<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, 1999
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 (Zip Code)
Offices)
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 10, 1999 was 3,910,400 shares.
===============================================================================
<PAGE>
G&L REALTY CORP.
INDEX
<TABLE>
<CAPTION>
Page
Part I Financial Information Number
<C> <S> <C>
Item 1 Financial Statements
Consolidated Balance Sheets as of June 30, 1999 (unaudited) and
December 31, 1998.............................................................. 3
Consolidated Statements of Operations for the Three and Six Month Periods
Ended June 30, 1999 and 1998 (unaudited)....................................... 4
Consolidated Statements of Cash Flows for the Six Month Periods Ended
June 30, 1999 and 1998 (unaudited)............................................. 5 - 6
Notes to Consolidated Financial Statements (unaudited)........................... 7 - 17
Item 2 Management's Discussion and Analysis of Financial Condition and Results of
Operations..................................................................... 18 - 24
Item 3 Quantitative and Qualitative Disclosures about Market Risk....................... 25
Part II Other Information
Item 1 Legal Proceedings................................................................ 26
Item 2 Changes in Securities............................................................ 26
Item 3 Defaults Upon Senior Securities.................................................. 26
Item 4 Submission of Matters to a Vote of Security Holders.............................. 26
Item 5 Other Information................................................................ 26
Item 6 Exhibits and Reports on Form 8-K................................................. 27 - 31
Signature ................................................................................. 32
</TABLE>
Page 2
<PAGE>
G&L REALTY CORP.
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
------
Rental properties (Note 3):
Land $ 34,746 $ 35,059
Building and improvements, net 152,872 142,531
Projects under development 1,542 9,161
-------- --------
Total rental properties 189,160 186,751
Cash and cash equivalents 1,885 1,379
Restricted cash 5,505 4,007
Tenant rent and reimbursements receivable, net 2,094 2,050
Unbilled rent receivable, net 2,043 1,892
Other receivables, net 335 208
Mortgage loans and notes receivable, net 13,500 12,101
Investments in unconsolidated affiliates (Note 6) 7,936 7,469
Deferred charges and other assets, net (Note 4) 4,699 3,642
-------- --------
TOTAL ASSETS $227,157 $219,499
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Notes payable $147,729 $134,880
Accounts payable and other liabilities 2,115 2,296
Distributions payable 1,810 1,768
Tenant security deposits 1,255 1,270
-------- --------
Total liabilities 152,909 140,214
-------- --------
Commitments and Contingencies (Note 8) --- ---
Minority interest in consolidated affiliates (2,103) (2,033)
Minority interest in Operating Partnership 1,253 1,734
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, 1999 and December 31, 1998 15 15
. Series B Preferred - 1,380,000 shares issued and outstanding as
of June 30, 1999 and December 31, 1998 14 14
Common shares - $.01 par value, 50,000,000 shares authorized,
3,931,700 and 3,995,000 shares issued and outstanding as of
June 30, 1999 and December 31, 1998, respectively 39 40
Additional paid-in capital 88,943 91,709
Distributions in excess of net income (13,913) (12,194)
-------- --------
Total stockholders' equity 75,098 79,584
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $227,157 $219,499
======== ========
</TABLE>
See accompanying notes to Consolidated Financial Statements
Page 3
<PAGE>
G&L REALTY CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Month For the Six Month
Periods Ended June 30, Periods Ended June 30,
1999 1998 1999 1998
-----------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Rental $7,064 $6,113 $13,976 $11,995
Tenant reimbursement 239 209 610 338
Parking 274 374 538 733
Interest, loan fees and related income 714 1,267 1,295 2,323
Other 254 113 290 171
-------------------------------------------
Total revenues 8,545 8,076 16,709 15,560
-------------------------------------------
EXPENSES:
Property operations 1,762 1,506 3,666 2,917
Depreciation and amortization 1,402 1,083 2,735 2,143
Interest 2,896 2,093 5,512 4,009
General and administrative 816 734 1,457 1,423
-------------------------------------------
Total expenses 6,876 5,416 13,370 10,492
-------------------------------------------
Income from operations 1,669 2,660 3,339 5,068
Equity in (loss) earnings of unconsolidated
affiliates (277) 101 (270) 153
Minority interest in consolidated affiliates (39) (69) (89) (115)
Minority interest in Operating Partnership 62 (95) 86 (143)
-------------------------------------------
Net income $1,415 $2,597 $ 3,066 $ 4,963
===========================================
Per share data:
Basic $(0.10) $ 0.19 $ (0.14) $ 0.33
===========================================
Fully diluted $(0.10) $ 0.19 $ (0.14) $ 0.32
===========================================
Weighted average shares outstanding:
Basic 3,937 4,122 3,957 4,124
===========================================
Fully diluted 3,949 4,163 3,971 4,177
===========================================
</TABLE>
See accompanying notes to Consolidated Financial Statements
Page 4
<PAGE>
G&L REALTY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Month Periods Ended June 30,
1999 1998
-------------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,066 $ 4,963
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,735 2,143
Amortization of deferred loan costs 123 86
Minority interests 3 258
Equity in loss (income) from unconsolidated affiliates 270 (153)
Unbilled rent receivable, net (151) (166)
Allowance for doubtful notes and accounts receivable 8 ---
(Increase) decrease in:
Other receivables (127) 529
Tenant rent and reimbursements receivable (52) (509)
Prepaid expense and other assets (75) (321)
Accrued interest receivable and loan fees (540) (761)
Increase (decrease) in:
Accounts payable and other liabilities (181) (197)
Tenant security deposits (15) 62
------------- -------------
Net cash provided by operating activities 5,064 5,934
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of rental properties --- (17,128)
Additions to rental properties (1,679) (651)
Pre-acquiition costs (611) (295)
Construction-in-progress (3,643) (1,697)
Leasing commissions (353) (289)
Investment in notes and bonds receivable (net) (960) (5,159)
Principal reductions received on notes receivable 101 1,016
Contributions to unconsolidated affiliates (885) (1,599)
Disposition of real estate assets 295 ---
Distributions from unconsolidated affiliates 148 ---
------------- ------------
Net cash used in investing activities (7,587) (25,802)
------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable proceeds 16,700 29,032
Repayment of notes payable (3,851) (8,339)
Deferred financing costs (258) (434)
(Decrease) increase in restricted cash (1,498) 4,065
Purchase of common stock and partnership units (767) (199)
Minority interest contribution --- 209
Distributions (7,297) (7,400)
------------- ------------
Net cash provided by financing activities 3,029 16,934
------------- ------------
</TABLE>
See accompanying notes to Consolidated Financial Statements
Page 5
<PAGE>
G&L REALTY CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 1998
------------------------------
(Unaudited)
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 506 (2,934)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,379 13,609
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,885 $10,675
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest $ 6,028 $ 4,289
======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Distributions declared not yet paid $ 1,780 $ 1,799
======= =======
Transfers from projects under development to building $11,262 --
======= =======
Preferred distributions due to minority partner $ 14 --
======= =======
</TABLE>
See accompanying notes to Consolidated Financial Statements
Page 6
<PAGE>
G&L REALTY CORP.
