<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, 1997
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
Registrant 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 12, 1997 was 4,036,500 shares.
===============================================================================
Page 1
<PAGE>
G&L REALTY CORP.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page Number
Part I Financial Information -----------
Item 1 Financial Statements
<S> <C> <C>
Condensed Consolidated Balance
Sheets as of March 31, 1997 3
(unaudited) and December 31, 1996
Condensed Consolidated Statements
of Operations for the Three Month
Periods Ended March 31, 1997 and 4
1996 (unaudited)
Condensed Consolidated Statements
of Cash Flows for the Three Month
Periods Ended March 31, 1997 and 5
1996 (unaudited)
Condensed Consolidated Statements
of Cash Flows: Supplemental
Schedule of Noncash Investing and
Financing Activities for the Three 6
Month Periods Ended March 31, 1997
and 1996 (unaudited)
Notes to Condensed Consolidated
Financial Statements (unaudited) 7-12
Item 2 Management's Discussion and
Analysis of Financial Condition 13-18
and Results of Operations
Part II Other Information
Item 1 Legal Proceedings 19
Item 2 Changes in Securities 19
Item 3 Defaults Upon Senior Securities 19
Item 4 Submission of Matters to a Vote of 19
Security Holders
Item 5 Other Information 19
Item 6 Exhibits and Reports on Form 8-K 19-20
Signature 21
Exhibit 22
Index
</TABLE>
Page 2
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
----------------------------------------
(Unaudited)
ASSETS
- ------
<S> <C> <C>
Rental properties:
Land $ 17,096,000 $ 17,096,000
Buildings and improvements, net 75,635,000 76,135,000
------------ ------------
Total rental properties 92,731,000 93,231,000
Cash and restricted cash 2,612,000 2,232,000
Other receivables, net 5,337,000 682,000
Tenant rent and reimbursements
receivable, net 891,000 1,048,000
Unbilled rent receivable, net 1,554,000 1,477,000
Investments in unconsolidated affiliates 8,795,000 ---
Mortgage loans and bonds receivable, net 15,093,000 14,358,000
Assets available for sale 312,000 20,523,000
Deferred charges and other assets, net 2,378,000 2,445,000
------------ ------------
TOTAL ASSETS $129,703,000 $135,996,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- -----------------------------------
Liabilities:
Notes payable $103,246,000 $109,025,000
Accounts payable and other liabilities 1,318,000 1,462,000
Distributions payable 1,642,000 1,642,000
Tenant security deposits 1,034,000 1,034,000
------------ ------------
Total liabilities 107,240,000 113,163,000
Commitments and contingencies --- ---
Minority interest in consolidated
partnership (2,688,000) (2,718,000)
Minority interest in Operating
Partnership 3,059,000 3,103,000
Stockholders' equity:
Preferred shares - $.01 par value,
10,000,000 shares authorized, no shares
issued and outstanding --- ---
Common shares - $.01 par value, 50,000,000
shares authorized, 4,062,500 shares issued
and outstanding as of 3/31/97 and 12/31/96
respectively 41,000 41,000
Additional paid-in capital 23,710,000 23,710,000
Distributions in excess of net income (1,659,000) (1,303,000)
------------ ------------
Total stockholders' equity 22,092,000 22,448,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $129,703,000 $135,996,000
============ ============
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 3
<PAGE>
G & L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
------------- --------------
(Unaudited)
<S> <C> <C>
REVENUES:
Rental $4,246,000 $4,022,000
Tenant reimbursements 249,000 139,000
Parking 360,000 345,000
Interest, loan fees and related income 1,575,000 1,645,000
Other 109,000 86,000
------------- --------------
Total revenues 6,539,000 6,237,000
EXPENSES:
Property operations 1,666,000 1,260,000
Depreciation and amortization 916,000 817,000
Interest 2,339,000 2,216,000
General and administrative 478,000 401,000
------------- --------------
Total expenses 5,399,000 4,694,000
------------- --------------
Income from operations 1,140,000 1,543,000
Equity in earnings of unconsolidated
affiliates 132,000 ---
Minority interest in consolidated
partnership (30,000) (37,000)
Minority interest in Operating
Partnership (136,000) (153,000)
------------- --------------
Net income $1,106,000 $1,353,000
============= ==============
Net income per share $0.26 $0.33
Weighted average number of
outstanding shares 4,175,000 4,062,000
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 4
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
-------------- -----------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,106,000 $ 1,353,000
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 916,000 817,000
Minority interests 166,000 190,000
Equity in income from affiliates (132,000) ---
Gain on sale of assets held for
sale (556,000) ---
Unbilled rent receivable (77,000) 34,000
Allowance for doubtful notes
and accounts receivable 33,000 42,000
(Increase) decrease in:
Other receivables (30,000) 24,000
Tenant rent and reimbursements
receivable 125,000 (213,000)
Prepaid expense and other assets (90,000) (304,000)
Accrued interest receivable
and loan fees (1,027,000) (744,000)
Increase (decrease) in:
Accounts payable and other
liabilities (144,000) (349,000)
Tenant security deposits --- 4,000
------------ ------------
Net cash provided by operating
activities 290,000 854,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to rental properties (229,000) (400,000)
Proceeds from sale of assets available
for sale 20,000 ---
Pre-acquisition costs (10,000) (208,000)
Return of pre-acquisition deposits --- 865,000
