SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
August 7, 2003
(Date of Earliest Event Reported)
GREAT LAKES REIT
(Exact name of registrant as specified in its charter)
| Maryland (State or other jurisdiction of incorporation) |
1-14307 (Commission File Number) |
36-4238056 (IRS Employer Identification No.) |
823 Commerce Drive
Suite 300
Oak Brook, Illinois 60523
(Address of principal executive offices, including zip code)
(630) 368-2900
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
| Item 7 | Exhibits |
| (a) Financial Statements of Businesses Acquired: | |
| Not applicable. | |
| (b) Pro Forma Financial Information: | |
| Not applicable. | |
| (c) The following exhibit is filed as a part of this current report on Form 8-K: |
| Exhibit | |
| Number | Description |
| 99.1 | Great Lakes REIT news release, dated August 7, 2003. |
| Item 9 | Regulation FD Disclosure |
| See Item 12. Results of Operations and Financial Condition | |
| Item 12 | Results of Operations and Financial Condition |
| On August 7, 2003, Great Lakes REIT issued a news release announcing its financial results for the three and six months ended June 30, 2003. A copy of the news release is furnished as a part of this current report on Form 8-K as Exhibit 99.1 and is incorporated herein in its entirety by reference. The information filed in this current report on Form 8-K is being furnished pursuant to Item 12 of Form 8-K and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 and Section 11 of the Securities Act of 1933 or otherwise subject to the liabilities of those sections. Furnishing this current report on Form 8-K does not constitute an admission Great Lakes REIT as to the materiality of any information contained in this current report that is required to be disclosed solely by Item 12. |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| GREAT LAKES REIT |
| By: /s/James Hicks | |
| Name: James Hicks | |
| Title: Chief Financial Officer and Treasurer |
Dated: August 7, 2003
| Exhibit | |
| Number | Description |
| 99.1 | Great Lakes REIT news release, dated August 7, 2003. |
Exhibit 99.1
OAK BROOK, ILLINOIS, August 7, 2003 - Great Lakes REIT (NYSE: GL), a real estate investment trust which holds a portfolio of Midwestern office and medical office properties, today announced second quarter 2003 net income of $1.8 million, or $0.11 per common share, and funds from operations (FFO) of $7.0 million, or $0.44 per common share. This compares to net income of $5.2 million, or $0.31 per common share, which included gain on sale of properties of $1.0 million, and FFO of $9.1 million or $0.55 per common share, for the second quarter of 2002. Results for the quarter ended June 30, 2003 were reduced due to one-time costs associated with the termination of certain employee share loans in the amount of $0.5 million, or $0.03 per common share. FFO represents a non-GAAP (generally accepted accounting principles) financial measure. A table reconciling FFO to the GAAP measure the Company believes to be most directly comparable, net income applicable to common shares, is included in this release. Although not a GAAP measure, the Company believes that the inclusion of information regarding funds from operations (FFO) provides important information to shareholders and potential investors. The GAAP measure, net income applicable to common shares, includes depreciation and amortization expenses, gains or losses on property sales and minority interests. In presenting FFO, the Company eliminates substantially all of these items in order to provide an indication of the results from the Company’s property operations. FFO is a widely recognized measure in the Company’s business and is presented by nearly all publicly traded REITs. The Company’s calculation of FFO may differ from the methodology for calculating FFO utilized by other real estate companies.
For the six months ended June 30, 2003, the Company reported net income of $4.5 million, or $0.28 per common share, compared to $9.4 million, or $0.57 per common share, for the comparable period of 2002 (including $1.0 million of gain on sale of properties for the six months ended June 30, 2002). There were no property sales during the six months ended June 30, 2003. Funds from operations totaled $14.9 million, or $0.92 per common share, for the six months ended June 30, 2003, as compared to FFO of $18.1 million, or $1.10 per common share for the comparable period of 2002. Results for the six months ended June 30, 2003 were reduced due to one-time costs associated with the termination of certain employee share loans in the amount of $0.5 million, or $0.03 per common share.
“The level of leasing activity, while challenging during the first six months of 2003, was somewhat better than expectations. Year to date we have averaged 40,000 square feet per month of new leases against a budget of 30,000 square feet per month. However, we expect that the leasing environment in our markets will remain difficult during the second half of 2003 and we continue to expect 30,000 square feet per month of new leasing for second half of 2003” commented Dick May, Great Lakes REIT’s Chairman and CEO. “The good news is, after averaging 20% per year average lease expirations over the last 3 years, our expiring leases average only 13% per year over the next 3 years. In addition, after 11 consecutive quarters of declining occupancies in our markets, occupancies improved by 0.2% since the first quarter”.
Based on current market conditions, the Company expects earnings per common share in the range of $0.55 to $0.70 and 2003 FFO per common share in the range of $1.70 to $1.80. This guidance assumes continued softness in the economy and office markets in which the Company operates. The Company does not anticipate acquiring any additional properties during the remainder of 2003 and, accordingly, has revised its guidance for 2003.
Portfolio Performance
Total revenues increased by 6% to $26.9 million in the second quarter of 2003 from $25.5 million in last year’s second quarter. Revenues increased primarily due to the acquisition of eight medical office properties on October 1, 2002. Same store sales decreased 17% (cash basis) for the three months ended June 30, 2003, as compared to the second quarter of 2002 primarily as a result of the decline in occupancy quarter over quarter.
Total revenues increased by $3.8 million, or 7.6%, to $54.0 million for the six months ended June 30, 2003, from $50.2 million for the comparable period of 2002. Revenues increased primarily due to the acquisition of eight medical office properties on October 1, 2002. Same store sales decreased 14.5% (cash basis) for the six months ended June 30, 2003, as compared to the six months ended June 30, 2002, primarily as a result of the decline in occupancy.
EBITDA decreased $1.3 million, or 5%, to $26.5 million for the six months ended June 30, 2003, as compared to $27.8 million for the comparable period in 2002. Cash provided by operating activities decreased slightly to $15.4 million for the six months ended June 30, 2003, from $15.6 million for the comparable period of 2002. Cash flow from operations for the six months ended June 30, 2003, slightly exceeded common and preferred share dividends paid for the same period.
EBITDA, a non-GAAP financial measure, represents net income before allocation to minority interests plus interest expense, federal income tax expense (if any) and depreciation and amortization expense. A table reconciling EBITDA to the GAAP measure the Company believes to be directly comparable, cash provided by operating activities, is included in this release. EBITDA is presented solely as a supplemental disclosure because the Company believes it provides useful information regarding the Company’s ability to service or incur debt. Because all companies do not calculate EBITDA the same way, the presentation of EBITDA may not be comparable to similarly titled measures of other companies.
