================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-12566
G & L REALTY CORP.
(Exact name of Registrant as specified in its charter)
Maryland 95-4449388
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
439 N. Bedford Drive
Beverly Hills, California 90210
(Address of Principal Executive (Zip Code)
Offices)
Registrant's telephone number, including area code: (310) 273-9930
________________
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 .
--- ---
The number of shares outstanding of the Registrant's Common Stock as
of May 11, 2001 was 2,333,800 shares.
================================================================================
G&L REALTY CORP.
INDEX
Page
Part I Financial Information Number
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 2001 (unaudited) and December
31, 2000............................................................................. 3
Condensed Consolidated Statements of Operations for the Three Month Periods Ended
March 31, 2001 and 2000 (unaudited).................................................. 4
Condensed Consolidated Statements of Cash Flows for the Three Month Periods Ended
March 31, 2001 and 2000 (unaudited).................................................. 5 - 6
Notes to Condensed Consolidated Financial Statements (unaudited)..................... 7 - 18
Item 2 Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................... 19 - 23
Item 3 Quantitative and Qualitative Disclosures About Market Risk........................... 24
Part II Other Information
Item 1 Legal Proceedings.................................................................... 25
Item 2 Changes in Securities................................................................ 25
Item 3 Defaults Upon Senior Securities...................................................... 25
Item 4 Submission of Matters to a Vote of Security Holders.................................. 25
Item 5 Other Information.................................................................... 25
Item 6 Exhibits and Reports on Form 8-K..................................................... 26 - 29
Signature............................................................................................... 30
Page 2
G&L REALTY CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
March 31, December 31,
2001 2000
--------------------------------------
(Unaudited)
ASSETS
------
Rental properties (Note 3):
Land $ 28,599 $ 28,599
Buildings and improvements, net 138,993 139,510
Projects under development --- 171
-------- --------
Total rental properties 167,592 168,280
Cash and cash equivalents 4,018 2,791
Restricted cash 5,280 4,624
Tenant rent and reimbursements receivable, net 4,800 6,669
Unbilled rent receivable, net 2,488 2,412
Other receivables, net 48 46
Mortgage loans and notes receivable, net 11,398 11,244
Investments in unconsolidated affiliates (Note 6) 4,923 4,851
Deferred charges and other assets, net (Note 4) 4,579 4,549
-------- --------
TOTAL ASSETS $205,126 $205,466
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES:
Notes payable $158,229 $158,942
Accounts payable and other liabilities 5,052 6,099
Distributions payable 448 433
Tenant security deposits 1,540 1,367
-------- --------
Total liabilities 165,269 166,841
Commitments and Contingencies (Note 8) --- ---
Minority interest in consolidated affiliates (1,308) (1,266)
Minority interest in Operating Partnership --- ---
STOCKHOLDERS' EQUITY (Note 5):
Preferred shares - $.01 par value, 10,000,000 shares authorized,
liquidation preference of $25.00 per share
. Series A Preferred - 1,495,000 shares issued and 1,487,000 shares
outstanding as of March 31, 2001 and December 31, 2000 15 15
. Series B Preferred - 1,380,000 shares issued and 1,376,000 shares
outstanding as of March 31, 2001 and December 31, 2000 14 14
Common shares - $.01 par value, 50,000,000 shares authorized, 2,333,800
shares issued and outstanding as of March 31, 2001 and December 31,
2000 23 23
Additional paid-in capital 72,363 72,441
Distributions in excess of net income (31,250) (32,602)
-------- --------
Total stockholders' equity 41,165 39,891
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $205,126 $205,466
======== ========
See accompanying notes to Condensed Consolidated Financial Statements.
Page 3
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
For the Three Month
Periods Ended March 31,
2001 2000
----------------------------
REVENUES:
Rent $ 6,581 $ 6,789
Patient revenues 5,008 899
Tenant reimbursements 409 355
Parking 346 303
Interest and loan fees 510 484
Net gain on sale of assets --- 1,263
Lease termination income 2,613 ---
Other income 437 109
------- -------
Total revenues 15,904 10,202
------- -------
EXPENSES:
Property operations 2,177 1,855
Skilled nursing operations 4,530 818
Depreciation and amortization 1,473 1,533
Interest 3,298 3,423
Provision for doubtful accounts and notes receivable --- 2,288
General and administrative 848 700
------- -------
Total expenses 12,326 10,617
------- -------
Income (loss) from operations before minority interests,
equity in loss of unconsolidated affiliates and 3,578 (415)
extraordinary loss
Equity in loss of unconsolidated affiliates (83) (143)
Minority interest in consolidated affiliates (62) (67)
Minority interest in Operating Partnership --- 533
------- -------
Income before extraordinary loss 3,433 (92)
Extraordinary loss on early retirement of long-term debt --- (158)
------- -------
Net income (loss) 3,433 (250)
Dividends on preferred stock (1,790) (1,793)
------- -------
Net income (loss) available to common stockholders $ 1,643 $(2,043)
======= =======
Per common share data:
Basic:
------
Income (loss) before extraordinary loss $ 0.70 $ (0.75)
Extraordinary loss --- (0.06)
------- -------
Net income (loss) $ 0.70 $ (0.81)
======= =======
Fully diluted:
--------------
Income (loss) before extraordinary loss $ 0.70 $ (0.75)
Extraordinary loss --- (0.06)
------- -------
Net income (loss) $ 0.70 $ (0.81)
======= =======
Weighted average shares outstanding:
Basic 2,334 2,512
======= =======
Fully diluted 2,348 2,514
======= =======
See accompanying notes to Condensed Consolidated Financial Statements.
Page 4
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended March 31,
2001 2000
-------------------------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,433 $ (250)
Adjustments to reconcile net income to net cash provided by
Operating activities:
Depreciation and amortization 1,473 1,533
Amortization of deferred loan costs 170 136
Extraordinary loss on early retirement of long-term debt --- 158
Net gain on sale of assets --- (1,263)
Minority interests 62 (466)
Equity in loss of unconsolidated affiliates 83 143
Provision for doubtful accounts and notes receivables --- 2,288
Unbilled rent receivable, net (76) (67)
(Increase) decrease in:
Other receivables (2) 82
Tenant rent and reimbursements receivable 1,869 (1,567)
Prepaid expense and other assets (258) (803)
Accrued interest and loan fees receivable 18 285
Increase (decrease) in:
Accounts payable and other liabilities (1,047) 1,871
Tenant security deposits 173 6
------- -------
Net cash provided by operating activities 5,898 2,086
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of real estate assets --- (10,385)
Sale of real estate assets --- 8,794
Additions to rental properties (487) (1,041)
Pre-acquisition costs, net (10) 348
Construction in progress 171 (11)
Leasing commissions (178) (39)
Investment in mortgage loans and notes receivable (300) ---
Contributions to unconsolidated affiliates (155) (42)
Distributions from unconsolidated affiliates --- 1,213
Principal payments received from mortgage loans and notes receivable 128 100
------- -------
Net cash used in investing activities (831) (1,063)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Notes payable proceeds 5,100 7,513
Repayment of notes payable (5,813) (9,086)
Payment of deferred loan costs (208) (215)
Decrease (increase) in restricted cash (656) 380
Minority interest equity contribution --- 486
Purchase of common and preferred stock and partnership units --- (2,374)
Distributions (2,263) (2,584)
------- -------
Net cash used in financing activities (3,840) (5,880)
------- -------
See accompanying notes to Condensed Consolidated Financial Statements.
Continued...
Page 5
G&L REALTY CORP.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended March 31,
2001 2000
-----------------------------
(Unaudited)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,227 (4,857)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2,791 7,545
------ -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $4,018 $ 2,688
====== =======
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest $3,126 $ 3,457
====== =======
NONCASH INVESTING AND FINANCING ACTIVITIES
Distributions declared not yet paid $ 370 $ 378
====== =======
Preferred distributions due to minority partner $ 15 $ 14
====== =======
Transfers from projects under development to building $ 374 ---
====== =======
Transfer from investments in unconsolidated affiliates to notes receivable --- $ 3,070
====== =======
Transfer note receivable to land and building:
Land $ 252
Building 1,009
-------
Total $ 1,261
=======
Notes receivable $ 1,261
=======
Concluded.
Page 6
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. GENERAL
G&L Realty Corp. (the "Company") was formed as a Maryland corporation to
continue the ownership, management, acquisition and development activities
previously conducted by G&L Development, a California general partnership, the
Company's predecessor. All of the Company's assets are held by, and all of its
operations are conducted through, the following entities:
G&L Realty Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership")
G&L Realty Financing Partnership II, L.P., a Delaware limited
partnership (the "Realty Financing Partnership")*
G&L Medical Partnership, L.P., a Delaware limited partnership
(the "Medical Partnership")*
G&L Gardens, LLC, an Arizona limited liability company
("Maryland Gardens")*
435 North Roxbury Drive, Ltd., a California limited partnership
(the "Roxbury Partnership")
GL/PHP, LLC, a Delaware limited liability company ("GL/PHP")*
G&L Hampden, LLC, a Delaware limited liability company ("Hampden")*
G&L Valencia, LLC, a California limited liability company
("Valencia")
G&L Tustin, LLC, a California limited liability company ("Tustin")*
G&L Holy Cross, LLC, a California limited liability company ("Holy
Cross")*
G&L Burbank, LLC, a California limited liability company
("Burbank")*
GLH Pacific Gardens, LLC, a California limited liability company
("Pacific Gardens")
G&L Hoquiam, LLC, a California limited liability company ("Hoquiam")
G&L Lyon, LLC, a California limited liability company ("Lyon")
G&L Coronado (1998), LLC, a California limited liability company
("Coronado")
GLH Tarzana, LLC, a California limited liability company ("Tarzana")
G&L Heritage Care, LLC, a Delaware limited liability company
("Heritage")
G&L Massachusetts, LLC, a Delaware limited liability company
("Massachusetts")
G&L Aspen, LLC, a California limited liability company ("Aspen")
* The Realty Financing Partnership, the Medical Partnership, Maryland
Gardens, GL/PHP, Hampden, Tustin, Holy Cross, and Burbank are herein
collectively referred to as the "Financing Entities" and individually as
the "Financing Entity."
