Exhibit 99.1
GREAT LAKES REIT REPORTS $0.24 EPS AND $0.47 FFO PER
COMMON SHARE FOR FOURTH QUARTER 2003
Great Lakes REIT Fourth Quarter Highlights
• Net Income of $3.9 million, or $0.24 per common share
• Funds From Operations (FFO) of $7.5 million, or $0.47 per common share
• Occupancy at January 1, 2004 was 78.3 %.
OAK BROOK, ILLINOIS, February 13, 2004 - Great Lakes REIT (NYSE: GL), a real estate investment trust which holds a portfolio of Midwestern office and medical office properties, today announced fourth quarter 2003 net income of $3.9 million, or $0.24 per common share, which included gains on sale of properties of $1.8 million, or $0.11 per common share, and funds from operations (FFO) of $7.5 million, or $0.47 per common share. This compares to net income of $3.9 million, or $0.24 per common share, which included gain on sale of properties of $0.6 million, or $0.04 per common share, and FFO of $9.1 million, or $0.55 per common share, for the fourth quarter of 2002. 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 FFO provides important information to shareholders. 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 follows the definition of FFO as promulgated by the National Association of Real Estate Investment Trusts, but may differ from the methodology for calculating FFO utilized by other real estate companies.
For the year ended December 31, 2003, the Company reported net income of $11.8 million, or $0.73 per common share, which included gains on sale of properties of $4.0 million, or $0.25 per common share, compared to $22.8 million, or $1.38 per common share, for the comparable period of 2002 (including $7.8 million of gain on sale of properties, or $0.47 per common share, for the comparable period of 2002). Funds from operations totaled $29.2 million, or $1.80 per common share, for the year ended December 31, 2003, as compared to FFO of $35.4 million, or $2.14 per common share, for the comparable period of 2002. Results for the year ended December 31, 2003 were impacted by 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, and one-time costs associated with the initiatives undertaken to explore alternatives to improve shareholder value in the amount of $0.3 million, or $0.02 per common share
Pending Merger Transaction
On January 22, 2004, the Company announced the signing of a definitive merger agreement to be acquired by Aslan Realty Partners II, L.P., an affiliate of Transwestern Investment Company, L.L.C. (“Transwestern”). Great Lakes REIT also announced that it has entered into definitive agreements to sell its portfolio of medical office buildings for a contract price of approximately $69 million, and to sell its two Minnesota assets for total contract prices of approximately $42 million.
Under the terms of the merger agreement, Transwestern has agreed to pay no less than $14.98 per share in cash to the shareholders of Great Lakes REIT upon the closing of the merger. Pursuant to the terms of the merger agreement, Great Lakes REIT is permitted to sell certain of its properties, including its portfolio of medical office buildings and Minnesota assets, to the extent the net proceeds from these sales exceeds the value for such properties specified by Transwestern. The price per share to be paid by Transwestern will be increased to the
extent Great Lakes REIT sells one or more of such properties for prices in excess of the value specified by Transwestern. Assuming the portfolio of medical office buildings and the Minnesota assets are sold for their contract prices, Great Lakes REIT’s shareholders are expected to receive approximately $15.53 per share in cash upon the closing of the merger, subject to actual closing costs with respect to the property sales.
The proposed merger with Transwestern is contingent upon shareholder approval and certain other closing conditions, but not contingent on the completion of any of the additional property sales. The proposed sales of the portfolio of medical office buildings and the Minnesota assets are not contingent on one another or the merger, and each of the proposed property sale transactions is subject to customary closing conditions. Great Lakes REIT expects that the property sale transactions currently under contract will close by the end of the first quarter of 2004 and expects the merger to close in the second quarter of 2004. There can be no assurance, however, that Great Lakes REIT will sell any of the portfolio of medical office buildings, the Minnesota assets or any of the other specified properties. Shareholder approval will be solicited by Great Lakes REIT by means of a proxy statement, which will be mailed to Great Lakes REIT shareholders upon completion of the required Securities and Exchange Commission filing and review process.
Pursuant to the merger agreement with Transwestern, the Great Lakes REIT Board of Trustees has suspended the dividend on Great Lakes REIT common shares and will terminate the Company’s Dividend Reinvestment & Direct Share Purchase and Sale Plan.
In addition, pursuant to the merger agreement, Great Lakes REIT will redeem Great Lakes REIT’s 9¾% Series A Cumulative Redeemable Preferred Shares (NYSE: GL-PrA) immediately prior to the merger. The Company will continue to pay regular quarterly dividends on the Series A Preferred Shares arising prior to the merger date, and the redemption price will include accrued and unpaid dividends up to the redemption date. In this regard, the Board of Trustees has declared a regular quarterly dividend of $0.609375 per Series A Preferred Share, payable to shareholders of record as of February 15, 2004. This dividend payment will cover the period from December 1, 2003 through February 29, 2004. Such dividend will be paid on March 1, 2004.
Portfolio Performance
Total revenues decreased by 5% to $26.1 million in the fourth quarter of 2003 from $27.4 million in last year’s fourth quarter. Revenues decreased primarily due to declining occupancies in 2003 as compared to 2002. Same store sales decreased 16% (cash basis) for the three months ended December 31, 2003, as compared to the fourth quarter of 2002, primarily as a result of the decline in occupancy quarter over quarter.
Total revenues increased by $4.1 million, or 4%, to $105.2 million for the year ended December 31, 2003, from $101.1 million for the comparable period of 2002. Revenues increased primarily due to the addition of revenues from the eight medical office properties acquired on October 1, 2002. Same store sales decreased 14% (cash basis) for the year ended December 31, 2003, as compared to the year ended December 31, 2002, primarily as a result of the decline in occupancy.
EBITDA decreased $4.2 million, or 8%, to $51.1 million for the year ended December 31, 2003, as compared to $55.3 million for the comparable period in 2002. Cash provided by operating activities decreased to $28.6 million for the year ended December 31, 2003, from $40.2 million for the comparable period of 2002 due to declines in occupancy in the office portfolio in 2003.
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 cash provided by operating activities, the GAAP measure the Company believes to be directly comparable, 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 not all companies calculate EBITDA the same way, the presentation of EBITDA may not be comparable to similarly titled measures of other companies.
Balance Sheet, Market Value and Liquidity
EBITDA coverage of interest expense was 2.9 times for the year ended December 31, 2003 as compared to 3.6 times for the same period of 2002 and EBITDA coverage of interest plus preferred dividends was 2.5 times for the year ended December 31, 2003, as compared to 2.9 times for the same period of 2002. Cash provided by operating activities (before interest expense) coverage of interest expense was 2.5 times for the year ended December 31, 2003, as compared to 3.4 times for the comparable period of 2002. Cash provided by operating activities (before interest expense) coverage of interest expense plus preferred dividends was 2.2 times for the year ended December 31, 2003, as compared to 2.9 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 cash provided by operating activities, the GAAP measure the Company believes to be directly comparable, 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 $308.9 million of total debt outstanding at December 31, 2003. The interest rate on approximately 87% of this debt was fixed at a weighted average interest rate of 5.89%. At December 31, 2003, Great Lakes REIT had approximately $42 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.
Dividends
In November and December 2003 and January 2004, the Company paid monthly cash dividends of $0.135 per common share. As previously announced, pursuant to the merger agreement with Transwestern, the Great Lakes REIT Board of Trustees suspended the dividend on Great Lakes REIT common shares pending completion of the merger.