EBITDA coverage of interest expense was 3.0 times for the six months ended June 30, 2003 as compared to 3.7 times for the same period of 2002 and EBITDA coverage of interest plus preferred dividends was 2.5 times for the six months ended June 30, 2003 as compared to 3.0 times for the same period of 2002. Cash provided by operating activities (before interest expense) coverage of interest expense was 2.7 times for the six months ended June 30, 2003 as compared to 3.0 times for the comparable period of 2002. Cash provided by operating activities (before interest expense) coverage of interest expense plus preferred dividends was 2.3 times for the six months ended June 30, 2003 as compared to 2.5 times for the comparable period of 2002.
The Company has provided EBITDA and the related non-GAAP coverage ratios as supplemental disclosure because the Company believes such disclosure provides useful information regarding the Company’s ability to service or incur debt. Included with the reconciliation of EBITDA to the GAAP measure the Company believes to be directly comparable, cash provided by operating activities, are the coverage calculations for EBITDA coverage of interest expense, EBITDA coverage of interest plus preferred dividends, cash provided by operating activities (before interest expense) coverage of interest expense and cash provided by operating activities (before interest expense) coverage of interest expense plus preferred dividends.
The Company had $315.0 million of total debt outstanding at June 30, 2003. The interest rate on approximately 94% of this debt was fixed at an weighted average interest rate of 5.76%. At June 30, 2003, Great Lakes REIT had $45 million available for future borrowings under two secured lines of credit that the Company utilizes for acquisitions, development activities, capital improvements, tenant improvements, leasing costs and working capital needs.
In May, June and July 2003, the Company paid regular monthly cash dividends of $0.135 per common share.
Leasing For the quarter ended June 30, 2003, the Company signed 124,000 square feet of new leases bringing the total for the year to 241,000 square feet. Net rental rates on new leases and leases renewed for the quarter were 9% lower than net rents on the expiring leases.
As expected, the occupancy rate for the Company’s portfolio of properties declined to 80.2% at July 1, 2003 from 80.9% at April 1, 2003. The Company believes that the trend of vacancy increases is slowing, but the Company anticipates that the difficult leasing environment that currently exists in its markets will persist throughout 2003.
At July 1, 2003, Great Lakes REIT had 497,000 square feet of leases, or 8% of the portfolio, expiring during the balance of 2003. The Company currently expects to retain or renew 240,000 to 260,000 square feet of the remaining 497,000 square feet of leases rolling over during 2003. Although the Company has leased approximately 40,000 square feet of new space per month through June 30, it anticipates it will average 30,000 per month of new leasing activity for the balance of 2003, basically the same level as was experienced in the very difficult environment of 2002. Based on the tenant retention and new leasing activity expectations noted above, the Company expects that average portfolio occupancy during 2003 will be in the range of 79% to 80%. Occupancy at January 1, 2004 is expected to be in the range of 77% to 79% assuming no significant tenant defaults occur during the remainder of the year.
Lease expirations for the years 2001, 2002 and 2003 averaged approximately 20% of total year end portfolio square footage each year, while lease expirations for 2004, 2005 and 2006 are expected to be 16%, 13% and 9% of total portfolio square footage, respectively. The Company believes the economic impact of new leasing activity will be less pronounced over the next several years.
On July 8, 2003, the Company sold its properties located at 165 and 175 Hansen Court, Wood Dale, Illinois, for a contract price of $3.9 million. The gain on sale of properties for this transaction of approximately $1.7 million will be recognized in the third quarter of 2003. The proceeds from sale were used for retirement of long-term debt ($2.3 million) with the balance for working capital ($1.5 million).
Tenant Credit Issues As of July 1, 2003, several tenants were in default under their leases for failure to make rent payments. Several other tenants that are not currently in default are experiencing financial difficulties which may lead to lease defaults. These tenant defaults may adversely impact the Company’s results of operations in 2003.
Legion Insurance Company, which leases 58,000 square feet of space at Milwaukee Center and represented 1.53% of the Company’s aggregate portfolio annualized base rent as of December 31, 2002, was placed in rehabilitation by the Pennsylvania Department of Insurance on April 1, 2002. After completing its review, the Pennsylvania Department of Insurance has recommended to the Commonwealth Court that Legion Insurance Company be liquidated. The Commonwealth Court approved the recommendation of the Pennsylvania Department of Insurance on July 28, 2003. Based on currently available information, the Company believes it is more likely than not that Legion will fulfill all terms of its lease in 2003. Legion Insurance Company is current on its rental payments to date. The Legion lease specifies a termination date of February 28, 2006.
The Company’s Board of Trustees has engaged a real estate advisor and an investment banker to assist it in analyzing alternatives to improve shareholder value. These alternatives may include a sale of some or all of the Company’s properties, or a business combination or other similar transaction. Such activities are ongoing, and there can be no assurance that any such transaction will occur.
A live audio web cast and conference call presentation has been scheduled for August 7, 2003 at 11:00 AM Eastern time/10:00 AM Central time to review the results of the second quarter of 2003. To listen to the call over the Internet, go to Great Lakes REIT’s website at www.greatlakesreit.com under the Investor Information/audio-video section at least 15 minutes early to register, download and install any necessary audio software. To access the live call by telephone, please call (877) 407-9205 approximately five minutes prior to the scheduled start time. A recording of the call may also be accessed by telephone by dialing (877) 660-6853, entering Account number 1628 and then Conference ID 71387. The web cast and conference call contain time-sensitive information that is accurate only as of August 7, 2003, the date of the live broadcast. The call is the property of Great Lakes REIT. Any redistribution, retransmission or rebroadcast of the conference call in any form without the express written consent of Great Lakes REIT is strictly prohibited.
Great Lakes REIT is a fully integrated, self-administered and self-managed real estate investment trust with a current portfolio of 46 properties totaling 5.9 million square feet of office and medical office space in suburban areas of Chicago, Milwaukee, Detroit, Columbus, Minneapolis, Denver and Cincinnati.
A copy of the Company’s supplemental financial information for the quarter ended June 30, 2003, is available on the Company’s web site under the Investor section at www.greatlakesreit.com.
The Company is furnishing this earnings release to the Securities and Exchange Commission on Form 8-K in accordance with applicable SEC rules.
