SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-14162
GLENBOROUGH REALTY TRUST INCORPORATED
(Exact name of registrant as specified in its charter)
Maryland 94-3211970
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
400 South El Camino Real,
Suite 1100, San Mateo, California
(650) 343-9300 94402-1708
(Address of principal executive offices (Zip Code)
and telephone number)
Securities registered under Section 12(b) of the Act:
Name of Exchange
Title of each class: on which registered:
Common Stock, $.001 par value New York Stock Exchange
7.75% Series A Convertible Preferred Stock, New York Stock Exchange
$.001 par value
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No___
As of May 9, 2000, 29,335,603 shares of Common Stock ($.001 par value) and
10,097,800 shares of 7.75% Series A Convertible Preferred Stock ($.001 par
value) were outstanding.
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INDEX
GLENBOROUGH REALTY TRUST INCORPORATED
Page No.
PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements of Glenborough Realty Trust
Incorporated (Unaudited except for the Consolidated Balance Sheet
at December 31, 1999):
Consolidated Balance Sheets at March 31, 2000 and
December 31, 1999 3
Consolidated Statements of Income for the three months ended
March 31, 2000 and 1999 4
Consolidated Statement of Stockholders' Equity for the three
months ended March 31, 2000 5
Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and 1999 6-7
Notes to Consolidated Financial Statements 8-20
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 21-26
PART II OTHER INFORMATION
Item 1. Legal Proceedings 27
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 6. Exhibits and Reports on Form 8-K 27
SIGNATURES 28
EXHIBIT INDEX 29
2
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Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
March 31, December 31,
2000 1999
(Unaudited) (Audited)
----------------- -----------------
ASSETS
<S> <C> <C>
Rental properties, gross $ 1,717,717 $ 1,756,061
Accumulated depreciation (125,136) (114,170)
----------------- -----------------
Rental properties, net 1,592,581 1,641,891
Real estate held for sale, gross 7,017 -
Accumulated depreciation (289) -
----------------- -----------------
Real estate held for sale, net 6,728 -
Investments in Development and Joint Ventures 48,344 44,452
Investments in Associated Companies 9,259 9,404
Mortgage loans receivable 37,401 37,582
Cash and cash equivalents 846 6,482
Other assets 48,083 54,793
----------------- -----------------
TOTAL ASSETS $ 1,743,242 $ 1,794,604
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage loans $ 685,615 $ 701,715
Unsecured term debt 126,475 125,015
Unsecured bank line 72,901 70,628
Other liabilities 21,044 30,625
----------------- -----------------
Total liabilities 906,035 927,983
----------------- -----------------
Commitments and contingencies - -
Minority interest 80,803 82,287
Stockholders' Equity:
Common stock, 29,705,603 and 30,820,646 shares issued
and outstanding at March 31, 2000 and
December 31, 1999, respectively 30 31
Preferred stock, 11,236,300 and 11,330,000 shares issued and
outstanding at March 31, 2000 and December 31, 1999,
respectively 11 11
Additional paid-in capital 829,116 846,693
Deferred compensation (585) (613)
Retained earnings (deficit) (72,168) (61,788)
----------------- -----------------
Total stockholders' equity 756,404 784,334
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 1,743,242 $ 1,794,604
================= =================
See accompanying notes to consolidated financial statements
</TABLE>
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GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 2000 and 1999
(in thousands, except per share amounts)
(Unaudited)
2000 1999
--------------- ----------------
REVENUE
<S> <C> <C>
Rental revenue $ 63,161 $ 64,641
Fees and reimbursements from affiliates 468 1,131
Interest and other income 1,216 1,659
Equity in earnings of Associated Companies 46 309
Equity in loss of joint ventures (31) -
Net gain (loss) on sales of real estate assets (695) 1,351
--------------- ----------------
Total revenue 64,165 69,091
--------------- ----------------
EXPENSES
Property operating expenses 21,557 22,001
General and administrative 2,309 2,222
Depreciation and amortization 15,129 15,092
Interest expense 16,347 16,540
--------------- ----------------
Total expenses 55,342 55,855
--------------- ----------------
Income from operations before minority interest and
extraordinary item 8,823 13,236
Minority interest (306) (667)
--------------- ----------------
Net income before extraordinary item 8,517 12,569
Extraordinary item:
Net loss on early extinguishment of debt (466) (1,991)
--------------- ----------------
Net income 8,051 10,578
Preferred dividends (5,488) (5,570)
--------------- ----------------
Net income available to Common Stockholders $ 2,563 $ 5,008
=============== ================
Basic Per Share Data:
Net income before extraordinary item $ 0.10 $ 0.22
Extraordinary item (0.02) (0.06)
--------------- ----------------
Net income available to Common Stockholders $ 0.08 $ 0.16
=============== ================
Basic weighted average shares outstanding 30,355,685 31,764,834
=============== ================
Diluted Per Share Data:
Net income before extraordinary item $ 0.10 $ 0.21
Extraordinary item (0.02) (0.05)
--------------- ----------------
Net income available to Common Stockholders $ 0.08 $ 0.16
=============== ================
Diluted weighted average shares outstanding 34,096,464 36,098,374
=============== ================
See accompanying notes to consolidated financial statements
</TABLE>
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<CAPTION>
GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the three months ended March 31, 2000
(in thousands)
(Unaudited)
Common Stock Preferred Stock
--------------------- ---------------------
Additional Deferred Retained
Par Par Paid-in Compen- Earnings
Shares Value Shares Value Capital sation (Deficit) Total
--------------------------------------------------------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1999 30,821 $ 31 11,330 $ 11 $ 846,693 $ (613) $ (61,788) $ 784,334
Conversion of Operating Partnership
units into common stock 10 - - - 145 - - 145
Common and preferred stock repurchases (1,125) (1) (94) - (17,722) - - (17,723)
Amortization of deferred compensation - - - - - 28 - 28
Distributions - - - - - - (18,431) (18,431)
Net income - - - - - - 8,051 8,051
---------------------------------------------------------------------------------------------
Balance at March 31, 2000 29,706 $ 30 11,236 $ 11 $ 829,116 $ (585) $ (72,168) $ 756,404
========== ========= ========== ======== ============= =========== ============= ============
See accompanying notes to consolidated financial statements
</TABLE>
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<CAPTION>
GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2000 and 1999
(in thousands)
(Unaudited)
2000 1999
--------------- ----------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 8,051 $ 10,578
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 15,129 15,092
Amortization of loan fees, included in
interest expense 639 485
Minority interest in income from operations 306 667
Equity in earnings of Associated Companies (46) (309)
Net loss (gain) on sales of real estate assets 695 (1,351)
Net loss on early extinguishment of debt 466 1,991
Amortization of deferred compensation 28 23
Changes in certain assets and liabilities, net (7,311) (3,042)
--------------- ----------------
Net cash provided by operating activities 17,957 24,134
--------------- ----------------
Cash flows from investing activities:
Net proceeds from sales of real estate assets 20,181 17,522
Additions to rental properties (7,013) (14,176)
Investments in Development, net (102) (3,488)
Investment in Joint Ventures (3,789) -
Additions to mortgage loans receivable (959) (993)
Principal receipts on mortgage loans receivable 1,141 -
Repayments of notes receivable 992 -
Advances to affiliates - (200)
Distributions from Associated Companies 191 124
--------------- ----------------
Net cash provided by (used for) investing
activities 10,642 (1,211)
--------------- ----------------
Cash flows from financing activities:
Proceeds from borrowings 130,239 44,000
Repayment of borrowings (39,274) (45,514)
Retirement of Series A Senior Notes (less loss on
retirement of $466 in 2000) (87,526) -
Distributions to minority interest holders (1,520) (1,729)
Distributions to stockholders (18,431) (18,909)
Exercise of stock options - 750
Repurchases of common stock (16,335) (2,070)
Repurchases of preferred stock (1,388) -
--------------- ----------------
Net cash used for financing activities (34,235) (23,472)
--------------- ----------------
continued
See accompanying notes to consolidated financial statements
</TABLE>
6
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<CAPTION>
GLENBOROUGH REALTY TRUST INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
For the three months ended March 31, 2000 and 1999
(in thousands)
(Unaudited)
2000 1999
--------------- ----------------
<S> <C> <C>
Net decrease in cash and cash equivalents (5,636) (549)
Cash and cash equivalents at beginning of period 6,482 4,357
--------------- ----------------
Cash and cash equivalents at end of period $ 846 $ 3,808
=============== ================
Supplemental disclosure of cash flow information:
Cash paid for interest (net of capitalized interest of
$788 and $643 in 2000 and 1999, respectively) $ 16,823 $ 16,684
=============== ================
Supplemental disclosure of Non-Cash Investing and Financing
Activities:
Assumption of first trust deed notes payable in
acquisition of real estate $ 4,300 $ 14,100
=============== ================
Disposition of real estate involving buyer's
assumption of first trust deed notes payable $ 20,571 $ -
=============== ================
Conversion of Operating Partnership units into common
stock, at current market value of common stock $ 145 $ -
=============== ================
See accompanying notes to consolidated financial statements
</TABLE>
7
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GLENBOROUGH REALTY TRUST INCORPORATED
Notes to Consolidated Financial Statements
March 31, 2000
Note 1. ORGANIZATION
Glenborough Realty Trust Incorporated (the "Company") was organized in the State
of Maryland on August 26, 1994. The Company has elected to qualify as a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended (the "Code"). The Company completed a consolidation with certain public
California limited partnerships and other entities (the "Consolidation") engaged
in real estate activities (the "GRT Predecessor Entities") through an exchange
of assets of the GRT Predecessor Entities for 5,753,709 shares of Common Stock
of the Company. The Consolidation occurred on December 31, 1995, and the Company
commenced operations on January 1, 1996.
