<PAGE>
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
July 24, 1998
(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
60523 (Address of principal executive offices)
(Zip Code)
(630) 368 - 2900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ No / /
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
ACQUISITIONS
As previously reported in a Current Report on Form 8-K filed June 4, 1998, on
May 22, 1998, Great Lakes REIT, Inc. through Great Lakes REIT, L.P.
(Collectively the "Company") acquired 116 and 183 Inverness Drive, two
four-story office buildings located in Englewood, Colorado, a suburb of
Denver.
TERMS OF PURCHASE
116 Inverness Drive East and 183 Inverness Drive West were purchased from
unaffiliated third parties for approximately $41,900,000, including $543,000
for capital reserves. Funds for the purchases came from a borrowing under
the Company's unsecured line of credit as well as the assumption of a
long-term mortgage loan, and issuance of 48,447 operating partnership units.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The required financial statements for the Inverness office buildings are
attached as Exhibit A.
The required proforma financial statements are attached as Exhibit B.
The consent of Ernst & Young LLP is filed as Exhibit C.
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>
Combined Statements of Revenue and Certain Expenses
Inverness Properties
Year Ended December 31, 1997
with Report of Independent Auditors
<PAGE>
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 116 Inverness and 183 Inverness (the Inverness Properties) for
the year ended December 31, 1997. This Combined Statement of Revenue and
Certain Expenses is the responsibility of the Inverness 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 accounting principles 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/A of Great Lakes REIT, Inc. as described in Note 2, and is not
intended to be a complete presentation of the Inverness 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 revenue and
certain expenses described in Note 2 of the Inverness Properties for the year
ended December 31, 1997, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
June 18, 1998
<PAGE>
Inverness Properties
Combined Statements of Revenue and Certain Expenses
<TABLE>
<CAPTION>
January 1, 1998
Year Ended through
December 31, 1997 May 22, 1998
(Unaudited)
-------------------- ---------------------
<S> <C> <C>
Revenue:
Base rents $4,644,997 $1,735,382
Tenant reimbursements 1,408,165 522,065
-------------------- ---------------------
Total revenue 6,053,162 2,257,447
-------------------- ---------------------
Expenses:
Real estate taxes 925,156 356,453
General operating 183,836 77,845
Utilities 648,212 226,927
Cleaning and landscaping 342,484 114,726
Repairs and maintenance 597,147 241,478
Property management fee 214,532 82,926
-------------------- ---------------------
Total expenses 2,911,367 1,100,355
-------------------- ---------------------
Revenue in excess of certain expenses $3,141,795 $1,157,092
==================== =====================
</TABLE>
See accompanying notes.
<PAGE>
==============================================================================
Inverness Properties
==============================================================================
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 116 Inverness Drive East, a four-story office building,
and 183 Inverness Drive West, a four-story office building (the Inverness
Properties) located in Englewood, Colorado. The Inverness Properties were
managed by the same property management company and each was owned by a
limited liability company with the same managing member. The Inverness
Properties were acquired on May 22, 1998 by a partnership controlled by Great
Lakes REIT, Inc. (Great Lakes).
As of May 22, 1998 and December 31, 1997, the Properties were 97% and 100%
occupied with twelve and eleven tenants, respectively. At May 22, 1998 and
December 31, 1997, three tenants and four tenants accounted for approximately
71% and 78% of base rents, 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/A of Great Lakes. The combined statements are not representative of
the actual operations of the Inverness 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 Inverness
Properties, have been excluded.
Revenue and Expense Recognition
Revenue of the Inverness Properties is recognized on a straight-line basis
over the terms of the related leases. Expenses are recognized in the period
in which they are incurred.
Use of Estimates
The preparation of the Combined Statements of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the
Combined Statements of Revenue and Certain Expenses. Actual results could
differ from those estimates.
<PAGE>
2. Summary of Significant Accounting Policies (continued)
Unaudited Interim Statement
In the opinion of management, the interim combined financial statement
reflects all adjustments necessary for fair presentation of the results of
the interim period. All adjustments are of a normal, recurring nature.
3. Rentals
The Inverness 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. Related Party Transactions
The Inverness Properties were managed by an affiliated management company.
During the period from January 1, 1998 to May 22, 1998 and the year ended
December 31, 1997, property management fees were $82,926 and $214,532,
respectively. In addition, the Inverness Properties have contracts with the
affiliated management company for monthly maintenance and asset management.
Total fees incurred during the period from January 1, 1998 to May 22, 1998
and the year ended December 31, 1997 for maintenance and asset management
were $159,123 and $391,315, respectively.
<PAGE>
Exhibit B
<PAGE>
GREAT LAKES REIT, INC.
