GOLF TRUST OF AMERICA INC, 10-Q, 2000-05-15

GOLF TRUST OF AMERICA INC
10-Q, 2000-05-15
LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES)

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<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

/x/ Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended March 31, 2000.

/_/ Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to ________.

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

Commission File Number 000-22091

GOLF TRUST OF AMERICA, INC.
(Exact name of registrant as specified in its charter)

Maryland 33-0724736
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)

14 North Adger's Wharf, Charleston, South Carolina 29401
(Address of principal executive offices) (Zip Code)

(843)723-4653
(Registrant's telephone number, including area code)

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

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 report(s) and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---

On May 12, 2000 there were 8,118,147 common shares outstanding of the
registrant's only class of common stock. On May 12, 2000, there were 800,000
shares outstanding of the registrant's 9.25% Series A Cumulative Convertible
Preferred Stock which is the registrant's only class of outstanding preferred
stock.

<PAGE>

GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2000

INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS Page
<S> <C>
Condensed Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999 ............... 3
Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2000 .......
and 1999 ........................................................................................ 4
Condensed Consolidated Statements of Stockholders' Equity for the Year Ended December 31,
1999 and the Three Months Ended March 31, 2000 .................................................. 5
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000
and 1999 ........................................................................................ 6
Notes to Condensed Consolidated Financial Statements ............................................ 7

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ................ 13

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ........................................... 19

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS .................................................................................... 20
ITEM 2. CHANGES IN SECURITIES ................................................................................ 20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES ...................................................................... 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .................................................. 20
ITEM 5. OTHER INFORMATION .................................................................................... 21
ITEM 6. EXHIBITS INDEX AND REPORT ON FORM 8-K ................................................................ 21
SIGNATURES ........................................................................................... 25
</TABLE>

<PAGE>

GOLF TRUST OF AMERICA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Property and equipment:
Land .......................................................... $ 53,779 $ 53,779
Golf course improvements ...................................... 206,763 204,635
Buildings ..................................................... 81,103 80,708
Furniture, fixtures, and equipment ............................ 31,383 31,581
--------- ---------

Total property and equipment .................................... 373,028 370,703
Less accumulated depreciation ................................. 47,661 43,001
--------- ---------

Property and equipment, net ..................................... 325,367 327,702
--------- ---------

Mortgage notes receivable ....................................... 73,316 73,160

Cash and cash equivalents ....................................... 4,989 3,905
Receivable from affiliates (Note 8) ............................. 7,401 6,952
Other assets (Notes 3 and 4) .................................... 23,268 22,193
--------- ---------

Total assets .................................................... $ 434,341 $ 433,912
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY

Debt ............................................................ $ 225,003 $ 223,085
Accounts payable and other liabilities .......................... 10,045 10,796
--------- ---------

Total liabilities ............................................... 235,048 233,881
--------- ---------

Commitments (Note 3)
Minority interest ............................................... 71,846 69,747
--------- ---------

Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares authorized,
800,000 shares issued ........................................ 20,000 20,000

Common stock, $.01 par value, 90,000,000 shares authorized,
8,118,147 and 7,736,450 shares issued and outstanding,
respectively .............................................. 81 78
Additional paid-in capital ................................... 130,014 125,218
Dividends in excess of accumulated earnings .................. (8,888) (7,720)
Unamortized restricted stock compensation .................... (2,264) (1,530)
Note receivable from stock sale (Note 6) ..................... (8,975) (3,298)
Loans to officers (Note 7) .................................. (2,521) (2,464)
--------- ---------

Stockholders' equity ............................................ 127,447 130,284
--------- ---------

Total liabilities and stockholders' equity ...................... $ 434,341 $ 433,912
========= =========
</TABLE>

See accompanying notes to condensed consolidated financial statements

3
<PAGE>

GOLF TRUST OF AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(IN THOUSANDS, EXCEPT FOR EARNINGS PER SHARE)

<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999

REVENUES:
<S> <C> <C>
Rent from affiliates (Note 6) ............. $ 4,707 $ 3,179
Rent ...................................... 7,422 7,851
Mortgage interest ......................... 2,309 2,293
-------- --------
Total revenues .............................. 14,438 13,323
-------- --------
EXPENSES:
Depreciation and amortization ............. 4,660 4,011
General and administrative ................ 1,666 1,511
-------- --------
Total expenses .............................. 6,326 5,522
-------- --------
Operating income ............................ 8,112 7,801
-------- --------
OTHER INCOME (EXPENSE):
Other income .............................. 194 --
Interest income ........................... 603 133
Interest expense .......................... (4,354) (3,678)
-------- --------
Total other income (expense) ................ (3,557) (3,545)
-------- --------
Net income before minority interest ......... 4,555 4,256
Income applicable to minority interest ...... 1,688 1,544
-------- --------
Net income .................................. $ 2,867 $ 2,712
-------- --------
Preferred Dividends ......................... (463) --
-------- --------
Net Income Available to Common Shareholders . $ 2,404 $ 2,712
======== ========

Basic earnings per share .................... $ .30 $ .35
======== ========

Weighted average number of shares - basic ... 7,903 7,680
======== ========

Diluted earnings per share .................. $ .30 $ .35
======== ========

Weighted average number of shares - diluted . 7,908 7,725
======== ========
</TABLE>

See accompanying notes to condensed consolidated financial statements

4
<PAGE>

GOLF TRUST OF AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(UNAUDITED)

PREFERRED STOCK COMMON STOCK ADDITIONAL
----------------- ---------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE at January 1, 1999 ........ -- -- 7,637 $ 76 $ 120,253 $ (3,958)

Issuance of preferred stock ....... 800 $ 20,000 -- -- -- --
Cost of preferred stock issuance .. -- -- -- -- (878) --
Issuance and cancellation of
restricted stock ............... -- -- 32 1 555 --
Amortization and cancellation of
restricted stock ............... -- -- -- -- -- --
Value of unvested options for non-
employees ...................... -- -- -- -- 72 --
Adjustments for minority interest
in operating partnership ....... -- -- -- -- 3,503 --
Conversion of OP Units into common
stock .......................... -- -- 63 1 1,671 --
Loans to officers ................. -- -- -- -- -- --
Issuance of shares of employee
stock purchase plan ............ -- -- 4 -- 42 --
Dividends ......................... -- -- -- -- -- (14,993)
Net income ........................ -- -- -- -- -- 11,231
-------------------------------------------------------------------------
BALANCE at December 31, 1999 ...... 800 $ 20,000 7,736 $ 78 $ 125,218 $ (7,720)
-------------------------------------------------------------------------

(UNAUDITED)
Conversion/Redemption of OP Units . -- -- 335 3 5,839 --
Stock Repurchase Program .......... -- -- (10) -- (167) --
Redeposit of shares of employee
stock purchase plan ............ -- -- 2 -- (2) --
Adjustments for Minority Interest
in operating partnership ....... -- -- -- -- (1,823) --
New Restricted Stock Grant ........ -- -- 55 -- 949 --
Amortization of Restricted Stock .. -- -- -- -- -- --
Loans to Officers ................. -- -- -- -- -- --
Dividends ......................... -- -- -- -- -- (4,035)
Net income ........................ -- -- -- -- -- 2,867
-------------------------------------------------------------------------
BALANCE at March 31, 2000 ......... 800 $ 20,000 8,118 $ 81 $ 130,014 $ (8,888)

</TABLE>

<TABLE>
<CAPTION>
NOTE
RECEIVABLE TOTAL
UNEARNED FROM STOCK LOANS TO STOCKHOLDERS'
COMPENSATION SALE OFFICERS EQUITY
------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE at January 1, 1999 ........ $ (1,533) $ (3,298) $ (1,893) $ 109,647