Leasing
For the quarter ended December 31, 2003, the Company signed 96,000 square feet of new leases bringing the total for the year to 391,000 square feet. Net rental rates on new leases and leases renewed for the year ended December 31, 2003 were 11% lower than net rents on the expiring leases. In addition, the Company has experienced higher costs for tenant improvements and leasing commissions on leases signed in 2003 as compared to 2002.
As expected, the occupancy rate for the Company’s portfolio of properties remained constant at 78.3% as of January 1, 2004 compared to October 1, 2003. The Company believes that the market trend of vacancy increases has abated, but the Company anticipates that the difficult leasing environment that currently exists in its markets will persist throughout 2004.
At January 1, 2004, Great Lakes REIT had 1.0 million square feet of leases, or 17% of the total portfolio, expiring during 2004. 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 17%, 14% and 10% of total portfolio square footage, respectively.
Property Dispositions
On December 15, 2003, the Company sold its property located at 823 Commerce Drive, Oak Brook, Illinois for a contract price of $5.6 million with a gain on sale recognized in the fourth quarter of 2003 of approximately $1.8 million. Net proceeds from the sale of the property were used for retirement of long-terms debt ($3.2 million) and working capital ($2.1 million).
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 was recognized in the third quarter of 2003. The net proceeds from sale were used for retirement of long-term debt ($2.3 million) and working capital ($1.3 million).
On September 10, 2003, the Company sold its property located at 191 Waukegan Road, Northfield, Illinois, for a contract price of $6.1 million. The gain on sale of properties for this transaction of approximately $0.5 million was recognized in the third quarter of 2003. The net proceeds from sale were used for retirement of long-term debt ($2.8 million) and working capital ($3.0 million).
Tenant Credit Issues
As of February 1, 2004, 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.
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 the payment obligations under its lease in 2004. Legion Insurance Company is current on its rental payments to date. The Legion lease specifies a termination date of February 28, 2006.
Great Lakes REIT is a fully integrated, self-administered and self-managed real estate investment trust with a current portfolio of 44 properties totaling 5.8 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 December 31, 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 proposed transaction with Transwestern, property sales, new tenant leasing activity, vacancy trends, occupancy rates, expectations 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: the failure to obtain the necessary approval for the proposed transaction with Transwestern in a timely matter or at all; satisfaction of various other closing conditions contained in the definitive merger agreement, including receipt of lender consents and a required private letter ruling from the Internal Revenue Service; 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; 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)
|
| December 31, |
| ||||
|
| 2003 |
| 2002 |
| ||
|
|
|
|
|
| ||
Assets |
|
|
|
|
| ||
Properties: |
|
|
|
|
| ||
Land |
| $ | 64,067 |
| $ | 66,540 |
|
Buildings and improvements |
| 527,576 |
| 526,026 |
| ||
|
| 591,643 |
| 592,566 |
| ||
Less accumulated depreciation |
| 77,848 |
| 66,761 |
| ||
|
| 513,795 |
| 525,805 |
| ||
Cash and cash equivalents |
| 2,720 |
| 5,061 |
| ||
Real estate tax escrows |
| 114 |
| 69 |
| ||
Rents receivable |
| 8,336 |
| 6,261 |
| ||
Deferred financing and leasing costs, net of accumulated amortization |
| 9,036 |
| 9,110 |
| ||
Goodwill |
| 1,061 |
| 1,061 |
| ||
Other assets |
| 2,220 |
| 1,614 |
| ||
Total assets |
| $ | 537,282 |
| $ | 548,981 |
|
|
|
|
|
|
| ||
Liabilities and shareholders’ equity |
|
|
|
|
| ||
Secured bank loan payable |
| $ | 17,000 |
| $ | 36,000 |
|
Mortgage loans payable |
| 288,702 |
| 275,050 |
| ||
Bonds payable |
| 3,245 |
| 3,620 |
| ||
Accounts payable and accrued liabilities |
| 5,716 |
| 3,740 |
| ||
Accrued real estate taxes |
| 14,392 |
| 14,872 |
| ||
Dividends payable |
| 2,477 |
| 2,539 |
| ||
Prepaid rent |
| 4,388 |
| 4,044 |
| ||
Security deposits |
| 1,492 |
| 1,617 |
| ||
Total liabilities |
| 337,412 |
| 341,482 |
| ||
Minority interests |
| 684 |
| 677 |
| ||
|
|
|
|
|
| ||
Commitments and contingencies |
|
|
|
|
| ||
Shareholders’ equity: |
|
|
|
|
| ||
Preferred shares of beneficial interest ($0.01 par value, 10,000 shares authorized; 1,500 9 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; 16,089 and 16,550 shares issued and outstanding in 2003 and 2002, respectively) |
| 161 |
| 165 |
| ||
Paid-in-capital |
| 201,468 |
| 208,319 |
| ||
Retained earnings (deficit) |
| (34,193 | ) | (19,765 | ) | ||
Employee share purchase loans |
| (3,493 | ) | (16,154 | ) | ||
Deferred compensation |
| (1,745 | ) | (2,035 | ) | ||
Accumulated other comprehensive income (loss) |
| (512 | ) | (1,208 | ) | ||
Total shareholders’ equity |
| 199,186 |
| 206,822 |
| ||
Total liabilities and shareholders’ equity |
| $ | 537,282 |
| $ | 548,981 |
|
Great Lakes REIT
Consolidated Statements of Income and Comprehensive Income
(unaudited)
(In thousands, except per share data)
Three months ended December 31, 2003 and 2002
|
| 2003 |
| 2002 |
| ||
Revenues: |
|
|
|
|
| ||
Rental |
| $ | 19,530 |
| $ | 20,939 |
|
Reimbursements |
| 5,426 |
| 5,437 |
| ||
Parking |
| 113 |
| 121 |
| ||
Telecommunications |
| 63 |
| 57 |
| ||
Tenant service |
| 145 |
| 130 |
| ||
Interest |
| 79 |
| 318 |
| ||
Other |
| 761 |
| 370 |
| ||
Total revenues |
| 26,117 |
| 27,372 |
| ||
|
|
|
|
|
| ||
Expenses: |
|
|
|
|
| ||
Real estate taxes |
| 4,186 |
| 4,422 |
| ||
Other property operating |
| 7,540 |
| 7,457 |
| ||
General and administrative |
| 1,411 |
| 1,353 |
| ||
Interest |
| 4,333 |
| 4,169 |
| ||
Depreciation and amortization |
| 5,581 |
| 5,878 |
| ||
Total expenses |
| 23,051 |
| 23,279 |
| ||
Income before allocation to minority interests |
| 3,066 |
| 4,093 |
| ||
