<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, 2000
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
May 12, 2000 was 2,333,800 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, 2000 (unaudited)
and December 31, 1999 .................................................... 3
Condensed Consolidated Statements of Operations for the Three Month
Periods Ended March 31, 2000 and 1999 (unaudited) ........................ 4
Condensed Consolidated Statements of Cash Flows for the Three Month
Periods Ended March 31, 2000 and 1999 (unaudited) ........................ 5 - 6
Notes to Condensed Consolidated Financial Statements (unaudited) ........... 7 - 20
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations .................................................... 21 - 25
Item 3 Quantitative and Qualitative Disclosures About Market Risk ................. 26
Part II Other Information
Item 1 Legal Proceedings .......................................................... 27
Item 2 Changes in Securities ...................................................... 27
Item 3 Defaults Upon Senior Securities ............................................ 27
Item 4 Submission of Matters to a Vote of Security Holders ........................ 27
Item 5 Other Information .......................................................... 27
Item 6 Exhibits and Reports on Form 8-K ........................................... 28 - 30
Signature .......................................................................... 31
</TABLE>
Page 2
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
March 31, December 31,
2000 1999
-------------------------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Rental properties (Note 3):
Land $ 34,239 $ 33,388
Buildings and improvements, net 150,678 146,821
Projects under development 169 158
-------- --------
Total rental properties 185,086 180,367
Cash and cash equivalents 2,688 7,545
Restricted cash 8,383 8,763
Tenant rent and reimbursements receivable, net 3,446 2,478
Unbilled rent receivable, net 2,303 2,346
Other receivables, net 89 171
Mortgage loans and notes receivable, net 15,725 16,026
Investments in unconsolidated affiliates (Note 6) 4,734 9,736
Deferred charges and other assets, net (Note 4) 5,067 4,964
-------- --------
TOTAL ASSETS $227,521 $232,396
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Notes payable $175,798 $177,371
Accounts payable and other liabilities 5,149 3,279
Distributions payable 398 452
Tenant security deposits 1,334 1,329
-------- --------
Total liabilities 182,679 182,431
Commitments and Contingencies (Note 8) --- ---
Minority interest in consolidated affiliates (658) (862)
Minority interest in Operating Partnership 162 772
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, 2000 and December 31, 1999 15 15
. Series B Preferred - 1,380,000 shares issued and outstanding as
of March 31, 2000 and December 31, 1999 14 14
Common shares - $.01 par value, 50,000,000 shares
authorized, 2,397,800 and 2,636,000 shares issued and
outstanding as of March 31, 2000 and December 31, 1999, 24 26
respectively
Additional paid-in capital 73,040 75,412
Distributions in excess of net income (27,755) (25,412)
-------- --------
Total stockholders' equity 45,338 50,055
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $227,521 $232,396
======== ========
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 3
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Month
Periods Ended March 31,
2000 1999
-----------------------------
<S> <C> <C>
REVENUES:
Rental $ 7,688 $6,912
Tenant reimbursements 355 371
Parking 303 264
Interest and loan fees 484 581
Net gain on sale of assets 1,263 ---
Other income 109 36
--------------- -----------
Total revenues 10,202 8,164
--------------- -----------
EXPENSES:
Property operations 2,673 1,904
Depreciation and amortization 1,533 1,333
Interest 3,423 2,616
Provision for doubtful accounts, notes and bonds receivable (Note 9) 2,288 ---
General and administrative 700 641
--------------- -----------
Total expenses 10,617 6,494
--------------- -----------
(Loss) income from operations before minority interests, equity in (415) 1,670
(loss) earnings of unconsolidated affiliates and extraordinary loss
Equity in (loss) earnings of unconsolidated affiliates (143) 7
Minority interest in consolidated affiliates (67) (50)
Minority interest in Operating Partnership 533 24
--------------- ----------
(Loss) income before extraordinary loss $ (92) $1,651
Extraordinary loss on early retirement of long-term debt (Note 10) (158) ---
--------------- ----------
Net (loss) income $ (250) $1,651
=============== ==========
Per share data:
Basic:
------
Loss before extraordinary loss $ (0.75) $(0.04)
Extraordinary loss $ (0.06) ---
--------------- ----------
Net loss $ (0.81) $(0.04)
=============== ==========
Fully diluted:
--------------
Loss before extraordinary loss $ (0.75) $(0.04)
Extraordinary loss $ (0.06) ---
--------------- ----------
Net loss $ (0.81) $(0.04)
=============== ==========
Weighted average shares outstanding:
Basic 2,512 3,976
=============== ==========
Fully diluted 2,514 3,994
=============== ==========
</TABLE>
See accompanying notes to Condensed Financial Statements.
Page 4
<PAGE>
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For the Three Month
Periods Ended March 31,
2000 1999
----------------------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (250) $ 1,651
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation and amortization 1,533 1,333
Amortization of deferred loan costs 136 54
Extraordinary loss on early retirement of long-term debt 158 ---
Net gain on sale of assets (1,263) ---
Minority interests (466) 26
Equity in loss (earnings) of unconsolidated affiliates 143 (7)
Provision for doubtful accounts, notes and bonds receivables 2,288 ---
Unbilled rent receivable, net (67) 9
(Increase) decrease in:
Other receivables 82 (36)
Tenant rent and reimbursements receivable (1,567) 605
Prepaid expense and other assets (803) (143)
Accrued interest receivable and loan fees 285 (168)
Increase (decrease) in:
Accounts payable and other liabilities 1,871 311
Tenant security deposits 6 (24)
-------------- ------------
Net cash provided by operating activities 2,086 3,611
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of real estate assets (10,385) ---
Sale of real estate assets 8,794 ---
Additions to rental properties (1,041) (853)
Pre-acquisition costs 348 (327)
Construction-in-progress (11) (2,038)
Leasing commissions (39) (156)
Investment in notes and bonds receivable, net --- (265)
Distributions from unconsolidated affiliates 1,213 ---
Principal payments received on notes receivable 100 101
Contributions to unconsolidated affiliates (42) (468)
-------------- -------------
Net cash used in investing activities (1,063) (4,006)
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable proceeds 7,513 6,200
Repayment of notes payable (9,086) (904)
Payment of deferred financing costs (215) (233)
Decrease (increase) in restricted cash 380 (328)
Minority interest equity contribution 486 ---
Purchase of common and preferred stock and partnership units (2,374) (344)
Distributions (2,584) (3,667)
-------------- -------------
Net cash (used in) provided by financing activities (5,880) 724
-------------- -------------
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 5
<PAGE>
Continued...
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For the Three Month
Periods Ended March 31,
2000 1999
-------------------------------
(Unaudited)
<S> <C> <C>
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,857) 329
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 7,545 1,379
------ ------
CASH AND CASH EQUIVALENTS, END OF PERIOD $2,688 $1,708
====== ======
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest $3,457 $2,724
====== ======
NONCASH INVESTING AND FINANCING ACTIVITIES
Distributions declared not yet paid $ 378 $1,794
====== ======
Preferred distributions due to minority partner $ 14 ---
====== ======
Transfer from investments in unconsolidated affiliates to notes
receivable $3,070 ---
====== ======
Transfer note receivable to land and building:
Land $ 252
Building 1,009
------
Total $1,261
======
Notes receivable $1,261
======
Concluded.
