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 June 30, 1994
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 1-9317
HEALTH AND RETIREMENT PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland No. 04-6558834
(State of Incorporation) (I.R.S. Employer Identification No.)
400 Centre Street, Newton, Massachusetts 02158
(Address of principal executive office) (Zip Code)
(617) 332-3990
(Telephone number, including area code)
HEALTH AND REHABILITATION PROPERTIES TRUST
(Former name, former address and former fiscal year, if changed since last
report)
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
Number of Common Shares outstanding at the latest practicable date,
July 29, 1994: 57,385,000 shares of beneficial interest, $.01 par value.
HEALTH AND RETIREMENT PROPERTIES TRUST
FORM 10-Q
June 30, 1994
INDEX
PART I Financial Information Page
Item 1. Financial Statements
Balance Sheets - December 31, 1993 and
June 30, 1994 1
Statements of Income - Quarters and Six Months
Ended June 30, 1993 and 1994 2
Statements of Cash Flows - Six Months Ended
June 30, 1993 and 1994 3
Notes to Financial Statements 4-8
Item 2. Management's Discussion and Analysis of Financial 9-13
Condition and Results of Operations
PART II. Other Information
Item 4. Submission of Matters to a Vote of 14
Securities Holders
Item 6. Exhibits and Reports on Form 8-K 14
Signatures
HEALTH AND RETIREMENT PROPERTIES TRUST
BALANCE SHEETS
(dollars in thousands)
(Unaudited)
December 31, June 30,
1993 1994
ASSETS
Real estate properties, at cost:
Land $ 33,450 $ 46,710
Buildings and improvements 330,988 462,337
Equipment 20,373 31,800
384,811 540,847
Less accumulated depreciation 34,969 36,073
349,842 504,774
Real estate mortgages and notes, net 157,281 152,887
Cash and cash equivalents 13,887 24,597
Interest and rent receivable 3,039 3,674
Deferred interest and finance costs,
net and other assets 3,613 4,705
$527,662 $690,637
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank borrowings $ 73,000 $ 62,000
Security deposits 8,300 3,800
Due to affiliates 709 316
Accounts payable and accrued expenses 4,518 5,687
Shareholders' equity:
Preferred shares of beneficial
interest, $.01 par value,
50,000,000 shares authorized,
none issued - -
Common shares of beneficial interest,
$.01 par value, 100,000,000 shares
authorized, 44,121,000 shares and
57,372,500 shares issued and
outstanding, respectively 441 574
Additional paid-in capital 470,572 652,805
Cumulative net income 118,889 147,913
Distributions of funds
from operations (148,767) (182,458)
Total shareholders' equity 441,135 618,834
$527,662 $690,637
See accompanying notes
HEALTH AND RETIREMENT PROPERTIES TRUST
STATEMENTS OF INCOME
(amounts in thousands, except per share data)
(Unaudited)
Quarter Ended Six Months
June 30, Ended June 30,
1993 1994 1993 1994
Revenues:
Rental income $11,463 $13,531 $22,852 $26,001
Interest income 2,300 6,385 3,561 11,462
Total revenues 13,763 19,916 26,413 37,463
Expenses:
Interest 1,178 1,069 2,447 2,328
Advisory fees 625 852 1,199 1,627
Depreciation and amortization 2,216 3,337 4,429 5,955
General and administrative 208 324 393 569
Total expenses 4,227 5,582 8,468 10,479
Income before gain on sale of
properties and extraordinary
items 9,536 14,334 17,945 26,984
Gain on sale of properties - - - 3,994
Extraordinary items - early
extinguishment of debt and
termination costs of interest
rate hedging arrangements - ( 1,953) ( 3,392) ( 1,953)
Net income $ 9,536 $12,381 $14,553 $29,025
Weighted average shares
outstanding 35,114 51,395 33,432 48,014
Per share amounts:
Income before gain on sale of
properties and extraordinary
items $ .27 $ .28 $ .54 $ .56
Net income $ .27 $ .24 $ .44 $ .60
See accompanying notes
HEALTH AND RETIREMENT PROPERTIES TRUST
STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
Six Months Ended
June 30,
1993 1994
Cash flows from operating activities:
Net income $14,553 $ 29,025
Adjustments to reconcile net income to
cash provided by operating activities:
Gain on sale of properties - ( 3,994)
Loss on early extinguishment of debt 3,392 1,953
Depreciation and amortization 4,429 5,955
Amortization of interest costs 251 317
Decrease in security deposits - ( 4,500)
Deferred finance costs ( 183) ( 3,659)
Changes in assets and liabilities:
Increase in interest and
rent receivable and other assets ( 2,122) ( 769)
(Decrease) increase in accounts
payable and accrued expenses ( 1,161) 1,169
Increase (decrease) in due
to affiliate 20 ( 393)
Cash provided by operating
activities 19,179 25,104
Cash flows from investing activities:
Investment in mortgage loans ( 73,325) ( 13,257)
Repayment of mortgage loans 4,316 17,651
Real estate acquisitions ( 6,292) (184,863)
Sale of real estate - 28,400
Cash used in
