SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
[X] Current Report Pursuant to Section 13 OR 15(d)
of the Securities Exchange Act of 1934
December 12, 1997
(Date of Report)
Commission file number: 0-28354
Great Lakes REIT, Inc.
(Exact name of Registrant as specified in its Charter)
Maryland 36-3844714
(State or other jurisdiction (I.R.S. Employer identification no.)
of incorporation organization)
823 Commerce Drive, Suite 300, Oak Brook, IL 60521
(Address of principal executive offices) (Zip Code)
(630) 368 - 2900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
ACQUISITIONS
As previously reported in a Current Report on Form 8-K filed October 14, 1997,
on September 30, 1997, Great Lakes REIT, Inc. through Great Lakes REIT L.P.
(collectively the "Company") acquired Metro Center IV, a six-story office
building located at 425 Metro Place North, and Metro Center V, a seven and nine
story class A office building located at 655 Metro Place South, Dublin, Ohio.
(collectively "Metro Center IV and V")
TERMS OF PURCHASE
Metro Center IV and V were purchased from an unaffiliated third party for
approximately $26.6 million. Funds for the purchase came from the Company's
bank line of credit.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The required financial statements for Metro Center IV and V is attached as
Exhibit A. The required proforma financial statement is attached as Exhibit B.
No information is required under Items 1,3,4, and 6, and these items have
therefore been omitted.
By: /s/ Richard L. Rasley
Richard L. Rasley, Secretary
<PAGE>
EXHIBIT A
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Great Lakes REIT, Inc.
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of Metro Center IV and Metro Center V (the "Properties") for the year
ended December 31, 1996. The Combined Statement of Revenue and Certain Expenses
is the responsibility of the Properties' management. Our responsibility is to
express an opinion on the Combined 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 Combined Statement of Revenue and Certain Expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Combined Statement of
Revenue and Certain Expenses. An audit also includes assessing the basis of
accounting used and significant estimates made by management, as well as
evaluating the overall presentation of the Combined Statement of Revenue and
Certain Expenses. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying Combined Statement of Revenue and Certain Expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission, for inclusion in the Current Report on Form 8-K of
Great Lakes REIT, Inc. as described in Note 2, and is not intended to be a
complete presentation of the Properties' combined revenue and expenses.
In our opinion, the Combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the combined revenue and
certain expenses described in Note 2 of the Properties for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 7, 1997
<PAGE>
<TABLE>
Metro Center IV and Metro Center V
Combined Statements of Revenue and Certain Expenses
<CAPTION>
January 1, 1997
through
Year Ended September 30, 1997
December 31, 1996 (Unaudited)
<S> <C> <C>
Revenue
Base rents $2,636,098 $2,047,939
Tenant reimbursements 1,461,449 1,238,899
Other income 9,216 14,264
Total revenue 4,106,763 3,301,102
Expenses
Real estate taxes 532,228 412,336
General operating 286,572 199,045
Utilities 482,269 355,256
Cleaning and landscaping 365,747 271,798
Repairs and maintenance 182,900 145,813
Management fee 126,938 101,530
Total expenses 1,976,654 1,485,778
Revenue in excess of certain expenses $2,130,109 $1,815,324
</TABLE>
See accompanying notes.
<PAGE>
Metro Center IV and Metro Center V
Notes to Combined Statements of Revenue
and Certain Expenses
1. Business
The accompanying Combined Statements of Revenue and Certain Expenses relate to
the operations of Metro Center IV and Metro Center V (the "Properties"), which
are commercial office buildings located in Dublin, Ohio. The Properties were
acquired on September 30, 1997 by a partnership controlled by Great Lakes REIT,
Inc. ("Great Lakes").
As of September 30, 1997, Metro Center IV was 94% leased with 15 tenants and
Metro Center V was 90% leased with 27 tenants. As of December 31, 1996, Metro
Center IV was 82% leased with 16 tenants and Metro Center V was 75% leased with
24 tenants. At Metro Center IV, three tenants accounted for approximately 50% of
base rents and two tenants accounted for approximately 52% of base rents at
September 30, 1997 and December 31, 1996, respectively. At Metro Center V, two
tenants accounted for approximately 30% and 27% of base rents at September 30,
1997 and December 31, 1996, respectively.
