<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)
January 12, 1998 (December 22, 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: (650) 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 January 6, 1998, to file the Financial Statements and
Exhibits of the Company relating to the acquisition of the Opus Properties
(as defined in such Form 8-K or "Opus Portfolio").
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 4
Combined statements of revenues and certain
expenses of the Opus Portfolio 5
Notes to combined statements of revenues and
certain expenses of the Opus Portfolio 6
(b) PRO FORMA FINANCIAL STATEMENTS
Pro Forma Consolidated Balance Sheet as of
September 30, 1997 with accompanying notes
and adjustments 8
Pro Forma Consolidated Statement of
Operations for the nine months ended
September 30, 1997, and the year ended
December 31, 1996, with accompanying notes
and adjustments 17
2
<PAGE> 3
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: January 12, 1998 /s/ TERRI GARNICK
-----------------------------------------
Senior Vice President,
Chief Accounting Officer,
Treasurer
(Principal Accounting Officer)
3
<PAGE> 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Glenborough Realty Trust Incorporated:
We have audited the accompanying combined statement of revenues and certain
expenses of the Opus Portfolio, as defined in Note 1, for the nine months ended
September 30, 1997. 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. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying combined statement of revenues and certain expenses has
been prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, as described in Note 1, and is not intended
to be a complete presentation of the revenues and expenses of the Opus
Portfolio.
In our opinion, the combined financial statement referred to above presents
fairly, in all material respects, the revenues and certain expenses of the Opus
Portfolio for the nine months ended September 30, 1997, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California
January 8, 1998
2
<PAGE> 5
GLENBOROUGH REALTY TRUST INCORPORATED
COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES OF
THE OPUS PORTFOLIO
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997
-----------------
<S> <C>
REVENUES..................................................................... $ 796
CERTAIN EXPENSES............................................................. --
----------
REVENUES IN EXCESS OF CERTAIN EXPENSES....................................... $ 796
==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 6
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES TO COMBINED STATEMENT OF REVENUES AND CERTAIN EXPENSES OF
THE OPUS PORTFOLIO
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICY
Property Acquired -- The accompanying combined statement of revenues and
certain expenses includes the operations (see "Basis of Presentation" below) of
the properties listed below (collectively, the "Opus Portfolio") acquired by the
Company from an unaffiliated third party.
<TABLE>
<CAPTION>
DATE OF
PROPERTY CITY STATE TYPE COMPLETION
-------------------- ---------------- ----- ------------ ---------------
<S> <C> <C> <C> <C>
Wausau.............. Temple Terrace FL Office April 1997
Fingerhut........... Tampa FL Office/Flex January 1997
Primeco............. Tampa FL Office/Flex October 1996
Atlantic Tech....... Brandon FL Office/Flex January 1998
ADS-Alliance........ Denver CO Office/Flex September 1997
</TABLE>
Basis of Presentation -- The accompanying combined statement of revenues
and certain expenses is not intended to be a complete presentation of the actual
operations of the Opus Portfolio for the periods presented. Amounts at September
30, 1997 include the operations for the properties for the period from the
earlier of January 1, 1997 or date of completion to September 30, 1997. All
properties are single tenant buildings under triple net leasing arrangements for
which the tenant is responsible for the payment of all operating expenses.