Issuance of preferred stock ....... -- -- -- $ 20,000
Cost of preferred stock issuance .. -- -- -- (878)
Issuance and cancellation of
restricted stock ............... (1,001) -- -- (445)
Amortization and cancellation of
restricted stock ............... 1,004 -- -- 1,004
Value of unvested options for non-
employees ...................... -- -- -- 72
Adjustments for minority interest
in operating partnership ....... -- -- -- 3,503
Conversion of OP Units into common
stock .......................... -- -- -- 1,672
Loans to officers ................. -- -- (571) (571)
Issuance of shares of employee
stock purchase plan ............ -- -- -- 42
Dividends ......................... -- -- -- (14,993)
Net income ........................ -- -- -- 11,231
------------------------------------------------
BALANCE at December 31, 1999 ...... $ (1,530) $ (3,298) $ (2,464) $ 130,284
------------------------------------------------

(UNAUDITED)
Conversion/Redemption of OP Units . -- (5,677) -- 165
Stock Repurchase Program .......... -- -- -- (167)
ESPP .............................. -- -- -- (2)
Adjustments for Minority Interest
in operating partnership ....... -- -- -- (1,823)
New Restricted Stock Grant ........ (949) -- -- --
Amortization of Restricted Stock .. 215 -- -- 215
Loans to Officers ................. -- -- (57) (57)

Dividends ......................... -- -- -- (4,035)

Net income ........................ -- -- -- 2,867
------------------------------------------------
BALANCE at March 31, 2000 ......... $ (2,264) $ (8,975) $ (2,521) $ 127,447
</TABLE>

See accompanying notes to condensed consolidated financial statements

5
<PAGE>

GOLF TRUST OF AMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
-------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income ......................................... $ 2,867 $ 2,712
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization .................... 4,660 4,011
Loan cost amortization ........................... 261 170
Straight-line interest and rent .................. (174) (319)
Amortization of restricted stock compensation .... 215 120
Redeposit of ESPP shares ......................... (2) --
Income applicable to minority interest ........... 1,688 1,544
Income applicable to redemption of collateral .... (184) --
Increase in receivable from affiliates ........... (449) (30)
Increase in other assets ......................... (1,365) 844
Increase in accounts payable and other liabilities (751) 3,767
-------- --------

Net cash provided by operating activities ............ 6,766 12,819
-------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Golf course acquisitions and improvements .......... (1,160) (5,201)
Decrease (increase) in mortgage notes receivable ... 3 (5)
-------- --------
Net cash used in investing activities ................ (1,157) (5,206)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on line of credit ................... 2,000 12,000
Payments on notes and line of credit ............... (82) (5,093)
Loan fees .......................................... (187) (300)
Loans to officers .................................. (57) (411)
Redemption of OP Units ............................. -- (382)
Distributions to partners .......................... (2,164) (2,340)
Dividends paid ..................................... (4,035) (3,399)
-------- --------
Net cash provided by (used in) financing activities .. (4,525) 75
-------- --------

Net increase in cash ................................. 1,084 7,688

Cash and cash equivalents, beginning of period ....... 3,905 1,891

Cash and cash equivalents, end of period ............. $ 4,989 $ 9,579
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid during the period ..................... $ 4,354 $ 3,678
</TABLE>

See accompanying notes to condensed consolidated financial statements

6
<PAGE>

GOLF TRUST OF AMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. ORGANIZATION AND BASIS OF PRESENTATION

GENERAL

The accompanying consolidated financial statements include the accounts
of Golf Trust of America, Inc., its wholly owned subsidiary corporations and
their majority-owned and controlled partnership ("GTA") and its limited
liability companies. The outside equity interests in the consolidated
partnership and not owned and controlled by GTA are reflected as the minority
interest in the consolidated financial statements. All significant
inter-company balances and transactions have been eliminated in consolidation.

GTA is a self-administered real estate investment trust ("REIT") formed to
capitalize upon consolidation opportunities in the ownership of upscale golf
courses throughout the United States. We hold our golf course interests through
Golf Trust of America, L.P., a Delaware limited partnership and, in one
instance, through a wholly owned subsidiary of Golf Trust of America, L.P.
Currently, we hold participating interests in 47 golf courses (the "Golf
Courses"), 43 of which are owned by us and four of which serve as collateral for
a 30-year participating mortgage loan wherein we are the lender. Of the 43
courses that we own, 41 are held in fee simple and two held pursuant to
long-term ground leases. The golf courses are located in Florida (14), South
Carolina (6), Michigan (3.5), Illinois (3.5), Ohio (3), California (2.5),
Georgia (2), Virginia (2), Nebraska (1.5), Missouri (1.5), Texas (1.5), Alabama,
Kansas, Kentucky, North Carolina, New Mexico and West Virginia. Golf course
quantities are stated in terms of 18-hole equivalents, such that one 27-hole
golf course facility would be counted as 1.5 golf courses.

Because of the tax rules applicable to REIT's, we are generally not
allowed to operate our Golf Courses. As an exception to this rule, however,
we are allowed to operate a Golf Course for the 90-day period following a
foreclosure or eviction of the tenant. After this period the gross revenue
from Golf Course operations for this Golf Course is disqualified income for
REIT tax purposes. The tax code's REIT rules limit the amount of disqualified
income that we may receive. Thus, when we acquire a Golf Course, we lease it
back to an affiliate of the seller or to another qualified operator. Often
times, we lease the Golf Course back to the seller's affiliate in instances
where we believe that the seller's familiarity with local conditions and
continuity of management facilitates the Golf Course's growth and
profitability (which we participate in under certain conditions as described
below). However, we also have developed strong relationships with
multi-course operators who lease a number of our Golf Courses. We would take
over direct operations of a Golf Course if we are forced to foreclose on a
Golf Course due to a tenant's default under their Participating Lease as
occurred with Tierra Del Sol Golf Club. In the event of a foreclosure, we
explore opportunities to (i) re-let the Golf Course, (ii) enter in to a
management agreement with a more experienced golf operator than the original
tenant, or (iii) potentially sell the Golf Course. As of the date of this
filing, we have not yet elected to execute any of these options for Tierra
Del Sol Golf Club. The 90-grace period allowed by the Internal Revenue
Service during which the gross revenues from Golf Course operations are
qualifying income for REIT tax purposes expired on May 6, 2000; therefore,
gross revenues from the operation of Tierra Del Sol Golf Club subsequent to
this date will be disqualified for REIT tax purposes.

INTERIM STATEMENTS

The accompanying condensed consolidated financial statements for the three
months ended March 31, 2000 and 1999 have been prepared in accordance with
generally accepted accounting principles ("GAAP") and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. These financial statements have not
been audited by independent public accountants but include all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the financial condition,
results of operations and cash flows for such periods. However, these results
are not necessarily indicative of results for any other interim period or for
the full year. The accompanying consolidated balance sheet as of December 31,
1999 has been derived from the audited financial statements, but does not
include all disclosures required by GAAP.

Certain information and footnote disclosures normally included in financial
statements in accordance with GAAP have been omitted pursuant to requirements of
the Securities and Exchange Commission (the "SEC"). Management believes that the
disclosures included in the accompanying interim financial statements and
footnotes are adequate to make the information not misleading but should be read
in conjunction with the consolidated

7
<PAGE>

financial statements and notes thereto included in GTA's annual report of Form
10-K/A for the year ended December 31, 1999.

MINORITY INTEREST

The accompanying consolidated balance sheets have been adjusted to reflect
an accounting allocation for reporting purposes from additional paid-in capital
to minority interest for the limited partners' percentage interest in the net
assets of Golf Trust of America, L.P. This adjustment had no effect on earnings
per share or results of operations or allocations of net income to the general
and limited partners of Golf Trust of America, L.P. The reallocation for the
three month period ended March 31, 2000 and the year ended December 31, 1999 was
approximately $1.8 million and $3.6 million, respectively.

EARNINGS PER SHARE

The computation of basic earnings per share is computed by dividing net
income by the weighted average number of outstanding common shares during the
period. The computation of diluted earnings per share is based on the weighted
average number of outstanding common shares during the period and the
incremental common shares, using the treasury stock method for stock options.
The incremental common shares for the three months ended March 31, 2000 and 1999
were 4,000 and 44,000 respectively. Since the conversion of the preferred shares
would be anti-dilutive, these amounts are not included in the calculations of
diluted shares.

