<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 June 30, 1998
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
August 12, 1998 was 4,093,700 shares.
================================================================================
<PAGE>
G&L REALTY CORP.
INDEX
<TABLE>
<CAPTION>
PAGE
PART I FINANCIAL INFORMATION NUMBER
<S> <C> <C>
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1998 (unaudited) and
December 31, 1997................................................................... 3
Condensed Consolidated Statements of Operations for the Three Month and
Six Month Periods Ended June 30, 1998 and 1997 (unaudited).......................... 4
Condensed Consolidated Statements of Cash Flows for the Six Month Periods
Ended June 30, 1998 and 1997 (unaudited)............................................ 5-6
Notes to Condensed Consolidated Financial Statements (unaudited)..................... 7-15
Item 2 Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................................ 16-20
PART II OTHER INFORMATION
Item 1 Legal Proceedings...................................................................... 20
Item 2 Changes in Securities.................................................................. 20
Item 3 Defaults Upon Senior Securities........................................................ 20
Item 4 Submission of Matters to a Vote of Security Holders.................................... 20
Item 5 Other Information...................................................................... 20
Item 6 Exhibits and Reports on Form 8-K....................................................... 21-26
Signature ....................................................................................... 27
</TABLE>
Page 2
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-----------------------------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Rental properties (Note 3):
Land $ 30,482 $ 27,470
Building and improvements, net 124,006 111,312
-------- --------
Total rental properties 154,488 138,782
Cash and cash equivalents 10,675 13,609
Restricted cash 3,680 7,745
Tenant rent and reimbursements receivable, net 1,842 1,333
Unbilled rent receivable, net 1,981 1,815
Other receivables, net 443 972
Mortgage loans and bonds receivable, net 19,002 14,098
Investments in unconsolidated affiliates (Note 6) 10,343 8,591
Deferred charges and other assets, net (Note 4) 5,315 2,435
-------- --------
TOTAL ASSETS $207,769 $189,380
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Notes payable $115,865 $ 95,172
Accounts payable and other liabilities 1,723 1,920
Distributions payable 1,799 1,801
Tenant security deposits 1,108 1,046
-------- --------
Total liabilities 120,495 99,939
Commitments and Contingencies (Note 8) --- ---
Minority interest in consolidated affiliates (2,094) (2,399)
Minority interest in Operating Partnership 2,670 2,916
STOCKHOLDERS' EQUITY (Note 5):
Preferred shares - $.01 par value, 10,000,000 shares authorized,
liquidation preference of $25.00 per share
. Series A Preferred - 1,495,000 shares issued and outstanding as of
June 30, 1998 and December 31, 1997 15 15
. Series B Preferred - 1,380,000 shares issued and outstanding as of
June 30, 1998 and December 31, 1997 14 14
Common shares - $.01 par value, 50,000,000 shares
authorized, 4,113,700 and 4,120,100 shares issued and
outstanding as of June 30, 1998 and December 31, 1997, respectively 41 41
Additional paid-in capital 91,457 91,656
Distributions in excess of net income (4,829) (2,802)
-------- --------
Total stockholders' equity 86,698 88,924
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $207,769 $189,380
======== ========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
Page 3
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Month For the Six Month
Period Ended June 30, Period Ended June 30,
1998 1997 1998 1997
----------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Rental $6,113 $4,903 $11,995 $ 9,413
Tenant reimbursements 209 146 338 395
Parking 374 358 733 718
Interest, loan fees and related income 1,267 810 2,323 2,385
Other 113 28 171 137
------ ------ ------- -------
Total revenues 8,076 6,245 15,560 13,048
------ ------ ------- -------
EXPENSES:
Property operations 1,506 1,501 2,917 3,167
Depreciation and amortization 1,083 830 2,143 1,615
Interest 2,093 2,441 4,009 5,076
General and administrative 734 529 1,423 1,007
------ ------ ------- -------
Total expenses 5,416 5,301 10,492 10,865
------ ------ ------- -------
Income (loss) from operations 2,660 944 5,068 2,183
Equity in earnings of unconsolidated affiliates 101 520 153 572
Minority interest in consolidated affiliates (69) (46) (115) (95)
Minority interest in Operating Partnership (95) (136) (143) (272)
------ ------ ------- -------
Net income $2,597 $1,282 $ 4,963 $ 2,388
====== ====== ======= =======
Per share data:
Basic $ 0.19 $ 0.19 $ 0.33 $ 0.46
====== ====== ======= =======
Fully diluted $ 0.19 $ 0.19 $ 0.32 $ 0.46
====== ====== ======= =======
Weighted average shares outstanding:
Basic 4,122 4,006 4,124 4,035
====== ====== ======= =======
Fully diluted 4,163 4,102 4,177 4,139
====== ====== ======= =======
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 4
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
-----------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,963 $ 2,388
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,143 1,615
Amortization of deferred loan costs 86 401
Minority interests 258 367
Equity in income from affiliates (153) (405)
Gain on sale of assets held for sale --- (556)
Unbilled rent receivable, net (166) (139)
Allowance for doubtful notes and accounts receivable --- 212
(Increase) decrease in:
Other receivables 529 (736)
Tenant rent and reimbursements receivable (509) (320)
Prepaid expense and other assets (321) (267)
Accrued interest receivable and loan fees (761) 192
Increase (decrease) in:
Accounts payable and other liabilities (197) 202
Tenant security deposits 62 10
-------- --------
Net cash provided by operating activities 5,934 2,964
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of rental properties (17,128) (22,384)
Additions to rental properties (651) (613)
Proceeds from sale (acquisition) of assets available for sale --- 4,520
Pre-acquisition costs (295) ---
Return of pre-acquisition deposits --- 17
Construction-in-progress (1,697) ---
Leasing commissions (289) (42)
Investment in notes and bonds receivable (net) (5,159) (14,208)
Principal reductions received on notes receivable 1,016 ---
Investments in affiliates, net of cash distributions received (1,599) (2,038)
-------- --------
Net cash used in investing activities (25,802) (34,748)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable proceeds 29,032 33,963
Repayment of notes payable (8,339) (33,663)
Deferred financing costs (434) (367)
Decrease (increase) in restricted cash 4,065 (186)
Sale (purchase) of preferred stock and preferred partnership units --- 35,415
Sale (purchase) of common stock and partnership units (199) (925)
Minority interest equity contribution 209 858
Distributions (7,400) (3,475)
-------- --------
Net cash provided by financing activities 16,934 31,620
-------- --------
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements
Page 5
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
-------------------------
(Unaudited)
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,934) (164)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 13,609 265
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $10,675 $ 101
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest $ 4,289 $ 4,283
======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
During the period, the Company sold Series A and B Bonds for the
following consideration:
Assignment of note payable $ --- $14,000
Increase in other receivables 4,500
Investment in affiliate 3,165
-------
$21,665
=======
Distributions declared not yet paid $ 1,799 $ 1,621
======= =======
</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 to
continue the ownership, management, acquisition and development activities
previously conducted by G&L Development, a California general partnership, 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")*
G&L Gardens, LLC, an Arizona limited liability company
("Maryland Gardens")*
435 North Roxbury Drive, Ltd., a California limited partnership
(the "Roxbury Partnership")
GL/PHP, LLC, a Delaware limited liability company ("GL/PHP")*
G&L Hampden, LLC, a Delaware limited liability company ("Hampden")*
G&L Valencia, LLC, a California limited liability company ("Valencia")
G&L Tustin, LLC, a California limited liability company ("Tustin")*
G&L Holy Cross, LLC, a California limited liability company ("Holy
Cross")*
G&L Burbank, LLC, a California limited liability company ("Burbank")*
GLH Pacific Gardens, LLC, a California limited liability company
("Pacific Gardens")
* The Realty Financing Partnership, the Medical Partnership, Maryland
Gardens, GL/PHP, Hampden, Tustin, Holy Cross, and Burbank are herein
collectively referred to as the "Financing Entities" and individually as a
"Financing Entity."