Leasing commissions (14,000) (33,000)
Investment in notes and bonds receivable --- (373,000)
Investments in affiliates (6,055,000) ---
------------ ------------
Net cash used in investing activities (6,288,000) (149,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable proceeds 8,518,000 1,400,000
Repayment of notes payable (297,000) (172,000)
Deferred financing costs (201,000) (12,000)
Sale of common stock and
partnership units --- 4,000
Distributions (1,642,000) (1,447,000)
------------ ------------
Net cash provided by (used in)
financing activities 6,378,000 (227,000)
------------ ------------
NET INCREASE IN CASH AND
RESTRICTED CASH 380,000 478,000
CASH AND RESTRICTED CASH AT
BEGINNING OF PERIOD 2,232,000 1,280,000
------------ ------------
CASH AND RESTRICTED CASH AT END
OF PERIOD $ 2,612,000 $ 1,758,000
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest $ 2,450,000 $ 1,960,000
============ ============
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 5
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
<TABLE>
<CAPTION>
Three Months Ended March 31,
1997 1996
-----------------------------
(Unaudited)
<S> <C> <C>
During the period, the Company sold
Series A and B Bonds for the following
consideration:
Assignment of note payable $ 14,000,000
Increase in other receivables 4,500,000
Investment in affiliate 3,165,000
------------
$ 21,665,000
============
Distributions declared not yet paid $ 1,642,000 $1,447,000
============ ==========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 6
<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 to continue the ownership, management, acquisition and
development operations of medical office buildings conducted 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, the following entities:
G&L Realty Partnership, L.P., a Delaware limited partnership (the
"Operating Partnership")
G&L Realty Financing Partnership II, L.P., a Delaware limited
partnership (the "Realty Financing Partnership")
G&L Medical Partnership, L.P., a Delaware limited partnership (the
"Medical Partnership")
435 North Roxbury Drive, Ltd., a California limited partnership (the
"Roxbury Partnership")
The Company, as the sole general partner and as owner of an approximately
89% ownership interest, controls the Operating Partnership. 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. The sole limited partner and 99% owner of the Medical Partnership
is the Operating Partnership. The Company controls the Medical Partnership
through its wholly owned subsidiary, G&L Medical, Inc., a Delaware corporation,
which is the sole general partner and 1% owner of the Medical Partnership.
References in these consolidated financial statements to the Company, its
operations, assets and liabilities include the operations, assets and
liabilities of its consolidated subsidiaries, the Operating Partnership, the
Realty Financing Partnership, the Medical Partnership and the Roxbury
Partnership, in which the Operating Partnership owns a 61.75% partnership
interest and is the sole general partner.
The Company also owns interests in two unconsolidated affiliates: (i) GLN
Capital Co., LLC ("GLN Capital"), a Delaware limited liability company formed in
1996, and (ii) GL/PHP, LLC ("GL/PHP"), a Delaware limited liability company
formed in 1997. GLN Capital is owned 49.9% by the Operating Partnership and
50.1% by an affiliate of Nomura Asset Capital Corp. ("Nomura"). The purpose of
GLN Capital is to fund loans to the senior care industry.
The Operating Partnership and PHP Healthcare Corporation, a Delaware
corporation ("PHP") own 80.5% and 19.5% interests, respectively, in GL/PHP,
which purchased six New Jersey medical office properties in February 1997 for
$22.4 million. The properties total 80,415 square feet and have been leased to
PHP for 25 years.
Page 7
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business- The Company is a self-administered and self-managed real estate
investment trust ("REIT") that finances, acquires, develops, manages and leases
health care properties. The Company's business currently consists primarily of
investments, either directly or through joint ventures, in health care
properties (primarily through its Medical Office Building Division) and in debt
obligations secured by health care properties (primarily through its Senior Care
Division).
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, 1997 and 1996
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 periods.
The results of operations for the three months ended March 31, 1997 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.
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, 1997 and 1996.
Cash and Restricted Cash - As of March 31, 1997, the Company had $1,967,000
in a segregated interest bearing account to be used for debt service due in
April 1997, current property taxes, insurance and property improvements.
Assets Available for Sale - The Company is currently involved in
negotiations to sell certain assets. The associated cost of these assets is
included in the Company's balance sheet as assets available for sale. No
adjustment has been made to the cost basis of these assets as Management
believes that the net realizable value of the assets available for sale
approximate their original cost.
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 Company's 1993 Stock Incentive
Plan. As of March 31, 1997, there were approximately 354,200 stock options
outstanding with a weighted average exercise price of $11.95. Using the closing
market price of $17.50 on March 31, 1997, the number of shares which may be
issued pursuant to the Plan is 112,300.
