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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
--- THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
--- THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------- --------
COMMISSION FILE NUMBER: 1-11852
--------------------------------
HEALTHCARE REALTY TRUST INCORPORATED
(Exact name of Registrant as specified in its charter)
MARYLAND 62 - 1507028
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3310 WEST END AVENUE
SUITE 400
NASHVILLE, TENNESSEE 37203
(Address of principal executive offices)
(615) 269-8175
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports 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 Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
As of May 1, 1996, 13,184,681 shares of the Registrant's Common Stock,
$.01 par value, were outstanding.
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HEALTHCARE REALTY TRUST
INCORPORATED
FORM 10-Q
MARCH 31, 1996
TABLE OF CONTENTS
Part I - Financial Information
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Income 2
Condensed Consolidated Statements of Cash Flows 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
3
Item 1.
HEALTHCARE REALTY TRUST INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited) (1)
ASSETS MAR. 31, 1996 DEC. 31, 1995
------------- -------------
Real estate properties:
Land $ 41,435,193 $ 41,435,193
Buildings and improvements 275,627,008 273,522,934
Personal property 2,853,966 2,761,458
Construction in progress 26,392,711 15,253,397
------------ ------------
346,308,878 332,972,982
Less accumulated depreciation (16,551,942) (14,492,646)
------------ ------------
Total real estate properties, net 329,756,936 318,480,336
Cash and cash equivalents 915,345 9,142,775
Restricted cash 644,105 552,885
Receivables 1,688,419 1,378,261
Deferred costs, net 1,433,644 1,497,045
Other assets 5,984,476 5,726,375
------------ ------------
Total assets $340,422,925 $336,777,677
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes and bonds payable $ 99,470,000 $ 92,970,000
Security deposits payable 4,442,490 4,562,490
Accounts payable and accrued liabilities 2,798,665 4,214,599
Deferred income 545,417 582,795
Commitments and contingencies 0 0
------------ ------------
Total liabilities 107,256,572 102,329,884
------------ ------------
Stockholders' equity:
Preferred stock, $.01 par value; 50,000,000 shares
authorized; none outstanding 0 0
Common stock, $.01 par value; 150,000,000 shares authorized; 13,184,68
issued and outstanding at Mar. 31, 1996 and 12,976,796 at Dec. 31, 1995 131,847 129,768
Additional paid-in capital 248,113,201 243,418,805
Deferred compensation (5,019,954) (478,288)
Cumulative net income 42,681,421 37,923,238
Cumulative dividends (52,740,162) (46,545,730)
------------ ------------
Total stockholders' equity 233,166,353 234,447,793
------------ ------------
Total liabilities and stockholders' equity $340,422,925 $336,777,677
============ ============
(1) The balance sheet at Dec. 31, 1995 has been derived from audited financial
statements at that date but does not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
(The accompanying notes, together with the Notes to the Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, are an integral part of these financial statements.)
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HEALTHCARE REALTY TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
1996 1995
---------- ----------
REVENUES:
Rental income $ 8,584,100 $ 7,821,690
Management fees 277,646 58,331
Interest and other income 121,161 14,116
----------- -----------
8,982,907 7,894,137
----------- -----------
EXPENSES:
General and administrative 514,409 523,556
Interest 1,560,608 997,752
Depreciation 2,059,296 1,831,081
Amortization 90,411 36,476
----------- -----------
4,224,724 3,388,865
----------- -----------
NET INCOME $ 4,758,183 $ 4,505,272
=========== ===========
NET INCOME PER SHARE $ 0.36 $ 0.35
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 13,077,312 12,961,068
=========== ===========
(The accompanying notes, together with the Notes to the Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, are an integral part of these financial statements.)
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5
HEALTHCARE REALTY TRUST INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
1996 1995
----------- -----------
Cash flows from operating activities:
Net income $ 4,758,183 $ 4,505,272
Adjustments to reconcile net income to cash provided by operating
activities:
Depreciation and amortization 2,152,514 1,879,510
Deferred compensation 91,204 0
Increase (decrease) in deferred income (37,378) 113,222
Increase in receivables and other assets (568,259) (429,311)
Increase (decrease) in accounts payable and accrued liabilities (1,415,934) 155,172
----------- -----------
Net cash provided by operating activities 4,980,330 6,223,865
=========== ===========
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of real estate properties (13,379,352) (15,190,925)
Acquisition of subsidiary 0 (380,000)
Disbursement of security deposits (120,000) (197,282)
----------- -----------
Net cash used in investing activities (13,499,352 (15,768,207)
=========== ===========
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on long-term notes payable 6,500,000 15,400,000
Deferred financing and organization costs paid (29,816) (2,247)
Increase in restricted cash (91,220) (91,005)
Dividends paid (6,122,702) (5,831,837)
Proceeds from issuance of common stock 35,330 172,162
----------- -----------
Net cash provided by financing activities 291,592 9,647,073
=========== ===========
INCREASE IN CASH AND CASH EQUIVALENTS (8,227,430) 102,731
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 9,142,775 496,852
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 915,345 $ 599,583
=========== ===========
(The accompanying notes, together with the Notes to the Consolidated Financial
Statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995, are an integral part of these financial statements.)
