1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended: DECEMBER 31, 1993
Commission file number: 0-14022
MEDITRUST
(Exact name of registrant as specified in its charter)
Massachusetts 04-6532031
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
128 Technology Center, Waltham, MA 02154
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code (617) 736-1500
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
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Shares of Beneficial Interest without par value New York Stock Exchange
9% Convertible Debentures due 2002 New York Stock Exchange
7% Convertible Debentures due 1998 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes x No________
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K. ______
Aggregate market value of voting shares held by non-affiliates as of February
28, 1994: $1,083,421,000
Number of Shares of Beneficial Interest outstanding of registrant as of
February 28, 1994: 33,407,993
The following documents are incorporated by reference into the indicated Part
of this Form 10-K.
Document Part
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Definitive Proxy Statement for the May 26, 1994 Annual Meeting of
Shareholders, to be filed pursuant to Regulation 14A III
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PART I
Item 1.
BUSINESS
General
Information regarding Meditrust's business is given as of February 28,
1994.
Meditrust (the "Company"), a real estate investment trust organized on
August 6, 1985, invests in the subacute sector of the health care industry in
locations throughout the United States. The objective of the Company is to
enable shareholders to participate in the investment in health care related
facilities held primarily for the production of income to be distributed to
shareholders. In meeting this objective, the Company attempts to invest in
high quality facilities that are managed by experienced operators and to
achieve diversity in its property portfolio by sector of the health care
industry, geographic location, operator and form of investment.
The Company was organized to qualify, and intends to continue to
operate, as a real estate investment trust in accordance with federal tax laws
and regulations. So long as the Company so complies, with limited exceptions,
the Company will not be taxed under federal income tax laws on that portion of
its taxable income that it distributes to its shareholders. The Company has
distributed, and intends to continue to distribute, substantially all of its
real estate investment trust taxable income to shareholders.
The Company currently has investments in 213 facilities, consisting of
179 long-term care facilities, 20 rehabilitation hospitals, two alcohol and
substance abuse treatment facilities, six psychiatric hospitals, four
retirement living centers and two medical office buildings. Included in the
213 facilities are four properties under construction that are expected to
begin operations during the next three to twelve months. The Company's
investments take the form of sale/leaseback transactions, permanent mortgage
loans and development mortgage loans. The Company only enters into development
mortgage loans if, upon completion of the facility, the Company's development
mortgage loan is to be replaced by either a permanent mortgage loan from the
Company or a sale/leaseback transaction with the Company.
The Company's gross real estate investments increased by $206,822,000
during 1993 to $1,287,602,000 at December 31, 1993 as a result of the Company
making permanent and development mortgage loans and entering into
sale/leaseback transactions.
Permanent Mortgage Loans. During 1993, the Company provided permanent
mortgage financing of $181,908,000 for 26 long-term care facilities, one
rehabilitation facility and one retirement living facility totaling
approximately 4,300 beds and located in 13 states and for additions to four
facilities having permanent mortgage loans. As of February 28, 1994, the
Company was committed to provide additional financing of approximately
$2,207,000 for four existing permanent mortgage loans.
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Sale/Leaseback Transactions. During 1993, the Company funded $8,000,000
for the purchase of a rehabilitation facility located in Arkansas and
capitalized additional costs of $10,272,000 relating to thirteen facilities
located in eight states.
Other Transactions. During the year ended December 31, 1993, the
Company entered into a series of transactions with a prior operator of certain
rehabilitation and long-term care facilities financed by the Company. As a
result of these transactions, the Company acquired for $99,763,000 five
rehabilitation and four long-term care facilities (located in New York,
Massachusetts, Michigan, New Hampshire, Wisconsin and Washington), reduced
existing mortgage loans by $81,690,000, reduced a related bank participation in
one of the mortgage loans by $18,073,000, acquired from the operators of
certain facilities operating receivables and provided advances under a working
capital line. Also in connection with these transactions, the Company leased
eight of these facilities to four different operators and entered into a
management agreement for the remaining facility.
During 1993, the Company acquired a psychiatric facility in Texas for an
amount equal to its existing mortgage loan of $6,803,000 and entered into a
lease transaction with one of its existing operators.
Also during 1993, the Company reduced its real estate investments by
$34,978,000 from the sale of a long-term care facility located in Washington
and from the prepayment of permanent mortgage loans on five long-term care
facilities located in Massachusetts and two long-term care facilities located
in Connecticut. In addition, the Company collected principal payments of
$4,662,000 and reduced its investment in a partnership by $178,000.
Conversion of Development Mortgage Loans to Permanent Loans. During
1993, the Company provided ongoing development financing of $16,097,000
resulting in an aggregate funding of $33,963,000 for four long-term care
facilities located in four states totaling 496 beds. Construction of these
facilities was completed and development mortgage loans totaling $16,969,000
were converted to permanent mortgage loans and development mortgage loans
totaling $16,994,000 were converted into sale/leaseback transactions.
Development Mortgage Loans. During 1993, the Company provided ongoing
construction financing of $12,290,000 for three long- term care facilities and
for additions to two existing long-term care facilities. As of February 28,
1994, the Company is committed to provide additional financing of approximately
$17,831,000 for the completion of seven facilities.
Financings. In February 1993, the Company completed the sale of
3,277,500 Shares at $30.625 per Share and issued $92,120,000 of 7% convertible
debentures due 1998. The Company used the proceeds to repay short-term
borrowings and for investments in additional health care facilities.
In November 1993, the Company issued $86,250,000 of 6 7/8% convertible
debentures due 1998. The Company used the proceeds to repay short-term
borrowings and for investments in additional health care facilities.
The Company may raise additional capital from public or private sources
and invest in additional health care related facilities.
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INVESTMENT AND OTHER POLICIES
General
The Company invests in income-producing health care related facilities
which may include long-term care facilities, rehabilitation hospitals, alcohol
and substance abuse treatment facilities, psychiatric hospitals, retirement
living facilities, medical office buildings and other health care related
facilities. These investments are made primarily for the production of income.
Because the Company invests in health care related facilities, the Company is
not in a position to diversify its investment portfolio to include assets
selected to reduce the risks associated with investment in improved real estate
in a single industry. However, the Company intends to continue to diversify
its portfolio by broadening its geographic base, providing financing to more
operators, diversifying the type of health care facilities in its portfolio and
diversifying the types of financing methods provided.
In evaluating potential investments, the Company considers such factors
as: (1) the current and anticipated cash flow and its adequacy to meet
operational needs and other obligations and to provide a competitive market
return on equity to the Company's shareholders; (2) the geographic area, type
of property and demographic profile; (3) the location, construction quality,
condition and design of the property; (4) the potential for capital
appreciation, if any; (5) the growth, tax and regulatory environment of the
communities in which the properties are located; (6) occupancy and demand for
similar health care facilities in the same or nearby communities; (7) an
adequate mix of private and governmental-sponsored patients; (8) potential
alternative uses of the facilities; and (9) prospects of liquidity through
financing or refinancing.
Management conducts market research and analysis for all potential
investments on behalf of the Company. Management also reviews the value of the
property, the interest rates and debt service coverage requirements of any debt
to be assumed and the anticipated sources of repayment for such debt.
The Company's Declaration of Trust places no limitations on the
percentage of the Company's total assets that may be invested in any one
property or joint venture or on the nature or identity of the operators of such
properties. The independent Trustees of the Company, however, may establish
such limitations as they deem appropriate from time to time.
From time to time, the Company enters into senior debt transactions.
The Company has no current plans to underwrite securities of other issuers.
The Company has authority to offer shares of beneficial interest ("Shares") in
exchange for investments which conform to its standards and to repurchase or
otherwise acquire its Shares or other securities. The Company has no present
plans to invest in the securities of others for the purpose of exercising
control, although the Company owns interests in partnerships which own health
care facilities. The Company makes loans on such terms as the Trustees may
approve.
The Company will not, without the prior approval of a majority of
Trustees, including a majority of the independent Trustees of the Company,
acquire from or sell to any Trustee, director, officer or employee of the
Company, or any affiliate thereof, any of the assets or other property of the
Company.
The Company provides its shareholders with annual reports containing
audited financial statements and quarterly reports containing unaudited
financial information.
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Reinvestment of Sales Proceeds
In the event the Company sells or otherwise disposes of any of its
properties, the independent Trustees will determine whether and to what extent
the Company will acquire additional properties or distribute the proceeds to
the shareholders.
Short-Term Investments
The Company invests its cash in certain short-term investments during
interim periods between the receipt of revenues and distributions to
shareholders. Cash not invested in facilities may be invested in
interest-bearing bank accounts, certificates of deposit, short-term
money-market securities, short-term United States government securities,
mortgage-backed securities guaranteed by the Government National Mortgage
Association, mortgages insured by the Federal Housing Administration or
guaranteed by the Veterans Administration, mortgage loans, mortgage loan
participations, and certain other similar investments. The Company's ability
to make certain of these investments may be limited by tax considerations. The
Company's return on these short-term investments may be more or less than its
return on real estate investments.
Borrowing Policies
The Company may incur additional indebtedness when, in the opinion of
the Trustees, it is advisable. For short-term purposes, the Company may, from
time to time, negotiate lines of credit, arrange for other short-term
borrowings from banks or others or issue commercial paper. The Company may
arrange for long-term borrowing from banks, insurance companies, public
offerings or private placements to institutional investors. Under the
Company's Declaration of Trust and under documents pertaining to certain
existing indebtedness, the Company is subject to various restrictions with
respect to borrowings. See "Prohibited Investments and Activities."
In addition, the Company may incur mortgage indebtedness on real estate
which it has acquired through purchase, foreclosure or otherwise. When terms
are deemed favorable, the Company may invest in properties subject to existing
loans or mortgages. The Company also may obtain financing for unleveraged
properties in which it has invested or may refinance properties acquired on a
leveraged basis. There is no limitation on the number or amount of mortgages
which may be placed on any one property, but overall restrictions on mortgage
indebtedness are provided under documents pertaining to certain existing
indebtedness.
Prohibited Investments and Activities
The Declaration of Trust imposes certain prohibitions and restrictions
on various investment practices or activities of the Company, including
prohibitions against:
(i) investing in junior mortgage loans, unless, by appraisal or
other method, the Independent Trustees determine: (a) the capital investment
in any such mortgage loan is adequately secured on the basis of the equity of
the borrower in the property underlying such investment and of the ability of
the borrower to repay the mortgage loan; or (b) such mortgage loan is a
financing device entered into by the Company to establish the priority of its
capital investment over the capital of others investing with the Company in a
real estate project;
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(ii) allowing the aggregate borrowings of the Company to exceed 300%
of the net assets of the Company, unless the Independent Trustees determine
that a higher level of borrowing is appropriate;
(iii) investing more than 10% of the Company's total assets in
unimproved real property or mortgage loans with respect thereto;
(iv) investing in commodity or commodity futures contracts other than
interest rate futures used solely for hedging purposes;
(v) issuing equity securities which are redeemable at the option of
the holders thereof;
(vi) issuing debt securities, unless the historical debt service
coverage for the most recently completed fiscal year, as adjusted for known
changes, is sufficient to service the higher level of debt;
(vii) granting options or issuing warrants to purchase Shares at an
exercise price or for consideration less than the fair market value of such
Shares on the date of such grant or issuance;
(viii) investing more than 1% of the assets of the Company in real
estate contracts for sale, unless such real estate contracts are recordable in
the chain of title; and
(ix) acting in any way that would disqualify the Company as a real
estate investment trust under the provisions of the Internal Revenue Code.
At the Annual Meeting in May 1992, the shareholders voted to amend the
Declaration of Trust by deleting all of the foregoing restrictions. The
amendment remains subject to the consent of certain third party lenders.
In addition to prohibitions and restrictions imposed by the Declaration
of Trust, there are and may be, from time to time, additional restrictions
imposed by debt instruments or other agreements entered into by the Company.
Policy Changes
The prohibitions and restrictions contained in the Declaration of Trust
may not be changed by the Trustees without shareholder approval. All other
policies set forth herein may be changed by the Trustees without shareholder
approval.
Competition
The Company competes, primarily on the basis of price, knowledge of the
industry, and flexibility of financing structure, with real estate
partnerships, other real estate investment trusts, banks and other investors
generally in the acquisition, leasing and financing of health care related
facilities.
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The operators of the facilities compete on a local and regional basis
with other operators of comparable facilities. They compete with independent
operators as well as companies managing multiple facilities, some of which are
substantially larger and have greater resources than the operators of the
Company's facilities. Some of these facilities are operated for profit while
others are owned by governmental agencies or tax-exempt not-for-profit
organizations.
Employees
The Company currently employs 44 persons.
Declaration of Trust
The Declaration of Trust of the Company provides that shareholders of
the Company shall not be subject to any liability for the acts or obligations
of the Company and that, as far as is practicable, each written agreement of
the Company is to contain a provision to that effect. No personal liability
will attach to the shareholders for claims under any contract containing such a
provision in writing where adequate notice is given of such provision, except
possibly in a few jurisdictions. With respect to all types of claims in such
jurisdictions and with respect to tort claims, contract claims where the
shareholder liability is not disavowed as described above, claims for taxes and
certain statutory liabilities in other jurisdictions, a shareholder may be held
personally liable to the extent that claims are not satisfied by the Company.
However, the Declaration of Trust provides that, upon payment of any such
liability, the shareholder will be entitled to reimbursement from the general
assets of the Company. The Trustees intend to conduct the operations of the
Company, with the advice of counsel, in such a way as to avoid, as far as is
practicable, the ultimate liability of the shareholders of the Company. The
Trustees do not intend to provide insurance covering such risks to the
shareholders.