</TABLE>
See accompanying notes to Condensed Consolidated Financial Statements.
Page 6
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
G&L Realty Corp. (the "Company") was formed as a Maryland corporation to
continue the ownership, management, acquisition and development activities
previously conducted by G&L Development, a California general partnership, the
Company's predecessor. All of the Company's assets are held by, and all of its
operations are conducted through, the following entities:
G&L Realty Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership")
G&L Realty Financing Partnership II, L.P., a Delaware limited
partnership (the "Realty Financing Partnership")*
G&L Medical Partnership, L.P., a Delaware limited partnership
(the "Medical Partnership")*
G&L Gardens, LLC, an Arizona limited liability company
("Maryland Gardens")*
435 North Roxbury Drive, Ltd., a California limited partnership
(the "Roxbury Partnership")
GL/PHP, LLC, a Delaware limited liability company ("GL/PHP")*
G&L Hampden, LLC, a Delaware limited liability company ("Hampden")*
G&L Valencia, LLC, a California limited liability company ("Valencia")
G&L Tustin, LLC, a California limited liability company ("Tustin")*
G&L Holy Cross, LLC, a California limited liability company ("Holy
Cross")*
G&L Burbank, LLC, a California limited liability company ("Burbank")*
GLH Pacific Gardens, LLC, a California limited liability company
("Pacific Gardens")
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")
GLH Tarzana, LLC, a California limited liability company ("Tarzana")
G&L Heritage Care, LLC, a Delaware limited liability company
("Heritage")
G&L Massachusetts, LLC, a Delaware limited liability company
("Massachusetts")
* 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
the "Financing Entity."
The Company, as the sole general partner and as owner of an approximately 79%
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 condensed 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
Page 7
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
is the sole managing member), Pacific Gardens (in which the Operating
Partnership owns a 93% membership interest and is a co-managing member), Tarzana
(in which the Operating Partnership owns an 85% membership interest and is a co-
managing member) and Hoquiam, Lyon, Coronado, Heritage and Massachusetts (in
which the Operating Partnership owns a 100% interest).
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 condensed
consolidated financial statements of the Company. The entities in which the
Company has unconsolidated financial interests are as follows:
. GLN Capital Co., LLC ("GLN") is 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.
. 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 medical office
building ("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 three MOBs
located at 1360 West 6/th/ Street in San Pedro, California.
. G&L Penasquitos, LLC ("Penasquitos LLC") is a California limited liability
company, formed by the Company on April 24, 1998, through the Operating
Partnership, and Parsons House, LLC, a California limited liability company
("Parsons"). The Company and Parsons contributed to Penasquitos LLC 75%
and 25% of the equity, respectively. However, the initial ownership
interests of the parties will be adjusted to 50% as each partner receives a
return of its initial capital contribution through preferred distributions.
Penasquitos LLC was formed for the purpose of acquiring and converting a
building located in Rancho Penasquitos, California into an assisted living
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 an assisted living facility 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 an assisted living facility located in Santa Monica, California,
which was purchased by the Company. Since July 1, 1999, Pacific Gardens
Corp. has not operated the assisted living facility as a wholly owned
subsidiary of ASL assumed all of the assets and liabilities of Pacific
Gardens Corp. in order to operate the facility.
. 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
developed an assisted living 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 an assisted living facility in Omaha, Nebraska on the
land acquired by Eagle Run.
Page 8
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT - CONTINUED
(Unaudited)
. Lakeview Associates, LLC ("Lakeview") is a California limited liability
company, formed on September 2, 1999 by the Company, through the operating
partnership and D.D.&F. ("Prestige"), an Oregon general partnership. The
Company and Prestige each contributed 50% of the equity of Lakeview. The
Company contributed land and construction in progress in exchange for 50%
of the equity of Lakeview and a $1.4 million note receivable. Prestige
contributed $250,000 for a 50% interest in Lakeview. Lakeview was formed
for the purpose of developing a two-story, 80 unit, 92 bed assisted living
facility in Yorba Linda, California.
. Tustin Heritage Park, LLC ("Heritage Park") is a California limited
liability company in which the Company has a 25% equity ownership interest.
In June 1999, the Company sold a vacant piece of land in Tustin to Heritage
Park. In exchange, the Company received $75,000 in cash, a $425,000 first
deed of trust and a 25% equity ownership interest in Heritage Park.
Heritage Park intends to develop a 53-unit senior apartment residence on
the land.
GLN, San Pedro, Penasquitos Inc., Penasquitos LLC, Pacific Gardens Corp., Eagle
Run, Eagle Run, Inc., Lakeview and Heritage Park 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-managed real estate investment trust
("REIT") that acquires, develops, manages, finances and leases healthcare
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 medical office buildings ("MOBs"),
skilled nursing facilities ("SNFs") or assisted living facilities ("ALFs"). The
Company's lending activities consist of providing short-term secured loans to
facilitate third party acquisitions of healthcare facilities.
Basis of Presentation - The accompanying condensed consolidated financial
statements include the accounts of the Company. The interests in the Roxbury
Partnership, Valencia, Pacific Gardens and Tarzana that are not owned by the
Company, have been reflected as 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, 2000 and 1999 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, 2000
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 9
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
3. BUILDINGS AND IMPROVEMENTS
Buildings and improvements consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------------------------
(in thousands)
<S> <C> <C>
Buildings and improvements....................... $164,809 $160,360
Tenant improvements.............................. 8,318 7,705
Furniture, fixtures and equipment................ 2,835 2,668
-------- --------
175,962 170,733
Less accumulated depreciation and amortization... (25,284) (23,912)
-------- --------
Total.................................... $150,678 $146,821
======== ========
</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>
March 31, December 31,
2000 1999
------------------------
(in thousands)
<S> <C> <C>
Deferred financing costs......................... $ 3,895 $ 3,844
Pre-acquisition costs............................ 272 621
Leasing commissions.............................. 1,495 1,711
Prepaid expense and other assets................. 840 57
------- -------
6,502 6,233
Less accumulated amortization.................... (1,435) (1,269)
------- -------
Total.................................... $ 5,067 $ 4,964
======= =======
</TABLE>
Page 10
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED 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 three
months ended March 31, 2000 and for the year ended December 31, 1999:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------------------------
(in thousands)
<S> <C> <C>
Distributions in excess of net income
at beginning of period................... $(25,412) $(12,194)
Net (loss) during period.................... (250) (2,115)
Less: Distributions declared................ (2,093) (11,103)
-------- --------
Distributions in excess of net income....... $(27,755) $(25,412)
======== ========
</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 March 31, 2000 and 1999 there were approximately
250,500 and 213,500 stock options outstanding with weighted average exercise
prices of $11.31 and $14.49, respectively. For the three months ended March 31,
2000 and 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 months ended March
31, 2000 and 1999:
Page 11
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
<TABLE>
<CAPTION>
For the Three Month
Periods Ended March 31,
2000 1999
-----------------------
(in thousands)
<S> <C> <C>
Numerator:
----------
Net (loss) income $ (250) $ 1,651
Preferred stock dividends (1,793) (1,803)
------- -------
Net (loss) income available to common
stockholders $(2,043) $ (152)
======= =======
Denominator:
------------
Weighted average shares - basic 2,512 3,976
Dilutive effect of stock options 2 18
------- -------
Weighted average shares - fully diluted 2,514 3,994
======= =======
Per share:
----------
Basic $ (0.81) $ (0.04)
Dilutive effect of stock options --- ---
------- -------
Fully diluted $ (0.81) $ (0.04)
======== =======
</TABLE>
At various times during the three months ended March 31, 2000 the Company
repurchased a total of 237,800 shares of the Company's Common Stock at an
average price of approximately $9.12 per share.