The Company, as the sole general partner and as owner of an approximately 89%
ownership interest, controls the Operating Partnership. The Company controls
the Financing Entities through wholly owned subsidiaries incorporated either in
the State of Delaware or the State of California (collectively, the
"Subsidiaries" and individually, a "Subsidiary"). Each Subsidiary either (i)
owns, as sole general partner or sole managing member, a 1% ownership interest
in its related Financing Entity or (ii) owns no interest and acts as the manager
of the Financing Entity. The remaining 99% ownership interest in each Financing
Entities which are owned 1% by a Subsidiary is owned by the Operating
Partnership, acting as sole limited partner or member.
References in these consolidated financial statements to the Company include
its operations, assets and liabilities including the operations, assets and
liabilities of the Operating Partnership, the Subsidiaries, the Financing
Entities, the Roxbury Partnership (in which the Operating Partnership owns a
61.75% partnership interest and is the sole general partner), Valencia (in which
the Operating Partnership owns an 80% membership interest and is the sole
managing member) and Pacific Gardens (in which the Operating Partnership owns a
93% membership interest and is the sole managing member).
In addition to the Subsidiaries, the Company also owns interests in various
unconsolidated affiliates. Although the Company's investment represents a
significant portion of the capital of such unconsolidated affiliates and the
Company exercises significant influence over the activities of these entities,
the Company does not have the requisite level of voting control to include the
assets, liabilities and operating activities of these entities in the
Page 7
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
consolidated financial statements of the Company. The entities in which the
Company has unconsolidated financial interests are as follows:
. GLN Capital Co., LLC ("GLN Capital"), a Delaware limited liability company
formed in 1996. 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.
. Valley Convalescent, LLC ("Valley Convalescent") is a California limited
liability company formed by the Company, through the Operating Partnership,
and Continuum Health Incorporated, a Delaware corporation ("Continuum").
Both the Operating Partnership and Continuum hold a 50% ownership interest
in Valley Convalescent. Continuum is the managing member of Valley
Convalescent, which was formed for the purpose of acquiring Valley
Convalescent Center located in El Centro, California.
. AV Medical Associates, LLC ("AV Medical") is a California limited liability
company formed by the Company through the Operating Partnership, and M&Z
Aliso Associates, LLC, a California limited liability company ("M&Z
Aliso"). Both the Operating Partnership and M&Z Aliso hold a 50% ownership
interest in AV Medical. M&Z Aliso Associates, LLC is the managing member
of AV Medical which was formed for the purpose of acquiring a vacant parcel
of land in Aliso Viejo, California upon which AV Medical is currently
constructing a 33,000 square foot, three story medical office building
("MOB") which has been preleased to an investment grade hospital
owner/operator.
. G&L/M&Z Aliso Partners ("Aliso Partners") is a California general
partnership formed by the Company through the Operating Partnership, and
M&Z Aliso Associates, LLC, a California limited liability company. Both the
Operating Partnership and M&Z Aliso hold a 50% ownership interest in Aliso
Partners. M&Z Aliso is the managing member of Aliso Partners which was
formed for the purpose of acquiring a vacant parcel of land in Aliso Viejo,
California upon which the partners are currently constructing a 52,000
square foot retail building.
. G&L - Grabel, San Pedro, LLC ("San Pedro") is a California limited
liability company, formed on March 10, 1998 by the Company through the
Operating Partnership, and Gary Grabel, an experienced MOB manager. Both
the Operating Partnership and Gary Grabel, who is the managing member, hold
a 50% interest in San Pedro. San Pedro was formed for the purpose of
acquiring four MOBs located at 1360 West 6/th/ street in San Pedro,
California.
. G&L Penasquitos, LLC ("Penasquitos LLC") is a California limited liability
company, formed by the Company on April 24, 1998, through the Operating
Partnership, and Parsons House, LLC, a California limited liability company
("Parsons"). The Company and Parsons contributed to Penasquitos LLC 75%
and 25% of the equity, respectively. However, the initial ownership
interests of the parties will be adjusted to 50% as each partner receives a
return of its initial capital contribution through preferred distributions.
Penasquitos LLC was formed for the purpose of acquiring and converting a
building located in Rancho Penasquitos, California into a senior care
facility.
. G&L Penasquitos, Inc. ("Penasquitos Inc.") is a California corporation
formed on April 21, 1998 by the Company, through the Operating Partnership,
and Parsons House, LLC, a California limited liability company . The
Company owns 75% of the total equity in Penasquitos Inc. in the form of
non-voting preferred stock. Parsons holds 25% of the total equity and all
of the voting common stock. Penasquitos Inc. was formed for the purpose of
operating a senior care facility to be built in Rancho Penasquitos,
California.
. GLH Pacific Gardens Corp. ("Pacific Gardens Corp.") is a California
corporation formed on June 25, 1998 by the Company, through the Operating
Partnership, and American Senior Care, Inc., a California corporation
("American"). The Company owns 93% of the total equity in Pacific Gardens
Corp. in the form of non-voting preferred stock. American Senior Living
holds 7% of the total equity and all of the voting common stock. Pacific
Gardens Corp. was formed for the purpose of operating a senior care
facility located in Santa Monica, California, which was purchased by the
Company. As of June 30, 1998, there was no activity in Pacific Gardens
Corp.
Page 8
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
GLN Capital, Valley Convalescent, AV Medical, Aliso Partners, San Pedro,
Penasquitos Inc., Penasquitos LLC and Pacific Gardens Corp. are herein
collectively referred to as the "Unconsolidated Affiliates" and individually as
"Unconsolidated Affiliate".
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 of
investments in healthcare properties and in debt obligations secured by
healthcare properties. Investments in healthcare property consists of
acquisitions, made either directly or through joint ventures, in MOBs or senior
care facilities which are leased to healthcare providers. The Company's lending
activities consist of providing short-term secured loans to facilitate third
party acquisitions either directly or through GLN Capital.
Basis of Presentation - The accompanying condensed consolidated financial
statements include the accounts of the Company. The interests in the Roxbury
Partnership, Valencia and Pacific Gardens not owned by the Company have been
reflected in minority interests. All significant intercompany accounts and
transactions have been eliminated in consolidation. Prior period amounts have
been reclassified to conform to the current period's financial statement
presentation.
The information presented as of and for the three month and six month
periods ended June 30, 1998 and 1997 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 and six months ended June 30, 1998 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
include the operating results of the Company for the three months and six months
ended June 30, 1998 and 1997. The Condensed Consolidated Statements of Cash
Flows have been prepared to reflect the operations of the Company for the six
months ended June 30, 1998 and 1997.
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 to purchase shares of common stock granted under
the Company's 1993 Stock Incentive Plan, as amended. As of June 30, 1998 and
1997 there were approximately 233,500 and 371,500 stock options outstanding with
weighted average exercise prices of $14.49 and $12.11, respectively. The
weighted average share price for the three months ended June 30, 1998 and 1997
was $17.57 and $16.33, respectively. Based upon the number and amounts of
vested and unvested options outstanding, the dilutive effect on the Company's
outstanding shares for the three months ended June 30, 1998 and 1997 is 40,728
and 96,420 shares, respectively.