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 Current Report on Form
8-K of Great Lakes. The combined 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 on a straight-line basis over the terms of the related
leases. Expenses are recognized in the period in which they are incurred.
Uses 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 those
estimates.
<PAGE>
Metro Center IV and Metro Center V
Notes to Combined Statements of Revenue
and Certain Expenses (continued)
2. Summary of Significant Accounting Policies (continued)
Unaudited Interim Statement
In the opinion of management, the interim financial statement reflects all
adjustments necessary for a fair presentation of the results of the interim
period. All adjustments are of a normal, recurring nature.
3. Rentals
The Properties have entered into tenant leases that provide for tenants to share
in the operating expenses and real estate taxes on a pro rata basis, as defined.
4. Management Agreement
During the periods from January 1, 1997 to September 30, 1997 and from January
1, 1996 to December 31, 1996, the Properties were managed by a third-party
management company. The management agreement for Metro Center IV provided for a
monthly management fee equal to the greater of 3.75% of gross monthly rental
income or $2,000. The management agreement for Metro Center V provided for a
monthly management fee equal to the greater of 2.75% of gross monthly rental
income or $5,000.
<PAGE>
EXHIBIT B
GREAT LAKES REIT, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
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 acquisition of Equity Partners Ltd., the Advisor, and the Company's
initial public offering of its common shares had all occurred as of January 1,
1996 (the Offering).
The unaudited consolidated pro forma statement of income for the nine
months ended September 30, 1997 is presented as if the properties acquired in
1997 had occurred as of January 1, 1997.
The pro forma financial statements are not necessarily indicative of what
the Company's results 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.
<PAGE>
<TABLE>
Great Lakes REIT, Inc.
Consolidated Pro forma Statement of Income
For the Year Ended December 31, 1996
<CAPTION>
1996 1996 1996 Pro forma
Historical (1) Advisor (1) Acquisitions (2) Dispositions (3) Adjustments
Revenues
<S> <C> <C> <C> <C> <C>
Rental $20,249,565 $10,181,410 (1,522,795)
Reimbursements 4,814,005 4,196,142 (172,833)
Interest and other 168,739 567,620 472,579 (562,847)(4)
-----------------------------------------------------------------------------------------------------
Total revenues 25,232,309 567,620 14,850,131 (1,695,628) (562,847)
-----------------------------------------------------------------------------------------------------
Expenses
Real estate taxes 3,954,144 2,853,267 (160,166)
Other property operating 6,548,057 144,436 4,264,742 (449,311) (217,971)(5)
General and administrative 2,242,165 339,220 (203,697)(5)
67,460 (7)
Interest 3,778,065 (105,902) 2,882,725 (8)
Depreciation and amortization 4,000,736 (221,246) 1,728,428 (6)
-----------------------------------------------------------------------------------------------------
Total expenses 20,523,167 483,656 7,118,009 (936,625) 4,256,945
-----------------------------------------------------------------------------------------------------
Income before gains on sale of
real property 4,709,142 83,964 7,732,122 (759,003) (4,819,792)
Gain on sale of properties 3,139,892 (3,139,892)(9)
-----------------------------------------------------------------------------------------------------
Net income $7,849,034 83,964 7,732,122 (759,003) (7,959,684)
=====================================================================================================
Earnings per common share and
common share equivalent $1.32
===================
Weighted average number of
common shares and common
shares equivalents outstanding 5,927,208
===================
</TABLE>
<TABLE>
Great Lakes REIT, Inc.
