<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------------------------------
FORM 8-K/A
(Amendment No.2)
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
August 8, 1996 (July 15, 1996)
----------------------------
GLENBOROUGH REALTY TRUST INCORPORATED
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 0-14162 94-3211970
---------------- ------------ ---------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) I.D. Number)
incorporation)
400 South El Camino Real, Ste. 1100, San Mateo, California 94402
(Address of principal executive offices)
Registrant's Telephone number, including area code:(415) 343-9300
N/A
--------------------------------------------------------------
(Former name or former address, if changes since last report)
This form 8-K contains a total of 31 pages.
Page 1 of 37
<PAGE> 2
Glenborough Realty Trust Incorporated (the "Company") hereby amends Item 7 of
its Current Report on Form 8-K filed with the Securities and Exchange Commission
on July 30, 1996, to file the Pro Forma Financial Statements of the Company and
exhibits related to the acquisition of the UCT Property and the Wells Fargo
financing agreements (as those terms were defined in such Form 8-K).
<TABLE>
<CAPTION>
<S> <C>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 5
Statement of revenues and certain expenses of University
Club Tower for the three months ended March 31, 1996 and
for the years ended December 31, 1995, 1994 and
1993. 6
(b) PRO FORMA FINANCIAL STATEMENTS
</TABLE>
The following pro forma financial statements represent the Company's
consolidated balance sheet and consolidated statement of income at and for the
three months ended March 31, 1996 and for the year ended December 31, 1995, as
if the transaction and the Consolidation (discussed below) took place on January
1, 1995.
The pro forma adjustments reflect: (a) the balance sheet and statements of
income for the UCT Property; (b) the new debt and interest thereon; (c) the
elimination of management fees and reimbursements incurred at the UCT Property
paid to the Associated Companies; and (d) the effect that these adjustments have
on minority interest.
The Pro Forma information is unaudited and is not necessarily indicative of the
consolidated results which would have occurred if the transactions had been
consummated in the year presented, or on any particular date in the future, nor
does it purport to represent the financial position or results of operations in
future periods.
<TABLE>
<S> <C> <C> <C>
Pro Forma Consolidated Balance Sheet at
March 31, 1996 9
Pro Forma Consolidated Statement of
Operations for the three months ended
March 31, 1996 11
Pro Forma Consolidated Statement of
Operations for the year ended
December 31, 1995 12
</TABLE>
Page 2 of 37
<PAGE> 3
The As Adjusted financial statements represent the Company's consolidated
statement of operations for the year ended December 31, 1995 as if the
consolidation of eight predecessor California Limited partnerships (Equitec
Income Real Estate Investors B, Equitec Income Real Estate Investors C, Equitec
Income Real Estate Investors-Equitec Fund 4, Equitec Mortgage Investors Fund IV,
Equitec 79 Real Estate Investors, Outlook Properties Fund IV, Glenborough All
Suites Hotels, L.P. and Glenborough Pension Investors) (the "Partnerships") and
Glenborough Corporation (the "Consolidation") transaction (previously disclosed
on Forms 8-K and 8K/A filed with the Securities and Exchange Commission on
January 15, 1996 and March 15, 1996, respectively) had taken place on January 1,
1995.
The As Adjusted information is unaudited and is not necessarily indicative of
the consolidated results which would have occurred if the transactions had been
consummated in the year presented, or on any particular date in the future, nor
does it purport to represent the financial position or results of operations in
future periods.
The following financial statements reflect the Unaudited As Adjusted
Consolidated Financial Statements of Glenborough Realty Trust Incorporated for
the year ended December 31, 1995.
<TABLE>
<S> <C>
Glenborough Realty Trust Incorporated
As Adjusted Consolidating Statement of
Operations with accompanying notes and
adjustments 15
Glenborough Realty Trust Incorporated
As Adjusted Historical Combining
Statement of Operations with
accompanying notes and adjustments 20
Glenborough Realty Trust Incorporated
As Adjusted Statement of Hotel Lessor
Operations with accompanying notes
and adjustments 23
Glenborough Hotel Group ("GHG") As
Adjusted Statement of Operations with
accompanying notes and adjustments 25
Glenborough Corporation ("GC") As
Adjusted Statement of Operations with
accompanying notes and adjustments 30
Glenborough Inland Realty Corporation
(GIRC") As Adjusted Statement of
Operations with accompanying notes
and adjustments 35
</TABLE>
Page 3 of 37
<PAGE> 4
(c) EXHIBITS
Amendment to First Amended and Restated Agreement of
Limited Partnership of Glenborough Properties, L.P.(*)
Purchase agreement related to the purchase of
University Club Tower. (*)
Financing agreements with Wells Fargo Bank related to the
$50,000,000 secured revolving line of credit and the $6,100,000
2-year secured term loan. (*)
(*) Incorporated by reference to exhibits to the Company's
Registration Statement on Form S-11 (Registration
No.333-09411), which was filed on August 1, 1996.