investing activities ( 75,301) (152,069)
Cash flows from financing activities:
Proceeds from issuance of shares, net 123,138 182,366
Proceeds from borrowings 54,000 95,000
Payments on borrowings ( 88,590) (106,000)
Termination costs of debt and
interest rate hedging arrangements ( 2,843) -
Payment related to stock surrender ( 3,000) -
Dividends paid ( 22,040) ( 33,691)
Cash provided by
financing activities 60,665 137,675
Increase in cash and cash equivalents 4,543 10,710
Cash and cash equivalents at
beginning of period 14,104 13,887
Cash and cash equivalents at end of period $ 18,647 $ 24,597
Supplemental cash flow information:
Interest paid $ 2,997 $ 1,287
See accompanying notes
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
June 30, 1993 and 1994
(dollars in thousands, except per share data)
(Unaudited)
1. Basis of presentation
The financial statements of Health and Retirement Properties Trust,
formerly known as Health and Rehabilitation Properties Trust, ("the
Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for interim periods are not necessarily
indicative of the results that may be expected for the full year.
2. Tax status
The Company is a real estate investment trust under the Internal
Revenue Code of 1986, as amended. Accordingly, the Company expects not to
be subject to federal income taxes on amounts distributed to shareholders
provided it distributes at least 95% of its real estate investment trust
taxable income and meets certain other requirements for qualifying as a
real estate investment trust.
3. Dividends
On July 7, 1994, the Trustees declared a dividend on the Company's
common shares of beneficial interest with respect to the quarter ended June
30, 1994 of $.33 per share, which will be paid on or about August 30, 1994
to shareholders of record at the close of business on July 29, 1994.
Dividends are principally based on funds from operations which means
net income excluding gains (or losses) from debt restructuring and sales of
property plus depreciation and amortization. Dividends in excess of net
income are a return of capital.
4. Leases
On February 11, 1994, in connection with the merger of Greenery
Rehabilitation Group Inc. (Greenery) into Horizon Healthcare Corporation
(Horizon), the Company sold to Horizon for $28,400, three facilities that
had been leased to Greenery. The Company realized a capital gain of
approximately $3,994 on the sale of these properties. In addition, Horizon
has leased seven facilities previously leased to Greenery, on substantially
similar terms except the leases were extended through 2005. The Company
has also granted Horizon a ten year option to buy, at the rate of no more
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
June 30, 1993 and 1994
(dollars in thousands, except per share data)
(Unaudited)
4. Leases-continued
than one facility per year, the seven leased facilities. Also, the
Company leased the three remaining Greenery facilities to a newly formed
corporation, Connecticut Subacute Corporation II (CSC II), an affiliate of
HRPT Advisors, Inc. (Advisor). These facilities are being managed by and
the lease payments are guaranteed by Horizon for a term of up to five
years. The terms of these lease arrangements are substantially similar to
the original lease arrangements.
On March 17, 1994, the Company entered into an agreement with Host
Marriott Corporation to acquire 14 retirement communities containing 3,952
residences or beds for $320,000, subject to adjustments. The communities
are triple net leased through December 31, 2013 to a wholly owned
subsidiary of Marriott International, Inc. (Marriott). The leases provide
for fixed rent aggregating approximately $28,000 per year and additional
rentals equal to 4.5% of annual revenues from operations in excess of base
amounts determined on a facility by facility basis. All of the leases are
subject to cross default provisions and are guaranteed by Marriott. In
connection with the execution of the purchase and sale agreement for the
Marriott transaction, the Company provided a $25,000 cash deposit. As of
July 29, the Company has completed the acquisition of 11 of the 14
communities for $228,991 funded from the proceeds of the equity offering
described in Note 7, application of a portion of the cash deposit,
borrowings under the Company's revolving credit facility and proceeds of
the debt offering described in Note 6. The remaining purchase price will
be funded by the assumption of $17,600 of existing debt bearing interest at
8.75%, proceeds of the debt offering described in Note 6, available cash,
application of the balance of the cash deposit, and/or drawings under the
Company's revolving credit facility. The remainder of this acquisition is
expected to close in August 1994.
