<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
October 17, 1997 (September 12, 1997)
GLENBOROUGH REALTY TRUST INCORPORATED
-----------------------------
(Exact name of registrant as specified in its charter)
Maryland 001-14162 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
1
<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
(the "Commission") on September 29, 1997, to file the Financial Statements and
Exhibits of the Company related to the acquisition of the T. Rowe Price
Properties and the Advance Properties (each as defined in such Form 8-K).
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 3
Combined Statements of revenues and certain
expenses of the T. Rowe Price Properties,
Groups A and B. 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 7
Combined Statements of revenues and certain
expenses of the Advance Properties. 8
(b) PRO FORMA FINANCIAL STATEMENTS
Pro Forma Consolidated Balance Sheet as of
June 30, 1997 with accompanying notes
and adjustments 10
Pro Forma Consolidated Statement of
Operations for the six months ended
June 30, 1997, and the year ended
December 31, 1996, with accompanying notes
and adjustments 17
2
<PAGE> 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Glenborough Realty Trust Incorporated:
We have audited the accompanying combined statements of revenues and
certain expenses of the T. Rowe Price Properties, Groups A and B, as defined in
Note 1, for the years ended September 30, 1996, and December 31, 1996,
respectively. These combined financial statements are the responsibility of the
management of the Company. Our responsibility is to express an opinion on these
combined 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 audit 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 combined statements of revenues and certain expenses have
been prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and are not intended
to be a complete presentation of the revenues and expenses of the T. Rowe Price
Properties, Groups A and B.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the revenues and certain expenses of the T.
Rowe Price Properties, Groups A and B for the years ended September 30, 1996,
and December 31, 1996, respectively, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
October 15, 1997
3
<PAGE> 4
GLENBOROUGH REALTY TRUST INCORPORATED
COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES OF
THE T. ROWE PRICE PROPERTIES, GROUPS A AND B
(IN THOUSANDS)
<TABLE>
<CAPTION>
GROUP A GROUP B
NINE MONTHS ENDED GROUP A SIX MONTHS GROUP B
JUNE 30, YEAR ENDED ENDED JUNE 30, YEAR ENDED
1997 SEPTEMBER 30, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
----------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
REVENUES...................... $ 3,359 $4,246 $ 8,944 $ 16,751
CERTAIN EXPENSES:
Operating..................... 765 990 1,429 3,112
Real estate taxes............. 297 460 1,475 2,661
------ ------ ------ -------
1,062 1,450 2,904 5,773
------ ------ ------ -------
REVENUES IN EXCESS OF CERTAIN
EXPENSES.................... $ 2,297 $2,796 $ 6,040 $ 10,978
====== ====== ====== =======
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES OF
THE T. ROWE PRICE PROPERTIES, GROUPS A AND B
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICY
Property Acquired -- The accompanying combined statements of revenues and
certain expenses includes the operations (see "Basis of Presentation" below) of
the following T. Rowe Price Properties acquired by the Company from T.
Rowe Price Partnerships, an unaffiliated third party.
<TABLE>
<CAPTION>
PROPERTY CITY STATE TYPE
--------------------------------------- ------------------ ----- -----------
<S> <C> <C> <C>
GROUP A
Springdale............................. Santa Fe Springs CA Industrial
Newport Center......................... Deerfield Beach FL Office/Flex
Airport Perimeter...................... College Park GA Industrial
The Business Park...................... Gwinnett County GA Office/Flex
Montgomery Executive Center............ Gaithersburg MD Office
GROUP B
Baseline Business Park................. Tempe AZ Office/Flex
Coronado............................... Anaheim CA Industrial
Scripps Terrace........................ San Diego CA Office/Flex
Tierrasanta............................ San Diego CA Office/Flex
Valley Business Center................. Denver CO Office/Flex
Cypress Creek.......................... Ft. Lauderdale FL Office/Flex
River Run.............................. Miramar FL Retail
Burnham................................ Boca Raton FL Industrial
Buschwood III.......................... Tampa FL Office
Atlantic............................... Gwinnett County GA Industrial
Oakbrook Corners....................... Norcross GA Office/Flex
Bonnie Lane Industrial................. Elk Grove Village IL Industrial
Glenn Avenue........................... Wheeling IL Industrial
Wood Dale.............................. Wood Dale IL Industrial
Westbrook Commons...................... Westchester IL Retail
Goshen................................. Gaithersburg MD Retail
Winnetka Industrial Park............... Crystal MN Office/Flex
Riverview Industrial Park.............. St. Paul MN Office/Flex
Gatehall I............................. Parsipanny NJ Office
Clark Avenue........................... King of Prussia PA Office/Flex
Post Oak Place......................... Houston TX Office
Kent Park.............................. Kent WA Office/Flex
</TABLE>
Basis of Presentation -- The accompanying combined statements of revenues
and certain expenses are not intended to be a complete presentation of the
actual operations of the T. Rowe Price Properties for the periods presented.
Certain expenses may not be comparable to the expenses expected to be incurred
by the Company in the future operations of the T. Rowe Price Properties;
however, the Company is not aware of any material factors relating to the T.
Rowe Price Properties 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 T. Rowe Price Properties.
5
<PAGE> 6
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES OF
THE T. ROWE PRICE PROPERTIES, GROUPS A AND B -- CONTINUED
These combined financial statements have been prepared for the purpose of
complying with certain rules and regulations of the Securities and Exchange
Commission.
Revenue Recognition -- All leases are classified as operating leases.
Rental revenue is recognized as earned over the terms of the leases.
2. LEASING ACTIVITY
The minimum future rental revenues from leases in effect as of July 1,
1997 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
--------------------------------------------------- -------
<S> <C>
1997 (six months) ................................. $ 7,481
1998............................................... 11,775
1999............................................... 7,676
2000............................................... 4,596
2001............................................... 2,868
2002............................................... 2,356
Thereafter......................................... 10,404
-------
Total.................................... $47,156
=======
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $402
(unaudited) for the nine months ended June 30, 1997 and $501 for the year ended
September 30, 1996 for Group A, and $1,979 (unaudited) for the six months ended
June 30, 1997 and $3,696 for the year ended December 31, 1996 for Group B.
Certain leases contain lessee renewal options.
