SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
ý Current Report Pursuant to Section 13 OR 15(d)
of the Securities Exchange Act of 1934
December 13, 2002
Date of report
(Date of earliest event reported)
Great Lakes REIT
(Exact name of Registrant as specified in Charter)
Commission file number: 1-14307
Maryland (State or other jurisdiction of incorporation or organization) |
36-4238056 (I.R.S. Employer identification no.) |
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823 Commerce Drive, Suite 300, Oak Brook, IL (Address of principal executive offices) |
60523 (Zip Code) |
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(630) 368-2900 (Registrant's telephone number, including area code) |
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
As previously reported in a Current Report on Form 8-K filed October 14, 2002, on October 1, 2002, Great Lakes REIT through Great Lakes REIT, L.P. and a newly formed subsidiary, GLR-Medical Properties One, LLC, a Delaware limited liability company (collectively, the "Company") completed the purchase of eight medical office buildings in the metropolitan Chicago market for approximately $59.6 million. The properties were acquired from Advocate Health and Hospitals Corporation and an affiliate, a Chicago-area health care services provider not affiliated with the Company.
The eight medical office buildings, seven of which are subject to 75-year ground leases, total 459,000 square feet and range in size from 50,000 to 130,000 square feet.
Funds for the purchase came from funds held in trust for the completion of a 1031 tax-free exchange transaction and from a $36 million one-year bridge loan from Bank One NA. The interest rate on the bridge loan floats at LIBOR plus 1.85% for the first six months and at LIBOR plus 2.5% for the second six months. The bridge loan may be pre-paid any time prior to its due date without penalty.
Item 7. Financial Statements and Exhibits
The required financial statements for the medical office buildings are attached as exhibit A.
The required pro forma financial statements are attached as exhibit B.
The consent of Ernst & Young LLP is filed as exhibit C.
No information is required under Items 1,3,4,5 and 6, and these items have therefore been omitted.
By: |
/s/ James Hicks James Hicks, Treasurer |
Exhibit A
Combined Statements of Revenue and Certain Expenses
Professional Office Buildings
Year ended December 31, 2001 and period from
January 1, 2002 to September 30, 2002 (Unaudited)
with Report of Independent Auditors
Professional Office Buildings
Combined Financial Statements
Year ended December 31, 2001
Report of Independent Auditors | 1 | |
Combined Statements of Revenue and Certain ExpensesYear ended December 31, 2001 and period from January 1, 2002 to September 30, 2002 (Unaudited) | 2 | |
Notes to Combined Statements of Revenue and Certain Expenses | 3 |
Report of Independent Auditors
The
Board of Trustees of
Great Lakes REIT
We have audited the accompanying combined statement of revenue and certain expenses of Professional Office Buildings as described in Note 1 (the Properties) for the year ended December 31, 2001. The combined statement of revenue and certain expenses is the responsibility of the Properties' management. Our responsibility is to express an opinion on the combined statement of revenue and certain expenses based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined statement of revenue and certain expenses is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures made in the combined statement of revenue and certain expenses. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the combined statement of revenue and certain expenses. We believe that our audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenue and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Form 8-K of Great Lakes REIT as described in Note 2 and is not intended to be a complete presentation of the Properties' revenue and expenses.
In our opinion, the combined statement of revenue and certain expenses referred to above presents fairly, in all material respects, the revenue and certain expenses of the Properties described in Note 2 for the year ended December 31, 2001, in conformity with accounting principles generally accepted in the United States.
Chicago,
Illinois
December 9, 2002
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Professional Office Buildings
Combined Statements of Revenue and Certain Expenses
|
Year ended December 31, 2001 |
January 1, 2002, to September 30, 2002 (Unaudited) |
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---|---|---|---|---|---|---|
|
(In Thousands) |
|||||
Revenue | ||||||
Rents including expense reimbursements | $ | 7,772 | $ | 6,056 | ||
Total revenue | 7,772 | 6,056 | ||||
Expenses | ||||||
Property operating and maintenance |
2,296 |
1,755 |
||||
Real estate taxes | 1,334 | 1,073 | ||||
Management fees | 237 | 182 | ||||
General and administrative | 406 | 270 | ||||
Total expenses | 4,273 | 3,280 | ||||
Revenue in excess of certain expenses | $ | 3,499 | $ | 2,776 | ||
See accompanying notes.