This combined financial statements 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 October 1,
1997 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
------------------------------------------------------------------- -------
<S> <C>
1997 (three months)................................................ $ 549
1998............................................................... 2,738
1999............................................................... 2,738
2000............................................................... 2,738
2001............................................................... 2,738
2002............................................................... 2,738
Thereafter......................................................... 12,227
--------
Total.................................................... $26,466
========
</TABLE>
4
<PAGE> 7
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 (ii) the Pending
Acquisitions of the Pru-Bache Portfolio, the Eaton & Lauth Portfolio and Capitol
Center (iii) the Offering and the application of the net proceeds therefrom (iv)
the October 1997 Offering and the application of the net proceeds therefrom; (v)
debt assumed and borrowings under the Interim Loan and 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 and a portion of
the Interim Loan; and (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, (viii) the
GRCAA transaction 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 of the Notes and Adjustments to Pro Forma
Consolidated Balance Sheet as of September 30, 1997; (ii) the Pending
Acquisitions of the Pru-Bache Portfolio, the Eaton & Lauth Portfolio and Capitol
Center (iii) the Offering and the application of the net proceeds therefrom (iv)
the October 1997 Offering, the July 1997 Offering, the March 1997 Offering and
the October 1996 Offering 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, a portion of the Interim Loan; (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 the sale of various properties held by
the partnerships managed by the Associated Companies to third parties, as if
each of such transactions had been completed on January 1, 1996.
These unaudited, pro forma consolidated financial statements should be read
in conjunction with the financial statements and related notes of the Company
included herein and 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.
7
<PAGE> 8
GLENBOROUGH REALTY TRUST INCORPORATED
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMPLETED PENDING REPAYMENT OF OTHER
HISTORICAL(1) TRANSACTIONS(2) ACQUISITIONS(3) OFFERING(4) DEBT(5) ADJUSTMENTS(6) PRO FORMA
------------- --------------- --------------- ----------- ------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Rental property,
net........... $ 588,644 $ 633,820 $ 156,030 $ -- $ -- $ (4,658) $1,373,836
Investments in
Associated
Companies..... 7,567 -- -- -- -- -- 7,567
Mortgage loans
receivable,
net........... 3,622 -- -- -- -- -- 3,622
Cash and cash
equivalents... 2,770 4,064 (80,540) 191,500 (134,177) 17,383 1,000
Other Assets.... 13,373 2,518 -- -- -- -- 15,891
-------- -------- -------- -------- --------- ------- ----------
Total
Assets... $ 615,976 $ 640,402 $ 75,490 $ 191,500 $(134,177) $ 12,725 $1,401,916
======== ======== ======== ======== ========= ======= ==========
LIABILITIES
Acquisition
Credit
Facility...... $ -- $ 179,755 7,990 $ -- $ -- $ -- $ 187,745
Line of
Credit........ 28,865 (28,865) -- -- -- -- --
Mortgage
loans......... 114,580 183,940 36,280 -- (68,009) (2,590) 264,201
Interim Loan.... -- 150,000 -- -- (59,721) -- 90,279
Interim
unsecured
loan.......... 114,000 (114,000) -- -- -- -- --
Other
liabilities... 11,216 1,880 720 -- -- -- 13,816
-------- -------- -------- -------- --------- ------- ----------
Total
Liabilities... 268,661 372,710 44,990 -- (127,730) (2,590) 556,041
-------- -------- -------- -------- --------- ------- ----------
MINORITY INTEREST 36,012 -- 24,500 -- -- 13,663 74,175
-------- -------- -------- -------- --------- ------- ----------
STOCKHOLDERS'
EQUITY
Common stock.... 20 11 -- -- -- -- 31
Series A
Preferred
stock......... -- -- -- 191,500 -- -- 191,500
Additional
paid-in....... 321,771 267,681 6,000 -- -- 450 595,902
Deferred
compensation... (257) -- -- -- -- -- (257)
Retained
earnings...... (10,231) -- -- -- (6,447) 1,202 (15,476)
-------- -------- -------- -------- --------- ------- ----------
Total
Equity... 311,303 267,692 6,000 191,500 (6,447) 1,652 771,700
-------- -------- -------- -------- --------- ------- ----------
Total
liabilities
and
Stockholders'
Equity... $ 615,976 $ 640,402 $ 75,490 $ 191,500 $(134,177) $ 12,725 $1,401,916
======== ======== ======== ======== ========= ======= ==========
</TABLE>
8
<PAGE> 9
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
61,211 partnership units in the Operating Partnership (based on an agreed
per unit value of $27.156); and (ii) the balance in cash.