During the first quarter of 2000, the Company also purchased 7,700 shares
of its Series A Preferred Stock at an average price of $15.03 and 4,600 shares
of its Series B Preferred Stock at an average price of $14.68.
Page 12
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED 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 March 31, 2000. (In thousands).
<TABLE>
<CAPTION>
Valley San Penasquitos Penasquitos Tustin Pacific Eagle Run,
GLN Convalescent Pedro LLC Inc. Heritage Gardens, Inc. Inc.
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Opening balance at beginning
of period.................... $776 $ 323 $1,070 $ 1,379 $ 106 $ --- $(312) $ 61
Equity in earnings (loss) of
affiliates................... (2) (8) 31 (44) --- --- --- (110)
Cash contributions............ --- --- --- --- --- --- ---
Cash distributions............ --- (315) --- (1,128) (86) --- --- ---
---- ----- ------ ------- ----- ----- ----- -----
Equity, before inter-company
adjustments.................. 774 --- 1,101 207 20 --- (312) (49)
---- ----- ------ ------- ----- ----- ----- -----
Intercompany transactions:
Receivable (payable), net.... 61 --- 30 238 (20) 13 1 6
---- ----- ------ ------- ----- ----- ----- -----
Investment in unconsolidated
affiliates................... $835 $ --- $1,131 $ 445 $ --- $ 13 $(311) $ (43)
==== ===== ====== ======= ===== ===== ===== =====
<CAPTION>
Eagle Run, Lakeview
LLC Assoc. Total
----------------------------------
<S> <C> <C> <C>
Opening balance at beginning
of period.................... $654 $ 250 $ 4,307
Equity in earnings (loss) of
affiliates................... (10) --- (143)
Cash contributions............ --- --- ---
Cash distributions............ (5) --- (1,534)
---- ------ -------
Equity, before inter-company
adjustments.................. 639 250 2,630
---- ------ -------
Intercompany transactions:
Receivable (payable), net.... 52 1,723 2,104
---- ------ -------
Investment in unconsolidated
affiliates................... $691 $1,973 $ 4,734
==== ====== =======
</TABLE>
Page 13
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Following is a summary of the condensed financial information of each of the
unconsolidated affiliates as of and for the three month period ended March 31,
2000. (In thousands).
<TABLE>
<CAPTION>
Pacific
Valley San Penasquitos Penasquitos Tustin Gardens
GLN Convalescent Pedro LLC Inc. Heritage Corp.
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Financial Position:
- ------------------
Land.......................... $ --- $ --- $ 1,882 $ 641 $ --- $ 500 $ ---
Buildings..................... --- --- 4,298 6,584 --- --- ---
Notes receivable, net......... 1,561 --- --- --- --- --- ---
Other assets.................. --- --- 233 1,181 --- 68 ---
Notes payable................. --- --- (4,793) (8,000) --- (554) ---
Other liabilities............. (17) --- (291) (11) (10) (14) (349)
------ ----- ------- ------- ----- ----- -----
Net assets........................ $1,544 $ --- $ 1,329 $ 395 $ (10) $ --- $(349)
====== ===== ======= ======= ===== ===== =====
Partner's equity:
- ----------------
G&L Realty Partnership, L.P... $ 774 $ --- $ 1,101 $ 207 $ 20 $ --- $(312)
Others........................ 770 --- 228 188 (30) --- (37)
------ ----- ------- ------- ----- ----- -----
Total equity...................... $1,544 $ --- $ 1,329 $ 395 $ (10) $ --- $(349)
====== ===== ======= ======= ===== ===== =====
Operations:
- ----------
Revenues...................... $ --- $ 83 $ 287 $ 207 $ --- $ --- $ ---
Expenses...................... (3) (99) (256) (295) --- --- ---
------ ----- ------- ------- ----- ----- -----
Net (loss) income................. $ (3) $ (16) $ 31 $ (88) --- --- $ ---
====== ===== ======= ======= ===== ===== =====
Allocation of net (loss) income:
- -------------------------------
G&L Realty Partnership, L.P... $ (2) $ (8) $ 31 $ (44) $ --- $ --- $ ---
Others........................ (1) (8) --- (44) --- --- ---
------ ----- ------- ------- ----- ----- -----
Net (loss) income................. $ (3) $ (16) $ 31 $ (88) $ --- $ --- $ ---
====== ===== ======= ======= ===== ===== =====
<CAPTION>
Eagle Run Eagle Run Lakeview
Inc. LLC Associates Total
--------------------------------------------------
<S> <C> <C> <C> <C>
Financial Position:
- ------------------
Land.......................... $ --- $ 1,191 $ 947 $ 5,161
Buildings..................... --- 5,133 --- 16,015
Notes receivable, net......... --- --- --- 1,561
Other assets.................. 293 414 1,360 3,549
Notes payable................. --- (5,426) (1,443) (20,216)
Other liabilities............. (390) (35) (364) (1,481)
----- ------- ------- --------
Net assets........................ $ (97) $ 1,277 $ 500 $ 4,589
===== ======= ======= ========
Partner's equity:
- ----------------
G&L Realty Partnership, L.P... (49) $ 639 $ 250 $ 2,630
Others........................ (48) 638 250 1,959
----- ------- ------- --------
Total equity...................... $ (97) $ 1,277 $ 500 $ 4,589
===== ======= ======= ========
Operations:
- ----------
Revenues...................... $ 309 $ 179 $ --- $ 1,065
Expenses...................... (529) (198) --- (1,380)
----- ------- ------- --------
Net (loss) income................. (220) $ (19) $ --- $ (315)
===== ======= ======= ========
Allocation of net (loss) income:
- -------------------------------
G&L Realty Partnership, L.P... $(110) $ (10) $ --- $ (143)
Others........................ (110) (9) --- (172)
----- ------- ------- --------
Net (loss) income................. $(220) $ (19) $ --- $ (315)
===== ======= ======= ========
</TABLE>
Page 14
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. SEGMENT INFORMATION
In prior years, the Company has presented segment information based on the
following types of investments: direct real estate investments in healthcare
properties and debt obligations secured by healthcare properties. The Company
believes that the composition of its direct real estate investments has changed
to the extent that greater segment disclosure is necessary. The Company's
business currently consists of the following segments:
. Medical office buildings - These investments consist of 24 high quality
MOBs, two retail facilities and one parking facility totaling
approximately 890,000 square feet and all located in Southern
California. These properties are owned either directly by the Company or
indirectly through joint ventures.