The Company, as the sole general partner and as owner of an approximately 79%
ownership interest, controls the Operating Partnership. The Company controls
the Financing Entities through wholly owned subsidiaries incorporated either in
the State of Delaware or the State of California (collectively, the
"Subsidiaries" and individually, a "Subsidiary"). Each Subsidiary either (i)
owns, as sole general partner or sole managing member, a 1% ownership interest
in its related Financing Entity or (ii) owns no interest and acts as the manager
of the Financing Entity. The remaining 99% ownership interest in each Financing
Entity, which is owned 1% by a Subsidiary, is owned by the Operating
Partnership, acting as sole limited partner or member. Financing Entities in
which a Subsidiary owns no interest are 100% owned by the Operating Partnership.
References in these condensed consolidated financial statements to the
Company include its operations, assets and liabilities including the operations,
assets and liabilities of the Operating Partnership, the Subsidiaries, the
Financing Entities, the Roxbury Partnership (in which the Operating Partnership
owns a 61.75% partnership interest and is the sole general partner), Pacific
Gardens (in which the Operating Partnership owns a 93% membership interest and
is a co-managing
Page 7
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
member), Tarzana (in which the Operating Partnership owns a 85% membership
interest and is a co-managing member) and Hoquiam, Lyon, Coronado, Heritage,
Massachusetts and Aspen (in which the Operating Partnership owns a 100%
interest).
In addition to the Subsidiaries, the Company also owns interests in various
unconsolidated affiliates. Although the Company's investment represents a
significant portion of the capital of such unconsolidated affiliates and the
Company exercises significant influence over the activities of these entities,
the Company does not have the requisite level of voting control to include the
assets, liabilities and operating activities of these entities in the
consolidated financial statements of the Company. The entities in which the
Company has unconsolidated financial interests are as follows:
. GLN Capital Co., LLC ("GLN") is a Delaware limited liability company
formed in 1996. GLN is owned 49.9% by the Operating Partnership and 50.1%
by an affiliate of Nomura Asset Capital Corp. ("Nomura"). GLN was formed
to fund loans to the senior care industry.
. G&L Grabel, San Pedro, LLC ("San Pedro") is a California limited
liability company formed on March 10, 1998 by the Company through the
Operating Partnership, and Gary Grabel, an experienced medical office
building ("MOB") manager. The Company and Gary Grabel contributed to San
Pedro 84% and 16% of the equity, respectively. However, the initial
ownership interests of the parties will be adjusted to 50% as each
partner receives a return of its initial capital contribution plus a
preferred return on their initial contribution. San Pedro was formed for
the purpose of acquiring three MOBs located at 1360 West 6th Street in
San Pedro, California.
. G&L Penasquitos, LLC ("Penasquitos LLC") is a California limited
liability company, formed by the Company on April 24, 1998, through the
Operating Partnership, and Parsons House, LLC, a California limited
liability company ("Parsons"). The Company and Parsons contributed to
Penasquitos LLC 75% and 25% of the equity, respectively. However, the
initial ownership interests of the parties will be adjusted to 50% as
each partner receives a return of its initial capital contribution plus
preferred distributions equal to 15% per annum on their capital
contribution. Penasquitos LLC was formed for the purpose of acquiring and
converting a building located in Rancho Penasquitos, California into an
assisted living facility.
. G&L Penasquitos, Inc. ("Penasquitos Inc.") is a California corporation
formed on April 21, 1998 by the Company, through the Operating
Partnership, and Parsons House, LLC, a California limited liability
company . The Company owns 75% of the total equity in Penasquitos Inc. in
the form of non-voting preferred stock. Parsons holds 25% of the total
equity and all of the voting common stock. Penasquitos Inc. was formed
for the purpose of operating an assisted living facility in Rancho
Penasquitos, California.
. GLH Pacific Gardens Corp. ("Pacific Gardens Corp.") is a California
corporation formed on June 25, 1998 by the Company, through the Operating
Partnership, and ASL Santa Monica, Inc., a California corporation
("ASL"). The Company owns 93% of the total equity in Pacific Gardens
Corp. in the form of non-voting preferred stock. ASL holds 7% of the
total equity in the form of common stock. Pacific Gardens Corp. was
formed for the purpose of operating an assisted living facility located
in Santa Monica, California, which was purchased by the Company. Since
July 1, 1999, Pacific Gardens Corp. has not operated the assisted living
facility and a wholly owned subsidiary of ASL assumed all of the assets
and liabilities of Pacific Gardens Corp. in order to operate the
facility.
. G&L Parsons on Eagle Run, LLC ("Eagle Run") is a California limited
liability company, formed on December 29, 1998, through the Operating
Partnership and Parsons. The Company and Parsons each contributed 50% of
the total equity in Eagle Run. Eagle Run was formed for the purpose of
acquiring a vacant piece of land in Omaha, Nebraska upon which the
members developed an assisted living facility.
. G&L Parsons on Eagle Run, Inc. ("Eagle Run Inc.") is a California
corporation formed on December 20, 1998 by the Company, through the
Operating Partnership, and Parsons. Eagle Run Inc. was formed for the
purpose of operating an assisted living facility in Omaha, Nebraska on
the land acquired by Eagle Run.
. Lakeview Associates, LLC ("Lakeview") is a California limited liability
company, formed on September 2, 1999 by the Company, through the
Operating Partnership and D.D.&F. ("Prestige"), an Oregon general
partnership. The Company and Prestige each contributed 50% of the equity
of Lakeview. The Company contributed land and construction in progress in
exchange for 50% of the equity of Lakeview and two notes totaling $1.4
million. Prestige contributed $250,000 for a 50% interest in Lakeview.
Lakeview was formed for the purpose of developing a two-story, 80 unit,
92 bed assisted living facility in Yorba Linda, California.
Page 8
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
. Tustin Heritage Park, LLC ("Heritage Park") is a California limited
liability company in which the Company has a 25% equity ownership
interest. In June 1999, the Company sold a vacant piece of land in Tustin
to Heritage Park. In exchange, the Company received $75,000 in cash, a
$425,000 first deed of trust and a 25% equity ownership interest in
Heritage Park. In September 2000, the first deed of trust was increased
to $675,000 in exchange for unearned development fees and an extension of
the note. Heritage Park intends to develop a 53-unit senior apartment
residence on the land.
GLN, San Pedro, Penasquitos Inc., Penasquitos LLC, Pacific Gardens Corp., Eagle
Run, Eagle Run, Inc., Lakeview and Heritage Park are herein collectively
referred to as the "Unconsolidated Affiliates" and individually as
"Unconsolidated Affiliate".
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business - The Company is a self-managed Real Estate Investment Trust
("REIT") that acquires, develops, manages, finances and leases healthcare
properties. The Company's business currently consists of investments in
healthcare properties and in debt obligations secured by healthcare properties.
Investments in healthcare property consist of acquisitions, made either directly
or through joint ventures, in medical office buildings ("MOBs"), skilled nursing
facilities ("SNFs") or assisted living facilities ("ALFs"). The Company's
lending activities consist of providing short-term secured loans to facilitate
third party acquisitions of healthcare properties.
Basis of Presentation - The accompanying condensed consolidated financial
statements include the accounts of the Company and its Subsidiaries. The
interests in the Roxbury Partnership, Pacific Gardens, Pacific Park, Tarzana and
the Operating Partnership that are not owned by the Company, have been reflected
as minority interests in the Operating Partnership. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The information presented as of and for the three-month period ended
March 31, 2001 and 2000 has not been audited by independent accountants, but
includes all adjustments (consisting of normal recurring adjustments) which are,
in the opinion of management, necessary for a fair presentation of the results
for such periods. The results of operations for the three months ended March 31,
2001 are not necessarily indicative of results that might be expected for the
full fiscal year.
Certain information and footnote disclosures normally included in annual
financial statements have been omitted. The Company believes that the
disclosures included in these financial statements are adequate for a fair
presentation and conform to reporting requirements established by the Securities
and Exchange Commission ("SEC"). These condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and the notes included in the Company's annual report on Form 10-K as
filed with the SEC.
Recent accounting pronouncements-- In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 133
"Accounting for Derivative Instruments and Hedging Activities," ("SFAS 133").
SFAS 133, as amended, is effective for fiscal years beginning after June 15,
2000 and requires all derivatives to be recorded on the balance sheet at fair
value as either assets or liabilities depending on the rights or obligations
under the contracts. SFAS 133 also establishes new accounting methodologies for
the following three classifications of hedges: fair value, cash flow and net
investment in foreign operations. The Company's adoption of SFAS 133 on January
1, 2001 did not have a material impact on the Company's financial position or
results of operations.