Pro Forma Condensed Consolidated Financial Statements
(unaudited)
The accompanying unaudited Pro Forma Condensed Consolidated Balance Sheet
reflects as of March 31, 1998, the April 15, 1998 acquisition of Milwaukee
Center and the May 22, 1998 acquisition of the Inverness Properties.
The accompanying unaudited Pro Forma Condensed Consolidated Statement of
Income for the three months ended March 31, 1998 reflects the January 6, 1998
acquisition of Star Bank Office Building and the two acquisitions identified
in the preceding paragraph as if they had occurred January 1, 1998.
The accompanying unaudited Pro Forma Condensed Statement of Income for the
year ended December 31, 1997 reflects the 1998 acquired properties identified
above, the properties acquired during 1997 and the Company's May, 1997
initial public offering as if these events had occurred January 1, 1997.
The accompanying unaudited pro forma condensed consolidated financial
statements have been prepared by management of the Company and do not purport
to be indicative of the results which would actually have been obtained had
the transactions described above been completed on the dates indicated or
which may be obtained in the future. The pro forma condensed combined
financial statements should be read in conjunction with the accompanying
notes to the pro forma condensed consolidated financial statements.
<PAGE>
Great Lakes REIT, Inc.
Pro Forma Condensed Consolidated Balance Sheet
As of March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
3/31/98 Milwaukee Prior to Inverness 3/31/98
As Reported (1) Center (2) Inverness Properties (3) Pro Forma
<S> <C> <C> <C> <C> <C>
Assets
Properties:
Land $45,734,153 2,176,000 47,910,153 7,100,000 $55,010,153
Buildings, improvements, and equipment 275,672,807 44,561,843 320,234,650 33,998,033 354,232,683
--------------------------------------------------------------------------
321,406,960 46,737,843 368,144,803 41,098,033 409,242,836
Less accumulated depreciation 13,353,272 13,353,272 13,353,272
--------------------------------------------------------------------------
308,053,688 46,737,843 354,791,531 41,098,033 395,889,564
Cash and cash equivalents 3,809,836 (873,486) 2,936,350 (285,680) 2,650,670
Real estate tax escrows 366,482 366,482 366,482
Rents receivable 3,118,065 3,118,065 3,118,065
Deferred financing and leasing costs, net of accumulated
amortization 3,807,410 3,807,410 124,347 3,931,757
Goodwill, net of accumulated amortization 1,340,129 1,340,129 1,340,129
Other assets 963,832 26,427 990,259 990,259
--------------------------------------------------------------------------
Total assets $321,459,442 45,890,784 367,350,226 40,936,700 $408,286,926
--------------------------------------------------------------------------
--------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Bank loan payable $93,566,000 45,000,000 138,566,000 27,000,000 $165,566,000
Mortgage loans payable 17,485,272 17,485,272 12,434,713 29,919,985
Bonds payable 5,030,000 5,030,000 5,030,000
Accounts payable and accrued liabilities 3,663,920 161,665 3,825,585 1,082,036 4,907,621
Accrued real estate taxes 7,333,347 705,508 8,038,855 356,454 8,395,309
Prepaid rent 2,371,869 3,771 2,375,640 11,805 2,387,445
Security deposits 905,744 19,840 925,584 51,692 977,276
Distributions/dividends payable 4,805,747 4,805,747 4,805,747
--------------------------------------------------------------------------
Total liabilities 135,161,899 45,890,784 181,052,683 40,936,700 221,989,383
--------------------------------------------------------------------------
Common stock ($0.01 par value, 60,000,000
authorized; 15,920,691 shares issued as of
March 31, 1998) 159,207 159,207 159,207
Paid-in-capital 197,353,745 197,353,745 197,353,745
Retained earnings (deficit) (5,302,221) (5,302,221) (5,302,221)
Employee stock loans (5,577,574) (5,577,574) (5,577,574)
Deferred compensation (65,375) (65,375) (65,375)
Treasury stock, at cost (21,784 shares) (270,239) (270,239) (270,239)
--------------------------------------------------------------------------
Total stockholders' equity 186,297,543 0 186,297,543 0 186,297,543
--------------------------------------------------------------------------
Total liabilities and stockholders' equity $321,459,442 45,890,784 367,350,226 40,936,700 $408,286,926
--------------------------------------------------------------------------
--------------------------------------------------------------------------
</TABLE>
See accompanying notes to pro forma condensed consolidated balance sheet
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998
(UNAUDITED)
1. Represents the historical results of the Company.
2. Represents the allocation of acquisition price paid for Milwaukee Center.
3. Represents the allocation of acquisition prices paid for the Inverness
Properties. The value of the 48,447 operating partnership units issued
($887,467) is classified as accounts payable and accrued liabilities due
to materiality considerations.
