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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(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, 2004



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



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G & L REALTY CORP.

(Exact name of Registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Maryland                                                       |  | 95-4449388                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                               |  |           
|---------------------------------------------- |  | ----------
|439 N. Bedford Drive Beverly Hills, California |  | 90210     
|(Address of Principal Executive Offices)       |  | (Zip Code)



Registrants
telephone number, including area code: (310) 273-9930



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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 ̈.



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).    Yes ̈No  x



As of May 17, 2004, 710,199
shares of common stock of G&L Realty Corp. were outstanding.



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G&L REALTY CORP.



INDEX



|          |  |                                                                                                                       |  |            
|--------- |  | --------------------------------------------------------------------------------------------------------------------- |  | -----------
|          |  |                                                                                                                       |  | Page Number
|Part I    |  | Financial Information                                                                                                 |  |            
|          |  |                                                                                                                      
|Item 1    |  | Financial Statements                                                                                                  |  |            
|          |  | Condensed Consolidated Balance Sheets as of March 31, 2004 (unaudited) and December 31, 2003                          |  | 3          
|          |  | Condensed Consolidated Statements of Operations for the Three Month Periods Ended March 31, 2004 and 2003 (unaudited) |  | 4          
|          |  | Condensed Consolidated Statements of Cash Flows for the Three Month Periods Ended March 31, 2004 and 2003 (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 25     
|Item 3    |  | Quantitative and Qualitative Disclosures About Market Risk                                                            |  | 26         
|Item 4    |  | Controls and Procedures                                                                                               |  | 27         
|Part II   |  | Other Information                                                                                                     |  |            
|Item 1    |  | Legal Proceedings                                                                                                     |  | 28         
|Item 2    |  | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities                                      |  | 28         
|Item 3    |  | Defaults Upon Senior Securities                                                                                       |  | 28         
|Item 4    |  | Submission of Matters to a Vote of Security Holders                                                                   |  | 28         
|Item 5    |  | Other Information                                                                                                     |  | 28         
|Item 6    |  | Exhibits and Reports on Form 8-K                                                                                      |  | 28 30     
|          | 
|Signature |  | 31                                                                                                                   





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G&L REALTY CORP.



CONDENSED
CONSOLIDATED BALANCE SHEETS

(In thousands)



|                                                                                                            |  |                |         |   |                   |   |         |  
|----------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                                            |  | March 31, 2004 |         |   | December 31, 2003 |  
|                                                                                                            |  | (Unaudited)    |        
|ASSETS                                                                                                      |  |                |         |   |                   |   |         |  
|Rental properties (Note 3):                                                                                 |  |                |         |   |                   |   |         |  
|Land                                                                                                        |  | $              | 23,544  |   |                   | $ | 23,544  |  
|Buildings and improvements, net                                                                             |  |                | 100,166 |   |                   |   | 101,425 |  
|Projects under development                                                                                  |  |                | 1,548   |   |                   |   | 989     |  
|                                                                                                            |  |                |         |   |                   |   |         |  
|Total rental properties                                                                                     |  |                | 125,258 |   |                   |   | 125,958 |  
|Assets held for sale (Note 3)                                                                               |  |                | 11,751  |   |                   |   | 30,097  |  
|Cash and cash equivalents                                                                                   |  |                | 15,949  |   |                   |   | 11,950  |  
|Restricted cash                                                                                             |  |                | 2,538   |   |                   |   | 2,613   |  
|Tenant rent and reimbursements receivable, net                                                              |  |                | 5,507   |   |                   |   | 5,278   |  
|Unbilled rent receivable, net                                                                               |  |                | 2,522   |   |                   |   | 2,584   |  
|Mortgage loans and notes receivable, net                                                                    |  |                | 1,407   |   |                   |   | 764     |  
|Investments in unconsolidated affiliates (Note 6)                                                           |  |                | 5,041   |   |                   |   | 5,077   |  
|Deferred charges and other assets, net (Note 4)                                                             |  |                | 3,949   |   |                   |   | 3,896   |  
|                                                                                                            |  |                |         |   |                   |   |         |  
|TOTAL ASSETS                                                                                                |  | $              | 173,922 |   |                   | $ | 188,217 |  
|                                                                                                            |  |                |         |   |                   |   |         |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                       |  |                |         |   |                   |   |         |  
|LIABILITIES:                                                                                                |  |                |         |   |                   |   |         |  
|Notes payable                                                                                               |  | $              | 174,948 |   |                   | $ | 179,379 |  
|Liabilities of assets held for sale (Note 3)                                                                |  |                | 8,280   |   |                   |   | 17,377  |  
|Accounts payable and other liabilities                                                                      |  |                | 5,202   |   |                   |   | 5,836   |  
|Tenant security deposits                                                                                    |  |                | 1,401   |   |                   |   | 1,371   |  
|                                                                                                            |  |                |         |   |                   |   |         |  
|Total liabilities                                                                                           |  |                | 189,831 |   |                   |   | 203,963 |  
|                                                                                                            |  |                |         |   |                   |   |         |  
|Minority interest in consolidated affiliates                                                                |  |                | (1,392  | ) |                   |   | (1,453  | )
|                                                                                                            |  |                |         |   |                   |   |         |  
|STOCKHOLDERS EQUITY (DEFICIT) (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 outstanding                                              |  |                | 15      |   |                   |   | 15      |  
| Series B Preferred - 1,380,000 shares issued and outstanding                                              |  |                | 14      |   |                   |   | 14      |  
|Common shares - $.01 par value, 50,000,000 shares authorized, 710,199 shares issued and outstanding         |  |                | 7       |   |                   |   | 7       |  
|Additional paid-in capital                                                                                  |  |                | 40,827  |   |                   |   | 40,827  |  
|Distributions in excess of net income                                                                       |  |                | (50,266 | ) |                   |   | (50,042 | )
|Notes receivable from stockholders                                                                          |  |                | (5,114  | ) |                   |   | (5,114  | )
|                                                                                                            |  |                |         |   |                   |   |         |  
|Total stockholders deficit                                                                                 |  |                | (14,517 | ) |                   |   | (14,293 | )
|                                                                                                            |  |                |         |   |                   |   |         |  
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT                                                                 |  | $              | 173,922 |   |                   | $ | 188,217 |  
|                                                                                                            |  |                |         |   |                   |   |         |  



See accompanying notes
to Condensed Consolidated Financial Statements



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G&L REALTY CORP.



CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)



|                                                                                                                                          |  |                                    |        |   |      |   |        |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                                                                          |  | Three Month Period Ended March 31, |       
|                                                                                                                                          |  | 2004                               |        |   | 2003 |  
|                                                                                                                                          |  | (Unaudited)                        |       
|REVENUES:                                                                                                                                 |  |                                    |        |   |      |   |        |  
|Rent                                                                                                                                      |  | $                                  | 5,716  |   |      | $ | 5,715  |  
|Patient revenues                                                                                                                          |  |                                    | 6,736  |   |      |   | 5,899  |  
|Tenant reimbursements                                                                                                                     |  |                                    | 830    |   |      |   | 701    |  
|Parking                                                                                                                                   |  |                                    | 419    |   |      |   | 369    |  
|Interest and loan fees                                                                                                                    |  |                                    | 194    |   |      |   | 207    |  
|Other income                                                                                                                              |  |                                    | 154    |   |      |   | 525    |  
|                                                                                                                                          |  |                                    |        |   |      |   |        |  
|Total revenues                                                                                                                            |  |                                    | 14,049 |   |      |   | 13,416 |  
|                                                                                                                                          |  |                                    |        |   |      |   |        |  
|EXPENSES:                                                                                                                                 |  |                                    |        |   |      |   |        |  
|Property operations                                                                                                                       |  |                                    | 1,925  |   |      |   | 1,957  |  
|Skilled nursing operations                                                                                                                |  |                                    | 6,158  |   |      |   | 5,409  |  
|Depreciation and amortization                                                                                                             |  |                                    | 1,206  |   |      |   | 1,203  |  
|Provision for doubtful accounts, notes and bonds receivable                                                                               |  |                                    | 59     |   |      |   | 279    |  
|Loss on sale of bonds receivable                                                                                                          |  |                                    |       |   |      |   | 120    |  
|Interest                                                                                                                                  |  |                                    | 2,705  |   |      |   | 3,399  |  
|General and administrative                                                                                                                |  |                                    | 1,038  |   |      |   | 953    |  
|                                                                                                                                          |  |                                    |        |   |      |   |        |  
|Total expenses                                                                                                                            |  |                                    | 13,091 |   |      |   | 13,320 |  
|                                                                                                                                          |  |                                    |        |   |      |   |        |  
|Income from continuing operations before equity in (loss) earnings of unconsolidated affiliates, minority interest and income tax
expense |  |                                    | 958    |   |      |   | 96     |  
|Equity in (loss) earnings of unconsolidated affiliates (Note 6)                                                                           |  |                                    | (99    | ) |      |   | 3,884  |  
|Minority interest in consolidated affiliates                                                                                              |  |                                    | (125   | ) |      |   | 71     |  
|Income tax expense                                                                                                                        |  |                                    |       |   |      |   | (23    | )
|                                                                                                                                          |  |                                    |        |   |      |   |        |  
|Income from continuing operations                                                                                                         |  |                                    | 734    |   |      |   | 4,028  |  
|Discontinued operations                                                                                                                   |  |                                    |        |   |      |   |        |  
|Net income (loss) from operations of discontinued operations                                                                              |  |                                    | 247    |   |      |   | (218   | )
|Gain from sale of discontinued operations                                                                                                 |  |                                    | 586    |   |      |   |       |  
|                                                                                                                                          |  |                                    |        |   |      |   |        |  
|Total income (loss) from discontinued operations                                                                                          |  |                                    | 833    |   |      |   | (218   | )
|                                                                                                                                          |  |                                    |        |   |      |   |        |  
|Net income                                                                                                                                |  |                                    | 1,567  |   |      |   | 3,810  |  
|Dividends on preferred stock                                                                                                              |  |                                    | (1,791 | ) |      |   | (1,790 | )
|                                                                                                                                          |  |                                    |        |   |      |   |        |  
|Net (loss) income available to common stockholders                                                                                        |  | $                                  | (224   | ) |      | $ | 2,020  |  
|                                                                                                                                          |  |                                    |        |   |      |   |        |  



See accompanying notes
to Condensed Consolidated Financial Statements



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G&L REALTY CORP.



CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                                  |  |                                    |        |   |      |   |        |  
|--------------------------------------------------------------------------------- |  | ---------------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                  |  | Three Month Period Ended March 31, |       
|                                                                                  |  | 2004                               |        |   | 2003 |  
|                                                                                  |  | (Unaudited)                        |       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                                    |        |   |      |   |        |  
|Net income                                                                        |  | $                                  | 1,567  |   |      | $ | 3,810  |  
|Adjustments to reconcile net income to net cash provided by Operating activities: |  |                                    |        |   |      |   |        |  
|Depreciation and amortization                                                     |  |                                    | 1,217  |   |      |   | 1,547  |  
|Amortization of deferred loan costs                                               |  |                                    | 87     |   |      |   | 221    |  
|Gain from sale of discontinued operations                                         |  |                                    | (586   | ) |      |   |       |  
|Loss on change in value of interest rate hedge                                    |  |                                    |       |   |      |   | 97     |  
|Minority interest                                                                 |  |                                    | 125    |   |      |   | (71    | )
|Equity in loss (earnings) of unconsolidated affiliates                            |  |                                    | 99     |   |      |   | (3,884 | )
|Provision for doubtful accounts, notes and bonds receivable                       |  |                                    | 59     |   |      |   | 279    |  
|Unbilled rent receivable, net                                                     |  |                                    | 58     |   |      |   | (54    | )
|(Increase) decrease in:                                                           |  |                                    |        |   |      |   |        |  
|Tenant rent and reimbursements receivable                                         |  |                                    | (195   | ) |      |   | 359    |  
|Prepaid expense and other assets                                                  |  |                                    | 104    |   |      |   | (312   | )
|Accrued interest and loan fees receivable                                         |  |                                    | (143   | ) |      |   | (144   | )
|Increase (decrease) in:                                                           |  |                                    |        |   |      |   |        |  
|Accounts payable and other liabilities                                            |  |                                    | (316   | ) |      |   | (587   | )
|Tenant security deposits                                                          |  |                                    | 29     |   |      |   | 30     |  
|                                                                                  |  |                                    |        |   |      |   |        |  
|Net cash provided by operating activities                                         |  |                                    | 2,105  |   |      |   | 1,291  |  
|                                                                                  |  |                                    |        |   |      |   |        |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |  |                                    |        |   |      |   |        |  
|Sale of real estate assets                                                        |  |                                    | 9,864  |   |      |   |       |  
|Sale of bonds receivable                                                          |  |                                    |       |   |      |   | 720    |  
|Additions to buildings and improvements                                           |  |                                    | (329   | ) |      |   | (617   | )
|Pre-acquisition costs, net                                                        |  |                                    | (217   | ) |      |   | (1     | )
|Projects under development                                                        |  |                                    | (561   | ) |      |   | (378   | )
|Leasing commissions                                                               |  |                                    | (23    | ) |      |   | (11    | )
|Investment in mortgage loans and notes receivable                                 |  |                                    | (500   | ) |      |   |       |  
|Contributions to unconsolidated affiliates                                        |  |                                    | (63    | ) |      |   | (144   | )
|Distributions from unconsolidated affiliates                                      |  |                                    |       |   |      |   | 2,917  |  
|                                                                                  |  |                                    |        |   |      |   |        |  
|Net cash provided by investing activities                                         |  |                                    | 8,171  |   |      |   | 2,486  |  
|                                                                                  |  |                                    |        |   |      |   |        |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                                    |        |   |      |   |        |  
|Notes payable proceeds                                                            |  |                                    |       |   |      |   | 8,200  |  
|Repayment of notes payable                                                        |  |                                    | (4,459 | ) |      |   | (8,956 | )
|Payment of deferred loan costs                                                    |  |                                    | (35    | ) |      |   | (1,379 | )
|Decrease (increase) in restricted cash                                            |  |                                    | 108    |   |      |   | (31    | )
|Distributions                                                                     |  |                                    | (1,891 | ) |      |   | (1,867 | )
|                                                                                  |  |                                    |        |   |      |   |        |  
|Net cash used in financing activities                                             |  |                                    | (6,277 | ) |      |   | (4,033 | )
|                                                                                  |  |                                    |        |   |      |   |        |  



Continued



See accompanying notes to Condensed Consolidated Financial
Statements



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G&L REALTY CORP.



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                     |  |                                    |        |      |   |       |  
|-------------------------------------------------------------------- |  | ---------------------------------- | ------ | ---- | - | ----- | -
|                                                                     |  | Three Month Period Ended March 31, |       
|                                                                     |  | 2004                               |        | 2003 |  
|                                                                     |  | (Unaudited)                        |       
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                 |  |                                    | 3,999  |      |   | (256  | )
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                       |  |                                    | 11,950 |      |   | 2,366 |  
|                                                                     |  |                                    |        |      |   |       |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                             |  | $                                  | 15,949 |      | $ | 2,110 |  
|                                                                     |  |                                    |        |      |   |       |  
|SUPPLEMENTAL CASH FLOW INFORMATION                                   |  |                                    |        |      |   |       |  
|Cash paid during the period for interest                             |  | $                                  | 2,734  |      | $ | 3,842 |  
|                                                                     |  |                                    |        |      |   |       |  
|NONCASH INVESTING AND FINANCING ACTIVITIES                           |  |                                    |        |      |   |       |  
|Preferred distributions due to minority partner                      |  | $                                  |       |      | $ | 15    |  
|                                                                     |  |                                    |        |      |   |       |  
|Transfer from construction in progress to buildings and improvements |  | $                                  | 309    |      | $ |      |  
|                                                                     |  |                                    |        |      |   |       |  
|Disposition of notes payable upon sale of real estate assets         |  | $                                  | 8,687  |      | $ |      |  
|                                                                     |  |                                    |        |      |   |       |  



Concluded.



See accompanying notes to Condensed Consolidated Financial Statements



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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 Senior Care Partnership, L.P., a Delaware limited partnership (the
Senior Care 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)

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)*

G&L Hoquiam, LLC, a California limited liability company (Hoquiam)

G&L Lyons, LLC, a California limited liability company (Lyons)

G&L Coronado (1998), LLC, a California limited liability company (Coronado)

GLH Tarzana, LLC, a California limited liability company (Tarzana)

G&L Massachusetts, LLC, a Delaware limited liability company (Massachusetts)

G&L Aspen, LLC, a California limited liability company (Aspen)

G&L Tustin II, LLC, a Delaware limited liability company (Tustin II)

G&L Tustin III, LLC, a Delaware limited liability company (Tustin III)

G&L St. Thomas More, Inc., a Maryland corporation (St. Thomas More)

St. Thomas More, Inc., a Maryland Corporation (St. Thomas More, Inc.)

405 Bedford, LLC, a Delaware limited liability company (405 Bedford)

415 Bedford, LLC, a Delaware limited liability company (415 Bedford)

416 Bedford, LLC, a Delaware limited liability company (416 Bedford)

435 Bedford, LLC, a Delaware limited liability company (435 Bedford)

G&L 436 Bedford, LLC, a Delaware limited liability company (436 Bedford)

G&L Sherman Oaks, LLC, a Delaware limited liability company (Sherman Oaks)

G&L 4150 Regents, LLC, a Delaware limited liability company (Regents)

---

|* | Maryland Gardens, Hampden, Tustin, Holy Cross and Burbank are herein defined collectively as the Financing Entities and individually as the Financing Entity.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company, as the sole general partner and as
owner of an approximately 95% ownership interest, controls the Operating Partnership and the Senior Care Partnership. The Company controls the Financing Entities through wholly owned subsidiaries incorporated in either 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 or the Senior Care Partnership, acting as
sole limited partner or member. Financing Entities in which a Subsidiary owns no interest are 100% owned by the Operating Partnership or the Senior Care Partnership.



References in these consolidated financial statements to the Company include its operations, assets and liabilities
including the operations, assets and liabilities of the Operating Partnership, the Senior Care Partnership, the Subsidiaries, the Financing Entities, the Roxbury Partnership (in which the Operating Partnership owns a 32.81% partnership interest and
is the sole general partner), Tarzana (in which the Operating Partnership owns a 85% membership interest and is a



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G&L REALTY CORP.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)



co-managing member) and Hoquiam, Lyons, Coronado, Massachusetts, Aspen, Tustin II, Tustin III, St. Thomas More, St.
Thomas More, Inc., 405 Bedford, 415 Bedford, 416 Bedford, 435 Bedford, 436 Bedford, Sherman Oaks and Regents (in which the Operating Partnership or the Senior Care Partnership own 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 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:



G&L Grabel, San Pedro, LLC (San
Pedro)

G&L Penasquitos, LLC (Penasquitos)

Lakeview Associates, LLC (Lakeview)

Tustin Heritage Place, LLC (Heritage Place)

G&L Radius Realty, LLC (Radius)



San Pedro, Penasquitos, Eagle Run, Eagle Run, Inc., Lakeview, Heritage Place
and Radius are herein collectively referred to as the Unconsolidated Affiliates and individually as an Unconsolidated Affiliate.



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Business - The Company is a self-managed Real Estate Investment Trust (REIT) that acquires, develops, manages and leases healthcare
properties. The Companys business currently consists of investments in healthcare properties. Investments in healthcare properties consist of acquisitions, made either directly or through joint ventures, in medical office buildings
(MOBs), skilled nursing facilities (SNFs) and assisted living facilities (ALFs).



Basis of Presentation - The accompanying condensed consolidated financial statements include the accounts of the Company and its Subsidiaries. The
interests in the Roxbury Partnership, the Operating Partnership and the Senior Care Partnership that are not owned by the Company, have been reflected as minority interests in the Operating and Senior Care Partnerships. All significant intercompany
accounts and transactions have been eliminated in consolidation. Prior year amounts have been reclassified to conform to the current years presentation.



The information presented as of and for the three-month periods ended March 31, 2004 and 2003 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, 2004 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 December 2003, the FASB issued FASB Interpretation No. 46-R, Consolidation of Variable Interest
Entities-an Interpretation of ARB No. 51 (FIN 46-R). FIN 46-R clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements and provides guidance on the identification of entities
for which control is achieved through means other than voting rights (variable interest entities or VIEs) and how to determine when and which business enterprise should consolidate the VIE. This new model for consolidation
applies to an entity in which either: (1) the equity investors (if any) do not have a controlling financial interest or (2) the equity investment at risk is insufficient to finance that entitys activities without receiving additional
subordinated financial support from other parties. The provisions of this interpretation are immediately effective for VIEs formed after January 31, 2003. For VIEs formed prior to January 31, 2003, the



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)



provisions of this interpretation apply to the first fiscal year or interim period beginning after March 15, 2004.
The Company has completed an evaluation of all of its investments and other interests in entities that may be deemed VIEs under the provisions of FIN 46-R. These investments include real estate joint ventures with assets totaling $32.1 million as of
March 31, 2004. The Company believes that its real estate joint ventures do not fall under the provisions of FIN 46-R and will not be consolidated, however, it is still evaluating the provisions of FIN 46-R and cannot make a definitive conclusion
until it completes the evaluation.



3. BUILDINGS AND IMPROVEMENTS



Buildings and improvements consist of the following:



|                                               |  |                |         |   |                   |   |         |  
|---------------------------------------------- |  | -------------- | ------- | - | ----------------- | - | ------- | -
|                                               |  | March 31, 2004 |         |   | December 31, 2003 |  
|                                               |  | (in thousands) |        
|Buildings and improvements                     |  | $              | 122,991 |   |                   | $ | 122,868 |  
|Tenant improvements                            |  |                | 11,140  |   |                   |   | 11,074  |  
|Furniture, fixtures and equipment              |  |                | 5,054   |   |                   |   | 4,976   |  
|                                               |  |                |         |   |                   |   |         |  
|                                               |  |                | 139,185 |   |                   |   | 138,918 |  
|Less accumulated depreciation and amortization |  |                | (39,019 | ) |                   |   | (37,493 | )
|                                               |  |                |         |   |                   |   |         |  
|Total                                          |  | $              | 100,166 |   |                   | $ | 101,425 |  
|                                               |  |                |         |   |                   |   |         |  



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.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)



As of March 31, 2004, the Company had listed for sale or was under contract to sell a total of three
properties. The properties include a three-story, 40,000 square foot office and retail complex located in Coronado, California (Coronado), a 59-bed SNF in Chico, California (Chico) and a 10,000 square foot MOB located in
Tustin, California (Tustin). For presentation purposes, the assets and liabilities relating to these properties have been included in assets held for sale and liabilities of assets held for sale, respectively, on the balance sheet. The
following tables summarize assets held for sale and liabilities of assets held for sale as of March 31, 2004 and December 31, 2003:



Assets & Liabilities of Assets Held for Sale

As of March 31, 2004



|                                               |  |       |     |                |   |        |  |   |       |   |  |   |       
|---------------------------------------------- |  | ----- | --- | -------------- | - | ------ |  | - | ----- | - |  | - | ------
|                                               |  | Chico |     | Coronado       |   | Tustin |  |   | Total
|                                               |  |       |     | (in thousands) |   |        | 
|Rental properties:                             |  |       |     |                |   |        |  |   |       |   |  |   |       
|Land                                           |  | $     | 159 |                | $ | 809    |  | $ | 474   |   |  | $ | 1,442 
|Buildings and improvements, net                |  |       | 582 |                |   | 8,663  |  |   | 606   |   |  |   | 9,851 
|Projects under development                     |  |       |    |                |   | 13     |  |   |      |   |  |   | 13    
|                                               |  |       |     |                |   |        |  |   |       |   |  |   |       
|Total rental properties                        |  |       | 741 |                |   | 9,485  |  |   | 1,080 |   |  |   | 11,306
|                                               |  |       |     |               
|Restricted cash                                |  |       |    |                |   | 74     |  |   | 9     |   |  |   | 83    
|Tenant rent and reimbursements receivable, net |  |       |    |                |   | 56     |  |   | (19   | ) |  |   | 37    
|Unbilled rent receivable, net                  |  |       |    |                |   | 42     |  |   | 135   |   |  |   | 177   
|Deferred charges and other assets, net         |  |       | 4   |                |   | 117    |  |   | 27    |   |  |   | 148   
|                                               |  |       |     |                |   |        |  |   |       |   |  |   |       
|Total assets held for sale                     |  | $     | 745 |                | $ | 9,774  |  | $ | 1,232 |   |  | $ | 11,751
|                                               |  |       |     |                |   |        |  |   |       |   |  |   |       
|LIABILITIES:                                   |  |       |     |                |   |        |  |   |       |   |  |   |       
|Notes Payable                                  |  | $     |    |                | $ | 7,041  |  | $ | 1,192 |   |  | $ | 8,233 
|Accounts payable and other liabilities         |  |       |    |                |   | 13     |  |   |      |   |  |   | 13    
|Tenant security deposits                       |  |       |    |                |   | 34     |  |   |      |   |  |   | 34    
|                                               |  |       |     |                |   |        |  |   |       |   |  |   |       
|Total liabilities of assets held for sale      |  | $     |    |                | $ | 7,088  |  | $ | 1,192 |   |  | $ | 8,280 
|                                               |  |       |     |                |   |        |  |   |       |   |  |   |       



Assets &
Liabilities of Assets Held for Sale

As of December 31, 2003



|                                               |  |                |     |           |   |         |  |          |        |  |        |       |       |  |   |       |  |   |       
|---------------------------------------------- |  | -------------- | --- | --------- | - | ------- |  | -------- | ------ |  | ------ | ----- | ----- |  | - | ----- |  | - | ------
|                                               |  | Chico          |     | Irwindale |   | Tarzana |  | Coronado |        |  | Tustin |       | Total
|                                               |  | (in thousands)
|Rental properties:                             |  |                |     |           |   |         |  |          |        |  |        |       |       |  |   |       |  |   |       
|Land                                           |  | $              | 159 |           | $ | 1,260   |  | $        | 2,350  |  | $      | 809   |       |  | $ | 474   |  | $ | 5,052 
|Buildings and improvements, net                |  |                | 577 |           |   | 6,249   |  |          | 7,420  |  |        | 8,054 |       |  |   | 606   |  |   | 22,906
|Projects under development                     |  |                |    |           |   |        |  |          | 41     |  |        | 307   |       |  |   |      |  |   | 348   
|                                               |  |                |     |           |   |         |  |          |        |  |        |       |       |  |   |       |  |   |       
|Total rental properties                        |  |                | 736 |           |   | 7,509   |  |          | 9,811  |  |        | 9,170 |       |  |   | 1,080 |  |   | 28,306
|                                               |  |                |     |           |   |        
|Restricted cash                                |  |                |    |           |   |        |  |          | 296    |  |        | 111   |       |  |   | 5     |  |   | 412   
|Tenant rent and reimbursements receivable, net |  |                |    |           |   |        |  |          | 153    |  |        | 60    |       |  |   | 9     |  |   | 222   
|Unbilled rent receivable, net                  |  |                |    |           |   | 365     |  |          |       |  |        | 37    |       |  |   | 136   |  |   | 538   
|Deferred charges and other assets, net         |  |                | 2   |           |   | 196     |  |          | 260    |  |        | 132   |       |  |   | 29    |  |   | 619   
|                                               |  |                |     |           |   |         |  |          |        |  |        |       |       |  |   |       |  |   |       
|Total assets held for sale                     |  | $              | 738 |           | $ | 8,070   |  | $        | 10,520 |  | $      | 9,510 |       |  | $ | 1,259 |  | $ | 30,097
|                                               |  |                |     |           |   |         |  |          |        |  |        |       |       |  |   |       |  |   |       
|LIABILITIES:                                   |  |                |     |           |   |         |  |          |        |  |        |       |       |  |   |       |  |   |       
|Notes payable                                  |  | $              |    |           | $ |        |  | $        | 8,690  |  | $      | 7,060 |       |  | $ | 1,199 |  | $ | 16,949
|Accounts payable and other liabilities         |  |                | 3   |           |   |        |  |          | 336    |  |        | (3    | )     |  |   |      |  |   | 336   
|Tenant security deposits                       |  |                |    |           |   | 58      |  |          |       |  |        | 34    |       |  |   |      |  |   | 92    
|                                               |  |                |     |           |   |         |  |          |        |  |        |       |       |  |   |       |  |   |       
|Total liabilities of assets held for sale      |  | $              | 3   |           | $ | 58      |  | $        | 9,026  |  | $      | 7,091 |       |  | $ | 1,199 |  | $ | 17,377
|                                               |  |                |     |           |   |         |  |          |        |  |        |       |       |  |   |       |  |   |       



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)



4. DEFERRED CHARGES AND OTHER ASSETS



Deferred charges and other assets consist of the following:



|                                 |  |                |        |   |                   |   |        |  
|-------------------------------- |  | -------------- | ------ | - | ----------------- | - | ------ | -
|                                 |  | March 31, 2004 |        |   | December 31, 2003 |  
|                                 |  | (in thousands) |       
|Deferred loan costs              |  | $              | 2,804  |   |                   | $ | 2,769  |  
|Pre-acquisition costs            |  |                | 217    |   |                   |   | 141    |  
|Leasing commissions              |  |                | 1,474  |   |                   |   | 1,452  |  
|Prepaid expense and other assets |  |                | 1,074  |   |                   |   | 1,036  |  
|                                 |  |                |        |   |                   |   |        |  
|                                 |  |                | 5,569  |   |                   |   | 5,398  |  
|Less accumulated amortization    |  |                | (1,620 | ) |                   |   | (1,502 | )
|                                 |  |                |        |   |                   |   |        |  
|Total                            |  | $              | 3,949  |   |                   | $ | 3,896  |  
|                                 |  |                |        |   |                   |   |        |  



5. STOCKHOLDERS DEFICIT



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,
2004 and for the year ended December 31, 2003:



|                                                             |  |                |         |   |                  |   |         |  
|------------------------------------------------------------ |  | -------------- | ------- | - | ---------------- | - | ------- | -
|                                                             |  | March 31, 2004 |         |   | December 31,2003 |  
|                                                             |  | (in thousands) |        
|Distributions in excess of net income at beginning of period |  | $              | (50,042 | ) |                  | $ | (37,895 | )
|Net income during period                                     |  |                | 1,567   |   |                  |   | 520     |  
|Less: Distributions declared                                 |  |                | (1,791  | ) |                  |   | (12,667 | )
|                                                             |  |                |         |   |                  |   |         |  
|Distributions in excess of net income                        |  | $              | (50,266 | ) |                  | $ | (50,042 | )
|                                                             |  |                |         |   |                  |   |         |  



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G&L REALTY CORP.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(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, 2004:



|                                                          |  |        |       |          |   |       |                |  |   |               |   |          |   |    |       |   |       |   |  |   |       |  
|--------------------------------------------------------- |  | ------ | ----- | -------- | - | ----- | -------------- |  | - | ------------- | - | -------- | - | -- | ----- | - | ----- | - |  | - | ----- | -
|                                                          |  | Radius |       | SanPedro |   |       | Penasquitos    |  |   | HeritagePlace |   | Lakeview |   |    | Total |  
|                                                          |  |        |       |          |   |       | (in thousands) |  |   |               |   |          |  
|Balance at beginning of period                            |  | $      | 1,182 |          | $ | 792   |                |  | $ | (612          | ) |          | $ |   |       | $ | 751   |   |  | $ | 2,113 |  
|Equity in earnings (loss) of affiliates                   |  |        | 31    |          |   | (4    | )              |  |   | (12           | ) |          |   |   |       |   | (114  | ) |  |   | (99   | )
|Cash contributions                                        |  |        |      |          |   |      |                |  |   |              |   |          |   |   |       |   | 50    |   |  |   | 50    |  
|Cash distributions                                        |  |        |      |          |   |      |                |  |   |              |   |          |   |   |       |   |      |   |  |   |      |  
|                                                          |  |        |       |          |   |       |                |  |   |               |   |          |   |    |       |   |       |   |  |   |       |  
|Balance at end of period, before intercompany adjustments |  |        | 1,213 |          |   | 788   |                |  |   | (624          | ) |          |   |   |       |   | 687   |   |  |   | 2,064 |  
|                                                          |  |        |       |          |   |       |                |  |   |               |   |          |   |    |       |   |       |   |  |   |       |  
|Intercompany adjustments:                                 |  |        |       |          |   |       |                |  |   |               |   |          |   |    |       |   |       |   |  |   |       |  
|Receivable, net                                           |  |        |      |          |   | 960   |                |  |   | 297           |   |          |   | 14 |       |   | 1,706 |   |  |   | 2,977 |  
|                                                          |  |        |       |          |   |       |                |  |   |               |   |          |   |    |       |   |       |   |  |   |       |  
|Investment in unconsolidated affiliates                   |  | $      | 1,213 |          | $ | 1,748 |                |  | $ | (327          | ) |          | $ | 14 |       | $ | 2,393 |   |  | $ | 5,041 |  
|                                                          |  |        |       |          |   |       |                |  |   |               |   |          |   |    |       |   |       |   |  |   |       |  



