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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



(Mark One)



|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended June 30, 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)



|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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 August 16, 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 June 30, 2004 (unaudited) and December 31, 2003                                  |  | 3          
|          |  | Condensed Consolidated Statements of Operations for the Three and Six Month Periods Ended June 30, 2004 and 2003 (unaudited) |  | 4          
|          |  | Condensed Consolidated Statements of Cash Flows for the Six Month Periods Ended June 30, 2004 and 2003 (unaudited)           |  | 5          
|          |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                             |  | 7          
|Item 2    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                        |  | 20         
|Item 3    |  | Quantitative and Qualitative Disclosures About Market Risk                                                                   |  | 29         
|Item 4    |  | Controls and Procedures                                                                                                      |  | 30         
|          |  |                                                                                                                             
|Part II   |  | Other Information                                                                                                            |  |            
|          |  |                                                                                                                             
|Item 1    |  | Legal Proceedings                                                                                                            |  | 31         
|Item 2    |  | Changes in Securities                                                                                                        |  | 31         
|Item 3    |  | Defaults Upon Senior Securities                                                                                              |  | 31         
|Item 4    |  | Submission of Matters to a Vote of Security Holders                                                                          |  | 31         
|Item 5    |  | Other Information                                                                                                            |  | 31         
|Item 6    |  | Exhibits and Reports on Form 8-K                                                                                             |  | 32         
|          |  |                                                                                                                             
|Signature |  |                                                                                                                              |  | 34         



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G&L REALTY CORP.



CONDENSED
CONSOLIDATED BALANCE SHEETS

(In thousands)



|                                                                                                                                            |  |               |         |   |                   |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ----------------- | - | ------- | -
|                                                                                                                                            |  | June 30, 2004 |         |   | December 31, 2003 |  
|                                                                                                                                            |  | (Unaudited)   |         |   |                   |  
|ASSETS                                                                                                                                      |  |               |         |   |                   |   |         |  
|                                                                                                                                            |  |              
|Rental properties (Note 3):                                                                                                                 |  |               |         |   |                   |   |         |  
|Land                                                                                                                                        |  | $             | 24,924  |   |                   | $ | 24,353  |  
|Buildings and improvements, net                                                                                                             |  |               | 114,545 |   |                   |   | 109,479 |  
|Projects under development                                                                                                                  |  |               | 2,068   |   |                   |   | 1,296   |  
|                                                                                                                                            |  |               |         |   |                   |   |         |  
|Total rental properties                                                                                                                     |  |               | 141,537 |   |                   |   | 135,128 |  
|Assets held for sale (Note 3)                                                                                                               |  |               | 1,234   |   |                   |   | 20,587  |  
|Cash and cash equivalents                                                                                                                   |  |               | 14,349  |   |                   |   | 11,950  |  
|Restricted cash                                                                                                                             |  |               | 3,415   |   |                   |   | 2,724   |  
|Tenant rent, reimbursements and other receivables, net                                                                                      |  |               | 3,084   |   |                   |   | 5,338   |  
|Unbilled rent receivable, net                                                                                                               |  |               | 2,524   |   |                   |   | 2,620   |  
|Mortgage loans and notes receivable, net                                                                                                    |  |               | 1,879   |   |                   |   | 764     |  
|Investments in unconsolidated affiliates (Note 6)                                                                                           |  |               | 4,994   |   |                   |   | 5,077   |  
|Deferred charges and other assets, net (Note 4)                                                                                             |  |               | 4,005   |   |                   |   | 4,029   |  
|                                                                                                                                            |  |               |         |   |                   |   |         |  
|TOTAL ASSETS                                                                                                                                |  | $             | 177,021 |   |                   | $ | 188,217 |  
|                                                                                                                                            |  |               |         |   |                   |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                        |  |               |         |   |                   |   |         |  
|                                                                                                                                            |  |              
|LIABILITIES:                                                                                                                                |  |               |         |   |                   |   |         |  
|Notes payable                                                                                                                               |  | $             | 186,869 |   |                   | $ | 186,439 |  
|Liabilities of assets held for sale (Note 3)                                                                                                |  |               | 1,193   |   |                   |   | 10,285  |  
|Accounts payable and other liabilities                                                                                                      |  |               | 4,992   |   |                   |   | 5,834   |  
|Tenant security deposits                                                                                                                    |  |               | 1,440   |   |                   |   | 1,405   |  
|                                                                                                                                            |  |               |         |   |                   |   |         |  
|Total liabilities                                                                                                                           |  |               | 194,494 |   |                   |   | 203,963 |  
|Minority interest in consolidated affiliates                                                                                                |  |               | (1,227  | ) |                   |   | (1,453  | )
|STOCKHOLDERS EQUITY (Note 5):                                                                                                              |  |               |         |   |                   |   |         |  
|Preferred shares$.01 par value, 10,000,000 shares authorized, liquidation preference of $25.00 per share                                   |  |               |         |   |                   |   |         |  
|        Series A Preferred1,495,000 shares issued and outstanding as of June 30, 2004 and
December 31, 2003                               |  |               | 15      |   |                   |   | 15      |  
|        Series B Preferred1,380,000 shares issued and outstanding as of June 30, 2004 and
December 31, 2003                               |  |               | 14      |   |                   |   | 14      |  
|Common shares$.01 par value, 50,000,000 shares authorized, 710,199 shares issued and outstanding as of June 30, 2004 and December 31,
2003 |  |               | 7       |   |                   |   | 7       |  
|Additional paid-in capital                                                                                                                  |  |               | 40,827  |   |                   |   | 40,827  |  
|Distributions in excess of net income                                                                                                       |  |               | (51,995 | ) |                   |   | (50,042 | )
|Notes receivable from stockholders                                                                                                          |  |               | (5,114  | ) |                   |   | (5,114  | )
|                                                                                                                                            |  |               |         |   |                   |   |         |  
|Total stockholders deficit                                                                                                                 |  |               | (16,246 | ) |                   |   | (14,293 | )
|                                                                                                                                            |  |               |         |   |                   |   |         |  
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                 |  | $             | 177,021 |   |                   | $ | 188,217 |  
|                                                                                                                                            |  |               |         |   |                   |   |         |  



See accompanying notes
to Condensed Consolidated Financial Statements



Page 3



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G&L REALTY CORP.



CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands)



|                                                                                                                                                 |  |                                   |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------------------------------- | ------ | - | ------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                                                 |  | Three Month Period Ended June 30, |        |   | Six Month Period Ended June 30, |  
|                                                                                                                                                 |  | 2004                              |        |   | 2003                            |   |        | 2004 |  |   | 2003   |  
|                                                                                                                                                 |  | (Unaudited)                       |       
|REVENUES:                                                                                                                                        |  |                                   |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Rent                                                                                                                                             |  | $                                 | 7,063  |   |                                 | $ | 5,931  |      |  | $ | 13,092 |   |  | $ | 11,949 |  
|Patient revenues (Note 7)                                                                                                                        |  |                                   |       |   |                                 |   | 6,337  |      |  |   | 6,736  |   |  |   | 12,236 |  
|Tenant reimbursements                                                                                                                            |  |                                   | 948    |   |                                 |   | 794    |      |  |   | 1,860  |   |  |   | 1,575  |  
|Parking                                                                                                                                          |  |                                   | 441    |   |                                 |   | 411    |      |  |   | 861    |   |  |   | 784    |  
|Interest and loan fees                                                                                                                           |  |                                   | 211    |   |                                 |   | 192    |      |  |   | 405    |   |  |   | 399    |  
|Other income                                                                                                                                     |  |                                   | 301    |   |                                 |   | 72     |      |  |   | 455    |   |  |   | 597    |  
|                                                                                                                                                 |  |                                   |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Total revenues                                                                                                                                   |  |                                   | 8,964  |   |                                 |   | 13,737 |      |  |   | 23,409 |   |  |   | 27,540 |  
|                                                                                                                                                 |  |                                   |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|EXPENSES:                                                                                                                                        |  |                                   |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Property operations                                                                                                                              |  |                                   | 2,107  |   |                                 |   | 2,059  |      |  |   | 4,061  |   |  |   | 4,103  |  
|Skilled nursing operations                                                                                                                       |  |                                   |       |   |                                 |   | 5,843  |      |  |   | 6,287  |   |  |   | 11,252 |  
|Depreciation and amortization                                                                                                                    |  |                                   | 1,574  |   |                                 |   | 960    |      |  |   | 2,782  |   |  |   | 2,264  |  
|Provision for doubtful accounts, notes and bonds receivable                                                                                      |  |                                   | 852    |   |                                 |   | 114    |      |  |   | 911    |   |  |   | 393    |  
|Loss on sale of bonds receivable                                                                                                                 |  |                                   |       |   |                                 |   |       |      |  |   |       |   |  |   | 120    |  
|Interest                                                                                                                                         |  |                                   | 2,831  |   |                                 |   | 8,112  |      |  |   | 5,661  |   |  |   | 11,637 |  
|General and administrative                                                                                                                       |  |                                   | 1,218  |   |                                 |   | 879    |      |  |   | 2,256  |   |  |   | 1,832  |  
|                                                                                                                                                 |  |                                   |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Total expenses                                                                                                                                   |  |                                   | 8,582  |   |                                 |   | 17,967 |      |  |   | 21,958 |   |  |   | 31,601 |  
|                                                                                                                                                 |  |                                   |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Income (loss) from continuing operations before equity in (loss) earnings of unconsolidated affiliates, minority interest and income tax
expense |  |                                   | 382    |   |                                 |   | (4,230 | )    |  |   | 1,451  |   |  |   | (4,061 | )
|Equity in (loss) earnings of unconsolidated affiliates (Note 6)                                                                                  |  |                                   | (64    | ) |                                 |   | (84    | )    |  |   | (163   | ) |  |   | 3,800  |  
|Minority interest in consolidated affiliates                                                                                                     |  |                                   | (136   | ) |                                 |   | (81    | )    |  |   | (261   | ) |  |   | (10    | )
|Income tax expense                                                                                                                               |  |                                   |       |   |                                 |   | (22    | )    |  |   |       |   |  |   | (45    | )
|Income (loss) from continuing operations                                                                                                         |  |                                   | 182    |   |                                 |   | (4,417 | )    |  |   | 1,027  |   |  |   | (316   | )
|                                                                                                                                                 |  |                                   |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Discontinued operations                                                                                                                          |  |                                   |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Net income (loss) from operations of discontinued operations                                                                                     |  |                                   | 26     |   |                                 |   | (267   | )    |  |   | 162    |   |  |   | (558   | )
|(Loss) gain from sale of discontinued operations                                                                                                 |  |                                   | (147   | ) |                                 |   |       |      |  |   | 439    |   |  |   |       |  
|                                                                                                                                                 |  |                                   |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Total (loss) income from discontinued operations                                                                                                 |  |                                   | (121   | ) |                                 |   | (267   | )    |  |   | 601    |   |  |   | (558   | )
|                                                                                                                                                 |  |                                   |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Net income (loss)                                                                                                                                |  |                                   | 61     |   |                                 |   | (4,684 | )    |  |   | 1,628  |   |  |   | (874   | )
|Dividends on preferred stock                                                                                                                     |  |                                   | (1,790 | ) |                                 |   | (1,791 | )    |  |   | (3,581 | ) |  |   | (3,581 | )
|                                                                                                                                                 |  |                                   |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  
|Net loss available to common stockholders                                                                                                        |  | $                                 | (1,729 | ) |                                 | $ | (6,475 | )    |  | $ | (1,953 | ) |  | $ | (4,455 | )
|                                                                                                                                                 |  |                                   |        |   |                                 |   |        |      |  |   |        |   |  |   |        |  