Page 9
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
3. BUILDINGS AND IMPROVEMENTS
Buildings and improvements consist of the following:
March 31, December 31,
2001 2000
----------------------------------
(in thousands)
Buildings and improvements.................................................... $155,439 $155,224
Tenant improvements........................................................... 9,792 9,214
Furniture, fixtures and equipment............................................. 3,347 3,280
-------- --------
168,578 167,718
Less accumulated depreciation and amortization................................ (29,585) (28,208)
-------- --------
Total...................................................................... $138,993 $139,510
======== ========
Rental property is recorded at cost less accumulated depreciation.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets as follows:
Buildings and improvements 40 years
Tenant improvements Life of lease
Furniture, fixtures and equipment 5 years
Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations and all external costs directly related to
acquisitions are capitalized.
4. DEFERRED CHARGES AND OTHER ASSETS
Deferred charges and other assets consist of the following:
March 31, December 31,
2001 2000
--------------------------
(in thousands)
Deferred loan costs........................................................... $ 4,219 $ 4,011
Pre-acquisition costs......................................................... 160 150
Leasing commissions........................................................... 1,664 1,486
Prepaid expense and other assets.............................................. 766 914
------- -------
6,809 6,561
Less accumulated amortization................................................. (2,230) (2,012)
------- -------
Total....................................................................... $ 4,579 $ 4,549
======= =======
Page 10
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
5. STOCKHOLDERS' EQUITY
Distributions in excess of net income--The Company has elected to be
treated, for federal income tax purposes, as a REIT. As such, the Company is
required to distribute annually, in the form of distributions to its
stockholders, at least 90% of its taxable income. In reporting periods in which
distributions exceed net income, stockholders' equity will be reduced by the
distributions in excess of net income in such period and will be increased by
the excess of net income over distributions in reporting periods in which net
income exceeds distributions. For tax reporting purposes, a portion of the
dividends declared represents a return of capital. The following table
reconciles net income and distributions in excess of net income for the three
months ended March 31, 2001 and for the year ended December 31, 2000:
March 31, December 31,
2001 2000
-----------------------------------
(in thousands)
Distributions in excess of net income at beginning of period................. $(32,602) $(25,412)
Net income during period..................................................... 3,433 1,149
Less: Distributions declared................................................. (2,081) (8,339)
Distributions in excess of net income........................................ $(31,250) $(32,602)
Earnings per common share--Basic earnings per share is computed by dividing
net income less preferred stock dividends by the weighted average number of
common shares outstanding during each period. Fully diluted earnings per share
is computed by dividing net income less preferred stock dividends by the
weighted average number of common shares outstanding during each year plus the
incremental shares that would have been outstanding upon the assumed exercise of
dilutive stock options. The treasury stock method is used to determine the
number of incremental common equivalent shares resulting from options to
purchase shares of common stock granted under the Company's 1993 Stock Incentive
Plan, as amended. As of March 31, 2001 and 2000 there were approximately
247,500 and 250,500 stock options outstanding with weighted average exercise
prices of $11.11 and $11.31, respectively. For the three months ended March 31,
2000, the incremental shares that would have been outstanding upon the assumed
exercise of stock options would have been anti-dilutive and, therefore, were not
considered in the computation of fully diluted earnings per share. The
following table reconciles the numerator and denominator of the basic and fully
diluted per share computations for net income for the three months ended March
31, 2001 and 2000:
Page 11
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
For the Three Month Periods
ended March 31,
2001 2000
---------------------------
(in thousands)
Numerator:
- ----------
Net income (loss) $ 3,433 $ (250)
Preferred stock dividends (1,790) (1,793)
------- -------
Net income (loss) available to common
stockholders $ 1,643 $(2,043)
======= =======
Denominator:
- ------------
Weighted average shares - basic 2,334 2,512
Dilutive effect of stock options 14 2
------- -------
Weighted average shares - fully diluted 2,348 2,514
======= =======
Per share:
- ---------
Basic $ 0.70 $ (0.81)
Dilutive effect of stock options --- ---
------- -------
Fully diluted $ 0.70 $ (0.81)
======= =======
On May 10, 2001, the Board of Directors of the Company approved a
definitive merger agreement with Daniel M. Gottlieb and Steven D. Lebowitz, the
Chief Executive Officer and the President, respectively, of the Company, for the
acquisition of the Company's publicly-held Common Stock for a cash price of
$12.00 per share. The acquisition of the shares is to be effected through the
merger of an entity newly formed by Mr. Gottlieb and Mr. Lebowitz. The Series A
and Series B Preferred Stock would remain outstanding following the consummation
of the merger.
The merger is conditioned on the approval of the merger and the definitive
agreement by the affirmative vote of holders of a majority of the outstanding
shares of Common Stock; Houlihan Lokey Howard & Zukin Financial Advisors, Inc.,
financial advisor to the Special Committee of the Board of Directors, not
withdrawing or materially and adversely modifying the fairness opinion it has
delivered to the Special Committee; the receipt by Mr. Gottlieb and Mr. Lebowitz
of necessary financing; the receipt of applicable governmental and third party
consents and approvals; and other conditions that are customary for transactions
of this type. The definitive agreement also contains other provisions that are
common in agreements of this type, including reimbursement of certain expenses
incurred by Mr. Gottlieb and Mr. Lebowitz, standstill provisions and provisions
permitting the Company to terminate the agreement upon receipt of a superior
offer and under certain other circumstances upon payment of a termination fee.
In connection with this agreement, Messrs. Gottlieb and Lebowitz announced
that they intend to make a cash tender offer for up to approximately 16% of the
total number of outstanding shares of Preferred Stock at a price of $17.50 per
share of Series A and $17.00 per share of Series B. The tender offer would occur
during the period in which the Company solicits proxies for the stockholders
meeting to consider the proposed merger and would close concurrently with, and
be subject to, the closing of the merger. In addition, Mr. Gottlieb and Mr.
Lebowitz have advised the Company that, prior to the record date for the
stockholders meeting, they intend to convert Operating Partnership Units so that
they will own approximately 42% of the outstanding Common Stock entitled to vote
on the definitive agreement. Mr. Gottlieb and Mr. Lebowitz also own stock
options which, if exercised, would increase their ownership to approximately 45%
of the outstanding common stock.
See also the Company's Current Reports on Form 8-K filed on December 1,
2000, February 22, 2001, April 16, 2001 and May 11, 2001 for more information
regarding the proposal from Messrs. Gottlieb and Lebowitz and the agreement with
them.
Page 12
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
6. INVESTMENTS IN UNCONSOLIDATED AFFILIATES
The Company has investments in various unconsolidated affiliates as described in
Note 1. The following table provides a summary of the Company's investment in
each of these entities as of March 31, 2001. (In thousands).
Penasquitos Penasquitos Heritage Pacific
GLN San Pedro LLC Inc. Park Gardens Corp.
------------------------------------------------------------------------------------
Opening balance at beginning of
period.......................... $765 $1,144 $161 $ 20 $ --- $(312)
Equity in (loss) earnings of
affiliates...................... --- 52 (1) --- --- ---
Cash contributions............... --- --- 70 --- --- ---
Cash distributions............... --- --- --- --- --- ---
---- ------ ---- ----- ----- -----
Equity, before inter-company
adjustments..................... 765 1,196 230 20 --- (312)
---- ------ ---- ----- ----- -----
Intercompany transactions:
Receivable (payable), net........ 66 88 248 (20) 13 110
---- ------ ---- ----- ----- -----
Investment in unconsolidated
affiliates...................... $831 $1,284 $478 $ --- $ 13 $(202)
==== ====== ==== ===== ===== =====
Eagle Run, Inc. Eagle Run Lakeview Total
------------------------------------------------------
Opening balance at beginning of
period.......................... $(370) $655 $ 250
Equity in (loss) earnings of
affiliates...................... (153) 19 --- (83)
Cash contributions............... --- --- 54 124
Cash distributions............... --- --- --- ---
----- ---- ------ ------
Equity, before inter-company
adjustments..................... (523) 674 304 2,354
----- ---- ------ ------
Intercompany transactions:
Receivable (payable), net........ 9 48 2,007 2,569
----- ---- ------ ------
Investment in unconsolidated
affiliates...................... $(514) $722 $2,311 $4,923
===== ==== ====== ======
Page 13
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
Following is a summary of the condensed financial information of each of the
unconsolidated affiliates as of and for the three months ended March 31, 2001.
(In thousands).
Pacific
San Penasquitos Penasquitos Heritage Gardens
GLN Pedro LLC Inc. Park Corp.