6
<PAGE> 7
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Glenborough Realty Trust Incorporated:
We have audited the accompanying combined statement of revenues and
certain expenses of the Advance Properties, as defined in Note 1, for the year
ended December 31, 1996. This combined financial statement is the responsibility
of the management of the Company. Our responsibility is to express an opinion on
this combined financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenues and certain expenses has
been prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of the revenues and expenses of the Advance
Properties.
In our opinion, the combined financial statement referred to above
presents fairly, in all material respects, the revenues and certain expenses of
the Advance Properties for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
October 10, 1997
7
<PAGE> 8
GLENBOROUGH REALTY TRUST INCORPORATED
COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES OF
THE ADVANCE PROPERTIES
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months
Ended Year
June 30, Ended
1997 December 31,
(unaudited) 1996
------- -------
<S> <C> <C>
REVENUES ............................. $ 6,766 $12,353
CERTAIN EXPENSES
Operating .......................... 1,434 3,001
Real estate taxes .................. 488 896
------- -------
1,922 3,897
------- -------
REVENUES IN EXCESS OF CERTAIN EXPENSES $ 4,844 $ 8,456
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE> 9
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES OF
THE ADVANCE PROPERTIES
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 1996
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICY.
Property Acquired -- The accompanying combined statements of revenues
and certain expenses include the operations (see "Basis of Presentation" below)
of the properties listed below (collectively "the Advance Properties") acquired
by the Company from an unaffiliated third party.
<TABLE>
<CAPTION>
PROPERTY CITY STATE TYPE
- -------- ---- ----- ----
<S> <C> <C> <C>
25 Independence Warren NJ Office
Frontier Executive Quarters II Bridgewater NJ Office
Frontier Executive Quarters I Bridgewater NJ Office
Bridgewater Executive Quarters I Bridgewater NJ Office
Morristown Medical Offices Bedminster NJ Office
Fox Hollow Business Quarters I Branchburg NJ Office/Flex
Fairfield Business Quarters Fairfield NJ Office/Flex
Germantown Business Center Germantown MD Office/Flex
Jencraft Industrial Totowa NJ Industrial
Eatontown Industrial Eatontown NJ Industrial
</TABLE>
Basis of Presentation -- The accompanying combined statements of
revenues and certain expenses are not intended to be a complete presentation of
the actual operations of the Advance Properties for the periods presented.
Certain expenses may not be comparable to the expenses expected to be incurred
by the Company in the future operations of the Advance Properties; however, the
Company is not aware of any material factors relating to the Advance Properties
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 Advance Properties.
These combined financial statements have been prepared for the purpose
of complying with certain rules and regulations of the Securities and Exchange
Commission.
Revenue Recognition -- All leases are classified as operating leases.
Rental revenue is recognized as earned over the terms of the leases.
2. LEASING ACTIVITY
The minimum future rental revenues from leases in effect as of July 1,
1997 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1997 (six months).....................................................$4,679
1998...................................................................9,275
1999...................................................................8,647
2000...................................................................6,790
2001...................................................................5,787
2002...................................................................5,714
Thereafter............................................................33,061
-------
Total........................................................$73,953
=======
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $1,468
(unaudited) for the six months ended June 30, 1997 and $2,823 for the year ended
December 31, 1996. Certain leases contain lessee renewal options.
9
<PAGE> 10
PRO FORMA FINANCIAL STATEMENTS
The following unaudited, pro forma consolidated balance sheet as of June 30,
1997 has been prepared to reflect (i) all property acquisitions (including the
debt assumed and borrowings on the Line of Credit in connection therewith)
completed in 1997, (ii) the pending acquisitions of the Copley Properties,
Bryant Lake, the Prudential-Bache/Equitec Portfolio (the "Pru-Bache Portfolio"),
the Rancon IV Portfolio and the Rancon V Portfolio (collectively, the "Rancon IV
and V Portfolios"), (iii) the Offering, and the application of the net proceeds
therefrom, (iv) the July 1997 Offering, (v) the Company's $60 Million Secured
Loan and the $114 Million Interim Unsecured Loan and the repayment of a $60
million unsecured bridge loan, a portion of the $114 Million Interim Unsecured
Loan and borrowings on the Line of Credit and (vi) the sale of one QuikTrip
property and the use of these sale proceeds as well as the proceeds from the
sale of the six Atlanta Auto Care Center properties and nine QuikTrip properties
sold in June 1997 for the repayment of mortgage debt and the funding of certain
property acquisitions as if such transactions had been completed on June 30,
1997. The following unaudited, pro forma consolidated statements of operations
for the six months ended June 30, 1997, and for the year ended December 31,
1996, have been prepared to reflect (i) all property acquisitions (including the
debt assumed and borrowings on the Line of Credit in connection therewith)
completed in 1997, and the Property acquisitions completed in 1996, as described
in footnote one of the Notes and Adjustments to Pro Forma Consolidated Balance
Sheet as of June 30, 1997, (ii) the pending acquisitions of the Copley
Properties, the Bryant Lake Property, the Pru-Bache Portfolio and the Rancon IV
and V Portfolios, (iii) the proposed October 1997 Offering, and the application
of the net proceeds, the July 1997 Offering, the March 1997 Offering, and the
October 1996 Offering, (iv) the $60 Million Secured Loan and the $114 Million
Interim Unsecured Loan and the repayment of a $60 million unsecured bridge loan,
a portion of the $114 Million Interim Secured Loan and borrowings on the Line of
Credit, (v) the sale of the two All American Industrial Properties, the six
Atlanta Auto Care Center properties and ten QuikTrip properties, and use of sale
proceeds for the repayment of mortgage debt and the funding of certain property
acquisitions, (vi) the collection on the Hovpark mortgage loan receivable, and
(vii) the sale of various properties held by the partnerships managed by the
Associated Companies to the Company and the sale of various properties held by
the partnerships managed by the Associated Companies to third parties as if each
of such transactions had been completed on January 1, 1996. In the opinion of
management, all adjustments necessary to reflect the effects of the transactions
have been made.
The pro forma consolidated financial information is unaudited and is not
necessarily indicative of the results of which would have occurred if the
transactions had been consummated in the periods presented, or on any particular
date in the future, nor does it purport to represent the financial position,
results of operations, or cash flows for future periods.