See accompanying notes
to Condensed Consolidated Financial Statements



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G&L REALTY CORP.



CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)



|                                                                                         |  |                                |        |   |      |   |         |  
|---------------------------------------------------------------------------------------- |  | ------------------------------ | ------ | - | ---- | - | ------- | -
|                                                                                         |  | Six Month Period EndedJune 30, |       
|                                                                                         |  | 2004                           |        |   | 2003 |  
|                                                                                         |  | (Unaudited)                    |       
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |  |                                |        |   |      |   |         |  
|Net income (loss)                                                                        |  | $                              | 1,628  |   |      | $ | (874    | )
|Adjustments to reconcile net income (loss) to net cash provided by Operating activities: |  |                                |        |   |      |   |         |  
|Depreciation and amortization                                                            |  |                                | 2,791  |   |      |   | 2,749   |  
|Amortization of deferred loan costs                                                      |  |                                | 181    |   |      |   | 385     |  
|Gain from sale of discontinued operations                                                |  |                                | (439   | ) |      |   |        |  
|Write-off of deferred loan costs                                                         |  |                                |       |   |      |   | 272     |  
|Loss on sale of bonds receivable                                                         |  |                                |       |   |      |   | 120     |  
|Loss on change in value of interest rate hedge                                           |  |                                |       |   |      |   | 319     |  
|Minority interests                                                                       |  |                                | 261    |   |      |   | 10      |  
|Equity in loss (earnings) of unconsolidated affiliates                                   |  |                                | 163    |   |      |   | (3,800  | )
|Provision for doubtful accounts, notes and bonds receivable                              |  |                                | 911    |   |      |   | 393     |  
|Unbilled rent receivable, net                                                            |  |                                | 98     |   |      |   | (10     | )
|(Increase) decrease in:                                                                  |  |                                |        |   |      |   |         |  
|Tenant rent and reimbursements receivable                                                |  |                                | 1,712  |   |      |   | (946    | )
|Prepaid expense and other assets                                                         |  |                                | 330    |   |      |   | (34     | )
|Accrued interest and loan fees receivable                                                |  |                                | (255   | ) |      |   | (239    | )
|Increase (decrease) in:                                                                  |  |                                |        |   |      |   |         |  
|Accounts payable and other liabilities                                                   |  |                                | (529   | ) |      |   | 823     |  
|Tenant security deposits                                                                 |  |                                | 34     |   |      |   | 46      |  
|                                                                                         |  |                                |        |   |      |   |         |  
|Net cash provided by (used in) operating activities                                      |  |                                | 6,886  |   |      |   | (786    | )
|                                                                                         |  |                                |        |   |      |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |  |                                |        |   |      |   |         |  
|Sale of real estate assets                                                               |  |                                | 10,469 |   |      |   |        |  
|Sale of bonds receivable                                                                 |  |                                |       |   |      |   | 600     |  
|Purchase of real estate assets                                                           |  |                                | (7,661 | ) |      |   | (3,932  | )
|Additions to buildings and improvements                                                  |  |                                | (507   | ) |      |   | (1,105  | )
|Pre-acquisition costs, net                                                               |  |                                | (227   | ) |      |   | 6       |  
|Projects under development                                                               |  |                                | (1,039 | ) |      |   | (546    | )
|Leasing commissions                                                                      |  |                                | (41    | ) |      |   | (49     | )
|Investment in mortgage loans and notes receivable                                        |  |                                | (1,140 | ) |      |   |        |  
|Contributions to unconsolidated affiliates                                               |  |                                | (80    | ) |      |   | (159    | )
|Distributions from unconsolidated affiliates                                             |  |                                |       |   |      |   | 2,924   |  
|                                                                                         |  |                                |        |   |      |   |         |  
|Net cash used in investing activities                                                    |  |                                | (226   | ) |      |   | (2,261  | )
|                                                                                         |  |                                |        |   |      |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |  |                                |        |   |      |   |         |  
|Notes payable proceeds                                                                   |  |                                | 7,600  |   |      |   | 64,425  |  
|Repayment of notes payable                                                               |  |                                | (7,187 | ) |      |   | (55,492 | )
|Payment of deferred loan costs                                                           |  |                                | (332   | ) |      |   | (909    | )
|Increase in restricted cash                                                              |  |                                | (690   | ) |      |   | (458    | )
|Minority interest equity contribution                                                    |  |                                | 130    |   |      |   |        |  
|Distributions                                                                            |  |                                | (3,782 | ) |      |   | (4,535  | )
|                                                                                         |  |                                |        |   |      |   |         |  
|Net cash (used in) provided by financing activities                                      |  |                                | (4,261 | ) |      |   | 3,031   |  
|                                                                                         |  |                                |        |   |      |   |         |  



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)



|                                                                     |  |                                |        |      |   |       |  
|-------------------------------------------------------------------- |  | ------------------------------ | ------ | ---- | - | ----- | -
|                                                                     |  | Six Month Period EndedJune 30, |       
|                                                                     |  | 2004                           |        | 2003 |  
|                                                                     |  | (Unaudited)                    |       
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                 |  |                                | 2,399  |      |   | (16   | )
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                       |  |                                | 11,950 |      |   | 2,366 |  
|                                                                     |  |                                |        |      |   |       |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                             |  | $                              | 14,349 |      | $ | 2,350 |  
|                                                                     |  |                                |        |      |   |       |  
|SUPPLEMENTAL CASH FLOW INFORMATION                                   |  |                                |        |      |   |       |  
|Cash paid during the period for interest                             |  | $                              | 5,649  |      | $ | 7,535 |  
|                                                                     |  |                                |        |      |   |       |  
|Cash paid during the period for mortgage loan prepayment penalties   |  | $                              |       |      | $ | 4,719 |  
|                                                                     |  |                                |        |      |   |       |  
|NONCASH INVESTING AND FINANCING ACTIVITIES                           |  |                                |        |      |   |       |  
|Preferred distributions due to minority partner                      |  | $                              |       |      | $ | 63    |  
|                                                                     |  |                                |        |      |   |       |  
|Transfer from construction in progress to buildings and improvements |  | $                              | 309    |      | $ |      |  
|                                                                     |  |                                |        |      |   |       |  
|Assumption of notes payable by buyer 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 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)

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)

Palm Valley Senior Care, LLC, an Arizona limited liability company (Palm Valley)



|* | Maryland Gardens, Hampden, Tustin and Holy Cross 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 Medical 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 Senior Care



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Partnership owned a 85% membership interest until January 26, 2004 when the Company sold its membership interest),
Palm Valley (in which the Senior Care Partnership owns a 75% membership interest) 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, either the affiliates are not considered variable interest entities or 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, 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, Palm Valley, 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 six-month periods ended June 30, 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 six
months ended June 30, 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.



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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 provisions of this interpretation apply to the first fiscal year or interim period ending 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 and has concluded that its unconsolidated real estate joint ventures do not fall under the provisions of FIN 46-R. These investments include real estate joint ventures with assets totaling $31.9 million as of June 30,
2004.



3.        BUILDINGS AND
IMPROVEMENTS



Buildings and improvements consist of the
following:



|                                               |  |                |         |   |                   |   |         |  
|---------------------------------------------- |  | -------------- | ------- | - | ----------------- | - | ------- | -
|                                               |  | June 30, 2004  |         |   | December 31, 2003 |  
|                                               |  | (in thousands) |        
|Buildings and improvements                     |  | $              | 139,183 |   |                   | $ | 131,997 |  
|Tenant improvements                            |  |                | 11,315  |   |                   |   | 11,129  |  
|Furniture, fixtures and equipment              |  |                | 5,506   |   |                   |   | 5,003   |  
|                                               |  |                |         |   |                   |   |         |  
|                                               |  |                | 156,004 |   |                   |   | 148,129 |  
|Less accumulated depreciation and amortization |  |                | (41,459 | ) |                   |   | (38,650 | )
|                                               |  |                |         |   |                   |   |         |  
|Total                                          |  | $              | 114,545 |   |                   | $ | 109,479 |  
|                                               |  |                |         |   |                   |   |         |  



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.