Subsequent to the Consolidation on December 31, 1995, and through March 31,
2000, the following Common Stock transactions occurred: (i) 70,250 shares of
Common Stock were issued to officers and directors as stock compensation; (ii)
25,446,000 shares were issued in four separate public equity offerings; (iii)
453,507 shares were issued in connection with various acquisitions; (iv) 107,414
shares were issued in connection with the exercise of employee stock options;
(v) 660,398 shares were issued in connection with the exchange of Operating
Partnership units; (vi) 2,785,616 shares were repurchased by the Company (see
discussion below) and (vii) 59 shares were retired, resulting in total shares of
Common Stock issued and outstanding at March 31, 2000, of 29,705,603. Assuming
the issuance of 3,604,769 shares of Common Stock issuable upon redemption of
3,604,769 partnership units in the Operating Partnership, there would be
33,310,372 shares of Common Stock outstanding as of March 31, 2000.
In January 1998, the Company completed a public offering of 11,500,000 shares of
7-3/4% Series A Convertible Preferred Stock (the "January 1998 Convertible
Preferred Stock Offering"). The shares are convertible at any time at the option
of the holder thereof into shares of Common Stock at an initial conversion price
of $32.83 per share of Common Stock (equivalent to a conversion rate of 0.7615
shares of Common Stock for each share of Series A Convertible Preferred Stock),
subject to adjustment in certain circumstances. Except in certain instances
relating to the preservation of the Company's status as a REIT, the 7-3/4%
Series A Convertible Preferred Stock is not redeemable prior to January 16,
2003. On and after January 16, 2003, the Series A Preferred Stock may be
redeemed at the option of the Company, in whole or in part, initially at 103.88%
of the liquidation preference per share, and thereafter at prices declining to
100% of the liquidation preference on and after January 16, 2008, plus in each
case accumulated, accrued and unpaid dividends, if any, to the redemption date.
Shares of Preferred Stock issued and outstanding at March 31, 2000, totaled
11,236,300. As of March 31, 2000, 263,700 shares, representing approximately 15%
of the preferred stock repurchase program (see discussion below) have been
repurchased.
In July 1998, the Company's Board of Directors adopted a stockholder rights plan
which is intended to protect the Company's stockholders in the event of coercive
or unfair takeover tactics, or an unsolicited attempt to acquire control of the
Company in a transaction the Board of Directors believes is not in the best
interests of the stockholders. Under the plan, the Company declared a dividend
of Rights on its Common Stock. The rights issued under the plan will be
triggered, with certain exceptions, if and when any person or group acquires, or
commences a tender offer to acquire, 15% or more of the Company's shares.
In February 1999, the Company's Board of Directors authorized the Company to
repurchase up to 3.1 million shares of its outstanding Common Stock. This
represented approximately 10% of the Company's total outstanding Common Stock at
the time of authorization. In November 1999, the Company announced that its
Board of Directors had doubled the size of the repurchase authorization under
the Company's common stock repurchase plan. The repurchase plan was increased to
6.2 million shares, or approximately 20% of the Company's total outstanding
common stock. Such purchases will be made from time to time in the open market
or otherwise and the timing will depend on market conditions and other factors.
As of March 31, 2000, 2,785,616 shares, representing approximately 45% of the
expanded repurchase authorization, have been repurchased. In addition, during
the third quarter of 1999, the Company announced that its Board of Directors had
approved an expansion of the stock repurchase program to include preferred stock
as well as common stock. The Company is authorized to repurchase up to 15% of
its preferred stock, or 1,725,000 shares.
8
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GLENBOROUGH REALTY TRUST INCORPORATED
Notes to Consolidated Financial Statements
March 31, 2000
To maintain the Company's qualification as a REIT, no more than 50% of the value
of the outstanding shares of the Company may be owned, directly or indirectly,
by five or fewer individuals (defined to include certain entities), applying
certain constructive ownership rules. To help ensure that the Company will not
fail this test, the Company's Articles of Incorporation provide for certain
restrictions on the transfer of the Common Stock to prevent further
concentration of stock ownership.
The Company, through its majority owned subsidiaries, is engaged primarily in
the ownership, operation, management, leasing, acquisition, expansion and
development of various income-producing properties. The Company's major
consolidated subsidiary, in which it holds a 1% general partner interest and a
88.18% limited partner interest at March 31, 2000, is Glenborough Properties,
L.P. (the "Operating Partnership"). Each of the holders of the remaining
interests in the Operating Partnership ("OP Units") has the option to redeem its
OP Units and to receive, at the option of the Company, in exchange for each OP
Unit, either (i) one share of common stock of the Company, or (ii) cash equal to
the fair market value of one share of common stock of the Company. As of March
31, 2000, the Operating Partnership, directly and through the subsidiaries in
which it and the Company own 100% of the ownership interests, controls a
portfolio of 148 real estate projects.
Prior to September 30, 1999, the Operating Partnership also held 100% of the
non-voting preferred stock of the following associated companies (the
"Associated Companies"):
o Glenborough Corporation ("GC") is the general partner of several real
estate limited partnerships and provides asset and property management
services for these partnerships (the "Managed Partnerships"). It also
provides partnership administration, asset management, property management
and development services to a group of unaffiliated partnerships, which
include three public partnerships sponsored by Rancon Financial
Corporation, an unaffiliated corporation which has significant real estate
assets in the Inland Empire region of Southern California (the "Rancon
Partnerships").
o Glenborough Hotel Group ("GHG") owns an approximate 36% limited partner
interest in a real estate joint venture.
Effective September 30, 1999, GHG merged with GC. In the merger, the Operating
Partnership received preferred stock of GC in exchange for its preferred stock
of GHG. The merger was accounted for as a reorganization of entities under
common control.
Following the merger, the Operating Partnership owns 100% of the 47,500 shares
(representing 95% of total outstanding shares) of non-voting preferred stock of
GC. Six individuals, including Sandra Boyle, Frank Austin and Terri Garnick,
executive officers of the Company, own the 2,500 shares (representing 5% of
total outstanding shares) of voting common stock of GC. The Operating
Partnership and GC intend that the Operating Partnership's interest in GC
complies with REIT qualification standards.
The Operating Partnership, through its ownership of preferred stock of GC, is
entitled to receive cumulative, preferred annual dividends of $1.896 per share,
which GC must pay before it pays any dividends with respect to the common stock
of GC. Once GC pays the required cumulative preferred dividend, it will pay any
additional dividends in equal amounts per share on both the preferred stock and
the common stock at 95% and 5%, respectively. Through the preferred stock, the
Operating Partnership is also entitled to receive a preferred liquidation value
of $169.49 per share plus all cumulative and unpaid dividends. The preferred
stock is subject to redemption at the option of GC after December 31, 2005, for
a redemption price of $169.49 per share. As the holder of preferred stock of GC,
the Operating Partnership has no voting power with respect to the election of
the directors of GC; all power to elect directors of GC is held by the owners of
the common stock of GC.
This structure is intended to provide the Operating Partnership with a
significant portion of the economic benefits of the operations of GC. The
Operating Partnership will account for the financial results of GC using the
equity method.
9
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GLENBOROUGH REALTY TRUST INCORPORATED
Notes to Consolidated Financial Statements
March 31, 2000
Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements present the consolidated financial
position of the Company as of March 31, 2000, and December 31, 1999, and the
consolidated results of operations and cash flows of the Company for the three
months ended March 31, 2000 and 1999. All intercompany transactions, receivables
and payables have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal accruals) necessary to
present fairly the financial position and results of operations of the Company
as of March 31, 2000, and for the period then ended.
Reclassification
Certain prior year balances have been reclassified to conform to the current
year presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the results of operations during the reporting period. Actual results could
differ from those estimates.
New Accounting Pronouncements
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities" was issued in June 1998. SFAS No.
133 was originally effective for fiscal years beginning after June 15, 1999,
with early adoption permitted. In June 1999, SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective Date
of FASB Statement No. 133 - an amendment of FASB Statement No. 133" was issued
which, among other things, deferred the final implementation to fiscal years
beginning after June 15, 2000. SFAS No. 133 provides comprehensive guidelines
for the recognition and measurement of derivatives and hedging activities and
specifically requires all derivatives to be recorded on the balance sheet at
fair value. Management is evaluating the effects, if any, that this
pronouncement will have on the Company's consolidated financial position,
results of operations and financial statement position.
