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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transaction period from _____________ to _____________
COMMISSION FILE NUMBER 1-12566
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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
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $.01 par value New York Stock Exchange
Series A Preferred Stock, $.01 par value New York Stock Exchange
Series B Preferred Stock, $.01 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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This Annual Report on Form 10-K/A is being filed by G & L Realty Corp. (the
"Company") to (i) correct the "Ratio of total debt to total market
capitalization" as shown in the table of Consolidated Selected Financial Data
included in Part II, Item 6 for the years ended December 31, 1996, 1995, 1994
and 1993 (this page 28 supercedes and replaces page 28 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (the "Form 10-K)); and
(ii) correct the number of options exercisable and the weighted-average exercise
price based upon market value at the grant date as of December 31, 1997 included
in Note 14 of the "Notes to Consolidated Financial Statements" (pages F-19 and
F-20 included herewith, supercede and replace pages F-19 and F-20 of the Form
10-K).
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<TABLE>
<CAPTION>
At or for the Year ended December 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Funds From Operations (1):
- -------------------------
Operating Partnership funds from operations............ $ 8,366 $ 8,028 $ 7,397 $ 7,042
Minority interest in consolidated partnership.......... (917) (847) (747) (700) --
-------- -------- -------- -------- --------
Funds from operations.................................. $ 7,449 $ 7,181 $ 6,650 $ 6,342 --
======== ======== ======== ======== ========
Dividends paid......................................... $ 5,953 $ 5,525 $ 5,067 $ 6,821 --
======== ======== ======== ======== ========
Payout ratio........................................... 79.9% 76.9% 76.2% 107.6% --
Common shares and units outstanding:
Weighted average shares............................. 4,049 4,063 4,091 4,159 --
Weighted average shares and units................... 4,547 4,542 4,550 4,618 --
Dividends/distributions declared per share/unit........ $ 1.47 $ 1.36 $ 1.24 $ 1.64 $ 0.07
Cash Flow Data:
- --------------
Net cash provided by operating activities.............. $ 9,045 $ 5,726 $ 7,862 $ 7,632 $ 2,094
Net cash used in investing activities.................. (49,534) (23,413) (37,037) (31,552) (17,724)
Net cash provided by financing activities.............. 58,833 17,283 28,675 21,849 18,871
Balance Sheet Data:
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Land, buildings and improvements,
net................................................. $138,782 $ 93,231 $ 92,147 $ 92,715 $ 51,908
Mortgage loans and bonds receivable, net............... 14,098 34,576 33,634 -- 12,200
Total investments...................................... 152,880 127,807 125,781 92,715 64,108
Total assets........................................... 189,380 135,996 133,347 98,384 71,840
Total debt............................................. 95,172 109,025 111,627 74,018 45,500
Total stockholders' equity............................. 88,924 22,448 18,267 21,311 25,038
Other Data:
- ----------
Ratio of earnings to fixed charges and preferred
dividends (2)....................................... 1.36x 1.59x 1.61x 1.83x --
Ratio of funds from operations to fixed
charges and preferred dividends (3)................. 1.77x 1.88x 2.09x 2.66x --
Ratio of total debt to total market
capitalization (4).................................. 35.9% 63.8% 79.0% 62.4% 36.9%
Number of properties................................... 25 15 12 12 7
</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
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 the National Association of Real Estate Investment Trusts ("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) For purposes of these computations, earnings consist of net income plus
fixed charges. Fixed charges and preferred dividends consist of interest
expense, capitalized interest, amortization of deferred financing costs and
preferred dividends paid to preferred stock holders during the period.
3) For purposes of these computations, ratio of funds from operations to fixed
charges consists of FFO as defined in note (1) plus fixed charges and
preferred dividends paid to preferred stock holders during the period. Fixed
charges and preferred dividends consist of interest expense, capitalized
interest, amortization of deferred financing costs and preferred dividends
paid to preferred stock holders during the period.
4) Total market capitalization as of the dates presented is long-term 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 plus the liquidation value of the
Preferred Stock outstanding.
- 28 -
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In December 1995, the Company canceled outstanding options for 218,800 shares
of Common Stock which were originally issued at the time of the Company's
initial public offering at an average exercise price of $18.25 per share.
Concurrently, the Company issued new unvested options for the same aggregate
amount with exercise prices of $9.625 per share, the market price on the date
the new options were granted.
A summary of the status of the Company's stock incentive plan as of December
31, 1997, 1996, 1995, and changes during the years ending on those dates is
presented in the following table. The average price presented below represents
the weighted average exercise price based upon the market value at the grant
date.
