<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
March 24, 1998 (February 17, 1998)
----------------------------------
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: (650) 343-9300
--------
1
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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 March 3, 1998, to file the Financial Statements and
Exhibits of the Company relating to the acquisition by the Company's Operating
Partnership of the 99% limited partnership interest in GRC Airport Associates
(as defined in such Form 8-K, or "GRCAA"). The financial statements referred to
in Item 7(a) relate to the operations of SkyPark, the sole asset property of
GRCAA.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 4
Combined statements of revenues and certain
expenses of SkyPark 5
Notes to combined statements of revenues
and certain expenses of SkyPark 6
(b) PRO FORMA FINANCIAL STATEMENTS
Pro forma Consolidated Balance Sheet as of
September 30, 1997, with accompanying notes
and adjustments 8
Pro form Consolidated Statements of Operations
for the nine months ended September 30, 1997,
and the year ended December 31, 1996, with
accompanying notes and adjustments 16
(c) EXHIBIT
23.1 Consent of Independent Auditors 22
2
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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: March 24, 1998 /s/ TERRI GARNICK
-----------------------------------
Terri Garnick
Senior Vice President
Chief Accounting Officer, Treasurer
(Principal Accounting Officer)
3
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Glenborough Realty Trust Incorporated:
We have audited the accompanying combined statement of revenues and certain
expenses of SkyPark, 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 financial statement
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. These 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 SkyPark.
In our opinion, the combined financial statement referred to above presents
fairly, in all material respects, the revenues and certain expenses of SkyPark
for the year ended December 31, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
March 2, 1998
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GLENBOROUGH REALTY TRUST INCORPORATED
COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES OF
SKYPARK
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
AND THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
REVENUES................................................... $1,321 $1,227
CERTAIN EXPENSES
Operating................................................ 11 17
Real estate taxes........................................ 79 89
------ ------
90 106
------ ------
REVENUES IN EXCESS OF CERTAIN EXPENSES..................... $1,231 $1,121
====== ======
</TABLE>
The accompanying notes are an integral part of these statements.
5
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GLENBOROUGH REALTY TRUST INCORPORATED
NOTES TO COMBINED STATEMENTS OF REVENUES AND CERTAIN EXPENSES
OF SKYPARK
FOR THE NINE MONTHS ENDED SEPTEMBER 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
SkyPark, the sole asset property of GRC Airport Associates, located in San
Bruno, California, acquired by Glenborough Properties, L.P. (the "Operating
Partnership"), the operating partnership of Glenborough Realty Trust
Incorporated (the "Company"). SkyPark is a 216,780 square foot, industrial
property located in San Bruno, California, which is leased in its entirety to
GRC Airport Associates, an affiliate of the Company.
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 SkyPark 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 SkyPark, however, the Company is not aware of any material
factors relating to SkyPark 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 SkyPark.
These combined financial statements have been prepared for the purpose of
complying with certain rules and regulations of the Securities and Exchange
Commission. GRC Airport Associates purchased SkyPark in the last quarter of
1995. The periods presented in the accompanying combined statements of revenues
and certain expenses represent substantially all of the periods for which GRC
Airport Associates owned SkyPark.
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 October 1,
1997 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -------
<S> <C>
1997 (three months)......................................... $ 288
1998........................................................ 1,207
1999........................................................ 1,268
2000........................................................ 1,331
2001........................................................ 1,398
2002........................................................ 1,467
Thereafter.................................................. 30,185
-------
Total............................................. $37,144
-------
</TABLE>
In addition to minimum rental payments, tenants pay reimbursements for
their pro rata share of specified operating expenses, which amounted to $458
(unaudited) for the nine months ended September 30, 1997 and $154 for the year
ended December 31, 1996. Certain leases contain lessee renewal options.
6
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PRO FORMA FINANCIAL INFORMATION
The following unaudited, pro forma consolidated balance sheet as of
September 30, 1997 has been prepared to reflect: (i) all property acquisitions
completed in 1997 and in 1998 through the date hereof as described in footnote
one and two to the Notes and Adjustments to Pro Forma Consolidated Balance Sheet
as of September 30, 1997; (ii) the pending property acquisitions as described in
footnote three to the Notes and Adjustments to Pro Forma Consolidated Balance
Sheet as of September 30, 1997; (iii) the March 1998 offering of $150 million
Senior Notes of the Operating Partnership, "the Offering" and the application of
the net proceeds therefrom; (iv) the October 1997 offering of 11,300,000 shares
of Common Stock ("the October 1997 Offering") and the January 1998 offering of
11,500,000 shares of Series A Convertible Preferred Stock, ("the January 1998
Offering") and the application of the respective net proceeds therefrom; (v)
debt assumed and borrowings under a $150 million interim loan ("the Interim
Loan") and the Company's $250 million unsecured acquisition credit facility
("the Acquisition Credit Facility"); (vi) repayment of certain mortgage loans,
the Company's previous $50 million line of credit, a $114 million interim
unsecured loan, the Interim Loan and a portion of the borrowings on the
Acquisition Credit Facility; (vii) the sale of one QuikTrip property and the
Summer Breeze property and the use of these sales proceeds for the repayment of
related mortgage debt and for the funding of certain property acquisitions; and
(viii) the acquisition of the limited partnership interests of GRC Airport
Associates, a California Limited Partnership ("GRCAA") and the sale of the sole
property in GRCAA to a third party as if each of such transactions had been
completed on September 30, 1997.
