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, 2002.
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from to
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Commission file number 1-8895
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HEALTH CARE PROPERTY INVESTORS, INC.
(Exact name of registrant as specified in its charter)
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Maryland 33-0091377
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
4675 MacArthur Court, Suite 900
Newport Beach, California 92660
(Address of principal executive offices)
(949) 221-0600
(Registrant's telephone number, including area code)
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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[ ]
As of May 7, 2002 there were 57,216,155 shares of $1.00 par value common
stock outstanding.
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HEALTH CARE PROPERTY INVESTORS, INC.
INDEX
PART I. FINANCIAL INFORMATION
PAGE NO.
--------
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
March 31, 2002 and December 31, 2001.................... 2
Condensed Consolidated Statements of Income
Three Months Ended March 31, 2002 and 2001.............. 3
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2002 and 2001.............. 4
Notes to Condensed Consolidated Financial Statements.... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........... 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................ 24
Signatures ........................................................ 28
1
Health Care Property Investors, Inc.
Condensed Consolidated Balance Sheets
(Amounts in thousands)
March 31, December 31,
2002 2001
----------- ------------
(Unaudited)
Assets
Real Estate Investments:
Buildings and Improvements $ 2,376,513 $ 2,267,030
Accumulated Depreciation (369,146) (339,971)
----------- -----------
2,007,367 1,927,059
Construction in Progress 16,474 11,616
Land 269,083 255,881
----------- -----------
2,292,924 2,194,556
Loans Receivable 168,027 176,286
Investments in and Advances to Partnerships 21,546 21,750
Accounts Receivable 21,183 20,940
Other Assets 8,772 9,903
Cash and Cash Equivalents 6,617 8,408
----------- -----------
Total Assets $ 2,519,069 $ 2,431,843
=========== ===========
Liabilities and Stockholders' Equity
Bank Notes Payable $ 309,800 $ 108,500
Senior Notes Payable 653,411 764,230
Mortgage Notes Payable 181,682 185,022
Accounts Payable, Accrued Expenses and Deferred Income 57,583 57,399
Minority Interests in Partnerships/Convertible Operating
Partnership Units 69,767 69,968
Stockholders' Equity:
Preferred Stock 274,487 274,487
Common Stock 57,050 56,387
Additional Paid-In Capital 1,124,032 1,100,743
Other Equity (10,676) (7,948)
Cumulative Net Income 913,493 883,084
Cumulative Dividends (1,111,560) (1,060,029)
----------- -----------
Total Stockholders' Equity 1,246,826 1,246,724
----------- -----------
Total Liabilities and Stockholders' Equity $ 2,519,069 $ 2,431,843
=========== ===========
See accompanying Notes to Condensed Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
2
Health Care Property Investors, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(Amounts in thousands, except per share amounts)
Three Months
Ended March 31,
-----------------
2002 2001
------- -------
Revenue
Rental Income, Triple Net Properties $52,811 $51,475
Rental Income, Managed Properties 22,447 19,796
Interest and Other Income 5,511 5,319
------- -------
80,769 76,590
------- -------
Expense
Interest Expense 17,536 20,996
Real Estate Depreciation 17,934 18,561
Managed Properties Operating Expenses 7,475 7,201
General and Administrative Expenses 4,199 3,256
------- -------
47,144 50,014
------- -------
Income From Operations 33,625 26,576
Minority Interests (1,999) (1,337)
------- -------
Income Before Discontinued Operations 31,626 25,239
Discontinued Operations
Operating Income from Discontinued Operations 102 1,559
Loss on Real Estate Dispositions (1,319) (774)
------- -------
(1,217) 785
------- -------
Net Income 30,409 26,024
Dividends to Preferred Stockholders (6,225) (6,225)
------- -------
Net Income Applicable to Common Shares $24,184 $19,799
======= =======
Basic Earnings Per Common Share $ 0.43 $ 0.39
======= =======
Diluted Earnings Per Common Share $ 0.42 $ 0.39
======= =======
Weighted Average Shares Outstanding - Basic 56,737 50,963
======= =======
Weighted Average Shares Outstanding - Diluted 58,619 51,193
======= =======
See accompanying Notes to Condensed Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
3
Health Care Property Investors, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
Three Months
Ended March 31,
--------------------
2002 2001
--------- --------
Cash Flows From Operating Activities:
Net Income $ 30,409 $ 26,024
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Real Estate Depreciation 18,125 18,739
Non Cash Charges 1,312 1,080
Joint Venture Adjustments 283 106
Loss on Sale of Real Estate Properties 1,319 774
Changes in:
Operating Assets 590 450
Operating Liabilities (285) 3,025
--------- --------
Net Cash Provided By Operating Activities 51,753 50,198
========= ========
Cash Flows From Investing Activities:
Acquisition of Real Estate (125,572) (22,949)
Proceeds from the Sale of Real Estate Properties, Net 8,630 686
Other Investments and Loans 7,855 10,697
--------- --------
Net Cash Used In Investing Activities (109,087) (11,566)
========= ========
Cash Flows From Financing Activities:
Net Change in Bank Notes Payable 201,300 (45,000)
Repayment of Senior Notes Payable (111,000) (1,000)
Cash Proceeds from Issuing Common Stock 19,420 1,218
Final and Periodic Payments on Mortgages (3,340) (1,277)
Dividends Paid (51,531) (44,966)
Other Financing Activities 694 (17)
--------- --------
Net Cash Used In Financing Activities 55,543 (91,042)
========= ========
Net Decrease In Cash And Cash Equivalents (1,791) (52,410)
Cash And Cash Equivalents, Beginning Of Period 8,408 58,623
--------- --------
Cash And Cash Equivalents, End Of Period $ 6,617 $ 6,213
========= ========
Capitalized Interest $ 274 $ --
========= ========
See accompanying Notes to Condensed Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
4
HEALTH CARE PROPERTY INVESTORS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2002
(Unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES
We, the management of Health Care Property Investors, Inc., believe that
the unaudited financial information contained in this report reflects all
adjustments that are necessary to state fairly the financial position, the
results of operations, and the cash flows of the Company. Unless the context
otherwise indicates, the Company or HCPI means Health Care Property Investors,
Inc. and its affiliated subsidiaries and joint ventures. We both recommend and
presume that users of this interim financial information read or have read or
have access to the audited financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations for the preceding
fiscal year ended December 31, 2001. Therefore, notes to the financial
statements and other disclosures that would repeat the disclosures contained in
our most recent annual report to security holders have been omitted. This
interim financial information does not necessarily represent a full year's
operations for various reasons, including acquisitions and dispositions, changes
in rents and interest rates, and the timing of debt and equity financings.
Managed Property Operations:
We own interests in 67 medical office buildings ("MOBs"), six healthcare
laboratory and biotech research facilities and 27 physician group practice
clinics where property management is provided by independent property management
companies ("Managed Portfolio"). These facilities are leased to multiple tenants
under gross, modified gross or triple net leases. Rents and operating income
attributable to these properties are included in Rental Income, Managed
Properties in our financial statements. Expenses related to the operation of
these facilities are recorded as Operating Expenses, Managed Properties.
Derivatives and Hedging:
Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (Statement 133) established accounting and reporting standards
requiring that every derivative instrument (including certain derivative
instruments embedded in other contracts) be recorded in the balance sheet as
either an asset or liability measured at its fair value. Additionally, changes
in the derivative's fair value are recognized as comprehensive income if
specific hedge accounting criteria are met. If these criteria are not met,
changes in the fair value are to be included in earnings. See Note 4 for the
impact of agreements requiring the application of Statement 133.
