<PAGE>

================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               _________________


                                   FORM 10-Q
(Mark One)
  [X]          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
               For the quarterly period ended September 30, 2001

                                      OR

  [_]          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

          For the transition period from ____________ to ____________

                        Commission file number 1-12566

                               _________________

                              G & L REALTY CORP.
            (Exact name of Registrant as specified in its charter)

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

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

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

                               _________________

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X    No ___.
                                               ---
     The number of shares outstanding of the Registrant's Common Stock as of
October 31, 2001 was 710,199 shares.


================================================================================
<PAGE>

                               G&L REALTY CORP.

                                     INDEX

<TABLE>
<CAPTION>
                                                                                                          Page
Part I         Financial Information                                                                     Number
<S>                                                                                                      <C>
      Item 1   Financial Statements
                    Condensed Consolidated Balance Sheets as of  September 30, 2001
                         (unaudited) and December 31, 2000.........................................           3
                    Condensed Consolidated Statements of Operations for the Three and Nine
                         Month Periods Ended September 30, 2001 and 2000 (unaudited)...............           4
                    Condensed Consolidated Statements of Cash Flows for the Nine Month Periods
                         Ended September 30, 2001 and 2000 (unaudited).............................       5 - 6
                    Notes to Condensed Consolidated Financial Statements (unaudited)...............      7 - 21
      Item 2        Management's Discussion and Analysis of Financial Condition and Results of
                         Operations................................................................     22 - 29
      Item 3        Quantitative and Qualitative Disclosures About Market Risk.....................          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 - 37

Signature..........................................................................................          38
</TABLE>

                                     Page 2
<PAGE>

                               G&L REALTY CORP.

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                                (In thousands)

<TABLE>
<CAPTION>
                                                                                 September 30,     December 31,
                                                                                     2001              2000
                                                                                ------------------------------
                                                                                 (Unaudited)
<S>                                                                             <C>                  <C>
                                    ASSETS
                                    ------
Rental properties (Note 3):
      Land                                                                        $  28,599          $  28,599
      Buildings and improvements, net                                               138,288            139,510
      Projects under development                                                        ---                171
                                                                                  ---------          ---------
          Total rental properties                                                   166,887            168,280
Cash and cash equivalents                                                             1,272              2,791
Restricted cash                                                                       4,481              4,624
Tenant rent and reimbursements receivable, net                                        6,580              6,669
Unbilled rent receivable, net                                                         2,538              2,412
Other receivables, net                                                                  ---                 46
Mortgage loans and notes receivable, net                                             11,701             11,244
Investments in unconsolidated affiliates (Note 6)                                     4,641              4,851
Deferred charges and other assets, net (Note 4)                                       6,101              4,549
                                                                                  ---------          ---------
   TOTAL ASSETS                                                                   $ 204,201          $ 205,466
                                                                                  =========          =========

                     LIABILITIES AND STOCKHOLDERS' EQUITY
                     ------------------------------------
LIABILITIES:
      Notes payable                                                               $ 159,003          $ 158,942
      Accounts payable and other liabilities                                          6,401              6,099
      Distributions payable                                                             463                433
      Tenant security deposits                                                        1,542              1,367
                                                                                  ---------          ---------
          Total liabilities                                                         167,409            166,841

Commitments and Contingencies (Note 8)                                                  ---                ---

Minority interest in consolidated affiliates                                         (1,351)            (1,266)
Minority interest in Operating Partnership                                              ---                ---

STOCKHOLDERS' EQUITY (Note 5):
      Preferred shares - $.01 par value, 10,000,000 shares authorized,
        liquidation preference of $25.00 per share
        . Series A Preferred - 1,495,000 shares issued and 1,495,000 shares
          outstanding as of September 30, 2001 and December 31,
          2000                                                                           15                 15
        . Series B Preferred - 1,380,000 shares issued and 1,380,000
          shares outstanding as of  September 30, 2001 and December 31,                  14                 14
          2000
      Common shares - $.01 par value, 50,000,000 shares authorized, 2,333,800
        shares issued and outstanding as of September 30,
        2001 and December 31, 2000                                                       23                 23
      Additional paid-in capital                                                     72,274             72,441
      Distributions in excess of net income                                         (34,183)           (32,602)
                                                                                  ---------          ---------
          Total stockholders' equity                                                 38,143             39,891
                                                                                  ---------          ---------
   TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                     $ 204,201          $ 205,466
                                                                                  =========          =========
</TABLE>

     See accompanying notes to Condensed Consolidated Financial Statements

                                     Page 3
<PAGE>

                               G&L REALTY CORP.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (In thousands, except per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                              For the Three Month             For the Nine Month
                                                          Periods Ended September 30,     Periods Ended September 30,
                                                             2001             2000           2001             2000
                                                        -------------------------------------------------------------
<S>                                                     <C>                 <C>             <C>              <C>
REVENUES:
   Rent                                                    $  6,867         $  6,275        $ 19,957         $ 19,325
   Patient revenues                                           5,289            5,593          15,650           11,944
   Tenant reimbursements                                        413              401           1,436            1,127
   Parking                                                      347              322           1,128              932
   Interest and loan fees                                       445              590           1,444            1,972
   Net gain on sale of assets                                   ---              ---             ---            1,263
   Lease termination income                                     ---              ---           2,613              ---
   Other income                                                 398              187             984              419
                                                           --------         --------        --------         --------
       Total revenues                                        13,759           13,368          43,212           36,982
                                                           --------         --------        --------         --------

EXPENSES:
   Property operations                                        2,530            1,906           7,050            5,841
   Skilled nursing operations                                 4,793            5,235          14,076           10,990
   Depreciation and amortization                              1,544            1,472           4,512            4,538
   Interest                                                   3,207            3,491           9,747           10,335
   Provision for doubtful accounts and notes
       receivable                                               ---              ---             ---            2,288
   General and administrative                                   834              702           2,542            2,170
                                                           --------         --------        --------         --------
       Total expenses                                        12,908           12,806          37,927           36,162
                                                           --------         --------        --------         --------
Income from operations before minority interests,
   equity in earnings (loss) of unconsolidated
   affiliates and extraordinary loss                            851              562           5,285              820
Equity in earnings (loss) of unconsolidated affiliates           83              (45)            (92)            (393)
Minority interest in consolidated affiliates                    (68)             (27)           (201)            (133)
Minority interest in Operating Partnership                      ---              (78)            ---              538
Corporate income tax expense                                   (212)             ---            (212)             ---
                                                           --------         --------        --------         --------
Income before extraordinary loss                                654              412           4,780              832
Extraordinary loss on early retirement of long-term debt        (48)             ---             (48)            (158)
                                                           --------         --------        --------         --------
Net income                                                      606              412           4,732              674
Dividends on preferred stock                                 (1,790)          (1,791)         (5,371)          (5,374)
                                                           --------         --------        --------         --------
Net loss available to common stockholders                  $ (1,184)        $ (1,379)       $   (639)        $ (4,700)
                                                           ========         ========        ========         ========
Per common share data:
   Basic:
   -----
   Loss before extraordinary loss                          $  (0.43)        $  (0.59)       $  (0.24)        $  (1.90)
   Extraordinary loss                                         (0.02)             ---           (0.02)           (0.06)
                                                           --------         --------        --------         --------
   Net loss                                                $  (0.45)        $  (0.59)       $  (0.26)        $  (1.96)
                                                           ========         ========        ========         ========
   Fully diluted:
   -------------
   Loss before extraordinary loss                          $  (0.43)        $  (0.59)       $  (0.24)        $  (1.90)
   Extraordinary loss                                         (0.02)             ---           (0.02)           (0.06)
                                                           --------         --------        --------         --------
   Net loss                                                $  (0.45)        $  (0.59)       $  (0.26)        $  (1.96)
                                                           ========         ========        ========         ========
Weighted average shares outstanding:
   Basic                                                      2,638            2,334           2,436            2,394
                                                           ========         ========        ========         ========
   Fully diluted                                              2,694            2,334           2,476            2,394
                                                           ========         ========        ========         ========
</TABLE>

     See accompanying notes to Condensed Consolidated Financial Statements

                                     Page 4
<PAGE>

                               G&L REALTY CORP.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)

<TABLE>
<CAPTION>
                                                                                Nine Months Ended September 30,
                                                                                   2001                2000
                                                                             -------------------------------------
                                                                                          (Unaudited)
<S>                                                                             <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income                                                                   $   4,732          $     674
   Adjustments to reconcile net income to net cash provided by
       Operating activities:

             Depreciation and amortization                                          4,512              4,538
             Amortization of deferred loan costs                                      514                449
             Extraordinary loss on early retirement of long-term debt                  48                158
             Net gain on sale of assets                                               ---             (1,263)
             Minority interests                                                       201               (405)
             Equity in loss of unconsolidated affiliates                               92                393
             Provision for doubtful accounts and notes receivables                    ---              2,288
             Unbilled rent receivable, net                                           (126)              (141)
             (Increase) decrease in:
                Other receivables                                                      46                103
                Tenant rent and reimbursements receivable                              89             (4,271)
                Prepaid expense and other assets                                   (1,370)            (1,236)
                Accrued interest receivable and loan fees                            (201)               165
             Increase (decrease) in:
                Accounts payable and other liabilities                                302              4,336
                Tenant security deposits                                              175                 11
                                                                                ---------          ---------
Net cash provided by operating activities                                           9,014              5,799
                                                                                ---------          ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
       Purchases of real estate assets                                                ---            (10,385)
       Sale of real estate assets                                                     ---              8,794
       Additions to rental properties                                              (2,621)            (2,326)
       Pre-acquisition costs, net                                                    (150)               385
       Construction-in-progress                                                       171               (333)
       Leasing commissions                                                           (430)               (97)
       Investment in mortgage loans and notes receivable                             (354)              (279)
       Contributions to unconsolidated affiliates                                    (280)              (292)
       Distributions from unconsolidated affiliates                                   398              1,262
       Principal payments received from mortgage loans and notes receivable            98                468
                                                                                ---------          ---------
Net cash used in investing activities                                              (3,168)            (2,803)
                                                                                ---------          ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
       Notes payable proceeds                                                      12,300              9,195
       Repayment of notes payable                                                 (12,239)           (11,829)
       Payment of deferred loan costs                                                (786)              (398)
       Decrease in restricted cash                                                    143              2,587
       Minority interest equity contribution                                          ---                486
       Purchase of common and preferred stock and partnership units                   ---             (2,974)
       Distributions                                                               (6,783)            (7,349)
                                                                                ---------          ---------
Net cash used in financing activities                                              (7,365)           (10,282)
                                                                                =========          =========
</TABLE>

     See accompanying notes to Condensed Consolidated Financial Statements

                                     Page 5
<PAGE>

                                G&L REALTY CORP.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                Nine Months Ended September 30,
                                                                                     2001             2000
                                                                               -------------------------------
                                                                                       (Unaudited)
<S>                                                                            <C>                    <C>
NET DECREASE IN CASH AND CASH EQUIVALENTS                                            (1,519)            (7,286)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                        2,791              7,545
                                                                                   --------           --------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                           $  1,272           $    259
                                                                                   ========           ========

SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for interest                                           $  9,215           $  9,916
                                                                                   ========           ========
NONCASH INVESTING AND FINANCING ACTIVITIES

Distributions declared not yet paid                                                $    370           $    370
                                                                                   ========           ========
Preferred distributions due to minority partner                                    $     44           $     43
                                                                                   ========           ========
Transfer from investments in unconsolidated affiliates to notes receivable              ---           $  3,070
                                                                                   ========           ========
Transfer from projects under development to building                               $    376                ---
                                                                                   ========           ========

Transfer note receivable to land and building:
                 Land                                                                                 $    252
                 Building                                                                                1,009
                                                                                                      --------
                 Total                                                                                $  1,261
                                                                                                      ========

                 Notes receivable                                                                     $  1,261
                                                                                                      ========
                                                                                                      Concluded.
</TABLE>

     See accompanying notes to Condensed Consolidated Financial Statements

                                     Page 6
<PAGE>

                               G&L REALTY CORP.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)



1. GENERAL

    G&L Realty Corp. (the "Company") was formed as a Maryland corporation to
continue the ownership, management, acquisition and development activities
previously conducted by G&L Development, a California general partnership, the
Company's predecessor. All of the Company's assets are held by, and all of its
operations are conducted through, the following entities:

       G&L Realty Partnership, L.P., a Delaware limited partnership
               (the "Operating Partnership")
       G&L Realty Financing Partnership II, L.P., a Delaware limited partnership
               (the "Realty Financing Partnership")*
       G&L Medical Partnership, L.P., a Delaware limited partnership
               (the "Medical Partnership")*
       G&L Gardens, LLC, an Arizona limited liability company
               ("Maryland Gardens")*
       435 North Roxbury Drive, Ltd., a California limited partnership
                      (the "Roxbury Partnership")
       GL/PHP, LLC, a Delaware limited liability company ("GL/PHP")*
       G&L Hampden, LLC, a Delaware limited liability company ("Hampden")*
       G&L Valencia, LLC, a California limited liability company ("Valencia")
       G&L Tustin, LLC, a California limited liability company ("Tustin")*
       G&L Holy Cross, LLC, a California limited liability company
               ("Holy Cross")*
       G&L Burbank, LLC, a California limited liability company ("Burbank")*
       GLH Pacific Gardens, LLC, a California limited liability company
               ("Pacific Gardens")
       G&L Hoquiam, LLC, a California limited liability company ("Hoquiam")
       G&L Lyon, LLC, a California limited liability company ("Lyon")
       G&L Coronado (1998), LLC, a California limited liability company
               ("Coronado")
       GLH Tarzana, LLC, a California limited liability company ("Tarzana")
       G&L Heritage Care, LLC, a Delaware limited liability company
               ("Heritage")
       G&L Massachusetts, LLC, a Delaware limited liability company
               ("Massachusetts")
       G&L Aspen, LLC, a California limited liability company ("Aspen")
       G&L Tustin II, LLC, a Delaware limited liability company ("Tustin II")
       G&L Tustin III, LLC, a Delaware limited liability company ("Tustin III")

    * The Realty Financing Partnership, the Medical Partnership, Maryland
      Gardens, GL/PHP, Hampden, Tustin, Holy Cross, and Burbank are herein
      collectively referred to as the "Financing Entities" and individually as
      the "Financing Entity."

