Great Lakes REIT Reports $0.58 EPS and $0.50 FFO Per Common Share for Third Quarter 2002

Business Wire, Nov 1, 2002

Business Editors

OAK BROOK, Ill.--(BUSINESS WIRE)--Nov. 1, 2002

Great Lakes REIT (NYSE: GL):

Great Lakes REIT Third Quarter Highlights

-- Net Income of $9.5 million, or $0.57 per common share

-- Funds From Operations (FFO) of $8.2 million, or $0.50 per common share

-- EBITDA of $13.1 million

-- Average occupancy of 83% for the third quarter of 2002

-- Lease rates increased 12% on spaces that were renewed or re-leased in 2002

-- Monthly cash dividend of $0.135 per common share paid in August, September and October 2002.

Great Lakes REIT (NYSE: GL), a real estate investment trust which holds a portfolio of Midwestern office properties, today announced third quarter 2002 net income of $9.5 million, or $0.57 per common share, and funds from operations (FFO) of $8.2 million, or $0.50 per common share. This compares to net income of $4.5 million or $0.27 per common share, and FFO of $9.2 million or $0.55 per common share, for the third quarter of 2001. Net income for the third quarter of 2002 included $6.1 million, or $0.37 per common share of gain on sale of properties, compared with the third quarter of 2001, during which there were no property sales and no gain on sale additions to net income.

For the nine months ended September 30, 2002, the Company reported net income of $18.9 million, or $1.14 per common share, compared to $14.3 million, or $0.86 per common share, for the comparable period of 2001. During the nine months ended September 30, 2002, property sale gains contributed $7.2 million to net income, or $0.43 per share, compared with the nine months ended September 30, 2001 during which there were no property sales and no gain on sale additions to net income. Funds from operations totaled $26.3 million, or $1.59 per common share, for the nine months ended September 30, 2002, a decrease of $.08 per common share from the same period in 2001.

"Our FFO per common share for the third quarter was down due in part to a temporary decline in revenues caused by the sales of our Northbrook, Illinois and Ann Arbor, Michigan properties early in the quarter. However, our overall operating results for the nine months ended September 30, 2002 generally reflect the impact of declining occupancies in our markets and portfolio. We expect that the leasing environment in our markets will continue to be challenging during the balance of 2002 and 2003," commented Dick May, Great Lakes REIT's Chairman and CEO. "We have taken proactive measures to address issues raised by this very difficult leasing environment. One of these actions was the acquisition of a portfolio of medical office properties, which we completed after the close of the third quarter. These medical office properties are 99% leased and we expect they will enhance our property portfolio by providing stable cash flows and offering strong potential for income growth. In addition, we expect to complete the refinancing of our unsecured bank credit facility. This will enable us to take advantage of current low long-term rates, and fix rates on a higher portion of our outstanding debt. Finally, we continue to focus our leasing efforts on maintaining our occupancies rather than emphasizing growth in rental rates."

"Although we don't anticipate the leasing environment in our Midwestern office markets will improve meaningfully this year or next year, we do believe that the fundamental long-term strength of our markets remains intact," continued Mr. May. "Eventually the business climate will improve, leasing demand will rise, and portfolio occupancies for Great Lakes REIT and others will return to more normalized levels. When this occurs, Great Lakes REIT will be poised for significant FFO gains. Average occupancy levels for the Company's portfolio have exceeded 90% over the last five years, considerably above the current and project year-end levels of 83%."

Based on current market conditions, the Company expects 2002 FFO per common share in the range of $2.13 to 2.15, and EPS in the range of $1.43 to $1.45 per common share.

The Company currently expects that 2003 FFO per share will be between $1.85 and $2.00. This guidance assumes continued softness in the economy and office markets and the acquisition of $75 million of new properties during the year.

Portfolio Performance

Total revenues increased by 0.7% to $24.9 million in the third quarter of 2002 from $24.7 million in last year's third quarter. EBITDA decreased to $13.1 million in the third quarter of 2002 as compared to $13.9 million for the third quarter of 2001. Same store sales decreased 5.4% (cash basis) for the three months ended September 30, 2002, as compared to the third quarter of 2001 primarily as a result of the decline in occupancy quarter over quarter. Same store sales decreased 7.7% for the nine months ended September 30, 2002 compared to the same period of 2001 due to occupancy declines.

Balance Sheet, Market Value and Liquidity

At September 30, 2002, the Company's total debt and equity market capitalization was $593.4 million. Debt to total market capitalization was 44.9%, based on equity market capitalization of $327.2 million, compared to 42.8% at June 30, 2002. EBITDA coverage of interest expense was 3.4 times for the quarter ended September 30, 2002 and EBITDA coverage of interest and preferred dividends was 2.8 times for the same period. Both decreased from the quarter ended June 30, 2002.