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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, 2004:



|                                 |  |        |        |   |          |   |        |                |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|-------------------------------- |  | ------ | ------ | - | -------- | - | ------ | -------------- |  | - | ------------- | - |  | -------- | ---- | - | ----- | - | ------ | - |  | - | ------- | -
|                                 |  | Radius |        |   | SanPedro |   |        | Penasquitos    |  |   | HeritagePlace |   |  | Lakeview |      |   | Total |  
|                                 |  |        |        |   |          |   |        | (in thousands) |  |   |               |   |  |          |     
|Financial Position:              |  |        |        |   |          |   |        |                |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Land                             |  | $      | 200    |   |          | $ | 2,011  |                |  | $ | 641           |   |  | $        | 750  |   |       | $ | 947    |   |  | $ | 4,549   |  
|Buildings                        |  |        | 5,524  |   |          |   | 4,202  |                |  |   | 5,822         |   |  |          |     |   |       |   | 8,028  |   |  |   | 23,576  |  
|Other assets                     |  |        | 1,340  |   |          |   | 471    |                |  |   | 1,207         |   |  |          | 238  |   |       |   | 731    |   |  |   | 3,987   |  
|Notes payable                    |  |        | (5,406 | ) |          |   | (4,410 | )              |  |   | (8,309        | ) |  |          | (940 | ) |       |   | (7,353 | ) |  |   | (26,418 | )
|Other liabilities                |  |        | (264   | ) |          |   | (1,192 | )              |  |   | (624          | ) |  |          | (48  | ) |       |   | (1,164 | ) |  |   | (3,292  | )
|                                 |  |        |        |   |          |   |        |                |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Net assets                       |  | $      | 1,394  |   |          | $ | 1,082  |                |  | $ | (1,263        | ) |  | $        |     |   |       | $ | 1,189  |   |  | $ | 2,402   |  
|                                 |  |        |        |   |          |   |        |                |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Partners equity:                |  |        |        |   |          |   |        |                |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Company                          |  | $      | 1,213  |   |          | $ | 788    |                |  | $ | (624          | ) |  | $        |     |   |       | $ | 687    |   |  | $ | 2,064   |  
|Others                           |  |        | 181    |   |          |   | 294    |                |  |   | (639          | ) |  |          |     |   |       |   | 502    |   |  |   | 338     |  
|                                 |  |        |        |   |          |   |        |                |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Total equity                     |  | $      | 1,394  |   |          | $ | 1,082  |                |  | $ | (1,263        | ) |  | $        |     |   |       | $ | 1,189  |   |  | $ | 2,402   |  
|                                 |  |        |        |   |          |   |        |                |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Operations:                      |  |        |        |   |          |   |        |                |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Revenues                         |  | $      | 187    |   |          | $ | 243    |                |  | $ | 228           |   |  | $        |     |   |       | $ | 198    |   |  | $ | 856     |  
|Expenses                         |  |        | (145   | ) |          |   | (248   | )              |  |   | (252          | ) |  |          |     |   |       |   | (427   | ) |  |   | (1,072  | )
|                                 |  |        |        |   |          |   |        |                |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Net income (loss)                |  | $      | 42     |   |          | $ | (5     | )              |  | $ | (24           | ) |  | $        |     |   |       | $ | (229   | ) |  | $ | (216    | )
|                                 |  |        |        |   |          |   |        |                |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Allocation of net income (loss): |  |        |        |   |          |   |        |                |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Company                          |  | $      | 31     |   |          | $ | (4     | )              |  | $ | (12           | ) |  | $        |     |   |       | $ | (114   | ) |  | $ | (99     | )
|Others                           |  |        | 11     |   |          |   | (1     | )              |  |   | (12           | ) |  |          |     |   |       |   | (115   | ) |  |   | (117    | )
|                                 |  |        |        |   |          |   |        |                |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Net income (loss)                |  | $      | 42     |   |          | $ | (5     | )              |  | $ | (24           | ) |  | $        |     |   |       | $ | (229   | ) |  | $ | (216    | )
|                                 |  |        |        |   |          |   |        |                |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  



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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 22 high quality MOBs, an office and retail facility and one parking facility totaling approximately 785,000 rentable
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 eight SNFs and one senior apartment complex which is located adjacent to the SNF in Phoenix, Arizona. The SNFs are
located in Hampden, Massachusetts; Phoenix, Arizona; Hoquiam, Washington; Hyattsville, Maryland and Chico, California. Seven of the SNFs and the apartment complex are owned 100% by the Company. The Company currently holds the operating license in
three of the eight 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 is 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. In February 2004, the manager of these
facilities received approval from the Massachusetts Department of Health to obtain the operating licenses for the three facilities from the Company. The manager subsequently entered into a lease agreement with the Company for these facilities
effective on the date of the license transfers which occurred on April 1, 2004. Upon the transfer of the licenses, the Company will no longer reflect all of the assets, liabilities, revenues and expenses of these three SNFs in its consolidated
financial statements. The Company will record rental income per the terms of the lease it entered into with the new owner of the operating licenses.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Assisted living facilities  These investments consist of two ALFs owned through joint ventures. The two ALFs contain 172 units that are typically occupied by residents who
require a less intense level of care in comparison to the SNFs.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Debt obligations  These investments initially consisted of short-term secured and unsecured loans made to third parties to facilitate the acquisition of healthcare facilities.
The Company is no longer in the business of lending money and has not originated any new loans since 2001. The Company is working to collect the balance of its loans that are currently outstanding, most of which have been partially or fully
reserved. As of March 31, 2004, the Company had seven loans outstanding with a net book value of $1.4 million. One of the Companys loans is an unsecured note due from one of its SNFs. For purposes of the segment information disclosure, that
loan is reported under the Companys skilled nursing facility segment.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The tables on the following pages reconcile the Companys income and expense activity for the three months ended March 31, 2004 and 2003 and balance sheet data as of March 31, 2004.



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G&L REALTY CORP.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



2004 Reconciliation of Reportable Segment Information

For the three month period ended March 31, 2004



|                                                             |  |               |       |   |                |   |       |                |  |   |                 |   |       |   |     |       |   |       |   |  |   |        |  
|------------------------------------------------------------ |  | ------------- | ----- | - | -------------- | - | ----- | -------------- |  | - | --------------- | - | ----- | - | --- | ----- | - | ----- | - |  | - | ------ | -
|                                                             |  | MedicalOffice |       |   | SkilledNursing |   |       | AssistedLiving |  |   | DebtObligations |   | Other |   |     | Total |  
|                                                             |  |               |       |   |                |   |       | (in thousands) |  |   |                 |   |       |  
|Revenue:                                                     |  |               |       |   |                |   |       |                |  |   |                 |   |       |   |     |       |   |       |   |  |   |        |  
|Rents, tenant reimb. and parking                             |  | $             | 6,517 |   |                | $ | 448   |                |  | $ |                |   |       | $ |    |       | $ |      |   |  | $ | 6,695  |  
|Patient revenues                                             |  |               |      |   |                |   | 6,736 |                |  |   |                |   |       |   |    |       |   |      |   |  |   | 6,736  |  
|Interest and loan fees                                       |  |               | 7     |   |                |   | 7     |                |  |   |                |   |       |   | 166 |       |   | 14    |   |  |   | 194    |  
|Other income                                                 |  |               | 47    |   |                |   | 8     |                |  |   |                |   |       |   |    |       |   | 99    |   |  |   | 154    |  
|                                                             |  |               |       |   |                |   |       |                |  |   |                 |   |       |   |     |       |   |       |   |  |   |        |  
|Total revenues                                               |  |               | 6,571 |   |                |   | 7,199 |                |  |   |                |   |       |   | 166 |       |   | 113   |   |  |   | 14,049 |  
|                                                             |  |               |       |   |                |   |       |                |  |   |                 |   |       |   |     |       |   |       |   |  |   |        |  
|Expenses:                                                    |  |               |       |   |                |   |       |                |  |   |                 |   |       |   |     |       |   |       |   |  |   |        |  
|Property operations                                          |  |               | 1,768 |   |                |   | 156   |                |  |   |                |   |       |   | 1   |       |   |      |   |  |   | 1,925  |  
|Skilled nursing operations                                   |  |               |      |   |                |   | 6,158 |                |  |   |                |   |       |   |    |       |   |      |   |  |   | 6,158  |  
|Depreciation and amortization                                |  |               | 821   |   |                |   | 381   |                |  |   |                |   |       |   |    |       |   | 4     |   |  |   | 1,206  |  
|Provision for doubtful accounts, notes and bonds receivable  |  |               |      |   |                |   | 59    |                |  |   |                |   |       |   |    |       |   |      |   |  |   | 59     |  
|Interest                                                     |  |               | 2,175 |   |                |   | 530   |                |  |   |                |   |       |   |    |       |   |      |   |  |   | 2,705  |  
|General and administrative                                   |  |               |      |   |                |   |      |                |  |   |                |   |       |   |    |       |   | 1,038 |   |  |   | 1,038  |  
|                                                             |  |               |       |   |                |   |       |                |  |   |                 |   |       |   |     |       |   |       |   |  |   |        |  
|Total expenses                                               |  |               | 4,764 |   |                |   | 7,284 |                |  |   |                |   |       |   | 1   |       |   | 1,042 |   |  |   | 13,091 |  
|                                                             |  |               |       |   |                |   |       |                |  |   |                 |   |       |   |     |       |   |       |   |  |   |        |  
|Income (loss) from operations                                |  |               | 1,807 |   |                |   | (85   | )              |  |   |                |   |       |   | 165 |       |   | (929  | ) |  |   | 958    |  
|Equity in (loss) earnings of unconsolidated affiliates       |  |               | (4    | ) |                |   | 31    |                |  |   | (126            | ) |       |   |    |       |   |      |   |  |   | (99    | )
|Net income (loss) from operations of discontinued operations |  |               | 287   |   |                |   | (10   | )              |  |   | (30             | ) |       |   |    |       |   |      |   |  |   | 247    |  
|Gain from sale of discontinued operations                    |  |               | 333   |   |                |   |      |                |  |   | 253             |   |       |   |    |       |   |      |   |  |   | 586    |  
|                                                             |  |               |       |   |                |   |       |                |  |   |                 |   |       |   |     |       |   |       |   |  |   |        |  
|Income (loss) from operations before minority interest       |  | $             | 2,423 |   |                | $ | (64   | )              |  | $ | 97              |   |       | $ | 165 |       | $ | (929  | ) |  | $ | 1,692  |  
|                                                             |  |               |       |   |                |   |       |                |  |   |                 |   |       |   |     |       |   |       |   |  |   |        |  



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G&L REALTY CORP.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)



2003 Reconciliation of Reportable Segment Information

For the three month period ended March 31, 2003



|                                                             |  |               |       |                |   |       |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  
|------------------------------------------------------------ |  | ------------- | ----- | -------------- | - | ----- | -------------- |  | - | --------------- | - | ----- | - | --- | ----- | - | ------ | - |  | - | ------ | -
|                                                             |  | MedicalOffice |       | SkilledNursing |   |       | AssistedLiving |  |   | DebtObligations |   | Other |   |     | Total |  
|                                                             |  |               |       |                |   |       | (in thousands) |  |   |                 |   |       |  
|Revenue:                                                     |  |               |       |                |   |       |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  
|Rents, tenant reimb. and parking                             |  | $             | 6,262 |                | $ | 523   |                |  | $ |                |   |       | $ |    |       | $ |       |   |  | $ | 6,785  |  
|Patient revenues                                             |  |               |      |                |   | 5,899 |                |  |   |                |   |       |   |    |       |   |       |   |  |   | 5,899  |  
|Interest and loan fees                                       |  |               | 1     |                |   | 7     |                |  |   |                |   |       |   | 189 |       |   | 10     |   |  |   | 207    |  
|Other income                                                 |  |               | 983   |                |   | 19    |                |  |   | (494            | ) |       |   |    |       |   | 17     |   |  |   | 525    |  
|                                                             |  |               |       |                |   |       |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  
|Total revenues                                               |  |               | 7,246 |                |   | 6,448 |                |  |   | (494            | ) |       |   | 189 |       |   | 27     |   |  |   | 13,416 |  
|                                                             |  |               |       |                |   |       |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  
|Expenses:                                                    |  |               |       |                |   |       |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  
|Property operations                                          |  |               | 1,782 |                |   | 153   |                |  |   |                |   |       |   | 22  |       |   |       |   |  |   | 1,957  |  
|Skilled nursing operations                                   |  |               |      |                |   | 5,409 |                |  |   |                |   |       |   |    |       |   |       |   |  |   | 5,409  |  
|Depreciation and amortization                                |  |               | 810   |                |   | 382   |                |  |   |                |   |       |   |    |       |   | 11     |   |  |   | 1,203  |  
|Provision for doubtful accounts, notes and bonds receivable  |  |               |      |                |   | 279   |                |  |   |                |   |       |   |    |       |   |       |   |  |   | 279    |  
|Loss on sale of bonds receivable                             |  |               |      |                |   |      |                |  |   |                |   |       |   | 120 |       |   |       |   |  |   | 120    |  
|Interest                                                     |  |               | 1,956 |                |   | 583   |                |  |   |                |   |       |   |    |       |   | 860    |   |  |   | 3,399  |  
|General and administrative                                   |  |               |      |                |   |      |                |  |   |                |   |       |   |    |       |   | 953    |   |  |   | 953    |  
|                                                             |  |               |       |                |   |       |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  
|Total expenses                                               |  |               | 4,548 |                |   | 6,806 |                |  |   |                |   |       |   | 142 |       |   | 1,824  |   |  |   | 13,320 |  
|                                                             |  |               |       |                |   |       |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  
|Income (loss) from operations                                |  |               | 2,698 |                |   | (358  | )              |  |   | (494            | ) |       |   | 47  |       |   | (1,797 | ) |  |   | 96     |  
|Equity in earnings of unconsolidated affil.                  |  |               | 1,330 |                |   | 18    |                |  |   | 2,536           |   |       |   |    |       |   |       |   |  |   | 3,884  |  
|Net income (loss) from operations of discontinued operations |  |               | 140   |                |   | (11   | )              |  |   | (347            | ) |       |   |    |       |   |       |   |  |   | (218   | )
|Corporate income tax expense                                 |  |               |      |                |   | (23   | )              |  |   |                |   |       |   |    |       |   |       |   |  |   | (23    | )
|                                                             |  |               |       |                |   |       |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  
|Income (loss) from operations before minority interest       |  | $             | 4,168 |                | $ | (374  | )              |  | $ | 1,695           |   |       | $ | 47  |       | $ | (1,797 | ) |  | $ | 3,739  |  
|                                                             |  |               |       |                |   |       |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  