Minority interests |
| 39 |
| 12 |
| ||
Income from continuing operations |
| 3,027 |
| 4,081 |
| ||
Discontinued operations, net (including gain on sale of properties of $1,833 and $607 in 2003 and 2002, respectively) |
| 1,749 |
| 743 |
| ||
Net income |
| 4,776 |
| 4,824 |
| ||
Income allocated to preferred shareholders |
| 914 |
| 914 |
| ||
Net income applicable to common shares |
| $ | 3,862 |
| $ | 3,910 |
|
Earnings per common share from continuing operations - basic |
| $ | 0.13 |
| $ | 0.19 |
|
Earnings per common share - basic |
| $ | 0.24 |
| $ | 0.24 |
|
Weighted average common shares outstanding - basic |
| 15,920 |
| 16,378 |
| ||
Diluted earnings per common share from continuing operations |
| $ | 0.13 |
| $ | 0.19 |
|
Diluted earnings per common share |
| $ | 0.24 |
| $ | 0.24 |
|
Weighted average common shares outstanding - diluted |
| 16,056 |
| 16,537 |
| ||
Dividends declared per common share |
| $ | 0.405 |
| $ | 0.405 |
|
Comprehensive income: |
|
|
|
|
| ||
Net income |
| $ | 4,776 |
| $ | 4,824 |
|
Change in fair value of interest rate swaps |
| 249 |
| (61 | ) | ||
Total comprehensive income |
| $ | 5,025 |
| $ | 4,763 |
|
Great Lakes REIT
Consolidated Statements of Income and Comprehensive Income
(unaudited)
(In thousands, except per share data)
Years ended December 31, 2003 and 2002
|
| 2003 |
| 2002 |
| ||
|
|
|
|
|
| ||
Revenues: |
|
|
|
|
| ||
Rental |
| $ | 79,554 |
| $ | 76,267 |
|
Reimbursements |
| 22,208 |
| 21,385 |
| ||
Parking |
| 458 |
| 494 |
| ||
Telecommunications |
| 253 |
| 176 |
| ||
Tenant service |
| 416 |
| 383 |
| ||
Interest |
| 572 |
| 1,319 |
| ||
Other |
| 1,777 |
| 1,064 |
| ||
Total revenues |
| 105,238 |
| 101,088 |
| ||
|
|
|
|
|
| ||
Expenses: |
|
|
|
|
| ||
Real estate taxes |
| 17,379 |
| 16,307 |
| ||
Other property operating |
| 30,755 |
| 26,834 |
| ||
General and administrative |
| 5,837 |
| 5,241 |
| ||
Employee share loan termination cost |
| 511 |
| — |
| ||
Interest |
| 17,645 |
| 15,502 |
| ||
Depreciation and amortization |
| 21,615 |
| 19,836 |
| ||
Total expenses |
| 93,742 |
| 83,720 |
| ||
|
|
|
|
|
| ||
Income before gain on sale of properties and allocation to minority interests |
| 11,496 |
| 17,368 |
| ||
Minority interests |
| 66 |
| 65 |
| ||
Income from continuing operations |
| 11,430 |
| 17,303 |
| ||
Discontinued operations, net (including gain on sale of properties of $4,024 and $7,789 in 2003 and 2002, respectively) |
| 4,041 |
| 9,149 |
| ||
Net income |
| 15,471 |
| 26,452 |
| ||
Income allocated to preferred shareholders |
| 3,656 |
| 3,656 |
| ||
Net income applicable to common shares |
| $ | 11,815 |
| $ | 22,796 |
|
Earnings per common share from continuing operations—basic |
| $ | 0.48 |
| $ | 0.83 |
|
Earnings per common share—basic |
| $ | 0.74 |
| $ | 1.39 |
|
Weighted average common shares outstanding—basic |
| 16,033 |
| 16,372 |
| ||
Diluted earnings per common share from continuing operations |
| $ | 0.48 |
| $ | 0.82 |
|
Diluted earnings per common share |
| $ | 0.73 |
| $ | 1.38 |
|
Weighted average common shares outstanding—diluted |
| 16,162 |
| 16,522 |
| ||
Dividends declared per common share |
| $ | 1.62 |
| $ | 1.61 |
|
|
|
|
|
|
| ||
Comprehensive income: |
|
|
|
|
| ||
Net income |
| $ | 15,471 |
| $ | 26,452 |
|
Change in fair value of interest rate swap agreements |
| 696 |
| (1,707 | ) | ||
Total comprehensive income |
| $ | 16,167 |
| $ | 24,745 |
|
Great Lakes REIT
Consolidated Statements of Cash Flows
(unaudited)
(Dollars in thousands)
Years ended December 31, 2003 and 2002
|
| 2003 |
| 2002 |
| ||
|
|
|
|
|
| ||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
| ||
Net income |
| $ | 15,471 |
| $ | 26,452 |
|
Adjustments to reconcile net income to cash flows from operating activities |
|
|
|
|
| ||
Depreciation and amortization |
| 22,022 |
| 21,077 |
| ||
Gain on sale of properties, net |
| (4,024 | ) | (7,789 | ) | ||
Other non-cash items |
| 770 |
| 355 |
| ||
Net changes in assets and liabilities: |
|
|
|
|
| ||
Rents receivable |
| (2,075 | ) | 400 |
| ||
Real estate tax escrows and other assets |
| (108 | ) | (602 | ) | ||
Accounts payable, accrued expenses and other liabilities |
| (344 | ) | 1,577 |
| ||
Accrued real estate taxes |
| (480 | ) | 2,162 |
| ||
Payment of deferred leasing costs |
| (2,587 | ) | (3,421 | ) | ||
Net cash provided by operating activities |
| 28,645 |
| 40,211 |
| ||
|
|
|
|
|
| ||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
| ||
Purchase of properties |
| — |
| (86,361 | ) | ||
Additions to buildings and improvements |
| (17,768 | ) | (16,020 | ) | ||
Proceeds from property sales, net |
| 14,641 |
| 33,052 |
| ||
Other investing activities, net |
| (25 | ) | 8 |
| ||
Net cash provided by (used in) investing activities |
| (3,152 | ) | (69,321 | ) | ||
|
|
|
|
|
| ||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
| ||
Proceeds from exercise of share options |
| 107 |
| 254 |
| ||
Proceeds from repayment of employee share loans |
| 5,359 |
| 3,929 |
| ||
Proceeds from bank and mortgage loans payable |
| 61,155 |
| 224,250 |
| ||
Distributions / dividends paid |
| (27,421 | ) | (28,055 | ) | ||
Distributions to minority interests |
| (59 | ) | (70 | ) | ||
Purchase of treasury shares |
| — |
| — |
| ||
Payment of bank and mortgage loans and bonds |
| (66,878 | ) | (166,658 | ) | ||
Payment of deferred financing costs and other items |
| (97 | ) | (2,375 | ) | ||
Net cash provided by (used in) financing activities |
| (27,834 | ) | 31,275 |
| ||
Net increase (decrease) in cash and cash equivalents |
| (2,341 | ) | 2,165 |
| ||
Cash and cash equivalents, beginning of year |
| 5,061 |
| 2,896 |
| ||
Cash and cash equivalents, end of year |
| $ | 2,720 |
| $ | 5,061 |
|
|
|
|
|
|
| ||
Supplemental disclosure of cash flow: |
|
|
|
|
| ||
Interest paid |
| $ | 16,524 |
| $ | 15,879 |
|
|
|
|
|
|
| ||
Non-cash financing transactions: |
|
|
|
|
| ||
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. Funds from Operations should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of the Company’s financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of the Company’s liquidity, nor is it indicative of funds available to fund the Company’s cash needs, including its ability to make dividends.