GLENBOROUGH REALTY TRUST INCORPORATED
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED PENDING REPAYMENT OF OTHER
HISTORICAL(1) TRANSACTIONS(2) ACQUISITIONS(3) OFFERING(4) DEBT(5) ADJUSTMENTS(6) PRO FORMA
------------- --------------- -------------- ----------- ------------ -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Rental property,
net.............. $ 286,553 $ 303,500 $ 210,700 $ -- $ -- $ (801) $799,952
Investments in
Associated
Companies........ 6,775 -- -- -- -- -- 6,775
Mortgage loans
receivable,
net.............. 3,547 -- -- -- -- -- 3,547
Cash and cash
equivalents...... 32,636 (32,636) (173,697) 262,747 (89,140) 1,090 1,000
Other Assets....... 7,659 770 -- -- -- -- 8,429
-------- -------- ------- -------- -------- ---- --------
Total
Assets..... $ 337,170 $ 271,634 $ 37,003 $ 262,747 $ (89,140) $ 289 $819,703
======== ======== ======= ======== ======== ==== ========
LIABILITIES
Line of Credit..... $ 36,118 $ (22,167) $ -- $ -- $ (13,951) $ -- $ --
Mortgage loans..... 56,563 7,438 35,620 -- -- -- 99,621
Secured Loan....... -- 60,000 -- -- -- -- 60,000
Interim Unsecured
Loan............. -- 114,000 -- -- (75,189) -- 38,811
Unsecured bridge
loan............. 60,000 (60,000) -- -- -- -- --
Other
liabilities...... 5,180 2,210 1,383 -- -- -- 8,773
-------- -------- ------- -------- -------- ---- --------
Total
Liabilities... 157,861 101,481 37,003 -- (89,140) -- 207,205
-------- -------- ------- -------- -------- ---- --------
MINORITY INTEREST.... 15,652 20,726 -- -- -- -- 36,378
-------- -------- ------- -------- -------- ---- --------
STOCKHOLDERS' EQUITY
Common stock....... 13 6 -- 10 -- -- 29
Additional paid-in
capital.......... 172,621 149,421 -- 262,737 -- -- 584,779
Deferred
compensation..... (304) -- -- -- -- -- (304)
Retained earnings
(deficit)........ (8,673) -- -- -- -- 289 (8,384)
-------- -------- ------- -------- -------- ---- --------
Total
Equity..... 163,657 149,427 -- 262,747 -- 289 576,120
-------- -------- ------- -------- -------- ---- --------
Total
liabilities
and
Stockholders'
Equity..... $ 337,170 $ 271,634 $ 37,003 $ 262,747 $ (89,140) $ 289 $819,703
======== ======== ======= ======== ======== ==== ========
</TABLE>
10
<PAGE> 11
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1997
(UNAUDITED)
1. Reflects the historical consolidated balance sheet of the Company as of June
30, 1997, which includes the acquisitions of the following properties and
property portfolios:
<TABLE>
<CAPTION>
PURCHASE PRICE
PROPERTY (IN 000'S) DATE ACQUIRED
----------------------------------------------- -------------- -------------------
<S> <C> <C>
CRI Properties................................. $ 14,800 June 18, 1997
CIGNA Properties............................... 45,400 April 29, 1997
E&L Properties................................. 22,200 April 18, 1997
Riverview Property............................. 20,500 April 14, 1997
Lennar Properties.............................. 23,200 April 8, 1997
Scottsdale Hotel............................... 12,100 February 28, 1997
Carlsberg Properties........................... 23,200 November 19, 1996
TRP Properties................................. 43,800 October 17, 1996
Bond Street Property........................... 3,200 September 24, 1996
Kash n' Karry Property......................... 1,600 August 2, 1996
San Antonio Hotel.............................. 2,800 August 1, 1996
UCT Property................................... 18,800 July 15, 1996
</TABLE>
CRI Properties. In June 1997, the Company acquired from Carlsberg Realty Inc.
the CRI Properties, a portfolio of three Properties, aggregating
approximately 245,600 square feet. The total acquisition cost, including
capitalized costs, was approximately $14.8 million, which was paid entirely
in cash. The CRI Properties consist of one office Property in California, and
one office/flex Property and one industrial Property in Arizona. The CRI
Properties have been managed by Glenborough Corporation, one of the
Associated Companies, since November 1996.
CIGNA Properties. In April 1997, the Company acquired from two partnerships
formed and managed by affiliates of CIGNA the CIGNA Properties, a portfolio
of six Properties, aggregating approximately 616,000 square feet and 224
multi-family units. The total acquisition cost, including capitalized costs,
was approximately $45.4 million, which was paid entirely in cash. The CIGNA
Properties consist of two office Properties, two office/flex Properties, a
shopping center and a multi-family Property, and are located in four states.
E&L Properties. In April 1997, the Company acquired from seven partnerships
and their general partner, a Southern California syndicator the E&L
Properties, a portfolio of 11 Properties, aggregating approximately 523,000
square feet, together with associated management interests (the "E&L
Properties"). The total acquisition cost, including capitalized costs, was
approximately $22.2 million, which consisted of (i) approximately $12.8
million of mortgage debt assumed, (ii) approximately $6.7 million in the form
of 352,197 partnership units in the Operating Partnership (based on an agreed
per unit value of $19.075), (iii) approximately $633,000 in the form of
approximately 33,198 shares of Common Stock of the Company (based on an
agreed per share value of $19.075), and (iv) the balance in cash. The E&L
Properties consist of one office Property, nine office/flex Properties and
one industrial Property, all located in Southern California.
Riverview Property. In April 1997, the Company acquired from a private seller
the Riverview Property, a 15-story office property containing 227,129 square
feet located in Bloomington, Minnesota. The total acquisition cost, including
capitalized costs, was approximately $20.5 million, which was paid entirely
in cash.
11
<PAGE> 12
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF JUNE 30, 1997
(UNAUDITED)
Lennar Properties. In April 1997, the Company acquired from two limited
partnerships and one limited liability company managed by affiliates of
Lennar Partners the Lennar Properties, a portfolio of three Properties,
aggregating approximately 282,000 square feet. The total acquisition cost,
including capitalized costs, was approximately $23.2 million, which was paid
entirely in cash. The Lennar Properties consist of one office Property
located in Virginia and one office/flex Property and one industrial Property,
each located in Massachusetts.