Page 8
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
3. BUILDINGS AND IMPROVEMENTS
Buildings and improvements consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------------------------
(Unaudited)
<S> <C> <C>
Buildings and improvements $ 81,779,000 $ 81,677,000
Tenant improvements 4,828,000 4,708,000
Furniture, fixtures and equipment 366,000 359,000
------------- -------------
86,973,000 86,744,000
Less accumulated depreciation and
amortization (11,338,000) (10,609,000)
------------- -------------
Total $ 75,635,000 $ 76,135,000
============= =============
</TABLE>
4. DEFERRED CHARGES AND OTHER ASSETS
Deferred charges and other assets consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-----------------------------
(Unaudited)
<S> <C> <C>
Deferred financing costs $1,997,000 $2,061,000
Pre-acquisition costs 27,000 17,000
Leasing commissions 476,000 462,000
Prepaid expense and other assets 362,000 272,000
------------- -------------
2,862,000 2,812,000
Less accumulated amortization (484,000) (367,000)
------------- -------------
Total $2,378,000 $2,445,000
============= =============
</TABLE>
Page 9
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
5. STOCKHOLDERS' EQUITY
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 for the three month period ended March 31,
1997 and for the year ended December 31, 1996:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-----------------------------------
(Unaudited)
<S> <C> <C>
Distributions in excess of net income
at beginning of period $(1,303,000) $(5,479,000)
Net income during period 1,106,000 9,701,000
Less: Distributions declared (1,462,000) (5,525,000)
------------ -------------
Distributions in excess of net income $(1,659,000) $(1,303,000)
============ =============
</TABLE>
6. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
GLN CAPITAL
- -----------
On November 25, 1996, the Company expanded its activities in the Senior
Care Division by entering into an unconsolidated operating venture, GLN Capital.
In January 1997, GLN Capital commenced operations, and in February, the Company
funded its first senior care loan through GLN Capital to CoreCare Behavioral
Management. The $6.4 million loan has a term of 18 months and is secured by a
first deed of trust on the Institute of Pennsylvania Hospital in Philadelphia,
Pennsylvania, which CoreCare acquired using the proceeds of the loan by GLN
Capital.
In addition, GMAC Commercial Mortgage ("GMAC-CM"), which has previously
funded four loans to the Company, has committed to provide a credit line to
GLN Capital of $50.0 million, which will be secured by loans originated by GLN
Capital.
GL/PHP
- ------
On February 28, 1997 the Company, through the Operating Partnership,
entered into a joint venture by forming GL/PHP with PHP. The Operating
Partnership and PHP own an 80.5% and 19.5% interest in GL/PHP, respectively.
Subject to restrictions in the operating agreement, the Operating Partnership is
the sole manager of GL/PHP. Mr. Charles P. Reilly, a director of the Company and
chairman of the Compensation Committee of the Company's Board of Directors, is
Chairman of the Board of Directors of PHP. Until May 31, 1997, PHP has an option
to purchase the Operating Partnership's interest in GL/PHP.
Page 10
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
In February 1997, GL/PHP purchased six medical office properties in New
Jersey, totaling 80,415 square feet, for a purchase price of $22.4 million. The
Company and PHP funded the $4.4 million down payment in proportion to their
ownership interests. The Company's contribution was financed by a loan from GLN
Capital. The balance of the purchase price was financed by two loans from PHP,
secured by first and second deeds of trust. The greater of the two loans, at $16
million, carries a term of six months and gives PHP a right, upon default, to
purchase the Company's 80.5% interest in GL/PHP.
The properties, which were acquired from Blue Cross/Blue Shield of New
Jersey, are 100% leased to PHP pursuant to the terms of a 25-year net lease
that provides fixed rent escalations during the term of the lease. In addition,
PHP has entered into a three-year contract as a preferred provider to Blue
Cross/Blue Shield of New Jersey. The following table sets forth certain
information regarding each of the PHP properties at March 1, 1997.
<TABLE>
<CAPTION>
YEAR RENTABLE TOTAL AVERAGE
CONSTRUCTED SQUARE ANNUALIZED RENT PER
PROPERTY OR REHABILITATED FEET (1) RENT (2) SQ. FT. (3)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2103 Mt. Holly Rd.
Burlington, NJ 1994 12,560 $ 414,000 $32.96
150 Century Parkway
Mt. Laurel, NJ 1995 12,560 371,450 29.57
274 Highway 35, South
Eatontown, NJ 1995 12,560 457,930 36.46
80 Eisenhower Drive
Paramus, NJ 1994 12,675 401,465 31.67
16 Commerce Drive
Cranford, NJ 1963 17,500 468,740 26.79
4622 Black Horse Pike
Mays Landing, NJ 1994 12,560 416,415 33.15
------ ----------
Total 80,415 $2,530,000 $31.46
====== ========== ======
</TABLE>
(1) Rentable square feet includes space used for management purposes but does
not include storage space.
(2) Rent is based on third-party leased space billed in February 1997; no rent
is assumed from management space.
(3) Average rent per square foot is calculated based upon third-party leased
space, excluding management space.
7. DISPOSITION OF ASSETS
In March 1997, the Company sold Series A and B Industrial Revenue Bonds
issued by the Massachusetts Industrial Finance Agency to GLN Capital for total
consideration of $21.7 million. The bonds, which had a book value of $20.6
million, were purchased in October 1995 for $19.9 million. At the time of sale,
the Series A and B Bonds had a combined outstanding balance of $27.7 million,
including principal and accrued interest. Total consideration paid included $4.5
million in cash, a $3.2 million capital contribution to GLN Capital, and an
assumption of the $14 million note payable to GMAC-CM.
Although the Company, with the approval of GMAC-CM, assigned the $14
million obligation to GLN Capital, the Company remains contingently liable to
GMAC-CM on the loan, which is due on June 6, 1997.
Page 11
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
8. COMMITMENTS AND CONTINGENCIES
Neither the Company, the Operating Partnership, the Realty Financing
Partnership, the Medical Partnership, the Roxbury Partnership nor any of the
assets within their portfolios of medical office buildings, parking facilities,
and retail space (the "Properties") is currently a party to any material
litigation.