GOVERNMENT REGULATION
Each of the Company's investments is in a health care related facility
and the amount of percentage rent or additional interest, if any, which is
based on the operator's gross revenues from certain of the facilities, is in
most cases subject to changes in the reimbursement and license policies of
federal, state and local governments. In addition, the acquisition of health
care facilities is generally subject to state and local regulatory approval.
Medicare, Medicaid, Blue Cross and Other Payors
Certain of the operators receive payments for patient care from federal
Medicare programs for elderly and disabled patients, state Medicaid programs
for medically indigent and cash grant patients, private insurance carriers,
employers and Blue Cross plans, health maintenance organizations, preferred
provider organizations and directly from patients. In general, Medicare
payments for psychiatric care, long-term care services and rehabilitative care
are based on allowable costs plus a return on equity for proprietary
facilities. Payments from state Medicaid programs for psychiatric care are
based on reasonable costs or are at fixed rates. Long-term care facilities are
generally paid by the Medicaid programs at fixed rates. Most Medicare and
Medicaid payments are below retail rates. Blue Cross payments in different
states and areas are based on costs, negotiated rates or retail rates.
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Long-Term Care Facilities
Regulation of long-term care facilities is exercised primarily through
the licensing of such facilities. The particular agency having regulatory
authority and the license qualification standards vary from state to state and,
in some instances, from locality to locality. Licensure standards are
constantly under review and undergo periodic revision. Governmental
authorities generally have the power to review the character, competence and
community standing of the operator and the financial resources and adequacy of
the facility, including its plant, equipment, personnel and standards of
medical care. Long-term care facilities are certified under the Medicare
program and all are eligible to qualify under state Medicaid programs, although
not all participate in the Medicaid programs.
Rehabilitation Hospitals
Rehabilitation hospitals are also subject to extensive federal, state
and local legislation and regulation. Rehabilitation hospitals are subject to
periodic inspections and licensure requirements. Inpatient rehabilitation
facilities are cost-reimbursed, receiving the lower of reasonable costs or
reasonable charges. Typically, the fiscal intermediary pays a set rate per day
based on the prior year's costs for each facility. Annual cost reports are
filed with the operator's fiscal intermediary and adjustments are made, if
necessary.
Alcohol and Substance Abuse Treatment Facilities
Alcohol and substance abuse treatment facilities must comply with the
licensing requirements of federal, state and local health agencies and with the
requirements of municipal building codes, health codes and local fire
departments. In granting and renewing a facility's license, a state health
agency considers, among other things, the physical buildings and equipment, the
qualifications of the administrative personnel and health care staff, the
quality of nursing and other services and the continuing compliance of such
facility with the laws and regulations applicable to its operations.
Psychiatric Hospitals
Psychiatric hospitals generally are subject to extensive federal, state
and local legislation and regulation. Licensing for psychiatric hospitals is
subject to periodic inspections regarding standards of medical care, equipment
and hygiene. In addition, there are specific laws regulating civil commitment
of patients and disclosure of information regarding patients being treated for
chemical dependency. Many states have adopted a "patient's bill of rights"
which sets forth standards, such as using the least restrictive treatment,
allowing patient access to the telephone and mail, allowing the patient to see
a lawyer and requiring the patient to be treated with dignity. Insurance
reimbursement for psychiatric treatment generally is more limited than for
general health care.
Medical Office Buildings
The individual physicians, groups of physicians and health care
providers which occupy medical office buildings are subject to a variety of
federal, state and local regulations applicable to their specific areas of
practice. Since medical office buildings may contain numerous types of medical
services, a wide variety of regulations may apply. In addition, medical office
buildings must comply with the requirements of municipal building codes, health
codes and local fire departments.
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Item 2.
PROPERTIES
The table sets forth certain information as of February 28, 1994
regarding the Company's facilities:
Purchase Price Annual Base Rent
Number of Number of or Mortgage Plus Debt Service or
Location Facilities Beds (1) Amount (2) Interest Payment(3)
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(dollars in thousands)
LONG-TERM CARE FACILITIES
Alabama 1 226 $ 7,759 $ 940
Arizona 1 120 2,883 (4) 317
Colorado 3 427 19,209 (5) 2,305
Connecticut 18 2,382 129,071 (6) 15,056
Florida 2 330 19,432 (7) 2,149
Illinois 29 2,881 59,100 (8) 5,572
Indiana 1 145 6,270 706
Maryland 1 136 8,494 977
Massachusetts 20 3,194 187,799 (9) 21,209
Michigan 7 888 28,978 (10) 3,580
Missouri 1 186 8,798 1,078
New Jersey 4 687 27,211 (11) 2,952
Nevada 2 350 16,846 (4) 2,087
New York 3 432 49,226 5,529
North Carolina 1 120 3,164 (4) 380
Ohio 5 567 23,400 2,581
Pennsylvania 4 546 21,443 (12) 2,665
Pennsylvania and New Jersey (16) 12 2,050 84,947 (4) 9,776
Rhode Island 1 156 5,000 (4) 538
Tennessee 2 323 11,187 (4) 1,204
Texas 22 1,903 41,759 (13) 3,745
Utah 1 120 5,600 (4) 461
West Virginia and Pennsylvania (16) 5 400 13,968 (4) 1,607
Wyoming 1 150 5,500 649
Various (17) 15 1,759 44,182 (4) 5,304
Various (18) 17 2,680 96,075 (4) 10,332
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TOTAL LONG-TERM CARE 179 23,158 927,301 103,699
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REHABILITATION HOSPITALS
Arkansas 2 140 17,451 1,999
Arizona 1 80 9,965 1,196
California 5 298 68,899 (14) 8,528
Kansas 1 80 11,649 1,437
Louisiana 2 170 21,920 2,751
Michigan 1 55 7,788 817
New Hampshire 1 128 11,835 1,354
New York 1 30 4,701 493
Tennessee 1 60 8,858 (4) 1,108
Texas 3 200 34,889 4,344
Washington 1 55 5,685 686
Wisconsin 1 109 13,861 1,619
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TOTAL REHABILITATION 20 1,405 217,501 26,332
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Purchase Price Annual Base Rent
Number of Number of or Mortgage Plus Debt Service or
Location Facilities Beds (1) Amount (2) Interest Payment(3)
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(dollars in thousands)
ALCOHOL AND SUBSTANCE
ABUSE TREATMENT FACILITIES
New York 2 354 94,000 10,058
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PSYCHIATRIC HOSPITALS
Arizona 1 114 8,088 (4) 1,012
California 1 61 5,750 719
Louisiana 1 90 8,750 1,050
New York 1 100 30,000 3,363
Texas 2 156 13,420 1,462
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TOTAL PSYCHIATRIC 6 521 66,008 7,606
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RETIREMENT LIVING FACILITIES
Colorado 1 215 15,820 (4) 1,701
Florida 1 182 10,430 (4) 1,025
Texas 1 424 960 (15) 899 (15)
Wyoming 1 161 9,700 1,144
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TOTAL RETIRMENT LIVING 4 982 36,910 4,769
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MEDICAL OFFICE BUILDINGS
California 1 8,201 (19) 656
Florida 1 5,023 (19) 402
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TOTAL MEDICAL OFFICE
BUILDINGS 2 13,224 1,058
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TOTAL ALL FACILITIES (20)(21) 213 26,420 $1,354,944 $153,522
=== ====== ========== ========
(1) Based upon information provided by the operators of the facilities,
the average occupancy of the Company's facilities for the year ended
December 31, 1993, was as follows: long-term care facilities, 90%;
rehabilitation hospitals, 54%; alcohol and substance abuse treatment
facilities, 61%; psychiatric hospitals, 52%; retirement living
facilities, 82%. Generally, average occupancy rates are determined by
dividing the number of patient days in each period by the average
number of licensed bed days during such period.
(2) Represents purchase price or mortgage amount at February 28, 1994 for
operating facilities and the estimated construction loan amount for
facilities under construction. The annual base rentals/interest
payments under the leases or mortgages are generally projected to be
10.0% - 12.5% of the purchase price or mortgage amount, in accordance
with the terms of the respective agreements.
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(3) Base rent excludes additional and percentage rent and interest but
includes an aggregate of $6,868,000 in debt service. Additional and
percentage rent and interest for the year ended December 31, 1993 was
an aggregate of $8,657,000 for all of the facilities. Additional and
percentage rent and interest are calculated based upon a percentage of
a facility's revenues over an agreed upon base amount.
(4) Permanent mortgage loans.
(5) Includes a permanent mortgage loan of $7,301,000.
(6) Includes permanent mortgage loans aggregating $69,158,000.
(7) Includes permanent mortgage loan of $8,432,000
(8) Includes a permanent mortgage loan of $50,500,000.
(9) Includes permanent mortgage loans of $74,292,000.
(10) Includes permanent mortgage loans of $21,494,000.
(11) Includes a permanent mortgage loan of $3,426,000.
(12) Includes a permanent mortgage loan of $9,911,000.
(13) Includes permanent mortgage loans of $36,246,000.
(14) Includes a permanent mortgage loan of $29,911,000.
(15) Fifty percent owned by the Company. The amount shown as annual base
rent represents the Company's partnership distribution received during
the year ended December 31, 1993.
(16) Represents mortgages collateralized by multi-state facilities.
(17) Represents a permanent mortgage on fifteen properties located in nine
states.
(18) Represents a permanent mortgage on seventeen properties located in ten
states.
(19) Construction mortgage loan.
(20) Investments by the Company in facilities operated by The Mediplex
Group, Inc., Life Care Centers of America, Inc., and Continental
Medical Systems, Inc. represented 27.2%, 14.6% and 9.7%, respectively,
of the Company's total assets as of February 28, 1994.
(21) The 28 facilities for which The Mediplex Group, Inc. has guaranteed
the lessee's or borrower's obligations or provided working capital
assurances are located in Massachusetts, Connecticut, New York, New
Jersey, Florida, Michigan and Arkansas and include 22 long-term care
facilities, 3 rehabilitation hospitals, 2 alcohol and substance abuse
treatment facilities and 1 psychiatric hospital.
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Long-Term Care Facilities. The long-term care facilities offer
restorative, rehabilitative and custodial nursing care for patients not
requiring more extensive and sophisticated treatment available at acute care
hospitals. The facilities are designed to provide custodial care and to
supplement hospital care and many have transfer agreements with one or more
acute care hospitals.
Rehabilitation Hospitals. The rehabilitation hospitals provide
treatment to restore physical, psycho-social, educational, vocational and
economic usefulness and independence to disabled persons. Rehabilitation
concentrates on physical disabilities and impairments and utilizes a
coordinated multidisciplinary team approach to help patients attain measurable
goals.
Alcohol and Substance Abuse Treatment Facilities. These facilities
provide inpatient treatment for alcohol and substance abuse, including medical
evaluation, detoxification and rehabilitation. Specialized programs offer
treatment for adults, adolescents, families and chronic abusers.
Psychiatric Hospitals. The psychiatric hospitals offer comprehensive,
multidisciplinary adult, adolescent and substance abuse psychiatric programs.
Patients are evaluated upon admission and an individualized treatment plan is
developed. Elements of the treatment plan include individual, group and family
therapy, activity therapy, educational programs and career and vocational
planning.
Retirement Living Facilities. The retirement living facilities offer
specially designed residential units for active and ambulatory elderly
residents and provide various ancillary services. They contain nursing
facilities to provide a continuum of care. The retirement living facilities
offer their residents an opportunity for an independent lifestyle with a range
of social and health services.
Medical Office Buildings. Medical office building facilities contain
individual physician, physician group and other health care provider offices
for the administration and treatment of patients, usually in close proximity to
the general service acute care hospital to which the physicians are affiliated.
The types of services provided in a medical office building may include
outpatient therapy, clinics, examination facilities and the provision of other
medical services in a non-hospital setting.
LEASES
Each facility (which includes the land, buildings and improvements,
related easements and rights and fixtures (the "Leased Properties")), that is
owned by the Company is leased to a health care provider pursuant to a
long-term net lease (collectively, the "Leases") which generally contains terms
as outlined below. Generally, the Leased Properties do not include major
movable equipment.
The fixed terms of the Leases generally range from 10 to 20 years and
contain from two to nine five-year renewal options. Some Leases are subject to
earlier termination upon the occurrence of certain contingencies described in
the Lease.
The Company's Leased Properties aggregated approximately $686,000,000
of gross real estate investments at December 31, 1993. The base rents range
from approximately 10% to 15% per annum of the Company's equity investment in
the Leased Properties and many may be adjusted upward during the terms of the
leases to an amount equal to 300 to 500 basis points over the five-year United
States Treasury securities' yield at the time of adjustment. The base rents
for the renewal periods are generally fixed rents for the initial renewal
periods and market rates for later renewal periods. All Leases, except for two
facilities located in New York, provide for additional rents in addition to the
base rent, based on revenues exceeding specified base revenues. The rents for
these two facilities are subject to periodic
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fixed increases. In addition, the Company typically charges a lease commitment
fee at the initiation of the sale/leaseback transaction.
Each Lease is a net lease requiring the lessee to pay rent and all
additional charges incurred in the operation of the Leased Property. The
lessees are required to repair, rebuild and maintain the Leased Properties.
The obligations under the Leases are guaranteed by the parent
corporation of the lessee, if any, or affiliates or individual principals of
the lessee. Some obligations are further backed by letters of credit, security
deposits or certificates of deposit from various financial institutions which
cover up to one full year's lease payments and which remain in effect until the
expiration of a fixed time period or the fulfillment of certain performance
criteria. The Company also may obtain other credit enhancement devices similar
to those it may obtain with respect to permanent mortgage loans. See
"Permanent Mortgage Loans."
With respect to two of the facilities, the Company leases the land
pursuant to ground leases and in turn subleases the land to the operator of the
facility. Such subleases contain substantially similar terms as the Leases.