Consolidated Pro forma Statement of Income
For the Year Ended December 31, 1996
<CAPTION>
Pro forma
Before 1997 Pre Offering Pro forma
Acquisitions and 1997 Pro Forma Pro forma Adjustments
the Offering Acquisitions Adjustments 12/31/96 For Offering
Revenues
<S> <C> <C> <C> <C> <C>
Rental 28,908,180 4,506,316 33,414,496
Reimbursements 8,837,314 235,283 9,072,597
Interest and other 646,091 71,077 717,168
------------------------------------------------------------------------------------------------------
Total revenues 38,391,585 4,812,676 43,204,261
------------------------------------------------------------------------------------------------------
Expenses
Real estate taxes 6,647,245 1,038,231 7,685,476
Other property operating 10,289,953 1,326,415 11,616,368
General and administrative 2,445,148 2,445,148
Interest 6,554,888 867,113 7,422,001 (6,047,878)(10)
Depreciation and amortization 5,507,918 439,616 209,682 (6) 6,157,216 (14,798)(6)
------------------------------------------------------------------------------------------------------
Total expenses 31,445,152 3,671,375 209,682 35,326,209 (6,062,676)
------------------------------------------------------------------------------------------------------
Income before gains on sale of
real property 6,946,433 1,141,301 (209,682) 7,878,052 6,062,676
Gain on sale of properties
------------------------------------------------------------------------------------------------------
Net income 6,946,433 1,141,301 (209,682) 7,878,052 6,062,676
======================================================================================================
</TABLE>
<TABLE>
Great Lakes REIT, Inc.
Consolidated Pro forma Statement of Income
For the Year Ended December 31, 1996
<CAPTION>
Pro forma
Before 1996
Metro IV & V Metro IV & V Company
Acquisition Acquisition Pro forma
Revenues
<S> <C> <C> <C>
Rental $33,414,496 2,636,098 36,050,594
Reimbursements 9,072,597 1,461,449 10,534,046
Interest and other 717,168 9,216 726,384
----------------------------------------------------------
Total revenues 43,204,261 4,106,763 47,311,024
----------------------------------------------------------
Expenses
Real estate taxes 7,685,476 532,228 8,217,704
Other property operating 11,616,368 1,444,426 13,060,794
General and administrative 2,445,148 2,445,148
Interest 1,374,123 1,972,500 3,346,623
Depreciation and amortization 6,142,418 620,380 6,762,799
----------------------------------------------------------
Total expenses 29,263,533 4,569,534 33,833,068
----------------------------------------------------------
Income before gains on sale of
real property 13,940,728 (462,771) 13,477,956
Gain on sale of properties
----------------------------------------------------------
Net income $13,940,728 ($462,771) $13,477,956
==========================================================
Earnings per common share and
common share equivalent $0.86
===================
Weighted average number of
common shares and common
shares equivalents outstanding 15,697,473
===================
<FN>
See accompanying notes to pro forma consolidated statement of income.
GREAT LAKES REIT, INC.
NOTES TO CONSOLIDATED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(Unaudited)
1. Represents the historical operations of the Company and Equity
Partners Ltd., the Advisor for the period described.
2. Represents the historical operations of properties acquired subsequent
to December 31, 1995. Based on preacquisition discussions with local
assessors and tax counsel, the Company has concluded that no adjustment
to historical real estate taxes is appropriate.
3. Represents the actual historical results of the properties sold in 1996 for the period prior to
disposition.
4. 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 (the
Merger). Income earned in 1996 by the Advisor from the Company prior to
the Merger is eliminated from the pro forma income statements:
Acquisition fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,750
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,697
Property management fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217,971
Construction fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,717
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,712
$562,847
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:
1996
Other property operating expenses:
Property management fees. . . . . . . . . . . . . . . . . . . . . . . . . . $217,971
General and administrative costs:
Advisory fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .$203,697
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.
<PAGE>
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 $56,327 in 1996. Costs incurred by the Advisor
for acquisition and construction activities 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 $18,613 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 decreased by $14,798 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.
Depreciation is computed on a straight-line basis over 40 years based
on the purchase price paid by the Company for the properties.
A summary of the depreciation and amortization adjustments is as
follows:
Pro Forma
Offering
1996 Acquisitions 1997 Acquisitions Other
Increase in goodwill amortization.. $ 18,613
Decrease in amortization of deferred
financing costs. . . . ... . . . . .. $(14,798)
Decrease in depreciation due to
Advisor capitalized costs. . . . . . . . (56,327)
Depreciation on acquisitions . . . . . . 1,867,074 $209,682
Total. . . . . . . . . . . . . . . . . . $1,829,360 $209,682 $(14,798)
7. If the Merger had occurred on January 1, 1996, general and
administrative expense would have increased by $67,460 representing an
additional three months amortization of deferred compensation related
to restricted stock awards issued in connection with the acquisition of
the Advisor.