Page 9
<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>
June 30, December 31,
1998 1997
--------------------------------
(in thousands)
<S> <C> <C>
Buildings and improvements................................ $132,742 $118,799
Tenant improvements....................................... 5,408 4,946
Furniture, fixtures and equipment......................... 1,990 1,628
-------- --------
140,140 125,373
Less accumulated depreciation and amortization............ (16,134) (14,061)
-------- --------
Total............................................. $124,006 $111,312
======== ========
</TABLE>
Rental property is recorded at cost less accumulated depreciation.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets as follows:
<TABLE>
<S> <C>
Buildings and improvements................... 40 years
Tenant improvements.......................... Life of lease
Furniture, fixtures and equipment............ 5 to 7 years
</TABLE>
Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations and all external costs directly related to
acquisitions are capitalized.
4. DEFERRED CHARGES AND OTHER ASSETS
Deferred charges and other assets consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-----------------------------------
(in thousands)
<S> <C> <C>
Deferred financing costs..................... $2,078 $1,669
Construction-in-progress..................... 1,997 300
Pre-acquisition costs........................ 295 ---
Leasing commissions.......................... 870 581
Prepaid expense and other assets............. 594 273
------ ------
5,834 2,823
Less accumulated amortization................ (519) (388)
------ ------
Total................................ $5,315 $2,435
====== ======
</TABLE>
Page 10
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
5. STOCKHOLDERS' EQUITY AND DEBT OUTSTANDING
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 shareholders, at least 95% of its taxable income. In
reporting periods in which distributions exceed net income, shareholders' 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 six month period ended June 30, 1998 and for the year ended December 31,
1997:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------------------------
(in thousands)
<S> <C> <C>
Distributions in excess of net income
at beginning of period.............................................. $(2,802) $(1,303)
Net income during period.............................................. 4,963 6,561
Less: Distributions declared.......................................... (6,990) (8,060)
------- -------
Distributions in excess of net income................................. $(4,829) $(2,802)
======= =======
</TABLE>
At various times during the six months ended June 30, 1998 the Company
repurchased a total of 32,900 shares of the Company's Common Stock at an
average price of approximately $17.07 per share.
Page 11
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
6. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
The Company has investments in various unconsolidated affiliates as described in
Note 1. The following table provides a summary of the Company's investment in
each of these entities as of June 30, 1998. (In thousands).
<TABLE>
<CAPTION>
GLN Valley AV Aliso San Penasquitos Penasquitos
Capital Convalescent Medical Partners Pedro LLC Inc. Total
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Opening balance at beginning of
period............................ $ 2,730 $ 311 $ 600 $550 $ --- $--- $--- $ 4,191
Equity in earnings of affiliates... 112 41 --- --- --- --- --- 153
Cash contributions................. --- --- 6,300 966 270 7,536
Return of capital and cash
distributions..................... (2,166) (36) --- --- (5,100) --- --- (7,302)
------- ------ ------ ---- ------- ---- ---- -------
Equity, before inter-company
adjustments....................... 676 316 600 550 1,200 966 270 4,578
------- ------ ------ ---- ------- ---- ---- -------
Intercompany transactions:
Adjustments/eliminations.... (149) (149)
Receivable, net............. 166 2,945 2,690 80 --- 33 --- 5,914
------- ------ ------ ---- ------- ---- ---- -------
Investment in unconsolidated
affiliates........................ $ 842 $3,261 $3,290 $630 $ 1,051 $999 $270 $10,343
======= ====== ====== ==== ======= ==== ==== =======
</TABLE>
Page 12
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
Following is a summary of the condensed financial information of each of the
unconsolidated affiliates as of and for the six months ended June 30, 1998. (In
thousands).
<TABLE>
<CAPTION>
GLN Valley AV Aliso San Penasquitos Penasquitos
Capital Convalescent Medical Partners Pedro LLC Inc. Total
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Financial Position:
- ------------------
Land.............................. $ --- $ 382 $ 1,738 $ 3,107 $ 1,882 $ --- $--- $ 7,109
Buildings......................... --- 2,709 --- --- 4,361 --- --- 7,070
Notes and bonds receivable, net... 1,406 --- --- --- --- --- --- 1,406
Other assets...................... 103 438 1,772 1,286 258 3,937 360 8,154
Notes payable..................... --- (2,799) (2,669) (3,215) (4,930) (2,617) --- (16,230)
Other liabilities................. (166) (35) (41) (78) (164) (32) --- (516)
------ ------- ------- ------- ------- ------- ---- --------
Net assets............................ $1,343 $ 695 $ 800 $ 1,100 $ 1,407 $ 1,288 $360 $ 6,993
====== ======= ======= ======= ======= ======= ==== ========
Partner's equity:
- ----------------
G&L Realty Partnership, L.P....... $ 676 $ 316 $ 600 $ 550 $ 1,200 $ 966 $270 $ 4,578
Others............................ 667 379 200 550 207 322 90 2,415
------ ------- ------- ------- ------- ------- ---- --------
Total equity.......................... $1,343 $ 695 $ 800 $ 1,100 $ 1,407 $ 1,288 $360 $ 6,993
====== ======= ======= ======= ======= ======= ==== ========
Operations:
- ----------
Revenues.......................... $ 277 $ 300 $ --- $ --- $ 316 $ --- $--- $ 893
Expenses.......................... 53 202 --- --- 340 --- --- 595
------ ------- ------- -------- ------- ------- ---- --------
Net income............................ $ 224 $ 98 $ --- --- $ (24) --- --- $ 298
====== ======= ======= ======== ======= ======= ==== ========
Allocation of net income:
- ------------------------
G&L Realty Partnership, L.P....... $ 112 $ 41 $ --- $ --- $ --- $ --- $--- $ 153
Others............................ 112 57 --- --- (24) --- --- 145
------ ------- ------- -------- ------- ------- ---- --------
Net income............................ $ 224 $ 98 $ --- $ --- $ (24) $ --- $--- $ 298
====== ======= ======= ======== ======= ======= ==== ========
</TABLE>
Page 13
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
7. SEGMENT INFORMATION
The Company's business currently consists of investments in healthcare
properties and in debt obligations secured by healthcare properties.
Investments in healthcare property consists of acquisitions, made either
directly or indirectly through joint ventures, in MOBs or senior care facilities
which are leased to healthcare providers. The Company's lending activities
consist of providing short-term secured loans to facilitate third party
acquisitions either directly or through GLN Capital. The tables on the
following pages reconcile the Company's income and expense activity for the six
months ended June 30, 1998 and 1997 and balance sheet data as of June 30, 1998.
