<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] 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 1-12566
---------------
G & L REALTY CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 95-4449388
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
439 N. BEDFORD DRIVE
BEVERLY HILLS, CALIFORNIA 90210
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 273-9930
-----------------
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
Registrants was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
The number of shares outstanding of the Registrant's Common Stock, as
of May 10, 1996, was 4,062,500 shares.
Page 1 of 16 pages
<PAGE>
G & L REALTY CORP.
FORM 10-Q
INDEX
Page Number
-----------
Part I Financial Information.
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of
March 31, 1996 (unaudited) and December 31, 1995. 3
Condensed Consolidated Statements of Operations for
the Three Month Periods Ended March 31, 1996 and
1995 (unaudited). 4
Condensed Consolidated Statements of Cash Flows for
the Three Month Periods Ended March 31, 1996
and 1995 (unaudited). 5
Notes to Condensed Consolidated Financial
Statements. 6 - 9
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations. 10 - 13
Part II Other Information.
Item 1 Legal Proceedings. 14
Item 2 Changes in Securities. 14
Item 3 Defaults Upon Senior Securities. 14
Item 4 Submission of Matters to a Vote of Security
Holders. 14
Item 5 Other Information. 14
Item 6 Exhibits and Reports on Form 8-K. 14 - 15
Signature. 16
Page 2 of 16 pages
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
G & L REALTY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
------
Rental properties:
Land $ 15,262,221 $ 15,262,221
Buildings and improvements, net 76,607,284 76,884,946
Total rental properties 91,869,505 92,147,167
Cash and cash equivalents 1,758,014 1,280,191
Accounts receivable, net 105,351 129,265
Tenant rent and reimbursements
receivable, net 880,427 709,436
Unbilled rent receivable, net 2,547,454 2,581,756
Mortgage loans and bonds receivable 34,750,649 33,633,635
Deferred charges and other assets, net 2,418,562 2,865,707
------------ ------------
TOTAL ASSETS $134,329,962 $133,347,157
============ ============
LIABILITIES AND STOCKHOLDERS EQUITY
-----------------------------------
Liabilities:
Notes payable $112,854,521 $111,626,872
Accounts payable and other liabilities 1,372,262 1,766,718
Distributions payable 1,446,980 1,401,607
Tenant security deposits 1,036,012 1,032,437
------------ ------------
Total liabilities 116,709,775 115,827,634
Minority interest in consolidated
partnership (2,809,658) (2,846,777)
Minority interest in Operating
Partnership 2,105,068 2,099,204
Stockholders' equity:
Common shares - $.01 par value,
50,000,000 shares authorized,
4,062,500 and 4,062,000 shares issued
and outstanding as of 3/31/96 and
12/31/95 respectively 40,625 40,620
Preferred shares - $.01 par value,
10,000,000 shares authorized, no
shares issued and outstanding 0 0
Additional paid - in capital 23,710,054 23,705,496
Distributions in excess of net income (5,425,902) (5,479,020)
------------ ------------
Total stockholders' equity 18,324,777 18,267,096
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY $134,329,962 $133,347,157
============ ============
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 3 of 16 pages
<PAGE>
G & L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
------------ -----------
(Unaudited)
<S> <C> <C>
REVENUES:
Rental $4,022,164 $4,209,035
Tenant reimbursements 138,766 169,088
Parking 344,649 350,693
Interest, loan fees and related income 1,645,102 9,897
Other 86,544 149,207
---------- ----------
Total revenues 6,237,225 4,887,920
EXPENSES:
Property operations 1,259,604 1,295,470
Earthquake costs (reimbursements) (245,162)
Depreciation and amortization 817,129 1,045,464
Interest 2,215,781 1,341,334
General and administrative 401,629 395,262
---------- ----------
Total expenses 4,694,143 3,832,368
---------- ----------
Income from operations 1,543,082 1,055,552
Minority interest in consolidated
partnership (37,119) (26,700)
Minority interest in Operating
Partnership (152,845) (102,324)
---------- ----------
Net income 1,353,118 $ 926,528
========== ==========
Net income per share $0.33 $0.22
Weighted average number of
outstanding shares 4,062,440 4,159,000
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 4 of 16 pages
<PAGE>
G & L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
1996 1995
----------- -----------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,353,118 $ 926,528
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 817,129 1,045,464
Minority interests 189,964 129,024
(Increase) decrease in:
Tenant rents and accounts receivable (112,775) 244,918
Prepaid expense and other assets (303,891) (359,406)
Loan and bond interest receivable (744,470)
Accounts payable and other liabilities (349,083) (27,616)
Tenant security deposits 3,575 13,347
----------- -----------
Net cash provided by operating activities 853,567 1,972,259
=========== ===========
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real and other property (400,256) (514,432)