    The Company, as the sole general partner and as owner of an approximately
97% ownership interest, controls the Operating Partnership. The Company controls
the Financing Entities through wholly owned subsidiaries incorporated either in
the State of Delaware or the State of California (collectively, the
"Subsidiaries" and individually, a "Subsidiary"). Each Subsidiary either (i)
owns, as sole general partner or sole managing member, a 1% ownership interest
in its related Financing Entity or (ii) owns no interest and acts as the manager
of the Financing Entity. The remaining 99% ownership interest in each Financing
Entity, which is owned 1% by a Subsidiary, is owned by the Operating
Partnership, acting as sole limited partner or member. Financing Entities in
which a Subsidiary owns no interest are 100% owned by the Operating Partnership.

    References in these condensed consolidated financial statements to the
Company include its operations, assets and liabilities including the operations,
assets and liabilities of the Operating Partnership, the Subsidiaries, the
Financing Entities, the Roxbury Partnership (in which the Operating Partnership
owns a 61.75% partnership interest and is the sole general partner), Pacific
Gardens (in which the Operating Partnership owns a 93% membership interest and
is a co-

                                     Page 7
<PAGE>

                               G&L REALTY CORP.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                  (Unaudited)


managing member), Tarzana (in which the Operating Partnership owns a 85%
membership interest and is a co-managing member) and Valencia, Hoquiam, Lyon,
Coronado, Heritage, Massachusetts, Aspen, Tustin II and Tustin III (in which the
Operating Partnership owns a 100% interest).

     In addition to the Subsidiaries, the Company also owns interests in various
unconsolidated affiliates. Although the Company's investment represents a
significant portion of the capital of such unconsolidated affiliates and the
Company exercises significant influence over the activities of these entities,
the Company does not have the requisite level of voting control to include the
assets, liabilities and operating activities of these entities in the condensed
consolidated financial statements of the Company. The entities in which the
Company has unconsolidated financial interests are as follows:

     .    GLN Capital Co., LLC ("GLN") is a Delaware limited liability company
          formed in 1996. GLN is owned 49.9% by the Operating Partnership and
          50.1% by an affiliate of Nomura Asset Capital Corp. ("Nomura"). GLN
          was formed to fund loans to the senior care industry.

     .    G&L Grabel, San Pedro, LLC ("San Pedro") is a California limited
          liability company formed on March 10, 1998 by the Company through the
          Operating Partnership, and Gary Grabel, an experienced medical office
          building ("MOB") manager. The Company and Gary Grabel contributed to
          San Pedro 84% and 16% of the equity, respectively. However, the
          initial ownership interests of the parties will be adjusted to 50% as
          each partner receives a return of its initial capital contribution
          plus a preferred return on their initial contribution. San Pedro was
          formed for the purpose of acquiring three MOBs located at 1360 West
          6th Street in San Pedro, California.

     .    G&L Penasquitos, LLC ("Penasquitos LLC") is a California limited
          liability company, formed by the Company on April 24, 1998, through
          the Operating Partnership, and Parsons House, LLC, a California
          limited liability company ("Parsons"). The Company and Parsons
          contributed to Penasquitos LLC 75% and 25% of the equity,
          respectively. However, the initial ownership interests of the parties
          will be adjusted to 50% as each partner receives a return of its
          initial capital contribution plus preferred distributions equal to 15%
          per annum on their capital contribution. Penasquitos LLC was formed
          for the purpose of acquiring and converting a building located in
          Rancho Penasquitos, California into an assisted living facility.

     .    G&L Penasquitos, Inc. ("Penasquitos Inc.") is a California corporation
          formed on April 21, 1998 by the Company, through the Operating
          Partnership, and Parsons. The Company owns 75% of the total equity in
          Penasquitos Inc. in the form of non-voting preferred stock. Parsons
          holds 25% of the total equity and all of the voting common stock.
          Penasquitos Inc. was formed for the purpose of operating an assisted
          living facility in Rancho Penasquitos, California.

     .    GLH Pacific Gardens Corp. ("Pacific Gardens Corp.") is a California
          corporation formed on June 25, 1998 by the Company, through the
          Operating Partnership, and ASL Santa Monica, Inc., a California
          corporation ("ASL"). The Company owns 93% of the total equity in
          Pacific Gardens Corp. in the form of non-voting preferred stock. ASL
          holds 7% of the total equity in the form of common stock. Pacific
          Gardens Corp. was formed for the purpose of operating an assisted
          living facility located in Santa Monica, California, which was
          purchased by the Company. Since July 1, 1999, Pacific Gardens Corp.
          has not operated the assisted living facility and a wholly owned
          subsidiary of ASL assumed all of the assets and liabilities of Pacific
          Gardens Corp. in order to operate the facility.

     .    G&L Parsons on Eagle Run, LLC ("Eagle Run") is a California limited
          liability company, formed on December 29, 1998, through the Operating
          Partnership and Parsons. The Company and Parsons each contributed 50%
          of the total equity in Eagle Run. Eagle Run was formed for the purpose
          of acquiring a vacant piece of land in Omaha, Nebraska upon which the
          members developed an assisted living facility.

     .    G&L Parsons on Eagle Run, Inc. ("Eagle Run Inc.") is a California
          corporation formed on December 20, 1998 by the Company, through the
          Operating Partnership, and Parsons. Eagle Run Inc. was formed for the
          purpose of operating an assisted living facility in Omaha, Nebraska on
          the land acquired by Eagle Run.

     .    Lakeview Associates, LLC ("Lakeview") is a California limited
          liability company, formed on September 2, 1999 by the Company, through
          the Operating Partnership and D.D.&F. ("Prestige"), an Oregon general
          partnership. The Company and Prestige each contributed 50% of the
          equity of Lakeview. The Company contributed land and construction in
          progress in exchange for 50% of the equity of Lakeview and two notes
          totaling $1.4 million. Prestige contributed $250,000 for a 50%
          interest in Lakeview. Lakeview was formed for the purpose of
          developing a two-story, 80 unit, 92 bed assisted living facility in
          Yorba Linda, California.

                                     Page 8
<PAGE>

                               G&L REALTY CORP.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                  (Unaudited)


     .    Tustin Heritage Park, LLC ("Heritage Park") is a California limited
          liability company in which the Company has a 25% equity ownership
          interest. In June 1999, the Company sold a vacant piece of land in
          Tustin to Heritage Park. In exchange, the Company received $75,000 in
          cash, a $425,000 first deed of trust and a 25% equity ownership
          interest in Heritage Park. In September 2000, the first deed of trust
          was increased to $675,000 in exchange for unearned development fees
          and an extension of the note. Heritage Park intends to develop a 53-
          unit senior apartment residence on the land.

GLN, San Pedro, Penasquitos Inc., Penasquitos LLC, Pacific Gardens Corp., Eagle
Run, Eagle Run, Inc., Lakeview and Heritage Park are herein collectively
referred to as the "Unconsolidated Affiliates" and individually as
"Unconsolidated Affiliate".

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Business - The Company is a self-managed Real Estate Investment Trust
("REIT") that acquires, develops, manages, finances and leases healthcare
properties. The Company's business currently consists of investments in
healthcare properties and in debt obligations secured by healthcare properties.
Investments in healthcare property consist of acquisitions, made either directly
or through joint ventures, in medical office buildings ("MOBs"), skilled nursing
facilities ("SNFs") or assisted living facilities ("ALFs"). The Company's
lending activities consist of providing short-term secured loans to facilitate
third party acquisitions of healthcare properties.

          Basis of Presentation - The accompanying condensed consolidated
financial statements include the accounts of the Company and its Subsidiaries.
The interests in the Roxbury Partnership, Pacific Gardens, Pacific Park, Tarzana
and the Operating Partnership that are not owned by the Company, have been
reflected as minority interests in the Operating Partnership. All significant
intercompany accounts and transactions have been eliminated in consolidation.

          The information presented as of and for the three-month and nine-month
periods ended September 30, 2001 and 2000 have not been audited by independent
accountants, but include 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
nine months ended September 30, 2001 are not necessarily indicative of results
that might be expected for the full fiscal year.

          Certain information and footnote disclosures normally included in
annual financial statements have been omitted. The Company believes that the
disclosures included in these financial statements are adequate for a fair
presentation and conform to reporting requirements established by the Securities
and Exchange Commission ("SEC"). These condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and the notes included in the Company's annual report on Form 10-K as
filed with the SEC.

          Corporate income tax expense - The provision for corporate income tax
expense is based on income recognized for financial statement purposes related
to Massachusetts and Hampden. While the Company expects to qualify as a REIT for
2001, the Company is currently operating three SNFs located in Hampden,
Massachusetts and will be required to pay the applicable corporate income tax on
any net income produced by these facilities. See Footnote 7 Segment Information
for additional information regarding these three facilities.

          Recent accounting pronouncements-- In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 133 "Accounting for Derivative Instruments and Hedging Activities," ("SFAS
133"). SFAS 133, as amended, is effective for fiscal years beginning after June
15, 2000 and requires all derivatives to be recorded on the balance sheet at
fair value as either assets or liabilities depending on the rights or
obligations under the contracts. SFAS 133 also establishes new accounting
methodologies for the following three classifications of hedges: fair value,
cash flow and net investment in foreign operations. The Company's adoption of
SFAS 133 on January 1, 2001 did not have a material impact on the Company's
financial position or results of operations.

                                     Page 9
<PAGE>

                               G&L REALTY CORP.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                  (Unaudited)


          In July 2001, the Financial Accounting Standards Board issued SFAS No.
141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 is effective immediately and SFAS No. 142 will be
effective in January 2002. The Company's adoption of these new standards is not
expected to have a material impact on the Company's financial position or
results of operations.

          In October 2001, the Financial Accounting Standards Board issued SFAS
No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets," ("SFAS
144"). SFAS 144 addresses financial accounting and reporting for the disposal of
long-lived assets. SFAS 144 becomes effective for financial statements issued
for fiscal years beginning after December 15, 2001 and interim periods within
those fiscal years. The Company does not expect the pronouncement to have a
material impact on its financial position or results of operations.

                                    Page 10
<PAGE>

                               G&L REALTY CORP.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
                                  (Unaudited)

3.  BUILDINGS AND IMPROVEMENTS

         Buildings and improvements consist of the following:
<TABLE>
<CAPTION>
                                                                                September 30,        December 31,
                                                                                    2001                 2000
                                                                             ---------------------------------------
                                                                                           (in thousands)
<S>                                                                          <C>                     <C>
         Buildings and improvements....................................              $155,645             $155,224
         Tenant improvements...........................................                11,625                9,214
         Furniture, fixtures and equipment.............................                 3,445                3,280
                                                                               --------------        -------------
                                                                                      170,715              167,718
         Less accumulated depreciation and amortization................               (32,427)             (28,208)
                                                                               --------------        -------------
                Total..................................................              $138,288             $139,510
                                                                                =============        =============
</TABLE>

      Rental property is recorded at cost less accumulated depreciation.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the assets as follows:


              Buildings and improvements ....................      40 years
              Tenant improvements ...........................      Life of lease
              Furniture, fixtures and equipment .............      5 years


      Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations and all external costs directly related to
acquisitions are capitalized.