8. As the acquisitions subsequent to December 31, 1995, the dispositions
in 1996, and the 1996 private equity offering are all assumed to have
occurred on January 1, 1996, the Company would need to borrow
approximately $38,436,335 as of January 1, 1996 to fund the property
acquisitions calculated as follows:
Cost of properties acquired in 1996. . . . . . . . . . . . . . . . . . $97,563,034
less: Proceeds of 1996 private equity offering. . . . . . . . . . . . 47,419,261
less: Proceeds of property sales. . . . . . . . . . . . . . . . . . . 11,707,438
Borrowings needed to acquire properties. . . . . . . . . . . . . . . . $38,436,335
Interest expense is calculated on this amount at 7.5% per annum, the
interest rate in effect under the Credit Facility during 1996,
resulting in additional interest expenses in 1996 of $2,882,725.
9. The Consolidated Pro Forma Statement of Income excludes gain on sale of properties of
$3,139,892.
10. In connection with the Offering, the Company retired all of its bank loan payable and
$13,568,404 of its long-term debt.
The pro forma interest expense adjustment is calculated as follows:
Pro forma adjustment in Note 8. . . . . . . . . . . . . . . . . . . . $2,882,725
Actual bank loan interest incurred by the Company in 1996. . . . . . 1,991,130
Actual interest incurred by the Company in 1996 on long-term debt
retired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,174,023
---------
Pro forma interest expense adjustment. . . . . . . . . . . . . . . . . $6,047,878
11. Interest expense on Metro IV and V ($1,972,500) is computed on the
amount borrowed to acquire the properties ($26,300,000) at 7.5% per
annum, the average interest rate during 1996.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Great Lakes REIT, Inc.
Consolidated Pro Forma Statement of Income
For the Nine Months Ended September 30, 1997
Pro Forma
Previous Before
09/30/97 1997 Pro Forma Metro IV & V Metro IV & V Company
As reported Acquisitions Adjustments Acquisition Acquisition Pro Forma
Revenues
<S> <C> <C> <C> <C> <C> <C>
Rental $25,219,293 2,500,741 27,720,034 2,047,939 $29,767,973
Reimbursements 7,775,120 98,363 7,873,483 1,238,899 9,112,382
Interest and other 539,811 30,529 570,340 14,264 584,604
-------------------------------------------------------------------------------------------------
Total revenues 33,534,224 2,629,633 36,163,857 3,301,102 39,464,959
-------------------------------------------------------------------------------------------------
Expenses
Real estate taxes 5,400,664 503,644 5,904,308 412,336 6,316,644
Other property operating 8,323,061 756,577 9,079,638 1,073,442 10,153,080
General and administrative 2,598,460 2,598,460 2,598,460
Interest 3,144,940 451,172 (2,631,517) 964,595 1,413,850 2,378,445
Depreciation and amortization 5,839,273 336,906 6,176,179 464,010 6,640,190
-------------------------------------------------------------------------------------------------
Total expenses 25,306,398 2,048,300 (2,631,517) 24,723,181 3,363,639 28,086,819
-------------------------------------------------------------------------------------------------
Net income $8,227,826 581,333 2,631,517 11,440,676 (62,537) $11,378,140
=================================================================================================
Earnings per common share
and common share equivalent $0.52 $0.72
===================== ==============
Weighted average number of
common shares and common
share equivalents outstanding 15,697,473 15,697,473
===================== ==============
See accompanying notes to pro forma consolidated statement of income
<FN>
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
1. Represents the historical results of the Company.
2. Represents the unaudited historical results of operations of Metro IV and V for the
period January 1, 1997 to September 30, 1997.
3. Depreciation is computed on a straight-line basis over 40 years for the period January 1,
1997 to September 30, 1997.
4. Interest expense ($1,413,850) is computed on the amount borrowed
($26,300,000) to acquire Metro IV and V for the period January 1, 1997
to September 30, 1997 at 7.2% per annum, the average interest rate
during this period.
5. Interest expense has been reduced by $2,631,517 which represents interest paid on debt
retired with the proceeds of the Offering.
</FN>
</TABLE>