As of June 30, 2004, the Company was under contract to sell its 10,000 square foot MOB located in Tustin, California (Tustin) for $3.58
million which would produce a net gain on sale of approximately $2.1 million. On January 26, 2004, the Company sold its membership interest in a two-story, 80-unit ALF located in Tarzana, California (Tarzana) for $1.7 million and
recognized a net gain on sale of $0.3 million. On March 18, 2004, the Company sold a two-story, 48,000 square foot research and development building located in Irwindale, California (Irwindale) for $8.85 million recognizing a net gain on
sale of $0.3 million. On June 9, 2004, the Company sold a 59-bed SNF in Chico, California (Chico) for $0.7 million recognized a net loss on sale of $0.2 million. For presentation purposes, the assets and liabilities relating to Tustin
have been included in assets held for sale and liabilities of assets held for sale, respectively, on the balance sheet as of June 30, 2004, and the assets and liabilities relating to Chico, Irwindale, Tarzana and Tustin have been included in assets
held for sale and liabilities of assets held for sale, respectively, on the balance sheet as of December 31, 2003. Tustin was sold on August 2, 2004 (See Note 11 below). The following tables summarize assets held for sale and liabilities of assets
held for sale as of June 30, 2004 and December 31, 2003:



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Assets and Liabilities of Assets Held for Sale

June 30, 2004

(In thousands)



|                                               |  |        |       |  
|---------------------------------------------- |  | ------ | ----- | -
|                                               |  | Tustin |      
|Rental properties:                             |  |        |       |  
|Land                                           |  | $      | 474   |  
|Buildings and improvements, net                |  |        | 606   |  
|                                               |  |        |       |  
|Total rental properties                        |  |        | 1,080 |  
|Restricted cash                                |  |        | 4     |  
|Tenant rent and reimbursements receivable, net |  |        | (19   | )
|Unbilled rent receivable, net                  |  |        | 135   |  
|Deferred charges and other assets, net         |  |        | 34    |  
|                                               |  |        |       |  
|Total assets held for sale                     |  | $      | 1,234 |  
|                                               |  |        |       |  
|LIABILITIES:                                   |  |        |       |  
|Notes payable                                  |  | $      | 1,184 |  
|Accounts payable and other liabilities         |  |        | 9     |  
|                                               |  |        |       |  
|Total liabilities of assets held for sale      |  | $      | 1,193 |  
|                                               |  |        |       |  



Assets and
Liabilities of Assets Held for Sale

December 31, 2003

(In thousands)



|                                               |  |       |     |           |   |         |  |        |        |       |   |       |  |   |       
|---------------------------------------------- |  | ----- | --- | --------- | - | ------- |  | ------ | ------ | ----- | - | ----- |  | - | ------
|                                               |  | Chico |     | Irwindale |   | Tarzana |  | Tustin |        | Total
|Rental properties:                             |  |       |     |           |   |         |  |        |        |       |   |       |  |   |       
|Land                                           |  | $     | 159 |           | $ | 1,260   |  | $      | 2,350  |       | $ | 474   |  | $ | 4,243 
|Buildings and improvements, net                |  |       | 577 |           |   | 6,249   |  |        | 7,420  |       |   | 606   |  |   | 14,852
|Projects under development                     |  |       |    |           |   |        |  |        | 41     |       |   |      |  |   | 41    
|                                               |  |       |     |           |   |         |  |        |        |       |   |       |  |   |       
|Total rental properties                        |  |       | 736 |           |   | 7,509   |  |        | 9,811  |       |   | 1,080 |  |   | 19,136
|Restricted cash                                |  |       |    |           |   |        |  |        | 296    |       |   | 5     |  |   | 301   
|Tenant rent and reimbursements receivable, net |  |       |    |           |   |        |  |        | 153    |       |   | 9     |  |   | 162   
|Unbilled rent receivable, net                  |  |       |    |           |   | 365     |  |        |       |       |   | 136   |  |   | 501   
|Deferred charges and other assets, net         |  |       | 2   |           |   | 196     |  |        | 260    |       |   | 29    |  |   | 487   
|                                               |  |       |     |           |   |         |  |        |        |       |   |       |  |   |       
|Total assets held for sale                     |  | $     | 738 |           | $ | 8,070   |  | $      | 10,520 |       | $ | 1,259 |  | $ | 20,587
|                                               |  |       |     |           |   |         |  |        |        |       |   |       |  |   |       
|LIABILITIES:                                   |  |       |     |           |   |         |  |        |        |       |   |       |  |   |       
|Notes payable                                  |  | $     |    |           | $ |        |  | $      | 8,690  |       | $ | 1,199 |  | $ | 9,889 
|Accounts payable and other liabilities         |  |       | 3   |           |   |        |  |        | 336    |       |   |      |  |   | 339   
|Tenant security deposits                       |  |       |    |           |   | 57      |  |        |       |       |   |      |  |   | 57    
|                                               |  |       |     |           |   |         |  |        |        |       |   |       |  |   |       
|Total liabilities of assets held for sale      |  | $     | 3   |           | $ | 57      |  | $      | 9,026  |       | $ | 1,199 |  | $ | 10,285
|                                               |  |       |     |           |   |         |  |        |        |       |   |       |  |   |       



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4.        DEFERRED CHARGES AND OTHER ASSETS



Deferred charges and other assets consist of the following:



|                                 |  |                |        |   |                   |   |        |  
|-------------------------------- |  | -------------- | ------ | - | ----------------- | - | ------ | -
|                                 |  | June 30, 2004  |        |   | December 31, 2003 |  
|                                 |  | (in thousands) |       
|Deferred loan costs              |  | $              | 3,233  |   |                   | $ | 2,901  |  
|Pre-acquisition costs            |  |                | 227    |   |                   |   | 141    |  
|Leasing commissions              |  |                | 1,537  |   |                   |   | 1,514  |  
|Prepaid expense and other assets |  |                | 832    |   |                   |   | 1,061  |  
|                                 |  |                |        |   |                   |   |        |  
|                                 |  |                | 5,829  |   |                   |   | 5,617  |  
|Less accumulated amortization    |  |                | (1,824 | ) |                   |   | (1,588 | )
|                                 |  |                |        |   |                   |   |        |  
|Total                            |  | $              | 4,005  |   |                   | $ | 4,029  |  
|                                 |  |                |        |   |                   |   |        |  



5.        STOCKHOLDERS EQUITY



Distributions in excess of net incomeThe Company has elected to be treated, for federal income tax purposes, as a REIT. As such, the Company is required to distribute annually, in the form of
distributions to its stockholders, at least 90% of its taxable income. In reporting periods in which distributions exceed net income, stockholders equity will be reduced by the distributions in excess of net income in such period and will be
increased by the excess of net income over distributions in reporting periods in which net income exceeds distributions. For tax reporting purposes, a portion of the dividends declared represents a return of capital. The following table reconciles
net income and distributions in excess of net income for the six months ended June 30, 2004 and for the year ended December 31, 2003:



|                                                             |  |                |         |   |                  |   |         |  
|------------------------------------------------------------ |  | -------------- | ------- | - | ---------------- | - | ------- | -
|                                                             |  | June 30, 2004  |         |   | December 31,2003 |  
|                                                             |  | (in thousands) |        
|Distributions in excess of net income at beginning of period |  | $              | (50,042 | ) |                  | $ | (37,895 | )
|Net income during period                                     |  |                | 1,628   |   |                  |   | 520     |  
|Less: Distributions declared                                 |  |                | (3,581  | ) |                  |   | (12,667 | )
|                                                             |  |                |         |   |                  |   |         |  
|Distributions in excess of net income                        |  | $              | (51,995 | ) |                  | $ | (50,042 | )
|                                                             |  |                |         |   |                  |   |         |  



The Company has
retained an investment banking firm to advise it on the possible issuance of a new series of preferred stock, the proceeds of which would be used, in significant part, to redeem the Companys outstanding Series A Preferred Stock and Series B
Preferred Stock. If market conditions permit, the Company anticipates that the issuance and redemption would occur during 2004.



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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 June 30, 2004. (In thousands).



|                                                          |  |        |       |          |   |       |             |  |   |               |   |          |   |    |       |   |       |   |  |   |       |  
|--------------------------------------------------------- |  | ------ | ----- | -------- | - | ----- | ----------- |  | - | ------------- | - | -------- | - | -- | ----- | - | ----- | - |  | - | ----- | -
|                                                          |  | Radius |       | SanPedro |   |       | Penasquitos |  |   | HeritagePlace |   | Lakeview |   |    | Total |  
|Balance at beginning of period                            |  | $      | 978   |          | $ | 636   |             |  | $ | (612          | ) |          | $ |   |       | $ | 751   |   |  | $ | 1,753 |  
|Equity in earnings (loss) of affiliates                   |  |        | 54    |          |   | (2    | )           |  |   | (43           | ) |          |   |   |       |   | (172  | ) |  |   | (163  | )
|Cash contributions                                        |  |        |      |          |   |      |             |  |   |              |   |          |   |   |       |   | 75    |   |  |   | 75    |  
|Cash distributions                                        |  |        |      |          |   |      |             |  |   |              |   |          |   |   |       |   |      |   |  |   |      |  
|                                                          |  |        |       |          |   |       |             |  |   |               |   |          |   |    |       |   |       |   |  |   |       |  
|Balance at end of period, before intercompany adjustments |  |        | 1,032 |          |   | 634   |             |  |   | (655          | ) |          |   |   |       |   | 654   |   |  |   | 1,665 |  
|                                                          |  |        |       |          |   |       |             |  |   |               |   |          |   |    |       |   |       |   |  |   |       |  
|Intercompany adjustments:                                 |  |        |       |          |   |       |             |  |   |               |   |          |   |    |       |   |       |   |  |   |       |  
|Receivable, net                                           |  |        | 204   |          |   | 1,097 |             |  |   | 297           |   |          |   | 14 |       |   | 1,717 |   |  |   | 3,329 |  
|                                                          |  |        |       |          |   |       |             |  |   |               |   |          |   |    |       |   |       |   |  |   |       |  
|Investment in unconsolidated affiliates                   |  | $      | 1,236 |          | $ | 1,731 |             |  | $ | (358          | ) |          | $ | 14 |       | $ | 2,371 |   |  | $ | 4,994 |  
|                                                          |  |        |       |          |   |       |             |  |   |               |   |          |   |    |       |   |       |   |  |   |       |  



As of August 16, 2004,
the ALF owned by Lakeview was under contract to be sold for $10.6 million and Penasquitos is expected to enter into a contract within the next week to sell its ALF for $10.1 million.



