<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, 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 May 13, 1998 was 4,114,033 shares.
================================================================================
<PAGE>
G&L REALTY CORP.
INDEX
<TABLE>
<CAPTION>
PAGE
PART I FINANCIAL INFORMATION NUMBER
<C> <S> <C>
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1998 (unaudited) and
December 31, 1997............................................................ 3
Condensed Consolidated Statements of Operations for the Three Month Periods
Ended March 31, 1998 and 1997 (unaudited).................................... 4
Condensed Consolidated Statements of Cash Flows for the Three Month Periods
Ended March 31, 1998 and 1997 (unaudited)...................................... 5
Condensed Consolidated Statements of Cash Flows: Supplemental Schedule of
Noncash Investing and Financing Activities for the Three Month Periods
Ended March 31, 1998 and 1997 (unaudited)................................... 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 - 18
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 Security Holders............................ 19
Item 5 Other Information.............................................................. 19
Item 6 Exhibits and Reports on Form 8-K............................................... 20 - 25
Signature ............................................................................... 26
</TABLE>
Page 2
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
------
Rental properties (Note 3):
Land $ 27,470,000 $ 27,470,000
Building and improvements, net 114,500,000 111,312,000
------------ ------------
Total rental properties 141,970,000 138,782,000
Cash and cash equivalents 2,597,000 13,609,000
Restricted cash 3,855,000 7,745,000
Tenant rent and reimbursements receivable, net 1,225,000 1,333,000
Unbilled rent receivable, net 1,881,000 1,815,000
Other receivables, net 770,000 972,000
Mortgage loans and bonds receivable, net 18,679,000 14,098,000
Investments in unconsolidated affiliates (Note 6) 13,429,000 8,591,000
Deferred charges and other assets, net(Note 4) 3,291,000 2,435,000
------------ ------------
TOTAL ASSETS $187,697,000 $189,380,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Notes payable $ 94,734,000 $ 95,172,000
Accounts payable and other liabilities 1,800,000 1,920,000
Distributions payable 1,804,000 1,801,000
Tenant security deposits 1,120,000 1,046,000
------------ ------------
Total liabilities 99,458,000 99,939,000
Commitments and Contingencies (Note 8) --- ---
Minority interest in consolidated affiliates (2,353,000) (2,399,000)
Minority interest in Operating Partnership 2,770,000 2,916,000
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 March 31, 1998 and
December 31, 1997 15,000 15,000
. Series B Preferred - 1,380,000 shares issued and
outstanding as of March 31, 1998 and December 31, 1997 14,000 14,000
Common shares - $.01 par value, 50,000,000 shares
authorized, 4,129,033 and 4,120,100 shares issued
and outstanding as of March 31, 1998 and
December 31, 1997, respectively 41,000 41,000
Additional paid-in capital 91,770,000 91,656,000
Distributions in excess of net income (4,018,000) (2,802,000)
------------ ------------
Total stockholders' equity 87,822,000 88,924,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $187,697,000 $189,380,000
============ ============
</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,
1998 1997
----------------------------
(Unaudited)
<S> <C> <C>
REVENUES:
Rental $5,882,000 $4,510,000
Tenant reimbursements 129,000 249,000
Parking 359,000 360,000
Interest, loan fees and related income 1,056,000 1,575,000
Other 58,000 109,000
---------- ----------
Total revenues 7,484,000 6,803,000
EXPENSES:
Property operations 1,411,000 1,666,000
Depreciation and amortization 1,060,000 785,000
Interest 1,916,000 2,635,000
General and administrative 689,000 477,000
---------- ----------
Total expenses 5,076,000 5,563,000
---------- ----------
Income from operations before minority
interests and earnings from
unconsolidated affiliates 2,408,000 1,240,000
Equity in earnings of unconsolidated affiliate 52,000 52,000
Minority interest in consolidated affiliates (46,000) (49,000)
Minority interest in Operating Partnership (48,000) (136,000)
---------- ----------
Net income $2,366,000 $1,107,000
========== ==========
Per share earnings:
Basic $ 0.14 $ 0.27
Fully diluted $ 0.13 $ 0.27
Weighted average shares outstanding:
Basic 4,129,000 4,063,000
Fully diluted 4,174,000 4,175,000
</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,
1998 1997
----------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,366,000 $ 1,107,000
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 1,060,000 785,000
Deferred interest costs 39,000 166,000
Minority interests 94,000 185,000
Equity in income from affiliates (52,000) (52,000)
Gain on sale of assets held for sale --- (556,000)
Unbilled rent receivable (64,000) (117,000)