NOTES TO 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")
G&L Hoquiam, LLC, a California limited liability company ("Hoquiam")
G&L Lyon, LLC, a California limited liability company ("Lyon")
G&L Coronado (1998), LLC, a California limited liability company
("Coronado")
* 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
86% 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
Entity which is owned 1% by a Subsidiary is owned by the Operating Partnership,
acting as sole limited partner or member. Financing Entities in which a
Subsidiary owns no interest are 100% owned by the Operating Partnership.
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), Pacific Gardens (in which the Operating Partnership owns a 93%
membership interest and is a co-managing member) and Hoquiam, Lyon and Coronado
(in which the Operating Partnership owns a 100% interest).
Page 7
<PAGE>
G&L REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
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
consolidated financial statements of the Company. The entities in which the
Company has unconsolidated financial interests are as follows:
. GLN Capital Co., LLC ("GLN"), a Delaware limited liability company
formed in 1996. GLN is owned 49.9% by the Operating Partnership and 50.1%
by an affiliate of Nomura Asset Capital Corp. ("Nomura"). The purpose of
GLN 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 the Valley Convalescent Center located in El Centro,
California.
. 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. The
Company and Gary Grabel contributed to San Pedro 84% and 16% 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. San Pedro
was formed for the purpose of acquiring four MOBs located at 1360 West
6th St. 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 ASL Santa Monica, Inc., a California corporation
("ASL"). The Company owns 93% of the total equity in Pacific Gardens
Corp. in the form of non-voting preferred stock. ASL holds 7% of the
total equity in the form of 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.
. G&L Parsons on Eagle Run, LLC ("Eagle Run") is a California limited
liability company, formed on December 29, 1998, through the Operating
Partnership and Parsons. The Company and Parsons each contributed 50% of
the total equity in Eagle Run. Eagle Run was formed for the purpose of
acquiring a vacant piece of land in Omaha, Nebraska upon which the
members intend to develop a senior care facility.
. G&L Parsons on Eagle Run, Inc. ("Eagle Run Inc.") is a California
corporation formed on December 20, 1998 by the Company, through the
Operating Partnership, and Parsons. Eagle Run Inc. was formed for the
purpose of operating the senior care facility to be constructed in Omaha,
Nebraska on the land acquired by Eagle Run.
Page 8
<PAGE>
G&L REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
GLN, Valley Convalescent, San Pedro, Penasquitos Inc., Penasquitos LLC, Pacific
Gardens Corp., Eagle Run and Eagle Run Inc. 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.
Basis of Presentation - The accompanying 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 as
minority interests. All significant intercompany accounts and transactions have
been eliminated in consolidation.
The information presented as of and for the six month periods ended June
30, 1999 and 1998 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 six months ended June 30, 1999 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 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 9
<PAGE>
G&L REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
3. BUILDINGS AND IMPROVEMENTS
Buildings and improvements consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------------------------------------
(in thousands)
<S> <C> <C>
Buildings and improvements...................................... $164,555 $152,618
Tenant improvements............................................. 6,764 5,846
Furniture, fixtures and equipment............................... 2,664 2,560
------------ ----------
173,983 161,024
Less accumulated depreciation and amortization.................. (21,111) (18,493)
------------ ----------
Total......................................................... $152,872 $142,531
============ ==========
</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,
1999 1998
-----------------------------------
(in thousands)
<S> <C> <C>
Deferred financing costs........................................ $2,798 $2,558
Pre-acquisition costs........................................... 660 49
Leasing commissions............................................. 1,625 1,272
Prepaid expense and other assets................................ 553 478
------------ ----------
5,636 4,357
Less accumulated amortization................................... (937) (715)
------------ ----------
Total......................................................... $4,699 $3,642
============ ==========
</TABLE>
Page 10
<PAGE>
G&L REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
5. STOCKHOLDERS' EQUITY
Distributions in excess of net income-- The Company has elected to be
treated, for federal income tax purposes, as a REIT. As such, the Company is
required to distribute annually, in the form of distributions to its
stockholders, at least 95% of its taxable income. In reporting periods in which
distributions exceed net income, stockholders' equity will be reduced by the
distributions in excess of net income in such period and will be increased by
the excess of net income over distributions in reporting periods in which net
income exceeds distributions. For tax reporting purposes, a portion of the
dividends declared represents a return of capital. The following table
reconciles net income and distributions in excess of net income for the six
months ended June 30, 1999 and for the year ended December 31, 1998:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-----------------------------------
(in thousands)
<S> <C> <C>
Distributions in excess of net income
at beginning of period.................................................... $(12,194) $ (2,802)
Net income during period................................................... 3,066 4,343
Minority interest adjustment............................................... 1,902 ---
Less: Distributions declared............................................... (6,687) (13,735)
------------ ----------
Distributions in excess of net income...................................... $(13,913) $(12,194)
============ ==========
</TABLE>
Earnings per share--Basic earnings per share is computed by dividing net
income less preferred stock dividends by the weighted average number of common
shares outstanding during each period. Fully diluted earnings per share is
computed by dividing net income less preferred stock dividends by the weighted
average number of common shares outstanding during each year plus the
incremental shares that would have been outstanding upon the assumed exercise of
dilutive stock options. 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, 1999 and 1998 there were approximately 213,500
and 233,500 stock options outstanding with weighted average exercise prices of
$14.49. For the six months ended June 30, 1999, the incremental shares that
would have been outstanding upon the assumed exercise of stock options would
have been anti-dilutive and, therefore, were not considered in the computation
of fully diluted earnings per share. The following table reconciles the
numerator and denominator of the basic and fully diluted per share computations
for net income for the three and six months ended June 30, 1999 and 1998:
Page 11
<PAGE>
G&L REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
1999 1998 1999 1998
-------------------------------------------------------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Numerator:
----------
Net income $ 1,415 $ 2,597 $ 3,066 $ 4,963
Preferred stock dividends (1,803) (1,803) (3,606) (3,775)
---------- --------- --------- ----------
Net (loss) income available to
common stockholders $ (388) $ 794 $ (540) $ 1,188
========== ========= ========= ==========
Denominator:
------------
Weighted average shares - basic 3,937 4,122 3,957 4,124
Dilutive effect of stock options 12 41 14 53
---------- --------- --------- ----------
Weighted average shares - fully
diluted 3,949 4,163 3,971 4,177
========== ========= ========= ==========
Per share:
----------
Basic $ (0.10) $ 0.19 $ (0.14) $ 0.33
Dilutive effect of stock options --- --- --- (0.01)
---------- --------- --------- ----------
Fully diluted $ (0.10) $ 0.19 $ (0.14) $ 0.32
========== ========= ========= ==========
</TABLE>
At various times during the six months ended June 30, 1999 the Company
repurchased a total of 63,200 shares of the Company's Common Stock at an average
price of approximately $12.13 per share.