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Following is a summary of the condensed financial information of each of the unconsolidated
affiliates as of and for the six months ended June 30, 2004. (In thousands).



|                                 |  |        |        |   |          |   |        |             |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|-------------------------------- |  | ------ | ------ | - | -------- | - | ------ | ----------- |  | - | ------------- | - |  | -------- | ---- | - | ----- | - | ------ | - |  | - | ------- | -
|                                 |  | Radius |        |   | SanPedro |   |        | Penasquitos |  |   | HeritagePlace |   |  | Lakeview |      |   | Total |  
|Financial Position:              |  |        |        |   |          |   |        |             |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Land                             |  | $      | 200    |   |          | $ | 2,011  |             |  | $ | 641           |   |  | $        | 750  |   |       | $ | 947    |   |  | $ | 4,549   |  
|Buildings                        |  |        | 5,481  |   |          |   | 4,048  |             |  |   | 5,775         |   |  |          |     |   |       |   | 7,969  |   |  |   | 23,273  |  
|Other assets                     |  |        | 1,382  |   |          |   | 601    |             |  |   | 1,153         |   |  |          | 238  |   |       |   | 712    |   |  |   | 4,086   |  
|Notes payable                    |  |        | (5,395 | ) |          |   | (4,382 | )           |  |   | (8,294        | ) |  |          | (940 | ) |       |   | (7,288 | ) |  |   | (26,299 | )
|Other liabilities                |  |        | (283   | ) |          |   | (1,240 | )           |  |   | (600          | ) |  |          | (48  | ) |       |   | (1,216 | ) |  |   | (3,387  | )
|                                 |  |        |        |   |          |   |        |             |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Net assets                       |  | $      | 1,385  |   |          | $ | 1,038  |             |  | $ | (1,325        | ) |  | $        |     |   |       | $ | 1,124  |   |  | $ | 2,222   |  
|                                 |  |        |        |   |          |   |        |             |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Partners equity:                |  |        |        |   |          |   |        |             |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Company                          |  | $      | 1,032  |   |          | $ | 634    |             |  | $ | (655          | ) |  | $        |     |   |       | $ | 654    |   |  | $ | 1,665   |  
|Others                           |  |        | 353    |   |          |   | 404    |             |  |   | (670          | ) |  |          |     |   |       |   | 470    |   |  |   | 557     |  
|                                 |  |        |        |   |          |   |        |             |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Total equity                     |  | $      | 1,385  |   |          | $ | 1,038  |             |  | $ | (1,325        | ) |  | $        |     |   |       | $ | 1,124  |   |  | $ | 2,222   |  
|                                 |  |        |        |   |          |   |        |             |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Operations:                      |  |        |        |   |          |   |        |             |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Revenues                         |  | $      | 372    |   |          | $ | 521    |             |  | $ | 419           |   |  | $        |     |   |       | $ | 396    |   |  | $ | 1,708   |  
|Expenses                         |  |        | (300   | ) |          |   | (505   | )           |  |   | (505          | ) |  |          |     |   |       |   | (740   | ) |  |   | (2,050  | )
|                                 |  |        |        |   |          |   |        |             |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Net income (loss)                |  | $      | 72     |   |          | $ | 16     |             |  | $ | (86           | ) |  | $        |     |   |       | $ | (344   | ) |  | $ | (342    | )
|                                 |  |        |        |   |          |   |        |             |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Allocation of net income (loss): |  |        |        |   |          |   |        |             |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Company                          |  | $      | 54     |   |          | $ | (2     | )           |  | $ | (43           | ) |  | $        |     |   |       | $ | (172   | ) |  | $ | (163    | )
|Others                           |  |        | 18     |   |          |   | 18     |             |  |   | (43           | ) |  |          |     |   |       |   | (172   | ) |  |   | (179    | )
|                                 |  |        |        |   |          |   |        |             |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  
|Net income (loss)                |  | $      | 72     |   |          | $ | 16     |             |  | $ | (86           | ) |  | $        |     |   |       | $ | (344   | ) |  | $ | (342    | )
|                                 |  |        |        |   |          |   |        |             |  |   |               |   |  |          |      |   |       |   |        |   |  |   |         |  



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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 Massachusetts, Arizona, Washington and Maryland. Six of the SNFs and the apartment complex are owned 100% by the Company. The Company previously held 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,
from March 15, 2000 through March 31, 2004, all of the assets, liabilities, revenues and expenses of these SNFs were reflected in the condensed consolidated financial statements of the Company and the segment information provided below. The Company
was 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 was not 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 lease agreements with the Company for these facilities effective on the date of
the license transfers which occurred on April 1, 2004. Subsequent to the transfer of the licenses, the Company no longer reflects the assets, liabilities, revenues and expenses related to the operations of these three SNFs in its consolidated
financial statements. The Company records 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. As of August 16, 2004, the ALF owned by Lakeview was under contract to be sold for $10.6 million and Penasquitos is expected to enter into a contract within the next week to sell its
ALF for $10.1 million.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | 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 June 30, 2004, the Company had seven loans outstanding with a net book value of $1.9 million. One of the Companys loans is an unsecured note due from one of its SNFs. For purposes of the segment information disclosure, the 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 six months ended June 30, 2004 and 2003 and balance sheet data as of June 30, 2004.



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G&L REALTY CORP.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)



2004 Reconciliation of Reportable Segment Information

For the six months ended June 30, 2004



|                                                             |  |                |        |   |                |   |       |                |  |   |                 |   |  |       |     |   |       |   |        |   |  |   |        |  
|------------------------------------------------------------ |  | -------------- | ------ | - | -------------- | - | ----- | -------------- |  | - | --------------- | - |  | ----- | --- | - | ----- | - | ------ | - |  | - | ------ | -
|                                                             |  | MedicalOffice  |        |   | SkilledNursing |   |       | AssistedLiving |  |   | DebtObligations |   |  | Other |     |   | Total |  
|                                                             |  | (In thousands) |       
|Revenue:                                                     |  |                |        |   |                |   |       |                |  |   |                 |   |  |       |     |   |       |   |        |   |  |   |        |  
|Rents, tenant reimb. and parking                             |  | $              | 13,947 |   |                | $ | 1,866 |                |  | $ |                |   |  | $     |    |   |       | $ |       |   |  | $ | 15,813 |  
|Patient revenues                                             |  |                |       |   |                |   | 6,736 |                |  |   |                |   |  |       |    |   |       |   |       |   |  |   | 6,736  |  
|Interest and loan fees                                       |  |                | 15     |   |                |   | 80    |                |  |   |                |   |  |       | 263 |   |       |   | 47     |   |  |   | 405    |  
|Other income                                                 |  |                | 124    |   |                |   | 9     |                |  |   |                |   |  |       |    |   |       |   | 322    |   |  |   | 455    |  
|                                                             |  |                |        |   |                |   |       |                |  |   |                 |   |  |       |     |   |       |   |        |   |  |   |        |  
|Total revenues                                               |  |                | 14,086 |   |                |   | 8,691 |                |  |   |                |   |  |       | 263 |   |       |   | 369    |   |  |   | 23,409 |  
|                                                             |  |                |        |   |                |   |       |                |  |   |                 |   |  |       |     |   |       |   |        |   |  |   |        |  
|Expenses:                                                    |  |                |        |   |                |   |       |                |  |   |                 |   |  |       |     |   |       |   |        |   |  |   |        |  
|Property operations                                          |  |                | 3,804  |   |                |   | 248   |                |  |   |                |   |  |       | 9   |   |       |   |       |   |  |   | 4,061  |  
|Skilled nursing operations                                   |  |                |       |   |                |   | 6,287 |                |  |   |                |   |  |       |    |   |       |   |       |   |  |   | 6,287  |  
|Depreciation and amortization                                |  |                | 1,990  |   |                |   | 784   |                |  |   |                |   |  |       |    |   |       |   | 8      |   |  |   | 2,782  |  
|Provision for doubtful accounts and notes receivable         |  |                | 110    |   |                |   | 531   |                |  |   |                |   |  |       | 270 |   |       |   |       |   |  |   | 911    |  
|Interest                                                     |  |                | 4,599  |   |                |   | 1,062 |                |  |   |                |   |  |       |    |   |       |   |       |   |  |   | 5,661  |  
|General and administrative                                   |  |                |       |   |                |   |      |                |  |   |                |   |  |       |    |   |       |   | 2,256  |   |  |   | 2,256  |  
|                                                             |  |                |        |   |                |   |       |                |  |   |                 |   |  |       |     |   |       |   |        |   |  |   |        |  
|Total expenses                                               |  |                | 10,503 |   |                |   | 8,912 |                |  |   |                |   |  |       | 279 |   |       |   | 2,264  |   |  |   | 21,958 |  
|                                                             |  |                |        |   |                |   |       |                |  |   |                 |   |  |       |     |   |       |   |        |   |  |   |        |  
|Income (loss) from operations                                |  |                | 3,583  |   |                |   | (221  | )              |  |   |                |   |  |       | (16 | ) |       |   | (1,895 | ) |  |   | 1,451  |  
|Equity in (loss) earnings of unconsolidated affiliates       |  |                | (2     | ) |                |   | 54    |                |  |   | (215            | ) |  |       |    |   |       |   |       |   |  |   | (163   | )
|Net income (loss) from operations of discontinued operations |  |                | 204    |   |                |   | (12   | )              |  |   | (30             | ) |  |       |    |   |       |   |       |   |  |   | 162    |  
|Gain (loss) from sale of discontinued operations             |  |                | 333    |   |                |   | (147  | )              |  |   | 253             |   |  |       |    |   |       |   |       |   |  |   | 439    |  
|                                                             |  |                |        |   |                |   |       |                |  |   |                 |   |  |       |     |   |       |   |        |   |  |   |        |  
|Income (loss) from operations before minority interests      |  | $              | 4,118  |   |                | $ | (326  | )              |  | $ | 8               |   |  | $     | (16 | ) |       | $ | (1,895 | ) |  | $ | 1,889  |  
|                                                             |  |                |        |   |                |   |       |                |  |   |                 |   |  |       |     |   |       |   |        |   |  |   |        |  



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G&L REALTY CORP.



NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)



2003 Reconciliation of Reportable Segment Information

For the six months ended June 30, 2003



|                                                             |  |                |        |                |   |        |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  
|------------------------------------------------------------ |  | -------------- | ------ | -------------- | - | ------ | -------------- |  | - | --------------- | - | ----- | - | --- | ----- | - | ------ | - |  | - | ------ | -
|                                                             |  | MedicalOffice  |        | SkilledNursing |   |        | AssistedLiving |  |   | DebtObligations |   | Other |   |     | Total |  
|                                                             |  | (In thousands) |       
|Revenue:                                                     |  |                |        |                |   |        |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  
|Rents, tenant reimb. and parking                             |  | $              | 13,261 |                | $ | 1,047  |                |  | $ |                |   |       | $ |    |       | $ |       |   |  | $ | 14,308 |  
|Patient revenues                                             |  |                |       |                |   | 12,236 |                |  |   |                |   |       |   |    |       |   |       |   |  |   | 12,236 |  
|Interest and loan fees                                       |  |                | 19     |                |   | 14     |                |  |   |                |   |       |   | 356 |       |   | 10     |   |  |   | 399    |  
|Other income                                                 |  |                | 1,026  |                |   | 31     |                |  |   | (494            | ) |       |   |    |       |   | 34     |   |  |   | 597    |  
|                                                             |  |                |        |                |   |        |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  
|Total revenues                                               |  |                | 14,306 |                |   | 13,328 |                |  |   | (494            | ) |       |   | 356 |       |   | 44     |   |  |   | 27,540 |  
|                                                             |  |                |        |                |   |        |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  
|Expenses:                                                    |  |                |        |                |   |        |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  
|Property operations                                          |  |                | 3,758  |                |   | 263    |                |  |   |                |   |       |   | 82  |       |   |       |   |  |   | 4,103  |  
|Skilled nursing operations                                   |  |                |       |                |   | 11,252 |                |  |   |                |   |       |   |    |       |   |       |   |  |   | 11,252 |  
|Depreciation and amortization                                |  |                | 1,490  |                |   | 754    |                |  |   |                |   |       |   |    |       |   | 20     |   |  |   | 2,264  |  
|Provision for doubtful accounts and notes receivable         |  |                |       |                |   | 393    |                |  |   |                |   |       |   |    |       |   |       |   |  |   | 393    |  
|Loss on sale of bonds receivable                             |  |                |       |                |   |       |                |  |   |                |   |       |   | 120 |       |   |       |   |  |   | 120    |  
|Interest                                                     |  |                | 8,377  |                |   | 1,213  |                |  |   |                |   |       |   |    |       |   | 2,047  |   |  |   | 11,637 |  
|General and administrative                                   |  |                |       |                |   |       |                |  |   |                |   |       |   |    |       |   | 1,832  |   |  |   | 1,832  |  
|                                                             |  |                |        |                |   |        |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  
|Total expenses                                               |  |                | 13,625 |                |   | 13,875 |                |  |   |                |   |       |   | 202 |       |   | 3,899  |   |  |   | 31,601 |  
|                                                             |  |                |        |                |   |        |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  
|Income (loss) from operations                                |  |                | 681    |                |   | (547   | )              |  |   | (494            | ) |       |   | 154 |       |   | (3,855 | ) |  |   | (4,061 | )
|Equity in earnings of unconsolidated affiliates              |  |                | 1,359  |                |   | 18     |                |  |   | 2,423           |   |       |   |    |       |   |       |   |  |   | 3,800  |  
|Net income (loss) from operations of discontinued operations |  |                | 157    |                |   | (23    | )              |  |   | (692            | ) |       |   |    |       |   |       |   |  |   | (558   | )
|Corporate income tax expense                                 |  |                |       |                |   | (45    | )              |  |   |                |   |       |   |    |       |   |       |   |  |   | (45    | )
|                                                             |  |                |        |                |   |        |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  
|Income (loss) from operations before minority interests      |  | $              | 2,197  |                | $ | (597   | )              |  | $ | 1,237           |   |       | $ | 154 |       | $ | (3,855 | ) |  | $ | (864   | )
|                                                             |  |                |        |                |   |        |                |  |   |                 |   |       |   |     |       |   |        |   |  |   |        |  



2004 Reconciliation
of Reportable Segment Information

As of June 30, 2004



|                                         |  |                |         |                |   |                |  |                 |       |       |   |       |  |   |        |  |   |        
|---------------------------------------- |  | -------------- | ------- | -------------- | - | -------------- |  | --------------- | ----- | ----- | - | ----- |  | - | ------ |  | - | -------
|                                         |  | MedicalOffice  |         | SkilledNursing |   | AssistedLiving |  | DebtObligations |       | Other |   | Total
|                                         |  | (In thousands)
|Rental properties, net                   |  | $              | 95,482  |                | $ | 45,885         |  | $               |      |       | $ |      |  | $ | 170    |  | $ | 141,537
|Assets held for sale                     |  |                | 1,234   |                |   |               |  |                 |      |       |   |      |  |   |       |  |   | 1,234  
|Mortgage loans and notes receivable, net |  |                |        |                |   | 268            |  |                 |      |       |   | 1,611 |  |   |       |  |   | 1,879  
|Cash and cash equivalents                |  |                | 300     |                |   | 122            |  |                 |      |       |   |      |  |   | 13,927 |  |   | 14,349 
|Restricted cash                          |  |                | 2,456   |                |   | 900            |  |                 |      |       |   |      |  |   | 59     |  |   | 3,415  
|Tenant rent and reimb. receivable, net   |  |                | 178     |                |   | 2,071          |  |                 |      |       |   |      |  |   | 835    |  |   | 3,084  
|Unbilled rent receivable, net            |  |                | 2,524   |                |   |               |  |                 |      |       |   |      |  |   |       |  |   | 2,524  
|Investment in unconsolidated affiliates  |  |                | 1,731   |                |   | 1,236          |  |                 | 2,027 |       |   |      |  |   |       |  |   | 4,994  
|Pre-acquisition costs                    |  |                | 227     |                |   |               |  |                 |      |       |   |      |  |   |       |  |   | 227    
|Deferred loan costs, net                 |  |                | 1,708   |                |   | 826            |  |                 |      |       |   |      |  |   |       |  |   | 2,534  
|Deferred lease costs, net                |  |                | 412     |                |   |               |  |                 |      |       |   |      |  |   |       |  |   | 412    
|Prepaid expense and other                |  |                | 667     |                |   | 165            |  |                 |      |       |   |      |  |   |       |  |   | 832    
|                                         |  |                |         |                |   |                |  |                 |       |       |   |       |  |   |        |  |   |        
|Total assets                             |  | $              | 106,919 |                | $ | 51,473         |  | $               | 2,027 |       | $ | 1,611 |  | $ | 14,991 |  | $ | 177,021
|                                         |  |                |         |                |   |                |  |                 |       |       |   |       |  |   |        |  |   |        



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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, 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. 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, 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.



The Company and the
director defendants have reached a preliminary settlement of the California class actions providing for a class settlement and release of claims and entry of judgment dismissing the action with prejudice. The Company and its directors have also
reached a preliminary settlement of the Weisman suit also providing for a release of claims and entry of judgment dismissing the action with prejudice. The total payment in settlement of these suits would be $1.25 million, of which
approximately $1 million would be paid from insurance. The class settlement would be subject to court approval, and it is contemplated under the preliminary agreement that the settlement of the Weisman suit would be conditioned on obtaining
court approval for the class settlement.



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



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)



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. In December 2003 and June 2004, NVHF defaulted on the
semi-annual interest payment to the holders of the subordinated B-bonds. In July 2004, the letter of credit was called upon and the Company was required to fund the $250,000 that it had guaranteed. Also, in July 2004, the Company guaranteed a new
letter of credit issued by U.S. Bank in favor of Fannie Mae, the bond servicer, under which the Companys maximum liability is approximately $410,000. The Company has a liability of $250,000 on its balance sheet as of June 30, 2004 related to
the guaranty of the letter of credit against which the $250,000 payment made in July was applied. The Company has not recorded any additional liability on its balance sheet related to its guarantee under the new letter of credit issued by U.S. Bank
and does not anticipate having to pay anything under this guarantee.



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. In addition, Lakeview is currently under contract to sell the property at which time the mortgage loan would be repaid and the
guaranty would be released. The Company has recorded no liability on its balance sheet related to this guarantee as of June 30, 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, due on October 31, 2011, 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 June 30, 2004, the outstanding principal balance on the notes was $5.1 million. For purposes of presentation in these consolidated financial statements, the $5.1 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. On June 9, 2004, the Company sold a 59-bed SNF located in Chico, California for $0.7 million and received net proceeds of $0.6 million. The Company recognized a net loss on sale of $0.2
million. The net proceeds from these sales are being held by the Company for new acquisitions, future stock dividends and general corporate purposes.



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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(Unaudited)



In the first half of 2004, the Company obtained a $3 million secured line of credit bearing interest
at the London Interbank Offered Rate plus 255 basis points. The line of credit is secured by a first deed of trust on land owned by the Company in Santa Clarita. As of August 13, 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, which the Company has exercised. 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 June 30, 2004, the outstanding balance on this loan was $9.1 million.