Rental Properties
Rental properties are stated at cost unless circumstances indicate that cost
cannot be recovered, in which case, the carrying value of the property is
reduced to estimated fair value. Estimated fair value: (i) is based upon the
Company's plans for the continued operation of each property; and (ii) is
computed using estimated sales price, as determined by prevailing market values
for comparable properties and/or the use of capitalization rates multiplied by
annualized net operating income based upon the age, construction and use of the
building. The fulfillment of the Company's plans related to each of its
properties is dependent upon, among other things, the presence of economic
conditions which will enable the Company to continue to hold and operate the
properties prior to their eventual sale. Due to uncertainties inherent in the
valuation process and in the economy, it is reasonably possible that the actual
results of operating and disposing of the Company's properties could be
materially different than current expectations.
Depreciation is provided using the straight line method over the useful lives of
the respective assets.
The useful lives are as follows:
Buildings and Improvements 10 to 40 years
Tenant Improvements Term of the related lease
Furniture and Equipment 5 to 7 years
10
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GLENBOROUGH REALTY TRUST INCORPORATED
Notes to Consolidated Financial Statements
March 31, 2000
Real Estate Held for Sale
Real estate held for sale consists of rental properties that are under contract
to be disposed of. The fulfillment of the Company's plans to dispose of property
is dependent upon, among other things, the presence of economic conditions which
will enable the Company to hold the property for eventual sale. The Company
discontinues depreciation of rental property once it is classified as held for
sale.
Investments in Development and Joint Ventures
The Company, through mezzanine loans and equity contributions, invests in
various development alliances with projects currently under development. The
interest on advances and other direct project costs incurred by the Company are
capitalized to the investment during the period in which the projects are under
development. The Company's investments in joint ventures are accounted for using
the equity method. See Note 6 for further discussion.
Investments in Associated Companies
The Company's investments in Associated Companies are accounted for using the
equity method, as discussed further in Note 4.
Mortgage Loans Receivable
The Company monitors the recoverability of its loans and notes receivable
through ongoing contact with the borrowers to ensure timely receipt of interest
and principal payments, and where appropriate, obtains financial information
concerning the operation of the properties. Interest on mortgage loans is
recognized as revenue as it accrues during the period the loan is outstanding.
Mortgage loans receivable will be evaluated for impairment if it becomes evident
that the borrower is unable to meet its debt service obligations in a timely
manner and cannot satisfy its payments using sources other than the operations
of the property securing the loan. If it is concluded that such circumstances
exist, then such loan will be considered to be impaired and its recorded amount
will be reduced to the fair value of the collateral securing it. Interest income
will also cease to accrue under such circumstances. Due to uncertainties
inherent in the valuation process, it is reasonably possible that the amount
ultimately realized from the Company's collection on these receivables will be
different than the recorded amounts.
Cash Equivalents
The Company considers short-term investments (including certificates of deposit)
with a maturity of three months or less at the time of investment to be cash
equivalents.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 requires disclosure about
fair value for all financial instruments. Based on the borrowing rates currently
available to the Company, the carrying amount of debt approximates fair value.
Certain assumed debt instruments have been recorded at a premium based upon the
stated rate on the instrument and the then available borrowing rates for the
Company. Cash and cash equivalents consist of demand deposits and certificates
of deposit with financial institutions. The carrying amount of cash and cash
equivalents as well as the mortgage loans receivable described above,
approximates fair value.
Derivative Financial Instruments
The Company may use derivative financial instruments in the event that it
believes such instruments will be an effective hedge against fluctuations in
interest rates on a specific anticipated borrowing. Derivative financial
instruments such as forward rate agreements or interest rate swaps may be used
in this capacity. To the extent such instruments do not qualify as hedges, they
will be accounted for on a mark-to-market basis and recorded in earnings each
period as appropriate. The cost of terminated instruments not qualifying as
hedges will be recorded in earnings in the period they are terminated.
Instruments which qualify as hedges upon obtaining the related debt will be
11
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GLENBOROUGH REALTY TRUST INCORPORATED
Notes to Consolidated Financial Statements
March 31, 2000
recorded as a premium or discount on the related debt principal and amortized
into earnings over the life of the debt instrument. If the hedged instrument is
retired early, the unamortized discount or premium will be included as a
component of the calculation of gain or loss on retirement.
At March 31, 2000 and December 31, 1999, the Company was not a party to any open
interest rate protection agreements other than the interest rate cap contract
entered into in August 1999 and discussed in Note 8 below.
Deferred Financing and Other Fees
Fees paid in connection with the financing and leasing of the Company's
properties are amortized over the term of the related notes payable or leases
and are included in other assets.
Minority Interest
Minority interest represents the 10.82% limited partner interests in the
Operating Partnership not held by the Company.
Revenues
All leases are classified as operating leases. Rental revenue is recognized as
earned over the terms of the related leases.
For the three months ended March 31, 2000 and 1999, no tenants represented 10%
or more of rental revenue of the Company.
Fees and reimbursement revenue consists of property management fees, overhead
administration fees, and transaction fees from the acquisition, disposition,
refinancing, leasing and construction supervision of real estate for
unconsolidated affiliates.
Revenues are recognized only after the Company is contractually entitled to
receive payment, after the services for which the fee is received have been
provided, and after the ability and timing of payments are reasonably assured
and predictable.
Scheduled rent increases are based primarily on the Consumer Price Index or a
similar factor. Material incentives paid, if any, by the Company to a tenant are
amortized as a reduction of rental income over the life of the related lease.
The Company's portfolio of leases turns over continuously, with the number and
value of expiring leases varying from year to year. The Company's ability to
release the space to existing or new tenants at rates equal to or greater than
those realized historically is impacted by, among other things, the economic
conditions of the market in which a property is located, the availability of
competing space, and the level of improvements which may be required at the
property. No assurance can be given that the rental rates that the Company will
obtain in the future will be equal to or greater than those obtained under
existing contractual commitments.
Income Taxes
The Company has made an election to be taxed as a REIT under Sections 856
through 860 of the Code. As a REIT, the Company generally will not be subject to
Federal income tax to the extent that it distributes at least 95% of its REIT
taxable income to its shareholders. REITs are subject to a number of
organizational and operational requirements. If the Company fails to qualify as
a REIT in any taxable year, the Company will be subject to Federal income tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate tax rates. Even if the Company qualifies for taxation as a
REIT, the Company may be subject to certain state and local taxes on its income
and property and to Federal income and excise taxes on its undistributed income.
Reference to 1999 Audited Financial Statements
These unaudited financial statements should be read in conjunction with the
Notes to Consolidated Financial Statements included in the 1999 audited
financial statements.
12
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GLENBOROUGH REALTY TRUST INCORPORATED
Notes to Consolidated Financial Statements
March 31, 2000
Note 3. RENTAL PROPERTY
Acquisitions
In the first quarter of 2000, through one of its development alliances, the
Company acquired Gateway 14 (with the proceeds from a tax deferred exchange), a
113,538 square foot industrial property located in Denver, Colorado. The total
acquisition cost of $6.2 million, which includes third party expenditures
incurred for the purpose of this transaction, was paid for with approximately
$1.9 million in cash and the assumption of $4.3 million in debt.
Dispositions
In the first quarter of 2000, the Company sold an industrial property known as
Columbia Warehouse, located in Columbia, Maryland, to an independent third party
for all cash consideration of $1,640,000. This resulted in a loss on sale of
approximately $420,000 and is included in net loss on sales of real estate
assets on the accompanying consolidated statement of income for the three months
ended March 31, 2000.
In the first quarter of 2000, the Company formed a limited liability company
with an independent third party and contributed its interest in the office
property known as 2000 Corporate Ridge, located in McLean, Virginia. This
transaction resulted in a loss on sale of approximately $211,000 and is included
in net loss on sales of real estate assets in the accompanying consolidated
statement of income for the three months ended March 31, 2000. See Note 6 for
further discussion.
Prospective Dispositions
The Company entered into a separate definitive agreement to sell one office
property. The sale closed in April 2000 for a sales price of approximately $7.3
million. This property is reflected in Real Estate Held For Sale on the
accompanying consolidated balance sheet as of March 31, 2000. See Note 14 for
discussion of sales subsequent to March 31, 2000.
Note 4. INVESTMENTS IN ASSOCIATED COMPANIES
The Company accounts for its investment in GC (as defined in Note 1) using the
equity method as a substantial portion of its economic benefits flow to the
Company by virtue of its 100% non-voting preferred stock interest in GC, which
interest constitutes substantially all of GC's capitalization. Three of the
holders of the voting common stock of GC are officers of the Company; however,
the Company has no direct voting or management control of GC. The Company
records earnings on its investment in GC equal to its cash flow preference, to
the extent of earnings, plus its pro rata share of remaining earnings, based on
cash flow allocation percentages. Distributions received from GC are recorded as
a reduction of the Company's investment.
