<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) August 8, 1997 (July 1, 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 July 15, 1997, to file the Financial Statements and
Exhibits of the Company related to the acquisition of the Centerstone Property
(as defined in such Form 8-K).
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 3
Statement of revenues and certain expenses
of the Centerstone Property for the three
months ended March 31, 1997 and the year
ended December 31, 1996. 4
(b) PRO FORMA FINANCIAL STATEMENTS
The following unaudited, pro forma consolidated balance sheet as of March 31,
1997 has been prepared to reflect (i) all property acquisitions (including debt
assumed in connection therewith) completed in 1997, with the exception of a
portfolio of three properties acquired in June 1997 (the "CRI Properties"),
(ii) the pending acquisition of a portfolio of 27 properties (the "T. Rowe
Price Properties"), (iii) the public offering and sale of 6,980,000 shares of
Common Stock effected in July 1997 (the "Offering," including 680,000 shares of
Common Stock sold in July 1997 pursuant to the exercise of an over-allotment
option), and application of the net proceeds from the Offering to fund in part
the acquisition of the T. Rowe Price Properties, reduce borrowings under the
Company's revolving line of credit (the "Line of Credit") with Wells Fargo
Bank, N.A. ("Wells Fargo Bank") and for general corporate purposes, (iv) the
$60 million mortgage financing (the "$60 Million Mortgage") with Wells Fargo
Bank secured by certain of the Company's Properties and an anticipated
additional $17 million in mortgage financing under the same facility (together
with the $60 Million Mortgage, the "Wells Fargo Financing") and the application
of the Wells Fargo Financing to repay borrowings under the Line of Credit and
principal and interest accrued under a $40 million unsecured loan used to
acquire the CIGNA Properties and (v) the sale of the six Atlanta Auto Care
Center properties and ten QuikTrip properties and use of the proceeds from such
sale to repay mortgage debt, as if such transactions had been completed on
March 31, 1997. The following unaudited, pro forma consolidated statements of
operations for the three months ended March 31, 1997, and for the year ended
December 31, 1996, have been prepared to reflect (i) all property acquisitions
(including debt assumed in connection therewith) completed in 1997, with the
exception of a portfolio of three properties acquired in June 1997 (the "CRI
Properties"), and the property acquisitions completed in 1996, (ii) the pending
acquisition of a portfolio of 27 properties (the "T. Rowe Price Properties"),
(iii) the Offering and application of the net proceeds therefrom to fund in
part the acquisition of the T. Rowe Price Properties, reduce borrowings under
the Line of Credit and for general corporate purposes, the offer and sale of
3,500,000 shares of Common Stock effected in March 1997 (the "March 1997
Offering") and the offer and sale of 3,666,000 shares of Common Stock effected
in October 1996 (the "October 1996 Offering"), (iv) the Wells Fargo Financing
and the application thereof to repay borrowings under the Line of Credit and
principal and interest accrued under a $40 million unsecured loan used to
acquire the CIGNA Properties, (v) the sale of two All American Industrial
Properties, the sale of the six Atlanta Auto Care Center properties and ten
QuikTrip properties and use of the proceeds therefrom to repay mortgage debt,
and (vi) the collection of the Hovpark mortgage loan receivable, as if such
transactions had been completed on January 1, 1996.
The pro forma consolidated financial information is unaudited and is not
necessarily indicative of the results 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.
Pro Forma Consolidated Balance Sheet as of
March 31, 1997 with accompanying notes
and adjustments 6
Pro Forma Consolidated Statement of
Operations for the three months ended
March 31, 1997, and the year ended
December 31, 1996, with accompanying notes
and adjustments 10
2
<PAGE> 3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Glenborough Realty Trust Incorporated:
We have audited the accompanying statement of revenues and certain expenses
of the Centerstone Property, as defined in Note 1, for the year ended December
31, 1996. This financial statement is the responsibility of the management of
the Company. Our responsibility is to express an opinion on this 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 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 Centerstone
Property.