|
| Three months ended |
| Years ended |
| ||||||||
|
| 2003 |
| 2002 |
| 2003 |
| 2002 |
| ||||
Net income applicable to common shares |
| $ | 3,862 |
| $ | 3,910 |
| $ | 11,815 |
| $ | 22,796 |
|
Adjustments to calculate funds from operations: |
|
|
|
|
|
|
|
|
| ||||
Minority interests |
| 39 |
| 12 |
| 66 |
| 65 |
| ||||
Adjusted depreciation and amortization (a) |
| 5,419 |
| 5,751 |
| 21,305 |
| 20,328 |
| ||||
Gain on sale of properties |
| (1,833 | ) | (607 | ) | (4,024 | ) | (7,789 | ) | ||||
Funds from operations |
| $ | 7,487 |
| $ | 9,066 |
| $ | 29,162 |
| $ | 35,400 |
|
|
|
|
|
|
|
|
|
|
| ||||
Weighted average common shares outstanding - diluted |
| 16,056 |
| 16,537 |
| 16,162 |
| 16,522 |
| ||||
(a) Adjusted depreciation and amortization is calculated as follows:
|
| Three months ended |
| Years ended |
| ||||||||
|
| 2003 |
| 2002 |
| 2003 |
| 2002 |
| ||||
Depreciation and amortization in consolidated statements of cash flows |
| $ | 5,605 |
| $ | 6,021 |
| $ | 22,022 |
| $ | 21,078 |
|
Less depreciation and amortization unrelated to properties |
| 186 |
| 270 |
| 717 |
| 750 |
| ||||
Adjusted depreciation and amortization |
| $ | 5,419 |
| $ | 5,751 |
| $ | 21,305 |
| $ | 20,328 |
|
EBITDA and Cash Provided by Operating Activities and Related Coverage Ratios
Years ended December 31, 2003 and 2002
(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 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:
|
| Years ended December 31, |
| ||||
|
| 2003 |
| 2002 |
| ||
Calculation of EBITDA: |
|
|
|
|
| ||
Income before allocation to minority interests |
| $ | 11,496 |
| $ | 17,368 |
|
Depreciation and amortization from consolidated statements of cash flows |
| 22,022 |
| 21,077 |
| ||
Interest expense |
| 17,645 |
| 15,502 |
| ||
Discontinued operations, net |
| 17 |
| 1,360 |
| ||
|
|
|
|
|
| ||
EBITDA |
| $ | 51,180 |
| $ | 55,307 |
|
|
|
|
|
|
| ||
Reconciliation of EBITDA to Cash Provided by Operating Activities: |
|
|
|
|
| ||
EBITDA |
| $ | 51,180 |
| $ | 55,307 |
|
Interest expense |
| (17,645 | ) | (15,502 | ) | ||
Other adjustments from Consolidated Statements of Cash Flows: |
|
|
|
|
| ||
Other non-cash items |
| 770 |
| 355 |
| ||
Minority interests |
| (66 | ) | (65 | ) | ||
Net changes in assets and liabilities: |
|
|
|
|
| ||
Rents receivable |
| (2,075 | ) | 400 |
| ||
Real estate tax escrows and other assets |
| (108 | ) | (602 | ) | ||
Accounts payable, accrued expenses and other liabilities |
| (344 | ) | 1,577 |
| ||
Accrued real estate taxes |
| (480 | ) | 2,162 |
| ||
Payment of deferred leasing costs |
| (2,587 | ) | (3,421 | ) | ||
Cash provided by operating activities |
| $ | 28,645 |
| $ | 40,211 |
|
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.
Years ended December 31, | |||||||
|
| 2003 |
| 2002 |
| ||
Cash provided by operating activities |
| $ | 28,645 |
| $ | 40,211 |
|
Interest expense |
| 17,645 |
| 15,502 |
| ||
Cash provided from operating activities before interest expense |
| $ | 46,290 |
| $ | 55,713 |
|
|
|
|
|
|
| ||
Interest expense |
| $ | 17,645 |
| $ | 15,502 |
|
Total interest expense |
| $ | 17,645 |
| $ | 15,502 |
|
Preferred dividends |
| 3,656 |
| 3,656 |
| ||
Total interest expense and preferred dividends |
| $ | 21,301 |
| $ | 19,158 |
|
|
|
|
|
|
| ||
Ratio of cash provided by operating activities before interest expense to interest expense |
| 2.6X |
| 3.6X |
| ||
|
|
|
|
|
| ||
Ratio of cash provided by operating activities before interest expense to interest expense and preferred dividends |
| 2.2X |
| 2.9X |
| ||
|
|
|
|
|
| ||
EBITDA |
| $ | 51,180 |
| $ | 55,307 |
|
|
|
|
|
|
| ||
Ratio of EBITDA to interest expense |
| 2.9X |
| 3.6X |
| ||
|
|
|
|
|
| ||
Ratio of EBITDA to interest expense and preferred dividends |
| 2.4X |
| 2.9X |
| ||
SUPPLEMENTAL INFORMATION
For the Three Months and Year Ended
December 31, 2003
Great Lakes REIT
Portfolio Occupancy Schedule
January 1, 2004
Market/Property |
| Location |
| Year Built/ |
| Approximate |
| Percent |
|
|
|
|
|
|
|
|
|
|
|
Chicago |
|
|
|
|
|
|
|
|
|
Centennial Center |
| Schaumburg |
| 1980/1993 |
| 266,886 |
| 76.3 | % |
Highpoint Business Center |
| Wood Dale |
| 1986 |
| 33,495 |
| 60.5 | % |
Arlington Ridge Service Center |
| Arlington Heights |
| 1987 |
| 95,938 |
| 60.2 | % |
Arlington Business Center |
| Arlington Heights |
| 1984 |
| 98,241 |
| 72.3 | % |
1011 Touhy Atrium |
| Des Plaines |
| 1978/1995 |
| 153,777 |
| 82.2 | % |
Kensington Corporate Center |
| Mount Prospect |
| 1989 |
| 85,487 |
| 100.0 | % |
One Hawthorn Place |
| Vernon Hills |
| 1987 |
| 84,592 |
| 84.3 | % |
2 Marriott Drive |
| Lincolnshire |
| 1985 |
| 41,500 |
| 100.0 | % |
One Century Centre |
| Schaumburg |
| 1985 |
| 212,212 |
| 22.8 | % |
Lisle Executive Center |
| Lisle |
| 1988 |
| 150,036 |
| 50.7 | % |
Woodfield Green Executive Ctr. |
| Schaumburg |
| 1986 |
| 109,392 |
| 68.6 | % |
1600 Corporate Center |
| Rolling Meadows |
| 1986 |
| 254,448 |
| 89.8 | % |
Bannockburn Corporate |
| Bannockburn |
| 1999 |
| 202,218 |
| 83.0 | % |
O’Hare Commerce Center |
| Des Plaines |
| 1975 |