13
<PAGE>
<TABLE>
GLENBOROUGH REALTY TRUST INCORPORATED
Notes to Consolidated Financial Statements
March 31, 2000
As of March 31, 2000 and 1999, the Company had the following investments in the
Associated Companies (in thousands):
GC (1)
--------------
<S> <C>
Investment at December 31, 1999 $ 9,404
Distributions (191)
Equity in earnings 46
Investment at March 31, 2000 $ 9,259
GC (1)
--------------
Investment at December 31, 1998 $ 8,807
Distributions (124)
Equity in earnings (loss) 309
Investment at March 31, 1999 $ 8,992
(1) All amounts presented for GC represent combined amounts for GC and GHG due
to the September 30, 1999 merger, as previously discussed in Note 1.
Note 5. MORTGAGE LOANS RECEIVABLE
The Company's mortgage loans receivable consist of the following as of March 31,
2000, and December 31, 1999 (dollars in thousands):
2000 1999
-------------- ---------------
<S> <C> <C>
Note secured by a hotel property in Arlington, TX, with a fixed interest rate
of 9%, monthly interest-only payments and a maturity date of March 2000. (see
below for further discussion). $ - $ 1,141
Note secured by Gateway Park land located in Aurora, CO, with a stated fixed
interest rate of 13%, quarterly interest-only payments and a maturity date of
July 2005 (see below for further discussion). 37,401 36,441
-------------- ---------------
Total $ 37,401 $ 37,582
============== ===============
In September 1999, the Company sold a hotel property in Arlington, Texas, to a
third party for a sale price of $2.1 million, of which $1.141 million was
represented by a note receivable secured by the hotel property. This note was
paid off in January 2000.
In 1998, the Company entered into a development alliance with The Pauls
Corporation (see Note 6). In addition to this development alliance, the Company
loaned approximately $34 million ($37.4 million, including accrued interest, at
March 31, 2000), secured by a First Mortgage, to continue the build-out of
Gateway Park. In this arrangement, the Company has rights under certain
conditions and subject to certain contingencies to purchase the properties upon
completion of development and, thus, through this arrangement, the Company could
acquire up to 2.2 million square feet of office and industrial space and 1,600
multifamily units over the next ten years.
Note 6. INVESTMENTS IN DEVELOPMENT AND JOINT VENTURES
The Company is currently involved in 4 development alliances for the development
of approximately 713,000 square feet of office and distribution properties and
1,710 multifamily units in Colorado, Texas, New Jersey, Kansas and Michigan. As
of March 31, 2000, the Company has advanced approximately $40 million to these
alliances. Under these development alliances, the Company has certain rights to
purchase the properties upon completion of development over the next five years.
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
GLENBOROUGH REALTY TRUST INCORPORATED
Notes to Consolidated Financial Statements
March 31, 2000
In the first quarter of 2000, the Company formed a limited liability company
(the "LLC") with an independent third party and contributed its interest in the
office property known as 2000 Corporate Ridge, located in McLean, Virginia. This
transaction resulted in a loss on sale of approximately $211,000 and is included
in net loss on sales of real estate assets in the accompanying consolidated
statement of income for the three months ended March 31, 2000. Consideration
received for this contribution included $14.7 million in cash and the assumption
of a $20.6 million mortgage by the LLC. The Company now has a 10% interest in
the LLC and the LLC agreement provides for, among other things, a 3% annual
management fee to the Company for property management services, certain asset
management fees and certain additional distributions in excess of its 10%
interest, if available, upon the ultimate sale of the property by the LLC. The
Company will account for its interest in the LLC under the equity method.
Note 7. OTHER ASSETS
As of March 31, 2000 and December 31, 1999, other assets on the consolidated
balance sheets consists of the following (in thousands):
2000 1999
------------ ------------
<S> <C> <C>
Accounts receivable, net $ 4,460 $ 3,856
Prepaid expenses 7,182 8,164
Impound accounts 8,032 12,970
Lease commissions and loan fees, net 20,138 20,867
Corporate office fixed assets, net 5,325 4,726
Related party receivable (Note 10) 1,847 1,847
Other 1,099 2,363
------------ ------------
Total other assets $ 48,083 $ 54,793
============ ============
Note 8. SECURED AND UNSECURED LIABILITIES
The Company had the following mortgage loans, bank lines, unsecured notes and
notes payable outstanding as of March 31, 2000, and December 31, 1999 (dollars
in thousands):
2000 1999
------------ ------------
<S> <C> <C>
Secured loans with various lenders, net of unamortized discount of $5,359 and
$5,515 at March 31, 2000 and December 31, 1999, respectively. All loans have a
fixed interest rate of 6.125% and a November 10, 2008 maturity date. Monthly
principal and interest payments range between $296 and $458. These loans are
secured by 35 properties with an aggregate net carrying value of $398,584 and
$400,980 at March 31, 2000 and December 31, 1999, respectively. $ 232,162 $232,735
Secured loans with various lenders, bearing interest at fixed rates between
6.95% and 9.25% (approximately $52,376 of these loans include an unamortized
premium of approximately $204 which reduces the effective interest rate on those
instruments to 6.75%), with monthly principal and interest payments ranging
between $8 and $371 and maturing at various dates through December 1, 2030.
These loans are secured by properties with an aggregate net carrying value of
$505,882 and $547,264 at March 31, 2000 and December 31, 1999, respectively. 300,580 322,878
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
GLENBOROUGH REALTY TRUST INCORPORATED
Notes to Consolidated Financial Statements
March 31, 2000
2000 1999
------------ ------------
<S> <C> <C>
Secured loans with various banks bearing interest at variable rates ranging
between 6.80% and 9.00% at March 31, 2000 and 6.53% and 8.52% at December 31,
1999, monthly principal and interest payments ranging between $4 and $790 and
maturing at various dates through August 30, 2004. These loans are secured by
properties with an aggregate net carrying value of $228,415 and $224,526 at
March 31, 2000 and December 31, 1999, respectively. $152,873 $146,102
Unsecured $142,500 line of credit with a bank ("Credit Facility") with a
variable interest rate of LIBOR plus 1.75% (7.883% and 7.753% at March 31, 2000
and December 31, 1999, respectively), monthly interest only payments and a
maturity date of June 10, 2002, with one option to extend for 10 years. 72,901 70,628
Unsecured $125,000 term loan with a bank with a variable interest rate of LIBOR
plus 1.75% (7.883% and 8.25% at March 31, 2000 and December 31, 1999,
respectively), monthly interest only payments and a maturity date of June 10,
2002. 122,385 33,865
Unsecured Series A Senior Notes with a fixed interest rate of 7.625%, interest
payable semiannually on March 15 and September 15, and a maturity date of March
15, 2005. Approximately $87.1 million of the notes were retired in the first
three months of 2000 as discussed below. 4,090 91,150
Total $ 884,991 $ 897,358
In August 1999, the Company closed a $97.6 million secured financing with a
commercial bank ("Secured Financing"). In connection with the Secured Financing,
the Company entered into an interest rate cap agreement to hedge increases in
interest rates above a specified level of 11.21%. The agreement is for a term
concurrent with the Secured Financing instrument, is indexed to the 90-day LIBOR
rate, and is for a notional amount equal to the maximum amount available on the
Secured Financing loan. As of March 31, 2000, the 90-day LIBOR rate was 6.29%.
The Company paid a premium of approximately $434,000 at the inception of the cap
agreement, which is being amortized as additional interest expense over the life
of the agreement.
In the first quarter of 2000, the Company retired approximately $87.1 million of
unsecured Series A Senior Notes at a discount. As a result of these transactions
and the related write-off of capitalized original issuance costs, a net loss on
early extinguishment of debt of approximately $466,000 was recorded in the
accompanying consolidated statement of income for the three months ended March
31, 2000, as discussed in Note 9 below. See Note 14 for debt retirement
subsequent to March 31, 2000.
In the first quarter of 2000, the Company obtained a $10.5 million construction
loan to build an 80,000 square foot office property in Bedminster, New Jersey.
Approximately $2.5 million was outstanding at March 31, 2000. The loan has a
maturity date of November 12, 2001 and bears interest at the floating rate of
LIBOR plus 2.25%. The interest rate on this loan at March 31, 2000 was 8.38%.
In February 2000, the Company contributed its interest in the office property
known as 2000 Corporate Ridge to a limited liability company (the "LLC") The LLC
assumed the $20.6 million mortgage loan on this property. See Note 6 for further
discussion.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
GLENBOROUGH REALTY TRUST INCORPORATED
Notes to Consolidated Financial Statements
March 31, 2000
In March 2000, related to the acquisition of an industrial property from one of
the Company's development alliances (as discussed in Note 3 above), the Company
assumed a $4.3 million secured loan. This loan has a maturity date of October 1,
2000 (with options for two 6-month extensions) and bears interest at the
floating rate of LIBOR plus 1.55%. The interest rate on this loan at March 31,
2000 was 7.68%.
