REIT Keeps Close Eye on Milwaukee Tenant

"Leasing is our company's top priority," says president and chief operating officer Patrick R. Hunt in an earnings conference call. With nearly 1.3 million sf – 23% of the total portfolio – rolling over in 2002, Great Lakes REIT's leasing agents have renewed leases on or re-leased 531,000 sf, he adds, continuing its goal of 30,000 sf per month.

Legion Insurance Co. is now under control of the Pennsylvania Department of Insurance, according to Great Lakes REIT, which is in the lengthy process of evaluating the company's finances. The ultimate fate of the company could be a plan of rehabilitation or liquidation, company officials say, adding they expect the former. For now, the company is current in its rent and Great Lakes REIT expects it will meet the obligations of a lease that extends into 2006 at market rates near $24 per sf, says chief financial officer James Hicks.

At 372,497 sf, Milwaukee Center is Great Lakes REIT's largest asset in its 5.5-million-sf suburban Midwest office portfolio. The property also boasts one of the highest occupancy rate's in the portfolio at 97.6%, 19 percentage points higher than the rate for the REIT's 1 million sf of Milwaukee area office space.

The company's lone acquisition this year has been closing on the 99,000-sf Two Riverwoods Place in Pewaukee, WI for $8.3 million, with the REIT expecting to spend another $3.2 million there. The property is about 70% leased.

Chief investment officer Raymond M. Braun continues to scour the market for "opportunistic" deals that meet the company's goal of a 12% internal rate of return over a 10-year holding period. "Investment activity is starting to pick up, but there's a tremendous amount of capital chasing few deals," he says. "Now would be a good time to buy if you were an opportunist, assuming you could find deals."

The company hopes to do just that in the second quarter, indicating most of those opportunities may be found in suburban Chicago.