Leasing commissions (33,282) (53,234)
Pre-acquisition costs (208,247)
Return of pre-acquisition deposit 865,104
Decrease (increase) in notes and
bonds receivable (372,544)
----------- -----------
Net cash used in investing activities (149,225) (567,666)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable proceeds 1,400,000 1,626,447
Deferred financing costs (11,750) (461,095)
Repayments of notes payable (172,352) (105,685)
Proceeds from the sale of common stock 4,563
Distributions (1,446,980) (1,885,096)
----------- -----------
Net cash used by financing activities (226,519) (825,429)
----------- -----------
NET INCREASE IN CASH 477,823 579,164
CASH, AT BEGINNING OF PERIOD 1,280,191 1,168,983
----------- -----------
CASH, AT END OF PERIOD $ 1,758,014 $ 1,748,147
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest $ 1,959,946 $ 1,594,304
SUPPLEMENTAL SCHEDULE OF NONCASH
FINANCING ACTIVITIES
Distributions declared not yet paid $ 1,446,980 $ 1,496,677
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 5 of 16 pages
<PAGE>
G & L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. GENERAL
G & L Realty Corp. (the "Company") was formed as a Maryland corporation
on September 15, 1993 by Daniel M. Gottlieb and Steven D. Lebowitz to continue
the ownership, management, acquisition and development operations of medical
office buildings carried on previously by G & L Development, the Company's
predecessor. All of the Company's assets are held by, and all of its operations
are conducted through, G&L Realty Partnership, L.P. (the "Operating
Partnership"), a Delaware limited partnership, G & L Financing Partnership, L.P.
(the "Financing Partnership"), a Delaware limited partnership, or G & L Realty
Financing Partnership II, L.P. (the "Realty Financing Partnership"), a Delaware
limited partnership. The Company controls, as the sole general partner and as
owner of an approximately 90% ownership interest, the Operating Partnership.
The Company controlled the Financing Partnership through its wholly owned
subsidiary, G & L Financing, Inc., a Delaware corporation, which is the sole
general partner and 1% owner of the Financing Partnership. The sole limited
partner and 99% owner of the Financing Partnership is the Operating Partnership.
As a result of the refinancing of debt, the Financing Partnership was liquidated
effective August 17, 1995 and the assets it owned were transferred to its
partners. The Company also controls the Realty Financing Partnership through
its wholly owned subsidiary G & L Realty Financing II, Inc., a Delaware
corporation, which is the sole general partner and 1% owner of the Realty
Financing Partnership. The sole limited partner and 99% owner of the Realty
Financing Partnership is the Operating Partnership.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - The Company is a growth-oriented health care Real Estate
Investment Trust ("REIT") with two major areas of operation: the Medical Office
Building Division, which owns, develops and manages high-quality, strategically
located properties, and the Senior Care Division, which facilitates the sale of
skilled nursing and assisted care facilities to not-for-profit organizations
throughout the U.S.
Basis of Presentation - The accompanying condensed consolidated financial
statements include the accounts of the Company. The interests in 435 North
Roxbury Drive, Ltd. not owned by the Company have been reflected in minority
interests. All significant intercompany accounts and transactions have been
eliminated in consolidation.
The information for the three month periods ended March 31, 1996 and 1995
has not been audited by independent accountants, but includes all adjustments
(consisting of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair presentation of the results for such period.
The results of operations for the three months ended March 31, 1996 are
not necessarily indicative of results that might be expected for the full fiscal
year.
Certain information and footnote disclosures normally included in annual
financial statements have been omitted. The Company believes that the
disclosures included in these financial statements are adequate for a fair
presentation and conform to reporting requirements established by the Securities
and Exchange Commission (SEC). The condensed consolidated financial statements
as presented herein should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-K as filed with the SEC.
Page 6 of 16 pages
<PAGE>
The Condensed Consolidated Balance Sheets reflect the combined assets and
liabilities of the Company. The Condensed Consolidated Statements of Operations
and Cash Flows have been prepared to reflect the operations of the Company for
the periods ended March 31, 1996 and 1995.
Per Share Data - Earnings per share are computed based upon the weighted
average number of common shares outstanding during the period. The treasury
stock method is used to determine the number of incremental common equivalent
shares resulting from options granted under the incentive and non-qualified
share options plans. The effect of such incremental common equivalent shares is
considered to be non-dilutive.