In our opinion, the financial statement referred to above presents fairly,
in all material respects, the revenues and certain expenses of the Centerstone
Property for the year ended December 31, 1996, in conformity with generally
accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
June 30, 1997
3
<PAGE> 4
GLENBOROUGH REALTY TRUST INCORPORATED
STATEMENT OF REVENUES AND CERTAIN EXPENSES OF
THE CENTERSTONE PROPERTY
FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS YEAR
ENDED ENDED
MARCH 31, DECEMBER 31,
1997 1996
(UNAUDITED) (AUDITED)
------------ ------------
<S> <C> <C>
REVENUES........................................................... $955 $3,745
CERTAIN EXPENSES:
Operating........................................................ 174 706
Real estate taxes................................................ 37 150
---- ------
211 856
---- ------
REVENUES IN EXCESS OF CERTAIN EXPENSES............................. $744 $2,889
==== ======
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE> 5
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES OF
THE CENTERSTONE PROPERTY
FOR THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 1996
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICY
Property Acquired -- The accompanying statement of revenues and certain
expenses includes the operations (see "Basis of Presentation" below) of the
Centerstone Property located in Irvine, California, acquired by the Company from
an unaffiliated third party.
Basis of Presentation -- The accompanying statement of revenues and certain
expenses is not intended to be a complete presentation of the actual operations
of the Centerstone Property 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 Centerstone Property; however, the Company is not aware
of any material factors relating to the Centerstone 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 Centerstone Property.
This financial statement has 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 April 1,
1997 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
--------------------------------------------------- -------
<S> <C>
1997............................................... $ 2,686
1998............................................... 3,380
1999............................................... 2,659
2000............................................... 2,321
2001............................................... 2,254
Thereafter......................................... 7,848
-------
Total.................................... $21,148
=======
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $94
(unaudited) for the three months ended March 31, 1997 and $374 for the year
ended December 31, 1996. Certain leases contain lessee renewal options.
5
<PAGE> 6
GLENBOROUGH REALTY TRUST INCORPORATED
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED PENDING REPAYMENT OTHER
ACQUISI- ACQUISI- WELLS FARGO OF ADJUST-
HISTORICAL(1) TIONS(2) TIONS(3) OFFERING(4) FINANCING(5) DEBT(6) MENTS(7) PRO FORMA
-------------- --------- --------- ------------ ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Rental property,
net............... $173,316 $141,721 $ 146,823 $ -- $ -- $ -- $(12,104) $449,756
Investments in
Associated
Companies......... 6,864 -- -- -- -- -- -- 6,864
Mortgage loans
receivable, net... 3,454 -- -- -- -- -- -- 3,454
Cash and cash
equivalents....... 42,603 (48,295) (130,508) 149,366 60,000 (75,904) 6,844 4,106
Other Assets........ 8,205 -- 760 -- -- -- -- 8,965
-------- -------- --------- -------- ------- -------- -------- --------
Total
Assets..... $234,442 $ 93,426 $ 17,075 $149,366 $60,000 $(75,904) $ (5,260) $473,145
======== ======== ========= ======== ======= ======== ======== ========
LIABILITIES
Line of Credit........ $ -- $ 35,904 $ -- $ -- $ -- $(35,904) $ -- $ --
Mortgage loans........ 59,007 3,941 -- -- -- -- (6,120) 56,828
Wells Fargo
Financing........... -- -- 16,000 -- 60,000 -- -- 76,000
CIGNA Acquisition
Financing........... -- 40,000 -- -- -- (40,000) -- --
Other liabilities..... 3,353 730 1,075 -- -- -- -- 5,158
-------- -------- --------- -------- ------- -------- -------- --------
Total
Liabilities... 62,360 80,575 17,075 -- 60,000 (75,904) (6,120) 137,986
-------- -------- --------- -------- ------- -------- -------- --------
MINORITY INTEREST..... 8,856 12,218 -- -- -- -- -- 21,074
-------- -------- --------- -------- ------- -------- -------- --------
STOCKHOLDERS' EQUITY
Common stock........ 13 -- -- 7 -- -- -- 20
Additional paid-in
capital........... 172,257 633 -- 149,359 -- -- -- 322,249