The following unaudited, pro forma consolidated statements of operations
for the nine months ended September 30, 1997 and for the year ended December 31,
1996 have been prepared to reflect: (i) all property acquisitions completed in
1997 and in 1998 through the date hereof, and the property acquisitions
completed in 1996, as described in footnote one and two of the Notes and
Adjustments to Pro Forma Consolidated Balance Sheet as of September 30, 1997;
(ii) the pending property acquisitions as described in footnote three to the
Notes and Adjustments to Pro Forma Consolidated Balance Sheet as of September
30, 1997;(iii) the Offering and the application of the net proceeds therefrom;
(iv) the January 1998 Offering, the October 1997 Offering, the July 1997
offering of 6,980,000 shares of Common Stock, the March 1997 offering of
3,500,000 shares of Common Stock and the October 1996 offering of 3,666,000
shares of Common Stock and the application of the respective net proceeds
therefrom; (v) debt assumed and borrowings under the Interim Loan and the
Acquisition Credit Facility; (vi) the repayment of certain mortgage loans, the
Company's previous $50 million line of credit, a $114 million interim unsecured
loan, the Interim Loan and a portion of the borrowings on the Acquisition Credit
Facility; (vii) the sale of the two All American Industrial Properties, the six
Atlanta Auto Care Center properties, ten QuikTrip properties and the Summer
Breeze property, and use of sale proceeds for the repayment of related mortgage
debt and the funding of certain property acquisitions; (viii) the collection on
the Hovpark mortgage loan receivable; and (ix) the sale of various properties
held by the partnerships managed by the Associated Companies to the Company and
to third parties, as if each of such transactions had been completed on January
1, 1996.
These unaudited, pro forma consolidated financial statements should be read
in conjunction with the financial statements and related notes of the Company
included herein in the Company's reports filed under the Exchange Act. 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.
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GLENBOROUGH REALTY TRUST INCORPORATED
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED PENDING REPAYMENT OF
HISTORICAL(1) TRANSACTIONS(2) ACQUISITIONS(3) OFFERING(4) DEBT(5)
------------- --------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Rental property, net.................. $ 588,644 $ 680,830 $133,525 $ -- $ --
Investments in Associated Companies... 7,567 -- -- -- --
Mortgage loans receivable, net........ 3,622 -- -- -- --
Cash and cash equivalents............. 2,770 (18,004) 620 148,231 (150,000)
Other Assets.......................... 13,373 2,518 -- 1,525 --
--------- --------- -------- -------- ---------
Total Assets.................... $ 615,976 $ 665,344 $134,145 $149,756 $(150,000)
========= ========= ======== ======== =========
LIABILITIES
Acquisition Credit Facility........... $ -- $ 3,477 80,395 $ -- $ --
Line of Credit........................ 28,865 (28,865) -- -- --
Mortgage loans........................ 114,580 115,931 31,980 -- --
Interim Loan.......................... -- 150,000 -- -- (150,000)
Interim unsecured loan................ 114,000 (114,000) -- -- --
The Notes............................. -- -- -- 149,756 --
Other liabilities..................... 11,216 2,240 620 -- --
--------- --------- -------- -------- ---------
Total Liabilities............... 268,661 128,783 112,995 149,756 (150,000)
--------- --------- -------- -------- ---------
MINORITY INTEREST 36,012 116 16,820 -- --
--------- --------- -------- -------- ---------
STOCKHOLDERS' EQUITY
Common Stock.......................... 20 11 -- -- --
Series A Preferred Stock.............. -- 275,500 -- -- --
Additional paid-in capital............ 321,771 267,381 4,330 -- --
Deferred compensation................. (257) -- -- -- --
Retained earnings (deficit)........... (10,231) (6,447) -- -- --
--------- --------- -------- -------- ---------
Total Equity.................... 311,303 536,445 4,330 -- --
--------- --------- -------- -------- ---------
Total liabilities and
Stockholders' Equity.......... $ 615,976 $ 665,344 $134,145 $149,756 $(150,000)
========= ========= ======== ======== =========
<CAPTION>
OTHER
ADJUSTMENTS(6) PRO FORMA
-------------- ----------
<S> <C> <C>
ASSETS
Rental property, net.................. $(4,658) $1,398,341
Investments in Associated Companies... -- 7,567
Mortgage loans receivable, net........ -- 3,622
Cash and cash equivalents............. 17,383 1,000
Other Assets.......................... -- 17,416
------- ----------
Total Assets.................... $12,725 $1,427,946
======= ==========
LIABILITIES
Acquisition Credit Facility........... $ -- $ 83,872
Line of Credit........................ -- --
Mortgage loans........................ (2,590) 259,901
Interim Loan.......................... -- --
Interim unsecured loan................ -- --
The Notes............................. -- 149,756
Other liabilities..................... -- 14,076
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Total Liabilities............... (2,590) 507,605
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MINORITY INTEREST 12,089 65,037
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STOCKHOLDER'S EQUITY
Common Stock.......................... -- 31
Series A Preferred Stock.............. -- 275,500
Additional paid-in capital ........... 2,024 595,506
Deferred compensation................. -- (257)
Retained earnings (deficit)........... 1,202 (15,476)
------- ----------
Total Equity.................... 3,226 855,304
------- ----------
Total liabilities and
Stockholders' Equity.......... $12,725 $1,427,946
======= ==========
</TABLE>
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GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
1. Reflects the historical consolidated balance sheet of the Company as of
September 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>
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
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>
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
61,222 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 selected new
projects. 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.