Some of the Company's properties are held in limited partnerships and limited
liability companies in order to facilitate financing. Such limited partnerships
and limited liability companies are included in the consolidated financial
statements of the Company in accordance with Generally Accepted Accounting
Principles ("GAAP").
The required principal payments on the Company's debt for the next five years
and thereafter, as of March 31, 2000, are as follows (in thousands):
Year Ending
December 31,
<S> <C> <C>
2000 $ 104,368
2001 24,613
2002 209,103
2003 37,326
2004 124,829
Thereafter 384,752
Total $ 884,991
Note 9. NET LOSS ON EARLY EXTINGUISHMENT OF DEBT
In connection with the unsecured Series A Senior Notes repurchases discussed
above, the Company recorded a net loss on early extinguishment of debt of
$466,000 for the three months ended March 31, 2000. This loss consists of
$931,000 of discounts on retirement offset by $1,397,000 of losses due to the
writeoff of unamortized original issuance costs.
Note 10. RELATED PARTY TRANSACTIONS
Fee and reimbursement income earned by the Company from related parties totaled
$468,000 and $1,131,000 for the three months ended March 31, 2000 and 1999,
respectively, and consisted of property management fees, asset management fees
and other fee income. In addition, the Company paid GC property management fees
and salary reimbursements totaling $405,000 and $362,000 for the three months
ended March 31, 2000 and 1999, respectively, for management of a portfolio of
residential properties owned by the Company, which is included in property
operating expenses and general and administrative expenses on the accompanying
consolidated statements of income.
In 1998, the Company acquired from a Managed Partnership an option to purchase
all of its rights under a Lease with Option to Purchase Agreement, for certain
undeveloped and unentitled land located in Burlingame, California. Upon
expiration of the option period, the independent members of the Company's Board
of Directors concluded that proceeding with the development of the property
would have required that the Company incur substantial debt. Accordingly, on
February 1, 1999, the Company elected not to proceed with the development and
not to exercise the option in return for the Managed Partnership's agreement to
reimburse the Company for $2,309,000 of predevelopment costs, $462,000 to be
paid in cash with the balance in a promissory note bearing interest at 10% and
due on the earlier of sale, refinance or March 31, 2002. The note also contains
a participation in profits realized by the Managed Partnership from the sale of
the property if such sale occurs within 3 years. The principal balance of the
note is included in other assets in the accompanying consolidated balance
sheets.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
GLENBOROUGH REALTY TRUST INCORPORATED
Notes to Consolidated Financial Statements
March 31, 2000
Note 11. EARNINGS PER SHARE
Basic earnings per share is computed as earnings divided by weighted average
shares, excluding the dilutive effects of stock options and other potentially
dilutive securities. Earnings per share are as follows (in thousands, except for
weighted average shares and per share amounts):
Three months ended
March 31,
-------------------------------
2000 1999
-------------- -------------
<S> <C> <C>
Net income available to common
Stockholders - Basic $ 2,563 $ 5,008
Minority interest 306 667
-------------- -------------
Net income available to common
Stockholders - Diluted $ 2,869 $ 5,675
-------------- -------------
Weighted average shares:
Basic 30,355,685 31,764,834
Stock options 140,471 115,154
Convertible Operating Partnership Units 3,600,308 4,218,386
-------------- --------------
Diluted 34,096,464 36,098,374
-------------- --------------
Basic earnings per share $ 0.08 $ 0.16
Diluted earnings per share $ 0.08 $ 0.16
Note 12. STOCK COMPENSATION PLAN
In May 1996, the Company adopted an employee stock incentive plan (the "Plan")
to provide incentives to attract and retain high quality executive officers and
key employees. Certain amendments to the Plan were ratified and approved by the
stockholders of the Company at the Company's 1997 Annual Meeting of
Stockholders. The Plan, as amended, provides for the grant of (i) shares of
Common Stock of the Company, (ii) options, stock appreciation rights ("SARs") or
similar rights with an exercise or conversion privilege at a fixed or variable
price related to the Common Stock and/or the passage of time, the occurrence of
one or more events, or the satisfaction of performance criteria or other
conditions, or (iii) any other security with the value derived from the value of
the Common Stock of the Company or other securities issued by a related entity.
Such awards include, without limitation, options, SARs, sales or bonuses of
restricted stock, dividend equivalent rights ("DERs"), Performance Units or
Preference Shares. The total number of shares of Common Stock available under
the Plan is equal to the greater of 1,140,000 shares or 8% of the number of
shares outstanding determined as of the day immediately following the most
recent issuance of shares of Common Stock or securities convertible into shares
of Common Stock; provided that the maximum aggregate number of shares of Common
Stock available for issuance under the Plan may not be reduced. For purposes of
calculating the number of shares of Common Stock available under the Plan, all
classes of securities of the Company and its related entities that are
convertible presently or in the future by the security holder into shares of
Common Stock or which may presently or in the future be exchanged for shares of
Common Stock pursuant to redemption rights or otherwise, shall be deemed to be
outstanding shares of Common Stock. Notwithstanding the foregoing, the aggregate
number of shares as to which incentive stock options, one type of security
available under the Plan, may be granted under the Plan may not exceed 1,140,000
shares. In May 1999, the Company's stockholders approved the grant of 700,000
non-qualified stock options to Robert Batinovich and 300,000 non-qualified
options to Andrew Batinovich, outside the Plan. The Company accounts for the
fair value of the options and bonus grants in accordance with APB Opinion No.
25. As of March 31, 2000, 70,250 shares of bonus grants have been issued under
the Plan. The fair value of the shares granted have been recorded as deferred
compensation in the accompanying financial statements and will be charged to
earnings ratably over the respective vesting periods that range from 2 to 5
years. As of March 31, 2000, 3,367,786 options to purchase shares of Common
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
GLENBOROUGH REALTY TRUST INCORPORATED
Notes to Consolidated Financial Statements
March 31, 2000
Stock were outstanding under the Plan and 1,177,000 options were outstanding
outside the Plan, including the 1,000,000 stock options granted to Robert
Batinovich and Andrew Batinovich as described above. The exercise price of each
incentive stock option granted is greater than or equal to the per-share fair
market value of the Common Stock on the date the option is granted and, as such,
no compensation expense has been recognized. The options vest over periods
between 1 and 6 years, and have a maximum term of 10 years.
Note 13. SEGMENT INFORMATION
The Company owns a diverse portfolio of properties comprising five product
types: office, industrial, retail, multifamily and hotels. Effective January 1,
2000, in order to simplify reporting, the Company eliminated the office/flex
property type and reallocated the properties to either the office or industrial
category. Each of these product types represents a reportable segment with
distinct uses and tenant types which require the Company to employ different
management strategies. Each segment contains properties located in various
regions and markets within the United States. The office portfolio consists
primarily of suburban office buildings. The industrial portfolio consists of
properties designed for warehouse, distribution and light manufacturing for
single-tenant or multi-tenant use. The retail portfolio consists primarily of
community shopping centers anchored with national or regional supermarkets or
drug stores. The properties in the multifamily portfolio are apartment buildings
with units rented to residential tenants on either a month-by-month basis or for
terms of one year or less. The Company's hotel operations are from one 227 room
property leased to and operated by a third party.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. The Company evaluates performance of
its property types based on net operating income derived by subtracting rental
expenses and real estate taxes (operating expenses) from rental revenues.
Significant information used by the Company for its reportable segments as of
and for the three months ended March 31, 2000 and 1999 is as follows (in
thousands):
Multi-family
2000 Office Industrial Retail Hotel Total
------------ ----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Rental revenue $ 32,952 $ 9,945 $ 2,866 $ 17,023 $ 375 $ 63,161
Property operating expenses 12,433 2,604 937 7,412 60 23,446
------------ ----------- ----------- ----------- ----------- -------------
Net operating income (NOI) $ 20,519 $ 7,341 $ 1,929 $ 9,611 $ 315 $ 39,715
============ =========== =========== =========== =========== =============
1999
Rental revenue $ 32,629 $ 11,503 $ 3,241 $ 16,670 $ 598 $ 64,641
Property operating expenses 12,288 3,188 1,176 7,255 97 24,004
------------ ----------- ----------- ----------- ----------- -------------
Net operating income (NOI) $ 20,341 $ 8,315 $ 2,065 $ 9,415 $ 501 $ 40,637
============ =========== =========== =========== =========== =============
The following is a reconciliation of segment revenues and income to consolidated
revenues and income for the periods presented above (in thousands):
2000 1999
----------------- -----------------
Revenues
<S> <C> <C>
Total revenue for reportable segments $ 63,161 $ 64,641
Other revenue (1) 1,004 4,450
----------------- -----------------
Total consolidated revenues $ 64,165 $ 69,091
================= =================
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
GLENBOROUGH REALTY TRUST INCORPORATED
Notes to Consolidated Financial Statements
March 31, 2000
2000 1999
----------------- -----------------
Net Income
<S> <C> <C>
NOI for reportable segments $ 39,715 $ 40,637
Elimination of internal property management fees 1,889 2,003
Unallocated amounts:
Other revenue (1) 1,004 4,450
General and administrative expenses (2,309) (2,222)
Depreciation and amortization (15,129) (15,092)
Interest expense (16,347) (16,540)
----------------- -----------------
Income from operations before minority interest and
extraordinary items $ 8,823 $ 13,236
================= =================
(1) Other revenue includes fee income, interest and other income, equity in
earnings of Associated Companies, equity in earnings of joint ventures and
net gain/loss on sales of real estate assets.