3. BUILDINGS AND IMPROVEMENTS
Buildings and improvements consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
--------- ------------
(Unaudited)
<S> <C> <C>
Buildings and improvements $ 84,709,410 $ 84,638,984
Tenant improvements 3,778,055 3,450,249
Furniture, fixtures and equipment 298,094 296,070
------------ ------------
88,785,559 88,385,303
Less accumulated depreciation and
amortization (12,178,275) (11,500,357)
------------ ------------
Total $ 76,607,284 $ 76,884,946
============ ============
</TABLE>
4. DEFERRED CHARGES AND OTHER ASSETS
Deferred charges and other assets consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
Loan fees $ 1,470,801 $1,459,051
Pre-acquisition costs 546,981 1,203,838
Leasing commissions 1,148,877 1,115,595
Prepaid expense and other assets 350,534 46,643
----------- -----------
3,517,193 3,825,127
Less accumulated amortization (1,098,631) (959,420)
----------- ----------
Total $ 2,418,562 $2,865,707
=========== ==========
</TABLE>
Page 7 of 16 pages
<PAGE>
5. STOCKHOLDERS' EQUITY
Distributions in Excess of Net Income - As described in Note 2, the
Company has elected to be treated, for federal income tax purposes, as a REIT.
As such, the Company is required to distribute annually, in the form of
distributions to its stockholders, at least 95% of its taxable income. In
reporting periods in which distributions exceed net income, stockholders' equity
will be reduced by the distributions in excess of net income in such period and
will be increased by the excess of net income over distributions in reporting
periods in which net income exceeds distributions. For tax reporting purposes,
a portion of the dividends declared represents a return of capital. The
following table reconciles net income and distributions in excess of net income
and the related per share data for the three month period ended March 31, 1996
and for the year ended December 31, 1995:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
Distributions in excess of net income
at beginning of period $(5,479,020) $(3,753,475)
Net income during period 1,353,118 3,341,405
Less: Distributions declared (1,300,000) (5,066,950)
----------- -----------
Distributions in excess of net income $(5,425,902) $(5,479,020)
=========== ===========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
None of the Company, the Operating Partnership, the Financing
Partnership, the Realty Financing Partnership, nor any of the assets within
their portfolio of medical office buildings, parking facilities, and retail
space (the "Properties") is currently a party to any material litigation.
7. SUBSEQUENT EVENT
On April 19, 1996, the Company obtained a one year $3.0 million loan
from GMAC Commercial Mortgage Corporation which is collateralized by a
$4,120,000 note receivable. The loan requires monthly interest only payments,
in arrears, at prime plus one percent. Currently, interest accrues at a rate
of 9.25 percent.
8. RELATED PARTY TRANSACTION
On April 26, 1996, the Operating Partnership, of which the Company
serves as general partner, acquired a 59-percent ownership interest in 445
Bedford, a California limited liability company ("445 LLC"), from Milner
Investment Corporation, a California corporation, at a purchase price of
$808,000. Milner Investment Corporation is wholly owned by Reese L. Milner II, a
director of the Company. The remaining 41% ownership interest in 445 LLC is held
by a general partnership whose general partners are Daniel M.
Page 8 of 16 pages
<PAGE>
Gottlieb and Steven D. Lebowitz, both directors and officers of the Company. 445
LLC and the Milner Trust (a trust established for the benefit of Mr. Milner and
his family) own undivided joint interests in certain real property located at
445 N. Bedford Drive, Beverly Hills, California. The property has been sold for
cash to an unrelated third party as part of a tax deferred exchange. If the
final steps of the tax deferred transaction are consummated, the Operating
Partnership will obtain a fee interest in a hospital facility and medical office
building in Tustin, California for cash and partnership equity, and
Messrs. Gottlieb and Lebowitz will exchange their interest in 445 LLC for
units in the Operating Partnership at an effective rate per unit which will
include a premium above the trading price of the Company's stock on the
commitment date. It is anticipated that the Company will complete the exchange
transaction within the next 60 days; however, no definitive documentation has
been executed and there can be no assurance that such transactions will occur.
Page 9 of 16 pages
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Company's Unaudited Condensed Consolidated Financial Statements and Notes
thereto included elsewhere in this Form 10-Q.
Funds from Operations
- - ---------------------
Industry analysts generally consider Funds From Operations ("FFO") to be an
appropriate measure of the performance of a REIT. The Company believes that in
order to facilitate a clear understanding of the operating results of the
Company, FFO should be examined in conjunction with the net income as presented
in the Company's Condensed Consolidated Financial Statements and Notes thereto
included elsewhere in this Form 10-Q and the Additional Data presented below.
The following table presents an analysis of FFO and Additional Data for each of
the four quarters for the year ended December 31, 1995 and for the quarter ended
March 31, 1996 for the Operating Partnership. The FFO presented for the four
quarters of 1995 represent a restatement of the amounts previously presented.