Page 4 of 37
<PAGE> 5
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Glenborough Realty Trust Incorporated:
We have audited the accompanying statements of revenues and certain expenses of
University Club Tower, as defined in Note 1, for the years ended December 31,
1995, 1994 and 1993. These financial statements are the responsibility of the
management of the company. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The accompanying statements of revenues and certain expenses were prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission and are not intended to be a complete presentation of the
revenues and expenses of University Club Tower.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the revenues and certain expenses of University Club
Tower for the years ended December 31, 1995, 1994 and 1993, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
July 9, 1996
Page 5 of 37
<PAGE> 6
GLENBOROUGH REALTY TRUST INCORPORATED
STATEMENTS OF REVENUES AND CERTAIN EXPENSES FOR
UNIVERSITY CLUB TOWER
For The Three Months Ended March 31, 1996 (Unaudited)
And The Years Ended December 31, 1995, 1994 and 1993
(in thousands)
<TABLE>
<CAPTION>
Year Ended
Three Months December 31,
Ended March 31, ----------------------
1996 1995 1994 1993
---------------- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
REVENUES $1,092 $4,239 $4,073 $4,024
CERTAIN EXPENSES:
Operating 358 1,579 1,474 1,435
Real estate
taxes 130 463 475 453
------ ------ ------ ------
488 2,042 1,949 1,888
------ ------ ------ ------
RENTAL REVENUES IN
EXCESS OF CERTAIN
EXPENSES $ 604 $2,197 $2,124 $2,136
====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
Page 6 of 37
<PAGE> 7
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES TO STATEMENTS OF REVENUES AND CERTAIN EXPENSES FOR
UNIVERSITY CLUB TOWER
For The Three Months Ended March 31, 1996 (Unaudited)
And The Years Ended December 31, 1995, 1994 and 1993
(in thousands)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Property Acquired - The accompanying statements of revenues and certain expenses
include the operations (see "Basis of Presentation" below) of University Club
Tower (the "Property") a property acquired by Glenborough Realty Trust
Incorporated (the "Company"), from University Club Tower Associates, an
affiliate of the Company.
BASIS OF PRESENTATION - The accompanying statements of revenues and certain
expenses are not intended to be a complete presentation of the actual operations
of the Property for the periods presented. Certain expenses may not be
comparable to the expenses expected to be incurred by the Company in the
proposed future operations of the Property; however, the Company is not aware of
any material factors relating to the acquired property that would cause the
reported financial information not to be indicative of future operating results.
Excluded expenses consist of property management fees, interest expense,
depreciation and amortization and other costs not directly related to the future
operations of the Property.
These financial statements have been prepared for the purpose of complying with
certain rules and regulations of the Securities and Exchange Commission.
The financial information presented for the three months ended March 31, 1996 is
not audited. In the opinion of management, the unaudited financial information
contains all adjustments, consisting of normal recurring accruals, necessary for
a fair presentation of the statements of revenues and certain expenses for the
Property.
REVENUE RECOGNITION - All leases are classified as operating leases, and rental
revenue is recognized on a straight-line basis over the terms of the leases.
Page 7 of 37
<PAGE> 8
2. LEASING ACTIVITY
The minimum future rental revenues from leases in effect as of April 1, 1996,
for the remainder of 1996 and annually thereafter are as follows (in thousands)
<TABLE>
<CAPTION>
YEAR AMOUNT
<S> <C>
1996 (nine months) $ 2,040
1997 2,350
1998 1,856
1999 1,589
2000 1,075
2001 956
Thereafter 6,450
---------
Total $ 16,316
=========
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for their pro
rata share of specified operating expenses, which amounted to $32 (unaudited),
$169, $50 and $64 for the three months ended March 31, 1996, and the years ended
December 31, 1995, 1994 and 1993 respectively. Certain leases contain options to
renew.
Page 8 of 37
<PAGE> 9
GLENBOROUGH REALTY TRUST INCORPORATED
PRO FORMA CONSOLIDATED BALANCE SHEET
(in thousands, except shares)
March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
Rental property, net $ 74,300 $ 18,481 $ 92,781
Property held for sale, net 2,570 -- 2,570
Investments in Associated Companies
and Glenborough Partners 6,577 -- 6,577
Investments in management contracts
and other, net 433 -- 433
Mortgage loans receivable, net of
provision for loss of $863 7,451 -- 7,451
Cash and cash equivalents 1,326 303 1,629
Other assets 2,605 159 2,764
-------- -------- --------
TOTAL ASSETS $ 95,262 $ 18,943 $114,205
======== ======== ========
LIABILITIES
Mortgage loans $ 23,616 $ 6,120 $ 29,736
Secured bank line 10,000 12,280 22,280
Other liabilities 3,939 394 4,333
-------- -------- --------
Total liabilities 37,555 18,794 56,349
-------- -------- --------
MINORITY INTEREST 8,063 350 8,413
STOCKHOLDERS' EQUITY
Common stock (5,753,709 shares
issued and outstanding) 6 -- 6
Additional paid-in capital 55,622 -- 55,622
Retained earnings (deficit) (5,984) (201) (6,185)
-------- -------- --------
Total stockholders' equity 49,644 (201) 49,443
-------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 95,262 $ 18,943 $114,205
======== ======== ========
</TABLE>
Page 9 of 37
<PAGE> 10
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA CONSOLIDATED BALANCE SHEET
As of March 31, 1996
(Unaudited, dollars in thousands)
1. Adjustments in assets reflect the Company's Operating Partnership acquisition
of a 23-story, 272,443 square foot office building known as University Club
Tower (the "UCT Property"), for total consideration valued at $18,600,000, which
comprised (i) assumption of debt in the amount of $18,250,000, which was paid
off with proceeds of the Company's new line of credit from Wells Fargo Bank,
N.A. (discussed below), and (ii) 23,333 new limited partnership units ("Units")
issued by the Operating Partnership having an initial redemption value of
$350,000 (based on $15 per Unit value). The transaction was structured as a
contribution of partnership interests in University Club Tower Associates to the
Operating Partnership, by Robert Batinovich (Chairman, President and Chief
Executive Officer of the Company) and by GPA, Ltd., a partnership in which
certain executive officers of the Company hold a substantial indirect interest,
in exchange for the Units.