4.  DEFERRED CHARGES AND OTHER ASSETS

     Deferred charges and other assets consist of the following:

<TABLE>
<CAPTION>
                                                                                September 30,        December 31,
                                                                                    2001                 2000
                                                                             ----------------------------------------
                                                                                         (in thousands)
<S>                                                                          <C>                       <C>
         Deferred loan costs..........................................                  $4,703              $4,011
         Pre-acquisition costs........................................                     300                 150
         Leasing commissions..........................................                   1,916               1,486
         Prepaid expense and other assets.............................                   1,811                 914
                                                                                 -------------         -----------
                                                                                         8,730               6,561
         Less accumulated amortization................................                  (2,629)             (2,012)
                                                                                 -------------         -----------
              Total...................................................                  $6,101              $4,549
                                                                                 =============         ===========
</TABLE>

                                    Page 11
<PAGE>

                               G&L REALTY CORP.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
                                  (Unaudited)



5.       STOCKHOLDERS' EQUITY

         Distributions in excess of net income-- The Company has elected to be
treated, for federal income tax purposes, as a REIT. As such, the Company is
required to distribute annually, in the form of distributions to its
stockholders, at least 90% of its taxable income. In reporting periods in which
distributions exceed net income, stockholders' equity will be reduced by the
distributions in excess of net income in such period and will be increased by
the excess of net income over distributions in reporting periods in which net
income exceeds distributions. For tax reporting purposes, a portion of the
dividends declared represents a return of capital. The following table
reconciles net income and distributions in excess of net income for the nine
months ended September 30, 2001 and for the year ended December 31, 2000:

<TABLE>
<CAPTION>
                                                                                 September 30,    December 31, 2000
                                                                                     2001
                                                                               --------------------------------------
                                                                                         (in thousands)
<S>                                                                            <C>                       <C>
         Distributions in excess of net income at beginning of period...              $(32,602)          $(25,412)
         Net income during period.......................................                 4,732              1,149
         Less: Distributions declared...................................                (6,313)            (8,339)
                                                                                      --------           --------
         Distributions in excess of net income..........................              $(34,183)          $(32,602)
                                                                                      ========           ========
</TABLE>


         Earnings per common share--Basic earnings per share is computed by
dividing net income less preferred stock dividends by the weighted average
number of common shares outstanding during each period. Fully diluted earnings
per share is computed by dividing net income less preferred stock dividends by
the weighted average number of common shares outstanding during each period plus
the incremental shares that would have been outstanding upon the assumed
exercise of dilutive stock options. The treasury stock method is used to
determine the number of incremental common equivalent shares resulting from
options to purchase shares of common stock granted under the Company's 1993
Stock Incentive Plan, as amended. As of September 30, 2001 and 2000 there were
approximately 227,000 and 250,500 stock options outstanding with weighted
average exercise prices of $10.53 and $11.31, respectively. For the three months
ended September 30, 2001 the incremental shares that would have been outstanding
upon the assumed exercise of stock options of 55,476 were considered in the
computation of fully diluted earnings per share. For the nine months ended
September 30, 2001 and 2000, the incremental shares that would have been
outstanding upon the assumed exercise of stock options of 39,317 and 620,
respectively would have been anti-dilutive and, therefore, were not included in
the computation of fully diluted earnings per share. The following table
reconciles the numerator and denominator of the basic and fully diluted per
share computations for net income for the three and nine months ended September
30, 2001 and 2000:

                                    Page 12
<PAGE>

                               G&L REALTY CORP.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS-CONTINUED
                                  (Unaudited)



<TABLE>
<CAPTION>
                                                         Three months ended            Nine months ended
                                                          September 30,                  September 30,
                                                       2001            2000           2001           2000
                                                  ----------------------------------------------------------
                                                          (in thousands)                 (in thousands)
<S>                                               <C>             <C>             <C>            <C>
Numerator:
---------
   Net income                                      $       606    $        412    $      4,732   $       674
   Preferred stock dividends                            (1,790)         (1,791)         (5,371)       (5,374)
                                                  ------------    ------------    ------------   -----------
   Net (loss) income available to common
     stockholders                                   $   (1,184)   $     (1,379)   $       (639)  $    (4,700)
                                                  ============    ============    ============   ===========

Denominator:
----------
   Weighted average shares - basic                       2,638           2,334           2,436         2,394
   Dilutive effect of stock options                         56             ---              40           ---
                                                  ------------    ------------    ------------   -----------
   Weighted average shares - fully diluted               2,694           2,334           2,476         2,394
                                                  ============    ============    ============   ===========
Per share:
---------
   Basic                                           $     (0.45)   $      (0.59)   $      (0.26)  $     (1.96)
   Dilutive effect of stock options                        ---             ---             ---           ---
                                                  ------------    ------------    ------------   -----------
   Fully diluted                                   $     (0.45)   $      (0.59)   $      (0.26)  $     (1.96)
                                                  ============    ============    ============   ===========
</TABLE>

         On October 29, 2001, the Company completed a merger with G & L
Acquisition, LLC, a Maryland limited liability company, substantially on the
terms provided for in the Agreement of Plan and Merger, dated as of May 10,
2001, as amended, by and between the Company and G & L Acquisition, LLC (the
"Merger"). G & L Acquisition, LLC is 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. Immediately after the Merger, the Company had 710,199
shares of common stock outstanding, all of which are held by Messrs. Gottlieb
and Lebowitz.

         In connection with the Merger, Messrs. Gottlieb and Lebowitz, through
G&L Tender, LLC, launched a cash tender offer for up to $3.5 million of the
Company's Series A and Series B Preferred Stock at $17.50 per share and $17.00
per share, respectively (the "Tender Offer"). The Tender Offer was launched on
October 4, 2001 and was initially scheduled to expire on November 2, 2001.
However, On November 5, 2001, Messrs. Gottlieb and Lebowitz announced that they
had extended the expiration of the Tender Offer to December 3, 2001 with the
same terms and conditions as the original offer.

         See the Company's Definite Proxy Statement dated September 28, 2001 as
well as the Company's Current Reports on Form 8-K filed on October 4, 2001,
October 16, 2001, October 23, 2001, October 26, 2001 and October 31, 2001 for
more information regarding the Merger between the Company and G & L Acquisition,
LLC.

                                    Page 13
<PAGE>

                               G&L REALTY CORP.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


6.  INVESTMENTS IN UNCONSOLIDATED AFFILIATES

The Company has investments in various unconsolidated affiliates as described in
Note 1. The following table provides a summary of the Company's investment in
each of these entities as of September 30, 2001. (In thousands).

<TABLE>
<CAPTION>
                                                                  San       Penasquitos   Penasquitos        Heritage
                                                 GLN             Pedro          LLC          Inc.              Park
                                             ----------------------------------------------------------------------------
<S>                                             <C>            <C>         <C>             <C>             <C>
Opening balance at beginning of period......    $  765         $  1,144     $   161        $    20          $      ---
Equity in (loss) earnings of affiliates.....        (2)             152        (135)           ---                 ---
Cash contributions..........................        16              ---          70            ---                 ---
Cash distributions..........................       ---              ---        (398)           ---                 ---
                                                ------         --------     -------        -------          ----------
Equity, before inter-company adjustments....       779            1,296        (302)            20                 ---
                                                ------         --------     -------        -------          ----------
Intercompany transactions:
Receivable (payable), net...................        67               58         285            (20)                 14
                                                ------         --------     -------        -------          ----------
Investment in unconsolidated affiliates.....    $  846         $  1,354     $   (17)       $   ---          $       14
                                                ======         ========     =======        =======          ==========
<CAPTION>
                                                  Pacific       Eagle Run,
                                               Gardens Corp.      Inc.       Eagle Run      Lakeview           Total
                                             ----------------------------------------------------------------------------
<S>                                          <C>              <C>           <C>            <C>            <C>
Opening balance at beginning of period......    $ (312)        $   (370)    $   655        $   250          $    2,313
Equity in (loss) earnings of affiliates.....       ---              (66)        (41)           ---                 (92)
Cash contributions..........................       ---              ---         ---            102                 188
Cash distributions..........................       ---              ---         ---            ---                (398)
                                                ------         --------     -------        -------          ----------
Equity, before inter-company adjustments....      (312)            (436)        614            352               2,011
                                                ------         --------     -------        -------          ----------
Intercompany transactions:
Receivable (payable), net...................       110                9          67          2,040               2,630
                                                ------         --------     -------        -------          ----------
Investment in unconsolidated affiliates.....    $ (202)        $   (427)    $   681        $ 2,392          $    4,641
                                                ======         ========     =======        =======          ==========
</TABLE>

                                    Page 14
<PAGE>

                               G&L REALTY CORP.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                  (Unaudited)

      Following is a summary of the condensed financial information of each of
the unconsolidated affiliates as of and for the nine months ended September 30,
2001. (In thousands).

<TABLE>
<CAPTION>
                                                                 San         Penasquitos      Penasquitos        Heritage
                                                   GLN          Pedro            LLC              Inc.              Park
                                             -------------------------------------------------------------------------------
<S>                                           <C>            <C>           <C>               <C>             <C>
Financial Position:
-------------------
     Land.................................    $      ---      $    1,882      $      641      $       ---      $       750
     Buildings............................           ---           4,214           6,256              ---              ---
     Notes receivable, net................         1,585             ---             ---              ---              ---
     Other assets.........................           ---             357           1,190              ---              238
     Notes payable........................           ---          (4,662)         (8,434)             ---             (940)
     Other liabilities....................           (65)           (590)           (139)             (10)             (48)
                                             -----------      ----------      ----------      -----------      -----------
Net assets................................   $     1,520      $    1,201      $     (486)     $       (10)     $       ---
                                             ===========      ==========      ==========      ===========      ===========
Partner's equity:
-----------------
     G&L Realty Partnership, L.P..........   $       779      $    1,296      $     (302)     $        20      $       ---
     Others...............................           741             (95)           (184)             (30)             ---
                                             -----------      ----------      ----------      -----------      -----------
Total equity..............................   $     1,520      $    1,201      $     (486)     $       (10)     $       ---
                                             ===========      ==========      ==========      ===========      ===========
Operations:
-----------
     Revenues.............................   $       ---      $      866      $      449      $       ---      $       ---
     Expenses.............................            (4)           (714)           (719)             ---              ---
                                             -----------      ----------      ----------      -----------      -----------
Net (loss) income.........................   $        (4)     $      152      $     (270)     $       ---      $       ---
                                             ===========      ==========      ==========      ===========      ===========
Allocation of net (loss) income:
--------------------------------
     G&L Realty Partnership, L.P..........   $        (2)     $      152      $     (135)     $       ---      $       ---
     Others...............................            (2)            ---            (135)             ---              ---
                                             -----------      ----------      ----------      -----------      -----------
Net income (loss).........................   $        (4)     $      152      $     (270)     $       ---      $       ---
                                             ===========      ==========      ==========      ===========      ===========

<CAPTION>
                                               Pacific
                                               Gardens         Eagle Run
                                                Corp.             Inc.        Eagle Run        Lakeview           Total
                                             -------------------------------------------------------------------------------
<S>                                           <C>            <C>           <C>               <C>             <C>
Financial Position:
-------------------
     Land.................................    $      ---      $      ---      $    1,191      $       947      $     5,411
     Buildings............................           ---             ---           4,765              ---           15,235
     Notes receivable, net................           ---             ---             ---              ---            1,585
     Other assets.........................           ---             502           1,124            5,665            9,076
     Notes payable........................           ---             ---          (5,808)          (5,133)         (24,977)
     Other liabilities....................          (349)         (1,374)            (65)            (925)          (3,565)
                                             -----------      ----------      ----------      -----------      -----------
Net assets................................   $      (349)     $     (872)     $    1,207      $       554      $     2,765
                                             ===========      ==========      ==========      ===========      ===========
Partner's equity:
-----------------
     G&L Realty Partnership, L.P..........   $      (312)     $     (436)     $      614      $       352      $     2,011
     Others...............................           (37)           (436)            593              202              754
                                             -----------      ----------      ----------      -----------      -----------
     Total equity.........................   $      (349)     $     (872)     $    1,207      $       554      $     2,765
                                             ===========      ==========      ==========      ===========      ===========
Operations:
-----------
     Revenues.............................   $       ---      $    2,153      $      509      $       ---      $     3,977
     Expenses.............................           ---          (2,285)           (592)             ---           (4,314)
                                             -----------      ----------      ----------      -----------      -----------
Net (loss) income.........................   $       ---      $     (132)     $      (83)     $       ---      $      (337)
                                             ===========      ==========      ==========      ===========      ===========
Allocation of net (loss)income:
-------------------------------
     G&L Realty Partnership, L.P..........   $       ---      $      (66)     $      (41)     $       ---      $       (92)
     Others...............................           ---             (66)            (42)             ---             (245)
                                             -----------      ----------      ----------      -----------      -----------
Net income (loss).........................   $       ---      $     (132)     $      (83)     $       ---      $      (337)
                                             ===========      ==========      ==========      ===========      ===========
</TABLE>

                                    Page 15
<PAGE>

                               G&L REALITY CORP.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)



7.  SEGMENT INFORMATION

     The Company's business currently consists of the following segments:

     .    Medical office buildings - These investments consist of 24 high
          quality MOBs, two retail facilities and one parking facility totaling
          approximately 874,000 square feet and all located in Southern
          California. These properties are owned either directly by the Company
          or indirectly through joint ventures.

     .    Skilled nursing facilities - These investments consist of seven SNFs,
          one senior apartment complex which is located adjacent to the SNF in
          Phoenix, Arizona and one hospital located in Tustin, California. The
          SNFs are located in Hampden, Massachusetts; Phoenix, Arizona; Hoquiam,
          Washington and Chico and Paso Robles, California. Two of the SNFs were
          acquired through foreclosure in the first quarter of 2000 and are
          currently not operating. The five operating SNFs contain over 600 beds
          that are typically occupied by residents who require a high level of
          daily nursing care. The hospital consists of 183 beds and is 100%
          leased to a third-party operator. All of the SNFs, the apartment
          complex and the hospital are owned 100% by the Company. In addition,
          the Company currently holds the operating license in four of the seven
          SNFs. On March 15, 2000, the Company obtained licenses from the
          Commonwealth of Massachusetts to operate the three SNFs owned by the
          Company in Hampden, Massachusetts. The Company then entered into a
          management agreement with a third-party company to manage the
          facility. As a result, all of the assets, liabilities, revenues and
          expenses of these SNFs are reflected in the condensed consolidated
          financial statements of the Company and the segment information
          provided below. The Company also holds the license to operate its SNF
          located in Phoenix, Arizona. On April 1, 2000, the Company terminated
          its lease with the operator of this SNF and entered into a management
          agreement with a new manager. For the nine months ended December 31,
          2000, the assets, liabilities, revenues and expenses of this SNF were
          also included in the condensed consolidated financial statements of
          the Company. On January 1, 2001, the Company entered into a new lease
          with a new manager which entitles the Company to monthly lease
          payments. As a result of this new lease, the assets, liabilities,
          revenues and expenses of this SNF are no longer included in the
          condensed consolidated financial statements of the Company. The
          Company will be required to pay the applicable corporate income tax on
          any net income produced by these SNFs located in Hampden,
          Massachusetts, although the Company's REIT status will not be
          affected. While the Company does not intend to hold these operating
          licenses for the long term, the Company believes it is currently in
          the best interests to own the licenses to operate these facilities.

     .    Assisted living facilities - These investments consist of five ALFs,
          all owned through joint ventures. The five ALFs contain over 350 units
          that are typically occupied by residents who require a less intense
          level of care in comparison to the SNFs. The Company's joint venture
          partner in each of these ALFs operates the facility.