Discontinued Operations:
We have reclassified certain facilities operations as Discontinued
Operations in accordance with Statement of Financial Accounting Standards No.
144 "Accounting for
5
the Impairment or Disposal of Long-Lived Assets" (Statement 144) which was
issued in August 2001. Statement 144 established accounting and reporting
standards requiring that long-lived assets to be disposed of be reported as
Discontinued Operations if management has committed to a plan to sell the asset
under usual and customary terms within one year of establishing the plan to
sell.
Reclassifications:
We have made reclassifications, where necessary, for comparative financial
statement presentations.
(2) REAL ESTATE INVESTMENTS
As of March 31, 2002, our portfolio of properties, including equity
investments, consisted of 425 facilities located in 42 states. These facilities
are comprised of 172 long-term care facilities, 90 assisted living facilities,
85 medical office buildings, 37 physician group practice clinics, 21 acute care
hospitals, nine freestanding rehabilitation facilities, six health care
laboratory and biotech research facilities and five retirement living
communities. Our gross investment in these properties, which includes joint
venture acquisitions, was approximately $2,848,738,000 at March 31, 2002.
Acquisitions:
For the quarter ended March 31, 2002, we acquired six properties for an
aggregate purchase price of $118,000,000. These properties have an average lease
rate of 10.49%. The properties consist of three assisted living facilities, two
retirement living communities and one medical office building. In addition, upon
completion of certain refinancing transactions, we will acquire a fourth
assisted living facility for $6,000,000.
Construction:
During the quarter, construction continued on two new facilities, a
$28,000,000 short stay hospital and medical office building in Idaho Falls of
which $8,100,000 has been incurred to date and a $12,300,000 health care
research facility of which $6,400,000 has been incurred to date. These two
prospects are expected to start earning rent at an average lease rate of 11.3%
in the fourth quarter of 2002.
Dispositions:
At March 31, 2002, we had eight facilities classified as Discontinued
Operations with a net book value of $11,500,000. Included in Discontinued
Operations is operating income from these eight facilities of $102,000 and
$1,559,000 for the quarters ended March 31, 2002 and 2001, respectively.
During the quarter ended March 31, 2002, the Company sold two facilities
for a net loss of $342,000.
6
In accordance with Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," we wrote down to net realizable value three facilities to be
sold. The resulting $977,000 charge is included in Loss on Real Estate
Dispositions.
(3) OPERATORS
At March 31, 2002, we had approximately 93 health care operators and
approximately 650 leases in the Managed Portfolio.
Major Operators:
Listed below are our major operators which represent three percent or more
of our annualized revenue, the annualized revenue in properties operated by
those operators, and the percentage of total annualized revenue from these
operators for the three months ended March 31, 2002. All of the companies listed
below (with the exception of Centennial Healthcare Corp.) are publicly traded
companies and are subject to the informational filing requirements of the
Securities and Exchange Act of 1934, as amended, and accordingly file periodic
financial statements on Form 10-K and Form 10-Q with the Securities and Exchange
Commission.
Annualized
Revenue Percentage
----------- ----------
(Dollar amounts in 000s)
Tenet Healthcare Corporation (THC) $ 56,564 18%
HealthSouth Corporation (HRC) 16,931 5%
Kindred Healthcare, Inc. (KIND.OB) 16,290 5%
Emeritus Corporation (ESC) 15,642 5%
HCA Inc. (HCA) 14,470 5%
Beverly Enterprises (BEV) 11,971 4%
Centennial Healthcare Corp. 8,896 3%
-------- --
$140,764 45%
======== ==
Long-Term Care and Assisted Living Operators:
We derive 26% of our revenue from the long-term care industry. The
long-term care industry continues to face challenges on varying fronts including
availability of staff, access to liability insurance and adequate reimbursement.
Many states have improved Medicaid reimbursement; however, the economic slowdown
has put pressure on state budgets, which could hamper rate increases planned for
2002. Additionally, operators face the uncertainty of a possible reduction in
Medicare reimbursement planned for October 1, 2002.
On the positive side, occupancies and operations improved for many of our
facilities. Several long-term care facility operators, including three of our
lessees, Kindred Healthcare, Genesis Health Ventures, and Sun Healthcare, have
successfully emerged from bankruptcy proceedings. In addition, Mariner
Healthcare, another lessee, has submitted its disclosure plan for
reorganization, which may allow them to exit bankruptcy during the first half of
2002.
7
We own 11 long-term care facilities in Oklahoma, four long-term care
facilities in North Carolina, and eight long-term care facilities in various
other states whose operations have been negatively affected by reduced
reimbursement and the performance and financial situation of their lessees. We
recorded revenue from these 23 properties of approximately $1,400,000 less in
the first quarter of this year than in the corresponding quarter in 2001. Leases
are now in effect for six of these properties, six additional leases are to
become effective upon operator licensure and new leases are being negotiated on
an additional five facilities. Management expects improved results from higher
lease revenue or sales of these properties during the next 12 months.
We derive 13% of our revenue from the assisted living industry. The
assisted living industry has been challenged by over-building and slow fill-up.
Additionally, pressures on operating margins have resulted from higher acuity of
residents and higher operating costs, in particular liability insurance. The
development of new assisted living facilities has decreased significantly and
occupancy rates are improving, albeit more slowly than operators had forecasted.
Assisted living operators have experienced some success in their capital, debt,
and lease restructurings. Assisted living facilities that have achieved
stabilized operations appear to be able to sustain ongoing operations. A modest
number of new operators are entering the assisted living market with capital for
selective investment.
We own six assisted living facilities currently leased to two operators
whose operations have been negatively affected by their current market position.
This has resulted in recording revenue of approximately $500,000 less in the
first quarter of this year from these properties than in the same quarter in
2001. We are close to agreements with new operators on three of our facilities.
Management believes that there will be an improvement in our return on some of
these facilities in the next twelve months.
We have also recorded $500,000 for operating expenses (included in General
and Administrative Expenses) for transition costs on certain long-term care and
assisted living facilities.
(4) NOTES PAYABLE
During the quarter ended March 31, 2002, we paid off $111,000,000 of
maturing long-term debt with an average interest rate of 7.24%. These debt
maturities were financed with funds available under our revolving lines of
credit.
Derivatives and Hedging
During 1999, we entered into a $25,000,000 swap contract through which the
variable interest rate on a senior note was fixed until its February 2004
maturity. We have reflected the change in the fair market value of this
instrument of $280,000 as of March 31, 2002 as an accumulated comprehensive
loss, which is recorded under Other Equity. If the note is held to maturity as
planned, the unrealized loss will not be incurred.