9. SUBSEQUENT EVENT
In May 1997, the Company issued 1,300,000 shares of 10.25% Series A
Cumulative Preferred Stock, par value $.01 per share (the "Series A Preferred
Stock"), exclusive of 195,000 which may in the future be purchased by the
underwriters pursuant to an over allotment option. Dividends on the Series A
Preferred Stock are cumulative from the date of issue and are payable monthly,
commencing on June 15, 1997, to shareholders of record on the first day of each
month at the rate of $2.5625 per share, a yield of 10.25% per annum based upon
the $25 per share liquidation preference. The Series A Preferred Stock is not
redeemable prior to June 1, 2001; thereafter, the Company may redeem the Series
A Preferred Stock for cash at a redemption price of $25 per share plus any
accumulated, unpaid dividends.
Upon consummation of the offering, the Company received net proceeds of
$30.8 million. The Company contributed the net proceeds of the Series A
Preferred Stock offering to the Operating Partnership in exchange for a new
series of preferred partnership units having terms substantially similar to
those of the Series A Preferred Stock. Approximately $28.8 million of the
proceeds will be used by the Operating Partnership to repay indebtedness that
currently bears interest at rates ranging from 7.5% to 12%, as follows: (i) $4.2
million under a note due June 17, 1997 that carries interest at the prime
lending rate (or approximately 8.5% as of May 12, 1997), (ii) $3.0 million under
a note due May 31, 1997 that carries interest at the prime lending rate (or
approximately 8.5% as of May 12, 1997), (iii) $3.7 million under a note due
August 28, 1997 that carries interest at 12% per annum, (iv) $1.0 million under
an unsecured credit line that carries interest at the prime lending rate plus
2.0% (or approximately 10.5% as of May 12, 1997), and (v) $16.9 million under a
credit line that carries interest at the rate of LIBOR plus 1.75% (or
approximately 7.5%) as of May 12, 1997). The indebtedness to be repaid has
maturities between 1997 and 1998 but can be prepaid without a prepayment charge
or penalty. Excess proceeds (approximately $2.0 million) will be invested by the
Operating Partnership in interest-bearing accounts and short-term, interest-
bearing securities.
Page 12
<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.
Except for the historical information contained herein, the matters
discussed in this Form 10-Q are forward-looking statements which involve risk
and uncertainties. The risk and uncertainties include but are not limited to
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products, services and prices, and other factors
discussed in the Company's filings with the Securities and Exchange Commission.
Results of Operations
- ---------------------
Comparison of the Three Month Period Ended March 31, 1997 versus the Three Month
Period Ended March 31, 1996
Net income for the quarter ended March 31, 1997 declined approximately
$247,000, or 18%, from the same period in 1996. Among other changes, the decline
was primarily a result of the following: (i) a $57,000 net decrease in property
operations, which resulted from a $406,000 increase in property operations
expense that was partially offset by a $349,000 increase in rents, tenant
reimbursements and parking revenues, (ii) a $123,000 increase in interest
expense, and (iii) a $77,000 increase in general and administrative expense.
Property operations expense increased $406,000 in the first quarter of
1997, or 31.7%, over the comparable period in 1996. The major component of the
$406,000 increase in property operations expense is attributable to increases in
real property taxes, the increased expense of earthquake insurance and the
acquisition in June 1996 of Tustin Hospital in Tustin, California and related
medical office buildings.
In June 1996, the Los Angeles County Assessor's Office notified the Company
that it was increasing its valuation on four of the Bedford Drive properties as
a result of a transfer of ownership in conjunction with the Company's initial
public offering (the "IPO") on December 16, 1993. The Company retained
consultants specializing in property valuation appeals and, as of March 31,
1997, obtained partial reductions in the increased assessments on two of the
four properties. Although there can be no assurances, management believes that
the Company will be able to obtain further reductions in these assessments.
Interest expense increased $123,000 from $2,216,000 for the three months
ended March 31, 1996 to $2,339,000 for the same period in 1997, an increase of
approximately 6%. Funding of the Company's investments in GLN Capital and
GL/PHP was the primary reason for the increase.
Interest, loan fees and related revenues are primarily derived from
investments in short term loans secured by senior care facilities. Although the
senior care revenues declined $70,000 in the first quarter of 1997 as compared
to the first quarter of 1996, the decline was more than offset by the shift of
activity to GLN Capital.
Page 13
<PAGE>
General and administrative expenses increased approximately $77,000, from
approximately $401,000 for the quarter ended March 31, 1996, to approximately
$478,000 for the same period in 1997 as a result of personnel and start-up
costs associated with the Company's investment in GLN Capital. Except for
direct operating expenses, GLN Capital does not incur any personnel cost at the
entity level.
Liquidity and Capital Resources
- -------------------------------
The Company obtains its liquidity from multiple internal and external
sources. Internally, funds are derived from the operation of medical office
buildings and senior care lending activities and primarily consist of Funds From
Operations ("FFO") less dividends (see discussion below of FFO). Since the
Company's initial public offering, external sources have primarily consisted of
various secured loans and lines of credit. The Company's ability to expand its
medical office and senior care lending operations requires continued access to
capital to fund new acquisitions and loans. During the three months ended March
31, 1997, the Company's payout ratio was 82% of its FFO. Undistributed FFO were
used internally to fund maintenance capital expenditures necessary to maintain
the Company's existing properties.