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HEALTHCARE REALTY TRUST
INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
of Healthcare Realty Trust Incorporated (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements which are included in the Company's Annual Report on Form 10-K for
the period ended December 31, 1995. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. These financial statements should be
read in conjunction with the financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
The results of operations for the three-month period ending March 31,
1996 are not necessarily indicative of the results that may be expected for the
year ending December 31, 1996.
Certain reclassifications have been made for the period January 1,
1995 through March 31, 1995 to conform to the 1996 presentation. These
reclassifications had no effect on the results of operations as previously
reported.
NOTE 2. ORGANIZATION
The Company was incorporated on May 13, 1992, in the state of
Maryland. The Company completed an initial public offering of 6,000,000 shares
of common stock and commenced operations on June 3, 1993, with the receipt of
proceeds from the offering.
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7
The Company was organized to invest in healthcare-related properties
located throughout the United States, including ancillary hospital facilities,
medical office buildings, physician clinics, long-term care facilities,
comprehensive ambulatory care centers, clinical laboratories and ambulatory
surgery centers. In addition to acquisitions of existing facilities, the
Company provides capital for the construction of new facilities and through its
wholly-owned subsidiary, Healthcare Realty Management Incorporated, provides
property management, leasing and build-to-suit development services. As of
March 31, 1996, the Company had purchased, developed or had under development,
65 properties (the "Properties") for an aggregate investment of $346,308,878
located in 35 markets in 14 states, which are supported by 14
healthcare-related entities. The Properties include 34 ancillary hospital
facilities, 3 medical office buildings, 7 physician clinics, 13 long-term care
facilities, 3 comprehensive ambulatory care centers, 2 clinical laboratories,
and 3 ambulatory surgery centers. See Schedule 1 following "Notes to Condensed
Consolidated Financial Statements" for detailed information concerning the
Properties.
NOTE 3. FUNDS FROM OPERATIONS
Funds from operations, as defined by the National Association of Real
Estate Investment Trusts, Inc. ("NAREIT") 1995 White Paper, means net income
(computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales of property, plus
depreciation from real estate assets.
The Company considers funds from operations to be an informative
measure of the performance of an equity REIT and consistent with measures used
by analysts to evaluate equity REITs. Funds from operations does not represent
cash generated from operating activities in accordance with generally accepted
accounting principles, is not necessarily indicative of cash available to fund
cash needs, and should not be considered as an alternative to net income as an
indicator of the Company's operating performance or as an alternative to cash
flow as a measure of liquidity. Funds from operations for the three months
ended March 31, 1996 and 1995, were $6,735,694 ($0.52 per share) and $6,307,622
($0.49 per share), respectively.
NAREIT encourages REITs to make reporting changes consistent with the
1995 NAREIT White Paper on Funds from Operations no later than fiscal year
1996. The Company's policy will be to report funds from operations for 1996
calculated on the NAREIT 1995 White Paper while providing supplemental
information based upon previous methodology.
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Three Months Ended Three Months Ended
------------------ ------------------
March 31, 1996 March 31, 1995
-------------- --------------
NAREIT Previous
White Paper Previous NAREIT Methodology
As Reported Methodology White Paper As Reported
----------- ----------- ----------- -----------
NET INCOME $4,758,183 $4,758,183 $4,505,272 $4,505,272
NON-RECURRING ITEMS 0 0 0 0
GAIN OR LOSS ON DISPOSITIONS 0 0 0 0
STRAIGHT LINE RENTS 0 0 0 0
ADD:
DEPRECIATION
Real estate 1,977,511 1,977,511 1,802,350 1,802,350
Office F,F&E 0 36,654 0 12,408
Leasehold improvements 0 33,701 0 16,323
Other non-revenue producing assets 0 11,430 0 0
---------- ---------- ---------- ----------
1,977,511 2,059,296 1,802,350 1,831,081
---------- ---------- ---------- ----------
AMORTIZATION
Acquired property contracts (1) 0 72,024 0 35,126
Other non-revenue producing assets 0 17,037 0 0
Organization costs 0 1,350 0 1,350
---------- ---------- ---------- ----------
0 90,411 0 36,476
---------- ---------- ---------- ----------
DEFERRED FINANCING COSTS (2) 0 91,867 0 47,082
---------- ---------- ---------- ----------
TOTAL ADJUSTMENTS 1,977,511 2,241,574 1,802,350 1,914,639
FUNDS FROM OPERATIONS $6,735,694 $6,999,757 $6,307,622 $6,419,911
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING 13,077,312 13,077,312 12,961,068 12,961,068
========== ========== ========== ==========
FUNDS FROM OPERATIONS PER SHARE $ 0.52 $ 0.54 $ 0.49 $ 0.50
========== ========== ========== ==========
(1) Amortization of the acquisition cost of revenue producing property
management and development contracts.
(2) Amortization of deferred financing costs is reported as part of
interest expense on the income statement.