Allowance for doubtful notes and accounts receivable (202,000) 33,000
(Increase) decrease in:
Other receivables 402,000 (30,000)
Tenant rent and reimbursements receivable 108,000 112,000
Prepaid expense and other assets (310,000) (91,000)
Accrued interest receivable and loan fees (396,000) (1,027,000)
Increase (decrease) in:
Accounts payable and other liabilities (120,000) 235,000
Tenant security deposits 74,000 ---
------------ ------------
Net cash provided by operating activities 2,999,000 750,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of rental properties (4,148,000) (22,384,000)
Additions to rental properties (70,000) (229,000)
Proceeds from sale of assets available for sale --- 20,000
Pre-acquisition costs (105,000) (10,000)
Construction-in-progress (431,000) ---
Leasing commissions (44,000) (14,000)
Investment in notes and bonds receivable (4,770,000) ---
Principal reductions received on notes receivable 585,000 ---
Investments in affiliates, net of cash distributions received (4,786,000) (2,513,000)
------------ ------------
Net cash used in investing activities (13,769,000) (25,130,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable proceeds --- 26,253,000
Repayment of notes payable (438,000) (297,000)
Deferred financing costs (35,000) (201,000)
Decrease (increase) in restricted cash 3,890,000 (478,000)
Sale of common stock and partnership units 114,000 ---
Minority interest equity contribution --- 858,000
Distributions (3,773,000) (1,642,000)
------------ ------------
Net cash provided by (used in) financing activities (242,000) 24,493,000
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (11,012,000) 113,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 13,609,000 265,000
------------ ------------
CASH AND CASH EQUIVALENTS CASH AT END OF PERIOD $ 2,597,000 $ 378,000
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest $ 1,995,000 $ 2,450,000
============ ============
</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,
1998 1997
----------------------------
(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 $2,405,000 $ 1,642,000
========== ===========
</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 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")*
* The Realty Financing Partnership, the Medical Partnership, Maryland
Gardens, GL/PHP, and Hampden are herein defined collectively as the
"Financing Entities" and individually as the "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 in the
State of Delaware ( collectively, the "Subsidiaries" and individually, a
"Subsidiary"). Each Subsidiary owns, as sole general partner or sole managing
member, a 1% ownership interest in its related Financing Entity. The remaining
99% ownership interest in each Financing Entity 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) and Valencia (in
which the Operating Partnership owns an 80% membership interest and is the sole
managing member).
The Company also owns interests in various unconsolidated affiliates.
Although the Company's investment represents a significant portion of the
capital of such 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 affiliates in the consolidated financial statements of the Company. The
Company has unconsolidated financial interests in the following entities:
. GLN Capital Co., LLC ("GLN Capital"), a Delaware limited liability
company formed in 1996. GLN Capital, an unconsolidated affiliate, 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.
Page 7
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
. 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"), who each hold a 50% ownership interest. 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, who each hold a 50% ownership interest. The 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 intends to build a 33,000 square foot,
three story 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, who
each hold a 50% ownership interest. Aliso Partners was formed for the
purpose of acquiring a vacant parcel of land in Aliso Viejo, California
upon which the partners intends to develop a 52,000 square foot retail
building.
. G&L - Grabel, San Pedro, LLC ("San Pedro") is a limited liability
company, which was formed on March 10, 1998 for the purpose of acquiring
four medical office buildings located at 1360 West 6/th/ street in San
Pedro, California. The Company and Gary Grabel, who is the managing
member, hold a 50% and 50% ownership interest, respectively. San Pedro
acquired the facilities on March 25, 1998.
GLN Capital, Valley Convalescent, AV Medical, Aliso Partners and San Pedro
are herein defined collectively 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 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 the Roxbury
Partnerhsip and Valencia 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 periods ended
March 31, 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 ended March 31,
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.