Page 12
<PAGE>
G&L REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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, 1999. (In thousands).
<TABLE>
<CAPTION>
Valley San Penasquitos Penasquitos
GLN Convalescent Pedro LLC Inc.
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Opening balance at beginning
of period..................... $708 $ 76 $1,165 $1,229 $ 270
Equity in earnings (loss) of
affiliates.................... 36 (17) 167 15 (277)
Cash contributions............. 8 312 --- 125 113
Cash distributions............. --- (22) (86) --- ---
---- ------ ------ ------ -----
Equity, before inter-company
adjustments................... 752 349 1,246 1,369 106
---- ------ ------ ------ -----
Intercompany transactions:
Receivable, net............... 58 3,371 (65) 204 (1)
---- ------ ------ ------ -----
Investment in unconsolidated
affiliates.................... $810 $3,720 $1,181 $1,573 $ 105
---- ------ ------ ------ -----
<CAPTION>
Pacific
Gardens Eagle Run Eagle Run
Corp. Inc. LLC Total
---------------------------------------------
<S> <C> <C> <C> <C>
Opening balance at beginning
of period..................... $(149) $150 $650 $4,099
Equity in earnings (loss) of
affiliates.................... (163) (30) (1) (270)
Cash contributions............. --- --- 5 563
Cash distributions............. --- --- --- (108)
----- ---- ---- ------
Equity, before inter-company
adjustments................... (312) 120 654 4,284
----- ---- ---- ------
Intercompany transactions:
Receivable, net............... 57 --- 28 3,652
----- ---- ---- ------
Investment in unconsolidated
affiliates.................... $(255) $120 $682 $7,936
----- ---- ---- ------
</TABLE>
Page 13
<PAGE>
G&L REALTY CORP.
NOTES TO 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, 1999.
(In thousands).
<TABLE>
<CAPTION>
Valley San Penasquitos Penasquitos
GLN Convalescent Pedro LLC Inc.
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Financial Position:
- -------------------
Land............................... $ --- $ 382 $ 1,882 $ --- $ ---
Buildings.......................... --- 2,663 4,347 --- ---
Notes receivable, net 1,538 --- --- --- ---
Other assets....................... 31 783 322 7,798 482
Notes payable...................... --- (2,799) (4,853) (5,961) (199)
Other liabilities.................. (74) (336) (164) (265) (293)
------ ------- ------- ------- -----
Net assets........................... $1,495 $ 693 $ 1,534 $ 1,572 $ (10)
====== ======= ======= ======= =====
Partner's equity:
- -----------------
G&L Realty Partnership, L.P........ $ 752 $ 349 $ 1,246 $ 1,369 $ 106
Others............................. 743 344 288 203 (116)
------ ------- ------- ------- -----
Total equity......................... $1,495 $ 693 $ 1,534 $ 1,572 $ (10)
====== ======= ======= ======= =====
Operations:
- -----------
Revenues........................... $ 72 $ 234 $ 589 $ 227 $ 190
Expenses........................... --- (268) (422) (197) (560)
------ ------- ------- ------- -----
Net income (loss).................... $ 72 $ (34) $ 167 30 (370)
====== ======= ======= ======= =====
Allocation of net income (loss):
- --------------------------------
G&L Realty Partnership, L.P........ $ 36 $ (17) $ 167 $ 15 $(277)
Others............................. 36 (17) --- 15 (93)
------ ------- ------- ------- -----
Net income (loss).................... $ 72 $ (34) $ 167 $ 30 $(370)
====== ======= ======= ======= =====
<CAPTION>
Pacific
Gardens Eagle Run Eagle Run
Corp. Inc. LLC Total
----------------------------------------------------
<S> <C> <C> <C> <C>
Financial Position:
- -------------------
Land............................... $ --- $ --- $ --- $ 2,264
Buildings.......................... --- --- --- 7,010
Notes receivable, net --- --- --- 1,538
Other assets....................... 156 240 4,293 14,105
Notes payable...................... --- --- --- (13,812)
Other liabilities.................. (491) (113) (2,994) (4,730)
------- ----- ------- --------
Net assets........................... $ (335) $ 127 $ 1,299 $ 6,375
======= ===== ======= ========
Partner's equity:
- -----------------
G&L Realty Partnership, L.P........ $ (312) $ 120 654 $ 4,284
Others............................. (23) 7 645 2,091
------- ----- ------- --------
Total equity......................... $ (335) $ 127 $ 1,299 $ 6,375
======= ===== ======= ========
Operations:
- -----------
Revenues........................... $ 1,371 $ --- --- $ 2,683
Expenses........................... (1,546) (60) (2) (3,055)
------- ----- ------- --------
Net income (loss).................... $ (175) $ (60) $ (2) $ (372)
======= ===== ======= ========
Allocation of net income (loss):
- --------------------------------
G&L Realty Partnership, L.P........ $ (163) $ (30) (1) $ (270)
Others............................. (12) (30) (1) (102)
------- ----- ------- --------
Net income (loss).................... $ (175) $ (60) $ (2) $ (372)
======= ===== ======= ========
</TABLE>
Page 14
<PAGE>
G&L REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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, of 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 acquisitions of MOBs
or senior care facilities by third parties, made either directly or through GLN.
The tables on the following pages reconcile the Company's income and expense
activity for the six months ended June 30, 1999 and 1998 and balance sheet data
as of June 30, 1999 for these segments.