5. Real Estate Mortgages and Notes
On February 11, 1994, in connection with the Horizon - Greenery
merger, the Company provided Horizon with $9,400 first mortgage financing
for two facilities. One of the facilities previously was owned by the
Company and leased to Greenery. The mortgage notes bear interest at 11.5%
per annum and mature December 31, 2000.
During the first half of 1994, mortgage loans, secured by eight
properties, with outstanding principal balances totalling $18,563 were
repaid.
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
June 30, 1993 and 1994
(dollars in thousands, except per share data)
(Unaudited)
6. Borrowings
On February 24, 1994, the Company closed a new $110,000 revolving
credit facility from a syndicate of banks. The new credit facility, which
replaced the Company's $40,000 revolving credit facility scheduled to
mature in January 1995, will mature in 1997, unless extended by the
parties. Borrowings under the new credit facility bear interest, at the
Company's option, at a spread over LIBOR or prime. The Company has drawn
on the new credit facility, upon its closing, to repay the $40,000
outstanding on the previously existing revolving credit facility and, on
April 1, 1994, to repay the $33,000 term loan. On May 13, 1994, the
Company repaid all $73,000 outstanding under the new credit facility with
proceeds of the offering described in Note 7. On June 15, 1994, the
Company amended the revolving credit facility, among other things, to
reduce the interest rate spread over LIBOR, to increase the facility to
$120,000 with provision for possible further increases to $150,000 before
August 31, 1994 and to make the facility unsecured. In connection with the
closing of this new revolving credit facility and the prepayment of the
$33,000 term loan and borrowings under the previous revolving credit
facility, the Company wrote off deferred charges of $1,953 which has been
reported as an extraordinary item. During June the Company borrowed
$62,000 under the revolving credit facility to fund a portion of the
Marriott transaction. Such borrowings were repaid in July with the
proceeds of a debt offering described below and cash on hand.
On July 13, 1994, the Company received net proceeds of $197,270 from
the offering of $200,000 in floating rate senior notes due in 1999. The
notes were issued in two series. The Series A Notes, in an aggregate
principal amount of $75,000, bear interest at LIBOR plus 105 basis points
and may be called by the Company beginning April 13, 1995. The Series B
Notes, in an aggregate principal amount of $125,000, were issued at a
discount (99.0159% of par), bear interest at LIBOR plus 72 basis points and
may be called by the Company beginning July 13, 1996. A portion of these
proceeds were used to fund part of the Marriott transaction and to repay
$56,000 of borrowings under the Company's revolving credit facility. The
Company expects to apply the balance to fund the remainder of the Marriott
transaction and future real estate acquisitions.
7. Common Shares of Beneficial Interest
On January 19, 1994, the Company received net proceeds of
approximately $8,301 and issued 601,500 shares of the Company's stock in
connection with the exercise of the underwriter's over-allotment option
granted in connection with a public offering of the Company's stock in
December 1993. The proceeds were used as part of the initial deposit on
the Marriott transaction.
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
June 30, 1993 and 1994
(dollars in thousands, except per share data)
(Unaudited)
7. Common Shares of Beneficial Interest-Continued
On May 13, 1994, the Company received net proceeds of approximately
$174,065 from the public offering of 12,650,000 shares of the Company's
stock. These proceeds were used, in part, to repay $73,000 in borrowings
under the Company's revolving credit facility and the balance to fund part
of the Marriott transaction.
8. Financing Commitments
During the quarter ended June 30, 1994, the Company provided
improvement financing at existing properties of approximately $3,202.
As of June 30, 1994, the Company has commitments to provide additional
improvement financing at existing properties totalling approximately
$17,377.
9. Concentration of Credit Risk
Substantially all of the Company's assets are invested in income
producing health care real estate. At June 30, 1994, a total of 47% of the
Company's real estate properties, net and real estate mortgages and notes,
net were subject to mortgages and leases with Marriott and Horizon. The
financial statements of Marriott have been filed as a part of Marriott's
Quarterly Form 10-Q, file number 1-12188, for the twenty four weeks ended
June 17, 1994. The financial statements of Horizon have been filed as a
part of Horizon's Quarterly Form 10-Q, file number 1-9369, for the nine
months ended February 28, 1994.