8
(5) ACCOUNTS RECEIVABLE
Accounts receivable consists of the following:
March 31, December 31,
2002 2001
--------- ------------
(Amounts in thousands)
Rent and Interest Receivable $26,237 $25,900
Allowance for Doubtful Accounts (5,054) (4,960)
------- -------
Accounts Receivable, Net $21,183 $20,940
======= =======
(6) STOCKHOLDERS' EQUITY
The following table provides a summary of the activity for the
Stockholders' Equity account for the three months ended March 31, 2002 (amounts
in thousands):
Preferred Stock Common Stock
------------------ ------------------------------
Number Number Par Additional
of of Value Paid-In
Shares Amount Shares Amount Capital
- ----------------------------------------------------------------------------------------
Balances,
December 31, 2001 11,722 $274,487 56,387 $56,387 $1,100,743
Stock Options Exercised 34 34 902
Stock Grants Issued 93 93 3,318
Cancelled Shares
Common Stock Issued 536 536 19,069
Net Income
Dividends Paid - Preferred Shares
Dividends Paid - Common Shares
Deferred Compensation
Notes receivable From Officers
Other Comprehensive Income (Loss):
Comprehensive Income
(See Note 8)
- ----------------------------------------------------------------------------------------
Balances,
March 31, 2002 11,722 $274,487 $57,050 57,050 $1,124,032
========================================================================================
Total
Cumulative Cumulative Other Stockholders'
Net Income Dividends Equity Equity
- ----------------------------------------------------------------------------------------
Balances,
December 31, 2001 $883,084 $(1,060,029) $ (7,948) $1,246,724
Stock Options Exercised 936
Stock Grants Issued 3,411
Cancelled Shares
Common Stock Issued 19,605
Net Income 30,409 30,409
Dividends Paid - Preferred Shares (6,225) (6,225)
Dividends Paid - Common Shares (45,306) (45,306)
Deferred Compensation (2,858) (2,858)
Notes receivable From Officers (150) (150)
Other Comprehensive Income (Loss):
Comprehensive Income
(See Note 8) 280 280
- ----------------------------------------------------------------------------------------
Balances,
March 31, 2002 $913,493 $(1,111,560) $(10,676) $1,246,826
========================================================================================
(7) OPERATING PARTNERSHIP UNITS
During the quarter ended March 31, 2002, we issued 18,477 non-managing
member units in HCPI/Utah, LLC, a limited liability company of which we are the
managing member. As of March 31, 2002, there were a total of 1,638,969
non-managing member units outstanding in three limited liability companies of
which we are the managing member: HCPI/Utah, LLC, HCPI/Utah II, LLC and
HCPI/Indiana, LLC. These non-managing member units are convertible into our
common stock on a one-for-one basis.
9
(8) OTHER EQUITY
Other equity consists of the following:
March 31, December 31,
2002 2001
--------- -----------
(Amounts in thousands)
Unamortized Balance on Deferred Compensation $ 7,237 $4,379
Notes Receivable From Officers and Directors for
Purchase of Common Stock 2,579 2,429
Accumulated Comprehensive Loss (See Note 4) 860 1,140
------- ------
Total Other Equity $10,676 $7,948
======= ======
Accumulated comprehensive loss is a reduction to net income in calculating
comprehensive income. Comprehensive income is the change in equity from
non-owner sources. Comprehensive income for the quarters ended March 31, 2002
and 2001 was $30,689 and $26,024, respectively.
(9) EARNINGS PER COMMON SHARE
We compute earnings per share in accordance with Statement of Financial
Accounting Standards No. 128, Earnings Per Share. Basic earnings per common
share is computed by dividing Net Income applicable to common shares by the
weighted average number of shares of common stock outstanding during the period.
Diluted earnings per common share are calculated including the effect of
dilutive securities. Approximately 1,400,000 options to purchase shares of
common stock that had an exercise price in excess of the average market price of
the common stock during the period were not included because they are not
dilutive.
(All amounts in thousands, except per share amounts)
For the Three Months Ended For the Three Months Ended
March 31, 2002 March 31, 2001
---------------------------- ----------------------------
Per Share Per Share
Income Shares Amount Income Shares Amount
- -------------------------------------- ------- ------ --------- ------- ------ ---------
Basic Earnings Per Common Share:
Net Income Applicable to Common Shares $24,184 56,737 $0.43 $19,799 50,963 $0.39
Dilutive Options -- 288 -- 185
---------------- ----------------
Diluted Earnings Per Common Share:
Net Income Applicable to Common Shares $24,184 57,025 $0.42 $19,799 51,148 $0.39
================ ================
(10) FUNDS FROM OPERATIONS
We are required to report information about operations on the bases that we
use internally to measure performance under Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information."
We believe that Funds From Operations ("FFO") is the most important
supplemental measure of operating performance for a real estate investment
trust. Because the historical cost
10
accounting convention used for real estate assets requires straight-line
depreciation (except on land), such accounting presentation implies that the
value of real estate assets diminishes predictably over time. Since real estate
values instead have historically risen and fallen with market conditions,
presentations of operating results for a real estate investment trust that use
historical cost accounting for depreciation could be less informative. The term
FFO was designed by the real estate investment trust industry to address this
problem.
We adopted the definition of FFO prescribed by the National Association of
Real Estate Investment Trusts ("NAREIT"). FFO is defined as Net Income
applicable to common shares (computed in accordance with generally accepted
accounting principles), excluding gains (or losses) from sales of property and
extraordinary items, plus real estate depreciation and real estate related
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures are
calculated to reflect FFO on the same basis.
FFO 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. FFO, as we define it, may not be comparable to
similarly entitled items reported by other real estate investment trusts that do
not define it exactly as the NAREIT definition.
Below are summaries of the calculation of our FFO (all amounts in
thousands):
Three Months
Ended March 31,
-----------------
2002 2001
------- -------
Net Income Applicable to Common Shares $24,184 $19,799
Real Estate Depreciation 17,934 18,561
Loss and Depreciation on Real Estate Dispositions 1,510 952
Joint Venture Adjustments 283 106
------- -------
Funds From Operations $43,911 $39,418
======= =======
(11) COMMITMENTS
We have commitments to acquire six medical office buildings and one
assisted living facility for $38,000,000. We have outstanding commitments to
fund additional development of facilities on existing properties of
approximately $12,000,000, and are committed to fund $45,000,000 for
construction of new health care facilities. We expect that a significant portion
of these commitments will be funded; however, experience suggests that some
committed transactions may not close for various reasons including unsatisfied
closing conditions, competitive financing sources, final negotiation differences
or the operator's inability to obtain required internal or governmental
approvals.
11
(12) SUBSEQUENT EVENTS
On April 26, 2002, the Board of Directors declared a quarterly dividend of
$0.81 per common share payable on May 20, 2002 to shareholders of record as of
the close of business on May 6, 2002.
The Board of Directors also declared a cash dividend of $0.492188 per share
on its series A cumulative preferred stock, $0.54375 per share on its series B
cumulative preferred stock and $0.5375 per share on its series C cumulative
preferred stock depositary shares. These dividends will be paid on June 28, 2002
to shareholders of record as of the close of business on June 14, 2002.
(13) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value. The carrying amount for Cash and Cash Equivalents approximates fair
value because of the short-term maturity of those instruments. Fair values for
Mortgage Loans Receivable and Senior Notes and Mortgage Notes Payable are based
on the estimates of management and on rates currently prevailing for comparable
loans and instruments of comparable maturities, and are as follows:
March 31, 2002 December 31, 2001
------------------- -------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
(Amounts in thousands)
Mortgage Loans Receivable $146,605 $142,375 $148,075 $143,319
Senior Notes and Mortgage Notes Payable $835,092 $849,207 $949,252 $975,617
(14) NEW PROUNCEMENTS
In June 2001, the Financial Accounting Standards Board released Statements
of Financial Accounting Standards No. 141 "Business Combinations," No. 142
"Goodwill and Other Intangible Assets" and No. 143 "Accounting for Asset
Retirement Obligations." The effect of these pronouncements on our financial
statements is not expected to be material.