<TABLE>
<CAPTION>
1999 Reconciliation of Reportable Segment Information
For the six months ended June 30, 1999
Property Debt
Investments Obligations Other Total
----------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Revenue:
Rents, tenant reimbursements and parking... $15,124 $ --- $ --- $15,124
Interest, loan fees and related revenues... 205 1,005 85 1,295
Other...................................... 290 --- --- 290
------- ------ ------- -------
Total revenues......................... 15,619 1,005 85 16,709
------- ------ ------- -------
Expenses:
Property operations........................ 3,666 --- --- 3,666
Depreciation and amortization.............. 2,575 --- 160 2,735
Interest................................... --- --- 5,512 5,512
General and administrative................. --- --- 1,457 1,457
------- ------ ------- -------
Total expenses......................... 6,241 --- 7,129 13,370
------- ------ ------- -------
Income (loss) from operations before
minority interests......................... $ 9,378 $1,005 $(7,044) $ 3,339
======= ====== ======= =======
<CAPTION>
1998 Reconciliation of Reportable Segment Information
For the six months ended June 30, 1998
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 (loss) from operations before
minority interests......................... $ 8,348 $1,772 $(5,052) $ 5,068
======= ====== ======= =======
</TABLE>
Page 15
<PAGE>
G&L REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
<TABLE>
<CAPTION>
1999 Reconciliation of Reportable Segment Information
As of June 30, 1999
Property Debt
Investments Obligations Other Total
----------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Rental properties.................................. $187,618 $ --- $ --- $187,618
Mortgage loans and bonds receivable, net........... --- 13,500 --- 13,500
Other assets....................................... 21,031 810 4,198 26,039
-------- ------- ------ --------
Total assets................................... $208,649 $14,310 $4,198 $227,157
======== ======= ====== ========
Other assets:
Cash and cash equivalents........................ $ --- $ --- $1,885 $ 1,885
Restricted cash.................................. 5,505 --- --- 5,505
Tenant rent and reimbursements receivable, net... 2,094 --- --- 2,094
Unbilled rent receivable, net.................... 2,043 --- --- 2,043
Other receivables, net........................... 335 --- --- 335
Investment in unconsolidated affiliates.......... 7,126 810 --- 7,936
Investment in marketable securities.............. --- --- --- ---
Deferred financing costs, net.................... --- --- 2,313 2,313
Pre-acquisition costs............................ 660 --- --- 660
Construction in progress......................... 1,542 --- --- 1,542
Deferred lease costs, net........................ 1,173 --- --- 1,173
Prepaid expense and other........................ 553 --- --- 553
-------- ------- ------ --------
Total other assets............................. $ 21,031 $ 810 $4,198 $ 26,039
======== ======= ====== ========
Capital Expenditures
---------------------
Purchases of real estate assets.................. $ --- $ --- $ --- $ ---
Additions to rental properties................... 1,663 --- 33 1,696
-------- ------- ------ --------
Total capital expenditures..................... $ 1,663 $ --- $ 33 $ 1,696
======== ======= ====== ========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Except as discussed below, 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.
In November 1998, the previous tenant of six MOBs located in New Jersey and
owned by GL/PHP, LLC ("GL/PHP"), a wholly owned subsidiary of the Company,
Pinnacle Health Enterprises, LLC ("Pinnacle"), a subsidiary of PHP Healthcare
Corporation ("PHP"), filed a Chapter 7 bankruptcy petition. Subsequently, PHP
filed a Chapter 7 bankruptcy petition. In December 1998, the Commissioner of
the New Jersey Department of Banking and Insurance (the "Commissioner") took
over the operations of Pinnacle. Pinnacle paid administrative rent through the
bankruptcy proceeding through March 5, 1999. It then elected to terminate the
lease. The Commissioner continued to occupy and lease certain of the buildings
through March 31, 1999. The Commissioner vacated the buildings as of March 31,
1999. GL/PHP has leased one of the buildings, a portion of an additional
building and has a lease proposal for a third building. GL/PHP is attempting to
restructure the loan in order to attempt to preserve its investment in the MOBs.
On May 5, 1999, GL/PHP presented a loan-restructuring plan to Amresco
Management, Inc. ("Amresco"), the loan servicer, in regards to the mortgage
secured by the six MOBs.
Page 16
<PAGE>
G&L REALTY CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
GL/PHP has been in default on this loan since May 1999. On May 10, 1999, Amresco
rejected the Company's restructuring plan. The Company has since continued to
negotiate with Amresco in seeking an acceptable resolution of the current
problems. On July 6, 1999, Amresco served GL/PHP with a complaint commencing a
judicial foreclosure and requesting the appointment of a receiver in the
Superior Court of New Jersey Chancery Division Bergen County. GL/PHP has
retained legal counsel in New Jersey and is actively exploring various
alternatives.
9. RELATED PARTY TRANSACTIONS
On April 15, 1999, the Company borrowed $2.0 million from Reese L. Milner,
a director of the Company. The loan bore interest at 12% per annum and was due
on May 15, 1999. The Company also paid a loan fee of $20,000 to Mr. Milner. The
loan was secured by a first trust deed against a parcel of real property owned
by the Company. On May 13, 1999, the loan was extended until new financing on
the collateralized property was obtained. The Company repaid the loan plus all
accrued interest on June 13, 1999.
On May 4, 1999, the Company sold a vacant parcel of real property for $1.6
million to the Craig Corporation, whose president is S. Craig Tompkins, a
director of the Company. The Company has the option to repurchase the property
beginning on November 15, 1999 and ending on December 3, 1999 for $1.8 million
plus any costs incurred by the Craig Corporation with respect to the property.
Beginning on January 24, 2000 and ending on January 31, 2000, the Craig
Corporation has the option to sell the property to the Company for $1.9 million.
Thereafter, the option sale price will increase at a rate of 3% per month,
adjusted pro rata for any periods of less than one month. The Company has
accounted for this transaction in accordance with FAS 66 "Accounting for Sales
of Real Estate" and has treated this sale as a financing transaction.
On May 18, 1999, the Company entered into an agreement with the Craig
Corporation, whose president is S. Craig Tompkins, a director of the Company,
whereby the Craig Corporation would purchase up to 36,000 shares of the
Company's common stock on the open market and the Company would have the option
to purchase these shares from the Craig Corporation on or before December 3,
1999 at the Craig Corporation's cost plus a premium of 20% per annum, less any
dividends received. After December 3, 1999, the Craig Corporation has the
option to sell the shares to the Company between January 24 and January 31, 2000
at its cost plus a premium of 25% per annum. Thereafter, the option sale price
will increase at a rate of 3% per month. The exercise of the Company's option
is contingent upon the exercise of the Company's option to repurchase the vacant
parcel of land from the Craig Corporation discussed above. As of August 3,
1999, the Craig Corporation had purchased 35,400 shares of the Company's common
stock at an average price of $10.47.