Advance Properties. In September 1997, the Company acquired from a group of
partnerships affiliated with The Advance Group, the Advance Properties, a
portfolio of 10 Properties aggregating 755,006 square feet. The total
acquisition cost, including capitalized costs, was approximately $103.0
million, which consisted of: (i) approximately $13.6 million in the form of
599,508 partnership units in the Operating Partnership (based on an agreed
per unit value of $22.625); (ii) approximately $7.4 million in assumption
of debt; and (iii) the balance in cash. The Advance Properties consist of
five office Properties and three office/flex Properties located in northern
New Jersey and Maryland and two industrial Properties located in northern
New Jersey. Concurrent with this acquisition, the Company entered into a
joint venture with The Advance Group for the development of 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.
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
9
<PAGE> 10
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
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 Glenborough Corporation, one of the
Associated Companies, since November 1996.
CIGNA Properties. In April 1997, the Company acquired from two partnerships
formed and managed by affiliates of CIGNA the CIGNA Properties, a portfolio
of six Properties, aggregating approximately 616,000 square feet and 224
multi-family units. The total acquisition cost, including capitalized
costs, was approximately $45.4 million, which was paid entirely in cash.
The CIGNA Properties consist of two office Properties, two office/flex
Properties, a shopping center and a multi-family Property, and are located
in four states.
E&L Properties. In April 1997, the Company acquired from seven partnerships
and their general partner, a Southern California syndicator the E&L
Properties, a portfolio of 11 Properties, aggregating approximately 523,000
square feet, together with associated management interests. The total
acquisition cost, including capitalized costs, was approximately $22.2
million, which consisted of: (i) approximately $12.8 million of mortgage
debt assumed; (ii) approximately $6.7 million in the form of 352,197
partnership units in the Operating Partnership (based on an agreed per unit
value of $19.075); (iii) approximately $633,000 in the form of
approximately 33,198 shares of Common Stock of the Company (based on an
agreed per share value of $19.075), and (iv) the balance in cash. The E&L
Properties consist of one office Property, nine office/flex Properties and
one industrial Property, all located in Southern California.
Riverview Property. In April 1997, the Company acquired from a private
seller the Riverview Property, a 15-story office property containing
227,129 square feet located in Bloomington, Minnesota. The total
acquisition cost, including capitalized costs, was approximately $20.5
million, which was paid entirely in cash.
Lennar Properties. In April 1997, the Company acquired from two limited
partnerships and one limited liability company managed by affiliates of
Lennar Partners the Lennar Properties, a portfolio of three Properties,
aggregating approximately 282,000 square feet. The total acquisition cost,
including capitalized costs, was approximately $23.2 million, which was
paid entirely in cash. The Lennar Properties consist of one office Property
located in Virginia and one office/flex Property and one industrial
Property, each located in Massachusetts.
Scottsdale Hotel. In February 1997, the Company acquired the Scottsdale
Hotel, a 163-suite hotel Property, which began operations in January 1996
and is located in Scottsdale, Arizona. The total acquisition cost,
including capitalized costs, was approximately $12.1 million, which
consisted of approximately $4.6 million of mortgage debt assumed, and the
balance in cash. The Scottsdale Hotel and four of the Company's other hotel
Properties are marketed as Country Suites by Carlson.
Carlsberg Properties. In November 1996, the Company acquired a portfolio of
six Properties (including one property on which the Company made a mortgage
loan which included a purchase option), aggregating approximately 342,000
square feet, together with associated management interests (the "Carlsberg
Properties"). The total acquisition cost including the mortgage loan and
capitalized costs, was
10
<PAGE> 11
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
approximately $23.2 million, which consisted of: (i) approximately $8.9
million of mortgage debt assumed; (ii) approximately $350,000 in the form
of 24,844 shares of Common Stock of the Company (based on a per share value
of $14.09); and (iii) the balance in cash. The Carlsberg Properties consist
of five office Properties and one retail Property, located in two states.