The Company declared a quarterly distribution for the first quarter of
1997, in the amount of $0.36 per share, which was paid on April 16, 1997 to
stockholders of record on March 31, 1997. During the three month period ended
March 31, 1997 the Company invested approximately $229,000 to maintain its
rental properties and lease its vacant space.
During February and March 1997, the Company invested approximately $2.4
million in GLN Capital with funds drawn from various credit lines at interest
rates ranging from 7.5% to 10.5%. Also, the Company borrowed $3.6 million
directly from GLN Capital to fund its contribution to GL/PHP. The sale of the
Massachusetts Industrial Finance Agency Series A and B Bonds to GLN Capital
contributed to a $14.0 million reduction in debt at March 31, 1997.
In April 1997, the Company received a $1.0 million semiannual interest
payment due on the Massachusetts Industrial Finance Agency Series A Industrial
Revenue Bonds plus $4.5 million in proceeds from the sale of the Series A and B
Bonds, discussed in Note 7 to the Unaudited Condensed Consolidated Financial
Statements. These proceeds were used to reduce the Company's indebtedness at
the time of their receipt.
As a result of the aformentioned Series A Preferred Stock offering, the
Company received approximately $30.8 million on May 13, 1997. These funds will
be used to retire various debt obligations as described in the Unaudited
Condensed Consolidated Financial Statements. The table on the following page
sets forth the capitalization of the Company as of March 31, 1997 as adjusted to
give effect to the sale by the Company of the Preferred Stock and the use of the
net proceeds therefrom. This information should be read in conjunction with the
Company's consolidated financial statements and related notes included in the
Company's annual report on Form 10-K as well as the financial statements and
related notes included in this Form 10-Q.
Page 14
<PAGE>
G&L REALTY CORP.
CAPITALIZATION
(Unaudited)
<TABLE>
<CAPTION>
As of March 31, 1997
---------------------------
Actual As Adjusted
------------ --------------
(amounts in thousands)
DEBT:
<S> <C> <C>
Borrowings under lines of credit...... $ 20,200 $ 293
Other notes payable................... 83,046 72,203
------------ --------------
Total debt......................... 103,246 72,496
Minority interest in consolidated
partnership............................ (2,688) (2,688)
Minority interest in Operating
Partnership............................ 3,059 3,059
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value:
10,000,000 shares authorized, none
outstanding; 1,300,000 shares of
Series A Preferred Stock as adjusted. --- 13
Common Stock, $.01 par value:
50,000,000 shares authorized,
4,062,500 shares outstanding......... 41 41
Additional paid-in capital............ 23,710 54,447
Distributions in excess of net income. (1,659) (1,659)
------------ --------------
Total stockholders' equity......... 22,092 52,842
------------ --------------
TOTAL CAPITALIZATION............... $125,709 $125,709
============ ==============
Ratio of total debt to total
capitalization (1) (2) 56.5%
Pro forma ratio of total debt to total
capitalization (1) (3) 39.2%
- ---------------------
</TABLE>
(1) Market value for the Company's Common Stock was $17.5 on March 31, 1997, and
the market value for the Series A Preferred Stock is assumed to be $25 per
share.
(2) Total capitalization as of the dates presented is total debt plus the
aggregate market value of the Company's Common Stock and Operating
Partnership Units not owned by the Company, assuming one Unit is equivalent
in value to one share of Common Stock.
(3) Pro forma ratio of total debt to total capitalization is computed as defined
in Note (2) except that the proceeds from the sale of the Series A Preferred
Stock have been reflected in stockholders' equity at market value and the
net proceeds of the Series A Preferred Stock have been used to reduce debt.
Page 15
<PAGE>
The proceeds of the Series A Preferred Stock offering will be used to
extinguish variable rate debt bearing interest at various rates from 7.5% to
12%, thereby reducing the Company's exposure to such debt by approximately $27
million, from $35.3 million to $8.3 million. Since January 1, 1997, the Company
has reduced its overall exposure to variable rate debt by 88%, from a high of
$69 million at January 1, 1996 to approximately $8.3 million in May 1997.
Approximately $8.0 million of the remaining $8.3 million in variable rate debt
is attributable to the Roxbury Partnership, in which the Company owns a 61.75%
interest. At the conclusion of the offering and the debt repayments, the
Company's exposure to variable rate debt will have been reduced to $5.2 million,
based on the Operating Partnership's $4.9 million pro-rata share of the Roxbury
Partnership's debt and $300,000 due on one of the Company's credit lines.
In general, 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 and debt repayment 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.
Page 16
<PAGE>
G&L REALTY CORP.
FUNDS FROM OPERATIONS AND ADDITIONAL DATA
(Unaudited)
Funds from Operations
- ---------------------
Industry analysts generally consider Funds From Operations (FFO) to be an
appropriate measure of the performance of a REIT. The Company presents FFO
based upon the new guidelines established by the Board of Governors of the
National Association of Real Estate Investment Trusts ("NAREIT"). FFO is
calculated to include the minority interest's share of income since the
Operating Partnership's net income is allocated proportionately among all owners
of Operating Partnership units. The number of Operating Partnership units held
by the Company is identical to the number of outstanding shares of the Company's
common stock, and owners of Operating Partnership units may, at their discretion
and subject to certain restrictions, exchange their units into shares of common
stock on a one-for-one basis.
