<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

           [ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 1996
                                       OR
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                             SECURITIES ACT OF 1934

Commission file number 0-28354
                      ---------

                             GREAT LAKES REIT, INC.
             (Exact Name of Registrant as Specified in Its Charter)

         Maryland                                     36-3844714
(State or Other Jurisdiction of          (I.R.S. Employer Identification Number)
Incorporation or Organization)

                               823 Commerce Drive
                                    Suite 300
                            Oak Brook, Illinois 60521
                                 (630) 368-2900
          (Address and telephone number of principal executive offices)

           Securities registered pursuant to Section 12(b) of the Act:

                                      None

           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.01 par value
                                (Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [x] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]

As  of  March  1,  1997,  there  was  no  established  trading  market  for  the
Registrant's Common Stock, $.01 par value.

The  number  of  shares  of the  Registrant's  Common  Stock,  $.01  par  value,
outstanding as of March 1, 1997 was 8,938,040.

                      Documents Incorporated by Reference:

                                      None.


<PAGE>

                             GREAT LAKES REIT, INC.

                         Form 10-K Annual Report -- 1996

                                Table of Contents


PART I                                                                      Page
  Item 1.         Business................................................     3
  Item 2.         Properties..............................................    11
  Item 3.         Legal Proceedings.......................................    21
  Item 4.         Submission of Matters to a Vote of Security Holders.....    21

PART II
  Item 5.         Market for Registrant's Common Equity
                    and Related Stockholder Matters.......................    22
  Item 6.         Selected Financial Data.................................    23
  Item 7.         Management's Discussion and Analysis
                    of Financial Condition and Results of Operations......    25
  Item 8.         Financial Statements and Supplementary Data.............    29
  Item 9.         Changes in and Disagreements with Accountants
                    on Accounting and Financial Disclosure................    29

PART III
  Item 10.        Directors and Executive Officers of the Registrant......    30
  Item 11.        Executive Compensation..................................    33
  Item 12.        Security Ownership of Certain Beneficial
                    Owners and Management.................................    39
  Item 13.        Certain Relationships and Related Transactions..........    40

PART IV
  Item 14.        Exhibits, Financial Statement Schedules
                    and Reports on Form 8-K...............................    43

Signatures................................................................    47

Index to Financial Statements.............................................   F-1



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                                     PART I

ITEM 1--BUSINESS

General

     Great  Lakes  REIT,  Inc.,  a  Maryland  corporation  formed in 1992  ("the
Company"), is a fully integrated, self-administered and self-managed real estate
company focused on acquiring,  renovating,  owning and operating suburban office
properties located within an approximate 500-mile radius of metropolitan Chicago
(the  "Midwest  Region").  The  Company  acquired  six,  three,  seven  and  ten
properties in 1993,  1994, 1995 and 1996,  respectively.  The Company  currently
owns  and  operates  27  properties  (the  "Properties")  in  suburban  Chicago,
Milwaukee,   Minneapolis,   Detroit,   Columbus  and  Cincinnati  (the  "Current
Markets"). The Properties contain approximately 2.8 million rentable square feet
leased to approximately 300 tenants. As of December 31, 1996, the Properties had
a weighted  average  occupancy  rate of  approximately  92%. The Company's  five
executive  officers  have an average of 17 years  experience  in the real estate
industry.  The Company has elected to be treated for federal income tax purposes
as a real estate investment trust ("REIT").

     In 1996,  the Company  organized  Great Lakes REIT,  L.P.  (the  "Operating
Partnership") and transferred 15 of the Properties to the Operating Partnership.
The Company  intends to  transfer  its  remaining  Properties  to the  Operating
Partnership  after  receipt  of  necessary  consents  from  mortgage  lenders or
repayment  of amounts  owed under the related  mortgages.  These  transfers  are
expected to occur by June 30, 1997. As the sole general partner of the Operating
Partnership,  the Company has exclusive power to manage and conduct the business
of the Operating  Partnership,  subject to certain limited exceptions.  Although
the Company and the  Operating  Partnership  are separate  entities,  unless the
context  otherwise  requires,  all references in this Report on Form 10-K to the
"Company" refer to the Company and the Operating Partnership, collectively.

     Effective  April  1,  1996,  the  Company  became a  self-administered  and
self-managed  REIT upon the  consummation  of the merger (the  "Merger")  of the
Company with Equity  Partners,  Ltd. (the "Advisor").  Prior to the Merger,  the
Advisor provided  services to the Company  relating to the selection,  purchase,
financing and operation of the Company's properties.  Certain executive officers
and other employees of the Company were  previously  employed by the Advisor and
owned a substantial interest in the Advisor.

     The  Company's  primary  business  strategy  is  to  acquire  well-located,
underperforming  suburban office  properties in the Midwest Region at attractive
yields  and  to  increase  cash  flow  and  property  value  by  implementing  a
comprehensive operating strategy. The Company's operating strategy includes: (i)
investment  in  value-enhancing  renovation  and  refurbishment  programs;  (ii)
aggressive leasing efforts;  (iii) reduction and containment of operating costs;
and (iv) a strong emphasis on tenant services and satisfaction. This value-added
operating  strategy is intended to establish  the Company as one of the suburban
office owner/operators of choice in the markets it serves and to maximize tenant
retention.  The  Company's  commitment to tenant  satisfaction  and retention is
evidenced by its retention  rate of  approximately  85% (based on 264,530 square
feet  renewed)  from  January 1, 1993 to December 31,  1996.  In  addition,  the
Company believes it has been successful in implementing  its operating  strategy
as evidenced by increased occupancy rates and rental income at the Properties.

     The Company  generally  focuses on acquiring  properties (i) with less than
250,000  rentable  square feet and (ii) that are  available  at purchase  prices
below $20 million. Management believes that assets of this size are too small to
be efficiently acquired on a stand-alone basis by most institutional and public

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sector  buyers;  as a result,  competition  for these  properties  is  primarily
limited to  privately-held  real estate  companies  and  private  single-purpose
entities.  The Company's recent acquisition activities during the last 12 months
demonstrate  the  Company's  ability to make  acquisitions  consistent  with its
strategy  for growth.  During 1996,  the Company  acquired 10  Properties  at an
aggregate cost of $97.6 million.

     The Company believes that the economic  fundamentals in the Current Markets
and certain  other  markets  within the  Midwest  Region  provide an  attractive
environment  for owning,  acquiring and operating  suburban  office  properties.
Since 1990, there has been limited construction of suburban office properties in
the Midwest Region. The Company believes that the limited supply of new suburban
office  properties,  together  with the  increased  demand  caused  by a growing
economy,  will continue to result in increased  occupancies and rental rates for
suburban office space in the Midwest Region.

Competitive Advantages

     The Company believes it enjoys certain  competitive  advantages in pursuing
its business and growth strategies.

     Experienced  Management Team. The Company's five executive officers have an
average of 17 years of real estate  experience,  primarily  in  suburban  office
properties  located in the Midwest  Region.  Management's  market  knowledge and
long-standing  relationships  with  tenants,  brokers and  institutions  lead to
numerous investment and leasing opportunities.

     Focus on Suburban Office  Properties in the Midwest  Region.  The Company's
geographic and property-specific focus enables the Company to rapidly review and
respond to acquisition  opportunities  as well as to anticipate and  efficiently
address the needs of existing and  prospective  tenants,  resulting in favorable
lease renewals, tenant expansions and new acquisition opportunities.

     Fully Integrated Organization.  The Company utilizes an integrated approach
to acquisition,  management,  leasing and renovation  activities.  This approach
allows the Company to offer a full range of alternatives  (including  expansions
and  redevelopment  of  existing  facilities,   acquisitions  and  build-to-suit
projects) to satisfy the space needs of existing and prospective tenants.



     Access to  Capital.  The  Company  has a $75  million  secured  bank credit
facility (the "Credit  Facility")  with The First  National  Bank of Boston,  as
Agent to fund additional acquisitions and operations.

Organization

     The Company is a Maryland corporation,  its principal executive offices are
located at 823 Commerce  Drive,  Oak Brook,  Illinois  60521,  and its telephone
number is (630) 368-2900.  The Company is organized into four  functional  areas
with each such area being  managed by a vice  president or more senior member of
the Company's  management,  and,  ultimately,  the Company's President and Chief
Executive Officer,  Richard A. May. The  responsibilities of the four functional
areas are summarized below.

     Acquisitions and Dispositions. The acquisition and disposition area, headed
by Raymond M. Braun,  is responsible  for all of the Company's  acquisition  and
disposition   activities,   including   identifying  and  analyzing  prospective
acquisitions,  supervising third-party due diligence contractors, conducting the
Company's  purchase and sale  negotiations  and reviewing offers to purchase the
Company's Properties.

     Asset and  Property  Management.  The asset and property  management  area,
headed  by Kim S.  Mills,  is  responsible  for  all  of the  Company's  leasing
activities, including communicating and negotiating

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with existing and prospective tenants,  coordinating with outside leasing agents
and developing leasing strategies,  as well as the Company's property management
activities,  which  include  maintaining  the physical  properties  and ensuring
tenant satisfaction.

     Finance.  The finance area,  headed by James Hicks,  is responsible for the
Company's  financial matters,  including internal  accounting and recordkeeping,
cash  management,  oversight  of the  Company's  indebtedness,  projections  and
employee benefits.

     Administration  and Legal.  The  administrative  and legal area,  headed by
Richard L. Rasley, is responsible for all legal matters, including those related
to:  acquisitions,  leasing,  property management and dispositions,  and ongoing
reporting matters as well as all administrative  matters,  including  personnel,
internal management and investor relations.

Business and Growth Strategies

     The Company's  primary  business  objectives are to maximize growth in cash
flow per share and to enhance  the value of its  portfolio  in order to maximize
total  return to its  stockholders.  The Company  believes it can achieve  these
objectives by continuing to implement its business  strategies and  capitalizing
on the internal and external growth  opportunities  described below. The Company
also believes,  based on its evaluation of market  conditions,  that a number of
factors will enhance its ability to achieve its business  objectives,  including
opportunities to maximize  occupancy rates,  rental rates and overall  portfolio
value. These factors include the continuing economic  improvement in the Midwest
Region as well as the limited  construction of new suburban office properties in
the Midwest Region, due to the cost to develop such properties relative to their
current acquisition prices.

Business Strategies

     The  Company's  primary  business  strategy  is  to  acquire  well-located,
underperforming  suburban office  properties in the Midwest Region at attractive
yields  and  to  increase  cash  flow  and  property  value  by  implementing  a
comprehensive  value-added  operating  strategy.  This  strategy  includes:  (i)
investment  in  value-enhancing  renovation  and  refurbishment  programs;  (ii)
aggressive leasing efforts;  (iii) reduction and containment of operating costs;
and (iv) a strong emphasis on tenant services and satisfaction. This strategy is
intended to establish the Company as one of the suburban office  owner/operators
of choice in the markets it serves and to maximize tenant retention.

     Based on its  historical  activities  and its  knowledge  of various  local
marketplaces,  the Company believes that the Midwest Region offers opportunities
for companies that are well-capitalized,  experienced owners of real estate with
extensive  local market  expertise.  In addition,  based on this  experience and
knowledge,  the Company  believes  that the existence of a public market for its
securities  will  enhance  its access to  capital,  thereby  allowing it to take
advantage of opportunities to acquire  additional  suburban office properties at
attractive prices and develop office  properties,  when feasible,  at attractive
returns.  The Company  implements its business  strategies  by: (i)  emphasizing
tenant  satisfaction and retention and employing  intensive  property  marketing
programs;  (ii)  utilizing an integrated  approach to  acquisition,  management,
leasing and renovation activities that is designed to coordinate decision-making
and enhance  responsiveness to market  opportunities and tenant needs; and (iii)
implementing cost control management and systems that capitalize on economies of
scale arising from the size and location of the Company's portfolio. The Company
believes that the  implementation  of these  operating  practices has led to the
increased occupancy rates and rental revenue of its existing portfolio.

     Aggressive  Leasing.  The Company implements an aggressive leasing strategy
based on its  knowledge  of the Current  Markets  and its  tenants'  needs.  The
Company's relationships with the tenant

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and brokerage  communities  provide the Company with  information to enhance its
leasing  and  marketing   efforts.   The  Company's   policies  of   maintaining
communications,  delivering  a  high  level  of  service  and  offering  leasing
flexibility  provide  existing  tenants  greater control over existing space and
future space planning and serve to enhance tenant retention.

     As part of this aggressive  leasing strategy,  property-specific  marketing
plans are prepared at the time of acquisition  and are constantly  monitored and
updated to pro-actively position each Property within its respective market. The
Company  enhances  its leasing  efforts by  retaining  leasing  brokers that are
specifically  selected  for their market  knowledge,  tenant  relationships  and
historic  ability to  generate  leases.  This  strategy  enables  the Company to
attract and lease office space to a greater  number of tenants by improving  the
Company's  visibility  in  the  tenant  community.   The  Company  believes  its
broad-based  market presence in certain Current Markets  provides a wide variety
of Class A and Class B space  alternatives for prospective  tenants and existing
tenants whose facility requirements evolve as their businesses grow.

     As  part  of its  leasing  strategy,  the  Company  reviews  the  financial
statements and other financial  information on prospective tenants to assess the
creditworthiness  of tenants as compared to the rents  required to be paid under
the tenants' leases and the aggregate dollar investment  required by the Company
for tenant improvements and leasing commissions.  The Company may require credit
enhancements from tenants in the form of increased security deposits, letters of
credit, and personal or corporate guarantees of lease obligations.

     Active  Property  Management.  The Company  believes  that active  property
management  is a  critical  aspect of the  Company's  activities,  and it is the
objective of  management  to intensely  manage its  Properties to provide a high
level of service and maximum  flexibility to the Company's tenants.  The Company
currently employs 15 individuals in its property management division,  including
a Vice President of Property  Management who is a Certified Property Manager and
has been in the industry for  approximately  ten years.  The Company employs six
property  managers,  primarily located at the Properties,  and eight maintenance
personnel.

     Integrated Decision-making and Responsiveness.  In addition to the location
and  quality of its  Properties,  management  generally  credits  its ability to
maintain  its  Properties  at  above-average  market  occupancy  levels  to  the
coordination of its decision-making  team.  Acquisition,  renovation and leasing
activities are coordinated to enhance responsiveness to market opportunities and
tenant needs.  The  acquisition,  leasing and renovation teams work closely with
the  Company's  senior  management  from the initial  meeting  with  prospective
tenants or sellers through the  negotiation  process.  This integrated  approach
permits the Company to analyze the economic  terms and costs  (including  tenant
build-out and retrofitting costs) for each lease on a timely and efficient basis
throughout lease  negotiations.  With respect to  acquisitions,  the Company can
quickly  analyze the costs of upgrades  and lease-up  potential.  The Company is
able to commit to leasing and  acquisition  terms quickly,  facilitating  timely
transaction  execution and build-out of tenant space, and minimizing lost income
from lease rollovers.

     Economies of Scale and Leasing Flexibilities.  The Company seeks to enhance
portfolio  value by lowering  total  operating  costs and  expenses  compared to
single-site ownership and management and by capitalizing on its ability to offer
a range of leasing  options in certain  markets.  The  Company  also  strives to
minimize overhead by controlling corporate general and administrative expenses.

Growth Strategies

     Internal Growth. The Company believes that opportunities  exist to increase
cash flow  from its  existing  portfolio  and that  such  opportunities  will be
enhanced as the suburban office markets in the

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Midwest  Region  continue to improve.  The  Company  intends to pursue  internal
growth by (i) realizing fixed contractual base rental increases; (ii) re-leasing
expiring  leases at  increasing  market  rents which are expected to result from
increased  demand for and  decreased  supply of  available  space in the Midwest
Region;  (iii) continuing to maintain and improve occupancy rates through active
management and  aggressive  leasing;  and (iv)  controlling  operating  expenses
through the implementation of cost control management and systems.

     Contractual base rental increases.  The Company expects to achieve
internal growth in cash flow through leases which contain  provisions
for  fixed contractual rental increases.  For leases in place at January 1,
1997, 63% (on a weighted average basis) contain fixed contractual  rental
increases.  In 1996, the contractual  annualized increases in base rents
under leases at the Company's  existing Properties  totaled  approximately
$437,000 and, for 1997,  such  increases are expected to total approximately
$750,000.

     Re-leasing  expiring  leases  to  increasing  market  rents.  Many  of  the
Company's tenants entered into leases at favorable rental rates, compared to the
current  prevailing  market rates,  at times when the market for suburban office
space was depressed and when the Company did not own the Property.  As a result,
as those leases  expire,  the Company  believes that it will be able to re-lease
the space at higher effective rental rates.

     Maintaining and improving occupancy rates. The Company believes that it has
been successful in attracting,  expanding and retaining a diverse tenant base by
actively  managing  its  Properties  with an  emphasis on tenant  retention  and
satisfaction.  The Company  strives to be  responsive to the needs of individual
tenants  through  its on-site  professional  management  staff and by  providing
tenants with leasing  alternatives within the Company's portfolio to accommodate
their  changing space  requirements.  The Company's  success in maintaining  and
improving  occupancy rates is  demonstrated,  in part, by the number of existing
tenants which have renewed or released their space,  leased  additional space to
support  their  expansion  needs or moved to other  space  within the  Company's
portfolio. The Company has achieved a tenant retention rate of approximately 85%
(based on square feet renewed)  from January 1, 1993 through  December 31, 1996.
The  Company  also  seeks  to  improve  occupancies  by  aggressively  marketing
available  space within its  portfolio.  As of December 31, 1996, the Properties
had a weighted  average  occupancy  rate of 92% compared to 86.3% as of December
31, 1995 (or, for Properties acquired during 1996, the date of acquisition).

     External  Growth.  Based on its historical  activities and its knowledge of
the Midwest Region, the Company believes that opportunities continue to exist to
acquire  additional  office  properties in the Midwest  Region that: (i) provide
attractive  initial yields with  potential for growth in cash flow;  (ii) are in
desirable  locations within submarkets in the Midwest Region that exhibit strong
growth characteristics;  (iii) have purchase prices that represent a significant
discount to replacement cost; and (iv) are  underperforming  or need renovation,
thereby  providing  opportunities  for the Company to increase the cash flow and
value  of  such  properties  through  active   management,   rehabilitation  and
aggressive leasing.

     Acquisition  Strategy.  The Company's strategy is to acquire  well-located,
well-constructed  suburban office properties  containing  250,000 square feet or
less  that are less  than 15 years  old with  purchase  prices  of less than $20
million.  The Company believes that most institutional and public-sector  buyers
have  tended to focus  their  acquisition  activities  on  substantially  larger
properties  in terms of square  footage and purchase  price.  As a result of the
purchasing bias of these institutional and public-sector buyers, the Company has
encountered few well-capitalized competitors for the Company's target properties
in its target  markets.  The Company  believes it has been able to achieve  more
favorable  pricing  because it has been able to  contract  for the  purchase  of
properties without financing and other contingencies that are generally required
by less well-capitalized local buyers of these property types. In addition, the

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Company has  established a long and  successful  track record and reputation for
closing on properties it has contracted to purchase.

     The  Company  believes  that  attractive  opportunities  exist  to  acquire
well-located  suburban office  properties in the Midwest Region at a discount to
replacement  cost. Each acquisition  opportunity is reviewed to evaluate whether
it  meets  one or more of the  following  criteria:  (i)  potential  for  higher
occupancy  levels and/or rents as well as for lower  turnover  and/or  operating
expenses;  (ii) ability to generate returns in excess of the Company's  weighted
average cost of capital, taking into account the estimated costs associated with
tenant turnover (i.e., tenant improvements,  leasing commissions and the loss of
income due to vacancy) and property  rehabilitation;  and (iii) availability for
purchase at a price at or below estimated  replacement cost. The Company intends
to focus its investment  activities on properties that are in one or more of the
following categories:

          *  Under-managed  properties:  properties that have below market rents
          and/or  occupancies.  For example,  Princeton Hill Corporate Center, a
          Class A office building in Springdale, Ohio, was acquired on April 17,
          1996. At the time,  the  occupancy  was 31%.  Within 41 days of taking
          title, the Company  identified and signed as a tenant,  and leased the
          entire unleased portion of the building.

          * Yield-oriented  acquisitions:  properties  purchased below estimated
          replacement cost at attractive yields.  For example,  in December 1996
          the Company  completed the acquisition of 40 Oak Hollow, a three-story
          building  located in Southfield,  Michigan,  which is currently  97.3%
          occupied. The acquisition cost of the Property was $91 per square foot
          while the Company's  estimate of the  Property's  replacement  cost is
          $133 per square foot.

          *  Redevelopment  or  renovation   opportunities:   well  located  and
          fundamentally sound properties that may require physical renovation or
          cosmetic improvement to achieve their full potential performance.  The
          Company recently  completed a $3.0 million  renovation of 823 Commerce
          Drive in Oak Brook, Illinois, which was 36% occupied at acquisition in
          November 1995. The Property is currently 100% occupied.

          * Opportunistic  investments:  opportunities  to acquire  under-valued
          assets using the Company's local market  knowledge and expertise.  For
          example,  in  August  1995 the  Company  purchased  10 Oak  Hollow  in
          Southfield,  Michigan  at a  purchase  price  of $6.9  million,  which
          reflected  the  pending  vacancy  of the  entire  second  floor of the
          building.  However,  the  Company  was  aware of a tenant  in a nearby
          non-Company  owned property which was in need of expansion  space. The
          Company  ultimately sold 10 Oak Hollow to that tenant for $9.3 million
          14 months  after its  purchase of the  Property.  The Company used the
          proceeds from the sale to acquire an additional  property  utilizing a
          like-kind  exchange,  thereby  achieving  tax deferral of the gain. In
          addition to realizing a profit on the sale,  the Company  continues to
          manage 10 Oak Hollow  and,  as leases  expire and the new owner  takes
          over space for its own use,  the Company may have the  opportunity  to
          re-locate  displaced  tenants  to  the  two  Company-owned  Properties
          located within the same campus if any vacancies exist at that time.

     The  Company  believes  that  it  possesses  a  competitive   advantage  in
identifying and  capitalizing on acquisition  opportunities  for targeted office
properties due to (i) its broad-based  market presence in certain of the Current
Markets,  (ii) the experience of its  management  team;  (iii) its  conservative
capital structure and its available liquidity, including amounts available under
its $75 million secured credit  facility (the "Credit  Facility") with The First
National  Bank of  Boston,  as Agent;  and (iv) its  strong  relationships  with
certain of the region's institutional property owners and investment real estate
brokers.


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     Disposition  Strategy.  The Company also seeks to enhance stockholder value
through the strategic  disposition of its Properties.  The Company will consider
disposing of Properties on a tax-deferred  basis and  re-deploying  any proceeds
from sales into properties with higher yield potential.  Generally,  the Company
seeks to dispose of its Properties when one or more of the following  conditions
apply: (i) market prices are at or near replacement cost; (ii) occupancy is high
and the potential to increase  cash flow and property  value within a reasonable
period is limited;  (iii) the Company  believes the capital received can be more
efficiently  redeployed;  or  (iv)  ownership  of  the  Property  is  no  longer
consistent with the Company's operating strategies.

     In 1996, the Company sold two properties, 830 West End Court, Vernon
Hills, Illinois  and 10 Oak Hollow,  Southfield,  Michigan,  aggregating
approximately 110,000 square feet. The Company's  weighted  average holding
period for the two properties was approximately 19 months. As a result of the
Company's value-added operating strategy during the time the Company owned
the Vernon Hills and the 10 Oak Hollow properties,  the weighted average
occupancy rate increased from 90.4% to 99.4%.  The total sale price of $12.1
million  reflected a 36% increase over the Company's  aggregate  cost of
these properties (including leasing commissions).  Both properties were sold
on a tax-deferred basis using like-kind exchanges.

     Financing  Strategy.   The  Company  seeks  to  maintain  a  well-balanced,
conservative  and flexible  capital  structure by: (i) targeting a total debt to
total market  capitalization ratio of no greater than 50%; and (ii) limiting the
use of the Credit Facility to short term financing of  acquisitions  and working
capital  requirements.  The  Company  is  currently  negotiating  to expand  the
borrowing  capacity under the Credit  Facility from $75 million to $100 million;
however,  the  Company  does not expect to  consummate  such  increase  until it
determines such additional capacity is needed.

     Development.  The Company  intends to enhance its  leasing  flexibility  by
providing  build-to-suit  development  to  accommodate  current and  prospective
tenants  requiring space that is otherwise  unavailable in the marketplace.  The
Company will also continue its redevelopment activities of older buildings which
have desirable locations.

Competition

     The Company may be  competing  with other owners and  developers  that have
greater resources and more experience than the Company. In addition, an increase
in the number of competitive  properties in any  particular  market in which the
Properties are located could have a material adverse effect on (i) the Company's
ability to lease space at the Properties or any newly-acquired property and (ii)
the rents  charged at the  Properties.  The Company  believes that the number of
real estate  developers  has  decreased as a result of the  recessionary  market
conditions and tight credit markets during the early 1990s and the reluctance on
the part of more conventional financing sources to fund acquisition projects.

Insurance

     The Company carries  comprehensive  liability,  fire, extended coverage and
rental loss insurance covering all of the Properties, with policy specifications
and insured limits that the Company believes are adequate and appropriate  under
the  circumstances.  There are,  however,  certain  types of losses that are not
generally  insured  because  they are  either  uninsurable  or not  economically
feasible  to  insure.  Should an  uninsured  loss or a loss in excess of insured
limits  occur,  the  Company  could  lose  its  capital  invested  in any of the
Properties,  as well as the anticipated  future revenues from such Property and,
in the case of  recourse  debt,  the  Company  would  remain  obligated  for any
mortgage debt or other financial obligations related to such Property.  Any such
loss would adversely affect the Company.  Moreover,  as a general partner of the
Operating  Partnership,  the  Company  will  generally  be liable for any of the
Operating   Partnership's   unsatisfied   obligations  other  than  non-recourse
obligations. The Company believes that the

                                        9

<PAGE>



Properties  are  adequately  insured;  however,  no assurance  can be given that
material losses in excess of insurance proceeds will not occur in the future.

Environmental Regulations

     Under various federal,  state and local environmental laws,  ordinances and
regulations,  a current or  previous  owner or  operator  of real  estate may be
required to investigate and clean up hazardous or toxic  substances or petroleum
product  releases  at such  property  and may be held  liable to a  governmental
entity  or to third  parties  for  property  damage  and for  investigation  and
clean-up  costs incurred by such parties in connection  with the  contamination.
Such laws typically impose clean-up  responsibility and liability without regard
to whether the owner knew of or caused the presence of the contaminants, and the
liability  under such laws has been  interpreted  to be joint and several unless
the harm is  divisible  and  there  is a  reasonable  basis  for  allocation  of
responsibility.  The costs of  investigation,  remediation  or  removal  of such
substances  may be  substantial,  and the  presence of such  substances,  or the
failure to properly remediate the contamination on such property,  may adversely
affect the owner's ability to sell or rent such property or to borrow using such
property as  collateral.  Persons who arrange for the  disposal or  treatment of
hazardous or toxic  substances  at a disposal or treatment  facility also may be
liable for the costs of  removal or  remediation  of a release of  hazardous  or
toxic  substances  at such disposal or treatment  facility,  whether or not such
facility is owned or operated by such person.  In addition,  some  environmental
laws  create a lien on the  contaminated  site in favor  of the  government  for
damages and costs incurred in connection with the  contamination.  Finally,  the
owner of a site may be subject to common  law claims by third  parties  based on
damages and costs resulting from environmental contamination emanating from such
site.