9
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GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
Centerstone Property. In July 1997, the Company acquired the Centerstone
Property, an office property containing 157,579 square feet located in
Irvine, California. The total acquisition cost, including 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.
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 GC 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 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 (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.
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.
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GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
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 (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 (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, three
office/flex, three 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. In addition, the
Company committed an additional $1.8 million for future expansion and
tenant improvements, which the Operating Partnership expects will also be
paid in cash.
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.
11
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GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
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.
2. Reflects the completed acquisitions of the following properties and property
portfolios:
<TABLE>
<CAPTION>
PURCHASE PRICE
(IN 000'S) DATE ACQUIRED
-------------- -----------------
<S> <C> <C>
San Mateo Headquarters..................... $ 34,700 March 6, 1998
Capitol Center............................. 12,300 February 27, 1998
Windsor Portfolio.......................... 423,200 January 8, 1998
Marion Bass Portfolio...................... 58,300 December 31, 1997
Opus Portfolio............................. 27,900 December 22, 1997
Thousand Oaks.............................. 51,300 December 18, 1997
Bryant Lake................................ 9,400 November 4, 1997
Copley Properties.......................... 63,700 October 24, 1997
</TABLE>
San Mateo Headquarters. In March 1998, the Company acquired the San Mateo
Headquarters, a 15-story office property located in San Mateo, California,
containing 139,109 square feet, which currently houses the Company's
corporate headquarters, from Prudential Insurance Company of America. The
Company's corporate headquarters occupy approximately 30,000 square feet
and the balance of the rentable square feet is leased to third parties. The
San Mateo Headquarters property includes a contiguous parking garage. The
total acquisition cost, including capitalized costs, was approximately
$34.7 million, which was paid in cash, including cash from borrowings on
the Acquisition Credit Facility.
Capitol Center. In February 1998, the Company acquired Capitol Center, a
161,468 square foot office complex located in Des Moines, Iowa. The total
acquisition cost, including capitalized costs, was approximately $12.3
million, comprising: (i) approximately $116,000 in the form of 3,874
partnership units in the Operating Partnership (based on an agreed per unit
value of $30.00); and (ii) the balance in cash.
Windsor Portfolio. In January 1998, the Company acquired the Windsor
Portfolio from Windsor Realty Fund II, L.P., of which Windsor Advisor, LLC
is the general partner and DuPont Pension Fund Investments and Gid/S&S
Limited Partnership are limited partners, and other entities affiliated
with Windsor Realty Fund II, L.P. The Windsor Portfolio properties
aggregate 3,383,240 net rentable square feet, located in the eastern and
mid-western United States and are concentrated in suburban Washington,
D.C., Chicago, Atlanta, Boston, Philadelphia, Tampa, Florida and Cary,
North Carolina. The total acquisition cost, including capitalized costs,
was approximately $423.2 million, comprised of: (i) approximately $160.5
million in assumption of debt and (ii) the balance in cash, including cash
from borrowings under the Interim Loan and the Acquisition Credit Facility.
Marion Bass Portfolio. In December 1997, the Company acquired the Marion
Bass Portfolio aggregating 1,385 units from 14 limited partnerships each of
whose general partner is Marion Bass Real Estate Group. The total
acquisition cost, including capitalized costs, was approximately $58.3
million, comprising $23.5 million of assumed debt and the balance in cash,
including cash from borrowings under the Acquisition Credit Facility. Of
the 10 Marion Bass Portfolio Properties, six are located in Charlotte,
North Carolina, two are in Monroe, North Carolina, one is in Raleigh, North
Carolina and one is in Pineville, North Carolina.