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 Company's net income as presented in the Condensed Consolidated Financial
Statements and Notes thereto included elsewhere in this Form 10-Q and the
additional data presented below. FFO is only one of a range of indicators which
should be considered in determining a company's operating performance. The
methods of calculating FFO among different companies are subject to variation,
and FFO therefore may be an invalid measure of comparing companies. Also, the
elimination of depreciation and gains and losses on sales of property may not be
a true indication of an entity's ability to recover its investment in
properties. The tables below present an analysis of FFO and certain additional
data for the quarters ended March 31, 1997 and 1996.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1997 1996
--------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
FUNDS FROM OPERATIONS (1):
Net income $1,106 $1,353
Minority interest in Operating 136 153
Partnership ------ ------
Net income before minority interest in
Operating Partnership 1,242 1,506
ADD: Real estate related depreciation
and amortization 736 707
ADD: Depreciation from unconsolidated
affiliates 28 ---
LESS: Adjustment for minority
interest in consolidated partnership (8) (7)
------ ------
Funds from Operations (2) $1,998 $2,206
====== ======
Weighted averages shares outstanding (2) 4,561 4,522
====== ======
</TABLE>
Table and footnotes continue on the following page.
Page 17
<PAGE>
G&L REALTY CORP.
FUNDS FROM OPERATIONS AND ADDITIONAL DATA -- (CONTINUED)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1997 1996
---------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
ADDITIONAL DATA
- ---------------
Cash Flows:
- -----------
Operating Activities 290 854
Investing Activities (6,288) (149)
Financing Activities 6,378 (227)
Capital Expenditures
- --------------------
Building improvements 102 70
Tenant improvements 120 328
Furniture, fixtures & equipment 7 2
Leasing commissions 14 33
Depreciation and Amortization
- -----------------------------
Depreciation of real estate assets 716 667
Depreciation of non-real estate assets 14 11
Amortization of deferred lease costs 20 40
Amortization of capitalized financing
costs 166 99
Accrued rent in excess of billed rent 77 (34)
</TABLE>
_____________
(1) Funds from operations ("FFO") represents net income (computed in accordance
with generally accepted accounting principles, consistently applied
("GAAP")), excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation of real property, less preferred stock
dividends and after adjustments for consolidated and unconsolidated
entities in which the Company holds a partial interest. FFO is computed in
accordance with the definition adopted by NAREIT. FFO should not be
considered as an alternative to net income or any other indicator developed
in compliance with GAAP, including measures of liquidity such as cash flows
from operating, investing and financing activities. FFO is helpful in
evaluating the performance of a real estate portfolio considering the fact
that historical cost accounting assumes that the value of real estate
diminishes predictably over time. FFO is only one of a range of indicators
which should be considered in determining a company's operating
performance. The methods of calculating FFO among different companies are
subject to variation; therefore, FFO may be an invalid measure for purposes
of comparing companies. Also, the elimination of depreciation and gains and
losses on sales of property may not be a true indication of an entity's
ability to recover its investment in properties. The Company implemented
the new method of calculating FFO effective as of the NAREIT-suggested
adoption date of January 1, 1996.
(2) Assumes that all outstanding Operating Partnership units have been
converted to common stock.
Page 18
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
None of the Company, the Operating Partnership, the Financing
Partnership, the Realty Financing Partnership, the Medical Partnership,
the Roxbury Partnership nor any of their respective properties is
currently a party to any material litigation.
Item 2 Changes in Securities.
On May 13, 1997, the Company issued 1,300,000 shares of its Series A
Preferred Stock. The issuance of the Series A Preferred Stock has the
effect of modifying the rights of the holders of the Company's Common
Stock insofar as the holders of the Series A Preferred Stock enjoy
preferential rights as to dividends and proceeds upon liquidation. See
Note 9 to the Condensed Consolidated Financial Statements included
elsewhere in this Form 10-Q.
Item 3 Defaults Upon Senior Securities.
None.
Item 4 Submission of Matters to a Vote of Security Holders.
None.
Item 5 Other Information.
On May 7, 1997, Tokai Bank of California ("Tokai") and the Operating
Partnership entered into the First Amendment to Revolving Loan
Agreement (the "Amendment"), amending the existing Revolving Loan
Agreement, dated August 11, 1995 pursuant to which the Operating
Partnership can borrow up to an aggregate maximum amount of $20.0
million. Under the terms of the Amendment, Tokai and the Operating
Partnership agreed to modify certain restrictive covenants so as to
allow the Operating Partnership greater flexibility in making equity
investments and redeeming shares of capital stock of the Company. The
Amendment also imposes certain additional reporting requirements on the
Operating Partnership.
Item 6 Exhibits and Reports on Form 8-K.