10. SUBSEQUENT EVENTS
On July 2, 1999, the Company obtained a $10 million long-term loan secured
by its six building portfolio of MOBs located at the Henry Mayo Newhall Hospital
campus at an interest rate of 6.85%, of which $5 million was used to repay a
short-term loan secured by these buildings. An additional $2.5 million was
escrowed by the lender until the Company meets certain occupancy thresholds at
the collateralized buildings.
On July 26, 1999, the Company obtained a $7.5 million short-term loan
secured by three of its properties located in Tustin, California, at an interest
rate of prime plus 0.75%. The loan is due in 18 months.
On August 6, 1999, the Company refinanced the existing $8.5 million
mortgage on Pacific Gardens, a senior care facility located in Santa Monica,
California, with an $11.4 million long-term HUD loan at an interest rate of 8%.
Page 17
<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 Quarterly Report on Form 10-Q and the Company's 1998 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 "believe," "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 on Form 10-Q and the Company's 1998 Annual
Report on Form 10-K as previously filed with the SEC.
Results of Operations
- ---------------------
Comparison of the Six Month Period Ended June 30, 1999 versus the Six Month
Period Ended June 30, 1998.
Total revenues increased by $1.1 million, or 7%, from $15.6 million in the
first half of 1998, to $16.7 million for the same period in 1999. Rents, tenant
reimbursements and parking revenues increased an aggregate $2.0 million, or 15%,
from a combined total of $13.1 million during the first half of 1998, to $15.1
million for the same period in 1999. The purchase of two senior care facilities
located in Santa Monica, California and Hoquiam, Washington during June and
August 1998, respectively, accounted for $0.8 million of this increase. The
purchase of a 49,000 square foot MOB in Valencia, California and a 40,000 square
foot office and retail complex in Coronado, California in December 1998
accounted for an additional $1.2 million increase. Interest, loan fees and
related revenues derived from loans secured by senior care facilities decreased
approximately $1.0 million, or 43%, from $2.3 million in the first half of 1998,
to $1.3 million for the same period in 1999. This decrease was partially due
to the repayment during 1998 of seven outstanding loans, representing a total
decrease of $0.4 million in interest and loan fee income. An additional $0.4
million of this decrease was due to the loss of interest, during the first half
of 1999, on non-performing loans for which the Company had previously reserved
approximately $2.8 million in December 1998. Furthermore, interest earned on
cash on hand decreased in the first half of 1999 by approximately $0.2 million,
as the Company had approximately $14 million of cash on hand during the first
half of 1998 and only $1.9 million during the first half of 1999. Other income
increased by $0.1 million, or 50%, from $0.2 million in the first half of 1998,
to $0.3 million for the same period in 1999. This increase was due to the sale
of a parcel of land located in Tustin, California by the Company for a gain of
$0.2 million.
Total expenses increased by $2.9 million, or 27%, from $10.5 million for the
six months ended June 30, 1998, to $13.4 million for the same period in 1999.
Property operating expenses increased by $0.8 million, or 28%, from $2.9 million
for the six months ended June 30, 1998, to $3.7 million for the same period in
1999. Property acquisitions made by the Company during 1998 accounted for $0.5
million of this increase. The remaining $0.2 million increase was due to costs
related to new management personnel. Depreciation and amortization increased
$0.6 million, or 28%, from $2.1 million for the six months ended June 30, 1998,
to $2.7 million for the same period in 1999. This increase was attributable to
property acquisitions made by the Company during 1998 and new building
developments completed during 1999. Interest expense increased $1.5 million, or
38%, from $4.0
Page 18
<PAGE>
million for the six months ended June 30, 1998, to $5.5 million for the same
period in 1999. This increase was mainly due to interest incurred on borrowings
of $58.0 million made by the Company subsequent to March 31, 1998. These
borrowings accounted for an increase in interest expense of $1.6 million. This
increase was offset by an increase in the capitalization of interest expense of
$0.1 million related to real estate projects that the Company currently has in
development.
Equity in earnings of unconsolidated affiliates decreased $0.4 million, or
400%, from $0.1 million for the six months ended June 30, 1998 to $(0.3) million
for the same period in 1999. This decrease was primarily the result of start-up
losses associated with the Company's 75% investment in Penasquitos Inc. In
March 1999, Rancho Penasquitos, an assisted living facility operated by
Penasquitos Inc., commenced operations. The facility is currently in the
process of leasing its units. However, during this lease-up phase, the facility
is operating with a deficit. The Company expects the facility to reach
stabilized occupancy by the end of 1999, at which time the facility will produce
positive income for the Company.
Net income decreased $1.9 million, or 38%, from $5.0 million for the six
months ended June 30, 1998 to $3.0 million for the same period in 1999. This
decrease was primarily due to the $1.5 million increase in interest expense, the
$1.3 million increase in property operating expenses and depreciation as well as
the $1.0 million decrease in interest income. These amounts were offset by a
$2.0 million increase in rents, tenant reimbursements and parking revenues.
Comparison of the Three Month Period Ended June 30, 1999 versus the Three
Month Period Ended June 30, 1998.
Total revenues increased by $0.4 million, or 5%, from $8.1 million in the
three months ended June 30, 1998, to $8.5 million for the same period in 1999.
Rents, tenant reimbursements and parking revenues increased an aggregate $0.9
million, or 13%, from a combined total of $6.7 million during the second quarter
of 1998, to $7.6 million for the same period in 1999. The purchase of two
senior care facilities located in Santa Monica, California and Hoquiam,
Washington during June and August 1998, respectively, accounted for $0.4 million
of this increase. The purchase of a 49,000 square foot MOB in Valencia,
California and a 40,000 square foot office and retail complex in Coronado,
California in December 1998 accounted for an additional $0.5 million increase.
Interest, loan fees and related revenues derived from loans secured by senior
care facilities decreased approximately $0.6 million, or 46%, from $1.3 million
in the second quarter of 1998, to $0.7 million for the same period in 1999.