Scottsdale Hotel. In February 1997, the Company acquired the Scottsdale
Hotel, a 163-suite hotel Property, which began operations in January 1996 and
is located in Scottsdale, Arizona. The total acquisition cost, including
capitalized costs, was approximately $12.1 million, which consisted of
approximately $4.6 million of mortgage debt assumed, and the balance in cash.
The Scottsdale Hotel and four of the Company's other hotel Properties are
marketed as Country Suites by Carlson.
Carlsberg Properties. In November 1996, the Company acquired a portfolio of
six Properties (including one property on which the Company made a mortgage
loan which included a purchase option), aggregating approximately 342,000
square feet, together with associated management interests (the "Carlsberg
Properties"). The total acquisition cost including the mortgage loan and
capitalized costs, was approximately $23.2 million, which consisted of (i)
approximately $8.9 million of mortgage debt assumed, (ii) approximately
$350,000 in the form of 24,844 shares of Common Stock of the Company (based
on a per share value of $14.09) and (iii) the balance in cash. The Carlsberg
Properties consist of five office Properties and one retail Property, located
in two states. Concurrently with the Company's acquisition of the Carlsberg
Properties, one of the Associated Companies assumed management of a portfolio
of 13 additional properties with an aggregate of one million square feet
under a venture with an affiliate of the seller. In June 1997, the Company
acquired three of these properties, the CRI Properties, for an aggregate
purchase price of $14.8 million.
TRP Properties. In October 1996, the Company acquired a portfolio of 12
Properties, aggregating approximately 784,000 square feet and 538
multi-family units, together with associated management interests (the "TRP
Properties"). The total acquisition cost, including capitalized costs, was
approximately $43.8 million, which consisted of (i) approximately $16.3
million of mortgage debt assumed, (ii) approximately $760,000 in the form of
52,387 partnership units in the Operating Partnership (based on a per unit
value of $14.50), (iii) approximately $2.6 million in the form of 182,000
shares of Common Stock of the Company (based on a per share value of $14.50)
and (iv) the balance in cash. The TRP Properties consist of three office, six
industrial, one retail and two multi-family Properties, located in six
states.
Bond Street Property. In September 1996, the Company acquired a two-story,
40,595 square foot office building, in Farmington Hills, Michigan (the "Bond
Street Property"). The total acquisition cost, including capitalized costs,
was approximately $3.2 million, which consisted of approximately $391,000 in
the form of 26,067 partnership units in the Operating Partnership (based on a
per unit value of $15.00), and the balance paid in cash.
Kash n' Karry Property. In August 1996, the Company also expanded an existing
shopping center in Tampa, Florida (the "Kash n' Karry Property") through a
purchase-leaseback transaction with the anchor tenant. The Company's initial
acquisition cost, including capitalized costs, was approximately $1.6
million, all of which was paid in cash and financed through advances under
the Line of Credit. In addition, the Company committed an additional $1.8
million for future expansion and tenant improvements, which the Company
expects will also be paid in cash.
12
<PAGE> 13
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF JUNE 30, 1997
(UNAUDITED)
San Antonio Hotel. In August 1996, the Company acquired a 64-room hotel
Property (the "San Antonio Hotel"), which is located in San Antonio, Texas.
The total acquisition cost, including capitalized costs, was approximately
$2.8 million, which was paid in cash.
UCT Property. In July 1996, the Company acquired a 23-story, 272,443 square
foot office building, in St. Louis, Missouri (the "UCT Property"). The total
acquisition cost, including capitalized costs, was approximately $18.8
million, which consisted of approximately $350,000 in the form of 23,333
partnership units in the Operating Partnership (based on a per unit value of
$15.00), and the balance paid in cash.
Also reflects the sale of the six Atlanta Auto Care Center Properties and
nine of the ten QuikTrip Properties in June 1997 for an aggregate sales price
of approximately $12.0 million. The remaining QuikTrip Property was sold in
October 1997 for a sale price of approximately $1.1 million.
Also reflects as cash approximately $29.3 million held in escrow for certain
purchase and sale transactions occurring on or about June 30, 1997 which were
classified as "rental property, net" in the historical balance sheet as of
June 30, 1997.
2. Reflects the completed acquisitions of the following properties and property
portfolios:
<TABLE>
<CAPTION>
PURCHASE PRICE
(IN 000'S) DATE ACQUIRED
-------------- -------------------
<S> <C> <C>
Citibank Park Property......................... $ 23,300 September 30, 1997
Advance Properties............................. 103,000 September 12, 1997
T. Rowe Price Properties....................... 146,800 September 12, 1997
Centerstone Property........................... 30,400 July 1, 1997
</TABLE>
Citibank Park. In September 1997, the Company acquired Citibank Park, a
147,978 square-foot office building in Las Vegas, Nevada. The total
acquisition cost, including capitalized costs, was approximately $23.3
million, which consisted of (i) approximately $1.66 million in the form of
61,211 partnership units in the Operating Partnership (based on an agreed per
unit value of $27.156), and (ii) the balance in cash.
Advance Properties. In September 1997, the Company acquired from a group of
partnerships affiliated with The Advance Group, the Advance Properties, a
portfolio of 10 Properties aggregating 755,006 square feet. The total
acquisition cost, including capitalized costs, was approximately $103.0
million, which consisted of (i) approximately $13.6 million in the form of
599,508 partnership units in the Operating Partnership (based on an agreed
per unit value of $22.625), (ii) approximately $7.4 million in assumption of
debt, and (iii) the balance in cash. The Advance Properties consist of five
office Properties and three office/flex Properties located in northern New
Jersey and Maryland and two industrial Properties located in northern New
Jersey. Concurrent with this acquisition, the Company entered into a joint
venture with The Advance Group for the development of new projects in the New
Jersey market. This joint venture owns 57 acres of land suitable for office
and office/flex development of up to 560,000 square feet.
T. Rowe Price Properties. In September 1997, the Company acquired from five
limited partnerships, two general partnerships and one private REIT the T.
Rowe Price Properties, a portfolio of 27 properties aggregating approximately
2,888,000 square feet. The total acquisition cost, including capitalized
costs, was approximately $146.8 million, which was paid entirely in cash. The
T. Rowe Price Properties consist of four office properties, 12 office/flex
Properties, eight industrial Properties and three retail Properties located
in 12 states.