<TABLE>
<CAPTION>
1997 1996 1995
------------------- ------------------ ------------------
Average Average Average
Shares Price Shares Price Shares Price
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding
beginning of year 367,000 $11.95 257,000 $10.10 238,000 $18.20
Granted 59,500 18.75 143,000 15.00 242,000 9.65
Exercised (134,000) 9.65 (1,000) 9.15 -- --
Forfeited or canceled (49,000) 15.00 (32,000) 10.70 (223,000) $18.25
-------- ------- ------- ------- -------- --------
Outstanding,
end of year 243,000 $14.25 367,000 $11.95 257,000 $10.10
======== ======= ======= ======= ======== ========
Options exercisable
at year-end 57,000 $14.60 89,000 $10.80 21,000 $15.50
Weighted-average fair
value of options
granted during
the year $2.25 $2.50 $1.30
</TABLE>
The following table summarizes information relating to the Company's stock
incentive plan as of December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding
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Average
Remaining life Number
Exercise Price Number (in months) Exercisable
=========================================================================================
<C> <C> <C> <C>
$ 9.15 2,000 89 2,000
9.65 72,000 96 3,000
10.00 2,000 90 2,000
10.40 3,000 95 3,000
13.65 37,000 100 14,000
13.75 20,000 102 7,000
15.65 1,000 105 --
15.75 21,000 113 --
16.75 8,000 117 2,000
17.00 35,000 108 12,000
17.65 12,000 72 12,000
20.15 30,000 120 --
---------------- ----------------
243,000 57,000
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</TABLE>
F-19
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Fair value of the plan- As of December 31, 1997 the Company estimated the
fair value of all options granted to be $717,618, calculated based on the
following assumptions:
Weighted average grant price of stock............ $14.25
Risk-free interest rate........................... 5.77%
Expected life of the option...................... 3 years
Expected volatility of stock..................... 21.00%
Expected dividends............................... $ 1.56
The Company assumes that the equivalent risk-free interest rate is the
closing market rate, on the last trading day of the year, for ten-year treasury
bills.
The Company's stock incentive plan was introduced in conjunction with its
initial public offering on December 16, 1993. Based upon the number of options
exercised and cancelled since the inception of the plan, the Company assumes the
estimated life of the outstanding option agreements, to be three years.
The Company uses the treasury stock method for purposes of determining the
number of shares to be issued to in conjunction with the Company's stock
incentive plan. At a weighted-average exercise price of $14.25 and a market
price of $21.20 per share as of December 31, 1997, the number of shares to be
issued is 80,000.
15. CONCENTRATION OF CREDIT RISK
The Company is subject to the all risks associated with leasing property,
including but not limited to, the risk that upon the expiration of leases for
space located in the Company's properties, the leases may not be renewed, the
space may not be relet or the terms of renewal or releasing (including any cost
of required renovations or concessions to tenants) may be less favorable than
current lease terms. If the Company is unable to promptly relet or renew leases
for a significant portion of its space or if the rental rates upon renewal or
reletting are significantly lower than expected, the Company's earnings and the
ability to make distributions to stockholders may be adversely affected. Most
of the tenants in the Company's healthcare properties provide specialized health
care services. The ability of the tenants to honor the terms of their
respective leases is dependent upon the economic, regulatory and social factors
affecting the communities and industry in which the tenants operate.
Many of the Company's medical office properties are in close proximity to one
or more local hospitals. Relocation or closure of a local hospital could make
the Company's nearby properties (particularly those outside of the Beverly Hills
area) less desirable to doctors and healthcare providers affiliated with the
hospital and affect the Company's ability to collect rent due under existing
leases, renew leases and attract new business.
A substantial portion of the Company's assets are invested in debt
instruments secured by long-term senior care or skilled nursing facilities. The
ability of the facility owners to pay their obligations as they come due, as
well as their ability to obtain other permanent financing through the sale of
bonds or other forms of long-term financing is dependent upon their ability to
attract patients who are able to pay for the services they require. These
facilities have complex licensing requirements as do the professionals they
employ. The majority of the services rendered are paid by various federal,
state and local agencies. Each of these facilities function in a complex
environment of changing government regulations which have a significant impact
on economic viability.
The Company leases the six New Jersey primary care facilities to one tenant,
PHP Healthcare Corporation, a NYSE listed company ("PHP"). The annualized rent
paid to the Company by PHP is approximately $2.7 million or 13.3% of the $20.3
million in rental revenues recognized by the Company in 1997. The Company
believes that the current management of PHP is experienced and that PHP will be
able to pay its obligations under the lease as they become due. Not
withstanding management's belief, however, the financial position of the
Company, and its ability
F-20
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: April 22, 1998 By: /s/ Quentin Thompson
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Quentin Thompson
Principal Financial and Accounting Officer,
Treasurer and Secretary