12
HEALTH CARE PROPERTY INVESTORS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
Health Care Property Investors, Inc., including its wholly-owned
subsidiaries and affiliated joint ventures (HCPI), generally acquires health
care facilities and leases them on a long-term basis to health care providers.
We also lease medical office space to providers and physicians on a shorter term
basis. On a more limited basis, we provide mortgage financing on health care
facilities. As of March 31, 2002, our portfolio of properties, including equity
investments, consisted of 425 facilities located in 42 states. These facilities
are comprised of 172 long-term care facilities, 90 assisted living facilities,
85 medical office buildings, 37 physician group practice clinics, 21 acute care
hospitals, nine freestanding rehabilitation facilities, six health care
laboratory and biotech research facilities and five retirement living
communities. Our gross investment in these properties, which includes joint
venture acquisitions, was approximately $2.8 billion at March 31, 2002.
For the quarter ended March 31, 2002, we acquired six properties for an
aggregate purchase price of $118,000,000. These properties have an average lease
rate of 10.49%. The properties consist of three assisted living facilities, two
retirement living communities and one medical office building. In addition, upon
completion of certain refinancing transactions, we will acquire a fourth
assisted living facility for $6,000,000. We financed the acquisitions primarily
through the proceeds from the issuance of new equity and asset sales.
RESULTS OF OPERATIONS
Net Income applicable to common shares for the quarter ended March 31, 2002
totaled $24,184,000, or $0.42 per diluted share of common stock on revenue of
$80,769,000. This compares with Net Income applicable to common shares of
$19,799,000, or $0.39 per diluted share of common stock on revenue of
$76,590,000, for the quarter ended March 31, 2001. Included in diluted basis Net
Income applicable to common shares but not in FFO per share is a net loss on
real estate dispositions of $342,000, or $0.005 per diluted share for the
quarter ended March 31, 2002 and a write-down to fair market value of $977,000,
or $0.015 per diluted share of three facilities to be sold. Included in diluted
basis Net Income applicable to common shares but not in FFO per share for the
quarter ended March 31, 2001 is a net loss on real estate dispositions of
$774,000, or $0.02 per diluted share and a write-down to fair market value of
$1,600,000, or $0.03 per diluted share of a facility to be sold. Also included
in diluted basis Net Income applicable to common shares and FFO per share for
2002 and 2001 is the effect of the Securities and Exchange Commission's (SEC's)
Staff Accounting Bulletin No. 101 ("SAB 101") "Revenue Recognition in Financial
Statements," which delays the recognition of approximately $4,000,000 of cash
receipts paid by tenants for additional rents from the first quarter to
subsequent quarters each year.
Rental Income attributable to Triple Net Leases for the quarter ended March
31, 2002 increased $1,336,000 to $52,811,000 as compared to the same period in
the prior year. The increase is primarily the result of the positive impact of
acquisitions made during 2001 and
13
positive rent growth offset by rent reductions on certain properties (see Note 3
to the Condensed Consolidated Financial Statements) and dispositions made during
2001. Rental Income attributable to Managed Properties for the quarter ended
March 31, 2002 increased $2,651,000 to $22,447,000 as compared to the same
period in the prior year with a related increase in Managed Properties Operating
Expenses of $274,000 to $7,475,000. Net operating income on Managed Properties
increased $2,377,000 as compared to the same period in the prior year. These
increases were generated primarily from 2001 acquisition activity. Interest and
Other Income for the quarter ended March 31, 2002 increased $192,000 to
$5,511,000 as compared to the same period in the prior year primarily as a
result of receiving proceeds on a previously reserved loan.
Interest Expense for the three months ended March 31, 2002 decreased
$3,460,000 to $17,536,000 as compared to the same period in the prior year. The
decrease is primarily the result of lower interest rates on short-term bank
loans as well as senior debt refinancing. The increase in General and
Administrative Expenses includes $500,000 for operating expenses related to
transition costs on certain long-term care and assisted living facilities. The
decrease in Real Estate Depreciation of $627,000 to $17,934,000 for the quarter
ended March 31, 2002 compared to the first quarter of 2001 is the result of the
$1,600,000 write-down of one facility to be sold but offset in part by a full
quarter of depreciation on the acquisitions made during 2001.
We believe that Funds From Operations (FFO) is the most important
supplemental measure of operating performance for a real estate investment
trust. FFO for the quarter ended March 31, 2002 increased $4,493,000 to
$43,911,000 as compared to the same period in the prior year. The increase is
primarily due to the positive impact of our acquisitions made during 2001 and a
decrease in Interest Expense offset by dispositions made during 2001.
FFO 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. FFO, as we define it, may not be comparable to
similarly entitled items reported by other real estate investment trusts that do
not use the NAREIT definition.
LIQUIDITY AND CAPITAL RESOURCES
We have financed investments through the sale of common and preferred
stock, issuance of long-term debt, assumption of mortgage debt, the mortgaging
of certain of our properties, use of short-term bank lines and use of internally
generated cash flows. We have also raised cash through the disposition of assets
in 2000 and 2001. Management believes that our liquidity and sources of capital
are adequate to finance our operations for the foreseeable future, including
through December 31, 2002. Future investments in additional facilities will be
dependent on the availability of cost-effective sources of capital.
At March 31, 2002, stockholders' equity totaled $1,246,826,000 and our
equity securities had a market value of $2,858,852,000. Total debt presently
represents 29% and 48% of our total market and book capitalization,
respectively. Our senior debt is rated BBB+/BBB+/Baa2 by Standard & Poor's,
Fitch and Moody's, respectively, and has been rated medium investment grade
continuously since 1986, when we first received a bond rating. For the three
months ended March 31, 2002, FFO (before interest expense) covered Interest
Expense at a ratio of 3.5 to 1.00.
14
Tabulated below is our debt maturity table by year and in the aggregate.
2002 (April - December)............. $ 111,000,000
2003 ............................... 250,000,000
2004 ............................... 105,000,000
2005 ............................... 247,000,000
2006 ............................... 143,000,000
Thereafter ......................... 289,000,000
--------------
$1,145,000,000
==============
During the first quarter of 2002, we paid off $111,000,000 of maturing
long-term debt with an average interest rate of 7.24%. These payments were
financed with funds available under our revolving lines of credit.
Revolving Lines of Credit
We have revolving lines of credit totaling $395,000,000. Of this amount,
$188,000,000 will mature in November 2002, with the balance maturing in November
2003. Borrowings under the lines of credit averaged $184,000,000 for the quarter
ended March 31, 2002 at a rate of 2.74%. In the first quarter of 2001, we had
average borrowings of $160,000,000 at a rate of 6.87%. We expect to extend
maturities through the issuance of long-term senior notes during 2002.
Secured Debt
At March 31, 2002, we had a total of $181,682,000 in Mortgage Notes Payable
secured by 36 health care facilities with a net book value of approximately
$318,469,000. Interest rates on the Mortgage Notes ranged from 2.9% to 10.63%
with an average rate of 8.0%.
Equity
During the quarter ended March 31, 2002, we raised $18,500,000 under our
Dividend Reinvestment and Stock Purchase Plan at an average price per share of
$36.91.
During the quarter ended March 31, 2002, we issued 18,477 non-managing
member units in HCPI/Utah, LLC, a limited liability company of which we are the
managing member. As of March 31, 2002, there were a total of 1,638,969
non-managing member units outstanding in three limited liability companies of
which we are the managing member: HCPI/Utah, LLC, HCPI/Utah II, LLC and
HCPI/Indiana, LLC. These non-managing member units are convertible into our
common stock on a one-for-one basis.