10. Pro Forma Information (Unaudited)
The following summarized Pro Forma Statements of Income assume that
all of the Company's real estate financing transactions during 1993, both
1993 share offerings, the January 19, 1994 over-allotment option exercise,
the Horizon-Greenery merger and the Marriott transaction and the related
equity offering completed in May 1994 and debt offering completed in July
1994, had occurred on January 1, 1993 and give effect to the Company's
borrowing rates throughout the periods indicated.
The summarized Pro Forma Balance Sheet is intended to present the financial
position of the Company as if the Marriott transaction and the related
equity offering completed in May 1994 and debt offering completed in July
1994, had occurred on June 30, 1994.
These pro forma statements are not necessarily indicative of the expected
results of operations or the Company's financial position for any future
period. Differences could result from, but are not limited to, additional
property investments, changes in interest rates and changes in the debt
and/or equity structure of the Company.
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
June 30, 1993 and 1994
(dollars in thousands, except per share data)
(Unaudited)
Year Ended Six Months Ended
December 31, June 30,
1993 1993 1994
Pro Forma Statements of Income
Total revenues $94,985 $47,082 $48,772
Total expenses 35,497 18,730 20,575
Net income $59,488 $28,352 $28,197
Weighted average shares
outstanding 57,373 57,373 57,373
Net income per share $ 1.04 $ .49 $ .49
June 30,
1994
Pro Forma Balance Sheet
Real estate properties, net $651,671
Real estate mortgages and notes, net 152,887
Other assets 41,679
Total Assets $846,237
Borrowings $217,600
Other liabilities 9,803
Shareholder's equity 618,834
Total Liabilities and
Shareholder's Equity $846,237
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Quarter Ended June 30, 1994 versus 1993
Total revenues for the quarter ended June 30, 1994, increased to
$19,916,000 from $13,763,000 for the quarter ended June 30, 1993. Rental
income increased to $13,531,000 from $11,463,000 and interest income
increased to $6,385,000 from $2,300,000 during the comparable period.
Rental income increased primarily as a result of new investments in real
estate subsequent to June 30, 1993. Interest income increased primarily
due to the acquisition of three pools of performing mortgage loans between
May and December, 1993.
Total expenses for the quarter ended June 30, 1994, increased to
$5,582,000 from $4,227,000 for the quarter ended June 30, 1993. The
increase is primarily the result of increases in depreciation and
amortization of $1,121,000 as a result of new investments since the 1993
quarter.
Income before gain on sale of properties and extraordinary item
increased to $14,334,000 or $.28 per share for the 1994 quarter from
$9,536,000 or $.27 per share for the 1993 quarter. The increase in income
before gain on sale of properties and extraordinary items is primarily a
result of the new investments since June 30, 1993. Net income for the
quarters ended June 30, 1994 and 1993, was $12,381,000 ($.24 per share) and
$9,536,000 ($.27 per share), respectively.
The Company bases its dividend primarily on funds from operations
during the quarter. Funds from operations means net income excluding gains
(or losses) from debt restructuring and sales of property, plus
depreciation and amortization. Cash available for distribution may not
necessarily equal funds from operations as the cash flow of the Company is
affected by other factors not included in the funds from operations
calculation. Funds from operations for the 1994 quarter was $17,860,000 or
$.35 per share for the 1994 quarter and $11,895,000 or $.34 per share, for
the 1993 quarter.
The dividends declared which relate to these quarters were $18,937,050
or $.33 per share in 1994 and $11,236,000 or $.32 per share in 1993.
Dividends for the 1994 quarter exceeded, in the aggregate, the funds from
operations because dividends were declared on 12,620,500 shares, which were
not outstanding for the entire quarter.
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Six Months Ended June 30, 1994 versus 1993
Total revenues for the six months ended June 30, 1994 increased to
$37,463,000 from $26,413,000 for the six months ended June 30, 1993.
Rental income increased to $26,001,000 from $22,852,000 and interest income
increased to $11,462,000 from $3,561,000 during the comparable period.
Rental income increased as a result of new real estate investments,
primarily the Community Care of America transaction in December 1993. The
increase in interest income reflects the purchases between May and December
1993 of three pools of performing mortgage loans.