Deferred
compensation...... (352) -- -- -- -- -- -- (352)
Retained earnings
(deficit)......... (8,692) -- -- -- -- -- 860 (7,832)
-------- -------- --------- -------- ------- -------- -------- --------
Total
Equity..... 163,226 633 -- 149,366 -- -- 860 314,085
-------- -------- --------- -------- ------- -------- -------- --------
Total
liabilities
and
Stockholders'
Equity..... $234,442 $ 93,426 $ 17,075 $149,366 $60,000 $(75,904) $ (5,260) $473,145
======== ======== ========= ======== ======= ======== ======== ========
</TABLE>
6
<PAGE> 7
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(UNAUDITED)
1. Reflects the historical consolidated balance sheet of the Company as of
March 31, 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>
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>
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 cash portion was financed through advances under the
Line of Credit and the retirement of a mortgage receivable. Like four of
the Company's other hotel Properties, the Scottsdale Hotel is marketed as a
Country Suites by Carlson.
Carlsberg Properties. In November 1996, the Company acquired the Carlsberg
Properties (the "Carlsberg Properties"), 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 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 cash portion was financed through advances under the
Line of Credit. 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 for an aggregate purchase price of $14.8 million.
TRP Properties. In October 1996, the Company acquired the TRP Properties
(the "TRP Properties"), a portfolio of 12 Properties, aggregating
approximately 784,000 square feet and 538 multi-family units, together with
associated management interests. 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 cash
portion was financed through advances under the Line of Credit. 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 the Bond
Street Property, a two-story, 40,595 square foot office building, in
Farmington Hills, Michigan. The total acquisition cost, including
capitalized costs, was approximately $3.2 million, which consisted of
approximately $391,000 in the form
7
<PAGE> 8
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET -- (CONTINUED)
AS OF MARCH 31, 1997
(UNAUDITED)
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 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.
San Antonio Hotel. In August 1996, the Company acquired the San Antonio
Hotel, a 64-room hotel Property, which is located in San Antonio, Texas.
The total acquisition cost, including capitalized costs, was approximately
$2.8 million, which was paid in cash. The acquisition was financed with an
advance on the Line of Credit.
UCT Property. In July 1996, the Company acquired the UCT Property, a
23-story, 272,443 square foot office building, in St. Louis, Missouri. 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. The cash portion was
financed through advances under the Line of Credit.
2. Reflects the completed acquisitions of the following properties and property
portfolios:
<TABLE>
<CAPTION>
DATE ACQUIRED
PURCHASE PRICE ---------------
--------------
(IN 000'S)
<S> <C> <C>
Centerstone Property........................... $ 30,400 July 1, 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
</TABLE>
Pro forma data does not include the acquisition of the CRI Properties.
These acquisitions were funded with approximately $49.0 million of the net
proceeds from the March 1997 Offering and from the sale of the Atlanta Auto
Care Center Properties and the QuikTrip Properties (see Footnote 7),
assumption of approximately $3.9 million of mortgage debt, approximately
$40 million of proceeds from the CIGNA Acquisition Financing, approximately
$35.9 million of borrowings under the Line of Credit, the issuance of
352,197 Operating Partnership units with an aggregate approximate value of
$6.7 million (based on $19.075 per unit value), the issuance of 275,000
Operating Partnership units with an aggregate approximate value of $5.5
million (based on $20.00 per unit value) and 33,198 shares of unregistered
Common Stock with an aggregate approximate value of $633,000 (based on
$19.075 per share value). The assumed mortgages bear interest at rates of
7.3% to 8.4% and mature between 2006 and 2017. The Line of Credit and the
CIGNA Acquisition Financing bear 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 7.50%). The CIGNA Acquisition Financing
is assumed to be repaid in full with proceeds from the Wells Fargo
Financing (see Footnote 6).