The amounts presented below are based upon the new guidelines established by the
National Association of Real Estate Investment Trusts ("NAREIT"). The primary
difference relates to the treatment of average or straight-line rents and
deferred financing costs.
Under the old guidelines, FFO included rental income as received rather
than averaging rent receipts over the life of a lease. Also, expenses incurred
as a result of amortizing deferred financing costs were excluded from FFO. The
new NAREIT guidelines recommend the use of average rental revenue (i.e.
straight-line rents) and includes the amortization of deferred financing costs
in the calculation of FFO.
<TABLE>
<CAPTION>
Q 1 Q 2 Q 3 Q 4 Q 1
1995 1995 1995 1995 1996
------- ------- ------- ------- -------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Funds from Operations
- - ---------------------
Net income $ 927 $ 690 $ 696 $1,026 $1,353
Extraordinary loss 394
Minority interest in Operating
Partnership 102 78 123 114 153
------ ------ ------ ------ -------
Net income for Operating Partnership 1,029 768 1,213 1,140 1,506
Earthquake costs (net) (245) 112
Depreciation of real estate assets 799 833 798 784 667
Amortization of deferred lease costs 45 48 50 50 40
Adjustment for minority interest in
consolidated partnership (6) (9) (7) (7) (7)
------ ------ ------ ------ ------
FUNDS FROM OPERATIONS $1,622 $1,752 $2,054 $1,967 $2,206
====== ====== ====== ====== ======
Amount per share and unit $0.35 $0.39 $0.45 $0.44 $0.49
Weighted average number of outstanding
shares and units 4,618 4,539 4,521 4,521 4,522
</TABLE>
Page 10 of 16 pages
<PAGE>
<TABLE>
<CAPTION>
Additional Data
- - ---------------
Q 1 Q 2 Q 3 Q 4 Q 1
1995 1995 1995 1995 1996
------ ------ ------ ------ ------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Building improvements 106 145 122 113 70
Tenant improvements 394 347 249 289 328
Furniture, fixtures & equipment 14 12 42 19 2
Leasing commissions 53 43 38 23 33
Accrued rent in excess of billed rent 29 99 59 140 (34)
Depreciation and Amortization
- - -----------------------------
Depreciation of real estate assets 798 832 799 785 667
Depreciation of non-real estate assets 6 6 6 8 11
Amortization of deferred lease costs 45 48 50 50 40
Amortization of capitalized financing
costs 196 135 49 234 99
FFO Restatement
- - ----------------
FFO - previous NAREIT guidelines $1,788 $1,800 $2,052 $2,072 $2,349
Adjustments:
Accrued rent in excess of
billed rent 29 99 59 140 (34)
Non-real estate depreciation (5) (6) (6) (8) (11)
Amortization of deferred financing
costs (196) (135) (49) (234) (99)
Minority interest adjustment 6 (6) (2) (3) 1
------ ------ ------ ------ ------
FFO - new NAREIT guidelines $1,622 $1,752 $2,054 $1,967 $2,206
====== ====== ====== ====== ======
</TABLE>
Page 11 of 16 pages
<PAGE>
Results of Operations
- - ---------------------
Comparison of the Three Month Period Ended March 31, 1996 versus the Three Month
Period Ended March 31, 1995
Revenues increased approximately $1.35 million from $4,888,000 in the
first quarter of 1995 to $6,237,000 for the same period in 1996. The new Senior
Care Division generated the increase, which resulted from loan fees,
interest and the Rancho Cucamonga Hospital and Medical Center transaction.
Occupancy at the Company's properties are currently 95 percent.
Expenses for the first quarter of 1996 were generally down from the first
quarter of 1995 except for interest expense. The added interest expense is the
result of debt incurred to finance the Senior Care loan programs. Expense
amounts in the first quarter of 1995 included an insurance recovery in the
amount of $245,000 relating to damage incurred during the 1994 Northridge
earthquake.
Liquidity and Capital Resources
- - -------------------------------
The Company declared a quarterly distribution for the first quarter of 1996
in the amount of $0.32 per share which was paid on April 16, 1996 to
stockholders of record on March 29,1996. During the first quarter, the dividend
was increased 3 percent from an annual rate of $1.24 to $1.28. During the three
month period ended March 31, 1996 the Company invested approximately $431,000 to
maintain its rental properties and lease its vacant space.
On April 19, 1996, the Company obtained a new $3.0 million loan from
GMAC Commercial Mortgage Corporation ("GMAC"). Approximately $800,000 of the
proceeds of this new loan were used to capitalize a new joint venture
with Iatros Health Network and will be used to improve and reopen the 245-bed
Crystal Park nursing home in Olathe, Kansas.