Opus Portfolio. In December 1997, the Company acquired the Opus Portfolio
aggregating 289,874 square feet from four limited liability companies
affiliated with Opus Properties, LLC. The total acquisition cost, including
capitalized costs, was approximately $27.9 million, all of which was paid
in cash, including cash from borrowings under the Acquisition Credit
Facility. Four of the Opus Portfolio Properties are located in or near
Tampa, Florida, and one is located in Denver, Colorado.
Thousand Oaks. In December 1997, the Company acquired Thousand Oaks, an
office complex consisting of three office buildings, aggregating 418,457
square feet. The total acquisition cost, including capitalized costs, was
12
<PAGE> 13
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
including capitalized costs, was approximately $51.3 million, which was
paid entirely in cash, including cash from borrowings under the Acquisition
Credit Facility. The Thousand Oaks property includes 10 acres suitable for
the development of 182,000 square feet of office space. Thousand Oaks is
located in Memphis, Tennessee.
Bryant Lake. In November 1997, the Company acquired 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 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 voted when the Board of Directors
considered and acted to approve this acquisition. The price paid for Bryant
Lake equaled 100% of the appraised value as determined by an independent
appraiser. The total acquisition cost, including capitalized costs, was
approximately $9.4 million, comprising approximately $4.6 million in the
form of cash and the balance in the form of assumption of debt.
Copley Properties. In October 1997, the Company acquired the Copley
Properties from six separate limited partnerships in which affiliates of
AEW Capital Management, L.P. (successors in interest to one or more
affiliates of Copley Advisors Inc.) serve as general partners. The total
acquisition cost, including capitalized costs, was approximately $63.7
million, which was 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.
These acquisitions were funded with approximately $146.3 million of the net
proceeds from the October 1997 Offering and the January 1998 Offering,
assumption of approximately $188.8 million of mortgage debt, approximately
$150.0 million from the proceeds of the Interim Loan, approximately $196.0
million from borrowings under the Acquisition Credit Facility and the
issuance of 3,874 Operating Partnership units with an aggregate approximate
value of $116,000 (based on an agreed per unit value of $30.00). The
assumed mortgages bear interest at rates of 7.25% to 8.70% and mature
between 1999 and 2030. The Acquisition Credit Facility has a three year
term and bears interest on a sliding scale ranging from LIBOR plus 1.1% to
LIBOR plus 1.3% (assumed to be 6.725% for the nine months ended September
30, 1997 and 6.525% for the year ended December 31, 1996). In connection
with obtaining the Acquisition Credit Facility and in connection with a
portion of the assumed mortgages, the Company paid fees of $1,863,000 and
$355,000, respectively, which are shown as a reduction of cash and an
increase in other assets.
The Interim Loan bears interest at LIBOR plus 1.75% (assumed to be 7.375%
for the nine months ended September 30, 1997 and 7.175% for the year ended
December 31, 1996) and has a term of three months with an option to extend
the term to three additional months. In connection with obtaining the
Interim Loan, the Company paid fees of $300,000 which are shown as a
reduction of cash and an increase in other assets.
Tenant security deposits of approximately $2,240,000 related to these
acquisitions are reflected as cash and other liabilities.
Also reflects approximately $267.3 million of net proceeds from the
October 1997 Offering and the full repayment of a $114 million interim
unsecured loan, $4.9 million of mortgage debt, and $28.9 million on the
13
<PAGE> 14
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
of mortgage debt, and $28.9 million on the Company's previous $50 million
Line of Credit. This Line of Credit has been replaced by the Acquisition
Credit Facility.
Also reflects approximately $275.5 million of net proceeds from the January
1998 Offering, the repayment of $68.0 million of certain mortgage debt and
the repayment of a portion of the borrowings on the Acquisition Credit
Facility. In conjunction with the repayment of the mortgage debt, the
Company incurred approximately $6.4 million in prepayment penalty fees.
These fees are not reflected as an expense in the accompanying pro forma
consolidated statements of operations for the nine months ended September
30, 1997 and the year ended December 31, 1996 as this expense will be
recorded as an extraordinary item. However, the payment of the fees is
shown as a use of cash on the accompanying proforma consolidated balance
sheet as of September 30, 1997.
3. Reflects the pending acquisitions of the following properties and property
portfolios:
<TABLE>
<CAPTION>
PURCHASE
PRICE
(IN 000'S)
--------------
<S> <C>
Eaton & Lauth............................................... $90,000
Pru-Bache Portfolio......................................... 43,500
</TABLE>
Eaton & Lauth Portfolio. The Company is negotiating the terms of an
agreement to acquire the Eaton & Lauth Portfolio from a number of
partnerships in which affiliates of Eaton & Lauth serve as general
partners. The total acquisition cost, including capitalized costs, is
expected to be approximately $90.0 million, comprising: (i) approximately
$32.0 million of net assumed debt; (ii) approximately $21.1 million of
equity which will consist of: (a) approximately $4.3 million in the form of
shares of common stock (based on a negotiated per share value of $25.00);
and (b) approximately $16.8 million in the form of partnership units in the
Operating Partnership (based on a negotiated per unit value of $25.00); and
(iii) the balance in cash, including cash from borrowings under the
Acquisition Credit Facility. The Eaton & Lauth Portfolio properties are
located in the Indianapolis, Indiana area. This acquisition is subject to a
number of contingencies including the negotiation of terms of a definitive
agreement, the approval of the assumption of loans, satisfactory completion
of due diligence and customary closing conditions. As a result, there can
be no assurance that this transaction will be completed.