1998 RECONCILIATION OF REPORTABLE SEGMENT INFORMATION
For the six months ended June 30, 1998
<TABLE>
<CAPTION>
Property Debt
Investments Obligations Other Total
---------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Revenue:
Rents, tenant reimbursements and parking............ $13,066 $ --- $ --- $13,066
Interest, loan fees and related revenues............ 109 1,819 395 2,323
Other............................................... 152 4 15 171
------- ------ ------- -------
Total revenues................................. $13,327 $1,823 $ 410 $15,560
------- ------ ------- -------
Expenses:
Property operations................................. 2,866 51 --- 2,917
Depreciation and amortization....................... 2,113 --- 30 2,143
Interest............................................ --- --- 4,009 4,009
General and administrative.......................... --- --- 1,423 1,423
------- ------ ------- -------
Total expenses................................. 4,979 51 5,462 10,492
------- ------ ------- -------
Income from operations before minority interests......... $ 8,348 $1,772 $(5,052) $ 5,068
======= ====== ======= =======
</TABLE>
1997 RECONCILIATION OF REPORTABLE SEGMENT INFORMATION
For the six months ended June 30, 1997
<TABLE>
<CAPTION>
Property Debt
Investments Obligations Other Total
---------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Revenue:
Rents, tenant reimbursements and parking............ $10,526 $ --- $ --- $10,526
Interest, loan fees and related revenues............ 54 2,288 43 2,385
Other............................................... 110 --- 27 137
------- ------ ------- -------
Total revenues................................. 10,690 2,288 70 $13,048
------- ------ ------- -------
Expenses:
Property operations................................. 3,086 81 --- 3,167
Depreciation and amortization....................... 1,587 --- 28 1,615
Interest............................................ --- --- 5,076 5,076
General and administrative.......................... --- --- 1,007 1,007
------- ------ ------- -------
Total expenses................................. 4,673 81 6,111 10,865
------- ------ ------- -------
Income from operations before minority interests......... $ 6,017 $2,207 $(6,041) $ 2,183
======= ====== ======= =======
</TABLE>
Page 14
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
(UNAUDITED)
1998 RECONCILIATION OF REPORTABLE SEGMENT INFORMATION
As of June 30, 1998
<TABLE>
<CAPTION>
Property Debt
Investments Obligations Other Total
------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Rental properties.................................. $154,488 $ --- $ --- $154,488
Mortgage loans and bonds receivable, net........... --- 19,002 --- 19,002
Other assets....................................... 10,856 216 23,207 34,279
-------- ------- ------- --------
Total assets.............................. $165,344 $19,218 $23,207 $207,769
======== ======= ======= ========
Other assets:
Cash and cash equivalents..................... $ --- $ --- $10,675 $ 10,675
Restricted cash............................... 3,680 --- --- 3,680
Tenant rent and reimbursements
receivable, net.............................. 1,842 --- --- 1,842
Unbilled rent receivable, net................. 1,981 --- --- 1,981
Other receivables, net........................ 195 216 32 443
Investment in unconsolidated affiliates....... --- --- 10,343 10,343
Deferred financing costs, net................. --- --- 1,799 1,799
Pre-acquisition costs......................... --- --- 295 295
Construction in progress...................... 1,997 --- --- 1,997
Deferred lease costs, net..................... 630 --- --- 630
Prepaid expense and other..................... 531 --- 63 594
-------- ------- ------- --------
Total other assets........................ $ 10,856 $ 216 $23,207 $ 34,279
======== ======= ======= ========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Neither the Company, any of its consolidated or unconsolidated affiliates, nor
any of the assets within their respective portfolios of MOBs, senior care
facilities, parking facilities, and retail space is currently a party to any
material litigation.
9. SUBSEQUENT EVENTS
On July 31, 1997, the Company purchased undeveloped land located in Yorba
Linda, California for approximately $920,000 upon which the Company plans to
construct a senior care facility. On August 6, 1998, the Company, through a
wholly-owned subsidiary, purchased a senior care facility located in Hoquiam,
Washington for $3.25 million.
Page 15
<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 and the Company's 1997 Annual Report on Form 10-K as
previously filed with the SEC.
Information contained in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995, as amended.
These statements can be identified by the use of forward-looking terminology
such as "may," "will," "expect," "anticipate," "estimate" or "continue" or the
negative thereof or other comparable terminology. Any one factor or combination
of factors could cause the Company's actual operating performance or financial
results to differ substantially from those anticipated by management. Factors
influencing the Company's operating performance and financial results include,
but are not limited to, changes in the general economy, the supply of, and
demand for, healthcare related real estate in markets in which the Company has
investments, the availability of financing, governmental regulations concerning,
but not limited to, new construction and development, environmental issues,
healthcare services and government participation in the financing thereof, and
other risks and unforeseen circumstances affecting the Company's investments
which may be discussed elsewhere in this Quarterly Report Form 10-Q and the
Company's 1997 Annual Report on Form 10-K as previously filed with the SEC.
Results of Operations
- ---------------------
Comparison of the Six Month Period Ended June 30, 1998 versus the Six Month
Period Ended June 30, 1997.
Total revenues increased by $2.5 million, or 19%, from $13.0 million for the
six months ended June 30, 1997, to $15.5 million for the same period in 1998.
Rents, tenant reimbursements and parking revenues increased an aggregate $2.5
million, or 24%, from a combined total of $10.5 million for the six months ended
June 30, 1997, to $13.0 million for the same period in 1998. Two million of the
aggregate increase in rents, tenant reimbursements and parking revenues was
related to the acquisition of $23.2 million in rental properties and the
remaining 19.5% interest in six New Jersey medical office buildings ("MOB")
since June 30, 1997. Interest, loan fees and related revenues derived from
loans secured by senior care facilities decreased $0.1 million, or 3%, from $2.4
million for the six months ended June 30, 1997 to $2.3 million for the same
period in 1998, primarily due to the $0.6 million gain from the sale of bonds on
March 31, 1997. Excluding this gain on the sale of bonds, interest, loan fees
and related revenue increased $0.5 million, or 28%, from $1.8 million for the
six months ended June 30, 1997 to $2.3 million for the same period in 1998. Of
this increase, $0.3 million related to interest earned on excess cash from the
November 1997 Series B Preferred Stock offering and the April 1998 debt
refinancing and $0.2 million was attributable to interest earned on a $4.7
million senior care loan funded by the Company in December 1997.
Total expenses decreased by $0.4 million, or 4%, from $10.9 million for the
six months ended June 30, 1997, to $10.5 million for the same period in 1998.
Property operating expenses decreased $0.3 million, or 9%, from $3.2 million for
the six months ended June 30, 1997, to $2.9 million for the same period in 1998,
despite a $0.1 million increase in operating costs related to five MOBs acquired
in March 1998. This reduction is part of management's ongoing efforts to reduce
property operating costs and includes a $0.1 million reduction of property taxes
as a result of the Company's successful efforts in appealing the assessed value
of its properties. Furthermore, the $18.8 million in properties acquired
between June 30 and December 31, 1997 were leased on a triple-net basis, thus
the Company incurred no operating costs related to these buildings.
Depreciation and amortization increased $0.5 million, or 31%, from $1.6 million
for the six months ended June 30, 1997 to $2.1 million for the same period in
1998. Of this increase, $0.3 million was attributable to property acquisitions
made by the Company since June 30, 1997. The remaining $0.2 million increase
consisted of building and tenant improvements, non-real estate assets and the
amortization of leasing commissions. Interest expense
Page 16
<PAGE>
decreased $1.1 million, or 22%, from $5.1 million for the six months ended June
30, 1997, to $4.0 million for the same period in 1998. This decrease in interest
expense was attributable to the reduction of $40 million of the Company's notes
payable which were paid down with the net proceeds of the two preferred stock
offerings in 1997 totaling $71.9 million and the write-off of loan costs
associated with these notes payable. General and administrative expense
increased by $0.4 million, or 41%, from $1.0 million for the six months ended
June 30, 1997 to $1.4 million in for the same period in 1998. This increase is
related to the Company's addition of acquisition, development and support
personnel.
Net income increased $2.6 million, or 108%, from $2.4 million for the six
months ended June 30, 1997 to $5.0 million for the same period in 1998. This
change is primarily due to the $2.6 million increase in rental revenues and the
$0.4 million decrease in total expenses offset by a decrease in equity in
earnings from unconsolidated affiliates of $0.4 million.