Shelf Registrations
On April 19, 2002, we filed a registration statement with the Securities
and Exchange Commission for the registration of $975,000,000 of debt and equity
securities that may be issued from time to time. This registration statement is
not yet effective. The total dollar amount to be registered includes
$232,000,000 available on an existing shelf registration statement that will be
incorporated into the new shelf registration statement.
15
Letters of Credit
At March 31, 2002, we held approximately $8,173,000 in depository accounts
and $45,567,000 in irrevocable letters of credit from commercial banks to secure
a number of lessees' lease obligations and borrowers' loan obligations. We may
draw upon the letters of credit or depository accounts if there are any defaults
under the leases or loans. Amounts available under letters of credit could
change based upon facility operating conditions and other factors and such
changes may be material.
Facility Rollovers
As of March 31, 2002, we had 10 facilities that are subject to lease
expirations and mortgage maturities during the remainder of 2002. These
facilities currently represent approximately 0.4% of annualized revenue. For the
year ending December 31, 2003, we have 16 facilities, representing approximately
2.6% of annualized revenue, subject to lease expirations and mortgage
maturities.
SUPPLEMENTARY FINANCIAL AND OPERATING INFORMATION
Internal Growth
For the three months ended March 31, 2002, we had internal same facility
rent growth, net of rent decreases, of approximately $240,000, or 0.5% of rents,
in our Triple Net portfolio.
Acquisitions
For the quarter ended March 31, 2002, we acquired six properties for an
aggregate purchase price of $118,000,000. These properties have an average lease
rate of 10.49%. The properties consist of three assisted living facilities, two
retirement living communities and one medical office building. In addition, upon
completion of certain refinancing transactions, we will acquire a fourth
assisted living facility for $6,000,000.
Also during the quarter, construction continued on two new facilities, a
$28,000,000 short stay hospital and medical office building in Idaho Falls of
which $8,100,000 has been incurred to date and a $12,300,000 health care
research facility of which $6,400,000 has been incurred to date.
Managed Medical Office And Clinic Portfolio
Our 4,479,000 square foot managed medical office building, health care
laboratory and biotech research facility and physician group practice clinic
portfolio produces approximately 19% of the Company's revenue. Occupancy
remained at 91%.
Future Earnings and FFO Growth
Capital realized from equity issuances and facility sales were initially
utilized to pay down short-term borrowings until we deployed the new capital in
positive spread investments.
16
The impact of the short-term dilution during the quarter ended March 31, 2002
was a reduction in earnings of approximately $1,500,000. Shortly before March
31, 2002, we completed $118,000,000 in investments with an average return of
10.49% thereby significantly reducing the short-term dilution impact. As a
result, we expect that earnings and FFO should improve for 2002. However, our
2002 results will be dependent on execution of our $400,000,000 acquisition
program, stable capital costs and an early resolution of customer
reorganizations and bankruptcies. As market conditions continue to improve, we
anticipate that we will deploy new capital in positive spread investments,
thereby improving future growth rates.
17
PORTFOLIO OVERVIEW:
(Dollar amounts in thousands, except per bed and per square foot data)
Physician
Long Term Medical Assisted Group
Care Facilities Acute Care Office Living Rehabilitation Practice
(6) Hospitals Buildings Facilities (6) Hospitals Clinics
- -----------------------------------------------------------------------------------------------------------------------------
Revenue by State (1)
California $ 5,648 $ 28,769 $ 11,932 $ 5,457 $ -- $ 4,483
Texas 1,667 6,972 10,800 10,759 1,753 1,598
Indiana 18,990 -- 6,824 1,458 -- --
Florida 5,268 7,549 1,595 2,837 2,250 2,442
Utah 500 8,167 10,758 -- -- --
North Carolina 4,620 7,656 -- 1,415 -- 533
Tennessee 10,902 -- 1,285 13 -- 1,368
Other (35 States) 35,828 22,188 23,292 20,411 11,812 3,368
- -----------------------------------------------------------------------------------------------------------------------------
Grand Total (42 States) $ 83,423 $ 81,301 $ 66,486 $ 42,350 $ 15,815 $ 13,792
- -----------------------------------------------------------------------------------------------------------------------------
Percentage of Total Revenue 26.3% 25.6% 21.0% 13.3% 5.0% 4.3%
Investment (2) $ 657,040 $ 662,964 $ 695,256 $ 425,333 $113,977 $ 146,735
Return on Investments (5) 12.7% 12.4% 9.6% 10.0% 13.9% 9.4%
Number of Properties 172 21 85 90 9 37
Vacant Properties 4 -- -- -- -- 4
Number of Beds/Units 21,250 2,785 -- 7,056 685 --
Number of Square Feet 6,402,000 2,939,000 4,810,000 4,932,000 708,000 1,036,000
Investment per Bed/Unit (4) $ 31 $ 237 $ -- $ 60 $ 166 $ --
Investment per Square Foot (4) $ 103 $ 233 $ 145 $ 86 $ 161 $ 142
Occupancy Data-Current Quarter (5) 81% 54% -- 79% 76% --
Occupancy Data-Prior Quarter (5) 82% 54% -- 79% 77% --
=============================================================================================================================
Healthcare Retirement ----------
Laboratory Living Percentage Managed
and Biotech Communities Portfolio of Portfolio Portfolio
Research (6) Total Total (3)
- --------------------------------------------------------------------------------------------------------
Revenue by State (1)
California $ -- $ -- $ 56,289 17.7%
Texas -- 3,261 36,810 11.6%
Indiana -- -- 27,272 8.6%
Florida -- 3,150 25,091 7.9%
Utah 4,872 -- 24,297 7.7%
North Carolina -- -- 14,224 4.5%
Tennessee -- -- 13,568 4.3%
Other (35 States) -- 3,100 119,999 37.7%
- --------------------------------------------------------------------------------------------------------
Grand Total (42 States) $ 4,872 $ 9,511 $ 317,550 100.0% $ 59,922
- --------------------------------------------------------------------------------------------------------
Percentage of Total Revenue 1.5% 3.0% 100.0% 18.9%
Investment (2) $ 56,084 $ 91,349 $ 2,848,738 $ 655,225
Return on Investments (5) 9.8% 10.4% 11.2% --
Number of Properties 6 5 425 100
Vacant Properties -- -- 8 --
Number of Beds/Units -- 1,086 32,862 --
Number of Square Feet 432,000 1,059,000 22,318,000 4,479,000
Investment per Bed/Unit (4) $ -- $ 84 $ --
Investment per Square Foot (4) $ 132 $ 86 $ 147
Occupancy Data-Current Quarter (5) -- 85% 91%
Occupancy Data-Prior Quarter (5) -- -- 91%
==============================================================================================----------
(1) Annualized rental and interest income on total investments above. Includes
net operating income (NOI) on managed portfolio.
(2) Includes partnership and limited liability company investments and
incorporates all partners' and members' assets and facilities under
construction as well as our investment in unconsolidated joint ventures.
Construction in process and related land purchases totaled $16,474.
(3) Includes managed Medical Office Buildings, Physician Group Practice
Clinics, and Healthcare Laboratory and Biotech Research included in the
preceding totals.
(4) Excludes facilities under construction.
(5) Excludes facilities under construction, newly completed facilities under
start up, vacant facilities and facilities where the data is not available
or not meaningful.