PERMANENT MORTGAGE LOANS
The Company's permanent mortgage loan program is comprised of secured
loans which are structured to provide the Company with interest income,
additional interest based upon the revenue growth of the operating facility,
principal amortization and commitment fees. Virtually all of the approximately
$589,000,000 of permanent mortgage loans as of December 31, 1993 are first
mortgage loans.
The interest rates on the Company's investments in permanent mortgage
loans for operating facilities ranged from 10.0% to 13.5% per annum on the
outstanding balances. The yield to the Company on permanent mortgage loans
depends upon a number of factors, including the stated interest rate, average
principal amount outstanding during the term of the loan, the amount of the
commitment fee charged at the inception of the loan, the interest rate
adjustments and the additional interest earned in the revenue growth of the
operating facility.
The permanent mortgage loans for operating facilities made through
December 31, 1993 are generally subject to 10-year terms that provide for a
balloon payment on the outstanding principal balance at the end of the tenth
year. The interest adjustment generally provides for interest to be charged at
the greater of the current interest rate or 300 to 450 basis points over the
five- year United States Treasury securities' yield at the time of adjustment.
-13-
14
The Company generally requires a variety of additional forms of security
and collateral beyond that which is provided by the lien of the mortgage. For
example, the Company requires one or more of the following items: (a) a
guaranty of the complete payment and performance of all obligations associated
with each mortgage loan from the borrower's parent corporation, if any, other
affiliates of the borrower and/or one or more of the individual principals
controlling such borrower; (b) a collateral assignment from the borrower of the
leases and the rents relating to the mortgaged property; (c) a collateral
assignment from the borrower of all permits, licenses, approvals and contracts
relating to the operation of the mortgaged property; (d) a pledge of all, or
substantially all, of the equity interest held in the borrower; (e) cash
collateral or a pledge of a certificate of deposit, for a negotiated dollar
amount typically equal to at least one year's principal and interest on the
loan (which cash collateral or pledge of certificate of deposit typically
remains in effect until the later to occur of (i) three years after the closing
of the mortgage loan or (ii) the achievement by the facility of an agreed-upon
cash flow debt coverage ratio for three consecutive fiscal quarters and, in the
event that after the expiration of the letter of credit or pledge of
certificate of deposit, the agreed-upon financial covenants are not maintained
throughout the loan term, the borrower is often required to provide the Company
with cash collateral or pledge of certificate of deposit); (f) an agreement by
any affiliate of the borrower or the facility to subordinate all payments due
to it from the borrower to all payments due to the Company under the mortgage
loan; and (g) a security interest in all of the borrower's personal property,
including, in some instances, the borrower's accounts receivable. In addition,
the mortgage loans are generally cross-defaulted and cross-collateralized with
any other mortgage loans, leases or other agreements between the borrower or an
affiliate of the borrower and the Company.
DEVELOPMENT MORTGAGE LOANS
The Company makes development mortgage loans that by their terms convert
either into sale/leaseback transactions or permanent mortgage loans upon the
completion of development of the facilities. Generally, the interest rates on
the outstanding balances of the Company's development mortgage loans are the
greater of a base rate or 75 to 550 basis points over the prime rate of a
specified financial institution. The Company also typically charges a
commitment fee at the commencement of the loan. The development loan period
generally commences upon the funding of such loans and terminates upon the
earlier of (a) the completion of development of the applicable facility or (b)
a specific date. This period is generally 12 to 18 months. During the term of
the development loan, funds are advanced pursuant to draw requests made by the
borrower in accordance with the terms and conditions of the applicable loan
agreement which require a site visit prior to the advancement of funds.
Monthly payments of interest only are made on the total amount of the loan
proceeds advanced during the development period.
-14-
15
Since it began its development mortgage loan program in August 1987, the
Company has funded the development of ten rehabilitation hospitals, six
long-term care facilities and one retirement living facility. These
facilities, subsequently converted into sale/leaseback transactions, represent
an investment of approximately $140,606,000 as of December 31, 1993. The
Company had advanced approximately $11,477,000 towards a commitment of
$13,896,000 of development mortgage loans in conjunction with the development
of additions to three additional long-term care facilities as of December 31,
1993. These development loans convert automatically into sale/leaseback
transactions upon completion of the facility. Simultaneously with the
commencement of the term of each of these development loans, the Company has
generally entered into a purchase and sale and lease agreement with the
borrower pursuant to which (a) the Company will purchase the facility upon
completion of the development for purchase prices ranging from (i) a stated
maximum price that is generally equal to the face amount of the development
mortgage loan to (ii) the actual cost of developing the facility plus an amount
equal to the sum of specified "soft costs" items associated with such
development and (b) upon such sale the borrower will immediately lease back the
facility from the Company. The base rent under the lease is established upon
the conclusion of the development loan period at the greater of (i) a rate
specifically agreed to at the time of the issuance of the commitment for the
loan or (ii) 300 to 450 basis points over the five-year United States Treasury
securities' yield at the time of adjustment. See "Leases."
The Company has also funded since inception the development of two
rehabilitation hospitals, eight long-term care facilities and one retirement
living facility that were converted to permanent mortgage loans, representing
an investment of approximately $104,788,000 as of December 31, 1993. The
Company had advanced approximately $4,663,000 towards a total commitment of
$10,335,000 of development mortgage loans in conjunction with the development
of two additional long-term care facilities as of December 31, 1993. These
development mortgage loans convert automatically into permanent mortgage loans
upon completion of the facility and the balance, if any, of the principal
amount of the loan is advanced to the borrower. The interest rate of the loans
is adjusted upon their conversion to permanent status to be the greater of (i)
a rate specifically agreed to at the time of the issuance of the commitment for
the loan or (ii) 300 to 350 basis points over the five-year United States
Treasury securities' yield at the time of adjustment. The other terms and
conditions of such loans generally are substantially similar to the Company's
permanent mortgage loans. See "Permanent Mortgage Loans."
As with the Company's permanent mortgage financing program, the
development mortgage loans generally include a variety of additional forms of
security and collateral beyond that which is provided by the lien of the
mortgage. See "Permanent Mortgage Loans." During the development loan period,
the Company generally requires additional security and collateral in the form
of either (a) payment and performance completion bonds or (b) completion
guarantees by either one, or a combination of, the borrower's parent entity,
other affiliates of the borrower or one or more of the individual principals
who control the borrower. In addition, prior to any advance of funds by the
Company under the development mortgage loan, the borrower must provide (a)
satisfactory evidence in the form of an endorsement to the Company's title
insurance policy for the loan that no intervening liens have been placed on the
property since the date of the Company's previous advance; (b) a certificate
executed by the architect for the project that indicates that all construction
work completed on the project conforms with the requirements of the applicable
plans and specifications; (c) a certificate executed by the general contractor
that all work requested for reimbursement by the borrower has been completed;
and (d) satisfactory evidence that the funds remaining unadvanced under the
loan are sufficient for the payment of all costs necessary for the completion
of the project in accordance with the terms and provisions of the applicable
loan agreement.
-15-
16
As a further safeguard during the development loan period, the Company
generally will retain a portion of the loan proceeds equal to 10% of the
principal loan amount until it has received satisfactory evidence that the
project has been fully completed in accordance with the applicable plans and
specifications and the period during which liens may be perfected with respect
to any work performed, or labor or materials supplied, in connection with the
construction of the project has expired. The Company also monitors the
progress of the development of each project and the accuracy of the borrower's
draw requests by having its own inspector perform on- site inspections of the
project prior to the release of any requested funds.
Item 3.
LEGAL PROCEEDINGS
NONE.
Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following information relative to the Company's executive officers
is given as of February 28, 1994:
Name Age Position with the Company
---- --- -------------------------
Abraham D. Gosman 65 Chairman, Chief Executive
Officer and Trustee
David F. Benson 44 President and Trustee
Michael F. Bushee 36 Senior Vice President of Operations
Michael S. Benjamin 36 Senior Vice President, Secretary
and General Counsel
Lisa M. Pavelka 30 Vice President and Treasurer
Stephen H. Press 57 Vice President of Acquisitions
C. Michael Ford 55 Vice President of Marketing
Keith E. Grant 53 Controller
-16-
17
Abraham D. Gosman has been Chairman of the Company since its
organization in 1985 and became Chief Executive Officer in February 1991. He
had been Chief Executive Officer of A.M.A. Advisory Corp., the Company's former
advisor (the "Advisor"), from June 1988 until February 1991 and President of
the Advisor from its incorporation until July 1988. From August 1989 until
April 12, 1991, Mr. Gosman had been Chief Executive Officer of Diamond
Treatment Centers, Inc. ("Diamond") and, until he resigned in March 1991, each
of its subsidiaries, which own and operate alcohol treatment facilities. On
April 12, 1991, involuntary proceedings under Chapter 11 of the Federal
Bankruptcy Code were filed against Diamond and each of its subsidiaries, to
which filing such companies consented on April 24, 1991. Mr. Gosman was the
Chief Executive Officer of The Mediplex Group, Inc. ("Mediplex"), an operator
and developer of health care facilities, from its incorporation in 1983 until
September 1988. After the acquisition of Mediplex in August 1990 by a company,
the majority of whose stock was owned by Mr. Gosman, Mr. Gosman again assumed
the position of Chief Executive Officer and Chairman of the Board of Mediplex.
Mr. Gosman has been in the health care and development business for more than
thirty years.
David F. Benson has been President of the Company since September 1991
and was Treasurer of the Company from January 1986 to May 1992. He was
Treasurer of Mediplex from January 1986 through June 1987. He was previously
associated with Coopers & Lybrand, independent accountants, from 1979 to 1985.
Michael F. Bushee has been Senior Vice President of Operations of the
Company since October 1993. He was Vice President from December 1989 to
October 1993, Director of Development from January 1988 to December 1989 and
has been associated with the Company since July 1987. He was previously
associated with The Stop & Shop Companies, Inc., a retailer of food products
and general merchandise, for three years and Wolf & Company, P.C., independent
accountants, for four years.
Michael S. Benjamin has been Senior Vice President, Secretary and
General Counsel of the Company since October 1993. He was Vice President,
Secretary and General Counsel from May 1992 to October 1993, Secretary and
General Counsel from December 1990 to May 1992 and Assistant Counsel to the
Company from November 1989 to December 1990. His previous association was with
the law firm of Brown, Rudnick, Freed & Gesmer, from 1983 to 1989.
Lisa M. Pavelka has been Vice President of the Company since October
1993 and Treasurer since May 1992. She was Controller from December 1990 to May
1992 and Assistant Controller of the Company from November 1988 to December
1990. She was previously associated with Arthur Andersen & Co., independent
accountants, from 1985 to 1988.
Stephen H. Press has been Vice President of Acquisitions of the Company
since October 1993 and previously held this position with the Company from June
1987 to December 1990. He was Vice President of Development and Regulatory
Affairs for Integrated Health Services, Inc., a medical services company, from
April 1991 to October 1993.
C. Michael Ford has been Vice President of Marketing of the Company since
October 1993. He previously was Chairman of the Board and Chief Executive
Officer of Montpelier Corporation, a health care consulting company, from
December 1990 to October 1993. He was previously associated with Charter
Medical Corporation, an acute care and psychiatric hospital management company,
from 1976 to 1990.
-17-
18
Keith E. Grant has been Controller of the Company since May 1992. He was
Director of Operations Management of the Company from January 1990 to May 1992.
He was previously associated with New MediCo Holding Co., Inc., an operator of
health care facilities, from September 1989 to December 1989 and Damon
Corporation, a health care company, from August 1971 to August 1989.
-18-
19
PART II
Item 5.
MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
(a) The Shares are traded on the New York Stock Exchange under the
symbol MT. The following table sets forth for periods shown the high and low
sale prices for the Shares as reported on the New York Stock Exchange composite
tape.
High Low
---- ----
1992
First Quarter . . . . . . . . . . $31.250 $25.500
Second Quarter . . . . . . . . . . 28.500 25.375
Third Quarter . . . . . . . . . . 30.000 27.625
Fourth Quarter . . . . . . . . . . 31.375 28.250
1993
First Quarter . . . . . . . . . . $34.000 $29.125
Second Quarter . . . . . . . . . . 33.750 30.250
Third Quarter . . . . . . . . . . 34.625 31.875
Fourth Quarter . . . . . . . . . . 34.250 31.250
1994
First Quarter
(through February 28, 1994) . . . $33.750 $31.375
(b) As of February 28, 1994, there were 3,942 holders of record of
the Shares.
(c) The Company has declared the following dividends during its two
most recent fiscal years:
Dividends
Period Declared Per Share
------ ------------------
Quarter Ended March 31, 1992 . . . . . . . . . . . . . . $ .6075
Quarter Ended June 30, 1992 . . . . . . . . . . . . . . . .6125
Quarter Ended September 30, 1992 . . . . . . . . . . . . .6175
Quarter Ended December 31, 1992 . . . . . . . . . . . . . .6225
-------
$2.4600
=======
Quarter Ended March 31, 1993 . . . . . . . . . . . . . . $ .6275
Quarter Ended June 30, 1993 . . . . . . . . . . . . . . .6325
Quarter Ended September 30, 1993 . . . . . . . . . . . . .6375
Quarter Ended December 31, 1993 . . . . . . . . . . . . . .6425
-------
$2.5400
=======
-19-
20
The Company intends to distribute to its shareholders on a quarterly
basis a majority of cash flow from operating activities available for
distribution. Cash flow from operating activities available for distribution
to shareholders of the Company will be derived primarily from the rental
payments and interest payments derived from its real estate investments. All
distributions will be made by the Company at the discretion of the Trustees and
will depend on the earnings of the Company, its financial condition and such
other factors as the Trustees deem relevant. In order to qualify for the
beneficial tax treatment accorded to real estate investment trusts by Sections
856 to 860 of the Internal Revenue Code, the Company is required to make
distributions to holders of its Shares which actually will be of at least 95%
of the Company's "real estate investment trust taxable income".