Liquidity and Capital Resources
- -------------------------------
As of June 30, 1998, the Company's net investment in real estate assets
totaled approximately $154.5 million, $10.3 million in joint ventures and $19.0
million invested in notes. Of the $19.0 million of notes receivable, $17.9
million are secured by healthcare facilities located in Oregon, California,
Idaho and Maryland.
The Company obtains its liquidity from multiple internal and external sources.
Internally, funds are derived from the operation of MOBs and senior care lending
activities and primarily consist of Funds from Operations ("FFO") less dividends
(see discussion below of FFO). In addition to the recently completed preferred
stock offerings, the Company's external sources of capital consist of various
secured loans. The Company's ability to expand its MOB and senior care lending
operations requires continued access to capital to fund new investments.
The Company declared a quarterly distribution payable to holders of the
Company's Common Stock for the first and second quarter of 1998 in the amount of
$0.39 per share which was paid on April 15 and July 15, 1998 to shareholders of
record on March 31 and June 30, 1998, respectively. The Company also paid a
monthly dividend to holders of the Company's Preferred Stock on the fifteenth
day of each month during the year to stockholders of record on the first day of
each month. The dividend paid to holders of the Company's Series B Preferred
Stock on January 15, 1998 was approximately $0.33 per share which represents the
cumulative dividend due Series B shareholders from the offering date on November
12, 1997 through December 31, 1997. The Company declared dividends of $3.6
million to holders of the Company's Common Stock in the first six months of 1998
while the Company earned $3.3 million in FFO. However, for the three months
ended June 30, 1998, the Company declared dividends of $1.8 million while
earning FFO of $1.9 million. The Company is actively seeking additional
investments for the purpose of increasing FFO. However, there can be no
assurances that the Company will be able to acquire such assets or if such
assets are acquired and combined with the Company's other investments, will
enable the Company to consistently produce a level of FFO at least equal to the
current level of distributions.
In general, the Company expects to continue meeting its short-term liquidity
requirements through its working capital, cash flow provided by operations and,
if necessary, from its lines of credit. 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.
Page 17
<PAGE>
Historical Cash Flows
- ---------------------
The Company's net cash from operating activities increased $2.9 million, or
97%, from $3.0 million for the six months ended June 30, 1997 to $5.9 million
for the same period in 1998. The increase of $2.9 million is due primarily to a
$2.6 million increase in net income for the six months ended June 30, 1998
compared to the same period in 1997.
Net cash used in investing activities decreased $8.9 million, or 26%, to $25.8
million for the six months ended June 30, 1998 from $34.7 million for the same
period in 1997. The decrease was primarily due to a $5.2 million decrease in
rental property acquisitions and a $9.0 million decrease in investments in notes
receivable offset by a $4.5 million decrease in proceeds received from the sale
of assets available for sale.
Cash flows provided by financing activities decreased $14.7 million, or 47%,
to $16.9 million for the six months ended June 30, 1998 from $31.6 million for
the same period in 1997. The decrease is due primarily to a decrease in
proceeds received from notes payable of $5.0 million, a decrease in restricted
cash of $4.2 million, an increase in distributions of $3.9 million, a decrease
in the sale of preferred stock of $35.4 million and a decrease in the repayment
of notes payable of $25.4 million.
Year 2000
- ---------
Many computers, software programs and other equipment, which utilize
microprocessors (collectively referred to as "Systems" and individually as a
"System"), process date sensitive data in the normal course of operations. Some
of these Systems use a 2-digit field to designate the year. As the year 2000
approaches, these Systems may not be capable of distinguishing between events
occurring in the year 1900 and the year 2000, and therefore these Systems may
become inoperable or produce information that is unreliable.
Internally, the Company relies on third party vendors for its computer
hardware and software. Based upon management's communications with the
Company's Systems vendors, management believes that the Company's hardware and
software Systems are, or will be year 2000 compliant and that the Company's
internal computer hardware and software Systems will not be materially impacted
by this issue.
Management has communicated with other companies with whom it does significant
business to determine their year 2000 compliance readiness and the potential
impact on the Company. However, there is no assurance that the tests which have
been performed to date are conclusive, that other companies on which the Company
does significant business will prove reliable or that conversions needed to
upgrade all Systems will be completed in a timely manner.
The cost to the Company to make its internal Systems year 2000 compliant is
not anticipated to be material to the Company's financial position. However,
management is not able to adequately assess the extent to which the Company is
vulnerable to System failures, which may affect other companies. The Company
plans to continue testing computer Systems and building life-safety Systems to
obtain reasonable assurance that the Company's Systems will function reliably in
the year 2000. Management also plans to continue conversations with other
companies with which the Company does significant business to minimize, to the
extent possible, the potential impact of year 2000 compliance failures.
Funds from Operations
- ---------------------
Industry analysts generally consider FFO to be an appropriate measure of the
performance of a REIT. The Company's financial statements use the concept of
FFO as defined by the Board of Governors of the National Association of Real
Estate Investment Trusts ("NAREIT"). FFO is calculated to include the minority
interests' share of income for the Operating Partnership's 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
Page 18
<PAGE>
outstanding shares of the Company's Common Stock, and owners of Operating
Partnership units may, at their discretion, convert 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 Selected Financial Data and
Consolidated Financial Statements and Notes thereto included in the Company's
1997 Annual Report on Form 10-K and the additional data presented below. The
table on the following page presents an analysis of FFO and additional data for
the three and six month periods ended June 30, 1998 and 1997.
G&L REALTY CORP.
FUNDS FROM OPERATIONS AND ADDITIONAL DATA
(Unaudited)
<TABLE>
<CAPTION>
For the Three Month For the Six Month
Periods Ended June 30, Periods Ended June 30,
1998 1997 1998 1997
--------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
FUNDS FROM OPERATIONS/(1)/
- --------------------------
Net income....................................................... $ 2,597 $ 1,282 $ 4,963 $ 2,388
Minority interest in Operating Partnership....................... 95 136 143 272
-------- ------- -------- --------
Income (loss) for Operating Partnership.......................... 2,692 1,418 5,106 2,660
Depreciation of real estate assets............................... 976 796 1,931 1,547
Amortization of deferred lease costs............................. 39 20 70 40
Depreciation from unconsolidated affiliates...................... 6 2 13 2
Adjustment for minority interest in consolidated affiliates...... (15) (29) (23) (44)
Dividends on preferred stock..................................... (1,803) (192) (3,775) (192)
-------- ------- -------- --------
FUNDS FROM OPERATIONS/(1)/....................................... $ 1,895 $ 2,015 $ 3,322 $ 4,013
======== ======= ======== ========
PER SHARE/UNIT FUNDS FROM OPERATIONS:
- -------------------------------------
Basic $ 0.41 $ 0.45 $ 0.72 $ 0.89
======== ======= ======== ========
Fully diluted $ 0.41 $ 0.44 $ 0.71 $ 0.87
======== ======= ======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING/(2)/
- ----------------------------------------
Basic 4,620 4,504 4,622 4,533
======== ======= ======== ========
Fully diluted 4,661 4,600 4,675 4,631
======== ======= ======== ========
ADDITIONAL DATA
- ---------------
Cash flows:
- -----------
Operating activities....................................... 2,935 2,214 5,934 2,964
Investing activities....................................... (12,033) (9,618) (25,802) (34,748)
Financing activities....................................... 17,176 7,127 16,934 31,620
Capital expenditures
- --------------------
Building improvements...................................... 41 167 94 269
Tenant improvements........................................ 427 217 442 337
Furniture, fixtures & equipment............................ 113 --- 115 7
Leasing commissions........................................ 245 28 289 42
Depreciation and amortization
- -----------------------------
Depreciation of real estate assets......................... 976 796 1,931 1,547
Depreciation of non-real estate assets..................... 68 14 142 28
Amortization of deferred lease costs....................... 39 20 70 40
Amortization of capitalized financing costs................ 47 235 86 401
</TABLE>
Page 19
<PAGE>
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
paid to holders of preferred stock during the period 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 operations, 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, and FFO therefore 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. FFO has been restated
for all prior periods under the new method.