2. Adjustments in liabilities reflect that the following: The Company has
entered into two new financing agreements with Wells Fargo Bank, N.A. ("Wells
Fargo"). The first financing agreement (the "Facility") is a $50,000,000 secured
revolving line of credit to replace an existing $10,000,000 line of credit. The
Facility is secured by first mortgages on selected properties with full recourse
to the Company and availability is limited to the borrowing base provided by
these properties. The Facility has a term of two years, subject to annual
extensions. At the Company's option, the Facility will bear interest at LIBOR
plus 2.375% or at a base rate. The base rate is based upon the higher of Wells
Fargo's prime rate plus 0.5% or the Federal Funds Rate plus 1.0%. The second
financing arrangement (the "Term Loan") is a two-year term loan in the amount of
$6,100,000 that bears interest at the same rate as the Facility and will be
secured by first mortgage liens on 10 "QuickTrip" facilities owned by the
Company. The combined proceeds of the fundings under the Facility and the Term
Loan loans were $28,400,000, of which the Company applied $18,300,000 to the
acquisition of the UCT Property, $9,200,000 to the repayment of the outstanding
amount under the existing line of credit, and the balance to loan fees and
closing costs. Initial funding under the Facility and full disbursement of the
Term Loan occurred on July 15, 1996.
Page 10 of 37
<PAGE> 11
GLENBOROUGH REALTY TRUST INCORPORATED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the three months ended March 31, 1996
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES
Rental revenue $ 3,589 $ 1,092 $ 4,681
Fees and reimbursements from
affiliates -- 66
Interest and other income 191 -- 191
Equity in earnings of
Associated Companies 425 (19) 406
----------- ----------- -----------
Total revenue 4,271 1,073 5,344
----------- ----------- -----------
OPERATING EXPENSES
Property operating expenses 1,017 488 1,505
General and administrative 281 -- 281
Depreciation and amortization 897 90 987
Interest expense 722 395 1,117
----------- ----------- -----------
Total operating expense 2,917 973 3,890
----------- ----------- -----------
Income from operations before
minority interest 1,354 100 1,454
Minority interest (101) (23) (124)
----------- ----------- -----------
Net income before Consolidation 1,253 77 1,330
costs
Consolidation costs (6,082) -- (6,082)
Litigation costs (1,155) -- (1,155)
----------- ----------- -----------
Net income (loss) $ (5,984) $ 77 $ (5,907)
=========== =========== ===========
Net income per share before
Consolidation costs $ 0.22 $ 0.01 $ 0.23
=========== =========== ===========
Net income (loss) per share $ (1.04) $ 0.01 $ (1.03)
=========== =========== ===========
Weighted average shares
outstanding 5,753,709 5,753,709 5,753,709
=========== =========== ===========
</TABLE>
Page 11 of 37
<PAGE> 12
GLENBOROUGH REALTY TRUST INCORPORATED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 1995
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
As Adjusted
Historical Adjustments Pro Forma
------------ ------------- ------------
<S> <C> <C> <C>
REVENUES
Rental revenue $ 13,472 $ 4,239 $ 17,711
Fees and reimbursements from
affiliates 260 -- 260
Interest and other income 982 -- 982
Equity in earnings of Associated
Companies 1,691 (77) 1,614
----------- ----------- -----------
Total revenue 16,405 4,162 20,567
----------- ----------- -----------
OPERATING EXPENSES
Property operating expenses 4,061 2,042 6,103
General and administrative 983 -- 983
Depreciation and amortization 3,654 360 4,014
Interest expense 2,767 1,580 4,347
Loss provision 863 -- 863
----------- ----------- -----------
Total operating expense 12,328 3,982 16,310
----------- ----------- -----------
Income from operations before
minority interest 4,077 180 4,257
Minority interest (281) (6) (287)
----------- ----------- -----------
Net income $ 3,796 $ 174 $ 3,970
=========== =========== ===========
Net income per share $ 0.66 $ 0.03 $ 0.69
=========== =========== ===========
Weighted average shares
outstanding 5,753,709 5,753,709 5,753,709
=========== =========== ===========
</TABLE>
Page 12 of 37
<PAGE> 13
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES & ADJUSTMENTS TO PRO FORMA STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 1996 and December 31, 1995
1. Reflects the historical consolidated operations of the Company for the three
months ended March 31, 1996, excluding extraordinary items and Consolidation
costs, and the as adjusted consolidated operations of the Company for the year
ended December 31, 1995. The as adjusted operations reflect the Consolidation
and related transactions as if such transactions had occurred on January 1,
1995. These pro forma consolidated statements of operations should be read in
connection with the unaudited As Adjusted Statement of Operations of the Company
for the year ended December 31, 1995 included on pages 15 to 16 of this Form
8-K/A.