(a) Exhibits
10.39(1) Limited Liability Company Agreement by and between G&L
Realty Partnership, L.P., a Delaware limited partnership,
and PHP Healthcare Corporation, a Delaware corporation, for
the purpose of creating a limited liability company to be
named GL/PHP, LLC, dated as of February 26, 1997
10.40(1) First Amendment To Limited Liability Company Agreement
entered into as of March 31, 1997 by and between G&L Realty
Partnership, L.P., a Delaware limited partnership, and
Property Acquisition Trust I, a Delaware business trust,
for the purpose of amending that certain Limited Liability
Company Agreement of GLN Capital Co., LLC dated as of
November 25, 1996
10.41(1) Bond Purchase Agreement dated as of March 31, 1997 by and
between GLN Capital Co., LLC (as Buyer) and G&L Realty
Partnership, L.P. (as Seller)
10.42(2) Option Agreement, dated as of February 28, 1997, by and
among G&L Realty Partnership, L.P., GLN Capital Co., LLC
and PHP Healthcare Corporation
10.43 First Amendment To Revolving Loan Agreement by and between
G&L Realty Partnership, L.P., a Delaware limited
partnership ("Borrower") and Tokai Bank of California, a
California banking corporation ("Lender"), dated as of
May 7, 1997
27 Financial Data Schedule
- -------------------
(1) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996 and incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's Registration Statement on
Form S-11 and amendments thereto ( File No. 333-24911) and incorporated
herein by reference.
Page 19
<PAGE>
(b) Reports on Form 8-K.
(i) The Company filed a Report on Form 8-K on March 31, 1997
concerning the sale of certain Series A and B Industrial Revenue
Bonds issued by the Massachusetts Industrial Finance Agency (the
"Bonds"). The Bonds had an aggregate principal amount of
$25,665,000 and carried accrued and unpaid interest of
approximately $2,000,000 at the time of sale. The Operating
Partnership sold the Bonds to GLN Capital for $7,665,000 and, in
connection therewith, asigned $14,000,000 in indebtedness owed to
GMAC-CM.
Page 20
<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.
Dated: May 14, 1997 By: /s/ Quentin Thompson
-------------------------------
Quentin Thompson
Secretary, Treasurer
and Chief Accounting Officer
Page 21
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- ----------------------------------------------------------------
<C> <S>
10.39(1) Limited Liability Company Agreement by and between G&L Realty
Partnership, L.P., a Delaware limited partnership, and PHP
Healthcare Corporation, a Delaware corporation, for the purpose
of creating a limited liability company to be named GL/PHP, LLC,
dated as of February 26, 1997
10.40(1) First Amendment To Limited Liability Company Agreement entered
into as of March 31, 1997 by and between G&L Realty Partnership,
L.P., a Delaware limited partnership, and Property Acquisition
Trust I, a Delaware business trust, for the purpose of amending
that certain Limited Liability Company Agreement of GLN Capital
Co., LLC dated as of November 25, 1996
10.41(1) Bond Purchase Agreement dated as of March 31, 1997 by and between
GLN Capital Co., LLC (as Buyer) and G&L Realty Partnership, L.P.
(as Seller)
10.42(2) Option Agreement, dated as of February 28, 1997, by and among G&L
Realty Partnership, L.P., GLN Capital Co., LLC and PHP Healthcare
Corporation
10.43 First Amendment To Revolving Loan Agreement by and between G&L
Realty Partnership, L.P., a Delaware limited partnership
("Borrower") and Tokai Bank of California, a California banking
corporation ("Lender"), dated as of May 7, 1997.
27 Financial Data Schedule
</TABLE>
- ----------------------
(1) Previously filed as an exhibit to the Company's Annual Report on Form 10-K
for the year ended December 31, 1996 and incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's Registration Statement on
Form S-11 and amendments thereto ( File No. 333-24911) and incorporated
herein by reference.
Page 22
<PAGE>
EXHIBIT 10.43
FIRST AMENDMENT TO REVOLVING LOAN AGREEMENT
This FIRST AMENDMENT TO REVOLVING LOAN AGREEMENT (the "Amendment"), dated
as of May 7, 1997, by and between G&L Realty Partnership L.P., a Delaware
limited partnership ("Borrower") and Tokai Bank of California, a California
banking corporation ("Lender"), amends that certain Revolving Loan Agreement
(the "Revolving Loan Agreement"), dated as of August 11, 1995, by and between
Borrower and Lender. Capitalized terms used herein but not otherwise defined
shall have the meanings ascribed to them in the Revolving Loan Agreement.
WHEREAS, Borrower and Lender have entered into the Revolving Loan
Agreement;
WHEREAS, Section 7.8 of the Revolving Loan Agreement provides that the
Revolving Loan Agreement may be amended if such amendment is in writing and is
signed by Borrower and Lender; and
WHEREAS, Borrower and Lender desire to amend the Revolving Loan Agreement
on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto agree as follows:
1. SECTION 4.13 of the Revolving Loan Agreement is restated to read in its
entirety as follows:
"4.13 LIMITATION ON BORROWINGS. Borrower shall not create, incur, assume
------------------------
or suffer to exist any indebtedness, other than ordinary trade payables or other
indebtedness incurred in the ordinary course of business, except:
(a) indebtedness of the Borrower under the Revolving Loan Agreement,
as amended, and the other Loan Documents;
(b) indebtedness of the Borrower incurred to finance the acquisition
of fixed or capital assets (whether pursuant to a loan, a lease or
otherwise) in an aggregate principal not exceeding $1.0 million at any time
outstanding;
(c) indebtedness outstanding on the date of the First Amendment to
Revolving Loan Agreement and listed on Schedule 4.13 hereto;
(d) any refinancings, renewals or extensions of indebtedness described
in subsection (b) or (c) above, provided that the amount of such
indebtedness outstanding at the time of such refinancing, refunding,
renewal or extension is not increased; and
(e) unsecured indebtedness from any financial or institutional source
in the business of providing financing that is subordinated to the Loan."
