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EXHIBIT 99.4
UNAUDITED PRO FORMA
COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial statements give
effect to the merger using the purchase method of accounting, after giving
effect to the pro forma adjustments described in the accompanying notes. The
unaudited pro forma combined balance sheet gives effect to the merger as if it
had occurred on September 30, 1999. The unaudited pro forma combined statements
of income for the year ended December 31, 1998 and the nine months ended
September 30, 1999 give effect to the merger as if it had occurred at the
beginning of the periods presented.
PLEASE REMEMBER THAT THE INFORMATION PRESENTED IN THE FOLLOWING PRO
FORMA COMBINED FINANCIAL STATEMENTS IS ONLY HYPOTHETICAL AND DOES NOT
NECESSARILY REFLECT THE FINANCIAL PERFORMANCE THAT WOULD HAVE ACTUALLY RESULTED
IF THE MERGER HAD BEEN COMPLETED ON THOSE DATES. FURTHER, THIS INFORMATION DOES
NOT NECESSARILY REFLECT FUTURE FINANCIAL PERFORMANCE RESULTING FROM THE MERGER.
This information is only a summary and you should read it together with
the historical financial statements and related notes contained in the annual
reports, quarterly reports and other information that HCPI has filed with the
SEC and incorporated by reference.
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HEALTH CARE PROPERTY INVESTORS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(In thousands)
Historical
---------------------------------
Health Care American
Property Health Pro Forma
Investors, Inc. Properties, Inc. Adjustments Pro Forma
--------------- ---------------- ---------------- -------------
ASSETS
Real Estate Investments
Buildings and Improvements $ 1,283,343 $ 796,513 $ 66,897 (1) $ 2,146,753
Accumulated Depreciation (215,258) (118,597) 118,597 (1) (215,258)
----------- ----------- ----------- -----------
1,068,085 677,916 185,494 1,931,495
Construction in Progress 9,293 15,236 -- 24,529
Land 161,445 81,206 -- 242,651
----------- ----------- ----------- -----------
1,238,823 774,358 185,494 2,198,675
Investments in and Advances to
Partnerships 46,184 -- -- 46,184
Loans Receivable 187,461 8,669 (4,044)(1) 192,086
Other Assets 23,924 12,860 (4,227)(1) 32,557
Cash and Cash Equivalents 8,199 15,512 -- 23,711
----------- ----------- ---------- -----------
TOTAL ASSETS $ 1,504,591 $ 811,399 $ 177,223 $ 2,493,213
=========== =========== ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank Notes Payable $ 100,500 $ 53,000 $ 47,110 (2) $ 200,610
Senior Notes Payable 551,070 219,248 (4,394)(1) 765,924
Convertible Subordinated Notes due 2000 100,000 -- -- 100,000
Mortgage Notes Payable 60,596 56,032 -- 116,628
Accounts Payable, Accrued Expenses and
Deferred Income 35,150 29,721 1,260 (1) 66,131
Minority Interests in Partnerships 39,400 359 -- 39,759
STOCKHOLDERS' EQUITY
Preferred Stock 187,847 100,000 (11,850)(1) 275,997
Common Stock 32,046 250 19,238 (1) 51,534
Additional Paid-In Capital 463,456 516,335 (37,687)(1) 942,104
Cumulative Net Income 601,153 424,493 (424,493)(1) 601,153
Cumulative Dividends (666,627) (588,039) 588,039 (1) (666,627)
----------- ----------- ---------- -----------
TOTAL STOCKHOLDERS' EQUITY 617,875 453,039 133,247 1,204,161
----------- ----------- ---------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 1,504,591 $ 811,399 $ 177,223 $ 2,493,213
=========== =========== ========== ===========
See accompanying notes to unaudited pro forma combined financial statements.