     .    Debt obligations - These investments consist of short-term secured and
          unsecured loans made to third parties to facilitate the acquisition of
          healthcare facilities. As of September 30, 2001, the Company had
          eleven loans outstanding with a net book value of $11.7 million.


     The tables on the following pages reconcile the Company's income and
expense activity for the nine months ended September 30, 2001 and 2000 and
balance sheet data as of September 30, 2001.

                                    Page 16
<PAGE>

                               G&L REALITY CORP.

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


             2001 Reconciliation of Reportable Segment Information
                 For the nine months ended September 30, 2001

<TABLE>
<CAPTION>
                                                Medical      Skilled       Assisted         Debt
                                                Office       Nursing        Living       Obligations      Other         Total
                                                ------       -------        ------       -----------      -----         -----
                                                                               (In thousands)
<S>                                            <C>           <C>           <C>           <C>           <C>            <C>
Revenue:
   Rents, tenant reimbursements and
     parking ................................  $  19,105     $   1,356     $   2,060     $     ---     $     ---      $  22,521
   Patient revenues..........................        ---        15,650           ---           ---           ---         15,650
   Interest and loan fees....................        113             6             1         1,212           112          1,444
   Lease termination income..................      2,613           ---           ---           ---           ---          2,613
   Other income..............................        193           748           ---           ---            43            984
                                               ---------     ---------     ---------     ---------     ---------      ---------
      Total revenues.........................     22,024        17,760         2,061         1,212           155         43,212
                                               ---------     ---------     ---------     ---------     ---------      ---------

Expenses:
   Property operations.......................      6,038           722           133           157           ---          7,050
   Skilled nursing operations................        ---        14,076           ---           ---           ---         14,076
   Depreciation and amortization.............      3,316           776           383           ---            37          4,512
   Corporate tax expense.....................        ---           212           ---           ---           ---            212
   Interest..................................      6,801         1,261         1,136           539            10          9,747
   General and administrative................        ---           ---           ---           ---         2,542          2,542
                                               ---------     ---------     ---------     ---------     ---------      ---------
      Total expenses.........................     16,155        17,047         1,652           696         2,589         38,139
                                               ---------     ---------     ---------     ---------     ---------      ---------
Income (loss) from operations................      5,869           713           409           516        (2,434)         5,073
Equity in earnings (loss) of
   unconsolidated affiliates.................        152           ---          (242)           (2)          ---            (92)
                                               ---------     ---------     ---------     ---------     ---------      ---------
Income (loss) from operations before
   minority interests........................  $   6,021     $     713     $     167     $     514     $  (2,434)     $   4,981
                                               =========     =========     =========     =========     =========      =========

<CAPTION>
             2000 Reconciliation of Reportable Segment Information
                 For the nine months ended September 30, 2000

                                                Medical      Skilled       Assisted         Debt
                                                Office       Nursing        Living       Obligations      Other         Total
                                                ------       -------        ------       -----------      -----         -----
                                                                               (In thousands)
<S>                                            <C>           <C>           <C>           <C>           <C>            <C>
Revenue:
   Rents, tenant reimbursements and parking..  $  18,366    $    1,084     $   1,934     $     ---     $     ---      $  21,384
   Patient revenues..........................        ---        11,944           ---           ---           ---         11,944
   Interest and loan fees....................        187            10           ---         1,714            61          1,972
   Net gain on sale of assets................      1,405          (142)          ---           ---           ---          1,263
   Other income..............................        173           199           ---           ---            47            419
                                               ---------     ---------     ---------     ---------     ---------      ---------
      Total revenues.........................     20,131         13,095        1,934         1,714           108         36,982
                                               ---------     ---------     ---------     ---------     ---------      ---------

Expenses:
   Property operations.......................      5,264           360           110           107           ---          5,841
   Skilled nursing operations................        ---        10,990           ---           ---           ---         10,990
   Depreciation and amortization.............      3,424           700           364           ---            50          4,538
   Provision for doubtful accounts and
     notes receivable........................        ---           563           ---         1,725           ---          2,288
   Interest..................................      6,864         1,557         1,141           651           122         10,335
   General and administrative................        ---           ---           ---           ---         2,170          2,170
                                               ---------     ---------     ---------     ---------     ---------      ---------
      Total expenses.........................     15,552        14,170         1,615         2,483         2,342         36,162
                                               ---------     ---------     ---------     ---------     ---------      ---------
Income (loss) from operations................      4,579        (1,075)          319          (769)       (2,234)           820
Equity in earnings (loss) of
   unconsolidated affiliates.................         79            (8)         (455)           (9)          ---           (393)
                                               ---------     ---------     ---------     ---------     ---------      ---------
Income (loss) from operations before
minority interests...........................  $   4,658    $   (1,083)     $   (136)    $    (778)    $  (2,234)     $     427
                                               =========     =========     =========     =========     =========      =========
</TABLE>

                                    Page 17
<PAGE>

                               G&L REALTY CORP.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                  (Unaudited)


             2001 Reconciliation of Reportable Segment Information
                           As of September 30, 2001

<TABLE>
<CAPTION>
                                                Medical        Skilled       Assisted         Debt
                                                 Office        Nursing        Living       Obligations        Other        Total
                                                 ------        -------        ------       -----------        -----        -----
                                                                                (In thousands)
<S>                                            <C>            <C>          <C>               <C>            <C>         <C>
Rental properties............................  $ 114,628      $ 30,597     $  21,450         $    ---       $    212    $116,887
Mortgage loans and notes receivable, net.....        ---           290           ---           11,411            ---      11,701
Other assets.................................     10,304         5,958         4,255            2,187          2,909      25,613
                                               ---------      --------     ---------         --------       --------    --------
      Total assets...........................  $ 124,932      $ 36,845     $  25,705         $ 13,598       $  3,121    $204,201
                                               =========      ========     =========         ========       ========    ========

Other assets:
   Cash and cash equivalents.................  $     99       $    101     $     233         $    ---       $    839    $  1,272
   Restricted cash ..........................     2,959            630            61              831            ---       4,481
   Tenant rent and reimbursement
      receivable, net........................       698          4,280         1,061              125            416       6,580
   Unbilled rent receivable, net.............     2,495             43           ---              ---            ---       2,538
   Investment in unconsolidated affiliates...     1,354            ---         2,441              846            ---       4,641
   Deferred financing costs, net.............     1,968            453           417              251            ---       3,089
   Pre-acquisition costs.....................       ---             49           ---              134            117         300
   Deferred lease costs, net.................       895              6           ---              ---            ---         901
   Prepaid expense and other ................      (164)           396            42              ---          1,537       1,811
                                               --------       --------     ---------         --------       --------    --------
      Total  other  assets...................  $ 10,304       $  5,958     $   4,255         $  2,187       $  2,909    $ 25,613
                                               ========       ========     =========         ========       ========    ========
</TABLE>


8.  COMMITMENTS AND CONTINGENCIES

     The Company is the guarantor on a $500,000 letter of credit in favor of
NVHF Affiliates, LLC, a non-profit low-income apartment owner. The Company holds
an unsecured promissory note from NVHF Affiliates, LLC in the same amount. The
Company at this time does not anticipate having to pay anything under this
letter of credit.

     Neither the Company, the Operating Partnership, the Financing Entities, the
Subsidiaries, Maryland Gardens, the Roxbury Partnership, Valencia, Pacific
Gardens, Hoquiam, Lyons, Coronado, Tarzana, Heritage, Massachusetts, Aspen,
Tustin II, Tustin III, the Unconsolidated Affiliates nor any of the assets
within their portfolios of MOBs, parking facilities, and retail space (the
"Properties") is currently a party to any material litigation, except as
discussed below.

     On August 15, 1997, a subsidiary of the Company, GL/PHP, LLC ("GL/PHP")
borrowed $16 Million from Nomura Asset Capital Corp. ("Nomura"), the proceeds of
which were used to repay a loan made by PHP Healthcare Corporation ("PHP") in
connection with the purchase by GL/PHP of six New Jersey primary care centers
(the "New Jersey Properties"). Nomura received a first lien against the real
properties. The New Jersey Properties were leased by Pinnacle Health
Enterprises, LLC ("Pinnacle"), a subsidiary of PHP, and PHP guaranteed the
lease. Concurrently with the $16 million loan, the Operating Partnership
obtained a new $2 million loan from PHP evidenced by a $2 million promissory
note payable to PHP. The note by its terms was nonnegotiable and provides for a
right of offset against payments of interest and principal in an amount equal to
any losses sustained by reason of any defaults by Pinnacle under its lease with
GL/PHP, discussed below.

     As of August 15, 1997, Pinnacle leased the New Jersey Properties from
GL/PHP under the terms of a 17-year net operating lease. PHP guaranteed the
obligations of its subsidiary under the lease. In November 1998, Pinnacle filed
a Chapter 11 bankruptcy petition in the United States Bankruptcy Court of the
District of Delaware and its case was voluntarily converted to a Chapter 7 case.
Also in November 1998, PHP filed a Chapter 11 bankruptcy petition in the United
States Bankruptcy Court of the District of Delaware. CapMark Services, L.P.
("CapMark"), the loan servicer and successor to Amresco Management Inc., has
foreclosed on its security and taken title to the New Jersey Properties.

                                    Page 18
<PAGE>

                               G&L REALTY CORP.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                  (Unaudited)

     The Operating Partnership filed a declaratory relief action in the New
Jersey State Court seeking a determination that LaSalle National Bank
("LaSalle"), the successor to Nomura, as trustee for the holders of certain
obligations including the Nomura loan, did not have any rights against said $2
million note. LaSalle claims it is entitled to the $2 million borrowed from PHP
under the deed of trust and assignment of rent with GL/PHP. After proceedings in
both California and New Jersey, it was determined that this matter will be heard
in the Federal District Court in New Jersey. The Operating Partnership believes
that the lawsuit will be resolved with no adverse impact to the Company;
however, no assurances can be given at this time that this result will be
obtained.

     In November 1999, Landmark Healthcare Facilities, LLC ("Landmark") filed a
lawsuit against Valencia, a subsidiary of the Company, claiming that Landmark is
entitled to approximately $600,000 plus interest under a development agreement
entered into between Valencia and Landmark for the development of an MOB in
Valencia, California. The Company is vigorously opposing the lawsuit and has
filed a counter suit to recover approximately $400,000 plus interest that was
already paid under the development agreement and for a judgment and declaration
that all of Landmark's rights, title and interest in Valencia have been
terminated or assigned to the Company. The litigation went to trial on March 12,
2001. On March 21, 2001, the court issued a tentative ruling on the matter in
favor of the Company. On July 5, 2001, the court issued a ruling in favor of the
Company in an amount in excess of $900,000. The Company is currently pursuing
the recovery of this amount.

     A number of stockholder class actions have been filed against the Company
and its directors arising 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 currently owned by them. The first suit, Lukoff v. G & L Realty Corp. et
al., case number BC 241251, was filed in the Superior Court 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, although Abrons
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, among other things,
compensatory damages and/or to enjoin the transaction. On October 19, 2001, in
the Lukoff and Abrons suits, a Los Angeles County Superior Court judge issued an
order temporarily restraining the closing of the merger of the Company with a
new company owned by Daniel M. Gottlieb and Steven D. Lebowitz pursuant to the
agreement and plan of merger dated as of May 10, 2001, provided that the
plaintiffs delivered to the court a $16.2 million bond by 1:00 p.m. on Tuesday,
October 23. If a bond acceptable to the court had been timely delivered, then
the court would have proceeded with a hearing on Friday, October 26, 2001 with
respect to plaintiff's request for a preliminary injunction enjoining the
closing of the merger. The temporary restraining order was vacated because the
plaintiffs did not deliver to the court the required bond by 1:00 p.m. on
Tuesday, October 23. Defendants deny the claims, although it is premature to
predict the outcome of these actions.

     In January 2001, the Company settled a lawsuit with Cigna Healthcare, Inc
and Cigna Healthcare of California ("Cigna") and received a settlement of $4.1
million. The settlement ended litigation against Cigna for delinquent rent,
future rent and other amounts owed under a lease at the Company's MOB located in
Irwindale, California. At the time of the settlement the total delinquent rent
was approximately $1.5 million. The Company recorded lease termination income of
$2.6 million in the first quarter for the remainder of the proceeds.


9.   ACQUISITIONS, DISPOSITIONS AND FINANCINGS

     In February 2001, the Company used the proceeds from a new $5.1 million
loan secured by two of its properties located in Tustin, California to repay
$5.0 million of the outstanding loan balance on an existing $7.5 million
short-term loan secured by three of its properties located in Tustin,
California. The new loan bears interest at prime plus 1.00% and is due on
February 21, 2002.

                                    Page 19
<PAGE>

                               G&L REALTY CORP.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                  (Unaudited)

      In August 2001, the Company used the proceeds from a new $7.2 million loan
secured by two of its properties located in Tustin, California to repay the
existing $5.1 million loan which was obtained in February 2001. The new loan
bears interest at 7.51% and is due in August 2011.

      The Company is under contract to purchase, with a local partner, an
approximately $6.0 million SNF located in western Massachusetts. The purchase is
conditioned upon obtaining long-term financing.

      See Note 10 for a description of the loan obtained from GMAC Commercial
Mortgage Corporation.


10.   SUBSEQUENT EVENTS

      On October 29, 2001, the Company completed a merger with G & L
Acquisition, LLC, a Maryland limited liability company, substantially on the
terms provided for in the Agreement of Plan and Merger, dated as of May 10,
2001, as amended, by and between the Company and G & L Acquisition, LLC. G & L
Acquisition, LLC is owned by Daniel M. Gottlieb and Steven D. Lebowitz, Chief
Executive Officer and President, respectively, of the Company (the "Merger").
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.