Note 14. SUBSEQUENT EVENTS
Dispositions
Subsequent to March 31, 2000, the Company sold three office properties, two
retail properties and one industrial property. These properties were sold for an
aggregate sales price of $75 million, which approximated their aggregate net
book value.
Debt Retirement
Subsequent to March 31, 2000, the Company retired all of its unsecured Series A
Senior Notes, subject only to the contractual obligation of the remaining
holders to be redeemed on May 19, 2000. This transaction and the related
write-off of capitalized original issuance costs generated a net loss on early
extinguishment of debt of approximately $79,000.
</TABLE>
20
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Background
Glenborough Realty Trust Incorporated (the "Company") is a self-administered and
self-managed real estate investment trust ("REIT") engaged primarily in the
ownership, operation, management, leasing, acquisition, expansion and
development of various types of income-producing properties. As of March 31,
2000, the Company owned and operated 148 income-producing properties (the
"Properties," and each a "Property"). The Properties are comprised of 60 office
Properties, 37 industrial Properties, 10 retail Properties, 37 multifamily
Properties, 1 hotel Property and 3 joint ventures, located in 28 metropolitan
markets.
The Company was incorporated in the State of Maryland on August 26, 1994. On
December 31, 1995, the Company completed a consolidation (the "Consolidation")
in which Glenborough Corporation, a California corporation, and eight public
limited partnerships (the "Partnerships") collectively, the "GRT Predecessor
Entities", merged with and into the Company. The Company (i) issued 5,753,709
shares (the "Shares") of $.001 par value Common Stock of the Company to the
Partnerships in exchange for the net assets of the Partnerships; (ii) merged
with Glenborough Corporation, with the Company being the surviving entity; (iii)
acquired an interest in three companies (the "Associated Companies"), two of
which merged on June 30, 1997, and the remaining two of which merged on
September 30, 1999, that provide asset and property management services, as well
as other services; and (iv) through a subsidiary operating partnership,
Glenborough Properties, L.P. (the "Operating Partnership"), acquired interests
in certain warehouse distribution facilities from GPA, Ltd., a California
limited partnership ("GPA"). A portion of the Company's operations are conducted
through the Operating Partnership, of which the Company is the sole general
partner, and in which the Company holds a 88.18% limited partner interest at
March 31, 2000. The Company operates the assets acquired in the Consolidation
and in subsequent acquisitions (see further discussion below) and intends to
continue to invest in income-producing property directly and through joint
ventures. In addition, the Associated Companies may acquire general partner
interests in other real estate limited partnerships. The Company has elected to
qualify as a REIT under the Internal Revenue Code of 1986, as amended. The
common and preferred stock of the Company (the "Common Stock" and the "Preferred
Stock", respectively) are listed on the New York Stock Exchange ("NYSE") under
the trading symbols "GLB" and "GLB Pr A", respectively.
The Company's principal business objectives are to achieve a stable and
increasing source of cash flow available for distribution to stockholders. By
achieving these objectives, the Company will seek to raise the value of its
shares over time.
Results of Operations
Comparison of the three months ended March 31, 2000 to the three months ended
March 31, 1999.
Rental Revenues. Rental revenue decreased $1,480,000, or 2%, to $63,161,000 for
the three months ended March 31, 2000 from $64,641,000 for the three months
ended March 31, 1999. The decrease included decreases in revenues from the
industrial, retail and hotel Properties of $1,558,000, $375,000, $223,000,
respectively. These decreases are primarily due to the sales of thirteen
industrial, one retail and two hotels since March 31, 1999. These decreases are
partially offset by increases in revenue from the office and multifamily
Properties of $323,000 and $353,000, respectively.
Fees and Reimbursements from affiliates. Fees and reimbursements from affiliates
consist primarily of property and asset management fees paid to the Company
under property and asset management agreements with the Managed Partnerships.
This revenue decreased $663,000, or 59%, to $468,000 for the three months ended
March 31, 2000, from $1,131,000 for the three months ended March 31, 1999,
primarily due to transaction fees received from GC in the first quarter of 1999.
Interest and Other Income. Interest and other income decreased $443,000 to
$1,216,000 for the three months ended March 31, 2000, from $1,659,000 for the
three months ended March 31, 1999. The decrease primarily consisted of decreases
in interest earned on notes receivable due to payoffs received.
Equity in Earnings of Associated Companies. Equity in earnings of Associated
Companies decreased $263,000, or 85%, to $46,000 for the three months ended
March 31, 2000, from $309,000 for the three months ended March 31, 1999. The
decrease is primarily due to a decrease in earnings from GC due to transaction
fees received in the first quarter of 1999.
21
<PAGE>
Net Gain (Loss) on Sales of Real Estate Assets. The net loss on sales of real
estate assets of $695,000 during the three months ended March 31, 2000,
primarily resulted from the sales of one office property and one industrial
property from the Company's portfolio in 2000. The net gain on sales of real
estate assets of $1,351,000 during the three months ended March 31, 1999,
resulted from the sale of five industrial properties, two retail properties and
a small partial interest in a REIT.
Property Operating Expenses. Property operating expenses decreased $444,000, or
2%, to $21,557,000 for the three months ended March 31, 2000, from $22,001,000
for the three months ended March 31, 1999. This decrease corresponded to the 2%
decrease in rental revenues resulting from the sale of properties.
General and Administrative Expenses. General and administrative expenses did not
change significantly with an increase of $87,000, or 4%, to $2,309,000 for the
three months ended March 31, 2000, from $2,222,000 for the three months ended
March 31, 1999.
Depreciation and Amortization. Depreciation and amortization did not change
significantly with an increase of $37,000, or 0.20%, to $15,129,000 for the
three months ended March 31, 2000, from $15,092,000 for the three months ended
March 31, 1999.
Interest Expense. Interest expense did not change significantly with a decrease
of $193,000, or 1%, to $16,347,000 for the three months ended March 31, 2000,
from $16,540,000 for the three months ended March 31, 1999.
Net Loss on Early Extinguishment of Debt. Net loss on early extinguishment of
debt of $466,000 during the three months ended March 31, 2000, consists of
$931,000 of gains on retirement of Series A Senior Notes at a discount, offset
by the related write-off of unamortized loan fees in the amount of $1,397,000.
The net loss on early extinguishment of debt of $1,991,000 during the three
months ended March 31, 1999, consists of prepayment penalties and the write-off
of unamortized loan fees upon early payoff of debt.
Liquidity and Capital Resources
Cash Flows
For the three months ended March 31, 2000, cash provided by operating activities
decreased by $6,177,000 to $17,957,000 as compared to $24,134,000 for the same
period in 1999. The decrease is primarily due to an increase in cash used for
other assets and liabilities and by an decrease in net income (before
depreciation and amortization, minority interest, net gain on sales of real
estate assets and net gain on early extinguishment of debt) of $2,330,000 due to
the 1999 and 2000 sales of properties. Cash from investing activities increased
by $11,853,000 to $10,642,000 of cash provided by investing activities for the
three months ended March 31, 2000, as compared to $1,211,000 of cash used for
investing activities for the same period in 1999. The increase is primarily due
to a decrease in cash used for investments in development and property
acquisitions in the first three months of 2000 as compared to the same period in
1999. During the three months ended March 31, 1999, the Company acquired two
properties as compared to one property during the three months ended March 31,
2000. In addition, net proceeds from the sales of real estate assets, principal
receipts on mortgage loans receivable and repayments of notes receivable
increased in the first three months of 2000 as compared to the same period in
1999. These increases are partially offset by an increase in cash used for
investment in joint ventures in first three months of 2000 as compared to the
same period in 1999. Cash from financing activities decreased by $10,763,000 to
$34,235,000 of cash used for financing activities for the three months ended
March 31, 2000, as compared to $23,472,000 of cash used for financing activities
for the same period in 1999. This change was primarily due to an increase in
cash used for the retirement of Senior Notes and repurchases of common and
preferred stock offset by an increase in proceeds from new debt and a decrease
in the repayment of other debt.
The Company expects to meet its short-term liquidity requirements generally
through its working capital, its Credit Facility (as defined below) and cash
generated by operations. The Company believes that its cash generated by
operations will be adequate to meet operating requirements and to make
distributions in accordance with REIT requirements in both the short and the
long-term. In addition to cash generated by operations, the Credit Facility
provides for working capital advances. However, there can be no assurance that
the Company's results of operations will not fluctuate in the future and at
times affect (i) its ability to meet its operating requirements and (ii) the
amount of its distributions.
