"The only thing going against us is it's now socially acceptable, from a personal and business level, to file Chapter 11," says chief executive officer David Simon.

Simon Property Group chief financial officer Stephen E. Sterrett says the REIT's tenants include Kmart and Jacobson's, which have filed for bankruptcy protection, as well as Service Merchandise, which is going through the final stages of liquidation. "We have limited exposure to all three of these tenants, Sterrett says.

However, Simon points out that while a bankruptcy filing gives tenants a measure of protection, it is a step he believes that often can be avoided.

"It is somewhat fashionable," Simon says. "It seems inordinate leeway is given to companies in Chapter 11."

While not taking as strong a public stance as Simon, Great Lakes REIT officials are no less concerned about the issue that it figures could trim $0.02 per share to $0.04 per share off funds from operations this year. Its largest problem: A lease with an affiliate of PSINet, Inc. that occupies 31,600 sf in a suburban Minneapolis office building. "In addition, several other tenants that are not currently in default are experiencing financial difficulties which may lead to lease defaults," the company warns in a statement.

"The situation is quite fluid at this point in time," says chief financial officer James Hicks. However, president and chief operating officer Pat Hunt calls tenant defaults the "wild card" in the REIT's 2002 financial picture.