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NOTE 4. NOTES PAYABLE
Senior Notes
On September 18, 1995, the Company privately placed $90,000,000 of its
unsecured Senior Notes (the "Senior Notes") with sixteen credit institutions.
The Senior Notes bear interest at 7.41%, payable semi-annually, and mature on
September 1, 2002. Beginning on September 1, 1998 and on each September 1
through 2002, the Company must amortize $18,000,000 of principal. The note
agreements contain certain representations, warranties and financial and other
covenants customary in such loan agreements.
Senior Unsecured Revolving Credit Facility
The Company currently has a $75,000,000 Senior Unsecured Revolving
Credit Facility (the "Senior Credit Facility") from four commercial banks. At
the option of the Company, borrowings bear interest at: (1) one of the banks'
prime rate, or (2) the LIBOR rate for one, two, three, or six month dollar
deposits plus 1.25%. The Company pays a commitment fee of .25 of 1% per annum
on the unused portion of funds available for borrowing under the Senior Credit
Facility. The Senior Credit Facility expires on August 3, 1997, is unsecured,
and contains certain representations, warranties and financial and other
covenants customary in such loan agreements.
A summary of notes payable at March 31, 1996 is as follows:
Senior Notes $90,000,000
Senior Credit Facility 6,500,000
Other 2,970,000
-----------
Total $99,470,000
===========
NOTE 5. ACQUISITIONS
Effective January 1, 1995, the Company through its wholly-owned
subsidiary, Healthcare Realty Management Incorporated, purchased substantially
all of the assets of and assumed certain liabilities of Starr Sanders Johnson,
Inc., a provider of property management and development services to healthcare
companies, for approximately $3,800,000. The purchase price, which consisted
of $650,000 cash and 156,239 shares of the Company's common stock (valued at
approximately $3,150,000), includes 99,507 shares of common stock that are
being held in escrow and a $270,000 cash holdback, pending the final
determination of certain purchase contingencies.
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NOTE 6. DEFERRED COMPENSATION
Effective January 23, 1996, 141,666 restricted shares of the Company's
common stock previously reserved were released to certain officers of the
Company upon the achievement of the Company's performance based criteria in
accordance with the terms of the First Implementation of the Company's 1993
Employees Stock Incentive Plan (the "Employees Plan"). These restricted shares
require continued employment prior to vesting. Effective January 23, 1996,
262,530 options to purchase the Company's common stock were canceled and 61,181
restricted shares of the Company's common stock were released to non-employee
directors and certain officers of the Company in accordance with the 1993
Outside Directors Stock Incentive Plan and the Employees Plan. These
restricted shares require continued service to the Company prior to vesting.
NOTE 7. COMMITMENTS
As of March 31, 1996, the Company had a net investment of $26,392,711
for eight build-to-suit developments in progress and one expansion of an
existing facility, which have a total remaining funding commitment of
$39,710,827.
As of March 31, 1996, the Company, in the normal course of business,
had entered into a contract to acquire a comprehensive ambulatory care center
in Venice, Florida for approximately $6,750,000. The company also had entered
into a definitive agreement to purchase an ancillary hospital facility in
Fountain Valley, California for approximately $15,000,000. The facility,
currently under construction and financed by a commercial bank, will be
purchased upon completion.
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HEALTHCARE REALTY TRUST
INCORPORATED
SCHEDULE 1 - REAL ESTATE AND ACCUMULATED DEPRECIATION AT MARCH 31, 1996
LAND BUILDINGS & IMPROVEMENTS & CIP
---------------------------------- ----------------------------------------
COSTS INITIAL COSTS
CAPITALIZED INVESTMENT CAPITALIZED
FACILITY INITIAL SUBSEQUENT TO (INCLUDING SUBSEQUENT TO
FACILITY TYPE/NAME LOCATION INVESTMENT ACQUISITION TOTAL CIP) ACQUISITION TOTAL
- - --------------------------------------------- --------- ---------- ----------------------- -------------- -------------- ----------
ANCILLARY HOSPITAL FACILITIES
1 Orange Grove Medical Clinic AZ $ 308,070 $ 0 $ 308,070 $ 4,965,923 $ 0 $ 4,965,923