2. LEASES

All of our golf course leases are participating leases that require the
lessees to make payments of a fixed amount of base rent and a variable amount of
additional rent based on growth in revenue at the golf course. Participating
rent will generally be paid each year in the amount, if any, by which the sum of
33 1/3% of gross golf revenue exceeds the cumulative base rent escalation since
the commencement date of such leases. The base rent generally increases annually
by the lesser of 3% to 5%, or a multiple of the change in the Consumer Price
Index ("CPI"). Annual increases in lease payments are generally limited to
between 5% and 7% during the first five years of the lease term. There was no
participating rent (or participating mortgage interest under the mortgage note
receivable) for the three month periods ended March 31, 2000 and 1999,
respectively.

3. COMMITMENTS

LESSEES

Typically, we lease our golf courses to affiliates of the prior owners and
other initial operators believed to be qualified under non-cancelable
participating leases for an initial term of ten years, with options to extend
the initial term of each participating lease up to a maximum of forty years.
From the lease payments, we are generally required to make available a reserve
of between 2% and 5% of the annual gross golf revenue of each course for the
replacement and enhancement of the existing facilities. These reimbursements are
allocated between short and long-term categories and, therefore, the balance (at
March 31, 2000 and 1999 of $2,400,000 and $1,500,000, respectively) may not be
currently available to the lessees.

Under certain circumstances, the underlying base rent for a course will be
increased when we agree to pay for significant capital improvements or to expand
existing facilities. In addition, in limited circumstances, we may agree to
provide working capital loans to existing lessees. Currently, we have funded
$15,024,000 of our total

8
<PAGE>

commitments to date of $24,202,000. We anticipate that we will fund the
balance of $9,178,000 over the next two years.

The Company has agreed to maintain minimum loan balances of approximately
$17.2 million for up to ten years to accommodate certain prior owner's efforts
to seek to minimize certain adverse tax consequences from their contribution of
their courses to the Company.

Under the Performance Option for the Participating Leases, during years
three through five of each Participating Lease, the operator or its affiliate,
subject to certain qualifications and restrictions, may elect one time to
increase the Base Rent in order to receive additional OP Units or Common Stock.
An operator's ability to exercise the Performance Option and the number of OP
Units or Common Stock issuable to such Prior Owner in connection therewith, will
depend on future operating results at the applicable Golf Course and therefore
cannot be determined in advance.

4. OTHER ASSETS

The balance of Other Assets includes Rent Receivable totaling
approximately $1,848,000 attributed to the three default courses (Osage,
Mystic Creek, and Brentwood) that are currently in default proceedings. The
value of the collateral held against these Participating Leases significantly
exceeds the total amounts due at this time. This balance also includes Rent
Receivable totaling approximately $143,000 attributed to the two default
courses (Wekiva and Palm Desert) that are currently in the cure period of the
default process. The collateral held against these Participating Leases
significantly exceeds the amounts due at this time.

5. DEBT
<TABLE>
<CAPTION>
Debt consists of the following:
-------------------------------------------------------------------------- ------------------ -----------------
MARCH 31, DECEMBER 31,
(IN THOUSANDS) 2000 1999
-------------------------------------------------------------------------- ------------------ -----------------
<S> <C> <C>
REVOLVING CREDIT FACILITY
$200.0 million unsecured revolver with a weighted average interest rate
of 7.7% maturing April 2002 $200,000 $200,000
-------------------------------------------------------------------------- ------------------ -----------------
LINE OF CREDIT
$25.0 million unsecured line of credit with a weighted average interest
rate of 7.6% maturing October 1, 2000 2,700 700
-------------------------------------------------------------------------- ------------------ -----------------
NOTE PAYABLE
Secured financing, net book value of the property of $20 million with an
interest rate of 8.75% to 10% maturing thru November 2016 12,303 12,385
-------------------------------------------------------------------------- ------------------ -----------------
NOTE PAYABLE
Secured financing, net book value of the property is $10.0 million with
interest rate of prime (8.5% at March 31, 2000) maturing thru 2002 10,000 10,000
-------------------------------------------------------------------------- ------------------ -----------------
TOTAL $225,003 $223,085
-------------------------------------------------------------------------- ------------------ -----------------
</TABLE>

6. NOTE RECEIVABLE FOR STOCK SALE

Concurrent with the conversion to common stock of 274,039 OP units belonging to
Golf Host Resorts, Inc., the related note receivable was reclassified from
Minority Interest to Note Receivable from Stock Sale.

9
<PAGE>

7. STOCK OPTIONS AND AWARDS

EMPLOYEE STOCK PURCHASE PLAN

On March 1, 1998, GTA adopted an Employee Stock Purchase Plan ("the
Plan") to provide most employees with an opportunity to purchase common
shares in GTA through payroll deductions of up to 10% of eligible
compensation with a $25,000 maximum deferral. Semi-annually, participant
account balances will be used to purchase common shares at the lesser of 85%
of the fair market value of common shares at the beginning or ending of such
six-month period. The Plan expires on February 28, 2008. A total of 250,000
common shares are available for purchase under the Plan. In January 2000,
1,592 common shares were issued for the plan period July 1999-December 1999
and in July 1999, 2,152 common shares were issued for plan period January
1999 - June 1999. No compensation expense was recognized related to the Plan
for the three months ended March 31, 2000 and 1999.

RESTRICTED STOCK

For the three months ended March 31, 2000 and 1999, GTA granted 55,000 and
44,000 common shares, respectively, of restricted stock to employees under GTA's
1998 and 1997 Stock-Based Incentive Plans. The market value of the restricted
stock grants in 2000 and 1999 totaled $949,000 and $1,001,000, respectively.
Unearned compensation is being amortized to an expense item over the vesting
period, which ranges from three to five years. Such expense amounted to
approximately $215,000 and $120,000 for the three months ended March 31, 2000
and 1999, respectively.

LOANS TO OFFICERS

In 1997, the Board of Directors of GTA approved a Company Policy, which
has subsequently been amended and restated with respect to loans to executive
officers and certain key employees relating to purchases of GTA common shares
(the "Loan Program"). Pursuant to the Loan Program, GTA may lend amounts to
certain GTA executive officers for one or more of the following purposes: (1)
to finance the purchase of common shares by certain executive officers on the
open market at the then-current market prices; and (2) to finance an executive
officer's payment of the exercise price of options to purchase common shares
granted to such employee under GTA's option plans. In addition, GTA may lend
amounts to finance the annual tax liability of certain executive officers
related to the vesting of shares of common shares which constitute a portion
of a restricted stock award granted to such employees under GTA's option
plans. The maximum aggregate amount GTA may loan to an executive officer is
determined on a case-by-case basis by the Compensation Committee. Common
shares, which are the subject of a loan, serve as collateral for the repayment
of the note until the note has been paid in full. Each note bears interest at
the applicable federal rate, as defined by the Internal Revenue Service, in
effect on the execution date of the loan. Interest is paid on an annual basis
and varies from 4.5% -6.3% per annum. Each note becomes due and payable at the
earlier of (i) within three years of the applicable employee termination (ii)
five years after the making of the loan; and, specific to the notes granted to
purchase shares on the open market (iii) at the time of sale of such stock at
a price greater then $25 per share. Theses Notes are recourse to the Borrower.
As of March 31, 2000, GTA had outstanding loans in the amount of approximately
$2,521,000.

10
<PAGE>

8. TRANSACTIONS WITH AFFILIATE AND SIGNIFICANT LESSEE

Legends Golf is a significant lessee of the golf courses in GTA's
portfolio. Legends Golf is a golf course management group consisting of eight
companies affiliated through common ownership that operates a portfolio of
thirteen golf courses owned by GTA under triple net leases. Legends Golf derives
revenues from the operation of golf courses principally through receipt of green
fees, membership fees, golf cart rentals, and sales of food, beverage and
merchandise.

Effective July 1, 1999, Larry D. Young, a director of GTA and principle
owner of Legends Golf, acquired the stock of the lessee of the Bonaventure
courses.