On June 25, 2004, the Company acquired, through a joint
venture, the Palm Valley Nursing Home, a 155-bed SNF located in Goodyear, Arizona for $7.6 million. The Company funded approximately $0.4 million for a 75% interest in the joint venture. The joint venture borrowed $7.6 million to finance the
acquisition. The loan bears interest at 6.5% per annum, requires monthly principal and interest payments and is due in 18 months. The mortgage loan is insured by the Department of Housing and Urban Development and has certain restrictions with
respect to the operations of the borrower.



11.        SUBSEQUENT EVENT



On August 2, 2004, the Company sold a 10,000 square foot MOB located in Tustin, California for $3.6 million and recognized a net gain on sale of approximately $2.1 million. The Company plans to use the net proceeds of
approximately $2.1 million from this sale for new acquisitions, future stock dividends and for general corporate purposes.



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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 first half of 2004 or in 2003.



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Results of Operations



Comparison of the Six Month Period Ended June 30, 2004 versus the Six
Month Period Ended June 30, 2003.



Total revenues
decreased by $4.1 million, or 15%, from $27.5 million in the first half of 2003, to $23.4 million for the same period in 2004. The decrease was due to a $5.5 million decrease in patient revenues along with a decrease in other income of $0.1 million.
These decreases were offset by a $1.5 million increase in rents, tenant reimbursements and parking revenues.



Patient revenues decreased by $5.5 million, or 45%, from $12.2 million in the first half of 2003, to $6.7 million for the same period in 2004. On April 1,
2004, the licenses to operate the three SNFs owned by the Company in Hampden, Massachusetts were transferred to the manager of the facilities. Upon the transfer of these licenses, the Company no longer reflects the assets, liabilities, revenues and
expenses related to the operations of these three SNFs in its consolidated financial statements. As of April 1, 2004, the Company records rental income per the terms of the leases it entered into with the new owner of the operating licenses.



Rents, tenant reimbursements and parking revenues increased by
$1.5 million, or 11%, from $14.3 million in the first half of 2003, to $15.8 million for the same period in 2004. $0.9 million of this increase is due to an increase in rental revenue at the Companys three SNFs located in Hampden,
Massachusetts. Subsequent to the transfer of the operating licenses mentioned above, the Company records rental income per the terms of the new leases entered into with the manager of these facilities. The remaining $0.6 million increase includes a
$0.3 million increase in rental revenue due to increased occupancy and rental rates at the Companys MOB properties as well a $0.3 million increase in tenant reimbursements for building operating expenses. Tenant reimbursements have increased
despite a decrease in property operating expenses as the Company has been obtaining higher reimbursements of operating expenses from its tenants under new and renewed lease agreements.



Other income decreased by $0.1 million, or 17%, from $0.6 million in the first half of 2003, to $0.5 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 $9.6 million, or 30%, from $31.6 million for the
six months ended June 30, 2003, to $22 million for the same period in 2004. The decrease was due to a decrease in skilled nursing operation costs of $5.0 million, a decrease in interest expense of $5.9 million and a decrease in loss on the sale of
bonds receivable of $0.1 million. These decreases were offset by an increase in provisions for doubtful accounts of $0.5 million, an increase in depreciation and amortization expense of $0.5 million and an increase in general and administrative
costs of $0.5 million.Skilled nursing operations decreased by $5.0 million, or 44%, from $11.3 million in the first half of 2003, to $6.3 million for the same period in 2004. On April 1, 2004, the licenses to operate the three SNFs owned by the
Company in Hampden, Massachusetts were transferred to the manager of the facilities. Upon the transfer of these licenses, the Company no longer reflects the assets, liabilities, revenues and expenses related to the operations of these three SNFs in
its consolidated financial statements.



Depreciation and
amortization expense increased $0.5 million, or 22%, from $2.3 million in the first half of 2003, to $2.8 million for the same period in 2004. This increase is due to the recognition in the second quarter of 2004 of depreciation expense relating to
the Companys MOB located in Coronado, California which had been classified as an asset held for sale since January 1, 2003. Due to the classification as an asset held for sale, the Company has not been recording depreciation expense on this
property since January 2003. The Company has since decided not to sell this property, and thus, in the second quarter of 2004 has reclassed the property as an asset held and used at its carrying amount less all depreciation expense related to this
property from the period of January 1, 2003 through June 30, 2004 as if the property had continuously been classified as an asset held and used. This resulted in an increase in depreciation expense of $0.3 million in the second quarter of 2004.



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Interest expense decreased $5.9 million, or 51%, from $11.6 million for the six months ended June 30,
2003, to $5.7 million for the same period in 2004. $1.7 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 held by the
public. An additional $0.3 million of this decrease was due to a decrease in the first half of 2003 in the fair market value of the LIBOR interest rate cap associated with the $35 million loan. Also, an additional decrease of $4.6 million was due to
pre-payment fees and the write-off of deferred loan fees, incurred in the first half of 2003, relating to the early repayment of three separate loans totaling $38.0 million. During the first half of 2003, the Company refinanced a $26.2 million loan
secured by four of its MOBs located in Beverly Hills, California, a $7.2 million loan secured by another MOB located in Beverly Hills, California as well as a $4.6 million loan secured by an MOB located in Valencia, California. These decreases were
offset by an increase in interest expense of $0.6 million due to the 2003 refinancing of four mortgage loans totaling $69.6 million with new mortgage loans totaling $123.3 million.



General and administrative costs increased $0.5 million, or 28%, from $1.8 million for the six months ended June 30, 2003,
to $2.3 million for the same period in 2004. This increase was attributed to an increase in corporate staffing costs as well as additional legal and consulting costs.



Provisions for doubtful accounts, notes and bonds receivable increased by $0.5 million, or 125%, from $0.4 million for the
six months ended June 30, 2003, to $0.9 million for the same period in 2004. $0.3 million of this increase is the result of an increase in the Companys provision for doubtful accounts associated with the Companys three SNFs located in
Hampden, Massachusetts. Also, the Company increased its provision for doubtful bonds by an additional $0.3 million relating to the NVHF Affiliates, LLC subordinated bonds purchased by the Company in 1999. These increases were offset by a $0.1
million decrease in provision for doubtful accounts associated with the Companys SNF located in Hoquiam, Washington.



Equity in earnings of unconsolidated affiliates decreased $3.9 million for the six months ended June 30, 2004 compared to the same period in 2003. This
decrease was mainly 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 along with an ALF located in Omaha, NE, in which the Company also had a 50% interest. In the first
half of 2003, the Company recognized gains of approximately $1.3 million and $2.6 million, respectively, as a result of these sales.



The Company recognized a net gain from discontinued operations in the amount of $0.4 million during the first half 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 while the March 2004 sale of a two-story, 48,000 square foot research and development building
located in Irwindale, California accounted for an additional $0.3 million. These gains were offset by the $0.2 million loss on the sale of a 59-bed SNF located in Chico, California in June 2004.



Comparison of the Three Month Period Ended June 30, 2004 versus the Three
Month Period Ended June 30, 2003.



Total revenues
decreased by $4.7 million, or 34%, from $13.7 million in the second quarter of 2003, to $9 million for the same period in 2004. The decrease was due to a $6.3 million decrease in patient revenues offset by a $1.3 million increase in rents, tenant
reimbursements and parking revenues and a $0.2 million increase in other income.



Patient revenues decreased by $6.3 million, or 100%, from $6.3 million in the second quarter of 2003, to zero for the same period in 2004. On April 1, 2004, the licenses to operate the three SNFs owned by the Company
in Hampden, Massachusetts were transferred to the manager of the facilities. Upon the transfer of these licenses, the Company no longer reflects the assets, liabilities, revenues and expenses related to the operations of these three SNFs in its
consolidated financial statements. As of April 1, 2004, the Company records rental income per the terms of the leases it entered into with the new owner of the operating licenses.



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Rents, tenant reimbursements and parking revenues increased by $1.4 million, or 20%, from $7.1 million in
the second quarter of 2003, to $8.5 million for the same period in 2004. $0.9 million of this increase is due to an increase in rental revenue at the Companys three SNFs located in Hampden, Massachusetts. Subsequent to the transfer of the
operating licenses mentioned above, the Company records rental income per the terms of a new lease entered into with the manager of these facilities. The remaining $0.4 million increase includes a $0.2 million increase in rental revenue due to
increased occupancy and rental rates at the Companys MOB properties as well a $0.2 million increase in tenant reimbursements for building operating expenses. Tenant reimbursements have increased despite a decrease in property operating
expenses as the Company has been obtaining higher reimbursements of operating expenses from its tenants under new and renewed lease agreements.



Total expenses decreased by $9.4 million, or 52%, from $18.0 million for the three months ended June 30, 2003, to $8.6 million for the same period in
2004. The decrease was due to a decrease in skilled nursing operation costs of $5.8 million and a decrease in interest expense of $5.3 million. These decreases were offset by an increase in provisions for doubtful accounts of $0.8 million, an
increase in depreciation and amortization expense of $0.6 million and an increase in general and administrative costs of $0.3 million.



Skilled nursing operations decreased by $5.8 million from $5.8 million in the second quarter of 2003, to zero for the same period in 2004. On April 1,
2004, the licenses to operate the three SNFs owned by the Company in Hampden, Massachusetts were transferred to the manager of the facilities. Upon the transfer of these licenses, the Company no longer reflects the assets, liabilities, revenues and
expenses related to the operations of these three SNFs in its consolidated financial statements.