Negotiations are progressing with Citibank, the existing lender, to obtain
a multi-year extension on the $9 million note secured by 435 North Roxbury
Drive. Management believes that acceptable terms will be obtained and an
extension agreement will be executed within the next 45 days.
The $14 million loan due GMAC will be paid off once the Series A Health
Care Revenue Bonds have been restructured. The Company has retained GMAC to
obtain credit enhancement of the Series A bonds. GMAC submitted applications to
the Federal Housing Administration and the Department of Housing and Urban
Development to obtain a commitment for mortgage insurance on the Series A bonds
pursuant to Section 232/223(F) of the National Housing Act. It is anticipated
that approval will be obtained in the third quarter of 1996. Once the mortgage
insurance is in place, the currently unrated Series A bonds will be reissued on
a rated basis with an expected decrease in the 9.75 percent interest rate.
These reissued Series A bonds will be sold and the proceeds used to repay the
$14 million term loan to GMAC plus return the Company's investment capital. The
Company intends to retain ownership of the $5 million, 9.5 percent Series B
bonds as a long-term investment. Management believes that by restructuring the
debt on the Series A bonds the underlying properties will generate sufficient
cash flow to begin servicing their obligation on the Series B bonds.
Page 12 of 16 pages
<PAGE>
The Company currently has a $28.5 million loan secured by 436 North
Bedford Drive. This loan came due in August 1995 and is without recourse to the
Company or its assets other than 436 North Bedford Drive. In light of recent
prices at which other medical buildings in Beverly Hills have been sold or
offered for sale and the possible need to retrofit the building to meet more
stringent earthquake standards anticipated in the future, management believes
that the value of this Property is less than the amount of the loan. Although
this building has been generating cash flow to the Company, this may not
continue, particularly if retrofitting is required. The Company began
negotiations with the lender prior to the loan's due date. In August of 1995,
the Company signed a forbearance agreement with the lender to provide additional
time for discussion regarding a possible loan restructure on terms that would
permit the Company to retain the building with a reasonable expectation of
generating future cash flow. If there is no agreement between the Company and
the lender, the Company intends to surrender this building in satisfaction of
the debt.
The Company expects to continue meeting its short term liquidity
requirements through its working capital and cash flow provided by operations.
The Company considers its ability to generate cash to be good and expects to
continue meeting all operating requirements as well as providing sufficient
funds to maintain stockholder distributions in accordance with REIT
requirements. Long-term liquidity requirements such as refinancing mortgages,
financing acquisitions and financing capital improvements will be accomplished
through long-term borrowings, the issuance of debt securities and the offering
of additional equity securities. The Company anticipates that it will be able
to obtain financing for its long-term capital needs.
Page 13 of 16 pages
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
None of the Company, the Operating Partnership, the Financing
Partnership, the Realty Financing Partnership, or the Properties is
currently a party to any material litigation.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
On April 26, 1996, the Operating Partnership, of which the Company
serves as general partner, acquired a 59-percent ownership interest in
445 Bedford, a California limited liability company ("445 LLC"), from
Milner Investment Corporation, a California corporation, at a purchase
price of $808,000. Milner Investment Corporation is wholly owned by
Reese L. Milner II, a director of the Company. The remaining 41%
ownership interest in 445 LLC is held by a general partnership whose
general partners are Daniel M. Gottlieb and Steven D. Lebowitz, both
directors and officers of the Company. 445 LLC and the Milner Trust (a
trust established for the benefit of Mr. Milner and his family) own
undivided joint interests in certain real property located at 445 N.
Bedford Drive, Beverly Hills, California. The property has been sold
for cash to an unrelated third party as part of a tax deferred
exchange. If the final steps of the tax deferred transaction are
consummated, the Operating Partnership will obtain a fee interest in a
hospital facility and medical office building in Tustin, California for
cash and partnership equity, and Messrs. Gottlieb and Lebowitz
will exchange their interest in 445 LLC for units in the Operating
Partnership at an effective rate per unit which will include a premium
above the trading price of the Company's stock on the commitment date.
It is anticipated that the Company will complete the exchange
transaction within the next 60 days; however, no definitive
documentation has been executed and there can be no assurance that such
transactions will occur.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.27 Agreement of Purchase and Sale of Membership Interest dated
April 26, 1996, between Milner Investment Corporation and
G & L Realty Partnership, L.P.
Page 14 of 16 pages
<PAGE>
(b) Reports on Form 8-K.
(i) The Company filed a report on Form 8-K dated March 17, 1995
concerning the repurchase of company shares of Common Stock.