<PAGE>
Great Lakes REIT, Inc.
Pro Forma Condensed Consolidated Statement of Income
For the Three Months Ended March 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
Prior to Inverness 3/31/98
3/31/98 1998 Inverness Properties Company
As Reported (1) Acquisitions Acquisitions Acquisition Pro Forma
<S> <C> <C> <C> <C> <C>
Revenues
Rental $12,863,492 1,709,805(2) 14,573,297 1,107,691(3) $15,680,988
Reimbursements 3,765,137 272,324(2) 4,037,461 333,233(3) 4,370,694
Interest and other 174,415 7,981(2) 182,396 182,396
---------------------------------------------------------------------------
Total revenues 16,803,044 1,990,110 18,793,154 1,440,924 20,234,078
---------------------------------------------------------------------------
Expenses
Real estate taxes 2,728,292 269,140(2) 2,997,432 227,523(3) 3,224,955
Other property operating 4,235,563 673,841(2) 4,909,404 474,831(3) 5,384,235
General and administrative 1,097,120 1,097,120 1,097,120
Interest 2,035,139 835,200(5) 2,870,339 708,575(5) 3,578,914
Depreciation and amortization 2,738,578 279,588(4) 3,018,166 209,591(4) 3,227,757
---------------------------------------------------------------------------
Total expenses 12,834,692 2,057,769 14,892,461 1,620,520 16,512,981
---------------------------------------------------------------------------
Net income $3,968,352 (67,659) 3,900,693 (179,597) $3,721,096
===========================================================================
Earnings per common share - basic $0.25 $0.23
=========== ==========
Weighted average common shares outstanding - basic 15,860,320 15,920,691
=========== ==========
Diluted earnings per common share $0.25 $0.23
=========== ==========
Weighted average common shares outstanding - diluted 16,145,417 16,205,788
=========== ==========
</TABLE>
See accompanying notes to pro forma condensed consolidated statement of income
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
1. Represents the historical results of the Company.
2. Represents the unaudited historical results of operations of properties
acquired subsequent to December 31, 1997 for the period January 1, 1998 to
the acquisition date or March 31, 1998, whichever is earlier.
3. Represents the unaudited historical results of operations of the Inverness
Properties for the period January 1, 1998 to March 31, 1998.
4. Depreciation is computed on a straight-line basis over 40 years for the
period January 1, 1998 to the acquisition date or March 31, 1998, whichever
is earlier, based on the purchase price paid by the Company for the
properties.
5. Interest expense for the Inverness Properties ($708,575) is computed on the
amount borrowed ($27,000,000) on the Company's unsecured line of credit to
acquire the properties for the period January 1, 1998 to March 31, 1998 at
7.2% per annum, the average interest rate during the period. Also included
in interest expense is the amount calculated on the mortgage loan
($12,434,713) assumed for the period January 1, 1998 to March 31, 1998 at
7.11% per annum, the fixed interest rate for the note.
Interest expense ($835,200) is computed on the amount borrowed
($66,000,000) on the Company's unsecured line of credit to acquire the
properties for the period January 1, 1998 to the acquisition date or
March 31, 1998, whichever is earlier, at 7.2% per annum, the average
interest rate during the period.
<PAGE>
Great Lakes REIT, Inc.