Pru-Bache Portfolio. The Company has entered into a definitive agreement to
acquire all of the real estate assets of Prudential-Bache/Equitec Real
Estate Partnership, a California limited partnership in which the managing
general partner is Prudential-Bache Properties, Inc., and in which
Glenborough Corporation and Robert Batinovich, the Company's Chairman and
Chief Executive Officer, have served as co-general partners since March of
14
<PAGE> 15
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
1994, but do not hold a material equity or economic interest. The total
acquisition cost, including capitalized costs, is expected to be
approximately $43.5 million, which is to be paid entirely in cash,
including cash from borrowings on the Acquisition Credit Facility. The
Pru-Bache Portfolio comprises four office buildings aggregating 405,825
square feet and one office/flex property containing 121,645 square feet.
This acquisition is subject to a number of contingencies including approval
of the acquisition by a majority vote of the limited partners of
Prudential-Bache/Equitec Real Estate Partnership, satisfactory completion
of due diligence and customary closing conditions. As a result, there can
be no assurance that this acquisition will be completed.
These acquisitions are expected to be funded with the assumption of
approximately $32.0 million of mortgage debt, approximately $80.4 million
of borrowings on the Acquisition Credit Facility, the issuance of 672,800
Operating Partnership units with an aggregate approximate value of $16.8
million (based on a negotiated per unit value of $25.00), and the issuance
of 173,200 shares of common stock with an aggregate approximate value of
$4.3 million (based on a negotiated per share value of $25.00). The assumed
mortgages bear interest at rates of 7.84% to 8.82% and mature between 2005
and 2007.
Tenant security deposits of approximately $620,000 related to these
acquisitions are reflected as an increase in cash and other liabilities.
4. Reflects the net proceeds from the Offering of $150,000,000 of Senior Notes
of the Operating Partnership, net of the discount of approximately $244,000
and estimated costs of the Offering. In connection with the Offering, the
Company is expected to incur costs of approximately $1.5 million.
5. Reflects the full repayment of the Interim Loan with the use of proceeds
from the Offering and working capital.
6. Reflects the sale of one of the ten QuikTrip properties, the sale of the
Summer Breeze property and the GRCAA transaction. Excludes the sale of the
Shannon Crossing property which is not expected to occur until late in
calendar 1998 and excludes the sale of the Belshaw Industrial property
which management believes is not material to the accompanying pro forma
consolidated balance sheet and pro forma consolidated statements of
operations for the nine months ended September 30, 1997 and for the twelve
months ended December 31, 1996.
15
<PAGE> 16
GLENBOROUGH REALTY TRUST INCORPORATED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
OTHER
COMPLETED PENDING DEBT TRANS- ADJUST- PRO
HISTORICAL(1) TRANSACTIONS(2) ACQUISITIONS(3) ACTIONS(4) MENTS(5) FORMA
------------- --------------- --------------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Rental revenue.......... $ 35,899 $97,794 $13,731 $ -- $ (1,475) $ 145,949
Equity in earnings of
Associated Companies. 1,942 -- -- -- 279 2,221
Fees, interest and other
income............... 1,739 -- -- -- (50) 1,689
---------- ------- ------- -------- -------- ----------
Total Revenue... 39,580 97,794 13,731 -- (1,246) 149,859
---------- ------- ------- -------- -------- ----------
OPERATING EXPENSES
Operating expenses...... 11,282 33,576 4,426 -- (349) 48,935
General and
administrative....... 2,031 986 170 -- -- 3,187
Depreciation and
amortization......... 8,867 18,358 2,410 -- (300) 29,335
Interest expense........ 6,416 27,860 5,991 (12,056) (420) 27,791
---------- ------- ------- -------- -------- ----------
Total operating
expenses...... 28,596 80,780 12,997 (12,056) (1,069) 109,248
---------- ------- ------- -------- -------- ----------
Income from
operations before
minority interest.... 10,984 17,014 734 12,056 (177) 40,611
Minority interest....... (689) -- -- -- (774) (1,463)
---------- ------- ------- -------- -------- ----------
Net income ............. $ 10,295 $17,014 $ 734 $ 12,056 $ (951) $ 39,148
========== ======= ======= ======== ======== ==========
Preferred Dividends..... -- -- -- -- (16,711) (16,711)
---------- ------- ------- -------- -------- ----------
Net income allocable to
common shareholders.. $ 10,295 $17,014 $ 734 $ 12,056 $(17,662) $ 22,437
========== ======= ======= ======== ======== ==========
Primary net income per
common share......... $ 0.71 $ 0.70
========== ==========
Primary weighted average
common shares
outstanding.......... 14,512,987 32,136,646
========== ==========
</TABLE>
16
<PAGE> 17
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>
OTHER
COMPLETED PENDING DEBT TRANS- ADJUST- PRO
HISTORICAL(1) TRANSACTIONS(2) ACQUISITIONS(3) ACTIONS(4) MENTS(5) FORMA
------------- --------------- --------------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Rental revenue............... $ 17,943 $154,652 $17,547 $ -- $ (2,700) $ 187,442