Depreciation and amortization expense increased $0.6 million, or 60%, from $1 million in the second quarter of 2003, to $1.6 million for the same period
in 2004. This increase is due to the recognition in the second quarter of 2004 of depreciation expense relating to the Companys MOB located in Coronado, California which had been classified as an asset held for sale since January 1, 2003. Due
to the classification as an asset held for sale, the Company has not been recording depreciation expense on this property since January 2003. The Company has since decided not to classify this property as an asset held for sale, and thus, in the
second quarter of 2004 has reclassed the property to an asset held and used at its carrying amount less all depreciation expense related to this property from the period of January 1, 2003 through June 30, 2004 as if the property had continuously
been classified as an asset held and used. This resulted in an increase in depreciation expense of $0.3 million in the second quarter of 2004.



Interest expense decreased $5.3 million, or 66%, from $8.1 million for the three months ended June 30, 2003, to $2.8 million for the same period in 2004.
$0.9 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 $0.2 million of this decrease was due to
decrease in the second quarter of 2003 in the fair market value of the LIBOR interest rate cap associated with the $35 million loan. Also, an additional decrease of $4.5 million was due to pre-payment fees and the write-off of deferred loan fees,
incurred in the second quarter of 2003, relating to the early repayment of two separate loans totaling $30.8 million. During the second quarter of 2003, the Company refinanced a $26.2 million loan secured by four of its MOBs located in Beverly
Hills, California and a $4.6 million loan secured by an MOB located in Valencia, California. These decreases were offset by an increase in interest expense of $0.3 million due to the 2003 refinancing of four mortgage loans totaling $69.6 million
with new mortgage loans totaling $123.3 million.



General and
administrative costs increased $0.3 million, or 33%, from $0.9 million for the three months ended June 30, 2003, to $1.2 million for the same period in 2004. This increase was attributed to an increase in corporate staffing costs as well as
additional legal and consulting costs.



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Provisions for doubtful accounts, notes and bonds receivable increased by $0.8 million, or 700%, from
$0.1 million for the three months ended June 30, 2003, to $0.9 million for the same period in 2004. $0.3 million of this increase is the result of an increase in reserves associated with the Companys three SNFs located in Hampden,
Massachusetts. Also, the Company reserved an additional $0.3 million relating to the NVHF Affiliates, LLC subordinated bonds purchased by the Company in 1999 and an additional $0.1 million associated with the Companys SNF located in Hoquiam,
Washington.



The Company recognized a net loss from
discontinued operations in the amount of $0.1 million during the second quarter of 2004. The sale, in June 2004, of the Companys 59-bed SNF located in Chico, California accounted for this loss.



Liquidity and Capital Resources



As of June 30, 2004, the Company had approximately $14.3 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 $4.1 million before minority
interests for the first half of 2004. The $4.1 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 June 30, 2004, were approximately 97.4% leased to over 400 tenants with lease terms typically ranging from three to ten years.



The ALFs produced no net income for the first half of 2004. The $0.3 million gain on sale of the Companys membership
interest in a joint venture that owned an ALF located in Tarzana, California was offset by the Companys share of losses in the Companys two remaining ALFs owned through joint ventures. Both ALFs have either been listed for sale or are
under contract to be sold by the Company and its joint venture partners. The Companys ALF located in Yorba Linda, California, in which the Company has a 50% interest, is under contract to be sold for $10.6 million. The Company expects to
obtain net proceeds of approximately $3.0 million from the sale. Penasquitos is expected to enter into a contract within the next week to sell its ALF for $10.1 million. Both ALFs are leased to operators who manage the facilities for the Company.
Both leases are for five years or less with non-credit tenants.



The SNFs produced a net loss of approximately $0.3 million for the first half of 2004 which included a $0.2 million loss on the sale of a SNF located in Chico, California. All of the SNFs 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 be adversely
affected.



The Companys principal external sources of
capital consist of various secured loans and selective asset sales. As of June 30, 2004, the Company had secured loans outstanding of approximately $180.4 million. In the first half of 2004, the Company obtained a $3 million secured line of credit
that is secured by a first deed of trust on land owned by the Company in Santa Clarita, California. As of August 13, 2004, the Company had no outstanding borrowings under the line of credit. The Company has also been selling some of its assets which
has provided additional liquidity. During the first half of 2004, the Company received proceeds of $10.8 million from the sale of its membership interest in a joint venture that owned an 80-unit ALF located in Tarzana, California, the sale of a
48,000 square foot research and development building located in Irwindale, California and the sale of a 59-bed SNF located in Chico, California. Also, in April 2004, the Company received additional proceeds of $0.2 million associated with the 2003
sale of an ALF located in Omaha, Nebraska in which the Company owned a 50% interest. In addition, on August 2, 2004, the Company sold a 10,000 square foot MOB located in Tustin, California for $3.6 million and realized net proceeds of $2.1 million
from the sale. The Company has reserved these funds for new acquisitions, future stock dividends and for general corporate purposes. The Companys 2004 asset purchase and sales are discussed below.



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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.



On June 9, 2004, the Company sold a 59-bed SNF located in Chico, California for $0.7 million and received net proceeds of
$0.6 million. The Company recognized a loss on sale of $0.2 million.



On June 25, 2004, the Company acquired, through a joint venture, a SNF located in Arizona for $7.6 million. The Company funded approximately $0.4 million in order to acquire a 75% interest in the property. The joint venture borrowed $7.6
million to finance the acquisition. The loan bears interest at 6.5% per annum, requires monthly principal and interest payments and is due in 18 months. The mortgage loan is insured by the Department of Housing and Urban Development and has certain
restrictions with respect to the operations of the borrower.



On August 2, 2004, the Company sold a 10,000 square foot MOB located in Tustin, California for $3.6 million and realized net proceeds of $2.1 million.



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 third quarter of 2004.



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 half of 2004 to holders of record on the first day of each month. On July 22, 2004, the Company distributed $3.0 million to holders of the Companys
Common Stock.



The Company has retained an investment banking
firm to advise it on the possible issuance of a new series of preferred stock, the proceeds of which would be used, in significant part, to redeem the Companys outstanding Series A Preferred Stock and Series B Preferred Stock. If market
conditions permit, the Company anticipates that the issuance and redemption would occur 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 5.92% as of June 30, 2004. 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 $7.7 million from net cash used of $0.8 million for the six months ended June 30,
2004 to a net cash provided of $6.9 million for the same period in 2004. The increase is due to a decrease in equity in income of unconsolidated affiliates of $4.0 million, an increase in net income of $2.5 million, a $2.7 million decrease in tenant
rent and reimbursements receivable and a $0.5 million increase in provisions for doubtful accounts, notes and bonds receivable. These increases were offset by a $0.4 million increase in net gains from sale of discontinued operations as well as a
$1.3 million decrease in accounts payable and other liabilities.



Net cash from investing activities increased $2.1 million from net cash used of $2.3 million for the six months ended June 30, 2003 to net cash used of $0.2 million for the same period in 2004. The increase was primarily due to a $10.5
million increase in sales of real estate assets. In the first half of 2004, the Company sold its membership interest in a joint venture that owned an ALF located in Tarzana, California, a research and development building located in Irwindale,
California and a 59-bed SNF located in Chico, California. These increases were partially offset by an increase in real estate purchases of $3.7 million and a decrease in distributions from unconsolidated affiliates of $2.9 million.



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Net cash flows from financing activities decreased by approximately $7.3 million from net cash provided
of $3.0 million for the six months ended June 30, 2003, to net cash used of $4.3 million for the same period in 2004. The decrease was due to a $56.8 million decrease in the notes payable proceeds offset by a $48.3 million decrease in the repayment
of notes payable and a $0.6 million decrease in payments of deferred loan costs.



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. In December 2003 and June 2004, NVHF defaulted on the semi-annual interest payment to the holders of the
subordinated B-bonds. In July 2004, the letter of credit was called upon and the Company was required to fund the $250,000 that it had guaranteed. Also, in July 2004, the Company guaranteed a new letter of credit issued by U.S. Bank in favor of
Fannie Mae, the bond servicer, under which the Companys maximum liability is approximately $410,000. The Company has a liability of $250,000 on its balance sheet as of June 30, 2004 related to the guaranty of the letter of credit against which
the $250,000 payment made in July was applied. The Company has not recorded any additional liability on its balance sheet related to its guarantee under the new letter of credit issued by U.S. Bank.



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. In addition, the joint venture is currently under contract to sell the property at which time the mortgage loan would be repaid and the guaranty would be released. The
Company has recorded no liability on its balance sheet related to this guarantee as of June 30, 2004.



As of June 30, 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. In May 2004, the Company paid the remaining balance of $0.5 million on
its $2.0 million line of credit secured by the accounts receivable at the Companys three SNFs located in Massachusetts. There were no other material changes in the



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first half of 2004 compared to the Companys contractual obligations as of December 31, 2003. As of June 30, 2004,
the Company had the following contractual obligations outstanding:



|                             |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|---------------------------- |  | -------------- | ------ | ---- | - | ------ |  | ---- | ------ | ---- | - | ---------- |  | ----- | ------ |  | - | ------- |  | - | -------
|                             |  | 2004           |        | 2005 |   | 2006   |  | 2007 |        | 2008 |   | Thereafter |  | Total
|                             |  | (in thousands)
|Obligations:                 |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|Fixed rate mortgage debt:    |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|Interest                     |  | $              | 5,032  |      | $ | 9,865  |  | $    | 9,697  |      | $ | 9,519      |  | $     | 8,890  |  | $ | 29,635  |  | $ | 72,638 
|Principal                    |  |                | 1,286  |      |   | 2,662  |  |      | 2,829  |      |   | 3,008      |  |       | 18,836 |  |   | 138,508 |  |   | 167,129
|Variable rate mortgage debt: |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|Principal (1)                |  |                | 9,149  |      |   | 4,175  |  |      | 7,600  |      |   |            |  |       |        |  |   |         |  |   | 20,924 
|                             |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        
|                             |  | $              | 15,467 |      | $ | 16,702 |  | $    | 20,126 |      | $ | 12,527     |  | $     | 27,726 |  | $ | 168,143 |  | $ | 260,691
|                             |  |                |        |      |   |        |  |      |        |      |   |            |  |       |        |  |   |         |  |   |        

---

|(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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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 ending 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 and has concluded that its unconsolidated real estate joint ventures do not fall under the provisions of FIN 46-R. These investments include real estate joint ventures with assets totaling $31.9 million
as of June 30, 2004.