This press release contains forward-looking statements that involve numerous risks and uncertainties. Statements in this document regarding the Company’s expectations for FFO per share, earnings per share, tenant retention, new tenant leasing activity, vacancy trends, occupancy rates, acquisition and disposition volume and timing, the expectation regarding the performance of the economy and the office markets, the anticipated level and effect of tenant defaults and anticipated market and other economic conditions are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on what the Company believes to be reasonable assumptions and management’s current expectations; however, actual results may vary from those implied by such forward-looking statements. Key factors that may cause actual results to differ from projected results include: conditions in the financial markets generally and the market for real estate finance specifically; local and/or national economic conditions; the pace of office space development and sub-lease availability; tenant office space demand; the financial position of the Company’s tenants, including changes in such financial position that may lead to increases in tenant defaults and the performance of Legion Insurance Company; actual tenant default rates compared to anticipated default rates; performance of the medical office market generally and the local markets for the Company’s medical office properties specifically; performance of the hospitals adjacent to the Company’s medical office properties; changes in interest rates; and other risks inherent in the real estate business. For more information, refer to Great Lakes REIT’s filings with the Securities and Exchange Commission.
Financial Tables to Follow
Great Lakes REIT
Consolidated Balance Sheets
(unaudited)
(In Thousands, except per share data)
June 30, December 31,
2003 2002
------------------------------
Assets
Properties:
Land $65,787 $66,540
Buildings and improvements 529,877 526,026
------------------------------
595,664 592,566
Less accumulated depreciation 72,984 66,761
------------------------------
522,680 525,805
Assets held for sale, net 1,900 -
Cash and cash equivalents 1,217 5,061
Real estate tax escrows 47 69
Rents receivable 6,709 6,261
Deferred financing and leasing costs, net of accumulated amortization 8,865 9,110
Goodwill 1,061 1,061
Other assets 1,709 1,614
------------------------------
Total assets $544,188 $548,981
==============================
Liabilities and shareholders' equity
Bank loan payable $11,155 $36,000
Mortgage loans payable 300,602 275,050
Bonds payable 3,245 3,620
Accounts payable and accrued liabilities 4,391 3,740
Accrued real estate taxes 13,529 14,872
Dividends payable 2,523 2,539
Prepaid rent 3,735 4,044
Security deposits 1,665 1,617
------------------------------
Total liabilities 340,845 341,482
------------------------------
Minority interests 655 677
------------------------------
Commitments and contingencies
Shareholders' equity:
Preferred shares of beneficial interest ($0.01 par value, 10,000 shares authorized; 1,5009 3/4%
Series A Cumulative Redeemable shares, with a $25.00 per share Liquidation Preference, issued
and outstanding) 37,500 37,500
Common shares of beneficial interest ($0.01 par value, 60,000 shares authorized; 16,078 and
16,550 shares issued and outstanding in 2003 and 2002, respectively) 161 165
Paid-in-capital 201,371 208,319
Retained earnings (deficit) (28,487) (19,765)
Employee share purchase loans (4,939) (16,154)
Deferred compensation (1,890) (2,035)
Accumulated other comprehensive income (loss) (1,028) (1,208)
------------------------------
Total shareholders' equity 202,688 206,822
------------------------------
Total liabilities and shareholders' equity $544,188 $548,981
==============================
Great Lakes REIT
Consolidated Statements of Income and Comprehensive Income
(unaudited)
(In Thousands, except per share data)
Three months ended June 30,
--------------------------------
2003 2002
--------------- ---------------
Revenues:
Rental $ 20,275 $ 19,108
Reimbursements 5,842 5,518
Parking 109 127
Telecommunications 59 56
Tenant service 75 65
Interest 150 329
Other 421 274
--------------- ---------------
Total revenues 26,931 25,477
--------------- ---------------
Expenses:
Real estate taxes 4,455 4,026
Other property operating 8,155 6,729
General and administrative 1,400 1,462
Employee share loan termination 511 -
Interest 4,421 3,767
Depreciation and amortization 5,361 4,727
--------------- ---------------
Total expenses 24,303 20,711
--------------- ---------------
Income before allocation to minority interests 2,628 4,766
Minority interests 7 15
--------------- ---------------
Income from continuing operations 2,621 4,751
Discontinued operations, net (including gain on sale of properties of $1,037 in 2002) 104 1,329
--------------- ---------------
Net income 2,725 6,080
Income allocated to preferred shareholders 914 914
--------------- ---------------
Net income applicable to common shares $ 1,811 $ 5,166
=============== ===============
Earnings per common share from continuing operations- basic. $ 0.11 $ 0.23
=============== ===============
Earnings per common share-basic $ 0.11 $ 0.32
=============== ===============
Weighted average common shares outstanding-basic 15,912 16,371
=============== ===============
Diluted earnings per common share from continuing operations $ 0.11 $ 0.23
=============== ===============
Diluted earnings per common share $ 0.11 $ 0.31
=============== ===============
Weighted average common shares outstanding-diluted 16,020 16,547
=============== ===============
Dividends declared per common share $ 0.405 $ 0.40
=============== ===============
Comprehensive income:
Net income $ 2,725 $ 6,080
Change in fair value of interest rate swap agreements 120 (922)
--------------- ---------------
Total comprehensive income $ 2,845 $ 5,158
=============== ===============
Great Lakes REIT
Consolidated Statements of Income and Comprehensive Income
(unaudited)
(In Thousands, except per share data)
Six months ended June 30,
---------------------------------
2003 2002
---------------- ---------------
Revenues:
Rental $ 41,033 $ 37,618
Reimbursements 11,321 10,893
Parking 238 255
Telecommunications 131 128
Tenant service 154 128
Interest 404 670
Other 715 467
---------------- ---------------
Total revenues 53,996 50,159
---------------- ---------------
Expenses:
Real estate taxes 8,909 8,070
Other property operating 16,020 13,180
General and administrative 2,727 2,570
Employee share loan termination 511 -
Interest 8,930 7,527
Depreciation and amortization 10,672 9,309
---------------- ---------------
Total expenses 47,769 40,656
---------------- ---------------
Income before allocation to minority interests 6,227 9,503
Minority interests 16 28
---------------- ---------------
Income from continuing operations 6,211 9,475