-------------------------------------------------------------------------------
Financial Position:
- -------------------
Land................................. $ $ 1,882 $ 641 $ --- $ 750 $ ---
Buildings............................ --- 4,195 6,356 --- --- ---
Notes receivable, net................ 1,585 --- --- --- --- ---
Other assets......................... --- 320 1,371 --- 238 ---
Notes payable........................ --- (4,707) (7,949) --- (940) ---
Other liabilities.................... (60) (465) (390) (10) (48) (349)
------ ------- ------- ---- ----- -----
Net assets............................. $1,525 $ 1,225 $ 29 $(10) $ --- $(349)
====== ======= ======= ==== ===== =====
Partner's equity:
- -----------------
G&L Realty Partnership, L.P.......... $ 765 $ 1,196 $ 230 $ 20 $ --- $(312)
Others............................... 760 29 (201) (30) --- (37)
------ ------- ------- ---- ----- -----
Total equity........................... $1,525 $ 1,225 $ 29 $(10) $ --- $(349)
====== ======= ======= ==== ===== =====
Operations:
- -----------
Revenues............................. $ $ 276 $ 244 $--- $ --- $ ---
Expenses............................. --- (224) (246) --- --- ---
------ ------- ------- ---- ----- -----
Net (loss) income...................... $ --- $ 52 $ (2) $--- $ --- $ ---
====== ======= ======= ==== ===== =====
Allocation of net (loss) income:
- --------------------------------
G&L Realty Partnership, L.P.......... $ --- $ 52 $ (1) $--- $ --- $ ---
Others............................... --- --- (1) --- --- ---
------ ------- ------- ---- ----- -----
Net (loss) income...................... $ --- $ 52 $ (2) $--- $ --- $ ---
====== ======= ======= ==== ===== =====
Eagle Run
Inc. Eagle Run Lakeview Total
----------------------------------------------
Financial Position:
- -------------------
Land................................. $ --- $ 1,191 $ 947 $ 5,411
Buildings............................ --- 4,876 --- 15,427
Notes receivable, net................ --- --- --- 1,585
Other assets......................... 475 1,147 2,716 6,267
Notes payable........................ --- (5,808) (2,361) (21,765)
Other liabilities.................... (1,522) (69) (748) (3,661)
------- ------- ------- --------
Net assets............................. $(1,047) $ 1,337 $ 554 $ 3,264
======= ======= ======= ========
Partner's equity:
- -----------------
G&L Realty Partnership, L.P.......... $ (523) $ 674 $ 304 $ 2,354
Others............................... (524) 663 250 910
------- ------- ------- --------
Total equity........................... $(1,047) $ 1,337 $ 554 $ 3,264
======= ======= ======= ========
Operations:
- -----------
Revenues............................. $ 646 $ 256 $ --- $ 1,422
Expenses............................. (952) (218) --- (1,640)
------- ------- ------- --------
Net (loss) income...................... $ (306) $ 38 $ --- $ (218)
======= ======= ======= ========
Allocation of net (loss) income:
- --------------------------------
G&L Realty Partnership, L.P.......... $ (153) $ 19 $ --- $ (83)
Others............................... (153) 19 --- (135)
------- ------- ------- --------
Net (loss) income...................... $ (306) $ 38 $ --- $ (218)
======= ======= ======= ========
Page 14
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. SEGMENT INFORMATION
The Company's business currently consists of the following segments:
. Medical office buildings - These investments consist of 24 high quality
MOBs, two retail facilities and one parking facility totaling
approximately 874,000 square feet and all located in Southern California.
These properties are owned either directly by the Company or indirectly
through joint ventures.
. Skilled nursing facilities - These investments consist of seven SNFs, one
senior apartment complex which is located adjacent to the SNF in Phoenix,
Arizona and one hospital located in Tustin, California. The SNFs are
located in Hampden, Massachusetts, Phoenix, Arizona, Hoquiam, Washington
and Chico and Paso Robles, California. Two of the SNFs were acquired
through foreclosure in the first quarter of 2000 and are currently not
operating. The five operating SNFs contain over 600 beds that are
typically occupied by residents who require a high level of daily nursing
care. The hospital consists of 183 beds and is 100% leased to a third-
party operator. All of the SNFs, the apartment complex and the hospital
are owned 100% by the Company. In addition, the Company currently holds
the operating license in four of the seven SNFs. On March 15, 2000, the
Company obtained licenses from the Commonwealth of Massachusetts to
operate the three SNFs owned by the Company in Hampden, Massachusetts. The
Company then entered into a management agreement with a third-party
company to manage the facility. As a result, all of the assets,
liabilities, revenues and expenses of these SNFs are reflected in the
condensed consolidated financial statements of the Company and the segment
information provided below. The Company also holds the license to operate
its SNF located in Phoenix, Arizona. On April 1, 2000, the Company
terminated its lease with the operator of this SNF and entered into a
management agreement with a new manager. For the nine months ended
December 31, 2000, the assets, liabilities, revenues and expenses of this
SNF were also included in the condensed consolidated financial statements
of the Company. On January 1, 2001, the Company entered into a new lease
with a new manager which entitles the Company to monthly lease payments.
As a result of this new lease, the assets, liabilities, revenues and
expenses of this SNF are no longer included in the condensed consolidated
financial statements of the Company. The Company will be required to pay
the applicable corporate income tax on any net income produced by the SNFs
located in Hampden, Massachusetts, although the Company's REIT status will
not be affected. While the Company does not intend to hold these operating
licenses for the long term, the Company believes it is currently in the
best interests to own the licenses to operate these facilities.
. Assisted living facilities - These investments consist of four ALFs, all
owned through joint ventures. The four ALFs contain over 350 units that
are typically occupied by residents who require a less intense level of
care in comparison to the SNFs. The Company's joint venture partner in
each of these ALFs operates the facility.
. Debt obligations - These investments consist of short-term secured and
unsecured loans made to third parties to facilitate the acquisition of
healthcare facilities. As of March 31, 2001, the Company had eleven loans
outstanding with a net book value of $11.4 million.
The tables on the following pages reconcile the Company's income and expense
activity for the three months ended March 31, 2001 and 2000 and balance sheet
data as of March 31, 2001.
Page 15
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2001 Reconciliation of Reportable Segment Information
For the three months ended March 31, 2001
Medical Skilled Assisted Debt
Office Nursing Living Obligations Other Total
------- ------- --------- ----------- ------- --------
(In thousands)
Revenue:
Rents, tenant reimb. and parking............. $6,229 $ 419 $ 688 $ --- $ --- $ 7,336
Patient revenues............................. --- 5,008 --- --- --- 5,008
Interest and loan fees....................... 44 3 --- 408 55 510
Lease termination income..................... 2,613 --- --- --- --- 2,613
Other income................................. 105 318 --- --- 14 437
------ ------ ----- ----- ------ -------
Total revenues............................. 8,991 5,748 688 408 69 15,904
------ ------ ----- ----- ------ -------
Expenses:
Property operations.......................... 1,845 253 43 36 --- 2,177
Skilled nursing operations................... --- 4,530 --- --- --- 4,530
Depreciation and amortization................ 1,079 253 128 --- 13 1,473
Interest..................................... 2,242 478 373 202 3 3,298
Provision for doubtful accounts and notes
receivable.................................. --- --- --- --- --- ---
General and administrative................... --- --- --- --- 848 848
------ ------ ----- ----- ------ -------
Total expenses............................. 5,166 5,514 544 238 864 12,326
------ ------ ----- ----- ------ -------
Income (loss) from operations................. 3,825 234 144 170 (795) 3,578
Equity in earnings (loss) of unconsolidated
affiliates................................... 52 --- (135) --- --- (83)
------ ------ ----- ----- ------ -------
Income (loss) from operations before minority
interests.................................... $3,877 $ 234 $ 9 $ 170 $ (795) $ 3,495
====== ====== ===== ===== ====== =======
2000 Reconciliation of Reportable Segment Information
For the three months ended March 31, 2000
Medical Skilled Assisted Debt
Office Nursing Living Obligations Other Total
------- -------- --------- ------------ ------- --------
(In thousands)
Revenue:
Rents, tenant reimb. and parking............. $6,294 $ 828 $ 325 $ --- $ --- $ 7,447
Patient revenues............................. --- 899 --- --- --- 899
Interest and loan fees....................... 60 2 1 364 57 484
Net gain on sale of assets................... 1,405 (142) --- --- --- 1,263
Other income................................. 94 1 --- --- 14 109
------ ------ ----- ------- ----- -------
Total revenues............................. 7,853 1,588 326 364 71 10,202
------ ------ ----- ------- ----- -------
Expenses:
Property operations.......................... 1,582 228 30 15 --- 1,855
Skilled nursing operations................... --- 818 --- --- --- 818
Depreciation and amortization................ 1,233 206 75 --- 19 1,533
Provision for doubtful accounts and notes
receivable.................................. --- 563 --- 1,725 --- 2,288
Interest..................................... 2,286 393 466 208 70 3,423
General and administrative................... --- --- --- --- 700 700
------ ------ ----- ------- ----- -------
Total expenses............................. 5,101 2,208 571 1,948 789 10,617
------ ------ ----- ------- ----- -------
Income (loss) from operations................. 2,752 (620) (245) (1,584) (718) (415)
Equity in earnings (loss) of unconsolidated
affiliates................................... 31 (8) (164) (2) --- (143)
------ ------ ----- ------- ----- -------
Income (loss) from operations before minority
interests.................................... $2,783 $ (628) $(409) $(1,586) $(718) $ (558)
====== ====== ===== ======= ===== =======
Page 16
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
2001 Reconciliation of Reportable Segment Information
As of March 31, 2001
Medical Skilled Assisted Debt
Office Nursing Living Obligations Other Total
--------- -------- -------- ----------- ------- --------
(In thousands)
Rental properties............................ $114,631 $31,028 $21,705 $ --- $ 228 $167,592
Mortgage loans and notes receivable, net..... --- 290 --- 11,108 --- 11,398
Other assets................................. 10,875 5,265 4,287 2,095 3,614 26,136
-------- ------- ------- ------- ------ --------
Total assets.............................. $125,506 $36,583 $25,992 $13,203 $3,842 $205,126
======== ======= ======= ======= ====== ========
Other assets:
Cash and cash equivalents................... $ 456 $ 9 $ 181 $ --- $3,372 $ 4,018
Restricted cash............................. 3,670 702 34 874 --- 5,280
Tenant rent and reimbursement receivable,
net........................................ 382 3,508 833 21 56 4,800
Unbilled rent receivable, net............... 2,417 71 --- --- --- 2,488
Other receivables, net...................... 13 --- --- 35 --- 48
Investment in unconsolidated affiliates..... 1,284 --- 2,808 831 --- 4,923
Deferred loan costs, net.................... 1,686 574 388 223 --- 2,871
Pre-acquisition costs....................... --- 49 --- 111 --- 160
Deferred lease costs, net................... 773 9 --- --- --- 782
Prepaid expense and other................... 194 343 43 --- 186 766
-------- ------- ------- ------- ------ --------
Total other assets........................ $ 10,875 $ 5,265 $ 4,287 $ 2,095 $3,614 $ 26,136
======== ======= ======= ======= ====== ========
8. COMMITMENTS AND CONTINGENCIES
The Company is the guarantor on a $500,000 letter of credit in favor of NVHF
Affiliates, LLC, a non-profit low-income apartment owner. The Company holds an
unsecured promissory note from NVHF Affiliates, LLC in the same amount. The
Company at this time does not anticipate having to pay anything under this
letter of credit.