Equity in earnings of
Associated Companies...... 1,598 -- -- -- 29 1,627
Fees, interest and other
income.................... 1,391 -- -- -- (258) 1,133
--------- -------- ------- -------- -------- ----------
Total Revenue........ 20,932 154,652 17,547 -- (2,929) 190,202
--------- -------- ------- -------- -------- ----------
OPERATING EXPENSES
Operating expenses........... 5,266 52,775 6,044 -- (615) 63,470
General and administrative... 1,393 1,714 227 -- -- 3,334
Depreciation and
amortization.............. 4,575 30,342 3,130 -- (562) 37,485
Interest expense............. 3,913 37,704 7,828 (13,213) (738) 35,494
--------- -------- ------- -------- -------- ----------
Total operating
expenses........... 15,147 122,535 17,229 (13,213) (1,915) 139,783
Income from operations
before minority interest.. 5,785 32,117 318 13,213 (1,014) 50,419
Minority interest............ (292) -- -- -- (1,609) (1,901)
--------- -------- ------- -------- -------- ----------
Net income .................. $ 5,493 $ 32,117 $ 318 $ 13,213 $ (2,623) $ 48,518
========= ======== ======= ======== ======== ==========
Preferred Dividends.......... -- -- -- -- (22,281) (22,281)
--------- -------- ------- -------- -------- ----------
Net income allocable to
common shareholders....... $ 5,493 $ 32,117 $ 318 $ 13,213 $(24,904) $ 26,237
--------- -------- ------- -------- -------- ----------
Primary net income
per common share.......... $ 0.83 $ 0.82
========= ==========
Primary weighted average
common shares............. 6,632,707 32,136,646
========= ==========
</TABLE>
17
<PAGE> 18
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 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 nine
months ended September 30, 1997, excluding the gains on the sale of property
and the collection of a mortgage loan receivable totaling $1,207, 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 are
all related to the formation of the Company and are non-recurring.
2. Reflects the historical operations of the San Mateo Headquarters, Capitol
Center the Windsor Portfolio, Marion Bass Portfolio, Opus Portfolio, Thousand
Oaks, Bryant Lake and Copley Properties (collectively the "Recent
Acquisitions") for the nine months ended September 30, 1997, as well as the
historical operations of the Citibank Park Property, Advance Properties, T.
Rowe Price Properties, Centerstone Property, CRI Properties, CIGNA
Properties, E&L Properties, Riverview Property, Lennar Properties and the
Scottsdale Hotel (collectively, the "Prior 1997 Acquisitions") for the nine
months ended September 30, 1997 or portion of 1997 prior to acquisition.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
(OR PORTION OF 1997 PRIOR TO ACQUISITION)
------------------------------------------------------------------------
SAN MATEO CAPITOL WINDSOR MARION BASS OPUS THOUSAND
HEADQUARTERS CENTER PORTFOLIO PORTFOLIO PORTFOLIO OAKS
------------ ------- ---------- ----------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues............. $ 2,223 $ 1,777 $ 40,713 $ 7,160 $ 796 $ 4,658
Operating expenses... (954) (764) (15,195) (2,804) -- (1,776)
------- ------- -------- -------- -------- -------
$ 1,269 $ 1,013 $ 25,518 $ 4,356 $ 796 $ 2,882
======= ======= ======== ======== ======== =======
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
(OR PORTION OF 1997 PRIOR TO ACQUISITION)
----------------------------------------------------
COPLEY PRIOR 1997 COMBINED
BRYANT LAKE PROPERTIES ACQUISITIONS TOTAL
----------- ---------- ------------ ----------
<S> <C> <C> <C> <C>
Revenues............. $1,298 $5,115 $34,054 $ 97,794
Operating expenses... (490) (1,010) (10,583) (33,576)
------ ------ ------- --------
$ 808 $4,105 $23,471 $ 64,218
====== ====== ======= ========
</TABLE>
Also reflects the historical operations of the Recent 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)
---------------------------------------------------------------------------------------------------------
SAN MATEO CAPITOL WINDSOR MARION BASS OPUS THOUSAND COPLEY
HEADQUARTERS CENTER PORTFOLIO PORTFOLIO PORTFOLIO OAKS BRYANT LAKE PROPERTIES
------------ ------------ ------------ ----------- --------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............. $ 2,714 $ 2,361 $ 53,738 $ 9,351 $ 80 $ 5,778 $1,778 $ 6,460
Operating expenses... (1,199) (1,042) (19,914) (3,271) -- (2,164) (612) (1,216)
------- ------- -------- -------- -------- ------- ------ -------
$ 1,515 $ 1,319 $ 33,824 $ 6,080 $ 80 $ 3,614 $1,166 $ 5,244
======= ======= ======== ======== ======== ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
(OR PORTION OF 1996 PRIOR TO ACQUISITION)
------------------------------------------------------------------------------
PRIOR 1997 1996 COMBINED
ACQUISITIONS ACQUISITIONS TOTAL
------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............. $60,449 $ 11,943 $154,652
Operating expenses... (19,033) (4,324) (52,775)
------- -------- --------
$41,416 $ 7,619 $101,877
======= ======== ========
</TABLE>
The results of operations of the Windsor Portfolio for the year ended
December 31, 1996 include estimates for certain properties not acquired by
Windsor until 1997.
