,320 84,964
Utilities.......................................................................... 49,348 145,935
Repairs and maintenance............................................................ 20,823 103,734
Management fee..................................................................... 7,500 19,200
Insurance.......................................................................... 4,667 15,725
Other.............................................................................. 2,847 57,441
-------------- ------------
Total expenses..................................................................... 157,574 538,245
-------------- ------------
Certain expenses in excess of revenue.............................................. $ (7,905) $ (169,833)
-------------- ------------
-------------- ------------
</TABLE>

See accompanying notes.

F-45
<PAGE>
PRINCETON HILL CORPORATE CENTER

NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES

NOTE 1 BUSINESS

The accompanying Statements of Revenue and Certain Expenses relates to the
operations of Princeton Hill Corporate Center (the Property). The Property was
acquired on April 17, 1996, by Great Lakes REIT, Inc. (Great Lakes).

As of April 17, 1996 and December 31, 1995, the Property had four tenants.
The four tenants (JD Edwards & Company, Healthspan Ltd. Partnership, Information
Builders Inc. and Coca-Cola Foods ) account for 100% of total revenue.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

REVENUE AND EXPENSE RECOGNITION

Revenue is recognized in the period in which it is earned. Expenses are
recognized in the period in which they are incurred.

USE OF ESTIMATES

NOTE 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 share as defined.

NOTE 4 MANAGEMENT AGREEMENT

During the period from January 1, 1996 to April 17, 1996 and the year ended
December 31, 1995, the Property was managed by a third-party management company.
The management agreement provided for a fee of $1,300 per month or 2.5% of gross
receipts collected, whichever is greater, through September 1995. The $1,300 was
increased to $2,500 effective October 1995.

F-46
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, TO
ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.

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

SUMMARY TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 1
Risk Factors................................... 11
The Company.................................... 20
Business and Growth Strategies................. 22
Use of Proceeds................................ 27
Distributions.................................. 28
Capitalization................................. 29
Selected Financial and Operating Data.......... 30
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 33
Business and Properties........................ 39
The Midwest Region Suburban Office Markets and
Properties.................................... 52
Management..................................... 70
Policies with Respect to Certain Activities.... 80
Certain Transactions........................... 83
Partnership Agreement.......................... 85
Principal Stockholders......................... 88
Capital Stock of the Company................... 90
Certain Provisions of Maryland Law and the
Company's Charter and Bylaws.................. 95
Shares Available for Future Sale............... 97
Certain Federal Income Tax Considerations...... 98
ERISA Considerations........................... 115
Underwriting................................... 118
Experts........................................ 119
Legal Matters.................................. 119
Available Information.......................... 120
Glossary....................................... 121
Index to Consolidated Financial Statements..... F-1
</TABLE>

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

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE SECURITIES OFFERED HEREBY, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

5,700,000 SHARES

[LOGO]

GREAT LAKES REIT, INC.

COMMON STOCK

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

PROSPECTUS
, 1997

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

LEHMAN BROTHERS
A.G. EDWARDS & SONS, INC.
SMITH BARNEY INC.
EVEREN SECURITIES, INC.

ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<S> <C>
Securities and Exchange Commission Registration
Fee............................................. $ 33,769
NASD Fee.......................................... $ 11,644
New York Stock Exchange Listing Fee............... $ 130,000
Transfer Agent and Registrar's Fees............... $ 30,000
Printing and Engraving Expenses................... $ 100,000
Legal Fees and Expenses........................... $ 850,000
Accounting Fees and Expenses...................... $ 250,000
Miscellaneous Expenses............................ $ 194,587
--------------
TOTAL......................................... $ 1,600,000
--------------
--------------
</TABLE>

ITEM 31. SALES TO SPECIAL PARTIES.

See Item 32.

ITEM 32. 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 within the past three years that
were not registered under the Securities Act (the "Private Placements"):

<TABLE>
<CAPTION>
TYPE OF SHARES OR TOTAL
SECURITY SOLD OFFERING PERIOD UNITS SOLD PROCEEDS ISSUANCE COSTS
- ------------------ --------------------------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Common Stock July 15, 1994-June 30, 1995 2,145,156 $25,132,411 $ 2,111,428
Common Stock August 20-December 31, 1995 503,978 $ 6,365,677 $ 454,051
Common Stock April 1, 1996 130,000 $ 1,710,000 $ 219,428
Common Stock August 20, 1996 3,867,000 $50,268,899 $ 2,866,550
Preferred Stock August 20, 1996 210,128 $ 2,101 (1)
Common Stock January 27-February 10, 1997 142,184(2) $ 1,848,397 0
</TABLE>

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

(1) The costs associated with the issuance of the Preferred Stock are included
in the cost of the issuance of the contemporaneous issuance of Common Stock
that occurred on August 20, 1996.

(2) Represents the issuance of 118,134 shares of Common Stock and 24,050 OP
Units in connection with the acquisition by the Company of all of the
partnership interests not already owned by the Company in the partnerships
that previously owned two of the Properties.

The Company conducted the Private Placements pursuant to Section 4(2) of the
Securities Act, including in reliance upon the exemption provided by Regulation
D promulgated thereunder to "accredited investors" and to a limited number of
non-accredited investors in those states in which it was authorized to do so.
Each of the Private Placements was conducted on a best-efforts basis, and there
was no underwriter involved in any of the Private Placements.

The placement agent fees paid in connection with the July 1994-June 1995
Private Placement, the August 1995-December 1995 Private Placement and the
August 20, 1996 Private Placement were: $1,494,816, $223,561 and $2,513,550,
respectively. Such placement agent fees are included in the "Issuance Costs"
listed in the table above in this Item 32. No placement agent fees were paid in
connection with the April 1, 1996 Private Placement or the January 28-February
10, 1997 Private Placement.

II-1
<PAGE>
From January 1, 1994 to February 10, 1997, an aggregate of 337,081 shares of
Common Stock were issued upon the exercise of stock options pursuant to Rule 701
of the Securities Act.

The table above includes an aggregate of 370,481 shares of Common Stock
issued to "accredited investors" under the Company's dividend reinvestment
program prior to the termination of that program on December 31, 1995.

ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The charter of the
Company (the "Charter") contains such a provision which eliminates such
liability except to the extent required by the MGCL.

The Charter obligates the Company to indemnify the directors and officers
(and former directors and officers) of the Company to the fullest extent
permitted by the MGCL. The bylaws of the Company (the "Bylaws") obligate it, to
the maximum extent permitted by Maryland law, to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any present or former director or officer who is made a party to the
proceeding by reason of his service in that capacity or (b) any individual who,
while a director of the Company and at the request of the Company, serves or has
served another corporation, partnership, joint venture, trust, employee benefit
plan or any other enterprise as a director, officer, partner or trustee of such
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise and who is made a party to the proceeding by reason of his service in
that capacity. The Charter and Bylaws also permit the Company to indemnify and
advance expenses to any person who served a predecessor of the Company in any of
the capacities described above and to any employee or agent of the Company or a
predecessor of the Company.

The MGCL requires a corporation (unless its charter provides otherwise,
which the Company's Charter does not) to indemnify a director or officer who has
been successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (a) the act or omission of the director
or officer was material to the matter giving rise to the proceeding and (i) was
committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) the director or officer actually received an improper personal
benefit in money, property or services or (c) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, under the MGCL, a Maryland corporation may
not indemnify for an adverse judgment in a suit by or in the right of the
corporation. In addition, the MGCL requires the Company, as a condition to
advancing expenses, to obtain (a) a written affirmation by the director or
officer of his good faith belief that he has met the standard of conduct
necessary for indemnification by the Company as authorized by the Bylaws and (b)
a written statement by or on his behalf to repay the amount paid or reimbursed
by the Company if it shall ultimately be determined that the standard of conduct
was not met.

ITEM 34. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.

Not applicable.

II-2
<PAGE>
ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements.

<TABLE>
<S> <C>
GREAT LAKES REIT, INC.
Consolidated Pro Forma Financial Statements (Unaudited):
Consolidated Pro Forma Balance Sheet as of December 31, 1996
Notes to Consolidated Pro Forma Balance Sheet
Consolidated Pro Forma Statement of Income for the Year Ended December 31,
1996
Notes to Consolidated Pro Forma Statement of Income

Historical:
Report of Independent Auditors
Consolidated Balance Sheets as of December 31, 1996 and 1995
Consolidated Statements of Income for the Years Ended December 31, 1996,
1995 and 1994
Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended December 31, 1996, 1995 and 1994
Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and
1994
Notes to Consolidated Financial Statements

COURT INTERNATIONAL II
Report of Independent Auditors
Statements of Revenue and Certain Expenses for the period from January 1, 1996
to December 13, 1996 and for the year ended December 31, 1995
Notes to Combined Statements of Revenue and Certain Expenses

WOODCREEK I AND II
Report of Independent Auditors
Combined Statements of Revenue and Certain Expenses for the ten months ended
October 31, 1996 and the year ended December 31, 1995
Notes to Combined Statements of Revenue and Certain Expenses

LONG LAKE CROSSING
Report of Independent Auditors
Statements of Revenue and Certain Expenses for the period from January 1, 1996
to November 22, 1996 and the year ended December 31, 1995
Notes to Statements of Revenue and Certain Expenses

LINCOLN CENTER II & III
Report of Independent Auditors
Combined Statements of Revenue and Certain Expenses for the period from January
1, 1996 to November 8, 1996 and the year ended December 31, 1995
Notes to Combined Statements of Revenue and Certain Expenses

40 OAK HOLLOW
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the period from March 19, 1996 to
December 20, 1996
Notes to Statement of Revenue and Certain Expenses

CENTENNIAL CENTER
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the period from January 1, 1996 to
December 27, 1996 and the year ended December 31, 1995
Notes to Statement of Revenue and Certain Expenses
</TABLE>

II-3
<PAGE>
<TABLE>
<S> <C>
DUBLIN TECHMART
Report of Independent Auditors
Statement of Revenue and Certain Expenses for year ended December 31, 1995
Notes to Statement of Revenue and Certain Expenses

PRINCETON HILL CORPORATE CENTER
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the period from January 1, 1996 to
April 17, 1996 and the year ended December 31, 1995
Notes to Statement of Revenue and Certain Expenses
</TABLE>

(b) Financial Statement Schedules
Report of Independent Auditors
Schedule III - Real Estate and Accumulated Depreciation

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ---------- ------------------------------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement between the Company and the Representatives

3.1 Articles of Incorporation of the Company dated June 22, 1992 (Incorporated by reference from the
Company's Registration Statement on Form 10 filed with the Securities and Exchange Commission
on April 29, 1996 (the "Form 10"))

3.2 Articles of Merger of Equity Partners, Ltd. (the "Advisor") into the Company dated April 1, 1996
(Incorporated by reference from the Form 10)

3.3 Articles Supplementary of the Company dated August 20, 1996 (Incorporated by reference from the
Company's Current Report on Form 8-K dated August 28, 1996 (the "August 1996 8-K"))

3.4 Amended and restated bylaws of the Company dated February 25, 1997

4.1 Specimen of certificate representing shares of Common Stock (Incorporated by reference from the
Form 10)

*5.1 Opinion of Ballard Spahr Andrews & Ingersoll regarding the validity of the securities being
registered

*8.1 Opinion of Jones, Day, Reavis & Pogue regarding tax matters

10.1 Merger Agreement dated January 26, 1996 between the Company and the Advisor (Incorporated by
reference from the Form 10)

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

10.3 First Amendment to the Amended and Restated Agreement of Limited Partnership of Great Lakes
REIT, L.P., dated February 6, 1997

10.4 Offering Services Agreement dated August 15, 1995 between the Company and the Advisor
(Incorporated by reference from the Form 10)

10.5 Managing Dealer & Wholesaling Agreement dated August 20, 1995 between the Company and Chauner
Securities, Inc. (Incorporated by reference from the Form 10)

10.6 Agreement dated August 24, 1995 between the Company and EVEREN Securities, Inc. regarding
offering services (Incorporated by reference from the Form 10)
</TABLE>

II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ---------- ------------------------------------------------------------------------------------------------
<C> <S>
10.7 Indemnification Escrow Agreement dated April 1, 1996 between the Company, Richard A. May,
Richard L. Rasley, Tim A. Grodrian, and American National Bank (Incorporated by reference from
the Form 10)

10.8.1 Restricted Stock Agreement dated April 1, 1996 between the Company and Richard L. Rasley
(Incorporated by reference from the Form 10)

10.8.2 Restricted Stock Agreement dated April 1, 1996 between Great Lakes REIT and James Hicks
(Incorporated by reference from the Form 10)