. Skilled nursing facilities - These investments consist of seven SNFs and
one senior apartment complex located in Hampden, Massachusetts, Phoenix,
Arizona and Hoquiam, Washington. Two of the SNFs were acquired through
foreclosure and are currently not operating. The five operating SNFs
contain over 600 beds that are typically occupied by residents who
require a high level of daily nursing care. All of the SNFs and the
apartment complex are owned 100% by the Company. In addition, the
Company currently holds the operating license for four of the seven
SNFs. On March 15, 2000, the Company obtained licenses from the
Commonwealth of Massachusetts to operate the three SNFs owned by the
Company in Hampden, Massachusetts. As a result, all of the assets,
liabilities, revenues and expenses of these SNFs for the period from
March 15, 2000 through March 31, 2000 are reflected in the condensed
consolidated financial statements of the Company and the segment
information provided below. Furthermore, the Company will be required to
pay the applicable corporate income tax on any net income produced by
these SNFs, although the Company's REIT status will not be affected.
While the Company does not intend to hold these operating licenses for
the long term, the Company believes it is currently in its best
interests to own the licenses to operate these facilities.
. Assisted living facilities - These investments consist of four ALFs and
one hospital. All of the ALFs are owned through joint ventures. The four
ALFs contain over 350 units that are typically occupied by residents who
require a less intense level of care in comparison to the SNFs. The
Company's joint venture partner in each of these ALFs operates the
facility. The hospital consists of 183 beds and is 100% leased to a
third-party operator.
. Debt obligations - These investments consist of short-term secured loans
made to third parties to facilitate the acquisition of healthcare
facilities. As of March 31, 2000, the Company had eight loans
outstanding totaling $15.7 million, of which $14.2 million is secured by
SNFs located in California and Maryland.
The tables on the following pages reconcile the Company's income and
expense activity for the three months ended March 31, 2000 and 1999 and balance
sheet data as of March 31, 2000.
Page 15
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2000 Reconciliation of Reportable Segment Information
For the three month period ended March 31, 2000
<TABLE>
<CAPTION>
Medical Skilled Assisted Debt
Office Nursing Living Obligations Other Total
------- ------- -------- ----------- ----- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Rents, tenant reimbursements and
parking................................ $6,294 $1,727 $ 325 $ --- $ --- $ 8,346
Interest and loan fees.................. 60 2 1 364 57 484
Net gain on sale of assets.............. 1,405 (142) --- --- --- 1,263
Other income............................ 94 1 --- --- 14 109
------ ------ ----- ------- ----- -------
Total revenues........................ 7,853 1,588 326 364 71 10,202
------ ------ ----- ------- ----- -------
Expenses:
Property operations..................... 1,582 1,046 30 15 --- 2,673
Depreciation and amortization........... 1,233 206 75 --- 19 1,533
Interest................................ 2,286 393 466 208 70 3,423
Provision for doubtful accounts, notes
and bonds receivable................... --- 563 --- 1,725 --- 2,288
General and administrative.............. --- --- --- --- 700 700
------ ------ ----- ------- ----- -------
Total expenses........................ 5,101 2,208 571 1,948 789 10,617
------ ------ ----- ------- ----- -------
Income (loss) from operations............. 2,752 (620) (245) (1,584) (718) (415)
Equity in earnings (loss) of
unconsolidated affiliates................ 31 (8) (164) (2) --- (143)
------ ------ ----- ------- ----- -------
Income (loss) from operations before
minority interests....................... $2,783 $ (628) $(409) $(1,586) $(718) $ (558)
====== ====== ===== ======= ===== =======
</TABLE>
1999 Reconciliation of Reportable Segment Information
For the three month period ended March 31, 1999
<TABLE>
<CAPTION>
Medical Skilled Assisted Debt
Office Nursing Living Obligations Other Total
------- ------- -------- ----------- ----- -----
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Rents, tenant reimbursements and
parking................................ $6,199 $952 $ 396 $ --- $ --- $ 7,547
Interest and loan fees.................. 42 5 2 528 4 581
Other income............................ 22 --- --- --- 14 36
------ ---- ----- ----- ------ -------
Total revenues........................ 6,263 957 398 528 18 8,164
------ ---- ----- ----- ------ -------
Expenses:
Property operations..................... 1,649 14 14 227 --- 1,904
Depreciation and amortization........... 1,024 206 81 --- 22 1,333
Interest................................ 2,196 177 162 (33) 114 2,616
General and administrative.............. --- --- --- --- 641 641
------ ---- ----- ----- ------ -------
Total expenses........................ 4,869 397 257 194 777 6,494
------ ---- ----- ----- ------ -------
Income (loss) from operations............. 1,394 560 141 334 (759) 1,670
Equity in earnings (loss) of
unconsolidated affiliates................ 79 (9) (81) 18 --- 7
------ ---- ----- ----- ------ -------
Income (loss) from operations before
minority interests....................... $1,473 $551 $ 60 $ 352 $ (759) $ 1,677
====== ==== ===== ===== ====== =======
</TABLE>
Page 16
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
<TABLE>
<CAPTION>
2000 Reconciliation of Reportable Segment Information
As of March 31, 2000
Medical Skilled Assisted Debt
Office Nursing Living Obligations Other Total
--------- -------- -------- ----------- ------ --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Rental properties.......................... $143,261 $28,544 $12,832 $ --- $ 280 $184,917
Mortgage loans and notes receivable, net... --- --- --- 15,725 --- 15,725
Other assets............................... 16,010 4,143 3,215 3,200 311 26,879
-------- ------- ------- ------- ----- --------
Total assets......................... $159,271 $32,687 $16,047 $18,925 $ 591 $227,521
======== ======= ======= ======= ===== ========
Other assets:
Cash and cash equivalents................ $ 1,296 $ 923 $ 28 $ --- $ 441 $ 2,688
Restricted cash.......................... 6,556 952 --- 875 --- 8,383
Tenant rent and reimbursements
receivable, net....................... 889 1,502 89 963 3 3,446
Unbilled rent receivable, net............ 2,175 --- 128 --- --- 2,303
Other receivables, net................... --- 15 --- 226 (152) 89
Investments in unconsolidated
affiliates............................ 1,131 --- 2,768 835 --- 4,734
Deferred financing costs, net............ 2,116 612 157 231 --- 3,116
Pre-acquisition costs.................... 124 49 30 69 --- 272
Construction in progress................. 165 4 --- --- --- 169
Deferred lease costs, net................ 824 --- 15 --- --- 839
Prepaid expense and other................ 734 86 --- 1 19 840
-------- ------- ------- ------- ----- --------
Total other assets.................... $ 16,010 $ 4,143 $ 3,215 $ 3,200 $ 311 $ 26,879
======== ======= ======= ======= ===== ========
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Neither the Company, the Operating Partnership, the Financing Entities, the
Subsidiaries, Maryland Gardens, the Roxbury Partnership, Valencia, Pacific
Gardens, Hoquiam, Lyons, Coronado, Tarzana, Heritage, Massachusetts, the
Unconsolidated Affiliates nor any of the assets within their portfolios of MOBs,
SNFs, ALFs, parking facilities, and retail space (the "Properties") is currently
a party to any material litigation, except as discussed below.