Page 8
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
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
ended March 31, 1998 and 1997. The Condensed Consolidated Statements of Cash
Flows have been prepared to reflect the operations of the Company for the three
months ended March 31, 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 March
31, 1998 and 1997 there were approximately 198,000 and 354,200 stock options
outstanding with a weighted average exercise prices of $14.00 and $11.95,
respectively. The closing market price of the Company's common shares as
reported by the New York Stock Exchange was $18.10 and $17.50 on March 31, 1998
and 1997, respectively. Based upon the number and amounts of vested and
unvested options outstanding, the dilutive effect on the Company's outstanding
shares as of March 31, 1998 and 1997 is 45,000 and 112,000 shares, respectively.
3. BUILDINGS AND IMPROVEMENTS
Buildings and improvements consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
============================
(Unaudited)
<S> <C> <C>
Buildings and improvements............. $122,730,000 $118,799,000
Tenant improvements.................... 4,937,000 4,946,000
Furniture, fixtures and equipment...... 1,924,000 1,628,000
------------ ------------
129,591,000 125,373,000
Less accumulated depreciation and
amortization......................... (15,091,000) (14,061,000)
------------ ------------
Total........................ $114,500,000 $111,312,000
============ ============
</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 costs directly related to acquisitions
are capitalized.
Page 9
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
4. DEFERRED CHARGES AND OTHER ASSETS
Deferred charges and other assets consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
=========================
(Unaudited)
<S> <C> <C>
Deferred financing costs........... $1,704,000 $1,669,000
Construction-in-progress........... 731,000 300,000
Pre-acquisition costs.............. 105,000 ---
Leasing commissions................ 625,000 581,000
Prepaid expense and other assets... 582,000 273,000
---------- ----------
3,747,000 2,823,000
Less accumulated amortization...... (456,000) (388,000)
---------- ----------
Total.................... $3,291,000 $2,435,000
========== ==========
</TABLE>
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
three month period ended March 31, 1998 and for the year ended December 31,
1997:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
=================================
<S> <C> <C>
(Unaudited)
Distributions in excess of net income
at beginning of period................. $(2,802,000) $(1,303,000)
Net income during period................ 2,366,000 6,561,000
Less: Distributions declared............ (3,582,000) (8,060,000)
----------- -----------
Distributions in excess of net income... $(4,018,000) $(2,802,000)
=========== ===========
</TABLE>
At various times during the three months ended March 31, 1998 the Company
repurchased a total of 8,900 shares of the Company's Common Stock at an average
price of approximately $18.35 per share.
Page 10
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
6. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
The Company has investments in various limited liability companies and a
general partnership. Although the Company's investment represents a significant
portion of the capital of such 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 affiliates in the consolidated financial
statements of the Company. The Company has unconsolidated financial interests in
the following entities:
. GLN Capital was formed in 1996 with Nomura to provide short-term
financing and participating loans secured by health care properties
throughout the United States. The Company commenced operations in
January 1997. The Company holds a 49.9% interest in GLN Capital.
. Valley Convalescent was formed in August 1997 with Continuum to acquire
a fee interest in Valley Convalescent Center, a 123-bed skilled nursing
facility located in El Centro, California. The Company and Continuum,
each hold a 50% ownership interest. Valley Convalescent acquired the
facility in December, 1997.
. AV Medical was formed in September, 1997 together with M&Z Aliso
Associates, LLC for the purpose of acquiring a vacant parcel of land in
Aliso Viejo, California upon which AV Medical intends to build a 33,000
square foot, three story MOB. The development land was acquired on
October 24, 1997. M&Z Aliso Associates, LLC is the managing member of
AV Medical.
. Aliso Partners is a general partnership which was formed in December,
1997 with M&Z Aliso Associates, LLC for the purpose of acquiring a
vacant parcel of land in Aliso Viejo, California upon which the
partners intend to develop a 52,000 square foot retail building. The
partners each hold a 50% ownership interest. The property was acquired
on December 31, 1997.