2
Professional 0ffice Buildings
Notes to Combined Statements of Revenue and Certain Expenses
1. Business
The accompanying combined statements of revenue and certain expenses relate to the operations of eight medical office buildings with approximately 459,000 aggregate rentable square feet, located in the metropolitan Chicago market (the Properties). The Properties were acquired on October 1, 2002, in a single transaction from affiliated sellers who are not related to Great Lakes REIT.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying combined statements of revenue and certain expenses were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission for inclusion in the Form 8-K of Great Lakes REIT. The statements are not representative of the actual operations of the Properties for the periods presented nor indicative of future operations as certain expenses, primarily depreciation, amortization and interest expense, which may not be comparable to the expenses expected to be incurred by Great Lakes REIT in future operations of the Properties, have been excluded.
Revenue and Expense Recognition
Revenue is recognized on a straight-line basis over the terms of the related leases. Expenses are recognized in the period in which they are incurred.
Use of Estimates
The preparation of the combined statements of revenue and certain expenses in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.
Unaudited Interim Statement
The financial statement for the 2002 interim period includes the revenue and certain expenses for the period prior to acquisition by Great Lakes REIT. In the opinion of management, such financial statement reflects all adjustments necessary for a fair presentation of the results of the interim period. All such adjustments are of a normal, recurring nature.
3. Rentals
The Properties have entered into tenant leases that provide for tenants to share in the operating expenses and real estate taxes on a pro rata basis, as defined.
4. Related Party Transactions
The Properties are generally located on the grounds of hospitals operated by the sellers. During 2001 and the interim period in 2002, the Properties were provided some or all of the following services by the related hospitals: housekeeping, building and grounds maintenance, security, engineering, utilities, property and casualty insurance coverage and certain administrative services. Charges for such services were based on management's estimates regarding utilization of hospital personnel or various apportionment factors such as relative square footage. The
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amounts of such related party charges reflected in the accompanying statements of revenue and certain expenses are as follows:
|
Year Ended December 31, 2001 |
January 1, 2002 to September 30, 2002 (unaudited) |
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---|---|---|---|---|---|---|
Personnel related | $ | 163,231 | $ | 137,365 | ||
Maintenance, housekeeping, and security | 151,041 | 133,199 | ||||
Utilities | 632,476 | 467,933 | ||||
Administrative, asset management and insurance | 398,910 | 268,126 | ||||
$ | 1,345,658 | $ | 1,006,623 | |||
During 2001 and the interim period in 2002, approximately 123,000 square feet of office space in the Properties were used by the hospitals for their own purposes. Accordingly, no rental and reimbursement income is reflected in the accompanying statements of revenue and certain expenses relating to such space.
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Exhibit B
Great Lakes REIT
Pro Forma Condensed Consolidated Balance Sheet
As of September 30, 2002
(Unaudited) (In Thousands except per share data)
|
As Reported (1) |
Medical Office Buildings (2) |
Pro Forma |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
Assets | ||||||||||
Operating Properties: | ||||||||||
Land | $ | 63,065 | $ | 1,290 | $ | 64,355 | ||||
Buildings and improvements | 458,007 | 58,330 | 516,337 | |||||||
521,072 | 59,620 | 580,692 | ||||||||
Less accumulated depreciation | 63,371 | 63,371 | ||||||||
457,701 | 59,620 | 517,321 | ||||||||