Tenant security deposits of approximately $730,000 related to these
acquisitions are reflected as cash and other liabilities.
8
<PAGE> 9
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET -- (CONTINUED)
AS OF MARCH 31, 1997
(UNAUDITED)
3. Reflects the pending acquisition of the T. Rowe Price Properties:
This acquisition is expected to be funded with approximately $130.8 million
of the net proceeds from the Offering (see Footnote 4) and approximately
$16 million of proceeds from the Wells Fargo Financing.
Tenant security deposits of approximately $1,075,000 related to this
acquisition are reflected as an increase in cash and other liabilities. The
$760,000 of estimated fees and costs related to the Wells Fargo Financing
is shown as a reduction of cash and an increase in other assets.
4. Reflects the net proceeds from the Offering of 6,980,000 shares of the
Company's Common Stock at a price of $22.625 per share. In connection with
the Offering, the Company is expected to incur costs of approximately $8
million.
5. Reflects the $60 Million Mortgage, the first portion of the Wells Fargo
Financing. For further discussion see Footnote 4 in Notes and Adjustments to
Pro Forma Consolidated Statements of Operations.
6. Reflects the repayment of the $40 million CIGNA Acquisition Financing and of
borrowings on the Line of Credit of approximately $35.9 million using
proceeds from the Wells Fargo Financing and the Offering.
7. Reflects the sale of the Atlanta Auto Care Center Properties and the
QuikTrip Properties which had a net book value of approximately $12.1
million at March 31, 1997. The net proceeds from the sale of these
properties is expected to be approximately $6.8 million (net of
approximately $300,000 of selling costs and the repayment of approximately
$6.1 million of mortgage debt), with a resulting gain on sale of
approximately $860,000.
9
<PAGE> 10
GLENBOROUGH REALTY TRUST INCORPORATED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED PENDING DEBT OTHER
ACQUISI- ACQUISI- TRANS- ADJUST-
HISTORICAL(1) TIONS(2) TIONS(3) ACTIONS(4) MENTS(5) PRO FORMA
------------- --------- ------- ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Rental revenue.................... $ 7,907 $ 5,741 $5,436 $ -- $ (424) $ 18,660
Equity in earnings of Associated
Companies....................... 145 -- -- -- 44 189
Fees, interest and other income... 531 -- -- -- (50) 481
---------- ------ ------ ---- ----- ----------
Total Revenue........... 8,583 5,741 5,436 -- (430) 19,330
---------- ------ ------ ---- ----- ----------
OPERATING EXPENSES
Operating expenses................ 2,382 1,746 1,699 -- (30) 5,797
General and administrative........ 651 -- -- -- 163 814
Depreciation and amortization..... 1,537 945 979 (95) 3,366
Interest expense.................. 1,573 1,561 312 (633) (129) 2,684
---------- ------ ------ ---- ----- ----------
Total operating
expenses.............. 6,143 4,252 2,990 (633) (91) 12,661
---------- ------ ------ ---- ----- ----------
Income from operations before
minority interest............... 2,440 1,489 2,446 633 (339) 6,669
Minority interest................. (231) -- -- -- (151) (382)
---------- ------ ------ ---- ----- ----------
Net income(6)..................... $ 2,209 $ 1,489 $2,446 $633 $ (490) $ 6,287
========== ====== ====== ==== ===== ==========
Primary net income per common
share(7)........................ $ 0.22 $ 0.31
========== ==========
Primary weighted average common
shares outstanding(7)........... 10,256,129 20,456,035
========== ==========
Fully diluted net income per
common share(7)................. $ 0.21 $ 0.29
========== ==========
Fully diluted weighted average
common shares outstanding(7).... 10,295,124 21,727,352
========== ==========
</TABLE>
10
<PAGE> 11
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
ACQUISI- ACQUISI- TRANS- ADJUST-
HISTORICAL(1) TIONS(2) TIONS(3) ACTIONS(4) MENTS(5) PRO FORMA
------------- --------- ------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Rental revenue..................... $ 17,943 $34,193 $20,997 $ -- $ (1,920) $ 71,213
Equity in earnings of Associated
Companies........................ 1,598 -- -- -- 42 1,640
Fees, interest and other income.... 1,391 -- -- -- (258) 1,133