Centerstone Property. In July 1997, the Company acquired the Centerstone
Property, an office Property containing 155,021 square feet located in
Irvine, California. The total acquisition cost, including
13
<PAGE> 14
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF JUNE 30, 1997
(UNAUDITED)
capitalized costs, was approximately $30.4 million, which consisted of (i)
approximately $5.5 million in the form of 275,000 partnership units in the
Operating Partnership (based on an agreed per unit value of $20.00), and (ii)
the balance in cash.
These acquisitions were funded with approximately $53.3 million of cash,
assumption of approximately $7.4 million of mortgage debt, the proceeds of
the $60 Million Secured Loan, the proceeds of the $114 Million Interim
Unsecured Loan, approximately $48.1 million of borrowings under the Line of
Credit, the issuance of 275,000 Operating Partnership units with an aggregate
approximate value of $5.5 million (based on $20 per unit value), the issuance
of 599,508 Operating Partnership units with an aggregate approximate value of
$13.6 million (based on $22.625 per unit value) and the issuance of 61,211
Operating Partnership units with an aggregate approximate value of $1.6
million (based on $27.15 per unit value). The assumed mortgages bear interest
at rates of 8.13% to 8.87% and mature between 2005 and 2007. The Line of
Credit bears interest at LIBOR plus 2.375% (assumed to be 7.80%). Subsequent
to December 31, 1996, this interest rate was reduced to LIBOR plus 1.75%
(assumed to be 7.30%). See Footnote 4 in Notes and Adjustments to Pro Forma
Consolidated Statements of Operations for further discussion on the Line of
Credit.
The $60 Million Secured Loan has a 10-year term, and bears interest at a
fixed annual rate of 7.50%. The $114 Million Interim Unsecured Loan has a
90-day term with two 90-day extension options and bears interest at a fixed
annual rate of 7.50%. In connection with obtaining the $60 Million Secured
Loan, the Company paid fees of $770,000 which are shown as a reduction of
cash and an increase in other assets.
Tenant security deposits of approximately $2.2 million related to these
acquisitions are reflected as cash and other liabilities.
Also reflects $149.3 million of net proceeds from the July 1997 Offering and
the repayment of a $60 million unsecured bridge loan and approximately $70.2
million of borrowings on the Line of Credit.
3. Reflects the pending acquisition of the following properties and property
portfolios:
<TABLE>
<CAPTION>
PURCHASE
PRICE
(IN 000'S)
----------
<S> <C>
Copley Properties..................................... $ 63,300
Bryant Lake Property.................................. 9,400
Rancon IV Portfolio................................... 49,000
Rancon V Portfolio.................................... 45,500
Pru-Bache Properties.................................. 43,500
</TABLE>
Copley Properties. The Company has entered into a definitive agreement to
acquire the Copley Properties. The total acquisition cost, including
capitalized costs, is expected to be approximately $63.3 million, which is to
be paid entirely in cash. The Copley Properties comprise 766,269 square feet
of industrial space, with one property located in Tempe, Arizona, one in
Anaheim, California, one in Columbia, Maryland and five in Las Vegas, Nevada.
The Company anticipates the acquisition of the Copley Properties will be
completed in late October 1997. The acquisition is subject to certain closing
conditions, and, thus, there can be no assurance that this acquisition will
ultimately be completed.
Bryant Lake. The Company has entered into a definitive agreement to acquire
Bryant Lake, a 171,789 square-foot office/flex building in Eden Prairie,
Minnesota, from Outlook Income Fund 9, a limited partnership in which GC is
managing general partner. Robert Batinovich, the Company's Chairman and
14
<PAGE> 15
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF JUNE 30, 1997
(UNAUDITED)
Chief Executive Officer, is co-general partner of Outlook Income Fund 9 and
holds an indirect economic interest therein equal to an approximate 0.83%
limited partnership interest. Because of this affiliation, and consistent
with the Company's Board of Directors' policy, neither Robert Batinovich nor
Andrew Batinovich, the Company's President and Chief Operating Officer, voted
when the Board of Directors considered and acted to approve this acquisition.
The price to be paid for Bryant Lake is equal to 100% of the appraised value
as determined by an independent appraiser. The sale of Bryant Lake to the
Company has been approved by the limited partners of Outlook Income Fund 9.
The total acquisition cost, including capitalized costs, is expected to be
approximately $9.4 million, comprising approximately $4.8 million in the form
of cash and the balance in the form of assumption of debt.
Rancon IV Portfolio. The Company entered into a definitive agreement to
acquire the Rancon IV Portfolio. The total acquisition cost, including
capitalized costs, is expected to be approximately $49.0 million, comprising
approximately $32.0 million in the form of cash and the balance in the form
of assumption of debt. The Rancon IV Portfolio comprises three office
properties aggregating 223,938 square feet; one office/flex property
containing 62,605 square feet; four retail properties aggregating 135,554
square feet; one multi-family property with 240 units containing 214,400
square feet; and approximately 74 acres of undeveloped land. All of the
office and retail properties, and approximately 26 acres of the undeveloped
land, are located within the Tri-City mixed use complex in San Bernardino,
California. The multi-family complex is located in Vista (San Diego County),
California, and the remaining approximately 48 acres of undeveloped land are
located in three separate sites in the Inland Empire region of Southern
California. Robert Batinovich holds an indirect economic interest in Rancon
Fund IV equal to an approximate 0.54% limited partnership interest. Because
of this interest, and consistent with the Company's Board of Directors'
policy, neither Robert Batinovich nor Andrew Batinovich voted when the Board
of Directors considered and acted to approve this acquisition. This
acquisition is subject to approval by a majority vote of the limited partners
of Rancon Realty Fund IV, which has filed with the Securities and Exchange
Commission, a preliminary proxy statement to solicit such approval. As a
result, there can be no assurance that this transaction will be completed.