2 Eaton Canyon Medical Building CA 1,337,483 0 1,337,483 3,106,587 0 3,106,587
3 Fountain Valley - AHF 1 CA 2,218,847 0 2,218,847 3,297,543 0 3,297,543
4 Fountain Valley - AHF 2 CA 2,059,953 0 2,059,953 3,047,816 0 3,047,816
5 Fountain Valley - AHF 3 CA 3,149,515 0 3,149,515 5,635,848 0 5,635,848
6 Fountain Valley - AHF 4 CA 3,160,865 0 3,160,865 5,828,809 0 5,828,809
7 Valley Presbyterian (15211) CA 1,720,127 0 1,720,127 5,797,840 0 5,797,840
8 Valley Presbyterian (6840-50) CA 1,522,222 0 1,522,222 3,787,288 0 3,787,288
9 Coral Gables Medical Plaza FL 532,112 0 532,112 10,676,167 0 10,676,167
10 Deering Medical Plaza FL 0 0 0 5,072,041 0 5,072,041
11 East Pointe Medical Plaza FL 45,216 0 45,216 4,936,632 0 4,936,632
12 Gulf Coast Medical Centre FL 0 0 0 4,687,897 0 4,687,897
13 Palms of Pasadena Medical Plaza FL 0 0 0 4,423,115 760,481 5,183,596
14 Southwest Medical Centre Plaza FL 0 0 0 8,042,863 0 8,042,863
15 Southwest Medical Centre Plaza II FL 0 0 0 1,620,558 0 1,620,558
16 Candler Parking Garage GA 0 0 0 4,169,090 0 4,169,090
17 Candler Professional Office Building GA 0 0 0 7,177,853 0 7,177,853
18 Candler Regional Heart Center GA 0 0 0 7,774,096 0 7,774,096
19 North Fulton Medical Arts Plaza GA 696,248 0 696,248 4,814,870 189,973 5,004,843
20 Northwest Medical Center GA 1,268,962 0 1,268,962 8,492,284 449,527 8,941,811
21 Overland Park Regional Medical Center (4) KS 0 0 0 4,353,487 0 4,353,487
22 Hendersonville Medical Office Building TN 395,056 0 395,056 2,643,834 100,000 2,743,834
23 Bayshore Doctors Center TX 125,471 0 125,471 1,767,799 0 1,767,799
24 Lake Pointe Medical Plaza TX 217,941 0 217,941 1,507,165 0 1,507,165
25 Oregon Medical Building TX 999,193 0 999,193 17,445,917 0 17,445,917
26 Rosewood Professional Building TX 682,867 0 682,867 4,569,953 0 4,569,953
27 Southwest General Birthing Center TX 124,000 0 124,000 2,982,549 0 2,982,549
28 Spring Branch Professional Building TX 3,833,076 0 3,833,076 10,295,139 0 10,295,139
29 Trinity Valley Birthing Center TX 73,147 0 73,147 3,315,284 0 3,315,284
30 Twelve Oaks Medical Plaza TX 389,107 0 389,107 2,690,851 670,627 3,361,478
31 Chippenham Medical Offices VA 0 0 0 3,771,667 0 3,771,667
32 Chippenham Medical Offices VA 874,497 0 874,497 3,718,966 0 3,718,966
33 Johnston-Willis Medical Offices VA 1,912,645 0 1,912,645 6,860,933 0 6,860,933
34 Johnston-Willis Medical Offices VA 0 0 0 4,729,002 1,126,713 5,855,715
---------- ------ ---------- ----------- --------- -----------
27,646,620 0 27,646,620 178,007,665 3,297,321 181,304,986
---------- ------ ---------- ----------- --------- -----------
AMBULATORY SURGERY CENTERS
35 Bakersfield Surgery Center CA 209,246 0 209,246 828,613 0 828,613
36 Valley View Surgery Center NV 940,000 0 940,000 2,860,571 0 2,860,571
37 Physicians Daysurgery Center TX 509,891 0 509,891 1,514,376 0 1,514,376
---------- ------ ---------- ----------- --------- -----------
1,659,137 0 1,659,137 5,203,560 0 5,203,560
---------- ------ ---------- ----------- --------- -----------
COMPREHENSIVE AMBULATORY CARE CENTERS
38 Five Points Medical Building (4) FL 0 0 0 4,676,490 0 4,676,490
39 Huebner Medical Center TX 601,475 0 601,475 11,067,141 200,000 11,267,141
40 Huebner Medical Center II TX 1,041,298 0 1,041,298 7,647,057 0 7,647,057
---------- ------ ---------- ----------- --------- -----------
1,642,773 0 1,642,773 23,390,687 200,000 23,590,687
---------- ------ ---------- ----------- --------- -----------
CLINICAL LABORATIES
41 Midtown Medical Center AL 180,633 0 180,633 8,601,151 0 8,601,151
42 Puckett Laboratory MS 537,660 0 537,660 3,718,165 0 3,718,165
---------- ------ ---------- ----------- --------- -----------
718,293 0 718,293 12,319,316 0 12,319,316
---------- ------ ---------- ----------- --------- -----------
(1) (2)
PERSONAL (2) ACCUMULATED DATE DATE OF
FACILITY TYPE/NAME PROPERTY TOTAL DEPRECIATION ENCUMBRANCES ACQUIRED CONSTRUCTION
- - ----------------------------------------------- ---------- ------------ -------------- ------------- ----------- ------------------
ANCILLARY HOSPITAL FACILITIES
1 Orange Grove Medical Clinic $ 0 $ 5,273,993 $ 440,167 $ 0 1993 1988
2 Eaton Canyon Medical Building 0 4,444,070 89,613 0 1995 1984
3 Fountain Valley - AHF 1 0 5,516,390 137,413 0 1994 1973
4 Fountain Valley - AHF 2 0 5,107,769 127,006 0 1994 1975
5 Fountain Valley - AHF 3 0 8,785,363 234,853 0 1994 1981