On August 15, 1997, a subsidiary of the Company, GL/PHP, LLC ("GL/PHP")
borrowed $16 Million from Nomura, the proceeds of which were used to repay a
loan made by PHP Healthcare Corporation ("PHP") in connection with the purchase
by GL/PHP of six New Jersey primary care centers (the "New Jersey Properties").
Nomura received a first lien against the real properties. The New Jersey
Properties were leased by Pinnacle Health Enterprises, LLC ("Pinnacle"), a
subsidiary of PHP, and PHP guaranteed the lease. Concurrently with the $16
Million loan, the Operating Partnership obtained a new $2 Million loan from PHP.
The note by its terms is nonnegotiable and provides for a right of offset
against payments of interest and principal in an amount equal to any losses
sustained by reason of any defaults by Pinnacle; under its lease with GL/PHP,
discussed below.
As of August 15, 1997, Pinnacle leased the New Jersey Properties from
GL/PHP under the terms of a 17-year net operating lease. PHP guaranteed the
obligations of its subsidiary under the lease. In November 1998, Pinnacle filed
a Chapter 11 bankruptcy petition in the United States Bankruptcy Court of the
District of Delaware and its case was voluntarily converted to a Chapter 7 case.
Also in November 1998, PHP filed a Chapter 11 bankruptcy petition in the United
States Bankruptcy Court of the District of Delaware. The Commissioner of the New
Jersey Department of Banking and Insurance (the "Commissioner") took over the
operations of Pinnacle. The Commissioner acting as rehabilitator for the entity
operating the facilities under a medical services agreement with
Page 17
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Pinnacle, paid Pinnacle's administrative rent through the bankruptcy proceeding
up to and including March 5, 1999. After the Commissioner ceased paying rent,
Pinnacle's Chapter 7 trustee elected to reject the lease. The Commissioner
continued to occupy and lease certain of the buildings through March 31, 1999.
During 1999, GL/PHP leased one of the buildings and a portion of an
additional building. Also during 1999, GL/PHP attempted to restructure the
Nomura loan in order to attempt to preserve its investment in the New Jersey
Properties. 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 New Jersey Properties. GL/PHP has been in default on
this loan since May 1999. On May 10, 1999, Amresco rejected the Company's
restructuring plan.
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. On September 15,
1999, the Superior Court ruled in Amresco's favor and appointed a receiver for
these buildings. Amresco filed a motion to foreclose its mortgage against the
New Jersey Properties. In February 2000, the court granted the motion and
transferred the matter to the foreclosure court of the New Jersey Superior
Court. New Jersey counsel has advised that the actual transfer of title should
be completed in approximately three to four months. A non-cash impairment loss
of $6.4 million was recorded in September 1999 to reflect the decline in value
of these buildings as a result of the loss of current and future rental revenue
due to the Pinnacle and PHP bankruptcies in November 1998 and their subsequent
departure from the buildings in March 1999. This impairment loss was recorded in
the third quarter of 1999 in response to the appointment of the receiver for the
buildings in September 1999 and their pending foreclosure.
LaSalle National Bank ("LaSalle"), as trustee in trust for the holders of
certain obligations including the Nomura loan by and through Amresco, has also
filed an action in March 2000 in the United States District Court, Central
District of California seeking to cause the Operating Partnership to turn over
the $2 Million borrowed from PHP to LaSalle as part of the security LaSalle
claims it is entitled to under the deed of trust and assignment of rent with
GL/PHP. The Operating Partnership believes that LaSalle is not entitled to
these funds and that LaSalle will not be successful in its claims but no
assurances can be given at this time that this result will be obtained.
On October 28, 1999, Landmark Healthcare Facilities, LLC ("Landmark")
filed a lawsuit against a subsidiary of the Company, G&L Valencia, LLC, claiming
that Landmark is entitled to approximately $600,000 plus interest costs under a
development agreement entered into between G&L Valencia, LLC and Landmark for
development of an MOB project in Valencia, California. The Company is vigorously
opposing the lawsuit and has filed a counter suit to recover approximately
$400,000 plus interest that was already paid under the development agreement and
for a judgment and declaration that all of Landmark's rights, title and interest
in G&L Valencia, LLC has been terminated or assigned to the Company. The
litigation is in its earliest stages and the likelihood of recovery by either
party is therefore inestimable.
The Company is the guarantor on a $500,000 letter of credit in favor of
NVHF Affiliates, LLC, a non-profit low-income apartment owner. The Company holds
an unsecured promissory note from NVHF Affiliates, LLC in the same amount.
As of December 31, 1999 the Company was in default on its $4.6 million
unsecured line of credit with Tokai Bank of California due to a loan covenant
violation. The loan covenant requires that the Company maintain a ratio of
EBITDA less distributions to debt service of at least 1.20 to 1.0. The Company
believes it will receive a waiver from Tokai Bank for the violation of this loan
covenant as of December 31, 1999 and that the loan will not be declared due and
payable. Furthermore, the Company repaid $3.0 million of the $4.6 million
outstanding to Tokai Bank in January 2000 and is not in default on its monthly
interest payments. The Company believes that the reduction in the Common Stock
dividend in 1999 will allow the Company to comply with the loan covenant in the
future.
Page 18
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
9. PROVISION FOR DOUBTFUL ACCOUNTS, NOTES AND BONDS RECEIVABLE
In November 1999, Lenox Healthcare, the manager of the Company's three
skilled nursing facilities located in Hampden, Massachusetts, filed for
bankruptcy. In December 1999, the Company reserved $2.0 million related to
delinquent rent and operating expense reimbursements from these facilities. In
January 2000, the bankruptcy court approved the cancellation of the Lenox
Healthcare management contract and the Company selected a new manager whose
initial performance has been very positive. The Company intends to retain the
new manager to continue to manage these facilities. On March 15, 2000, the
Company obtained licenses from the Commonwealth of Massachusetts to operate
these three SNFs. The Company believes that after the bankruptcy of the previous
two managers of these SNFs it was in the best interest of the facilities for the
Company to obtain the licenses. However, because the Company now owns the
operating licenses for these facilities, all of the assets, liabilities,
revenues and expenses of these facilities are reflected in the condensed
consolidated financial statements of the Company. Previously, the Company rented
these three facilities to the prior license holder for monthly rent of $225,000,
which was the only amount reported in previous financial statements. At the time
of the license transfers, the prior license holder owed delinquent rent of
approximately $0.6 million to the Company. As a result, the Company reserved
$0.6 million against this unpaid rent receivable. Since the prior license holder
no longer operates these facilities, the Company believes its ability to collect
these unpaid rent obligations is doubtful and that the addition to the reserve
is appropriate.