. San Pedro was formed on March 10, 1998 for the purpose of acquiring
four medical office buildings located at 1360 West 6th street in San
Pedro, California. The Company and Gary Grabel, who is the managing
member, each have a 50% ownership interest. The Company is entitled to
receive a preferred return on its $1.2 million of invested capital. San
Pedro acquired the facilities on March 25, 1998.
The following table provides a summary of the Company's investment in each
of these entities as of March 31, 1998.
<TABLE>
<CAPTION>
Valley Aliso G&L-Grabel
GLN Capital Convalescent AV Medical Partners San Pedro
====================================================================
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1998................ $ 2,730,000 $ 311,000 $ 600,000 $550,000 $ ---
Equity in earnings of affiliates.......... 36,000 16,000 --- --- ---
Cash contributions........................ --- --- --- --- 1,200,000
Return of capital and cash
distributions........................... (2,113,000) (11,000) --- --- ---
----------- ---------- ---------- -------- ----------
Equity, before inter-company
adjustments............................. 653,000 316,000 600,000 550,000 1,200,000
----------- ---------- ---------- -------- ----------
Intercompany transactions:
Adjustments/eliminations................ --- 81,000 --- --- (50,000)
Receivable (payable), net............... --- 2,842,000 2,384,000 --- 4,853,000
----------- ---------- ---------- -------- ----------
Investment in unconsolidated
affiliates.............................. $ 653,000 $3,239,000 $2,984,000 $550,000 $6,003,000
=========== ========== ========== ======== ==========
</TABLE>
Page 11
<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 three months ended March 31, 1998.
<TABLE>
<CAPTION>
Valley Aliso
GLN Capital Convalescent AV Medical Partners San Pedro
=======================================================================
<S> <C> <C> <C> <C> <C>
Financial Position:
- -------------------
Land............................. $ --- $ 382,000 $ 1,738,000 $ 3,107,000 $ 1,882,000
Buildings........................ --- 2,721,000 --- --- 4,392,000
Notes and bonds receivable, net.. 1,274,000 --- --- --- ---
Other Assets..................... 85,000 436,000 1,678,000 1,234,000 275,000
Notes payable.................... --- (2,799,000) (2,406,000) (3,226,000) (5,100,000)
Other liabilities................ (53,000) (58,000) (210,000) (15,000) (104,000)
---------- ----------- ----------- ----------- -----------
Net assets................................. $1,306,000 $ 682,000 $ 800,000 $ 1,100,000 $ 1,345,000
========== =========== =========== =========== ===========
Partner's equity:
- -----------------
G&L Realty Partnership, L.P...... $ 653,000 $ 316,000 $ 600,000 $ 550,000 $ 1,200,000
Others........................... 653,000 366,000 200,000 550,000 145,000
---------- ----------- ----------- ----------- -----------
Total Equity............................... $1,306,000 $ 682,000 $ 800,000 $ 1,100,000 $ 1,345,000
========== =========== =========== =========== ===========
Operations:
- -----------
Revenues......................... $ 224,000 $ 150,000 $ --- $ --- $ 17,000
Expenses......................... 156,000 103,000 --- --- (103,000)
---------- ----------- ----------- ----------- -----------
Net income................................. $ 68,000 $ 47,000 $ --- $ --- $ (86,000)
========== =========== =========== =========== ===========
Allocation of net income:
- -------------------------
G&L Realty Partnership, L.P...... $ 36,000 $ 16,000 $ --- $ --- $ ---
Others........................... 32,000 31,000 --- --- (86,000)
---------- ----------- ----------- ----------- ===========
Net income................................. $ 68,000 $ 47,000 $ --- $ --- $ (86,000)
========== =========== =========== =========== ===========
</TABLE>
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, an unconsolidated operating venture with
Nomura. The tables on the following pages reconcile the Company's income and
expense activity for the three months ended March 31, 1998 and 1997 and balance
sheet data as of March 31, 1998.