2) Assumes that all outstanding Operating Partnership units have been converted
to common stock.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
Neither the Company or any of its consolidated or unconsolidated
affiliates nor any of the assets within their portfolios of MOBs,
senior care facilities, parking facilities, and retail space 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.
On June 4, 1998, the Company held its 1998 Annual Meeting of
Stockholders. The only item of business conducted was the election of
directors.
The seven directors elected at the Annual Meeting, to serve for the
term ending at the next Annual Meeting of Stockholders or until their
successors are duly elected and qualified or until they resign or are
removed, were the following:
<TABLE>
<CAPTION>
NAME VOTES FOR VOTES WITHHELD
<S> <C> <C>
Daniel M. Gottlieb 3,781,633 24,874
Steven D. Lebowitz 3,781,633 24,874
Richard L. Lesher 3,781,633 24,874
Leslie D. Michelson 3,781,633 24,874
Reese L. Milner 3,781,633 24,874
Charles P. Reilly 3,781,633 24,874
S. Craig Tompkins 3,781,633 24,874
</TABLE>
Item 5 Other Information.
None.
Page 20
<PAGE>
Item 6 Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
Exhibit No. Note Description
- ----------- ---- -----------------------------------------------------------------------------------------------
<C> <C> <S>
3.1 (1) Amended and Restated Articles of Incorporation of G&L Realty Corp.
3.2 (3) Amended and Restated Bylaws of G&L Realty Corp.
10.1 (c) (2) Executive Employment Agreement between G&L Realty Corp. and Daniel M. Gottlieb.
10.2 (c) (2) Executive Employment Agreement between G&L Realty Corp. and Steven D. Lebowitz.
10.3 (2) Agreement of Limited Partnership of G&L Realty Partnership, L.P.
10.4 (c) (1) 1993 Employee Stock Incentive Plan
10.5 (1) Form of Indemnity Agreement between G&L Realty Corp. and directors and certain officers.
10.8 (1) Option Agreement for Purchase and Sale of 4955 Van Nuys Boulevard ("Sherman Oaks Medical
Plaza") by and between G&L Development and Arthur Gilbert, as Trustee of the Arthur Gilbert
and Rosalinde Gilbert 1982 Trust, dated as of October 29, 1993.
10.8.2 (2) Option Notice with respect to Sherman Oaks Medical Plaza.
10.9.2 (1) Agreement for Purchase and Sale of Limited Partnership Interests (435 North Roxbury Drive,
Ltd.) between the Selling Partner (as defined therein) and G&L Development, dated as of
October 29, 1993.
10.11 (1) Agreement for Transfer of Partnership Interests and Other Assets by and between G&L Realty
Corp. and Reese Milner, Helen Milner and Milner Development Corp., dated as of October 29,
1993.
10.12 (1) Nomura Commitment Letter with respect to the Acquisition Facility.
10.12.2 (3) Amended and Restated Mortgage Loan Agreement dated as of January 11, 1995 among G&L Financing
Partnership, L.P., Nomura Asset Capital Corporation and Bankers Trust Company of New York.
10.13 (1) Office Building Lease I between 405 North Bedford Drive, Ltd. and Saint John's Hospital and
Health Center dated October 12, 1987.
10.14 (1) Office Building Lease II between 405 North Bedford Drive, Ltd. and Saint John's Hospital and
Health Center dated as of October 12, 1987.
10.15 (1) Office Building Lease III between 405 North Bedford Drive, Ltd. and Saint John's Hospital and
Health Center dated as of December 1, 1987.
10.16 (1) Investment Banking and Financial Advisory Agreement between G&L Development and Gruntal & Co.,
Incorporated.
10.17 (1) Security Agreement dated as of December 16, 1993 by and between Daniel M. Gottlieb, Steven D.
Lebowitz and Milner Investment Corporation.
10.18 (2) Security Agreement dated as of December 16, 1993 by and between Daniel M. Gottlieb, Steven D.
Lebowitz and Reese L. Milner, II.
</TABLE>
Page 21
<PAGE>
(C) EXHIBITS - (CONTINUED FROM PREVIOUS PAGE)
<TABLE>
<CAPTION>
Exhibit No. Note Description
- ----------- ---- -----------------------------------------------------------------------------------------------
<C> <C> <S>
10.19 (2) Security Agreement dated as of December 16, 1993 by and between Daniel M. Gottlieb, Steven D.
Lebowitz and Reese L. Milner, II.
10.20 (2) Security Agreement dated as of December 16, 1993 by and between Daniel M. Gottlieb, Steven D.
Lebowitz and Reese L. Milner, II, Helen Milner and John Milner, as Trustees of the Milner
Trust.
10.21 (2) Security Agreement dated as of December 16, 1993 by and between Daniel M. Gottlieb, Steven D.
Lebowitz and Reese L. Milner, II.
10.22 (4) Amended and Restated Mortgage Loan Agreement by and between G&L Realty Financing Partnership
II, L.P., as Borrower, and Nomura Asset Capital Corporation, as Lender, dated as of October
31, 1995.
10.23 (4) Revolving Loan Agreement by and between G&L Realty Partnership, L.P. and Tokai Bank of
California dated as of August 11, 1995.
10.24 (4) Property Management Agreement between G&L Realty Financing Partnership II, L.P., as owner, and
G&L Realty Partnership, L.P., as agent, made August 10, 1995
10.25 (5) Commitment Letter between G&L Realty Partnership, L. P. and Nomura Asset Capital Corporation,
dated as of September 29, 1995.
10.26.1 (5) Loan and Security Agreement between G&L Realty Partnership, L. P. and GMAC Commercial Mortgage
Corporation dated as of December 5, 1995.
10.26.2 (5) Note in the amount of $14,000,000 executed by G&L Realty Partnership, L. P. in favor of GMAC
Commercial Mortgage Corporation, dated as of December 5, 1995.
10.26.3 (5) Notification and Consent Agreement among G&L Realty Partnership, L. P., GMAC Commercial
Mortgage Corporation, and Nomura International Trust Company, dated as of December 5, 1995.
10.26.4 (5) Assignment of Bond executed by G&L Realty Partnership, L. P., in favor of GMAC Commercial
Mortgage Corporation.
10.27 (6) Agreement of Purchase and Sale of Membership Interest dated April 26, 1996, between Milner
Investment Corporation and G&L Realty Partnership, L.P.
10.28 (7) Agreement for Deed in Lieu of Foreclosure by and among G&L Realty Partnership, L.P., a
Delaware Limited Partnership, and Loan Asset Structured Trust I, a Delaware trust, dated as of
May 24, 1996.
10.29 (7) Property Management Agreement by and between Loan Asset Structured Trust I, a Delaware trust,
and G&L Realty Partnership, L.P., a Delaware Limited Partnership, and dated as of May 24, 1996.