Discontinued operations, net (inc.gain on sale of properties of $1,037 in 2002) 158 1,787
---------------- ---------------
Net income 6,369 11,262
Income allocated to preferred shareholders 1,828 1,828
---------------- ---------------
Net income applicable to common shares $ 4,541 $ 9,434
================ ===============
Earnings per common share from continuing operations- basic. $ 0.27 $ 0.47
================ ===============
Earnings per common share-basic $ 0.28 $ 0.58
================ ===============
Weighted average common shares outstanding-basic 16,149 16,369
================ ===============
Diluted earnings per common share from continuing operations $ 0.27 $ 0.46
================ ===============
Diluted earnings per common share $ 0.28 $ 0.57
================ ===============
Weighted average common shares outstanding-diluted 16,263 16,518
================ ===============
Dividends declared per common share $ 0.81 $ 0.80
================ ===============
Comprehensive income:
Net income $ 6,369 $ 11,262
Change in fair value of interest rate swap agreements 180 (623)
---------------- ---------------
Total comprehensive income $ 6,549 $ 10,639
================ ===============
Great Lakes REIT
Consolidated Statements of Cash Flows
(unaudited)
(Dollars in Thousands)
Six months ended June 30,
---------------------------------
2003 2002
---------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,369 $ 11,262
Adjustments to reconcile net income to cash flows from operating activities
Depreciation and amortization 10,725 9,992
Gain on sale of properties - (1,037)
Non-cash portion of employee share loan termination 414 -
Other non-cash items 161 160
Net changes in assets and liabilities:
Rents receivable (448) 2,330
Real estate tax escrows and other assets 9 (250)
Accounts payable, accrued expenses and other liabilities 374 (4,030)
Accrued real estate taxes (1,343) (1,087)
Payment of deferred leasing costs (894) (1,743)
---------------- ---------------
Net cash provided by operating activities 15,367 15,597
---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of properties - (8,095)
Additions to buildings and improvements (8,213) (6,553)
Other investing activities, net (28) (123)
---------------- ---------------
Net cash provided by (used in) investing activities (8,241) (12,581)
---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of share options 11 59
Proceeds from repayment of employee share loans 3,913 1,566
Proceeds from bank and mortgage loans payable 53,155 10,000
Distributions / dividends paid (15,091) (8,447)
Distributions to minority interests (38) (48)
Payment of bank and mortgage loans and bonds (52,823) (4,156)
Other (97) (62)
---------------- ---------------
Net cash provided by (used in) financing activities (10,970) (1,088)
---------------- ---------------
Net increase (decrease) in cash and cash equivalents (3,844) 1,928
Cash and cash equivalents, beginning of year 5,061 2,896
---------------- ---------------
Cash and cash equivalents, end of year $ $1,217 $4,824
================ ===============
Supplemental disclosure of cash flow:
Interest paid $ 8,759 $ 7,582
============== ==============
Employee share loan termination $ 7,302 -
================ ===============
Non-GAAP Financial Measures
Although not a GAAP measure, the Company believes that the inclusion of information regarding funds from operations (FFO) provides important information to shareholders and potential investors. The GAAP measure, net income applicable to common shares, includes depreciation and amortization expenses, gains or losses on property sales and minority interests. In presenting FFO, the Company eliminates substantially all of these items in order to provide an indication of the results from the Company’s property operations. FFO is a widely recognized measure in the Company’s business and is presented by nearly all publicly traded REITs. The Company’s calculation of FFO may differ from the methodology for calculating FFO utilized by other real estate companies.
Three months ended June 30,
----------------------------
2003 2002
-------------- -------------
Net income applicable to common shares $ 1,811 $ 5,166
Adjustments to calculate funds from operations:
Minority interests 7 15
Gain on sale of properties - (1,037)
Adjusted depreciation and amortization (a) 5,206 4,976
-------------- -------------
Funds from operations $ 7,024 $ 9,120
============== =============
Weighted average common shares outstanding- diluted 16,020 16,547
============== =============
(a) Adjusted depreciation and amortization is calculated as follows:
Three months ended June 30,
----------------------------
2003 2002
-------------- -------------
Depreciation and amortization in consolidated statements of cash $ 5,390 $ 5,136
flows
Less depreciation and amortization unrelated to properties 184 160
-------------- -------------
Adjusted depreciation and amortization $ 5,206 $ 4,976
============== =============
Six months ended June 30,
----------------------------
2003 2002
-------------- -------------
Net income applicable to common shares $ 4,541 $ 9,434
Adjustments to calculate funds from operations:
Minority interests 16 28
Gain on sale of properties - (1,037)
Adjusted depreciation and amortization (a) 10,380 9,674
-------------- -------------
Funds from operations $ 14,937 $ 18,099
============== =============
Weighted average common shares outstanding- diluted 16,263 16,518
============== =============
(a) Adjusted depreciation and amortization is calculated as follows:
Six months ended June 30,
----------------------------
2003 2002
-------------- -------------
Depreciation and amortization in consolidated statements of cash $ 10,725 $ 9,992
flows
Less depreciation and amortization unrelated to properties 345 318
-------------- -------------
Adjusted depreciation and amortization $ 10,380 $ 9,674
============== =============
EBITDA and Cash Provided by Operating Activities and Related Coverage Ratios March 31, 2003 (dollars in thousands)
EBITDA, a non-GAAP financial measure, represents net income before allocation to minority interests plus interest expense, federal income tax expense (if any) and depreciation and amortization expense.
EBITDA is not intended to represent cash flow for the period, is not presented as a an alternative to operating income as an indicator of operating performance, should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP and is not indicative of operating income or cash provided by operating activities as determined under GAAP.
EBITDA is presented solely as a supplemental disclosure because the Company believes it provides useful information regarding the Company’s ability to service or incur debt. Because all companies do not calculate EBITDA the same way, the presentation of EBITDA may not be comparable to similarly titled measures of other companies.