Assets held for sale, net | 767 | 767 | ||||||||
Cash and cash equivalents | 23,324 | (21,203 | ) | 2,121 | ||||||
Real estate tax escrows | 288 | 288 | ||||||||
Rents receivable | 6,478 | 6,478 | ||||||||
Deferred financing and leasing costs, net of accumulated amortization | 8,736 | 141 | 8,877 | |||||||
Goodwill, net of accumulated amortization | 1,061 | 1,061 | ||||||||
Other assets | 2,887 | (1,000 | ) | 1,887 | ||||||
Total assets | $ | 501,242 | $ | 37,558 | $ | 538,800 | ||||
Liabilities and shareholders' equity: | ||||||||||
Bank loan payable | $ | 114,450 | $ | 36,000 | $ | 150,450 | ||||
Mortgage loans payable | 148,123 | 148,123 | ||||||||
Bonds payable | 3,620 | 3,620 | ||||||||
Accounts payable and accrued liabilities | 4,341 | 4,341 | ||||||||
Dividends payable | 2,538 | 2,538 | ||||||||
Accrued real estate taxes | 14,183 | 1,346 | 15,529 | |||||||
Prepaid rent | 4,270 | 149 | 4,419 | |||||||
Security deposits | 1,532 | 63 | 1,595 | |||||||
Total liabilities | 293,057 | 37,558 | 330,615 | |||||||
Minority interests | 676 | 676 | ||||||||
Preferred shares of beneficial interest ($0.01 par value, 10,000 shares authorized; 1,500 93/4% Series A Cumulative Redeemable shares, with a $25.00 per share Liquidation Preference, issued and outstanding in 2001 and 2000) | 37,500 | 37,500 | ||||||||
Common shares of beneficial interest ($0.01 par value, 60,000 shares authorized; 18,313 and 18,275 shares issued in 2002 and 2001, respectively) | 183 | 183 | ||||||||
Paid-in-capital | 235,484 | 235,484 | ||||||||
Retained earnings (deficit) | (16,975 | ) | (16,975 | ) | ||||||
Employee share loans | (18,101 | ) | (18,101 | ) | ||||||
Deferred compensation | (2,111 | ) | (2,111 | ) | ||||||
Accumulated other comprehensive income (loss) | (1,147 | ) | (1,147 | ) | ||||||
Treasury shares, at cost (1,772 shares) | (27,324 | ) | (27,324 | ) | ||||||
Total shareholders' equity | 207,509 | | 207,509 | |||||||
Total liabilities and shareholders' equity | $ | 501,242 | $ | 37,558 | $ | 538,800 | ||||
The accompanying notes are an integral part of these financial statements.
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Great Lakes REIT
Pro Forma Condensed Consolidated Statement of Income
For the nine months ended September 30, 2002
(Unaudited) (In Thousands except per share data)
|
As Reported (1) |
Medical Office Buildings (2) |
Other Acquisition (3) |
Other Dispositions (4) |
Pro Forma Adjustments |
Pro Forma |
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---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenues: | |||||||||||||||||||
Rental and reimbursements | $ | 72,725 | $ | 6,056 | $ | 1,600 | $ | | $ | 1,305 | (5) | $ | 81,686 | ||||||
Parking | 373 | 373 | |||||||||||||||||
Telecommunications | 119 | 119 | |||||||||||||||||
Tenant service | 257 | 257 | |||||||||||||||||
Interest | 1,000 | 1,000 | |||||||||||||||||
Other | 698 | 33 | 731 | ||||||||||||||||
Total revenues | 75,172 | 6,056 | 1,633 | | 1,305 | 84,166 | |||||||||||||
Expenses: | |||||||||||||||||||
Real estate taxes | 12,049 | 1,073 | 431 | 13,553 | |||||||||||||||
Other property operating | 19,856 | 1,937 | 473 | (69 | )(6) | 22,198 | |||||||||||||
General and administrative | 3,888 | 270 | 41 | 4,198 | |||||||||||||||
Interest | 11,334 | 1,094 | (7) | 12,428 | |||||||||||||||
Depreciation and amortization | 14,362 | 1,215 | (8) | 15,577 | |||||||||||||||
Total expenses | 61,489 | 3,280 | 945 | | 2,240 | 67,954 | |||||||||||||
Income from continuing operations | 13,683 | 2,776 | 688 | | (935 | ) | 16,212 | ||||||||||||
Gain on sale of properties | 7,165 | 7,165 | |||||||||||||||||
Discontinued operations, net | 812 | (812 | ) | | |||||||||||||||
Minority interest | (34 | ) | (34 | ) | |||||||||||||||
Net income | 21,626 | 2,776 | 688 | (812 | ) | (935 | ) | 23,343 | |||||||||||
Income allocated to preferred shareholders | 2,742 | 2,742 | |||||||||||||||||
Net income applicable to common shares | $ | 18,884 | $ | 2,776 | $ | 688 | $ | (1,624 | ) | $ | (935 | ) | $ | 20,601 | |||||
Earnings per common share basic | $ | 1.15 | $ | 1.26 | |||||||||||||||