2. Reflects the results of operations of the UCT Property for the three month
period ended March 31, 1996 and the year ended December 31, 1995 as if the
Company had acquired the UCT Property on January 1, 1995. These results include
a loss of management fees for the UCT Property by Glenborough Corporation, one
of the Associated Companies, which as a result causes a reduction in the
Company's equity in the earnings of the Associated Companies. Also included is
depreciation expense based upon a 40 year useful life and a depreciable basis of
$14,400, interest expense incurred on the borrowings described in Note 2 to the
pro forma balance sheet as of March 31, 1996 at a rate of LIBOR plus 2.375%
(assumed to be 7.75%), and amortization of loan fees presented as a component of
interest expense.
Page 13 of 37
<PAGE> 14
GLENBOROUGH REALTY TRUST INCORPORATED
AS ADJUSTED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
The following as adjusted consolidating statement of operations of the Company
for the year ended December 31, 1995 is provided for the purpose of supporting
the historical statement of operations data in the pro forma financial
statements included elsewhere in this filing. The as adjusted information and
related notes are necessary to providing an appropriate context in which to
evaluate the effects of the acquisition of the UCT Property. The as adjusted
operating information describes the results of operations of the Company prior
to any acquisitions as if the Consolidation transactions, which merged the
Partnerships and Glenborough Corporation and formed the Company, GC, GIRC and
GHG, had taken place on January 1, 1995; rather than solely showing the pro
forma effects of the acquisition transactions on the purely historical results
of operations of the Company's predecessors, which were in full operation
through December 31, 1995.
Page 14 of 37
<PAGE> 15
GLENBOROUGH REALTY TRUST INCORPORATED
AS ADJUSTED CONSOLIDATING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(Unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Glenborough As Adjusted
Realty Trust Historical Hotel Management
Incorporated(a) Combined(b) Operations(c) Operations(d)
-------------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Rental revenues $ -- $ 9,189 $2,182 $ --
Management fee income -- 260 -- --
Interest and other income -- 982 -- --
Equity in earnings of
Associated Companies -- -- 32 1,659
--------- ------- ------ ------
Total revenues -- 10,431 2,214 1,659
--------- ------- ------ ------
OPERATING EXPENSES:
Operating expenses -- 3,698 363 --
General and administrative -- 953 -- --
Depreciation and
amortization -- 2,488 944 --
Interest expense -- 1,993 -- --
Loss provision -- 863 -- --
--------- ------- ------ ------
Total operating
expenses -- 9,995 1,307 --
--------- ------- ------ ------
Income from operations
before minority interest -- 436 907 1,659
Minority interest -- -- -- --
--------- ------- ------ ------
Net income (loss) $ -- $ 436 $ 907 $1,659
========= ======= ====== ======
</TABLE>
-continued-
Page 15 of 37
<PAGE> 16
GLENBOROUGH REALTY TRUST INCORPORATED
AS ADJUSTED CONSOLIDATING STATEMENT OF OPERATIONS - CONTINUED
For the Year Ended December 31, 1995
(Unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
Glenborough
Debt Pay Other Realty Trust
GPA Down and Pro-Forma Incorporated
Properties(e) Refinancings(f) Adjustments Consolidated
-------------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Rental revenues $2,101 $-- $-- $ 13,472
Management fee income -- -- -- 260
Interest and other income -- -- -- 982
Equity in earnings of
Associated Companies -- -- -- 1,691
------ ----- ----- ---------
Total revenues 2,101 -- -- 16,405
------ ----- ----- ---------
OPERATING EXPENSES:
Operating expenses -- -- -- 4,061
General and administrative -- -- 30(g) 983
Depreciation and
amortization -- -- 222(h) 3,654
Interest expense -- 774 -- 2,767
Loss provision -- -- -- 863
------ ----- ----- ---------
Total operating
expenses -- 774 252 12,328
------ ----- ----- ---------
Income from operations
before minority interest 2,101 (774) (252) 4,077
Minority interest -- -- (281)(i) (281)
------ ----- ----- ---------
Net income (loss) $2,101 $(774) $(533) $ 3,796
====== ===== ===== =========
Net income per share $ 0.66
=========
Weighted average shares
outstanding 5,753,709 (j)
=========
</TABLE>
GLENBOROUGH REALTY TRUST INCORPORATED
Page 16 of 37
<PAGE> 17
NOTES AND ADJUSTMENTS TO
AS ADJUSTED CONSOLIDATING STATEMENTS OF OPERATIONS
For the Year ended December 31, 1995
(Unaudited, in thousands)
a) Not applicable as the Company had no operations prior to the
Consolidation.
b) Reflects the as adjusted historical combined statements of operations
of the Partnerships and GC. See as adjusted historical combining
statement of operations.
c) Reflects (i) estimated revenues and expenses related to the Company's
hotels leased to and operated by GHG and (ii) the Company's equity in
GHG's earnings. See as adjusted statement of hotel lessor operations
and statement of operations for GHG.
d) Reflects the Company's equity in the earnings of GC of approximately
$449 and GIRC of approximately $1,210.
e) Reflects the historical revenues and expenses of the GPA properties
acquired.