Page 12
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
<TABLE>
<CAPTION>
1998 RECONCILIATION OF REPORTABLE SEGMENT INFORMATION
For the three months ended March 31, 1998
Property Debt
Investments Obligations Other Total
===============================================================
(Amounts in thousands)
<S> <C> <C> <C> <C>
Revenue:
Rents, tenant reimbursements and parking............. $6,370 $ --- $ --- $6,370
Interest, loan fees and related revenues............. 45 848 163 1,056
Other................................................ 39 4 15 58
------ ------ ------- ------
Total revenues.................................. 6,454 852 178 7,484
------ ------ ------- ------
Expenses:
Property operations.................................. 1,364 47 --- 1,411
Depreciation and amortization........................ 1,045 --- 15 1,060
Interest............................................. --- --- 1,916 1,916
General and administrative........................... --- --- 689 689
------ ------ ------- ------
Total expenses.................................. 2,409 47 2,620 5,076
------ ------ ------- ------
Income from operations before minority interests..... $4,045 $ 805 $(2,442) $2,408
====== ====== ======= ======
</TABLE>
<TABLE>
<CAPTION>
1997 RECONCILIATION OF REPORTABLE SEGMENT INFORMATION
For the three months ended March 31, 1997
Property Debt
Investments Obligations Other Total
===============================================================
(Amounts in thousands)
<S> <C> <C> <C> <C>
Revenue:
Rents, tenant reimbursements and parking............. $5,119 $ --- $ --- $5,119
Interest, loan fees and related revenues............. 22 1,510 43 1,575
Other................................................ 91 --- 18 109
------ ------ ------- ------
Total revenues.................................. 5,232 1,510 61 6,803
------ ------ ------- ------
Expenses:
Property operations.................................. 1,608 58 --- 1,666
Depreciation and amortization........................ 771 --- 14 785
Interest............................................. --- --- 2,635 2,635
General and administrative........................... --- --- 477 477
------ ------ ------- ------
Total expenses.................................. 2,379 58 3,126 5,563
------ ------ ------- ------
Income from operations before minority interests..... $2,853 $1,452 $(3,065) $1,240
====== ====== ======= ======
</TABLE>
Page 13
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
<TABLE>
<CAPTION>
1998 RECONCILIATION OF REPORTABLE SEGMENT INFORMATION
As of March 31, 1998
Property Debt
Investments Obligations Other Total
===================================================================
(Amounts in thousands)
<S> <C> <C> <C> <C>
Rental Properties.................................. $141,970 $ --- $ --- $141,970
Mortgage loans and bonds receivable, net........... --- 18,679 --- 18,679
Other Assets....................................... 8,846 516 17,686 27,048
-------- ------- ------- --------
Total assets.................................. $150,816 $19,195 $17,686 $187,697
======== ======= ======= ========
Other Assets:
Cash and cash equivalents........................ $ --- $ --- $ 2,597 $ 2,597
Restricted cash.................................. 3,855 --- --- 3,855
Tenant rent and reimbursements
receivable, net................................ 1,225 --- --- 1,225
Unbilled rent receivable, net.................... 1,881 --- --- 1,881
Other receivables, net........................... 224 516 30 770
Investment in unconsolidated affiliates.......... --- --- 13,429 13,429
Deferred financing costs, net.................... --- --- 1,449 1,449
Pre-acquisition costs............................ --- --- 105 105
Construction in progress......................... 731 --- --- 731
Deferred lease costs, net........................ 424 --- --- 424
Prepaid expense and other........................ 506 --- 76 582
-------- ------- ------- --------
Total other assets............................ $ 8,846 $ 516 $17,686 $ 27,048
======== ======= ======= ========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Neither the Company, any of its consolidated or unconsolidated affiliates
nor any of the assets within their portfolios of medical office buildings,
senior care facilities, parking facilities, and retail space is currently a
party to any material litigation.
Page 14
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
9. SUBSEQUENT EVENTS
On April 22, 1998, the Company obtained $20.5 million in new, 10 year
secured financing at an annual interest rate of 7.05%. The loan proceeds were
partially used to refinance approximately $7.6 million of existing short-term
variable debt secured by the 435 North Roxbury property. The remaining $12.9
million will be used to finance additional acquisitions and development
opportunities. The following table provides details of the new loans.