10.8.3 Restricted Stock Agreement dated April 1, 1996 between Great Lakes REIT and Raymond Braun
(Incorporated by reference from the Form 10)

10.8.4 Restricted Stock Agreement dated April 1, 1996 between Great Lakes REIT and Edith M. Scurto
(Incorporated by reference from the Form 10)

10.8.5 Restricted Stock Agreement dated April 1, 1996 between Great Lakes REIT and Brett R. Brown
(Incorporated by reference from the Form 10)

10.8.6 Restricted Stock Agreement dated May 1, 1996 between the Company and Raymond Braun

10.9 Agreement dated August 24, 1995 between the Company and EVEREN Securities, Inc. regarding
fairness opinion (Incorporated by reference from the Form 10)

10.10 Stock Option Plan for Independent Directors and Brokers (the "Directors Plan") dated July 2,
1992 as amended July 15, 1994 (Incorporated by reference from the Form 10)

10.11.1 Non-qualified Stock Option Certificate dated December 31, 1995 from the Company to Jon K. Haahr
(Incorporated by reference from the Form 10)

10.11.2 Non-qualified Stock Option Certificate dated December 31, 1995 from the Company to Wayne M.
Janus (Incorporated by reference from the Form 10)

10.11.3 Non-qualified Stock Option Certificate dated December 31, 1995 from the Company to Daniel E.
Josephs (Incorporated by reference from the Form 10)

10.11.4 Non-qualified Stock Option Certificate dated December 31, 1995 from the Company to Donald E.
Phillips (Incorporated by reference from the Form 10)

10.11.5 Non-qualified Stock Option Certificate dated December 31, 1995 from the Company to Walter H.
Teninga (Incorporated by reference from the Form 10)

10.11.6 Non-qualified Stock Option Certificate dated December 31, 1995 from the Company to Richard A.
May (Incorporated by reference from the Form 10)

10.11.7 Non-qualified Stock Option Certificate dated December 31, 1995 from the Company to Richard L.
Rasley (Incorporated by reference from the Form 10)

10.11.8 Non-qualified Stock Option Certificate dated December 31, 1995 from the Company to Raymond M.
Braun (Incorporated by reference from the Form 10)

10.11.9 Non-qualified Stock Option Certificate dated December 31, 1995 from the Company to James Hicks
(Incorporated by reference from the Form 10)

10.11.10 Non-qualified Stock Option Certificate dated December 31, 1995 from the Company to Edith M.
Scurto (Incorporated by reference from the Form 10)

10.11.11 Non-qualified Stock Option Certificate dated December 31, 1995 from the Company to Brett A.
Brown (Incorporated by reference from the Form 10)
</TABLE>

II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ---------- ------------------------------------------------------------------------------------------------
<C> <S>
10.11.12 Form of Non-Qualified Stock Option Certificate for use in connection with stock options issued
pursuant to the Directors Plan

10.12 Amended and Restated Secured Revolving Loan Agreement dated September 28, 1994 between the
Company and American National Bank and Trust Company of Chicago (Incorporated by reference from
the Form 10)

10.13 First Amendment to Amended and Restated Secured Revolving Loan Agreement dated September 29,
1995 between the Company and American National Bank and Trust Company of Chicago (Incorporated
by reference from the Form 10)

10.14 Second Amendment to Amended and Restated Secured Revolving Loan Agreement dated December 27,
1995 between the Company and American National Bank and Trust Company of Chicago (Incorporated
by reference from the Form 10)

10.15 Revolving Note dated December 27, 1995 between the Company and American National Bank and Trust
Company of Chicago for $25,000,000 (Incorporated by reference from the Form 10)

10.16 Stock Purchase Agreement dated as of August 20, 1996 by and among the Company, Fortis Benefits
Insurance Company, Morgan Stanley Institutional Fund, Inc.--U.S. Real Estate Portfolio, Morgan
Stanley SICAV Subsidiary SA, Wellsford Karpf Zarrilli Ventures, L.L.C., Logan, Inc. and Pension
Trust Account 104972 Held by Bankers Trust Company as Trustee (Incorporated by reference from
the August 1996 8-K)

10.17 Registration Rights Agreement dated as of August 20, 1996 by and among the Company, Fortis
Benefits Insurance Company, Morgan Stanley Institutional Fund, Inc.--U.S. Real Estate
Portfolio, Morgan Stanley SICAV Subsidiary SA, Wellsford Karpf Zarrilli Ventures, L.L.C.,
Logan, Inc. and Pension Trust Account 104972 Held by Bankers Trust Company as Trustee
(Incorporated by reference from the August 1996 8-K)

10.18 Form of Change in Control Agreement between the Company and Messrs. May, Rasley, Braun, Hicks
and Mills (Incorporated by reference from the Company's Registration Statement on Form 10/A
filed with the SEC on January 9, 1997 (the "Form 10/A")

10.19 Form of Change in Control Agreement between the Company and Mr. Brown and Ms. Scurto
(Incorporated by reference from the Form 10/A)

10.20 1996 Incentive Stock Option Plan of the Company (Incorporated by reference from the Form 10/A)

10.21 Form of Stock Option Agreement for use in connection with incentive stock options issued
pursuant to the 1996 Incentive Stock Option Plan of the Company; Richard A. May, Richard L.
Rasley, James Hicks, Raymond Braun and Kim S. Mills entered into agreements in 1996 that
evidenced 32,000, 14,000, 12,000, 16,000 and 12,000 options, respectively under the 1996
Incentive Stock Option Plan effective September 24, 1996 (Incorporated by reference from the
Form 10/A)

10.22 Limited Purpose Employee Loan Program of the Company (Incorporated by reference from the Form
10/A)

10.23 Form of Limited Purpose Employee Loan Program Promissory Note for use in connection with limited
purpose employee loans (Incorporated by reference from the Form 10/A)
</TABLE>

II-6
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ---------- ------------------------------------------------------------------------------------------------
<C> <S>
10.24 Amended and Restated Revolving Credit Agreement (the "Amended and Restated Revolving Credit
Agreement") Dated as of December 27, 1996 among the Operating Partnership and the Company and
The First National Bank of Boston and Bank of America Illinois and First Bank National
Association and Other Banks Which May Become Parties to the Agreement and The First National
Bank of Boston as Agent (Incorporated by reference from the January 1997 8-K)

10.25 Form of First Amendment to the Amended and Restated Revolving Credit Agreement dated as of March
1, 1997

23.1 Consent of Ernst & Young LLP

*23.2 Consent of Ballard Spahr Andrews & Ingersoll (contained in Exhibit 5.1)

*23.3 Consent of Jones, Day, Reavis & Pogue (contained in Exhibit 8.1)

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

27.1 Financial Data Schedule
</TABLE>

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

* To be filed by amendment.

ITEM 36. UNDERTAKINGS.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions described under Item 33 above, or otherwise, the
Company has been advised that in the opinion of the SEC such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.

The undersigned Company hereby undertakes that:

(1) For the purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of the
Registration Statement in reliance upon Rule 430A and contained in the form of
Prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the Registration
Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

II-7
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-11 and has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in Oak
Brook, Illinois on the 28th day of February, 1997.

GREAT LAKES REIT, INC.

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

Each person whose signature appears below constitutes and appoints 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 any and all amendments (including post-effective amendments)
to this Registration Statement on Form S-11, and to file the same, with exhibits
and schedules thereto, and other documents in connection 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.

Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities
indicated and on the 28th day of February, 1997.

SIGNATURE TITLE
- ----------------------------------- -----------------------------------

/s/ RICHARD A. Chairman of the Board of Directors,
MAY President and Chief Executive
- ----------------------------------- Officer (Principal Executive
Richard A. May Officer)

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

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

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

II-8
<PAGE>

SIGNATURE TITLE
- ----------------------------------- -----------------------------------

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

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

/s/ DONALD E.
PHILLIPS
- ----------------------------------- Director
Donald E. Phillips

/s/ WALTER H.
TENINGA
- ----------------------------------- Director
Walter H. Teninga

II-9

<PAGE>

Exhibit 3.4

GREAT LAKES REIT, INC.

BYLAWS

ARTICLE I

OFFICES

Section 1. PRINCIPAL OFFICE. The principal office of the Corporation
shall be located at such place or places as the Board of Directors may
designate.

Section 2. ADDITIONAL OFFICES. The Corporation may have additional
offices at such places as the Board of Directors may from time to time determine
or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. PLACE. All meetings of stockholders shall be held at the
principal office of the Corporation or at such other place within the United
States as shall be stated in the notice of the meeting.

Section 2. ANNUAL MEETING. An annual meeting of the stockholders for
the election of directors and the transaction of any business within the powers
of the Corporation shall be held on a date and at the time set by the Board of
Directors during the month of July in 1997 and during the month of May in each
subsequent year.

Section 3. SPECIAL MEETINGS. The president, chief executive officer
or Board of Directors may call special meetings of the stockholders. Special
meetings of stockholders shall also be called by the secretary of the
Corporation upon the written request of the holders of shares entitled to cast
not less than a majority of all the votes entitled to be cast at such meeting.
Such request shall state the purpose of such meeting and the matters proposed to
be acted on at such meeting. The secretary shall inform such stockholders of
the reasonably estimated cost of preparing and mailing notice of the meeting
and, upon payment to the Corporation by such stockholders of such costs, the
secretary shall give notice to each stockholder entitled to notice of the
meeting.

Section 4. NOTICE. Not less than ten nor more than 90 days before
each meeting of stockholders, the secretary shall give to each stockholder
entitled to vote at such meeting and to each stockholder not entitled to vote
who is entitled to notice of the meeting written or printed notice stating the
time and place of the meeting and, in the case of a special meeting or as
otherwise may be required by any statute, the purpose for which the meeting is

<PAGE>

called, either by mail or by presenting it to such stockholder personally or by
leaving it at his residence or usual place of business. If mailed, such notice
shall be deemed to be given when deposited in the United States mail addressed
to the stockholder at his post office address as it appears on the records of
the Corporation, with postage thereon prepaid.

Section 5. SCOPE OF NOTICE. Any business of the Corporation may be
transacted at an annual meeting of stockholders without being specifically
designated in the notice, except such business as is required by any statute to
be stated in such notice. No business shall be transacted at a special meeting
of stockholders except as specifically designated in the notice.

Section 6. ORGANIZATION. At every meeting of stockholders, the
chairman of the board, if there be one, shall conduct the meeting or, in the
case of vacancy in office or absence of the chairman of the board, one of the
following officers present shall conduct the meeting in the order stated: the
vice chairman of the board, if there be one, the president, the vice presidents
in their order of rank and seniority, or a chairman chosen by the stockholders
entitled to cast a majority of the votes which all stockholders present in
person or by proxy are entitled to cast, shall act as chairman, and the
secretary, or, in his absence, an assistant secretary, or in the absence of both
the secretary and assistant secretaries, a person appointed by the chairman
shall act as secretary.

Section 7. QUORUM. At any meeting of stockholders, the presence in
person or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the charter of the
Corporation for the vote necessary for the adoption of any measure. If,
however, such quorum shall not be present at any meeting of the stockholders,
the stockholders entitled to vote at such meeting, present in person or by
proxy, shall have the power to adjourn the meeting from time to time to a date
not more than 120 days after the original record date without notice other than
announcement at the meeting. At such adjourned meeting at which a quorum shall
be present, any business may be transacted which might have been transacted at
the meeting as originally notified.

Section 8. VOTING. A plurality of all the votes cast at a meeting of
stockholders duly called and at which a quorum is present shall be sufficient to
elect a director. Each share may be voted for as many individuals as there are
directors to be elected and for whose election the share is entitled to be
voted. A majority of the votes cast at a meeting of stockholders duly called
and at which a quorum is present shall be sufficient to approve any other matter
which may properly come before the meeting, unless more than a majority of the
votes cast is required by statute or by the charter of the Corporation. Unless
otherwise provided in the charter, each outstanding share, regardless of class,
shall be

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<PAGE>

entitled to one vote on each matter submitted to a vote at a meeting of
stockholders.

Section 9. PROXIES. A stockholder may cast the votes entitled to be
cast by the shares of the stock owned of record by him either in person or by
proxy executed in writing by the stockholder or by his duly authorized attorney
in fact. Such proxy shall be filed with the secretary of the Corporation before
or at the time of the meeting. No proxy shall be valid after eleven months from
the date of its execution, unless otherwise provided in the proxy.