| 148,444 |
| 91.0 | % |
387 Shuman Blvd |
| Naperville |
| 1981 |
| 112,309 |
| 90.2 | % |
Medical Office Buildings |
| Various |
| Various |
| 458,156 |
| 98.1 | % |
Subtotal/Weighted Average |
|
|
|
|
| 2,507,131 |
| 78.1 | % |
|
|
|
|
|
|
|
|
|
|
Milwaukee |
|
|
|
|
|
|
|
|
|
One Park Plaza |
| Milwaukee |
| 1984 |
| 198,722 |
| 62.3 | % |
Milwaukee Center |
| Milwaukee |
| 1988 |
| 373,490 |
| 71.1 | % |
Park Place VII |
| Milwaukee |
| 1989 |
| 36,037 |
| 79.3 | % |
Lincoln Center |
| West Allis |
| 1984-1987 |
| 120,931 |
| 60.1 | % |
Brookfield Lakes |
| Brookfield |
| 1987 |
| 116,799 |
| 67.9 | % |
Corporate Woods |
| Brookfield |
| 1987 |
| 53,807 |
| 83.1 | % |
One Riverwood Place |
| Pewaukee |
| 1999 |
| 97,778 |
| 94.9 | % |
Two Riverwood Place |
| Pewaukee |
| 2002 |
| 98,202 |
| 91.3 | % |
Subtotal/Weighted Average |
|
|
|
| �� | 1,095,766 |
| 72.7 | % |
|
|
|
|
|
|
|
|
|
|
Minneapolis/St. Paul |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Court International |
| St. Paul |
| 1916/1985 |
| 319,848 |
| 91.1 | % |
University Office Plaza |
| Minneapolis |
| 1979/1997 |
| 98,495 |
| 75.7 | % |
Subtotal/Weighted Average |
|
|
|
|
| 418,343 |
| 87.5 | % |
|
|
|
|
|
|
|
|
|
|
Detroit |
|
|
|
|
|
|
|
|
|
Long Lake Crossings |
| Troy |
| 1988 |
| 170,457 |
| 81.0 | % |
Tri-Atria Office Building |
| Farmington Hills |
| 1986 |
| 236,921 |
| 95.8 | % |
777 Eisenhower Plaza |
| Ann Arbor |
| 1975 |
| 281,080 |
| 98.3 | % |
#40 OakHollow |
| Southfield |
| 1989 |
| 80,893 |
| 80.5 | % |
Oak Hollow Gateway |
| Southfield |
| 1987 |
| 79,052 |
| 88.1 | % |
Subtotal/Weighted Average |
|
|
|
|
| 848,403 |
| 91.5 | % |
|
|
|
|
|
|
|
|
|
|
Columbus |
|
|
|
|
|
|
|
|
|
Dublin Techmart |
| Dublin |
| 1986 |
| 124,929 |
| 80.0 | % |
MetroCenter IV |
| Dublin |
| 1982 |
| 101,592 |
| 57.9 | % |
MetroCenter V |
| Dublin |
| 1987 |
| 215,473 |
| 87.8 | % |
Firstar Tower |
| Columbus |
| 1981 |
| 198,171 |
| 79.3 | % |
Subtotal/Weighted Average |
|
|
|
|
| 640,165 |
| 78.9 | % |
|
|
|
|
|
|
|
|
|
|
Cincinnati |
|
|
|
|
|
|
|
|
|
Princeton Hill I |
| Springdale |
| 1988 |
| 95,910 |
| 86.9 | % |
|
|
|
|
|
|
|
|
|
|
Denver |
|
|
|
|
|
|
|
|
|
116 Inverness Drive East |
| Englewood |
| 1984 |
| 205,716 |
| 32.1 | % |
|
|
|
|
|
|
|
|
|
|
TOTAL/WEIGHTED AVERAGE |
|
|
|
|
| 5,811,434 |
| 78.3 | % |
Great Lakes REIT
Historic Occupancy
Since IPO
Reporting |
| 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’03 |
| 80.2 | % |
3Q’03 |
| 78.3 | % |
4Q’03 |
| 78.3 | % |
Average 27 quarters |
| 89.7 | % |
Great Lakes REIT
Operating Margins (unaudited)
(In thousands, except per share data)
|
| Three Months |
| Ended |
| % Chg |
|
Consolidated Income Statement |
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
Minimum Rents |
| 21,435 |
| 19,529 |
| -9 | % |
Expense Reimbursements |
| 5,461 |
| 5,426 |
|
|
|
Total Operating Revenues |
| 26,896 |
| 24,955 |
| -7 | % |
Other tenant - and interest - income |
| 1,001 |
| 1,164 |
|
|
|
Expenses |
|
|
|
|
|
|
|
Real estate taxes |
| 4,497 |
| 4,193 |
|
|
|
% of Oper. Revs |
| 16.7 | % | 16.8 | % |
|
|
% of NOI |
| 30.4 | % | 31.8 | % |
|
|
Other Operating Expenses |
| 7,628 |
| 7,596 |
|
|
|
% of Oper. Revs |
| 28.4 | % | 30.4 | % |
|
|
Total property-related exp. |
| 12,125 |
| 11,789 |
| -3 | % |
% of Oper. Revs |
| 45.1 | % | 47.2 | % |
|
|
NOI before General & Admin. |
| 14,771 |
| 13,166 |
| -11 | % |
as a % of Operating Revenue |
| 54.9 | % | 52.8 | % |
|
|
Depreciation & amort. |
| 6,021 |
| 5,604 |
|
|
|
General & Admin. |
| 1,353 |
| 1,411 |
| 4 | % |
% of Oper. Revs |
| 5.0 | % | 5.7 | % |
|
|
% of NOI |
| 9.2 | % | 10.7 | % |
|
|
Corp. Interest Expense |
| 4,169 |
| 4,333 |
|
|
|
Other |
| 0 |
| 0 |
|
|
|
Sub-Total Expenses |
| 23,668 |
| 23,137 |
| -2 | % |
Income before non-recurring items |
| 4,229 |
| 2,982 |
| -29 | % |
as a % of Total Revenues |
| 15.2 | % | 11.4 | % |
|
|
Extraordinary items / adjustments |
| 607 |
| 1,833 |
|
|
|
Net Income before minority interest |
| 4,836 |
| 4,815 |
|
|
|
Net Operating Income from Properties after G&A |
| 13,418 |
| 11,755 |
| -12 | % |
as a % of Operating Revenue |
| 49.9 | % | 47.1 | % |
|
|
Funds from Operations |
| 9,066 |
| 7,487 |
| -17 | % |
Per Share (fully-diluted) |
|
|
|
|
|
|
|
Net Income |
| 0.24 |
| 0.24 |
|
|
|
Funds From Operations (FFO) |
| 0.55 |
| 0.47 |
| -15 | % |
FFO less straight-lined rents |
| 0.53 |
| 0.40 |
|
|
|
Dividends per Share |
| 0.405 |
| 0.405 |
| 0 | % |
as a % of FFOperations (FDiluted) |
| 73.6 | % | 86.2 | % |
|
|
Wtd. Avg. Common Shares Outstanding - Diluted |
| 16,537 |
| 16,056 |
|
|
|
|
| Twelve Months Ended |
| ||||
|
| Dec 02 |
| Dec 03 |
| % Chg |
|
Consolidated Income Statement |
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
Minimum Rents |
| 80,932 |
| 80,683 |
| 0 | % |
Expense Reimbursements |
| 21,709 |
| 22,280 |
|
|
|
Total Operating Revenues |
| 102,641 |
| 102,963 |
| 0 | % |
Other tenant – and interest - income |
| 3,474 |
| 3,489 |
|
|
|
Expenses |
|
|
|
|
|
|
|
Real estate taxes |
| 17,137 |
| 17,662 |
|
|
|
% of Oper. Revs |