--------- ------- ------- ------ ------- ----------
Total Revenue............ 20,932 34,193 20,997 -- (2,136) 73,986
--------- ------- ------- ------ ------- ----------
OPERATING EXPENSES
Operating expenses................. 5,266 10,787 7,223 -- (275) 23,001
General and administrative......... 1,393 -- -- -- 808 2,201
Depreciation and amortization...... 4,575 4,891 3,915 -- (428) 12,953
Interest expense................... 3,913 8,315 1,248 (2,168) (534) 10,774
--------- ------- ------- ------ ------- ----------
Total operating
expenses............... 15,147 23,993 12,386 (2,168) (429) 48,929
--------- ------- ------- ------ ------- ----------
Income from operations before
minority interests............... 5,785 10,200 8,611 2,168 (1,707) 25,057
Minority interest.................. (292) -- -- -- (1,106) (1,398)
--------- ------- ------- ------ ------- ----------
Net income(6)...................... $ 5,493 $10,200 $ 8,611 $2,168 $ (2,813) $ 23,659
========= ======= ======= ====== ======= ==========
Primary net income per common
share(7)......................... $ 0.83 $ 1.16
========= ==========
Primary weighted average common
shares outstanding(7)............ 6,632,707 20,456,035
========= ==========
Fully diluted net income per common
share(7)......................... $ 1.09
==========
Fully diluted weighted average
common shares outstanding(7)..... 21,727,352
==========
</TABLE>
11
<PAGE> 12
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
1. Reflects the historical consolidated operations of the Company for the three
months ended March 31, 1997, excluding the gain on collection of the Hovpark
mortgage loan receivable of $154, and reflects the historical consolidated
operations of the Company for the year ended December 31, 1996, excluding
the gain on the sale of the All American Industrial Properties 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 the Centerstone Property, CIGNA
Properties, E&L Properties, Riverview Property and Lennar Properties for the
three months ended March 31, 1997, and the historical 1997 operations of the
Scottsdale Hotel for the period prior to acquisition. Excludes the CRI
Properties acquired in June 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
(OR PORTION OF 1997 PRIOR TO ACQUISITION)
--------------------------------------------------------------------------------------
CENTERSTONE CIGNA E&L RIVERVIEW LENNAR SCOTTSDALE COMBINED
PROPERTY PROPERTIES PROPERTIES PROPERTY PROPERTIES HOTEL TOTAL
----------- ---------- ---------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues..................... $ 955 $1,946 $ 751 $ 977 $ 901 $211 $ 5,741
Operating expenses........... (211) (635) (240) (414) (188) (58) (1,746)
----- ------ ----- ----- ----- ---- -------
$ 744 $1,311 $ 511 $ 563 $ 713 $153 $ 3,995
===== ====== ===== ===== ===== ==== =======
</TABLE>
Reflects the historical operations of the Centerstone Property, CIGNA
Properties, E&L Properties, Riverview Property, Lennar Properties and
Scottsdale Hotel for the year ended December 31, 1996, and the historical
1996 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 period prior to
acquisition. Excludes the CRI Properties acquired in June 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
(OR PORTION OF 1996 PRIOR TO ACQUISITION)
-----------------------------------------------------------------------------------------------------
CENTERSTONE CIGNA E&L RIVERVIEW LENNAR SCOTTSDALE 1996 COMBINED
PROPERTY PROPERTIES PROPERTIES PROPERTY PROPERTIES HOTEL ACQUISITIONS TOTAL
----------- ---------- ---------- --------- ---------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues......... $ 3,745 $ 7,811 $2,925 $ 2,768 $3,443 $1,558 $ 11,943 $34,193
Operating
expenses....... (856) (2,676) (575) (1,421) (704) (231) (4,324) (10,787)
------ ------- ------ ------- ------ ------ ------- --------
$ 2,889 $ 5,135 $2,350 $ 1,347 $2,739 $1,327 $ 7,619 $23,406
====== ======= ====== ======= ====== ====== ======= ========
</TABLE>
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 E&L Properties,
Scottsdale Hotel, TRP Properties and the Carlsberg Properties; the $40,000
CIGNA Acquisition Financing and the pro forma advances under the Line of
Credit in connection with the various 1997 and 1996 property acquisitions.
