Audited Statement of Revenue and
Certain Expenses
Northlake Tower Shopping Center
December 31, 1994
with Report of Independent Auditors
Report of Independent Auditors
Mr. Joel L. Teglia, Chief Financial Officer
Banyan Strategic Realty Trust
We have audited the Statement of Revenue and Certain Expenses of Northlake
Tower Shopping Center (the Property) as described in Note 2 for the year ended
December 31, 1994. The Statement of Revenue and Certain Expenses is the
responsibility of the Property's management. Our responsibility is to express
an opinion on the Statement of Revenue and Certain Expenses based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the Statement of Revenue and Certain
Expenses is from material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the Statement
of Revenue and Certain Expenses. An audit also includes assessing the basis
of accounting used and the significant estimates made by management, as well
as evaluating the overall presentation of the Statement of Revenue and Certain
Expenses. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying Statement of Revenue and Certain Expenses was prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission and is not intended to be a complete presentation of the
Property's revenue and expenses.
In our opinion, the Statement of Revenue and Certain Expenses referred to
above presents fairly, in all material respects, the revenue and certain
expenses described in Note 2 for the year ended December 31, 1994, in
conformity with generally accepted accounting purposes.
Ernst & Young LLP
October 2, 1995
Chicago, Illinois
Northlake Tower Shopping Center
Statement of Revenue and Certain Expenses
Year Ended
December 31,
1994
REVENUE
Base rents $3,130,364
Percentage rent 48,951
Tenant reimbursements 740,376
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Total revenue 3,919,691
EXPENSES
Ground rent 600,000
Percentage ground rent 273,664
Real estate taxes 349,259
General operating 205,307
Utilities 173,623
Cleaning and landscaping 103,195
Repairs and maintenance 61,955
----------
Total expenses 1,767,003
----------
Revenue in excess of certain
expenses $2,152,688
==========
See accompanying notes.
Northlake Tower Shopping Center
Notes to Statement of Revenue and Certain Expenses
NOTE 1 BUSINESS
The accompanying statement of revenue and certain expenses relates to the
operations of the Northlake Tower Shopping Center (the Property). The
property was acquired on July 28, 1995, by BSRT/M&J Northlake Limited
Partnership, a joint venture 80% owned by Banyan Strategic Realty Trust (the
Trust). The Property was previously owned by Confederation Life Insurance
Company.
As of December 31, 1994, the Property was 97% leased with forty-seven tenants.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying statement of revenue and certain expenses was prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission. The statement is not representative of the actual
operations of the Property for the period presented nor indicative of future
operations as certain expenses, namely management fees and depreciation and
amortization, which may not be comparable to the expenses expected to be
incurred by the Trust in future operations of the Property, have been
excluded.
REVENUE AND EXPENSE RECOGNITION
Revenue is recognized in the period in which it is earned. Expenses are
recognized in the period in which they are incurred.
NOTE 3 GROUND LEASE
The Property is subject to a ground lease with an independent third party.
Under the provisions of the lease, the Property pays annual base rent of
$600,000 through October 4, 2007, plus 7% of gross rents generated from the
Property when gross rents exceed $2,000,000. The ground lease also requires
the payment of the Property's expenses including real estate taxes.
NOTE 4 RENTALS
The Property has entered into tenant leases that provide for tenants to share
in increases in operating expenses and real estate taxes in excess of base
amounts, as defined. Certain leases provide for tenants to pay additional
rentals based upon a percent of gross sales in excess of base gross sales
amounts, as defined.
Northlake Tower Shopping Center
Estimated Pro Forma Statement
of Net Operating Income
(Unaudited)
The Estimated Pro Forma Statement of Net Operating Income represents the
amount of estimated income which would be realized by the Registrant during
twelve months of ownership of the Property, based upon the assumptions set
forth in the accompanying notes (See Note 1).
REVENUE
Base rents $3,178,700
Percentage rent 49,900
Tenant reimbursements 750,100
----------
Total revenue 3,978,700
EXPENSES
Ground rent 600,000
Percentage ground rent 278,500
Real estate taxes 377,000
General operating 175,600
Management fees 119,400
Utilities 158,600
Depreciation (See Note 2) 428,600
Cleaning and landscaping 114,700
Repairs and maintenance 57,200
----------
Total expenses 2,309,600
----------
Pro Forma revenue in excess of
expenses $1,669,100
==========
Pro Forma funds from operations
(See Note 4) $2,097,700
==========
Northlake Tower Shopping Center
Notes to Estimated Pro Forma Statement
1) This statement does not purpose to forecast actual operating results for
any period in the future and thus, the following assumptions may not be
valid for future years and actual results may differ. These statements
should be read in conjunction with the Statement of Revenue and Certain
Expenses for the year ended December 31, 1994 which were annualized and
modified by Management for known changes in revenues and expenses
associated with the Registrant's ownership of the Property in order to
estimate the pro forma statement.
2) Depreciation expense which represents a non-cash expenditure has been
included for informational purposes only. Depreciation is calculated on
a depreciable basis of approximately $17,144,000 using the straight line
method based on a useful life of 40 years.
3) The Property will be managed by an unaffiliated third party for an
initial management fee of 4.0% of gross revenues.
4) Funds From Operations (or "FFO") has been provided in the Pro Forma
Statement as supplemental information to the property's projected
operating results. FFO is used by the real estate investment trust
industry as a measure of a property's performance and is defined as net
operating income from a property's operations, plus certain non-cash
items including depreciation and amortization and excluding any
extraordinary capital items.