f) Reflects a net increase in interest expense resulting from the
refinancing of mortgage loans and other notes payable with borrowings
of (i) $20,000 on a secured bank line with an investment bank, (ii)
$10,000 on secured lines of credit with a bank and (iii) $2,650 of
secured loan with a bank. The $20,000 secured bank line has a term of
ten years and bears a fixed interest rate of 7.57%. The $10,000 secured
bank line of credit has a term of three years and bears a variable
interest rate at LIBOR plus 2.365% (7.88% at December 31, 1995). The
secured loan with a bank has a term of 10 years and bears a fixed
interest rate of 7.75%. The net increase in interest expense is
comprised of the following:
<TABLE>
<S> <C>
Increase due to new borrowings on secured
bank lines, lines of credit and loans $ 2,507
Increase due to amortization of new loan
origination fees 177
Reduction due to repayment of mortgage
loans and other notes payable (1,910)
-------
Net increase $ 774
=======
</TABLE>
g) Reflects estimated state income and franchise taxes.
h) Reflects estimated depreciation and amortization of the GPA Properties
acquired, based upon asset lives of 40 years.
Page 17 of 37
<PAGE> 18
i) Reflects GPA's approximate 13.63% ownership interest in the operations
of Glenborough Properties, L.P. (the "Operating Partnership"), of which
the Company is a 84.37% owner. GPA's minority interest is calculated as
follows;
<TABLE>
<S> <C>
Pro forma income before minority
interest of the Company $ 4,077
Add Company expenses before
Consolidation 983
Equity in earnings of Associated
Companies and management fees
earned by the Company (1,951)
Less fees paid by the Operating
Partnership to the Company (1,047)
Pro forma income from operations
of the Operating Partnership 2,062
-------
GPA's minority interest $ 281
=======
</TABLE>
j) Represents the weighted average shares outstanding assuming that GPA's
Units in the Operating Partnership are not converted into Common Stock
of the Company.
Page 18 of 37
<PAGE> 19
GLENBOROUGH REALTY TRUST INCORPORATED
AS ADJUSTED HISTORICAL COMBINING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
The following as adjusted historical combining statement of operations of the
Company for the year ended December 31, 1995 is provided for the purpose of
supporting the historical statement of operations data in the pro forma
financial statements included elsewhere in this filing. The as adjusted
information is necessary to providing an appropriate context in which to
evaluate the effects of the acquisition of the UCT Property. The as adjusted
operating information supports a proper description of the results of operations
of the Company prior to any acquisitions as if the Consolidation transactions
had taken place on January 1, 1995; rather than solely showing the pro forma
effects of the acquisition transactions on the purely historical results of
operations of the Company's predecessors, which were in full operation through
December 31, 1995.
Page 19 of 37
<PAGE> 20
GLENBOROUGH REALTY TRUST INCORPORATED
AS ADJUSTED HISTORICAL COMBINING STATEMENT OF OPERATIONS
For the Year ended December 31, 1995
(Unaudited, in thousands)
<TABLE>
<CAPTION>
1995
Historical Hotel Management
Combined(a) Operations(b) Operations(c)
----------- ------------- ------------
<S> <C> <C> <C>
Revenues:
Rental revenues $ 15,454 $(6,265) $ --
Fee and reimbursements 16,019 -- (16,019)
Interest and other 2,698 (302) (560)
-------- ------- --------
Total revenues 34,171 (6,567) (16,579)
-------- ------- --------
Expenses:
Operating 8,576 (4,998) --
General and administrative 15,947 -- (14,361)
Depreciation and
amortization 4,762 (944) (1,487)
Interest expense 2,129 -- (1,439)
Loss provision 1,876 -- (1,013)
-------- ------- --------
Total expenses 33,290 (5,942) (18,300)
-------- ------- --------
Operating income (loss) 881 (625) 1,721
Income taxes (357) -- 357
-------- ------- --------
Net income (loss) $ 524 $ (625) $ 2,078
======== ======= ========
</TABLE>
-continued-
Page 20 of 37
<PAGE> 21
GLENBOROUGH REALTY TRUST INCORPORATED
AS ADJUSTED HISTORICAL COMBINING STATEMENT OF OPERATIONS - CONTINUED
For the Year ended December 31, 1995
(Unaudited, in thousands)
<TABLE>
<CAPTION>
As Adjusted
Internalize Other Historical
Management (d) Adjustments Combined
-------------- ----------- ------------
<S> <C> <C> <C>
Revenues:
Rental revenues $-- $ -- $ 9,189
Fee and reimbursements -- 260 (f) 260
Interest and other -- (854)(e) 982
----- ------- -------
Total revenues -- (594) 10,431
----- ------- -------
Expenses:
Operating 120 -- 3,698
General and administrative (633) -- 953
Depreciation and
amortization -- 157 (f) 2,488
Interest expense -- 1,303 (e,g) 1,993
Loss provision -- -- 863
----- ------- -------
Total expenses (513) 1,460 9,995
----- ------- -------
Operating income (loss) 513 (2,054) 436
Income taxes -- -- --
----- ------- -------
Net income (loss) $ 513 $(2,054) $ 436
===== ======= =======
</TABLE>
Page 21 of 37
<PAGE> 22
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO
AS ADJUSTED HISTORICAL COMBINING STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(Unaudited, in thousands)
a) Reflects the historical combined operations of the Partnerships and GC.