     In order to fund the Merger and related transactions, Messrs. Gottlieb and
Lebowitz obtained a loan from GMAC Commercial Mortgage Corporation ("GMAC") in
the amount of $35 million (the "Loan"). Immediately following the completion of
the Merger on October 29, 2001, the Operating Partnership became the borrower
under the Loan. The Loan is for ten years and bears interest initially at the 30
day London Interbank Offered Rate ("LIBOR") plus 7.5%. The spread over 30 day
LIBOR can be reduced to as low as 5.5% based on the outstanding balance on the
Loan and if the Operating Partnership meets certain debt service covenant
ratios. As interest rate protection, the Operating Partnership purchased a LIBOR
cap on November 8, 2001 for $905,000 which caps the maximum 30 day LIBOR rate at
4.25% for five years in determining the interest due on the Loan.

     In order to secure the Loan, the Company, the Operating Partnership and
Messrs. Gottlieb and Lebowitz have granted GMAC a security interest in, among
other things, all accounts, chattel paper, documents, general intangibles,
investment property and security entitlements of the Company and the Operating
Partnership and all hedging agreements entered into by Messrs. Gottlieb and
Lebowitz, the Company or the Operating Partnership. The Company, the Operating
Partnership and Messrs. Gottlieb and Lebowitz have also granted GMAC a pledge of
(a) all promissory notes made by any of the Company, the Operating Partnership,
any MOB subsidiary, Messrs. Gottlieb and Lebowitz or an affiliate of Messrs.
Gottlieb and Lebowitz in favor of the Company or the Operating Partnership, (b)
all partnership units of the Operating Partnership owned by the Company or by
Messrs. Gottlieb and Lebowitz or their affiliates, together with any other share
certificates, options or rights of any nature in respect of the partnership
units of the Operating Partnership that may be issued or granted to, or held by,
the Company, the Operating Partnership or Messrs. Gottlieb and Lebowitz while
the Loan is in effect and (c) all Common Stock of the Company owned by Messrs.
Gottlieb and Lebowitz or their affiliates together with any other share
certificates, options or rights of any nature in respect of the Common Stock of
the Company that may be issued or granted to, or held by, the Company, the
Operating Partnership, or Messrs. Gottlieb and Lebowitz while the Loan is in
effect.

     The Operating Partnership used $28.1 million of the Loan proceeds to fund
the Merger consideration of $13.00 per share for each outstanding share of the
Company's Common Stock, other than a portion of the shares held by Messrs.
Gottlieb and Lebowitz. The Operating Partnership loaned $5.2 million of the Loan
proceeds to Messrs. Gottlieb and Lebowitz to fund the Tender Offer described in
Footnote 5 and to repay $1.7 million of personal debt. The remaining Loan
proceeds were used to purchase the LIBOR cap described above and to pay fees and
other costs associated with the Loan.

     Immediately prior to the Merger, the Company created a new partnership
named G&L Senior Care Partnership, L.P. (the "Senior Care Partnership") and the
Operating Partnership transferred its interest in Maryland Gardens, GL/PHP,
Hampden, Pacific Gardens, Hoquiam, Tarzana, Heritage, Massachusetts, Aspen, GLN,
Penasquitos LLC, Penasquitos Inc., Eagle Run, Eagle Run Inc., Lakeview and
Heritage to the Senior Care Partnership. In addition, the Operating

                                    Page 20
<PAGE>

                               G&L REALTY CORP.

       NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
                                  (Unaudited)

Partnership also transferred its direct ownership of a 183-bed hospital in
Tustin, California along with the debt secured by this property, a 20-unit
apartment complex in Phoenix, Arizona and all of its mortgage and notes
receivable outstanding to the Senior Care Partnership. The creation of the
Senior Care Partnership and the transfer of the Company's Non-MOB assets to this
partnership were part of the terms and conditions of the Loan.

     Also immediately prior to the Merger, two of the limited partners of the
Operating Partnership traded their limited partnership units back to the
Operating Partnership in exchange for an increased limited partnership interest
in the Roxbury Partnership. This exchange decreased the Operating Partnership's
interest in the Roxbury Partnership from 61.75% to 32.81%.

                                    Page 21
<PAGE>

Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

     The following discussion should be read in conjunction with the Company's
Unaudited Condensed Consolidated Financial Statements and Notes thereto included
elsewhere in this Quarterly Report on Form 10-Q and the Company's 2000 Annual
Report on Form 10-K as previously filed with the SEC.

     Information contained in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contains forward-looking statements. These
statements can be identified by the use of forward-looking terminology such as
"may," "will," "expect," "anticipate," "estimate" or "continue" or the negative
thereof or other comparable terminology. Any one factor or combination of
factors could cause the Company's actual operating performance or financial
results to differ substantially from those anticipated by management. Factors
influencing the Company's operating performance and financial results include,
but are not limited to, changes in the general economy, the supply of, and
demand for, healthcare related real estate in markets in which the Company has
investments, the availability of financing, governmental regulations concerning,
but not limited to, new construction and development, the creditworthiness of
tenants and borrowers, environmental issues, healthcare services and government
participation in the financing thereof, and other risks and unforeseen
circumstances affecting the Company's investments which may be discussed
elsewhere in this Quarterly Report on Form 10-Q and the Company's 2000 Annual
Report on Form 10-K as previously filed with the SEC.

Merger
------

      On October 29, 2001, the Company completed a merger with G & L
Acquisition, LLC, a Maryland limited liability company, substantially on the
terms provided for in the Agreement of Plan and Merger, dated as of May 10,
2001, as amended, by and between the Company and G & L Acquisition, LLC (the
"Merger"). G & L Acquisition, LLC is 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. Immediately after the Merger, the Company had 710,199
shares of Common Stock outstanding, all of which are held by Messrs. Gottlieb
and Lebowitz.

Results of Operations
---------------------

     Comparison of the Nine-Month Period Ended September 30, 2001 versus the
Nine-Month Period Ended September 30, 2000.

     Total revenues increased by $6.2 million, or 17%, from $37.0 million in the
first three quarters of 2000, to $43.2 million for the same period in 2001.
Patient revenues relating to the skilled nursing facilities in which the Company
currently owns the license to operate accounted for $3.7 million of this
increase. On March 15, 2000, the Company obtained licenses from the Commonwealth
of Massachusetts to operate the three SNFs comprising 383 beds owned by the
Company and located in Hampden, Massachusetts. As a result of the license
transfer, all of the assets, liabilities, revenues and expenses of these SNFs
beginning March 15, 2000 are reflected in the condensed consolidated financial
statements of the Company. On April 1, 2000, the Company obtained the license to
operate its SNF located in Phoenix, Arizona. For the nine months ended December
31, 2000, the assets, liabilities, revenues and expenses of this SNF were also
included in the condensed consolidated financial statements of the Company. On
January 1, 2001, the Company entered into a new lease with a new manager which
entitles the Company to monthly lease payments. As a result of this new lease,
the assets, liabilities, revenues and expenses of this SNF are no longer
included in the condensed consolidated financial statements of the Company.

     Rents, tenant reimbursements and parking revenues increased by $1.1
million, or 5%, from $21.4 million in the first three quarters of 2000, to $22.5
million for the same period in 2001. During the year 2000 and the first three
quarters of 2001, the Company increased the occupancy at its MOB properties by
approximately 3.4% and increased its rental rates per the terms of its lease
agreements resulting in an increase in rental revenues of approximately $1.7
million. In addition, new lease agreements at two of the Company's

                                    Page 22
<PAGE>

SNFs accounted for an increase of $0.6 million in rental revenue. These
increases were offset by the loss of $0.6 million in rental revenue as a result
of the termination of the lease at the Company's MOB located in Irwindale,
California and an additional $0.6 million related to the loss of rental revenue
from the SNFs discussed above in which the Company now owns the license to
operate. Previously, the Company collected monthly rent for these facilities in
the form of lease payments from the prior operator.

     Interest and loan fee income decreased approximately $0.5 million, or 26%,
from $1.9 million in the first three quarters of 2000, to $1.4 million for the
same period in 2001. $0.2 million of this decrease was due to a decrease in
interest income related to the financing by the Company of an apartment complex
located in Tulsa, Oklahoma. The remaining $0.3 million decrease is the result of
the November 2000 repayment of a $3.1 million mortgage held by the Company on a
SNF in El Centro, California.

     The Company recognized a net gain on the sale of assets in the amount of
$1.3 million in the first three quarters of 2000. The sale, in January 2000, of
a 33,000 square foot MOB located in Aliso Viejo, California to Hoag Memorial
Hospital accounted for $1.4 million of the gain. This gain was offset by the
loss of $0.1 million on the sale of the Company's 50% interest in Valley
Convalescent, LLC, an unconsolidated affiliate.

     The Company recognized lease termination income in the amount of $2.6
million in the first three quarters of 2001. This was related to the settlement
of a lawsuit for delinquent rent, future rent and other amounts owed under a
lease at the Company's MOB located in Irwindale, California. The Company sued
the tenant, which had been in default on their rent since December 1999, to
recover the delinquent rent payments as well as all future rent through the end
of the lease which was to expire on November 30, 2004. In January 2001, the
Company received a settlement in the amount of $4.1 million. At the time of the
settlement the total delinquent rent was approximately $1.5 million. The Company
recorded lease termination income of $2.6 million for the remainder of the
proceeds.

     Total expenses increased by $1.8 million, or 5%, from $36.2 million for the
nine months ended September 30, 2000, to $38.0 million for the same period in
2001. The consolidation of the operating revenues and expenses of the three
Hampden SNFs as of March 15, 2000 as discussed above accounted for $3.1 million
of this increase in total expenses. This increase was offset by a $2.3 million
decrease in provisions for doubtful accounts, notes and bonds receivable.

     Property operating expenses increased by $1.2 million, or 21%, from $5.8
million in the first three quarters of 2000 to $7.0 million in the same period
in 2001. A portion of this increase was due to additional utility, property tax
and repairs and maintenance costs at the Company's MOBs. The remaining increase
was due to increased rental reserves on the Company's SNFs.

     Depreciation and amortization expense remained unchanged for the nine
months ended September 30, 2001 as compared to the same period in 2000. A $0.1
million decrease in depreciation related to the foreclosure of the Company's six
MOBs located in New Jersey during 2000 was offset by a $0.1 million increase due
to additional depreciation and amortization on new building additions and
leasing commissions during 2001.

     Interest expense decreased $0.6 million, or 6%, from $10.3 million for the
nine months ended September 30, 2000, to $9.7 million for the same period in
2001. This decrease was due to the August 2000 repayment of the Company's
outstanding line of credit balance of $1.6 million as well as decreased interest
payments on the Company's approximately $33 million of variable rate mortgage
debt due to lower interest rates.

     General and administrative costs increased $0.4 million, or 19%, from $2.1
million for the nine months ended September 30, 2000, to $2.5 million for the
same period in 2001. This increase was attributed to the write-off of
acquisition and construction costs associated with a discontinued development
project and legal fees related to the Company's defense in its lawsuit with
Landmark.

     Equity in loss of unconsolidated affiliates decreased $0.3 million for the
nine months ended September 30, 2001 compared to the same period in 2000. This
decrease in the loss was primarily the result of increased occupancy rates at
the facilities associated with the Company's 50% investment in Penasquitos LLC
and the Company's 50% investment in Eagle Run Inc. In March 1999, The Arbors at
Rancho Penasquitos, an ALF owned by the Company through Penasquitos LLC,
commenced operations. The facility has been in a lease-

                                    Page 23
<PAGE>

up phase since opening in March 1999 and therefore had been producing a net
loss. Eagle Run commenced operations in November 1999 and also produced a net
loss for the first three quarters of 2001. Occupancy rates at both facilities
are increasing on a monthly basis and are expected to stabilize at the end of
2001, at which time both facilities are expected to produce income for the
Company.

     During 2000, the Company recorded an extraordinary loss on the early
retirement of long-term debt in the amount of $0.2 million. This loss was a
result of pre-payment fees and the write-off of deferred loan fees relating to
the repayment of a $5.5 million loan secured by a 33,000 square foot MOB in
Aliso Viejo, California. The building was sold to Hoag Memorial Hospital
Presbyterian on January 25, 2000 for a price of $8.3 million. The Company used a
portion of the proceeds to repay the $5.5 million loan. During the first three
quarters of 2001, the Company recorded an extraordinary loss on the early
retirement of long-term debt in the amount of $0.1 million. This loss was the
result of the write-off of deferred loan fees related relating to the repayment
of a $5.1 million loan secured by two of its properties located in Tustin,
California.

     Net income increased $4.0 million, from $0.7 million for the nine months
ended September 30, 2000 to $4.7 million for the same period in 2001. This
increase was primarily due to the $3.7 million increase in patient revenues, the
$2.6 million increase in lease termination income and the $2.3 million decrease
in provisions for doubtful accounts and notes receivable. These were offset by
the $3.1 million increase in skilled nursing operation expenses, the $1.3
million decrease in net gains on sale of assets and the $1.2 million increase in
property operation expenses.

     Comparison of the Three Month Period Ended September 30, 2001 versus the
Three Month Period Ended September 30, 2000.

     Total revenues increased by $0.4 million, or 3%, from $13.4 million in the
three months ended September 30, 2000, to $13.8 million for the same period in
2001.

     Rents, tenant reimbursements and parking revenues increased by $0.6
million, or 9%, from $7.0 million in the three months ended September 30, 2000,
to $7.6 million for the same period in 2001. During the first three quarters of
2001, the Company increased the occupancy at its MOB properties by approximately
3.4% and increased its rental rates per the terms of its lease agreements
resulting in an increase in rental revenues of $0.4 million. In addition, new
lease agreements at two of the Company's SNFs accounted for an increase of $0.2
million in rental revenue.