During the first quarter, the Company also established a reserve of
$1.7 million to reflect the impairment of a delinquent note receivable. Since
February 1998, the Company has held a $3.9 million note receivable secured by a
first mortgage on two SNFs located in Chico and Paso Robles, California. In
December 1998, the Company reserved $1.0 million with respect to the note
because of the borrower's financial instability. In April 1999, the borrower
filed for bankruptcy. However, the Company believed that it would recover the
remaining $2.9 million through foreclosure of the SNFs and litigation against
the various parties involved in the transaction. In March 2000, the Company
obtained title to the two SNFs from the bankruptcy court. Because these two SNFs
are not currently operating, the Company valued these two facilities at $1.2
million and an additional reserve of $1.7 million was established. Although the
Company is currently pursuing the re-opening of these facilities as well as
legal action against the borrower and other parties involved in the transaction,
the Company now believes that the outcome of these pursuits is not certain and
the addition to the reserve is appropriate.
10. EXTRAORDINARY LOSS ON EARLY RETIREMENT OF LONG-TERM DEBT
In January 2000, the Company sold a 33,000 square foot MOB in Aliso Viejo,
California for $8.3 million. A portion of the proceeds were used to repay a
$5.5 million loan secured by the MOB. In repaying the loan, the Company
incurred prepayment fees of approximately $28,000 and wrote off an additional
$130,000 in loan fees relating to the loan. These amounts have been presented
as an extraordinary loss on the statement of operations.
11. ACQUISITIONS, DISPOSITIONS AND FINANCINGS
In January 2000, the Company, in a joint venture with ASL Tarzana
Wedgewood, LLC, purchased a two-story, 80-unit, 44,117 square foot ALF located
in Tarzana, California for $10.3 million. The Company contributed $2.5 million
for an 85% equity interest in the newly formed joint venture. However, the
Company's ownership interest will be reduced to 65% after the Company's initial
capital contribution is repaid by the joint venture. The facility is operated by
ASL Tarzana, Inc., an affiliate of ASL Tarzana Wedgewood, LLC. As part of the
acquisition, the Company assumed three loans totaling $7.5 million. The loans
bear interest at rates ranging from 7.5% to 8.5% and are due in 2006.
Page 19
<PAGE>
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
In January 2000, the Company sold a 33,000 square foot MOB located in Aliso
Viejo, California to Hoag Memorial Hospital for $8.3 million. The Company used
the proceeds to repay a $5.5 million loan that was secured by the MOB and
recognized a gain on sale of $1.4 million.
In January 2000, the Company repaid $3.0 million on its line of credit with
Tokai Bank of California. As of March 31, 2000, the Company has $1.6 million
outstanding on its line of credit with Tokai Bank of California.
In March 2000, the Company refinanced its existing $6.3 million mortgage on
one of its joint venture ALFs with an $8.5 million, 35-year HUD loan at an
interest rate of 8.3%. The Company received net proceeds of $1.1 million from
the refinancing.
In March 2000, the Company sold its 50% interest in Valley Convalescent, a
joint venture that owned a 118-bed SNF located in El Centro, California, to its
joint venture partner. The transaction included a sale price of $500,000,
consisting of $200,000 in cash and a $300,000 mortgage note. The $300,000
mortgage note was consolidated with the $2.8 million mortgage that the Company
already holds on the facility. The Company now holds a $3.1 million first
mortgage on the property, which pays interest at 12% per annum and matures in
three years. In prior periods, the Company's first mortgage was presented as
part of the Company's investment in unconsolidated affiliates. Since the Company
no longer holds an equity interest in the joint venture, the first mortgage is
presented as part of the Company's mortgage loans and notes receivable in these
condensed consolidated financial statements.
Page 20
<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 1999 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. 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, the creditworthiness of
tenants and borrowers, 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 1999 Annual
Report on Form 10-K as previously filed with the SEC.
Results of Operations
- ---------------------
Comparison of the Three Month Period Ended March 31, 2000 versus the Three
Month Period Ended March 31, 1999.
Total revenues increased by $2.0 million, or 24%, from $8.2 million in the
first quarter of 1999, to $10.2 million for the same period in 2000. Rents,
tenant reimbursements and parking revenues increased an aggregate $0.8 million,
or 11%, from a combined total of $7.5 million during the first quarter of 1999,
to $8.3 million for the same period in 2000. On March 15, 2000, the Company
obtained licenses from the Commonwealth of Massachusetts to operate the three
SNFs owned by the Company and located in Hampden, Massachusetts. As a result of
the license transfer, all of the assets, liabilities, revenues and expenses of
these SNFs for the period from March 15, 2000 through March 31, 2000 are
reflected in the condensed consolidated financial statements of the Company. The
consolidation of the operating revenues and expenses related to these three SNFs
accounted for a $0.9 million increase in rental revenues. Excluding the revenues
from these SNFs from March 15 through March 31, 2000, rents, tenant
reimbursements and parking revenues actually decreased by $0.1 million. This
decrease was due to a decrease of $0.6 million in rental revenue related to the
vacancy of the Company's six MOBs located in New Jersey. This decrease was
offset by rental revenue from recently completed construction projects in
Valencia and Aliso Viejo of $0.3 million and by rental revenue of $0.2 million
from the January 2000 acquisition of an 80-unit, 44,117 square foot ALF located
in Tarzana, California.
Interest and loan fees derived from loans secured by healthcare facilities
decreased approximately $0.1 million, or 17%, from $0.6 million in the first
quarter of 1999, to $0.5 million for the same period in 2000. This decrease was
due to the March 31, 1999 long-term refinancing of the Company's note receivable
secured by the St. Thomas More facility in Hyattsville, Maryland.
The Company recognized a net gain on the sale of assets in the amount of
$1.3 million in the first quarter of 2000. The sale, in January 2000, of a
33,000 square foot MOB located in Aliso Viejo, California to Hoag Memorial
Hospital accounted for $1.4 million of the gain. This gain was offset by the
loss on the sale of the Company's 50% interest in Valley Convalescent, LLC, an
unconsolidated affiliate.
Page 21
<PAGE>
Total expenses increased by $4.1 million, or 63%, from $6.5 million for the
three months ended March 31, 1999, to $10.6 million for the same period in 2000.
$2.3 million of this increase was due to the increase in the Company's allowance
for doubtful accounts, notes and bonds receivable. Property operating expenses
increased by $0.8 million, or 42%, from $1.9 million for the three months ended
March 31, 1999, to $2.7 million for the same period in 2000. The consolidation
of the operating revenues and expenses of the three Hampden SNFs from March 15
through March 31, 2000 as discussed above accounted for a $0.9 million increase
in property operating expenses. Excluding the operating expenses from these
three SNFs, property operating expenses actually decreased by $0.1 million from
the same period in 1999. The decrease was due to a $0.2 million decrease in
management and overhead expenses associated with a wholly-owned subsidiary
formed by the Company in November 1998 for the purpose of making loans to obtain
healthcare facilities. This joint venture ceased operations in April 1999.
This decrease was offset by increased operating expenses of $0.1 million related
to development projects completed by the Company during 1999 and 2000.