Total expenses for the six months ended June 30, 1994 increased to
$10,479,000 from $8,468,000 in 1993. Advisory fees and depreciation and
amortization increased by $428,000 and $1,526,000, respectively, in the
1994 period as a result of new investments, including those mentioned
above, that occurred near the end of, or subsequent to, the 1993 period and
therefore, did not materially affect expenses during the six months ended
June 30, 1993.
Funds from operations for the six months ended June 30, 1994 and 1993
was $33,318,000 ($.69 per share) and $22,638,000 ($.68 per share),
respectively, income before gain on sale of properties and extraordinary
items was $26,984,000 ($.56 per share) and $17,945,000 ($.54 per share),
respectively, and net income was $29,025,000 ($.60 per share) and
$14,553,000 ($.44 per share), respectively. Income before gain on sale of
properties and extraordinary items increased primarily as a result of new
investments since June 1993. Dividends declared relating to the six months
ended June 30, 1994 and 1993 were $37,870,000 ($.66 per share) and
$22,040,000 ($.64 per share), respectively. Dividends for the 1994 period
exceeded funds from operations because dividends were declared on
12,620,500 shares which were not outstanding for the entire period.
LIQUIDITY AND CAPITAL RESOURCES
Assets of the Company increased to $690,637,000 at June 30, 1994 from
$527,662,000 at December 31, 1993. The increase is principally the net
result of increases in real estate properties, net, and cash and cash
equivalents of $154,932,000 and $10,710,000, respectively and a decrease in
real estate mortgages and notes, net, of $4,394,000. The increase in cash
and cash equivalents is attributable principally to $11,086,000 of cash on
deposit with Host Marriott Corporation and not available to reduce debt.
The increase in real estate properties is the net result of the acquisition
of nine retirement communities in connection with the Marriott transaction,
improvement financings for existing tenants and the sale of three
properties in connection with the February 11, 1994 merger of Greenery
Rehabilitation Group, Inc. (Greenery) into Horizon Healthcare Corporation
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES-Continued
(Horizon). Real estate mortgages and notes, net, decreased principally due
to the prepayment of mortgage investments totalling $18,563,000 net of new
mortgage financings of $10,557,000.
On February 11, 1994, in connection with the Horizon-Greenery merger,
the Company sold to Horizon for $28,400,000 three facilities that had been
leased to Greenery. The Company realized a capital gain of approximately
$3,994,000 on the sale of these properties. In addition, Horizon has
leased seven facilities previously leased to Greenery, on substantially
similar terms except the leases were extended through 2005. The Company
has also granted Horizon a ten year option to buy, at the rate of no more
than one facility per year, the seven leased facilities. Also, the Company
leased the three remaining Greenery Facilities to a newly formed
corporation, Connecticut Subacute Corporation, II (CSC II), an affiliate of
HRPT Advisors, Inc. (Advisor). These facilities are being managed by and
the lease payments are guaranteed by Horizon for a term of up to five
years. The terms of these lease arrangements are substantially similar to
the original lease arrangements.
On February 11, 1994, in connection with the Horizon-Greenery merger,
the Company provided Horizon with $9,400,000 first mortgage financing for
two facilities. One of the facilities previously was owned by the Company
and leased to Greenery. The mortgage notes bear interest at 11.5% per
annum and mature December 31, 2000.
On March 17, 1994, the Company entered into an agreement with Host
Marriott Corporation to acquire 14 retirement communities containing 3,952
residencies or beds for $320,000,000 subject to adjustments. The
communities are triple net leased through December 31, 2013 to a wholly
owned subsidiary of Marriott International, Inc. (Marriott). The leases
provide for fixed rent aggregating approximately $28,000,000 per year and
additional rentals equal to 4.5% of annual revenues from operations in
excess of base amounts determined on a facility by facility basis. All of
the leases are subject to cross default provisions and are guaranteed by
Marriott. In connection with the execution of the purchase and sale
agreement for the Marriott transaction, the Company provided a $25,000,000
cash deposit. As of July 29, the Company has completed the acquisition of
11 of the 14 communities for $228,991,000 which was funded from cash on
hand, the proceeds of an equity offering discussed below, application of a
portion of the cash deposit, drawings under the Company's revolving credit
facility and a portion of the proceeds from a floating rate note offering
described below. The balance of the purchase price will be funded by the
assumption of $17,600,000 of existing debt bearing interest at 8.75%,
available cash, application of the remainder of the cash deposit and
additional proceeds of the $200,000,000 floating rate note offering. The
remainder of the acquisition is expected to close in August, 1994.