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s 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, redeem their units for 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 and six month periods ended June 30, 2004 and 2003.



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##### Table of Contents

G&L REALTY CORP.



FUNDS FROM OPERATIONS AND ADDITIONAL DATA

(Unaudited)



|                                                            |  |                                           |        |   |                                          |   |        |      |  |   |        |   |  |   |        |  
|----------------------------------------------------------- |  | ----------------------------------------- | ------ | - | ---------------------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                            |  | For the Three MonthPeriods Ended June 30, |        |   | For the Six Month Periods Ended June 30, |  
|                                                            |  | 2004                                      |        |   | 2003                                     |   |        | 2004 |  |   | 2003   |  
|                                                            |  | (in thousands)                            |        |   | (in thousands)                           |  
|Funds from Operations(1)                                    |  |                                           |        |   |                                          |   |        |      |  |   |        |   |  |   |        |  
|Net income (loss)                                           |  | $                                         | 61     |   |                                          | $ | (4,684 | )    |  | $ | 1,628  |   |  | $ | (874   | )
|Depreciation of real estate assets                          |  |                                           | 1,338  |   |                                          |   | 768    |      |  |   | 2,319  |   |  |   | 1,870  |  
|Amortization of deferred lease costs                        |  |                                           | 36     |   |                                          |   | 42     |      |  |   | 84     |   |  |   | 90     |  
|Loss (gain) from sale of discontinued operations            |  |                                           | 147    |   |                                          |   |       |      |  |   | (439   | ) |  |   |       |  
|Depreciation from unconsolidated affiliates                 |  |                                           | 111    |   |                                          |   | 119    |      |  |   | 222    |   |  |   | 290    |  
|Adjustment for minority interest in consolidated affiliates |  |                                           | (23    | ) |                                          |   | (38    | )    |  |   | (48    | ) |  |   | (76    | )
|Dividends on preferred stock                                |  |                                           | (1,790 | ) |                                          |   | (1,791 | )    |  |   | (3,581 | ) |  |   | (3,581 | )
|                                                            |  |                                           |        |   |                                          |   |        |      |  |   |        |   |  |   |        |  
|Funds from Operations(1)                                    |  | $                                         | (120   | ) |                                          | $ | (5,584 | )    |  | $ | 185    |   |  | $ | (2,281 | )
|                                                            |  |                                           |        |   |                                          |   |        |      |  |   |        |   |  |   |        |  
|Additional Data                                             |  |                                           |        |   |                                          |   |        |      |  |   |        |   |  |   |        |  
|Cash flows:                                                 |  |                                           |        |   |                                          |   |        |      |  |   |        |   |  |   |        |  
|Operating activities                                        |  | $                                         | 4,781  |   |                                          | $ | (2,015 | )    |  | $ | 6,886  |   |  | $ | (786   | )
|Investing activities                                        |  |                                           | (8,397 | ) |                                          |   | (4,809 | )    |  |   | (226   | ) |  |   | (2,261 | )
|Financing activities                                        |  |                                           | 2,016  |   |                                          |   | 7,064  |      |  |   | (4,261 | ) |  |   | 3,031  |  
|Capital expenditures                                        |  |                                           |        |   |                                          |   |        |      |  |   |        |   |  |   |        |  
|Building improvements                                       |  | $                                         | 21     |   |                                          | $ | 106    |      |  | $ | 219    |   |  | $ | 398    |  
|Tenant improvements                                         |  |                                           | 115    |   |                                          |   | 332    |      |  |   | 191    |   |  |   | 590    |  
|Furniture, fixtures & equipment                             |  |                                           | 15     |   |                                          |   | 50     |      |  |   | 97     |   |  |   | 116    |  
|Leasing commissions                                         |  |                                           | 18     |   |                                          |   | 38     |      |  |   | 41     |   |  |   | 49     |  
|Depreciation and amortization                               |  |                                           |        |   |                                          |   |        |      |  |   |        |   |  |   |        |  
|Depreciation of real estate assets                          |  | $                                         | 1,331  |   |                                          | $ | 768    |      |  | $ | 2,321  |   |  | $ | 1,870  |  
|Depreciation of non-real estate assets                      |  |                                           | 173    |   |                                          |   | 137    |      |  |   | 339    |   |  |   | 278    |  
|Amortization of deferred lease costs                        |  |                                           | 36     |   |                                          |   | 42     |      |  |   | 84     |   |  |   | 90     |  
|Amortization of deferred licensing costs                    |  |                                           | 23     |   |                                          |   | 13     |      |  |   | 36     |   |  |   | 26     |  
|Amortization of capitalized financing costs                 |  |                                           | 93     |   |                                          |   | 164    |      |  |   | 181    |   |  |   | 385    |  
|Accrued rent in excess of billed rent                       |  | $                                         | (40    | ) |                                          | $ | (43    | )    |  | $ | (98    | ) |  | $ | 10     |  

---

|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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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
June 30, 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 June 30, 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 June 30, 2004 and December 31, 2003.



|                      |  |                                            |       |   |      |   |        |      |  |   |        |   |  |      |       |   |            |   |        |       |  |   |                               |   |  |   |         |   |  |   |        
|--------------------- |  | ------------------------------------------ | ----- | - | ---- | - | ------ | ---- |  | - | ------ | - |  | ---- | ----- | - | ---------- | - | ------ | ----- |  | - | ----------------------------- | - |  | - | ------- | - |  | - | -------
|                      |  | AS OF JUNE 30, 2004 PRINCIPAL MATURING IN: |       |   |      |   |        |     
|                      |  | 2004                                       |       |   | 2005 |   |        | 2006 |  |   | 2007   |   |  | 2008 |       |   | Thereafter |   |        | Total |  |   | Fair MarketValue June 30,2004
|                      |  | (in thousands)                             |       |   |      |   |        |     
|Liabilities:          |  |                                            |       |   |      |   |        |      |  |   |        |   |  |      |       |   |            |   |        |       |  |   |                               |   |  |   |         |   |  |   |        
|Mortgage debt:        |  |                                            |       |   |      |   |        |      |  |   |        |   |  |      |       |   |            |   |        |       |  |   |                               |   |  |   |         |   |  |   |        
|Fixed rate            |  | $                                          | 1,286 |   |      | $ | 2,662  |      |  | $ | 2,829  |   |  | $    | 3,008 |   |            | $ | 18,836 |       |  | $ | 138,508                       |   |  | $ | 167,129 |   |  | $ | 185,343
|Average interest rate |  |                                            | 5.92  | % |      |   | 5.92   | %    |  |   | 5.92   | % |  |      | 5.92  | % |            |   | 5.92   | %     |  |   | 5.92                          | % |  |   | 5.92    | % |  |   |        
|Variable rate         |  |                                            |       |   |      |   | 13,324 |      |  |   | 7,600  |   |  |      |       |   |            |   |        |       |  |   |                               |   |  |   | 20,924  |   |  |   | 20,924 
|Average interest rate |  |                                            |       |   |      |   | 6.27   | %    |  |   | 5.86   | % |  |      |       |   |            |   |        |       |  |   |                               |   |  |   | 6.00    | % |  |   |        
|                      |  |                                            |       |   |      |   |        |      |  |   |        |   |  |      |       |   |            |   |        |       |  |   |                               |   |  |   |         |   |  |   |        
|                      |  | $                                          | 1,286 |   |      | $ | 15,986 |      |  | $ | 10,429 |   |  | $    | 3,008 |   |            | $ | 18,836 |       |  | $ | 138,508                       |   |  | $ | 188,053 |   |  | $ | 206,267
|                      |  |                                            |       |   |      |   |        |      |  |   |        |   |  |      |       |   |            |   |        |       |  |   |                               |   |  |   |         |   |  |   |        



The Companys
future earnings and cash flows relating to market sensitive instruments are primarily dependent upon prevailing LIBOR market interest rate. Based upon interest rates as of June 30, 2004, a 1% increase in the LIBOR rate would decrease future earnings
by $209,000 annually, and decrease future cash flow by $118,000 annually. A 1% decrease in the LIBOR rate would increase future earnings by $209,000 annually, and increase future cash flow by $118,000 annually. A 1% change in the LIBOR rate would
not have a material impact on the fair value of the Companys debt.



|                      |  |                                                |        |   |      |   |       |      |  |   |       |   |  |      |       |   |            |   |        |       |  |   |                                   |   |  |   |         |   |  |   |        
|--------------------- |  | ---------------------------------------------- | ------ | - | ---- | - | ----- | ---- |  | - | ----- | - |  | ---- | ----- | - | ---------- | - | ------ | ----- |  | - | --------------------------------- | - |  | - | ------- | - |  | - | -------
|                      |  | AS OF DECEMBER 31, 2003 PRINCIPAL MATURING IN: |        |   |      |   |       |     
|                      |  | 2004                                           |        |   | 2005 |   |       | 2006 |  |   | 2007  |   |  | 2008 |       |   | Thereafter |   |        | Total |  |   | Fair MarketValue December 31,2003
|                      |  | (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. Based upon interest rates as of December 31, 2003, a 1% increase in the LIBOR rate would decrease future
earnings by $193,000 and future cash flow would decrease by $64,000. A 1% decrease in the LIBOR rate would increase future earnings by $193,000 and future cash flow would increase by $64,000. A 1% change in the LIBOR rate would not have a material
impact on the fair value of the Companys debt.



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##### Table of Contents

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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##### Table of Contents

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 Purchases 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 June 30, 2004.



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##### Table of Contents

|(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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##### Table of Contents

|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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##### Table of Contents

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:    August 16, 2004 |  | By:              |  | /s/    David E. Hamer   
|                         |  |                  |  | David E. Hamer          
|                         |  |                  |  | Chief Accounting Officer



Page 34