Effective August 17, 1999, Mr. Young, through an affiliated entity named
"Legend National Golf Management, LLC," also became the lessee at four courses
previously leased to Granite Golf Group or its affiliates. These courses are
Persimmon Ridge Golf Club, Silverthorn Country Club, Black Bear Golf Club and
Tiburon Golf Club.

The following table sets forth certain combined condensed financial
information for Legends Golf.

<TABLE>
<CAPTION>
March 31, December 31,
(IN THOUSANDS) 2000 1999
------------------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
Current assets $ 5,972 $ 4,912
Non-current assets 33,058 29,884
-------- --------
Total assets $ 39,030 $ 34,796
======== ========

Payable to Golf Trust of America, L.P. $ 7,401 $ 6,952
Other current liabilities 39,416 33,244
Long-term liabilities 1,844 1,960
Owners' equity (capital deficit) (9,631) (7,360)
-------- --------

Total liabilities and owners' equity (capital deficit) $ 39,030 $ 34,796
======== ========
</TABLE>

Included in the balance of "Payable to Golf Trust of America, L.P." are
working capital advances totaling approximately $5,773 which bear interest at 10
percent. Advances of $1,031 are due in August 2000 with the balance due at the
end of the lease term.

<TABLE>
<CAPTION>
For the three months ended
March 31,
(IN THOUSANDS) 2000 1999
----------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Total Revenues $ 8,846 $ 5,751
Operating Loss $ (1,046) $ (559)
Net Income $ 22 $ 582
</TABLE>

Total revenues from Golf Course operations for Legends Golf increased by
$3.1 million, or 53.8 percent, to $8.8 million for the three months ended March
31, 2000. The increase was primarily attributed to additional revenue of $3.2
million from the additional six courses under lease net of decreases in revenues
in Myrtle Beach and Virginia of $0.5 million. Total rounds played decreased in
Myrtle Beach and Virginia by approximately 8.8

11
<PAGE>

percent from the same period in 1999 primarily as a result of an unusually harsh
winter. The effect of the decrease in rounds played was partially offset by
higher greens fees.

Operating loss increased from $0.6 million to $1.0 million for the three
months ended March 31, 1999 and 2000, respectively. The increase is primarily
due to the operating loss of the additional leases of $0.6 million partially
offset by a reduction in the operating loss in Myrtle Beach and Virginia of $0.2
million primarily as a result of a reduction in the allocation of administrative
overhead. Legends Golf had net income of approximately $0.6 million for the
three months ended March 31, 1999 compared to breakeven for the three months
ended March 31, 2000 primarily as a result of the increase in the operating loss
in 2000.

9. SUBSEQUENT EVENTS

PAYMENT OF DIVIDENDS

On March 15, 2000, the Board of Directors declared a quarterly dividend
distribution of $0.44 per common share for the quarter ended March 31, 2000, to
stockholders of record on March 31, 2000, which was paid on April 15, 2000.
Also, on April 15, 2000, the Series A Preferred Stockholder was paid a dividend
of $.58 per share also declared on March 15, 2000.

12
<PAGE>

GOLF TRUST OF AMERICA, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2000

MANAGEMENT'S DISCUSSION AND ANALYSIS

OVERVIEW AND FORMATION

Golf Trust of America, Inc. ("GTA") conducts business through Golf Trust
of America, L.P. (the "Operating Partnership"), of which GTA, as of May 12,
2000, owns 64.4 percent interest through its two wholly owned subsidiaries and
is the general partner. Larry D. Young, a director of GTA, along with his
affiliates, owns 27.0 percent of the Operating Partnership and is a significant
lessee. Operators of the golf courses, their affiliates and an officer of GTA
hold the remaining interest in the Operating Partnership. In this report the
terms "we" and the "Company" mean GTA together with the Operating Partnership
and their consolidated subsidiaries, considered as a whole.

Concurrent with the initial public offering of our common stock, in
February 1997, we acquired ten initial golf courses in exchange for the issuance
of 4.1 million OP units, the repayment of $47.5 million of notes payable and
affiliate debt, and $6.2 million cash. The seven golf courses acquired from
Legends Golf have been accounted for at a carryover basis as Legends Golf is
considered the accounting acquirer under APB Opinion No. 16. The value of the OP
units issued and debt assumed was approximately $73.7 million greater than the
carryover basis of Legends Golf.

Our company was formed to capitalize upon consolidation opportunities in
the ownership of upscale golf courses in the United States. Our principal
business strategy is to own upscale golf courses and lease these golf courses to
qualified third-party operators which may include the sellers of the courses. In
addition to the ability to acquire golf courses for cash and/or the assumption
of indebtedness, we have the ability to issue units of limited partnership
interest ("OP Units") in the Operating Partnership. OP Unit holders are partners
who have the right (their "Redemption Right"), subject to certain terms and
conditions to redeem their OP Units for either shares of Common Stock, or cash
at our discretion. When we acquire a golf course in exchange for OP Units, in
most instances the seller of the course does not recognize taxable income until
it exercises the Redemption Right. OP Units can thus provide an attractive
tax-deferred sale structure for golf course sellers. We believe we are highly
regarded and recognized as having a significant presence in the ownership of
upscale golf course assets due to (i) our utilization of a multiple independent
lessee structure (ii) management's substantial industry knowledge, experience,
and relationships within the golf community, (iii) our strategic alliances with
prominent golf course operators and (iv) our ability to issue OP Units to golf
course owners on a tax-deferred basis.

Our primary sources of revenue are lease payments under the participating
leases and mortgage payments under the participating mortgage. We generally
participate in the increase in gross golf revenues over the base year. Base rent
will generally increase each year between 3% and 5%. Annual increases in lease
payments are generally limited to a maximum of 5% to 7% for the first five years
of the lease term.

Management believes the principal source of growth in gross golf revenues
at the golf courses will be increased green fees, cart fees, and other related
fees (due to increases in rounds and/or rates). In order to achieve higher
revenues, management believes the lessees will need to continue to offer golfers
a high quality golf experience as it relates to the pace of play, condition of
the golf course and overall quality of the facilities and services.

APPOINTMENT OF FINANCIAL ADVISOR

On February 9, 2000 we engaged Banc of America Securities LLC to act as
our financial advisor to undertake a review of a broad range of strategic
alternatives available to us in light of the current and prospective market
conditions facing GTA and the REIT industry. Executive management and/or the
Board is meeting regularly with our financial advisor in furtherance of
consideration of alternatives to enhance shareholder value. These alternatives
include a merger, sale, recapitalization, privatization or restructuring,
including de-REITing (revoking election of REIT-tax status), among others. The
professional fee structure in our agreement with Banc of America Securities

13
<PAGE>

LLC should not have a material impact on General & Administrative expenses for
2000.

RESULTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999

For the three months ended March 31, 2000 and 1999, we received
$14,438,000 and $13,323,000 in revenue from the participating leases and the
mortgage note receivable. The increase in revenues of $1,115,000 is due to
(1) minimum rent increases of approximately $348,000 which represents a 3%
average increase, (2) a full quarter of rent from the two golf courses
acquired subsequent to March 31, 1999 resulting in $476,000 in additional
rental revenue, (3) increase in capital expenditure reserve of $61,000 (4)
miscellaneous revenue of $96,000 from straight-line rents and other charges
billed to lessees, and (5) $16,000 of additional income from the mortgage
note receivable composed of $104,000 of additional interest reflecting
increased principal outstanding and minimum increases under the mortgage note
offset by a decrease of $88,000 in the amount of straight-line interest
income recognized on the mortgage. The increases in rent revenues for the
period ended March 31, 2000 were offset by $58,000 in lost rental revenue
from Tierra del Sol Golf Club which was foreclosed upon effective Feburary 7,
2000. Since this date, we have operated Tierra del Sol Golf Club and
recognized its net income from Golf Course operations of $10,000 for the
period February 8, 2000 - March 31, 2000 as other income on our financial
statements. In addition, excess collateral for this Golf Course valued at
$184,000 was recognized as other income on our financial statements on the
date of the foreclosure.