Rancon V Portfolio. The Company entered into a definitive agreement to
acquire the Rancon V Portfolio. The total acquisition cost, including
capitalized costs, is expected to be $45.5 million, comprising approximately
$31.8 million in the form of cash and the balance in the form of assumption
of debt. The Rancon V Portfolio comprises five office properties aggregating
390,785 square feet; one office/flex property containing 50,804 square feet;
one industrial property with an area of approximately 245,000 square feet;
two retail properties aggregating 31,500 square feet; and approximately 139
acres of undeveloped land. All of the office and retail properties, and
approximately 14 acres of the undeveloped land, are located within the
Tri-City mixed use complex in San Bernardino, California. The industrial
property is located in Ontario, California, and the remaining approximately
125 acres of undeveloped land are located in three separate sites in the
Inland Empire region of Southern California. Robert Batinovich holds an
indirect economic interest in Rancon Realty Fund V equal to an approximate
0.7% limited partnership interest. Because of this interest, and consistent
with the Company's Board of Directors' policy, neither Robert Batinovich nor
Andrew Batinovich voted when the Board of Directors considered and acted to
approve this acquisition. This acquisition is subject to approval by a
majority vote of the limited partners of Rancon Realty Fund V, which has
filed with the Securities and Exchange Commission, a preliminary proxy
statement to solicit such approval. As a result, there can be no assurance
that this transaction will be completed.
Prudential-Bache/Equitec Portfolio. The Company has negotiated the definitive
terms but has not yet signed an agreement to acquire all of the real estate
assets of Prudential-Bache/Equitec Real Estate
15
<PAGE> 16
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF JUNE 30, 1997
(UNAUDITED)
Partnership, a California limited partnership in which the managing general
partner is Prudential-Bache Securities, Inc., and in which GC and Robert
Batinovich have served as co-general partners since March of 1994, but do not
hold a material equity interest. The total acquisition cost, including
capitalized costs, is expected to be approximately $43.5 million, which is to
be paid entirely in cash. The Prudential-Bache/ Equitec Portfolio comprises
four office buildings aggregating 405,825 square feet and one office/flex
property containing 121,645 square feet. The largest of these properties are
in Rockville, Maryland (186,680 square feet) and Memphis, Tennessee (100,901
square feet), with the remaining properties located in Sacramento, California
and Kirkland, Washington. This acquisition is subject to approval by a
majority vote of the limited partners of Prudential-Bache/Equitec Real Estate
Limited Partnership, and thus there can be no assurance that this transaction
will be completed.
These acquisitions are expected to be funded with approximately $173.7
million of the net proceeds from the Offering (net of tenant security
deposits of approximately $1.4 million related to these acquisitions which
are reflected as an increase in cash and other liabilities), and assumption
of approximately $35.6 million of mortgage debt. These assumed mortgages bear
interest at rates of 7.95% to 9.39% per annum and mature between 1998 and
2006.
4. Reflects the net proceeds from the Offering of 10,000,000 shares of the
Company's Common Stock at a price of $27.75 per share. In connection with the
Offering, the Company is expected to incur costs of approximately $14.8
million.
5. Reflects the repayment of approximately $75.2 million of the $114 Million
Interim Unsecured Loan and the remaining borrowings on the Line of Credit
totalling $14.0 million using proceeds from the Offering.
6. Reflects the sale of one of the ten QuikTrip Properties which had a net book
value of approximately $801,000 at June 30, 1997. The net proceeds from the
sale of this property was approximately $1.1 million resulting in a gain on
sale of approximately $289,000. The sale of the six Atlanta Auto Care Center
Properties and the other nine QuikTrip Properties is reflected in the
historical balances as of June 30, 1997.
16
<PAGE> 17
GLENBOROUGH REALTY TRUST INCORPORATED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED PENDING DEBT OTHER
HISTORICAL(1) ACQUISITIONS(2) ACQUISITIONS(3) TRANSACTIONS(4) ADJUSTMENTS(5) PRO FORMA
------------- --------------- --------------- --------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Rental revenue............. $ 19,691 $28,055 $14,473 $ -- $ (848) $ 61,371
Equity in earnings of
Associated Companies.... 603 -- -- -- (200) 403
Fees, interest and other
income.................. 980 -- -- -- (50) 930
------------ ------- ------- -------- -------- -----------
Total Revenue...... 21,274 28,055 14,473 -- (1,098) 62,704
------------ ------- ------- -------- -------- -----------
OPERATING EXPENSES
Operating expenses......... 6,045 8,505 5,354 -- (76) 19,828
General and
administrative.......... 1,374 -- -- -- 1,304 2,678
Depreciation and
amortization............ 4,044 4,789 2,810 -- (190) 11,453
Interest expense........... 3,800 8,753 1,554 (5,714) (251) 8,142
------------ ------- ------- -------- -------- -----------
Total operating
expenses......... 15,263 22,047 9,718 (5,714) 787 42,101
------------ ------- ------- -------- -------- -----------
Income from operations before
minority interest.......... 6,011 6,008 4,755 5,714 (1,885) 20,603
Minority interest............ (629) -- -- -- (581) (1,210)
------------ ------- ------- -------- -------- -----------
Net income(6)................ $ 5,382 $ 6,008 $ 4,755 $ 5,714 $ (2,466) $ 19,393
============ ======= ======= ======== ======== ===========
Primary net income per common
share(7)................... $ 0.45 $ 0.64
============ ===========
Primary weighted average
common shares
outstanding(7)............. 11,852,810 30,456,714
============ ===========
Fully diluted net income per
common share(7)............ $ 0.45 $ 0.64
============ ===========
Fully diluted weighted
average common shares
outstanding(7)............. 11,995,306 32,388,750
============ ===========
</TABLE>
17
<PAGE> 18
GLENBOROUGH REALTY TRUST INCORPORATED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED PENDING DEBT OTHER
HISTORICAL(1) ACQUISITIONS(2) ACQUISITIONS(3) TRANSACTIONS(4) ADJUSTMENTS(5) PRO FORMA
------------- --------------- --------------- --------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Rental revenue.............. $ 17,943 $72,392 $26,694 $ -- $ (1,920) $ 115,109
Equity in earnings of
Associated Companies..... 1,598 -- -- -- (802) 796
Fees, interest and other
income................... 1,391 -- -- -- (258) 1,133
--------- ------- ------ ------- ------- ----------
Total Revenue....... 20,932 72,392 26,694 -- (2,980) 117,038
--------- ------- ------ ------- ------- ----------
OPERATING EXPENSES
Operating expenses.......... 5,266 23,357 10,755 -- (275) 39,103
General and
administrative........... 1,393 -- -- -- 2,908 4,301
Depreciation and
amortization............. 4,575 12,497 5,619 -- (428) 22,263
Interest expense............ 3,913 19,832 3,112 (10,135) (534) 16,188
--------- ------- ------ ------- ------- ----------
Total operating
expenses.......... 15,147 55,686 19,486 (10,135) 1,671 81,855
Income from operations before
minority interest........... 5,785 16,706 7,208 10,135 (4,651) 35,183
Minority interest............. (292) -- -- -- (1,778) (2,070)
--------- ------- ------ ------- ------- ----------
Net income(6)................. $ 5,493 $16,706 $ 7,208 $ 10,135 $ (6,429) $ 33,113
========= ======= ====== ======= ======= ==========
Primary net income per common
share(7).................... $ 0.83 $ 1.09
========= ==========
Primary weighted average
common shares
outstanding(7).............. 6,632,707 30,456,714
========= ==========
Fully diluted net income per
common share(7)............. $ 1.09
==========
Fully diluted weighted average
common shares
outstanding(7).............. 32,388,750
==========
</TABLE>
18
<PAGE> 19
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
1. Reflects the historical consolidated operations of the Company for the six
months ended June 30, 1997, excluding the gains on the sale of property and
the collection of a mortgage loan receivable totaling $1,222, and reflects
the historical consolidated operations of the Company for the year ended
December 31, 1996, excluding the gain on the sale of property of $321, an
extraordinary loss on refinancing of debt of $186, Consolidation costs of
$6,082 and litigation costs of $1,155. Consolidation and litigation costs
all related to the formation of the Company and are non-recurring.