Section 10. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the
Corporation registered in the name of a corporation, partnership, trust or other
entity, if entitled to be voted, may be voted by the president or a vice
president, a general partner or trustee thereof, as the case may be, or a proxy
appointed by any of the foregoing individuals, unless some other person who has
been appointed to vote such stock pursuant to a bylaw or a resolution of the
governing body of such corporation or other entity or agreement of the partners
of a partnership presents a certified copy of such bylaw, resolution or
agreement in which case such person may vote such stock. Any director or other
fiduciary may vote stock registered in his name as such fiduciary, either in
person or by proxy.

Shares of stock of the Corporation directly or indirectly owned by it
shall not be voted at any meeting and shall not be counted in determining the
total number of outstanding shares entitled to be voted at any given time,
unless they are held by it in a fiduciary capacity, in which case they may be
voted and shall be counted in determining the total number of outstanding
shares at any given time.

The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.

Section 11. INSPECTORS. At any meeting of stockholders, the chairman
of the meeting may appoint one or more persons as

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<PAGE>

inspectors for such meeting. Such inspectors shall ascertain and report the
number of shares represented at the meeting based upon their determination of
the validity and effect of proxies, count all votes, report the results and
perform such other acts as are proper to conduct the election and voting with
impartiality and fairness to all the stockholders.

Each report of an inspector shall be in writing and signed by him or by a
majority of them if there is more than one inspector acting at such meeting. If
there is more than one inspector, the report of a majority shall be the report
of the inspectors. The report of the inspector or inspectors on the number of
shares represented at the meeting and the results of the voting shall be PRIMA
FACIE evidence thereof.

Section 12. NOMINATIONS AND PROPOSALS BY STOCKHOLDERS.

(a) ANNUAL MEETINGS OF STOCKHOLDERS. (1) Nominations of persons for
election to the Board of Directors and the proposal of business to be considered
by the stockholders may be made at an annual meeting of stockholders (i)
pursuant to the Corporation's notice of meeting, (ii) by or at the direction of
the Board of Directors or (iii) by any stockholder of the Corporation who was a
stockholder of record both at the time of giving of notice provided for in this
Section 12(a) and at the time of the annual meeting, who is entitled to vote at
the meeting and who complied with the notice procedures set forth in this
Section 12(a).

(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of paragraph
(a)(1) of this Section 12, the stockholder must have given timely notice thereof
in writing to the secretary of the Corporation and such other business must
otherwise be a proper matter for action by stockholders. To be timely, a
stockholder's notice shall be delivered to the secretary at the principal
executive offices of the Corporation not later than the close of business on the
60th day nor earlier than the close of business on the 90th day prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is advanced by more than
30 days or delayed by more than 60 days from such anniversary date or if the
Corporation has not previously held an annual meeting, notice by the stockholder
to be timely must be so delivered not earlier than the close of business on the
90th day prior to such annual meeting and not later than the close of business
on the later of the 60th day prior to such annual meeting or the tenth day
following the day on which public announcement of the date of such meeting is
first made by the Corporation. In no event shall the public announcement of a
postponement or adjournment of an annual meeting to a later date or time
commence a new time period for the giving of a stockholder's notice as described
above. Such stockholder's notice shall set forth (i) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required

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<PAGE>

to be disclosed in solicitations of proxies for election of directors in an
election contest, or is otherwise required, in each case pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(including such person's written consent to being named in the proxy statement
as a nominee and to serving as a director if elected); (ii) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest in
such business of such stockholder and of the beneficial owner, if any, on whose
behalf the proposal is made; and (iii) as to the stockholder giving the notice
and the beneficial owner, if any, on whose behalf the nomination or proposal is
made, (x) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (y) the number of shares
of each class of stock of the Corporation which are owned beneficially and of
record by such stockholder and such beneficial owner.

(3) Notwithstanding anything in the second sentence of
paragraph (a)(2) of this Section 12 to the contrary, in the event that the
number of directors to be elected to the Board of Directors is increased and
there is no public announcement by the Corporation naming all of the nominees
for director or specifying the size of the increased Board of Directors at least
70 days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by this Section 12(a) shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the secretary at the principal executive
offices of the Corporation not later than the close of business on the tenth day
following the day on which such public announcement is first made by the
Corporation.

(b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) provided that the Board of Directors has determined that
directors shall be elected at such special meeting, by any stockholder of the
Corporation who is a stockholder of record both at the time of giving of notice
provided for in this Section 12(b) and at the time of the special meeting, who
is entitled to vote at the meeting and who complied with the notice procedures
set forth in this Section 12(b). In the event the Corporation calls a special
meeting of stockholders for the purpose of electing one or more directors to the
Board of Directors, any such stockholder may nominate a person or persons (as
the case may be) for election to such position as specified in the Corporation's
notice of meeting, if the stockholder's notice containing the information
required by paragraph (a)(2) of this Section 12 shall be delivered to the
secretary at the principal executive offices of

-5-
<PAGE>

the Corporation not earlier than the close of business on the 90th day prior to
such special meeting and not later than the close of business on the later of
the 60th day prior to such special meeting or the tenth day following the day on
which public announcement is first made of the date of the special meeting and
of the nominees proposed by the Board of Directors to be elected at such
meeting. In no event shall the public announcement of a postponement or
adjournment of a special meeting to a later date or time commence a new time
period for the giving of a stockholder's notice as described above.

(c) GENERAL. (1) Only such persons who are nominated in accordance
with the procedures set forth in this Section 12 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 12. The chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made or proposed, as the case may be, in
accordance with the procedures set forth in this Section 12 and, if any proposed
nomination or business is not in compliance with this Section 12, to declare
that such nomination or proposal shall be disregarded.

(2) For purposes of this Section 12, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.

(3) Notwithstanding the foregoing provisions of this Section
12, a stockholder shall also comply with all applicable requirements of state
law and of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 12. Nothing in this Section 12
shall be deemed to affect any rights of stockholders to request inclusion of
proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the
Exchange Act.

Section 13. VOTING BY BALLOT. Voting on any question or in any
election may be VIVA VOCE unless the presiding officer shall order or any
stockholder shall demand that voting be by ballot.

ARTICLE III

DIRECTORS

Section 1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors. It
shall be the duty of the Board of Directors to ensure that the Corporation
satisfies the requirements for qualification as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"),
including,

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<PAGE>

but not limited to, the ownership of outstanding shares of its stock, the nature
of its assets, the sources of its income and the amount and timing of its
distributions to its stockholders. The Board of Directors shall take no action
to disqualify the Corporation as a REIT under the Code or otherwise revoke the
Corporation's election to be taxed as REIT under the Code without the
affirmative vote of a majority of the number of shares entitled to cast votes on
such matter at a meeting of stockholders.

Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular meeting
or at any special meeting called for that purpose, a majority of the entire
Board of Directors may establish, increase or decrease the number of directors,
provided that the number thereof shall never be less than the minimum number
required by the Maryland General Corporation Law, nor more than 15, and further
provided that the tenure of office of a director shall not be affected by any
decrease in the number of directors.

Notwithstanding anything herein to the contrary, at all times
(except during a period not to exceed 60 days following the death, resignation,
incapacity or removal from office of a Director prior to the expiration of the
director's term of office), a majority of the Board of Directors shall be
comprised of persons who are not officers or employees of the Corporation (each
such person serving on the Board of Directors being an "Independent Director").

Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the
Board of Directors shall be held immediately after and at the same place as the
annual meeting of stockholders, no notice other than this Bylaw being necessary.
The Board of Directors may provide, by resolution, the time and place, either
within or without the State of Maryland, for the holding of regular meetings of
the Board of Directors without other notice than such resolution.

Section 4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the chairman of the board,
president or by a majority of the directors then in office. The person or
persons authorized to call special meetings of the Board of Directors may fix
any place, either within or without the State of Maryland, as the place for
holding any special meeting of the Board of Directors called by them.

Section 5. NOTICE. Notice of any special meeting of the Board of
Directors shall be delivered personally or by telephone, facsimile transmission,
United States mail or courier to each director at his business or residence
address. Notice by personal delivery, by telephone or a facsimile transmission
shall be given at least two days prior to the meeting. Notice by mail shall be
given at least five days prior to the meeting and shall be deemed to be given
when deposited in the United States mail properly addressed, with postage
thereon prepaid. Telephone notice shall be deemed to be given when the director
is personally given such

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<PAGE>

notice in a telephone call to which he is a party. Facsimile transmission
notice shall be deemed to be given upon completion of the transmission of the
message to the number given to the Corporation by the director and receipt of a
completed answer-back indicating receipt. Neither the business to be transacted
at, nor the purpose of, any annual, regular or special meeting of the Board of
Directors need be stated in the notice, unless specifically required by statute
or these Bylaws.

Section 6. QUORUM. A majority of the directors shall constitute a
quorum for transaction of business at any meeting of the Board of Directors,
provided that, if less than a majority of such directors are present at said
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice, and provided further that if, pursuant to the
charter of the Corporation or these Bylaws, the vote of a majority of a
particular group of directors is required for action, a quorum must also include
a majority of such group.

The directors present at a meeting which has been duly called and
convened may continue to transact business until adjournment, notwithstanding
the withdrawal of enough directors to leave less than a quorum.

Section 7. VOTING. The action of the majority of the directors
present at a meeting at which a quorum is present shall be the action of the
Board of Directors, unless the concurrence of a greater proportion is required
for such action by applicable statute.

Section 8. TELEPHONE MEETINGS. Directors may participate in a meeting
by means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.

Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
director and such written consent is filed with the minutes of proceedings of
the Board of Directors.

Section 10. RESIGNATION. Any director may resign by written notice to
the Board of Directors, effective upon execution and delivery to the Corporation
of such written notice or upon any future date specified in the notice.

Section 11. VACANCIES. If for any reason any or all the directors
cease to be directors, such event shall not terminate the Corporation or affect
these Bylaws or the powers of the remaining directors hereunder (even if fewer
than three directors remain). Any vacancy on the Board of Directors for any
cause other than an increase in the number of directors shall be filled by a
majority

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<PAGE>

of the remaining directors, although such majority is less than a quorum. Any
vacancy in the number of directors created by an increase in the number of
directors may be filled by a majority vote of the entire Board of Directors.
Notwithstanding the foregoing, Independent Directors shall nominate replacements
for vacancies among the Independent Directors' positions. In the event that,
after the closing of the initial public offering of the Corporation's Common
Stock, a majority of the Board of Directors are not Independent Directors by
reason of the resignation or removal of one or more Independent Directors or
otherwise, the remaining Independent Directors (or, if there are no Independent
Directors, the remaining members of the Board of Directors) shall promptly elect
that number of Independent Directors necessary to cause the Board of Directors
to include a majority of Independent Directors. Any individual so elected as
director shall hold office until the next annual meeting of stockholders and
until his successor is elected and qualifies.

Section 12. COMPENSATION. Directors shall not receive any stated
salary for their services as directors but, by resolution of the Board of
Directors, may receive fixed sums per year and/or per meeting and/or per visit
to real property or other facilities owned or leased by the Corporation and for
any service or activity they performed or engaged in as directors. Directors
may be reimbursed for expenses of attendance, if any, at each annual, regular or
special meeting of the Board of Directors or of any committee thereof and for
their expenses, if any, in connection with each property visit and any other
service or activity they performed or engaged in as directors; but nothing
herein contained shall be construed to preclude any directors from serving the
Corporation in any other capacity and receiving compensation therefor.

Section 13. LOSS OF DEPOSITS. No director shall be liable for any loss
which may occur by reason of the failure of the bank, trust company, savings and
loan association, or other institution with whom moneys or stock have been
deposited.

Section 14. SURETY BONDS. Unless required by law, no director shall
be obligated to give any bond or surety or other security for the performance
of any of his duties.

Section 15. RELIANCE. Each director, officer, employee and agent of
the Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by the adviser, accountants,
appraisers or other experts or consultants selected by the Board of Directors or
officers of the Corporation, regardless of whether such counsel or expert may
also be a director.

Section 16. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. The directors shall have no responsibility

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to devote their full time to the affairs of the Corporation. Unless otherwise
agreed with the Corporation, any director or officer, employee or agent of the
Corporation, in his personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar to or in addition to or in
competition with those of or relating to the Corporation.

ARTICLE IV

COMMITTEES

Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of Directors
may appoint from among its members an Executive Committee, an Audit Committee, a
Compensation Committee and other committees, comprised of not less than two
directors, a majority of whom will also be Independent Directors, to serve at
the pleasure of the Board of Directors.

Section 2. POWERS. The Board of Directors may delegate to committees
appointed under Section 1 of this Article any of the powers of the Board of
Directors, except as prohibited by law.