Expenses totaling $10,680,000 and $9,200,000 for the three months ended
March 31, 2000 and 1999 respectively reflect depreciation and amortization,
general and administrative expenses, and interest expense. The increase of
$1,480,000 reflects depreciation of $209,000 for the acquisitions subsequent to
March 31, 1999 plus additional depreciation on prior acquisitions and related
improvements of $440,000, a net increase in general and administrative costs of
$155,000 and an increase in interest expense of $676,000. The net increase in
general and administrative expenses is attributed to an increase in professional
fees of $448,000, an increase in amortization of loan fees of $98,000 offset by
savings of approximately $215,000 as a result of the reorganization of the
Acquisition Department that occurred in the fourth quarter of 1999 plus reduced
spending in other expense categories. Expenses for professional fees include
legal, strategic analysis, tax, audit, and shareholder services among others.
Interest expense was $4,354,000 for the three months ended March 31, 2000
compared to $3,678,000 for the three months ended March 31, 1999 primarily due
to the increase of approximately $7,500,000 in the average balance of
outstanding debt for the first quarter of 2000 versus the first quarter of 1999
coupled with higher interest rates.

Other Income and Interest Income totaled approximately $797,000 and
$133,000 for the three months ended March 31, 2000 and 1999, respectively.
Included in the $797,000 is $184,000 of Other Income from the redemption of
collateral from Tierra del Sol Golf Club that was acquired through
foreclosure proceedings. In addition, $10,000 of Net Income from Golf Course
operations for Tierra del Sol was recognized for the period subsequent to the
foreclosure, February 7, 2000 -March 31, 2000, during which time we managed
this course. Interest income for the first quarter of 2000 and 1999 was
approximately $603,000 and $133,000, respectively.

For the three months ended March 31, 2000 and 1999 net income was
$2,867,000 and $2,712,000, respectively. The increase in net income is primarily
the result of increased rental revenue.

14
<PAGE>

LESSEE RESULTS OF OPERATIONS

TIERRA DEL SOL GOLF CLUB: We have been operating this Golf Course since
February 7, 2000 when the tenant was evicted and we took possession. As of
the date of this filing, we have not yet elected to execute any of the
options explored in our business plan which include (i) re-letting the Golf
Course, (ii) entering into a management agreement with a more experienced
golf operator than the original tenant, or (iii) potentially selling the Golf
Course. OP Units initially pledged as collateral for the lease by the former
tenant of the Golf Course have been redeemed and were applied to past due
rent obligations and other accrued charges. The remaining collateral balance
of $184,000 (equivalent to approximately five months of Base Rent) was
recognized as Other Income in the first quarter of 2000. The 90-grace period
allowed by the Internal Revenue Service during which the gross revenues from
Golf Course operations are qualifying income for REIT tax purposes expired on
May 6, 2000; therefore, gross revenues from Golf Course operations subsequent
to this date will be disqualified for REIT tax purposes.

OSAGE NATIONAL GOLF CLUB: Discussions with the prior owner of the Golf
Course and the tenant to terminate the tenant's Participating Lease and the
tenant's possessory rights at the Golf course are ongoing, but in the
meantime, we have filed Notices to Quit in compliance with Missouri law, and
expect to file an eviction action against the tenant on May 16, 2000. Under
our current assumptions, the value of the tenant's collateral securing the
obligations of the defaulting tenant under the Participating Lease is
adequate to cover accrued rent (approximately $616,000 through May 5, 2000).
No other material developments have occurred in these proceedings since the
filing of our Annual Report on Form 10-K/A on April 6, 2000.

MYSTIC CREEK GOLF COURSE: It is our intention to continue the eviction
action that was stayed on February 25, 2000 as soon as legally permissible
and to seek to have an evidentiary hearing scheduled as quickly as possible
to determine the date for the tenant to assume the lease (by bringing rent
current) or reject the lease (which would mean a return of the Golf Course to
us). The tenant continues to operate the Golf Course pending the resolution
of the pending action and its bankruptcy. Under our current assumptions, the
value of the tenant's collateral securing the obligations of the defaulting
tenant under the Participating Lease is adequate to cover accrued rent
(approximately $833,000 through May 1, 2000). No other material developments
have occurred in these proceedings since the filing of our Annual Report on
Form 10-K/A on April 6, 2000.

BRENTWOOD GOLF & COUNTRY CLUB: The tenant refused to make the first
escrow payment required by the Order that was entered on March 28, 2000. We
filed a motion to compel enforcement of the escrow order and on May 3, 2000,
the court ordered the tenant to pay February, March and April rent in to
escrow. Subject to the foregoing limitations, the tenant continues to operate
the Golf Course pending resolution of the pending actions. Under our current
assumptions, the value of the tenant's collateral securing the obligations of
the defaulting tenant under the Participating Lease is adequate to cover
accrued rent (approximately $588,000 through April 25, 2000). No other
material developments have occurred in these proceedings since the filing of
our Annual Report on Form 10-K/A on April 6, 2000.

WEKIVA GOLF CLUB: This Golf Course is an 18-hole, high-end daily fee
Golf Course located in Florida, which we purchased in September 1998 for
$6,500,000. On April 20, 2000, we declared an event of default under this
Participating Lease as a result of the tenant's failure to timely pay rent.
We are in the process of pursuing our legal rights against the tenant and the
collateral securing the Participating Lease. The tenant continues to operate
this Golf Course pending a resolution to the default condition. Under our
current assumptions, the value of the tenant's collateral securing the
obligations of the defaulting tenant under this Participating Lease is
adequate to cover accrued rent (approximately $172,000 through May 3, 2000).

15
<PAGE>

PALM DESERT COUNTRY CLUB: This Golf Course is a 27-hole, high-end daily
fee Golf Course in Palm Desert, California, which we purchased in December
1998 for $5,800,000. On April 20, 2000, we declared an event of default under
the Participating Lease as a result of the tenant's failure to timely pay
rent. We are in the process of pursuing our legal rights against the tenant
and the collateral securing the Participating Lease. The tenant continues to
operate this Golf Course pending a resolution to the default condition. Under
our current assumptions, the value of tenant's collateral securing the
obligations of the defaulting tenant under the Participating Lease is
adequate to cover accrued rent (approximately $177,000 through May 3, 2000).

LIQUIDITY AND CAPITAL RESOURCES OF THE COMPANY

Cash flow from operating activities for the three months ended March 31,
2000 and 1999 was $6,766,000 and $12,819,000, respectively. This reflects net
income, plus non-cash charges to income for depreciation, loan cost
amortization, restricted stock compensation amortization, straight line rents
and interest, and working capital changes. For the three months ended March 31,
2000, $184,000 in non-cash other income is reflected in operating activities
which resulted from the foreclosure of OP units in excess of the outstanding
debt (approximately 10,555 OP units) of Tierra del Sol Golf Club.

Our investing activities reflect golf course improvements and capital
replacement reserve costs of $1,160,000 for the first three months of 2000
compared to $5,206,000 for the first three months of 1999. The 2000
improvements consisted primarily of $617,000 invested in Cypress Creek Golf
Club, $138,000 invested at Sandpiper plus $405,000 miscellaneous
improvements, replacements and capitalized costs among the other properties.
The 1999 investments included the $3.3 million completion of an additional
nine holes at Northgate Country Club.

During the first three months of 2000, our financing activities netted to
$4,525,000. We borrowed $2,000,000 under the unsecured Line of Credit, paid loan
fees of $187,000 related to the six-month extension of the unsecured line of
credit, made new officer loans of $57,000, paid principle payments on the note
payable of $82,000 and paid dividends and partner distributions of $6,199,000.
This compares to net financing activities of $75,000 for the first three months
of 1999. During this period, we borrowed $12,000,000 under the Credit Facility,
repaid notes of $5,093,000, paid loan costs associated with the amendment and
restatement of the Credit Facility of $300,000, made new officer loans of
$411,000, redeemed OP units for $382,000 and paid dividends and partner
distributions of $5,739,000 for the three months ended March 31, 1999.