Neither the Company, the Operating Partnership, the Financing Entities, the
Subsidiaries, Maryland Gardens, the Roxbury Partnership, Valencia, Pacific
Gardens, Hoquiam, Lyons, Coronado, Tarzana, Heritage, Massachusetts, Aspen, the
Unconsolidated Affiliates nor any of the assets within their portfolios of MOBs,
parking facilities, and retail space (the "Properties") is currently a party to
any material litigation, except as discussed below.
On August 15, 1997, a subsidiary of the Company, GL/PHP, LLC ("GL/PHP")
borrowed $16 Million from Nomura Asset Capital Corp. ("Nomura"), the proceeds of
which were used to repay a loan made by PHP Healthcare Corporation ("PHP") in
connection with the purchase by GL/PHP of six New Jersey primary care centers
(the "New Jersey Properties"). Nomura received a first lien against the real
properties. The New Jersey Properties were leased by Pinnacle Health
Enterprises, LLC ("Pinnacle"), a subsidiary of PHP, and PHP guaranteed the
lease. Concurrently with the $16 million loan, the Operating Partnership
obtained a new $2 million loan from PHP evidenced by a $2 million promissory
note payable to PHP. The note by its terms was nonnegotiable and provides for a
right of offset against payments of interest and principal in an amount equal to
any losses sustained by reason of any defaults by Pinnacle under its lease with
GL/PHP, discussed below.
As of August 15, 1997, Pinnacle leased the New Jersey Properties from GL/PHP
under the terms of a 17-year net operating lease. PHP guaranteed the obligations
of its subsidiary under the lease. In November 1998, Pinnacle filed a Chapter
11 bankruptcy petition in the United States Bankruptcy Court of the District of
Delaware and its case was voluntarily converted to a Chapter 7 case. Also in
November 1998, PHP filed a Chapter 11 bankruptcy petition in the United States
Bankruptcy Court of the District of Delaware. CapMark Services, L.P.
("CapMark"), the loan servicer and successor to Amresco Management Inc., has
foreclosed on its security and taken title to the New Jersey Properties.
Page 17
G&L REALTY CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The Operating Partnership filed a declaratory relief action in the New Jersey
State Court seeking a determination that LaSalle National Bank ("LaSalle"), the
successor to Nomura, as trustee for the holders of certain obligations including
the Nomura loan, did not have any rights against said $2 million note. LaSalle
claims it is entitled to the $2 million borrowed from PHP under the deed of
trust and assignment of rent with GL/PHP. After proceedings in both California
and New Jersey, it was determined that this matter will be heard in the Federal
District Court in New Jersey. The Operating Partnership believes that the
lawsuit will be resolved with no adverse impact to the Company, however no
assurances can be given at this time that this result will be obtained.
In November 1999, Landmark Healthcare Facilities, LLC ("Landmark") filed a
lawsuit against Valencia, a subsidiary of the Company, claiming that Landmark is
entitled to approximately $600,000 plus interest under a development agreement
entered into between Valencia and Landmark for the development of an MOB in
Valencia, California. The Company is vigorously opposing the lawsuit and has
filed a counter suit to recover approximately $400,000 plus interest that was
already paid under the development agreement and for a judgment and declaration
that all of Landmark's rights, title and interest in Valencia have been
terminated or assigned to the Company. The litigation went to trial on March
12, 2001. On March 21, 2001, the court issued a tentative ruling on the matter
in favor of the Company. Final judgement by the court is pending.
Two putative shareholder class actions have been filed against the Company
and its directors arising out of the proposal by Daniel M. Gottlieb and Steven
D. Lebowitz, the Chief Executive Officer and President, respectively, of the
Company, to acquire all of the outstanding shares of the Company's common stock
not currently owned by them. The first suit, Lukoff v. G&L Realty Corp. et al.,
case number BC 241251, was filed in the Superior Court of the State of
California, County of Los Angeles, on December 4, 2000. The second suit, Abrons
v. G&L Realty Corp. et al., case number 24-C-00-006109, was filed in the Circuit
Court for Baltimore City, Maryland, on December 14, 2000. Both actions assert
claims for breach of fiduciary duty and seek, among other things, compensatory
damages and to enjoin the transaction. Defendants have filed a motion to dismiss
the Abrons action on the ground that the complaint fails to state a claim. All
of the Defendants, except the Company, have filed an additional motion to
dismiss the Abrons action for lack of personal jurisdiction. Defendants also
have filed a motion to dismiss or stay the Abrons action on grounds of forum non
conveniens and comity. In the Lukoff action, Defendants have filed a demurrer to
the complaint on the ground that it fails to state facts sufficient to
constitute a cause of action. Defendants deny the claims, although it is
premature to predict the outcome of these actions.
In January 2001, the Company settled a lawsuit with Cigna Healthcare, Inc and
Cigna Healthcare of California ("Cigna") and received a settlement of $4.1
million. The settlement ended litigation against Cigna for delinquent rent,
future rent and other amounts owed under a lease at the Company's MOB located in
Irwindale, California. At the time of the settlement the total delinquent rent
was approximately $1.5 million. The Company recorded lease termination income of
$2.6 million in the first quarter for the remainder of the proceeds.
9. ACQUISITIONS, DISPOSITIONS AND FINANCINGS
In February 2001, the Company used the proceeds from a new $5.1 million loan
secured by two of its properties located in Tustin, California to repay $5.0
million of the outstanding loan balance on an existing $7.5 million short-term
loan secured by three of its properties located in Tustin, California. The
new loan bears interest at prime plus 1.00% and is due on February 21, 2002.
Page 18
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Unaudited Condensed Consolidated Financial Statements and Notes thereto included
elsewhere in this Quarterly Report on Form 10-Q and the Company's 2000 Annual
Report on Form 10-K as previously filed with the SEC.
Information contained in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contains forward-looking statements. These
statements can be identified by the use of forward-looking terminology such as
"may," "will," "expect," "anticipate," "estimate" or "continue" or the negative
thereof or other comparable terminology. Any one factor or combination of
factors could cause the Company's actual operating performance or financial
results to differ substantially from those anticipated by management. Factors
influencing the Company's operating performance and financial results include,
but are not limited to, changes in the general economy, the supply of, and
demand for, healthcare related real estate in markets in which the Company has
investments, the availability of financing, governmental regulations concerning,
but not limited to, new construction and development, the creditworthiness of
tenants and borrowers, environmental issues, healthcare services and government
participation in the financing thereof, and other risks and unforeseen
circumstances affecting the Company's investments which may be discussed
elsewhere in this Quarterly Report on Form 10-Q and the Company's 2000 Annual
Report on Form 10-K as previously filed with the SEC.
Results of Operations
- ---------------------
Comparison of the Three Month Period Ended March 31, 2001 versus the Three
Month Period Ended March 31, 2000.
Total revenues increased by $5.7 million, or 56%, from $10.2 million in the
first quarter of 2000, to $15.9 million for the same period in 2001. Patient
revenues relating to the skilled nursing facilities in which the Company
currently owns the license to operate accounted for $4.1 million of this
increase. On March 15, 2000, the Company obtained licenses from the
Commonwealth of Massachusetts to operate the three SNFs comprising 383 beds
owned by the Company and located in Hampden, Massachusetts. As a result of the
license transfer, all of the assets, liabilities, revenues and expenses of these
SNFs beginning March 15, 2000 are reflected in the condensed consolidated
financial statements of the Company. On April 1, 2000, the Company obtained the
license to operate its SNF located in Phoenix, Arizona. For the nine months
ended December 31, 2000, the assets, liabilities, revenues and expenses of this
SNF were also included in the condensed consolidated financial statements of the
Company. On January 1, 2001, the Company entered into a new lease with a new
manager which entitles the Company to monthly lease payments. As a result of
this new lease, the assets, liabilities, revenues and expenses of this SNF are
no longer included in the condensed consolidated financial statements of the
Company.
Rents, tenant reimbursements and parking revenues decreased by $0.1 million,
or 1%, from $7.4 million in the first quarter of 2000, to $7.3 million for the
same period in 2001. The loss of rental revenue related to the termination of
the lease at the Company's MOB located in Irwindale, California accounted for
$0.3 million of this decrease. In addition, $0.5 million of this decrease was
related to the loss of rental revenue from the SNFs discussed above in which the
Company now owns the licenses to operate. Previously, the Company collected
monthly rent for these facilities in the form of lease payments from the prior
operator. These decreases were offset by a $0.2 million increase in rental
revenues at two of the Company's SNFs resulting from new lease agreements.
Also, during the year 2000 and the first quarter of 2001, the Company increased
occupancy at its MOB properties by 3.4% and increased its rental rates per the
terms of its lease agreements resulting in an increase in rental revenues of
approximately $0.5 million.