Depreciation and amortization increased $0.2 million, or 15%, from
$1.3 million for the three months ended March 31, 1999, to $1.5 million for the
same period in 2000. This increase was attributable to property acquisitions
made by the Company during 2000 as well as new property developments placed into
service during 1999 and 2000.
Interest expense increased $0.8 million, or 31%, from $2.6 million for the
three months ended March 31, 1999, to $3.4 million for the same period in 2000.
This increase was mainly due to interest incurred on new borrowings of $38
million made by the Company subsequent to March 31, 1999, as well as the
addition of $7.5 million in debt associated with the acquisition of the assisted
living facility in Tarzana, California.
Provision for doubful accounts, notes and bonds receivable increased
$2.3 million for the three months ended March 31, 2000 compared to the same
period in 1999. In the first quarter of 2000, the Company increased its reserves
by $1.7 million against a delinquent note receivable secured by two SNFs and by
$0.6 million against unpaid rent obligations due from three SNFs owned by the
Company.
Equity in earnings (loss) of unconsolidated affiliates decreased
$0.2 million for the three months ended March 31, 2000 compared to the same
period in 1999. This decrease was primarily the result of start-up operating
losses associated with the Company's 75% investment in Penasquitos Inc. and the
Company's 50% investment in Eagle Run Inc. In March 1999, The Arbors at Rancho
Penasquitos, an ALF owned by the Company through a joint venture, commenced
operations. The facility has been in a lease-up phase since opening in March
1999 and therefore has been producing a net operating loss. Eagle Run commenced
operations in November 1999 and also produced a net loss for the first quarter
of 2000. Occupancy rates at both facilities are increasing on a monthly basis
and are expected to stabilize by the end of 2000, at which time both facilities
are expected to produce income for the Company.
During the first quarter of 2000, the Company recorded an extraordinary
loss on the early retirement of long-term debt in the amount of $0.2 million.
This loss was a result of pre-payment fees and the write-off of deferred loan
fees relating to the repayment of a $5.5 million loan secured by a 33,000 square
foot medical office building in Aliso Viejo, California. The building was sold
to Hoag Memorial Hospital Presbyterian on January 25, 2000 for a price of $8.3
million. The Company used a portion of the proceeds to repay the $5.5 million
loan.
Net income decreased $1.9 million, or 112%, from $1.7 million for the
three months ended March 31, 1999 to $(0.2) million for the same period in
2000. This decrease was primarily due to the $2.3 million increase in
provisions for doubtful accounts, notes and bonds receivable and the
$0.8 million increase in interest expense offset by the $1.3 million increase
in gains on sale of assets.
Page 22
<PAGE>
Liquidity and Capital Resources
- -------------------------------
As of March 31, 2000, the Company's direct investment in net real estate
assets totaled approximately $185.0 million, $4.7 million in joint ventures and
$15.7 million invested in notes receivable. Debt outstanding as of March 31,
2000 totaled $175.8 million.
The Company obtains its liquidity from multiple internal and external
sources. Internally, funds are derived from the operation of MOBs, SNFs, ALFs
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. During the
first quarter of 2000, the Company sold a 33,000 square foot MOB located in
Aliso Viejo, California for $8.3 million. The Company used the proceeds to repay
a $5.5 million loan that was secured by the MOB. The Company used the remaining
proceeds to repay $3.0 million on its line of credit with Tokai Bank of
California. As of March 31, 2000, the Company has $1.6 million outstanding on
its line of credit with Tokai Bank of California. In January 2000, as part of
its acquisition of a $10.4 million, 80-unit assisted living facility in Tarzana,
California, the Company assumed three loans totaling $7.5 million. The loans
bear interest at rates ranging from 7.5% to 8.5% and are due in 2006. In March
2000, the Company refinanced its existing $6.3 million mortgage on one of its
joint venture ALFs with an $8.5 million long-term HUD loan at an interest rate
of 8.3%. The Company received net proceeds of $1.1 million from the refinancing.
The Company declared a quarterly distribution payable to holders of the
Company's Common Stock for the first quarter of 2000 in the amount of $0.125 per
common share which was paid on April 15, 2000 to stockholders of record on March
31, 2000. The Company also paid monthly dividends of $0.6 million to holders
of the Company's Preferred Stock on the fifteenth day of each month during the
first quarter to holders of record on the first day of each month. The Company
distributed dividends of $0.3 million to holders of the Company's Common Stock
in the first quarter while the Company's FFO was a negative $2.2 million for the
same period. However, excluding the $2.3 million increase in reserves, the
Company's FFO for the first quarter of 2000 was $0.1 million.
In general, the Company expects to continue meeting its short-term
liquidity requirements through its working capital, cash flow provided by
operations, its line of credit and through the long-term financing of its
unencumbered properties. 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 sale of assets.
As of December 31, 1999, the Company was in default on its $4.6 million
unsecured line of credit with Tokai Bank of California due to a loan covenant
violation. The loan covenant requires that the Company maintain a ratio of
EBITDA less distributions to debt service of at least 1.20 to 1.0. The Company
believes it will receive a waiver from Tokai Bank for the violation of this loan
covenant as of December 31, 1999 and that the loan will not be declared due and
payable. Furthermore, the Company repaid $3.0 million of the $4.6 million
outstanding to Tokai Bank in January 2000 and is not in default on its monthly
interest payments. The Company believes that the reduction in the Common Stock
dividend in 1999 will allow the Company to comply with the loan covenant in the
future.
Historical Cash Flows
- ---------------------
The Company's net cash from operating activities decreased $1.5 million, or
42%, from $3.6 million for the three months ended March 31, 1999 to $2.1 million
for the same period in 2000. The decrease is due primarily to a $1.9 million
decrease in net income, a $2.2 million increase in tenant rent and
reimbursements receivable, a $1.3 million increase in net gain on sale of assets
offset by a $2.3
Page 23
<PAGE>
million increase in provisions for doubtful accounts, notes and bonds
receivables and a $1.6 million decrease in accounts payable and other
liabilities.
Net cash used in investing activities decreased $2.9 million, or 73%, from
$4.0 million for the three months ended March 31, 1999 to $1.1 million for the
same period in 2000. The decrease was primarily due to a $8.8 million increase
in the sale of assets, the $2.0 million decrease in construction-in-progress
costs, a $1.2 million increase in distributions from unconsolidated affiliates,
a $0.7 million decrease in pre-acquisition costs and a $0.4 million decrease in
contributions to unconsolidated affiliates. These were offset by a $10.4 million
increase in purchases of real estate assets.
Cash flows used in or provided by financing activities decreased by
approximately $6.6 million from cash provided of $0.7 million for the three
months ended March 31, 1999, to cash used of $5.9 million for the same period in
2000. The increase in cash used is due primarily to an increase in the
repayment of notes payable of $8.2 million and an increase in purchases of the
Company's Common Stock of $2.0 million. These were offset by an increase in
notes payable proceeds of $1.3 million, a decrease in restricted cash of $0.7
million, a decrease in distributions of $1.1 million and an increase in minority
interest contributions of $0.5 million.
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.
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 1999 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, 2000 and 1999.
Page 24
<PAGE>
G&L REALTY CORP.