Page 15 of 16 pages
<PAGE>
SIGNATURE
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.
G & L REALTY CORP.
Date: May 10, 1996 By: /s/ Quentin Thompson
---------------------------------------
Quentin Thompson
Secretary, Treasurer and Chief
Accounting Officer
Page 16 of 16 pages
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit Page
No. Description Number
- - ------- ----------- ----------
10.27 Agreement of Purchase and Sale of Membership
Interest dated April 26, 1996, between Milner
Investment Corporation and G&L Realty
Partnership, L.P.
<PAGE>
EXHIBIT 10.27
AGREEMENT OF PURCHASE AND SALE OF MEMBERSHIP INTEREST
-----------------------------------------------------
THIS AGREEMENT OF PURCHASE AND SALE OF MEMBERSHIP INTEREST ("Agreement") is
made and entered into as of this 26th day of April, 1996, by and between Milner
Investment Corporation, a California corporation ("Seller"), and G&L Realty
Partnership, L.P., a Delaware limited partnership ("Buyer"), with reference to
the following facts:
A. Seller is the owner of a fifty-nine percent (59%) membership interest in
445 Bedford, a California limited liability company (the "Membership Interest")
pursuant to the terms of that certain Operating Agreement of 445 Bedford, a
California limited liability company dated March 21, 1996 (the "LLC Agreement").
B. Buyer desires to purchase the Membership Interest from Seller.
NOW, THEREFORE, IN CONSIDERATION of the foregoing and the mutual covenants
and agreements herein set forth, and other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree
as follows:
ARTICLE I.
SALE OF MEMBERSHIP INTEREST
Seller hereby agrees to sell and convey to Buyer, and Buyer hereby agrees
to purchase from Seller, the Membership Interest, including:
(a) Seller's right, title and interest to, and as a Member in,
445 Bedford, a California limited liability company ("445 Bedford");
(b) All of Seller's right, title and interest in and to the capital,
profits and losses of 445 Bedford, and all distributions of property and other
assets from 445 Bedford made after the date hereof;
(c) All of Seller's rights and privileges under the LLC Agreement;
(d) All proceeds and all products of the foregoing, all whether known or
unknown, now existing or existing in the future.
Buyer agrees to abide by all of the terms and provisions of the Agreement.
<PAGE>
ARTICLE II.
PURCHASE PRICE
2.1 Purchase Price. The total purchase price for the Membership Interest
--------------
shall be Eight Hundred Eight Thousand Dollars ($808,000) (the "Purchase Price").
2.2 Manner of Payment. The Purchase Price shall be paid by the Buyer
-----------------
delivering a fully executed promissory note (the "Note"), payable to the order
of the Seller in the original principal amount of Eight Hundred Eight Thousand
Dollars ($808,000) in the form of Exhibit "A" attached hereto, concurrently with
the execution of this Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby expressly warrants, covenants and represents to Buyer that:
3.1 Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has the full corporate
power and authority to own the Membership Interest and to carry on its business
as it is now being conducted.
3.2 Seller has good and marketable title to the Membership Interest and no
liens have been filed against the Membership Interest.
3.3 This Agreement constitutes the legal, valid and binding obligation of
Seller enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency or other laws
affecting other enforcement of creditors' rights generally or by general
equitable principles. Seller has taken all necessary corporate action to
authorize and approve the execution and delivery of this Agreement and the
consummation of the transaction contemplated hereby.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby expressly warrants, covenants and represents to Seller that:
4.1 Buyer is a limited partnership duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the power and
authority to own the Membership Interest and to carry on its business as it is
now being conducted.
4.2 This Agreement constitutes the legal, valid and binding obligation of
Buyer enforceable in accordance with its terms,
2
<PAGE>
except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency or other laws affecting other enforcement of creditors'
rights generally or by general equitable principles. Buyer has taken all
necessary partnership action to authorize and approve the execution and delivery
of this Agreement and the consummation of the transaction contemplated hereby.
4.3 The execution, delivery and performance of the Agreement by Buyer does
not and will not:
(a) Require any consent or approval not heretofore obtained of any
partner of the Buyer;
(b) Violate or conflict with any provision of the Buyer's limited
partnership agreement;
(c) Result in or require the creation or imposition of any lien upon
or with respect to any property now owned or leased or hereafter acquired by
Buyer;
(d) Violate any law applicable to Buyer;
(e) Result in a breach of or constitute a default under, or cause or
permit the acceleration of any obligation owed under, any indenture or loan or
credit agreement or any other contractual obligation to which the Buyer is a
party or which the Buyer or any of its property is bound or affected;
and the Buyer is not in violation of, or default under, any law or contractual
obligation, or any indenture, loan or credit agreement in any respect.