b) Reflects the elimination of historical revenues and expenses of the
three hotels (Arlington, Tucson and Ontario) owned by the Company, that
are leased to and operated by GHG.
c) Represents the elimination of certain revenues and expenses that are
included in GC's historical statements of operations due to the
internalization of management.
d) Further reflects the internalization of management including (i)
property administration costs that were reimbursed to GC by the
Partnerships, but excluded by elimination of intercompany transactions
in the historical combined financial statements of the Partnerships and
GC and (ii) a reduction of general and administrative expenses
(including legal, accounting and investor relations) resulting from the
Consolidation and internalization of management.
e) Represents the elimination of interest income and expense related to
the Finley note receivable and related mortgage debt that were repaid
in April 1995.
f) Reflects management fees related to Glenborough Institutional Fund I
that are earned by the Company that were previously earned by GC and
amortization of the related management contract.
g) Reflects the historical interest expense related to notes payable
contributed by GC.
Page 22 of 37
<PAGE> 23
GLENBOROUGH REALTY TRUST INCORPORATED
AS ADJUSTED STATEMENT OF HOTEL LESSOR OPERATIONS
For the year ended December 31, 1995
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Lease Other
Adjustments(a) Adjustments As Adjusted
------------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Rental revenues $2,182 $--- $2,182
Equity in earnings of GHG -- 32(b) 32
------ ---- ------
Total revenues 2,182 32 2,214
------ ---- ------
Expenses:
Operating 275 88(c) 363
Depreciation and amortization 944 -- 944
------ ---- ------
Total expenses 1,219 88 1,307
------ ---- ------
Net income (loss) $ 963 $(56) $ 907
====== ==== ======
</TABLE>
Page 23 of 37
<PAGE> 24
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO
AS ADJUSTED STATEMENT OF HOTEL LESSOR OPERATIONS
For the Year Ended December 31, 1995
(Unaudited, in thousands)
a) Reflects the estimated lease payments, property taxes and depreciation
and amortization associated with the hotels owned by the Company and
leased to and operated by GHG. See as adjusted statement of operations
for GHG.
b) Reflects the Company's equity in earnings of GHG. See as adjusted
statement of operations for GHG.
c) Reflects management fees to be paid by the Company to GHG. GHG will
provide fee management services related to the Irving hotel.
Page 24 of 37
<PAGE> 25
GLENBOROUGH HOTEL GROUP
AS ADJUSTED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Historical (a)
--------------------------------------------------------
Arlington Tucson Ontario Sub-total
--------- ------ ------- ---------
<S> <C> <C> <C> <C>
Revenues:
Room revenues $2,210 $2,667 $ 1,388 $6,265
Management fees -- -- -- --
Interest and other 97 121 84 302
------ ------ ------- ------
Total revenues 2,307 2,788 1,472 6,567
------ ------ ------- ------
Expenses:
Operating 1,113 1,225 869 3,207
Salaries & administration 615 635 541 1,791
Depreciation and
amortization 325 386 233 944
Interest -- -- -- --
Lease expense -- -- -- --
------ ------ ------- ------
Total operating
expenses 2,053 2,246 1,643 5,942
------ ------ ------- ------
Operating income
(loss) 254 542 (171) 625
Income taxes -- -- -- --
------ ------ ------- ------
Income before minority
interest 254 542 (171) 625
Minority interest -- -- -- --
------ ------ ------- ------
Net income (loss) $ 254 $ 542 $ (171) $ 625
====== ====== ======= ======
</TABLE>
-continued-
Page 25 of 37
<PAGE> 26
GLENBOROUGH HOTEL GROUP
AS ADJUSTED STATEMENT OF OPERATIONS - CONTINUED
For the Year Ended December 31, 1995
(Unaudited, in thousands)
<TABLE>
<CAPTION>
As Adjusted
------------------------------------------------
Lease Other As Adjusted
Adjustments(b) Adjustments GHG
------------ ----------- -----------
<S> <C> <C> <C>
Revenues:
Room revenues $ -- $ -- $ 6,265
Management fees -- 2,225(c) 2,225
Interest and other -- -- 302
------- ------- -------
Total revenues -- 2,225 8,792
------- ------- -------
Expenses:
Operating (275) (644)(d) 2,288
Salaries & administration -- 2,320(c) 4,111
Depreciation and amortization (944) 87(f) 87
Interest -- 9 9
Lease expense 2,182 -- 2,182
------- ------- -------
Total operating
expenses 963 1,772 8,677
------- ------- -------
Operating income
(loss) (963) 453 115
Income taxes -- (46)(g) (46)
------- ------- -------
Income before minority
interest (963) 407 69
Minority interest -- (36)(h) (36)
------- ------- -------
Net income (loss) $ (963) $ 371 $ 33
======= ======= =======
Preferred stock dividends $ 98(i)
Common stock dividends 23
</TABLE>
Page 26 of 37
<PAGE> 27
GLENBOROUGH HOTEL GROUP
NOTES AND ADJUSTMENTS TO AS ADJUSTED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1995
(Unaudited, in thousands, except per share amounts)
a) Reflects the historical operations of the three hotels (Arlington,
Tucson and Ontario) owned by the Company that are leased to and
operated by GHG.