     During the last year, independent  environmental consultants have conducted
or updated Phase I Environmental  Assessments ("Phase I Assessments") at each of
the  Properties.  In addition,  a limited-scope  Phase II Assessment  ("Phase II
Assessment")  has been  conducted at the  University  Office Plaza property (the
Phase I Assessments and the Phase II Assessment are collectively  referred to as
the "Environmental  Assessments").  The Phase I Assessments have included, among
other things, a visual inspection of the Properties and the surrounding area and
a review of relevant  state,  federal and historical  documents.  Except for the
Phase II Assessment and certain limited  sampling in connection with underground
tank and/or piping  removals at The Arlington  Ridge Service Center and One Park
Plaza properties,  no invasive  techniques such as soil or groundwater  sampling
were performed at any of the Properties. The Company's Environmental Assessments
of  the  Properties   have  not  revealed  any  condition   giving  rise  to  an
environmental  liability that the Company believes would have a material adverse
effect on the Company's  business,  assets or results of  operations  taken as a
whole, nor is the Company otherwise aware of any such condition. There can be no
assurance,  however, that the Company's  Environmental  Assessments would reveal
all conditions giving rise to environmental liabilities.  Moreover, there can be
no assurance that (i) future laws, ordinances or regulations will not impose any
material environmental  liability or (ii) the current environmental condition of
the  Properties  will not be affected by tenants,  by the  condition  of land or
operations  in  the  vicinity  of  the  Properties  (such  as  the  presence  of
underground storage tanks), or by third parties unrelated to the Company.

Employees

     As of December  31,  1996,  the Company had 34  employees,  none of whom is
represented by a collective bargaining unit.


                                       10

<PAGE>



ITEM 2--PROPERTIES

General

     The Company owns 27 Properties containing  approximately 2.8 million square
feet. The Properties  consist  primarily of Class A and Class B suburban  office
properties,  which range in size from  approximately  15,000 to 260,000 rentable
square feet. The Properties consist of 20 suburban office properties,  two light
industrial  distribution  facilities and five office/service  centers (generally
single-story  buildings with both finished office and unfinished  storage area).
The 27 Properties are located in the suburban  areas of Chicago (15),  Milwaukee
(4),  Minneapolis (3), Detroit (3), Columbus (1) and Cincinnati (1). Many of the
Properties offer amenities,  including indoor and outdoor parking,  loading dock
facilities,  on-site property  management,  in-house  conference  facilities and
lounge areas with food and beverage service.

     Management  believes that the location and quality of  construction  of the
Properties,  as well as the Company's  reputation for providing  superior tenant
service,  enable the Company to attract and retain a diverse  tenant base. As of
December 31, 1996, the Properties were leased to approximately  300 tenants,  no
single tenant accounted for more than 3.3% of the aggregate Annualized Base Rent
of the Company's  portfolio and only 19 tenants  individually  represented  more
than 1% of such aggregate  Annualized  Base Rent. Over 60% of the occupied space
is leased to tenants that occupy 10,000 square feet or more.

     The Company or the Operating  Partnership holds fee simple title to each of
the Properties.  The following table sets forth certain of the information as of
January 1, 1997 regarding the Properties.

<TABLE>
<CAPTION>
                                                                       Percentage
                                                                        of Total
                                                                        Portfolio                       Percentage
                                                            Approximate Rentable            Annualized  of Portfolio
                                                Year Built/   Rentable   Square   Percent   Base Rent   Annualized  Encumbrance
Submarket/Property              Location         Renovated  Square Feet   Feet    Leased    ($000s)(1)   Base Rent    ($000s)
------------------              --------         ---------  -----------   ----    ------    ----------   ---------    -------
<S>                             <C>               <C>         <C>        <C>       <C>       <C>         <C>         <C>
Suburban Chicago
----------------
Centennial Center.............. Schaumburg        1980/1993   259,730     9.3%     95.2%     $1,973        6.3%            (2)
Highpoint Business Center...... Wood Dale           1986      113,911     4.1%     88.3%      1,026        3.3       $2,689
Arlington Ridge Service Center. Arlington Heights   1987       96,219     3.4%     87.4%      1,047        3.3        1,404
1251 Plum Grove Road........... Schaumburg        1986/1996    43,301     1.5%     43.1%        217        0.7          --
1011 East Touhy Avenue......... Des Plaines       1978/1995   155,657     5.6%     91.1%      2,311        7.4        2,429
2800 River Road................ Des Plaines         1983      100,527     3.6%     76.5%      1,253        4.0             (2)
Kensington Corporate Center.... Mount Prospect      1989       85,874     3.1%     77.3%        792        2.5             (2)
565 Lakeview Parkway........... Vernon Hills        1991       84,808     3.0%     68.4%        618        2.0             (2)
One Hawthorn Place............. Vernon Hills        1987       84,065     3.0%     91.5%      1,344        4.3        3,145
Two Marriott Drive............. Lincolnshire        1985       41,500     1.5%    100.0%        337        1.1             (2)
3400 Corporate Center.......... Northbrook          1986       74,884     2.7%    100.0%      1,246        4.0        2,061
3010 and 3020 Woodcreek Drive.. Downers Grove     1985-86     127,713     4.6%     92.5%      1,339        4.2             (2)
823 Commerce Drive............. Oak Brook         1969/1996    45,162     1.6%     80.9%        622        2.0             (2)
1675 Holmes Road............... Elgin               1990      101,286     3.6%    100.0%        473        1.5        2,237
Court Office Center............ Markham             1984       15,000     0.5%    100.0%        224        0.7          688
                                                            ---------    -----    ------     ------       -----      --------
   Subtotal/Weighted Average                                1,429,637    51.1%     88.0%     14,822       47.3%      14,653

Suburban Milwaukee
------------------
One Park Plaza................ Milwaukee            1984      197,122     7.0%     94.8%      2,191        7.0%            (2)
Park Place VII................ Milwaukee            1989       36,069     1.3%    100.0%        602        1.9        1,173
Lincoln Center II and III..... West Allis          1984-87    121,508     4.5%     96.1%      1,718        5.4             (2)
Brookfield Lakes Corporate
   Center..................... Brookfield           1987      117,615     4.4%     98.4%      1,275        4.1        3,349
                                                              -------    -----    ------      -----       -----      --------
   Subtotal/Weighted Average                                  472,314    16.8%     96.5%      5,786       18.4%       4,522

Suburban Minneapolis
--------------------
Court International II........ St. Paul           1916/1985   199,670     7.1%     95.5%      1,913        6.1%            (2)
University Office Plaza....... Minneapolis        1979/1997    97,658     3.5%    100.0%      1,176        3.7        5,235
11100 Hampshire Avenue........ Bloomington          1980       50,625     1.8%    100.0%        219         .7          824
                                                             --------    -----    ------     ------       -----       -------
   Subtotal/Weighted Average                                  347,953    12.4%     97.4%      3,308       10.5%       6,059

Suburban Detroit
----------------
Long Lake Crossings........... Troy                 1988      169,959     6.1%     91.4%      2,776        8.8%            (2)
40 Oak Hollow................. Southfield           1989       80,281     2.9%     97.3%      1,211        3.9             (2)
Oak Hollow Gateway............ Southfield           1987       79,546     2.8%     98.2%      1,206        3.8             (2)
                                                             --------    -----     -----     ------       -----       -------
   Subtotal/Weighted Average                                  329,786    11.8%     94.5%      5,193       16.5%         --

Suburban Columbus
-----------------
Dublin Techmart............... Dublin               1986      124,929     4.5%    100.0%      1,211        3.9%            (2)

Suburban Cincinnati
-------------------
Princeton Hill Corporate
  Center...................... Springdale           1988       95,910     3.4%    100.0%      1,057        3.4%            (2)
                                                              -------   ------    ------    -------       -----     ---------

Total / Weighted Average..................................  2,800,529   100.0%     92.3%    $31,377      100.0%     $25,234
</TABLE>

(1)  Annualized Base Rent is the monthly  contractual base rent as of January 1,
     1997 under existing leases, multiplied by 12.

(2)  The Property is pledged as security for the Credit Facility, which totalled
     $63,802,368 at December 31, 1996.

                                       11

<PAGE>

Tenants

     The  Properties  are  leased to over 300  tenants  which are  engaged  in a
variety of regional, national and international businesses, including healthcare
providers  such as Health  Partners,  United  Health Care Services of Minnesota,
Inc., CNR HEALTH,  INC. and Health  Direct,  Inc.,  insurance  companies such as
Metropolitan Life,  Community  Insurance Co., Employers  Insurance of Wausau and
St. Paul Fire and Marine Insurance  Company,  and high-tech firms such as Aksys,
Ltd., Bay Networks, Inc. and WorldCom, Inc.

     Tenant   Diversification.   The  following  table  sets  forth  information
regarding the Company's leases with its 20 largest tenants based upon Annualized
Base Rent as of January 1, 1997:

<TABLE>
<CAPTION>
                                                                          Percentage of                 Percentage
                                                Remaining                   Aggregate     Aggregate         of
                                      Number     Lease      Annualized      Portfolio      Rentable      Aggregate
                                        of       Term in    Base Rents     Annualized       Square        Leased
                                      Leases    Months(1)     (000s)        Base Rent        Feet       Square Feet
                                      ------     ------       ------        ---------        ----       -----------
<S>                                   <C>        <C>         <C>           <C>             <C>             <C>
Metropolitan Life Insurance
  Company............................    3         19         $  984           3.14%        83,511          3.23%
Health Partners......................    1         49            981           3.13         82,817          3.20
United HealthCare Services
  of Minnesota, Inc..................    1         66            795           2.53        105,949          4.10
Community Insurance Company..........    1         53            747           2.38         68,573          2.65
American Honda Motor
  Company, Inc.......................    2         41            606           1.93         50,062          1.94
Employers Insurance of
  Wausau.............................    1        106            601           1.92         48,798          1.89
Howard Needles Tammen
  & Bergendoff.......................    1         47            586           1.87         33,177          1.28
St. Paul Fire and Marine
   Insurance Company.................    1         19            577           1.84         27,091          1.05
Interim Technology...................    2         39            509           1.62         30,448          1.18
Health Direct, Inc...................    3          6            436           1.39         29,490          1.14
A.O. Smith Corporation...............    2        105            406           1.29         51,012          1.97
CNR HEALTH, INC......................    1         75            398           1.27         30,550          1.18
Crawford & Company...................    1         43            396           1.26         58,100          2.25
Sisters of The Sorrowful Mother
   Ministry Corporation..............    1         53            374           1.19         22,987          0.89
Midwest Re-employment
  Consultants, Inc...................    1          8            374           1.19         19,789          0.77
Walsh College of
  Accountancy and Business
  Administration.....................    1         20            372           1.19         20,836          0.81
Aksys, Ltd...........................    1        116            338           1.08         41,500          1.61
Bay Networks, Inc....................    1         51            326           1.04         20,532          0.79
WorldCom, Inc........................    1         55            309           0.98         18,700          0.72
The Lutheran General Medical
  Group, S.C.........................    1         65            300           0.96         19,239          0.74
                                        --        ---         ------         ------        -------        ------
Total/Weighted Average                  27         54        $10,415          33.19%        86,161         33.39%
</TABLE>

(1)  Weighted  average  calculation  based on aggregate  leased square footage
     for each tenant.


                                       12

<PAGE>


Leases

     The Company's leases are typically  structured for terms of five years. The
Company's leases are a mixture of net leases (whereby tenants pay their pro rata
share of real estate tax and operating expenses) and full service,  gross leases
under which tenants typically pay for all real estate tax and operating expenses
above  those  for  an  established  base  year  or  expense  stop.  Leases  on a
significant  portion of the rentable square feet in the Company's  portfolio are
net  leases  that  were in  existence  upon  the  Company's  acquisition  of the
Properties.  However, whether structured as net leases or gross leases with base
year or expense stop expense reimbursement clauses, virtually all leases entered
into by the Company  require  tenants to reimburse  the Company for the tenant's
pro-rata share of real estate tax and operating expense increases.

     Leases often contain  provisions  permitting tenants to renew at prevailing
market rates. Under the Company's leases,  the Company is generally  responsible
for  structural  repairs.  Certain leases  contain  provisions  which permit the
tenant to terminate its lease upon written notice to the Company, subject to the
tenant's obligation to pay a termination penalty. Such termination penalties are
generally  negotiated  with a tenant  when a lease is  executed  and are usually
calculated to compensate the Company for  unamortized  tenant  improvements  and
leasing commissions at the termination date, and, in certain instances, for rent
on the space for a period of months after the termination date.

     Lease Distributions. The following table sets forth information relating to
the  distribution  of the Company's  leases based on rentable  square feet under
lease, as of January 1, 1997.
<TABLE>
<CAPTION>
                                                                                                 Percentage of
                                                      Percentage of                                Aggregate
                                                        Aggregate              Annualized          Portfolio
Square Feet                     Number of           Portfolio Leased            Base Rent         Annualized
Under Lease                      Leases               Square Feet                (000s)            Base Rent
-----------                      ------               -----------                ------            ---------
<S>                               <C>                    <C>                     <C>               <C>
2,500 or Less................      116                     6.59%                 2,532                 8.07%
2,501 - 5,000................       85                    11.92                  4,252                13.55
5,001 - 7,500................       46                    10.96                  3,693                11.77
7,501 - 10,000...............       26                     8.85                  2,869                 9.14
10,001 - 20,000..............       37                    20.20                  6,925                22.07
20,001 - 40,000..............       16                    15.68                  5,137                16.37
40,001 +.....................       11                    25.80                  5,969                19.03
                                   ---                   ------                 ------               ------
   Total.....................      337                   100.00%               $31,377               100.00%
                                   ===                   ======                =======               ======
</TABLE>

                                       13

<PAGE>



     Lease  Expirations  -- Portfolio  Total.  The following  table sets forth a
summary schedule of the lease expirations for the Properties for leases in place
as of  January 1,  1997,  assuming  that none of the  tenants  exercise  renewal
options or termination rights, if any, at or prior to the scheduled expirations.
<TABLE>
<CAPTION>
                                                                                 Annualized        Percentage of
                                           Square          Percentage of        Base Rent of           Total
                         Number of       Footage of        Total Leased           Expiring           Portfolio
Year of                   Leases          Expiring        Square Feet of        Leases (000s)      Base Rent of
Lease Expiration         Expiring          Leases         Expiring Leases         at 1/1/97       Expiring Leases
----------------         --------          ------         ---------------         ---------       ---------------
<S>                         <C>           <C>             <C>                    <C>               <C>
1997...................      76           389,961              15.09%            $ 4,569                14.56%
1998...................      61           496,525              19.21               5,967                19.02
1999...................      57           279,262              10.80               3,568                11.37
2000...................      61           389,997              15.09               5,355                17.07
2001...................      51           494,435              19.12               6,535                20.83
2002...................      16           271,420              10.50               2,508                 7.99
2003...................       5            53,089               2.05                 767                 2.44
2004...................       4            35,658               1.38                 403                 1.29
2005...................       3            76,968               2.98                 694                 2.21
2006...................       3            97,634               3.78               1,011                 3.22
                            ---           -------              -----              ------                -----
   Total...............     337         2,584,949             100.00%            $31,377               100.00%
                            ===         =========             ======             =======               ======
</TABLE>
                                       14

<PAGE>

     Lease  Expirations - Property By Property.  The following  table sets forth
detailed lease  expiration  information for each of the Properties for leases in
place as of January 1, 1997, assuming that none of the tenants exercises renewal
options or termination rights, if any, at or prior to the scheduled expirations.
<TABLE>
<CAPTION>
                                                                           Year of Lease Expiration
                                                                           ------------------------
PROPERTY                                                  1997      1998        1999       2000         2001         2002
--------                                                  ----      ----        ----       ----         ----         ----
<S>                                                    <C>        <C>        <C>         <C>         <C>         <C>

SUBURBAN CHICAGO
   CENTENNIAL CENTER

   Square Footage of Expiring Leases                     38,229      4,406       2,973     13,646       19,056      166,515
   Percentage of Total Leased Sq. Ft                      15.47%      1.78%       1.20%      5.52%        7.71%       67.37%
   Annualized Base Rent of Expiring Leases             $346,384   $ 50,272   $  30,102   $ 83,514    $ 178,687   $1,273,150
   Percentage of Total Annualized Base Rent               17.56%      2.55%       1.53%      4.23%        9.06%       64.53%
   Number of Leases Expiring                                  3          1           2          1            4            5
   Annual base rent per square foot of expiring leases $   9.06   $  11.41   $   10.13   $   6.12    $    9.38   $     7.65

   1675 HOLMES ROAD

   Square Footage of Expiring Leases                               101,286
   Percentage of Total Leased Sq. Ft                                100.00%
   Annualized Base Rent of Expiring Leases                        $473,063
   Percentage of Total Annualized Base Rent                         100.00%
   Number of Leases Expiring                                             3
   Annual base rent per square foot of expiring leases            $   4.67

   ARLINGTON RIDGE SERVICE CENTER

   Square Footage of Expiring Leases                                                       61,980
   Percentage of Total Leased Sq. Ft                                                        73.72%
   Annualized Base Rent of Expiring Leases                                               $771,166
   Percentage of Total Annualized Base Rent                                                 73.63%
   Number of Leases Expiring                                                                    3
   Annual base rent per square foot of expiring leases                                   $  12.44

   1251 PLUM GROVE ROAD

   Square Footage of Expiring Leases                      5,085      9,195                               4,373
   Percentage of Total Leased Sq. Ft                      27.26%     49.30%                              23.44%
   Annualized Base Rent of Expiring Leases             $ 43,223   $114,711                            $ 59,036
   Percentage of Total Annualized Base Rent               19.92%     52.87%                              27.21%
   Number of Leases Expiring                                  1          2                                   1
   Annual base rent per square foot of expiring leases $   8.50   $  12.48                            $  13.50

</TABLE>

<TABLE>
<CAPTION>

PROPERTY                                                  2003         2004        2005        2006         Total
--------                                                  ----         ----        ----        ----         -----
<S>                                                    <C>           <C>          <C>         <C>        <C>
SUBURBAN CHICAGO
   CENTENNIAL CENTER

   Square Footage of Expiring Leases                      2,357                                             247,182
   Percentage of Total Leased Sq. Ft                       0.95%                                             100.00%
   Annualized Base Rent of Expiring Leases              $10,607                                          $1,972,716
   Percentage of Total Annualized Base Rent                0.54%                                             100.00%
   Number of Leases Expiring                                  1                                                  17
   Annual base rent per square foot of expiring leases  $  4.50

   1675 HOLMES ROAD

   Square Footage of Expiring Leases                                                                        101,286
   Percentage of Total Leased Sq. Ft                                                                         100.00%
   Annualized Base Rent of Expiring Leases                                                               $  473,063
   Percentage of Total Annualized Base Rent                                                                  100.00%
   Number of Leases Expiring                                                                                      3
   Annual base rent per square foot of expiring leases

   ARLINGTON RIDGE SERVICE CENTER

   Square Footage of Expiring Leases                                22,097                                   84,077
   Percentage of Total Leased Sq. Ft                                 26.28%                                  100.00%
   Annualized Base Rent of Expiring Leases                        $276,248                               $1,047,414
   Percentage of Total Annualized Base Rent                          26.37%                                  100.00%
   Number of Leases Expiring                                             2                                        5
   Annual base rent per square foot of expiring leases            $  12.50

   1251 PLUM GROVE ROAD

   Square Footage of Expiring Leases                                                                         18,653
   Percentage of Total Leased Sq. Ft                                                                         100.00%
   Annualized Base Rent of Expiring Leases                                                               $  216,970
   Percentage of Total Annualized Base Rent                                                                  100.00%
   Number of Leases Expiring                                                                                      4
   Annual base rent per square foot of expiring leases

</TABLE>

                                       15

<PAGE>

<TABLE>
<CAPTION>
                                                                       Year of Lease Expiration
                                                                       ------------------------
PROPERTY                                                  1997       1998       1999       2000         2001         2002
--------                                                  ----       ----       ----       ----         ----         ----
<S>                                                    <C>        <C>         <C>         <C>         <C>          <C>
   1011 EAST TOUHY AVENUE

   Square Footage of Expiring Leases                     55,260      9,472       9,355      6,132       22,108       19,239
   Percentage of Total Leased Sq. Ft.                     38.98%      6.68%       6.60%      4.33%       15.59%       13.57%
   Annualized Base Rent of Expiring Leases             $855,681   $189,160    $139,345    $89,129     $378,328     $299,698
   Percentage of Total Annualized Base Rent               37.03%      8.19%       6.03%      3.86%       16.37%       12.96%
   Number of Leases Expiring                                 14          3           5          1            5            1
   Annual base rent per square foot of expiring leases   $15.48     $19.97      $14.90     $14.54       $17.11       $15.58

   HIGHPOINT BUSINESS CENTER

   Square Footage of Expiring Leases                     41,535      9,628       3,376      2,958                    16,935
   Percentage of Total Leased Sq. Ft.                     41.28%      9.57%       3.36%      2.94%                    16.83%
   Annualized Base Rent of Expiring Leases             $427,557   $105,234     $43,888    $26,659                  $178,664
   Percentage of Total Annualized Base Rent               41.68%     10.26%       4.28%      2.60%                    17.42%
   Number of Leases Expiring                                  5          1           1          1                         1
   Annual base rent per square foot of expiring leases   $10.29     $10.93      $13.00      $9.01                    $10.55

   2800 RIVER ROAD

   Square Footage of Expiring Leases                     12,837      1,341      15,446     11,551       35,696
   Percentage of Total Leased Sq. Ft.                     16.70%      1.74%      20.09%     15.03%       46.44%
   Annualized Base Rent of Expiring Leases             $188,829    $24,138    $275,133   $190,854     $573,725
   Percentage of Total Annualized Base Rent               15.07%      1.93%      21.96%     15.24%       45.80%
   Number of Leases Expiring                                  4          1           3          5            5
   Annual base rent per square foot of expiring leases   $14.71     $18.00      $17.81     $16.52       $16.07

   KENSINGTON CORPORATE CENTER

   Square Footage of Expiring Leases                                66,419
   Percentage of Total Leased Sq. Ft.                               100.00%
   Annualized Base Rent of Expiring Leases                        $791,886
   Percentage of Total Annualized Base Rent                         100.00%
   Number of Leases Expiring                                             1
   Annual base rent per square foot of expiring leases              $11.92

   3010 AND 3020 WOODCREEK DRIVE

   Square Footage of Expiring Leases                     12,351     15,323      17,107     29,668       43,741
   Percentage of Total Leased Sq. Ft.                    10.45%      12.96%      14.47%     25.10%       37.02%
   Annualized Base Rent of Expiring Leases            $154,681    $220,365    $159,625   $292,908     $511,420
   Percentage of Total Annualized Base Rent              11.55%      16.46%      11.92%     21.88%       38.19%
   Number of Leases Expiring                                 3           2           2          3            3
   Annual base rent per square foot of expiring leases  $12.52      $14.38       $9.33      $9.87       $11.69

</TABLE>

<TABLE>
PROPERTY                                                   2003        2004        2005         2006        Total
--------                                                   ----        ----        ----         ----        -----
<S>                                                      <C>         <C>         <C>          <C>         <C>
   1011 EAST TOUHY AVENUE

   Square Footage of Expiring Leases                       12,867                                7,336       141,769
   Percentage of Total Leased Sq. Ft.                        9.08%                                5.17%       100.00%
   Annualized Base Rent of Expiring Leases               $234,823                             $124,712    $2,310,876
   Percentage of Total Annualized Base Rent                 10.16%                                5.40%       100.00%
   Number of Leases Expiring                                    1                                    1            31
   Annual base rent per square foot of expiring leases     $18.25                               $17.00

   HIGHPOINT BUSINESS CENTER

   Square Footage of Expiring Leases                                   7,939       18,241                    100,612
   Percentage of Total Leased Sq. Ft.                                   7.89%       18.13%                    100.00%
   Annualized Base Rent of Expiring Leases                           $79,239     $164,397                 $1,025,638
   Percentage of Total Annualized Base Rent                             7.73%       16.03%                    100.00%
   Number of Leases Expiring                                               1            1                         11
   Annual base rent per square foot of expiring leases                 $9.98        $9.01

   2800 RIVER ROAD

   Square Footage of Expiring Leases                                                                          76,871
   Percentage of Total Leased Sq. Ft.                                                                         100.00%
   Annualized Base Rent of Expiring Leases                                                                $1,252,679
   Percentage of Total Annualized Base Rent                                                                   100.00%
   Number of Leases Expiring                                                                                      18
   Annual base rent per square foot of expiring leases

   KENSINGTON CORPORATE CENTER

   Square Footage of Expiring Leases                                                                          66,419
   Percentage of Total Leased Sq. Ft.                                                                         100.00%
   Annualized Base Rent of Expiring Leases                                                                  $791,886
   Percentage of Total Annualized Base Rent                                                                   100.00%
   Number of Leases Expiring                                                                                       1
   Annual base rent per square foot of expiring leases

   3010 AND 3020 WOODCREEK DRIVE

   Square Footage of Expiring Leases                                                                         118,190
   Percentage of Total Leased Sq. Ft.                                                                         100.00%
   Annualized Base Rent of Expiring Leases                                                                $1,338,999
   Percentage of Total Annualized Base Rent                                                                   100.00%
   Number of Leases Expiring                                                                                      13
   Annual base rent per square foot of expiring leases

</TABLE>

                                       16

<PAGE>

<TABLE>
<CAPTION>
                                                                         Year of Lease Expiration
                                                                         ------------------------
PROPERTY                                                    1997       1998       1999       2000        2001        2002
--------                                                    ----       ----       ----       ----        ----        ----
<S>                                                       <C>       <C>        <C>         <C>        <C>          <C>
   823 COMMERCE DRIVE

   Square Footage of Expiring Leases                                  14,026                            22,515
   Percentage of Total Leased Sq. Ft.                                  38.38%                            61.62%
   Annualized Base Rent of Expiring Leases                          $203,377                          $418,779
   Percentage of Total Annualized Base Rent                            32.69%                            67.31%
   Number of Leases Expiring                                               1                                 2
   Annual base rent per square foot of expiring leases                $14.50                            $18.60

   565 LAKEVIEW PARKWAY

   Square Footage of Expiring Leases                        28,223                8,942                 17,133
   Percentage of Total Leased Sq. Ft.                        48.65%               15.42%                 29.54%
   Annualized Base Rent of Expiring Leases                $284,206             $101,134               $164,820
   Percentage of Total Annualized Base Rent                  46.00%               16.37%                 26.68%
   Number of Leases Expiring                                     1                    1                      1
   Annual base rent per square foot of expiring leases      $10.07               $11.31                  $9.62

   ONE HAWTHORN PLACE

   Square Footage of Expiring Leases                        17,469    13,053     19,889      17,658      6,039       2,822
   Percentage of Total Leased Sq. Ft.                        22.71%    16.97%     25.85%      22.95%      7.85%       3.67%
   Annualized Base Rent of Expiring Leases                $297,669  $233,587   $335,568    $314,934   $108,137     $53,619
   Percentage of Total Annualized Base Rent                  22.16%    17.39%     24.97%      23.44%      8.05%       3.99%
   Number of Leases Expiring                                     9         5          4           3          3           1
   Annual base rent per square foot of expiring leases      $17.04    $17.90     $16.87      $17.84     $17.91      $19.00