Concurrently with the Company's acquisition of the Carlsberg Properties,
one of the Associated Companies assumed management of a portfolio of 13
additional properties with an aggregate of one million square feet under a
venture with an affiliate of the seller. In June 1997, the Company acquired
three of these properties, the CRI Properties, for an aggregate purchase
price of $14.8 million.
TRP Properties. In October 1996, the Company acquired a portfolio of 12
Properties, aggregating approximately 784,000 square feet and 538
multi-family units, together with associated management interests (the "TRP
Properties"). The total acquisition cost, including capitalized costs, was
approximately $43.8 million, which consisted of: (i) approximately $16.3
million of mortgage debt assumed; (ii) approximately $760,000 in the form
of 52,387 partnership units in the Operating Partnership (based on a per
unit value of $14.50); (iii) approximately $2.6 million in the form of
182,000 shares of Common Stock of the Company (based on a per share value
of $14.50); and (iv) the balance in cash. The 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 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 Company
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.
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.
11
<PAGE> 12
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
2. Reflects the completed acquisitions of the following properties and property
portfolios:
<TABLE>
<CAPTION>
PURCHASE PRICE
(IN 000'S) DATE ACQUIRED
-------------- ------------------
<S> <C> <C>
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>
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; (ii) approximately $150.0 million in
borrowings under the Interim Loan and; (iii) the balance in cash including
cash from borrowings under the Acquisition Credit Facility. See "Use of
Proceeds".
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, 6 are located in Charlotte, North
Carolina, two are in Monroe, North Carolina, one is in Raleigh, North
Carolina and one 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. The
total acquisition cost, 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 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
12
<PAGE> 13
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
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 $115.6 million of the net
proceeds from the October 1997 Offering, assumption of approximately $188.8
million of mortgage debt, approximately $150.0 million of the proceeds of
the Interim Loan and approximately $179.8 million of borrowings under the
Acquisition Credit Facility. The assumed mortgages bear interest at rates
of 7.25% to 8.70% and mature between 1999 and 2030 . The Acquisition Credit
Facility bears interest on a sliding scale ranging from LIBOR plus 0.8% to
LIBOR plus 1.3% (assumed to be 6.850% 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, the Company paid fees of
$1,863,000 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 7.50%
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 $1,880,000 related to these
acquisitions are reflected as cash and other liabilities.
Also reflects $267.7 million of net proceeds from the October 1997 Offering
and the full repayment of a $114 interim unsecured loan, $4.9 million 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.
3. Reflects the pending acquisitions of the following properties and property
portfolios:
<TABLE>
<CAPTION>
PURCHASE
PRICE
(IN 000'S)
--------------
<S> <C>
Pru-Bache Portfolio................................................ $ 43,500
Eaton & Lauth Portfolio............................................ 99,700
Capitol Center..................................................... 12,800
</TABLE>
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 Securities, 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
1994, but do not hold a material equity or economic interest. The total
acquisition cost, including capitalized costs, is expected to be
approximately $43.6 million, which is to be paid entirely in cash. 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
13
<PAGE> 14
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
number of contingencies including approval of the acquisition by a majority
vote of the limited partners of Prudential-Bache/Equitec Real Estate
Limited Partnership, satisfactory completion of due diligence and customary
closing conditions. As a result, there can be no assurance that this
transaction will be completed.
Eaton & Lauth Portfolio. The Company is negotiating the definitive 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 $99.7 million, comprising: (i) approximately
$68.8 million of assumed debt, of which approximately $36.8 million is
expected to be paid in cash; and (ii) approximately $30.0 million of
equity. The equity consideration will consist of: (i) up to $10.0 million
in the form of shares of Common Stock or cash, with a maximum of $6.0
million of Common Stock (based on a negotiated per unit value of $25.00);
and (ii) the balance in the form of partnership units in the Operating
Partnership (based on a negotiated per unit value of $25.00). 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 definitive terms of an agreement, satisfactory completion of
due diligence and customary closing conditions. As a result, there can be
no assurance that this transaction will be completed.