     Patient revenues decreased by $0.3 million, or 5%, from $5.6 million in the
three months ended September 30, 2000, to $5.3 million for the same period in
2001. $0.7 million of this decrease was due to a new lease agreement at the
Company's SNF located in Phoenix, Arizona which entitles the Company to monthly
lease payments. As a result of this new lease, the assets, liabilities, revenues
and expenses of this SNF are no longer included in the condensed consolidated
financial statements of the Company. This decrease was offset by a $0.4 million
increase in patient revenues at the three SNFs owned by the Company in Hampden,
Massachusetts.

     Interest and loan fee income decreased approximately $0.1 million, or 17%,
from $0.6 million in the three months ended September 30, 2000 to $0.5 million
for the same period in 2001. This decrease is the result of the November 2000
repayment of a $3.1 million mortgage held by the Company on a SNF in El Centro,
California.

     Other income increased by $0.2 million from $0.2 million in the three
months ended September 30, 2000 to $0.4 million for the same period in 2001.
This increase was due to a settlement on favorable terms of prior accounts
payable relating to the Company's skilled nursing facilities located in Hampden,
Massachusetts.

     Total expenses increased by $0.1 million, or 1%, from $12.8 million for the
three months ended September 30, 2000, to $12.9 million for the same period in
2001.

     Property operating expenses increased by $0.6 million, or 32%, from $1.9
million for the three months ended September 30, 2000, to $ $2.5 million for the
same period in 2001. A portion of this increase was due to additional utility,
property tax and repairs and maintenance costs at the Company's MOBs. The
remaining increase was due to increased rental reserves on the Company's SNFs.

                                    Page 24
<PAGE>

     Skilled nursing operating expenses decreased by $0.4 million, or 8%, from
$5.2 million in the three months ended September 30, 2000, to $4.8 million for
the same period in 2001. $0.7 million of this decrease was due to a new lease
agreement at the Company's SNF located in Phoenix, Arizona which entitles the
Company to monthly lease payments. As a result of this new lease, the assets,
liabilities, revenues and expenses of this SNF are no longer included in the
condensed consolidated financial statements of the Company. This decrease was
offset by a $0.3 million increase in skilled nursing operating expenses at the
three SNFs owned by the Company in Hampden, Massachusetts.

     Depreciation and amortization expense increased by $0.1 million, or 7%,
from $1.4 million for the three months ended September 30, 2000, to $1.5 million
for the same period in 2001. This increase was due to additional depreciation
and amortization on new building additions and leasing commissions acquired
during 2001 and at the end of 2000.

     Interest expense decreased $0.3 million, or 9%, from $3.5 million for the
three months ended September 30, 2000, to $3.2 million for the same period in
2001. This decrease was due to the August 2000 repayment of the Company's
outstanding line of credit balance of $1.6 million as well as decreased interest
payments on the Company's approximately $33 million of variable rate mortgage
debt due to lower interest rates.

     The Company recorded an estimated tax liability in the amount of $0.2
million in the three months ended September 30, 2001. This is related to federal
taxes due on net income at the Company's skilled nursing facilities located in
Hampden, Massachusetts.

     General and administrative costs increased $0.1 million, or 14%, from $0.7
million for the three months ended September 30, 2000, to $0.8 million for the
same period in 2001. This increase was attributed to legal fees related to the
Company's defense in its lawsuit with Landmark.

     Equity in loss of unconsolidated affiliates decreased $0.1 million for the
three months ended September 30, 2001 compared to the same period in 2000. This
decrease in the loss was primarily the result of increased occupancy rates at
the facilities associated with the Company's 50% investment in Penasquitos LLC
and the Company's 50% investment in Eagle Run Inc. In March 1999, The Arbors at
Rancho Penasquitos, an ALF owned by the Company through Penasquitos LLC,
commenced operations. The facility has been in a lease-up phase since opening in
March 1999 and therefore had been producing a net loss. Eagle Run commenced
operations in November 1999 and also produced a net loss for the first three
quarters of 2001. Occupancy rates at both facilities are increasing on a monthly
basis and are expected to stabilize at the end of 2001, at which time both
facilities are expected to produce income for the Company.

     During the third quarter of 2001, the Company recorded an extraordinary
loss on the early retirement of long-term debt in the amount of $0.1 million.
This loss was the result of the write-off of deferred loan fees relating to the
repayment of a $5.1 million loan secured by two of its properties located in
Tustin, California.

     Net income increased $0.2 million, or 50% from $0.4 million for the three
months ended September 30, 2000 to $0.6 million for the same period in 2001.
This increase was primarily due to the $0.6 million increase in rental revenues,
the $0.4 million decrease in skilled nursing operation expenses and the $0.1
million increase in equity in the loss of unconsolidated affiliates. These were
offset by the $0.1 million decrease in interest and loan fee income, the $0.6
million increase in property operations and the $0.1 million increase in general
and administrative costs.


Liquidity and Capital Resources
-------------------------------

     As of September 30, 2001, the Company's direct investment in net real
estate assets totaled approximately $166.9 million, $4.6 million in joint
ventures and $11.7 million invested in mortgage loans and notes receivable. Debt
outstanding as of September 30, 2001 totaled $159 million.

     The Company obtains its liquidity from multiple internal and external
sources. Internally, funds are derived from the operation of MOBs, SNFs, ALFs
and senior care lending activities. These funds primarily consist of Funds from
Operations ("FFO" - see discussion below of FFO). The Company's principal
external sources of capital consist of various secured loans. The Company's
ability to expand its MOB, ALF

                                    Page 25
<PAGE>

and SNF property operations requires continued access to capital to fund new
investments. During the first nine months of 2001, the Company received proceeds
of $4.1 million related to the settlement of a lawsuit for delinquent rent,
future and other amounts owed under a lease at the Company's MOB located in
Irwindale, California. Total delinquent rent at the time of the settlement was
approximately $1.5 million. The Company recorded lease termination income of
$2.6 million in the first quarter of 2001 for the remainder of the proceeds. On
February 21, 2001, the Company used the proceeds from a new $5.1 million loan
secured by two of its properties located in Tustin, California to repay $5.0
million of outstanding loan balance of an existing $7.5 million short-term loan
secured by three of its properties located in Tustin, California. Both Daniel M.
Gottlieb and Steven D. Lebowitz, the Chief Executive Officer and the President,
respectively, of the Company, have personally guaranteed this loan. The new loan
bears interest at prime plus 1.00% and is due on February 21, 2002. On June 29,
2001, Pacific Health Corporation, the tenant at the Company's 101,000 square
foot hospital located in Tustin, California, exercised its option to purchase
the building for $4.9 million. The Company received a deposit in the amount of
$0.2 million with the remaining proceeds to be received in January 2002. In
August 2001, the Company used the proceeds from a new $7.2 million loan secured
by two of its properties located in Tustin, California to repay the existing
$5.1 million loan which was obtained in February 2001. The new loan bears
interest at 7.51% and is due in August 2011.

     On October 29, 2001, in connection with the Merger, the Operating
Partnership borrowed $35 million from GMAC. The Loan is for ten years and bears
interest initially at the 30 day LIBOR rate plus 7.5%. The spread over 30 day
LIBOR can be reduced to as low as 5.5% based on the outstanding balance on the
Loan and if the Operating Partnership meets certain debt service covenant
ratios. As interest rate protection, the Operating Partnership purchased a LIBOR
cap on November 8, 2001 for $905,000 which caps the maximum 30 day LIBOR rate at
4.25% for five years in determining the interest due on the Loan. Per the terms
of the Loan, any net proceeds from the refinancing of any of the Company's MOB
properties must be used to repay the outstanding principal on the Loan.

     The Operating Partnership used $28.1 million of the Loan proceeds to fund
the Merger consideration of $13.00 per share for each outstanding share of the
Company's Common Stock, other than a portion of the shares held by Messrs.
Gottlieb and Lebowitz. The Operating Partnership loaned $5.2 million of the Loan
proceeds to Messrs. Gottlieb and Lebowitz to fund the Tender Offer described in
Footnote 5 and to repay $1.7 million of personal debt. The remaining Loan
proceeds were used to purchase the LIBOR cap described above and to pay fees and
other costs associated with the Loan.

     The Company declared a quarterly distribution payable to holders of the
Company's Common Stock for the first, second and third quarters of 2001 in the
amount of $0.125 per common share. These distributions were paid on April 15,
July 15 and October 15 to stockholders of record on March 31, June 30 and
September 30, respectively. The Company also paid monthly dividends of $0.6
million to holders of the Company's Preferred Stock on the fifteenth day of each
month during the first, second and third quarters to holders of record on the
first day of each month. The Company distributed dividends of $1.1 million to
holders of the Company's Common Stock during the first nine months of 2001 while
the Company's FFO was $0.9 million for the same period.

     In general, the Company expects to continue meeting its short-term
liquidity requirements through its working capital and cash flow provided by
operations. The Company considers its ability to generate cash to be good and
expects to continue meeting all operating requirements as well as providing
sufficient funds to maintain stockholder distributions in accordance with REIT
requirements. Long-term liquidity requirements such as refinancing mortgages,
financing acquisitions and financing capital improvements will be accomplished
through long-term borrowings and the sale of assets.


Historical Cash Flows
---------------------

     The Company's net cash provided by operating activities increased $3.2
million, or 55%, from $5.8 million for the nine months ended September 30, 2000
to $9.0 million for the same period in 2001. The increase is due primarily to a
$4.0 million increase in net income, a $4.4 million decrease in tenant rent and
reimbursements receivable, a $1.3 million decrease in net gain on sale of assets
and a $0.6 million increase in minority interests. These were offset by a $4.0
million decrease in accounts payable and other liabilities, a $2.3 million
decrease in provisions for doubtful accounts and notes receivables and a $0.5
million increase in accrued interest receivable.

                                    Page 26
<PAGE>

     Net cash used in investing activities increased $0.4 million, or 14%, from
$2.8 million for the nine months ended September 30, 2000 to $3.2 million for
the same period in 2001. The decrease was primarily due to a $10.4 million
decrease in purchases of real estate assets as well as a $0.5 million decrease
in construction in progress costs. These were offset by an $8.8 million decrease
in the sale of real estate assets, a $0.9 million decrease in distributions from
unconsolidated affiliates, a $0.5 million increase in pre-acquisition costs and
a $0.3 million increase in leasing commissions.

     Cash flows used in financing activities decreased by approximately $2.9
million from $10.3 million for the nine months ended September 30, 2000, to $7.4
million for the same period in 2001. The decrease is mainly due to a $3.0
million decrease in repurchases of the Company's common stock and a $3.1 million
increase in notes payable proceeds. These were offset by a $2.4 million increase
in restricted cash and a $0.5 million decrease in minority interest
contributions.

New Accounting Pronouncements
-----------------------------

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative Instruments
and Hedging Activities," ("SFAS 133"). SFAS 133, as amended, is effective for
fiscal years beginning after June 15, 2000 and requires all derivatives to be
recorded on the balance sheet at fair value as either assets or liabilities
depending on the rights or obligations under the contracts. SFAS 133 also
establishes new accounting methodologies for the following three classifications
of hedges: fair value, cash flow and net investment in foreign operations. The
Company's adoption of SFAS 133 on January 1, 2001 did not have a material impact
on the Company's financial position or results of operations.

     In July 2001, the Financial Accounting Standards Board issued SFAS No. 141,
"Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 141 is effective immediately and SFAS No. 142 will be
effective in January 2002. The Company's adoption of these new standards is not
expected to have a material impact on the Company's financial position or
results of operations.

     In October 2001, the Financial Accounting Standards Board issued SFAS No.
144 "Accounting for the Impairment or Disposal of Long-Lived Assets," ("SFAS
144"). SFAS 144 addresses financial accounting and reporting for the disposal of
long-lived assets. SFAS 144 becomes effective for financial statements issued
for fiscal years beginning after December 15, 2001 and interim periods within
those fiscal years. The Company does not expect the pronouncement to have a
material impact on its financial position or results of operations.


Recent Developments
-------------------

     California has recently experienced energy shortages which have resulted in
"rolling black-outs" in certain instances in portions of the state. All of the
Company's MOBs and certain of the Company's SNFs and ALFs have back-up
generators in the event of electrical outages. The energy shortages have also
resulted in higher electricity rates. Depending on the terms of the lease
between the Company and its MOB tenant, in some cases, the Company is able to
pass all of the higher energy costs onto its MOB tenants; in other cases, the
Company is able to pass only a portion of the higher costs onto its MOB tenants,
with the Company paying the remainder. Generally, the operators of the Company's
SNFs and ALFs pay the electricity costs. The higher energy costs could affect
the ability of the MOB tenants and SNF and ALF operators to pay the Company
rent. However, the Company does not anticipate that the energy shortages and
higher energy costs will have a material adverse effect on the Company's
financial condition and results of operations.

                                    Page 27
<PAGE>

Funds from Operations
---------------------

     Industry analysts generally consider FFO to be an appropriate measure of
the performance of a REIT. The Company's financial statements use the concept of
FFO as defined by the Board of Governors of the National Association of Real
Estate Investment Trusts ("NAREIT"). FFO is calculated to include the minority
interests' share of income from the Operating Partnership since the Operating
Partnership's net income is allocated proportionately among all owners of
Operating Partnership units. The number of Operating Partnership units held by
the Company is identical to the number of outstanding shares of the Company's
Common Stock, and owners of Operating Partnership units may, at their
discretion, convert their units into shares of Common Stock on a one-for-one
basis.

     The Company believes that in order to facilitate a clear understanding of
the operating results of the Company, FFO should be examined in conjunction with
the Company's net income as presented in this Form 10-Q, the Selected Financial
Data and Consolidated Financial Statements and Notes thereto included in the
Company's 2000 Annual Report on Form 10-K and the additional data presented
below. The table on the following page presents an analysis of FFO and
additional data for the three and nine-month periods ended September 30, 2001
and 2000.