ARTICLE V.
INDEMNIFICATIONS
5.1 Seller Indemnification. Buyer hereby agrees to indemnify, defend and
----------------------
hold Seller and its directors, officers, employees, agents, successors and
assigns harmless from and against any and all liability, loss, cost, damage
and/or expense (including, without limitation, reasonable attorneys' fees and
costs) directly or indirectly arising out of or attributable to any liability of
the Membership Interest occurring from and after the date of this Agreement.
5.2 Buyer Indemnification. Seller hereby agrees to indemnify, defend and
---------------------
hold Buyer and its partners, employees, agents, successors and assigns harmless
from and against any and all liability, loss, cost, damage and/or expense
(including, without limitation, reasonable attorneys' fees and costs) directly
or indirectly arising out of or attributable to any liability of the Membership
Interest occurring prior to the date of this Agreement.
3
<PAGE>
ARTICLE VI.
MISCELLANEOUS
6.1 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between Seller and Buyer with respect to the subject matter hereof and may not
be modified, amended or otherwise changed in any manner except by a writing
executed by both Seller and Buyer.
6.2 Broker's Commission. The parties hereto acknowledge and agree that
-------------------
there is no broker's commission or finder's fee payable in any amount by Seller
and/or Buyer with respect to this transaction. Each party ("Indemnifying
Party") shall indemnify and hold harmless the other party ("Indemnified Party")
from any claims, liabilities, costs, and expenses (including attorneys' fees)
incurred by the Indemnified Party with respect to the payment of any broker's
commission or finder's fee with respect to this transaction which is claimed to
be due by reason of the acts of the Indemnifying Party.
6.3 Interpretation; Captions. Whenever used herein, the term "including"
------------------------
shall be deemed to be followed by the words "without limitation." Words used in
the singular number shall include the plural, and vice-versa, and any gender
shall be deemed to include each other gender. The captions and headings of the
Articles and Sections of this Agreement are for convenience of reference only,
and shall not be deemed to define or limit the provisions hereof.
6.4 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California.
6.5 Attorneys' Fees. In the event any action is necessary to enforce the
---------------
rights of either of the parties hereto, the prevailing party in any such action
shall be entitled to reasonable attorneys' fees in addition to costs.
6.6 Time of the Essence. Time is of the essence of this Agreement.
-------------------
6.7 Specific Performance. The parties understand and agree that the
--------------------
Membership Interest is unique and for that reason, among others, Buyer will be
irreparably damaged in the event that this Agreement is not specifically
enforced. Accordingly, in the event of any breach or default in or of the
Agreement, or any of the warranties, terms or provisions hereof by Seller, Buyer
shall have, in addition and without prejudice to any right or remedy available
at law or in equity or pursuant to this Agreement, the right to demand and have
specific performance of this Agreement.
6.8 Election of Remedies. No right or remedy conferred upon Buyer in this
--------------------
Agreement is intended to be exclusive of any
4
<PAGE>
other right or remedy contained herein or now or hereafter available to Buyer at
law or in equity, and every such right and remedy shall be cumulative and shall
be in addition to every other right or remedy contained in this Agreement or now
or hereafter available to Buyer at law or in equity.
6.9 Authority. The parties signing below represent and warrant that they
---------
have the requisite authority to bind the entities on whose behalf they are
signing.
6.10 Exhibit. The exhibit attached hereto is hereby incorporated by
-------
reference herein.
6.11 Severability. If any portion of this Agreement is declared void or
------------
unenforceable, such provision shall be deemed severed from this Agreement, which
shall otherwise remain in full force and effect.
6.12 Further Assurances. It is the intent of the parties that all right,
------------------
title and interest in the Membership Interest be fully conveyed to Buyer
hereunder. Accordingly, the parties hereto agree to execute, acknowledge and
deliver any and all additional papers, documents and other assurances and shall
perform any and all acts and things reasonably necessary in connection with the
performance of the obligations hereunder and to carry out the intent of the
parties hereto to ensure that all of the rights of Seller in the Property are
conveyed to Buyer.
6.13 Effect of Waiver. A waiver by either party hereto shall not affect
----------------
either party's right to enforce the provisions contained herein, nor shall any
extension or waiver be held to be an extension of time or waiver of any prior or
subsequent breach of the same or any other obligation under this Agreement.