The Company believes that cash provided by operating activities is the financial measure calculated and presented in accordance with GAAP that is most directly comparable to EBITDA. The following is a reconciliation of EBITDA to cash provided by operating activities for each of the periods for which EBITDA is presented in this earnings release:
For the six months ended June 30,
----------------------------------
2003 2002
---------------- ----------------
Calculation of EBITDA:
Income before allocation to minority interests $ 6,227 $ 9,503
Depreciation and amortization from consolidated statements of cash flows 10,725 9,992
Non-cash portion of employee share loan termination 414 -
Interest expense 8,930 7,527
Discontinued operations, net 158 750
---------------- ----------------
EBITDA $ 26,454 $ 27,772
================ ================
Reconciliation of EBITDA to Cash Provided by Operating Activities:
EBITDA $ 26,454 $ 27,772
Interest expense (8,930) (7,527)
Other adjustments from Consolidated Statements of Cash Flows:
Other non-cash items 161 160
Minority interests (16) (28)
Net changes in assets and liabilities:
Rents receivable (448) 2,330
Real estate tax escrows and other assets 9 (250)
Accounts payable, accrued expenses and other liabilities 374 (4,030)
Accrued real estate taxes (1,343) (1,087)
Payment of deferred leasing costs (894) (1,743)
---------------- ----------------
Cash provided by operating activities $ 15,367 $ 15,597
================ ================
The Company has included the coverage calculations for EBITDA coverage of interest expense and EBITDA coverage of interest plus preferred dividends, which are non-GAAP financial measures, as well as the GAAP ratio that the Company believes to be most directly comparable, cash provided by operating activities (before interest expense) coverage of interest expense and cash provided by operating activities (before interest expense) coverage of interest expense plus preferred dividends. The Company has provided both calculations so that investors may evaluate both the non-GAAP and GAAP ratios together, and the Company is providing such ratios as supplemental disclosure with respect to liquidity because the Company believes such ratios provide useful information regarding the Company’s ability to service or incur debt.
Six months ended
June 30, 2003 June 30, 2002
Cash provided by operating activities $15,367 $15,597
Interest expense 8,930 7,527
---------------------------------
Cash provided from operating activities before interest expense $24,297 $23,124
=================================
Interest expense $ 8,930 $7,527
=================================
Total interest expense $ 8,930 $7,527
Preferred dividends 1,828 1,828
---------------------------------
Total interest expense and preferred dividends $10,758 $9,355
=================================
Ratio of cash provided by operating activities before interest expense
to interest expense 2.7X 3.0X
=================================
Ratio of cash provided by operating activities before interest expense
to interest expense and preferred dividends 2.3X 2.5X
=================================
EBITDA $26,454 $27,772
=================================
Ratio of EBITDA to interest expense 3.0X 3.7X
=================================
Ratio of EBITDA to interest expense and preferred dividends 2.5X 3.0X
=================================
SUPPLEMENTAL INFORMATION
For the Three and Six Months Ended
June 30, 2003
823 Commerce Drive, Suite 300
Oak Brook, IL 60523
Phone (630) 368-2900
Fax (630) 368-2929
www.greatlakesreit.com
Great Lakes REIT
Portfolio Occupancy Schedule
July 1, 2003
Approximate
Year Built/ Rentable Percent
Market/Property Location Renovated Square Feet Occupied
--------------- ----------------------- ------------------ ---------------- ------------
Chicago
-------
Centennial Center Schaumburg 1980/1993 266,910 76.4%
Highpoint Business Center Wood Dale 1986 74,371 48.8%
Arlington Ridge Service Center Arlington Heights 1987 95,938 41.1%
Arlington Business Center Arlington Heights 1984 98,232 71.2%
1011 Touhy Atrium Des Plaines 1978/1995 153,777 85.3%
Kensington Corporate Center Mount Prospect 1989 85,487 100.0%
One Hawthorn Place Vernon Hills 1987 84,566 91.9%
2 Marriott Drive Lincolnshire 1985 41,500 100.0%
823 Commerce Drive Oak Brook 1969/1996 44,814 32.2%
One Century Centre Schaumburg 1985 212,212 53.5%
Lisle Executive Center Lisle 1988 150,036 57.1%
191 Waukegan Road Northfield 1983 61,245 88.8%
Woodfield Green Executive Ctr. Schaumburg 1986 109,392 76.9%
1600 Corporate Center Rolling Meadows 1986 254,725 86.3%
Bannockburn Corporate Bannockburn 1999 202,218 81.9%
O'Hare Commerce Center Des Plaines 1975 148,444 93.2%
387 Shuman Blvd Naperville 1981 112,309 87.9%
Medical Office Buildings Various Various 458,156 99.4%
------------ -----------
Subtotal/Weighted Average 2,654,332 79.7%
Milwaukee
---------
One Park Plaza Milwaukee 1984 198,075 58.7%
Milwaukee Center Milwaukee 1988 373,500 98.0%
Park Place VII Milwaukee 1989 36,037 79.3%
Lincoln Center West Allis 1984-1987 120,931 59.6%
Brookfield Lakes Brookfield 1987 115,899 56.9%
Corporate Woods Brookfield 1987 53,918 71.1%
One Riverwood Place Pewaukee 1999 97,778 94.9%
Two Riverwood Place Pewaukee 2002 98,202 83.5%
------------- ------------
Subtotal/Weighted Average 1,094,340 78.8%
Minneapolis/St. Paul
--------------------
Court International St. Paul 1916/1985 320,192 82.2%
University Office Plaza Minneapolis 1979/1997 97,610 73.9%
------------- -------------
Subtotal/Weighted Average 417,802 80.3%
Detroit
-------
Long Lake Crossings Troy 1988 170,457 80.9%
Tri-Atria Office Building Farmington Hills 1986 236,592 96.4%
777 Eisenhower Plaza Ann Arbor 1975 281,080 100.0%