<TABLE>
<CAPTION>
Loan Monthly Pay off on
Security Proceeds Payment April 22, 2008
-------- -------- ------- --------------
<S> <C> <C> <C>
435 N. Roxbury Dr.
Beverly Hills, CA....... $ 7,830,000 $ 56,116 $ 6,203,000
11550 Indian Hills Rd
Mission Hills, CA....... 8,100,000 58,051 6,417,000
1095 Irvine Blvd.
Tustin, CA.............. 1,333,000 9,554 1,056,000
2031 W. Alameda St
Burbank, CA............. 3,267,000 23,414 2,588,000
----------- -------- -----------
Total................... $20,530,000 $147,135 $16,264,000
=========== ======== ===========
</TABLE>
The loans may be paid-off at any time following the third anniversary of
the funding date, the Company will have the right, upon thirty days notice, to
make payment in full, but not in part, of the principal balance of the loans,
together with all accrued and unpaid interest thereon and all other amounts due.
The prepayment fee for the loans shall be two percent (2%) during the fourth,
fifth and sixth years and one percent (1%) during the seventh, eighth, and ninth
years. There is no prepayment fees after the ninth anniversary.
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 Three Month Period Ended March 31, 1998 versus the Three
Month Period Ended March 31, 1997.
Total revenues increased by $681,000 from $6,803,000 in the first quarter of
1997 to $7,484,000 for the same period in 1998. Rents, tenant reimbursements
and parking revenues increased an aggregate $1,251,000 or 24% from a combined
total of $5,119,000 during the first quarter of 1997 to $6,370,000 for the same
period in 1998. Increases in rents, tenant reimbursements and parking revenues
were related to the acquisition of the six New Jersey properties and the three
nursing homes in Massachusetts. Interest, loan fees and related revenues derived
from loans secured by senior care facilities were down $519,000 from the first
quarter of 1997, primarily due to the $556,000 gain from the sale of the Hampden
Bonds on March 31, 1997.
Expenses decreased by $487,000, from $5,563,000 in the first quarter of 1997
to $5,076,000 for the same period in 1998. Property operations decreased 15% or
$255,000 from $1,666,000 in the first quarter of 1997 to $1,411,000 for 1998.
This reduction is part of management's ongoing efforts to reduce property
operating costs and included a reduction of property taxes as a result of the
Company's successful efforts in appealing the assessed value of its properties.
Depreciation and amortization increased as a result of new property acquisitions
in 1997, including, but not limited to, the acquisition of the six New Jersey
properties and the three nursing homes in Massachusetts. Interest expense
decreased $719,000 or 27% from $2,635,000 in the first quarter of 1997 to
$1,916,000 in 1998. This decrease in interest expense is a result of the
reduction of the Company's notes payable which were paid down with the net
proceeds of the $71.9 million offerings of preferred stock in 1997. General and
administrative expense increased in the first quarter of 1998 by $212,000 or 44%
from $477,000 in 1997 to $689,000 in 1998. This increase is related to the
Company's addition of acquisition, development and support personnel.
Liquidity and Capital Resources
- -------------------------------
As of March 31, 1998, the Company's net investment in real estate assets
totaled approximately $142.0 million, $13.4 million in joint ventures and $18.7
million invested in notes (including an
Page 16
<PAGE>
allowance for doubtful accounts of $825,000). Of the $18.7 million of notes
receivable, $17.6 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 medical office
buildings 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 and credit line. The Company's
ability to expand its medical office 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 quarter of 1998 in the amount of $0.39 per
share which was paid on April 15, 1998 to stockholders of record on March 31,
1998. The Company also paid a monthly dividend to holders of the Company's
Preferred Stock on the fifteenth day of each of January, February, March and
April 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 through December 31,
1997. The Company distributed $1.8 million to holders of the Company's Common
Stock in the first quarter while the Company earned $1.4 million in FFO. The
excess of distributions over earnings, as measured by FFO, is anticipated to be
a temporary situation until the Company is able to invest the funds from the
November 1997 Series B Preferred Stock offering and the additional $12.9 million
refinancing proceeds received in April 1998 (see discussion of refinancing
transaction in the Subsequent Events note contained in the Company's Condensed
Consolidated Financial Statements included in this Quarterly Report on
Form 10-Q). The Company does not anticipate that FFO will equal or exceed the
current distribution level on the Company's Common Stock until sufficient
additional investments are made in income producing assets. The Company is
actively seeking such investments. 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.