FINANCING AND CAPITAL RESOURCES

As of April 6, 1999, GTA amended and restated its unsecured Revolving
Credit Facility ("Credit Facility") to increase the borrowing capacity to $200.0
million with a consortium of banks led by Bank of America, as lead agent. GTA
pays interest-only on the Credit Facility with the principal balance due in
April 2002. Borrowings typically bear interest at an adjusted Eurodollar rate
plus an applicable margin. The applicable margin (between 1.50% and 2.00%) is
subject to adjustment based upon certain leverage ratios. At March 31, 2000, all
amounts outstanding under the Credit Facility were based on the Eurodollar rate
and a margin of 1.75% for an average interest rate of 7.7% per annum.

The Credit Facility availability is limited to an unencumbered pool
calculation, including a 20% limitation for working capital needs. Financial
covenants include net worth, liquidity and cash flow covenants, among others.
Non-financial covenants include restrictions on loans outstanding,
construction-in-progress, loan to officers and changes in the Board of
Directors, among others. At the present time, these covenants have been met.

In addition to the amended and restated Credit Facility, on April 6, 1999
GTA also obtained a $25.0 million unsecured line of credit from Bank of America
which may be incorporated into the $200.0 million Credit Facility at

16
<PAGE>

a later date. The rates, covenants, conditions and other material provisions are
essentially the same as the Credit Facility, except for the term, which was one
year with an expiration date of April 1, 2000. In March of 2000, this line was
granted a six-month extension with a new maturity date of October 1, 2000. The
extension was granted with the same pricing that was in effect under the
original line plus a 3/4% up-front commitment fee.

We have agreed to maintain a minimum loan balance of approximately $17.2
million for up to ten years to accommodate certain prior owners' efforts to
minimize certain adverse tax consequences from their contribution of their
courses to GTA.

GTA may invest in additional golf courses as suitable opportunities arise,
but we will not undertake investments unless adequate sources of financing are
available. We anticipate that future acquisitions would be funded with debt
financing provided by the Credit Facility, the issuance of OP Units or with
proceeds of additional equity offerings. In the future, we may negotiate
additional credit facilities or issue corporate debt instruments. Any debt
issued or incurred by GTA may be secured or unsecured, long-term or short-term,
fixed or variable interest rate and may be subject to such other terms, as the
Board of Directors deems prudent.

We have on file with the Securities and Exchange Commission a universal
shelf registration statement relating to the issuance of debt securities, common
stock or preferred stock as well as re-sales of securities issued upon
redemption of certain OP Units by their holders, with a remaining availability
of approximately $280.0 million. The exact amount of debt, common stock, or
preferred stock issued will depend on acquisitions, asset sales, GTA's unsecured
debt and preferred stock ratings, and the general interest rate environment.

We generally intend to maintain a capital structure with consolidated
indebtedness representing no more than 50% of our total capitalization, although
we have no express limitation in our charter documents on our ability to incur
indebtedness.

17
<PAGE>

FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION

We consider Funds From Operations ("FFO") as an appropriate measure of
performance of an equity REIT. In accordance with the resolution adopted by the
Board of Governors of the National Association of Real Estate Investment Trusts,
Inc. ("NAREIT"), FFO represents net income (loss) (computed in accordance with
generally accepted accounting principles ("GAAP")), excluding gains (or losses)
from debt restructuring or sales of property, plus depreciation of real
property, and after adjustments for unconsolidated partnership and joint
ventures. The depreciation that is added back in this calculation is net of the
depreciation expense for corporate assets. FFO should not be considered as an
alternative to net income or other measurements under GAAP as an indicator of
operating performance or to cash flows from operating investing or financial
activities as a measure of liquidity. FFO does not reflect working capital
changes, cash expenditures for capital improvements or principal payments on
indebtedness. We believe that FFO is helpful to investors as a measure of the
performance of an equity REIT, because along with cash flows from operating
activities, financing activities and investing activities, it provides investors
with an understanding of our ability to incur and service debt and make capital
expenditures. Compliance with the NAREIT definition of FFO is voluntary.
Accordingly, our calculation of funds from operations in accordance with the
NAREIT definition may be different than similarly titled measures used by other
REITs.

Cash available for distribution ("CAD") is defined as FFO less capital
expenditures funded by operations and straight line rent and interest payments.
We believe that in order to facilitate a clear understanding of our consolidated
historical operating results, FFO and CAD should be examined in conjunction with
net income as presented in the consolidated financial statements and data
included elsewhere in this report.

FFO and CAD for the three months ended March 31, 2000 and 1999 presented on
a historical basis are summarized in the following table:

<TABLE>
<CAPTION>
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 2000 MARCH 31, 1999
--------------------------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Income before minority interest ............................. $ 4,555 $ 4,256
Depreciation and amortization for real estate assets ........ 4,626 4,011
--------------------------------------

Funds from Operations ....................................... 9,181 8,267
Preferred dividends ......................................... (463) --
Preferred distributions ..................................... (36) --
--------------------------------------
Funds from operations available to common stockholders
and OP Unit Holders ......................................... 8,682 8,267

Adjustments:
Non-cash mortgage interest and rent ....................... (174) (319)
Capital expenditure reserve ............................... (688) (593)
--------------------------------------

Cash Available for Distribution to Common Stockholders and OP
Unit Holders ................................................ $ 7,820 $ 7,355
--------------------------------------
</TABLE>

Non-cash mortgage and rent interest revenue represents the difference
between revenue on the participating mortgage that we report in accordance with
GAAP and the actual cash payment that we receive. The participating leases
generally require the Operating Partnership to reserve annually between 2.0% and
5.0% of the gross golf revenues of the golf courses to fund a capital
replacement reserve. The lessees will fund any capital expenditures in excess of
such amounts.

18
<PAGE>

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We have not entered into any transactions using derivative commodity
instruments. We are subject to market risk associated with changes in interest
rates. Prior to the expiration of our interest rate swap agreement on March 27,
2000, our interest rate exposure was primarily limited to our $135.9 million of
debt outstanding as of that date that was priced at floating interest rates. As
of the date of this filing, we have not entered in to a new interest rate swap
agreement; therefore, the total outstanding debt subject to interest rate
exposure is $212.7 million. A 25 basis point movement in the interest rate on
the floating rate debt would result in an approximate $532,000 annualized
increase or decrease in interest expense and cash flows. The remaining debt is
fixed rate debt. Reference is made to Item 2 and Note 4 of Item 1 for additional
debt information.

19
<PAGE>

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Owners and operators of golf courses are subject to a variety of legal
proceedings arising in the ordinary course of operating a golf course, including
proceedings relating to personal injury and property damage. Such proceedings
are generally brought against the operator of a golf course, but may also be
brought against the owner. The Participating Leases provide that each Lessee is
responsible for claims based on personal injury and property damage at the Golf
Courses which are leased and require each Lessee to maintain insurance for such
purposes.

LITIGATION ARISING THROUGH EVENTS OF DEFAULT

TIERRA DEL SOL GOLF CLUB: We took possession of this property and took
over Golf Course operations on February 7, 2000, pursuant to an order issued by
the District Court. The 90-day grace period allowed by the Internal Revenue
Service during which the gross Golf Course revenues are qualifying income for
REIT tax purposes expired on May 6, 2000; therefore, gross Golf Course revenues
subsequent to this date will be disqualified for REIT tax purposes.

BRENTWOOD GOLF & COUNTRY CLUB: The tenant refused to make the first escrow
payment required by the Order that was entered on March 28, 2000. We filed a
motion to compel enforcement of the escrow order and on May 3, 2000, the court
ordered the tenant to pay February, March and April rent in to escrow. Subject
to the foregoing limitations, the tenant continues to operate the Golf Course
pending resolution of the pending actions. No other material developments have
occurred in these proceedings since the filing of our Annual Report on Form
10-K/A on April 6, 2000.

ITEM 2. CHANGES IN SECURITIES

Not Applicable.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

Not Applicable.

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

Not Applicable.

20
<PAGE>

ITEM 5. OTHER INFORMATION

Not Applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

The following exhibits are part of this quarterly report on Form 10-Q
for the quarterly period ended March 31, 2000 (and are numbered in
accordance with Item 601 of Regulation S-K). Items marked with an asterisk
(*) are filed herewith.