| 16.7 | % | 17.2 | % |
|
|
% of NOI |
| 30.0 | % | 32.7 | % |
|
|
Other Operating Expenses |
| 28,429 |
| 31,263 |
|
|
|
% of Oper. Revs |
| 27.7 | % | 30.4 | % |
|
|
Total property-related exp. |
| 45,566 |
| 48,925 |
| 7 | % |
% of Oper. Revs |
| 44.4 | % | 47.5 | % |
|
|
NOI before General & Admin. |
| 57,075 |
| 54,038 |
| -5 | % |
as a % of Operating Revenue |
| 55.6 | % | 52.5 | % |
|
|
Depreciation & amort. |
| 21,078 |
| 22,021 |
|
|
|
General & Admin. |
| 5,241 |
| 6,348 |
| 21 | % |
% of Oper. Revs |
| 5.1 | % | 6.2 | % |
|
|
% of NOI |
| 9.2 | % | 11.7 | % |
|
|
Corp. Interest Expense |
| 15,502 |
| 17,645 |
|
|
|
Other |
| 0 |
| 0 |
|
|
|
Sub-Total Expenses |
| 87,387 |
| 94,939 |
| 9 | % |
Income before non-recurring items |
| 18,728 |
| 11,513 |
| -39 | % |
as a % of Total Revenues |
| 17.6 | % | 10.8 | % |
|
|
Extraordinary items / adjustments |
| 7,789 |
| 4,024 |
|
|
|
Net Income before minority interest |
| 26,517 |
| 15,537 |
|
|
|
Net Operating Income from Properties after G&A |
| 51,834 |
| 47,690 |
| -8 | % |
as a % of Operating Revenue |
| 50.5 | % | 46.3 | % |
|
|
Funds from Operations |
| 35,400 |
| 29,162 |
| -18 | % |
Per Share (fully-diluted) |
|
|
|
|
|
|
|
Net Income |
| 1.38 |
| 0.73 |
|
|
|
Funds From Operations (FFO) |
| 2.14 |
| 1.80 |
| -16 | % |
FFO less straight-lined rents |
| 2.10 |
| 1.67 |
|
|
|
Dividends per Share |
| 1.61 |
| 1.62 |
| 1 | % |
as a % of FFOperations (FDiluted) |
| 75.2 | % | 90.0 | % |
|
|
Wtd. Avg. Common Shares Outstanding - Diluted |
| 16,522 |
| 16,162 |
|
|
|
Great Lakes REIT
Same Store Sales Analysis (unaudited)
(Dollars in Thousands)
Non-GAAP Financial Measure
|
|
|
| Three months ended December 31, |
| ||||
|
|
|
| 2003 |
| 2002 |
| ||
Net Operating Income |
|
|
|
|
|
|
| ||
Property |
| Location |
|
|
|
|
| ||
CHICAGO |
|
|
|
|
|
|
| ||
Centennial Center |
| Schaumburg |
| $ | 533 |
| $ | 649 |
|
One Century Centre |
| Schaumburg |
| (240 | ) | 359 |
| ||
Highpoint Business Center |
| Wood Dale |
| 2 |
| 84 |
| ||
Arlington Business Center |
| Arlington Heights |
| 132 |
| 72 |
| ||
Arlington Ridge Service Center |
| Arlington Heights |
| 127 |
| (19 | ) | ||
1011 Touhy Avenue |
| Des Plaines |
| 342 |
| 287 |
| ||
Kensington Corporate Center |
| Mount Prospect |
| 113 |
| 252 |
| ||
One Hawthorn Place |
| Vernon Hills |
| 240 |
| 279 |
| ||
Two Marriott Drive |
| Lincolnshire |
| 118 |
| 104 |
| ||
Lisle Executive Center |
| Lisle |
| 161 |
| 162 |
| ||
Woodfield Green |
| Schaumburg |
| 196 |
| 357 |
| ||
1600 Corporate Center |
| Rolling Meadows |
| 496 |
| 622 |
| ||
Bannockburn Corporate Center |
| Bannockburn |
| 749 |
| 605 |
| ||
Subtotal |
|
|
| 2,969 |
| 3,811 |
| ||
13 Properties - Decrease |
|
|
| -22.09 | % |
|
| ||
|
|
|
|
|
|
|
| ||
MILWAUKEE |
|
|
|
|
|
|
| ||
One Park Plaza |
| Milwaukee |
| 277 |
| 313 |
| ||
Park Place VII |
| Milwaukee |
| 78 |
| 109 |
| ||
Milwaukee Center |
| Milwaukee |
| 1,556 |
| 1,584 |
| ||
Lincoln Center II & III |
| West Allis |
| 114 |
| 258 |
| ||
Brookfield Lakes Corporate Center |
| Brookfield |
| 176 |
| 206 |
| ||
Corporate Woods |
| Brookfield |
| 135 |
| 107 |
| ||
One Riverwood |
| Waukesha |
| 359 |
| 342 |
| ||
Subtotal |
|
|
| 2,696 |
| 2,920 |
| ||
7 Properties - Decrease |
|
|
| -7.68 | % |
|
| ||
|
|
|
|
|
|
|
| ||
MINNEAPOLIS / ST. PAUL |
|
|
|
|
|
|
| ||
Court International |
| St. Paul |
| 801 |
| 722 |
| ||
University Office Plaza |
| Minneapolis |
| 164 |
| 204 |
| ||
|
|
|
| 965 |
| 925 |
| ||
2 Properties - Increase |
|
|
| 4.26 | % |
|
| ||
|
|
|
|
|
|
|
| ||
DETROIT |
|
|
|
|
|
|
| ||
777 Eisenhower |
| Ann Arbor |
| 957 |
| 1,347 |
| ||
Tri-Atria |
| Farmington Hills |
| 812 |
| 768 |
| ||
Long Lake Crossings |
| Troy |
| 554 |
| 504 |
| ||
No. 40 OakHollow |
| Southfield |
| 190 |
| 254 |
| ||
OakHollow Gateway |
| Southfield |
| 250 |
| 246 |
| ||
Subtotal |
|
|
| 2,763 |
| 3,120 |
| ||
5 Properties - Decrease |
|
|
| -11.45 | % |
|
| ||
|
|
|
|
|
|
|
| ||
COLUMBUS |
|
|
|
|
|
|
| ||
Firstar |
| Columbus |
| 468 |
| 498 |
| ||
Metro V |
| Dublin |
| 535 |
| 466 |
| ||
Metro IV |
| Dublin |
| 77 |
| 170 |
| ||
Dublin Techmart |
| Dublin |
| 186 |
| 210 |
| ||
Subtotal |
|
|
| 1,266 |
| 1,344 |
| ||
4 Properties - Decrease |
|
|
| -5.76 | % |
|
| ||
|
|
|
|
|
|
|
| ||
CINCINNATI |
|
|
|
|
|
|
| ||
Princeton Hill Corporate Center |
| Springdale |
| 277 |
| 316 |
| ||
1 Property - Decrease |
|
|
| -12.46 | % |
|
| ||
|
|
|
|
|
|
|
| ||
DENVER |
|
|
|
|
|
|
| ||
116 Inverness |
| Englewood |
| 24 |
| 627 |
| ||
1 Property - Decrease |
|
|
| -96.15 | % |
|
| ||
|
|
|
|
|
|
|
| ||
TOTAL |
|
|
| $ | 10,960 |
| $ | 13,063 |
|
33 Properties - Decrease |
|
|
| -16.10 | % |
|
| ||
|
|
|
| Twelve months ended December 31, |
| ||||
|
|
|
| 2003 |
| 2002 |
| ||
Net Operating Income |
|
|
|
|
|
|
| ||
Property |
| Location |
|
|
|
|
| ||
CHICAGO |
|
|
|
|
|
|
| ||
Centennial Center |
| Schaumburg |
| $ | 2,565 |
| $ | 2,925 |
|
One Century Centre |
| Schaumburg |
| 379 |
| 2,330 |
| ||
Highpoint Business Center |
| Wood Dale |
| (11 | ) | 321 |
| ||
Arlington Business Center |
| Arlington Heights |