Capitol Center. The Company has entered into a definitive agreement to
acquire Capitol Center, a 161,468 square foot office/flex complex located
in Des Moines, Iowa. The total acquisition cost, including capitalized
costs, is expected to be approximately $12.8 million, comprising: (i)
$500,000 to $1,000,000 in the form of 17,241 to 34,482 partnership units in
the Operating Partnership (based on an assumed per unit value of $29.00
(which will be determined using the 10-day average per share price of
Common Stock as of the closing date)); (ii) approximately $4.3 million of
assumed debt; and (iii) the balance in cash. The accompanying Pro Forma
Consolidated Balance Sheet assumes the issuance of 17,241 partnership units
in the Operating Partnership. This acquisition is subject to a number of
contingencies including 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 approximately $81.2
million of the net proceeds from the Offering (see Footnote 4), assumption
of approximately $36.3 million of mortgage debt, approximately $8.0 million
of borrowings on the Acquisition Credit Facility, the issuance of 960,000
Operating Partnership units with an aggregate approximate value of $24.0
million (based on $25.00 per unit value), the issuance of 17,241 Operating
Partnership units with an aggregate approximate value of $500,000 (based on
an assumed per unit value of $29.00 (which will be determined using the
10-day average per share price of Common Stock as of the closing date)),
and the issuance of 240,000 shares of Common Stock of the Company with an
aggregate approximate value of $6.0 million. These assumed mortgages bear
interest at rates of 6.00% to 8.82% and mature between 2005 and 2015.
Tenant security deposits of approximately $720,000 related to these
acquisitions are reflected as an increase in cash and other liabilities.
4. Reflects the net proceeds from the Offering of 8,000,000 shares of the
Company's Series A Preferred Stock at a price of $25.00 per share. In
connection with the Offering, the Company is expected to incur costs of
approximately $8.5 million.
5. Reflects the repayment of $68.0 million of certain mortgage debt and $59.7
million of borrowings on the Interim Loan. In conjunction with the
repayment of the mortgage debt, the Company will incur
14
<PAGE> 15
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
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,
15
<PAGE> 16
GLENBOROUGH REALTY TRUST INCORPORATED
NOTES AND ADJUSTMENTS TO PRO FORMA
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
1997 and the year ended December 31, 1996 as the 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.
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 will not occur until late in calendar 1998.
16
<PAGE> 17
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 $93,794 $15,781 $ -- $ (1,475) $143,999
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 93,794 15,781 -- (1,246) 147,909
---------- ------- ------- ------- -------- ----------
OPERATING EXPENSES
Operating expenses.... 11,282 31,858 5,272 -- (349) 48,063
General and
administrative..... 2,031 986 170 -- -- 3,187
Depreciation and
amortization....... 8,867 17,662 3,121 -- (300) 29,350
Interest expense...... 6,416 27,281 2,540 (6,266) (420) 29,551
---------- ------- ------- ------- -------- ----------
Total
operating
expenses.... 28,596 77,787 11,103 (6,266) (1,069) 110,151
---------- ------- ------- ------- -------- ----------
Income from operations
before minority
interest........... 10,984 16,007 4,678 6,266 (177) 37,758
Minority interest..... (689) -- -- -- (1,861) (2,550)
---------- ------- ------- ------- -------- ----------
Net income(6)......... $10,295 $16,007 $ 4,678 $ 6,266 $ (2,038) $ 35,208
========== ======= ======= ======= ======== ==========
Preferred Dividends... -- -- -- -- (11,250) (11,250)
---------- ------- ------- ------- -------- ----------
Net income allocable
to common
shareholders....... $10,295 $16,007 $ 4,678 $ 6,266 $(13,288) $ 23,958
========== ======= ======= ======= ======== ==========
Primary net income per