<PAGE>
2. SECTION 4.14 of the Revolving Loan Agreement is restated to read in its
entirety as follows:
"4.14 LIMITATION ON ADVANCES AND INVESTMENTS. Borrower shall not make or
--------------------------------------
permit to exist any advances or loans to, or any investments in, any Person
(collectively, "Investments"), except for Investments listed on Schedule 4.14
hereto, other Investments in an aggregate amount not in excess of $1.0 million
made in the ordinary course of the Borrower's business and other Investments
made with the express written consent of the Lender; provided that in each such
case Borrower's shall not have any liability or contingent liability with
respect to liabilities of the Persons in which such Investments are made beyond
the amount of the Borrower's Investments in such Persons. Borrower shall not
assume or incur any contingent obligation or liability, as guarantor or
otherwise, with respect to the obligations of any Person, whether by
contributions to capital, purchase of stock, securities or other evidences of
indebtedness or otherwise except for endorsements of instruments for deposit or
collection in the ordinary course of business, reimbursement obligations in
respect of letters of credit obtained in the ordinary course of business and
other contingent obligations incurred in the ordinary course of business and not
violating the first sentence of this Section 4.14.
3. SECTION 4.15 of the Revolving Loan Agreement is restated to read in its
entirety as follows:
"4.15 LIMITATIONS ON DISPOSITIONS OF ASSETS AND DISTRIBUTIONS. Except for
-------------------------------------------------------
Assets or properties sold, leased or otherwise disposed of in the ordinary
course of business, Borrower shall not convey, sell, lease or otherwise dispose
of properties or Assets without the prior written consent of Lender. Borrower
shall not declare any distributions, including without limitation any
distributions of capital gain (but excluding stock dividends), except for (i)
distributions required to maintain the status of the general partner of the
Borrower as a "real estate investment trust" within the meaning of Section 856
of the Internal Revenue Code of 1986, as amended (and any successor statute)
(the "Code") and (ii) other distributions made with the express written consent
of Lender. Borrower shall not purchase, redeem, retire or otherwise acquire,
whether in a single transaction or in more than one transaction during a single
calendar year, any of its equity securities for an aggregate value in excess of
$250,000, without the express written consent of Lender; provided, however, the
waiver and consent given by Lender to Borrower in the consent letter dated April
25, 1997, as amended, shall be deemed to constitute a waiver for any redemptions
in violation of this Section 4.15 through the date hereof."
4. SECTION 4.18 of the Revolving Loan Agreement is amended to added a
subsection (l), which subsection shall read in its entirety as follows:
"(l) Audited financial reports within ninety (90) days of the respective
fiscal year ends of GL/PHP, LLC, a Delaware limited liability company (the "PHP
Venture") and GLN Capital Co., LLC, a Delaware limited liability company (the
"GLN Venture"), in which Borrower is a member. Borrower shall notify Lender of
any capital distributions made by either the PHP Venture or the GLN Venture
within fifteen (15) days after such distribution. In the event Borrower
receives actual notice of any claim or suit ("Claim") filed in any court of any
jurisdiction
2
<PAGE>
for an amount in excess of $250,000, Borrower shall notify Lender
of receipt of such Claim within 7 business days of Borrower's receipt of such
Claim."
5. The Revolving Loan Agreement amended hereby shall remain in full force
and effect as amended hereby. References on and after the date of execution of
the Revolving Loan Agreement to the "Agreement" or the "Revolving Loan
Agreement" in the Revolving Loan Agreement or in any other Loan Document, shall
mean the Revolving Loan Agreement as amended hereby.
6. This Amendment may be executed in one or more counterparts, and all
such counterparts shall constitute one and the same instrument.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to
Revolving Loan Agreement to be duly executed by their respective authorized
officers as of the day and the year first written above.
"BORROWER"
G&L REALTY PARTNERSHIP, L.P.,
a Delaware limited partnership
BY: G & L REALTY CORP.,
a Maryland corporation,
as General Partner
By: /s/ Steven D. Lebowitz
------------------------
Steven D. Lebowitz
President
"LENDER"
TOKAI BANK OF CALIFORNIA,
a California banking corporation
By: /s/ Mary S. LeBlanc
-----------------------------
Mary S. LeBlanc
Regional Vice President
Corporate Banking Division
By: /s/ Stephen Moyer
------------------------------
Stephen Moyer
Vice President
4
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 1997 (UNAUDITED) AND DECEMBER 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,612,000
<SECURITIES> 0
<RECEIVABLES> 24,217,000
<ALLOWANCES> 1,342,000
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 104,069,000
<DEPRECIATION> 11,338,000
<TOTAL-ASSETS> 129,703,000
<CURRENT-LIABILITIES> 2,960,000
<BONDS> 0
0
0
<COMMON> 41,000
<OTHER-SE> 22,051,000
<TOTAL-LIABILITY-AND-EQUITY> 129,703,000
<SALES> 0
<TOTAL-REVENUES> 6,671,000
<CGS> 0
<TOTAL-COSTS> 1,666,000
<OTHER-EXPENSES> 1,394,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,339,000
<INCOME-PRETAX> 1,106,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,106,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,106,000
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0
</TABLE>