(6) In addition to the properties acquired in the first quarter of 2002, three
additional facilities were reclassified to retirement living communities.
These include a facility in Texas and two campuses in South Carolina. The
two campuses in South Carolina, previously classified as five assisted
living facilities and two long-term care facilities, have been combined
into two retirement living communities.
18
PORTFOLIO BY OPERATOR/TENANT:
(Dollar amounts in thousands)
Operator/Tenant (1) Revenue (2) Percentage
- ------------------------------------------------------------------------
Tenet Healthcare $ 56,564 17.8%
HealthSouth Corporation 16,931 5.3%
Kindred Healthcare, Inc. 16,290 5.1%
Emeritus Corporation 15,642 4.9%
HCA Inc. 14,470 4.6%
Beverly Enterprises 11,971 3.8%
Centennial Healthcare 8,896 2.8%
Not-For-Profit Investment Grade Tenants 6,319 2.0%
Other Publicly Traded Operators or Guarantors
(17 Operators) 48,617 15.3%
Other Non Public Operators and Tenants 121,850 38.4%
---------------------
Grand Total $317,550 100.0%
=====================
OPERATORS AT RISK:
(Dollar amounts in thousands)
Annual Rental
Operator Income to HCPI
- --------------------------------------------------------------
Near Term Potential Future Rent
Reduction from the Following Operators $ 255
------
Percent of Revenue 0.1%
======
Integrated Health Services $1,694
Mariner Post Acute Network 1,258
Other Non Public Operators and Tenants 3,432
------
$6,384
------
Percent of Revenue 2.0%
------
(1) At March 31, 2002, we had approximately 93 health care operators and
approximately 650 leases in the managed portfolio.
(2) Annualized rental and interest income on total investments above. Includes
net operating income (NOI) on managed portfolio.
19
RENEWAL INFORMATION:
(Dollar amounts in thousands)
Lease Expirations and
Mortgage Maturities
-----------------------------
Year Revenue (1), (2) Percentage
- -------------------------------------------
2002 $ 1,183 0.4%
2003 8,145 2.6%
2004 (3) 66,807 21.0%
2005 (3) 27,068 8.5%
2006 15,714 4.9%
Thereafter 198,633 62.6%
----------------------
Grand Total $317,550 100.0%
======================
SAME STORE GROWTH:
(Dollar amounts in thousands)
Rent Growth on Comparable Facilities for the
Quarter Ended March 31, 2002 vs. March 31, 2001
Triple Net Properties:
Number of Facilities 267
Revenue Increase $240
Managed Properties:
Number of Facilities 83
Occupancy Percentage at March 31, 2002 90%
Occupancy Percentage Change from March 31, 2001 (1%)
Net Operating Income Increase $456
(1) Annualized rental and interest income on total investments. Includes net
operating income (NOI) on managed portfolio.
(2) This column includes the revenue impact by year and the total annualized
rental and interest income associated with the properties subject to lease
expiration, lessees' renewal option and/or purchase options and mortgage
maturities.
(3) Revenue of $43,656 and $10,572 for 2004 and 2005, respectively, relates to
eight hospitals leased to Tenet.
20
LEASE UP STATISTICS ON NEW ASSISTED LIVING FACILITIES:
(Dollar amounts in thousands)
Average Months Percent of
Occupancy Facilities in Operation Rents Revenue
- --------------------------------------------------------------
0% - 50% 1 25.0 $ 881 0.28%
50% - 70% 2 26.5 549 0.17%
70% - 90% 8 35.2 3,425 1.08%
----
1.53%
====
CAPITAL EXPENDITURES:
(All amounts in thousands)
Quarter Ended
March 31, 2002
--------------
Acquisitions $118,000
Construction in Progress $ 4,858
Rentable Square Footage Acquired (1) 1,137
(1) Excludes facilities under construction.
CASH FLOW COVERAGE:
Current Quarter Prior Quarter
-------------------------------
Cash Flow Coverage Before
Management Fees 2.6 2.6
Cash Flow Coverage After
Management Fees 2.3 2.2
CAUTIONARY LANGUAGE REGARDING FORWARD LOOKING STATEMENTS
Statements in this Quarterly Report that are not historical factual
statements are "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The statements include, among other
things, statements regarding our intent, belief or expectations and can be
identified by the use of terminology such as "may," "will," "expect," "believe,"
"intend," "plan," "estimate," "should" and other comparable terms or the
negative thereof. In addition, we, through our senior management, from time to
time make forward looking oral and written public statements concerning our
expected future operations and other developments. Readers are cautioned that,
while forward looking statements reflect our good faith belief and best judgment
based upon current information, they are not guarantees of future performance
and are subject to known and unknown risks and uncertainties. Actual results may
differ materially from the expectations contained in the forward looking
statements as a result of various factors. In addition to other factors set
forth in this Quarterly Report and our Annual Report on Form 10-K for the year
ended December 31, 2001, readers should consider the following:
(a) Legislative, regulatory, or other changes in the health care industry at
the local, state or federal level which increase the costs of or otherwise
affect the operations of our lessees;
21
(b) Changes in the reimbursement available to our lessees and mortgagors by
governmental or private payors, including changes in Medicare and Medicaid
payment levels and the availability and cost of third party insurance
coverage;
(c) Competition for lessees and mortgagors, including with respect to new
leases and mortgages and the renewal or rollover of existing leases;
(d) Availability of suitable health care facilities to acquire at a favorable
cost of capital and the competition for such acquisition and financing of
health care facilities;
(e) The ability of our lessees and mortgagors to operate our properties in a
manner sufficient to maintain or increase revenues and to generate
sufficient income to make rent and loan payments;
(f) The financial weakness of operators in the long-term care and assisted
living sectors, including the bankruptcies of certain of our tenants, which
results in uncertainties in our ability to continue to realize the full
benefit of such operators' leases; and
(g) Changes in national or regional economic conditions, including changes in
interest rates and the availability and cost of capital for the Company.
DISCLOSURES ABOUT MARKET RISK
Our investments are financed by the sale of common stock, long-term debt,
internally generated cash flows, and short-term bank debt.
We generally have fixed base rent on our leases; in addition, there can be
additional rent based on a percentage of increased revenue over specified base
period revenue of the properties and/or increases based on inflation indices or
other factors. Financing costs are comprised of dividends on preferred and
common stock, fixed interest on long-term debt and short-term interest on bank
debt.
On a more limited basis, we have provided mortgage loans to operators of
health care facilities in the normal course of business. All of the mortgage
loans receivable have fixed interest rates or interest rates with periodic fixed
increases. Therefore, the mortgage loans receivable are all considered to be
fixed rate loans, and the current interest rate (the lowest rate) is used in the
computation of market risk provided in the following table if material.
We may assume existing mortgage notes payable as part of an acquisition
transaction. Currently we have two mortgage notes payable with variable interest
rates and the remaining mortgage notes payable have fixed interest rates or
interest rates with fixed periodic increases. Our Senior Notes are at fixed
rates with one exception for a $25,000,000 variable rate senior note for which
management has fixed the interest rate by means of a swap contract. The variable
rate loans are at interest rates below the current prime rate of 4.75%, and
fluctuations are tied to the prime rate or to a rate currently below the prime
rate.
At March 31, 2002, we are exposed to market risks related to fluctuations
in interest rates only on $4,743,000 of variable rate mortgage notes payable and
$309,800,000 of variable rate bank debt out of our portfolio of real estate of
$2,849,000,000.