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HEALTH CARE PROPERTY INVESTORS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1999
(In Thousands)
Historical
---------------------------------
Health Care American
Property Health Pro Forma
Investors, Inc. Properties, Inc. Adjustments Pro Forma
--------------- ---------------- ----------- ---------
Revenue
Rental Income $ 128,245 $ 79,425 $ -- $ 207,670
Tenant Reimbursements 6,394 2,426 -- 8,820
Interest and Other Income 19,012 2,027 -- 21,039
--------- --------- --------- ---------
153,651 83,878 -- 237,529
--------- --------- --------- ---------
Expense
Interest Expense 39,496 16,280 4,011 (3) 59,787
Depreciation/Non Cash Charges 32,059 16,518 2,688 (4) 51,265
Facility Operating Expenses 11,894 5,238 -- 17,132
Other Expenses 7,440 6,259 (5,507)(5) 8,192
--------- --------- --------- ---------
90,889 44,295 1,192 136,376
--------- --------- --------- ---------
Income From Operations 62,762 39,583 (1,192) 101,153
Minority Interests (3,838) (141) -- (3,979)
Gain on Sale of Real Estate
Properties 10,303 55,133 -- 65,436
--------- --------- --------- ---------
Net Income 69,227 94,575 (1,192) 162,610
--------- --------- --------- ---------
Dividends to Preferred Stockholders 12,328 6,450 -- 18,778
Net Income Applicable to Psychiatric
Group Depository Shares -- 1,378 -- 1,378
--------- --------- --------- ---------
Net Income Applicable to Common Shares $ 56,899 $ 86,747 $ (1,192) $ 142,454(6)
========= ========= ========= =========
Basic Earnings Per Common Share $ 1.80 $ 3.47 $ 2.79(6)
========= ========= =========
Diluted Earnings Per Common Share $ 1.80 $ 3.44 $ 2.73(6)
========= ========= =========
Funds From Operations (7) $ 77,608 $ 49,297 $ 2,783 (8) $ 129,688(6)
========= ========= ========= =========
Dividends Per Common Share $ 2.07 $ 1.70 -- $ 2.07
========= ========= ========= =========
Weighted Average Shares
Outstanding -- Basic 31,590 24,988 (5,500)(9) 51,078
========= ========= ========= =========
Weighted Average Shares
Outstanding -- Diluted 34,317 25,189 (5,005)(9) 54,501
========= ========= ========= =========
See accompanying notes to unaudited pro forma combined financial statements.
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HEALTH CARE PROPERTY INVESTORS, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
(In Thousands)
Historical
---------------------------------
Health Care American
Property Health Pro Forma
Investors, Inc. Properties, Inc. Adjustments Pro Forma
--------------- ---------------- ----------- ---------
Revenue
Rental Income $ 134,158 $ 105,600 $ -- $ 239,758
Tenant Reimbursements 2,800 2,099 -- 4,899
Interest and Other Income 24,591 5,023 -- 29,614
--------- --------- --------- ---------
161,549 112,722 -- 274,271
--------- --------- --------- ---------
Expense
Interest Expense 36,753 21,609 5,339 (3) 63,701
Depreciation/Non Cash Charges 32,523 21,354 3,579 (4) 57,456
Facility Operating Expenses 5,053 5,769 -- 10,822
Impairment Loss on Real Estate
and Notes Receivable -- 8,330 -- 8,330
Other Expenses 8,566 9,006 (8,003)(5) 9,569
--------- --------- --------- ---------
82,895 66,068 915 149,878
--------- --------- --------- ---------
Income From Operations 78,654 46,654 (915) 124,393
Minority Interests (5,540) (189) -- (5,729)
Gain on Sale of Real Estate
Properties 14,053 -- -- 14,053
--------- --------- --------- ---------
Net Income 87,167 46,465 (915) 132,717
--------- --------- --------- ---------
Dividends To Preferred
Stockholders 8,532 8,600 -- 17,132
Net Loss Applicable To
Psychiatric Group Depositary
Shares -- (5,180) -- (5,180)
--------- --------- --------- ---------
Net Income Applicable to Common
Shares $ 78,635 $ 43,045 $ (915) $ 120,765(6)
========= ========= ========= =========
Basic Earnings Per Common Share $ 2.56 $ 1.77 $ 2.40(6)
========= ========= =========
Diluted Earnings Per Common Share $ 2.54 $ 1.75 $ 2.40(6)
========= ========= =========
Funds From Operations (7) $ 96,255 $ 63,485 $ 4,384 (8) $ 164,124(6)
========= ========= ========= =========
Dividends Per Common Share $ 2.62 $ 2.20 $ 2.62
========= ========= =========
Weighted Average Shares
Outstanding -- Basic 30,747 24,379 (4,891)(9) 50,235
========= ========= ========= =========
Weighted Average Shares
Outstanding -- Diluted 33,664 24,605 (5,119)(9) 53,150
========= ========= ========= =========
See accompanying notes to unaudited pro forma combined financial statements.
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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BALANCE SHEET
(1) Adjustments to reflect (a) the estimated fair value of assets
acquired and liabilities assumed, (b) the elimination of AHP stockholders'
equity, (c) the issuance of HCPI's common stock in exchange for all the
outstanding common stock of AHP and (d) the conversion of AHP series B
cumulative redeemable preferred stock into HCPI series C cumulative redeemable
preferred stock.