The Company's principal sources of funding for acquisitions, development,
expansion and renovation of properties and stock repurchases include the
22
<PAGE>
unsecured Credit Facility, permanent secured debt financing, public unsecured
debt financing, public and private equity and debt issuances, the issuance of
partnership units in the Operating Partnership, proceeds from property sales and
cash flow provided by operations.
Mortgage Loans Receivable
Mortgage loans receivable decreased from $37,582,000 at December 31, 1999, to
$37,401,000 at March 31, 2000. This decrease was due to the payoff of a
$1,141,000 loan made by the Company to the buyer of one of the hotel properties,
offset by accrued interest on a loan made by the Company under a development
alliance.
Secured and Unsecured Financing
Mortgage loans payable decreased from $701,715,000 at December 31, 1999, to
$685,615,000 at March 31, 2000. This decrease resulted from the assumption by
the buyer of one of the Company's properties of a mortgage loan in the amount of
$20,571,000 and scheduled principal payments of approximately $2,319,000. This
decrease is partially offset by $6,790,000 of new mortgage loans in connection
with an acquisition and the construction of a property in Bedminster, New Jersey
(see below for further discussion).
In August 1999, the Company closed a $97.6 million secured financing with a
commercial bank ("Secured Financing"). In connection with the Secured Financing,
the Company entered into an interest rate cap agreement to hedge increases in
interest rates above a specified level of 11.21%. The agreement is for a term
concurrent with the Secured Financing instrument, is indexed to the 90-day LIBOR
rate, and is for a notional amount equal to the maximum amount available on the
Secured Financing loan. As of March 31, 2000, the 90-day LIBOR rate was 6.29%.
The Company paid a premium of approximately $434,000 at the inception of the cap
agreement, which is being amortized as additional interest expense over the life
of the agreement.
In the first quarter of 2000, the Company retired approximately $87.1 million of
unsecured Series A Senior Notes at a discount, as previously discussed.
In the first quarter of 2000, the Company obtained a $10.5 million construction
loan to build an 80,000 square foot office property in Bedminster, New Jersey.
Approximately $2.5 million was outstanding at March 31, 2000. The loan has a
maturity date of November 12, 2001 and bears interest at the floating rate of
LIBOR plus 2.25%. The interest rate on this loan at March 31, 2000 was 8.38%.
In the first quarter of 2000, the Company formed a limited liability company
(the "LLC") with an independent third party and contributed its interest in the
office property known as 2000 Corporate Ridge, located in McLean, Virginia.
Consideration received for this contribution included $14.7 million in cash and
the assumption of a $20.6 million mortgage by the LLC.
In March 2000, related to the acquisition of an industrial property from one of
the Company's development alliances, the Company assumed a $4.3 million secured
loan. This loan has a maturity date of October 1, 2000 (with options for two
6-month extensions) and bears interest at the floating rate of LIBOR plus 1.55%.
The interest rate on this loan at March 31, 2000 was 7.68%.
The Company has an unsecured line of credit provided by a group of commercial
banks (the "Credit Facility"). Outstanding borrowings under the Credit Facility
increased from $70,628,000 at December 31, 1999, to $72,901,000 at March 31,
2000. The increase was due to draws of $39,228,000 for acquisitions, stock
repurchases, and purchases of the Company's Series A Senior Notes, offset by pay
downs of $36,955,000 generated from proceeds from the sales of properties and
cash from operations. In February 2000, the maturity date on the Credit Facility
was extended from December 2000 to June 2002.
At March 31, 2000, the Company's total indebtedness included fixed-rate debt of
$536,832,000 and floating-rate indebtedness of $348,159,000. Approximately 65%
of the Company's total assets, comprising 103 properties, is encumbered by debt
at March 31, 2000.
It is the Company's policy to manage its exposure to fluctuations in market
interest rates through the use of fixed rate debt instruments to the extent
possible. At March 31, 2000, approximately 39% of the Company's outstanding
debt, including amounts borrowed under the Credit Facility, were subject to
variable rates. The Company may, from time to time, enter into interest rate
protection agreements intended to hedge the cost of new borrowings that are
reasonably assured of completion. It is not the Company's policy to engage in
hedging activities for previously outstanding debt instruments or for
23
<PAGE>
speculative purposes. At March 31, 2000, the Company was not a party to any open
interest rate protection agreements other than the interest rate cap contract
associated with the Secured Financing loan discussed above.
Equity and Debt Offerings
In January 1999, the Operating Partnership and the Company filed a shelf
registration statement with the SEC (the "January 1999 Shelf Registration
Statement") to register $300 million of debt securities of the Operating
Partnership and to carry forward the remaining $801.2 million in equity
securities of the Company from a November 1997 shelf registration statement
(declared effective by the SEC on December 18, 1997). The January 1999 Shelf
Registration Statement was declared effective by the SEC on January 25, 1999.
Therefore, the Operating Partnership and the Company have the capacity pursuant
to the January 1999 Shelf Registration Statement to issue up to $300 million in
debt securities and $801.2 million in equity securities, respectively. The
Company currently has no plans to issue equity or debt under these shelf
registrations.
Development Alliances
The Company is currently involved in 4 development alliances for the development
of approximately 713,000 square feet of office, office/flex and distribution
properties and 1,710 multifamily units in Colorado, Texas, New Jersey, Kansas
and Michigan. As of March 31, 2000, the Company has advanced approximately $40
million to these alliances. Under these development alliances, the Company has
certain rights to purchase the properties upon completion of development over
the next five years. In addition, the Company has loaned approximately $37.4
million (including accrued interest) under another development alliance to
continue the build-out of a 1,200 acre master-planned development in Denver,
Colorado.
Inflation
Substantially all of the leases at the industrial and retail Properties provide
for pass-through to tenants of certain operating costs, including real estate
taxes, common area maintenance expenses, and insurance. Leases at the
multifamily properties generally provide for an initial term of one month or one
year and allow for rent adjustments at the time of renewal. Leases at the office
Properties typically provide for rent adjustment and pass-through of certain
operating expenses during the term of the lease. All of these provisions may
permit the Company to increase rental rates or other charges to tenants in
response to rising prices and therefore, serve to reduce the Company's exposure
to the adverse effects of inflation.
Funds from Operations and Cash Available for Distribution
Funds from Operations, as defined by NAREIT, represents income (loss) before
minority interests and extraordinary items, adjusted for real estate related
depreciation and amortization and gains (losses) from the disposal of
properties. The Company believes that FFO is a widely used measure of the
financial performance of equity REITs which provides a relevant basis for
comparison among other REITs. Together with net income and cash flows, FFO
provides investors with an additional basis to evaluate the ability of a REIT to
incur and service debt and to fund acquisitions, developments and other capital
expenditures. FFO does not represent net income or cash flows from operations as
defined by GAAP, and should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indicator of the Company's operating
performance or as an alternative to cash flows from operating, investing and
financing activities (determined in accordance with GAAP) as a measure of
liquidity. FFO does not necessarily indicate that cash flows will be sufficient
to fund all of the Company's cash needs including principal amortization,
capital improvements and distributions to stockholders. Further, FFO as
disclosed by other REITs may not be comparable to the Company's calculation of
FFO. The Company calculates FFO in accordance with the White Paper on FFO
approved by the Board of Governors of NAREIT in March 1995.
In October 1999, NAREIT issued an update, 'White Paper on FFO-October 1999' to
clarify its definition of FFO. The clarification is effective January 1, 2000
and requires restatement for all periods presented in financial statements or
tables. FFO, as clarified by NAREIT, represents "net income excluding gains (or
losses) from sales of property, plus depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures will be calculated to reflect FFO
on the same basis." The Company will report using the clarified definition in
periods beginning after January 1, 2000.
Cash available for distribution ("CAD") represents net income (loss) before
minority interests and extraordinary items, adjusted for depreciation and
amortization including amortization of deferred financing costs and gains
24
<PAGE>
(losses) from the disposal of properties, less lease commissions and recurring
capital expenditures, consisting of tenant improvements and normal expenditures
intended to extend the useful life of the property such as roof and parking lot
repairs. CAD should not be considered an alternative to net income (computed in
accordance with GAAP) as a measure of the Company's financial performance or as
an alternative to cash flow from operating activities (computed in accordance
with GAAP) as a measure of the Company's liquidity, nor is it necessarily
indicative of sufficient cash flow to fund all of the Company's cash needs.
Further, CAD as disclosed by other REITs may not be comparable to the Company's
calculation of CAD.
<TABLE>
<CAPTION>
The following table sets forth the Company's calculation of FFO and CAD for the
three months ended March 31, 2000 (in thousands, except weighted average shares
and per share amounts):
March 31,
2000
-------------
<S> <C>
Income from operations before minority interest,
extraordinary items and preferred dividends $ 8,823
Preferred dividends (5,488)
Net (gain) loss on sales of real estate assets 695
Depreciation and amortization (1) 14,915
Adjustment to reflect FFO of Unconsolidated
JV's (2) 190
Adjustment to reflect FFO of Associated Companies (3) 164
-------------
FFO $ 19,299
=============
Amortization of deferred financing fees 639
Capital reserve -
Capital expenditures (4,989)
-------------
CAD $ 14,949
=============
Distributions per share (4) $ 0.42
=============
Diluted weighted average shares outstanding 34,096,464
=============
(1) Excludes depreciation of corporate office fixed assets.