   3400 CORPORATE CENTER

   Square Footage of Expiring Leases                         2,716    17,867     20,349      16,140      8,655       3,535
   Percentage of Total Leased Sq. Ft.                         3.63%    23.86%     27.17%      21.55%     11.56%       4.72%
   Annualized Base Rent of Expiring Leases                 $29,187  $320,869   $401,225    $287,464   $107,124     $51,967
   Percentage of Total Annualized Base Rent                   2.34%    25.76%     32.22%      23.08%      8.60%       4.17%
   Number of Leases Expiring                                     2         7          3           7          3           1
   Annual base rent per square foot of expiring leases      $10.75    $17.96     $19.72      $17.81     $12.38      $14.70

   TWO MARRIOTT DRIVE

   Square Footage of Expiring Leases
   Percentage of Total Leased Sq. Ft.
   Annualized Base Rent of Expiring Leases
   Percentage of Total Annualized Base Rent
   Number of Leases Expiring
   Annual base rent per square foot of expiring leases
</TABLE>


<TABLE>
<CAPTION>

PROPERTY                                                    2003        2004        2005        2006      Total
--------                                                    ----        ----        ----        ----      -----
<S>                                                       <C>         <C>          <C>         <C>     <C>
   823 COMMERCE DRIVE

   Square Footage of Expiring Leases                                                                      36,541
   Percentage of Total Leased Sq. Ft.                                                                     100.00%
   Annualized Base Rent of Expiring Leases                                                              $622,156
   Percentage of Total Annualized Base Rent                                                               100.00%
   Number of Leases Expiring                                                                                   3
   Annual base rent per square foot of expiring leases

   565 LAKEVIEW PARKWAY

   Square Footage of Expiring Leases                        3,704                                         58,002
   Percentage of Total Leased Sq. Ft.                        6.39%                                        100.00%
   Annualized Base Rent of Expiring Leases                $67,654                                       $617,814
   Percentage of Total Annualized Base Rent                 10.95%                                        100.00%
   Number of Leases Expiring                                    1                                              4
   Annual base rent per square foot of expiring leases    $ 18.27

   ONE HAWTHORN PLACE

   Square Footage of Expiring Leases                                                                      76,930
   Percentage of Total Leased Sq. Ft.                                                                     100.00%
   Annualized Base Rent of Expiring Leases                                                            $1,343,514
   Percentage of Total Annualized Base Rent                                                               100.00%
   Number of Leases Expiring                                                                                  25
   Annual base rent per square foot of expiring leases

   3400 CORPORATE CENTER

   Square Footage of Expiring Leases                                  5,622                               74,884
   Percentage of Total Leased Sq. Ft.                                  7.51%                              100.00%
   Annualized Base Rent of Expiring Leases                          $47,715                           $1,245,551
   Percentage of Total Annualized Base Rent                            3.83%                              100.00%
   Number of Leases Expiring                                              1                                   24
   Annual base rent per square foot of expiring leases                $8.49

   TWO MARRIOTT DRIVE

   Square Footage of Expiring Leases                                                           41,500     41,500
   Percentage of Total Leased Sq. Ft.                                                          100.00%    100.00%
   Annualized Base Rent of Expiring Leases                                                   $337,500   $337,500
   Percentage of Total Annualized Base Rent                                                    100.00%    100.00%
   Number of Leases Expiring                                                                        1          1
   Annual base rent per square foot of expiring leases                                          $8.13
</TABLE>

                                       17

<PAGE>
<TABLE>
<CAPTION>
                                                                      Year of Lease Expiration
                                                                      ------------------------
PROPERTY                                                  1997       1998       1999        2000        2001         2002
--------                                                  ----       ----       ----        ----        ----         ----
<S>                                                    <C>        <C>         <C>          <C>         <C>          <C>
   COURT OFFICE CENTER

   Square Footage of Expiring Leases                      2,385                 12,615
   Percentage of Total Leased Sq. Ft.                     15.90%                 84.10%
   Annualized Base Rent of Expiring Leases              $33,716               $190,427
   Percentage of Total Annualized Base Rent               15.04%                 84.96%
   Number of Leases Expiring                                  2                      3
   Annual base rent per square foot of expiring leases   $14.14                 $15.10

SUBURBAN MILWAUKEE
   ONE PARK PLAZA

   Square Footage of Expiring Leases                      5,797     12,361      23,053     35,482       11,162           16
   Percentage of Total Leased Sq. Ft.                      3.10%      6.61%      12.33%     18.98%        5.97%        0.01%
   Annualized Base Rent of Expiring Leases              $94,790   $133,707    $269,122   $608,742     $136,810         $300
   Percentage of Total Annualized Base Rent                4.33%      6.10%      12.28%     27.78%        6.24%        0.01%
   Number of Leases Expiring                                  3          5           7          3            2            1
   Annual base rent per square foot of expiring leases   $16.35     $10.82      $11.67     $17.16       $12.26       $18.75

   PARK PLACE VII

   Square Footage of Expiring Leases                                             4,013      9,069       22,987
   Percentage of Total Leased Sq. Ft.                                            11.13%     25.14%       63.73%
   Annualized Base Rent of Expiring Leases                                     $71,752   $156,380     $373,769
   Percentage of Total Annualized Base Rent                                      11.92%     25.98%       62.10%
   Number of Leases Expiring                                                         1          2            1
   Annual base rent per square foot of expiring leases                          $17.88     $17.24       $16.26

   LINCOLN CENTER II & III

   Square Footage of Expiring Leases                      8,892     27,106      10,776     19,762       11,243
   Percentage of Total Leased Sq. Ft.                      7.61%     23.21%       9.23%     16.92%        9.63%
   Annualized Base Rent of Expiring Leases             $132,669   $417,040    $169,788   $300,978     $168,060
   Percentage of Total Annualized Base Rent                7.72%     24.29%       9.88%     17.52%        9.78%
   Number of Leases Expiring                                  4          5           5          3            2
   Annual base rent per square foot of expiring leases   $14.92     $15.39      $15.76     $15.23       $14.95

   BROOKFIELD LAKES CORPORATE CENTER

   Square Footage of Expiring Leases                      7,762     23,966      39,820     20,588       14,358        9,277
   Percentage of Total Leased Sq. Ft.                      6.70%     20.70%      34.41%     17.78%       12.40%        8.01%
   Annualized Base Rent of Expiring Leases             $103,413   $286,412    $382,213   $216,323     $205,683      $80,895
   Percentage of Total Annualized Base Rent                8.11%     22.46%      29.98%     16.97%       16.13%        6.35%
   Number of Leases Expiring                                  2          3           5          4            3            1
   Annual base rent per square foot of expiring leases   $13.32     $11.95       $9.60     $10.51       $14.33        $8.72
</TABLE>


<TABLE>
<CAPTION>
PROPERTY                                                     2003        2004         2005        2006         Total
--------                                                     ----        ----         ----        ----         -----
<S>                                                       <C>          <C>          <C>        <C>           <C>
   COURT OFFICE CENTER

   Square Footage of Expiring Leases                                                                            15,000
   Percentage of Total Leased Sq. Ft.                                                                           100.00%
   Annualized Base Rent of Expiring Leases                                                                    $224,143
   Percentage of Total Annualized Base Rent                                                                     100.00%
   Number of Leases Expiring                                                                                         5
   Annual base rent per square foot of expiring leases

SUBURBAN MILWAUKEE
   ONE PARK PLAZA

   Square Footage of Expiring Leases                                                 50,262       48,798       186,931
   Percentage of Total Leased Sq. Ft.                                                 26.90%       26.10%       100.00%
   Annualized Base Rent of Expiring Leases                                         $398,591     $548,978    $2,191,040
   Percentage of Total Annualized Base Rent                                           18.19%       25.07%       100.00%
   Number of Leases Expiring                                                              1            1            23
   Annual base rent per square foot of expiring leases                                $7.93       $11.25

   PARK PLACE VII

   Square Footage of Expiring Leases                                                                            36,069
   Percentage of Total Leased Sq. Ft.                                                                           100.00%
   Annualized Base Rent of Expiring Leases                                                                    $601,901
   Percentage of Total Annualized Base Rent                                                                     100.00%
   Number of Leases Expiring                                                                                         4
   Annual base rent per square foot of expiring leases

   LINCOLN CENTER II & III

   Square Footage of Expiring Leases                        30,550                    8,465                    116,794
   Percentage of Total Leased Sq. Ft.                        26.15%                    7.25%                    100.00%
   Annualized Base Rent of Expiring Leases                $398,067                 $131,208                 $1,717,810
   Percentage of Total Annualized Base Rent                  23.17%                    7.64%                    100.00%
   Number of Leases Expiring                                     1                        1                         21
   Annual base rent per square foot of expiring leases      $13.03                   $15.50

   BROOKFIELD LAKES CORPORATE CENTER

   Square Footage of Expiring Leases                                                                           115,771
   Percentage of Total Leased Sq. Ft.                                                                           100.00%
   Annualized Base Rent of Expiring Leases                                                                  $1,274,939
   Percentage of Total Annualized Base Rent                                                                     100.00%
   Number of Leases Expiring                                                                                        18
   Annual base rent per square foot of expiring leases
</TABLE>


                                       18

<PAGE>
<TABLE>
<CAPTION>

                                                                            Year of Lease Expiration
                                                                            ------------------------
PROPERTY                                                 1997       1998        1999        2000        2001         2002
--------                                                 ----       ----        ----        ----        ----         ----
<S>                                                    <C>        <C>         <C>         <C>         <C>           <C>
SUBURBAN MINNEAPOLIS
   COURT INTERNATIONAL II


   Square Footage of Expiring Leases                     18,423     27,601      69,910     26,678       41,381        6,754
   Percentage of Total Leased Sq. Ft.                      9.66%     14.47%      36.65%     13.99%       21.69%        3.54%
   Annualized Base Rent of Expiring Leases             $148,946   $325,757    $669,884   $251,721     $443,852      $72,600
   Percentage of Total Annualized Base Rent                7.79%     17.03%      35.02%     13.16%       23.20%        3.80%
   Number of Leases Expiring                                  5          3           9          5            7            1
   Annual base rent per square foot of expiring leases    $8.08     $11.80       $9.58      $9.44       $10.73       $10.75

   UNIVERSITY OFFICE PLAZA

   Square Footage of Expiring Leases                      9,967      3,437                  1,437       82,817
   Percentage of Total Leased Sq. Ft.                     10.21%      3.52%                  1.47%       84.80%
   Annualized Base Rent of Expiring Leases             $103,005    $73,464                $18,268     $981,392
   Percentage of Total Annualized Base Rent                8.76%      6.25%                  1.55%       83.44%
   Number of Leases Expiring                                  6          1                      1            1
   Annual base rent per square foot of expiring leases   $10.33     $21.37                 $12.71       $11.85

   11100 HAMPSHIRE AVENUE

   Square Footage of Expiring Leases                     50,625
   Percentage of Total Leased Sq. Ft.                    100.00%
   Annualized Base Rent of Expiring Leases             $219,357
   Percentage of Total Annualized Base Rent              100.00%
   Number of Leases Expiring                                  1
   Annual base rent per square foot of expiring leases    $4.33

SUBURBAN DETROIT
   LONG LAKE CROSSINGS

   Square Footage of Expiring Leases                     10,176     66,781      13,583     35,315       28,627          917
   Percentage of Total Leased Sq. Ft.                      6.55%     42.97%       8.74%     22.73%       18.42%        0.59%
   Annualized Base Rent of Expiring Leases             $158,132 $1,269,838    $227,720   $639,178     $465,552      $16,047
   Percentage of Total Annualized Base Rent                5.70%     45.73%       8.20%     23.02%       16.77%        0.58%
   Number of Leases Expiring                                  4          9           3          6            4            1
   Annual base rent per square foot of expiring leases   $15.54     $19.01      $16.77     $18.10       $16.26       $17.50

   40 OAK HOLLOW

   Square Footage of Expiring Leases                     27,361                            20,788        4,913       21,448
   Percentage of Total Leased Sq. Ft.                    35.03%                             26.61%        6.29%       27.45%
   Annualized Base Rent of Expiring Leases            $485,731                           $317,962      $84,749     $266,572
   Percentage of Total Annualized Base Rent              40.11%                             26.26%        7.00%       22.01%
   Number of Leases Expiring                                 3                                  3            1            2
   Annual base rent per square foot of expiring leases  $17.75                             $15.30       $17.25       $12.43
</TABLE>


<TABLE>
<CAPTION>

PROPERTY                                                     2003       2004        2005        2006         Total
--------                                                     ----       ----        ----        ----         -----
<S>                                                         <C>        <C>         <C>        <C>       <C>
SUBURBAN MINNEAPOLIS
   COURT INTERNATIONAL II

   Square Footage of Expiring Leases                                                                        190,747
   Percentage of Total Leased Sq. Ft.                                                                        100.00%
   Annualized Base Rent of Expiring Leases                                                               $1,912,760
   Percentage of Total Annualized Base Rent                                                                  100.00%
   Number of Leases Expiring                                                                                     30
   Annual base rent per square foot of expiring leases

   UNIVERSITY OFFICE PLAZA

   Square Footage of Expiring Leases                                                                         97,658
   Percentage of Total Leased Sq. Ft.                                                                        100.00%
   Annualized Base Rent of Expiring Leases                                                               $1,176,129
   Percentage of Total Annualized Base Rent                                                                  100.00%
   Number of Leases Expiring                                                                                      9
   Annual base rent per square foot of expiring leases

   11100 HAMPSHIRE AVENUE

   Square Footage of Expiring Leases                                                                         50,625
   Percentage of Total Leased Sq. Ft.                                                                        100.00%
   Annualized Base Rent of Expiring Leases                                                                 $219,357
   Percentage of Total Annualized Base Rent                                                                  100.00%
   Number of Leases Expiring                                                                                      1
   Annual base rent per square foot of expiring leases

SUBURBAN DETROIT
   LONG LAKE CROSSINGS

   Square Footage of Expiring Leases                                                                        155,399
   Percentage of Total Leased Sq. Ft.                                                                        100.00%
   Annualized Base Rent of Expiring Leases                                                               $2,776,467
   Percentage of Total Annualized Base Rent                                                                  100.00%
   Number of Leases Expiring                                                                                     27
   Annual base rent per square foot of expiring leases

   40 OAK HOLLOW

   Square Footage of Expiring Leases                        3,611                                            78,121
   Percentage of Total Leased Sq. Ft.                        4.62%                                           100.00%
   Annualized Base Rent of Expiring Leases                $55,971                                        $1,210,985
   Percentage of Total Annualized Base Rent                  4.62%                                           100.00%
   Number of Leases Expiring                                    1                                                10
   Annual base rent per square foot of expiring leases     $15.50
</TABLE>


                                       19

<PAGE>
<TABLE>
<CAPTION>
                                                                          Year of Lease Expiration
                                                                          ------------------------
PROPERTY                                                  1997       1998       1999        2000         2001       2002
--------                                                  ----       ----       ----        ----         ----       ----
<S>                                                    <C>        <C>          <C>       <C>           <C>         <C>
   OAK HOLLOW GATEWAY

   Square Footage of Expiring Leases                     15,294      3,019       3,613     27,095       29,058
   Percentage of Total Leased Sq. Ft.                     19.59%      3.87%       4.63%     34.70%       37.21%
   Annualized Base Rent of Expiring Leases             $256,023    $46,794     $57,808   $417,598     $428,147
   Percentage of Total Annualized Base Rent               21.22%      3.88%       4.79%     34.62%       35.49%
   Number of Leases Expiring                                  2          1           2          4            2
   Annual base rent per square foot of expiring leases   $16.74     $15.50      $16.00     $15.41       $14.73

SUBURBAN COLUMBUS
   DUBLIN TECHMART

   Square Footage of Expiring Leases                     19,574     61,605       4,442     15,346                    23,962
   Percentage of Total Leased Sq. Ft.                     15.67%     49.31%       3.56%     12.28%                    19.18%
   Annualized Base Rent of Expiring Leases             $205,527   $594,341     $43,087   $154,648                  $213,988
   Percentage of Total Annualized Base Rent               16.96%     49.06%       3.56%     12.76%                    17.66%
   Number of Leases Expiring                                  2          6           1          4                         1
   Annual base rent per square foot of expiring leases   $10.50      $9.65       $9.70     $10.08                     $8.93

SUBURBAN CINCINNATI
   PRINCETON HILL CORPORATE CENTER

   Square Footage of Expiring Leases                                 8,633                 18,704       68,573
   Percentage of Total Leased Sq. Ft.                                 9.00%                 19.50%       71.50%
   Annualized Base Rent of Expiring Leases                         $93,236               $216,203     $747,446
   Percentage of Total Annualized Base Rent                           8.82%                 20.46%       70.72%
   Number of Leases Expiring                                             1                      2            1
   Annual base rent per square foot of expiring leases              $10.80                 $11.56       $10.90

   PORTFOLIO TOTALS

   Square Footage of Expiring Leases                    389,961    496,525     279,262    389,997      494,435      271,420
   Percentage of Total Leased Sq. Ft.                     15.09%     19.21%      10.80%     15.09%       19.13%       10.50%
   Annualized Base Rent of Expiring Leases           $4,568,726 $5,967,251  $3,567,821 $5,354,629   $6,535,516   $2,507,500
   Percentage of Total Annualized Base Rent               14.56%     19.02%      11.37%     17.07%       20.83%        7.99%
   Number of Leases Expiring                                 76         61          57         61           51           16
</TABLE>


<TABLE>
<CAPTION>
PROPERTY                                                       2003       2004         2005        2006         Total
--------                                                       ----       ----         ----        ----         -----
<S>                                                          <C>         <C>         <C>         <C>         <C>
   OAK HOLLOW GATEWAY

   Square Footage of Expiring Leases                                                                             78,079
   Percentage of Total Leased Sq. Ft.                                                                            100.00%
   Annualized Base Rent of Expiring Leases                                                                   $1,206,370
   Percentage of Total Annualized Base Rent                                                                      100.00%
   Number of Leases Expiring                                                                                         11
   Annual base rent per square foot of expiring leases

SUBURBAN COLUMBUS
   DUBLIN TECHMART

   Square Footage of Expiring Leases                                                                            124,929
   Percentage of Total Leased Sq. Ft.                                                                            100.00%
   Annualized Base Rent of Expiring Leases                                                                   $1,211,591
   Percentage of Total Annualized Base Rent                                                                      100.00%
   Number of Leases Expiring                                                                                         14
   Annual base rent per square foot of expiring leases

SUBURBAN CINCINNATI
   PRINCETON HILL CORPORATE CENTER

   Square Footage of Expiring Leases                                                                             95,910
   Percentage of Total Leased Sq. Ft.                                                                            100.00%
   Annualized Base Rent of Expiring Leases                                                                   $1,056,885
   Percentage of Total Annualized Base Rent                                                                      100.00%
   Number of Leases Expiring                                                                                          4
   Annual base rent per square foot of expiring leases

   PORTFOLIO TOTALS

   Square Footage of Expiring Leases                          53,089      35,658     76,968       97,634      2,584,949
   Percentage of Total Leased Sq. Ft.                           2.05%       1.38%      2.98%        3.78%        100.00%
   Annualized Base Rent of Expiring Leases                  $767,122    $403,202   $694,196   $1,011,190    $31,377,153
   Percentage of Total Annualized Base Rent                     2.44%       1.29%      2.21%        3.22%        100.00%
   Number of Leases Expiring                                       5           4          3            3            337
</TABLE>


                                       20

<PAGE>

Historic Lease Renewals

     The following  table sets forth certain  historical  information  regarding
tenants at the  Properties  that  renewed an  existing  lease at or prior to the
expiration of the existing lease:
<TABLE>
<CAPTION>
                                                                                                       Total/Weighted
                                                                                                           Average
                                                                  1993    1994       1995      1996      1993 - 1996
                                                                  ----    ----       ----      ----      -----------
<S>                                                            <C>       <C>        <C>      <C>        <C>
Number of leases expired during calendar year.................      3         7         25        34            69
Number of leases renewed......................................      3         4         18        26            51
Percentage of leases renewed..................................    100%       57%        72%       76%           74%
Aggregate rentable square footage of expiring leases (1)...... 54,157    26,716     92,205   139,615       312,693
Aggregate rentable square footage of lease renewals........... 54,157    19,645     72,586   118,142       264,530
Percentage of expiring rentable square footage renewed........    100%       74%        79%      85%            85%
</TABLE>

(1)  The aggregate rentable square footage of expiring leases excludes the
     square feet for tenants where the tenant had vacated the Property prior to
     the Company's acquisition date or disclosed plans in the Company's tenant
     due diligence to move from the Property within twelve months of the
     Company's acquisition date.


ITEM 3--LEGAL PROCEEDINGS

     As of January 31, 1997,  the Company was not a party to any material  legal
proceedings.


ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to stockholders  during the fourth quarter of the
fiscal year ended December 31, 1996.


                                       21

<PAGE>

                                     PART II

ITEM 5--MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     As of December 31, 1996,  there was no  established  trading market for the
Company's Common Stock, $.01 par value (the "Common Stock").

     As of December 31, 1996, there were  approximately 630 holders of record of
the Common Stock.

     The Company currently has two classes of equity securities outstanding: one
class  of  Common  Stock  and one  class of  Preferred  Stock,  $.01  par  value
("Preferred Stock").

     During the past three years,  the Company has made quarterly  distributions
with respect to its Common Stock, as follows:

                                                   Distributions
                   Calendar Period                   Per Share
                   ---------------                   ---------
                   1994:
                     First Quarter...............      $0.20
                     Second Quarter..............      $0.23
                     Third Quarter...............      $0.26
                     Fourth Quarter..............      $0.27
                   1995:
                     First Quarter...............      $0.27
                     Second Quarter..............      $0.27
                     Third Quarter...............      $0.29
                     Fourth Quarter..............      $0.30
                   1996:
                     First Quarter...............      $0.30
                     Second Quarter..............      $0.30
                     Third Quarter...............      $0.30
                     Fourth Quarter..............      $0.30

     The Company,  in order to qualify as a REIT under the Code,  is required to
make distributions  (other than capital gain  distributions) to its stockholders
with  respect to each  taxable  year in amounts at least equal to (i) the sum of
(A) 95% of its "REIT taxable income"  (computed  without regard to the dividends
paid  deduction  and its net capital  gain) and (B) 95% of the net income (after
tax), if any, from foreclosure property,  minus (ii) the sum of certain items of
non-cash income.  The Company's  distribution  strategy is to distribute what it
believes is a conservative  percentage of its cash flow,  permitting the Company
to retain funds for capital improvements and other investments while funding its
distributions.

     For  federal  income tax  purposes,  distributions  may consist of ordinary
income dividends,  nontaxable return of capital,  capital gains or a combination
thereof.  Distributions  in  excess of the  Company's  current  and  accumulated
earnings and profits  (calculated for tax purposes) will constitute a nontaxable
return of capital rather than a dividend and will reduce the stockholder's basis
in his or her shares of Common  Stock for tax  purposes.  To the  extent  that a
distribution  exceeds both the Company's  current and  accumulated  earnings and
profits and

                                       22

<PAGE>



the  stockholder's  basis in his or her  shares,  the amount of such excess will
generally  be treated as gain from the sale or  exchange  of that  stockholder's
shares.  The  Company  annually  notifies  stockholders  of  the  taxability  of
distributions paid during the preceding year. The following table sets forth the
taxability of distributions paid in 1996, 1995 and 1994:

                                                  1996       1995       1994
                                                  ----       ----       ----

         Ordinary income.....................      88.3%      87.4%     93.0%
         Non-taxable return of capital.......      11.7%      12.6%      7.0%
                                                   -----      -----      ----

         Total...............................     100.0%     100.0%    100.0%
                                                  ======     ======    ======

Recent Sales of Unregistered Securities

     The  following  table is a summary of certain  information  relating to all
securities of the Company sold by the Company  during the period covered by this
Report  on Form  10-K that were not  registered  under the  Securities  Act (the
"Private Placements"):

   Type of                                                 Total       Issuance
Security Sold         Offering Period     Shares Sold    Proceeds       Costs
-------------         ---------------     -----------    --------       -----

Common Stock          April 1, 1996       $  130,000   $ 1,710,000  $  219,428
Common Stock          August 20, 1996      3,867,000    50,268,899   2,866,550
Preferred Stock(1)    August 20, 1996        210,128         2,101       (2)

(1)  The Preferred Stock that was sold in the August 20, 1996 Private
     Placement is convertible into Common Stock on a one-for-one basis
     depending on the Company's attainment of certain objectives related
     to the timing, pricing and size of a public offering of additional
     Common Stock by September 30, 1998.

(2)  The costs  associated with the issuance of the Preferred Stock are included
     in the cost of the issuance of the contemporaneous issuance of Common Stock
     that occurred on August 20, 1996.


     The Company  conducted the Private  Placements  pursuant to Section 4(2) of
the Securities Act of 1933, including in reliance upon the exemption provided by
Regulation D promulgated thereunder to "accredited investors" in those states in
which it was  authorized to do so. Each of the Private  Placements was conducted
on a best-efforts  basis,  and there was no  underwriter  involved in any of the
Private Placements.

     The  placement  agent fees paid in  connection  with the  August  20,  1996
Private  Placement were $2,513,550.  Such placement agent fee is included in the
"Issuance Costs" listed in the table above. No placement agent fees were paid in
connection with the April 1, 1996 Private Placement.


ITEM 6--SELECTED FINANCIAL DATA

     The following sets forth selected  financial and operating  information for
the  Company  (i) on a  historical  basis  for  each of the  periods  and  dates
indicated  and (ii) on a pro forma basis at and for the year ended  December 31,
1996. The following information should be read in conjunction with the financial
statements and notes thereto of the Company  included  elsewhere in this report.
The selected historical  financial and operating  information for the Company at
December 31, 1996,  1995 and 1994, and for each of the three years in the period
ended December 31, 1996 has been derived from the Company's historical financial
statements audited by Ernst & Young LLP, independent auditors, whose report with
respect  thereto  is  included  elsewhere  in  this  Prospectus.   The  selected
historical  financial and operating  information for the Company at December 31,
1993 and 1992 and for the period  June 22,  1992 to  December  31, 1992 has been
derived from the Company's historical audited financial statements.