#40 OakHollow Southfield 1989 80,893 78.1%
Oak Hollow Gateway Southfield 1987 79,052 91.6%
---------------- ------------
Subtotal/Weighted Average 848,074 92.3%
Columbus
--------
Dublin Techmart Dublin 1986 124,929 76.3%
MetroCenter IV Dublin 1982 102,585 67.1%
MetroCenter V Dublin 1987 215,576 86.6%
Firstar Tower Columbus 1981 197,870 83.1%
---------------- ------------
Subtotal/Weighted Average 640,960 80.4%
Cincinnati
----------
Princeton Hill I Springdale 1988 95,910 86.9%
Denver
------
116 Inverness Drive East Englewood 1984 205,716 39.9%
---------------- ------------
TOTAL/WEIGHTED AVERAGE 5,957,134 80.2%
================ ============
Great Lakes REIT
Historic Occupancy
Since IPO
Reporting
Period Percent
2Q'97 93.5%
3Q'97 92.0%
4Q'97 92.9%
1Q'98 93.0%
2Q'98 94.8%
3Q'98 94.9%
4Q'98 94.8%
1Q'99 95.3%
2Q'99 95.8%
3Q'99 95.8%
4Q'99 93.7%
1Q'00 94.4%
2Q'00 93.6%
3Q'00 93.3%
4Q'00 91.9%
1Q'01 92.4%
2Q'01 90.5%
3Q'01 88.1%
4Q'01 88.4%
1Q'02 84.5%
2Q'02 82.6%
3Q'02 85.0%
4Q'02 83.0%
1Q'03 80.9%
2Q'02 80.2%
--------------
Average 25 quarters 90.6%
==============
Great Lakes REIT
Operating Margins (unaudited)
(In thousands, except per share data)
Three Months Ended
Consolidated Income Statement Jun 02 Jun 03 % Chg
Revenues
Minimum Rents 20,354 20,373 0%
Expense Reimbursements 5,627 5,868
Total Operating Revenues 25,981 26,241 1%
Other tenant - and interest - income 857 816
Expenses
Real estate taxes 4,267 4,465
% of Oper. Revs 16.4% 17.0%
% of NOI 29.3% 32.7%
Other Operating Expenses 7,149 8,138
% of Oper. Revs 27.5% 31.0%
Total property-related exp. 11,416 12,603 10%
% of Oper. Revs 43.9% 48.0%
NOI before General and Admin. 14,565 13,638 -6%
as a % of Operating Revenue 56.1% 52.0%
Depreciation and amort. 5,136 5,390
General and Admin. 1,462 1,911 31%
% of Oper. Revs 5.6% 7.3%
% of NOI 10.0% 14.0%
Corp. Interest Expense 3,766 4,421
Other 0 0
Sub-Total Expenses 21,780 24,325 12%
Income before non-recurring items 5,058 2,732 -46%
as a % of Total Revenues 18.8% 10.1%
Extraordinary items / adjustments 1,037 0
Net Income before minority interest 6,095 2,732
Net Operating Income from Properties after GandA 13,103 11,727 -11%
as a % of Operating Revenue 50.4% 44.7%
Funds from Operations 9,120 7,024 -23%
Per Share (fully-diluted)
Net Income 0.31 0.11
Funds From Operations (FFO) 0.55 0.44 -20%
FFO less straight-lined rents 0.54 0.42
Dividends per Share 0.40 0.405 1%
as a % of FFOperations (FDiluted) 72.7% 92.0%
Wtd. Avg. Common Shares Outstanding - Diluted 16,547 16,020
Great Lakes REIT
Operating Margins (unaudited)
(In thousands, except per share data)
Six Months Ended
Consolidated Income Statement Jun 02 Jun 03 % Chg
Revenues
Minimum Rents 40,067 41,219 3%
Expense Reimbursements 11,114 11,371
Total Operating Revenues 51,181 52,590 3%
Other tenant - and interest - income 1,668 1,645
Expenses
Real estate taxes 8,553 8,928
% of Oper. Revs 16.7% 17.0%
% of NOI 29.8% 32.3%
Other Operating Expenses 13,954 16,029
% of Oper. Revs 27.3% 30.5%
Total property-related exp. 22,507 24,957 11%
% of Oper. Revs 44.0% 47.5%
NOI before General and Admin. 28,674 27,633 -4%
as a % of Operating Revenue 56.0% 52.5%
Depreciation and amort. 9,992 10,725
General and Admin. 2,570 3,238 26%
% of Oper. Revs 5.0% 6.2%
% of NOI 9.0% 11.7%
Corp. Interest Expense 7,527 8,930
Other 0 0
Sub-Total Expenses 42,596 47,850 12%
Income before non-recurring items 10,253 6,385 -38%
as a % of Total Revenues 19.4% 11.8%
Extraordinary items / adjustments 1,037 0
Net Income before minority interest 11,290 6,385
Net Operating Income from Properties after GandA 26,104 24,395 -7%
as a % of Operating Revenue 51.0% 46.4%
Funds from Operations 18,099 14,937 -17%
Per Share (fully-diluted)
Net Income 0.57 0.28
Funds From Operations (FFO) 1.10 0.92 -16%
FFO less straight-lined rents 1.08 0.88
Dividends per Share 0.80 0.81 1%
as a % of FFOperations (FDiluted) 72.7% 88.0%
Wtd. Avg. Common Shares Outstanding - Diluted 16,518 16,263
Great Lakes REIT
Same Store Sales Analysis (unaudited)
(Dollars in Thousands)
Non-GAAP Financial Measure
Net Operating Income
Three months ended June 30,
----------------------------------
Property Location 2003 2002
---- ----
CHICAGO
Centennial Center Schaumburg $582 $670
One Century Centre Schaumburg 266 570
Highpoint Business Center Wood Dale () 64
Arlington Business Center Arlington Heights 117 60
Arlington Ridge Service Center Arlington Heights (9) 2
1011 Touhy Avenue Des Plaines 301 318
Kensington Corporate Center Mount Prospect (55) 227
One Hawthorn Place Vernon Hills 209 242
Two Marriott Drive Lincolnshire 95 110
823 Commerce Drive Oak Brook (41) 106
Lisle Executive Center Lisle 122 277
191 Waukegan Northfield 95 69
Woodfield Green Schaumburg 290 220
1600 Corporate Center Rolling Meadows 576 818
Bannockburn Corporate Center Bannockburn 725 720
----------------------------------
Subtotal 3,273 4,473
----------------------------------
15 Properties - Decrease -26.83%
-----------------
MILWAUKEE
One Park Plaza Milwaukee 189 166
Park Place VII Milwaukee 67 50
Milwaukee Center Milwaukee 1,619 1,526
Lincoln Center II and III West Allis 117 237
Brookfield Lakes Corporate Center Brookfield 75 129
Corporate Woods Brookfield 92 123
One Riverwood Waukesha 312 371
----------------------------------
Subtotal 2,471 2,602
----------------------------------
7 Properties - Decrease -5.06%
-----------------
MINNEAPOLIS / ST. PAUL
Court International St. Paul 839 1,204
University Office Plaza Minneapolis 163 140
----------------------------------
1,002 1,344
----------------------------------
2 Properties - Decrease -25.47%
-----------------
DETROIT
777 Eisenhower Ann Arbor 1,144 771
Tri-Atria Farmington Hills 896 782
Long Lake Crossings Troy 524 592