2004 Reconciliation
of Reportable Segment Information

As of March 31, 2004



|                                         |  |               |         |                |   |                |  |                 |       |       |   |       |  |   |        |  |   |        
|---------------------------------------- |  | ------------- | ------- | -------------- | - | -------------- |  | --------------- | ----- | ----- | - | ----- |  | - | ------ |  | - | -------
|                                         |  | MedicalOffice |         | SkilledNursing |   | AssistedLiving |  | DebtObligations |       | Other |   | Total
|                                         |  |               |         |                |   | (in thousands) |  |                 |       |      
|Rental properties                        |  | $             | 86,698  |                | $ | 38,386         |  | $               |      |       | $ |      |  | $ | 174    |  | $ | 125,258
|Assets held for sale                     |  |               | 11,006  |                |   | 745            |  |                 |      |       |   |      |  |   |       |  |   | 11,751 
|Mortgage loans and notes receivable, net |  |               |        |                |   | 268            |  |                 |      |       |   | 1,139 |  |   |       |  |   | 1,407  
|Cash and cash equivalents                |  |               | 527     |                |   | 409            |  |                 |      |       |   |      |  |   | 15,013 |  |   | 15,949 
|Restricted cash                          |  |               | 1,739   |                |   | 740            |  |                 |      |       |   |      |  |   | 59     |  |   | 2,538  
|Tenant rent and reimb. receivable, net   |  |               | 251     |                |   | 4,681          |  |                 |      |       |   |      |  |   | 575    |  |   | 5,507  
|Unbilled rent receivable, net            |  |               | 2,522   |                |   |               |  |                 |      |       |   |      |  |   |       |  |   | 2,522  
|Investment in unconsolidated affiliates  |  |               | 1,762   |                |   | 1,213          |  |                 | 2,066 |       |   |      |  |   |       |  |   | 5,041  
|Deferred loan costs, net                 |  |               | 1,677   |                |   | 575            |  |                 |      |       |   |      |  |   |       |  |   | 2,252  
|Pre-acquisition costs                    |  |               | 217     |                |   |               |  |                 |      |       |   |      |  |   |       |  |   | 217    
|Deferred lease costs, net                |  |               | 406     |                |   |               |  |                 |      |       |   |      |  |   |       |  |   | 406    
|Prepaid expense and other                |  |               | 839     |                |   | 235            |  |                 |      |       |   |      |  |   |       |  |   | 1,074  
|                                         |  |               |         |                |   |                |  |                 |       |       |   |       |  |   |        |  |   |        
|Total assets                             |  | $             | 107,644 |                | $ | 47,252         |  | $               | 2,066 |       | $ | 1,139 |  | $ | 15,821 |  | $ | 173,922
|                                         |  |               |         |                |   |                |  |                 |       |       |   |       |  |   |        |  |   |        



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G&L REALTY CORP.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)



8. COMMITMENTS AND CONTINGENCIES



Neither the Company, the Operating Partnership, the Financing Entities, the Subsidiaries, the Roxbury Partnership, Valencia,
Hoquiam, Lyons, Coronado, Tarzana, Massachusetts, Aspen, Tustin II, Tustin III, St. Thomas More, St. Thomas More, Inc., 405 Bedford, 415 Bedford, 416 Bedford, 435 Bedford, 436 Bedford, Sherman Oaks, Regents, 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.



There are a number of common stockholder class actions pending against the Company and its directors that arose out of the
proposal by Daniel M. Gottlieb, the Chief Executive Officer of the Company, and Steven D. Lebowitz, the President of the Company, to acquire all of the outstanding shares of the Companys common stock not then owned by them. The first suit,
Lukoff v. G & L Realty Corp. et al., case number BC 241251, was filed in the Superior Court for the State of California, County of Los Angeles, on December 4, 2000. A 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. This suit was voluntarily dismissed without prejudice on June 7, 2001, and re-filed in the Superior Court for the State of California, County of Los
Angeles, case number BC 251479, on May 31, 2001. Morse v. G & L Realty Corp. et al., case number 221719-V, was filed in the Circuit Court for Montgomery County, Maryland, on May 17, 2001. Another suit, Harbor Finance Partners v. Daniel M.
Gottlieb et al., case number BC 251593, was filed in the Superior Court for the State of California, County of Los Angeles, on June 1, 2001. All these actions assert claims for breach of fiduciary duty and seek compensatory damages and other relief.
The Lukoff, Abrons and Harbor Finance actions have been consolidated for all purposes, with Lukoff designated as the lead action. No trial date has been set. The Morse action has been stayed pending the conclusion of the California class actions.



In addition, on April 4, 2002, a group of four former common
stockholders of the Company filed an individual suit against the Company and its directors arising from the same conduct alleged in the putative class actions and the merger proposals made by those four stockholders in 2001. In Lyle Weisman, et al.
v. G & L Realty Corp., et al., case number BC 271401, pending in the Superior Court of California, County of Los Angeles, the fourth amended complaint asserts claims against the individual directors for breach of fiduciary duty, fraud and
violations of the California Corporations Code, sections 25400-25403 and 25500-25502. The fourth amended complaint also asserts a claim for unjust enrichment against Messrs. Gottlieb and Lebowitz and a claim for unfair competition under Business and
Professions Code sections 17200 et seq. against Messrs. Gottlieb and Lebowitz and the Company. The Court previously dismissed with prejudice Plaintiffs claims for negligent and intentional interference with prospective economic advantage.



On January 17, 2003, the Company and Messrs. Gottlieb and
Lebowitz jointly filed a cross-complaint against the Weisman plaintiffs alleging that their acquisition proposals were made with no real intent to acquire the Company, but simply to disrupt the Companys existing merger agreement with Messrs.
Gottlieb and Lebowitz. The cross-complaint asserts causes of action for, among other things, intentional interference with contract, intentional interference with prospective economic advantage, and fraud. The Weisman suit has been consolidated with
the Lukoff class actions for purposes of discovery. No trial date has been set in this action.



The Company is the guarantor on a $250,000 letter of credit in favor of NVHF Affiliates, LLC (NVHF), a non-profit low-income apartment owner. In December 1999, the Company purchased $1.3 million of
subordinated bonds issued by NVHF for the acquisition of an apartment complex located in Tulsa, Oklahoma. In order to facilitate the acquisition of the property, the Company agreed to guarantee a letter of credit issued by the Bank of Oklahoma. The
letter of credit was established to pay the interest payments on the secured debt of the property in the event the cash flow of the property was insufficient to meet such payments. To date, the letter of credit has not been accessed. However, NVHF
has defaulted on the December 2003 semi-annual interest payment to the holders of the subordinated B-bonds and the Company anticipates the letter of credit will be called upon by NVHF in order to make future interest payments on the secured debt.
The Company is negotiating to replace the existing letter of credit with a new letter of credit under which the Companys maximum liability would increase to approximately $410,000. The Company has a liability of $250,000 on its balance sheet
as of March 31, 2004 related to this letter of credit.



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G&L REALTY CORP.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)



In the third quarter of 2003, Lakeview, a joint venture in which the Company owns a 50% interest,
received a one-year extension on a $6.4 million mortgage loan secured by the ALF that is owned by Lakeview. The Company, along with the Companys joint venture partner, is a guarantor on the loan. The individual owners of the Companys
joint venture partner have also personally guaranteed the loan. The Companys maximum liability under the guarantee is $6.2 million, the current balance on the loan, although the Company does not anticipate having to pay anything under this
guarantee. The Company has recorded no liability on its balance sheet related to this guarantee as of March 31, 2004.



9. RELATED PARTY TRANSACTIONS



On October 29, 2001, the Company completed a merger with G & L Acquisition, LLC, a Maryland limited liability company owned by Daniel M. Gottlieb and
Steven D. Lebowitz, Chief Executive Officer and President, respectively, of the Company. Upon completion of the Merger, each outstanding share of the Companys Common Stock, other than a portion of the shares held by Messrs. Gottlieb and
Lebowitz, was converted into the right to receive $13.00 in cash, without interest. After completion of the Merger, the Companys Common Stock was delisted from the New York Stock Exchange.



As part of the Merger, the Operating Partnership loaned $5.2 million to
Messrs. Gottlieb and Lebowitz to fund a $3.5 million tender offer for the Companys Series A and Series B Preferred Stock and to repay $1.7 million of personal debt. Each of the $2.6 million loans to Messrs. Gottlieb and Lebowitz are for a term
of ten years, bear interest at an annual rate of Libor plus 7.5% and require monthly interest only payments. Messrs. Gottlieb and Lebowitz have the option to accrue any and all interest payments, which shall then be added to the principal balance of
the notes. As of March 31, 2004, the outstanding principal balance on the notes was $5.11 million. For purposes of presentation in these consolidated financial statements, the $5.11 million balance has been reflected on the balance sheet as a
deduction to stockholders equity.



10. ACQUISITIONS, DISPOSITIONS AND
FINANCINGS



On January 26, 2004, the Company sold its
membership interest in Tarzana for $1.7 million and recognized a net gain on sale of $0.3 million. Tarzana owned a two-story, 80-unit ALF located in Tarzana, California. On March 18, 2004, the Company sold a two-story, 48,000 square foot research
and development building located in Irwindale, California for $8.85 million and received net proceeds of $8.5 million. The Company recognized a gain on sale of $0.3 million. The net proceeds from these sales are being held by the Company for new
acquisitions, future stock dividends and general corporate purposes.



In the first quarter of 2004, the Company obtained a $3 million secured line of credit from US Bank. The line of credit is secured by a first deed of trust on land owned by the Company in Santa Clarita. As of May 17, 2004, the Company had
no borrowings under the line of credit.



In February 2004, the
Company received an extension on a loan from GMAC in the original amount of $13.9 million that was due on January 1, 2004 to July 1, 2004 with the option to extend for an additional six months to January 1, 2005. All other terms remained the same.
On March 10, 2004, the Company made a principal payment of $3.6 million to GMAC on this loan in order to obtain the release of two of the three properties which secured the loan. As of March 31, 2004, the outstanding balance on this loan was $9.2
million.