| 576 |
| 366 |
| ||
Arlington Ridge Service Center |
| Arlington Heights |
| 356 |
| 241 |
| ||
1011 Touhy Avenue |
| Des Plaines |
| 1,261 |
| 1,246 |
| ||
Kensington Corporate Center |
| Mount Prospect |
| 40 |
| 982 |
| ||
One Hawthorn Place |
| Vernon Hills |
| 1,008 |
| 976 |
| ||
Two Marriott Drive |
| Lincolnshire |
| 440 |
| 429 |
| ||
Lisle Executive Center |
| Lisle |
| 575 |
| 1,068 |
| ||
Woodfield Green |
| Schaumburg |
| 727 |
| 823 |
| ||
1600 Corporate Center |
| Rolling Meadows |
| 1,896 |
| 2,506 |
| ||
Bannockburn Corporate Center |
| Bannockburn |
| 3,036 |
| 2,756 |
| ||
Subtotal |
|
|
| 12,847 |
| 16,968 |
| ||
13 Properties - Decrease |
|
|
| -24.29 | % |
|
| ||
|
|
|
|
|
|
|
| ||
MILWAUKEE |
|
|
|
|
|
|
| ||
One Park Plaza |
| Milwaukee |
| 839 |
| 746 |
| ||
Park Place VII |
| Milwaukee |
| 260 |
| 273 |
| ||
Milwaukee Center |
| Milwaukee |
| 6,423 |
| 6,081 |
| ||
Lincoln Center II & III |
| West Allis |
| 625 |
| 971 |
| ||
Brookfield Lakes Corporate Center |
| Brookfield |
| 565 |
| 578 |
| ||
Corporate Woods |
| Brookfield |
| 438 |
| 513 |
| ||
One Riverwood |
| Waukesha |
| 1,501 |
| 1,475 |
| ||
Subtotal |
|
|
| 10,650 |
| 10,636 |
| ||
7 Properties - Increase |
|
|
| 0.13 | % |
|
| ||
|
|
|
|
|
|
|
| ||
MINNEAPOLIS / ST. PAUL |
|
|
|
|
|
|
| ||
Court International |
| St. Paul |
| 3,148 |
| 3,653 |
| ||
University Office Plaza |
| Minneapolis |
| 745 |
| 626 |
| ||
|
|
|
| 3,894 |
| 4,279 |
| ||
2 Properties - Decrease |
|
|
| -9.01 | % |
|
| ||
|
|
|
|
|
|
|
| ||
DETROIT |
|
|
|
|
|
|
| ||
777 Eisenhower |
| Ann Arbor |
| 3,967 |
| 3,656 |
| ||
Tri-Atria |
| Farmington Hills |
| 3,366 |
| 2,972 |
| ||
Long Lake Crossings |
| Troy |
| 2,155 |
| 2,232 |
| ||
No. 40 OakHollow |
| Southfield |
| 693 |
| 1,129 |
| ||
OakHollow Gateway |
| Southfield |
| 1,070 |
| 1,007 |
| ||
Subtotal |
|
|
| 11,252 |
| 10,996 |
| ||
5 Properties - Increase |
|
|
| 2.33 | % |
|
| ||
|
|
|
|
|
|
|
| ||
COLUMBUS |
|
|
|
|
|
|
| ||
Firstar |
| Columbus |
| 2,023 |
| 2,234 |
| ||
Metro V |
| Dublin |
| 1,741 |
| 2,073 |
| ||
Metro IV |
| Dublin |
| 479 |
| 695 |
| ||
Dublin Techmart |
| Dublin |
| 630 |
| 914 |
| ||
Subtotal |
|
|
| 4,872 |
| 5,916 |
| ||
4 Properties - Decrease |
|
|
| -17.65 | % |
|
| ||
|
|
|
|
|
|
|
| ||
CINCINNATI |
|
|
|
|
|
|
| ||
Princeton Hill Corporate Center |
| Springdale |
| 1,259 |
| 1,341 |
| ||
1 Property - Decrease |
|
|
| -6.11 | % |
|
| ||
|
|
|
|
|
|
|
| ||
DENVER |
|
|
|
|
|
|
| ||
116 Inverness |
| Englewood |
| 752 |
| 3,005 |
| ||
1 Property - Decrease |
|
|
| -74.96 | % |
|
| ||
|
|
|
|
|
|
|
| ||
TOTAL |
|
|
| $ | 45,527 |
| $ | 53,141 |
|
33 Properties - Decrease |
|
|
| -14.33 | % |
|
| ||
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 twelve months ended December 31, 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 twelve months ended December 31,2003 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 December 31, |
| Twelve months ended December 31, |
| ||||||||
|
| 2003 |
| 2002 |
| 2003 |
| 2002 |
| ||||
Same store net operating income |
| $ | 10,960 |
| $ | 13,063 |
| $ | 45,527 |
| $ | 53,141 |
|
Net operating income from acquisitions: |
|
|
|
|
|
|
|
|
| ||||
Two Riverwood Place |
| 302 |
| 19 |
| 1,147 |
| 773 |
| ||||
O’Hare Commerce Center |
| 322 |
| 327 |
| 1,308 |
| 609 |
| ||||
Medical Portfolio |
| 1,321 |
| 1,286 |
| 5,282 |
| 1,286 |
| ||||
387 Shuman Blvd |
| 321 |
| 186 |
| 1,095 |
| 186 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Straight-line rent |
| 1,086 |
| 294 |
| 2,173 |
| 633 |
| ||||
Interest income |
| 79 |
| 318 |
| 572 |
| 1,319 |
| ||||
General and administrative expense |
| (1,411 | ) | (1,353 | ) | (6,348 | ) | (5,241 | ) | ||||
Interest expense |
| (4,333 | ) | (4,169 | ) | (17,645 | ) | (15,502 | ) | ||||
Depreciation and amortization |
| (5,581 | ) | (5,878 | ) | (21,615 | ) | (19,836 | ) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Income before allocation to minority interests |
| $ | 3,066 |
| $ | 4,093 |
| $ | 11,496 |
| $ | 17,368 |
|
Great Lakes REIT
Portfolio Lease Expirations
As of January 1, 2004
YEAR |
| SQ FT |
| PERCENT |
|
|
| Columbus |
| Denver |
| Detroit |
| Milwaukee |
| Minneapolis |
| Total |
| Medical |
| ||
|
|
|
| ||||||||||||||||||||
|
|
| |||||||||||||||||||||
Breakout By Market | |||||||||||||||||||||||
Chicago |
| Cincinnati | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Included in Chicago) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2004 |
| 1,000,009 |
| 17.21 | % | 331,780 |
| 83,365 |
| 113,316 |
| 18,471 |
| 216,554 |
| 202,110 |
| 34,413 |
| 1,000,009 |
| 74,719 |
|
|
|
|
|
|
| 34 | % | 8 | % | 11 | % | 2 | % | 22 | % | 20 | % | 3 | % | 100 | % | 7 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005 |
| 781,615 |
| 13.45 | % | 411,908 |
| — |
| 82,019 |
| — |
| 68,815 |
| 149,040 |
| 69,833 |
| 781,615 |
| 141,029 |
|
|
|
|
|
|
| 53 | % | 0 | % | 10 | % | 0 | % | 9 | % | 19 | % | 9 | % | 100 | % | 18 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006 |
| 577,582 |
| 9.94 | % | 222,115 |
| — |
| 63,899 |
| — |