The estimated interest on the mortgage loans assumed is based upon an
assumed weighted average rate of 8.20%. The Line of Credit and the CIGNA
Acquisition Financing bear interest at LIBOR plus 2.375% (assumed to be
7.80%) for the year ended December 31, 1996 and LIBOR plus 1.75% (assumed
to be 7.50%) for the three months ended March 31, 1997. The CIGNA
Acquisition Financing and the Line of Credit are assumed to be repaid in
full with proceeds from the Wells Fargo Financing (see Footnote 4) and the
Offering.
12
<PAGE> 13
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS -- CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
3. Reflects the historical operations of the T. Rowe Price Properties for the
three months ended March 31, 1997 and for the year ended December 31, 1996,
respectively.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Revenues.................................. $ 5,436 $20,997
Operating Expenses........................ (1,699) (7,223)
------- -------
$ 3,737 $13,774
======= =======
</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 years on a straight-line basis.
Also, reflects the estimated interest on the $16,000 mortgage financing (a
portion of the Wells Fargo Financing) in connection with the acquisition of
the T. Rowe Price Properties. The mortgage financing is assumed to bear
interest at a fixed rate equal to 10-year Treasuries plus 110 basis points
(assumed to be 7.80%).
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 and
$6,120 of mortgage debt for the year ended December 31, 1996. Also, reflects
the estimated interest on the pro forma repayment of the CIGNA Acquisition
Financing with the proceeds from the $60 Million Mortgage (the first portion
of the Wells Fargo Financing), as well as repayments on the Line of Credit
from proceeds from the Offering and the $60 Million Mortgage for the three
months ended March 31, 1997 and the year ended December 31, 1996. The
repayments result in a net decrease in interest expense consisting of the
following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Interest differential..................... $ 740 $ 3,488
Interest on repayments.................... (1,423) (5,921)
Amortization of new loan fees............. 19 177
Amortization of old loan fees............. -- (37)
Unused Line of Credit fees................ 31 125
------- -------
$ (633) $(2,168)
======= =======
</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 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 7.50%) 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. If the
Line of Credit is not renewed, then at the option of the Company and
subject to certain underwriting conditions, the outstanding balance thereof
is repayable either (i) at the same interest rate, fully amortized over a
three-year period, or (ii) at a fixed interest rate equal to 10 year
Treasuries plus 275 basis points, with a 10 year maturity and a 20 year
amortization schedule. The $6,120 of mortgage debt has a term of two
13
<PAGE> 14
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS -- CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
years and bears interest on the same current terms as the Line of Credit.
In connection with obtaining the Line of Credit and $6,120 of mortgage
debt, the Company incurred commitment fees and other costs totaling
approximately $1,121.