6 Fountain Valley - AHF 4 0 8,989,674 242,894 0 1994 1984
7 Valley Presbyterian (15211) 20,237 7,538,204 521,858 1,000,000 (3) 1993 1981
8 Valley Presbyterian (6840-50) 18,267 5,327,777 342,873 0 1993 1961, 1968, 1984-85
9 Coral Gables Medical Plaza 0 11,208,279 558,911 0 1994 1991
10 Deering Medical Plaza 0 5,072,041 222,162 0 1994 1994
11 East Pointe Medical Plaza 0 4,981,848 174,072 0 1994 1994
12 Gulf Coast Medical Centre 0 4,687,897 160,417 0 1994 1994
13 Palms of Pasadena Medical Plaza 0 5,183,596 176,668 0 1994 1994
14 Southwest Medical Centre Plaza 0 8,042,863 300,762 0 1994 1994
15 Southwest Medical Centre Plaza II 0 1,620,558 43,284 0 1995 1977
16 Candler Parking Garage 0 4,169,090 58,350 0 1994 1995
17 Candler Professional Office Building 0 7,177,853 314,399 1,000,000 (3) 1994 1981
18 Candler Regional Heart Center 0 7,774,096 90,676 0 1995 1995
19 North Fulton Medical Arts Plaza 38,409 5,739,500 304,138 0 1993 1983
20 Northwest Medical Center 0 10,210,773 436,708 0 1994 1975
21 Overland Park Regional Medical Center (4) 0 4,353,487 0 0 1995 Under construction
22 Hendersonville Medical Office Building 0 3,138,890 130,953 0 1994 1991
23 Bayshore Doctors Center 12,547 1,905,817 161,623 0 1993 1989
24 Lake Pointe Medical Plaza 12,023 1,737,129 93,284 0 1993 1988
25 Oregon Medical Building 39,968 18,485,078 1,562,067 0 1993 1992
26 Rosewood Professional Building 0 5,252,820 219,729 0 1994 1982
27 Southwest General Birthing Center 0 3,106,549 123,033 0 1993 1994
28 Spring Branch Professional Building 173,532 14,301,747 980,700 0 1993 1985
29 Trinity Valley Birthing Center 0 3,388,431 57,668 0 1994 1995
30 Twelve Oaks Medical Plaza 21,465 3,772,050 188,784 0 1993 1968, 1994
31 Chippenham Medical Offices 0 3,771,667 164,058 0 1994 1972-80
32 Chippenham Medical Offices 0 4,593,463 164,057 0 1994 1994
33 Johnston-Willis Medical Offices 0 8,773,578 276,313 2,970,000 1994 1980, 1987-88
34 Johnston-Willis Medical Offices 0 5,855,715 268,781 0 1994 1993, 1994
------- ----------- --------- ---------
336,448 209,288,054 9,368,271 4,970,000
------- ----------- --------- ---------
AMBULATORY SURGERY CENTERS
35 Bakersfield Surgery Center 8,370 1,046,229 76,735 0 1993 1985
36 Valley View Surgery Center 0 3,800,571 125,297 0 1994 1994
37 Physicians Daysurgery Center 15,296 2,039,563 140,241 0 1993 1985
------- ----------- --------- ---------
23,666 6,886,363 342,273 0
------- ----------- --------- ---------
COMPREHENSIVE AMBULATORY CARE CENTERS
38 Five Points Medical Building (4) 0 4,676,490 0 0 1995 Under construction
39 Huebner Medical Center 60,148 11,928,764 1,008,657 0 1993 1991
40 Huebner Medical Center II 0 8,688,355 136,501 0 1994 1995
------- ----------- --------- ---------
60,148 25,293,608 1,145,158 0
------- ----------- --------- ---------
CLINICAL LABORATORIES
41 Midtown Medical Center 8,028 8,789,812 765,539 0 1993 1906, 1986
42 Puckett Laboratory 29,660 4,285,485 244,805 0 1993 1986, 1991
------- ----------- --------- ---------
37,688 13,075,297 1,010,344 0
------- ----------- --------- ---------
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HEALTHCARE REALTY TRUST
INCORPORATED
SCHEDULE 1 - REAL ESTATE AND ACCUMULATED DEPRECIATION AT MARCH 31, 1996
LAND BUILDINGS & IMPROVEMENTS & CIP
---------------------------------- ----------------------------------------
COSTS INITIAL COSTS
CAPITALIZED INVESTMENT CAPITALIZED
FACILITY INITIAL SUBSEQUENT TO (INCLUDING SUBSEQUENT TO
FACILITY TYPE/NAME LOCATION INVESTMENT ACQUISITION TOTAL CIP) ACQUISITION TOTAL
- - --------------------------------------------- --------- ---------- ----------------------- -------------- -------------- ----------
LONG-TERM CARE FACILITIES
43 Fountain Valley - Living Care Center CA 1,361,952 0 1,361,952 11,325,746 0 11,325,746
44 Life Care Center of Aurora CO 1,651,477 0 1,651,477 4,579,039 0 4,579,039
45 Life Care Center of Orange Park (4) FL 0 0 0 6,894,909 0 6,894,909
46 Life Care Center of Wichita (4) KS 0 0 0 2,156,114 0 2,156,114
47 Life Care Center of Westminster (4) CO 0 0 0 635,923 0 635,923
48 New Harmonie Healthcare Center IN 96,059 0 96,059 3,511,750 0 3,511,750
49 Fenton Extended Care Center MI 40,463 0 40,463 3,467,687 0 3,467,687
50 Meadows Nursing Center MI 6,984 0 6,984 3,241,787 0 3,241,787
51 Ovid Convalescent Manor MI 62,326 0 62,326 1,547,461 0 1,547,461
52 Wayne Convalescent Center MI 52,468 0 52,468 963,337 0 963,337
53 Westgate Manor Nursing Home MI 30,855 0 30,855 1,633,307 0 1,633,307