Fluctuation in the interest rate environment will not affect our future
earnings and cash flows on our fixed rate debt until that debt matures and must
be replaced or refinanced. Interest rate changes will affect the fair value of
the fixed rate instruments. Conversely, changes in
22
interest rates on variable rate debt would change our future earnings and cash
flows, but not affect the fair value on those instruments. Assuming a one
percentage point increase in the interest rate related to the variable rate debt
including the mortgage notes payable and the bank lines of credit, and assuming
no change in the outstanding balance as of year end, interest expense for 2002
would increase by approximately $3,145,000.
The principal amount and the average interest rates for the mortgage loans
receivable and debt categorized by the final maturity dates is presented in the
following table. The fair value estimates for the mortgage loans receivable are
based on the estimates of management and on rates currently prevailing for
comparable loans. The fair market value estimates for debt securities are based
on discounting future cash flows utilizing current rates offered to us for debt
of the same type and remaining maturity.
|---------------------------Maturity--------------------------------|
----------------------------------------------------------------------------------------
2002 2003 2004 2005 2006 Thereafter Total Fair Value
----------------------------------------------------------------------------------------
(Amounts in thousands, except percentages)
ASSETS
Mortgage Loans Receivable $ 2,621 $ 41,128 $102,856 $146,605 $142,375
Weighted Average Interest Rate 7.95% 9.75% 10.56% 10.29%
LIABILITIES
Variable Rate Debt:
Bank Notes Payable $102,800 $207,000 $309,800 $309,800
Weighted Average Interest Rate 3.53% 3.53% 3.53%
Mortgage Notes Payable $ 248 $ 4,495 $ 4,743 $ 4,743
Weighted Average Interest Rate 3.28% 2.92% 2.94%
Fixed Rate Debt:
Senior Notes Payable $ 5,000 $ 31,000 $92,000 $231,000 $135,000 $159,410 $653,410 $667,195
Weighted Average Interest Rate 7.41% 7.09% 7.78% 6.87% 6.74% 7.98% 7.26%
Mortgage Notes Payable $ 345 $ 8,519 $ 9,777 $ 14,088 $144,210 $176,939 $177,269
Weighted Average Interest Rate 9.00% 8.52% 7.59% 8.77% 8.09% 8.14%
We do not believe that the future market rate risks related to the above
securities will have a material impact on us or the results of our future
operations. Readers are cautioned that most of the statements contained in the
"Disclosures about Market Risk" paragraphs are forward looking and should be
read in conjunction with the disclosures under the heading "Cautionary Language
Regarding Forward Looking Statements" previously set forth.
NEW PRONOUNCEMENTS
See Note 1 to the Consolidated Financial Statements for a discussion of our
implementation of the Financial Accounting Standards Board's Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" and No. 144 "Accounting for the Impairment or Disposal
of Long-Lived Assets". Other recently issued Financial Accounting Standards
Board's Statement of Financial Accounting Standards, No.141 "Business
Combinations," No. 142 "Goodwill and Other Intangible Assets" and No. 143
"Accounting for Asset Retirement Obligations" are not expected to have a
material effect on our financial statements.
23
PART II. OTHER INFORMATION
8. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits:
3.1 Articles of Restatement of HCPI (incorporated herein by reference
to exhibit 3.1 of HCPI's quarterly report on Form 10-Q for the
period ended June 30, 2001).
3.2 Second Amended and Restated Bylaws of HCPI (incorporated herein
by reference to exhibit 3.2 of HCPI's quarterly report on form
10-Q for the period ended March 31, 1999).
3.3 Amendment No. 1 to Second Amended and Restated Bylaws of HCPI
(incorporated by reference to exhibit 10.22 to HCPI's annual
report on Form 10-K for the year ended December 31, 2001).
4.1 Rights agreement, dated as of July 27, 2000, between Health Care
Property Investors, Inc. and the Bank of New York which includes
the form of Certificate of Designations of the Series D Junior
Participating Preferred Stock of Health Care Property Investors,
Inc. as Exhibit A, the form of Right Certificate as Exhibit B and
the Summary of Rights to Purchase Preferred Shares as Exhibit C
(incorporated by reference to exhibit 4.1 of Health Care Property
Investors, Inc.'s Current Report on Form 8-K dated July 28,
2000).
4.2 Indenture, dated as of September 1, 1993, between HCPI and The
Bank of New York, as Trustee, with respect to the Series C and D
Medium Term Notes, the Senior Notes due 2006 and the Mandatory
Par Put Remarketed Securities due 2015 (incorporated by reference
to exhibit 4.1 to HCPI's registration statement on Form S-3 dated
September 9, 1993).
4.3 Indenture, dated as of April 1, 1989, between HCPI and The Bank
of New York for Debt Securities (incorporated by reference to
exhibit 4.1 to HCPI's registration statement on Form S-3 dated
March 20, 1989).
4.4 Form of Fixed Rate Note (incorporated by reference to exhibit 4.2
to HCPI's registration statement on Form S-3 dated March 20,
1989).
4.5 Form of Floating Rate Note (incorporated by reference to exhibit
4.3 to HCPI's registration statement on Form S-3 dated March 20,
1989).
4.6 Registration Rights Agreement dated November 20, 1998 between
HCPI and James D. Bremner (incorporated by reference to exhibit
4.8 to HCPI's annual report on Form 10-K for the year ended
December 31, 1999). This exhibit is identical in all material
respects to two other documents except the parties thereto. The
parties to these other documents, other than HCPI, were James P.
Revel and Michael F. Wiley.
4.7 Registration Rights Agreement dated January 20, 1999 between HCPI
and Boyer Castle Dale Medical Clinic, L.L.C. (incorporated by
reference to exhibit 4.9 to HCPI's annual report on Form 10-K for
the year ended December 31, 1999). This exhibit is identical in
all material respects to 13 other documents except the parties
thereto. The parties to these other documents, other than HCPI,
were Boyer Centerville Clinic Company, L.C., Boyer Elko, L.C.,
Boyer Desert Springs, L.C., Boyer Grantsville
24
Medical, L.C., Boyer-Ogden Medical Associates, LTD., Boyer Ogden
Medical Associates No. 2, LTD., Boyer Salt Lake Industrial Clinic
Associates, LTD., Boyer-St. Mark's Medical Associates, LTD.,
Boyer McKay-Dee Associates, LTD., Boyer St. Mark's Medical
Associates #2, LTD., Boyer Iomega, L.C., Boyer Springville, L.C.,
and - Boyer Primary Care Clinic Associates, LTD. #2.
4.8 Form of Deposit Agreement (including form of Depositary Receipt
with respect to the Depositary Shares, each representing one-one
hundredth of a share of our 8.60% Cumulative Redeemable Preferred
Stock, Series C) (incorporated by reference to exhibit 4.8 to
HCPI's quarterly report on Form 10-Q for the period ended March
31, 2001) dated as of March 1, 2001 by and among HCPI, Wells
Fargo Bank Minnesota, N.A. and the holders from time to time of
the Depositary Shares described therein.
4.9 Indenture, dated as of January 15, 1997, between American Health
Properties, Inc. and The Bank of New York, as trustee
(incorporated herein by reference to exhibit 4.1 to American
Health Properties, Inc.'s current report on Form 8-K (file no.
001-09381), dated January 21, 1997).
4.10 First Supplemental Indenture, dated as of November 4, 1999,
between HCPI and The Bank of New York, as trustee (incorporated
by reference to HCPI's quarterly report on Form 10-Q for the
period ended September 30, 1999).