18
<PAGE> 19
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
The results of operations of the Opus Portfolio reflect the period from the
date of completion to the end of the periods presented. All properties are
single tenant buildings under triple net leasing arrangements for which the
tenant is responsible for the payment of all operating expenses.
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 and estimated
general and administrative expenses related to these acquisitions.
Also, reflects the estimated pro forma interest on the mortgage debt
assumed in connection with the acquisition of the Windsor Portfolio, Marion
Bass Portfolio, Advance Properties, E&L Properties, Scottsdale Hotel, TRP
Properties and Carlsberg Properties, the Interim Loan and the pro forma
advances under the Acquisition Credit Facility in connection with the
various 1998 and 1997 completed property acquisitions. The estimated
interest on the mortgage loans assumed is based upon an assumed weighted
average rate of 7.72%. The Acquisition Credit Facility bears interest on a
sliding scale ranging from LIBOR plus 1.1% to LIBOR plus 1.3% (assumed to
be 6.725% for the nine months ended September 30, 1997 and 6.525% for the
year ended December 31, 1996). A 1/8% change in LIBOR would cause the
interest expense on the outstanding pro forma balance of the Acquisition
Credit Facility as of September 30, 1997 to change by $105 on an annualized
basis. The Interim Loan bears interest at LIBOR plus 1.75% (assumed to be
7.375% for the nine months ended September 30, 1997 and 7.175% for the year
ended December 31, 1996.) The Interim Loan is expected to be repaid in full
with the use of proceeds from the Offering and working capital.
3. Reflects the historical operations of the Pending Acquisitions for the nine
months ended September 30, 1997 and for the year ended December 31, 1996,
respectively.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1997
------------------------------------------------------
PRU-BACHE EATON & LAUTH COMBINED
PORTFOLIO PORTFOLIO TOTAL
--------- ------------- --------
<S> <C> <C> <C>
Revenues........................... $ 5,242 $ 8,489 $ 13,731
Operating expenses................. (1,915) (2,511) (4,426)
------- ------- --------
$ 3,327 $ 5,978 $ 9,305
======= ======= ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
------------------------------------------------------
PRU-BACHE EATON & LAUTH COMBINED
PORTFOLIO PORTFOLIO TOTAL
--------- ------------- --------
<S> <C> <C> <C>
Revenues........................... $ 6,379 $11,168 $ 17,547
Operating expenses................. (2,682) (3,362) (6,044)
------- ------- --------
$ 3,697 $ 7,806 $ 11,503
======= ======= ========
</TABLE>
Also, reflects estimated annual depreciation and amortization, based upon
estimated useful lives of 30 years on a straight-line basis and estimated
general and administrative expenses related to these acquisitions.
19
<PAGE> 20
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
Also, reflects the estimated interest on the assumption of approximately
$32,000 in debt in connection with the acquisition of the Eaton & Lauth
Portfolio and the advances under the Acquisition Credit Facility in
connection with the acquisition of the Pending Acquisitions. The weighted
average interest rate on the assumed debt is 8.07%. The Acquisition Credit
Facility bears interest on a sliding scale ranging from LIBOR plus 1.1% to
LIBOR plus 1.3% (assumed to be 6.725% for the nine months ended September
30, 1997 and 6.525% for the year ended December 31, 1996).
4. Reflects the estimated pro forma interest and the related effect on loan
fee amortization expense on the repayment of the Company's original secured
bank line with the borrowings on the Company's previous line of credit for
the year ended December 31, 1996. Also, reflects the estimated pro forma
interest and the related effect on loan fee amortization expense on the
repayment of the previous line of credit, a $114,000 interim unsecured
loan, certain mortgage debt, the Interim Loan and a portion of the
Acquisition Credit Facility, from proceeds from the Offering and from
proceeds of the October 1997 Offering and the January 1998 Offering for the
nine months ended September 30, 1997 and the year ended December 31, 1996.