The CIGNA Acquisition Financing bears interest at the same current terms as
the Line of Credit. The $60 Million Mortgage is assumed to have a term of
ten years and assumed to bear interest at a fixed rate of 7.50%. In
connection with the $60 Million Mortgage and the $16 million additional
mortgage financing discussed in Footnote 3, the Company will incur
commitment fees and other costs of approximately $760.
The amortization of the new loan fees is based upon total estimated fees
and costs of $1,881 over the respective terms of the related Line of
Credit, $6,120 of mortgage debt and Wells Fargo Financing. The unused Line
of Credit fees are based upon 0.25% of the pro forma unused Line of Credit
capacity as of March 31, 1997 of approximately $50,000. The $6,120 of
mortgage debt is included in Mortgage Loans in the accompanying pro forma
balance sheet.
5. Reflects the following adjustments:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Rental revenue
Elimination of revenues of All American
Industrial Properties........................ $ -- $ (260)
Elimination of revenues of Atlanta Auto Care
Center and QuikTrip Properties............... (424) (1,660)
----- -------
Net reduction in rental revenue................... $ (424) $(1,920)
===== =======
</TABLE>
14
<PAGE> 15
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS -- CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE
MONTHS ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Equity in earnings of the Associated Companies
GHG
Addition of the Scottsdale Hotel....................... $ 77 $ 168
Addition of the San Antonio Hotel...................... -- (158)
GC
Addition of the Carlsberg fee managed properties....... -- 141
Sale of the UCT Property to the Company................ -- (77)
---- -----
Net additional income................................ 77 74
Provision for income taxes........................... (33) (32)
---- -----
Net additional equity in earnings to the Company............ $ 44 $ 42
==== =====
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 All American Industrial
Properties............................................. $ -- $(128)
Elimination of expenses of Atlanta Auto Care Center and
QuikTrip Properties.................................... (51) (232)
Additional expenses of the E&L Properties.............. 21 85
---- -----
Net decrease in operating expenses.......................... $ (30) $(275)
==== =====
General and administrative expenses attributable to 1996 and
1997 acquisitions......................................... $ 163 $ 808
==== =====
Depreciation and amortization
Elimination of expenses of All American Industrial
Properties............................................. $ -- $ (50)
Elimination of expenses of Atlanta Auto Care Center and
QuikTrip Properties.................................... (95) (378)
---- -----
Net decrease in depreciation and amortization............... $ (95) $(428)
==== =====
Interest expense and loan fee amortization expense reduction
due to repayment of $6,120 of mortgage debt from proceeds
from sale of QuikTrip Properties.......................... $ (129) $(534)
==== =====
</TABLE>
15
<PAGE> 16
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS -- CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 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 three months ended March 31, 1997 and for the year ended December
31, 1996 is calculated as follows:
<TABLE>
<CAPTION>
THREE
MONTHS ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Pro forma net income from operations.................. $6,287 $23,659
Add: GAAP basis depreciation and amortization....... 3,366 12,953
Less: Tax basis depreciation and amortization......... (2,392) (9,569)
Other book-to-tax differences......................... 24 111
------ -------
Pro forma taxable income.............................. $7,285 $27,154
====== =======
</TABLE>
7. Primary per share amounts reflect the dilutive effects of outstanding stock
options on a historical basis as of March 31, 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 $22.625. 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 $20.00 per share for the three months ended March 31, 1997
on an historical basis and $22.625 per share on a pro forma basis for the
three months ended March 31, 1997 and the year ended December 31, 1996. On
an historical basis, the units of the Operating Partnership were
antidilutive for the three months ended March 31, 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.
16
<PAGE> 17
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: August 8, 1997 /s/ ANDREW BATINOVICH
-----------------------------------------
Andrew Batinovich
Director, Executive Vice President,
Chief Operating Officer,
Chief Financial Officer
(Principal Financial Officer)
Date: August 8, 1997 /s/ TERRI GARNICK
-----------------------------------------
Senior Vice President,
Chief Accounting Officer,
Treasurer
(Principal Accounting Officer)
17