| 74,040 |
| 134,770 |
| 82,758 |
| 577,582 |
| 59,595 |
|
|
|
|
|
|
| 39 | % | 0 | % | 11 | % | 0 | % | 13 | % | 23 | % | 14 | % | 100 | % | 10 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
| 799,158 |
| 13.75 | % | 354,617 |
| — |
| 126,306 |
| 42,656 |
| 124,898 |
| 81,330 |
| 69,351 |
| 799,158 |
| 97,164 |
|
|
|
|
|
|
| 44 | % | 0 | % | 16 | % | 5 | % | 16 | % | 10 | % | 9 | % | 100 | % | 12 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
| 711,506 |
| 12.24 | % | 294,440 |
| — |
| 67,232 |
| 4,856 |
| 219,571 |
| 69,315 |
| 56,092 |
| 711,506 |
| 27,334 |
|
|
|
|
|
|
| 41 | % | 0 | % | 9 | % | 1 | % | 31 | % | 10 | % | 8 | % | 100 | % | 4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
| 254,677 |
| 4.38 | % | 106,109 |
| — |
| 34,760 |
| — |
| 42,196 |
| 57,480 |
| 14,132 |
| 254,677 |
| 4,976 |
|
|
|
|
|
|
| 41 | % | 0 | % | 14 | % | 0 | % | 17 | % | 22 | % | 6 | % | 100 | % | 2 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
| 143,563 |
| 2.47 | % | 122,945 |
| — |
| 9,769 |
| — |
| — |
| 10,849 |
| — |
| 143,563 |
| 5,077 |
|
|
|
|
|
|
| 85 | % | 0 | % | 7 | % | 0 | % | 0 | % | 8 | % | 0 | % | 100 | % | 4 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
| 84,674 |
| 1.46 | % | 29,771 |
| — |
| — |
| — |
| 19,769 |
| 9,264 |
| 25,870 |
| 84,674 |
| 1,242 |
|
|
|
|
|
|
| 35 | % | 0 | % | 0 | % | 0 | % | 23 | % | 11 | % | 31 | % | 100 | % | 1 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 |
| 85,922 |
| 1.48 | % | 32,251 |
| — |
| — |
| — |
| — |
| 53,671 |
| — |
| 85,922 |
| 32,251 |
|
|
|
|
|
|
| 38 | % | 0 | % | 0 | % | 0 | % | 0 | % | 62 | % | 0 | % | 100 | % | 38 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
| 13,572 |
| 0.23 | % | 13,572 |
| — |
| — |
| — |
| — |
| — |
| — |
| 13,572 |
| 3,276 |
|
|
|
|
|
|
| 100 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 100 | % | 24 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
| 1,718 |
| 0.03 | % | 1,718 |
| — |
| — |
| — |
| — |
| — |
| — |
| 1,718 |
| 1,718 |
|
|
|
|
|
|
| 100 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 100 | % | 100 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 |
| 19,600 |
| 0.34 | % | — |
| — |
| — |
| — |
| — |
| 19,600 |
| — |
| 19,600 |
| — |
|
|
|
|
|
|
| 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 100 | % | 0 | % | 100 | % | 0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Month-to-Month |
| 34,214 |
| 0.59 | % | 21,535 |
| — |
| 2,878 |
| — |
| 316 |
| 2,890 |
| 6,595 |
| 34,214 |
| 1,008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non Income Producing |
| 44,936 |
| 0.77 | % | 16,347 |
| — |
| 5,027 |
| — |
| 9,981 |
| 6,662 |
| 6,919 |
| 44,936 |
| — |
|
Office Market Statistics
Fourth Quarter 2003
Suburban |
| Existing |
|
|
|
|
| Anticipated |
| Anticipated |
| ||||||||||
4Q,2002 |
| 3Q,2003 |
| 4Q,2003 |
| 2001 |
| 2002 |
| 4Q, 2003 |
| Y-T-D 2003 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chicago |
| 98,991 |
| 17.0 | % | 19.4 | % | 19.2 | % | 32 |
| (1,510 | ) | 135 |
| (546 | ) | 158 |
| — |
|
Detroit |
| 56,147 |
| 15.8 | % | 18.0 | % | 18.2 | % | (539 | ) | (1,854 | ) | (189 | ) | (1,088 | ) | 624 |
| 121 |
|
Denver |
| 78,989 |
| 18.5 | % | 18.3 | % | 18.8 | % | (279 | ) | (3,656 | ) | (270 | ) | (4 | ) | — |
| — |
|
Columbus |
| 17,228 |
| 20.5 | % | 21.6 | % | 21.2 | % | (279 | ) | (62 | ) | 2 |
| (85 | ) | — |
| — |
|
Cincinnati |
| 19,053 |
| 21.0 | % | 21.4 | % | 20.6 | % | 184 |
| (67 | ) | 227 |
| 158 |
| 168 |
| 125 |
|
Minneapolis |
| 34,338 |
| 16.3 | % | 15.1 | % | 15.8 | % | (364 | ) | (517 | ) | (318 | ) | 123 |
| — |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Average: |
| 304,745 |
| 17.5 | % | 18.6 | % | 18.7 | % | (1,246 | ) | (7,666 | ) | (412 | ) | (1,441 | ) | 950 |
| 246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Columbus CBD |
| 10,369 |
| 21.0 | % | 21.1 | % | 20.5 | % | 251 |
| (150 | ) | 36 |
| 176 |
| 193 |
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals Suburban/CBD: |
| 315,114 |
| 17.6 | % | 18.7 | % | 18.8 | % | (995 | ) | (7,816 | ) | (376 | ) | (1,265 | ) | 1,144 |
| 246 |
|
Source: CB Richard Ellis, Paragon Corporate Realty Services (Detroit), and Great Lakes REIT
* The Milwaukee office market is not accurately surveyed in its entirety on a quarterly basis. In lieu of general statistics that encompass the entire market, the following analysis is based on a property set that directly competes with Great Lakes REIT’s holdings in the market. The source for suburban statistics, including new deliveries, is RFP Commercial and for the CBD, the source is The Polacheck Company. Vacancy as of the fourth quarter of 2003 for the Milwaukee suburbs was 13.0%. Vacancy as of the fourth quarter of 2003 for the CBD was 13.9%. As of the fourth quarter, there was no speculative construction in either the suburbs or the CBD.
** Vacancy rates include direct, available space (exclude sublease space).
*** Anticipated Deliveries refers only to buildings that are currently under construction. Development that is initiated in the future would affect these annual totals.