Interest and loan fee income increased approximately $0.1 million, or 25%,
from $0.4 million in the first quarter of 2000, to $0.5 million for the same
period in 2000. This increase was due to additional interest income related to
the financing by the Company in 1999 of an apartment complex located in Tulsa,
Oklahoma.
The Company recognized a net gain on the sale of assets in the amount of $1.3
million in the first quarter of 2000. The sale, in January 2000, of a 33,000
square foot MOB located in Aliso Viejo, California
Page 19
to Hoag Memorial Hospital accounted for $1.4 million of the gain. This gain was
offset by the loss of $142,000 on the sale of the Company's 50% interest in
Valley Convalescent, LLC, an unconsolidated affiliate.
The Company recognized lease termination income in the amount of $2.6 million
in the first quarter of 2001. This was related to the settlement of a lawsuit
for delinquent rent, future rent and other amounts owed under a lease at the
Company's MOB located in Irwindale, California. The Company sued the tenant,
which had been in default on their rent since December 1999, to recover the
delinquent rent payments as well as all future rent through the end of the lease
which was to expire on November 30, 2004. In January 2001, the Company received
a settlement in the amount of $4.1 million. At the time of the settlement the
total delinquent rent was approximately $1.5 million. The Company recorded
lease termination income of $2.6 million for the remainder of the proceeds.
Other income increased $0.3 million in the first quarter of 2001 compared to
the same period in 2000. This increase is due to the amortization of negative
goodwill related to the Company's acquisition of the operating licenses at its
three SNFs located in Hampden, Massachusetts and the recognition of income
relating to cash received on accounts receivable that arose prior to March 15,
2000.
Total expenses increased by $1.7 million, or 16%, from $10.6 million for the
three months ended March 31, 2000, to $12.3 million for the same period in 2001.
The consolidation of the operating revenues and expenses of the three Hampden
SNFs as of March 15, 2000 as discussed above accounted for $3.7 million of this
increase in total expenses. This increase was offset by a $2.3 million decrease
in provisions for doubtful accounts, notes and bonds receivable.
Property operating expenses increased by $0.3, or 16%, from $1.9 million in
the first quarter of 2000 to $2.2 million in the same period in 2001. This
increase is mainly due to additional utility and repairs and maintenance costs
at the Company's MOBs.
Depreciation and amortization expense decreased $0.1 million, or 7%, from
$1.5 million for the three months ended March 31, 2000, to $1.4 million for the
same period in 2001. This decrease was related to the foreclosure of the
Company's six MOBs located in New Jersey during 2000.
Interest expense decreased $0.1 million, or 3%, from $3.4 million for the
three months ended March 31, 2000, to $3.3 million for the same period in 2001.
This decrease was due to the August 2000 repayment of the Company's line of
credit as well as decreased interest payments on the Company's variable rate
mortgages due to lower interest rates.
General & administrative costs increased $0.2 million, or 29%, from $0.7
million for the three months ended March 31, 2000, to $0.9 million for the same
period in 2001. This increase was attributed to the write- off of acquisition
and construction costs associated with a discontinued development project.
Equity in loss of unconsolidated affiliates increased $0.1 million for the
three months ended March 31, 2001 compared to the same period in 2000. This
increase was primarily the result of increased occupancy rates at the facilities
associated with the Company's 50% investment in Penasquitos LLC and the
Company's 50% investment in Eagle Run Inc. In March 1999, The Arbors at Rancho
Penasquitos, an ALF owned by the Company through Penasquitos LLC, commenced
operations. The facility has been in a lease-up phase since opening in March
1999 and therefore had been producing a net loss. Eagle Run commenced
operations in November 1999 and produced a net loss for the first quarter of
2001. Occupancy rates at both facilities are increasing on a monthly basis and
are expected to stabilize during 2001, at which time both facilities are
expected to produce income for the Company.
During 2000, the Company recorded an extraordinary loss on the early
retirement of long-term debt in the amount of $0.2 million. This loss was a
result of pre-payment fees and the write-off of deferred loan fees relating to
the repayment of a $5.5 million loan secured by a 33,000 square foot MOB in
Aliso Viejo, California. The building was sold to Hoag Memorial Hospital
Presbyterian on January 25, 2000 for a price of $8.3 million. The Company used
a portion of the proceeds to repay the $5.5 million loan.
Net income increased $3.6 million, from a net loss of $0.2 million for the
three months ended March 31, 2000 to a gain of $3.4 million for the same period
in 2001. This increase was primarily due to the $4.1
Page 20
million increase in patient revenues, the $2.9 million increase in other income
and the $2.3 million decrease in provisions for doubtful accounts and notes
receivable. These were offset by the $3.7 million increase in skilled nursing
operation expenses, the $1.3 million decrease in net gains on sale of assets and
the $0.3 million increase in property operations.
Liquidity and Capital Resources
- -------------------------------
As of March 31, 2001, the Company's direct investment in net real estate
assets totaled approximately $167.6 million, $4.9 million in joint ventures and
$11.4 million invested in notes receivable. Total debt outstanding as of March
31, 2001 totaled $158.2 million.
The Company obtains its liquidity from multiple internal and external
sources. Internally, funds are derived from the operation of MOBs, SNFs, ALFs
and senior care lending activities. These funds primarily consist of Funds from
Operations ("FFO - see discussion below of FFO). The Company's external sources
of capital consist of various secured loans. The Company's ability to expand its
MOB, ALF and SNF Property operations requires continued access to capital to
fund new investments. During the first three months of 2001, the Company
received proceeds of $4.1 million related to the settlement of a lawsuit for
delinquent rent, future rent and other amounts owed under a lease at the
Company's MOB located in Irwindale, California. Total delinquent rent at the
time of the settlement was approximately $1.5 million. The Company recorded
lease termination income of $2.6 million in the first quarter of 2001 for the
remainder of the proceeds. On February 21, 2001, the Company used the proceeds
from a new $5.1 million loan secured by two of its properties located in Tustin,
California to repay $5.0 million of outstanding loan balance of an existing $7.5
million short-term loan secured by three of its properties located in Tustin,
California. Both Daniel M. Gottlieb and Steven D. Lebowitz, the Chief Executive
Officer and the President, respectively, of the Company, have personally
guaranteed this loan. The new loan bears interest at prime plus 1.00% and is due
on February 21, 2002.
The Company declared a quarterly distribution payable to holders of the
Company's Common Stock for the first quarter of 2001 in the amount of $0.125 per
common share. These distributions were paid on April 15, 2001 to stockholders
of record on March 31, 2001. The Company also paid monthly dividends of $0.6
million to holders of the Company's Preferred Stock on the fifteenth day of each
month during the first quarter to holders of record on the first day of each
month. The Company distributed dividends of $0.4 million to holders of the
Company's Common Stock during the first three months of 2001 while the Company's
FFO was $0.4 million for the same period.
In general, the Company expects to continue meeting its short-term liquidity
requirements through its working capital and cash flow provided by operations.
The Company considers its ability to generate cash to be good and expects to
continue meeting all operating requirements as well as providing sufficient
funds to maintain stockholder distributions in accordance with REIT
requirements. Long-term liquidity requirements such as refinancing mortgages,
financing acquisitions and financing capital improvements will be accomplished
through long-term borrowings and the sale of assets.
Historical Cash Flows
- ---------------------
The Company's net cash provided by operating activities increased $3.8
million, or 181%, from $2.1 million for the three months ended March 31, 2000 to
$5.9 million for the same period in 2001. The increase is due primarily to a
$3.6 million increase in net income, a $3.4 million decrease in tenant rent and
reimbursements receivable, a $1.3 million decrease in net gain on sale of assets
and a $0.6 million increase in minority interests. These were offset by a $2.9
million decrease in accounts payable and other liabilities, and a $2.3 million
decrease in provisions for doubtful accounts and notes receivables.
Net cash used in investing activities decreased $0.2 million, or 20%, from
$1.0 million for the three months ended March 31, 2000 to $0.8 million for the
same period in 2001. The decrease was primarily due to an $8.8 million decrease
in the sale of real estate and a $1.2 million decrease in distributions from
unconsolidated affiliates. These were offset by a $10.4 million decrease in
purchases of real estate assets and a $0.6 million decrease in additions to
rental properties.
Cash flows used in financing activities decreased by approximately $2.0
million from $5.9 million for the three months ended March 31, 2000, to $3.9
million for the same period in 2001. The decrease is mainly
Page 21
due to a $3.3 million decrease in the repayment of notes payable as well as a
$2.4 million decrease in purchases of the Company's common stock. These were
offset by a $2.4 million decrease in notes payable proceeds, a $1.0 million
increase in restricted cash and a $0.5 million decrease in minority interest
contributions.
New Accounting Pronouncements
- -----------------------------
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities," ("SFAS 133"). SFAS 133, as amended, is effective for
fiscal years beginning after June 15, 2000 and requires all derivatives to be
recorded on the balance sheet at fair value as either assets or liabilities
depending on the rights or obligations under the contracts. SFAS 133 also
establishes new accounting methodologies for the following three classifications
of hedges: fair value, cash flow and net investment in foreign operations. The
Company's adoption of SFAS 133 on January 1, 2001 did not have a material impact
on the Company's financial position or results of operations.