                                       23

<PAGE>
<TABLE>
<CAPTION>
                                                           Year Ended December 31,
                                                           -----------------------
                                                                Historical
                                                                ----------
                                        1996         1995          1994           1993         1992(1)
                                        ----         ----          ----           ----         ----
                                                   (in thousands, except per share data)
<S>                                   <C>          <C>           <C>           <C>             <C>
Income Statement Data:
Revenue
  Rental...........................   $ 20,250     $ 12,410      $  6,647      $  1,230        $    --
  Reimbursement....................      4,814        2,355           884                           --
  Interest.........................        168          201            52            63             16
                                      --------     --------      --------      --------        -------

     Total revenue.................     25,232       14,966         7,583         1,293             16
                                      --------     --------      --------      --------        -------

Expenses:
  Real estate taxes................      3,954        2,625         1,418           292
  Other property operating.........      6,549        3,967         1,944           181
  General and administrative.......      2,242          923           561           177             10
  Interest.........................      3,778        2,296           911            73
  Depreciation and amortization          4,000        1,955           761           160
                                      --------     --------      --------       -------        -------

     Total expenses................     20,523       11,766         5,595           883             10
                                      --------     --------      --------      --------        -------

Income before gain or sale
  of properties....................      4,709        3,200         1,988           410              6
Gain on sale of properties.........      3,140           --            --                           --
                                      --------     --------      --------      --------        -------

Net income.........................   $  7,849     $  3,200      $  1,988      $    410        $     6
                                      ========     ========      ========      ========        =======

Net income per common share and
  common share equivalent..........   $   1.32     $   0.88      $   0.96      $   0.38        $  0.02
                                      ========     ========      ========      ========        =======

Weighted average common share and
  common share equivalent..........      5,927        3,650         2,070         1,081            316

Balance Sheet Data (end of period):
Properties - net of accumulated
  depreciation.....................   $184,122     $ 91,858      $ 37,234      $ 17,409        $    --
Total assets.......................   $194,149     $ 98,978      $ 42,522      $ 21,919        $ 2,784
Total long-term debt...............   $ 86,111     $ 48,307      $ 15,955      $  3,777        $    --
Total liabilities..................   $ 97,554     $ 54,013      $ 18,460      $  5,420        $     3
Stockholders' equity...............   $ 96,595     $ 44,965      $ 24,062      $ 16,498        $ 2,781


Operating Data:
EBITDA (2).........................   $ 12,487     $  7,451      $  3,660      $    643        $     6
Funds from Operations (3):
  Net income.......................   $  7,849     $  3,200      $  1,988      $    410        $     6
  Gain on sale of properties.......     (3,140)
  Depreciation and amortization....      3,741        1,824           718           160             --
                                      --------     --------      --------       -------           ----
  Funds from Operations............      8,450        5,024         2,706           570              6
Cash dividends per share...........   $   1.20     $   1.13      $   0.96      $   0.47        $    --
Cash flows from operating activities    12,828        5,650         1,977         1,569              9
Cash flows from investing activities   (91,211)     (51,650)      (20,493)      (17,558)           (45)
Cash flows from financing activities    78,768       44,626        17,420        17,021          2,776
Number of properties owned
  at period end....................         25           16             9             6             --
Aggregate square feet of
  properties owned at period end...      2,684        1,529           758           441             --
Occupancy at period end of
  properties owned at period end...         92%          86%           84%           78%            --
</TABLE>
---------------------


(1)  Represents  the  period  from  June 22,  1992  (the  date of the  Company's
     inception) to December 31, 1992.

(2)  EBITDA  is  defined  as  net  income  before  interest,  gain  on  sale  of
     properties,  taxes, depreciation and amortization expenses.  Because of the
     Company's REIT status, the Company does not pay income taxes. EBITDA 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
     distributions.

                                       24

<PAGE>

(3)  The White Paper on Funds From Operations approved by the Board of Governors
     of the National  Association of Real Estate Investment Trusts ("NAREIT") in
     March 1995 (the "White Paper")  defines Funds from Operations as net income
     (loss) (computed in accordance with GAAP), excluding gains (or losses) from
     debt  restructuring  and  sales  of  property,  plus  real  estate  related
     depreciation  and  amortization  and after  adjustments for  unconsolidated
     partnerships and joint ventures. Management considers Funds from Operations
     an  appropriate  measure of  performance  of an equity  REIT  because it is
     predicated  on  cash  flow  analyses.   The  Company  computes  Funds  from
     Operations  in accordance  with  standards  established  by the White Paper
     which may differ from the methodology for calculating Funds from Operations
     utilized by other equity REITs and,  accordingly,  may not be comparable to
     such other REITs.  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 distributions.


ITEM 7--MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
     OF OPERATIONS

Recent Events

     Since July 1, 1996,  the Company  acquired ten  Properties  at an
aggregate cost of $95.3 million.  In addition,  in the fourth quarter of
1996, the Company  disposed of two properties,  with a weighted average
holding period of 19 months,  in  tax-deferred  transactions.  The total
sales  price of $12.1 million  represented a 36% increase over the aggregate
cost of these properties (including leasing commissions).

     On April 1, 1996,  the Advisor was merged into the Company in exchange  for
100,000  shares of Common  Stock.  Pursuant  to several  agreements  between the
Advisor  and the  Company,  the  Advisor had  provided  various  services to the
Company,  including  administrative  and  management  services  relating  to the
Company's  day-to-day  operations,  day-to-day  property management services and
various support services.

     During 1996, the Company issued  approximately 3.9 million shares of Common
Stock  in a  private  placement  to six  institutional  investors,  raising  net
proceeds of  approximately  $47.4  million.  These proceeds were used to acquire
Properties and to repay indebtedness.  In addition, the Company entered into the
Credit  Facility,  which  amended and restated the  Company's  prior bank credit
facility.  Among other things,  this amendment  increased the maximum  borrowing
limit under the Credit Facility from $50 million to $75 million.

Results of Operations

     Year Ended  December 31, 1996  Compared to 1995.  The changes in the income
statement items in 1996 compared to 1995 are as follows:

                                                             Increase (Decrease)

          Rents and reimbursements...........................   $10,299,000
          Interest and other.................................       (33,000)
                                                                 ----------
                  Total Revenues.............................    10,266,000
                                                                 ----------
          Real estate taxes..................................     1,330,000
          Other property operating...........................     2,581,000
          General and administrative.........................     1,319,000
          Interest...........................................     1,482,000
          Depreciation and amortization......................     2,045,000
                                                                 ----------
                  Total expenses.............................     8,757,000
                                                                 ----------
                  Income before gain on sale of properties...     1,509,000
                  Gain on sale of properties.................     3,140,000
                                                                 ----------
                  Net income.................................    $4,649,000
                                                                 ==========


                                       25

<PAGE>


     In analyzing  the operating  results for the year ended  December 31, 1996,
the increases in rental income,  real estate taxes and other property  operating
expenses  (which  include  management  fees  (through  the date of the  Merger),
repairs and maintenance,  janitorial and other services related to the operation
of the Properties)  compared to 1995 are due  principally to three factors:  (i)
the addition of  operating  results  from  properties  acquired in 1996 from the
dates of their respective acquisitions, (ii) a complete year's operating results
attributable  to properties  acquired in 1995 compared to the partial  period of
operating  results from the dates of their  respective  acquisitions in 1995 and
(iii) improved operations of properties during 1996 compared to 1995.

     During  the  year  ended  December  31,  1996,  the  Company   acquired  10
properties.  The operating results of these properties have been included in the
Company's financial statements from the dates of their respective  acquisitions.
In 1995,  the  Company  acquired  seven  properties,  and in 1996 a full year of
operations of these  properties  has been  included in the  Company's  financial
statements.

         A summary of these  changes as they impact rental  income,  real estate
taxes and other property operating expenses for 1996 follows:
<TABLE>
<CAPTION>

                                                         Rental and                             Other Property
                                                        Reimbursement        Real Estate           Operating
                                                           Income               Taxes              Expenses
                                                           ------               -----              --------
          <S>                                           <C>                 <C>                   <C>
          Increase due to 1996 acquisitions........     $   3,392,000       $     462,000         $   940,000
          Increase due to inclusion of results of
             properties acquired during 1995.......         5,413,000           1,040,000           1,220,000
          Increase due to operations of properties
             sold in 1996..........................           801,000              58,000             239,000
          1996 operations compared to 1995 for
             properties owned at 12/31/95..........           693,000            (230,000)            182,000
                                                        -------------       -------------       -------------
          Total increase in 1996...................     $  10,299,000       $   1,330,000         $ 2,581,000
                                                        =============       =============       =============
</TABLE>

     Interest  expense  during the year ended  December  31, 1996  increased  by
$1,482,000  as the  Company  had  greater  amounts of long and  short-term  debt
outstanding in 1996. This debt was used to finance the acquisition of properties
acquired in 1995 and 1996.

     General and  administrative  expenses  increased by  $1,319,000  due to the
increase in the size of the Company  ($875,000),  increased audit and legal fees
($174,000), increased directors fees ($41,000), and the increase in amortization
of deferred compensation ($229,000).

     Depreciation  and  amortization  increased  in  1996 by  $2,045,000  as the
Company  incurred  these  expenses  on 25  properties  in  1996  compared  to 16
properties in 1995.


                                       26

<PAGE>

     Year Ended  December 31, 1995  Compared to 1994.  The changes in the income
statement items in 1995 compared to 1994 are as follows:

                                                      Increase (Decrease)

          Rents and reimbursements.....................   $ 7,234,000
          Interest.....................................       149,000
                                                           ----------
                  Total Revenues.......................     7,383,000
                                                           ----------
          Real estate taxes............................     1,207,000
          Other property operating.....................     2,024,000
          General and administrative...................       362,000
          Interest.....................................     1,385,000
          Depreciation and amortization................     1,193,000
                                                           ----------
                  Total expenses.......................     6,171,000
                                                           ----------
                  Net income...........................    $1,212,000
                                                           ==========


     During 1995, the Company acquired seven  properties.  The operating results
of these  properties  have been included in the Company's  financial  statements
from the dates of their respective  acquisitions.  In 1994, the Company acquired
three properties,  and in 1995 a full year of operations of these properties has
been included in the Company's financial statements as compared to the operating
results  of these  three  properties  only  from the  respective  dates of their
acquisitions  in 1994. In analyzing the 1995  operating  results of the Company,
the changes in rental income,  real estate taxes,  and other property  operating
expenses from 1994 are due principally to: (i) the addition of operating results
from  properties  acquired  during  1995  from the  dates  of  their  respective
acquisition;  (ii) the  addition of a full year's  operating  results in 1995 of
properties  acquired in 1994 compared to the partial  year's  operating  results
from the  dates of their  respective  acquisitions  in 1994 and  (iii)  improved
operations  of  properties  during  1995  compared  to 1994.  A summary of these
changes as they  impact  rental  income,  real estate  taxes and other  property
operating expenses for 1995 follows:
<TABLE>
<CAPTION>

                                                         Rental and                        Other Property
                                                        Reimbursement      Real Estate        Operating
                                                           Income             Taxes           Expenses
                                                           ------             -----           --------
          <S>                                           <C>                <C>              <C>
          Increase due to 1995 property
             acquisitions..........................     $   4,744,000      $ 1,000,000      $   1,413,000
          Increase due to inclusion of results for
             properties acquired 1994..............         1,603,000          177,000            535,000
          1995 operations compared to 1994 for
             properties owned at 12/31/94..........           887,000           30,000             76,000
                                                        -------------      -----------      -------------
          Total increase in 1995...................     $   7,234,000      $ 1,207,000      $   2,024,000
                                                        =============      ===========      =============
</TABLE>

     Interest  expense  increased by  $1,385,000 in 1995 compared to 1994 as the
Company increased its short-and long-term mortgage debt to partially finance the
acquisition  of investment  properties in 1995.  Depreciation  and  amortization
increased by $1,193,000 as the Company  incurred  depreciation  and amortization
expense on 16  properties  in 1995,  as  compared  to nine  properties  in 1994.
General and  administrative  expenses  increased  by $362,000  due to  increased
advisory fees paid to the Advisor  ($314,000)  and increased  professional  fees
($48,000).


                                       27

<PAGE>

Forward-Looking Statements

     Certain statements in this document constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, and the Company intends that such
"forward-looking statements" be subject to the safe harbors created thereby.
The words "believe", "expect" and "anticipate" and similar expressions
identify forward-looking statements.   These forward-looking statements reflect
the Company's current views with respect to future events and financial
performance, but are subject to many uncertainties and factors relating to the
Company's operations and business environment that may cause the actual results
of the Company to be materially different from any future results expressed
or implied by such forward-looking statements.  Examples of such uncertainties
include, but are not limited to, changes in interest rates, increased
competition for acquisition of new properties, unanticipated expenses and delays
in acquiring properties or increasing occupancy rates and regional economic and
business conditions.

Liquidity and Capital Resources

     The Company's  Credit Facility is currently $75 million.  In addition,  the
Company is negotiating to increase the maximum amount available under the Credit
Facility to $100  million;  however,  the Company does not expect to  consummate
such an increase until the Company anticipates that such additional amounts will
be  needed.  The  Company  anticipates  that the  Credit  Facility  will be used
primarily  to acquire  additional  properties  and for general  working  capital
purposes.   The  Credit  Facility   contains   financial   covenants   including
requirements  for a minimum  tangible net worth,  maximum  liabilities  to asset
values,  debt service coverage and property operating net income (all calculated
in  accordance  with the Credit  Facility).  The Credit  Facility  also contains
restrictions on, among other things, indebtedness,  investments,  distributions,
liens, mergers and development activities of the Company. The Company also has a
$5 million  revolving credit facility with The American  National Bank and Trust
Company of Chicago  that  expires  in June 1997 and under  which no amounts  are
outstanding.

     The Company expects to meet its short-term liquidity requirements generally
through its available  working capital and net cash provided by operations.  The
Company  believes that its net cash provided by operations will be sufficient to
allow the Company to make any  distributions  necessary to enable the Company to
continue to qualify as a REIT under the Code. The Company also believes that the
foregoing  sources  of  liquidity  will be  sufficient  to fund  its  short-term
liquidity  needs for the foreseeable  future,  including  capital  expenditures,
tenant improvements and leasing commissions.

     The Company expects to meet certain long-term  liquidity  requirements such
as property acquisitions, scheduled debt maturities, renovations, expansions and
other non-recurring capital improvements through long-term secured and unsecured
indebtedness and the issuance of additional equity securities.  The Company also
expects to use funds available  under the Credit Facility to fund  acquisitions,
development activities and capital improvements on an interim basis.

Statements of Cash Flows

     Year Ended  December 31, 1996 Compared to 1995.  Cash flows from  operating
activities  increased by $7.2 million as the Company owned 25 properties  during
1996 compared to 16 properties during 1995.

     Cash  used by  investing  activities  increased  by $39.6  million  in 1996
compared to 1995 as the Company  acquired 10 properties  during 1996 compared to
seven properties in 1995.

     Cash  provided  by  financing  activities  increased  by $34.1  million  as
proceeds from equity  offerings  increased by $28.6 million,  proceeds from bank
and mortgage loans increased by $12.0 million,  dividends paid increased by $3.4
million,  dividends  reinvested  decreased by $2.6 million and cash  provided by
other items declined by $0.5 million.

     Year Ended  December 31, 1995 Compared to 1994.  Cash flows from  operating
activities  increased  by $3.7  million in 1995  compared to 1994 as the Company
owned 16 properties in 1995 compared to nine properties in 1994.

     Cash flows used by investing  activities increased by $31.2 million in 1995
compared to 1994 as the Company  acquired  seven  properties in 1995 compared to
three  properties in 1994.  Cash flows from  financing  activities  increased by
$27.2  million in 1995  compared to 1994 as the  Company  raised  $18.8  million
through the private  placement of Common Stock in 1995 compared to $6 million in
1994. In addition, the Company's borrowings increased by $15 million in 1995.


                                       28

<PAGE>

ITEM 8--FINANCIAL STATEMENTS

     The financial  statements and supplementary data required by Regulation S-X
are included in this Report on Form 10-K commencing on Page F-1.


ITEM 9--CHANGES  IN  AND  DISAGREEMENTS   WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
     FINANCIAL DISCLOSURE

     For the year ended  December 31, 1995,  the Company  selected Ernst & Young
LLP as its  independent  accountant.  For the years ended  December 31, 1994 and
1993, the Company's independent accountant had been Coopers & Lybrand L.L.P. The
change in independent  accountants was recommended by the Audit Committee of the
Board of Directors of the Company (the "Board of Directors") and approved by the
Board of Directors on August 14, 1995. The decision of the Board of Directors to
dismiss  Coopers & Lybrand L.L.P.  was made  notwithstanding  that there were no
disagreements with the Company's former independent  accountant on any matter of
accounting principles or practices, financial statement disclosures, or auditing
scope or  procedure  for the two most  recent  fiscal  years and the  subsequent
interim period preceding the dismissal.  The opinion on the Company's  financial
statements  for the years  ended  December  31, 1994 and 1993  expressed  by the
former independent accountant was unqualified. However, Coopers & Lybrand L.L.P.
considered the reissuance and inclusion of its reports on the Company's 1993 and
1994 financial  statements in this Report on Form 10-K as a new engagement,  and
has declined to accept this engagement.  Therefore,  the Company engaged Ernst &
Young LLP to conduct  audits of its  financial  statements  for the years  ended
December 31, 1993 and 1994.  The report of Ernst & Young LLP  regarding  1994 is
included herein.



                                       29

<PAGE>



                                    PART III

ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Executive Officers and Directors

     The Board of Directors consists of seven directors, all of whom are elected
for one-year terms at each annual meeting of stockholders.  The Company's bylaws
(the "Bylaws") require that a majority of the Board of Directors be comprised of
persons who are not  officers  or  employees  of the  Company  (each such person
serving on the Board of Directors being an "Independent  Director").  Holders of
shares of Common  Stock have no right to  cumulative  voting in the  election of
directors.  Consequently, at each annual meeting, a majority of the stockholders
will be able to elect all of the directors. The Company's executive officers are
elected annually by the Board of Directors;  however, they may be removed at any
time by the Board of Directors.

     The  following  table sets forth  certain  information  with respect to the
executive officers and directors of the Company:



        Name                    Age     Position
        ----                    ---     --------

        Richard A. May          52     Chairman of the Board, President
                                        and Chief Executive Officer
        Richard L. Rasley       40     Executive Vice President, Secretary,
                                       General Counsel and Director
        James Hicks             41     Senior Vice President - Finance, Chief
                                        Financial Officer and Treasurer
        Raymond M. Braun        39     Senior Vice President - Acquisitions
        Kim S. Mills            48     Senior Vice President - Asset Management
                                        and Leasing
        James J. Brinkerhoff    46     Director
        Daniel E. Josephs       65     Director
        Edward Lowenthal        52     Director
        Donald E. Phillips      64     Director
        Walter H. Teninga       69     Director


     RICHARD A. MAY.  Mr. May  co-founded  the Company in 1992 and has served as
Chairman and  President of the Company and as a member of the Board of Directors
since its inception.  Mr. May is currently the Chairman of the Board,  President
and Chief  Executive  Officer of the Company.  In 1986,  Mr. May  co-founded the
Advisor  and,  from  1987  until  April 1,  1996,  Mr.  May was an  officer  and
shareholder  of the  Advisor.  Mr. May is a licensed  real estate  broker in the
States of Illinois and Indiana and holds several  inactive NASD licenses.  He is
also a member of NAREIT.  Mr. May received his  Bachelor's  Degree in mechanical
engineering from the University of Illinois and received his M.B.A.  degree from
The University of Chicago.

     RICHARD L. RASLEY. Mr. Rasley co-founded the Company in 1992 and has served
as  Secretary  of the Company and a member of the Board of  Directors  since its
inception. Mr. Rasley is currently the Executive Vice President, General Counsel
and  Secretary  of the Company and has general  supervisory  responsibility  for
administrative and legal matters.  From 1987 until April l, 1996, Mr. Rasley was
employed by the Advisor;  he was an officer and shareholder of the Advisor.  Mr.
Rasley is a Certified Public  Accountant,  holds several inactive NASD licenses,
and is a  member  of the  Illinois  Bar and  NAREIT.  Mr.  Rasley  received  his
Bachelor's  Degree from the University of Iowa and received his M.B.A.  and J.D.
degrees from the University of Illinois.


                                       30

<PAGE>

     JAMES HICKS. Mr. Hicks joined the Advisor in 1994 and currently has general
supervisory  responsibility  for the finance and  accounting  activities  of the
Company.  From 1989 to 1993, Mr. Hicks was employed by JMB Institutional  Realty
Corporation,  which  was a real  estate  adviser  to  pension  funds  and  other
institutional  investors,  as a vice  president  of  portfolio  management  with
responsibility  for overall asset management of a portfolio of international and
domestic commercial real estate properties. He received his Bachelor's Degree in
Accounting and  Mathematics  from Augustana  College and his M.B.A.  degree from
Northwestern  University.  Mr. Hicks is a Certified  Public  Accountant and is a
member of the Illinois CPA Society and  American  Institute of Certified  Public
Accountants.

     RAYMOND M. BRAUN.  Mr. Braun  joined the Advisor in May 1990 and  currently
has primary  responsibility  for all of the  Company's  real estate  acquisition
activities.  Prior to joining the Advisor,  Mr. Braun was employed  from 1986 to
1990 by The Balcor Company,  a major real estate investment  company involved in
all aspects of real estate including  development,  management,  syndication and
mortgage  lending.  Mr. Braun received his Bachelor's Degree from the University
of Illinois. Mr. Braun is a member of the National Association of Industrial and
Office Park Realtors.

     KIM S. MILLS.  Mr. Mills joined the Advisor in January 1996.  Mr. Mills has
primary  responsibility  for all of the  Company's  asset  management,  property
management and leasing activities.  Prior to joining the Advisor,  Mr. Mills was
employed by Simon Property Group REIT, a commercial  property REIT, from 1992 to
1995 as a regional manager with responsibility for overall portfolio  management
of high rise office buildings totalling over four million square feet. Mr. Mills
received his  Bachelor's  Degree from Ohio  Northern  University  and has a Real
Property  Administrator  designation  from  the  Building  Owners  and  Managers
Association.

     JAMES J. BRINKERHOFF.  Mr.  Brinkerhoff has served as a member of the Board
of Directors  since August 1996. Mr.  Brinkerhoff  was appointed to the Board of
Directors pursuant to Fortis Benefits Insurance  Company's right to nominate one
director  under the Stock  Purchase  Agreement  dated as of August 20, 1996 (the
"Stock Purchase Agreement") by and among the Company,  Fortis Benefits Insurance
Company;  Morgan Stanley  Institutional Fund, Inc. - U.S. Real Estate Portfolio;
Morgan Stanley SICAV Subsidiary S.A., Wellsford Karpf Zarrilli Ventures, L.L.C.;
Logan,  Inc.; and Pension Trust Account No. 104972 Held by Bankers Trust Company
as Trustee.  Mr.  Brinkerhoff is Senior Vice President,  Real Estate,  of Fortis
Advisers, Inc. ("Fortis Advisers"), the New York-based investment management arm
of Fortis,  Inc.  Prior to joining  Fortis  Advisers in 1994, he was Senior Vice
President and Portfolio Manager with Aldrich, Eastman & Waltch,  responsible for
managing the United States Real Estate Portfolio of the Church Commissioners for
England.  From  1983 to  1993,  he was an  officer  and  partner  of  Chesterton
International,  a London-based real estate adviser, where he was responsible for
the creation and  management  of the Church  Commissioners'  United  States Real
Estate Portfolio.  Mr. Brinkerhoff  received his M.B.A.  degree from the Wharton
School,  University  of  Pennsylvania,  and his  Bachelor's  Degree  from Boston
University. He is a full member of the Urban Land Institute.

     DANIEL  E.  JOSEPHS.  Mr.  Josephs  has  served as a member of the Board of
Directors  since March 1993. Mr.  Josephs is currently an  independent  business
consultant.  From 1985 through 1995, Mr. Josephs served as the President,  Chief
Operating Officer and Director of Dominick's Finer Foods of Northlake, Illinois,
a major Chicago-area retail grocery company. Mr. Josephs currently serves on the
Board of Directors of Grand Union  Company,  a regional  grocery  firm,  and the
Board of  Directors  of Options  for People,  Inc.,  a  Chicago-area  non-profit
concern. Mr. Josephs received his Bachelor's Degree from Northwestern University
and received his M.B.A. degree from The University of Chicago.

     EDWARD  LOWENTHAL.  Mr.  Lowenthal  has  served as a member of the Board of
Directors  since  August  1996.  Mr.  Lowenthal  was  nominated  to the Board of
Directors  pursuant to Wellsford  Karpf  Zarrilli  Ventures,  L.L.C.'s  right to
appoint one director  under the Stock  Purchase  Agreement.  Mr.  Lowenthal is a
Founder, Director and President of Wellsford Residential Property Trust ("WRP"),
a  NYSE-listed  multi-family  REIT.  On January  17,  1997,  Equity  Residential
Properties Trust ("Equity Residential"),  a publicly traded apartment properties
REIT,

                                       31

<PAGE>



announced  that it had  agreed  to  acquire  WRP and that such  acquisition  was
expected to be  completed by May 1997,  subject to  shareholder  approval.  Upon
completion of Equity  Residential's  acquisition of WRP, it is expected that Mr.
Lowenthal  will (i) join the Board of Directors of Equity  Residential  and (ii)
serve as President of Wellsford Real Properties Inc., a newly formed real estate
investment  company.  Mr.  Lowenthal  is a member of the Board of  Governors  of
NAREIT and was  Co-chair of its 1993 Annual  Meeting.  Mr.  Lowenthal  currently
serves as a member of the Boards of  Directors  of Omega  Healthcare  Investors,
Inc., an investment  company and Corporate  Renaissance  Partners,  a securities
mutual  fund.  Mr.  Lowenthal  is also a  member  of the  Board of  Trustees  of
Corporate Realty Income Trust, a private REIT that invests in triple-net  leased
commercial and  industrial  properties.  He received his Bachelor's  Degree from
Case Western University and received his J.D. degree from Georgetown  University
Law Center.

     DONALD E.  PHILLIPS.  Mr.  Phillips  has served as a member of the Board of
Directors since September  1992. Mr.  Phillips is currently  retired.  From 1960
until  1980,  Mr.  Phillips  served as a  corporate  executive  in a variety  of
capacities  for  International  Minerals & Chemicals  Corporation of Northbrook,
Illinois and,  from 1976 to 1980,  he was Group  President & CEO of IMC Industry
Group,  Inc.  ("IMC"),  a chemical and minerals  firm.  From 1980 until 1988, he
served as Group  President  & CEO of Pitman  Moore,  Inc.,  then a wholly  owned
subsidiary  of IMC. Mr.  Phillips  presently  serves as Chairman of the Board of
Directors  of  Synbiotics   Corporation  of  Rancho  Bernardo,   California,   a
manufacturer and distributor of veterinary devices and products. Mr. Phillips is
also a member of the Board of Directors of Potash  Corporation of  Saskatchewan,
Canada,  a miner and distributer of minerals for agricultural  application.  Mr.
Phillips  received his Bachelor's  Degree from Mississippi  College and received
his M.B.A.  degree from the University of Mississippi.  He is also a graduate of
the  Executive  Program in Business  Administration  in the  Graduate  School of
Business,  Columbia  University  and he is a recipient of an Honorary  Doctor of
Laws degree from Mississippi College.

     WALTER  H.  TENINGA.  Mr.  Teninga  has  served as a member of the Board of
Directors  since  September  1992.  From 1991 to 1993, Mr. Teninga served as the
President and Chief  Executive  Officer of American Club Stores,  Inc., a wholly
owned  subsidiary of American  Stores Company,  a grocery and food  distribution
business. Prior to 1991, Mr. Teninga served as Chairman, Chief Executive Officer
and  Director  of the  Warehouse  Club,  a  wholesale  cash-and-carry  warehouse
business that he founded in 1982. Mr. Teninga is currently a member of the Board
of Directors of Developers  Diversified Realty  Corporation,  a NYSE-listed real
estate  investment  trust  and Solo  Serve  Corporation,  an  off-price  apparel
retailer.  Mr.  Teninga  received his  Bachelor's  Degree from the University of
Michigan and his M.B.A. degree from Michigan State University.