                                    Page 28
<PAGE>

                               G&L REALTY CORP.
                   FUNDS FROM OPERATIONS AND ADDITIONAL DATA
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                  For the Three Month           For the Nine Month
                                                              Periods Ended September 30,    Periods Ended September 30,
                                                                 2001            2000           2001            2000
                                                            -----------------------------------------------------------
                                                                    (in thousands)                 (in thousands)
<S>                                                         <C>                <C>            <C>          <C>
Funds from Operations/(1)/
--------------------------
Net income................................................     $    606        $    412       $  4,732     $     674
Minority interest in Operating Partnership................          ---              78            ---          (538)
                                                               -----------------------------------------------------
Income for Operating Partnership..........................          606             490          4,732           136
Depreciation of real estate assets........................        1,326           1,285          3,890         3,979
Amortization of deferred lease costs......................           74              65            132           217
Lease termination income..................................          ---             ---         (2,613)          ---
Net gain on sale of assets................................          ---             ---            ---        (1,263)
Depreciation from unconsolidated affiliates...............           73              70            216           326
Extraordinary loss on early retirement of debt............           48             ---             48           158
Adjustment for minority interest in consolidated
  affiliates..............................................          (43)            (36)          (123)         (103)
Dividends on preferred stock..............................       (1,790)         (1,791)        (5,371)       (5,374)
                                                               -----------------------------------------------------
Funds from Operations/(1)/................................     $    294        $     83       $    911     $  (1,924)
                                                               =====================================================
Weighted average shares outstanding/(2)/
----------------------------------------
Basic.....................................................        2,958           2,959          2,958         3,019
                                                               =====================================================
Fully diluted.............................................        3,014           2,959          2,998         3,019
                                                               =====================================================
Additional Data
---------------
Cash flows:
-----------
    Operating activities..................................     $  2,401        $  1,792       $  9,014     $   5,799
    Investing activities..................................       (1,898)           (893)        (3,168)       (2,803)
    Financing activities..................................         (572)         (1,770)        (7,365)      (10,282)

Capital expenditures
--------------------
    Building improvements.................................     $     97        $     86       $    421     $     806
    Tenant improvements...................................        1,445             110          2,411         1,212
    Furniture, fixtures & equipment.......................           64             215            166           308
    Leasing commissions...................................           87              28            430            97

Depreciation and amortization
-----------------------------
    Depreciation of real estate assets....................     $  1,326        $  1,285       $  3,890     $   3,979
    Depreciation of non-real estate assets................          122             122            368           342
    Amortization of deferred lease costs..................           74              65            206           217
    Amortization of deferred licensing costs..............           14              13             40            22
    Amortization of capitalized financing costs...........          167             160            515           449

    Accrued rent in excess of billed rent.................     $     44        $     58       $    125     $     150
</TABLE>

1)  Funds from operations ("FFO") represents net income (computed in accordance
    with generally accepted accounting principles, consistently applied
    ("GAAP")), excluding gains (or losses) from debt restructuring and sales of
    property, plus depreciation of real property, less preferred stock dividends
    paid to holders of preferred stock during the period and after adjustments
    for consolidated and unconsolidated entities in which the Company holds a
    partial interest. FFO should not be considered as an alternative to net
    income or any other indicator developed in compliance with GAAP, including
    measures of liquidity such as cash flows from operations, investing and
    financing activities. FFO is helpful in evaluating the performance of a real
    estate portfolio considering the fact that historical cost accounting
    assumes that the value of real estate diminishes predictably over time. FFO
    is only one of a range of indicators which should be considered in
    determining a company's operating performance. The methods of calculating
    FFO among different companies are subject to variation, and FFO therefore
    may be an invalid measure for purposes of comparing companies. Also, the
    elimination of depreciation and gains and losses on sales of property may
    not be a true indication of an entity's ability to recover its investment in
    properties. The Company implemented the new methods of calculating FFO
    effective as of the NAREIT-suggested adoption date of January 1, 1996 and
    January 1, 2000, respectively.
2)  Assumes that all outstanding Operating Partnership units have been converted
    to common stock.

                                    Page 29
<PAGE>

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The primary risk inherent in the Company's market sensitive instruments is
the risk of loss resulting from interest rate fluctuations. Approximately 10% of
the Company's notes payable bear interest at a rate indexed to the one-month
LIBOR rate. The table below provides information as of September 30, 2001 about
the Company's long-term debt obligations that are sensitive to changes in
interest rates, including principal cash flows by scheduled maturity, weighted
average interest rate and estimated fair value. The weighted average interest
rates presented are the actual rates as of September 30, 2001.

<TABLE>
<CAPTION>
                                                   PRINCIPAL MATURING IN:                                     Fair Market
                                -----------------------------------------------------------------                Value
                                                                                                               September
                                  2001       2002       2003       2004       2005     Thereafter    Total      30, 2001
                                  ----       ----       ----       ----       ----     ----------    -----         -----
                                                      (in thousands)
<S>                             <C>        <C>         <C>        <C>        <C>        <C>         <C>          <C>
Liabilities:
Mortgage debt:
    Fixed rate                  $    562   $  2,205    $ 2,371    $ 2,542    $ 9,310    $ 102,322   $ 119,312    $ 123,824
    Average interest rate           7.73%      7.73%      7.73%      7.73%      7.73%        7.73%       7.73%

    Variable rate                  8,529     17,885         88         95        103       11,341      38,041       38,041
    Average interest rate           5.31%      5.31%      5.31%      5.31%      5.31%        5.31%       5.31%

Line of credit:
    Variable rate                  1,650                                                                1,650        1,650
    Average interest rate           8.75%                                                                8.75%

                                --------   --------    -------    -------    -------    ---------   ---------    ---------
                                $ 10,741   $ 20,090    $ 2,459    $ 2,637    $ 9,413    $ 113,663   $ 159,003    $ 163,515
                                ========   ========    =======    =======    =======    =========   =========    =========
</TABLE>

     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 September 30, 2001, a 1% increase in the LIBOR
rate would decrease future earnings by $375,000. Future cash flow would not be
affected. A 1% decrease in the LIBOR rate would increase future earnings by
$375,000. Future cash flow would not be affected. A 1% change in the LIBOR rate
would not have a material impact on the fair value of the Company's debt.

                                    Page 30
<PAGE>

                           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
           Consolidated Financial Statements.

Item 2   Changes in Securities.

           On October 29, 2001, the Company completed a merger with G & L
           Acquisition, LLC, a Maryland limited liability company, substantially
           on the terms provided for in the Agreement of Plan and Merger, dated
           as of May 10, 2001, as amended, by and between the Company and G & L
           Acquisition, LLC (the "Merger"). G & L Acquisition, LLC is 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. Immediately after the
           Merger, the Company had 710,199 shares of Common Stock outstanding,
           all of which are held by Messrs. Gottlieb and Lebowitz.


Item 3   Defaults Upon Senior Securities.

           None.



Item 4   Submission of Matters to a Vote of Security Holders.

           None.


Item 5   Other Information.

           None.

                                    Page 31
<PAGE>

Item 6   Exhibits and Reports on Form 8-K

(a)  Exhibits



       Exhibit No. Note                       Description
       ----------- ----   ------------------------------------------------------

         2.1       (16)   The Agreement of Plan and Merger between G&L
                          Acquisition, LLC and G&L Realty Corp.

         2.2       (17)   Amendment No. 2 to The Agreement of Plan and Merger
                          between G&L Acquisition, LLC and G&L Realty Corp.
                          dated October 26, 2001.

         2.3              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.

         10.1 (c)  (2)    Executive Employment Agreement between G&L Realty
                          Corp. and Daniel M. Gottlieb.

         10.2 (c)  (2)    Executive Employment Agreement between G&L Realty
                          Corp. and Steven D. Lebowitz.

         10.3      (2)    Agreement of Limited Partnership of G&L Realty
                          Partnership, L.P.

         10.3.2           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.

         10.8.2    (2)    Option Notice with respect to Sherman Oaks Medical
                          Plaza.

         10.9.2    (1)    Agreement for Purchase and Sale of Limited Partnership
                          Interests (435 North Roxbury Drive, Ltd.) between the
                          Selling Partner (as defined therein) and G&L
                          Development, dated as of October 29, 1993.

         10.11     (1)    Agreement for Transfer of Partnership Interests and
                          Other Assets by and between G&L Realty Corp. and Reese
                          Milner, Helen Milner and Milner Development Corp.,
                          dated as of October 29, 1993.

         10.12     (1)    Nomura Commitment Letter with respect to the
                          Acquisition Facility.

         10.12.2   (3)    Amended and Restated Mortgage Loan Agreement dated as
                          of January 11, 1995 among G&L Financing Partnership,
                          L.P., Nomura Asset Capital Corporation and Bankers
                          Trust Company of New York.

         10.22     (4)    Amended and Restated Mortgage Loan Agreement by and
                          between G&L Realty Financing Partnership II, L.P., as
                          Borrower, and Nomura Asset Capital Corporation, as
                          Lender, dated as of October 31, 1995.

         10.24     (4)    Property Management Agreement between G&L Realty
                          Financing Partnership II, L.P., as owner, and G&L
                          Realty Partnership, L.P., as agent, made August 10,
                          1995

                                    Page 32
<PAGE>

(c)   Exhibits - (continued from previous page)


       Exhibit No.  Note                      Description
       -----------  ----  ------------------------------------------------------

          10.25     (5)   Commitment Letter between G&L Realty Partnership, L.
                          P. and Nomura Asset Capital Corporation, dated as of
                          September 29, 1995.

          10.30     (6)   Mortgage Loan Agreement dated as of May 24, 1996 by
                          and between G&L Medical Partnership, L.P. as Borrower
                          and Nomura Asset Capital Corporation as Lender.

          10.38     (7)   Limited Liability Company Agreement by and between G&L
                          Realty Partnership, L.P., a Delaware limited
                          partnership, and Property Acquisition Trust I, a
                          Delaware business trust, for the purpose of creating a
                          Limited Liability Company to be named GLN Capital Co.,
                          LLC, dated as of November 25, 1996.

          10.39     (7)   Limited Liability Company Agreement by and between G&L
                          Realty Partnership, L.P., a Delaware limited
                          partnership, and PHP Healthcare Corporation, a
                          Delaware corporation, for the purpose of creating a
                          Limited Liability Company to be named GL/PHP, LLC,
                          dated as of February 26, 1997.

          10.40     (7)   First Amendment To Limited Liability Company Agreement
                          entered into as of March 31, 1997 by and between G&L
                          Realty Partnership, L.P., a Delaware limited
                          partnership, and Property Acquisition Trust I, a
                          Delaware business trust, for the purpose of amending
                          that certain Limited Liability Company Agreement of
                          GLN Capital Co., LLC dated as of November 25, 1996.

          10.45     (10)  First Amendment to GL/PHP, LLC Limited Liability
                          Company Agreement by and among G&L Realty Partnership,
                          L.P., a Delaware limited partnership (the "Retiring
                          Manager"), G&L Realty Partnership, L.P., a Delaware
                          limited partnership ("G&L Member"), and G&L Management
                          Delaware Corp., a Delaware corporation ("Manager
                          Member"), made as of August 15, 1997.

          10.46     (10)  Lease Agreement between GL/PHP, a Delaware limited
                          liability company (the "Landlord") and Pinnacle Health
                          Enterprises, LLC, a Delaware limited liability company
                          wholly owned by PHP Healthcare Corporation, a Delaware
                          corporation (the "Tenant"), dated August 15, 1997

          10.47     (10)  Guaranty of Lease by PHP Healthcare Corporation, a
                          Delaware corporation (the "Guarantor"), dated February
                          15, 1997.

          10.48     (10)  Non-Negotiable 8.5% Note Due July 31, 2007 in which
                          G&L Realty Partnership, L.P., a Delaware limited
                          partnership (the "Maker"), promises to pay to PHP
                          Healthcare Corporation (the "Payee") the principal sum
                          of $2,000,000.00, dated August 15, 1997.

          10.49     (10)  Mortgage Note in which GL/PHP, LLC a Delaware limited
                          liability company (the "Maker") promises to pay to the
                          order of Nomura Asset Capital Corporation, a Delaware
                          corporation, the principal sum of $16,000,000.00,
                          dated August 15, 1997.

          10.50     (10)  Mortgage, Assignment of Leases and Rents and Security
                          Agreement by GL/PHP, LLC a Delaware limited liability
                          company (the "Mortgagor") to Nomura Asset Capital
                          Corporation, a Delaware corporation (the "Mortgagee"),
                          dated August 15, 1997.

          10.51     (10)  Assignment of Leases and Rents by GL/PHP, LLC a
                          Delaware limited liability company (the "Assignor") to
                          Nomura Asset Capital Corporation, a Delaware
                          corporation (the "Assignee"), dated August 15, 1997.

                                    Page 33
<PAGE>

(c)   Exhibits - (continued from previous page)


       Exhibit No. Note                       Description
       ----------- ----    -----------------------------------------------------
          10.52     (10)   Environmental and Hazardous Substance Indemnification
                           Agreement by GL/PHP, LLC a Delaware limited liability
                           company (the "Borrower") to Nomura Asset Capital
                           Corporation, a Delaware corporation (the "Lender"),
                           dated August 15, 1997.

          10.58     (11)   Limited Liability Company Agreement of G&L Hampden,
                           LLC.

          10.68     (12)   Promissory Note in the Amount of $2,799,490.00 given
                           by Valley Convalescent, LLC in favor of G&L Realty
                           Partnership, L.P.

          10.69     (12)   Deed of Trust, Security Agreement, Fixture Filing
                           with Assignment of Rents and Agreements, dated as of
                           August 29, 1997, by and between Valley Convalescent,
                           LLC and G&L Realty Partnership, L.P.