-20-
21
Item 6.
SELECTED FINANCIAL INFORMATION
The following table presents selected financial information with respect
to the Company for each of the five years in the period ended December 31,
1993. This financial information has been derived from financial statements
included elsewhere in this Form 10-K and should be read in conjunction with
those financial statements and accompanying footnotes.
Year Ended December 31,
-----------------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(In thousands except per Share data)
OPERATING DATA:
Revenues $ 150,826 $132,394 $112,910 $89,121 $71,601
--------- -------- -------- ------- -------
Expenses:
Interest expense . . . . . . . . . 62,193 58,159 56,886 43,494 34,614
Depreciation and amortization . . 16,277 14,032 13,185 10,821 9,625
General and administrative expenses 8,720 8,845 4,930 5,824 5,847
--------- -------- -------- ------- -------
Total expenses . . . . . . . . . 87,190 81,036 75,001 60,139 50,086
--------- -------- -------- ------- -------
Net income before extraordinary item 63,636 51,358 37,909 28,982 21,515
Loss on prepayment of debt --------- -------- 3,684 ------- -------
Net income . . . . . . . . . . . . . $ 63,636 $ 51,358 $ 34,225 $28,982 $21,515
========= ======== ======== ======= =======
Shares of beneficial interest
(weighted average) . . . . . . . . 31,310 26,360 21,710 18,409 15,721
PER SHARE DATA:
Net income before extraordinary item $2.03 $1.95 $1.75 $1.57 $1.37
Net income . . . . . . . . . . . . . 2.03 1.95 1.58 1.57 1.37
Dividends paid(1) . . . . . . . . . . 2.54 2.46 2.38 2.33 2.09
December 31,
-----------------------------------------------------------
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
(in Thousands)
BALANCE SHEET DATA:
Real estate investments, net . . . . $ 1,214,308 $1,021,630 $842,518 $746,517 $647,104
Total assets . . . . . . . . . . . . 1,310,401 1,094,941 928,254 821,741 681,638
Long-term obligations . . . . . . . . 658,245 606,585 463,695 512,010 417,039
Total liabilities . . . . . . . . . . 724,606 663,458 500,736 548,378 459,885
Total shareholders' equity . . . . . 585,795 431,483 427,518 273,363 221,753
(1) Dividends, used in this context, include distributions in excess of current
or accumulated net income.
-21-
22
Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Year Ended December 31, 1993 vs. Year Ended December 31, 1992
Revenues for the year ended December 31, 1993 were $150,826,000 compared
to $132,394,000 for the year ended December 31, 1992, an increase of
$18,432,000 or 14%. Revenue growth resulted from increased rental income of
$10,776,000 and increased interest income of $7,656,000 as a result of
additional real estate investments made during the past year.
For the year ended December 31, 1993, total expenses increased by
$6,154,000. Interest expense increased by $4,034,000 and resulted primarily
from the issuance of convertible debentures in February and November 1993 which
was partially offset by the prepayment of senior debt in December 1992.
Depreciation and amortization increased by $2,245,000 primarily due to
depreciation of the additional real estate investments made during the past
year. Other expenses decreased by $125,000 principally attributable to lower
administrative expenses.
Year Ended December 31, 1992 vs. Year Ended December 31, 1991
Revenues for the year ended December 31, 1992 were $132,394,000 compared
to $112,910,000 for the year ended December 31, 1991, an increase of
$19,484,000 or 17%. This increase is primarily the result of increased
interest income of $19,259,000 from additional mortgage investments made during
the year. Additional rent and interest increased approximately $2,222,000 or
41% from $5,399,000 in 1991 to $7,621,000 in 1992. Interest earned on
investments decreased in 1992 by $3,005,000 resulting from a higher level of
investment cash available from an equity offering in the second quarter of
1991. Other revenues increased by approximately $1,008,000.
For the year ended December 31, 1992, total expenses increased
$6,035,000. Interest expense increased by $1,273,000, resulting from the
issuance of $100,000,000 of convertible debentures in April 1992 and was
partially offset by the secured debt prepayment of $57,000,000 in December
1991. Depreciation and amortization increased by $847,000, principally due to
increased amortization expense of other assets. Other expenses increased by
$3,915,000, principally due to a higher level of operating costs associated
with the portfolio growth and the issuance of Shares for executive
compensation, a non-cash expense of $1,220,000.
-22-
23
Liquidity and Capital Resources
The Company provides funding for its investments through a combination
of long-term and short-term financing including both debt and equity. The
Company obtains long-term financing through the issuance of Shares, the
issuance of long-term secured and unsecured notes, the issuance of convertible
debentures and the assumption of mortgage notes. The Company obtains
short-term financing through the use of bank lines of credit which are replaced
with long-term financing as appropriate. It is the Company's objective to
match the mortgage and lease terms with the terms of its borrowings. The
Company seeks to maintain an appropriate spread between its borrowing costs and
the rate of return on its investments. When development mortgage loans convert
to sale/leaseback transactions or permanent mortgage loans, the base rent or
interest rate, as appropriate, is fixed at the time of such conversion.
In February 1993, the Company completed the sale of 3,277,500 Shares at
$30.63 per Share and issued $92,120,000 of 7% convertible debentures due 1998.
The Company used the proceeds to repay short-term borrowings and for
investments in additional health care facilities.
In November 1993, the Company issued $86,250,000 of 6 7/8% convertible
debentures due 1998. The Company used the proceeds to repay short-term
borrowings and for investments in additional health care facilities.
As of February 28, 1994, the Company's gross real estate investments
totaled approximately $1,338,599,000 including 179 long- term care facilities,
20 rehabilitation hospitals, two alcohol and substance abuse treatment
facilities, six psychiatric hospitals, three retirement living facilities and
two medical office buildings. The Company has shareholders' equity of
approximately $590,313,000 and a total debt to equity ratio of approximately
1.2 to 1.0 as of February 28, 1994.
The Company has an unsecured line of credit of $130,000,000 bearing
interest at the lender's prime rate or LIBOR plus 1.5%, of which $16,000,000 is
available at February 28, 1994. As of February 28, 1994, the Company had
outstanding funding commitments of approximately $20,038,000 for the completion
of four facilities under construction and for additions to seven existing
facilities.
The Company believes that its various sources of capital resources are
adequate to finance its operations as well as pending property acquisitions,
mortgage financings and future dividends. For the balance of 1994, however, in
the event that the Company identifies appropriate investment opportunities, the
Company may raise additional capital through the sale of shares of beneficial
interest or by the issuance of additional long-term debt.
-23-
24
Item 8.
FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . F-2
Financial Statements
- --------------------
Consolidated Balance Sheets as of December 31, 1993 and 1992 . . . . . . . . . . F-3
Consolidated Statements of Income for the years ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Changes in Shareholders'
Equity for the years ended December 31, 1993, 1992 and 1991 . . . . . . . F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991 . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . F-8
Financial Statement Schedules
- -----------------------------
Report of Independent Accountants on Financial Statement Schedules . . . . . . . S-1
VIII. Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . S-2
XI. Real Estate and Accumulated Depreciation . . . . . . . . . . . . . . . . . S-3
XII. Mortgage Loans on Real Estate . . . . . . . . . . . . . . . . . . . . . . S-6
F-1
25
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Trustees of Meditrust:
We have audited the accompanying consolidated balance sheets of
Meditrust as of December 31, 1993 and 1992, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Meditrust at December 31, 1993 and 1992, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1993, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND
Boston, Massachusetts
March 10, 1994
F-2
26
MEDITRUST
CONSOLIDATED BALANCE SHEETS
December 31,
-------------------------------
1993 1992
-------- --------
(In thousands)
ASSETS
Real estate investments:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 48,257 $ 42,836
Buildings and improvements, net of
accumulated depreciation of $73,294
and $59,150, respectively (Notes 3 and 6) . . . . . . 564,345 446,978
Real estate mortgages (Note 4) . . . . . . . . . . . . . 601,706 531,816
---------- ----------
Total real estate investments . . . . . . . . . . . 1,214,308 1,021,630
Other assets, net . . . . . . . . . . . . . . . . . . . . . . 66,862 36,551
Short-term cash investments . . . . . . . . . . . . . . . . . 16,306 24,858
Fees, interest and other receivables (Note 7) . . . . . . . . 12,925 11,902
---------- ----------
Total assets . . . . . . . . . . . . . . . . . . . . $1,310,401 $1,094,941
========== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Indebtedness (Note 6):
Senior unsecured notes payable, net . . . . . . . . . . . $ 297,155 $ 296,476
Senior mortgage notes payable, net . . . . . . . . . . . . 31,804 75,167
Convertible debentures, net . . . . . . . . . . . . . . . 199,822 93,356
Bank notes payable, net . . . . . . . . . . . . . . . . . 69,375 80,780
Bonds and mortgages payable, net . . . . . . . . . . . . . 60,089 60,806
---------- ----------
Total indebtedness . . . . . . . . . . . . . . . . . 658,245 606,585
Deferred income . . . . . . . . . . . . . . . . . . . . . . . 14,468 14,910
Accrued expenses and other liabilities . . . . . . . . . . . 51,893 41,963
---------- ----------
Total liabilities . . . . . . . . . . . . . . . . . 724,606 663,458
---------- ----------
Commitments and contingencies (Note 4)
Shareholders' equity (Notes 5, 6 and 12):
Shares of Beneficial Interest without par value:
Unlimited Shares authorized; 32,836
and 26,767 Shares issued and
outstanding in 1993 and 1992, respectively . . . . . 666,220 497,222
Distributions in excess of net income . . . . . . . . . (80,425) (65,739)
---------- ---------
Total shareholders' equity . . . . . . . . . . . . . 585,795 431,483
---------- ---------
Total liabilities and shareholders' equity . . . . . $1,310,401 $1,094,941
========== =========
The accompanying notes are an integral part of these financial statements.
F-3
27
MEDITRUST
CONSOLIDATED STATEMENTS OF INCOME
For The Year Ended December 31,
----------------------------------------------
1993 1992 1991
----------- ----------- -------------
(In thousands except per Share data)
Revenues:
Rental income (Note 7) . . . . . . . . . . . $ 80,455 $ 69,679 $ 68,628
Interest income . . . . . . . . . . . . . . . 70,371 62,715 44,282
--------- -------- --------
Total revenues . . . . . . . . . 150,826 132,394 112,910
--------- -------- --------
Expenses:
Interest expense . . . . . . . . . . . . . . 62,193 58,159 56,886
Depreciation and amortization . . . . . . . . 16,277 14,032 13,185
General and administrative (Note 7) . . . . . 8,720 8,845 4,930
--------- -------- --------
Total expenses . . . . . . . . . 87,190 81,036 75,001
--------- -------- --------
Net income before extraordinary item . . . . . . 63,636 51,358 37,909
Loss on prepayment of debt (Note 6) . . . . . . 3,684
--------- -------- --------
Net income . . . . . . . . . . . . . . . . . . . $ 63,636 $ 51,358 $ 34,225
========= ======== ========
Net income before extraordinary item per Share
of Beneficial Interest . . . . . . . . . . . $ 2.03 $ 1.95 $ 1.75
Net income per Share of Beneficial Interest . . . 2.03 1.95 1.58
Weighted average Shares of Beneficial
Interest outstanding . . . . . . . . . . . . . 31,310 26,360 21,710
The accompanying notes are an integral part of these financial statements.
F-4
28
MEDITRUST
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Shares Amount
--------- ------------
(In thousands
except per Share data)
Balance, December 31, 1990 . . . . . . . . . . . . . . . . . . . . . 18,722 $273,363
Proceeds from issuance of Shares of Beneficial
Interest, net of offering costs of $6,089 . . . . . . . . . . . . 6,880 161,604
Issuance of Shares of Beneficial Interest for
purchase of A.M.A. Advisory Corp. (Note 7) . . . . . . . . . . . 342 8,005
1991 Dividends paid during 1991 ($2.38 per Share) . . . . . . . . . . (49,679)
Net income for the year ended December 31, 1991 . . . . . . . . . . 34,225
------ --------
Balance, December 31, 1991 . . . . . . . . . . . . . . . . . . . . . 25,944 427,518
Issuance of Shares of Beneficial Interest associated with:
Conversion of debentures . . . . . . . . . . . . . . . . . . . . . 114 3,075
Exercise of warrants . . . . . . . . . . . . . . . . . . . . . . . 486 9,712
Employee compensation . . . . . . . . . . . . . . . . . . . . . . 223 4,750
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (86)
1992 Dividends paid during 1992 ($2.46 per Share) . . . . . . . . . . (64,844)
Net income for the year ended December 31, 1992 . . . . . . . . . . . 51,358
------ --------
Balance, December 31, 1992 . . . . . . . . . . . . . . . . . . . . . 26,767 431,483
Proceeds from issuance of Shares of Beneficial
Interest, net of offering costs of $5,135 . . . . . . . . . . 3,277 95,239
Issuance of Shares of Beneficial Interest associated with:
Conversion of debentures, net of unamortized issue costs of $2,414 2,508 67,263
Exercise of warrants . . . . . . . . . . . . . . . . . . . . . 182 3,646
Employee compensation . . . . . . . . . . . . . . . . . . . . 102 2,851
1993 Dividends paid during 1993 ($2.54 per Share) . . . . . . . . (78,323)
Net income for the year ended December 31, 1993 . . . . . . . . . 63,636
------ --------
Balance, December 31, 1993 . . . . . . . . . . . . . . . . . . . 32,836 $585,795
====== ========
The accompanying notes are an integral part of these financial statements.