Weighted average common shares outstanding basic | 16,370 | 16,370 | |||||||||||||||||
Diluted earnings per common share | $ | 1.14 | $ | 1.25 | |||||||||||||||
Weighted average common shares outstanding diluted | 16,532 | 16,532 | |||||||||||||||||
Comprehensive income: | |||||||||||||||||||
Net income | $ | 21,626 | $ | 23,343 | |||||||||||||||
Change in fair value of interest rate swaps | (1,646 | ) | (1,646 | ) | |||||||||||||||
Total comprehensive income | $ | 19,980 | $ | 21,697 | |||||||||||||||
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Property |
Location |
Date of Sale |
||
---|---|---|---|---|
160 Hansen Court | Wood Dale, IL | April 22, 2002 | ||
3400 Dundee Road | Northbrook, IL | July 1, 2002 | ||
305, 315 and 325 Eisenhower Parkway | Ann Arbor, MI | August 31, 2002 |
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Great Lakes REIT
Pro Forma Condensed Consolidated Statement of Income
For the year ended December 31, 2001
(Unaudited) (In Thousands except per share data)
|
As Reported (1) |
Medical Office Buildings (2) |
Other Acquisition (3) |
Other Dispositions (4) |
Pro Forma Adjustments |
Pro Forma |
|||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Revenues: | |||||||||||||||||||
Rental and reimbursements | $ | 99,646 | $ | 7,772 | $ | 2,724 | $ | (5,366 | ) | $ | 1,740 | (5) | $ | 106,516 | |||||
Parking | 436 | (18 | ) | 418 | |||||||||||||||
Telecommunications | 467 | (16 | ) | 451 | |||||||||||||||
Tenant service | 437 | (18 | ) | 419 | |||||||||||||||
Interest | 1,532 | 1,532 | |||||||||||||||||
Other | 628 | 77 | (27 | ) | 678 | ||||||||||||||
Total revenues | 103,146 | 7,772 | 2,801 | (5,445 | ) | 1,740 | 110,014 | ||||||||||||
Expenses: | |||||||||||||||||||
Real estate taxes | 16,209 | 1,334 | 658 | (910 | ) | 17,291 | |||||||||||||
Other property operating | 26,090 | 2,533 | 882 | (1,238 | ) | (85 | )(6) | 28,182 | |||||||||||
General and administrative | 4,992 | 406 | 82 | (197 | ) | 5,283 | |||||||||||||
Interest | 14,331 | 1,840 | (7) | 16,171 | |||||||||||||||
Depreciation and amortization | 19,852 | (1,025 | ) | 1,664 | (8) | 20,491 | |||||||||||||
Total expenses | 81,474 | 4,273 | 1,622 | (3,370 | ) | 3,419 | 87,418 | ||||||||||||
Income before allocation to minority interests | 21,672 | 3,499 | 1,179 | (2,075 | ) | (1,679 | ) | 22,596 | |||||||||||
Minority interest | (52 | ) | (52 | ) | |||||||||||||||
Net income | 21,620 | 3,499 | 1,179 | (2,075 | ) | (1,679 | ) | 22,544 | |||||||||||
Income allocated to preferred shareholders | 3,656 | 3,656 | |||||||||||||||||
Net income applicable to common shares | $ | 17,964 | $ | 3,499 | $ | 1,179 | $ | (2,075 | ) | $ | (1,679 | ) | $ | 18,888 | |||||
Earnings per common share basic | $ | 1.09 | $ | 1.14 | |||||||||||||||
Weighted average common shares outstanding basic | 16,520 | 16,520 | |||||||||||||||||
Diluted earnings per common share | $ | 1.08 | $ | 1.13 | |||||||||||||||
Weighted average common shares outstanding diluted | 16,655 | 16,655 | |||||||||||||||||
Comprehensive income: | |||||||||||||||||||
Net income | $ | 21,620 | $ | 22,544 | |||||||||||||||
Change in fair value of interest rate swaps | 499 | 499 | |||||||||||||||||
Total comprehensive income | $ | 22,119 | $ | 23,043 | |||||||||||||||
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Property |
Location |
Date of Sale |
||
---|---|---|---|---|
160 Hansen Court | Wood Dale, IL | April 22, 2002 | ||
3400 Dundee Road | Northbrook, IL | July 1, 2002 | ||
305, 315 and 325 Eisenhower Parkway | Ann Arbor, MI | August 31, 2002 |
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EXHIBIT C
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements Form S-3 No. 333-49499, Form S-8 No. 333-56617 and Form S-8 No. 333-56619 of Great Lakes REIT of our report dated December 9, 2002, with respect to the combined statement of revenue and certain expenses of Professional Office Buildings for the year ended December 31, 2001 included in the Report (Form 8-K/A) of Great Lakes REIT, dated December 13, 2002.
Ernst & Young LLP
Chicago,
Illinois
December 13, 2002