FUNDS FROM OPERATIONS AND ADDITIONAL DATA
(Unaudited)
<TABLE>
<CAPTION>
For the Three Month
Periods Ended March 31,
2000 1999
---------------------------
(in thousands)
<S> <C> <C>
Funds from Operations/(1)/
- --------------------------
Net (loss) income............................................. $ (250) $ 1,651
Minority interest in Operating Partnership.................... (533) (24)
------- -------
(Loss) income for Operating Partnership....................... (783) 1,627
Depreciation of real estate assets............................ 1,342 1,170
Amortization of deferred lease costs.......................... 79 54
Net gain on sale of assets.................................... (1,263) ---
Depreciation from unconsolidated affiliates................... 149 21
Extraordinary loss on early retirement of long-term debt...... 158 ---
Adjustment for minority interest in consolidated affiliates... (53) (22)
Dividends on preferred stock.................................. (1,793) (1,803)
------- -------
Funds from (used in) Operations/(1)/ $(2,164) $ 1,047
======= =======
Weighted average shares outstanding/(2)/
- ----------------------------------------
Basic 3,137 4,609
======= =======
Fully diluted 3,139 4,627
======= =======
Additional Data
- ---------------
Cash flows:
- ----------
Operating activities....................................... 2,086 3,611
Investing activities....................................... (1,063) (4,006)
Financing activities....................................... (5,880) 724
Capital expenditures
- --------------------
Building improvements..................................... 262 330
Tenant improvements........................................ 613 438
Furniture, fixtures & equipment............................ 166 85
Leasing commissions........................................ 39 156
Depreciation and amortization
- -----------------------------
Depreciation of real estate assets......................... 1,342 1,170
Depreciation of non-real estate assets..................... 112 109
Amortization of deferred lease costs....................... 79 54
Amortization of deferred financing costs................... 136 54
Accrued rent in excess of billed rent 71 (7)
</TABLE>
1) Funds from operations ("FFO") represents net income (computed in accordance
with generally accepted accounting principles, consistently applied
("GAAP")), excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation of real property, less preferred stock dividends
paid to holders of preferred stock during the period and after adjustments
for consolidated and unconsolidated entities in which the Company holds a
partial interest. FFO 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.
2) Assumes that all outstanding Operating Partnership units have been converted
to common stock.
Page 25
<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, 1999 filed on March 30, 2000.
Page 26
<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,
SNFs, ALFs, parking facilities, and retail space is currently a
party to any material litigation, except as discussed in Note 8 to
the Condensed Consolidated Financial Statements which is
incorporated herein by reference.
Item 2 Changes in Securities.
None.
Item 3 Defaults Upon Senior Securities.
As discussed in Note 8 to the Condensed Consolidated Financial
Statements, 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.
As discussed in Note 8 to the Condensed Consolidated Financial
Statements and in Management's Discussion and Analysis of
Financial Condition and Results of Operations Liquidity and
Capital Resources which are incorporated herein by reference, the
Company, as of December 31, 1999, was in default on its $4.6
million unsecured line of credit due to a loan covenant violation.
Item 4 Submission of Matters to a Vote of Security Holders.
None.
Item 5 Other Information.
None.
Page 27
<PAGE>
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Note Description
------------ ------ --------------------------------------------------------
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.
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.
Page 28
<PAGE>
(c) Exhibits - (continued from previous page)
Exhibit No. Note Description
------------ ------ -------------------------------------------------------
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.
10.45 (7) 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 (7) 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 (7) Guaranty of Lease by PHP Healthcare Corporation, a
Delaware corporation (the "Guarantor"), dated
February 15, 1997.
10.48 (7) 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 (7) 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 (7) 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 (7) 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 (7) 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.
10.58 (8) Limited Liability Company Agreement of G&L
Hampden, LLC.
10.68 (9) 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 (9) 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 (9) 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 (10) 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 (10) Tenant Estoppel and Real Estate Lease between G&L
Coronado, LLC as Landlord and Coronado Managers Corp. as
Tenant dated December 1, 1998.
Page 29
<PAGE>
(c) Exhibits - (continued from previous page)
Exhibit No. Note Description
------------ ------ -------------------------------------------------------
10.79 (10) Guaranty of Lease between Steven D. Lebowitz and Daniel
M. Gottlieb (collectively "Guarantor") in favor of G&L
Coronado, LLC ("Landlord").
10.80 (11) 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.
10.81 (12) Loan Agreement in the amount of $13.92 million
between G&L Hampden, LLC, as Borrower, and GMAC
Commercial Mortgage Corporation, as Lender.
11 Computation of Per Share Earnings
27 Financial Data Schedule
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 Current Report on Form 8-K (filed as
of August 15, 1997) and incorporated herein by reference.
8) 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.
9) 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.
10) 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.
11) 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.
12) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q (filed
as of November 12, 1999) for the quarter ended September 30, 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
March 31, 2000.
Page 30
<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 15, 2000 By: /s/ David E. Hamer
-------------------------
David E. Hamer
Chief Accounting Officer
Page 31
<PAGE>
Exhibit 11
G&L Realty Corp.
Computation of Per Share Earnings
Quarterly Report on Form 10-Q
March 31, 2000
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Three Month
Periods Ended March 31,
------------------------
2000 1999
------- -------
<S> <C> <C>
Net (loss) income $ (250) $ 1,651
Less: Preferred dividends
10.25% Series A Cumulative Preferred (952) (958)
9.8% Series B Cumulative Preferred (841) (845)
-------- --------
Net (loss) income available to common stockholders $(2,043) $ (152)
======== ========
Options outstanding 251 214
======== ========
Weighted average exercise price $ 11.31 $ 14.49
======== ========
Proceeds upon exercise of options $ 2,833 $ 3,094
======== ========
Treasury stock shares 249 197
======== ========
Common share equivalents 2 18
Average shares outstanding 2,512 3,976
-------- --------
Total common and common share equivalents outstanding 2,514 3,994
======== ========
Per share earnings data:
- -----------------------
Basic $ (0.81) $ (0.04)
======== ========
Fully diluted $ (0.81) $ (0.04)
======== ========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,688
<SECURITIES> 0
<RECEIVABLES> 29,632
<ALLOWANCES> 8,069
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 210,201
<DEPRECIATION> 25,284
<TOTAL-ASSETS> 227,521
<CURRENT-LIABILITIES> 6,881
<BONDS> 175,798
0
29
<COMMON> 24
<OTHER-SE> 49,595
<TOTAL-LIABILITY-AND-EQUITY> 227,521
<SALES> 0
<TOTAL-REVENUES> 10,202
<CGS> 0
<TOTAL-COSTS> 2,673
<OTHER-EXPENSES> 2,233
<LOSS-PROVISION> 2,288
<INTEREST-EXPENSE> 3,423
<INCOME-PRETAX> (415)
<INCOME-TAX> 0
<INCOME-CONTINUING> (92)
<DISCONTINUED> 0
<EXTRAORDINARY> (158)
<CHANGES> 0
<NET-INCOME> (250)
<EPS-BASIC> (0.81)
<EPS-DILUTED> (0.81)
</TABLE>