          10.70     (12)   Assignment of Leases and Rents, dated as of August
                           29, 1997, by and between Valley Convalescent, LLC and
                           G&L Realty Partnership, L.P.

          10.77     (13)   Agreement for Transfer of Property by and among G&L
                           Coronado, LLC as Transferor and G&L Realty
                           Partnership, L.P. as Operating Partnership dated as
                           of December 30, 1998.

          10.78     (13)   Tenant Estoppel and Real Estate Lease between G&L
                           Coronado, LLC as Landlord and Coronado Managers Corp.
                           as Tenant dated December 1, 1998.

          10.79     (13)   Guaranty of Lease between Steven D. Lebowitz and
                           Daniel M. Gottlieb (collectively "Guarantor") in
                           favor of G&L Coronado, LLC ("Landlord").

          10.80     (14)   Promissory Note in the Amount of $2,000,000 given by
                           G&L Realty Corporation in favor of Reese L. Milner,
                           as Trustee of The Milner Trust.

          10.81     (15)   Loan Agreement in the amount of $13.92 million
                           between G&L Hampden, LLC, as Borrower, and GMAC
                           Commercial Mortgage Corporation, as Lender.

          10.82     (18)   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     (18)   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               Subsidiaries of the registrant.


1)   Previously filed as an exhibit of like number to the Registrant's
     Registration Statement on Form S-11 and amendments thereto (File No. 33-
     68984) and incorporated herein by reference.

2)   Previously filed as an exhibit of like number to the Company's Annual
     Report on Form 10-K for the year ended December 31, 1993 and incorporated
     herein by reference.

3)   Previously filed as an exhibit of like number to the Company's Annual
     Report on Form 10-K for the year ended December 31, 1994 and incorporated
     herein by reference.

4)   Previously filed as Exhibits 10.1 (with respect to Exhibit 10.22), 10.2
     (with respect to Exhibit 10.23), and 10.3 (with respect to Exhibit 10.24)
     to the Registrant's Quarterly Report on Form 10-Q for the Quarter ended
     September 30, 1995 and incorporated herein by reference.

5)   Previously filed as an exhibit of like number to the Company's Annual
     Report on Form 10-K for the year ended December 31, 1995 and incorporated
     herein by reference.

6)   Previously filed as an exhibit of like number to the Company's Quarterly
     Report on Form 10-Q for the quarter ended June 30, 1996 and incorporated
     herein by reference.

                                    Page 34
<PAGE>

7)   Filed as an exhibit to the Company's Annual Report on Form 10-K for the
     year ended December 31, 1996 and incorporated herein by reference.

8)   Filed as an exhibit to the Company's Registration Statement on Form S-11
     and amendments thereto (File No. 333-24911) and incorporated herein by
     reference.

9)   Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
     quarter ended June 30, 1997 and incorporated herein by reference.

10)  Filed as an exhibit to the Company's Current Report on Form 8-K (filed as
     of August 15, 1997) and incorporated herein by reference.

11)  Filed as an exhibit to the Company's Current Report on Form 8-K (filed as
     of October 28, 1997) and incorporated herein by reference.

12)  Filed as an exhibit to the Company's Quarterly Report on Form 10-Q (filed
     as of November 5, 1997) for the quarter ended September 30, 1997 and
     incorporated herein by reference.

13)  Filed as an exhibit to the Company's Annual Report on Form 10-K (filed as
     of April 9, 1999) for the year ended December 31, 1998 and incorporated
     herein by reference.

14)  Filed as an exhibit to the Company's Quarterly Report on Form 10-Q (filed
     as of May 17, 1999) for the quarter ended March 31, 1999 and incorporated
     herein by reference.

15)  Filed as an exhibit to the Company's Quarterly Report on Form 10-Q (filed
     as of November 12, 1999) for the quarter ended September 30, 1999 and
     incorporated herein by reference.

16)  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.

17)  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.

18)  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.


c)   Management contract or compensatory plan or arrangement.


(b)  Reports on Form 8-K

     A report on Form 8-K dated July 6, 2001 was filed with the Securities and
     Exchange Commission on July 11, 2001 for the purpose of announcing that the
     Weisman Group delivered to the special committee a second amendment to the
     Weisman Proposal that: (a) increased the price per share of common stock of
     the Company, if the Weisman Group acquires 100% of such common stock, to
     $16.00 per share, subject to satisfactory completion of corporate and legal
     due diligence, and with a statement that the price per share would not be
     adjusted to less than $15.25 per share if the Weisman Group elects to
     continue with the transaction; (b) offers to purchase, at the Company's
     election, less than all, but not less than 50.1% of the Company's common
     stock on a fully diluted basis, at a price of $15.25 per share, without a
     contingency for due diligence; (c) conditions the amended proposal on the
     negotiation and execution of a definitive and customary acquisition
     agreement and the termination of the agreement and plan of merger dated as
     of May 10, 2001 between the Company and a company owned by Daniel M.
     Gottlieb and Steven D. Lebowitz; (d) offers to deliver a deposit of
     $750,000 to counsel for the special committee if the Company accepts the
     amended proposal; and (e) extends the expiration date of the proposal to
     6:00 p.m., Pacific time, on Friday, July 13, 2001.

     A report on Form 8-K dated July 19, 2001 was filed with the Securities and
     Exchange Commission on July 20, 2001 for the purpose of announcing that the
     special committee had responded in a letter addressed to the Weisman Group
     that it would be prepared to support a proposal by the Weisman Group to
     acquire the Company in which: (a) all common stockholders receive a price
     of not less than $16.00 per share; (b) there would be no contingencies for
     due diligence or financing; (c) the Weisman Group would make a
     nonrefundable payment of $2.5 million to the Company; and (d) other
     requirements set forth in the response are met.

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     A report on Form 8-K dated July 31, 2001 was filed with the Secuties and
     Exchange Commission on August 1, 2001 for the purpose of announcing that
     the special committee had received a further amendment to the Weisman
     Proposal that (a) reaffirmed the Weisman Group's desire to acquire all, but
     not less than 50.1%, of the Company's common stock; (b) increased the
     proposed cash purchase price per share to $16.35 per share, subject to
     satisfactory completion of customary corporate and legal due diligence, or
     $15.35 per share without a contingency for due diligence; (c) conditioned
     the amended proposal on the negotiation and execution of a definitive
     acquisition agreement and the termination of the agreement and plan of
     merger dated as of May 10, 2001 between the Company and a company owned by
     Daniel M. Gottlieb and Steven D. Lebowitz; (d) offered to deliver a deposit
     of $750,000 to counsel for the special committee if the Company accepted
     the amended proposal, and to increase the deposit by an additional $400,000
     upon execution of a definitive acquisition agreement, provided that the
     deposit is to be refunded if the transaction is unable to close prior to
     October 30, 2001, for any reason other than a breach of the acquisition
     agreement by the Weisman Group; and (e) extended the expiration date of the
     proposal to 6:00 p.m., Pacific time, on Tuesday, August 7, 2001.

     A report on Form 8-K dated August 7, 2001 was filed with the Securities and
     Exchange Commission on August 9, 2001 for the purpose of announcing that
     the Third Amendment to the Weisman Proposal which was originally to expire
     on August 7, 2001 has been extended by the Weisman Group to August 14,
     2001.

     A report on Form 8-K dated August 14, 2001 was filed with the Securities
     and Exchange Commission on August 16, 2001 for the purpose of announcing
     that the Third Amendment to the Weisman Proposal which was originally to
     expire on August 14, 2001 has been extended by the Weisman Group to August
     20, 2001.

     A report on Form 8-K dated August 17, 2001 was filed with the Securities
     and Exchange Commission on August 20, 2001 for the purpose of announcing
     that the special committee advised the Weisman Group that it is unable to
     recommend to the full board of directors that it proceed with the
     transaction outlined in the Third Amendment to the Weisman Proposal.

     A report on Form 8-K dated August 21, 2001 was filed with the Securities
     and Exchange Commission on August 24, 2001 for the purpose of announcing
     that a further amendment to the Weisman Proposal (the "Fourth Amendment")
     was received by the special committee. The Fourth Amendment (i) offered to
     deliver a deposit of $750,000 to counsel for the special committee, which
     would be credited toward the purchase price of the Company's common stock
     (ii) provided for, no later than three business days following the
     execution of a definitive agreement between the Company and the Weisman
     Group, an increase in the initial deposit by $1,750,000 for a total of
     $2,500,000 to be credited towards the purchase price of the Company's
     common stock , and (iii) provided that the Good Faith Deposit would become
     non-refundable to the Weisman Group and be paid to the Company should no
     transaction whereby holders of the common stock of the Company receive
     aggregate consideration of $12.00 or more for each share of the Company's
     common stock they own close within 12 calendar months from the date of
     execution of the Acquisition Agreement.

     A report on Form 8-K dated August 30, 2001 was filed with the Securities
     and Exchange Commission on August 31, 2001 for the purpose of announcing
     that the Fourth Amendment to the Weisman Proposal which was originally to
     expire on August 24, 2001 has been extended by the Weisman Group to
     September 6, 2001.

     A report on Form 8-K dated September 5, 2001 was filed with the Securities
     and Exchange Commission on September 5, 2001 for the purpose of announcing
     that the special committee has advised the Weisman Group that it is unable
     to recommend to the full board of directors that it proceed with the
     transaction outlined in the Weisman Group's latest proposal made on August
     21, 2001.

     A report on Form 8-K dated September 5, 2001 was filed with the Securities
     and Exchange Commission on September 7, 2001 for the purpose of announcing
     that the special committee had received a further amendment (the "Fifth
     Amendment") to the Weisman Proposal that (i) increased the proposed cash

                                    Page 36
<PAGE>

     purchase price per share to $15.50 per share without a due diligence
     contingency, or $16.50 per share with a due diligence contingency, (ii)
     reduced the minimum required threshold for the Weisman Group's Proposal to
     acquire the Company's common stock to 45.0% , and (iii) provided that the
     Company would promptly, upon completion of a transaction with the Weisman
     Group, take such steps as may be necessary or appropriate for delisting the
     shares of common stock.

     A report on Form 8-K dated September 7, 2001 was filed with the Securities
     and Exchange Commission on September 10, 2001 for the purpose of announcing
     that the special committee had determined that the transaction contemplated
     by the Merger Agreement to be fair and reasonable to and in the best
     interests of the Company and its unaffiliated common stockholders. The
     special committee reaffirmed its recommendation that the Company consummate
     the transaction. In addition, the special committee advised the Weisman
     Group that it would not recommend its latest proposal dated September 5,
     2001 to the full board of directors.

     A report on Form 8-K dated September 17, 2001 was filed with the Securities
     and Exchange Commission on September 18, 2001 for the purpose of announcing
     that the Weisman Group delivered to the special committee a sixth amendment
     to the Weisman Proposal.

     A report on Form 8-K dated September 20, 2001 was filed with the Securities
     and Exchange Commission on September 21, 2001 for the purpose of announcing
     that the special committee had advised the Weisman Group that it cannot
     recommend the Weisman Group's latest proposal to the board of directors.

     A report on Form 8-K dated September 28, 2001 was filed with the Securities
     and Exchange Commission on October 4, 2001 for the purpose of announcing
     that the special committee had received a limited waiver under the Merger
     Agreement that permits the special committee to enter into discussions and
     negotiations with the Weisman Group and its counsel regarding the latest
     Weisman Proposal.

     A report on Form 8-K dated October 12, 2001 was filed with the Securities
     and Exchange Commission on October 16, 2001 for the purpose of announcing
     that the special committee had received a revised proposal from the Weisman
     Group to acquire the outstanding common stock of the Company.

     A report on Form 8-K dated October 20, 2001 was filed with the Securities
     and Exchange Commission on October 23, 2001 for the purpose of announcing
     that a Los Angeles County Superior Court judge had issued an order
     temporarily restraining the closing of the merger of the Company with a new
     company owned by Daniel M. Gottlieb and Steven D. Lebowitz pursuant to the
     agreement and plan of merger dated as of May 10, 2001, provided that the
     plaintiffs have delivered to the court a $16.2 million bond on Tuesday,
     October 23. The Company also announced that the special committee had
     advised the Weisman Group that it would be prepared to recommend to the
     board of directors the transaction that is described in its response letter
     to the Weisman Group, which was delivered on October 20, 2001.

     A report on Form 8-K dated October 22, 2001 was filed with the Securities
     and Exchange Commission on October 26, 2001 for the purpose of announcing
     that a Los Angeles County Superior Court judge has vacated an order
     temporarily restraining the closing of the merger of the Company with a new
     company owned by Daniel M. Gottlieb and Steven D. Lebowitz pursuant to the
     agreement and plan of merger dated as of May 10, 2001. The Company also
     announced that the special committee had responded to the most recent
     proposal of the Weisman Group. In addition, the Company announced that at
     its annual meeting of the stockholders held on October 24, 2001 the
     Company's common stockholders approved the merger of the Company with a new
     company owned by Daniel M. Gottlieb and Steven D. Lebowitz by the
     affirmative vote of approximately 60% of the common stock.

     A report on Form 8-K dated October 26, 2001 was filed with the Securities
     and Exchange Commission on October 31, 2001 for the purpose of announcing
     the completion of the merger of the Company with a new company owned by
     Daniel M. Gottlieb and Steven D. Lebowitz. Under the terms of the merger
     agreement, as amended, each share of the Company's common stock had been
     converted into the right to receive $13 in cash. Following the merger, the
     Company's common stock was delisted from the New York Stock Exchange.

                                    Page 37
<PAGE>

                                   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: November 14, 2001                            By:  /s/ David E. Hamer
                                                        ------------------------
                                                        David E. Hamer
                                                        Chief Accounting Officer

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