Section 3. MEETINGS. Notice of committee meetings shall be given in
the same manner as notice for special meetings of the Board of Directors. A
majority of the members of the committee shall constitute a quorum for the
transaction of business at any meeting of the committee. The act of a majority
of the committee members present at a meeting shall be the act of such
committee. The Board of Directors may designate a chairman of any committee,
and such chairman or any two members of any committee may fix the time and place
of its meeting unless the Board shall otherwise provide. In the absence of any
member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint another director to act in
the place of such absent member. Each committee shall keep minutes of its
proceedings.

Section 4. TELEPHONE MEETINGS. Members of a committee of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.

Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Board of Directors
may be taken without a meeting, if a consent in writing to such action is signed
by each member of the committee and such written consent is filed with the
minutes of proceedings of such committee.

Section 6. VACANCIES. Subject to the provisions hereof, the Board of
Directors shall have the power at any time to change

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the membership of any committee, to fill all vacancies, to designate alternate
members to replace any absent or disqualified member or to dissolve any such
committee.

ARTICLE V

OFFICERS

Section 1. GENERAL PROVISIONS. The officers of the Corporation shall
include a chief executive officer, a president, a secretary and a treasurer and
may include a chairman of the board, a vice chairman of the board, one or more
vice presidents, a chief operating officer, a chief financial officer, one or
more assistant secretaries and one or more assistant treasurers. In addition,
the Board of Directors may from time to time appoint such other officers with
such powers and duties as they shall deem necessary or desirable. The officers
of the Corporation shall be elected annually by the Board of Directors at the
first meeting of the Board of Directors held after each annual meeting of
stockholders, except that the chief executive officer may appoint one or more
vice presidents, assistant secretaries and assistant treasurers. If the
election of officers shall not be held at such meeting, such election shall be
held as soon thereafter as may be convenient. Each officer shall hold office
until his successor is elected and qualifies or until his death, resignation or
removal in the manner hereinafter provided. Any two or more offices except
president and vice president may be held by the same person. In its discretion,
the Board of Directors may leave unfilled any office except that of president,
treasurer and secretary. Election of an officer or agent shall not of itself
create contract rights between the corporation and such officer or agent.

Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the
Corporation may be removed by the Board of Directors if in its judgment the best
interests of the Corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed. Any
officer of the Corporation may resign at any time by giving written notice of
his resignation to the Board of Directors, the chairman of the board, the
president or the secretary. Any resignation shall take effect at any time
subsequent to the time specified therein or, if the time when it shall become
effective is not specified therein, immediately upon its receipt. The
acceptance of a resignation shall not be necessary to make it effective unless
otherwise stated in the resignation. Such resignation shall be without
prejudice to the contract rights, if any, of the Corporation.

Section 3. VACANCIES. A vacancy in any office may be filled by the
Board of Directors for the balance of the term.

Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors may
designate a chief executive officer. In the absence of such designation, the
chairman of the board shall be the chief executive officer of the Corporation.
The chief executive officer

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shall have general responsibility for implementation of the policies of the
Corporation, as determined by the Board of Directors, and for the management of
the business and affairs of the Corporation.

Section 5. CHIEF OPERATING OFFICER. The Board of Directors may
designate a chief operating officer. The chief operating officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.

Section 6. CHIEF FINANCIAL OFFICER. The Board of
Directors may designate a chief financial officer. The chief financial officer
shall have the responsibilities and duties as set forth by the Board of
Directors or the chief executive officer.

Section 7. CHAIRMAN OF THE BOARD. The Board of Directors shall
designate a chairman of the board. The chairman of the board shall preside over
the meetings of the Board of Directors and of the stockholders at which he shall
be present. The chairman of the board shall perform such other duties as may be
assigned to him or them by the Board of Directors.

Section 8. PRESIDENT. The president or chief executive officer, as
the case may be, shall in general supervise and control all of the business and
affairs of the Corporation. In the absence of a designation of a chief
operating officer by the Board of Directors, the president shall be the chief
operating officer. He may execute any deed, mortgage, bond, contract or other
instrument, except in cases where the execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other officer or
agent of the Corporation or shall be required by law to be otherwise executed;
and in general shall perform all duties incident to the office of president and
such other duties as may be prescribed by the Board of Directors from time to
time.

Section 9. VICE PRESIDENTS. In the absence of the president or in the
event of a vacancy in such office, the vice president (or in the event there be
more than one vice president, the vice presidents in the order designated at the
time of their election or, in the absence of any designation, then in the order
of their election) shall perform the duties of the president and when so acting
shall have all the powers of and be subject to all the restrictions upon the
president; and shall perform such other duties as from time to time may be
assigned to him by the president or by the Board of Directors. The Board of
Directors may designate one or more vice presidents as executive vice president
or as vice president for particular areas of responsibility.

Section 10. SECRETARY. The secretary shall (a) keep the minutes of the
proceedings of the stockholders, the Board of Directors and committees of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the corporate records and of

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the seal of the Corporation; (d) keep a register of the post office address of
each stockholder which shall be furnished to the secretary by such stockholder;
(e) have general charge of the share transfer books of the Corporation; and (f)
in general perform such other duties as from time to time may be assigned to him
by the chief executive officer, the president or by the Board of Directors.

Section 11. TREASURER. The treasurer shall have the
custody of the funds and securities of the Corporation and shall keep full and
accurate accounts of receipts and disbursements in books belonging to the
Corporation and shall deposit all moneys and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the Board of Directors. In the absence of a designation of a chief financial
officer by the Board of Directors, the treasurer shall be the chief financial
officer of the Corporation.

The treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and Board of Directors, at the
regular meetings of the Board of Directors or whenever it may so require, an
account of all his transactions as treasurer and of the financial condition of
the Corporation.

If required by the Board of Directors, the treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, moneys and other property of whatever kind in his possession or under
his control belonging to the Corporation.

Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or treasurer, respectively,
or by the president or the Board of Directors. The assistant treasurers shall,
if required by the Board of Directors, give bonds for the faithful performance
of their duties in such sums and with such surety or sureties as shall be
satisfactory to the Board of Directors.

Section 13. SALARIES. The salaries and other compensation of the
officers shall be fixed from time to time by the Board of Directors and no
officer shall be prevented from receiving such salary or other compensation by
reason of the fact that he is also a director.

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ARTICLE VI

CONTRACTS, LOANS, CHECKS AND DEPOSITS

Section 1. CONTRACTS. The Board of Directors may authorize any
officer or agent to enter into any contract or to execute and deliver any
instrument in the name of and on behalf of the Corporation and such authority
may be general or confined to specific instances. Any agreement, deed,
mortgage, lease or other document executed by one or more of the directors or by
an authorized person shall be valid and binding upon the Board of Directors and
upon the Corporation when authorized or ratified by action of the Board of
Directors.

Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or agent of the
Corporation in such manner as shall from time to time be determined by the Board
of Directors.

Section 3. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may designate.

ARTICLE VII

STOCK

Section 1. CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation. Each certificate
shall be signed by the chief executive officer, the president or a vice
president and countersigned by the secretary or an assistant secretary or the
treasurer or an assistant treasurer and may be sealed with the seal, if any, of
the Corporation. The signatures may be either manual or facsimile.
Certificates shall be consecutively numbered; and if the Corporation shall, from
time to time, issue several classes of stock, each class may have its own number
series. A certificate is valid and may be issued whether or not an officer who
signed it is still an officer when it is issued. Each certificate representing
shares which are restricted as to their transferability or voting powers, which
are preferred or limited as to their dividends or as to their allocable portion
of the assets upon liquidation or which are redeemable at the option of the
Corporation, shall have a statement of such restriction, limitation, preference
or redemption provision, or a summary thereof, plainly stated on the
certificate. If the Corporation has authority to issue stock of more than one
class, the certificate shall contain on the face or back a full statement or
summary of the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of

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redemption of each class of stock and, if the Corporation is authorized to issue
any preferred or special class in series, the differences in the relative rights
and preferences between the shares of each series to the extent they have been
set and the authority of the Board of Directors to set the relative rights and
preferences of subsequent series. In lieu of such statement or summary, the
certificate may state that the Corporation will furnish a full statement of such
information to any stockholder upon request and without charge. If any class of
stock is restricted by the Corporation as to transferability, the certificate
shall contain a full statement of the restriction or state that the Corporation
will furnish information about the restrictions to the stockholder on request
and without charge.

Section 2. TRANSFERS. Upon surrender to the Corporation or the
transfer agent of the Corporation of a stock certificate duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.

The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share or
on the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.

Notwithstanding the foregoing, transfers of shares of any class of stock
will be subject in all respects to the charter of the Corporation and all of the
terms and conditions contained therein or in these Bylaws.

Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the
Board of Directors may direct a new certificate to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate, an officer designated by the Board of Directors
may, in his discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or the owner's
legal representative to advertise the same in such manner as he shall require
and/or to give bond, with sufficient surety, to the Corporation to indemnify it
against any loss or claim which may arise as a result of the issuance of a new
certificate.

Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The
Board of Directors may set, in advance, a record date for the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or determining stockholders entitled to receive payment of any
dividend or the

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allotment of any other rights, or in order to make a determination of
stockholders for any other proper purpose. Such date, in any case, shall not be
prior to the close of business on the day the record date is fixed and shall be
not more than 90 days and, in the case of a meeting of stockholders, not less
than ten days, before the date on which the meeting or particular action
requiring such determination of stockholders of record is to be held or taken.

In lieu of fixing a record date, the Board of Directors may provide that
the stock transfer books shall be closed for a stated period but not longer than
20 days. If the stock transfer books are closed for the purpose of determining
stockholders entitled to notice of or to vote at a meeting of stockholders, such
books shall be closed for at least ten days before the date of such meeting.

If no record date is fixed and the stock transfer books are not closed
for the determination of stockholders, (a) the record date for the determination
of stockholders entitled to notice of or to vote at a meeting of stockholders
shall be at the close of business on the day on which the notice of meeting is
mailed or the 30th day before the meeting, whichever is the closer date to the
meeting; and (b) the record date for the determination of stockholders entitled
to receive payment of a dividend or an allotment of any other rights shall be
the close of business on the day on which the resolution of the directors,
declaring the dividend or allotment of rights, is adopted.

When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, each determination shall
apply to any adjournment thereof, except when (i) the determination has been
made through the closing of the transfer books and the stated period of closing
has expired or (ii) the meeting is adjourned to a date more than 120 days after
the record date fixed for the original meeting, in either of which case a new
record date shall be determined as set forth herein.

Section 5. STOCK LEDGER. The Corporation shall maintain at its
principal office or at the office of its counsel, accountants or transfer agent,
an original or duplicate share ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.

Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of
Directors may issue fractional stock or provide for the issuance of scrip, all
on such terms and under such conditions as they may determine. Notwithstanding
any other provision of the charter or these Bylaws, the Board of Directors may
issue units consisting of different securities of the Corporation. Any security
issued in a unit shall have the same characteristics as any identical securities
issued by the Corporation, except that the Board of Directors may provide that
for a specified period securities of the Corporation issued in such unit may be
transferred on the books of the Corporation only in such unit.

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Section 7. RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES.

Section 7.1 DEFINITIONS. For the purpose of this Section 7, the
following terms shall have the following meanings:

AGGREGATE STOCK OWNERSHIP LIMIT. The term "Aggregate Stock Ownership
Limit" shall mean not more than 9.9 percent in value of the aggregate of the
outstanding shares of Capital Stock. The value of the outstanding shares of
Capital Stock shall be determined by the Board of Directors of the Corporation
in good faith, which determination shall be conclusive for all purposes hereof.

BENEFICIAL OWNERSHIP. The term "Beneficial Ownership" shall mean
ownership of Capital Stock by a Person, whether the interest in the shares of
Capital Stock is held directly or indirectly (including by a nominee), and shall
include interests that would be treated as owned through the application of
Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code. The
terms "Beneficial Owner," "Beneficially Owns" and "Beneficially Owned" shall
have the correlative meanings.

BUSINESS DAY. The term "Business Day" shall mean any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which banking
institutions in New York City are authorized or required by law, regulation or
executive order to close.

CAPITAL STOCK. The term "Capital Stock" shall mean all classes or
series of stock of the Corporation, including, without limitation, Common Stock
and Preferred Stock.

CHARITABLE BENEFICIARY The term "Charitable Beneficiary" shall mean one
or more beneficiaries of the Trust as determined pursuant to Section 7.3.6,
provided that each such organization must be described in Section 501(c)(3) of
the Code and contributions to each such organization must be eligible for
deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of the Code.

CHARTER. The term "Charter" shall mean the charter of the Corporation,
as that term is defined in the MGCL.