6.14 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each or which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SELLER: Milner Investment Corporation, a California
corporation
By: /s/ Reese L. Milner, II
------------------------------------
Name: Reese L. Milner, II
Its: President
BUYER: G&L REALTY PARTNERSHIP, L.P., a Delaware
limited partnership
By: G&L Realty Corp., a Maryland corporation
Its: General Partner
By: /s/ Steven D. Lebowitz
-------------------------------
Name: Steven D. Lebowitz
Its: President
6
<PAGE>
Exhibit "A"
PROMISSORY NOTE
---------------
(unsecured)
$808,000.00 April 26, 1996
Los Angeles, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of the
Milner Investment Corporation, a California corporation, ("Holder") at 439 North
Bedford Drive, Beverly Hills, California 90210 or at such other place as the
Holder may in writing designate, in lawful money of the United States of
America and in immediately available funds, the principal amount of EIGHT
HUNDRED EIGHT THOUSAND DOLLARS ($808,000) (the "Principal Amount") together with
interest (computed on the basis of a 365 day year and the actual number of days
elapsed) at a rate of ten percent (10%) per annum, on the Principal Amount from
time to time outstanding. Notwithstanding anything to the contrary contained
herein, the interest rate shall at no time exceed the maximum interest rate
permitted under applicable usury laws. If the interest rate at any time is
determined to exceed such maximum rate, then the interest rate to be applied
herein shall be the maximum interest rate permitted by such applicable usury
laws.
The entire Principal Amount outstanding under this Promissory Note
("Note"), together with all accrued but unpaid interest shall be due and payable
upon the earlier of ("Maturity Date"):
(1) Six (6) months from the date hereof; or
(2) The sale, exchange or other disposition by 445 Bedford, a California
limited liability company, of its interest in the Real Property as defined in
that certain Purchase Agreement dated March 22,1996 between Republic Bank
California National Association, a national banking association organized under
the laws of the United States of America, as Buyer, and 445 Bedford, a
California limited liability company, and The Milner Trust, dated
November 2, 1973, as Seller.
Each payment shall be credited first on interest, if any, then due and the
remainder on principal. The undersigned shall have the privilege of paying in
advance all or any portion of the principal amount outstanding hereunder without
penalty at any time.
If the undersigned shall fail to pay any principal or interest within five
(5) days of the principal and interest becoming due, the undersigned shall pay
all costs and expenses,
7
<PAGE>
including attorneys' fees, incurred by the Holder in collecting or attempting to
collect amounts due under this Note or otherwise in enforcing his rights
hereunder. The right to plead any and all statues of limitation as a defense to
a demand hereunder is hereby waived to the fullest extent permitted by law.
None of the provisions hereof and none of Holder's rights or remedies on account
of any past or future default shall be deemed to have been waived by Holder's
acceptance of any past due payment or by an indulgence granted by Holder to the
undersigned. The undersigned, for himself and his successors and assigns,
waives presentment, demand, protest and notice of dishonor and diligence in
collecting or bringing suit. It is hereby agreed that time is of the essence of
this Note.
The undersigned agrees to pay all costs of collection when incurred,
including, but not limited to, reasonable attorneys' fees. If any suit or
action is instituted to enforce this Note, the undersigned promises to pay, in
addition to the costs and disbursements otherwise allowed by law, such sum as
the court may adjudge reasonable attorneys' fees in such suit or action.
Any notice to the undersigned required under this Note shall be in writing
and shall be delivered in person, by reputable overnight courier or by
registered or certified mail, postage prepaid with return receipt requested, to
the undersigned at 439 N. Bedford Drive, Beverly Hills, California 90210, or
such other address as the undersigned may have furnished the Holder.
This Note and the rights and obligations of the undersigned and Holder
shall be governed by and construed in accordance with the laws of the State of
California, without regard to the rules regarding conflicts of laws.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed by
the duly authorized president of its corporate general partner as of the day and
year first above written.
G&L REALTY PARTNERSHIP, L.P.,
a Delaware limited partnership
By: G&L REALTY CORP., a Maryland
corporation
Its: General Partner
By: /s/ STEVEN D. LEBOWITZ
------------------------
Name: Steven D. Lebowitz
Its: President
8
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,758,014
<SECURITIES> 0
<RECEIVABLES> 39,930,531
<ALLOWANCES> (1,646,650)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 104,047,780
<DEPRECIATION> (12,178,275)
<TOTAL-ASSETS> 134,329,962
<CURRENT-LIABILITIES> 2,819,242
<BONDS> 112,854,521
<COMMON> 40,625
0
0
<OTHER-SE> 18,284,152
<TOTAL-LIABILITY-AND-EQUITY> 134,329,962
<SALES> 0
<TOTAL-REVENUES> 6,237,225
<CGS> 0
<TOTAL-COSTS> 1,259,604
<OTHER-EXPENSES> 1,218,758
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,215,781
<INCOME-PRETAX> 1,353,118
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,353,118
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,353,118
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0
</TABLE>