This decrease was partially due to the repayment during 1998 of seven
outstanding loans, representing a total decrease of $0.3 million in interest and
loan fee income. An additional $0.2 million of this decrease was due to the
loss of interest, during the second quarter of 1999, on non-performing loans for
which the Company had previously reserved approximately $2.8 million in December
1998. Furthermore, interest earned on cash on hand decreased in the second
quarter of 1999 by approximately $0.1 million. Other income increased by $0.2
million, or 200%, from $0.1 million in the second quarter of 1998, to $0.3
million for the same period in 1999. This increase was due to the sale of a
parcel of land located in Tustin, California by the Company for a gain of $0.2
million.
Total expenses increased by $1.5 million, or 28%, from $5.4 million for the
three months ended June 30, 1998, to $6.9 million for the same period in 1999.
Property operating expenses increased by $0.3 million, or 20%, from $1.5 million
for the three months ended June 30, 1998, to $1.8 million for the same period in
1999. Property acquisitions made by the Company during 1998 accounted for this
increase. Depreciation and amortization increased $0.3 million, or 27%, from
$1.1 million for the three months ended June 30, 1998, to $1.4 million for the
same period in 1999. This increase was attributable to property acquisitions
made by the Company during 1998 and new building developments completed during
1999. Interest expense increased $0.8 million, or 38%, from $2.1 million for
the three months ended June 30, 1998, to $2.9 million for the same period in
1999. This increase was mainly due to interest incurred on borrowings of $58.0
million made by the Company subsequent to March 31, 1998. These borrowings
accounted for an increase in interest expense of $0.7 million. This increase
was offset by an increase in the capitalization of interest expense of $0.1
million related to real estate projects that the Company currently has in
development.
Page 19
<PAGE>
Net income decreased $1.2 million, or 46%, from $2.6 million for the three
months ended June 30, 1998 to $1.4 million for the same period in 1999. This
decrease was primarily due to the $0.8 million increase in interest expense, the
$0.6 million increase in property operating expenses and depreciation as well as
the $0.6 million decrease in interest income. These amounts were offset by a
$0.9 million increase in rents, tenant reimbursements and parking revenues.
Liquidity and Capital Resources
- -------------------------------
As of June 30, 1999, the Company's net investment in real estate assets
totaled approximately $189.2 million, $7.9 million in joint ventures and $13.5
million invested in notes receivable. Debt outstanding as of June 30, 1999
totaled $147.7 million.
The Company obtains its liquidity from multiple internal and external
sources. Internally, funds are derived from the operation of MOBs and Senior
Care Facilities and senior care lending activities. These funds primarily
consist of Funds from Operations ("FFO" - see discussion below of FFO). The
Company's external sources of capital consist of various secured loans and lines
of credit as well as access to public equity markets. During the second
quarter of 1999, the Company obtained a $5.5 million short-term loan secured by
one of its properties at an interest rate of LIBOR plus 3.0% and a $1.4 million
short-term loan secured by one of its properties at an interest rate of prime
plus 0.75%. In addition, the Company borrowed $2 million from one of its
directors which was repaid during the quarter and sold a vacant parcel of land
for $1.6 million to a company whose president is also a director of the Company
(See Note 9 Related Party Transactions). Subsequent to June 30, 1999, the
Company refinanced the $1.4 million short-term loan with a long-term $1.4
million loan at an interest rate of 7.375%. Also, in July 1999, the Company
obtained a $10 million long-term loan secured by one of its properties at an
interest rate of 6.85%, of which $5 million was used to repay a short-term loan
secured by the property and an additional $2.5 million was escrowed by the
lender until the Company meets certain occupancy thresholds at the
collateralized property. Finally, subsequent to June 30, 1999, the Company
obtained a $7.5 million short-term loan secured by three of its properties at an
interest rate of prime plus 0.75%. During July 1999, the Company also repaid
the outstanding balance of $1.2 million on one of its lines of credit. In
August 1999, the Company refinanced its existing $8.5 million mortgage on one of
its senior care facilities with an $11.4 million long-term HUD loan at an
interest rate of 8%. All of the Company's secured loans as of June 30, 1999
bear interest at fixed rates ranging from 6.75% to 8.98%, except for an $8.5
million loan which bears interest at LIBOR plus 2.35% and a $5.5 million loan
which bears interest at LIBOR plus 3.0%. The Company's ability to expand its
MOB, Senior Care Facility 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 1999 in the amount of
$0.39 per common share, which was paid on April 15 and July 15, 1999 to
stockholders of record on March 31 and June 30, respectively. The Company also
paid monthly dividends totaling $0.6 million to holders of the Company's
Preferred Stock on the fifteenth day of each month during the first and second
quarters to stockholders of record on the first day of each month. The Company
distributed dividends of $3.6 million to holders of the Company's Common Stock
during the first six months of 1999 while the Company's FFO was $1.9 million
for the same period. Furthermore, in November 1998, one of the Company's major
tenants declared bankruptcy and vacated the six buildings it occupied in New
Jersey in March 1999 (See Note 8 Commitments and Contingencies). The Company has
successfully leased one building and a part of another building and is
continuing its lease-up efforts. However, these properties are secured by a
$15.5 million loan and the Company's subsidiary that owns these properties has
been in default on this loan since May 1999. On July 6, 1999, the lender
commenced with a judicial foreclosure and requested the appointment of a
receiver. The Company is continuing its efforts to resolve this situation.
However, if the Company is unable to re-lease these properties or if the lender
successfully forecloses on the properties, the Company's ability to make
distributions to its shareholders will be negatively impacted. Notwithstanding
the above, 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
Page 20
<PAGE>
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. Furthermore, the Company's
Board of Directors is currently evaluating whether or not the Company can or
should maintain the dividend on its common stock at its current level or whether
the dividend should be reduced.
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, of which $1.5 million is available as of
August 13, 1999. 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.
Historical Cash Flows
- ---------------------
The Company's net cash from operating activities decreased $0.9 million, or
15%, from $5.9 million for the six months ended June 30, 1998 to $5.0 million
for the same period in 1999. The decrease is due primarily to a $1.9 million
decrease in net income for the first half of 1999 compared to the same period in
1998 , offset by an increase of $0.6 million in depreciation and amortization
and an increase in equity from the loss of unconsolidated affiliates of $0.4
million.
Net cash used in investing activities decreased $18.2 million, or 71%, from
$25.8 million for the six months ended June 30, 1998 to $7.6 million for the
same period in 1999. The decrease was primarily due to a $17.1 million decrease
in rental property acquisitions, a $4.2 million decrease in investments in
notes and bonds receivable and a $0.7 million decrease in distributions to
unconsolidated affiliates. These decreases were offset by a $1.9 million
increase in expenditures on construction in progress, a $1.0 million increase in
additions to rental properties and a $0.9 million decrease in principal payments
on notes receivable.