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##### Table of Contents

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 2003 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 2003 Annual Report on Form 10-K as previously
filed with the SEC.



Critical Accounting
Policies



Revenue recognition. The majority of the
Companys revenues results from rents from operating leases. Base rental income is recognized on a straight-line basis over the term of the lease regardless of when payments are due. Certain leases include rent concessions and escalation
clauses creating an effective rent that is included in unbilled rent receivable. The remaining source of the Companys revenue is from patient revenue derived from its operation of three SNFs located in Massachusetts. Patient revenue is
reported at the estimated net realizable amount from patients, third party payors and others for services rendered, net of contractual adjustments.



Allowances for doubtful accounts, notes and bonds receivable. Tenant rents and reimbursements receivable, unbilled rent receivable and mortgage
loans and bonds receivable are carried net of the allowances for doubtful accounts, notes and bonds receivable. Managements determination of the adequacy of these allowances requires significant judgments and estimates. Tenant rents and
reimbursements receivable consist of amounts due for contractual lease payments and reimbursements for common area maintenance, property taxes, insurance and other expenses due from tenants. Management regularly reviews its tenant receivables and
adjusts the allowance based on specific identification, in managements opinion, of an individual tenants ability to pay its obligations under the terms of its lease. Unbilled rent receivable consists of the cumulative straight-line
rental income recorded to date that exceeds the actual amounts billed to date under the Companys lease agreements. Based on historical loss experience, management has typically maintained a reserve for unbilled rent receivable equal to 10% to
20% of the unbilled rent receivable balance. Mortgage loans and bonds receivable consist of the Companys investment in loans secured by real property along with certain unsecured notes. Management regularly evaluates its loan portfolio and
adjusts the allowance based on the specific identification, in managements opinion, of a borrowers ability to pay its obligations under the terms of the loan.



Long-lived assets.The Companys assets consist mainly of investments in real property. The Company
reviews long-lived assets for impairment whenever events or changes in circumstances indicate that an assets book value exceeds the undiscounted expected future cash flows to be derived from that asset. Whenever undiscounted expected future
cash flows are less than the book value, the asset will be reduced to estimated fair value and an impairment loss will be recognized. The Company recorded no impairment losses in the 1stquarter of 2004 or in 2003.



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##### Table of Contents

Results of Operations



Comparison of the Three Month Period Ended March 31, 2004 versus the
Three Month Period Ended March 31, 2003.



Total revenues
increased by $0.6 million, or 5%, from $13.4 million in the first quarter of 2003, to $14.0 million for the same period in 2004. The increase was due to an increase in patient revenues of $0.8 million and an increase in tenant reimbursements of $0.1
million. These increases were offset by a $0.3 million decrease in other income.



Patient revenues relating to the skilled nursing facilities located in Hampden, Massachusetts, which are operated by the Company, increased by $0.8 million, or 14% from $5.9 million in the first quarter of 2003, to
$6.7 million for the same period in 2004. This increase was mainly due to increased occupancy and a higher percentage of Medicare patients for whom the government pays a higher reimbursement rate.



Rents, tenant reimbursements and parking revenues increased by $0.2 million,
or 3%, from $6.8 million in the first quarter of 2003, to $7.0 million for the same period in 2004. Increased occupancy and rental rates along with tenants reimbursing the Company for a greater share of building and operating expenses per the terms
of their lease agreements at the Companys MOB properties accounted for this increase.



Other income decreased by $0.3 million, or 60%, from $0.5 million in the first quarter of 2003, to $0.2 million for the same period in 2004. This decrease was due to lease termination income recorded in 2003
associated with the early termination of a lease at the Companys MOB located in San Diego, California.



Total expenses decreased by $0.2 million, or 2%, from $13.3 million for the three months ended March 31, 2003, to $13.1 million for the same period in
2004. The decrease was due to a decrease in interest expense of $0.7 million, a decrease in losses on the sale of bonds receivable of $0.1 million and a decrease in provisions for doubtful accounts of $0.2 million. These decreases were offset by an
increase in general and administrative costs of $0.1 million as well as an increase in skilled nursing operation costs at the Companys three SNFs located in Massachusetts of $0.7 million. Rising liability insurance and staffing costs at these
SNFs were the primary reason for the increase in costs at the SNFs.



Interest expense decreased $0.7 million, or 21%, from $3.4 million for the three months ended March 31, 2003, to $2.7 million for the same period in 2004. $0.8 million of this decrease was due to the repayment of the Companys $35
million loan obtained in October 2001 in order to repurchase the Companys outstanding common stock. An additional $0.1 million of this decrease was due to a first quarter 2003 decrease in the fair market value of the LIBOR interest rate cap
associated with the $35 million loan. Also, an additional decrease of $0.2 million was due to pre-payment fees, incurred in the first quarter of 2003, relating to the early repayment of a $7.2 million loan secured by an MOB located in Beverly Hills,
California. These decreases were offset by an increase in interest expense of $0.4 million due to the 2003 refinancing of four individual loans totaling $123.3 million.



General & administrative costs increased $0.1 million, or 11%, from $0.9 million for the three months ended March 31,
2003, to $1.0 million for the same period in 2004. This increase was attributed to an increase in corporate staffing costs as well as additional legal costs.



Provisions for doubtful accounts, notes and bonds receivable decreased by $0.2 million, or 67%, from $0.3 million for the three months ended March 31,
2003, to $0.1 million for the same period in 2004. This decrease is the result of a decrease in reserves associated with the Companys SNF located in Hoquiam. Washington.



Equity in earnings of unconsolidated affiliates decreased $4.0 million for the three months ended March 31, 2004 compared to
the same period in 2003. This decrease was partially due to the sale, in 2003, of a 23,000 square foot MOB located in Aliso Viejo, California in which the Company held a 50% interest. In the first quarter of 2003, the Company recognized a gain of
approximately $1.3 million as a result of this sale. In addition, another joint venture, in which the Company held a 50% interest, sold an ALF located in Omaha, Nebraska during the first quarter of 2003. The Company recognized a gain of
approximately $2.6 million as a result of the sale.



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##### Table of Contents

The Company recognized a net gain from discontinued operations in the amount of $0.6 million during the
first quarter of 2004. The sale, in January 2004, of the Companys membership interest in a joint venture that owned an 80-unit ALF located in Tarzana, California accounted for $0.3 million of this gain. In addition, the Company sold a
two-story, 48,000 square foot research and development building located in Irwindale, California recognizing a gain of an additional $0.3 million.



Liquidity and Capital Resources



As of March 31, 2004, the Company had approximately $16 million of cash on hand. The Company obtains its liquidity from multiple internal and external
sources. Internally, funds are derived from the operation of its MOBs, SNFs and ALFs. The MOB properties produced net income of approximately $2.4 million before minority interests for the first quarter of 2004. The $2.4 million includes a $0.3
million gain on the sale of the Companys 48,000 square foot research and development building located in Irwindale, California. The Companys MOB properties contain approximately 785,000 rentable square feet and, as of March 31, 2004,
were approximately 97.4% leased to over 400 tenants with lease terms typically ranging from three to ten years.



The ALFs produced approximately $0.1 million of net income for the first quarter of 2004 including a gain on the sale of $0.3 million of the
Companys membership interest in a joint venture that owned an ALF located in Tarzana, California. As of March 31, 2004, the Company owned two ALFs through joint ventures. Both ALFs have been listed for sale by the Company and its joint venture
partners. The ALFs are leased to operators who manage the facilities for the Company. All of the leases are for five years or less with non-credit terms.



The SNFs produced a net loss of approximately $0.1 million for the first quarter of 2004. All of the SNFs, with the exception of the three SNFs located in
Hampden, Massachusetts where the Company holds the operating licenses and has entered into a management agreement with a local operator and also the North Valley Nursing and Rehabilitation Center which is closed, are leased to operators who manage
the facilities for the Company. In the event that the operators of the ALFs and SNFs are unable to effectively operate the facilities, the ability of the operators to make rental payments to the Company may become impaired and the Company may need
to commit additional capital to the facilities in order to keep them operating. If any of these operators experience financial difficulty, the financial position of the Company and the ability of the Company to make expected distributions would
likely be adversely affected.



The Companys principal
external sources of capital consist of various secured loans and selective asset sales. As of March 31, 2004, the Company had secured loans outstanding of approximately $183.2 million. In the first quarter of 2004, the Company obtained a $3 million
secured line of credit from US Bank. The line of credit is secured by a first deed of trust on land owned by the Company in Santa Clarita. As of May 17, 2004, the Company had no borrowings under the line of credit. The Company has also been selling
some of its assets in order to provide additional liquidity. During the first quarter of 2004, the Company received proceeds of $10.2 million from the sale of its membership interest in a joint venture that owned an 80-unit ALF located in Tarzana,
California and the sale of a two-story, 48,000 square foot research and development building located in Irwindale, California and reserved such funds for new acquisitions, future stock dividends and for general corporate purposes. The Companys
2004 asset sales are discussed below.



On January 26, 2004, the
Company sold its membership interest in a joint venture that owned an 80-unit ALF located in Tarzana, California for $1.7 million in cash and recognized a net gain on sale of $0.3 million. The existing mortgage balance of $8.2 million along with an
unsecured note payable of $0.5 million were assumed by the buyer.



On March 18, 2004, the Company sold a two-story, 48,000 square foot research and development building located in Irwindale, California for $8.85 million and received net proceeds of $8.5 million. The Company recognized a gain on sale of
$0.3 million.





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##### Table of Contents

The Company is in the process of entering into a joint venture with respect to its 220-bed SNF in
Maryland. The Company intends to contribute its 100% interest in the property to the joint venture for a 75% interest in the joint venture and the joint venture partner will contribute $1 million in cash for its 25% interest. The Company expects the
joint venture to close in the second quarter of 2004.



As of
May 17, 2004, the Company had listed for sale or was under contract to sell a total of three properties. The properties include a three-story, 40,000 square foot office and retail complex located in Coronado, California; a 59-bed nursing and
rehabilitation center in Chico, California; and a 10,000 square foot MOB located in Tustin, California. The Company plans to use the net proceeds from these sales for new acquisitions, future common stock dividends and for general corporate
purposes.



The Company 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 has paid no dividends to holders of the Companys Common Stock during
2004.



While the Company is highly leveraged, the Company
expects to continue meeting its short-term liquidity requirements through its working capital and cash flow provided by operations. Through its debt refinancings in 2003, the Company reduced its average interest rate on its long-term, fixed rate
debt from 7.52% as of December 31, 2002 to 5.98% as of December 31, 2003. The Company also expects to maintain stockholder distributions in accordance with REIT requirements, although no assurances can be given that the current level of
distributions will be maintained. Long-term liquidity requirements such as refinancing mortgages, financing acquisitions and financing capital improvements will be accomplished through long-term borrowings, the sale of assets and joint venture
arrangements.



Sources and Uses of Funds



The Companys net cash provided by operating activities increased $0.8
million from $1.3 million for the three months ended March 31, 2003 to $2.1 million for the same period in 2004. The increase is due primarily to a decrease in equity in income of unconsolidated affiliates of $4.0 million. This increase was offset
by a decrease in net income of $2.2 million, a $0.6 million increase in net gains from sale of discontinued operations as well as a $0.2 million decrease in provisions for doubtful accounts, notes and bonds receivable.