Pro Forma Condensed Consolidated Statement of Income
For the Year Ended December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
1997 1997 Pro Forma Prior to 1998
Historical (1) Acquisitions Adjustments Acquisitions
<S> <C> <C> <C> <C>
Revenues
Rental $36,231,301 12,671,161(2) 48,902,462
Reimbursements 10,688,046 2,567,376(2) 13,255,422
Interest and other 744,514 112,933(2) 857,447
-----------------------------------------------------------
Total revenues 47,663,861 15,351,470 63,015,331
-----------------------------------------------------------
Expenses
Real estate taxes 7,702,203 2,199,404(2) 9,901,607
Other property operating 11,969,092 4,822,634(2) 16,791,726
General and administrative 3,379,121 3,379,121
Interest 4,308,173 5,826,453(4) (3,622,836)(5) 6,511,790
Depreciation and amortization 8,199,846 1,608,845(3) 9,808,691
-----------------------------------------------------------
Total expenses 35,558,435 14,457,336 (3,622,836) 46,392,935
-----------------------------------------------------------
Net income $12,105,426 894,134 3,622,836 16,622,396
===========================================================
Earnings per common share - basic $0.92
===========
Weighted average common shares outstanding - basic 13,140,124
===========
Diluted earnings per common share $0.91
===========
Weighted average common shares outstanding - diluted 13,304,540
===========
<CAPTION>
Pro Forma
Prior to Inverness 1997
1998 Inverness Properties Company
Acquisitions Acquisition Acquisition Pro Forma
<S> <C> <C> <C> <C>
Revenues
Rental 8,979,438(2) 57,881,900 4,644,997(2) $62,526,897
Reimbursements 1,589,673(2) 14,845,095 1,408,165(2) 16,253,260
Interest and other 58,806(2) 916,253 916,253
----------------------------------------------------------------
Total revenues 10,627,917 73,643,248 6,053,162 79,696,410
----------------------------------------------------------------
Expenses
Real estate taxes 902,990(2) 10,804,597 925,156(2) 11,729,753
Other property operating 3,804,417(2) 20,596,143 1,986,211(2) 22,582,354
General and administrative 3,379,121 3,379,121
Interest 4,785,000(4) 11,296,790 2,835,591(4) 14,132,381
Depreciation and amortization 1,662,524(3) 11,471,215 850,008(3) 12,321,223
----------------------------------------------------------------
Total expenses 11,154,931 57,547,866 6,596,966 64,144,832
----------------------------------------------------------------
Net income (527,014) 16,095,382 (543,804) $15,551,578
----------------------------------------------------------------
Earnings per common share - basic $0.98
===========
Weighted average common shares outstanding - basic 15,841,027
===========
Diluted earnings per common share $0.97
===========
Weighted average common shares outstanding - diluted 16,005,443
===========
</TABLE>
See accompanying notes to pro forma condensed consolidated statement of income
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
1. Represents the historical results of the Company.
2. Represents the unaudited historical results of operations of properties
acquired subsequent to December 31, 1996 as if the properties were
acquired by the Company at the beginning of 1997.
3. Depreciation is computed on a straight-line basis over 40 years for the
period January 1, 1997 to the acquisition date for the 1997 acquisitions
and to December 31, 1997 for the 1998 acquisitions based on the purchase
price paid by the Company for the properties.
4. Interest expense ($5,826,453) for the 1997 acquisitions is computed on the
amount borrowed ($68,500,000) on the Company's line of credit to acquire
the properties for the period January 1, 1997 to December 31, 1997 at 7.25%
per annum, the average interest rate during the period. Also included in
interest expense is the amount calculated on a property specific mortgage
loan ($12,125,000) for the period January 1, 1997 to December 31, 1997 at
7.08% per annum, the fixed interest rate for the note.
Interest expense ($4,785,000) for 1998 acquisitions is computed on the
amount borrowed ($66,000,000) on the Company's unsecured line of credit to
acquire the properties for the period January 1, 1997 to December 31, 1997
at 7.25% per annum, the averge interest rate for the period.
Interest expense ($2,835,591) for the Inverness Properties is computed on
the amount borrowed ($27,000,000) on the Company's unsecured line of credit
to acquire the properties for the period January 1, 1997 to December 31,
1997 at 7.25% per annum, the average interest rate for the period, and
interest on a mortgage loan ($12,434,713) assumed in connection with the
Inverness properties at the interest rate on the mortgage loan (7.11%).
5. Interest expense has been reduced by $3,622,836 which represents interest
paid on debt retired with the proceeds of the Company's initial public
offering in May 1997 as if the offering occurred on January 1, 1997.
The pro forma interest expense adjustment is calculated as follows:
Actual bank loan interest incurred by the Company in 1997 $2,798,119
Actual interest incurred by the Company in 1997 on long-term
debt retired 824,717
----------
Pro forma interest expense adjustment $3,622,836
==========
<PAGE>
Exhibit C
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
indicated below of Great Lakes REIT, Inc. of our reports indicated below filed
with the Securities and Exchange Commission.
Registration Statements
Form S-3 No. 333-40129
Form S-3 No. 333-49499
Form S-8 No. 333-56617
Form S-8 No. 333-56619
Financial Statement Date of Auditors' Report
Statement of revenue and certain expenses of Star Bank April 9, 1998
Office Building for the year ended December 31, 1997
included in the Report (Form 8-K/A) of Great Lakes REIT,
Inc. dated June 18, 1998
Combined statement of revenue and certain expenses of May 21, 1998
Milwaukee Portfolio for the year ended December 31, 1997
included in the Report (Form 8-K/A) of Great Lakes REIT,
Inc. dated June 18, 1998
Combined statement of revenue and certain expenses of June 18, 1998
Inverness Properties for the year ended December 31, 1997
included in the Current Report (Form 8-K/A) of Great
Lakes REIT, Inc. dated July 24, 1998
Ernst & Young LLP
Chicago, Illinois
July 24, 1998