Cash flows provided by financing activities decreased $13.9 million from
$16.9 million for the six months ended June 30, 1998, to $3.0 million for the
same period in 1999. The decrease is due primarily to a decrease in proceeds
received from notes payable of $12.3 million, a $5.6 million decrease in
restricted cash and a $0.6 million increase in purchases of the Company's common
stock. These were offset by a decrease in the repayment of notes payable of
$4.5 million.
Year 2000 Readiness Disclosure
- ------------------------------
The information provided below contains Year 2000 statements and is a Year
2000 Readiness Disclosure pursuant to Pub.L.No.105-271.
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.
Information Technology Systems
The Company's critical information technology Systems consist of its Windows
NT operating systems and related Windows software as well as its accounting,
property management and fixed assets software. The Company relies on third
party vendors for its computer hardware and software. Based upon management's
communications with the Company's Systems vendors and an outside consultant,
Page 21
<PAGE>
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. Currently,
the Company's accounting and property management software has not yet been
deemed Year 2000 compliant. However, the Company plans to upgrade to the next
version of this software, which is Year 2000 compliant. The Company has
obtained the updated version and will install it during 1999. The cost of this
upgrade will not be material to the Company.
Non-Information Technology Systems
The Company's critical non-information technology building Systems consist of
utilities, security and elevators. The Company has not yet determined whether
all of these Systems are Year 2000 compliant. The Company relies on third party
vendors to service most of these Systems and is currently in communication with
these vendors to determine if these Systems are or will be Year 2000 compliant
by December 31, 1999. The Company's property managers have contacted the
Company's vendors and made inquiries about the Year 2000 readiness of these
Systems. Many of the Company's vendors have confirmed in writing that these
Systems are Year 2000 compliant. The Company has also received confirmation in
writing from certain vendors that the Systems will be Year 2000 compliant by
December 31, 1999. The Company is still following up with those vendors who
have only verbally confirmed Year 2000 compliance or who have not responded to
the Company's inquiries. In January 1999, the Company made inquiries of all of
its tenants concerning their Year 2000 compliance and what impact non-compliance
would have on the Company. Through August 13, 1999, the Company had received
approximately 66 responses, representing 17% of its tenants. None of these
responses indicated that the Company would suffer any negative impact due to
Year 2000 non-compliance.
Risks
While the Company does not expect Year 2000 issues related to the Company's
internal Systems to have a serious impact on the Company's operations, the
Company receives most of its revenues in the form of rental payments. If any of
the Company's tenants suffer a severe disruption of their business due to a Year
2000 problem, it could affect the ability of those tenants to pay their rent.
If multiple tenants were to suffer a severe disruption of their business, the
Company can provide no assurance that its operations would not be materially
affected.
Costs
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 of any of its tenants or other companies providing
utilities or other services to its properties. Management 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. A contingency plan has not been developed for dealing with
the "most reasonably likely worst case scenario" because the Company is unable
at this time to identify such a scenario. The Company will continue to evaluate
these and other potential areas of risk and develop contingency plans, as
appropriate.
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 from the Operating Partnership 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.
Page 22
<PAGE>
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 this Form 10-Q, the Selected Financial
Data and Consolidated Financial Statements and Notes thereto included in the
Company's 1998 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, 1999 and
1998.
Page 23
<PAGE>
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,
1999 1998 1999 1998
------------------------------------------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Funds from Operations/(1)/
- --------------------------
Net income........................................... $ 1,415 $ 2,597 $ 3,066 $ 4,963
Minority interest in Operating Partnership........... (62) 95 (86) 143
-------------------------------------------------
Income for Operating Partnership..................... 1,353 2,692 2,980 5,106
Depreciation of real estate assets................... 1,231 976 2,401 1,931
Amortization of deferred lease costs................. 63 39 117 70
Depreciation from unconsolidated affiliates 79 6 100 13
Adjustment for minority interest in consolidated
affiliates.......................................... (28) (15) (50) (23)
Dividends on preferred stock......................... (1,803) (1,803) (3,606) (3,775)
-------------------------------------------------
Funds from Operations/(1)/........................... $ 895 $ 1,895 $ 1,942 $ 3,322
=================================================
Weighted average shares outstanding/(2)/
- ----------------------------------------
Basic 4,570 4,122 4,590 4,124
=================================================
Fully diluted 4,582 4,163 4,604 4,177
=================================================
Additional Data
- ---------------
Cash flows:
- -----------
Operating activities............................... $ 1,453 $ 2,935 $ 5,064 $ 5,934
Investing activities............................... (3,581) (12,033) (7,587) (25,802)
Financing activities............................... 2,305 17,176 3,029 16,934
Capital expenditures
- --------------------
Building improvements.............................. $ 345 $ 41 $ 675 $ 94
Tenant improvements................................ 480 427 918 442
Furniture, fixtures & equipment.................... 18 113 103 115
Leasing commissions................................ 197 245 353 289
Depreciation and amortization
- -----------------------------
Depreciation of real estate assets................. $ 1,231 $ 976 $ 2,041 $ 1,931
Depreciation of non-real estate assets............. 108 68 217 142
Amortization of deferred lease costs............... 63 39 117 70
Amortization of capitalized financing costs........ 69 47 123 86
Accrued rent in excess of billed rent.............. $ 158 $ 100 $ 151 $ 178
</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 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 NAREIT's 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 24
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to the Company's market risk as
described in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998 filed on April 9, 1999.
Page 25
<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 MOBs,
senior care facilities, parking facilities, and retail space is
currently a party to any material litigation, except as discussed
in Note 8 to the Consolidated Financial Statements.
Item 2 Changes in Securities.
None.
Item 3 Defaults Upon Senior Securities.
As Discussed in Note 8 to the Consolidated Financial Statements and
in Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources, GL/PHP
defaulted on the $15.5 million loan, which is secured by the six
MOBs in New Jersey. The six MOBs were previously occupied by
Pinnacle, a subsidiary of PHP, both of which filed a Chapter 7
bankruptcy petition. The amount in default is $15.5 million and the
total arrearage as of the date of this report is $0.6 million.
Item 4 Submission of Matters to a Vote of Security Holders.
None.
Item 5 Other Information.
None.
Page 26
<PAGE>
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Note Description
- --------------- ------ ------------------------------------------------------------------------------------------------
<S> <C> <C>
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.