Recent Developments
- -------------------
California has recently experienced energy shortages which have resulted in
"rolling black-outs" in certain instances in portions of the state. All of the
Company's MOBs and certain of the Company's SNFs and ALFs have back-up
generators in the event of electrical outages. The energy shortages have also
resulted in higher electricity rates. Depending on the terms of the lease
between the Company and its MOB tenant, in some cases, the Company is able to
pass all of the higher energy costs onto its MOB tenants; in other cases, the
Company is able to pass only a portion of the higher costs onto its MOB tenants,
with the Company paying the remainder. Generally, the operators of the Company's
SNFs and ALFs pay the electricity costs. The higher energy costs could affect
the ability of the MOB tenants and SNF and ALF operators to pay the Company
rent. However, the Company does not anticipate that the energy shortages and
higher energy costs will have a material adverse effect on the Company's
financial condition and results of operations.
Funds from Operations
- ---------------------
Industry analysts generally consider FFO to be an appropriate measure of the
performance of a REIT. The Company's financial statements use the concept of
FFO as defined by the Board of Governors of the National Association of Real
Estate Investment Trusts ("NAREIT"). FFO is calculated to include the minority
interests' share of income from the Operating Partnership since the Operating
Partnership's net income is allocated proportionately among all owners of
Operating Partnership units. The number of Operating Partnership units held by
the Company is identical to the number of outstanding shares of the Company's
Common Stock, and owners of Operating Partnership units may, at their
discretion, convert their units into shares of Common Stock on a one-for-one
basis.
The Company believes that in order to facilitate a clear understanding of the
operating results of the Company, FFO should be examined in conjunction with the
Company's net income as presented in this Form 10-Q, the Selected Financial Data
and Consolidated Financial Statements and Notes thereto included in the
Company's 2000 Annual Report on Form 10-K and the additional data presented
below. The table on the following page presents an analysis of FFO and
additional data for the three month periods ended March 31, 2001 and 2000.
Page 22
G&L REALTY CORP.
FUNDS FROM OPERATIONS AND ADDITIONAL DATA
(Unaudited)
For the Three Month
Periods Ended March 31,
2001 2000
-----------------------
(in thousands)
Funds from Operations(1)
- ------------------------
Net income (loss)............................................. $ 3,433 $ (250)
Minority interest in Operating Partnership.................... --- (533)
---------------------
Income (loss) for Operating Partnership....................... 3,433 (783)
Depreciation of real estate assets............................ 1,272 1,342
Amortization of deferred lease costs.......................... 67 79
Net gain on sale of assets.................................... --- (1,263)
Lease termination income...................................... (2,613) ---
Depreciation from unconsolidated affiliates................... 70 149
Extraordinary loss on early retirement of debt................ --- 158
Adjustment for minority interest in consolidated affiliates... (40) (53)
Dividends on preferred stock.................................. (1,790) (1,793)
---------------------
Funds from Operations(1)...................................... $ 399 $(2,164)
=====================
Weighted average shares outstanding(2)
- --------------------------------------
Basic 2,959 3,137
=====================
Fully diluted 2,973 3,139
=====================
Additional Data
- ---------------
Cash flows:
- -----------
Operating activities....................................... $ 5,898 $ 2,086
Investing activities....................................... (831) (1,063)
Financing activities....................................... (3,840) (5,880)
Capital expenditures
- --------------------
Building improvements...................................... $ 215 $ 262
Tenant improvements........................................ 578 613
Furniture, fixtures & equipment............................ 67 166
Leasing commissions........................................ 178 39
Depreciation and amortization
- -----------------------------
Depreciation of real estate assets......................... $ 1,272 $ 1,342
Depreciation of non-real estate assets..................... 121 112
Amortization of deferred lease costs....................... 67 79
Amortization of deferred licensing costs................... 13 ---
Amortization of capitalized financing costs................ 170 136
Accrued rent in excess of billed rent $ 76 $ 71
1) Funds from operations ("FFO") represents net income (computed in accordance
with generally accepted accounting principles, consistently applied
("GAAP")), excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation of real property, less preferred stock dividends
paid to holders of preferred stock during the period and after adjustments
for consolidated and unconsolidated entities in which the Company holds a
partial interest. FFO should not be considered as an alternative to net
income or any other indicator developed in compliance with GAAP, including
measures of liquidity such as cash flows from operations, investing and
financing activities. FFO is helpful in evaluating the performance of a real
estate portfolio considering the fact that historical cost accounting assumes
that the value of real estate diminishes predictably over time. FFO is only
one of a range of indicators which should be considered in determining a
company's operating performance. The methods of calculating FFO among
different companies are subject to variation, and FFO therefore may be an
invalid measure for purposes of comparing companies. Also, the elimination of
depreciation and gains and losses on sales of property may not be a true
indication of an entity's ability to recover its investment in properties.
The Company implemented the new methods of calculating FFO effective as of
the NAREIT-suggested adoption date of January 1, 1996 and January 1, 2000,
respectively.
2) Assumes that all outstanding Operating Partnership units have been converted
to common stock.
Page 23
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary risk inherent in the Company's market sensitive instruments is
the risk of loss resulting from interest rate fluctuations. Approximately 10%
of the Company's notes payable bear interest at a rate indexed to the one-month
LIBOR rate. The table below provides information as of March 31, 2001 about the
Company's long-term debt obligations that are sensitive to changes in interest
rates, including principal cash flows by scheduled maturity, weighted average
interest rate and estimated fair value. The weighted average interest rates
presented are the actual rates as of March 31, 2001.
Fair Market
PRINCIPAL MATURING IN: Value
-------------------------------------------------------------------------- March 31,
2001 2002 2003 2004 2005 Thereafter Total 2001
---- ---- ---- ---- ---- ---------- ----- ----
(in thousands)
Liabilities:
Mortgage debt:
Fixed rate $ 890 $ 2,145 $2,307 $2,475 $9,253 $ 96,086 $113,156 $110,208
Average interest rate 7.73% 7.73% 7.73% 7.73% 7.73% 7.73% 7.73%
Variable rate 9,310 22,947 88 95 103 10,852 43,395 43,395
Average interest rate 7.83% 7.83% 7.83% 7.83% 7.83% 7.83% 7.83%
Line of credit:
Variable rate 1,678 1,678 1,678
Average interest rate 11.50% 11.50%
------- ------- ------ ------ ------ -------- -------- --------
$11,878 $25,092 $2,395 $2,570 $9,356 $106,938 $158,229 $158,281
======= ======= ====== ====== ====== ======== ======== ========
The Company's future earnings and cash flows relating to market sensitive
instruments are primarily dependent upon prevailing LIBOR market interest rate.
Based upon interest rates as of March 31, 2001, a 1% increase in the LIBOR rate
would decrease future earnings by $429,000, future cash flow would not be
affected. A 1% decrease in the LIBOR rate would increase future earnings by
$429,000, future cash flow would not be affected. A 1% change in the LIBOR rate
would not have a material impact on the fair value of the Company's debt.
24
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
Neither the Company or any of its consolidated or unconsolidated
affiliates nor any of the assets within their portfolios of MOBs,
SNFs, ALFs, parking facilities, and retail space is currently a party
to any material litigation, except as discussed in Note 8 to the
Condensed Consolidated Financial Statements.
Item 2 Changes in Securities.
On May 10, 2001, the Board of Directors of the Company waived the
ownership limitation found in the Company's Charter for Daniel M.
Gottlieb and Steven D. Lebowitz, the Chief Executive Officer and the
President, respectively, of the Company. The waiver is effective so
long as Messrs. Gottlieb and Lebowitz do not own more than 25% in the
aggregate in value of the outstanding equity stock of the Company. In
addition, the Board decreased the ownership limitation for all other
persons, other than Messrs. Gottlieb and Lebowitz, from 9.8% (in value
or in number of shares, whichever is more restrictive) to 8.0% (in
value or in number of shares, whichever is more restrictive) of the
outstanding shares of equity stock of the Company.
Item 3 Defaults Upon Senior Securities.
None.
Item 4 Submission of Matters to a Vote of Security Holders.
None.
Item 5 Other Information.
None.
25
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Note Description
- ----------- ---- -------------------------------------------------------------------------------------------------
2.1 The Agreement of Plan and Merger between G&L Acquisition, LLC and G&L Realty Corp.
3.1 (1) Amended and Restated Articles of Incorporation of G&L Realty Corp.
3.2 (3) Amended and Restated Bylaws of G&L Realty Corp.
10.1 (c) (2) Executive Employment Agreement between G&L Realty Corp. and Daniel M. Gottlieb.
10.2 (c) (2) Executive Employment Agreement between G&L Realty Corp. and Steven D. Lebowitz.
10.3 (2) Agreement of Limited Partnership of G&L Realty Partnership, L.P.
10.4 (c) (1) 1993 Employee Stock Incentive Plan
10.5 (1) Form of Indemnity Agreement between G&L Realty Corp. and directors and certain officers.
10.8.2 (2) Option Notice with respect to Sherman Oaks Medical Plaza.
10.9.2 (1) Agreement for Purchase and Sale of Limited Partnership Interests (435 North Roxbury Drive, Ltd.)
between the Selling Partner (as defined therein) and G&L Development, dated as of October 29,
1993.
10.11 (1) Agreement for Transfer of Partnership Interests and Other Assets by and between G&L Realty Corp.
and Reese Milner, Helen Milner and Milner Development Corp., dated as of October 29, 1993.
10.12 (1) Nomura Commitment Letter with respect to the Acquisition Facility.
10.12.2 (3) Amended and Restated Mortgage Loan Agreement dated as of January 11, 1995 among G&L Financing
Partnership, L.P., Nomura Asset Capital Corporation and Bankers Trust Company of New York.
10.16 (1) Investment Banking and Financial Advisory Agreement between G&L Development and Gruntal & Co.,
Incorporated.