54 Life Care Center of Houston (4) TX 0 0 0 2,655,521 0 2,655,521
55 Life Care Center of Forth Worth (4) TX 0 0 0 4,660,154 0 4,660,154
----------- -------- ----------- ------------ --------- ------------
3,302,584 0 3,302,584 47,272,736 0 47,272,736
----------- -------- ----------- ------------ --------- ------------
MEDICAL OFFICE BUILDINGS
56 Rowlett Medical Plaza TX 166,123 0 166,123 1,774,431 0 1,774,431
57 New River Valley Med. Arts Building VA 43,126 0 43,126 839,285 0 839,285
58 Valley Medical Center VA 64,347 0 64,347 867,590 0 867,590
----------- -------- ----------- ------------ --------- ------------
273,596 0 273,596 3,481,306 0 3,481,306
----------- -------- ----------- ------------ --------- ------------
PHYSICIAN CLINICS
59 Doctors# Clinic FL 2,183,572 0 2,183,572 8,070,828 0 8,070,828
60 Medical & Surgical Institute of
Ft. Lauderdale FL 906,829 0 906,829 3,573,475 717,332 4,290,807
61 Southwest Florida Orthopedic Center FL 468,544 0 468,544 3,135,642 0 3,135,642
62 Woodstock Clinic GA 586,435 0 586,435 2,087,444 0 2,087,444
63 Durham Medical Center TX 992,738 0 992,738 6,865,237 288,566 7,153,803
64 Valley Diagnostic Medical and
Surgical Clinic TX 502,919 158,368 661,287 3,776,918 0 3,776,918
65 Clinica Latina CA 392,785 0 392,785 331,685 0 331,685
----------- -------- ----------- ------------ --------- ------------
6,033,822 158,368 6,192,190 27,841,230 1,005,898 28,847,127
----------- -------- ----------- ------------ --------- ------------
Total Real Estate $41,276,825 $158,368 $41,435,193 $297,516,500 $4,503,219 $302,019,719
Corporate Property 0 0 0 0 0 0
Total Property $41,276,825 $158,368 $41,435,193 $297,516,500 $4,503,219 $302,019,719
=========== ======== =========== ============ ========= ============
(1) (2)
PERSONAL (2) ACCUMULATED DATE DATE OF
FACILITY TYPE/NAME PROPERTY TOTAL DEPRECIATION ENCUMBRANCES ACQUIRED CONSTRUCTION
- - ----------------------------------------------- ---------- ------------ -------------- ------------- ----------- ------------------
Long-Term Care Facilities
43 Fountain Valley - Living Care Center 0 12,687,698 471,958 0 1994 1989
44 Life Care Center of Aurora 0 6,230,516 190,814 0 1994 1994
45 Life Care Center of Orange Park (4) 0 6,894,909 0 0 1995 Under construction
46 Life Care Center of Wichita (4) 0 2,156,114 0 0 1996 Under construction
47 Life Care Center of Westminster (4) 0 635,923 0 0 1996 Under construction
48 New Harmonie Healthcare Center 32,331 3,640,140 323,976 0 1993 1987
49 Fenton Extended Care Center 32,345 3,540,495 320,084 0 1993 1968
50 Meadows Nursing Center 35,415 3,284,186 301,259 0 1993 1971, 1977
51 Ovid Convalescent Manor 48,791 1,658,578 124,415 0 1993 1968
52 Wayne Convalescent Center 33,548 1,049,353 98,570 0 1993 1967
53 Westgate Manor Nursing Home 32,887 1,697,049 157,694 0 1993 1964, 1974
54 Life Care Center of Houston (4) 0 2,655,521 0 0 1995 Under construction
55 Life Care Center of Forth Worth (4) 0 4,660,154 0 0 1995 Under construction
---------- ------------ ----------- ----------
215,317 50,790,637 1,988,771 0
---------- ------------ ----------- ----------
Medical Office Buildings
56 Rowlett Medical Plaza 0 1,940,554 75,435 0 1994 1994
57 New River Valley Med. Arts Building 43,611 926,022 91,528 0 1993 1988
58 Valley Medical Center 83,179 1,015,116 109,584 0 1993 1989
---------- ------------ ----------- ----------
126,790 3,881,692 276,548 0
---------- ------------ ----------- ----------
Physician Clinics
59 Doctors# Clinic 50,781 10,305,181 735,331 0 1993 1969, 1973
60 Medical & Surgical Institute of
Ft. Lauderdale 0 5,197,636 176,415 0 1994 1991
61 Southwest Florida Orthopedic Center 0 3,604,186 150,766 0 1994 1984
62 Woodstock Clinic 0 2,673,879 109,280 0 1994 1991
63 Durham Medical Center 364,987 8,511,528 507,997 0 1993 1993
64 Valley Diagnostic Medical and
Surgical Clinic 20,118 4,458,323 342,682 0 1993 1982
65 Clinica Latina 0 724,470 7,442 0 1995 1991
---------- ------------ ----------- ----------
435,886 35,475,203 2,029,913 0
---------- ------------ ----------- ----------
Total Real Estate $1,235,943 $344,690,854 $16,161,278 $4,970,000
Corporate Property 1,618,024 1,618,024 390,664 0
Total Property $2,853,966 $346,308,878 $16,551,942 $4,970,000
========== ============ =========== ==========
(1) Depreciation is provided on buildings and improvements over 31.5 or 39.0
years and personal property over 3.0, 5.0 or 7.0 years.