common share(7).... $ 0.71 $ 0.74
========== ==========
Primary weighted
average common
shares
outstanding(7)..... 14,512,987 32,158,512
========== ==========
</TABLE>
17
<PAGE> 18
GLENBOROUGH REALTY TRUST INCORPORATED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
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 $149,577 $20,252 $ -- $(2,700) $185,072
Equity in earnings of
Associated
Companies.......... 1,598 -- -- -- 29 1,627
Fees, interest and
other income....... 1,391 -- -- -- (258) 1,133
--------- -------- ------- ------- -------- ----------
Total
Revenue..... 20,932 149,577 20,252 -- (2,929) 187,832
--------- -------- ------- ------- -------- ----------
OPERATING EXPENSES
Operating expenses.... 5,266 50,534 7,194 -- (615) 62,379
General and
administrative..... 1,393 1,714 227 -- -- 3,334
Depreciation and
amortization....... 4,575 29,794 4,161 -- (562) 37,968
Interest expense...... 3,913 36,585 3,361 (5,986) (738) 37,135
--------- -------- ------- ------- -------- ----------
Total
operating
expenses.... 15,147 118,627 14,943 (5,986) (1,915) 140,816
--------- -------- ------- ------- -------- ----------
Income from operations
before minority
interest........... 5,785 30,950 5,309 5,986 (1,014) 47,016
Minority interest..... (292) -- -- -- (3,047) (3,339)
--------- -------- ------- ------- -------- ----------
Net income(6)......... $5,493 $30,950 $5,309 $5,986 $(4,061) $43,677
--------- -------- ------- ------- -------- ----------
Preferred Dividends... -- -- -- -- (15,000) (15,000)
--------- -------- ------- ------- -------- ----------
Net income allocable
to common
shareholders....... $5,493 $30,950 $5,309 $5,986 $(19,061) $28,677
--------- -------- ------- ------- -------- ----------
Primary net income per
common share(7).... $0.83 $0.89
--------- ----------
Primary weighted
average common
shares
outstanding(7)..... 6,632,707 32,158,512
--------- ----------
</TABLE>
18
<PAGE> 19
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 Windsor Portfolio, Marion Bass
Portfolio, Opus Portfolio, Thousand Oaks, Bryant Lake and Copley Properties
(collectively the "Recent 1997 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)
--------------------------------------------------------------------------------------------------
WINDSOR MARION BASS OPUS THOUSAND COPLEY PRIOR 1997 COMBINED
PORTFOLIO PORTFOLIO PORTFOLIO OAKS BRYANT LAKE PROPERTIES ACQUISITIONS TOTAL
---------- ----------- --------- -------- ----------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues........... $ 40,713 $ 7,160 $ 796 $ 4,658 $ 1,298 $5,115 $ 34,054 $ 93,794
Operating
expenses......... (15,195) (2,804) -- (1,776) (490) (1,010) (10,583) (31,858)
-------- -------- -------- ------- ------
$ 25,518 $ 4,356 $ 796 $ 2,882 $ 808 $4,105 $ 23,471 $ 61,936
======== ======== ======== ======= ======
</TABLE>
Reflects the historical operations of the Recent 1997 Acquisitions and the
Prior 1997 Acquisitions for the year ended December 31, 1996 and the
historical operations of the Carlsberg Properties, TRP Properties, Bond
Street Property, Kash n' Karry Property, San Antonio Hotel and UCT Property
(collectively, the "1996 Acquisitions") for the portion of 1996 prior to
acquisition.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
(OR PORTION OF 1996 PRIOR TO ACQUISITION)
----------------------------------------------------------------------------
WINDSOR MARION BASS OPUS THOUSAND COPLEY
PORTFOLIO PORTFOLIO PORTFOLIO OAKS BRYANT LAKE PROPERTIES
------------ ----------- --------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues...................... $ 53,738 $ 9,351 $ 80 $ 5,778 $ 1,778 $ 6,460
Operating expenses............ (19,914) (3,271) -- (2,164) (612) (1,216)
-------- ------- -------- ------- ------ -------
$ 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>
Revenues...................... $ 60,449 $11,943 $ 149,577
Operating expenses............ (19,033) (4,324) (50,534)
-------- ------- --------
$ 41,416 $ 7,619 $ 99,043
======== ======= ========
</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.