F-5
29
MEDITRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Year Ended December 31,
---------------------------------------
1993 1992 1991
-------- -------- --------
(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . $ 63,636 $ 51,358 $34,225
Depreciation, amortization and provision for
losses . . . . . . . . . . . . . . . . . . . . . 28,422 16,020 14,982
Gain on sale of real estate and mortgage
prepayments . . . . . . . . . . . . . . . . . . . (8,005)
Loss on prepayment of debt . . . . . . . . . . . . . 3,684
Other items, net . . . . . . . . . . . . . . . . . . 778 564 1,059
---------- -------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
AVAILABLE FOR DISTRIBUTION . . . . . . . . . . . . . . 84,831 67,942 53,950
Net change in other assets and liabilities (Note 2) . (5,540) 7,916 (9,656)
--------- -------- --------
Net cash provided by operating activities . . . 79,291 75,858 44,294
---------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from convertible debentures . . . . . . . . 178,370 100,000
Proceeds from bank notes . . . . . . . . . . . . . . 100,000 75,000
Payment of senior mortgage notes payable . . . . . . (43,800) (32,600) (57,200)
Debt prepayment and issuance costs . . . . . . . . . (5,483) (4,541) (4,338)
Payments of bank note payable . . . . . . . . . . . (130,000)
Proceeds from bonds and mortgages payable.... . . . 8,300
Principal payments on bonds and mortgages payable . (868) (662) (560)
Distributions to shareholders . . . . . . . . . . . (78,323) (64,844) (49,679)
Proceeds from equity offering . . . . . . . . . . . 100,374 166,244
Equity offering costs . . . . . . . . . . . . . . . (5,135) (97) (6,089)
Proceeds from warrant conversions and stock options 5,671 13,253 1,449
---------- -------- --------
Net cash provided by financing activities . . . 120,806 85,509 58,127
---------- -------- --------
The accompanying notes are an integral part of these financial statements.
F-6
30
MEDITRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS, continued
For The Year Ended December 31,
--------------------------------------
1993 1992 1991
------- -------- --------
(In thousands)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of real estate . . . . . . . . . . . $ (18,272) $ (6,520) $(15,886)
Investment in real estate mortgages and
development funding . . . . . . . . . . . . . (210,295) (208,092) (135,933)
Prepayment proceeds and principal payments on real
estate mortgages and note . . . . . . . . . . 42,045 27,228 3,200
Proceeds from sale of real estate . . . . . . . . 5,194
Repayment of construction loan advances . . . . . 41,053
Acquisition of receivables and working
capital advances . . . . . . . . . . . . . . . (47,153)
Collection of receivables and repayment of working
capital advances . . . . . . . . . . . . . . . 19,832
Decrease in committed funds. . . . . . . . . . . 33,958 8,416
--------- -------- --------
Net cash used in investing activities . . (208,649) (153,426) (99,150)
--------- -------- --------
Net (decrease) increase in
short-term cash investments . . . . . . (8,552) 7,941 3,271
Short-term cash investments at:
Beginning of year . . . . . . . . . . . . . . . 24,858 16,917 13,646
--------- -------- --------
End of year . . . . . . . . . . . . . . . . . . $ 16,306 $ 24,858 $ 16,917
========= ======== ========
Supplemental disclosure of cash flow information:
Interest paid during the period . . . . . . . . . . . $ 59,746 $ 51,600 $ 55,383
Non-cash investing and financing transactions:
Acquisition and lease of real estate:
Value of real estate acquired . . . . . . . . . 106,566 22,500
Reduction of real estate mortgage . . . . . . . (88,493) (15,843)
Issuance of demand note payable . . . . . . . . (18,073) (6,657)
Shares issued for:
Purchase of A.M.A. Advisory Corp. . . . . . . . 8,005
Executive compensation . . . . . . . . . . . . 826 1,220
Conversion of debentures . . . . . . . . . . . 69,677 3,075
The accompanying notes are an integral part of these financial statements.
F-7
31
MEDITRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Meditrust (the "Company"), a real estate investment trust, invests in the
sub-acute sector of the health care industry, including long-term care
facilities, rehabilitation hospitals, and other sub-acute health care related
facilities. These facilities are located throughout the United States and are
operated by regional and national health care providers. The Company's more
significant accounting policies follow:
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiaries and its majority- owned partnerships
after the elimination of all significant intercompany accounts and
transactions. The Company uses the equity method of accounting for its 50%
ownership in a limited partnership.
Real Estate Investments
Land, buildings and improvements are stated at cost. Depreciation is
provided for on a straight-line basis over 40 years, the expected useful lives
of the buildings and improvements. The Company provides reserves for potential
losses based upon management's periodic review of its portfolio and such
reserves are included in accrued expenses and other liabilities.
Capitalization of Construction Period Interest
The Company capitalizes interest costs associated with funds used to
finance the construction of facilities. The amount capitalized is based upon
the borrowings outstanding during the construction period using the rate of
interest which approximates the Company's cost of financing.
Short-term Cash Investments
Short-term cash investments consist of certificates of deposit and
other investments with less than 90-day maturities at time of purchase and are
stated at cost which approximates fair value.
Other Assets
Other assets includes cash restricted for specified disbursement in
accordance with certain facility acquisitions and mortgage financings. The
corresponding liabilities are reflected in accrued expenses and other
liabilities.
Other assets also includes goodwill associated with the acquisition of
the Company's previous investment advisor which is being amortized on a
straight-line basis over a ten year period and facilities' operating
receivables and working capital advances.
F-8
32
MEDITRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
Debt Issuance Costs
Debt issuance costs have been deferred and are being amortized using
primarily the effective interest method over the term of the related
borrowings.
Revenue Recognition
Rental income from operating leases is recognized as earned over the
life of the lease agreements. Interest income on real estate mortgages is
recognized on the accrual basis. Deferred income consists principally of fees
which are being amortized over the fixed term of the lease, construction period
or mortgage related to such facilities.
Net Income Per Share
Net income per Share of Beneficial Interest ("Shares") is computed using
the weighted average number of Shares outstanding during the year of
computation.
Income Taxes
The Company has elected to be taxed as a real estate investment trust
under the Internal Revenue Code of 1986, as amended, and believes it has met
all the requirements for qualification as such. Accordingly, the Company will
not be subject to federal income taxes on amounts distributed to shareholders,
provided it distributes annually at least 95% of its real estate investment
trust taxable income and meets certain other requirements for qualifying as a
real estate investment trust. Therefore, no provision for federal income taxes
is believed necessary in the financial statements.
Reclassifications
Certain reclassifications have been made in the prior years'
consolidated financial statements to conform with the current year's
presentation.
F-9
33
MEDITRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
2. SUPPLEMENTAL CASH FLOW INFORMATION
Details of net change in other assets and liabilities (excluding
non-cash items, deferred income recognized in excess of cash received and
changes in restricted cash and related liabilities) follow:
For The Year Ended December 31,
--------------------------------------
1993 1992 1991
-------- --------- ---------
(In thousands)
Increase in fees, interest and
other receivables . . . . . . . . . . . . . . . . $(1,705) $(3,904) $ (6,157)
Increase in other assets . . . . . . . . . . . . . (1,630) (83) (7,144)
Increase in deferred income . . . . . . . . . . . . 2 2,314 4,122
Increase (decrease) in accrued
expenses and other liabilities . . . . . . . . (2,207) 9,589 (477)
-------- ------ ---------
$(5,540) $7,916 $ (9,656)
======== ====== =========
3. REAL ESTATE INVESTMENTS
During 1993, the Company funded $8,000,000 for the purchase of a
rehabilitation facility located in Arkansas and capitalized additional costs of
$10,272,000 relating to thirteen facilities located in eight states. Also
during 1993, the Company received proceeds of $5,194,000 from the sale of a
long-term care facility located in Washington.
Depreciation of real estate amounted to $14,548,000, $12,250,000 and
$11,992,000 for the years ended December 31, 1993, 1992 and 1991, respectively.
Minority interest in the equity of the majority-owned (94%) partnerships
relating to the Company's investment in seven rehabilitation facilities is
$2,661,000 and $2,686,000 as of December 31, 1993 and 1992 and is included in
accrued expenses and other liabilities in the consolidated financial
statements.
4. REAL ESTATE MORTGAGES
During 1993, the Company provided permanent mortgage financing of
approximately $181,908,000 for 26 long-term care facilities, one rehabilitation
facility and one retirement living facility, which are located in 13 states and
for additions to four facilities having permanent mortgage loans. During 1993,
the Company also provided ongoing construction financing of $12,290,000 for
three long-term care facilities and for additions to two existing long-term
care facilities. Also during 1993, the Company provided ongoing development
funding of $16,097,000, resulting in aggregate funding of $33,963,000 for four
long-term care facilities located in three states. Construction of these
facilities was completed and development mortgage loans totaling $16,969,000
were converted to permanent mortgage loans and development mortgage loans
totaling $16,994,000 were converted into sale/leaseback transactions.
F-10
34
MEDITRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
During 1993, the Company received proceeds amounting to $37,383,000 from
the prepayment of permanent mortgage loans on five long-term care facilities
located in Massachusetts and two long-term care facilities located in
Connecticut and collected principal payments of $4,662,000 on mortgage loans.
During the year ended December 31, 1993, the Company entered into a
series of transactions with a prior operator of certain rehabilitation and
long-term care facilities financed by the Company. As a result of these
transactions, the Company acquired for $99,763,000 five rehabilitation and four
long-term care facilities (located in New York, Massachusetts, Michigan, New
Hampshire, Wisconsin and Washington), reduced existing mortgage loans by
$81,690,000, reduced a related bank participation in one of the mortgage loans
by $18,073,000, acquired from operators of certain facilities operating
receivables and provided advances under a working capital line. Amounts
associated with the receivables and advances under the working capital line are
included in other assets at December 31, 1993. Also in connection with these
transactions, the Company leased eight of these facilities to four different
operators and entered into a management agreement for the remaining facility.
During 1993, the Company acquired a psychiatric facility in Texas for an
amount equal to its existing mortgage loan of $6,803,000 and entered into a
lease transaction with one of its existing operators.
At December 31, 1993, the Company was committed to provide additional
financing of approximately $8,994,000 relating to three long-term care
facilities currently under construction and for additions to four existing
long-term care facilities.
5. SHARES OF BENEFICIAL INTEREST
Distributions paid to shareholders are determined by the Company's Board
of Trustees based on an analysis of cash flows from operating activities. Cash
flows from operating activities differ from net income primarily due to
depreciation and amortization expense, a noncash item. Distributions in excess
of net income as reflected on the Company's consolidated balance sheets is
primarily a result of an accumulation of this difference. All Shares
participate equally in dividends and in net assets available for distribution
to shareholders on liquidation or termination of the Company. The Trustees of
the Company have the authority to effect certain Share redemptions or prohibit
the transfer of Shares under certain circumstances.
Total distributions to shareholders during the years ended December 31,
1993, 1992 and 1991 included a return of capital per Share of $.3797, $.7462
and $.7273, respectively. Also, the 1993 distribution includes a long-term
capital gain distribution of $.1351 per Share.
F-11
35
MEDITRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
6. INDEBTEDNESS.
Indebtedness of the Company at December 31, 1993 and 1992 is as follows:
1993 1992
---- ----
(In thousands)
Senior unsecured notes:
Principal payments of $20,000,000 due in December 1995
and $16,000,000 due in December 1996 through December
2000, interest ranging from 10.00% to 10.57% . . . . . . . . $ 99,511 $ 99,331
Principal payments of $20,000,000 due in October 1995
through October 1999, interest at 10.22% . . . . . . . . . . 98,920 98,716
Principal payments of $12,500,000 due in February 1994
through February 2001, interest at 10.86% . . . . . . . . . 98,724 98,429
-------- --------
297,155 296,476
-------- --------
Senior mortgage notes:
Principal payments of $10,800,000 due in December 1994 through
December 1996 and $200,000 due in December 1997,
interest at 10.75% . . . . . . . . . . . . . . . . . . . . . 31,804 42,402
Principal payment with interest at 9.95% . . . . . . . . . . . 32,765
-------- --------
31,804 75,167
-------- --------
Convertible debentures:
9% interest, convertible at $27.00 per Share, due 2002 . . . . 42,499 93,356
7% interest, convertible at $30.625 per Share, due 1998 . . . 73,317
6 7/8% interest, convertible at $37.125 per Share, due 1998 . 84,006
-------- --------
199,822 93,356
-------- --------
Bank notes payable:
Revolving credit agreement expiring July 1995 . . . . . . . . 44,785 74,135
Demand note, due July 1994 . . . . . . . . . . . . . . . . . . 24,590 6,645
-------- --------
69,375 80,780
Bonds and mortgages payable:
Mortgage notes, interest ranging from 3.1% to 12.2%,
monthly principal and interest payments ranging from
$22,000 to $78,000 and maturing from January 1998
through March 2001, collateralized by nine facilities . . . 56,519 57,196
Manatee County, Florida Industrial Revenue Bonds, Series
1983, serial payments ranging from $45,000 to $90,000 due
in 1994 through 2000 and $345,000 due in December 2003
and $2,770,000 due in December 2013, interest ranging from
12.0% to 13.5%, collateralized by one facility . . . . . . . 3,570 3,610
-------- --------
60,089 60,806
-------- --------
Total indebtedness . . . . . . . . . . . . . . . . . . . . . . . $658,245 $606,585
======== ========
F-12
36
MEDITRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
Convertible Debentures.
The 9% convertible debentures issued in April 1992 are subject to
redemption by the Company on or after April 23, 1995 at 100% of the principal
amount plus accrued interest. During the year ended December 31, 1993,
$53,042,000 of debentures were converted into 1,964,495 Shares. During the
year ended December 31, 1992, $3,075,000 of debentures were converted into
113,886 Shares.