Also reflects the pro forma loan fee amortization expense and unused
facility fees related to the Acquisition Credit Facility for each of the
periods presented. Also reflects the estimated pro forma interest and the
related effect on loan fee amortization expense on the Notes for each of
the periods presented. These transactions result in a net decrease in
interest expense consisting of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
Interest differential.............................. $ 11,666 $ 17,177
Interest on repayments............................. (24,271) (31,195)
Amortization of new loan fees...................... 430 632
Amortization of old loan fees...................... (66) (74)
Unused Acquisition Credit Facility fees............ 185 247
-------- --------
$(12,056) $(13,213)
======== ========
</TABLE>
The Notes bear interest at a fixed rate of 7.625% and have a term of seven
years, unless previously redeemed.
The Interim Loan bears interest at LIBOR plus 1.75% (assumed to be 7.375%
for the nine months ended September 30, 1997 and 7.175% for the year ended
December 31, 1996) and has a term of three months with an option to extend
the term to three additional months.
The Acquisition Credit Facility has a three year term and bears interest on
a sliding scale ranging from LIBOR plus 1.1% to LIBOR plus 1.3% (assumed to
be 6.725% for the nine months ended September 30, 1997 and 6.525% for the
year ended December 31, 1996).
A $114,000 interim unsecured loan and the Company's previous line of credit
have no net impact on pro forma interest expense as these loans were repaid
in full with the use of proceeds from the October 1997 Offering.
The amortization of the new loan fees is based upon total estimated fees
and costs of approximately $3,688 over the respective terms of the related
Acquisition Credit Facility, the Interim Loan and the Notes. The unused
20
<PAGE> 21
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS)
Acquisition Credit Facility fees are based upon 0.15% of the pro forma
unused Acquisition Credit Facility capacity as of September 30, 1997 of
approximately $166,128.
5. Reflects the following adjustments:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ ------------------
<S> <C> <C>
Rental Revenue
Elimination of revenues of Sold Properties.......... $(1,475) $(2,700)
======= =======
Equity in earnings of the Associated Companies
GHG
Addition of the Scottsdale & San Antonio Hotels... 77 10
Disposition of properties from the managed
portfolio....................................... (27) (93)
GC
Addition of the Carlsberg fee managed properties.. -- 141
Elimination of revenues related to sale of
properties managed by the Associated Companies.. (1,228) (1,852)
Elimination of expenses related to sale of
properties managed by the Associated Companies.. 1,667 1,846
------- -------
Net decrease in income.......................... 489 52
Provision for income taxes...................... (210) (23)
------- -------
Net increase in equity in earnings to the Company..... $ 279 $ 29
======= =======
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.......... $ (375) $ (700)
Additional expenses of the E&L Properties........... 26 85
------- -------
Net decrease in operating expenses.................... $ (349) $ (615)
======= =======
Depreciation and amortization
Elimination of expenses of Sold Properties.......... $ (300) $ (562)
======= =======
Interest expense and loan fee amortization expense
reduction due to repayment of mortgage debt from
proceeds from Sold Properties....................... $ (420) $ (738)
======= =======
</TABLE>
Excludes the effects of the sale of the Shannon Crossing Property which
will not occur until late 1998 and excludes the sale of the Belshaw
Industrial property which management believes is not material to the
accompanying pro forma consolidated statements of operations for the nine
months ended September 30, 1997 and for the twelve months ended December
31, 1996.
6. The pro forma taxable income before dividends paid deduction for the
Company for the nine months ended September 30, 1997 and for the year
ended December 31, 1996 is calculated as follows:
<TABLE>
<CAPTION>
FOR THE NINE
MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ ------------------
<S> <C> <C>
Pro forma net income from operations.................. $ 39,148 $ 48,518
Add: GAAP basis depreciation and amortization....... 29,223 37,363
Less: Tax basis depreciation and amortization....... (21,249) (28,199)
Other book-to-tax differences....................... (900) 255
-------- --------
Pro forma taxable income............................ $ 46,222 $ 57,937
======== ========
</TABLE>
7. Primary per share amounts reflect the dilutive effects of outstanding stock
options on a historical basis as of September 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 $28.375. On an historical basis, there
was no dilutive effect resulting from the outstanding stock options for the
year ended December 31, 1996. The effects of the conversion of Operating
Partnership units and Series A Preferred Stock into Common Stock are either
anti-dilutive or not material in all periods presented.
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.
21
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Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation of our report dated March 2, 1998
included in this Form 8-K/A, into the Company's previously filed Registration
Statement File Nos. 333-40959 and 333-27677.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
San Francisco, California
March 24, 1998