Committees of the Board of Directors

     AUDIT  COMMITTEE.  The  Audit  Committee  was  established  by the Board of
Directors in 1993 and is responsible for making  recommendations  concerning the
engagement of independent  public  accountants,  reviewing with the  independent
accountants   the  plans  and  results  of  the  audit   engagement,   approving
professional   services   provided  by  the  independent   public   accountants,
considering  the range of audit and  non-audit  professional  fees and reviewing
with the  independent  accountants  and management the adequacy of the Company's
internal accounting controls. The Audit Committee is required to be comprised of
two or more  Independent  Directors.  The current members of the Audit Committee
are Messrs. Josephs (Chairman), Brinkerhoff and Teninga.

     COMPENSATION  COMMITTEE.  The Compensation Committee was established by the
Board of  Directors in 1995 and is  responsible  for  establishing  remuneration
levels for  executive  officers of the Company and  administering  the Company's
Stock  Incentive  Plan  and  any  other  incentive  programs.  The  Compensation
Committee is required to be comprised  of three or more  Independent  Directors.
The Compensation  Committee currently consists of Messrs.  Phillips  (Chairman),
Josephs, Lowenthal and Teninga.


                                       32

<PAGE>

            SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors and holders of 10% or more of the
outstanding Common Stock to file an initial report of ownership (Form 3) and
reports of changes of ownership (Forms 4 and 5) of Common Stock with the
Securities and Exchange Commission.  Such persons are required to furnish the
Company with copies of all Section 16(a) forms that they file. Based upon a
review of these filings, the Company notes that no Section 16 reports related
to 1996 were delinquent.

ITEM 11--EXECUTIVE COMPENSATION

     Until April 1, 1996,  the Company had no employees  and all  services  were
provided by the  Advisor  pursuant to various  fee-for-service  agreements.  The
table below sets forth the summary  compensation of the Chief Executive  Officer
and the four other most highly  paid  executive  officers  of the  Company  (the
"Named  Executive  Officers") based on the aggregate  compensation  paid to such
officers in 1996 (i) by the Company  for the period  beginning  on April 1, 1996
and (ii) by the Advisor for the period from January 1, 1996 to April 1, 1996 and
for the years  ended  December  31,  1994 and 1995.  All of the 1995  options to
purchase Common Stock and a portion of the 1996 options to purchase Common Stock
held by the Named  Executive  Officers  were granted to the Advisor  pursuant to
various services agreements and the Advisor then transferred such options to its
employees pursuant to the Advisor Plan.



                                       33

<PAGE>
<TABLE>
<CAPTION>
                                                                                   Long-Term
                                        Annual Compensation                    Compensation Awards
                                        -------------------                    -------------------
                                                                     Restricted   Securities
                                                                       Stock      Underlying         All Other
Name and Principal Position      Year    Salary($)(1)    Bonus($)   Awards($)(2) Options(#)(3)  Compensation ($)(4)
---------------------------      ----    ------------   --------    ------------ -------------  -------------------
<S>                              <C>        <C>           <C>         <C>         <C>              <C>
Richard A. May                   1996       180,000       72,000           --       49,578            4,038
Chairman                         1995       150,000       15,000           --      229,568            4,432
                                 1994       128,750       15,000           --           --            4,432

Richard L. Rasley                1996       115,000       34,500      102,852       20,785            4,007
Executive Vice President         1995       100,000       10,000           --       86,310            4,438
                                 1994        93,133       17,300           --           --            4,352

Raymond M. Braun                 1996       105,000       36,750      222,852       18,800            4,224
Senior Vice President -          1995        86,875        9,000           --       36,300            4,421
    Acquisitions                 1994        70,333       13,000           --           --            4,525


James Hicks                      1996       100,000       30,000       51,432       14,800            4,213
Senior Vice President,           1995        86,875        9,000           --       18,200            4,421
    Chief Financial Officer      1994        47,470        4,850           --           --            2,278


Kim S. Mills                     1996       100,000       30,000           --       12,000              255
Senior Vice President -
    Asset Management (5)
</TABLE>

---------------------


(1)  The  salary  information  for  1996  represents  the  individual's   salary
     compensation  for the period from  January 1, 1996 to April 1, 1996 as paid
     by the Advisor  and for the period from April 1, 1996 to December  31, 1996
     as paid by the Company.

(2)  Effective April 1, 1996 and in connection with the Merger,  Messrs. Rasley,
     Braun and Hicks received 8,571, 8,571 and 4,286 restricted shares of Common
     Stock,  respectively,  as an  inducement  to  accept  employment  with  the
     Company.  Effective May 1, 1996,  Mr. Braun  received an additional  10,000
     restricted  shares as an  inducement  to remain  employed with the Company.
     Such restricted shares were valued at prices equal to the fair market value
     on the dates of grant,  which in all cases was deemed to be $12.00 (the Net
     Asset  Value as of such  date).  As of  December  31,  1996,  the number of
     restricted shares of Common Stock held by Messrs.  Rasley,  Braun and Hicks
     was 8,571,  18,571 and 4,286,  respectively.  As of December 31, 1996,  the
     value of the restricted shares held by Messrs.  Rasley, Braun and Hicks was
     $111,423, $241,423 and $55,718,  respectively (based upon a Net Asset Value
     of $13.00). Dividends will be paid on all restricted shares held by Messrs.
     Rasley, Hicks and Braun. On April 1, 1997, the restrictions will lapse with
     respect to 4,285.5  restricted shares held by Messrs.  Rasley and Braun and
     with respect to 2,143 restricted shares held by Mr. Hicks. On April 1, 1998
     and  provided  that the  recipient is still  employed by the  Company,  the
     restrictions  will lapse with respect to the  remaining  restricted  shares
     held by  Messrs.  Rasley and Hicks and with  respect to 4,285.5  restricted
     shares  held  by  Mr.  Braun.  Notwithstanding  anything  to  the  contrary
     contained in this note (3), the restrictions with respect to all restricted
     shares  held by  Messrs.  Rasley  and  Hicks  and  with  respect  to  8,571
     restricted  shares held by Mr. Braun will lapse upon the earlier of (i) the
     employee's death, (ii) the employee's total and permanent disability, (iii)
     the  completion  of a  public  offering  of the  Common  Stock  or (iv) the
     dismissal of the employee other than for cause.

(3)  Options  granted  during 1996 were issued at exercise  prices  equal to the
     fair market  value on the dates of grant,  which was the Net Asset Value as
     of such date.  Options granted during 1995 and options to purchase  17,578,
     6,785,  2,800 and 2,800  shares of Common Stock deemed to have been granted
     to Messrs. May, Rasley,  Braun and Hicks,  respectively,  in 1996 represent
     Advisor  Options  that were  assigned  to such  individuals  by the Advisor
     during 1995 from a pool of options  that had been granted to the Advisor by
     the Company  pursuant to service  agreements  at various  times  during the
     period from the Company's  incorporation through December 31, 1995. Advisor
     Options were  exercisable on the date of grant.  Options  granted under the
     1996 Option Plan expire upon the earliest of (i) September  24, 2006,  (ii)
     one year after the  termination  of the optionee for death or disability or
     (iii) three months after the termination of the optionee for cause. Options
     granted  under  the 1996  Option  Plan  become  exercisable  at the rate of
     one-third  of the shares  covered  thereby on September 24 in each of 1997,
     1998 and 1999. See "-- Stock Option Plans."

(4)  These amounts  represent group life and health  insurance  premiums paid by
     the Advisor (for 1995) and the Advisor and Company (for 1996).

(5)  Mr. Mills became an employee of the Advisor in January 1996; therefore,  no
     information is presented for 1994 or 1995.


                                       34

<PAGE>

Stock Option Plans

      1996 Incentive Stock Option Plan

     The Company has adopted  the 1996  Incentive  Stock  Option Plan (the "1996
Option Plan") for the purpose of attracting and retaining certain key employees.
The 1996 Option Plan is administered by the Compensation  Committee and provides
for the granting of options with respect to up to 500,000 shares of Common Stock
to executives  or other key employees of the Company.  Options may be granted in
the form of "incentive stock options," as defined in Section 422 of the Code, or
non-statutory  stock options and are  exercisable  for up to ten years following
the date of grant  (five  years  in  certain  cases  involving  incentive  stock
options). The exercise price and other terms,  including vesting provisions,  of
each option will be set by the Compensation Committee;  provided,  however, that
in no event will the price per share be less than the fair  market  value of the
Common  Stock on the date of  grant,  or 110% of the  fair  market  value of the
Common Stock on the date of grant if the option is granted to an individual  who
at the time the option is granted  owns  stock  possessing  more than 10% of the
total combined voting power of all classes of stock of the Company or its parent
or  subsidiary;  provided  further  that no  option  can vest  until  the  first
anniversary of the date of grant.  Vested options  granted under the 1996 Option
Plan  expire the  earlier of (i) ten years from the date of grant (five years in
certain  cases  involving  incentive  stock  options),  (ii) one year  after the
termination  of the optionee for death or disability or (iii) three months after
the termination of the optionee for cause.

     Effective  September 24, 1996,  94,000  options were granted under the 1996
Option Plan.  Such options  become  exercisable  at the rate of one-third of the
shares covered thereby on September 24 in each of 1997, 1998 and 1999.

     Advisor Stock Option Plan

     Effective July 2, 1992,  the Company  adopted the Advisor Stock Option Plan
(the  "Advisor  Plan")  pursuant to which the  Advisor  was  granted  options to
purchase Common Stock ("Advisor  Options"),  which the Advisor could transfer to
key employees or affiliates of the Advisor. All Advisor Options have an exercise
price at least equal to the fair market value of the Common Stock on the date of
grant and  terminate ten years after the date of grant.  In connection  with the
merger of the Company and the Advisor, the Advisor Plan was terminated effective
April 1, 1996, subject to the rights of holders of Advisor Options granted prior
to the termination of the Advisor Plan.

     During  the  period of 30 days  after any  "change  in  control,"  a person
entitled  to  exercise an option  granted  under the  Advisor  Plan may elect to
require the Company to purchase  all or any portion of such option at a purchase
price  equal to the  difference  between  the fair  market  value and the option
exercise  price.  For purposes of the Advisor Plan, a "change in control"  means
(i) certain  consolidations or mergers of the Company, (ii) certain sales of all
or  substantially  all of the  assets  of the  Company,  (iii)  the  filing of a
Schedule 13D or Schedule 14D-1 under the Exchange Act disclosing that any person
has become  the  beneficial  owner of 20% or more of the issued and  outstanding
shares of voting  securities  of the  Company  or (iv)  during any period of two
consecutive  years,  individuals  who  at  the  beginning  of  any  such  period
constitute the Board of Directors  cease for any reason to constitute at least a
majority  thereof  unless the election,  or the  nomination  for election by the
Company's  stockholders,  of each  new  member  of the  Board of  Directors  was
approved  by a vote of at  least  two-thirds  of the  members  of the  Board  of
Directors then still in office at the beginning of any such period.

     Under the  Advisor  Plan,  the  Advisor  was  granted  annually  options to
purchase  Common Stock equal to 1% of the average total  outstanding  shares for
each 1% that  the  Operations  Yield  (as  defined  in the  Advisory  Agreement)
exceeded 10%.  Options  granted under the Advisor Plan were  exercisable  on the
date of grant.  For the three  months  ended  March 31,  1996,  the  Advisor was
granted  options to purchase  41,424 shares of Common Stock at an exercise price
of $12.00 per share.  These  options  expire  March 31,  2006.  The  Advisor has
assigned

                                       35

<PAGE>



a total of 29,963 of these options to Messrs. May, Rasley,  Braun and Hicks. For
the year ended  December  31,  1995,  the  Advisor  was  granted  (i) options to
purchase 143,777 shares of Common Stock at an exercise price of $12.00 per share
and an  expiration  date of December 31, 2005,  (ii) options to purchase  77,949
shares  of  Common  Stock  at an  exercise  price of  $12.25  per  share  and an
expiration  date of June 30, 2000 and (iii) options to purchase 20,783 shares of
Common Stock at an exercise price of $13.50 per share and an expiration  date of
December 31, 2000.  The Advisor  assigned a total of 180,397 of these options to
Messrs. May, Rasley,  Braun and Hicks. For the year ended December 31, 1994, the
Advisor was  granted  options to purchase  60,150  shares of Common  Stock at an
exercise price of $10.75 per share and an expiration  date of December 31, 2004.
The Advisor assigned a total of 44,887 of these options to Messrs.  May, Rasley,
Braun and Hicks.

     The following tables set forth certain information  regarding stock options
granted to and  exercised by the Named  Executive  Officers  during 1996 and the
stock options held by them as of December 31, 1996:


<TABLE>
<CAPTION>

                        Option Grants in Last Fiscal Year

                                           Individual Grants
                                           -----------------
                                      % of Total
                        Number of       Options                              Potential Realizable Value at
                       Securities     Granted to                                Assumed Annual Rates of
                       Underlying      Employees    Exercise                  Stock Price Appreciation for
                         Options       in Fiscal      Price     Expiration          Option Term
      Name               Granted         Year        ($/sh)        Date       5% ($)(3)     10% ($)(3)
--------------------  -------------  ------------ ------------ ------------  ----------     -----------
<S>                   <C>               <C>         <C>         <C>          <C>            <C>
Richard A. May......    17,578(1)        12.98%     $12.00       3/31/06     $132,657       $336,178
                        32,000(2)        23.63%      13.00       9/24/06      261,620        662,997
Richard L. Rasley...     6,785(1)        5.01%       12.00       3/31/06       51,205        129,763
                        14,000(2)        10.34%      13.00       9/24/06      114,459        290,061
Raymond M. Braun....     2,800(1)        2.07%       12.00       3/31/06       21,131         53,550
                        16,000(2)        11.81%      13.00       9/24/06      130,810        331,498
James Hicks.........     2,800(1)        2.07%       12.00       3/31/06       21,131         53,550
                        12,000(2)        8.86%       13.00       9/24/06       98,108        248,624
Kim S. Mills........    12,000(2)        8.86%       13.00       9/24/06       98,108        248,624
</TABLE>

---------------------

(1)  Options were assigned  under the Advisor Plan and vested on March 31, 1996,
     the date of grant.


(2)  Options were granted under the 1996 Option Plan and become  exercisable  at
     the rate of one-third of the shares covered thereby on September 24 in each
     of 1997, 1998 and 1999.

(3)  Assumed annual rates of stock price appreciation for illustrative  purposes
     only as required by the rules of the SEC.  The actual price of Common Stock
     will vary from time to time based upon  market  factors  and the  Company's
     financial  performance.  No assurance  can be given that such rates will be
     achieved.



                                       36

<PAGE>
                       Aggregated Option Exercises in Last
                  Fiscal Year and Fiscal Year-End Option Values

<TABLE>
<CAPTION>
                                                             Number of Securities     Value of Unexercised
                                                            Underlying Unexercised          In-The-Money
                                                               Options at Fiscal             Options at
                                                                  Year-End (#)            Fiscal Year-End ($)
                              Shares Acquired       Value         Exercisable/               Exercisable/
                Name          on Exercise (#)     Realized        Unexercisable            Unexercisable (1)
---------------------------   ---------------     --------  -------------------------  -----------------------
<S>                              <C>              <C>            <C>                     <C>
Richard A. May.............       192,637         $415,754        54,509/32,000               $37,023/0
Richard L. Rasley..........             0                0        93,095/14,000              $175,031/0
James Hicks................        13,400          $16,000         7,600/12,000                $4,825/0
Raymond M. Braun...........         8,075          $24,975        31,025/16,000               $48,525/0
Kim S. Mills...............             0                0             0/12,000                     0/0
</TABLE>

---------------------


(1)  Value was calculated by  subtracting  the exercise price from the Net Asset
     Value as of December 31, 1996.



Compensation of Directors

     Members of the Board of Directors and  committees  thereof who are not also
officers of the Company  receive an annual  retainer fee of $10,000 plus fees of
$1,000  for each day on which they  attend a meeting of the Board of  Directors,
$500 for each day on which they attend a meeting of a Committee  of the Board of
Directors and $250 for each day in which they  participate  telephonically  in a
meeting of the Board of Directors or a Committee thereof. The Company reimburses
each  director  for  expenses  incurred  in  attending  meetings.  In  addition,
directors who are not also officers of the Company are currently  eligible to be
granted  options to acquire up to 5,000  shares of Common  Stock under the Stock
Option Plan for Independent  Directors and Brokers (the "Directors Plan") at the
Company's  Net Asset Value as determined by the Board of Directors as of the end
of each fiscal year. As compensation for services performed during 1996, each of
Messrs. Brinkerhoff, Josephs, Lowenthal, Phillips and Teninga received an option
to purchase  5,000  shares of Common  Stock at an  exercise  price of $13.00 per
share. Mr.  Brinkerhoff  assigned his stock option to Fortis Benefits  Insurance
Company.  Such options were exercisable when granted and will expire on December
31, 2006 or six months after a director is removed by the stockholders for cause
pursuant to the Bylaws.

     During  the  period of 30 days  after any  "change  in  control,"  a person
entitled to exercise an option  granted  under the  Directors  Plan may elect to
require the Company to purchase  all or any portion of such option at a purchase
price  equal to the  difference  between  the fair  market  value and the option
exercise price.  For purposes of the Directors Plan, a "change in control" means
(i) certain  consolidations or mergers of the Company, (ii) certain sales of all
or  substantially  all of the  assets  of the  Company,  (iii)  the  filing of a
Schedule 13D or Schedule 14D-1 under the Exchange Act disclosing that any person
had become  the  beneficial  owner of 20% or more of the issued and  outstanding
shares of voting  securities  of the  Company  or (iv)  during any period of two
consecutive  years,  individuals  who  at  the  beginning  of  any  such  period
constitute the Board of Directors  cease for any reason to constitute at least a
majority  thereof  unless the election,  or the  nomination  for election by the
Company's  stockholders,  of each  new  member  of the  Board of  Directors  was
approved  by a vote of at  least  two-thirds  of the  members  of the  Board  of
Directors then still in office at the beginning of any such period.


Change in Control Agreements

     The Company has entered into change in control agreements with Messrs. May,
Rasley,  Braun,  Hicks and Mills providing for the payment of specified benefits
under the  circumstances  described  below  after a "change  in  control."  If a
"change in control"  occurs,  the executive  will receive an amount equal to two
times the sum of his base salary plus two times the amount that would  otherwise
be earned under certain existing  executive  compensation plans and arrangements
if within the period  commencing on the date of a "change in control" and


                                       37

<PAGE>


ending on the last day of the  month in which  occurs  the  second  anniversary
of the "change in control" of the Company (the  "Employment  Period"),  the
executive's employment  with the  Company is  terminated  (a  "Termination")
other than for death,  disability or "cause" or termination by the executive
for "good reason," defined as (i) the  executive's  resignation  or  retirement
is requested by the Company other than for cause; (ii) any significant change
in the nature or scope of the executive's  duties or level of authority and
responsibility;  (iii) any reduction in the  executive's  applicable  total
compensation or benefits other than a reduction in compensation or benefits
applicable to substantially all of the  Company's  employees;  (iv) a breach by
the  Company of any other  material provision of the change in control
agreement; or (v) a reasonable  determination by the  executive  that, as a
result of a change in control of the Company and a change in  circumstances
thereafter  significantly  affecting  the  executive's position,  the
executive is unable to exercise the prior level of the executive authority and
responsibility. A "change in control" is deemed to occur under the change in
control  agreements  if (i) any person  other than  certain  "excluded persons"
becomes  the  beneficial  owner  of  50%  or  more  of  the  Company's
outstanding   Common  Stock  (a  "50%  Beneficial   Owner"),   (ii)  during  any
twenty-four-month  period,  individuals  who at the  beginning  of  such  period
constitute the Board of Directors (the  "Incumbent  Board") cease for any reason
to constitute at least a majority of the Board of Directors;  provided, however,
that any individual  becoming a director during such period whose  election,  or
nomination for election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then  comprising the Incumbent  Board shall
be considered as though such  individual  were a member of the Incumbent  Board,
but excluding for this purpose any such individual  whose initial  assumption of
office is in connection with an actual or threatened contest for the election of
directors (as such terms are used in Rule 14a-11 of Regulation  14A  promulgated
under the Exchange  Act, or any  successor  rule) or other actual or  threatened
solicitation  of proxies or consents by or on behalf of a person  other than the
Board of Directors,  (iii) certain  consolidations  or mergers of the Company or
(iv)  certain  sales,   leases,   exchanges  or  other   transfers  of  all,  or
substantially  all,  of the assets of the  Company.  An  executive  subject to a
Termination  will be subject to a  non-competition  agreement for the Employment
Period.

Limited Purpose Employee Loan Program

     The Company has established the Limited Purpose  Employee Loan Program (the
"Employee Loan Program") for the purpose of attracting and retaining certain key
employees by facilitating  their ability to exercise  options to purchase Common
Stock. Under the Employee Loan Program, the Compensation Committee may authorize
the  Company to make loans and loan  guarantees  to, or for the  benefit of, any
employee  of the  Company to whom  options to  purchase  Common  Stock have been
granted. Under the Employee Loan Program,  employees may borrow up to 90% of the
cost of exercising stock options held by the employee.  Such loans bear interest
at the interest rate for borrowings under the Credit  Facility,  are recourse to
the employees and are secured by a pledge of the stock  acquired by the employee
through this program.  The loan expires on the earlier of the fifth  anniversary
of the loan  date and the  date  such  employee's  employment  with the  Company
ceases. As of December 31, 1996,  employees had acquired an aggregate of 119,892
shares of Common Stock  through this program  with  aggregate  outstanding  loan
amounts of $1.2 million due the Company. Such amount is reflected as a reduction
of stockholders' equity until the loans are repaid.  Richard A. May, Chairman of
the  Board,  President  and Chief  Executive  Officer of the  Company,  borrowed
$1,067,764  under the Employee Loan  Program,  all of which was  outstanding  at
December 31, 1996.

Compensation Committee Interlocks and Insider Participation

     The  Compensation   Committee   currently  consists  of  Messrs.   Phillips
(Chairman),  Josephs,  Lowenthal  and  Teninga.  None  of  the  members  of  the
Compensation Committee is or has ever been an officer or employee of the Company
or had any other relationship with the Company,  except as a member of the Board
of Directors and as a stockholder.


                                       38

<PAGE>



ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The  following  table  sets  forth  certain  information  regarding  the
beneficial  ownership  of  Common  Stock  as of  January  31,  1997 by (i)  each
director,  (ii) each of the Named  Executive  Officers,  (iii) all directors and
executive  officers of the Company as a group and (iv) each other  person who is
known by the Company to be the beneficial owner of 5% or more of the outstanding
shares of Common  Stock.  Except as indicated  below,  all such shares of Common
Stock  are  owned  directly,  and the  indicated  person  has  sole  voting  and
investment power.
<TABLE>
<CAPTION>

                                                              Number of Shares of        Percentage
                                                                 Common Stock              as of
Name and Address of Beneficial Owner (1)                     Beneficially Owned(2)    January 31, 1997
----------------------------------------                     ------------------       ----------------
<S>                                                          <C>                       <C>
Fortis Benefits Insurance Company (3)(4)................       1,005,000(5)                11.40%
  One Chase Manhattan Plaza
  41st Floor
  New York, New York  10005
Morgan Stanley Asset Management Inc. (3)(4).............       1,005,000(6)                11.40%
  1221 Avenue of the Americas
  21st Floor
  New York, New York  10020
Wellsford Karpf Zarrilli Ventures, L.L.C. (3)(4)........       1,000,000                   11.35%
  201 Hamilton Road
  Ridgewood, New Jersey  07450
Logan, Inc. (4).........................................         482,000                    5.75%
  720 East Wisconsin Avenue
  Milwaukee, Wisconsin  53202
Raymond M. Braun (7)....................................          57,671                      --
James J. Brinkerhoff....................................              --                       *
James Hicks (8).........................................          26,286                       *
Daniel E. Josephs (9)...................................          64,856                       *
Edward Lowenthal (10)...................................       1,005,000                   11.40%
Richard A. May (11).....................................         320,781                    3.62%
Kim S. Mills ...........................................              --                      --
Donald E. Phillips (12).................................          43,981                       *
Richard L. Rasley (13)..................................         115,115                    1.29%
Walter H. Teninga (14)..................................          44,424                       *
All directors and executive officers
as a group (10 persons) (15)............................       1,683,114                   18.61%
</TABLE>

--------------------------

*    Less than 1%

(1)  Except as otherwise  noted,  the address for each of the persons  listed is
     823 Commerce Drive, Suite 300, Oak Brook, Illinois 60521.

(2)  Except as  otherwise  noted,  all persons  have sole voting and  investment
     power with respect to their shares.

(3)  Based on the most  recent  Schedule  13D on file  with the SEC,  except  as
     discussed in footnote (4) below.

(4)  The Number of Shares of Common Stock Beneficially Owned excludes (i) 54,339
     shares of Common Stock held by each of Fortis Benefits  Insurance  Company,
     Morgan Stanley Asset Management Inc.  ("MSAM") and Wellsford Karpf Zarrilli
     Ventures,  L.L.C.  ("WKZV") and (ii) 26,191  shares of Common Stock held by
     Logan,  Inc. that are issuable  pursuant to the  conversion of  outstanding
     shares of Preferred Stock. Upon the completion of the Offering,  all of the
     Company's outstanding Preferred Stock will be cancelled.

(5)  Includes  options  exercisable  within 60 days to purchase  5,000 shares of
     Common  Stock,  which options were granted to Mr.  Brinkerhoff  as director
     compensation and assigned by Mr. Brinkerhoff to Fortis.

(6)  As reported in Amendment  No. 2 to a Schedule 13D filed by MSAM on December
     2, 1996, (i) MSAM has shared voting power as to 1,054,339  shares of Common
     Stock and shared  dispositive power as to 1,054,339 shares of Common Stock,
     (ii) Morgan Stanley  Institutional  Fund,  Inc.  ("MSIF") has shared voting
     power as to 643,150 shares of Common Stock and shared  dispositive power as
     to 643,150 shares of Common Stock,  (iii) Morgan  Stanley SICAV  Subsidiary
     S.A. (the "SICAV  Subsidiary") has shared voting power as to 411,189 shares
     of Common Stock and shared dispositive power

                                       39

<PAGE>



     as to 411,189  shares and (iv) Morgan  Stanley Group Inc. has shared voting
     power as to 1,054,339 shares of Common Stock and shared  dispositive  power
     as to 1,054,339 shares of Common Stock. MSAM acts as investment  adviser to
     MSIF and the SICAV Subsidiary.  Includes options exercisable within 60 days
     to purchase 5,000 shares of Common Stock, which options were granted to Mr.
     Platt as director compensation and assigned by Mr. Platt to MSAM.

(7)  Includes  options  exercisable  within 60 days to purchase 23,100 shares of
     Common Stock.

(8)  Includes  options  exercisable  within 60 days to purchase  7,600 shares of
     Common Stock.

(9)  Includes  options  exercisable  within 60 days to purchase 80,394 shares of
     Common Stock.

(10) Includes  options  exercisable  within 60 days to purchase 14,000 shares of
     Common Stock.

(11) Mr. Lowenthal is a member of WKZV and may be deemed to beneficially own the
     1,000,000 shares of Common Stock that are  beneficially  owned by WKZV. Mr.
     Lowenthal disclaims  beneficial ownership of all but 19,231 of such shares.
     Includes  options  exercisable  within 60 days to purchase  5,000 shares of
     Common Stock.