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.
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)
Certain of the T. Rowe Price Properties' operating results reflect the year
ended September 30, 1996 rather than December 31, 1996. These have been
combined as if the year ends of all properties were the same. In the
opinion of management, the operations of these properties is not seasonal.
Also, reflects estimated annual depreciation and amortization, based upon
estimated useful lives of 30-40 years on a straight-line basis and
estimated pro forma 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, 1997 and 1996 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 0.8% to LIBOR plus 1.3% (assumed to
be 6.850% 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 $235 on an annualized
basis. The Interim Loan bears interest at LIBOR plus 1.75% (assumed to be
7.50% for the nine months ended September 30, 1997 and 7.175% 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 Interim Loan as of
September 30, 1997 to change by $113 on an annualized basis.
3. Reflects the historical operations of the Pru-Bache Portfolio, Eaton & Lauth
Portfolio and Capitol Center (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
PROPERTIES PORTFOLIO CAPITOL CENTER TOTAL
--------- ------------- -------------- --------
<S> <C> <C> <C> <C>
Revenues........................... $ 5,242 $ 8,762 $ 1,777 $15,781
Operating expenses................. (1,915) (2,593) (764) (5,272)
------- ------- ------- -------
$ 3,327 $ 6,169 $ 1,013 $10,509
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------------------------------------------------
PRU-BACHE EATON & LAUTH COMBINED
PROPERTIES PORTFOLIO CAPITOL CENTER TOTAL
--------- ------------- -------------- --------
<S> <C> <C> <C> <C>
Revenues........................... $ 6,379 $11,512 $ 2,361 $20,252
Operating expenses................. (2,682) (3,470) (1,042) (7,194)
------- ------- ------- -------
$ 3,697 $ 8,042 $ 1,319 $13,058
======= ======= ======= =======
</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.
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)
Also, reflects the estimated interest on the assumption of approximately
$36,300 in debt in connection with the acquisition of the Eaton & Lauth
Portfolio and Capitol Center. The weighted average interest rate on the
assumed debt is 7.83%.
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 line of credit, a $114 million interim unsecured loan,
certain mortgage debt and a portion of the Interim Loan from proceeds from
the October 1997 Offering and the 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. These
transactions result in a net decrease in interest expense consisting of the
following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED
1997 DECEMBER 31, 1996
----------------- -----------------
<S> <C> <C>
Interest differential.............................. $ 3,115 $ 5,739
Interest on repayments............................. (9,652) (12,158)
Amortization of new loan fees...................... 267 414
Amortization of old loan fees...................... (66) (74)
Unused Acquisition Credit Facility fees............ 70 93
------- --------
$(6,266) $ (5,986)
======= ========
</TABLE>
The Interim Loan bears interest at LIBOR plus 1.75% (assumed to be 7.50%
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.
A $114 million 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 from proceeds of the October 1997 Offering.
The amortization of the new loan fees is based upon total estimated fees
and costs of approximately $2,163 over the respective terms of the related
Acquisition Credit Facility and the Interim Loan. The unused 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 $62.
21
<PAGE> 22
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)
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 decrease 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.
22
<PAGE> 23
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)
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.................. $ 35,208 $ 43,677
Add: GAAP basis depreciation and amortization....... 29,350 37,968
Less: Tax basis depreciation and amortization....... (21,249) (28,199)
Other book-to-tax differences....................... (900) 255
------- -------
Pro forma taxable income............................ $ 42,409 $ 53,701
======= =======
</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 $29.00. 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.
23