10.8.2 (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.
10.16 (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.
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.
</TABLE>
Page 27
<PAGE>
(c) Exhibits - (continued from previous page)
<TABLE>
<CAPTION>
Exhibit No. Note Description
- --------------- ------ ------------------------------------------------------------------------------------------------
<S> <C> <C>
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.
10.30 (6) 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.
10.38 (7) 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 (7) 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 (7) 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 (7) 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 (8) Option Agreement, dated February 28, 1997, by and among G&L Realty Partnership, L.P., GLN
Capital Co., LLC and PHP Healthcare Corporation
10.44 (9) 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.
10.45 (10) 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 (10) 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 (10) Guaranty of Lease by PHP Healthcare Corporation, a Delaware corporation (the "Guarantor"),
dated February 15, 1997.
</TABLE>
Page 28
<PAGE>
(c) Exhibits - (continued from previous page)
<TABLE>
<CAPTION>
Exhibit No. Note Description
- --------------- ------ ------------------------------------------------------------------------------------------------
<S> <C> <C>
10.48 (10) 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 (10) 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 (10) 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 (10) 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 (10) 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 (11) Purchase and Sale Agreement, dated October 1, 1997, by and between Hampden Nursing Homes,
Inc. and G&L Senior Care, LLC.
10.54 (11) Lease and Agreement, dated October 1, 1997, by and between G&L Hampden, LLC and Hampden
Holding Group, Inc.
10.55 (11) Loan Commitment, dated October 23, 1997, by and between G&L Realty Partnership, L.P. and
Iatros Health Network, Inc.
10.56 (11) Lease and Agreement, dated October 1, 1997, by and between G&L Hampden, LLC and Hampden
Nursing Homes, Inc.
10.57 (11) Guaranty of Lease, dated October 1, 1997, by Iatros Health Network, Inc.
10.58 (11) Limited Liability Company Agreement of G&L Hampden, LLC.
10.59 (11) Loan Agreement by and between Nomura Asset Capital Corporation and G&L Hampden, LLC.
10.60 (11) 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 (11) Form of Mortgage, Assignment of Rents, Security Agreement and Fixture Filing for each of
the 3 Hampden Properties.
10.62 (12) Operating Agreement of AV Medical Associates, LLC, dated as of September 25, 1997.
10.63 (12) Real Estate Lease by and between AV Medical Associates, LLC and Hoag Memorial Hospital
Presbyterian.
</TABLE>
Page 29
<PAGE>
(c) Exhibits - (continued from previous page)
<TABLE>
<CAPTION>
Exhibit No. Note Description
- --------------- ------ ------------------------------------------------------------------------------------------------
<S> <C> <C>
10.64 (12) 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.
10.68 (12) 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 (12) 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 (12) Assignment of Leases and Rents, dated as of August 29, 1997, by and between Valley
Convalescent, LLC and G&L Realty Partnership, L.P.
10.77 (13) Agreement for Transfer of Property by and among G&L Coronado, LLC as Transferor and G&L
Realty Partnership, L.P. as Operating Partnership dated as of December 30, 1998.
10.78 (13) Tenant Estoppel and Real Estate Lease between G&L Coronado, LLC as Landlord and Coronado
Managers Corp. as Tenant dated December 1, 1998.
10.79 (13) Guaranty of Lease between Steven D. Lebowitz and Daniel M. Gottlieb (collectively
"Guarantor") in favor of G&L Coronado, LLC ("Landlord").
10.80 (14) Promissory Note in the Amount of $2,000,000 given by G&L Realty Corporation in favor of
Reese L. Milner, as Trustee of The Milner Trust.
11 Computation of Per Share Earnings
27 Financial Data Schedule
</TABLE>
Page 30
<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 June 30, 1996 and incorporated
herein by reference.
7) 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.
8) 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.
9) 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.
10) 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.
11) 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.
12) 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.
13) Filed as an exhibit to the Company's Annual Report on Form 10-K (filed as
of April 9, 1999) for the year ended December 31, 1998 and incorporated
herein by reference.
14) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q (filed
as of May 17, 1999) for the quarter ended March 31, 1999 and incorporated
herein by reference.
c) Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
There have been no reports filed on Form 8-K during the quarter ended
June 30, 1999.
Page 31
<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, 1999 By: /s/ David E. Hamer
__________________________________
David E. Hamer
Chief Accounting Officer
Page 32
<PAGE>
Exhibit 11
G&L Realty Corp.
Computation of Per Share Earnings
Quarterly Report on Form 10-Q
June 30, 1999
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
1999 1998 1999 1998
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income $1,415 $2,597 $ 3,066 $ 4,963
Less: Preferred Dividends
10.25% Series A Cumulative Preferred (958) (958) (1,916) (1,916)
9.8% Series B Cumulative Preferred (845) (845) (1,690) (1,690)
------- ------- -------- --------
Net (loss) income available to common $ (388) $ 794 $ (540) $ 1,357
shareholders ======= ======= ======== ========
Options outstanding 214 234 214 234
======= ======= ======== ========
Weighted average exercise price $14.49 $14.49 $ 14.49 $ 14.49
======= ======= ======== ========
Proceeds upon exercise of options $3,101 $3,391 $ 3,101 $ 3,391
======= ======= ======== ========
Treasury stock shares 203 193 199 181
======= ======= ======== ========
Common share equivalents 11 41 15 53
Average shares outstanding 3,937 4,122 3,957 4,124
------- ------- -------- --------
Total common and common share 3,949 4,163 3,971 4,177
equivalents outstanding ======= ======= ======== ========
Per share earnings data:
- ------------------------
Basic $(0.10) $ 0.19 $ (0.14) $ 0.33
======= ======= ======== ========
Fully diluted $(0.10) $ 0.19 $ (0.14) $ 0.32
======= ======= ======== ========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,885
<SECURITIES> 0
<RECEIVABLES> 23,803
<ALLOWANCES> 5,831
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 228,411
<DEPRECIATION> 21,111
<TOTAL-ASSETS> 227,157
<CURRENT-LIABILITIES> 5,180
<BONDS> 147,729
0
29
<COMMON> 39
<OTHER-SE> 75,030
<TOTAL-LIABILITY-AND-EQUITY> 227,157
<SALES> 0
<TOTAL-REVENUES> 8,545
<CGS> 0
<TOTAL-COSTS> 1,762
<OTHER-EXPENSES> 2,218
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,896
<INCOME-PRETAX> 1,669
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,415
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,415
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