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES - continued
At June 30, 1994, the Company had $24,597,000 of cash and cash
equivalents, including the remaining $11,086,000 cash deposit with
Marriott, and the ability to borrow up to an additonal $58,000,000 under
its revolving credit facility. At June 30, 1994, the Company had
outstanding commitments to provide $17,377,000 in improvement financing for
existing investments. On May 13, 1994 the Company received net proceeds of
approximately $174,541,000 from the public offering of 12,650,000 common
shares of beneficial interest (including the underwriter's over-allotment
option). A portion of the proceeds were used to repay the outstanding
balance of $73,000,000 on the Company's revolving credit facility and the
remainder to fund part of the Marriott transaction.
On July 13, 1994, the Company received net proceeds of $197,270,000
from the offering of $200,000,000 in floating rate senior notes due in
1999. The notes were issued in two series. The Series A Notes, in an
aggregate principal amount of $75,000,000, bear interest at LIBOR plus 105
basis points and may be called by the Company beginning April 13, 1995.
The Series B Notes, in an aggregate principal amount of $125,000,000, were
issued at a discount (99.0159% of par), bear interest at LIBOR plus 72
basis points and may be called by the Company beginning July 13, 1996. A
portion of these proceeds were used to fund part of the Marriott
transaction and to repay $56,000,000 in borrowings under the Company's
revolving credit facility. The Company expects to apply the balance to
fund the remainder of the Marriott transaction and future real estate
acquisitions. This senior note offering was drawn under a shelf
registration statement for the offering of up to $345,000,000 of debt
securities, preferred shares of beneficial interest, common shares of
beneficial interest and common share warrants. An additional $145,000,000
of securities may be issued under this registration statement.
The Company is continuing to seek new investments to expand and
diversify its portfolio of leased and mortgaged health care related real
estate. The Company believes that the new investments described above
substantially improve the quality and diversity of lessees and mortgagors
in its portfolio and also the security of its future cash flows and
dividends. Upon completion of the Marriott transaction approximately 70%
of the Company's portfolio will be leased to or mortgage financed with
seven New York Stock Exchange listed companies. Also, Marriott, which is
an A- investment grade rated company, will be the Company's largest single
tenant.
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES - continued
The Company intends to balance the use of debt and equity in such a manner
that the long term cost of funds borrowed to acquire or mortgage finance
facilities is appropriately matched, to the extent practicable, with the
terms of the investments made with such borrowed funds. As of June 30,
1994, the Company's debt as a percentage of total capitalization was
approximately 9% and upon completion of the $200,000,000 floating rate note
offering in July 1994 was approximately 24%. Current expenses and
dividends are provided for by funds from operations.
HEALTH AND RETIREMENT PROPERTIES TRUST
Part II Other Information
Item 4. Submission of Matters to a Vote of Securities Holders.
The Company's Annual Shareholders Meeting was held on May 17, 1994.
Rev. Justinian Manning, C.P. and Gerard M. Martin were re-elected to serve
as Trustees in Group II on the Board of Trustees. There were 34,290,024
shares and 34,321,761 shares voted in favor of and 274,658 shares and
242,921 shares withheld from voting, for the re-election of Rev. Justinian
Manning, C.P. and Gerard M. Martin, respectively. Trustees in Groups I and
III, John L. Harrington, Barry Portnoy and Arthur G. Koumantzelis continued
in office as Trustees, after the meeting.
Also on May 17, 1994, a proposed amendment to the Company's
Declaration of Trust to change the Company's name to "Health and Retirement
Properties Trust" was approved. There were 33,958,032 shares voted in
favor, 185,731 shares voted against, and 420,919 shares abstained on the
amendment.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 - Amended and Restated Revolving Credit Facility
10.2 - Letter Amendments dated June 13, 1994 and July 25,
1994 to the Marriott Purchase Agreement
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K, dated
July 1, 1994 in connection with the amendment and
restatement of its declaration of trust to reflect the
change in the Company's name
HEALTH AND RETIREMENT PROPERTIES TRUST
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned duly authorized.
HEALTH AND RETIREMENT
PROPERTIES TRUST
(Registrant)
DATE August 11, 1994 BY /s/ Mark J. Finkelstein
Mark J. Finkelstein, President
DATE August 11, 1994 BY /s/ David J. Hegarty
David J. Hegarty, Chief Financial
Officer