b) Reflects the estimated lease payments, property taxes and depreciation
and amortization associated with the hotels owned by the Company that
will be included in the operations of the Company. See as adjusted
statement of hotel lessor operations for the Company.
c) Reflects management fees of $718 and reimbursement of salaries of
$1,507 associated with fee management services provided to third
parties and the Company related to the contracts owned by Resort Group
Inc., the Irving hotel and the Outlook Income Fund 9 Hotels ("IF 9
Hotels"). The estimated fees and reimbursements are comprised of the
following:
<TABLE>
<S> <C>
Resort Group, Inc.:
Casa Del Mar $ 347
Coral Cay 73
Irving Hotel 514
OIF 9 Hotels 1,291
--------
Total $ 2,225
========
</TABLE>
d) Reflects the elimination of historical management fees paid by the
three hotels (Arlington, Tucson and Ontario) owned by the Company
resulting from the internalization of hotel management.
e) Reflects an increase in general and administrative expenses, including
salaries, associated with operating as a separate entity and fee
management services provided the third parties by GHG. Under the prior
ownership structure general and administrative expenses were recorded
at the partnership level and not at the property operating level. The
increase consists of the following:
Page 27 of 37
<PAGE> 28
<TABLE>
<S> <C>
Reimbursable salaries and benefits $1,507
Corporate and administrative
salaries and benefits 546
Rent and other overhead, including
utilities 95
Resort Group Inc. expenses 20
General and administrative expenses,
including accounting, legal and
directors fees 152
------
Total $2,320
======
</TABLE>
f) Reflects estimated depreciation for the year ended December 31, 1995 of
furniture, equipment and buildings of $3 that will be owned by GHG, and
amortization of the contracts owned by Resort Group, Inc. of $84.
g) Reflects estimated income tax expense of GHG.
h) Reflects the approximately 20% minority ownership interest in the
Resort Group Inc. held by an unaffiliated third party.
i) Reflects estimated dividends paid by GHG equal to $600 a share plus 75%
of any remaining cash flow. The primary source of dividends paid by GHG
will be cash flow from operations which is in excess of GHG's earnings.
Page 28 of 37
<PAGE> 29
GLENBOROUGH CORPORATION
AS ADJUSTED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
The following as adjusted statement of operations of Glenborough Corporation,
one of the Associated Companies, for the year ended December 31, 1995 is
provided for the purpose of supporting the historical statement of operations
data in the pro forma financial statements included elsewhere in this filing.
The as adjusted information is necessary to providing an appropriate context in
which to evaluate the effects of the acquisition of the UCT Property. The as
adjusted operating information supports a proper description of the results of
operations of the Company prior to any acquisitions as if the Consolidation
transactions had taken place on January 1, 1995; rather than solely showing the
pro forma effects of the acquisition transactions on the purely historical
results of operations of the Company's predecessors, which were in full
operation through December 31, 1995.
Page 29 of 37
<PAGE> 30
GLENBOROUGH CORPORATION
AS ADJUSTED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(Unaudited, in thousands)
<TABLE>
<CAPTION>
As Adjusted
Management Expired Participating Hotel
Operations(a) Contracts(b) Partnerships(c) Group(d)
------------- ----------- --------------- --------
<S> <C> <C> <C> <C>
REVENUES:
Fees and reimbursements $ 16,019 $(1,036) $ (186) $(4,331)
Interest and other 560 (336) (98) (29)
-------- ------- ------- -------
Total revenues 16,579 (1,372) (284) (4,360)
-------- ------- ------- -------
EXPENSES:
Salaries & administration 14,361 (3,192) (697) (3,862)
Depreciation and
amortization 1,487 (562) (121) (87)
Interest expense 1,439 -- (1,438) --
Loss provision 1,013 (1,013) -- --
-------- ------- ------- -------
Total expenses 18,300 (4,767) (2,256) (3,949)
-------- ------- ------- -------
Income (loss) before provisions
for income taxes (1,721) 3,395 1,972 (411)
Income taxes (357) -- -- --
-------- ------- ------- -------
Net income (loss) $ (2,078) $ 3,395 $ 1,972 $ (411)
======== ======= ======= =======
</TABLE>
-continued-
Page 30 of 37
<PAGE> 31
GLENBOROUGH CORPORATION
AS ADJUSTED STATEMENT OF OPERATIONS - CONTINUED
For the Year Ended December 31, 1995
(Unaudited, in thousands)
<TABLE>
<CAPTION>
As
Rancon Other Adjusted
Contracts(e) Adjustments GC
------------ ----------- ----------
<S> <C> <C> <C>
REVENUES:
Fees and reimbursements $(5,863) $-- $ 4,603
Interest and other -- -- 97
------- ----- -------
Total revenues (5,863) -- 4,700
------- ----- -------
EXPENSES:
Salaries & administration (3,118) 12(f) 3,504
Depreciation and
amortization (717) 284(g) 284
Interest expense -- 79(h) 80
Loss provision -- -- --
------- ----- -------
Total expenses (3,835) 375 3,868
------- ----- -------
Income (loss) before provision
for income taxes (2,028) (375) 832
Income taxes -- 24(i) (333)
------- ----- -------
Net income (loss) $(2,028) $(351) $ 499
======= ===== =======
Preferred stock
dividends $ 745(j)
Common stock
dividends $ 38
</TABLE>
Page 31 of 37
<PAGE> 32
GLENBOROUGH CORPORATION
NOTES AND ADJUSTMENTS TO AS ADJUSTED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1995
(Unaudited in thousands, except per share amounts)
a) Reflects the as adjusted consolidated historical management operations
of GC, GHG and GIRC.