CODE. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.

CONSTRUCTIVE OWNERSHIP. The term "Constructive Ownership" shall mean
ownership of Capital Stock by a Person, whether the interest in the shares of
Capital Stock is held directly or indirectly (including by a nominee) and shall
include interests that would be treated as owned through the application of
Section 318(a) of the Code, as modified by Section 856(d)(5) of the

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Code. The terms "Constructive Owner," "Constructively Owns" and
"Constructively Owned" shall have the correlative meanings.

EXCEPTED HOLDER. The term "Excepted Holder" shall mean a stockholder of
the Corporation for whom an Excepted Holder Limit is created by these Bylaws or
by the Board of Directors pursuant to Section 7.2.7.

EXCEPTED HOLDER LIMIT. The term "Excepted Holder Limit" shall mean,
provided that the affected Excepted Holder agrees to comply with the
requirements established by the Board of Directors pursuant to Section 7.2.7,
and subject to adjustment pursuant to Section 7.2.8, the percentage limit
established by the Board of Directors pursuant to Section 7.2.7.

INITIAL DATE. The term "Initial Date" shall mean the closing of the
initial public offering of the Corporation's Common Stock.

MARKET PRICE. The term "Market Price" on any date shall mean, with
respect to any class or series of outstanding shares of Capital Stock, the
Closing Price for such Capital Stock on such date. The "Closing Price" on any
date shall mean the last sale price for such Capital Stock, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, for such Capital Stock, in either case as reported in
the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the NYSE or, if such Capital Stock
is not listed or admitted to trading on the NYSE, as reported on the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which such Capital Stock is listed
or admitted to trading or, if such Capital Stock is not listed or admitted to
trading on any national securities exchange, the last quoted price, or, if not
so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or, if such system is no longer in use,
the principal other automated quotation system that may then be in use or, if
such Capital Stock is not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in such Capital Stock selected by the Board of Directors of the
Corporation or, in the event that no trading price is available for such Capital
Stock, the fair market value of the Capital Stock, as determined in good faith
by the Board of Directors of the Corporation.

MGCL. The term "MGCL" shall mean the Maryland General Corporation Law,
as amended from time to time.

NYSE. The term "NYSE" shall mean the New York Stock Exchange.

PERSON. The term "Person" shall mean an individual, corporation,
partnership, estate, trust (including a trust qualified under Sections 401(a) or
501(c)(17) of the Code), a

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portion of a trust permanently set aside for or to be used exclusively for the
purposes described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint stock company
or other entity and also includes a group as that term is used for purposes of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, and a group
to which an Excepted Holder Limit applies.

PROHIBITED OWNER. The term "Prohibited Owner" shall mean, with respect
to any purported Transfer, any Person who, but for the provisions of section
7.2.1, would Beneficially Own or Constructively Own shares of Capital Stock, and
if appropriate in the context, shall also mean any Person who would have been
the record owner of the shares that the Prohibited Owner would have so owned.

REIT. The term "REIT" shall mean a real estate investment trust within
the meaning of section 856 of the code.

RESTRICTION TERMINATION DATE. The term "Restriction Termination Date"
shall mean the first day after the initial Date on which the corporation
determines pursuant to Article III, Section 1 hereof that it is no longer in the
best interests of the Corporation to attempt to, or continue to, qualify as a
REIT or that compliance with the restrictions and limitations on Beneficial
Ownership, Constructive Ownership and Transfers of shares of Capital Stock set
forth herein and in the Charter is no longer required in order for the
corporation to qualify as a REIT.

TRANSFER. The term "Transfer" shall mean any issuance, sale, transfer,
gift, assignment, devise or other disposition, as well as any other event that
causes any Person to acquire Beneficial Ownership or Constructive Ownership, or
any agreement to take any such actions or cause any such events, of capital
Stock or the right to vote or receive dividends on Capital Stock, including (a)
the granting or exercise of any option (or any disposition of any option), (b)
any disposition of any securities or rights convertible into or exchangeable for
Capital Stock or any interest in Capital Stock or any exercise of any such
conversion or exchange right and (c) Transfers of interests in other entities
that result in changes in Beneficial or Constructive Ownership of Capital Stock;
in each case, whether voluntary or involuntary, whether owned of record,
Constructively Owned or Beneficially Owned and whether by operation of law or
otherwise. The terms "Transferring" and "Transferred" shall have the
correlative meanings.

TRUST. The term "Trust" shall mean any trust provided for in Section
7.3.1.

TRUSTEE. The term "Trustee" shall mean the Person unaffiliated with
the Corporation and a Prohibited Owner, that is appointed by the corporation to
serve as trustee of the Trust.

Section 7.2 CAPITAL STOCK.

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Section 7.2.1 OWNERSHIP LIMITATIONS. During the period
commencing on the Initial Date and prior to the Restriction Termination Date:

(a) BASIC RESTRICTIONS.

(i) (1) No Person, other than an Excepted Holder,
shall beneficially Own or Constructively Own shares of Capital Stock in excess
of the Aggregate Stock Ownership Limit and (2) no Excepted Holder shall
Beneficially Own or Constructively Own shares of Capital Stock in excess of the
Excepted Holder Limit for such Excepted Holder.

(ii) No Person shall Beneficially or
constructively Own shares of Capital Stock to the extent that such Beneficial or
Constructive Ownership of Capital Stock would result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code (without regard
to whether the ownership interest is held during the last half of a taxable
year), or otherwise failing to qualify as a REIT (including, but not limited to,
Beneficial or Constructive Ownership that would result in the corporation owning
(actually or Constructively) an interest in a tenant that is described in
Section 856(d)(2)(B) of the Code if the income derived by the corporation from
such tenant would cause the Corporation to fail to satisfy any of the gross
income requirements of Section 856(c) of the Code).

(iii) Subject to Section 7.4 hereof and
notwithstanding any other provisions contained herein, any Transfer of shares of
Capital Stock (whether or not such Transfer is the result of a transaction
entered into through the facilities of the NYSE or any other national securities
exchange or automated inter-dealer quotation system) that, if effective, would
result in the Capital Stock being beneficially owned by less than 100 Persons
(determined under the principles of Section 856(a)(5) of the Code) shall be void
AB INITIO, and the intended transferee shall acquire no rights in such shares of
capital Stock.

(b) TRANSFER IN TRUST. If any Transfer of shares of
Capital Stock (whether or not such Transfer is the result of a transaction
entered into through the facilities of the NYSE or any other national securities
exchange or automated inter-dealer quotation system) occurs which, if effective,
would result in any Person Beneficially Owning or Constructively Owning shares
of Capital Stock in violation of Section 7.2.1(a)(i) or (ii),

(i) then that number of shares of the capital
Stock the Beneficial or Constructive Ownership of which otherwise would cause
such Person to violate Section 7.2.1(a)(ii) or (ii) (rounded to the nearest
whole share) shall be automatically transferred to a Trust for the benefit of a
Charitable Beneficiary, as described in Section 7.3, effective as of the close
of business on the Business Day prior to the date of such Transfer, and such
Person shall acquire no rights in such shares; or

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(ii) if the transfer to the Trust described in
clause (i) of this sentence would not be effective for any reason to prevent the
violation of Section 7.2.1(a)(i) or (ii), then the Transfer of that number of
shares of Capital Stock that otherwise would cause any Person to violate Section
7.2.1(a)(i) or (ii) shall be void AB INITIO, and the intended transferee shall
acquire no rights in such shares of Capital Stock.

Section 7.2.2 REMEDIES FOR BREACH. If the Board of Directors of
the Corporation or any duly authorized committee thereof shall at any time
determine in good faith that a Transfer or other event has taken place that
results in a violation of Section 7.2.1 or that a Person intends to acquire or
has attempted to acquire Beneficial or Constructive Ownership of any shares of
Capital Stock in violation of Section 7.2.1 (whether or not such violation is
intended), the Board of Directors or a committee thereof shall take such action
as it deems advisable to refuse to give effect to or to prevent such Transfer or
other event, including, without limitation, causing the Corporation to redeem
shares, refusing to give effect to such Transfer on the books of the Corporation
or instituting proceedings to enjoin such Transfer or other event; PROVIDED,
HOWEVER, that any Transfers or attempted Transfers or other events in violation
of Section 7.2.1 shall automatically result in the transfer to the Trust
described above, and, where applicable, such Transfer (or other event) shall be
void AB INITIO as provided above irrespective of any action (or non-action) by
the Board of Directors or a committee thereof.

Section 7.2.3 NOTICE OF RESTRICTED TRANSFER. Any Person who
acquires or attempts or intends to acquire Beneficial Ownership or Constructive
Ownership of shares of Capital Stock that will or may violate Section 7.2.1(a),
or any Person who would have owned shares of Capital Stock that resulted in a
transfer to the Trust pursuant to the provisions of Section 7.2.1(b) shall
immediately give written notice to the Corporation of such event, or in the case
of such a proposed or attempted transaction, give at least 15 days prior written
notice, and shall provide to the Corporation such other information as the
Corporation may request in order to determine the effect, if any, of such
Transfer on the Corporation's status as a REIT.

Section 7.2.4 OWNERS REQUIRED TO PROVIDE INFORMATION. From the
Initial Date and prior to the Restriction Termination Date:
(a) every owner of more than five percent (or such lower
percentage as required by the Code or the Treasury Regulations promulgated
thereunder) of the outstanding shares of capital Stock, within 30 days after the
end of each taxable year, shall give written notice to the Corporation stating
the name and address of such owner, the number of shares of Capital Stock and
other shares of the Capital Stock Beneficially Owned and a description of the
manner in which such shares are held. Each such owner shall provide to the
Corporation such additional information as the Corporation may request in order
to determine the effect, if

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<PAGE>

any, of such Beneficial Ownership on the Corporation's status as a REIT and to
ensure compliance with the Aggregate Stock Ownership Limit.

(b) each Person who is a Beneficial or Constructive
Owner of Capital Stock and each Person (including the stockholder of record) who
is holding Capital Stock for a Beneficial or Constructive Owner shall provide to
the Corporation such information as the Corporation may request, in good faith,
in order to determine the Corporation's status as a REIT and to comply with
requirements of any taxing authority or governmental authority or to determine
such compliance.

Section 7.2.5 REMEDIES NOT LIMITED. Subject to the Charter and
Section 7.4 hereof, nothing contained in this Section 7.2 shall limit the
authority of the Board of Directors of the Corporation to take such other action
as it deems necessary or advisable to protect the Corporation and the interests
of its stockholders in preserving the Corporation's status as a REIT.

Section 7.2.6 AMBIGUITY. In the case of an ambiguity in the
application of any of the provisions of this Section 7.2, Section 7.3, or any
definition contained in Section 7.1, the Board of Directors of the Corporation
shall have the power to determine the application of the provisions of this
Section 7.2 or Section 7.3 with respect to any situation based on the facts
known to it. In the event Section 7.2 or 7.3 requires an action by the Board of
Directors and the Charter or these Bylaws fail to provide specific guidance with
respect to such action, the Board of Directors shall have the power to determine
the action to be taken so long as such action is not contrary to the provisions
of Sections 7.1, 7.2 or 7.3.

Section 7.2.7 EXCEPTIONS.

(a) Subject to Section 7.2.1(a)(ii), the Board of
Directors of the Corporation, in its sole discretion, may exempt a Person from
the Aggregate Stock Ownership Limit and may establish or increase an Excepted
Holder Limit for such Person if:

(i) the Board of Directors obtains such
representations and undertakings from such Person as are reasonably necessary to
ascertain that no individual's Beneficial or Constructive Ownership of such
shares of Capital stock will violate Section 7.2.1(a)(ii);

(ii) such Person does not and represents that it
will not own, actually or Constructively, an interest in a tenant of the
Corporation (or a tenant of any entity owned or controlled by the Corporation)
that would cause the Corporation to own, actually or Constructively, more than a
9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in such tenant
and the Board of Directors obtains such representations and undertakings from
such Person as are reasonably necessary to ascertain this fact

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<PAGE>

(for this purpose, a tenant from whom the Corporation (or an entity owned or
controlled by the Corporation) derives (and is expected to continue to derive) a
sufficiently small amount of revenue such that, in the opinion of the Board of
Directors of the Corporation, rent from such tenant would not adversely affect
the Corporation's ability to qualify as a REIT, shall not be treated as a tenant
of the Corporation); and

(iii) such Person agrees that any violation or
attempted violation of such representations or undertakings (or other action
which is contrary to the restrictions contained in Sections 7.2.1 through 7.2.6)
will result in such shares of Capital Stock being automatically transferred to a
Trust in accordance with Sections 7.2.1(b) and 7.3.