(12) Includes  options  exercisable  within 60 days to purchase 54,509 shares of
     Common  Stock and  Indemnification  Shares  held in escrow  pursuant to the
     terms of the Merger.

(13) Includes  options  exercisable  within 60 days to purchase  8,000 shares of
     Common Stock.

(14) Includes  options  exercisable  within 60 days to purchase 93,095 shares of
     Common  Stock and  Indemnification  Shares  held in escrow  pursuant to the
     terms of the Merger.

(15) Includes  options  exercisable  within 60 days to purchase 15,000 shares of
     Common Stock. Also includes 13,952 shares owned by Mr. Teninga's spouse.

(16) Includes  options  exercisable  within 60 days to purchase an  aggregate of
     313,623 shares of Common Stock.


ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Advisor Relationship

     Effective April 1, 1996, the Company became a  self-administered  REIT upon
the  consummation  of the merger (the  "Merger") of Equity  Partners,  Ltd. (the
"Advisor")  with and into the Company in exchange  for 100,000  shares of Common
Stock.  Messrs.  May and Rasley, who are directors and executive officers of the
Company,  owned 70.5% of the  outstanding  shares of Common Stock of the Advisor
and received  58,330 and 11,760  shares of Common  Stock,  respectively,  in the
Merger.  In  connection  with the Merger,  EVEREN  Securities,  Inc.  ("EVEREN")
rendered an opinion that the Merger was fair, from a financial point of view, to
the  Company.  The Merger was  approved by the members of the Board of Directors
who were  not also  employees  of the  Company,  affiliates  of the  Advisor  or
employees of EVEREN. The Merger was approved by the Company's  stockholders at a
special meeting of stockholders held on February 27, 1996.

     From the Company's  incorporation  until the completion of the Merger,  the
Advisor  provided  various  services  to the  Company  pursuant  to an  Advisory
Agreement  dated  July  2,  1992  as  restated  July 1,  1994,  relating  to the
selection,  purchase,  financing and operation of the Company's  properties (the
"Advisory  Agreement"),  and  pursuant to other  agreements  regarding  property
management and offering  administration  activities.  The Advisory Agreement and
the other  agreements  obligated the Advisor to manage and conduct the Company's
day-to-day operations in consideration for certain fees which were based in part
on the  Company's  funds  from  operations.  Under  the  terms  of the  Advisory
Agreement  and other  agreements,  the Advisor was paid  $566,320,  $791,103 and
$2,139,826 in 1993, 1994 and 1995,  respectively,  and $767,425 in 1996 prior to
the Merger. The Advisor also received Advisor Options under the Advisor Plan.

     In connection with the Merger,  the  shareholders  of the Advisor  received
100,000 shares of Common Stock,  15,000 of which were placed in escrow to secure
the  indemnification  obligations  of  the  shareholders  of  the  Advisor  (the
"Indemnification  Shares").  Indemnification  Shares  that  are not  applied  to
indemnifiable  damages will be  distributed to the  shareholders  of the Advisor
upon the later of (a) April 1, 2001 or (b) the expiration of the last applicable
statute of limitations  within which tax-based  claims can be made. In addition,
certain  employees of the Advisor received  restricted shares of Common Stock as
an inducement to accept employment with the Company,  including 8,571, 8,571 and
4,286  restricted  shares of Common  Stock issued to Messrs.  Rasley,  Braun and
Hicks, respectively.  The restrictions on these shares lapse upon the completion
of

                                       40

<PAGE>



the  Offering.  In  addition,  effective  May 1, 1996,  Mr.  Braun  received  an
additional  10,000  restricted  shares of Common Stock that vest in equal annual
installments  on May 1 of each of the years 1999 through 2002  provided that Mr.
Braun is then employed by the Company.

Management Loans

     Pursuant  to the terms of the  Company's  Employee  Loan  Program,  Mr. May
borrowed  $1,067,764 million in 1996, the proceeds of which were used,  together
with other funds  supplied by Mr.  May,  to pay the  exercise  price for options
covering 102,064 shares of Common Stock. Mr. Braun borrowed $71,325 in 1997, the
proceeds of which were used to pay the exercise price for options covering 7,925
shares of Common  Stock.  Such  loans bear  interest  at the  interest  rate for
borrowings under the Credit Facility and are payable quarterly.

Transactions with EVEREN

     In connection with rendering a fairness opinion with respect to the Merger,
EVEREN  received a fee of $200,000 in 1996. The Company also agreed to reimburse
EVEREN  for  its  reasonable  out-of-pocket  expenses  (approximately  $19,500),
including the reasonable fees and expenses of EVEREN's counsel, and to indemnify
EVEREN for certain liabilities to which it may be subject in connection with its
engagement.  The Company  also  retained  EVEREN to act as agent for the private
placement  of shares of Common  Stock  effected  pursuant to the Stock  Purchase
Agreement. In connection with that private placement EVEREN received a placement
agent fee and expense  reimbursements  aggregating $2.2 million. Jon K. Haahr, a
Managing Director of EVEREN,  was a member of the Board of Directors at the time
EVEREN was  engaged by the Company to provide  the  fairness  opinion and act as
agent with respect to the private  placement of Common Stock. Mr. Haahr declined
to stand for re-election as a director when his term expired effective September
24, 1996.

Consultant Arrangement

     Beginning in December  1996,  the Company  retained  Karpf,  Zarrilli & Co.
Incorporated  ("Karpf  Zarrilli")  as a consultant  in  connection  with certain
matters.  In its capacity as consultant,  the Company will pay Karpf Zarrilli up
to $25,000 per month, plus reasonable expenses. Steven A. Karpf and Frederick P.
Zarrilli  are (i)  Principals  of Karpf  Zarrilli  and (ii) members of Wellsford
Karpf  Zarrilli  Ventures,  L.L.C.  ("WKZV").  WKZV is the  beneficial  owner of
1,054,339  shares  of Common  Stock and has  certain  registration  rights  with
respect to such shares of Common Stock. WKZV also has the right to designate one
individual  to be nominated as a member of the Board of Directors  under certain
circumstances.

Rights to Nominate Directors

     Pursuant to the Stock Purchase Agreement,  for so long as they own at
least 750,000  shares of Common  Stock or 5% of the issued and  outstanding
shares of Common Stock, each of (i) Fortis Benefits  Insurance Company
("Fortis"), (ii) Morgan Stanley Asset Management Inc. and (iii) WKZV is
entitled to designate one  individual to be nominated as a member of the
Board of  Directors.  As a result of this  agreement,  Messrs.  Brinkerhoff
and Lowenthal were nominated by Fortis and WKZV, respectively,  and joined
the Board of Directors  effective  August 20, 1996. They were each
renominated and elected to serve as directors for a one-year term by the
stockholders  at the Company's annual meeting of stockholders that was held
on September 24, 1996.

                                       41

<PAGE>



Registration Rights

     Pursuant to the  Registration  Rights Agreement dated as of August 20, 1996
(the  "Registration  Rights  Agreement")  by and among the  Company  and  Fortis
Benefits Insurance Company ("Fortis"); Morgan Stanley Institutional Fund, Inc. -
U.S. Real Estate Portfolio  ("MSIF");  Morgan Stanley SICAV Subsidiary S.A. ("MS
SICAV");  Wellsford  Karpf  Zarrilli  Ventures,  L.L.C.  ("WKZV");  Logan,  Inc.
("Logan"); and Pension Trust Account No. 104972 Held by Bankers Trust Company as
Trustee ("Pension Trust Account No. 104972;" Fortis, MSIF, MS SICAV, WKZV, Logan
and Pension Trust Account No. 104972 are collectively  referred to herein as the
"Institutional  Investors") the Company has granted the Institutional  Investors
certain registration rights with respect to the 3,867,000 shares of Common Stock
acquired  by them  pursuant  to the Stock  Purchase  Agreement.  Certain  of the
Institutional Investors are principal stockholders of the Company.


                                       42

<PAGE>



                                     PART IV

ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a)  1. See Index to Financial Statements.

          2.   See Index to Financial Statements.

               All  other  schedules  are not  submitted  because  the  required
               criterias  not been met, or because the required  information  is
               included  in  the  consolidated  financial  statements  or  notes
               thereto.


          3.   Exhibits:

        Exhibit
        Number                      Description of Document
        -------                     -----------------------
          3.1  Articles  of  Incorporation  of the  Company  dated June 22, 1992
               (Incorporated  by  reference  from  the  Company's   Registration
               Statement  on Form 10 filed  with  the  Securities  and  Exchange
               Commission (the "SEC") on April 29, 1996 (the "Form 10"))

          3.2  Articles of Merger of Equity Partners,  Ltd. (the "Advisor") into
               the Company dated April 1, 1996  (Incorporated  by reference from
               the Form 10)

          3.3  Articles  Supplementary  of the  Company  dated  August 20,  1996
               (Incorporated  by reference from the Company's  Current Report on
               Form 8-K dated August 28, 1996 (the "August 1996 8-K"))

          3.4  Amended and  restated  bylaws of the Company  dated  February 25,
               1997  (Incorporated by reference from the Company's  Registration
               Statement  on Form S-11 filed with the SEC on  February  28, 1997
               (No. 333-22619) (the "S-11")

          4.1  Specimen  of  certificate  representing  shares of  Common  Stock
               (Incorporated by reference from the Form 10)

         10.1  Merger  Agreement  dated January 26, 1996 between the Company and
               the Advisor (Incorporated by reference from the Form 10)


         10.2  Amended and Restated  Agreement of Limited  Partnership  of Great
               Lakes  REIT,  L.P.,  dated  December  27, 1996  (Incorporated  by
               reference  from the  Company's  Current  Report on Form 8-K dated
               January 14, 1997 (the "January 1997 8-K"))

         10.3  First Amendment to the Amended and Restated  Agreement of Limited
               Partnership  of Great Lakes REIT,  L.P.,  dated  February 6, 1997
               (Incorporated by reference from the S-11)

         10.4  Offering  Services  Agreement  dated  August 15, 1995 between the
               Company and the Advisor  (Incorporated by reference from the Form
               10)

         10.5  Managing  Dealer &  Wholesaling  Agreement  dated August 20, 1995
               between the Company and Chauner Securities, Inc. (Incorporated by
               reference from the Form 10)

         10.6  Agreement  dated  August 24, 1995  between the Company and EVEREN
               Securities,  Inc.  regarding  offering services  (Incorporated by
               reference from the Form 10)


                                       43

<PAGE>

         10.7  Indemnification  Escrow Agreement dated April 1, 1996 between the
               Company,  Richard A. May, Richard L. Rasley, Tim A. Grodrian, and
               American National Bank and Trust Company of Chicago (Incorporated
               by reference from the Form 10)

      *10.8.1  Restricted  Stock  Agreement  dated April 1, 1996 between the
               Company and Richard L. Rasley (Incorporated by reference from the
               Form 10)

      *10.8.2  Restricted  Stock  Agreement dated April 1, 1996 between Great
               Lakes REIT and James Hicks  (Incorporated  by reference  from the
               Form 10)

      *10.8.3  Restricted  Stock  Agreement dated April 1, 1996 between Great
               Lakes REIT and Raymond Braun  (Incorporated by reference from the
               Form 10)

      *10.8.4  Restricted  Stock  Agreement dated April 1, 1996 between Great
               Lakes REIT and Edith M. Scurto  (Incorporated  by reference  from
               the Form 10)

      *10.8.5  Restricted  Stock  Agreement dated April 1, 1996 between Great
               Lakes REIT and Brett R. Brown (Incorporated by reference from the
               Form 10)

      *10.8.6  Restricted  Stock  Agreement  dated May 1, 1996  between  the
               Company and Raymond  Braun  (Incorporated  by reference  from the
               S-11)

         10.9  Agreement  dated  August 24, 1995  between the Company and EVEREN
               Securities,  Inc.  regarding  fairness  opinion  (Incorporated by
               reference from the Form 10)

       *10.10  Stock Option Plan for  Independent  Directors  and Brokers (the
               "Directors  Plan")  dated July 2, 1992 as amended  July 15,  1994
               (Incorporated by reference from the Form 10)

     *10.11.1  Non-qualified  Stock Option  Certificate  dated December 31,
               1995 from the Company to Jon K. Haahr  (Incorporated by reference
               from the Form 10)

     *10.11.2  Non-qualified  Stock Option  Certificate  dated December 31,
               1995  from  the  Company  to  Wayne  M.  Janus  (Incorporated  by
               reference from the Form 10)

     *10.11.3  Non-qualified  Stock Option  Certificate  dated December 31,
               1995  from the  Company  to Daniel E.  Josephs  (Incorporated  by
               reference from the Form 10)

     *10.11.4  Non-qualified  Stock Option  Certificate  dated December 31,
               1995 from the  Company  to Donald E.  Phillips  (Incorporated  by
               reference from the Form 10)

     *10.11.5  Non-qualified  Stock Option  Certificate  dated December 31,
               1995  from the  Company  to Walter H.  Teninga  (Incorporated  by
               reference from the Form 10)

     *10.11.6  Non-qualified  Stock Option  Certificate  dated December 31,
               1995  from  the  Company  to  Richard  A.  May  (Incorporated  by
               reference from the Form 10)

     *10.11.7  Non-qualified  Stock Option  Certificate  dated December 31,
               1995 from the  Company  to  Richard L.  Rasley  (Incorporated  by
               reference from the Form 10)

     *10.11.8  Non-qualified  Stock Option  Certificate  dated December 31,
               1995 from the  Company  to  Raymond  M.  Braun  (Incorporated  by
               reference from the Form 10)

     *10.11.9  Non-qualified  Stock Option  Certificate  dated December 31,
               1995 from the Company to James Hicks  (Incorporated  by reference
               from the Form 10)

    *10.11.10  Non-qualified  Stock Option  Certificate dated December 31,
               1995  from  the  Company  to  Edith M.  Scurto  (Incorporated  by
               reference from the Form 10)


                                       44

<PAGE>

    *10.11.11  Non-qualified  Stock Option  Certificate dated December 31,
               1995  from  the  Company  to  Brett  A.  Brown  (Incorporated  by
               reference from the Form 10)

    *10.11.12  Form of  Non-Qualified  Stock Option  Certificate for use in
               connection  with options  issued  pursuant to the Directors  Plan
               (Incorporated by reference from the S-11)

        10.12  Amended and  Restated  Secured  Revolving  Loan  Agreement  dated
               September 28, 1994 between the Company and American National Bank
               and Trust Company of Chicago  (Incorporated by reference from the
               Form 10)

        10.13  First  Amendment to Amended and Restated  Secured  Revolving Loan
               Agreement  dated  September  29,  1995  between  the  Company and
               American National Bank and Trust Company of Chicago (Incorporated
               by reference from the Form 10)

        10.14  Second Amendment to Amended and Restated  Secured  Revolving Loan
               Agreement  dated  December  27,  1995  between  the  Company  and
               American National Bank and Trust Company of Chicago (Incorporated
               by reference from the Form 10)

        10.15  Revolving  Note dated  December  27, 1995 between the Company and
               American   National   Bank  and  Trust  Company  of  Chicago  for
               $25,000,000 (Incorporated by reference from the Form 10)

        10.16  Stock  Purchase  Agreement  dated as of  August  20,  1996 by and
               among the Company,  Fortis  Benefits  Insurance  Company,  Morgan
               Stanley  Institutional  Fund, Inc. - U.S. Real Estate  Portfolio,
               Morgan  Stanley SICAV  Subsidiary  SA,  Wellsford  Karpf Zarrilli
               Ventures,  L.L.C.,  Logan, Inc.; and Pension Trust Account 104972
               Held  by  Bankers  Trust  Company  as  Trustee  (Incorporated  by
               reference from the August 1996 8-K)

        10.17  Registration  Rights Agreement dated as of August 20, 1996 by and
               among the Company,  Fortis  Benefits  Insurance  Company,  Morgan
               Stanley  Institutional  Fund, Inc. - U.S. Real Estate  Portfolio,
               Morgan  Stanley SICAV  Subsidiary  SA,  Wellsford  Karpf Zarrilli
               Ventures,  L.L.C.,  Logan, Inc.; and Pension Trust Account 104972
               Held  by  Bankers  Trust  Company  as  Trustee  (Incorporated  by
               reference from the August 1996 8-K)

       *10.18  Form of Change in Control  Agreement  between  the  Company and
               Messrs.  May,  Rasley,  Braun,  Hicks and Mills  (Incorporated by
               reference from the Company's  Registration Statement on Form 10/A
               filed with the SEC on January 9, 1997 (the "Form 10/A")

       *10.19  Form of Change in Control Agreement between the Company and Mr.
               Brown and Ms.  Scurto  (Incorporated  by reference  from the Form
               10/A)

       *10.20  1996 Incentive  Stock Option Plan of the Company  (Incorporated
               by reference from the Form 10/A)

       *10.21  Form of  Stock  Option  Agreement  for use in  connection  with
               incentive  stock option and pursuant to the 1996 Incentive  Stock
               Option Plan of the  Company;  Richard A. May,  Richard L. Rasley,
               James  Hicks,  Raymond  Braun  and  Kim  S.  Mills  entered  into
               agreements in 1996 that evidenced 32,000,  14,000, 12,000, 16,000
               and 12,000 options,  respectively  under the 1996 Incentive Stock
               Option  Plan  effective   September  24,  1996  (Incorporated  by
               reference from the Form 10/A)

       *10.22  Limited   Purpose   Employee   Loan  Program  of  the  Company
               (Incorporated by reference from the Form 10/A)

       *10.23  Form of Limited Purpose  Employee Loan Program  Promissory Note
               for  use  in  connection  with  limited  purpose  employee  loans
               (Incorporated by reference from the Form 10/A)


                                       45

<PAGE>

        10.24  Amended and Restated  Revolving  Credit  Agreement  (the "Amended
               and Restated  Revolving Credit  Agreement")  Dated as of December
               27, 1996 among the Operating  Partnership and the Company and The
               First  National  Bank of Boston and Bank of America  Illinois and
               First Bank National  Association and Other Banks Which May Become
               Parties to the Agreement and The First National Bank of Boston as
               Agent (Incorporated by reference from the January 1997 8-K)

        10.25  Form of Amendment to the Amended and  Restated  Revolving  Credit
               Agreement  dated as of March 1, 1997  (Incorporated  by reference
               from the S-11)

         24.1  Powers of Attorney

         27.1  Financial Data Schedule

-----------------------------


*  Management contract or compensation plan or arrangement.


     (b)  Reports on Form 8-K:

          During the fourth  quarter ended  December 31, 1996, the Company filed
          the following reports on Form 8-K.

               Report on Form 8-K dated December 6, 1996 reporting the following
                    item:

                    Item 2. Acquisition or Disposition of Assets

               Report  on  Form  8-K  dated  December  20,  1996  reporting  the
                    following item:

                    Item 2. Acquisition or Disposition of Assets



                                       46

<PAGE>



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the  undersigned,  thereunto  duly  authorized,
in the City of Chicago, State of Illinois on the 28th day of March, 1997.

                                     GREAT LAKES REIT, INC.


                                     By: /s/ Richard A. May
                                        -----------------------------------
                                        Richard A. May
                                        Chairman of the Board of Directors,
                                        President and Chief Executive Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities indicated and on the 28th day of March,
1997.

                                              Title

  /s/ Richard A. May            Chairman of the Board of Directors, President
      ----------------          and Chief Executive Officer (Principal Executive
      Richard A. May            Officer)

  /s/ Richard L. Rasley         Executive Vice President,
      -----------------         Secretary, General Counsel and Director
      Richard L. Rasley


  /s/ James Hicks               Senior Vice President-Finance,
      ------------------        Chief Financial Officer and Treasurer
      James Hicks               (Principal Financial Officer and
                                Principal Accounting Officer)

  /s/ James J. Brinkerhoff      Director
      ---------------------
      James J. Brinkerhoff

  /s/ Daniel E. Josephs         Director
      --------------------
      Daniel E. Josephs

  /s/ Edward Lowenthal          Director
      ------------------
      Edward Lowenthal

  /s/ Donald E. Phillips        Director
      ---------------------
      Donald E. Phillips

  /s/ Walter H. Teninga         Director
      ---------------------
      Walter H. Teninga

                                       47

<PAGE>
                             Great Lakes REIT, Inc.

                          Index to Financial Statements
                                  (Item 14(a))


Financial Statements

     Report of Independent Auditors.                                      F-2

     Consolidated Balance Sheets as of December 31, 1996 and 1995.        F-3

     Consolidated Statements of Income for the years ended
     December 31, 1996, 1995 and 1994.                                    F-4

     Consolidated Statements of Changes in Stockholders' Equity for the
     years ended December 31, 1996, 1995 and 1994.                        F-5

     Consolidated Statements of Cash Flows for the years ended
     December 31, 1996, 1995 and 1994.                                    F-6

     Notes to Consolidated Financial Statements.                          F-7


Financial Statement Schedules

     Schedule III - Real Estate and Accumulated Depreciation as of
     December 31, 1996                                                    S-1


Schedules,  other than as listed above, are omitted for the reason that they are
not applicable or equivalent information has been included elsewhere herein.



                                       F-1

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS


The Board of Directors and Stockholders
Great Lakes REIT, Inc.

     We have audited the accompanying consolidated balance sheets of Great Lakes
REIT,  Inc.  as of  December  31,  1996 and 1995  and the  related  consolidated
statements of income,  changes in stockholders'  equity, and cash flows for each
of the three  years in the  period  ended  December  31,  1996.  Our audit  also
included the financial  statement schedule listed in the Index at Item 14. These
financial  statements  and  schedule  are the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements and schedule based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the consolidated  financial  position of Great Lakes
REIT,  Inc. at December 31, 1996 and 1995, and the  consolidated  results of its
operations  and its cash flows for each of the three  years in the period  ended
December 31, 1996 in conformity with generally accepted  accounting  principles.
Also, in our opinion, the related financial statement schedule,  when considered
in relation to the basic financial statements taken as a whole,  presents fairly
in all material respects the information set forth therein.



                                                               Ernst & Young LLP

Chicago, Illinois
January 28, 1997

                                       F-2

<PAGE>



                              GREAT LAKES REIT, INC

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                     ASSETS

                                                                                           December 31,
                                                                                           ------------
                                                                                      1996             1995
                                                                                      ----             ----
<S>                                                                             <C>               <C>
Properties:
Land                                                                             $  31,529,000    $  18,673,750
Buildings, improvements, and equipment                                             157,902,629       75,667,086
                                                                                 -------------    -------------
                                                                                   189,431,629       94,340,836
Less accumulated depreciation                                                        5,309,666        2,482,844
                                                                                 -------------    -------------
                                                                                   184,121,963       91,857,992
Cash and cash equivalents                                                            1,688,173        1,302,728
Real estate tax escrows                                                              1,065,182        1,424,159
Rents receivable                                                                     2,130,935        1,284,316
Deferred financing and leasing costs,
  net of accumulated amortization                                                    2,976,902        1,492,149
Goodwill, net of accumulated amortization                                            1,433,194
Other assets                                                                           732,533        1,617,092
                                                                                 -------------    -------------
Total assets                                                                     $ 194,148,882    $  98,978,436
                                                                                 =============    =============


                                          LIABILITIES AND STOCKHOLDERS' EQUITY

Bank loan payable                                                                $  63,802,368    $  24,253,148
Mortgage loans payable                                                              17,073,979       18,634,022
Bonds payable                                                                        5,235,000        5,420,000
Accounts payable and accrued liabilities                                             4,153,800        1,128,692
Accrued real estate taxes                                                            5,423,160        3,200,570
Prepaid rent                                                                         1,170,101          469,763
Security deposits                                                                      695,570          402,480
Distributions/dividends payable                                                                         504,564
                                                                                 -------------    -------------
Total liabilities                                                                   97,553,978       54,013,239
                                                                                 -------------    -------------

Commitments and Contingencies:
Preferred Stock ($0.01 par value per share,
 10,000,000 authorized, 210,128 issued)                                                  2,101
Common Stock ($0.01 par value per share,
 20,000,000 authorized; 8,832,268 and 4,520,896 shares
 issued in 1996 and 1995, respectively)                                                 88,323           45,209
Paid-in-capital                                                                     98,096,085       45,861,352
Retained earnings (deficit)                                                            177,320         (785,953)
Employee stock loans                                                                (1,247,351)
Deferred compensation                                                                 (251,335)
Treasury stock, at cost (21,784 and 12,951
  shares in 1996 and 1995, respectively)                                              (270,239)        (155,411)
                                                                                 -------------    -------------

Total stockholders' equity                                                          96,594,904       44,965,197
                                                                                 -------------    -------------

Total liabilities and stockholders' equity                                       $ 194,148,882    $  98,978,436
                                                                                 =============    =============
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       F-3

<PAGE>
                             GREAT LAKES REIT, INC.

                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)

<TABLE>
<CAPTION>

                                                                       Years Ended December 31,
                                                                       ------------------------
                                                                  1996          1995          1994
                                                              -----------   -----------   -----------
<S>                                                           <C>           <C>           <C>
Revenues
   Rental                                                     $20,249,565   $12,410,510   $ 6,647,362
   Reimbursements                                               4,814,005     2,354,598       884,073
   Interest and other                                             168,739       200,818        51,404
                                                              -----------   -----------   -----------

Total revenues                                                 25,232,309    14,965,926     7,582,839
                                                              -----------   -----------   -----------

Expenses
   Real estate taxes                                            3,954,144     2,624,588     1,417,679
   Other property operating (including
    $217,971, $564,369 and $273,671 of
    property management earned by affiliates
    in 1996, 1995 and 1994, respectively)                       6,548,057     3,967,543     1,943,584
   General and administrative (including
    $203,697, $608,612 and $294,530 of
    advisory fees earned by affiliates in
    1996, 1995 and 1994, respectively)                          2,242,165       922,652       561,124
   Interest                                                     3,778,065     2,296,457       911,381
   Depreciation and amortization                                4,000,736     1,954,885       761,284
                                                              -----------   -----------   -----------

Total expenses                                                 20,523,167    11,766,125     5,595,052
                                                              -----------   -----------   -----------

Income before gain on sale of properties                        4,709,142     3,199,801     1,987,787

Gain on sale of properties                                      3,139,892
                                                              -----------   -----------   -----------
Net income                                                    $ 7,849,034   $ 3,199,801   $ 1,987,787
                                                              ===========   ===========   ===========

Earnings per common share
  and common share equivalent                                 $      1.32   $      0.88   $      0.96
                                                              ===========   ===========   ===========

Weighted average number of common
  shares and common share equivalents
  outstanding                                                   5,927,208     3,650,133     2,070,221
                                                              ===========   ===========   ===========
</TABLE>

   The accompanying notes are an integral part of these financial statements.