(2) Reflects the adjustments to FFO required to reflect the FFO of the
unconsolidated joint ventures allocable to the Company. The Company's
investments in the joint ventures are accounted for using the equity method
of accounting.
(3) Reflects the adjustments to FFO required to reflect the FFO of the
Associated Companies allocable to the Company. The Company's investments in
the Associated Companies are accounted for using the equity method of
accounting.
(4) The distributions for the three months ended March 31, 2000, were paid on
April 17, 2000.
Forward Looking Statements; Factors That May Affect Operating Results
This Report on Form 10-Q contains forward looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
and Exchange Act of 1934, including statements regarding the Company's
expectations, hopes, intentions, beliefs and strategies regarding the future
including the Company's belief that cash generated by operations will be
adequate to meet operating requirements and to make distributions, the Company's
expectations as to the timing of the completion of the development projects
through its development alliances and the acquisition by the Company of
properties developed through its development alliances. There can be no
assurance that the actual outcomes or results will be consistent with such
expectations, hopes, intentions, beliefs and strategies. Forward looking
statements include statements regarding potential acquisitions, the anticipated
performance of future acquisitions, recently completed acquisitions and existing
properties, and statements regarding the Company's financing activities. All
forward looking statements included in this document are based on information
available to the Company on the date hereof. It is important to note that the
Company's actual results could differ materially from those stated or implied in
such forward-looking statements.
</TABLE>
25
<PAGE>
Factors which may cause the Company's results to differ include the inability to
complete anticipated future acquisitions, defaults or non-renewal of leases,
increased interest rates and operational costs, failure to obtain necessary
outside financing, difficulties in identifying properties to acquire and in
effecting acquisitions, failure to qualify as a real estate investment trust
under the Internal Revenue Code of 1986, environmental uncertainties, risks
related to natural disasters, financial market fluctuations, changes in real
estate and zoning laws, increases in real property tax rates and other factors
discussed under the caption "Forward Looking Statements; Factors That May Affect
Operating Results" in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" section of the Company's Annual Report on
Form 10-K for the year ended December 31, 1999, and other risk factors set forth
in the Company's other Securities and Exchange Commission filings. In addition,
past performance of the Company's Common Stock is not necessarily indicative of
results that will be obtained in the future from an investment in the Company's
Common Stock. Furthermore, the Company makes distributions to stockholders if,
as and when declared by its Board of Directors, and expects to continue its
policy of paying quarterly distributions, however, there can be no assurance
that distributions will continue or be paid at any specific level.
Risk Factors
Stockholders or potential stockholders should read the "Risk Factors" section of
the Company's latest annual report on Form 10-K filed with the Securities and
Exchange Commission ("SEC") in conjunction with this quarterly report on Form
10-Q to better understand the factors affecting the Company's results of
operations and the Company's common stock share price. The fact that some of the
risk factors may be the same or similar to the Company's past filings means only
that the risks are present in multiple periods. The Company believes that many
of the risks detailed here and in the Company's other SEC filings are part of
doing business in the real estate industry and will likely be present in all
periods reported. The fact that certain risks are endemic to the industry does
not lessen the significance of the risk.
26
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On March 14, 2000, the Federal District Court for the Northern District of
California dismissed with prejudice a class action complaint relating to the
Consolidation (the "BEJ Action"). The plaintiffs in the action failed to file an
appeal within the permitted period, so the BEJ Action is fully resolved. The
plaintiffs in the BEJ Action had voluntarily stayed the action pending
resolution of a separate action relating to the Consolidation, which was
resolved in 1999. Following the resolution of the other action, the Company
filed a motion to dismiss the BEJ Action in January 2000. The plaintiffs did not
respond to the Company's motion to dismiss and, as noted above, the court
dismissed the action and there was no appeal.
Certain other claims and lawsuits have arisen against the Company in its normal
course of business. The Company believes that such other claims and lawsuits
will not have a material adverse effect on the Company's financial position,
cash flow or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the quarter
ended March 31, 2000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
The Exhibit Index attached hereto is hereby incorporated by reference
to this item.
(b) Reports on Form 8-K:
On January 26, 2000, the Company filed a report on Form 8-K with respect
to Supplemental Information for the quarter ended December 31, 1999.
On April 26, 2000, the Company filed a report on Form 8-K with respect
to Supplemental Information for the quarter ended March 31, 2000.
27
<PAGE>
SIGNATURES
Pursuant to the requirements of Section l3 or l5(d) of the Securities Exchange
Act of l934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GLENBOROUGH REALTY TRUST INCORPORATED
By: Glenborough Realty Trust Incorporated,
Date: May 15, 2000 /s/ Andrew Batinovich
Andrew Batinovich
Director, President
and Chief Operating Officer
(Principal Operating Officer)
Date: May 15, 2000 /s/ Stephen Saul
Stephen Saul
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date: May 15, 2000 /s/ Terri Garnick
Terri Garnick
Senior Vice President,
Chief Accounting Officer,
Treasurer
(Principal Accounting Officer)
28
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit Title
11.01 Statement re: Computation of Per Share Earnings is shown in Note 11 of
the Consolidated Financial Statements of the Company in Item 1.
12.01 Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings
to Fixed Charges and Preferred Dividends.
27.01 Financial Data Schedule.
29
<PAGE>
<TABLE>
<CAPTION>
Exhibit 12.01
GLENBOROUGH REALTY TRUST INCORPORATED
Computation of Ratio of Earnings to Fixed Charges
and Ratio of Earnings to Fixed Charges and Preferred Dividends
For the five years ended December 31, 1999
and the three months ended March 31, 2000
(in thousands)
GRT
Predecessor
Entities,
Combined The Company
------------- ------------------------------------------------------------------------
Three Months
Ended
Year Ended December 31, March 31,
---------------------------------------------------------------------- -------------
1995 1996 1997 1998 1999 2000
------------- ----------- ----------- ------------ ------------ -------------
EARNINGS, AS DEFINED
Net Income (Loss) before Preferred
<S> <C> <C> <C> <C> <C> <C>
Dividends (2) $ 524 $ (1,609) $19,368 $ 44,602 $ 50,286 $ 8,051
Extraordinary items - 186 843 1,400 (984) 466
Federal & State income taxes 357 - - - - -
Minority Interest - 292 1,119 2,550 3,647 306
Fixed Charges 2,129 3,913 9,668 53,289 64,782 16,347
------------- ----------- ----------- ------------ ------------ -------------
$ 3,010 $ 2,782 $30,998 $ 101,841 $ 117,731 $ 25,170
------------- ----------- ----------- ------------ ------------ -------------
FIXED CHARGES AND PREFERRED DIVIDENDS, AS
DEFINED
Interest Expense $ 2,129 $ 3,913 $ 9,668 $ 53,289 $ 64,782 $ 16,347
Capitalized Interest - - - 1,108 2,675 788
Preferred Dividends - - - 20,620 22,280 5,488
------------- ----------- ----------- ------------ ------------ -------------
$ 2,129 $ 3,913 $ 9,668 $ 75,017 $ 89,737 $ 22,623
RATIO OF EARNINGS TO FIXED CHARGES (3)
1.41 0.71 (1) 3.21 1.87 1.75 1.47
------------- ----------- ----------- ------------ ------------ -------------
RATIO OF EARNINGS TO FIXED CHARGES AND
PREFERRED DIVIDENDS (3)
1.41 0.71 (1) 3.21 1.36 1.31 1.11
------------- ----------- ----------- ------------ ------------ -------------
(1) For the twelve months ended December 31, 1996, earnings were insufficient
to cover fixed charges by $1,131.
(2) Net Income (Loss) before Preferred Dividends includes depreciation and
amortization expense as a deduction.
(3) Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed Charges
and Preferred Dividends includes depreciation and amortization expense as a
deduction from earnings.
</TABLE>
30
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000929454
<NAME> GLENBOROUGH REALTY TRUST INCORPORATED
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1.000
<CASH> 846
<SECURITIES> 0
<RECEIVABLES> 4,460
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,306
<PP&E> 1,717,717
<DEPRECIATION> 125,136
<TOTAL-ASSETS> 1,743,242
<CURRENT-LIABILITIES> 13,862
<BONDS> 0
0
11
<COMMON> 30
<OTHER-SE> 756,363
<TOTAL-LIABILITY-AND-EQUITY> 1,743,242
<SALES> 0
<TOTAL-REVENUES> 64,165
<CGS> 0
<TOTAL-COSTS> 21,557
<OTHER-EXPENSES> 17,744
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,347
<INCOME-PRETAX> 8,517
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,517
<DISCONTINUED> 0
<EXTRAORDINARY> (466)
<CHANGES> 0
<NET-INCOME> 8,051
<EPS-BASIC> 0.08
<EPS-DILUTED> 0.08
</TABLE>