(b) Prior to granting any exception pursuant to Section
7.2.7(a), the Board of Directors of the Corporation may require a ruling from
the Internal Revenue Service, or an opinion of counsel, in either case in form
and substance satisfactory to the Board of Directors in its sole discretion, as
it may deem necessary or advisable in order to determine or ensure the
Corporation's status as a REIT. Notwithstanding the receipt of any ruling or
opinion, the Board of Directors may impose such conditions or restrictions as it
deems appropriate in connection with granting such exception.

(c) Subject to Section 7.2.1(a)(ii), an underwriter
which participates in a public offering or a private placement of Capital Stock
(or securities convertible into or exchangeable for Capital Stock) may
Beneficially Own or Constructively Own shares of Capital Stock (or securities
convertible into or exchangeable for Capital Stock) in excess of the Aggregate
Stock Ownership Limit but only to the extent necessary to facilitate such public
offering or private placement.

(d) The Board of Directors may only reduce the Excepted
Holder Limit for an Excepted Holder: (l) with the written consent of such
Excepted Holder at any time, or (2) pursuant to the terms and conditions of the
agreements and undertakings entered into with such Excepted Holder in connection
with the establishment of the Excepted Holder Limit for that Excepted Holder.
No Excepted Holder Limit shall be reduced to a percentage that is less than the
Aggregate Stock Ownership Limit.

Section 7.2.8 INCREASE IN AGGREGATE STOCK OWNERSHIP LIMIT. The
Board of Directors may from time to time increase the Aggregate Stock Ownership
Limit.

Section 7.2.9 LEGEND. Each certificate for shares of capital
Stock shall bear substantially the following legend:

The shares represented by this certificate are subject to
restrictions on Beneficial and Constructive Ownership and Transfer
for the purpose of the Corporation's maintenance

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<PAGE>

of its status as a Real Estate Investment Trust under the Internal
Revenue Code of 1986, as amended (the "Code"). Subject to certain
further restrictions and except as expressly provided in the
Corporation's Charter or Bylaws, (i) no Person may Beneficially or
Constructively Own shares of Capital Stock of the Corporation in excess
of 9.9 percent of the value of the total outstanding shares of Capital
Stock of the Corporation, unless such Person is an Excepted Holder (in
which case the Excepted Holder Limit shall be applicable); (ii) no Person
may Beneficially or Constructively Own Capital Stock that would result in
the Corporation being "closely held" under Section 856(h) of the Code or
otherwise cause the Corporation to fail to qualify as a REIT; and (iii)
no Person may Transfer shares of Capital Stock if such Transfer would
result in the Capital Stock of the Corporation being owned by fewer than
100 Persons. Any Person who Beneficially or Constructively Owns or
attempts to Beneficially or Constructively Own shares of Capital Stock
which causes or will cause a Person to Beneficially or Constructively Own
shares of Capital Stock in excess or in violation of the above
limitations must immediately notify the Corporation. If any of the
restrictions on transfer or ownership are violated, the shares of Capital
Stock represented hereby will be automatically transferred to a Trustee
of a Trust for the benefit of one or more Charitable Beneficiaries. In
addition, upon the occurrence of certain events, attempted Transfers in
violation of the restrictions described above may be void AB INITIO. All
capitalized terms in this legend have the meanings defined in the Bylaws
or the Charter of the Corporation, as the same may be amended from time
to time, copies of which, including the restrictions on transfer and
ownership, will be furnished to each holder of Capital Stock of the
Corporation on request and without charge.

Instead of the foregoing legend, the certificate may state that
the Corporation will furnish a full statement about certain restrictions on
transferability to a stockholder on request and without charge.

Section 7.3 TRANSFER OF CAPITAL STOCK IN TRUST.

Section 7.3.1 OWNERSHIP IN TRUST. Upon any purported Transfer
or other event described in Section 7.2.1(b) that would result in a transfer of
shares of Capital Stock to a Trust, such shares of Capital Stock shall be deemed
to have been transferred to the Trustee as trustee of a Trust for the exclusive
benefit of one or more Charitable Beneficiaries. Such transfer to the Trustee
shall be deemed to be effective as of the close of business on the Business Day
prior to the purported Transfer or other event that results in the transfer to
the Trust pursuant to Section 7.2.1(b). The Trustee shall be appointed by the
Corporation and shall be a

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<PAGE>

Person unaffiliated with the Corporation and any Prohibited Owner. Each
Charitable Beneficiary shall be designated by the corporation as provided in
Section 7.3.6.

Section 7.3.2 STATUS OF SHARES HELD BY THE TRUSTEE. Shares of
Capital Stock held by the Trustee shall be issued and outstanding shares of
Capital Stock of the Company. The Prohibited Owner shall have no rights in the
shares held by the Trustee. The Prohibited Owner shall not benefit economically
from ownership of any shares held in trust by the Trustee, shall have no rights
to dividends and shall not possess any rights to vote or other rights
attributable to the shares held in the Trust.

Section 7.3.3 DIVIDEND AND VOTING RIGHTS. The Trustee shall
have all voting rights and rights to dividends or other distributions with
respect to share of Capital Stock held in the Trust, which rights shall be
exercised for the exclusive benefit of the Charitable Beneficiary. Any
dividend or other distribution paid prior to the discovery by the Corporation
that the shares of Capital Stock have been transferred to the Trustee shall
be paid by the recipient of such dividend or distribution to the Trustee upon
demand and any dividend or other distribution authorized but unpaid shall be
paid when due to the Trustee. Any dividend or distribution so paid to the
Trustee shall be held in trust for the charitable Beneficiary. The
Prohibited Owner shall have no voting rights with respect to shares held in
the Trust and, subject to Maryland law, effective as of the date that the
shares of Capital Stock have been transferred to the Trustee, the Trustee
shall have the authority (at the Trustee's sole discretion) (i) to rescind as
void any vote cast by a Prohibited Owner prior to the discovery by the
Corporation that the shares of Capital Stock have been transferred to the
Trustee and (ii) to recast such vote in accordance with the desires of the
Trustee acting for the benefit of the Charitable Beneficiary; provided,
however, that if the Corporation has already taken irreversible corporate
action, then the Trustee shall not have the authority to rescind and recast
such vote. Notwithstanding the provisions of this Section 7, until the
Corporation has received notification that shares of Capital Stock have been
transferred into a Trust, the Corporation shall be entitled to rely on its
share transfer an other stockholder records for purposes of preparing lists
of stockholders entitled to vote at meetings, determining the validity and
authority of proxies and otherwise conducting votes of stockholders.

Section 7.3.4 SALE OF SHARES BY TRUSTEE. Within 20 days of
receiving notice from the Corporation that shares of Capital Stock have been
transferred to the Trust, the Trustee of the Trust shall sell the shares held in
the Trust to a person, designated by the Trustee, whose ownership of the shares
will not violate the ownership limitations set forth in Section 7.2.1(a). Upon
such sale, the interest of the Charitable Beneficiary in the shares sold shall
terminate and the Trustee shall distribute the net proceeds of the sale to the
Prohibited Owner and to the Charitable Beneficiary as provided in this Section
7.3.4. The Prohibited

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<PAGE>

Owner shall receive the lesser of (1) the price paid by the Prohibited Owner for
the shares or, if the Prohibited Owner did not give value for the shares in
connection with the event causing the shares to be held in the Trust (e.g., in
the case of, a gift, devise or other such transaction), the Market Price of the
shares on the day of the event causing the shares to be held in the Trust and
(2) the price per share received by the Trustee from the sale or other
disposition of the shares held in the Trust. Any net sales proceeds in excess
of the amount payable to the Prohibited Owner shall be immediately paid to the
Charitable Beneficiary. If, prior to the discovery by the Corporation that
shares of Capital Stock have been transferred to the Trustee, such shares are
sold by a Prohibited Owner, then (i) such shares shall be deemed to have been
sold on behalf of the Trust and (ii) to the extent that the Prohibited Owner
received an amount for such shares that exceeds the amount that such Prohibited
Owner was entitled to receive pursuant to this Section 7.3.4, such excess shall
be paid to the Trustee upon demand.

Section 7.3.5 PURCHASE RIGHT IN STOCK TRANSFERRED TO THE
TRUSTEE. Shares of capital Stock transferred to the Trustee shall be deemed to
have been offered for sale to the Corporation, or its designee, at a price per
share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the Trust (or, in the case of a devise or gift, the
Market Price at the time of such devise or gift) and (ii) the Market Price on
the date the Corporation or its designee, accepts such offer. The Corporation
shall have the right to accept such offer until the Trustee has sold the shares
held in the Trust pursuant to Section 7.3.4. Upon such a sale to the
Corporation, the interest of the Charitable Beneficiary in the shares sold shall
terminate and the Trustee shall distribute the net proceeds of the sale to the
prohibited Owner.

Section 7.3.6 DESIGNATION OF CHARITABLE BENEFICIARIES. By
written notice to the Trustee, the Corporation shall designate one or more
nonprofit organizations to be the Charitable Beneficiary of the interest in the
Trust such that (i) the shares of Capital Stock held in the Trust would not
violate the restrictions set forth in Section 7.2.1(a) in the hands of such
Charitable Beneficiary and (ii) each such organization must be described in
Section 501(c)(3) of the Code and contributions to each such organization must
be eligible for deduction under each of Sections 170(b)(1)(A), 2055 and 2522 of
the Code.

Section 7.4 NYSE TRANSACTIONS. Nothing in this Section 7 shall
preclude the settlement of any transaction entered into through the facilities
of the NYSE or any other national securities exchange or automated inter-dealer
quotation system. The fact that the settlement of any transaction takes place
shall not negate the effect of any other provision of this Section 7 and any
transferee in such a transaction shall be subject to all of the provisions and
limitations set forth in this Section 7.

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<PAGE>

Section 7.5 ENFORCEMENT. The Corporation is authorized specifically to
seek equitable relief, including injunctive relief, to enforce the provisions of
this Section 7.

Section 7.6 NON-WAIVER. No delay or failure on the part of the
Corporation or the Board of Directors in exercising any right hereunder shall
operate as a waiver of any right of the Corporation or the Board of Directors,
as the case may be, except to the extent specifically waived in writing.

ARTICLE VIII

ACCOUNTING YEAR

The Board of Directors shall have the power, from time to time, to fix
the fiscal year of the Corporation by a duly adopted resolution.

ARTICLE IX

DISTRIBUTIONS

Section 1. AUTHORIZATION. Dividends and other
distributions upon the stock of the Corporation may be authorized and declared
by the Board of Directors, subject to the provisions of law and the charter of
the Corporation. Dividends and other distributions may be paid in cash,
property or stock of the Corporation, subject to the provisions of law and the
charter. The Board of Directors shall endeavor to declare and pay such
dividends and distributions as shall be necessary for the Corporation to qualify
as a REIT under the Code; however, stockholders shall have no right to any
dividend or distribution unless and until authorized and declared by the Board
of Directors.

Section 2. CONTINGENCIES. Before payment of any dividends or other
distributions, there may be set aside out of any assets of the Corporation
available for dividends or other distributions such sum or sums as the Board of
Directors may from time to time, in its absolute discretion, think proper as a
reserve fund for contingencies, for equalizing dividends or other distributions,
for repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall determine to be in the best interest of
the Corporation, and the Board of Directors may modify or abolish any such
reserve in the manner in which it was created.

ARTICLE X

INVESTMENT POLICY

Subject to the provisions of the charter of the Corporation, the Board of
Directors may from time to time adopt, amend, revise or terminate any policy or
policies with respect to investments by

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<PAGE>

the corporation as it shall deem appropriate in its sole discretion.

ARTICLE XI

SEAL

Section 1. SEAL. The Board of Directors may authorize the adoption of
a seal by the Corporation. The seal shall contain the name of the Corporation
and the year of its incorporation and the words "Incorporated Maryland." The
Board of Directors may authorize one or more duplicate seals and provide for the
custody thereof.

Section 2. AFFIXING SEAL. Whenever the Corporation is permitted or
required to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the word
"(SEAL)" adjacent to the signature of the person authorized to execute the
document on behalf of the Corporation.