2. Reflects the historical operations of Citibank Park, the Advance Properties
and the T. Rowe Price Properties (collectively the "Recent 1997
Acquisitions") for the six months ended June 30, 1997, as well as the
historical operations of the Centerstone Property, CRI Properties, CIGNA
Properties, E&L Properties, Riverview Property, Lennar Properties and the
Scottsdale Hotel (collectively, the "Prior 1997 Acquisitions") for the six
months ended June 30, 1997 or portion of 1997 prior to acquisition.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1997
(OR PORTION OF 1997 PRIOR TO ACQUISITION)
------------------------------------------------------
CITIBANK T. ROWE PRIOR 1997 COMBINED
PARK ADVANCE PRICE ACQUISITIONS TOTAL
-------- ------- ------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenues........................... $1,345 $6,766 $11,183 $ 8,761 $28,055
Operating expenses................. (276) (1,922) (3,612) (2,695) (8,505)
------ ------- ------- ------ -------
$1,069 $4,844 $7,571 $ 6,066 $19,550
====== ======= ======= ====== =======
</TABLE>
Reflects the historical operations of the Recent 1997 Acquisitions and the
Prior 1997 Acquisitions for the year ended December 31, 1996 and the
historical operations of the Carlsberg Properties, TRP Properties, Bond
Street Property, Kash n' Karry Property, San Antonio Hotel and UCT Property
(collectively, the "1996 Acquisitions") for the portion of 1996 prior to
acquisition.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
(OR PORTION OF 1996 PRIOR TO ACQUISITION)
---------------------------------------------------------------------
CITIBANK T. ROWE PRIOR 1997 1996 COMBINED
PARK ADVANCE PRICE ACQUISITIONS ACQUISITIONS TOTAL
-------- ------- ------- ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Revenues............... $2,586 $12,353 $20,997 $ 24,513 $ 11,943 $72,392
Operating expenses..... (643) (3,897) (7,223) (7,270) (4,324) (23,357)
------ ------- ------- ------- ------- -------
$1,943 $8,456 $13,774 $ 17,243 $ 7,619 $49,035
====== ======= ======= ======= ======= =======
</TABLE>
Certain of the T. Rowe Price Properties' operating results reflect the year
ended September 30, 1996 rather than December 31, 1996. These have been
combined as if the year ends of all properties were the same. In the opinion
of management, the operations of these properties is not seasonal.
Also, reflects estimated annual depreciation and amortization, based upon
estimated useful lives of 30-40 years on a straight-line basis.
Also, reflects the estimated interest on the pro forma mortgage debt assumed
in connection with the acquisition of the Advance Properties, E&L Properties,
Scottsdale Hotel, TRP Properties and the Carlsberg Properties; the $60
Million Secured Loan, the $114 million Interim Unsecured Loan and the pro
forma advances under the Line of Credit in connection with the various 1997
and 1996 property acquisitions. The mortgage loans bear interest at rates
ranging from 7.34% to 9.25% per annum. The $60 Million Secured Loan and the
$114 Million Interim Unsecured Loan bear interest at a fixed annual rate of
7.50%. The Line of Credit bears interest at LIBOR plus 2.375% (assumed to be
7.80%) for the year
19
<PAGE> 20
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
ended December 31, 1996 and LIBOR plus 1.75% (assumed to be 7.30%) for the
six months ended June 30, 1997.
3. Reflects the historical operations of the Copley Properties, Bryant Lake, the
Rancon IV and V Portfolios and the Prudential-Bache/Equitec Portfolio (the
"Pru-Bache Portfolio") for the six months ended June 30, 1997 and for the
year ended December 31, 1996, respectively.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997
-------------------------------------------------------------------------
COPLEY RANCON IV AND V PRU-BACHE COMBINED
PROPERTIES BRYANT LAKE PORTFOLIOS PORTFOLIO TOTAL
---------- ----------- --------------- --------- --------
<S> <C> <C> <C> <C> <C>
Revenues.................. $3,358 $ 915 $ 6,803 $ 3,397 $14,473
Operating expenses........ (663) (332) (3,142) (1,217) (5,354)
------ ------ ------- ------ -------
$2,695 $ 583 $ 3,661 $ 2,180 $ 9,119
====== ====== ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-------------------------------------------------------------------------
COPLEY RANCON IV AND V PRU-BACHE COMBINED
PROPERTIES BRYANT LAKE PORTFOLIOS PORTFOLIO TOTAL
---------- ----------- --------------- --------- --------
<S> <C> <C> <C> <C> <C>
Revenues.................. $6,460 $ 1,778 $12,077 $ 6,379 $26,694
Operating expenses........ (1,216) (612) (6,245) (2,682) (10,755)
------ ------ ------- ------ -------
$5,244 $ 1,166 $ 5,832 $ 3,697 $15,939
====== ====== ======= ====== =======
</TABLE>
Also, reflects estimated annual depreciation and amortization based upon
estimated useful lives of 30 years on a straight-line basis.