Net cash from investing activities increased $5.7 million, or 228%, from $2.5
million for the three months ended March 31, 2003 to $8.2 million for the same period in 2004. The increase was primarily due to an $9.9 million increase in sales of real estate assets. In the first quarter of 2004, the Company sold its membership
interest in a joint venture that owned an ALF located in Tarzana, California as well as its research and development building located in Irwindale, California. This increase was partially offset by a decrease in distributions from unconsolidated
affiliates of $2.9 million.



Net cash flows used in financing
activities increased by approximately $2.3 million from $4.0 million for the three months ended March 31, 2003, to $6.3 million for the same period in 2004. The increase was due to an $8.2 million decrease in the notes payable proceeds offset by a
$4.6 million decrease in the repayment of notes payable and a $1.3 million decrease in payments of deferred loan costs.



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Off- Balance Sheet Arrangements



The Company is the guarantor on a $250,000 letter of credit in favor of NVHF Affiliates, LLC (NVHF), a
non-profit low-income apartment owner. In December 1999, the Company purchased $1.3 million of subordinated bonds issued by NVHF for the acquisition of an apartment complex located in Tulsa, Oklahoma. In order to facilitate the acquisition of the
property, the Company agreed to guarantee a letter of credit issued by the Bank of Oklahoma. The letter of credit was established to pay the interest payments on the secured debt of the property in the event the cash flow of the property was
insufficient to meet such payments. To date, the letter of credit has not been accessed. However, NVHF has defaulted on the December 2003 semi-annual interest payment to the holders of the subordinated B-bonds and the Company anticipates the letter
of credit will be called upon by NVHF in order to make future interest payments on the secured debt. The Company is negotiating to replace the existing letter of credit with a new letter of credit under which the Companys maximum liability
would increase to approximately $410,000. The Company has a liability of $250,000 on its balance sheet as of March 31, 2004 related to the existing letter of credit.



The Company is a guarantor on a $6.2 million mortgage loan secured by an ALF that is owned by a joint venture in which the
Company owns a 50% interest. A corporate guaranty on a short-term mortgage loan is a usual and customary requirement by lenders in the industry. The Companys joint venture partner is also a guarantor on the loan. The individual owners of the
Companys joint venture partner have also personally guaranteed the loan. The Companys maximum liability under the guarantee is $6.2 million, the current balance on the loan, although the Company does not anticipate having to pay anything
under this guarantee. The Company has recorded no liability on its balance sheet related to this guarantee as of March 31, 2004.



As of March 31, 2004, the Company had investments in five unconsolidated joint ventures totaling $5.0 million. All of the unconsolidated joint ventures
were formed for the purpose of acquiring and owning real estate assets. Per the terms of the joint venture agreements, the Company could be required to advance additional funds to these joint ventures if the operating activities of the joint
ventures are insufficient to satisfy the obligations of the joint ventures. Any additional funds advanced to the joint ventures are treated as additional equity contributions and are recorded as an investment in unconsolidated affiliates on the
Companys balance sheet.



Contractual Obligations



On January 26, 2004, the Company sold its membership interest
in Tarzana for $1.7 million. The buyer assumed the existing mortgage and unsecured obligations totaling $8.7 million relieving the Company of any future obligations under these two obligations. On March 10, 2004, the Company made a principal payment
of $3.6 million on one of its variable rate mortgage loans in order to obtain the release of collateral of two of the three properties that secured the loan. There were no other material changes in the first quarter of 2004 compared to the
Companys contractual obligations as of December 31, 2003. As of March 31, 2004, the Company had the following contractual obligations outstanding:



|                             |  |      |        |      |   |                |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|---------------------------- |  | ---- | ------ | ---- | - | -------------- |  | ---- | ------ | ---- | - | ---------- |  | ----- | ------ |  | - | ------- |  | - | -------
|                             |  | 2004 |        | 2005 |   | 2006           |  | 2007 |        | 2008 |   | Thereafter |  | Total
|                             |  |      |        |      |   | (in thousands) |  |      |        |      |   |           
|Obligations:                 |  |      |        |      |   |                |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|                             |  |      |        |      |   |                | 
|Fixed rate mortgage debt:    |  |      |        |      |   |                |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|Interest                     |  | $    | 7,535  |      | $ | 9,865          |  | $    | 9,697  |      | $ | 9,519      |  | $     | 8,890  |  | $ | 29,635  |  | $ | 75,141 
|Principal                    |  |      | 1,891  |      |   | 2,662          |  |      | 2,829  |      |   | 3,008      |  |       | 18,836 |  |   | 138,508 |  |   | 167,734
|                             |  |      |        |      |   |                | 
|Variable rate mortgage debt: |  |      |        |      |   |                |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|Principal (1)                |  |      | 9,185  |      |   | 4,196          |  |      |        |      |   |            |  |       |        |  |   |         |  |   | 13,381 
|                             |  |      |        |      |   |                | 
|Line of credit:              |  |      |        |      |   |                |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|Principal (1)                |  |      |        |      |   | 2,066          |  |      |        |      |   |            |  |       |        |  |   |         |  |   | 2,066  
|                             |  |      |        |      |   |                |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|                             |  | $    | 18,611 |      | $ | 18,789         |  | $    | 12,526 |      | $ | 12,527     |  | $     | 27,726 |  | $ | 168,143 |  | $ | 258,322
|                             |  |      |        |      |   |                |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        

---

|(1) | The Company cannot reasonably determine the future interest obligations associated with its variable rate debt and line of credit due to the variable interest rates associated with
these loans.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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New Accounting Pronouncements



In December 2003, the FASB issued FASB Interpretation No. 46-R, Consolidation of Variable Interest Entities-an
Interpretation of ARB No. 51 (FIN 46-R). FIN 46-R clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements and provides guidance on the identification of entities for which
control is achieved through means other than voting rights (variable interest entities or VIEs) and how to determine when and which business enterprise should consolidate the VIE. This new model for consolidation applies to
an entity in which either: (1) the equity investors (if any) do not have a controlling financial interest or (2) the equity investment at risk is insufficient to finance that entitys activities without receiving additional subordinated
financial support from other parties. The provisions of this interpretation are immediately effective for VIEs formed after January 31, 2003. For VIEs formed prior to January 31, 2003, the provisions of this interpretation apply to the first fiscal
year or interim period beginning after March 15, 2004. The Company has completed an evaluation of all of its investments and other interests in entities that may be deemed VIEs under the provisions of FIN 46-R. These investments include real estate
joint ventures with assets totaling $32.1 million as of March 31, 2004. The Company believes that its real estate joint ventures do not fall under the provisions of FIN 46-R and will not be consolidated, however, it is still evaluating the
provisions of FIN 46-R and cannot make a definitive conclusion until it completes the evaluation.



Non-GAAP Supplemental Financial Measure



Industry analysts generally consider funds from operations (FFO) to be an appropriate measure of the performance of a REIT. The Company calculates FFO as defined by the Board of Governors of the National
Association of Real Estate Investment Trusts (NAREIT). 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 calculated to include the minority interests share of income from the Operating Partnership and Senior Care Partnership since the Operating Partnership and Senior Care Partnerships net income is allocated
proportionately among all owners of Operating Partnership and Senior Care Partnership units. The combined number of Operating Partnership and Senior Care 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 and Senior Care 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 2003 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, 2004 and 2003.



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##### Table of Contents

G&L REALTY CORP.

FUNDS FROM OPERATIONS AND ADDITIONAL DATA

(Unaudited)



|                                                            |  |                                           |         |   |      |   |        |  
|----------------------------------------------------------- |  | ----------------------------------------- | ------- | - | ---- | - | ------ | -
|                                                            |  | For the Three MonthPeriod Ended March 31, |        
|                                                            |  | 2004                                      |         |   | 2003 |  
|                                                            |  | (in thousands)                            |        
|Funds from Operations(1)                                    |  |                                           |         |   |      |   |        |  
|Net income                                                  |  | $                                         | 1,567   |   |      | $ | 3,810  |  
|Depreciation of real estate assets                          |  |                                           | 990     |   |      |   | 1,310  |  
|Amortization of deferred lease costs                        |  |                                           | 48      |   |      |   | 61     |  
|Gain from sale of discontinued operations                   |  |                                           | (586    | ) |      |   |       |  
|Gains from sale of unconsolidated affiliates                |  |                                           |        |   |      |   | (3,963 | )
|Depreciation from unconsolidated affiliates                 |  |                                           | 111     |   |      |   | 171    |  
|Adjustment for minority interest in consolidated affiliates |  |                                           | (25     | ) |      |   | (38    | )
|Dividends on preferred stock                                |  |                                           | (1,791  | ) |      |   | (1,790 | )
|                                                            |  |                                           |         |   |      |   |        |  
|Funds from Operations(1)                                    |  | $                                         | 314     |   |      | $ | (439   | )
|                                                            |  |                                           |         |   |      |   |        |  
|Additional Data                                             |  |                                           |         |   |      |   |        |  
|Cash flows:                                                 |  |                                           |         |   |      |   |        |  
|Operating activities                                        |  | $                                         | 2,105   |   |      | $ | 1,291  |  
|Investing activities                                        |  |                                           | 16,858  |   |      |   | 2,486  |  
|Financing activities                                        |  |                                           | (14,964 | ) |      |   | (4,033 | )
|                                                            |  |                                          
|Capital expenditures                                        |  |                                           |         |   |      |   |        |  
|Building improvements                                       |  | $                                         | 171     |   |      | $ | 293    |  
|Tenant improvements                                         |  |                                           | 76      |   |      |   | 258    |  
|Furniture, fixtures & equipment                             |  |                                           | 82      |   |      |   | 66     |  
|Leasing commissions                                         |  |                                           | 23      |   |      |   | 11     |  
|                                                            |  |                                          
|Depreciation and amortization                               |  |                                           |         |   |      |   |        |  
|Depreciation of real estate assets                          |  | $                                         | 990     |   |      | $ | 1,310  |  
|Depreciation of non-real estate assets                      |  |                                           | 166     |   |      |   | 163    |  
|Amortization of deferred lease costs                        |  |                                           | 48      |   |      |   | 61     |  
|Amortization of deferred licensing costs                    |  |                                           | 13      |   |      |   | 13     |  
|Amortization of capitalized financing costs                 |  |                                           | 88      |   |      |   | 221    |  
|                                                            |  |                                          
|Accrued rent in excess of billed rent                       |  | $                                         | (57     | ) |      | $ | 53     |  

---

|1) | FFO represents net income (computed in accordance with GAAP, consistently applied), excluding extraordinary items and gains (or losses) from 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
is computed in accordance with the definition adopted by NAREIT. 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 dates of January 1, 1996 and January 1, 2000, respectively.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

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. As of March
31, 2004, approximately 8% of the Companys notes payable bear interest at a rate indexed to the one-month LIBOR rate or Prime Rate. The tables below provide information as of March 31, 2004 and December 31, 2003 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, 2004 and December 31, 2003.