10.30 (8) Mortgage Loan Agreement dated as of May 24, 1996 by and between G&L Medical Partnership, L.P.
as Borrower and Nomura Asset Capital Corporation as Lender.
</TABLE>
Page 22
<PAGE>
(C) EXHIBITS - (CONTINUED FROM PREVIOUS PAGE)
<TABLE>
<CAPTION>
Exhibit No. Note Description
- ----------- ---- -----------------------------------------------------------------------------------------------
<S> <C> <C>
10.31 (8) Agreement of Purchase and Sale of Membership Interest dated April 26, 1996 by and between
Milner Investment Corporation as Seller and G&L Realty Partnership, L.P. as Buyer.
10.32 (8) Letter of Agreement regarding purchase of Tustin Hospital to 445 North Bedford Drive, LLC from
G&L Realty Partnership, L.P., dated June 12, 1996.
10.33 (8) Redemption Agreement by and between G&L Realty Partnership, L.P. and 445 Bedford, LLC, dated
as of June 27, 1996.
10.34 (8) Property Contribution Agreement by and between G&L Realty Partnership, L.P. as Purchaser and
445 Bedford, LLC as Seller, dated as of June 28, 1996.
10.35 (8) Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing between 445 Bedford,
LLC and G&L Realty Partnership, L.P. as tenants in common ("Trustor"), Chicago Title Company
("Trustee"), and Tokai Bank of California ("Beneficiary"), made to be effective on June 12,
1996.
10.36 (9) Agreement of Purchase and Sale by and between Loan Asset Structured Trust I, a Delaware trust
("Seller") and G&L Medical Partnership, L.P., a Delaware limited partnership ("Buyer"), dated
August 29, 1996.
10.37 (9) Grant Deed in which Loan Asset Structured Trust I, a Delaware trust ("Grantor"), grants
certain real property to G&L Medical Partnership, L.P., a Delaware limited partnership
("Grantee"), recorded August 30, 1996.
10.38 (10) Limited Liability Company Agreement 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 creating a Limited Liability Company to be named GLN Capital Co., LLC, dated as of
November 25, 1996.
10.39 (10) 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 (10) 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 (10) 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 (11) Option Agreement, dated February 28, 1997, by and among G&L Realty Partnership, L.P., GLN
Capital Co., LLC and PHP Healthcare Corporation
10.43 (13) 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.
10.44 (13) Loan and Security Agreement by GLN Capital Co., LLC, a Delaware limited liability Company, and
G&L Realty Partnership, L.P., a Delaware limited partnership, dated as of June 1, 1997.
</TABLE>
Page 23
<PAGE>
(C) EXHIBITS - (CONTINUED FROM PREVIOUS PAGE)
<TABLE>
<CAPTION>
Exhibit No. Note Description
- ----------- ---- -----------------------------------------------------------------------------------------------
<C> <C> <S>
10.45 (14) First Amendment to GL/PHP, LLC Limited Liability Company Agreement by and among G&L Realty
Partnership, L.P., a Delaware limited partnership (the "Retiring Manager"), G&L Realty
Partnership, L.P., a Delaware limited partnership ("G&L Member"), and G&L Management Delaware
Corp., a Delaware corporation ("Manager Member"), made as of August 15, 1997.
10.46 (14) Lease Agreement between GL/PHP, a Delaware limited liability company (the "Landlord") and
Pinnacle Health Enterprises, LLC, a Delaware limited liability company wholly owned by PHP
Healthcare Corporation, a Delaware corporation (the "Tenant"), dated August 15, 1997
10.47 (14) Guaranty of Lease by PHP Healthcare Corporation, a Delaware corporation (the "Guarantor"),
dated February 15, 1997.
10.48 (14) Non-Negotiable 8.5% Note Due July 31, 2007 in which G&L Realty Partnership, L.P., a Delaware
limited partnership (the "Maker"), promises to pay to PHP Healthcare Corporation (the "Payee")
the principal sum of $2,000,000.00, dated August 15, 1997.
10.49 (14) Mortgage Note in which GL/PHP, LLC a Delaware limited liability company (the "Maker") promises
to pay to the order of Nomura Asset Capital Corporation, a Delaware corporation, the principal
sum of $16,000,000.00, dated August 15, 1997.
10.50 (14) Mortgage, Assignment of Leases and Rents and Security Agreement by GL/PHP, LLC a Delaware
limited liability company (the "Mortgagor") to Nomura Asset Capital Corporation, a Delaware
corporation (the "Mortgagee"), dated August 15, 1997.
10.51 (14) Assignment of Leases and Rents by GL/PHP, LLC a Delaware limited liability company (the
"Assignor") to Nomura Asset Capital Corporation, a Delaware corporation (the "Assignee"),
dated August 15, 1997.
10.52 (14) Environmental and Hazardous Substance Indemnification Agreement by GL/PHP, LLC a Delaware
limited liability company (the "Borrower") to Nomura Asset Capital Corporation, a Delaware
corporation (the "Lender"), dated August 15, 1997.
10.53 (16) Purchase and Sale Agreement, dated October 1, 1997, by and between Hampden Nursing Homes, Inc.
and G&L Senior Care, LLC.
10.54 (16) Lease and Agreement, dated October 1, 1997, by and between G&L Hampden, LLC and Hampden
Holding Group, Inc.
10.55 (16) Loan Commitment, dated October 23, 1997, by and between G&L Realty Partnership, L.P. and
Iatros Health Network, Inc.
10.56 (16) Lease and Agreement, dated October 1, 1997, by and between G&L Hampden, LLC and Hampden
Nursing Homes, Inc.
10.57 (16) Guaranty of Lease, dated October 1, 1997, by Iatros Health Network, Inc.
10.58 (16) Limited Liability Company Agreement of G&L Hampden, LLC.
10.59 (16) Loan Agreement by and between Nomura Asset Capital Corporation and G&L Hampden, LLC.
10.60 (16) Promissory Note in the amount of $6,000,000.00 given by G&L Hampden, LLC in favor of Nomura
Asset Capital Corporation.
10.61 (16) Form of Mortgage, Assignment of Rents, Security Agreement and Fixture Filing for each of the 3
Hampden Properties.
</TABLE>
Page 24
<PAGE>
(C) EXHIBITS - (CONTINUED FROM PREVIOUS PAGE)
<TABLE>
<CAPTION>
Exhibit No. Note Description
- ----------- ---- -----------------------------------------------------------------------------------------------
<C> <C> <S>
10.62 (17) Operating Agreement of AV Medical Associates, LLC, dated as of September 25, 1997.
10.63 (17) Real Estate Lease by and between AV Medical Associates, LLC and Hoag Memorial Hospital
Presbyterian.
10.64 (17) Assignment of Purchase Agreement and Development Management Agreement by and between G&L
Realty Partnership, L.P., Centrium Associates LLC and M&Z Aliso Associates, LLC.
10.65 (17) Amended and Restated Promissory Note in the Amount of $1,934,325.00 given by Hearthside
Skilled Nursing Facility, LLC in favor of G&L Realty Partnership, L.P.
10.66 (17) Amended and Restated Deed of Trust, Security Agreement, Fixture Filing with Assignment of
Rents and Agreements, dated as of September 29, 1997, by and between Hearthside Skilled
Nursing Facility, LLC and G&L Realty Partnership, L.P.
10.67 (17) Amended and Restated Assignment of Leases and Rents, dated as of September 29, 1997, by and
between Hearthside Skilled Nursing Facility, LLC and G&L Realty Partnership, L.P.