(2) Reconciliations of Total Property and Accumulated Depreciation for the
quarter ended March 31, 1996:
Quarter Ended 3/31/96
-------------------------------
Accumulated
Total Property Depreciation
-------------- ------------
Beginning Balance $332,972,982 $14,492,646
Retirements/Dispositions 0 0
Additions during the period:
Acquisitions/Improvements 1,231,930 1,977,510
Corporate Property 964,652 81,786
Construction in Progress 11,139,314 0
-----------------------------
Balance at March 31, 1996 $346,308,878 $16,551,942
=============================
(3) The $1,000,000 encumbrances are to protect the lessee's interest in their
security deposit.
(4) Lessee development at March 31, 1996.
10
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OPERATING RESULTS
First Quarter 1996 Compared to First Quarter 1995
Total revenues for the quarter ended March 31, 1996 were $8,982,907
compared to $7,894,137 for the quarter ended March 31, 1995, which is an
increase of $1,088,770, or 14%. The increase is primarily due to base rent
derived from approximately $24,000,000 of property acquisitions and properties
reclassified from construction in progress subsequent to March 31, 1995. In
addition, revenues during the quarter ended March 31, 1996 reflect an increase
of $219,315, or 376% of property management fees (see Note 5). At March 31,
1996, the Company managed 40 properties compared to five properties at March
31, 1995. Interest and other income for the quarter ended March 31, 1996 were
$121,161 compared to $14,116 for the quarter ended March 31, 1995 primarily due
to an increase in third party development fees.
Total expenses for the quarter ended March 31, 1996 were $4,224,724
compared to $3,388,865 for the quarter ended March 31, 1995, which is an
increase of $835,859, or 25%. Depreciation expense increased $228,215 due to
the acquisition of additional properties and the completion of properties under
construction which were discussed in the preceding paragraph. There was no
significant change in general and administrative expenses. Interest expense
increased from $997,752 during the first quarter of 1995 to $1,560,608 during
the first quarter of 1996. As previously discussed in the notes to the
financial statements, on September 18, 1995, the Company privately placed
$90,000,000 of its unsecured 7.41% Senior Notes with sixteen credit
institutions. During the first quarter of 1995, the Company had an average
outstanding debt balance of $48,100,000 in comparison to an average outstanding
balance of $96,200,000 during the first quarter of 1996. Amortization
increased from $36,476 during the first quarter of 1995 to $90,411 during the
first quarter of 1996 due to an increase in amortization of revenue producing
management and development contracts acquired in the Starr Sanders Johnson,
Inc. acquisition (see Note 5).
11
14
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company had purchased, developed or had
under development, 65 properties (the "Properties") for an aggregate investment
of $346,308,878 located in 35 markets in 14 states, which are supported by to
14 healthcare-related entities. The Properties include 34 ancillary hospital
facilities, 3 medical office buildings, 7 physician clinics, 13 long-term care
facilities, 3 comprehensive ambulatory care centers, 2 clinical laboratories,
and 3 ambulatory surgery centers. See Schedule 1 following "Notes to Condensed
Consolidated Financial Statements" for detailed information concerning the
Properties. The Company has financed its acquisitions to date through the sale
or exchange of common stock, long-term indebtness, borrowings under its credit
facilities, and the assumption of bonds.
On September 18, 1995, the Company privately placed $90,000,000 of its
Senior Notes. The Senior Notes bear interest at 7.41% and mature on September
1, 2002 (see Note 4). During the quarter ended March 31, 1996, the remaining
$9.1 million of proceeds from the Senior Notes was disbursed by the Company.
The Company currently has a $75,000,000 Senior Credit Facility from
four commercial banks that expires in August 1997 (see Note 4). At March 31,
1996, $6,500,000 was outstanding under the Senior Credit Facility, which
results in a remaining borrowing capacity of $68,500,000.
At March 31, 1996, $2,970,000 of serial and term bonds were
outstanding.