b) Reflects the historical revenues and expenses associated with certain
management contracts which expired prior to the date of Consolidation.
c) Reflects the historical revenues and expenses associated with
management services provided to the Partnerships by GC which were
eliminated as a result of the internalization of management.
d) Reflects the historical revenues and expenses associated with hotel
management services provided to the Partnerships by GC and it's
subsidiaries which were eliminated as a result of the internalization
of management or are now incurred by GHG.
e) Reflects actual revenues and expenses, including salaries, benefits and
other administrative costs related to the Rancon Contracts that were
purchased by GC on January 1, 1995 and that were contributed to GIRC by
the Company. On a historical basis such revenues and expenses were
included in the operations of GC.
f) Reflects an estimated net increase of salaries and general and
administrative expenses (including legal, accounting and office
expenses) resulting from the Consolidation. The net increase consists
of the following:
<TABLE>
<S> <C>
Net increase in general and administrative
expenses, including accounting, legal
and directors fees $ 100
Reduction of officers' salaries ( 88)
--------
Total $ 12
========
</TABLE>
g) Reflects the estimated depreciation and amortization related to
furniture and equipment and the estimated amortization of contracts.
h) Reflects the estimated interest associated with the note payable of
$1,000 contributed to GC by the Company. The note payable bears
interest at 9%, with interest only payments, and matures in March of
1998.
i) Reflects estimated decrease in income tax expense of GC.
Page 32 of 37
<PAGE> 33
j) Reflects dividends paid by GC equal to $0.80 per share plus 95% of any
remaining cash flow. The primary source of dividends paid by GC is cash
flow from operations which is in excess of GC's earnings.
Page 33 of 37
<PAGE> 34
GLENBOROUGH INLAND REALTY CORPORATION
AS ADJUSTED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
The following as adjusted statement of operations of Glenborough Inland Realty
Corporation, one of the Associated Companies, for the year ended December 31,
1995 is provided for the purpose of supporting the historical statement of
operations data in the pro forma financial statements included elsewhere in this
filing. The as adjusted information is necessary to providing an appropriate
context in which to evaluate the effects of the acquisition of the UCT Property.
The as adjusted operating information supports a proper description of the
results of operations of the Company prior to any acquisitions as if the
Consolidation transactions had taken place on January 1, 1995; rather than
solely showing the pro forma effects of the acquisition transactions on the
purely historical results of operations of the Company's predecessors, which
were in full operation through December 31, 1995. Historical amounts are
presented in the column labeled "Rancon Adjustments."
Page 34 of 37
<PAGE> 35
GLENBOROUGH INLAND REALTY CORPORATION
AS ADJUSTED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Rancon Other As Adjusted
Adjustments(a) Adjustments GIRC
------------ ---------- ----------
<S> <C> <C> <C>
Revenues:
Fees and
reimbursements $5,863 $-- $ 5,863
Interest and other -- -- --
------ ----- -------
Total revenues 5,863 -- 5,863
------ ----- -------
Expenses:
Salaries &
administration 3,118 (224)(b) 2,894
Depreciation and
amortization 717 30 (c) 747
Interest expense -- 101 (d) 101
------ ----- -------
Total expenses 3,835 (93) 3,742
------ ----- -------
Income (loss)
before provision for
income taxes 2,028 93 2,121
Income taxes -- (848)(e) (848)
------ ----- -------
Net income (loss) $2,028 $(755) $ 1,273
====== ===== =======
Preferred stock
dividends $ 1,919(f)
Common stock
dividends $ 100
</TABLE>
Page 35 of 37
<PAGE> 36
GLENBOROUGH INLAND REALTY CORPORATION
NOTES AND ADJUSTMENTS TO AS ADJUSTED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 1995
(Unaudited, in thousands, except per share amounts)
a) Reflects the historical management fees and expenses related to the
Rancon Contracts with a carrying value of $6,813 contributed to GIRC by
the Company.
b) Reflects an estimated reduction of salaries, benefits and other
expenses resulting primarily from reductions in officers' salaries
resulting from the Consolidation.
c) Reflects estimated depreciation of furniture and equipment contributed
to GIRC by the Company.
d) Reflects the estimated interest expense associated with a note payable
consisting of $2,566 contributed to GIRC by the Company and $2,100
related to the acquisition of certain land parcels. The notes payable
bears interest at 9%, with interest only payments, and matures in March
of 1998.
e) Reflects estimated income tax expense of GIRC.
f) Reflects estimated dividends paid by GIRC equal to $0.80 per share plus
95% of any remaining cash flow. The primary source of dividends paid by
GIRC is cash flow from operations which is in excess of GIRC's
earnings.
Page 36 of 37
<PAGE> 37
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
GLENBOROUGH REALTY TRUST INCORPORATED
Date: February 21, 1997 By: /s/ Terri Garnick
---------------------------------
Terri Garnick
Senior Vice President,
Chief Accounting Officer,
Treasurer
(Principal Accounting Officer)
Page 37 of 37