No. 40 OakHollow Southfield 277 303
OakHollow Gateway Southfield 271 266
----------------------------------
Subtotal 3,112 2,714
----------------------------------
5 Properties - Increase 14.67%
-----------------
COLUMBUS
Firstar Columbus 469 624
Metro V Dublin 393 533
Metro IV Dublin 143 189
Dublin Techmart Dublin 130 235
----------------------------------
Subtotal 1,135 1,581
----------------------------------
4 Properties - Decrease -28.24%
-----------------
CINCINNATI
Princeton Hill Corporate Center Springdale 308 326
----------------------------------
1 Property - Decrease -5.44%
-----------------
DENVER
116 Inverness Englewood 155 791
----------------------------------
1 Property - Decrease -80.39%
-----------------
TOTAL $11,455 $13,831
==================================
35 Properties - Decrease -17.18%
=================
Great Lakes REIT
Same Store Sales Analysis (unaudited)
(Dollars in Thousands)
Non-GAAP Financial Measure
Net Operating Income
Six months ended June 30,
----------------------------------
Property Location 2003 2002
---- ----
CHICAGO
Centennial Center Schaumburg $1,435 $1,322
One Century Centre Schaumburg 547 1,286
Highpoint Business Center Wood Dale 10 162
Arlington Business Center Arlington Heights 225 106
Arlington Ridge Service Center Arlington Heights 24 199
1011 Touhy Avenue Des Plaines 646 658
Kensington Corporate Center Mount Prospect (64) 491
One Hawthorn Place Vernon Hills 491 447
Two Marriott Drive Lincolnshire 197 219
823 Commerce Drive Oak Brook 109 206
Lisle Executive Center Lisle 233 662
191 Waukegan Northfield 212 164
Woodfield Green Schaumburg 341 369
1600 Corporate Center Rolling Meadows 855 1,533
Bannockburn Corporate Center Bannockburn 1,647 1,436
----------------------------------
Subtotal 6,907 9,261
----------------------------------
15 Properties - Decrease -25.42%
-----------------
MILWAUKEE
One Park Plaza Milwaukee 354 306
Park Place VII Milwaukee 109 109
Milwaukee Center Milwaukee 3,281 2,992
Lincoln Center II and III West Allis 362 449
Brookfield Lakes Corporate Center Brookfield 233 245
Corporate Woods Brookfield 199 271
One Riverwood Waukesha 753 733
----------------------------------
Subtotal 5,292 5,104
----------------------------------
7 Properties - Increase 3.68%
-----------------
MINNEAPOLIS / ST. PAUL
Court International St. Paul 1,660 2,257
University Office Plaza Minneapolis 335 296
----------------------------------
1,995 2,553
----------------------------------
2 Properties - Decrease -21.87%
-----------------
DETROIT
777 Eisenhower Ann Arbor 1,962 1,528
Tri-Atria Farmington Hills 1,719 1,528
Long Lake Crossings Troy 1,047 1,109
No. 40 OakHollow Southfield 381 591
OakHollow Gateway Southfield 515 533
----------------------------------
Subtotal 5,623 5,289
----------------------------------
5 Properties - Increase 6.33%
-----------------
COLUMBUS
Firstar Columbus 1,047 1,207
Metro V Dublin 758 1,063
Metro IV Dublin 283 372
Dublin Techmart Dublin 274 468
----------------------------------
Subtotal 2,363 3,109
----------------------------------
4 Properties - Decrease -24.02%
-----------------
CINCINNATI
Princeton Hill Corporate Center Springdale 685 678
----------------------------------
1 Property - Increase 1.09%
-----------------
DENVER
116 Inverness Englewood 676 1,537
----------------------------------
1 Property - Decrease -56.03%
-----------------
TOTAL $23,540 $27,531
==================================
35 Properties - Decrease -14.50%
=================
Great Lakes REIT
Reconciliation of Same Store Net Operating Income to Income Before Allocation
to Minority Interests (unaudited)
(Dollars in thousands)
The Company provides same store net operating income which is the net operating income of properties owned in both the three and six months ended June 30, 2003 and 2002. Same store net operating income is considered a non-GAAP financial measure because it does not include depreciation and amortization, interest expense and general and administrative expenses. The Company provides same store net operating income as it allows investors to compare the results of property operations for the three and six months ended June 30, 2003 and 2002. The Company also provides a reconciliation of these amounts to the most comparable GAAP measure, income before allocation to minority interests.
Three months ended June 30, Six months ended June 30,
------------------------------------------------------------
2003 2002 2003 2002
---- ---- ---- ----
Same store net operating income $11,455 $13,831 $23,540 $27,531
Net operating income from acquisitions:
Two Riverwood Place 290 368 545 477
O'Hare Commerce Center 340 0 649 0
Medical Portfolio 1,479 0 2,829 0
387 Shuman Blvd 287 0 501 0
Straight-line rent 320 194 599 231
Interest income 150 329 404 670
General and administrative expense (1,911) (1,462) (3,238) (2,570)
Interest expense (4,421) (3,767) (8,930) (7,527)
Depreciation and amortization (5,361) (4,727) (10,672) (9,309)
------------------------------------------------------------
Income before allocation to minority interests $2,628 $4,766 $6,227 $9,503
============================================================
Great Lakes REIT
Portfolio Lease Expirations
July 1, 2003
-------------------------------------------------------------------------------------------------------------------------------------------
PERCENT
YEAR OF Medical
OF TOTAL Office
EXPIRY SQ FT PORTFOLIO Chicago Cincinnati Columbus Denver Detroit Milwaukee Minneapolis Total Buildings
------ ----- --------- ------- ---------- -------- ------ ------- --------- ----------- ----- ---------
(1)
2003 497,174 8.35% 257,256 - 46,875 25,418 27,629 129,504 10,492 497,174 27,149
52% 0% 9% 5% 6% 26% 2% 100% 5%