At March 31, 1996, the Company had stockholders' equity of
$233,166,353. The debt to total capitalization ratio was approximately 0.30 to
1.00 at March 31, 1996.
During the quarter ended March 31, 1996:
The Company provided the initial funding for two 57,035 square foot
long-term care, build-to-suit developments in Wichita, Kansas and Westminister,
Colorado which have a total commitment of $7,294,000 and $7,460,000,
respectively. These properties were funded from Company operations and
proceeds borrowed under the Senior Credit Facility.
In total, the Company funded $13,379,352 for construction in progress
and capital additions. The sources of these funds were cash provided by
Company operations and borrowings under the Senior Credit Facility, and
remaining proceeds of the Senior Notes.
On February 15, 1996, the Company paid a dividend of $0.47 per share
to the holders of its common stock as of the close of business on February 2,
1996. This dividend related to the period from October 1, 1995 through
December 31, 1995.
12
15
In April 1996, the Company announced payment of a dividend of $0.475
per share to the holders of common shares on May 2, 1996. The dividend will be
paid on May 15, 1996. The dividend relates to the period January 1, 1996
through March 31, 1996. The Company presently plans to continue to pay its
quarterly dividends, with increases consistent with its current practice. In
the event that the Company cannot make additional investments in 1996 because
of an inability to obtain new capital by issuing equity and debt securities,
the Company will continue to be able to pay its dividends in a manner
consistent with its current practice. No assurance can be made as to the
effect upon the Company's ability to increase its quarterly dividends during
periods subsequent to 1996, should access to new capital not be available to
the Company.
As of March 31, 1996, the Company had a net investment of $26,392,711
for eight build-to-suit developments in progress and one expansion of an
existing facility, which have a total remaining funding commitment of
$39,710,827. These commitments will be funded from Company operations and
proceeds borrowed under the Senior Credit Facility which had a remaining
borrowing capacity of $68,500,000 at March 31, 1996.
As of March 31, 1996, the Company, in the normal course of business,
had entered into a contract to acquire a comprehensive ambulatory care center
in Venice, Florida for approximately $6,750,000. The company also had entered
into a definitive agreement to purchase an ancillary hospital facility in
Fountain Valley, California for approximately $15,000,000. The facility,
currently under construction and financed by a commercial bank, will be
purchased upon completion. The Company will either assume the existing debt or
fund the acquisition from proceeds borrowed under the Senior Credit Facility.
During 1995, the Company filed a shelf registration statement
pertaining to $250,000,000 of equity securities, debt securities, and warrants.
Such registration statement has been declared effective by the Securities and
Exchange Commission. The Company intends to offer securities under such
registration statement from time to time to finance future acquisitions and
build-to-suit developments as they occur. The Company may, under certain
circumstances, borrow additional amounts in connection with the renovation or
expansion of its properties, the acquisition or development of additional
properties or, as necessary, to meet distribution requirements for REITs under
the Code. The Company may raise additional capital or make investments by
issuing, in public or private transactions, its equity and debt securities, but
the availability and terms of any such issuance will depend upon market and
other conditions. Although management believes that the Company will be able
to obtain additional financing or capital on terms acceptable to the Company in
sufficient amounts to meet its liquidity needs, there can be no assurance that
such additional financing or capital will be available on terms acceptable to
the Company.
Under the terms of the leases and other financial support agreements
relating to the properties, tenants or healthcare providers are generally
responsible for operating
13
16
expenses and taxes relating to the properties. As a result of these
arrangements, the Company does not believe that it will be responsible for any
major expenses in connection with the properties during the respective terms of
the agreements. The Company anticipates entering into similar arrangements
with respect to any additional properties it acquires. After the term of the
lease or financial support agreement, or in the event the financial obligations
required by the agreement are not met, the Company anticipates that any
expenditures it might become responsible for in maintaining the properties will
be funded by cash from operations and, in the case of major expenditures,
possibly by borrowings. To the extent that unanticipated expenditures or
significant borrowings are required, the Company's cash available for
distribution and liquidity may be adversely affected.
The Company's future results of operations will be influenced by the
terms of any subsequent investments the Company may make, as well as its
ability to generate revenues from the management and development services
performed by Healthcare Realty Management. There can be no assurance that the
Company will be able to purchase or develop additional properties or to lease
to others on suitable terms or to successfully market that services offered by
Healthcare Realty Management.
Management believes that inflation should not have a materially
adverse effect on the Company. The majority of the leases contain some
provision for additional rent payments based on increases in various economic
measures. These additional rent payments have not been significant to date.
14
17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11.1 Statement re: Computation of Per-Share Earnings
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the three
months ended March 31, 1996.
15
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEALTHCARE REALTY TRUST INCORPORATED
By: /s/ Timothy G. Wallace
--------------------------------------------------
Timothy G. Wallace
Vice President Finance and Chief Financial Officer
Date: May 10, 1996
16
19
EXHIBIT INDEX
Exhibit
Number Description of Exhibits
- - ------- -----------------------
11.1 Statement re: Computation of Per-Share Earnings
27 Financial Data Schedule (for SEC use only)
17