The 7% debentures issued in February 1993 are subject to redemption by
the Company on or after March 1, 1996 at 100% of the principal amount plus
accrued interest. During the year ended December 31, 1993, $16,635,000 of
debentures were converted into 543,182 Shares.
The 6 7/8% debentures issued in November 1993 are subject to redemption,
to the extent necessary to preserve the Company's status as a real estate
investment trust, at any time by the Company at 100% of the principal amount
plus accrued interest.
Senior Mortgage Notes.
The 10.75% notes due December 1997 are collateralized by six facilities.
In December 1992, $10,800,000 of principal amount due December 1997 was
prepaid. These notes were issued with detachable warrants to purchase 790,000
Shares at a price of $20 per Share with an expiration date of December 1994.
The Company has valued these warrants at $1,202,500 and is amortizing this
discount over ten years. Warrants were exercised for 182,308 Shares and
486,154 Shares during 1993 and 1992, respectively.
Principal payments on the mortgage notes in the amounts of $33,000,000
(9.95%) due in March 1994, $11,000,000 (9.81%) due in March 1993 and
$11,000,000 (9.81%) due in March 1992 were prepaid in December 1993, December
1992 and December 1991, respectively. In connection with the prepayment in
1991, the Company incurred charges and wrote off unamortized debt issuance
costs of $121,000, which is included in loss on prepayment of debt.
In December 1991, the Company prepaid a $46,200,000, 10.25% five-year
note agreement with a bank and incurred prepayment charges of $3,251,000 and
wrote off unamortized issuance costs of $312,000, which amounts are included in
loss on prepayment of debt.
Bank Notes Payable.
The Company has an unsecured revolving credit agreement for a maximum of
$130,000,000 bearing interest at the lender's prime rate or LIBOR plus 1.5%.
Fees associated with this agreement are .5% per annum of the total unused
commitment plus an $80,000 agent fee.
F-13
37
MEDITRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
Bonds Payable.
In December 1987, the Company defeased the Camden County, New Jersey
Economic Development Revenue Bonds, Series A and extinguished the related debt.
The Company placed U.S. Treasury bills aggregating $5,019,986 in an irrevocable
trust to fund applicable trustee fees and satisfy the interest and sinking fund
payments on the remaining balance of $4,270,000.
The senior unsecured notes payable, senior mortgage notes payable,
convertible debentures, bank notes payable and mortgages payable are presented
net of unamortized debt issuance costs of $9,785,000 and $9,347,000 at December
31, 1993 and 1992, respectively. Amortization expense associated with the debt
issuance costs amounted to $2,961,000, $2,123,000 and $1,797,000 for the years
ended December 31, 1993, 1992 and 1991, respectively, and is reflected in
interest expense.
All debt instruments contain certain covenants, the most restrictive of
which limits the ratio of total debt to consolidated shareholders' equity. The
Company's debt-to-equity ratio may exceed 180% no longer than 180 days out of
any 450-day period and may not exceed 225% at any time.
The aggregate maturities of senior unsecured notes payable, senior
mortgage notes payable, bonds and mortgages payable and convertible debentures,
excluding the bank notes payable, the 9% convertible debentures and amounts
defeased for the five years subsequent to December 31, 1993, are as follows:
1994...................... $ 48,714,000
1995...................... 64,195,000
1996...................... 60,274,000
1997...................... 49,767,000
1998...................... 231,335,000
7. RELATED PARTY TRANSACTIONS
The Company has material transactions with related parties as described
in these notes, including, but not limited to, the acquisition of health care
facilities, lending of mortgage and construction funds, lease transactions and
advisory services (through February 26, 1991), all of which transactions have
been reviewed by the Independent Trustees.
On February 26, 1991, the Company's Advisor merged (the "Merger") with
and into a wholly-owned subsidiary of the Company, Meditrust Management Corp.
("MMC"), pursuant to an Agreement and Plan of Merger among the Company, MMC,
the Advisor and all of the shareholders of the Advisor. Initial consideration
for this transaction totaled approximately $5,000,000, comprised of 185,000
Shares and $1,300,000 in cash. In addition, the Company agreed to pay to the
shareholders of the Advisor a contingent acquisition price up to a maximum of
$2,000,000 for each $1.00 increase in the price per Share in excess of $20.00
per Share during the five year period ending December 31, 1995, up to an
aggregate maximum amount of $10,000,000. During 1991, contingent payments
totaling $10,000,000 were paid in the form of Shares.
F-14
38
MEDITRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
Until the Merger, the Company had an Advisory Agreement with the
Advisor, a corporation principally owned by Abraham D. Gosman, the Company's
Chairman of the Board. For the year ended December 31, 1991, the fees pursuant
to its advisory agreements amounted to $738,000.
As of December 31, 1993, The Mediplex Group, Inc. ("Mediplex")
guarantees the lessees' and borrowers' obligations or provides working capital
assurances for 28 of the Company's facilities and a Mediplex affiliate is a
subordinated participant in six of the Company's permanent mortgage loans.
Approximately 25% of the stock of Mediplex is owned by the Chairman of the
Company. The expiration of the fixed term of the Company's leases and
mortgages with Mediplex or its subsidiaries range from 1995 to 2007. The lease
terms require Mediplex to pay aggregate base rent of $32,669,000 per annum and
the mortgages require annual principal and interest payments of $3,598,000. As
a result of these lease and mortgage transactions with Mediplex or its
subsidiaries, the Company recorded revenues of approximately $34,516,000,
$29,256,000 and $28,609,000 for the years ended December 31, 1993, 1992 and
1991, respectively. Mediplex owed the Company $450,000 and $250,000 for
additional rent at December 31, 1993 and 1992, respectively.
During 1992, the Company acquired from a prior operator for $22,500,000
two previously mortgaged long-term care facilities located in Massachusetts and
leased these facilities to The Mediplex Group, Inc. During 1993, the Company
acquired from a prior operator for $26,353,000 two previously mortgaged
rehabilitation facilities located in Michigan and in New York and a long-term
care facility located in Massachusetts and leased these properties to The
Mediplex Group, Inc. Also, during 1993, the Company provided permanent
mortgage financing of $32,740,000 for four long-term care facilities located in
Massachusetts and Connecticut and entered into a sale/leaseback transaction for
$8,000,000 for a rehabilitation facility located in Arkansas.
The land and facility owned by one of the Company's subsidiaries is
leased to a corporation wholly-owned by Abraham D. Gosman and is managed by a
Mediplex subsidiary. The lease is a fixed-term operating lease expiring in
2006. The lessee is required to pay aggregate base rent of $3,364,000 per
annum over the lease term and supplemental rent (as defined in the lease
agreements). Total revenues earned by the Company from this lease arrangement
were $3,421,000, $3,486,000 and $3,440,000 for the years ended December 31,
1993, 1992 and 1990, respectively.
For further information regarding the Company and Mediplex, see Note 12.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires that the Company disclose
estimated fair values for certain of its financial instruments as defined by
the Standard.
F-15
39
MEDITRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
Fair value estimates are subjective in nature and are dependent on a
number of significant assumptions associated with each financial instrument or
group of financial instruments. Because of a variety of permitted calculations
and assumptions regarding estimates of future cash flows, risks, discount rates
and relevant comparable market information, reasonable comparisons of the
Company's fair value information with other companies cannot necessarily be
made.
The following methods and assumptions were used to estimate the fair
value of financial instruments for which it is practicable to estimate that
value:
Real Estate Mortgages
The fair value of real estate mortgages have been estimated by
discounting future cash flows using current interest rates at which similar
loans would be made to borrowers with similar credit ratings and for the same
remaining maturities. As of December 31, 1993, the fair value of real estate
mortgages amounted to approximately $652,000,000.
Indebtedness
The quoted market price for the Company's publicly traded convertible
debentures and rates currently available to the Company for debt with similar
terms and remaining maturities were used to estimate fair value of existing
debt. As of December 31, 1993, the fair value of the Company's indebtedness
amounted to approximately $711,000,000.
9. LEASE COMMITMENTS
The Company's land and facilities are generally leased pursuant to
noncancelable, fixed-term operating leases expiring from 1995 to 2007. The
leases also generally provide multiple, five-year renewal options and the
option to purchase the facilities at fair market value at the end of the
initial term of the lease or at various times during the lease.
The lessees are required to pay aggregate base rent during the lease term
and applicable debt service payments as well as percentage, supplemental and
additional rent (as defined in the lease agreements). For the years ended
December 31, 1993, 1992 and 1991, additional rent and interest amounted to
$8,657,000, $7,621,000 and $5,399,000, respectively. In addition, the lessees
pay all taxes, insurance, maintenance and other operating costs of the land and
facilities.
F-16
40
MEDITRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--continued
Future minimum lease payments, including debt service payments (as
defined in the lease agreements) which are based on interest rates in effect at
December 31, 1993, expected to be received by the Company during the initial
term of the leases for the years subsequent to December 31, 1993, are as
follows:
1994 $ 77,144,000
1995 76,146,000
1996 70,927,000
1997 70,213,000
1998 63,086,000
Thereafter 244,576,000
10. STOCK OPTION PLANS
Incentive awards under the Company's stock option plans (the "Plans")
which may be granted by the Board of Trustees include nonqualified or
nonstatutory options to purchase Company shares and incentive stock options
(collectively, "options"). The number of Shares available for issuance under
the Plans is 5% of the number of outstanding Shares. Up to 500,000 Shares
available under each Plan may be issued pursuant to incentive stock options.
Trustees, officers and key employees of the Company or any other entity
providing similar services to the Company and its officers, directors and key
employees, and all persons retained by the Company solely as consultants are
eligible to participate in the Plans. Such options expire 10 years after the
date granted. One third of all options granted become exercisable at the end
of each year following the date of issuance. Options to purchase 290,000
Shares were exercisable as of December 31, 1993.
Information concerning option activity for the years 1993, 1992, and 1991
is as follows:
Shares Option Price
------ ------------
Outstanding at December 31, 1990 . . . . . . . . 299,000 $16.625 to $20.375
Granted . . . . . . . . . . . . . . . . . . . 585,000 $26.250 to $26.625
Exercised . . . . . . . . . . . . . . . . . . 86,000 $16.625 to $19.875
Expired . . . . . . . . . . . . . . . . . . . 52,000 $16.625 to $18.625
-------
Outstanding at December 31, 1991 . . . . . . . . 746,000 $16.625 to $26.625
Granted . . . . . . . . . . . . . . . . . . . 62,000 $26.75 to $29.00
Exercised . . . . . . . . . . . . . . . . . . 182,000 $16.625 to $26.375
Expired . . . . . . . . . . . . . . . . . . . 28,000 $26.25 to $26.375
-------
Outstanding at December 31, 1992 . . . . . . . . 598,000 $16.625 to $29.00
Granted . . . . . . . . . . . . . . . . . . . 126,000 $26.375 to $34.00
Exercised . . . . . . . . . . . . . . . . . . 83,000 $16.625 to $27.625
Expired . . . . . . . . . . . . . . . . . . . 23,000 $26.375 to $27.625
-------
Outstanding at December 31, 1993 . . . . . . . . 618,000 $16.625 to $34.000
=======
F-17
41
MEDITRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following quarterly financial data summarizes the unaudited quarterly
results for the years ended December 31, 1993 and 1992:
Quarter Ended
------------------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
1993 (In thousands, except per Share amounts)
- ----
Revenues . . . . . . . . . $36,625 $37,311 $38,616 $38,274
Net income . . . . . . . . 14,838 16,001 16,081 16,716
Net income per Share . . . .50 .51 .51 .51
Quarter Ended
-------------------------------------------------------------------
1992 March 31 June 30 September 30 December 31
- ---- -------- ------- ------------ -----------
(In thousands, except per Share amounts)
Revenues . . . . . . . . . $30,943 $33,235 $34,845 $33,371
Net income . . . . . . . . 12,662 12,676 12,981 13,039
Net income per Share . . . .49 .49 .49 .49
12. SUBSEQUENT EVENTS
On January 11, 1994, the Board of Trustees of the Company declared a
dividend of $.6475 per Share payable February 15, 1994, to shareholders of
record on January 31, 1994. The dividend related to the period October 1, 1993
through December 31, 1993.
On January 27, 1994, the Company entered into a Consent Agreement with
Sun Healthcare Group, Inc. ("Sun"), pursuant to which the Company agreed to
consent to a proposed merger of Mediplex with a subsidiary of Sun, subject to
the fulfillment by Sun and Mediplex of certain closing conditions. The
Company's consent to the merger is required pursuant to the terms of the
various leases and loans between the Company and Mediplex (the "Mediplex
Financing Documents"). As a condition to the Company's consent to the merger,
Sun and Mediplex have agreed to certain modifications to the existing Mediplex
Financing Documents and to certain terms which will govern the ongoing
relationship and future transactions among the Company, Mediplex and Sun. (See
Note 7 for further information regarding related party transactions between the
Company and Mediplex).
On March 2, 1994, the Company announced the sale of $90,000,000 of 7 1/2%
convertible debentures due 1998 and convertible at $36.18 per Share. The
Company used the proceeds to repay short-term borrowings.
F-18
42
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Shareholders and Trustees of Meditrust:
Our report on the consolidated financial statements of Meditrust is included on
page F-2 of this Form 10-K. In connection with our audits of such financial
statements, we have also audited the related financial statement schedules
listed in the index on page F-1 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand
Boston, Massachusetts
March 10, 1994
S-1
43
MEDITRUST
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
Balance at Additions Balance at
Beginning Charged to Costs End of
Description of Period and Expenses Deductions Period
- ----------- --------- ------------ ---------- ------
General valuation
allowance included in
Accrued Expenses and Other
Liabilities for the year
ended December 31:
1991 $1,031,000 $ 1,031,000
1992 $1,031,000 5,113,132 $3,438,186 (A) 2,705,946
1993 2,705,946 9,329,724 12,035,670
(A) Costs primarily associated with the disposition of certain real estate
investments.