No. Description
- -- -----------
3.1.1 Articles of Amendment and Restatement of the Company, as filed
with the State Department of Assessments and Taxation of
Maryland on January 31, 1997, (previously filed as Exhibit
3.1A to the Company's Registration Statement on Form S-11
(Commission File No. 333-15965) Amendment No. 2 (filed January
30, 1997) and incorporated herein by reference).

3.1.2 Articles of Amendment of the Company, as filed with the State
Department of Assessments and Taxation of Maryland on June 9,
1998 (previously filed as Exhibit 3.2B to the Company's
Quarterly Report on Form 10-Q, filed August 14, 1998 and
incorporated herein by reference).

3.2.1 Articles Supplementary of the Company relating to the Series A
Preferred Stock, as filed with the State Department of
Assessments and Taxation of the State of Maryland on April 2,
1999 (previously filed as Exhibit 3.1 to the Company's Current
Report on Form 8-K, filed April 13, 1999, and incorporated
herein by reference).

3.2.2 Articles Supplementary of the Company relating to the Series B
Junior Participating Preferred Stock, as filed with the State
Department of Assessments and Taxation of the State of
Maryland on August 27, 1999 (previously filed as Exhibit 3.1
to the Company's Current Report on Form 8-K, filed August 30,
1999, and incorporated herein by reference).

3.3 Bylaws of the Company, as amended by the Board of Directors on
February 16, 1998 and as currently in effect (previously filed
as Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q,
filed May 15, 1998 and incorporated herein by reference).

4.1 Form of Share Certificate for the Common Stock (previously
filed as Exhibit 4.3 to the Company's Current Report on Form
8-K, filed August 30, 1999, and incorporated herein by
reference).

4.2 Form of Share Certificate for the Series A Preferred Stock
(previously filed as Exhibit 3.2 to the Company's Current
Report on Form 8-K, filed April 13, 1999, and incorporated
herein by reference).

21
<PAGE>

4.3 Shareholder Rights Agreement, by and between the Company and
ChaseMellon Shareholder Services, L.L.C., as rights agent,
dated August 24, 1999 (previously filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K, filed August 30, 1999,
and incorporated herein by reference).

10.1.1 First Amended and Restated Agreement of Limited Partnership
(the "Partnership Agreement") of Golf Trust of America, L.P.
(the "Operating Partnership"), dated February 12, 1997
(previously filed as Exhibit 10.1 to the Company's Annual
Report on Form 10-K, filed March 31, 1997, and incorporated
herein by reference).

10.1.2 First Amendment to the Partnership Agreement, dated as of
February 1, 1998 (previously filed as Exhibit 10.1.2 to the
Company's Annual Report on Form 10-K, filed March 31, 1998,
and incorporated herein by reference).

10.1.3 Exhibit A to the Partnership Agreement (Schedule of
Partnership Interests), as revised through March 22, 2000
(previously filed as Exhibit 10.1.3 to the Company's Annual
Report on Form 10-K, filed March 30, 2000, and incorporated
herein by reference).

10.1.4 Designation of Class B Common OP Units of the Operating
Partnership, dated February 1, 1998, which has been added as
the first entry in Exhibit D to the Partnership Agreement
(included within the First Amendment to the Partnership
Agreement, which was previously filed as Exhibit 10.1.2 to the
Company's Annual Report on Form 10-K, filed March 31, 1998,
and incorporated herein by reference).

10.1.5 Designation of Series A Preferred OP Units of the Operating
Partnership, dated April 2, 1999, which has been added to
Exhibit D to the Partnership Agreement (previously filed as
Exhibit 10.3 to the Company's Current Report on Form 8-K,
filed April 13, 1999, and incorporated herein by reference).

10.1.6 Designation of Series B Preferred OP Units of the Operating
Partnership, dated May 11, 1999, which has been added to
Exhibit D to the Partnership Agreement (previously filed as
Exhibit 10.1.6 to the Company's Annual Report on Form 10-K,
filed March 30, 2000, and incorporated herein by reference).

10.1.7 Designation of Series C Preferred OP Units of the Operating
Partnership, dated July 28, 1999, which has been added to
Exhibit D to the Partnership Agreement (previously filed as
Exhibit 10.1.7 to the Company's Annual Report on Form 10-K,
filed March 30, 2000, and incorporated herein by reference).

10.2.1 Credit Agreement, dated as of June 20, 1997, by and among Golf
Trust of America, L.P., as Borrower, Golf Trust of America,
Inc., GTA GP, Inc. and GTA LP, Inc., as Guarantors, the
Lenders referred to therein, and NationsBank N.A., as Agent
(previously filed as Exhibit 10.1 to the Company's Current
Report on Form 8-K, dated June 20, 1997 and filed August 12,
1997, and incorporated herein by reference).

10.2.2 Amended and Restated Credit Agreement, dated as of July 8,
1998, by and among Golf Trust of America, L.P., as Borrower,
Golf Trust of America, Inc., GTA GP, Inc. and GTA LP, Inc., as
Guarantors, the Lenders referred to therein, and NationsBank
N.A., as Agent (previously filed as Exhibit 10.2.2 to the
Company's Amended Annual Report on Form 10-K/A, filed April 1,
1999, and incorporated herein by reference).

22
<PAGE>

10.2.3 Amended and Restated Credit Agreement, dated as of March 31,
1999, by and among Golf Trust of America, L.P., as Borrower,
Golf Trust of America, Inc., GTA GP, Inc. and GTA LP, Inc., as
Guarantors, the Lenders referred to therein, NationsBank,
N.A., as Administrative Agent, First Union National Bank as
Syndication Agent, and BankBoston, N.A., as Documentation
Agent (previously filed as Exhibit 10.2.3 to the Company's
Annual Report on Form 10-K, filed March 30, 2000, and
incorporated herein by reference).

10.3 Credit Agreement, dated as of March 31, 1999, by and among
Golf Trust of America, L.P., as Borrower, Golf Trust of
America, Inc., GTA GP, Inc. and GTA LP, Inc., as Guarantors,
the Lenders referred to therein, and NationsBank, N.A., as
Administrative Agent for the Lenders (previously filed as
Exhibit 10.3 to the Company's Annual Report on Form 10-K,
filed March 30, 2000, and incorporated herein by reference).

10.4 Loan Agreement, dated as of June 20, 1997, by and between Golf
Host Resorts, Inc., as Borrower, and Golf Trust of America,
L.P., as Lender (previously filed as Exhibit 10.2 to the
Company's Current Report on Form 8-K, dated June 20, 1997 and
filed August 12, 1997, and incorporated herein by reference).

10.5 1997 Non-Employee Directors' Plan of the Company (previously
filed as Exhibit 10.7 to the Company's Registration Statement
on Form S-11 (Commission File No. 333-15965) Amendment No. 1
(filed January 15, 1997) and incorporated herein by
reference).

10.6 1997 Stock Incentive Plan (the "Original 1997 Plan") of the
Company (previously filed as Exhibit 10.6 to the Company's
Registration Statement on Form S-11 (Commission File No.
333-15965) Amendment No. 1 (filed January 15, 1997) and
incorporated herein by reference).

10.7 1997 Stock-Based Incentive Plan of the Company (the "New 1997
Plan") (previously filed as Exhibit 10.3 to the Company's
Quarterly Report on Form 10-Q (Commission File No. 000-22091),
filed August 15, 1997, and incorporated herein by reference).

10.8 Form of Nonqualified Stock Option Agreement for use under the
New 1997 Plan (previously filed as Exhibit 10.4 to the
Company's Quarterly Report on Form 10-Q (Commission File No.
000-22091), filed August 15, 1997, and incorporated herein by
reference).

10.9 Form of Employee Incentive Stock Option Agreement for use
under the New 1997 Plan (previously filed as Exhibit 10.5 to
the Company's Quarterly Report on Form 10-Q (Commission File
No. 000-22091), filed August 15, 1997, and incorporated herein
by reference).