10.17 (1) Security Agreement dated as of December 16, 1993 by and between Daniel M. Gottlieb, Steven D.
Lebowitz and Milner Investment Corporation.
10.18 (2) Security Agreement dated as of December 16, 1993 by and between Daniel M. Gottlieb, Steven D.
Lebowitz and Reese L. Milner, II.
10.19 (2) Security Agreement dated as of December 16, 1993 by and between Daniel M. Gottlieb, Steven D.
Lebowitz and Reese L. Milner, II.
10.20 (2) Security Agreement dated as of December 16, 1993 by and between Daniel M. Gottlieb, Steven D.
Lebowitz and Reese L. Milner, II, Helen Milner and John Milner, as Trustees of the Milner Trust.
10.21 (2) Security Agreement dated as of December 16, 1993 by and between Daniel M. Gottlieb, Steven D.
Lebowitz and Reese L. Milner, II.
10.22 (4) Amended and Restated Mortgage Loan Agreement by and between G&L Realty Financing Partnership II,
L.P., as Borrower, and Nomura Asset Capital Corporation, as Lender, dated as of October 31, 1995.
26
(c) Exhibits - (continued from previous page)
Exhibit No. Note Description
- ----------- ---- --------------------------------------------------------------------------------------------------
10.24 (4) Property Management Agreement between G&L Realty Financing Partnership II, L.P., as owner, and
G&L Realty Partnership, L.P., as agent, made August 10, 1995
10.25 (5) Commitment Letter between G&L Realty Partnership, L. P. and Nomura Asset Capital Corporation,
dated as of September 29, 1995.
10.30 (6) Mortgage Loan Agreement dated as of May 24, 1996 by and between G&L Medical Partnership, L.P. as
Borrower and Nomura Asset Capital Corporation as Lender.
10.38 (7) Limited Liability Company Agreement by and between G&L Realty Partnership, L.P., a Delaware
limited partnership, and Property Acquisition Trust I, a Delaware business trust, for the purpose
of creating a Limited Liability Company to be named GLN Capital Co., LLC, dated as of November
25, 1996.
10.39 (7) Limited Liability Company Agreement by and between G&L Realty Partnership, L.P., a Delaware
limited partnership, and PHP Healthcare Corporation, a Delaware corporation, for the purpose of
creating a Limited Liability Company to be named GL/PHP, LLC, dated as of February 26, 1997.
10.40 (7) First Amendment To Limited Liability Company Agreement entered into as of March 31, 1997 by and
between G&L Realty Partnership, L.P., a Delaware limited partnership, and Property Acquisition
Trust I, a Delaware business trust, for the purpose of amending that certain Limited Liability
Company Agreement of GLN Capital Co., LLC dated as of November 25, 1996.
10.45 (10) First Amendment to GL/PHP, LLC Limited Liability Company Agreement by and among G&L Realty
Partnership, L.P., a Delaware limited partnership (the "Retiring Manager"), G&L Realty
Partnership, L.P., a Delaware limited partnership ("G&L Member"), and G&L Management Delaware
Corp., a Delaware corporation ("Manager Member"), made as of August 15, 1997.
10.46 (10) Lease Agreement between GL/PHP, a Delaware limited liability company (the "Landlord") and
Pinnacle Health Enterprises, LLC, a Delaware limited liability company wholly owned by PHP
Healthcare Corporation, a Delaware corporation (the "Tenant"), dated August 15, 1997
10.47 (10) Guaranty of Lease by PHP Healthcare Corporation, a Delaware corporation (the "Guarantor"), dated
February 15, 1997.
10.48 (10) Non-Negotiable 8.5% Note Due July 31, 2007 in which G&L Realty Partnership, L.P., a Delaware
limited partnership (the "Maker"), promises to pay to PHP Healthcare Corporation (the "Payee")
the principal sum of $2,000,000.00, dated August 15, 1997.
10.49 (10) Mortgage Note in which GL/PHP, LLC a Delaware limited liability company (the "Maker") promises to
pay to the order of Nomura Asset Capital Corporation, a Delaware corporation, the principal sum
of $16,000,000.00, dated August 15, 1997.
10.50 (10) Mortgage, Assignment of Leases and Rents and Security Agreement by GL/PHP, LLC a Delaware limited
liability company (the "Mortgagor") to Nomura Asset Capital Corporation, a Delaware corporation
(the "Mortgagee"), dated August 15, 1997.
10.51 (10) Assignment of Leases and Rents by GL/PHP, LLC a Delaware limited liability company (the
"Assignor") to Nomura Asset Capital Corporation, a Delaware corporation (the "Assignee"), dated
August 15, 1997.
27
(c) Exhibits - (continued from previous page)
Exhibit No. Note Description
- ----------- ---- --------------------------------------------------------------------------------------------------
10.52 (10) Environmental and Hazardous Substance Indemnification Agreement by GL/PHP, LLC a Delaware limited
liability company (the "Borrower") to Nomura Asset Capital Corporation, a Delaware corporation
(the "Lender"), dated August 15, 1997.
10.58 (11) Limited Liability Company Agreement of G&L Hampden, LLC.
10.68 (12) Promissory Note in the Amount of $2,799,490.00 given by Valley Convalescent, LLC in favor of G&L
Realty Partnership, L.P.
10.69 (12) Deed of Trust, Security Agreement, Fixture Filing with Assignment of Rents and Agreements, dated
as of August 29, 1997, by and between Valley Convalescent, LLC and G&L Realty Partnership, L.P.
10.70 (12) Assignment of Leases and Rents, dated as of August 29, 1997, by and between Valley Convalescent,
LLC and G&L Realty Partnership, L.P.
10.77 (13) Agreement for Transfer of Property by and among G&L Coronado, LLC as Transferor and G&L Realty
Partnership, L.P. as Operating Partnership dated as of December 30, 1998.
10.78 (13) Tenant Estoppel and Real Estate Lease between G&L Coronado, LLC as Landlord and Coronado Managers
Corp. as Tenant dated December 1, 1998.
10.79 (13) Guaranty of Lease between Steven D. Lebowitz and Daniel M. Gottlieb (collectively "Guarantor") in
favor of G&L Coronado, LLC ("Landlord").
10.80 (14) Promissory Note in the Amount of $2,000,000 given by G&L Realty Corporation in favor of Reese L.
Milner, as Trustee of The Milner Trust.
10.81 (15) Loan Agreement in the amount of $13.92 million between G&L Hampden, LLC, as Borrower, and GMAC
Commercial Mortgage Corporation, as Lender.
21 Subsidiaries of the registrant.
1) Previously filed as an exhibit of like number to the Registrant's
Registration Statement on Form S-11 and amendments thereto (File No. 33-
68984) and incorporated herein by reference.
2) Previously filed as an exhibit of like number to the Company's Annual Report
on Form 10-K for the year ended December 31, 1993 and incorporated herein by
reference.
3) Previously filed as an exhibit of like number to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994 and incorporated herein by
reference.
4) Previously filed as Exhibits 10.1 (with respect to Exhibit 10.22), 10.2
(with respect to Exhibit 10.23), and 10.3 (with respect to Exhibit 10.24) to
the Registrant's Quarterly Report on Form 10-Q for the Quarter ended
September 30, 1995 and incorporated herein by reference.
5) Previously filed as an exhibit of like number to the Company's Annual Report
on Form 10-K for the year ended December 31, 1995 and incorporated herein by
reference.
6) Previously filed as an exhibit of like number to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996 and incorporated
herein by reference.
7) Filed as an exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference.
8) Filed as an exhibit to the Company's Registration Statement on Form S-11 and
amendments thereto (File No. 333-24911) and incorporated herein by
reference.
9) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997 and incorporated herein by reference.
28
10) Filed as an exhibit to the Company's Current Report on Form 8-K (filed as of
August 15, 1997) and incorporated herein by reference.
11) Filed as an exhibit to the Company's Current Report on Form 8-K (filed as of
October 28, 1997) and incorporated herein by reference.
12) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q (filed as
of November 5, 1997) for the quarter ended September 30, 1997 and
incorporated herein by reference.
13) Filed as an exhibit to the Company's Annual Report on Form 10-K (filed as of
April 9, 1999) for the year ended December 31, 1998 and incorporated herein
by reference.
14) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q (filed as
of May 17, 1999) for the quarter ended March 31, 1999 and incorporated
herein by reference.
15) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q (filed as
of November 12, 1999) for the quarter ended September 30, 1999 and
incorporated herein by reference.
c) Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
A report on Form 8-K dated February 22, 2001 was filed with the Securities
and Exchange Commission for the purpose of announcing the receipt of a
revised proposal from Daniel M. Gottlieb and Steven D. Lebowitz, the Chief
Executive Officer and the President, respectively, of the Company, to
acquire its publicly-held Common Stock.
A report on Form 8-K dated April 16, 2001 was filed with the Securities and
Exchange Commission for the purpose of announcing the agreement in
principle for the acquisition of the Company's publicly-held common stock
by Daniel M. Gottlieb and Steven D. Lebowitz, the Chief Executive Officer
and the President, respectively, of the Company.
A report on Form 8-K dated May 11, 2001 was filed with the Securities and
Exchange Commission for the purpose of announcing the agreement for the
acquisition of the Company's publicly-held common stock by Daniel M.
Gottlieb and Steven D. Lebowitz, the Chief Executive Officer and the
President, respectively, of the Company.
29
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
G&L REALTY CORP.
Date: May 15, 2001 By: /s/ David E. Hamer
---------------------------------
David E. Hamer
Chief Accounting Officer
30