S-2
44
MEDITRUST
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1993
Initial Cost
to Company
----------
Cost
Capitalized
Building & Subsequent to
Description (1) Encumbrances Improvements Acquisiton
- -------------- ------------ ------------ ----------
LTC
- ---
Alabaster, AL . . $ 5,799,000 $1,810,000
Aurora, CO . . . 5,015,448
Evergreen, CO . . 5,540,775
Danbury, CT . . . 5,295,000
Westport, CT . . 4,970,000
Newington, CT . . 8,970,000
Cheshire, CT . . 6,770,000
Wethersfield, CT 12,440,000
Southfield, CT . 7,750,000
Bradenton, FL . . $3,570,000 9,900,000
Hoffman Estates, IL 6,000,012 7,720,000
W. Lafayette, IN 4,535,267 6,030,000 190,000
Beverly, MA . . . 6,300,000
Newton, MA . . . 12,430,000
Lexington, MA . . 11,210,000
E. Longmeadow, MA 12,400,000
Holyoke, MA . . . 11,980,670 684,248
Lowell, MA . . . 9,897,730 594,621
Lynn, MA . . . . 13,293,267 870,248
Peabody, MA . . . 7,245,315
Randolph, MA . . 9,014,760
Wilmington, MA . 6,689,925
Baltimore, MD . . 4,494,200
Grand Blanc, MI . 6,500,000 863,800
Riverside, MO . . 8,559,900
Bound Brook, NJ . 1,624,000
Camden, NJ . . . 8,334,780
New Milford, NJ . 11,110,000
Gross Amount at Which
Carried at Close of Period
--------------------------------------------
Acumm.
Building & Deprec. Cost Date
Description (1) Land (2) Improvements Total (5) (4)(5) Date Acquired
- --------------- -------- ------------ ---------- -------- ---- -------
LTC
- ---
Alabaster, AL . . $ 150,000 $ 7,609,000 $ 7,759,000 $ 1,019,206 1971 8/87
Aurora, CO . . . 974,552 5,015,448 5,990,000 449,306 1990 6/90
Evergreen, CO . . 377,013 5,540,775 5,917,788 415,214 1991 6/90
Danbury, CT . . . 305,000 5,295,000 5,600,000 1,086,562 1976 10/85
Westport, CT . . 400,000 4,970,000 5,370,000 1,019,874 1965 10/85
Newington, CT . . 430,000 8,970,000 9,400,000 1,840,688 1978 10/85
Cheshire, CT . . 455,000 6,770,000 7,225,000 1,389,253 1975 10/85
Wethersfield, CT 12,440,000 12,440,000 2,284,221 1965 8/86
Southfield, CT . 750,000 7,750,000 8,500,000 32,292 1993 11/93
Bradenton, FL . . 1,100,000 9,900,000 11,000,000 1,485,000 1985 12/87
Hoffman Estates, IL 880,000 7,720,000 8,600,000 1,157,996 1976 1/88
W. Lafayette, IN 50,000 6,220,000 6,270,000 912,758 1964 1/88
Beverly, MA . . . 645,000 6,300,000 6,945,000 1,292,815 1972 10/85
Newton, MA . . . 630,000 12,430,000 13,060,000 2,550,750 1977 10/85
Lexington, MA . . 590,000 11,210,000 11,800,000 2,058,365 1965 8/86
E. Longmeadow, MA 400,000 12,400,000 12,800,000 1,937,480 1986 9/87
Holyoke, MA . . . 121,600 12,664,918 12,786,518 403,107 1973 9/92
Lowell, MA . . . 500,000 10,492,351 10,992,351 333,345 1975 9/92
Lynn, MA . . . . 1,206,734 14,163,515 15,370,249 264,174 1960 4/93
Peabody, MA . . . 805,035 7,245,315 8,050,350 1,086,800 1987 10/90
Randolph, MA . . 1,001,640 9,014,760 10,016,400 1,352,220 1987 10/90
Wilmington, MA . 743,325 6,689,925 7,433,250 1,003,492 1987 10/90
Baltimore, MD . . 4,000,000 4,494,200 8,494,200 74,903 1993 5/93
Grand Blanc, MI . 120,000 7,363,800 7,483,800 979,780 1970 5/88
Riverside, MO . . 238,000 8,559,900 8,797,900 1,230,479 1965 3/88
Bound Brook, NJ . 1,176,000 1,624,000 2,800,000 284,177 1963 12/86
Camden, NJ . . . 450,250 8,334,780 8,785,030 1,458,571 1984 12/86
New Milford, NJ . 1,090,000 11,110,000 12,200,000 1,666,510 1971 12/87
S-3
45
MEDITRUST
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1993
Initial Cost
to Company
------------
Cost
Capitalized
Building & Subsequent
Description (1) Encumbrances Improvement Acquisiton
- -------------- ------------ ----------- ----------
LTC CONTINUED
- -------------
Cortland, NY . . $ 4,440,173 $ 260,930
Niskayuna, NY . . 9,708,000 834,537
Troy, NY 9,967,564 491,673
Bellbrook, OH . . 2,787,134
Huber Heights, OH 3,593,360
Medina, OH . . . $ 7,066,509 10,568,000
New London, OH . 2,110,837
West Carrolton, OH 3,483,669
Erie, PA . . . . 4,753,000 375,000
Greensburg, PA . 5,544,012
Houston, TX 4,000,000
Cheyenne, WY . . 5,200,000
RL-
Cheyenne, WY . . 9,325,000
PSYCH
- -----
Hollywood, CA . . 4,035,000
Monroe, LA . . . 7,770,000
Holliswood, NY . 26,400,000
DeSoto, TX . . . 3,934,000
College Station, TX 5,822,509
A & D------
Carmel, NY . . . 32,300,000
Scotia, NY . . . 57,000,000
REHAB.
- ------
Benton, AK . . . 7,865,000 392,410
Jonesboro, AR . . 4,305,472 8,861,835
Tucson, AZ . . . 9,965,000
Bakersfield, CA . 10,907,463
Fresno, CA . . . 8,077,584 14,469,580
Kentfield, CA . . 9,650,000
Topeka, KS . . . 5,286,162 10,353,829
Gross Amount at Which
Carried at Close of Period
-------------------------------------------
Accum.
Building & Deprec. Const. Date
Description (1) Land (2) Improvements Total (5) (4)(5) Date Acquired
- -------------- -------- ------------ --------- ------- ------ --------
LTC CONTINUED
- -------------
Cortland, NY . . $ 4,701,103 $ 4,701,103 $ 47,138 1986 8/93
Niskayuna, NY . . $ 292,000 10,542,537 10,834,537 210,135 1976 3/93
Troy, NY 56,100 10,459,237 10,515,337 104,854 1972 8/93
Bellbrook, OH . . 212,000 2,787,134 2,999,134 214,841 1981 12/90
Huber Heights, OH 174,000 3,593,360 3,767,360 276,988 1984 12/90
Medina, OH . . . 232,000 10,568,000 10,800,000 1,497,153 1954 4/88
New London, OH . 22,600 2,110,837 2,133,437 162,711 1985 12/90
West Carrolton, OH 216,400 3,483,669 3,700,069 268,534 1983 12/90
Erie, PA . . . . 335,000 5,128,000 5,463,000 756,055 1977 12/87
Greensburg, PA . 525,000 5,544,012 6,069,012 288,750 1991 6/90
Houston, TX 4,000,000 4,000,000 1962 3/92
Cheyenne, WY . . 300,000 5,200,000 5,500,000 519,984 1989 12/89
RL
- --
Cheyenne, WY . . 375,000 9,325,000 9,700,000 932,496 1989 12/89
PSYCH
- -----
Hollywood, CA . . 1,715,000 4,035,000 5,750,000 571,610 1957 5/88
Monroe, LA . . . 530,000 8,220,000 8,750,000 1,152,114 1982 5/88
Holliswood, NY . 3,600,000 26,400,000 30,000,000 4,620,000 1963 12/86
DeSoto, TX . . . 849,270 5,709,730 6,559,000 805,875 1988 1/88
College Station, TX 980,185 5,880,631 6,860,816 98,008 1987 5/93
A & D
- -----
Carmel, NY . . . 1,700,000 32,300,000 34,000,000 5,930,999 1979 8/86
Scotia, NY . . . 3,000,000 57,000,000 60,000,000 10,466,052 1929 8/86
REHAB.
- ------
Benton, AK . . . 135,000 8,257,410 8,392,410 148,287 1967 4/93
Jonesboro, AR . . 196,225 8,861,835 9,058,060 1,091,927 1989 2/89
Tucson, AZ . . . 9,965,000 9,965,000 851,177 1990 8/90
Bakersfield, CA . 1,522,537 10,907,463 12,430,000 977,129 1990 6/90
Fresno, CA . . . 2,088,920 14,469,580 16,558,500 1,026,687 1991 3/91
Kentfield, CA . . 350,000 9,650,000 10,000,000 1,387,179 1963 3/88
Topeka, KS . . . 1,295,499 10,353,829 11,649,328 1,276,313 1989 2/89
S-4
46
MEDITRUST
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1993
Initial Cost
to Company
----------
Cost
Capitalized
Building & Subsequent to
Description (1) Encumbrances Improvements Acquisition
- -------------- ------------ ------------ -----------
REHAB. (CONTINUED)
- ------------------
Ruston, LA . . . $ 4,258,489 $ 10,021,462
Baton Rouge, LA . 5,642,004 10,366,008
Battle Creek, MI 7,265,913 $ 374,542
Effingham, NH . . 8,121,200 2,235,304
Cortland, NY 26,309,407 1,303,410
Arlington, TX . . 10,132,662
Ft. Worth, TX . . 6,009,891 10,814,520
Houston, TX . . . 5,469,929 10,707,069
Lake Terrace, WA 4,389,224 265,819
Waterford, WI . . 11,515,023 2,066,205
----------- ------------ -----------
TOTAL . . . . . . $60,221,319 $621,742,223 $15,896,599
=========== ============ ===========
Gross Amount at Which
Carried at Close of Period
----------------------------------------
Accum.
Building & Deprec. Const. Date
Description (1) Land (2) Improvements Total (5) (4)(5) Date Acquired
- -------------- -------- ------------ --------- -------- ---- --------
REHAB. (CONTINUED)
- ------------------
Ruston, LA . . . $ 321,551 $ 10,021,462 $ 10,343,013 $1,277,904 1988 12/88
Baton Rouge, LA . 1,211,000 10,366,008 11,577,008 1,230,963 1988 4/89
Battle Creek, MI 146,970 7,640,455 7,787,425 137,190 1933 4/93
Effingham, NH . . 1,478,800 10,356,504 11,835,304 212,688 1985 4/93
Cortland, NY 263,000 27,612,817 27,875,817 276,770 1971 8/93
Arlington, TX . . 1,161,338 10,132,662 11,294,000 907,729 1990 6/90
Ft. Worth, TX . . 1,548,022 10,814,520 12,362,542 923,730 1990 8/90
Houston, TX . . . 525,000 10,707,069 11,232,069 1,271,465 1989 4/89
Lake Terrace, WA 1,029,980 4,655,043 5,685,023 73,708 1987 5/93
Waterford, WI . . 280,000 13,581,228 13,861,228 230,146 1968 4/93
---------- ------------ ------------ -----------
TOTAL . . . . . . $48,257,546 $637,638,822 $685,896,368 (3) $73,294,627
=========== ============ ============ ===========
S-5
47
MEDITRUST
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1993
(1) Facility classifications are Long-Term Care (LTC), Retirement Living
(RL), Psychiatric Hospital (Psych), Alcohol and Substance Abuse Treatment
(A&D) and Rehabilitation Hospital (Rehab).
(2) Gross amount at which land is carried at close of period also represents
initial cost to Company.
(3) Cost for federal income tax purposes.
(4) Depreciation is calculated using a 40-year life for all completed
facilities.