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 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 month periods ended March 31, 1998 and 1997.
Page 17
<PAGE>
G&L REALTY CORP.
FUNDS FROM OPERATIONS AND ADDITIONAL DATA
(Unaudited)
<TABLE>
<CAPTION>
For the Three Month
Periods Ended March 31,
1998 1997
-------------------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C>
FUNDS FROM OPERATIONS/1/
- ------------------------
Net income....................................................... $ 2,366 $ 1,107
Minority interest in Operating Partnership....................... 48 136
-------- --------
Income (loss) for Operating Partnership.......................... 2,414 1,243
Depreciation of real estate assets............................... 955 751
Amortization of deferred lease costs............................. 30 20
Adjustment for minority interest in consolidated affiliates...... (8) (15)
Dividends on preferred stock..................................... (1,972) ---
-------- --------
FUNDS FROM OPERATIONS/2/......................................... $ 1,419 $ 1,999
======== ========
Weighted average shares outstanding/2/........................... 4,628 4,561
ADDITIONAL DATA
- ---------------
Cash Flows:
- -----------
Operating Activities............................... 2,999 750
Investing Activities............................... (13,769) (25,130)
Financing Activities............................... (242) 24,493
Capital Expenditures
- --------------------
Building improvements.............................. 53 102
Tenant improvements................................ 15 120
Furniture, fixtures & equipment.................... 2 7
Leasing commissions................................ 44 14
Depreciation and Amortization
- -----------------------------
Depreciation of real estate assets................. 955 751
Depreciation of non-real estate assets............. 75 14
Amortization of deferred lease costs............... 30 20
Amortization of capitalized financing costs........ 39 166
Accrued rent in excess of billed rent............................ 79 117
</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 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.
Page 18
<PAGE>
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 medical office buildings, 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.
None.
Item 5. Other Information.
None.
Page 19
<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 20
<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 21
<PAGE>
(C) EXHIBITS - (CONTINUED FROM PREVIOUS PAGE)
<TABLE>
<CAPTION>
Exhibit No. Note Description
- ----------- ---- --------------------------------------------------------------------------------------------
<C> <C> <S>
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 22
<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 23
<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 24
<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 25
<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: May 13, 1998 By: /s/ Quentin Thompson
-------------------------------------
Quentin Thompson
Secretary, Treasurer
and Chief Accounting and
Financial Officer
Page 26
<PAGE>
EXHIBIT 11
G&L Realty Corp
Computation of Per Share Earnings
Quarterly Report on Form 10-Q
March 31, 1998
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Proceeds upon exercise of options $3,584,000 $6,195,000
Market price of shares:
As of March 31 $ 18.10 $ 17.50
Weighted average $ 14.00 $ 11.95
Option shares outstanding 198,000 354,000
Common equivalent shares 45,000 112,000
Average shares outstanding 4,129,000 4,063,000
---------- ----------
Total common and common
equivalent shares outstanding 4,174,000 4,175,000
========== ==========
Net Income $2,366,000 $1,107,000
Less: Preferred Dividends
10.25% Series A Cumulative Preferred 958,000 ----
9.8% Series B Cumulative Preferred 845,000 ----
---------- ----------
Net income available to $ 563,000 $1,107,000
common shareholders ========== ==========
Per share earnings data:
Basic $ 0.14 $ 0.27
Fully diluted $ 0.13 $ 0.27
</TABLE>
<PAGE>
EXHIBIT 21
G&L Realty Corp.
List of Subsidiaries
April 30, 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.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 6,452
<SECURITIES> 0
<RECEIVABLES> 23,991
<ALLOWANCES> 1,436
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 157,061
<DEPRECIATION> 15,091
<TOTAL-ASSETS> 187,697
<CURRENT-LIABILITIES> 4,724
<BONDS> 94,734
0
29
<COMMON> 41
<OTHER-SE> 87,752
<TOTAL-LIABILITY-AND-EQUITY> 187,697
<SALES> 0
<TOTAL-REVENUES> 7,484
<CGS> 0
<TOTAL-COSTS> 1,411
<OTHER-EXPENSES> 1,749
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,916
<INCOME-PRETAX> 2,460
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,366
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,366
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.13
</TABLE>