Also, reflects the estimated interest on the assumption of approximately
$35.6 million in debt in connection with the acquisition of Bryant Lake and
the Rancon IV and V Portfolios. The weighted average interest rate on the
assumed debt is 8.73% per annum.
4. Reflects the estimated interest on the pro forma repayment of the Company's
original secured bank line with the borrowings on the Line of Credit for the
year ended December 31, 1996. Also, reflects the estimated interest on the
pro forma repayment on the Line of Credit, a $60 million unsecured bridge
loan and a portion of the $114 Million Interim Unsecured Loan from proceeds
from the July 1997 Offering and the Offering for the six months ended June
30, 1997 and the year ended December 31, 1996. The repayments result in a net
decrease in interest expense consisting of the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31, 1996
---------------- -----------------
<S> <C> <C>
Interest differential..................... $ 2,327 $ 6,305
Interest on repayments.................... (8,143) (16,706)
Amortization of new loan fees............. 39 178
Amortization of old loan fees............. -- (37)
Unused Line of Credit fees................ 63 125
-------- --------
$ (5,714) $ (10,135)
======== ========
</TABLE>
The Line of Credit is renewable from year to year at the option of Wells
Fargo Bank, provides for maximum borrowings of up to $50,000, but is limited
to a specified borrowing base ($50,000 on a pro
20
<PAGE> 21
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
forma basis), and bears interest at LIBOR plus 2.375% (assumed to be 7.80%)
prior to December 31, 1996, and LIBOR plus 1.75% (assumed to be 7.30%)
subsequent to December 31, 1996. So long as credit is available under the
Line of Credit, the Line of Credit requires monthly interest-only payments
and annual unused Line of Credit fees equal to 0.25% of the unused Line of
Credit balance.
The $114 Million Interim Unsecured Loan has a 90-day term with two 90-day
extension options and bears interest at a fixed annual rate of 7.50%. The $60
million unsecured bridge loan has no net impact on pro forma interest expense
as the loan was repaid in full from proceeds of the July 1997 Offering.
The amortization of the new loan fees is based upon total estimated fees and
costs of $1,778 over the respective terms of the related Line of Credit and
the $60 Million Secured Loan. The unused Line of Credit fees are based upon
0.25% of the pro forma unused Line of Credit capacity as of June 30, 1997 of
approximately $50,000.
21
<PAGE> 22
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
5. Reflects the following adjustments:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE YEAR
JUNE 30, ENDED
1997 DECEMBER 31, 1996
------------ -----------------
<S> <C> <C>
Rental Revenue
Elimination of revenues of Sold Properties................. $ (848) $(1,920)
----- ------
Equity in earnings of the Associated Companies
GHG
Addition of the Scottsdale & San Antonio Hotels......... $ 77 $ 10
Disposition of properties from the managed portfolio.... (18) (93)
GC
Addition of the Carlsberg fee managed properties........ -- 141
Sale of property held by partnerships managed by the
Associated Companies to the Company................... (248) (933)
Sale of property held by partnerships managed by the
Associated Companies to third parties................. (161) (531)
----- ------
Net decrease in income................................ (350) (1,406)
Provision for income taxes............................ 150 604
----- ------
Net decrease in equity in earnings to the
Company.......................................... $ (200) $ (802)
===== ======
Fees, interest and other income
Additional Interest on Grunow note receivable relating to
the Carlsberg Properties acquisition at 11% per annum... $ -- $ 347
Reduction of interest due to collection of Hovpark note
receivable at 8% per annum.............................. (50) (605)
----- ------
Net decrease in fees, interest and other income.... $ (50) $ (258)
===== ======
Operating expenses
Elimination of expenses of Sold Properties................. $ (102) $ (360)
Additional expenses of the E&L Properties.................. 26 85
----- ------
Net decrease in operating expenses................. $ (76) $ (275)
===== ======
General and administrative expenses attributable to 1996 and
1997 acquisitions.......................................... $1,304 $ 2,908
===== ======
Depreciation and amortization
Elimination of expenses of Sold Properties................. $ (190) $ (428)
===== ======
Interest expense and loan fee amortization expense reduction
due to repayment of mortgage debt from proceeds from Sold
Properties................................................. $ (251) $ (534)
===== ======
</TABLE>
22
<PAGE> 23
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
6. The pro forma taxable income before dividends paid deduction for the Company
for the six months ended June 30, 1997 and for the year ended December 31,
1996 is calculated as follows:
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
JUNE 30, FOR THE YEAR ENDED
1997 DECEMBER 31, 1996
------------ ------------------
<S> <C> <C>
Pro forma net income from operations............... $ 19,393 $ 33,113
Add: GAAP basis depreciation and amortization.... 11,453 22,263
Less: Tax basis depreciation and amortization.... (8,234) (16,647)
Other book-to-tax differences.................... 608 1,250
------- -------
Pro forma taxable income......................... $ 23,220 $ 39,979
======= =======
</TABLE>
7. Primary per share amounts reflect the dilutive effects of outstanding stock
options on a historical basis as of June 30, 1997 and December 31, 1996,
respectively based upon the average price per common share for the period
presented. Pro forma primary per share amounts for the same periods assume an
average price per share of $27.75. On an historical basis, there was no
dilutive effect resulting from the outstanding stock options for the year
ended December 31, 1996.
Fully diluted per share amounts reflect the dilutive effects of the units of
the Operating Partnership and outstanding options based upon an ending stock
price of $25.25 per share for the six months ended June 30, 1997 on an
historical basis and $27.75 per share on a pro forma basis for the six months
ended June 30, 1997 and the year ended December 31, 1996. On an historical
basis, the units of the Operating Partnership were antidilutive for the six
months ended June 30, 1997. Also on an historical basis, there was no
dilutive effect resulting from either outstanding options or units of the
Operating Partnership for the year ended December 31, 1996.
The impact on reported per share amounts resulting from the adoption of
Statement of Financial Accounting Standards No. 128 -- "Earnings Per Share"
will not be material.
23
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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
By: Glenborough Realty Trust Incorporated
Date: October 17, 1997 /s/ TERRI GARNICK
-----------------------------------------
Senior Vice President,
Chief Accounting Officer,
Treasurer
(Principal Accounting Officer)
24