(5) Real estate and accumulated depreciation reconciliations for the three
years ended December 31, 1993 are as follows:
Accumulated
Real Estate Depreciation
----------- ------------
Balance at close of year--December 31, 1990 . . . . . . . $540,343,000 $35,661,000
Additions during the period:
Acquisitions . . . . . . . . . . . . . . . . . . 15,886,000
Construction in progress . . . . . . . . . . . . 4,768,000
Provision for depreciation . . . . . . . . . . . 11,239,000
Deductions during the period:
Repayment of construction loan advance . . . . . . (41,053,000)
------------ -----------
Balance at close of year--December 31, 1991 . . . . . . . 519,944,000 46,900,000
Additions during the period:
Acquisitions . . . . . . . . . . . . . . . . . . 4,750,000
Value of real estate acquired . . . . . . . . . 22,500,000
Additions to existing properties . . . . . . . . 1,770,000
Provision for depreciation . . . . . . . . . . . -----------
Balance at close of year--December 31, 1992 . . . . . . . 548,964,000 59,150,000
Additions during the period:
Acquisitions . . . . . . . . . . . . . . . . . . 20,244,000
Value of real estate acquired . . . . . . . . . . 106,566,000
Other . . . . . . . . . . . . . . . . . . . . . . 4,000,000
Additions to existing properties . . . . . . . . 10,272,000
Provision for depreciation . . . . . . . . . . . 14,548,000
Deductions:
Sale of real estate . . . . . . . . . . . . . . . (4,150,000) (404,000)
------------ -----------
Balance at close of year--December 31, 1993 . . . . . . . $685,896,000 $73,294,000
============ ===========
S-6
48
MEDITRUST
SCHEDULE XII
MORTGAGE LOANS ON REAL ESTATE
December 31, 1993
Periodic Face Carrying
Interest Final Payment Amount of Amount of
Description(A) Rate Maturity Date Terms (B)(C) Mortgages Mortgages (D)
-------------- -------- ------------- ------------ --------- ------------
Long-term care facilities:
Arizona 11.00% October, 2002 $ 2,509,000 $ 2,910,000 $2,887,000
Colorado 12.00% May, 2001 6,542,000 7,455,000 7,312,000
Connecticut 7.13% - August, 1995 -
13.5% December, 2003 68,794,000 68,959,000 67,696,000
Connecticut 11.00% -
11.50% In progress 7,738,000 7,738,000
Florida 10.75% November, 2003 8,181,244 8,432,000 8,432,000
Illinois
(29 facilities) 12.03% December, 1998 30,252,000 37,073,000 32,900,000
Massachusetts 12.50% November, 2001 25,912,000 27,000,000 26,960,000
Massachusetts 11.50% In progress 3,450,000 3,450,000
Massachusetts 11.00% - August, 2000 -
(All other) 12.90% March, 2003 44,451,000 49,890,000 47,430,000
Michigan 11.75% - December, 2001 -
12.75% June, 2002 20,770,000 21,768,000 21,521,000
Nevada 12.25% - May, 2000 -
12.50% February, 2001 16,296,000 16,994,000 16,866,000
New Jersey 11.38% December, 1993 8,332,000 4,636,000 3,439,000(E)
North Carolina 12.00% September, 1998 2,918,000 3,325,000 3,171,000
Pennsylvania 12.25% In progress 9,911,000 9,911,000
Pennsylvania and
New Jersey 12.00% April, 2002 77,152,000 86,003,000 85,063,000
Rhode Island 10.75% November, 2003 4,851,000 5,000,000 5,000,000
Tennessee 10.75% July, 2003 10,888,000 11,222,000 11,196,000
Texas 12.00% November, 2000 8,360,000 8,625,000 8,480,000
Utah 11.00% In progress 3,440,000 3,440,000
Various (9 states) 12.00% October, 1994 44,150,000 44,493,000 44,213,000
Various (9 states) 10.75% May, 2003 93,063,000 96,298,000 96,149,000
West Virginia and
Pennsylvania 11.50% October, 2002 12,269,000 14,100,000 13,987,000
Rehabilitation hospitals:
California 12.50% July, 2001 24,042,000 30,975,000 29,990,000
Tennessee 12.50% September, 2000 8,637,000 9,000,000 8,870,000
Retirement living facilities:
Colorado 12.25% October, 1993 15,795,000 16,200,000 15,770,000(F)
Florida 10.00% December, 1998 11,734,000 11,734,000 11,734,000
Psychiatric hospitals:
Arizona 12.50% October, 1999 7,077,000 8,360,000 8,101,000
------------ ------------
Total $614,991,000 $601,706,000(G)(H)
============ ============
S-7
49
MEDITRUST
SCHEDULE XII
MORTGAGE LOANS ON REAL ESTATE
(A) All mortgage loans on real estate are first mortgage loans except a
second mortgage loan amounting to $4,250,000 for a Connecticut
facility.
(B) Ten-year terms (except for loan on fifteen facilities located in nine
states which is two years, Waterford, CT, Bourne and New Bedford, MA
and Lauderhill, FL, which are five years and Waterbury and Bristol,
CT, which are seven years) with principal and interest payable at
varying amounts over life to maturity with interest adjustment
generally at the end of the fifth year.
(C) Balloon payment is due upon maturity based on current interest rate
with various prepayment penalties.
(D) No mortgage loan is subject to delinquent principal or interest.
(E) Mortgage loan term has been extended for a one year period.
(F) Mortgage loan term has been extended for a ten year period.
(G) The aggregate cost for federal income tax purposes.
(H) Reconciliation of carrying amount of mortgage loans for the three
years ended December 31, 1993 is as follows:
Balance at December 31, 1990 . . . . . . . . . . $240,141,000
Additions during period:
New mortgage loans . . . . . . . . . . . . 108,194,000
Construction loan advances . . . . . . . . 22,371,000
Deductions during period:
Collection of principal . . . . . . . . . . (2,600,000)
-----------
Balance at December 31, 1991 . . . . . . . . . . 368,106,000
Additions during period:
New mortgage loans . . . . . . . . . . . . 183,426,000
Construction loan advances . . . . . . . . 24,666,000
Other . . . . . . . . . . . . . . . . . . . 1,189,000
Deductions during period:
Collection of principal . . . . . . . . . . (27,228,000)
Acquisition of properties, net . . . . . . . (15,843,000)
Other . . . . . . . . . . . . . . . . . . . (2,500,000)
-----------
Balance at December 31, 1992 . . . . . . . . . . 531,816,000
Additions during period:
New mortgage loans . . . . . . . . . . . . 181,908,000
Construction loan advances . . . . . . . . 28,387,000
Deductions during period:
Collection of principal . . . . . . . . . . (35,490,000)
Acquisition of properties, net . . . . . . (88,493,000)
Conversion of construction loans to
sale/leaseback transactions . . . . . . (12,244,000)
Other . . . . . . . . . . . . . . . . . . . (4,178,000)
------------
Balance at December 31, 1993 . . . . . . . . . . $601,706,000
============
S-8
50
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
NOT APPLICABLE.
PART III
Item 10.
TRUSTEES AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to Item 4a above and the table and the
information following it appearing in the first subsection of the section
entitled "Election of Trustees" contained in the Company's Proxy Statement for
its Annual Meeting of Shareholders ("Annual Meeting Proxy Statement"), to be
filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended ("Regulation 14A"). There are no family relationships among any of the
Trustees or executive officers of the Company.
Item 11.
EXECUTIVE COMPENSATION
Incorporated by reference to the section entitled "Executive
Compensation" contained in the Company's Annual Meeting Proxy Statement, to be
filed pursuant to Regulation 14A.
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the table appearing in the first subsection
of the section entitled "Election of Trustees" and the section entitled "Voting
Securities, Principal Holders Thereof and Holdings by Certain Executive
Officers" contained in the Company's Annual Meeting Proxy Statement, to be
filed pursuant to Regulation 14A.
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the section entitled "Certain Transactions"
contained in the Company's Annual Meeting Proxy Statement, to be filed pursuant
to Regulation 14A.
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PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Financial Statements filed as a part of this report are listed in the
index appearing on Page F-1.
(a) 2. Financial Statement Schedules
Financial Statement Schedules required as part of this report are
listed on the index appearing on Page F-1.
(a) 3. Exhibits
Exhibits required as part of this report are listed in the index
appearing on Page 29.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
1988 Stock Option Plan - Form 10-K for fiscal year ended December 31, 1988, Exhibit
10.13
1992 Equity Incentive Plan - Registration Statement No. 33-48695, Exhibit 4.3
Employment Agreement with - Form 10-Q for fiscal quarter ended March 31, 1993, Exhibit
Abraham D. Gosman 10.1
(b) No reports on Form 8-K were filed during the quarter ended
December 31, 1993.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
MEDITRUST
By:/s/ Lisa M. Pavelka
Vice President and Treasurer
(and Principal Financial and
Accounting Officer)
Dated: March 21, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Abraham D. Gosman Chairman, Chief Executive March 21, 1994
- ----------------------------
Abraham D. Gosman Officer and Trustee
/s/ David F. Benson President and March 21, 1994
- ----------------------------
David F. Benson Trustee
/s/ Edward W. Brooke Trustee March 21, 1994
- ----------------------------
Edward W. Brooke
/s/ Hugh L. Carey Trustee March 21, 1994
- ----------------------------
Hugh L. Carey
/s/ Robert Cataldo Trustee March 21, 1994
- ----------------------------
Robert Cataldo
/s/ Thomas J. Magovern Trustee March 21, 1994
- ----------------------------
Thomas J. Magovern
/s/ Philip L. Lowe Trustee March 21, 1994
- ----------------------------
Philip L. Lowe
/s/ Gerald Tsai, Jr. Trustee March 21, 1994
- ----------------------------
Gerald Tsai, Jr.
/s/ Frederick W. Zuckerman Trustee March 21, 1994
- ----------------------------
Frederick W. Zuckerman
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The Declaration of Trust establishing Meditrust dated August 6, 1985
(the "Declaration"), a copy of which is duly filed in the office of the
Secretary of State of the Commonwealth of Massachusetts, provides that the name
"Meditrust" refers to the Trustees under the Declaration collectively as
Trustees, but not individually or personally; and that no Trustee, officer,
shareholder, employee or agent of the Company shall be held to any personal
liability, jointly or severally, for any obligation of, or claim against, the
Company. All persons dealing with the Company, in any way, shall look only to
the assets of the Company for the payment of any sum or the performance of any
obligation.
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EXHIBITS
Exhibit
No Title Method of Filing
- ------- ----- ----------------
3.1 Restated Declaration of Trust, as
amended . . . . . . . . . . . . Incorporated by reference to Exhibit 3.1 to the
Registration Statement on Form S-3 (File No. 33-55386)
3.2 By-Laws, as amended . . . . . . Incorporated by reference to Exhibit 3.2 to Form 10-K
for the fiscal year ended December 31, 1992
4.1 1988 Stock Option Plan, as amended
. . . . . . . . . . . . . . . . .. Incorporated by reference to Exhibit 10.13 to Form 10-K
for the fiscal year ended December 31, 1988
4.2 1992 Equity Incentive Plan . . Incorporated by reference to Exhibit 4.3 to the
Registration Statement on Form S-8 (File No. 33-48695)
4.3 Form of Indenture dated February 4,
1993 between The Company and Fleet
National Bank, as trustee . . . Incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-3 (File No. 33-55386)
4.4 Form of 7% Convertible Debenture due
1998 . . . . . . . . . . . . . Incorporated by reference to Exhibit 4.2 to the
Registration Statement on Form S-3 (File No. 33-55386)
4.5 Form of Fiscal Agency Agreement dated
February 4, 1993 between the Company
and Fleet National Bank as fiscal
agent . . . . . . . . . . . . . Filed herewith
4.6 Form of 7% Convertible Debenture due
1998 . . . . . . . . . . . . . Included in Exhibit 4.5
4.7 Form of Fiscal Agency Agreement dated
November 15, 1993 between the Company
and Fleet National Bank as fiscal
agent . . . . . . . . . . . . . Filed herewith
4.8 Form of 6 7/8% Convertible Debenture
due 1998 . . . . . . . . . . . Included in Exhibit 4.7
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Exhibit
No Title Method of Filing
- ------- ----- ----------------
4.9 Form of Indenture dated April 23, 1992
between The Company and Fleet National
Bank, as trustee.. Incorporated by reference to Exhibit 4 to the
Registration Statement on Form S-3 (File No. 33-45979
4.10 Form of 9% Convertible Debenture due
2002 . . . . . . . . . . . . . Incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-3 (File No. 33-45979)
10.1 Note Agreement relating to first
mortgage notes due December 1, 1997
Incorporated by reference to Exhibit 10.4 to the
Registration Statement on Form S-11 (File No. 33-20557)
10.2 Amended and Restated Lease Agreement
between Mediplex of Queens, Inc. and
QPH, Inc. dated December 30, 1986
Incorporated by reference to Exhibit 2.2 to the Form 8-K
dated January 13, 1987
10.3 Form of Lease for Carmel, New York and
Scotia, New York facilities . . Incorporated by reference to Exhibit 10.5 to the
Registration Statement on Form S-11 (File No. 33-7483)
10.4 Form of Credit Agreement between the
Registrant and Barclays Bank PLC, New
York Branch dated as of March 7, 1988
. . . . . . . . . . . . . . . . . . . Incorporated by reference to Exhibit 10.11 to the
Registration Statement on Form S-11 (File No. 33-20557)
10.5 Note Agreement dated as of October 31,
1989 among the Registrant, The
Prudential Insurance Company of
America, et al . . . . . . . . Incorporated by reference to Exhibit 10.4 to Form 8
-- dated December 5, 1989
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Exhibit
No Title Method of Filing
- ------- ----- ----------------
10.6 Note Agreement dated as of February
16, 1989, as amended and restated as
of October 31, 1989, among the
Registrant, The Prudential Insurance
Company of America, et al . . Incorporated by reference to Exhibit 10.5 to Form 8
----- dated December 5, 1989
10.7 Note Agreement dated as of January 1,
1993 by and among the Registrant,
Principal Mutual Life Insurance
Company, et al . . . . . . . . Incorporated by reference to Exhibit 10.1 to Form 10-Q
----- dated May 4, 1993
10.8 Employment Agreement dated January 1,
1993 by and between the Company and
Abraham D. Gosman . . . . . . . Incorporated by reference to Exhibit 10.1 to Form 10-Q
dated May 4, 1993
10.9 Revloving Credit Agreement dated as of
July 1, 1991 among the Company,
various financial institutions and
Societe Generale, New York Branch, as
agent . . . . . . . . . . . . . Incorporated by reference to Exhibit 10.23 to Form 10-K
dated February 28, 1992
10.10 Revolving Credit Agreement dated as of
March 10, 1992 between the Company and
Via Banque . . . . . . . . . . Incorporated by reference to Exhibit 10.10 to Form 10-K
dated March 25, 1993
10.11 Consent Agreement dated as of January
27, 1994 between the Company and Sun
Healthcare Group, Inc. . . . . Incorporated by reference to Form 8-K dated
January 27, 1994
11 Statement Regarding Computation of Per
Share Earnings . . . . . . . . Filed herewith
21 Subsidiaries of the Registrant Filed herewith
23 Consent of Coopers & Lybrand Filed herewith
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