10.10 General Provisions Applicable to Restricted Stock Awards
Granted Under the New 1997 Plan (previously filed as Exhibit
10.14 to the Company's Registration Statement on Form S-11
(Commission File No. 333-36847), dated September 30, 1997 and
filed as of October 1, 1997, and incorporated herein by
reference).

10.11 Form of Restricted Stock Award Agreement for use under the New
1997 Plan (previously filed as Exhibit 10.15 to the Company's
Registration Statement on Form S-11 (Commission File No.
333-36847), dated September 30, 1997 and filed as of October
1, 1997, and incorporated herein by reference).

23
<PAGE>

10.12 1998 Stock-Based Incentive Plan of the Company (previously
filed as Exhibit A to the Company's definitive Proxy
Statement, dated April 1, 1999 and filed March 29, 1999, and
incorporated herein by reference).

10.13 Employee Stock Purchase Plan of the Company (previously filed
as Exhibit 4.1 to the Company's Registration Statement on Form
S-8 (Commission File No. 333-46659), filed February 20, 1998,
and incorporated herein by reference).

10.14 Subscription Agreement for use with the Employee Stock
Purchase Plan (previously filed as Exhibit 4.2 to the
Company's Registration Statement on Form S-8 (Commission File
No. 333-46659), filed February 20, 1998, and incorporated
herein by reference).

10.15 First Amended and Restated Employment Agreement between the
Company and W. Bradley Blair, II, dated November 7, 1999
(previously filed as Exhibit 10.15 to the Company's Annual
Report on Form 10-K, filed March 30, 2000, and incorporated
herein by reference).

10.16 Second Amended and Restated Employment Agreement between the
Company and Scott D. Peters, dated November 7, 1999
(previously filed as Exhibit 10.16 to the Company's Annual
Report on Form 10-K, filed March 30, 2000, and incorporated
herein by reference).

10.17 Stock Purchase Agreement, dated April 2, 1999, by and among
Golf Trust of America, Inc., Golf Trust of America, L.P., GTA
GP, Inc., GTA LP, Inc. and AEW Targeted Securities Fund, L.P.
(previously filed as Exhibit 10.1 to the Company's Current
Report on Form 8-K, filed April 13, 1999, and incorporated
herein by reference).

10.18 Registration Rights Agreement, dated April 2, 1999, by and
between Golf Trust of America, Inc. and AEW Targeted
Securities Fund, L.P. (previously filed as Exhibit 10.2 to the
Company's Current Report on Form 8-K, filed April 13, 1999,
and incorporated herein by reference).

21.1 List of Subsidiaries of the Company (previously filed as
Exhibit 21.1 to the Company's Annual Report on Form 10-K,
filed March 30, 2000 and incorporated herein by reference).

27.1* Financial Data Schedule

24
<PAGE>

SIGNATURES

Pursuant to the requirements 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.

GOLF TRUST OF AMERICA, INC., registrant

By: /s/ W. Bradley Blair, II
----------------------------
W. Bradley Blair, II
President and Chief Executive Officer

/s/ W. Bradley Blair, II May 15, 2000
- ----------------------------- -----------------
W. Bradley Blair, II Date
President, Chief Executive Officer and
Chairman of the Board of Directors

/s/ Scott D. Peters May 15, 2000
- ----------------------------- -----------------
Scott D. Peters Date
Senior Vice President and
Chief Financial Officer

25
<PAGE>

EXHIBIT INDEX

Pursuant to Item 601(a)(2) of Regulation S-K, this exhibit index
immediately precedes the exhibits.

The following exhibits are part of this Quarterly Report on Form 10-Q
(and are numbered in accordance with Item 601 of Regulation S-K). Items marked
with an asterisk (*) are filed herewith.

No. Description
- --- -----------

3.1.1 Articles of Amendment and Restatement of the Company, as filed
with the State Department of Assessments and Taxation of
Maryland on January 31, 1997, (previously filed as Exhibit
3.1A to the Company's Registration Statement on Form S-11
(Commission File No. 333-15965) Amendment No. 2 (filed January
30, 1997) and incorporated herein by reference).

3.1.3 Articles of Amendment of the Company, as filed with the State
Department of Assessments and Taxation of Maryland on June 9,
1998 (previously filed as Exhibit 3.2B to the Company's
Quarterly Report on Form 10-Q, filed August 14, 1998 and
incorporated herein by reference).

4.1 Form of Share Certificate for the Common Stock (previously
filed as Exhibit 4.3 to the Company's Current Report on Form
8-K, filed August 30, 1999, and incorporated herein by
reference).

26
<PAGE>

10.1.6 Designation of Class B Common OP Units of the Operating
Partnership, dated February 1, 1998, which has been added as
the first entry in Exhibit D to the Partnership Agreement
(included within the First Amendment to the Partnership
Agreement, which was previously filed as Exhibit 10.1.2 to the
Company's Annual Report on Form 10-K, filed March 31, 1998,
and incorporated herein by reference).

10.1.7 Designation of Series A Preferred OP Units of the Operating
Partnership, dated April 2, 1999, which has been added to
Exhibit D to the Partnership Agreement (previously filed as
Exhibit 10.3 to the Company's Current Report on Form 8-K,
filed April 13, 1999, and incorporated herein by reference).

10.2.3 Amended and Restated Credit Agreement, dated as of July 8,
1998, by and among Golf Trust of America, L.P., as Borrower,
Golf Trust of America, Inc., GTA GP, Inc. and GTA LP, Inc., as
Guarantors, the Lenders referred to therein, and NationsBank
N.A., as Agent (previously filed as Exhibit 10.2.2 to the
Company's Amended Annual Report on Form 10-K/A, filed April 1,
1999, and incorporated herein by reference).

27
<PAGE>

10.19 Stock Purchase Agreement, dated April 2, 1999, by and among
Golf Trust of America, Inc., Golf Trust of America, L.P., GTA
GP, Inc., GTA LP, Inc. and AEW Targeted Securities Fund, L.P.
(previously filed as Exhibit 10.1 to the Company's Current
Report on Form 8-K, filed April 13, 1999, and incorporated
herein by reference).

28
<PAGE>

10.20 Registration Rights Agreement, dated April 2, 1999, by and
between Golf Trust of America, Inc. and AEW Targeted
Securities Fund, L.P. (previously filed as Exhibit 10.2 to the
Company's Current Report on Form 8-K, filed April 13, 1999,
and incorporated herein by reference).

21.1 List of Subsidiaries of the Company (previously filed as
Exhibit 21.1 to the Company's Annual Report on Form 10-K,
filed March 30, 2000 and incorporated herein by reference).

27.1* Financial Data Schedule

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000 AND DECEMBER 31, 1999 AND
CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND
1999, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 4989
<SECURITIES> 0
<RECEIVABLES> 80717<F5>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23268<F1>
<PP&E> 373028
<DEPRECIATION> 47661
<TOTAL-ASSETS> 434341
<CURRENT-LIABILITIES> 10045<F2>
<BONDS> 225003
71846<F6>
20,000
<COMMON> 81
<OTHER-SE> 179212
<TOTAL-LIABILITY-AND-EQUITY> 434341
<SALES> 0
<TOTAL-REVENUES> 14438
<CGS> 0
<TOTAL-COSTS> 6326
<OTHER-EXPENSES> (797)<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4354
<INCOME-PRETAX> 2867
<INCOME-TAX> 0
<INCOME-CONTINUING> 2867
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2404<F4>
<EPS-BASIC> .30
<EPS-DILUTED> .30
<FN>
<F1>AS A REIT, WE DO NOT HAVE A CLASSIFIED BALANCE SHEET
<F2>AS A REIT, WE DO NOT HAVE A CLASSIFIED BALANCE SHEET
<F3>OTHER INCOME AND INTEREST INCOME
<F4>NET INCOME AFTER MINORITY INTEREST ALLOCATION AND PREFERRED DIVIDENDS
<F5>INCLUDES MORTGAGE NOTE RECEIVABLE
<F6>REPRESENTS MINORITY INTEREST
</FN>

</TABLE>