                                       F-4

<PAGE>
                             GREAT LAKES REIT, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              For the Years Ended December 31, 1996, 1995, and 1994

<TABLE>
<CAPTION>
                                  Preferred Stock            Common Stock           Paid        Retained
                                 Shares                  Shares                      in         Earnings        Employee
                               Outstanding  Amount     Outstanding    Amount       Capital      (Deficit)     Stock Loans
                               -----------  ------     -----------    ------       -------      ---------     -----------
<S>                            <C>          <C>        <C>          <C>         <C>            <C>            <C>
Balance at 1/1/94                                      1,839,352    $  18,394   $ 16,632,663   $ (152,649)

Net proceeds from the sale
  of common stock                                        580,043        5,800      5,963,812
Net income                                                                                      1,987,787
Distributions
  ($0.96 per share)                                                                            (1,920,436)
Distributions
  reinvested                                             142,023        1,420      1,525,331
                                                         -------        -----      ---------   -----------


Balance at 12/31/94                                    2,561,418       25,614     24,121,806      (85,298)

Net proceeds from the sale
  of common stock                                      1,698,610       16,986     18,810,244
Exercise of stock options                                 32,410          324        322,571
Net income                                                                                      3,199,801
Distributions
  ($1.13 per share)                                                                            (3,900,456)
Distributions reinvested                                 228,458        2,285      2,606,731
Purchase of treasury stock                               (12,951)
                                                         -------        -----      ---------   -----------


Balance at 12/31/95                                    4,507,945       45,209     45,861,352     (785,953)

Net proceeds from the sale
  of stock                        210,128    2,101     3,867,000       38,670     47,378,490
Exercise of stock options                                304,372        3,044      3,247,071                   (1,247,351)
Net income                                                                                      7,849,034
Distributions
  ($1.20 per share)                                                                            (6,885,761)
Issuance of shares in
  acquisition of Advisor, net
  of issuance costs of $219,428                          100,000        1,000      1,129,572
Restricted stock awards                                   40,000          400        479,600
Purchase of treasury stock                                (8,833)
Amortization of deferred
  compensation
                                  -------  -------     ---------     --------   ------------    ---------   -------------
Balance at 12/31/96               210,128  $ 2,101     8,810,484     $ 88,323   $ 98,096,085    $ 177,320   $  (1,247,351)
                                  =======  =======     =========     ========   ============    =========   =============


</TABLE>
                                                                  Total
                                    Deferred       Treasury    Stockholders'
                                  Compensation      Stock         Equity
                                  ------------      -----         ------

Balance at 1/1/94                                              $ 16,498,408

Net proceeds from the sale
  of common stock                                                 5,969,612
Net income                                                        1,987,787
Distributions
  ($0.96 per share)                                              (1,920,436)
Distributions
  reinvested                                                      1,526,751
                                                                  ---------


Balance at 12/31/94                                              24,062,122

Net proceeds from the sale
  of common stock                                                18,827,230
Exercise of stock options                                           322,895
Net income                                                        3,199,801
Distributions
  ($1.13 per share)                                              (3,900,456)
Distributions reinvested                                          2,609,016
Purchase of treasury stock                         (155,411)       (155,411)
                                                   --------        --------

Balance at 12/31/95                                (155,411)     44,965,197

Net proceeds from the sale
  of stock                                                       47,419,261
Exercise of stock options                                         2,002,764
Net income                                                        7,849,034
Distributions
  ($1.20 per share)                                              (6,885,761)
Issuance of shares in
  acquisition of Advisor, net
  of issuance costs of $219,428                                   1,130,572
Restricted stock awards            (480,000)
Purchase of treasury stock                         (114,828)       (114,828)
Amortization of deferred
  compensation                      228,665                         228,665
                                    -------        --------         -------

Balance at 12/31/96                (251,335)       (270,239)   $ 96,594,904
                                   ========        ========    ============



   The accompanying notes are an integral part of these financial statements.

                                       F-5

<PAGE>

                             GREAT LAKES REIT, INC.

                       CONSOLIDATED  STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                  Years Ended December 31,
                                                             1996            1995           1994
                                                        ------------    ------------    ------------
<S>                                                     <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                              $  7,849,034    $  3,199,801    $  1,987,787
Adjustments to reconcile net income to cash
  flows from operating activities:
Depreciation and amortization                              4,000,736       1,954,885         761,284
Amortization of deferred compensation                        228,665
Gain on sale of properties                                (3,139,892)
Net changes in assets and liabilities:
Rents receivable                                            (846,619)       (714,156)       (499,425)
Real estate tax escrows                                      358,977        (489,937)       (703,972)
Other assets                                                 (65,441)       (563,333)         80,761
Accounts payable and accrued expenses                      3,025,108         657,258         353,534
Accrued real estate taxes                                  2,222,590       1,699,512         411,604
Payment of deferred leasing costs                         (1,293,616)       (561,373)       (454,215)
Other liabilities                                            488,864         466,850          39,941
                                                        ------------    ------------     -----------
Net cash provided by operating activities                 12,828,406       5,649,507       1,977,299
                                                        ------------    ------------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of properties                                   (97,563,034)    (47,838,629)    (18,196,369)
Additions to buildings, improvements and equipment        (6,305,673)     (2,861,135)     (2,296,522)
Proceeds from property sales, net                         11,707,438
Decrease (increase) in earnest money deposits                950,000        (950,000)
                                                        ------------    ------------    ------------
Net cash used by investing activities                    (91,211,269)    (51,649,764)    (20,492,891)
                                                        ------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of preferred stock                          2,101
Proceeds from sale of common stock                        50,268,899      20,628,232       6,734,492
Payment of stock offering costs                           (2,851,739)     (1,801,002)       (764,880)
Proceeds from exercise of stock options                    2,002,764         322,895
Proceeds from bank and mortgage
 loans payable                                            39,549,220      27,503,148      12,500,000
Distributions/dividends                                   (6,885,761)     (3,523,211)     (1,863,438)
Distributions/dividends reinvested                                         2,609,016       1,526,751
Purchase of treasury stock                                  (114,828)       (155,411)
Payment of mortgage notes and bonds                       (1,745,043)       (740,996)       (322,170)
Payment of deferred financing costs                       (1,022,151)       (216,280)       (390,868)
Acquisition of Advisor                                      (435,154)
                                                        ------------    ------------    ------------
Net cash provided by financing
 activities                                               78,768,308      44,626,391      17,419,887
                                                        ------------    ------------     -----------
Net increase (decrease) in cash and
 cash equivalents                                            385,445      (1,373,866)     (1,095,705)
Cash and cash equivalents,
 beginning of year                                         1,302,728       2,676,594       3,772,299
                                                        ------------    ------------     -----------
Cash and cash equivalents,
 end of year                                            $  1,688,173    $  1,302,728    $  2,676,594
                                                        ============    ============    ============

Supplemental disclosure of cash flow:
Interest paid                                           $  3,542,064    $  2,311,568    $    896,270
                                                        ============    ============    ============

Non cash financing transactions:
Bonds payable assumed with purchase
 of property                                                            $  5,590,000
                                                                        ============
Issuance of shares to acquire Advisor                   $  1,350,000
                                                        ============
Restricted stock awards                                 $    480,000
                                                        ============
Employee stock loans                                    $  1,247,351
                                                        ============
</TABLE>


   The accompanying notes are an integral part of these financial statements.

                                       F-6

<PAGE>

                             GREAT LAKES REIT, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Summary of Significant Accounting Policies

     Nature of Activities

     GreatLakes REIT, Inc., ( the "Company"), a Maryland corporation, was formed
on June 22, 1992 to invest in  income-producing  real  property.  The  principal
business of the Company is the ownership,  management,  leasing,  renovation and
acquisition of suburban office and industrial properties located in the Midwest.
At December 31, 1996,  the Company owned and operated 25  properties  located in
suburban  areas  of  Chicago,  Detroit,  Milwaukee,   Cincinnati,  Columbus  and
Minneapolis.  The Company leases office and industrial space to over 300 tenants
in a variety of businesses.

     Principles of Consolidation

     The consolidated  financial  statements include the accounts of the Company
and its wholly-owned  subsidiaries and partnership,  each of which was formed in
1996. Significant intercompany accounts and transactions have been eliminated in
consolidation.

     Properties

     Costs  incurred  for  the   acquisition,   development,   construction  and
improvement of properties are capitalized.  Certain costs of yet-to-be  acquired
properties,  including  deposits and professional fees, are capitalized as other
assets.  These costs are subsequently  capitalized as property acquisition costs
or charged to expense when it becomes  apparent that acquisition of a particular
property is not  probable.  Maintenance  and repairs are charged to expense when
incurred.

     Depreciation of buildings is computed using the  straight-line  method over
the estimated  useful lives of the assets,  generally 40 years.  Depreciation of
tenant improvements is computed using the straight-line  method over the shorter
of the lease term or useful life.  For the years ended  December 31, 1996,  1995
and 1994, depreciation expense amounted to $3,169,182,  $1,665,730 and $667,509,
respectively.

     Properties  are carried at cost,  which is not in excess of net  realizable
value.  The  Company  recognizes  impairment  losses  for  its  properties  when
indicators of impairment are present and a property's expected undiscounted cash
flows are not sufficient to recover the property's carrying amount.

     Deferred Costs

     Deferred   costs  consist   principally   of  financing  fees  and  leasing
commissions that are amortized over the terms of the respective agreements.

     Revenue Recognition

     Minimum  rentals are recognized on a  straight-line  basis over the term of
the related leases. Additional rents from expense reimbursements for common area
maintenance expenses and real estate taxes are recognized in the period in which
the related expenses are incurred.

                                       F-7

<PAGE>


                             GREAT LAKES REIT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.   Summary of Significant Accounting Policies (continued)

     Cash and Cash Equivalents

     The Company  considers  all highly  liquid  investments  purchased  with an
original  maturity of three months or less to be cash  equivalents.  At December
31, 1996 and 1995, the Company had $418,528 and $1,300,265,  respectively,  in a
money market fund.

     Income Taxes

     The Company has  elected to be treated as a real  estate  investment  trust
("REIT") under the applicable  provisions of the Internal  Revenue Code of 1986,
as amended. In order to qualify as a REIT, the Company is required to distribute
to stockholders at least 95% of its taxable income and to meet certain asset and
income tests as well as certain other  requirements.  Accordingly,  no provision
for income taxes has been reflected in the financial statements.

     As of December 31, 1996, properties, rents receivable and prepaid rent have
a federal income tax basis of $182,530,510, $491,921 and $0, respectively.

     Stock Options

     The Company has elected to follow  Accounting  Principles Board Opinion No.
25,  "Accounting  for Stock Issued to Employees"  (APB 25) in accounting for its
stock options.  Under APB 25, no compensation  expense is recognized because the
exercise  price of the Company's  employee stock options equals the market price
of the underlying stock at the date of grant.

     Fair Value of Financial Instruments

     The Company  discloses  information  concerning the fair value of financial
instruments for which it is practical to estimate such fair values. The carrying
amounts reported for cash and cash equivalents in the accompanying  consolidated
balance sheets  approximate its fair value. The carrying amount of the Company's
long-term debt  approximates  its fair value at December 31, 1996 and 1995 based
upon (a) the fixed  interest  rates on mortgage  loans payable are comparable to
interest  rates offered in the market as of the  respective  balance sheet dates
and (b) the variable interest rates on other long-term debt.

     Use of Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying notes. Actual results could differ from those estimates.

     Reclassification

     Certain  reclassifications  have been  made to the 1995 and 1994  financial
statements to conform to the 1996 presentation.  Such  reclassifications did not
affect the results of operations.


                                       F-8

<PAGE>


                             GREAT LAKES REIT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2.   Deferred Costs

     Deferred costs consisted of the following at December 31, 1996 and 1995:

                                                  1996               1995
                                             --------------     ------------

           Deferred financing costs          $    1,526,503     $    739,773
           Deferred leasing costs                 2,345,455        1,146,076
                                             --------------     ------------
                                                  3,871,958        1,885,849
           Less accumulated amortization            895,056          393,700
                                             --------------     ------------
                                             $    2,976,902     $  1,492,149
                                             ==============     ============

     During the years ended  December 31, 1996,  1995 and 1994  amortization  of
financing  costs  was  $427,375,   $130,500  and  $33,744,   respectively,   and
amortization of leasing costs was $348,340, $158,655, and $60,031, respectively.

3.   Long-Term Debt

     Mortgage loans payable  aggregated  $17,073,979 and $18,634,022 at December
31, 1996 and 1995,  respectively.  The mortgage  loans payable  require  monthly
payments of principal  and interest and mature at various  dates  through  2009.
Interest rates at December 31, 1996 ranged from 7.875% to 8.95%.

     In 1995 the Company  acquired an office  building  located in  Minneapolis,
Minnesota subject to Variable Rate Demand Commercial  Development  Revenue Bonds
(the "Bonds")  issued by the City of Minneapolis  with an outstanding  principal
amount of $5,235,000 and $5,420,000 at December 31, 1996 and 1995, respectively.
The Company  has  obtained a bank  letter of credit to secure  repayment  of the
Bonds in an amount of  approximately  $5.3 million.  The Company has  guaranteed
repayment  of the letter of credit to the  issuing  bank as well as granted  the
issuing bank a first  mortgage on the  property.  The interest rate on the Bonds
(4.3% per annum at  December  31,  1996) is reset  weekly by the bond  placement
agent.  The Bonds  mature  June 1, 2009 and  require  the Company to make annual
principal  payments  on June 1 of each year at a  stipulated  amount so that the
Bonds will be fully retired on June 1, 2009.

     As of December 31, 1996, the following is a summary of principal maturities
of mortgage loans and bonds payable over the next five years:


                             Year Ending
                            December 31,                 Amount
                            ------------                 ------

                               1997                 $    855,847
                               1998                      937,395
                               1999                    1,018,869
                               2000                    3,933,600
                               2001                    1,116,792

     The Company has  obtained  credit  facilities  from banks  aggregating  $80
million at December 31, 1996.  The  borrowings  under the credit  facilities are
limited by certain loan-to-value covenants related to the Company's

                                       F-9

<PAGE>


                             GREAT LAKES REIT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3.  Long-Term Debt (continued)

properties.  At December 31, 1996,  amounts  outstanding were $63,802,368 on the
$75 million secured bank credit facility (the "Credit  Facility") with the First
National  Bank of Boston,  as Agent and none on the $5 million  credit  facility
(the "ANB  Facility")  with The  American  National  Bank and Trust  Company  of
Chicago.  Interest accrues on the Credit Facility at LIBOR plus 1.875% per annum
(7.543% at December  31,  1996).  Interest  accrues on the ANB Facility at prime
plus 0.5% per annum. The amounts  outstanding at December 31, 1996 are due April
12, 1998.

     At December 31, 1996,  properties with a carrying  amount of  approximately
$182.7 million were pledged as collateral under the various debt agreements.

4.   Dividend Reinvestment and Share Redemption Plans

     Until December 31, 1995 the Company maintained a dividend reinvestment plan
whereby  shareholders  were able to reinvest  dividends  and receive  additional
shares of the  Company's  Common  Stock,  $.01 par value per share (the  "Common
Stock")  priced at the Net Asset  Value per share,  as  defined in the  dividend
reinvestment plan, as set by the Board of Directors.  Subsequent to December 31,
1995, the Company suspended the dividend reinvestment plan.

     Shareholders  have the right to redeem  their  shares at the then Net Asset
Value per share (as  defined in the plan)  subject to  approval  of the Board of
Directors and certain other limitations.  As of December 31, 1996, the aggregate
amount subject to share redemptions was approximately  $4.5 million.  During the
years ended December 31, 1996 and 1995, 8,833 and 12,951 shares were redeemed at
a cost of $114,828 and $155,411, respectively.

5.   Related Parties

     On April 1, 1996, the Company acquired all the outstanding shares of Equity
Partners  Ltd. (the  "Advisor")  in exchange for 100,000  shares of Common Stock
(the  "Merger").  The Merger has been accounted for as a purchase.  Of the total
purchase price of $1,565,726, $1,489,033 was assigned to goodwill and $76,693 to
the net  tangible  assets  of the  Advisor  acquired  by the  Company.  Goodwill
amortization is computed on a straight-line  basis over a 20 year period.  As of
April 1, 1996,  the Company  employed  the  employees  of the Advisor and is now
self-managed and  self-advised.  Certain  employees of the Advisor have received
40,000  restricted  shares of Common Stock.  Certain  restricted  shares (30,000
shares) vest to the  recipients  in equal  amounts on April 1, 1997 and April 1,
1998  provided  the  recipients  are still  employed by the  Company.  The other
restricted  shares  (10,000  shares) vest 25% on May 1, 1999 and 25% on May 1 of
the next three years (2000-2002) provided the recipient is still employed by the
Company.  The  fair  value  of the  restricted  shares  at the  dates  of  grant
($480,000) was deferred and is being recognized as compensation expense over the
vesting periods.


                                      F-10

<PAGE>


                             GREAT LAKES REIT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

     Pursuant to various advisory and management agreements,  the following fees
were  incurred with respect to the Advisor,  or affiliates  prior to the Merger.
Two directors of the Company were shareholders of the Advisor.

                                           1996       1995       1994
                                         --------   --------   --------

         Property acquisition fees       $ 15,750   $787,256   $ 93,045
         Stock offering fees                 --      131,747     42,551
         Stock selling commissions (a)       --      217,046     67,065
         Advisory fees (b)                203,697    608,612    294,530
         Property management fees (b)     217,971    564,369    273,671
         Construction management fees     107,717     73,549     67,525
         Other, primarily legal fees       17,712     30,703     19,781

(a)  Selling commissions were paid to owners and/or employees of the Advisor who
     are registered representatives.

(b)  Advisory  fees are  classified  as general and  administrative  expenses in
     these  financial  statements.  Property  management  fees are classified as
     property operating expenses in these financial statements.


     Certain  computer  hardware and software owned by the Company was leased to
the  Advisor  under a five year lease that  would  have  expired  April 1, 1999.
Semi-annual  rental payments of $9,103 were made to the Company from the Advisor
until the lease agreement was terminated on the date of the Merger.

6.   Stock Options

     The Company had two stock option plans, the Plan for Independent  Directors
and Brokers  (the  "Directors  Plan"),  and the Advisor  Stock  Option Plan (the
"Advisor Plan").  Under the plans,  options have been granted to purchase shares
of Common Stock at values which have been  determined to be fair market value on
the date of grant.  In  connection  with the  acquisition  of the  Advisor,  the
Advisor Plan was canceled,  and currently  options under the Directors  Plan are
only granted to non-employee  Directors. At December 31, 1996 options on 155,590
shares were available for future grant.

     In September,  1996, the Company  adopted the 1996  Incentive  Stock Option
Plan (the "1996 Option  Plan"),  which  authorizes the issuance of up to 500,000
shares of the  Company's  common  stock to key  employees.  In  September  1996,
options on 94,000 shares were granted to certain employees under the 1996 Option
Plan. At December 31, 1996,  options on 406,000  shares are available for future
grant under this plan. The exercise  price of options  granted in 1996 under the
1996  Option  Plan is $13 per  share,  the  fair  value of the  Common  Stock as
determined  by the  Board of  Directors  at the date of grant.  Accordingly,  no
compensation  expense has been  recognized for the year ended December 31, 1996.
These  options  have a term of ten years and vest in equal  installments  over a
three year period commencing on the first anniversary date of the grant.


                                      F-11

<PAGE>


                             GREAT LAKES REIT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



6.   Stock Options (continued)

     A summary of the Company's  stock option  activity and related  information
for the years ended December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
                                       1996                1995                  1994
                                    Weighted             Weighted              Weighted
                                    Average               Average              Average
                           1996     Exercise     1995    Exercise      1994    Exercise
                         Options     Price     Options     Price      Options    Price
                        --------   ---------   -------   ---------   -------   --------
        <S>              <C>       <C>         <C>       <C>         <C>       <C>
        Balance 1/1      735,576   $   11.02   451,129   $   10.10   375,979   $   9.96
        Granted          170,424   $   12.76   316,857   $   12.24    75,150   $  10.75
        Exercised        304,372   $   10.68    32,410   $    9.96
                        --------   ---------   -------   ---------   -------   --------
        Balance 12/31    601,628   $   11.69   735,576   $   11.02   451,129   $  10.10
                        ========   =========   =======   =========   =======   ========
        Exercisable      507,628   $   11.45   735,576   $   11.02   451,129   $  10.10
                        ========   =========   =======   =========   =======   ========
</TABLE>


     The weighted  average fair value of options granted in 1996 where the stock
price equals the exercise  price is $0.13 per share.  The weighted  average fair
value of options granted in 1995 where the stock price equals the exercise price
at date of grant is $0.12 per share.  The weighted average fair value of options
granted in 1995  where the stock  price is less than the  exercise  price at the
date of  grant  is  $0.02  per  share.  The  weighted  average  life of  options
outstanding at December 31, 1996 was 5.81 years.

     Pro forma  information  regarding  net  income  and  earnings  per share is
required by FASB Statement 123 "Accounting for  Stock-Based  Compensation,"  and
has been  determined  as if the Company had  accounted  for its  employee  stock
options under the fair value method of that Statement.  The fair value for these
options was estimated at the date of grant using a Black-Scholes  option pricing
model  with  the  following  weighted-average  assumptions  for  1993  to  1996:
risk-free interest rates of 6%; dividend yields of 9%; volatility factors of the
expected  market  price of the  Common  Stock of  0.8%;  and a  weighted-average
expected life of the options of 5 years.

     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
estimating  the fair value of traded  options that have no vesting  restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input of highly  subjective  assumptions  including  the  expected  stock  price
volatility.  Because the Company's  employee stock options have  characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially  affect the fair value estimate,  in
management's  opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

     The  effects on 1996 and 1995 pro forma net  income and pro forma  earnings
per common  share and common  share  equivalent  of  amortizing  to expense  the
estimated fair value of stock options are not necessarily  representative of the
effects on net income to be reported  in future  years due to such things as the
vesting  period  of the  stock  options,  and  the  potential  for  issuance  of
additional stock options in future years.


                                      F-12

<PAGE>


                             GREAT LAKES REIT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6.  Stock Options (continued)

     For  purposes of pro forma  disclosures,  the  estimated  fair value of the
options is amortized to expense over the options' vesting period.  The Company's
pro forma information follows for the years ended December 31, 1996 and 1995:

                                           1996           1995
                                      ------------    -----------

Pro forma net income                  $  7,838,767    $ 3,178,067

Pro forma earnings per common
 share and common share equivalent    $       1.32    $      0.87

     In September  1996,  the Company  adopted a limited  purpose  employee loan
program whereby  employees may borrow up to 90% of the cost of exercising  stock
options held by the employee.  Such loans bear interest at LIBOR plus 2.375% per
annum  payable  quarterly,  are recourse to the  employees,  have a term of five
years provided the employee remains employed by the Company,  and are secured by
a pledge of the Common Stock acquired by the employee  through this program.  As
of December 31, 1996, employees had acquired 119,892 shares through this program
with  outstanding  loan amounts of  $1,247,351  due the Company.  Such amount is
reflected as a reduction of stockholders' equity until the loans are repaid.

7.   Stock Offering

     In 1996, the Company sold 3,867,000 shares of Common Stock at $13 per share
and issued 210,128 shares of Class A Convertible Preferred Stock (the "Preferred
Shares").  The Company received proceeds of $47.4 million (net of offering costs
of  $2,851,739)  from the sale of these shares.  The  Preferred  Shares carry no
dividend  or  voting  rights,  and  shall  be  converted  to  Common  Stock on a
one-for-one basis or canceled,  depending on the Company's attainment of certain
objectives  related to the  timing,  pricing  and size of a public  offering  of
additional Common Stock by September 30, 1998.

8.   Leases

     The  Company  leases  office and  industrial  properties  to tenants  under
noncancelable  operating  leases that expire at various dates through 2006.  The
lease  agreements   typically  provide  for  a  specific  monthly  payment  plus
reimbursement  of certain  operating  expenses.  The  following  is a summary of
minimum future rental revenue under noncancelable operating leases:

                    Year ending
                   December 31,
                   ------------
                       1997           $  29,196,272
                       1998              24,997,815
                       1999              20,416,268
                       2000              16,232,073
                       2001               9,624,788
                    Thereafter           13,094,436
                                         ----------
                                      $ 113,561,652
                                      =============

     Minimum  future  rentals do not  include  amounts  that are  received  from
tenants as a reimbursement of property operating expenses.

                                      F-13

<PAGE>


                             GREAT LAKES REIT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


9.   Distributions

     The Company declared periodic  distributions of $6,885,761,  $3,900,456 and
$1,920,436 to  stockholders  of record during the calendar years 1996,  1995 and
1994,  respectively.  Of the $3,900,456 and $1,920,436 of distributions for 1995
and 1994,  $504,564 and $127,319 were paid in January of the next calendar year,
respectively. The Company has determined the stockholders' treatment for Federal
income tax purposes to be as follows:


                          1996            1995            1994
                      -----------     -----------     -----------

Ordinary income       $ 6,078,061     $ 3,410,249     $ 1,785,429
Return of capital         807,700         490,207         135,007
                      -----------     -----------     -----------
Total                 $ 6,885,761     $ 3,900,456     $ 1,920,436
                      ===========     ===========     ===========

                                      F-14

<PAGE>


                             GREAT LAKES REIT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10.  Property Acquisitions

     The following  properties were acquired in 1996 and 1995 and the results of
their  operations are included in the statements of income from their respective
dates of acquisition.

                                                        Total Acquisition Price
                                                        -----------------------
   Location                           Date Acquired       1996          1995
   ---------------------------        -------------    -----------   -----------

   2800 River Rd
   Des Plaines, IL                       02/09/95                    $ 4,761,053

   Minneapolis, MN                       05/04/95                      8,190,374

   Mt. Prospect, IL                      08/22/95                      5,402,526

   10 Oak Hollow & Gateway
   Southfield, MI                        08/29/95                     12,756,163

   One Park Plaza
   Milwaukee, WI                         09/29/95                     15,675,908

   Oak Brook, IL                         11/28/95                      1,760,930

   565 Lakeview Pkwy
   Vernon Hills, IL                      12/27/95                      4,881,675

   1251 Plum Grove Rd
   Schaumburg, IL                        01/01/96        $ 1,080,911

   Springdale, OH                        04/17/96          6,145,650

   Lincolnshire, IL                      07/24/96          2,840,378

   Dublin, OH                            09/25/96          8,382,268

   Downers Grove, IL                     11/01/96          9,373,393

   West Allis, WI                        11/08/96          7,994,581

   Troy, MI                              11/22/96         16,100,416

   St. Paul, MN                          12/13/96         14,327,418

   40 Oak Hollow
   Southfield, MI                        12/18/96          7,306,200

   Centennial Center
   Schaumburg, IL                        12/27/96         24,011,819

                                      F-15

<PAGE>



                             GREAT LAKES REIT, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11.  Property Dispositions

     In October 1996,  the Company sold for cash its property  located at 10 Oak
Hollow,  Southfield,  Michigan for a contract price of $9,300,000  (less selling
costs of approximately $278,771) resulting in a gain on sale of $2,273,800.  The
proceeds from the sale were  invested in the Downers  Grove,  Illinois  property
(see Note 10) via a tax-deferred exchange.

     In December  1996,  the Company sold for cash its  property  located at 830
West End Court in Vernon  Hills,  Illinois  for a contract  price of  $2,778,000
(less selling  costs of  approximately  $91,791)  resulting in a gain on sale of
$866,092.  Long term debt in an amount of $926,051 was retired  concurrent  with
the sale.  The proceeds from the sale were  invested in the St. Paul,  Minnesota
property (see Note 10) via a tax-deferred exchange.