Components of the estimated purchase price (in thousands):
LIABILITIES ASSUMED:
Existing Liabilities Net Assumed $358,360
Estimated Fair Value Decrease in Liabilities (3,134)
Estimated Increase in Bank Credit Facility 47,110
--------
Estimated Total Liabilities Assumed $402,336
========
EQUITY ISSUED:
Preferred Stock (4,000,000 depositary shares valued at
$22.04, the average closing price of AHP series B
cumulative redeemable preferred depositary shares
during the week of August 2, 1999) 88,150
Common Stock (19,488,000 shares valued at $25.57 per
share, the average closing price of HCPI common stock
during the week of August 2, 1999) 498,386
Estimated Registration Costs (250)
--------
Estimated Equity Issued 586,286
--------
Estimated Total Purchase Price $988,622
========
Fair value of the real estate properties are based on preliminary
estimates. HCPI is in the process of determining fair values on a
property-by-property basis using the present value of future cash flows. Senior
Notes Payable have been adjusted to estimated fair values based upon current
interest rates.
Estimated allocation of the purchase price (in thousands):
Cash and Cash equivalents $ 15,512
Estimated Real Estate Properties 959,852
Estimated Loans Receivable 4,625
Estimated Other Assets 8,633
--------
Estimated Assets Acquired $988,622
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NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
(2) Adjustment to reflect estimated borrowings required to fund the
amounts listed below in connection with the merger (in thousands):
AHP executive employment and consulting
agreements costs $ 17,000
Estimated cash payments for AHP common stock
options and rights 8,500(a)
Other AHP employee and director compensation costs 3,300
Financial advisory, legal, accounting and other costs 18,310
--------
$ 47,110
========
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(a) assumes outstanding options to acquire AHP common stock were converted into
the right to receive cash.
STATEMENTS OF INCOME
(3) Adjustment to reflect the effect of (a) the increase in interest
expense related to additional borrowings described in the adjustment described
in Note (2) applying an 8.25% annual interest rate (a change of 0.125% in this
interest rate would result in a $60,000 annual change in this interest expense
adjustment) and (b) the increase in interest expense related to adjusting
assumed liabilities to estimated fair value.
(4) Adjustment to reflect (a) increased depreciation expense associated
with the increase to fair value of the AHP depreciable property using the
straight-line method over a 35-year period and (b) elimination of amortization
expense related to intangible assets which have no continuing value to HCPI
after the merger.
(5) Adjustments to reflect the net reduction in general and
administrative expenses resulting from (a) the elimination of most of AHP's
payroll and corporate office costs, (b) the elimination of duplicative
administrative costs and offset by (c) increased payroll and related costs
pertaining to additional employees required by HCPI due to the merger.
(6) If the adjustments referred to in (5) above had not been made, (a)
pro forma net income applicable to common shares would have been $136,947 and
$112,762 for the nine months ended September 30, 1999 and the year ended
December 31, 1998, respectively, (b) pro forma basic earnings per common share
would have been $2.68 and $2.24 for the nine months ended September 30, 1999 and
the year ended December 31, 1998, respectively, (c) pro forma diluted earnings
per common share would have been $2.63 and $2.24 for the nine months ended
September 30, 1999 and the year ended December 31, 1998, respectively, and (d)
pro forma funds from operations would have been $124,181 and $156,121 for the
nine months ended September 30, 1999 and the year ended December 31, 1998,
respectively.
(7) HCPI believes that funds from operations is an important
supplemental measure of operating performance. Funds from operations is defined
as net income applicable to common shares (computed in accordance with generally
accepted accounting principles), excluding gains (or losses) from debt
restructure and sales of property, plus real estate depreciation, and after
adjustments for unconsolidated partnerships and joint ventures. Funds from
operations does not, and is not intended to, represent cash generated from
operating activities in accordance with generally accepted accounting
principles, is not necessarily indicative of cash available to fund cash needs
and should not be considered as an alternative to net income. Funds from
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NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
operations, as defined by HCPI, may not be comparable to similarly titled items
reported by other real estate investment trusts that do not define it in
accordance with the definition prescribed by the National Association of Real
Estate Investment Trusts (NAREIT).
(8) Adjustment to reflect the effect of the merger upon funds from
operations due to (a) additional interest expense on additional borrowings
discussed in Note (2) and an increase in interest expense related to adjusting
assumed liabilities to estimated fair value, (b) elimination of non-cash
amortization due to the elimination of intangible assets with no future value
after the completion of the merger and (c) impact of adjustments to general and
administrative expenses discussed in Note (5).
(9) Adjustment to reflect the impact of the issuance of HCPI common
stock by applying the exchange ratio of 0.78 to the outstanding AHP common
stock. Assumes options to acquire AHP common stock were converted into the right
to receive cash.
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