ARTICLE XII

INDEMNIFICATION AND ADVANCE OF EXPENSES

To the maximum extent permitted by Maryland law in effect from time to
time, the corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any individual who is a present or former director or officer of the
Corporation and who is made a party to the proceeding by reason of his service
in that capacity or (b) any individual who, while a director of the corporation
and at the request of the Corporation, serves or has served another corporation,
partnership, joint venture, trust, employee benefit plan or any other enterprise
as a director, officer, partner or trustee of such corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise and who is made
a party to the proceeding by reason of his service in that capacity. The
Corporation may, with the approval of its Board of Directors, provide such
indemnification and advance for expenses to a person who served a predecessor of
the Corporation in any of the capacities described in (a) or (b) above and to
any employee or agent of the Corporation or a predecessor of the Corporation.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or charter of the Corporation
inconsistent with this Article, shall apply to or affect in any respect the
applicability of the preceding paragraph with respect to any act or failure to
act which occurred prior to such amendment, repeal or adoption.

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<PAGE>

ARTICLE XIII

WAIVER OF NOTICE

Whenever any notice is required to be given pursuant to the charter of
the Corporation or these Bylaws or pursuant to applicable law, a waiver thereof
in writing, signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice. Neither the business to be transacted at nor the purpose
of any meeting need be set forth in the waiver of notice, unless specifically
required by statute. The attendance of any person at any meeting shall
constitute a waiver of notice of such meeting, except where such person attends
a meeting for the express purpose of objecting to the transaction of any
business on the ground that the meeting is not lawfully called or convened.

ARTICLE XIV

AMENDMENT OF BYLAWS

The Board of Directors shall have the exclusive power to adopt, alter or
repeal any provision of these Bylaws and to make new Bylaws; provided that any
amendment of Article III, Section 2 hereof or Article III, Section 11 hereof
must be approved by at least a majority of the Board of Directors, including at
least a majority of the Independent Directors.

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<PAGE>

Exhibit 10.3

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

This First Amendment to the Amended and Restated Agreement of Limited
Partnership of Great Lakes REIT, L.P. is made and entered into as of the 6th day
of February, 1997 by and between Great Lakes REIT, Inc., a Maryland corporation
("GLREIT"), and GLR No. 3, a Maryland business trust ("GLR3").

RECITALS:

WHEREAS, GLREIT and GLR3 are all of the partners 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 Amended and Restated Agreement of Limited Partnership dated as of
December 19, 1996 (the "Partnership Agreement"); and

WHEREAS, GLREIT and GLR have intended, and the Partnership Agreement
expressly provides, that GLREIT, the general partner of the Partnership, will
conduct all of its activities and business operations through the Partnership;
and

WHEREAS, in order to comply with the Partnership Agreement, GLREIT has
transferred, or will transfer, all of its real property (the "Properties") to
the Partnership; and

WHEREAS, GLREIT has requested, but has not yet received, the consent of
all third party lenders whose consent is needed before GLREIT transfers certain
of the Properties to the Partnership; and

WHEREAS, GLREIT and GLR3 desire to amend the Partnership Agreement to
clarify the timing of the conduct of GLR's business operations through the
Partnership; and

NOW THEREFORE, the parties hereto hereby agree as follows:

1. The first sentence of Section 7.8 of the Partnership Agreement
shall be, and hereby is, amended to read as follows (new language is
italicized):

ON AND AFTER THE EARLIER OF THE DATE ON WHICH THE GENERAL PARTNER
COMPLETES THE TRANSFER TO THE PARTNERSHIP OR THE SALE OR OTHER
DISPOSITION TO A NONAFFILIATED THIRD PARTY, OF ALL REAL PROPERTIES OWNED
BY THE GENERAL PARTNER AS OF DECEMBER 31, 1996, ALL activities and
business operations of the General Partner, including but not limited to,
activities pertaining to the acquisition, development, redevelopment and
ownership of properties, shall be conducted directly or indirectly,
through the Partnership or any

<PAGE>

Subsidiary; any property acquisitions shall henceforth be acquired
through the Partnership or any Subsidiary; and, except as provided below,
any funds raised by the General Partner, whether by issuance of stock,
borrowing or otherwise, will be made available to the Partnership,
whether as Capital Contributions, loans, or otherwise, as appropriate.

2. 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.

3. The foregoing amendment has been proposed by GLREIT, in its
capacity as the General Partner of the Partnership, and, on the date hereof has
been unanimously approved by all of the partners of the Partnership in
accordance with the provisions of Section 13.1 of the Partnership Agreement.

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

GREAT LAKES REIT, INC.

By: /s/ Richard A. May
---------------------------------
Its: President

GLR No. 3

By: /s/ Richard A. May
----------------------------------
Its: Trustee

<PAGE>

Exhibit 10.8.6

RESTRICTED STOCK AWARD AGREEMENT

THIS AGREEMENT is made as of the first day of May, 1996 between Great
Lakes REIT, Inc., a Maryland corporation (the "Company"), and Raymond Braun
("Employee").

WITNESSETH:

WHEREAS, the Board of Directors believes it to be in the best interests
of the Company's stockholders for certain officers and employees of the Company
to own stock in the Company in order that they will have a greater incentive to
manage the Company's affairs in such a way that its shares may become more
valuable; and

WHEREAS, Employee is a Senior Vice President of Acquisitions and a key
contributor to the success of the Company; and

WHEREAS, the Board of Directors has determined that as an inducement for
Employee to remain employed with the Company, it is in the best interests of the
Company and its stockholders to award shares of the Company's common stock to
Employee, which shares shall be subject to certain vesting and transfer
restrictions as set forth herein; and

WHEREAS, Employee and the Company wish to memorialize the terms of such
award.

NOW, THEREFORE, in consideration of the premises set forth herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

1. AWARD OF SHARES. The Company hereby awards Employee and Employee
hereby accepts the Company's award of Ten Thousand (10,000) shares (the
"Restricted Shares") of common stock, $.01 par value per share, of the Company
("Common Stock"), subject to the terms and conditions set forth in this
Agreement (the "Award").

2. AWARD DATE. The issuance of the Restricted Shares to Employee
shall occur simultaneously with the execution of this Agreement (the "Award
Date"). Concurrently with the execution of this Agreement, Employee shall
notify the Company if he has elected to file a Section 83(b) election with
respect to his receipt of the Restricted Shares. If he has made such an
election, Employee shall, within 30 days of the date hereof, deliver to the
Company a copy of such Section 83(b) election.

<PAGE>

3. RESTRICTIONS.

(a) RESTRICTED SHARES. The Restricted Shares are being
awarded to Employee subject to the transfer and forfeiture restrictions set
forth below (the "Restrictions"), which shall lapse after the expiration of the
periods described (and as otherwise provided) in Section 4 below. Restricted
Shares for which Restrictions have lapsed shall constitute "Vested Shares".

(b) TRANSFER. Employee may not directly or indirectly,
by operation of law or otherwise, voluntarily or involuntarily, anticipate,
alienate, attach, sell, assign, pledge, encumber, charge or otherwise transfer
(any of which shall constitute a "Transfer") any of the Restricted Shares still
subject to Restrictions without the prior written consent of the Company.

(c) FORFEITURE. Subject to the provisions of Section 4
below, at such time as Employee is no longer employed by the Company other than
as a result of a consolidation, merger or asset sale which does not constitute a
"Change-In-Control" of the Company under Section 4(c) hereof, all Restricted
Shares still subject to Restrictions shall be returned to or canceled by the
Company, appropriately adjusted for any change in the stock of the Company by
reason of any stock dividend, split, or distribution, recapitalization,
reorganization, merger, consolidation, split-up, combination or exchange of
shares, or any similar change affecting the stock of the Company, which has
occurred after the date hereof, and shall be deemed to have been forfeited by
Employee. The Company will neither owe nor pay Employee any amount for any
forfeited Restricted Share upon any forfeiture of Employee's Restricted Shares.

4. LAPSE OF RESTRICTIONS.

(a) SCHEDULED VESTING. The Restrictions shall remain
fully (100%) in place until the fifth anniversary of the Award Date, at which
time 2,500 of the Restricted Shares awarded hereunder shall become Vested
Shares. On each subsequent anniversary of the Award Date, an additional 2,500
of the Restricted Shares shall become Vested Shares. The Restrictions on all
remaining Restricted Shares awarded hereunder shall lapse on the eighth
anniversary of the Award Date, at which time all such remaining Restricted
Shares shall become Vested Shares.

(b) EARLY VESTING. Notwithstanding anything in this
Section 4 to the contrary, all Restricted Shares awarded hereunder and not
previously forfeited by Employee shall become Vested Shares upon the earliest of
the following: (i) Employee's death, (ii) Employee's total and permanent
disability (as determined by a physician selected by Company's Board of
Directors), (iii) a Change-In-Control of the Company, or (iv) a dismissal of
Employee by the Company other than a Dismissal For Cause.

2
<PAGE>

(c) CHANGE-IN-CONTROL. For purposes of Section
4(b)(iii) above, a "Change-In-Control" shall mean any of the following events
occurring after the Award Date:

(i) a consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation or other entity or
pursuant to which shares of the Common Stock of the Company
("Company Common Stock") would be converted into cash, securities
or other property, other than a consolidation or merger of the
Company in which the holders of Company Common Stock immediately
prior to the consolidation or merger have substantially the same
proportionate equity ownership of the surviving corporation or
other entity immediately after the consolidation or merger or;

(ii) a sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of
the assets of the Company other than a sale, lease, exchange or
other transfer to an entity in which the Company owns, directly or
indirectly, at least eighty percent (80%) of the outstanding
voting securities after such transfer; or

(iii) a complete liquidation or dissolution of the Company; or

(iv) any parson (as such term is used in Sections 13(d) and 14(d)(2) of
the Securities Exchange Act of 1934, hereinafter the "1934 Act"),
other than one or more trusts established by the Company for the
benefit of employees of the Company or a corporation controlled by
the Company or the Company's stockholders, shall become the
beneficial owner (within the meaning of rule 13d-3 under the Act)
of fifty percent (50%) or more of the Company's outstanding Common
Stock.

(d) DISMISSAL FOR CAUSE. For purposes of Section
4(b)(iv) above, "Dismissal For Cause" shall mean a termination of Employee's
employment by the Company for one or more of the following reasons:

(i) the commission by Employee of any grossly negligent, fraudulent,
or dishonest act in connection with his employment with the
Company;

(ii) the commission by Employee of any act of embezzlement, theft,
fraud, or dishonesty, of any act constituting a felony, or of any
crime involving moral turpitude;

(iii) Employee's gross dereliction of duty, malfeasance in the
performance of the duties and responsibilities reasonably assigned
by an appropriate officer of the Company or the Board of
Directors, or chronic insubordination (the refusal to perform such
duties or responsibilities);

3
<PAGE>

(iv) Employee's diversion, for his own direct or indirect benefit, of
any business opportunity of the Company involving any business
that is substantially similar to that in which the Company is then
engaged or is then actively considering; or

(v) a material breach by Employee of his duties or obligations to the
Company under this Agreement or under the Company's policy
statements or manuals, not cured within fifteen days of the
receipt by Employee of notice of the breach from the Company.

5. ADJUSTMENTS.

(a) ADJUSTMENT FOR PARTICULAR TRANSACTIONS; NO
FRACTIONAL SHARES. In the event of any change in the outstanding shares of
Common Stock by reason of any stock dividend, split, distribution,
recapitalization, reorganization, merger, consolidation, split-up, combination
or exchange of shares or other similar change affecting the stock of the
Company, the aggregate number and class of shares which are to be delivered to
Employee hereunder shall be proportionately adjusted by the Board of Directors
of the Company, and any such additional shares or securities to be issued with
respect to Restricted Shares shall be subject to the same restrictions and shall
be included within the definition of "Restricted Shares" for all purposes
hereunder. Further, if there is an adjustment in the number of shares, no
fractional share shall be delivered with respect to any Restricted Share awarded
hereunder, although the Company shall pay, in lieu thereof, the Fair Market
Value (measured as of the date the restrictions lapse) of such fractional share
to Employee or Employee's estate. Any shares of stock or other securities
credited to Employee with respect to Employee's Restricted Shares shall be
subject to the same restrictions.

(b) FAIR MARKET VALUE. For purposes of this Section 5,
Fair Market Value means the most recent determination by the Board of Directors
of the per share Net Asset Value of the Company's Common Stock or, if the
Company shall then be a publicly traded company (when shares of its Common Stock
are actively traded on a national or regional securities exchange or the NASDAQ
system), the current per share market price of the Company's Common Stock based
on

(i) if the Company's Common Stock is actively traded on either a
national or regional securities exchange, then the average of the
closing prices of the Company's Common Stock over the 30 day
period ending three days before the day the Fair Market Value of
the Company's Common Stock is being determined; or

(ii) if the Company's Common Stock is actively traded over-the-counter,
the average of the closing bid and asked prices of the Company's
Common Stock quoted on the NASDAQ system (or similar system) over
the 30 day period ending three days before the day the Fair Market
Value of the Company's Common Stock is being determined.