12.  Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>

   Quarter
    Ended                          3/31/96      6/30/96      9/30/96     12/31/96
    -----                          -------      -------      -------     --------
<S>                             <C>          <C>          <C>          <C>
Revenues                        $5,543,783   $5,927,282   $6,141,521   $7,619,723
Net income                         971,412      939,374    1,001,779    4,936,469
Net income per common share
  and common share equivalent   $     0.21   $     0.19   $     0.17   $     0.58

   Quarter
    Ended                          3/31/95      6/30/95      9/30/95     12/31/95
    -----                          -------      -------      -------     --------

Revenues                        $2,619,990   $3,146,709   $3,878,343   $5,320,884
Net income                         624,832      713,109      991,424      870,436
Net income per common share
  and common share equivalent   $     0.23   $     0.21   $     0.24   $     0.20

</TABLE>

13.  Pro Forma Financial Statement (unaudited)

     The unaudited consolidated pro forma statement of income for the year ended
December  31,  1996  is  presented  as if the  acquisition  and  disposition  of
properties  subsequent  to December  31,  1995,  the  Company's  private  equity
offering in 1996, and the Merger had all occurred as of January 1, 1996.

     The pro forma financial  statements are not necessarily  indicative of what
the  Company's  result of  operations  would have been assuming the above events
actually occurred as of the dates indicated,  nor do they purport to project the
Company's  financial position or results of operations at any future date or for
any future period.


                                      F-16

<PAGE>



                             Great Lakes REIT, Inc.
                   Consolidated Pro Forma Statement of Income
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                             Pro Forma       Pro Forma
                       Historical (1)   Advisor (1)  Acquisitions (2)   Dispositions(3)     Adjustments      12/31/96
                       --------------   -----------  ----------------   ---------------     -----------      --------
<S>                     <C>             <C>          <C>                 <C>                <C>             <C>
Revenues
   Rental               $20,249,565                    $ 10,181,410      $ (1,522,795)                      $28,908,180
   Reimbursements         4,814,005                       4,196,142          (172,833)                        8,837,314
   Interest and other       168,739       567,620           472,579                 0        (562,847)          646,091
                            -------       -------           -------               ---         -------           -------

Total revenues           25,232,309       567,620        14,850,131        (1,695,628)       (562,847)       38,391,585
                         ----------       -------        ----------         ---------         -------        ----------

Expenses
   Real estate taxes      3,954,144                       2,853,267          (160,166)                        6,647,245
   Other property
      operating           6,548,057       144,436         4,264,742          (449,311)       (217,971)(5)    10,289,953
   General and
      administrative      2,242,165       339,220                 0                 0        (203,697)(5)     2,377,688
   Interest               3,778,065                               0          (105,902)      2,882,725 (7)     6,554,888
   Depreciation and
      amortization        4,000,736                       1,766,144          (221,246)        (37,715)(6)     5,507,919
                          ---------         -----         ---------          --------          ------         ---------

Total expenses           20,523,167       483,656         8,884,153          (936,625)      2,423,342        31,377,693
                         ----------       -------         ---------          --------       ---------        ----------

Income before gain on
   sale of properties     4,709,142        83,964         5,965,978          (759,003)     (2,986,189)        7,013,892


Gain on sale of
   properties             3,139,892                                                        (3,139,892)(8)
                        -----------     ---------        ----------      --------------   -----------      ------------

Net income              $ 7,849,034     $  83,964      $  5,965,978      $   (759,003)   $ (6,126,081)      $ 7,013,892
                        ===========     =========      ============      ============    ============       ===========

Earnings per common
   share and common
   share equivalent          $ 1.32                                                                         $      0.79
                             ======                                                                         ===========

Weighted average
   number of common
   shares and common
   share equivalents
   outstanding            5,927,208                                                                           8,871,484
                        ===========                                                                          ==========
</TABLE>


            See notes to consolidated pro forma statement of income.


                                      F-17

<PAGE>

                             GREAT LAKES REIT, INC.
               NOTES TO CONSOLIDATED PRO FORMA STATEMENT OF INCOME
                                   (Unaudited)


1.   Represents the historical operations of the Company and the Advisor for the
     period described.  See Note 5 of Notes to Consolidated Financial Statements
     regarding the acquisition of the Advisor.

2.   Represents the historical  operations of properties  acquired subsequent to
     December 31, 1995 as if the properties  were acquired by the Company at the
     beginning of 1996.  Depreciation is computed on a straight-line  basis over
     40  years  based  on the  purchase  price  paid  by  the  Company  for  the
     properties.  Additionally,  based on preacquisition  discussions with local
     assessors and tax counsel,  the Company has concluded that no adjustment to
     historical  real  estate  taxes  is  appropriate.  See  Note 10 of Notes to
     Consolidated  Financial  Statements for details of the properties  acquired
     during 1996.

3.   Represents the actual historical results of the properties sold in 1996 for
     the  period  prior to  disposition.  See  Note 11 of Notes to  Consolidated
     Financial Statements for details of 1996 property disposals.

4.   As more fully described in Note 5 to the Consolidated Financial Statements,
     on April 1, 1996, the Company acquired all of the outstanding shares of the
     Advisor in exchange for 100,000  shares of the Common Stock.  Income earned
     in 1996 by the Advisor from the Company  prior to the Merger is  eliminated
     from the pro forma income statements:

          Acquisition fees             $     15,750
          Advisory fees                     203,697
          Property management fees          217,971
          Construction fees                 107,717
          Other                              17,712
                                       ------------
                                       $    562,847
                                       ============


     Amounts not  eliminated  represent  income earned by the Advisor from third
     parties that would have been earned by the Company had the Merger  occurred
     at the beginning of 1996.

5.   Expenses  incurred by the Company that are paid to the Advisor prior to the
     merger are eliminated from the pro forma income statement:

                                                        1996
                                                        ----
             Other property operating expenses:
               Property management fees             $   217,971
                                                    ===========
             General and administrative costs:
               Advisory fees                        $   203,697
                                                    ===========

     As a consequence of this  elimination,  the  accompanying  consolidated pro
     forma statement of income  includes the property  operating and general and
     administrative expenses of the Advisor for the period prior to the Merger.

6.   Acquisition,  construction,  and certain  other fees paid by the Company to
     the  Advisor  were   capitalized   by  the  Company  into   buildings   and
     improvements. If the Merger had occurred January 1, 1996, these

                                      F-18

<PAGE>

     fees  would  not have  been  incurred  and  depreciation  and  amortization
     expenses  would have  decreased by $56,328 in 1996.  Costs  incurred by the
     Advisor  for  acquisition  and  construction  activities  during  1996  are
     primarily  salary  costs and are  reflected  as general and  administrative
     expenses in the historical operations of the Advisor.

     Goodwill  amortization  is  increased  by  $18,613 in 1996 as the Merger is
     assumed to have occurred on January 1, 1996 in this  consolidated pro forma
     statement of income which represents an additional three months of goodwill
     amortization.


7.   As the  acquisitions  subsequent to December 31, 1995, the  dispositions in
     1996, and the 1996 private equity offering are all assumed to have occurred
     on  January  1,  1996,  the  Company  would  need to  borrow  approximately
     $38,436,335 to fund the property acquisitions calculated as follows:

      Cost of properties acquired in 1996         $97,563,034
      less:  Proceeds of 1996 private
                equity offering                    47,419,261
      less:  Proceeds of property sales            11,707,438
                                                   ----------
      Borrowings needed to acquire properties     $38,436,335
                                                  ===========


     Interest  expense  is  calculated  on this  amount at 7.5% per  annum,  the
     interest rate during 1996 resulting in additional  interest expense in 1996
     of $2,882,725.

8.   The  Consolidated  Pro Forma  Statement of Income excludes gains on sale of
     properties of $3,139,892.

9.   The transfer of the Company's properties to the Operating Partnership would
     have had no effect on this Consolidated Pro Forma Statement of Income.


                                      F-19

<PAGE>
<TABLE>
<CAPTION>
                                                                         Costs Capitalized         Gross Amount
                                                                            Subsequent           at which Carried
                                   Initial Cost to the Company            to Acquisition       at December 31, 1996
                               ------------------------------------     -----------------     -----------------------
                                                         Buildings &           Buildings &                Buildings &
                              Encumbrance      Land     Improvements   Land   Improvements      Land      Improvements      Total
                              -----------      ----     ------------   ----   ------------      ----      ------------      -----
<S>                           <C>          <C>          <C>            <C>    <C>           <C>           <C>           <C>
11100 Hampshire Avenue        $  823,741   $  310,000   $1,123,932      --     $    5,873   $   310,000   $ 1,129,805   $ 1,439,805
Bloomington, MN
601 Campus Drive               1,404,381      900,000    2,263,967      --      1,009,768       900,000     3,273,735     4,173,735
Arlington Heights, IL
11925 W. Lake Park Drive       1,172,513      318,750    1,819,058      --        260,754       318,750     2,079,812     2,398,562
Milwaukee, WI
3400 Dundee Road               2,061,559      607,500    3,475,923      --        675,363       607,500     4,151,286     4,758,786
Northbrook, IL
1011 Touhy Avenue              2,428,821      720,000    3,932,248      --      1,899,875       720,000     5,832,123     6,552,123
Des Plaines, IL
160-185 Hansen Court           2,688,990    2,100,000    3,210,289      --        893,474     2,100,000     4,103,763     6,203,763
Wood Dale, IL
150, 175, 250 Patrick Blvd     3,349,302    2,600,000    3,964,742      --        681,432     2,600,000     4,646,174     7,246,174
Brookfield, WI
175 Hawthorn Parkway           3,144,672    1,600,000    4,721,338      --        625,505     1,600,000     5,346,843     6,946,843
Vernon Hills, IL
2800 River Road                      (B)    1,300,000    3,461,053      --        511,849     1,300,000     3,972,902     5,272,902
Des Plaines, IL
2221 University Avenue SE      5,235,000    1,100,000    7,090,374      --         46,590     1,100,000     7,136,964     8,236,964
Minneapolis, MN
1660 Feehanville Drive               (B)    1,100,000    4,302,526      --         32,347     1,100,000     4,334,873     5,434,873
Mount Prospect, IL
24800 Denso Drive                    (B)    1,400,000    4,546,305      --        534,010     1,400,000     5,080,315     6,480,315
Southfield, MI
11270 W. Park Place                  (B)      940,000   14,735,908      --        320,932       940,000    15,056,840    15,996,840
Milwaukee, WI
823 Commerce Drive                   (B)      500,000    1,260,930      --      2,147,211       500,000     3,408,141     3,908,141
Oak Brook, IL
565 Lakeview Parkway                 (B)    1,300,000    3,581,675      --        200,196     1,300,000     3,781,871     5,081,871
Vernon Hills, IL
1251 Plum Grove Road                --        372,750      708,161      --        123,983       372,750       832,144     1,204,894
Schaumbrug, IL
30 Merchant Street                   (B)      650,000    5,495,650      --      1,121,588       650,000     6,617,238     7,267,238
Springdale, OH


</TABLE>

                             Accumulated     Date     Method of
                            Depreciation   Acquired  Depreciation
                            ------------   --------  ------------

11100 Hampshire Avenue        $113,545      Jan-93      (A)
Bloomington, MN
601 Campus Drive               462,620      May-93      (A)
Arlington Heights, IL
11925 W. Lake Park Drive       215,204      Jun-93      (A)
Milwaukee, WI
3400 Dundee Road               552,809      Oct-93      (A)
Northbrook, IL
1011 Touhy Avenue              521,797      Dec-93      (A)
Des Plaines, IL
160-185 Hansen Court           503,024      Jan-94      (A)
Wood Dale, IL
150, 175, 250 Patrick Blvd     473,263      Jun-94      (A)
Brookfield, WI
175 Hawthorn Parkway           441,638      Sep-94      (A)
Vernon Hills, IL
2800 River Road                260,312      Feb-95      (A)
Des Plaines, IL
2221 University Avenue SE      293,682      May-95      (A)
Minneapolis, MN
1660 Feehanville Drive         148,052      Aug-95      (A)
Mount Prospect, IL
24800 Denso Drive              262,108      Aug-95      (A)
Southfield, MI
11270 W. Park Place            499,201      Sep-95      (A)
Milwaukee, WI
823 Commerce Drive              64,856      Nov-95      (A)
Oak Brook, IL
565 Lakeview Parkway            95,463      Dec-95      (A)
Vernon Hills, IL
1251 Plum Grove Road            29,970      Jan-96      (A)
Schaumbrug, IL
30 Merchant Street              97,347      Apr-96      (A)
Springdale, OH


                                       S-1

<PAGE>
<TABLE>
<CAPTION>
                                                                       Costs Capitalized            Gross Amount
                                                                          Subsequent              at which Carried
                                   Initial Cost to the Company          to Acquisition          at December 31, 1996
                             -------------------------------------     -----------------      -------------------------
                                                       Buildings &            Buildings &                   Buildings &
                             Encumbrance    Land      Improvements    Land   Improvements       Land       Improvements     Total
                             -----------    ----      ------------    ----   ------------       ----       ------------     -----
<S>                             <C>      <C>          <C>             <C>       <C>          <C>            <C>            <C>
Two Marriott Drive               (B)       610,000      2,230,378      --         26,656        610,000      2,257,034     2,867,034
Lincolnshire, IL
4860-5000 Blazer Memorial Pkwy   (B)     1,340,000      7,042,268      --         74,200      1,340,000      7,116,468     8,456,468
Dublin, OH
3010 & 3020 Woodcreek Drive      (B)     2,385,000      6,988,393      --              0      2,385,000      6,988,393     9,373,393
Downers Grove, IL
2514 S. 102nd Street &           (B)       975,000      7,019,581      --              0        975,000      7,019,581     7,994,581
10150 W. National Avenue
West Allis, WI
1301 W. Long Lake Road           (B)     2,500,000     13,600,416      --              0      2,500,000     13,600,416    16,100,416
Troy, MI
2550 University Avenue West      (B)       850,000     13,477,418      --         48,510        850,000     13,525,928    14,375,928
St. Paul, MN
No. 40 Oak Hollow                (B)     1,250,000      6,056,200      --             (0)     1,250,000      6,056,200     7,306,200
Southfield, MI
1900 East Golf Road              (B)     3,800,000     20,211,819      --         24,000      3,800,000     20,235,819    24,035,819
                          ------------ -----------   ------------   -------  -----------    -----------   ------------  ------------
Schaumburg, IL
Totals                    $ 22,308,979 $31,529,000   $146,320,552   $   0    $11,264,116    $31,529,000   $157,584,668  $189,113,668
                          ============ ===========   ============   =======  ===========    ===========   ============  ============
</TABLE>

                                   Accumulated     Date      Method of
                                   Depreciation   Acquired  Depreciation
                                   ------------   --------  ------------

Two Marriott Drive                     25,584      Jul-96        (A)
Lincolnshire, IL
4860-5000 Blazer Memorial Pkwy         51,427      Sep-96        (A)
Dublin, OH
3010 & 3020 Woodcreek Drive            21,839      Nov-96        (A)
Downers Grove, IL
2514 S. 102nd Street &                 21,936      Nov-96        (A)
10150 W. National Avenue
West Allis, WI
1301 W. Long Lake Road                 42,501      Nov-96        (A)
Troy, MI
2550 University Avenue West            14,090      Dec-96        (A)
St. Paul, MN
No. 40 Oak Hollow                       6,309      Dec-96        (A)
Southfield, MI
1900 East Golf Road                    21,079      Dec-96        (A)
                                  -----------
Schaumburg, IL
Totals                             $5,239,656
                                   ==========

(A)  Depreciation  of  buildings  is computed  over a 40 year life on a straight
     line basis.  Tenant  improvements  are depreciated  over the shorter of the
     estimated useful life of the improvements or the term of the lease.

(B)  These  properties  are pledged as security for the Company's line of credit
     which totalled $63,802,368 at December 31, 1996.

(C)  At  December  31,  1996,  the  aggregate  cost  of  land,  buildings,   and
     improvements   for   Federal   income  tax   purposes   was   approximately
     $185,974,000.

(D)  Reconciliation of Real Estate Owned and Accumulated Depreciation.

          Real Estate Owned:
                                           1996          1995          1994
                                       ------------  ------------  ------------

          Balance at beginning of year $ 94,265,979  $ 37,976,215  $ 17,558,181
          Property acquisitions          97,563,034    53,428,629    18,196,369
          Additions                       6,136,428     2,861,135     2,221,665
          Disposals                       8,851,773         --            --
                                       ------------  ------------  ------------

          Balance end of year          $189,113,668  $ 94,265,979   $37,976,215
                                       ============  ============   ===========



      Accumulated Depreciation:
                                          1996          1995           1994
                                      ------------   -----------   -----------

      Balance beginning of year        $2,462,187    $  817,114    $ 149,605
      Depreciation expense              3,119,829     1,645,073      667,509
      Retirements                           --            --           --
      Disposals                           342,360         --           --
                                       ------------  ------------   --------

      Balance end of year              $5,239,656    $2,462,187    $ 817,114
                                       ==========    ==========    =========

                                       S-2

<PAGE>

==============================================================================
------------------------------------------------------------------------------

                       Securities and Exchange Commission
                             Washington, D.C. 20549


                              --------------------




                                    EXHIBITS

                                       To

                           ANNUAL REPORT ON FORM 10-K
                               FOR THE YEAR ENDED
                                DECEMBER 31, 1996


                              --------------------



                             GREAT LAKES REIT, INC.

------------------------------------------------------------------------------
==============================================================================

<PAGE>

        Exhibit
        Number                      Description of Document
        ------                      -----------------------

          3.1  Articles  of  Incorporation  of the  Company  dated June 22, 1992
               (Incorporated  by  reference  from  the  Company's   Registration
               Statement  on Form 10 filed  with  the  Securities  and  Exchange
               Commission (the "SEC") on April 29, 1996 (the "Form 10"))

          3.2  Articles of Merger of Equity Partners,  Ltd. (the "Advisor") into
               the Company dated April 1, 1996  (Incorporated  by reference from
               the Form 10)

          3.3  Articles  Supplementary  of the  Company  dated  August 20,  1996
               (Incorporated  by reference from the Company's  Current Report on
               Form 8-K dated August 28, 1996 (the "August 1996 8-K"))

          3.4  Amended and  restated  bylaws of the Company  dated  February 25,
               1997  (Incorporated by reference from the Company's  Registration
               Statement  on Form S-11 filed with the SEC on  February  28, 1997
               (No. 333-22619) (the "S-11")

          4.1  Specimen  of  certificate  representing  shares of  Common  Stock
               (Incorporated by reference from the Form 10)

         10.1  Merger  Agreement  dated January 26, 1996 between the Company and
               the Advisor (Incorporated by reference from the Form 10)

         10.2  Amended and Restated  Agreement of Limited  Partnership  of Great
               Lakes  REIT,  L.P.,  dated  December  27, 1996  (Incorporated  by
               reference  from the  Company's  Current  Report on Form 8-K dated
               January 14, 1997 (the "January 1997 8-K"))

         10.3  First Amendment to the Amended and Restated  Agreement of Limited
               Partnership  of Great Lakes REIT,  L.P.,  dated  February 6, 1997
               (Incorporated by reference from the S-11)

         10.4  Offering  Services  Agreement  dated  August 15, 1995 between the
               Company and the Advisor  (Incorporated by reference from the Form
               10)

         10.5  Managing  Dealer &  Wholesaling  Agreement  dated August 20, 1995
               between the Company and Chauner Securities, Inc. (Incorporated by
               reference from the Form 10)

         10.6  Agreement  dated  August 24, 1995  between the Company and EVEREN
               Securities,  Inc.  regarding  offering services  (Incorporated by
               reference from the Form 10)


<PAGE>

         10.7  Indemnification  Escrow Agreement dated April 1, 1996 between the
               Company,  Richard A. May, Richard L. Rasley, Tim A. Grodrian, and
               American National Bank and Trust Company of Chicago (Incorporated
               by reference from the Form 10)

      *10.8.1  Restricted  Stock  Agreement  dated April 1, 1996 between the
               Company and Richard L. Rasley (Incorporated by reference from the
               Form 10)

      *10.8.2  Restricted  Stock  Agreement dated April 1, 1996 between Great
               Lakes REIT and James Hicks  (Incorporated  by reference  from the
               Form 10)

      *10.8.3  Restricted  Stock  Agreement dated April 1, 1996 between Great
               Lakes REIT and Raymond Braun  (Incorporated by reference from the
               Form 10)

      *10.8.4  Restricted  Stock  Agreement dated April 1, 1996 between Great
               Lakes REIT and Edith M. Scurto  (Incorporated  by reference  from
               the Form 10)

      *10.8.5  Restricted  Stock  Agreement dated April 1, 1996 between Great
               Lakes REIT and Brett R. Brown (Incorporated by reference from the
               Form 10)

      *10.8.6  Restricted  Stock  Agreement  dated May 1, 1996  between  the
               Company and Raymond  Braun  (Incorporated  by reference  from the
               S-11)

         10.9  Agreement  dated  August 24, 1995  between the Company and EVEREN
               Securities,  Inc.  regarding  fairness  opinion  (Incorporated by
               reference from the Form 10)

       *10.10  Stock Option Plan for  Independent  Directors  and Brokers (the
               "Directors  Plan")  dated July 2, 1992 as amended  July 15,  1994
               (Incorporated by reference from the Form 10)

     *10.11.1  Non-qualified  Stock Option  Certificate  dated December 31,
               1995 from the Company to Jon K. Haahr  (Incorporated by reference
               from the Form 10)

     *10.11.2  Non-qualified  Stock Option  Certificate  dated December 31,
               1995  from  the  Company  to  Wayne  M.  Janus  (Incorporated  by
               reference from the Form 10)

     *10.11.3  Non-qualified  Stock Option  Certificate  dated December 31,
               1995  from the  Company  to Daniel E.  Josephs  (Incorporated  by
               reference from the Form 10)

     *10.11.4  Non-qualified  Stock Option  Certificate  dated December 31,
               1995 from the  Company  to Donald E.  Phillips  (Incorporated  by
               reference from the Form 10)

     *10.11.5  Non-qualified  Stock Option  Certificate  dated December 31,
               1995  from the  Company  to Walter H.  Teninga  (Incorporated  by
               reference from the Form 10)

     *10.11.6  Non-qualified  Stock Option  Certificate  dated December 31,
               1995  from  the  Company  to  Richard  A.  May  (Incorporated  by
               reference from the Form 10)

     *10.11.7  Non-qualified  Stock Option  Certificate  dated December 31,
               1995 from the  Company  to  Richard L.  Rasley  (Incorporated  by
               reference from the Form 10)

     *10.11.8  Non-qualified  Stock Option  Certificate  dated December 31,
               1995 from the  Company  to  Raymond  M.  Braun  (Incorporated  by
               reference from the Form 10)

     *10.11.9  Non-qualified  Stock Option  Certificate  dated December 31,
               1995 from the Company to James Hicks  (Incorporated  by reference
               from the Form 10)

    *10.11.10  Non-qualified  Stock Option  Certificate dated December 31,
               1995  from  the  Company  to  Edith M.  Scurto  (Incorporated  by
               reference from the Form 10)


<PAGE>

    *10.11.11  Non-qualified  Stock Option  Certificate dated December 31,
               1995  from  the  Company  to  Brett  A.  Brown  (Incorporated  by
               reference from the Form 10)

    *10.11.12  Form of  Non-Qualified  Stock Option  Certificate for use in
               connection  with options  issued  pursuant to the Directors  Plan
               (Incorporated by reference from the S-11)

        10.12  Amended and  Restated  Secured  Revolving  Loan  Agreement  dated
               September 28, 1994 between the Company and American National Bank
               and Trust Company of Chicago  (Incorporated by reference from the
               Form 10)

        10.13  First  Amendment to Amended and Restated  Secured  Revolving Loan
               Agreement  dated  September  29,  1995  between  the  Company and
               American National Bank and Trust Company of Chicago (Incorporated
               by reference from the Form 10)

        10.14  Second Amendment to Amended and Restated  Secured  Revolving Loan
               Agreement  dated  December  27,  1995  between  the  Company  and
               American National Bank and Trust Company of Chicago (Incorporated
               by reference from the Form 10)

        10.15  Revolving  Note dated  December  27, 1995 between the Company and
               American   National   Bank  and  Trust  Company  of  Chicago  for
               $25,000,000 (Incorporated by reference from the Form 10)

        10.16  Stock  Purchase  Agreement  dated as of  August  20,  1996 by and
               among the Company,  Fortis  Benefits  Insurance  Company,  Morgan
               Stanley  Institutional  Fund, Inc. - U.S. Real Estate  Portfolio,
               Morgan  Stanley SICAV  Subsidiary  SA,  Wellsford  Karpf Zarrilli
               Ventures,  L.L.C.,  Logan, Inc.; and Pension Trust Account 104972
               Held  by  Bankers  Trust  Company  as  Trustee  (Incorporated  by
               reference from the August 1996 8-K)

        10.17  Registration  Rights Agreement dated as of August 20, 1996 by and
               among the Company,  Fortis  Benefits  Insurance  Company,  Morgan
               Stanley  Institutional  Fund, Inc. - U.S. Real Estate  Portfolio,
               Morgan  Stanley SICAV  Subsidiary  SA,  Wellsford  Karpf Zarrilli
               Ventures,  L.L.C.,  Logan, Inc.; and Pension Trust Account 104972
               Held  by  Bankers  Trust  Company  as  Trustee  (Incorporated  by
               reference from the August 1996 8-K)

       *10.18  Form of Change in Control  Agreement  between  the  Company and
               Messrs.  May,  Rasley,  Braun,  Hicks and Mills  (Incorporated by
               reference from the Company's  Registration Statement on Form 10/A
               filed with the SEC on January 9, 1997 (the "Form 10/A")

       *10.19  Form of Change in Control Agreement between the Company and Mr.
               Brown and Ms.  Scurto  (Incorporated  by reference  from the Form
               10/A)

       *10.20  1996 Incentive  Stock Option Plan of the Company  (Incorporated
               by reference from the Form 10/A)

       *10.21  Form of  Stock  Option  Agreement  for use in  connection  with
               incentive  stock option and pursuant to the 1996 Incentive  Stock
               Option Plan of the  Company;  Richard A. May,  Richard L. Rasley,
               James  Hicks,  Raymond  Braun  and  Kim  S.  Mills  entered  into
               agreements in 1996 that evidenced 32,000,  14,000, 12,000, 16,000
               and 12,000 options,  respectively  under the 1996 Incentive Stock
               Option  Plan  effective   September  24,  1996  (Incorporated  by
               reference from the Form 10/A)

       *10.22  Limited   Purpose   Employee   Loan  Program  of  the  Company
               (Incorporated by reference from the Form 10/A)

       *10.23  Form of Limited Purpose  Employee Loan Program  Promissory Note
               for  use  in  connection  with  limited  purpose  employee  loans
               (Incorporated by reference from the Form 10/A)



<PAGE>

        10.24  Amended and Restated  Revolving  Credit  Agreement  (the "Amended
               and Restated  Revolving Credit  Agreement")  Dated as of December
               27, 1996 among the Operating  Partnership and the Company and The
               First  National  Bank of Boston and Bank of America  Illinois and
               First Bank National  Association and Other Banks Which May Become
               Parties to the Agreement and The First National Bank of Boston as
               Agent (Incorporated by reference from the January 1997 8-K)

        10.25  Form of Amendment to the Amended and  Restated  Revolving  Credit
               Agreement  dated as of March 1, 1997  (Incorporated  by reference
               from the S-11)

         24.1  Powers of Attorney

         27.1  Financial Data Schedule

-----------------------------

*  Management contract or compensation plan or arrangement.