10.68 (17) Promissory Note in the Amount of $2,799,490.00 given by Valley Convalescent, LLC in favor of
G&L Realty Partnership, L.P.
10.69 (17) Deed of Trust, Security Agreement, Fixture Filing with Assignment of Rents and Agreements,
dated as of August 29, 1997, by and between Valley Convalescent, LLC and G&L Realty
Partnership, L.P.
10.70 (17) Assignment of Leases and Rents, dated as of August 29, 1997, by and between Valley
Convalescent, LLC and G&L Realty Partnership, L.P.
10.71 (17) Promissory Note in the amount of $870,000.00 given by Burley Skilled Nursing Facility, LLC in
favor of G&L Realty Partnership, L.P.
10.72 (17) Deed of Trust, Security Agreement, Fixture Filing with Assignment of Rents and Agreements,
dated as of September 29, 1997, by and between Burley Skilled Nursing Facility, LLC and G&L
Realty Partnership, L.P.
10.73 (17) Assignment of Leases and Rents, dated as of September 29, 1997, by and between Burley Skilled
Nursing Facility, LLC and G&L Realty Partnership, L.P.
10.74 (17) Promissory Note in the amount of $115,272.00 given by Valley Living Center, LLC in favor of
G&L Realty Partnership, L.P.
10.75 (17) Deed of Trust, Security Agreement, Fixture Filing with Assignment of Rents and Agreements,
dated as of September 29, 1997, by and between Valley Living Center, LLC and G&L Realty
Partnership, L.P.
10.76 (17) Assignment of Leases and Rents, dated as of September 29, 1997, by and between Valley Living
Center, LLC and G&L Realty Partnership, L.P.
11 Computation of Per Share Earnings
21 Subsidiaries of the registrant.
27 Financial Data Schedule
</TABLE>
Page 25
<PAGE>
1) Previously filed as an exhibit of like number to the Registrant's
Registration Statement on Form S-11 and amendments thereto (File No. 33-
68984) and incorporated herein by reference.
2) Previously filed as an exhibit of like number to the Company's Annual Report
on Form 10-K for the year ended December 31, 1993 and incorporated herein by
reference.
3) Previously filed as an exhibit of like number to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994 and incorporated herein by
reference.
4) Previously filed as Exhibits 10.1 (with respect to Exhibit 10.22), 10.2
(with respect to Exhibit 10.23), and 10.3 (with respect to Exhibit 10.24) to
the Registrant's Quarterly Report on Form 10-Q for the Quarter ended
September 30, 1995 and incorporated herein by reference.
5) Previously filed as an exhibit of like number to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995 and incorporated herein by
reference.
6) (Previously filed as an exhibit of like number to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996 and incorporated
herein by reference.
7) Previously filed as an exhibit of like number to the Company's Form 8-K
dated May 24, 1996 and incorporated herein by reference.
8) Previously filed as an exhibit of like number to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996 and incorporated
herein by reference.
9) Previously filed as an exhibit of like number to the Company's Form 8-K
dated August 30, 1996 and incorporated herein by reference.
10) 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.
11) 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.
12) Filed as an Exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997 and incorporated herein by reference.
13) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 and incorporated herein by reference.
14) Filed as an exhibit to the Company's Current Report on Form 8-K (filed as of
August 15, 1997) and incorporated herein by reference.
15) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q/A (filed
as of October 14, 1997) for the quarter ended June 30, 1997 and incorporated
herein by reference.
16) Filed as an exhibit to the Company's Current Report on Form 8-K (filed as of
October 28, 1997) and incorporated herein by reference.
17) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q (filed as
of November 5, 1997) for the quarter ended September 30, 1997 and
incorporated herein by reference.
c) Management contract or compensatory plan or arrangement.
Page 26
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
G&L REALTY CORP.
Date: August 13, 1998 By: /s/ David E. Hamer
----------------------------
David E. Hamer
Chief Accounting Officer
Page 27
<PAGE>
EXHIBIT 11
G&L Realty Corp
Computation of Per Share Earnings
Quarterly Report on Form 10-Q
June 30, 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Income $2,597 $1,282 $4,963 $2,388
Less: Preferred Dividends
10.25% Series A Cumulative Preferred 958 511 1,916 511
9.8% Series B Cumulative Preferred 845 ---- 1,690 ----
------ ------ ------ ------
Net income available to
common shareholders $ 794 $ 771 $1,357 $1,877
====== ====== ====== ======
Option shares outstanding 234 372 234 372
Weighted average exercise price 14.49 12.11 14.49 12.11
Proceeds upon exercise of options $3,391 $4,506 $3,391 $4,506
Weighted average price for period 17.57 16.33 18.73 16.81
Treasury stock shares 193 276 181 268
Common equivalent shares 41 96 53 104
Average shares outstanding 4,122 4,006 4,124 4,035
------ ------ ------ ------
Total common and common
equivalent shares outstanding 4,163 4,102 4,177 4,139
====== ====== ====== ======
Per share earnings data:
Basic $ 0.19 $ 0.19 $ 0.33 $ 0.46
Fully diluted $ 0.19 $ 0.19 $ 0.32 $ 0.46
</TABLE>
<PAGE>
EXHIBIT 21
G&L Realty Corp.
List of Subsidiaries
July 31, 1998
1. AV Medical Associates, LLC, a California limited liability company
2. G&L Hampden, Inc., a Delaware corporation
3. G&L Hampden, LLC a Delaware limited liability company
4. G&L Realty Partnership, L.P., a Delaware limited partnership
5. G&L Realty Financing II, Inc., a Delaware corporation
6. G&L Realty Financing Partnership II, L.P., a Delaware limited partnership
7. G&L Medical, Inc., a Delaware corporation
8. G&L Gardens, LLC, an Arizona limited liability company
9. G&L Management Delaware Corp., a Delaware corporation
10. G&L Senior Care, Inc., a Delaware corporation
11. G&L Medical Partnership, L.P., a Delaware limited partnership
12. GLN Capital Co. LLC, a Delaware limited liability company
13. GL/PHP, LLC a Delaware limited liability company
14. Theme World, L.P., a New Jersey limited partnership
15. Valley Convalescent, LLC, a California limited liability company
16. 435 N. Roxbury Drive, Ltd., a California limited partnership
17. G&L/M&Z Aliso Partners, a California general partnership
18. G&L - Grabel San Pedro, LLC
19. G&L Burbank, LLC
20. G&L Burbank Managers Corp., a California coporation
21. G&L Holy Cross, LLC
22. G&L Holy Cross Managers Corp., a California corporation
23. G&L Tustin, LLC
24. G&L Tustin Managers Corp., a California corporation
25. G&L Valencia, LLC
26. G&L Penasquitos, LLC
27. G&L Penasquitos, Inc.
28. GLH Pacific Gardens, LLC
29. GLH Pacific Gardens Corp., a California corporation
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 14,355
<SECURITIES> 0
<RECEIVABLES> 24,604
<ALLOWANCES> 1,336
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 170,622
<DEPRECIATION> 16,134
<TOTAL-ASSETS> 207,769
<CURRENT-LIABILITIES> 4,630
<BONDS> 115,865
0
29
<COMMON> 41
<OTHER-SE> 86,628
<TOTAL-LIABILITY-AND-EQUITY> 207,769
<SALES> 0
<TOTAL-REVENUES> 8,076
<CGS> 0
<TOTAL-COSTS> 1,506
<OTHER-EXPENSES> 1,817
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,093
<INCOME-PRETAX> 2,761
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,597
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,597
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