|                      |  |                        |        |   |                |   |       |                                |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   |         |   |  |   |        
|--------------------- |  | ---------------------- | ------ | - | -------------- | - | ----- | ------------------------------ |  | - | ----- | - |  | ---- | ----- | - | ---------- | - | ------ | ----- |  | - | ------- | - |  | - | ------- | - |  | - | -------
|                      |  | PRINCIPAL MATURING IN: |        |   |                |   |       | Fair MarketValue March 31,2004
|                      |  | As of March 31, 2004   |        |   |                |   |      
|                      |  | 2004                   |        |   | 2005           |   |       | 2006                           |  |   | 2007  |   |  | 2008 |       |   | Thereafter |   |        | Total |  |  
|                      |  |                        |        |   | (in thousands) |   |       |                                |  |   |       |   |  |     
|Liabilities:          |  |                        |        |   |                |   |       |                                |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   |         |   |  |   |        
|Mortgage debt:        |  |                        |        |   |                |   |       |                                |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   |         |   |  |   |        
|Fixed rate            |  | $                      | 1,891  |   |                | $ | 2,662 |                                |  | $ | 2,829 |   |  | $    | 3,008 |   |            | $ | 18,836 |       |  | $ | 138,508 |   |  | $ | 167,734 |   |  | $ | 189,316
|Average interest rate |  |                        | 5.92   | % |                |   | 5.92  | %                              |  |   | 5.92  | % |  |      | 5.92  | % |            |   | 5.92   | %     |  |   | 5.73    | % |  |   | 5.89    | % |  |   |        
|                      |  |                        |        |   |                |   |       |                               
|Variable rate         |  |                        | 9,185  |   |                |   | 4,196 |                                |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   | 13,381  |   |  |   | 13,381 
|Average interest rate |  |                        | 6.15   | % |                |   | 5.37  | %                              |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   | 6.04    | % |  |   |        
|                      |  |                        |        |   |                |   |       |                               
|Line of credit:       |  |                        |        |   |                |   |       |                                |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   |         |   |  |   |        
|Variable rate         |  |                        |        |   |                |   | 2,066 |                                |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   | 2,066   |   |  |   | 2,066  
|Average interest rate |  |                        |        |   |                |   | 6.00  | %                              |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   | 6.00    | % |  |   |        
|                      |  |                        |        |   |                |   |       |                                |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   |         |   |  |   |        
|                      |  | $                      | 11,076 |   |                | $ | 8,924 |                                |  | $ | 2,829 |   |  | $    | 3,008 |   |            | $ | 18,836 |       |  | $ | 138,508 |   |  | $ | 183,181 |   |  | $ | 204,763
|                      |  |                        |        |   |                |   |       |                                |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   |         |   |  |   |        



The Companys
future earnings and cash flows relating to market sensitive instruments are primarily dependent upon the prevailing LIBOR market interest rate and the Prime Rate. Based upon interest rates as of March 31, 2004, a 1% increase in the LIBOR rate and
the Prime Rate would decrease future earnings by $154,000 annually, and decrease future cash flow by $63,000 annually. A 1% decrease in the LIBOR rate and the Prime Rate would increase future earnings by $154,000 annually, and increase future cash
flow by $63,000 annually. A 1% change in the LIBOR rate and the Prime Rate would not have a material impact on the fair value of the Companys debt.



|                      |  |                         |        |   |                |   |       |                                   |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   |         |   |  |   |        
|--------------------- |  | ----------------------- | ------ | - | -------------- | - | ----- | --------------------------------- |  | - | ----- | - |  | ---- | ----- | - | ---------- | - | ------ | ----- |  | - | ------- | - |  | - | ------- | - |  | - | -------
|                      |  | PRINCIPAL MATURING IN:  |        |   |                |   |       | Fair MarketValue December 31,2003
|                      |  | As of December 31, 2004 |        |   |                |   |      
|                      |  | 2004                    |        |   | 2005           |   |       | 2006                              |  |   | 2007  |   |  | 2008 |       |   | Thereafter |   |        | Total |  |  
|                      |  |                         |        |   | (in thousands) |   |       |                                   |  |   |       |   |  |     
|Liabilities:          |  |                         |        |   |                |   |       |                                   |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   |         |   |  |   |        
|Mortgage debt:        |  |                         |        |   |                |   |       |                                   |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   |         |   |  |   |        
|Fixed rate            |  | $                       | 2,565  |   |                | $ | 2,752 |                                   |  | $ | 2,927 |   |  | $    | 3,112 |   |            | $ | 18,949 |       |  | $ | 146,708 |   |  | $ | 177,013 |   |  | $ | 202,829
|Average interest rate |  |                         | 5.98   | % |                |   | 5.98  | %                                 |  |   | 5.98  | % |  |      | 5.98  | % |            |   | 5.92   | %     |  |   | 5.81    | % |  |   | 5.94    | % |  |   |        
|                      |  |                         |        |   |                |   |       |                                  
|Variable rate         |  |                         | 12,910 |   |                |   | 4,218 |                                   |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   | 17,128  |   |  |   | 17,128 
|Average interest rate |  |                         | 6.22   | % |                |   | 5.37  | %                                 |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   | 6.17    | % |  |   |        
|                      |  |                         |        |   |                |   |       |                                  
|Line of credit:       |  |                         |        |   |                |   |       |                                   |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   |         |   |  |   |        
|Variable rate         |  |                         |        |   |                |   | 2,186 |                                   |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   | 2,186   |   |  |   | 2,186  
|Average interest rate |  |                         |        |   |                |   | 6.00  | %                                 |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   | 6.00    | % |  |   |        
|                      |  |                         |        |   |                |   |       |                                   |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   |         |   |  |   |        
|                      |  | $                       | 15,475 |   |                | $ | 9,156 |                                   |  | $ | 2,927 |   |  | $    | 3,112 |   |            | $ | 18,949 |       |  | $ | 146,708 |   |  | $ | 196,327 |   |  | $ | 222,143
|                      |  |                         |        |   |                |   |       |                                   |  |   |       |   |  |      |       |   |            |   |        |       |  |   |         |   |  |   |         |   |  |   |        



The Companys
future earnings and cash flows relating to market sensitive instruments are primarily dependent upon prevailing LIBOR market interest rate and the Prime Rate. Based upon interest rates as of December 31, 2003, a 1% increase in the LIBOR rate and the
Prime Rate would decrease future earnings by $193,000 and future cash flow would decrease by $64,000. A 1% decrease in the LIBOR rate and the Prime Rate would increase future earnings by $193,000 and future cash flow would increase by $64,000. A 1%
change in the LIBOR rate and the Prime Rate would not have a material impact on the fair value of the Companys debt.



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Item 4. CONTROLS AND PROCEDURES



The Company evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) at the end of the quarterly period covered by this report. This evaluation was performed
by the Companys Chief Accounting Officer, its President and its Chief Executive Officer. Based on this evaluation, the certifying officers concluded that the Companys disclosure controls and procedures were effective as of the end of the
quarterly period covered by this report. There has been no change in the Companys internal control over financial reporting that occurred during the Companys most recent fiscal quarter that has materially affected, or is reasonably
likely to materially affect, the Companys internal control over financial reporting.



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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, Use of Proceeds and Issuer Purchase of Equity Securities.                                                                                                                                                                                                                                      
|        | 
|        |  | None.                                                                                                                                                                                                                                                                                                                 
|        | 
|Item 3  |  | Defaults Upon Senior Securities.                                                                                                                                                                                                                                                                                      
|        | 
|        |  | None.                                                                                                                                                                                                                                                                                                                 
|        | 
|Item 4  |  | Submission of Matters to a Vote of Security Holders.                                                                                                                                                                                                                                                                  
|        | 
|        |  | None.                                                                                                                                                                                                                                                                                                                 
|        | 
|Item 5  |  | Other Information.                                                                                                                                                                                                                                                                                                    
|        | 
|        |  | None.                                                                                                                                                                                                                                                                                                                 
|        | 
|Item 6  |  | Exhibits and Reports on Form 8-K                                                                                                                                                                                                                                                                                      
|        | 
|        |  | There were no reports on Form 8-K filed during the three month period ended March 31, 2004.                                                                                                                                                                                                                           



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|(a) | Exhibits
|--- | --------



|            |  |      |  |                                                                                                                                                                                                                               
|----------- |  | ---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Note |  | Description                                                                                                                                                                                                                   
|2.1         |  | (6)  |  | The Agreement and Plan of Merger between G&L Acquisition, LLC and G&L Realty Corp.                                                                                                                                            
|            |  |     
|2.2         |  | (7)  |  | Amendment No. 1 to the Agreement and Plan of Merger between G&L Acquisition, LLC and G&L Realty Corp. dated September 28, 2001.                                                                                               
|            |  |     
|2.3         |  | (8)  |  | Amendment No. 2 to the Agreement and Plan of Merger between G&L Acquisition, LLC and G&L Realty Corp. dated October 26, 2001.                                                                                                 
|            |  |     
|2.4         |  | (10) |  | Partnership Merger Agreement dated as of May 10, 2001 by and among G&L Acquisition, LLC, G&L Partnership, LLC, G&L Realty Corp. and G&L Realty Partnership,
L.P.                                                              
|            |  |     
|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.                                                                                                                                                                               
|            |  |     
|10.3        |  | (2)  |  | Agreement of Limited Partnership of G&L Realty Partnership, L.P.                                                                                                                                                              
|            |  |     
|10.3.2      |  | (9)  |  | Amendment to Agreement of Limited Partnership of G&L Realty Partnership, L.P. dated as of July 31, 2001.                                                                                                                      
|            |  |     
|10.5        |  | (1)  |  | Form of Indemnity Agreement between G&L Realty Corp. and directors and certain officers.                                                                                                                                      
|            |  |     
|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.                                   
|            |  |     
|10.77       |  | (4)  |  | 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       |  | (4)  |  | 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       |  | (4)  |  | Guaranty of Lease between Steven D. Lebowitz and Daniel M. Gottlieb (collectively Guarantor) in favor of G&L Coronado, LLC (Landlord).                                                                                    
|            |  |     
|10.81       |  | (5)  |  | Loan Agreement in the amount of $13.92 million between G&L Hampden, LLC, as Borrower, and GMAC Commercial Mortgage Corporation, as Lender.                                                                                    
|            |  |     
|10.82       |  | (9)  |  | Credit Agreement among G&L Realty Partnership, L.P., G&L Partnership, LLC, the Several Lenders from Time to Time Parties Hereto and GMAC Commercial Mortgage Corporation, as Agent,
dated as of October 29, 2001              
|            |  |     
|10.83       |  | (9)  |  | Guarantee and Collateral Agreement made by Daniel M. Gottlieb, Steven D. Lebowitz, G&L Realty Corp. and G&L Realty Partnership, L.P. in favor of GMAC Commercial Mortgage Corporation,
as Agent, dated as of October 29, 2001.
|            |  |     
|21          |  |      |  | List of Subsidiaries                                                                                                                                                                                                          
|            |  |     
|31.1        |  |      |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                       
|            |  |     
|31.2        |  |      |  | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                       
|            |  |     
|32.1        |  |      |  | Certification Pursuant to 18 U.S.C. Section 1350                                                                                                                                                                              
|            |  |     
|32.2        |  |      |  | Certification Pursuant to 18 U.S.C. Section 1350                                                                                                                                                                              

---

|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.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|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) | 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.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5) | 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
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6) | Filed as an exhibit to the Companys Quarterly Report on Form 10-Q (filed as of May 15, 2001) for the quarter ended March 31, 2001 and incorporated herein by reference.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7) | Filed as an exhibit to the Companys Current Report on Form 8-K (filed as of October 4, 2001) and incorporated herein by reference.
|-- | -----------------------------------------------------------------------------------------------------------------------------------

|8) | Filed as an exhibit to the Companys Current Report on Form 8-K (filed as of October 31, 2001) and incorporated herein by reference.
|-- | ------------------------------------------------------------------------------------------------------------------------------------

|9) | Filed as an exhibit to the Companys Current Report on Form 8-K (filed as of November 13, 2001) and incorporated herein by reference.
|-- | -------------------------------------------------------------------------------------------------------------------------------------

|10) | Filed as an exhibit to the Companys Quarterly Report on Form 10-Q (filed as of November 14, 2001) for the quarter ended September 30, 2001 and incorporated herein by
reference.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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 17, 2004 |  | By:              |  | /s/ David E. Hamer      
|                   |  |                  |  | David E. Hamer          
|                   |  |                  |  | Chief Accounting Officer



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