2004 964,640 16.19% 317,115 83,365 114,807 13,948 222,707 182,960 29,738 964,640 77,169
33% 9% 12% 1% 23% 19% 3% 100% 8%
2005 800,482 13.44% 420,279 - 87,560 - 64,972 153,697 73,974 800,482 141,762
53% 0% 11% 0% 8% 19% 9% 100% 18%
2006 535,236 8.98% 215,859 - 46,113 - 63,008 131,678 78,578 535,236 61,152
39% 0% 9% 0% 12% 25% 15% 100% 11%
2007 808,526 13.57% 374,090 - 126,306 42,656 123,503 72,620 69,351 808,526 97,164
46% 0% 16% 5% 15% 9% 9% 100% 12%
2008 632,552 10.62% 255,990 - 46,739 - 229,235 45,991 54,597 632,552 7,298
41% 0% 7% 0% 36% 7% 9% 100% 1%
2009 176,044 2.96% 63,670 - 28,829 - 19,909 53,397 10,239 176,044 4,976
36% 0% 16% 0% 11% 31% 6% 100% 3%
2010 143,563 2.41% 122,945 - 9,769 - - 10,849 - 143,563 5,077
85% 0% 7% 0% 0% 8% 0% 100% 4%
2011 44,190 0.74% 15,157 - - - 19,769 9,264 - 44,190 1,242
34% 0% 0% 0% 45% 21% 0% 100% 3%
2012 78,290 1.31% 32,251 - - - - 46,039 - 78,290 32,251
41% 0% 0% 0% 0% 59% 0% 100% 41%
2013 10,296 0.17% 10,296 - - - - - - 10,296 -
100% 0% 0% 0% 0% 0% 0% 100% 0%
2017 20,116 0.34% - - - - - 20,116 - 20,116 -
0% 0% 0% 0% 0% 100% 0% 100% 0%
MTM 8,890 0.15% 4,422 - 80 - 316 - 4,072 8,890 0
Non income 55,881 0.94% 25,909 - 8,149 - 11,424 6,126 4,273 55,881
producing
Vacant 1,181.254 19.8%
Total 5,957,134 100.0%
-------------------------------------------------------------------------------------------------------------------------------------------
Great Lakes REIT
Disposition Analysis
December 1, 2002
Net Gross Book Net
Square Sale Holding Acquisition Value at DispositionUnleveraged Leveraged
Property Footage Date Period Price Disposition Price IRR IRR (1)
----------------------------------------------------------------------------------------------------------------------------
10 Oak Hollow 84,736 21-Oct-96 15 months $6,723,118 $6,883,350 $9,025,921 36.4% 79.2%
Southfield, MI
830 West End Court 26,909 2-Dec-96 38 months $1,801,208 $1,968,423 $2,709,331 23.1% 30.2% (2)
Vernon Hills, IL
Roadway Industrial 50,625 27-Feb-98 61 months $1,433,932 $1,458,285 $1,312,055 11.3% 14.6% (3)
Bloomington, MN
1675 Holmes Rd, Elgin,
IL and 116,286 23-May-99 27 months $4,965,502 $5,204,189 $4,939,098 4.3% -2.1% (4)
Court Office Center, Markham, IL (5)
2800 River Road 99,732 30-Jun-99 53 months $4,051,532 $5,483,449 $7,525,579 22.3% 32.5%
Des Plaines, IL
1251 Plum Grove Road 43,338 30-Jun-99 42 months $936,773 $1,745,349 $3,394,438 31.7% 40.7%
Schaumburg, IL
565 Lakeview Parkway 84,808 25-Aug-99 45 months $4,417,775 $5,778,898 $8,483,584 22.2% 31.0%
Vernon Hills, IL
Woodcreek I and II 126,911 6-Apr-00 42 months $9,147,437 $9,814,956 $12,032,765 17.9% 25.0%
Downers Grove, IL
183 Inverness Drive 183,895 1-Dec-00 31 months $19,968,538 $20,376,245 $26,938,213 18.9% 27.1%
Englewood, CO
160 Hansen Court 21,329 22-Apr-02 99 months $947,441 $1,311,563 $2,216,470 27.1% 42.8%
Wood Dale, IL
3400 Dundee 75,070 1-Jul-02 105 months $3,999,854 $5,028,267 $7,658,008 15.5% 20.1%
Northbrook, IL
Burlington Office Center 182,167 30-Aug-02 40 months $19,536,381 $21,009,489 $21,939,442 11.2% 14.0%
Ann Arbor, MI
180 Hansen Court 18,241 22-Nov-02 106 months $810,271 $888,545 $1,640,456 10.8% 12.2%
Wood Dale, IL
165 and 175 Hansen Court 40,876 8-Jul-03 113 months $1,815,724 $2,269,880 $3,633,254 20.1% 31.5%
----------------------
Wood Dale, IL
----------------------------------------------------------------------------------------------
Totals/Weighted Average(6) 1,154,923 46 months $80,555,486 $89,417,147 $113,448,614 18.8% 28.8%
Office Market Statistics
Second Quarter 2003
Vacancy **
----------------------------------------------
Suburban Existing
Market * Stock (1,000's) 2Q,2002 1Q,2003 2Q,2003
-------- --------------- ------- ------- -------
Chicago 98,894 16.4% 19.4% 19.4%
Detroit 55,779 14.4% 17.8% 17.6%
Denver 78,754 16.2% 19.2% 18.7%
Columbus 16,789 19.4% 19.8% 20.4%
Cincinnati 18,867 18.5% 21.0% 20.8%
Minneapolis 34,276 15.2% 16.1% 16.0%
----------------------------------------------------------------------------------------
Subtotal/Average: 303,360 16.1% 18.8% 18.6%
----------------------------------------------------------------------------------------
Columbus CBD 10,343 19.5% 22.7% 21.7%
----------------------------------------------------------------------------------------
Totals Suburban/CBD: 313,703 16.2% 18.9% 18.7%
----------------------------------------------------------------------------------------
Anticipated Anticipated
Net Absorption (1,000's) Deliveries Deliveries
----------------------------------------------
Existing 2003 2004
Stock (1,000's) 2001 2002 2Q, 2003 Y-T-D 2003 (1,000's) (1,000's)
--------------- ---- ---- -------- ---------- --------- ---------
Chicago 98,894 32 (1,510) (94) (659) 144 -
Detroit 55,779 (539) (1,854) (64) (777) 202 394
Denver 78,754 (279) (3,656) 419 28 - -
Columbus 16,789 (279) (62) 3 (115) 160 144
Cincinnati 18,867 184 (67) 35 (25) - -
Minneapolis 34,276 (364) (517) 136 184 - -
------------------------------------------------------------------------------------------------------------------------------------
Subtotal/Average: 303,360 (1,246) (7,666) 435 (1365) 505 538
------------------------------------------------------------------------------------------------------------------------------------
Columbus CBD 10,343 251 (150) 127 20 - -
------------------------------------------------------------------------------------------------------------------------------------
Totals Suburban/CBD: 313,703 (995) (7,816) 562 (1345) 505 538
------------------------------------------------------------------------------------------------------------------------------------
Source: CB Richard Ellis, Paragon Corporate Realty Services (Detroit), and Great Lakes REIT