4
<PAGE>

The Fair Market Value per share shall be computed on the basis of the total
number of outstanding shares.

(c) NET ASSET VALUE. For purposes of this Section 5,
Net Asset Value means the fair market value of the Company, as determined by the
Board of Directors from time to time. The parties acknowledge and agree that in
determining Net Asset Value, the Board of Directors may (but is not obligated)
(i) to consider the financial statements of the Company for prior years, cash
flow projections for current and future property operations, interest rate
trends, the availability of financing, and the return available on alternative
investments (including but not limited to public real estate investment trusts),
appraisals of the Company's real properties, and various other appropriate
factors, and (ii) to obtain the opinion of a valuation firm regarding the Board
of Directors' Net Asset Value determination. The Net Asset Value per share
shall be computed on the basis of the total number of outstanding shares.

6. RESTRICTIVE LEGEND. Employee shall be issued a stock certificate
representing the Restricted Shares. Such certificate shall be registered in
Employee's name and shall be inscribed with a legend evidencing the Restrictions
and forfeiture provisions hereof, and such additional legend as may be required
to comply with the Securities Act of 1933, as amended, and any stockholders
agreement that Employee may be subject to with respect to ownership of Company
Stock.

7. PROCEDURE UPON TRIGGER OF RESTRICTIONS.

(a) TRANSFER. Employee agrees, acknowledges, and
understands that any Transfer or attempted Transfer of the Restricted Shares in
violation of Section 3(b) shall be of no force and effect and the Company shall
be under no obligation to register any such Transfer on the stock ledger of the
Company.

(b) FORFEITURE. Upon receipt of a notice of forfeiture
from the Company, with respect to some or all of the Restricted Shares, Employee
shall immediately deliver to the Company the certificates or certificates
representing such forfeited Restricted Shares and if the certificate(s) are not
received by the Company promptly after Employee's receipt of the forfeiture
notice, then the Company shall be authorized to cancel such Restricted Shares on
the stock ledger of the Company and to re-issue a certificate for any Shares not
subject to the Restrictions, if any, represented by the same certificate(s) as
the forfeited Restricted Shares. The Company may condition the re-issuance of a
new certificate on the receipt from Employee of the original stock
certificate(s), or upon the delivery of an affidavit accompanied by security
deemed adequate by the Company with respect to any lost, stolen, or destroyed
certificates representing such forfeited Restrictive Shares.

8. WITHHOLDING TAXES. The sale or other transfer of the Restricted
Shares, and the lapse of Restrictions on the Restricted Shares, shall be
conditioned further on any applicable withholding taxes having been collected by
lump sum payroll deduction or direct payment to the Company.

5
<PAGE>

9. VOTING RIGHTS; EMPLOYMENT RIGHTS.

(a) STOCKHOLDER RIGHTS. Except as otherwise
specifically provided herein, upon issuance of the Restricted Shares in
Employee's name, Employee shall have all of the rights and status as a
stockholder of the Company in respect of the Restricted Shares, including the
right to vote such shares and to receive dividends or other distributions
thereon.

(b) NO RIGHT TO EMPLOYMENT. Neither the granting of the
Restricted Shares nor the execution of this Agreement shall be construed to
confer upon Employee any right to continued employment with the Company.

10. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefits of the Company, its successors or assigns, by operation of
law or otherwise, including without limitation any corporation or other entity
or person which shall succeed (whether direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the business and
assets of the Company, and the Company will require any successor, by agreement
in form and substance satisfactory to Employee, expressly to assume and agree to
perform the Agreement. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit as Employee, and his legal
representatives, heirs, and assigns.

11. SEVERABILITY. In the event that any provision of this Agreement
shall be determined to be invalid or unenforceable for any reason, the remaining
provisions of this Agreement shall be uneffected thereby and shall remain in
full force and effect.

12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be original but all of which
together constitute one and the same instrument.

13. APPLICABLE LAW. This Agreement shall be construed and enforced in
accordance with, and governed by, the law of the State of Illinois, without
application of any choice of law principles that would apply any law other than
the law of Illinois.

6
<PAGE>

IN WITNESS WHEREOF, the parties have caused this Agreement to be
effective as of the day and year first above written.

EMPLOYEE: Great Lakes REIT, Inc.

By:
- ----------------------------------- ----------------------------------

Its:
---------------------------------

<PAGE>

Exhibit 10.11.12

GREAT LAKES REIT, INC.
NON-QUALIFIED STOCK OPTION CERTIFICATE/INDEPENDENT DIRECTOR

This is to certify that on this 26TH DAY OF FEBRUARY, 1997, GREAT LAKES
REIT, INC.,, A MARYLAND CORPORATION (THE "COMPANY"), pursuant to the Great
Lakes REIT, Inc. Stock Option Plan dated July 2, 1992 (the "Plan"), hereby
grants to (DIRECTOR) (THE "DIRECTOR") an option to purchase 5,000 SHARES
of its common stock, par value $.01 per share, upon the terms and conditions
set forth herein. The Director and other individual 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
$13.00 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 shall 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 shares of the Company's
common stock or by a combination of such methods of payments.

(c) 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 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.

<PAGE>

3. The term of the option is TEN (10) YEARS (UNTIL DECEMBER 31, 2006),
but is subject to earlier expiration as provided in paragraph 5. The option
is thus not exercisable to any extent after the expiration of ten (10) years
from the date of this stock 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 be transferrable only by will or the laws of
descent and distribution except that the Director may assign the Option to
such Director's employer or an affiliate of such employer.

5. In the event the Director is removed "for cause" under Article II
Section 13 of the Company's By-Laws, 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 common stock is
changed by any stock dividend, stock 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 corporation or corporations, there shall be
substituted on an equitable basis as determined by the Board for each share
of common stock then subject to the option, the number and kind of shares of
stock or other securities to which the holders of common stock 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 common stock
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 per share" (as defined in the Plan) 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 Optionholder(s) shall not have any rights of shareholders with
respect to the shares subject to the option until such shares are actually
issued upon exercise of the option.

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

Great Lakes REIT, Inc.

By: _______________________, Secretary

<PAGE>

Exhibit 10.25

FIRST AMENDMENT TO AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT

This First Amendment to Amended and Restated Revolving Credit
Agreement is made as of the 1st day of March, 1997 by and among GREAT LAKES
REIT, L.P., a Delaware limited partnership (the "Borrower"), GREAT LAKES REIT,
INC., a Maryland corporation (the "Company"), THE FIRST NATIONAL BANK OF BOSTON,
BANK OF AMERICA ILLINOIS and FIRST BANK NATIONAL ASSOCIATION (collectively, the
"Banks") and THE FIRST NATIONAL BANK OF BOSTON, as Agent for the Banks (the
"Agent").

WHEREAS, the parties hereto are parties to that certain Amended
and Restated Revolving Credit Agreement dated as of December 27, 1996 (the
"Existing Agreement"); and

WHEREAS, the parties have agreed to amend the Existing Agreement
to provide for a reduction in certain of the interest rates thereunder.

NOW, THEREFORE, the parties hereby agree that effective upon the
date hereof the Existing Agreement is amended as follows:

1. The definition of Applicable Margin contained Section 1.1
of the Existing Agreement is hereby amended to read as follows:

"APPLICABLE MARGIN. As of any date of
determination, with respect to LIBOR Rate loans
1.65%, PROVIDED that upon completion of a Successful
Initial Public Offering the Applicable Margin shall
be reduced to 1.50%."

2. EFFECTIVE DATE. This Amendment shall become effective on
March 1, 1997 so long as counterparts of this Amendment executed by each of the
parties hereto have been received by the Agent prior to such Effective Date.

3. REPRESENTATIONS AND WARRANTIES. The Borrower and the
Company represent and warrant that each of the representations and warranties
contained in Section 6 of the Credit Agreement is true, correct and complete in
all material respects as of the date hereof to the same extent as though made on
such date and that no Default or Event of Default has occurred and is continuing
on the date hereof.

4. EFFECTIVENESS OF LOAN DOCUMENTS. The Company, in its
capacity as Guarantor under the Guaranty, hereby consents to this Amendment and
confirms that the Guaranty shall continue to guaranty the payment and
performance of all of the "Obligations" as defined in the Guaranty. The
Borrower confirms that each of the Security Documents shall continue to secure
the payment and performance of all of the Obligations under the Existing
Agreement as amended hereby and the Borrower's obligations thereunder shall
continue to be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Every reference contained in the
Loan Documents to the Credit Agreement

1
<PAGE>

shall mean and be a reference to the Existing Agreement as amended hereby and as
the Credit Agreement may be further amended. Except as specifically amended by
this Amendment, the Existing Agreement and each of the Loan Documents shall
remain in full force and effect and are hereby ratified and confirmed.

5. MISCELLANEOUS. This Amendment shall be governed by,
interpreted and construed in accordance with all of the same provisions
applicable under the Existing Agreement including, without limitation, all
definitions set forth in Section 1.1, the rules of interpretation set forth in
Section 1.2, the provisions relating to governing law set forth in Section 21,
the provisions relating to counterparts in Section 23 and the provision
relating to severability in Section 28.

IN WITNESS WHEREOF, the undersigned have duly executed this
Amendment as a sealed instrument as of the date first set forth above.

GREAT LAKES REIT, L.P.
By its sole general partner:
GREAT LAKES REIT, INC.

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

GREAT LAKES REIT, INC.

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

THE FIRST NATIONAL BANK OF BOSTON,
individually and as Agent

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

2
<PAGE>

BANK OF AMERICA ILLINOIS

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

FIRST BANK NATIONAL ASSOCIATION

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

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Summary Selected
Condensed Financial and Operating Information", "Selected Financial and
Operating Data" and "Experts" and to the use of our reports indicated below in
this Registration Statement (Form S-11) and related Prospectus of Great Lakes
REIT, Inc. for the registration of 6,555,000 shares of its common stock.

<TABLE>
<CAPTION>
DATE OF AUDITORS
FINANCIAL STATEMENTS REPORT
- --------------------------------------------------------------------------------------- ----------------------

<S> <C>
Consolidated balance sheets of Great Lakes REIT, Inc. as of December 31, 1996 and 1995
and the related consolidated statements of income, stockholders' equity and cash flows
for each of three years in the period ended December 31, 1996.......................... January 28, 1997

Statements of Revenue and Certain Expenses of Court International II for the period
from January 1, 1996 to December 13, 1996 and for the year ended December 31, 1995..... December 18, 1996

Combined Statements of Revenue and Certain Expenses of Woodcreek I and II for the ten
months ended October 31, 1996 and the year ended December 31, 1995..................... December 13, 1996

Statements of Revenue and Certain Expenses of Long Lake Crossing for the period from
January 1, 1996 to November 22, 1996 and the year ended December 31, 1995.............. December 27, 1996

Combined Statements of Revenue and Certain Expenses of Lincoln Center II and III for
the period from January 1, 1996 to November 8, 1996 and the year ended December 31,
1995................................................................................... December 27, 1996

Statement of Revenue and Certain Expenses of 40 Oak Hollow for the period from March
19, 1996 to December 20, 1996.......................................................... January 23, 1997

Statements of Revenue and Certain Expenses of Centennial Center for the period from
January 1, 1996 to December 27, 1996 and the year ended December 31, 1995.............. January 10, 1997

Statements of Revenue and Certain Expenses of Dublin Techmart for the year ended
December 31, 1995...................................................................... October 31, 1996

Statements of Revenue and Certain Expenses of Princeton Hill Corporate Center for the
period from January 1, 1996 to April 17, 1996 and the year ended December 31, 1995..... January 14, 1997
</TABLE>

Ernst & Young LLP

Chicago, Illinois

February 28, 1997

<PAGE>
<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,688,173
<SECURITIES> 0
<RECEIVABLES> 2,130,935
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,819,108
<PP&E> 189,431,629
<DEPRECIATION> 5,309,666
<TOTAL-ASSETS> 192,899,055
<CURRENT-LIABILITIES> 11,442,631
<BONDS> 86,111,347
0
2,101
<COMMON> 88,323
<OTHER-SE> 95,254,653
<TOTAL-LIABILITY-AND-EQUITY> 192,899,055
<SALES> 20,249,565
<TOTAL-REVENUES> 25,232,309
<CGS> 0
<TOTAL-COSTS> 10,502,201
<OTHER-EXPENSES> 7,492,728
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,778,065
<INCOME-PRETAX> 6,599,207
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,599,207
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,599,207
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.11

</TABLE>