4.11 Dividend Reinvestment and Stock Purchase Plan, dated November 9,
2000 (incorporated by reference to exhibit 99.1 to HCPI's
registration statement on Form S-3 dated November 13, 2000,
registration number 333-49796).
4.12 Registration Rights Agreement dated August 17, 2001 between HCPI,
Boyer Old Mill II, L.C., Boyer-Research Park Associates, LTD.,
Boyer Research Park Associates VII, L.C., Chimney Ridge, L.C.,
Boyer-Foothill Associates, LTD., Boyer Research Park Associates
VI, L.C., Boyer Stansbury II, L.C., Boyer Rancho Vistoso, L.C.,
Boyer-Alta View Associates, LTD., Boyer Kaysville Associates,
L.C., Boyer Tatum Highlands Dental Clinic, L.C., Amarillo Bell
Associates, Boyer Evanston, L.C., Boyer Denver Medical, L.C.,
Boyer Northwest Medical Center Two, L.C., and Boyer Caldwell
Medical, L.C. (incorporated by reference to exhibit 4.12 to
HCPI's annual report on Form 10-K for the year ended December 31,
2001).
10.1 Amendment No. 1, dated as of May 30, 1985, to Partnership
Agreement of Health Care Property Partners, a California general
partnership, the general partners of which consist of HCPI and
certain affiliates of Tenet (incorporated by reference to exhibit
10.1 to HCPI's annual report on Form 10-K for the year ended
December 31, 1985).
10.2 HCPI Second Amended and Restated Directors Stock Incentive Plan
(incorporated by reference to exhibit 10.43 to HCPI's quarterly
report on Form 10-Q for the period ended March 31, 1997).*
10.3 HCPI Second Amended and Restated Stock Incentive Plan
(incorporated by reference to exhibit 10.44 to HCPI's quarterly
report on Form 10-Q for the period ended March 31, 1997).*
10.4 First Amendment to Second Amended and Restated Directors Stock
Incentive Plan, effective as of November 3, 1999 (incorporated by
25
reference to exhibit 10.1 to HCPI's quarterly report on Form 10-Q
for the period ended September 30, 1999).*
10.5 Second Amendment to Second Amended and Restated Directors Stock
Incentive Plan, effective as of January 4, 2000 (incorporated by
reference to exhibit 10.15 to HCPI's annual report on Form 10-K
for the year ended December 31, 1999).*
10.6 First Amendment to Second Amended and Restated Stock Incentive
Plan effective as of November 3, 1999 (incorporated by reference
to exhibit 10.3 to HCPI's quarterly report on Form 10-Q for the
period ended September 30, 1999).*
10.7 HCPI 2000 Stock Incentive Plan, effective as of March 23, 2000
(incorporated by reference to exhibit 10.7 to HCPI's annual
report on Form 10-K for the year ended December 31, 2001).*
10.8 HCPI Second Amended and Restated Directors Deferred Compensation
Plan (incorporated by reference to exhibit 10.45 to HCPI's
quarterly report on Form 10-Q for the period ended September 30,
1997).*
10.9 Second Amendment to Second Amended and Restated Directors
Deferred Compensation Plan, effective as of November 3, 1999
(incorporated by reference to exhibit 10.2 to HCPI's quarterly
report on Form 10-Q for the period ended September 30, 1999).
10.10 Fourth Amendment to Second Amended and Restated Director
Deferred Compensation Plan, effective as of January 4, 2000
(incorporated by reference to exhibit 10.17 to HCPI's annual
report on Form 10-K for the year ended December 31, 1999).*
10.11 Employment Agreement dated October 13, 2000 between HCPI and
Kenneth B. Roath (incorporated by reference to exhibit 10.11 to
HCPI's annual report on Form 10-K for the year ended December 31,
2000).*
10.12 Various letter agreements, each dated as of October 16, 2000,
among HCPI and certain key employees of the Company (incorporated
by reference to exhibit 10.12 to HCPI's annual report on Form
10-K for the year ended December 31, 2000).*
10.13 HCPI Amended and Restated Executive Retirement Plan
(incorporated by reference to exhibit 10.13 to HCPI's annual
report on Form 10-K for the year ended December 31, 2001).*
10.14 Stock Transfer Agency Agreement between HCPI and The Bank of New
York dated as of July 1, 1996 (incorporated by reference to
exhibit 10.40 to HCPI's quarterly report on Form 10-Q for the
period ended September 30, 1996).
10.15 Amended and Restated Limited Liability Company Agreement dated
November 20, 1998 of HCPI/Indiana, LLC (incorporated by reference
to exhibit 10.15 to HCPI's annual report on Form 10-K for the
year ended December 31, 1998).
10.16 Amended and Restated Limited Liability Company Agreement dated
January 20, 1999 of HCPI/Utah, LLC (incorporated by reference to
exhibit 10.16 to HCPI's annual report on Form 10-K for the year
ended December 31, 1998).
10.17 Revolving Credit Agreement, dated as of November 3, 1999, among
HCPI, each of the banks identified on the signature pages hereof,
The
26
Bank of New York, as agent for the banks and as issuing bank, and
Bank of America, N.A. and Wells Fargo Bank, N.A., as
co-documentation agents, with BNY Capital Markets, Inc., as lead
arranger and Book Manager (incorporated by reference to exhibit
10.4 to HCPI's quarterly report on Form 10-Q for the period ended
September 30, 1999).
10.18 364-Day Revolving Credit Agreement, dated as of November 3, 1999
among HCPI, each of the banks identified on the signature pages
hereof, The Bank of New York, as agent for the banks, and Bank of
America, N.A. and Wells Fargo Bank, N.A., as co-documentation
agents, with BNY Capital Markets, Inc., as lead arranger and book
manager (incorporated by reference to exhibit 10.5 to HCPI's
quarterly report on Form 10-Q for the period ended September 30,
1999).
10.19 Cross-Collateralization, Cross-Contribution and Cross-Default
Agreement, dated as of July 20, 2000, by HCP Medical Office
Buildings II, LLC, and Texas HCP Medical Office Buildings, L.P.,
for the benefit of First Union National Bank (incorporated by
reference to exhibit 10.20 to HCPI's annual report on Form 10-K
for the year ended December 31, 2000).
10.20 Cross-Collateralization, Cross-Contribution and Cross-Default
Agreement, dated as of August 31, 2000, by HCP Medical Office
Buildings I, LLC, and Meadowdome, LLC, for the benefit of First
Union National Bank (incorporated by reference to exhibit 10.21
to HCPI's annual report on Form 10-K for the year ended December
31, 2000).
10.21 Amended and Restated Limited Liability Company Agreement dated
August 17, 2001 of HCPI/Utah II, LLC (incorporated by reference
to exhibit 10.21 to HCPI's annual report on Form 10-K for the
year ended December 31, 2001).
10.22 First Amendment to Amended and Restated Limited Liability
Company Agreement dated October 30, 2001 of HCPI/Utah II, LLC
(incorporated by reference to exhibit 10.22 to HCPI's annual
report on Form 10-K for the year ended December 31, 2001).
10.23 Amendment No. 1, dated as of October 29, 2001, to the 364-Day
Revolving Credit Agreement, dated as of November 3, 1999 among
HCPI, each of the banks identified on the signature pages
thereto, The Bank of New York, as agent for the banks, and Bank
of America, N.A. and Wells Fargo Bank, N.A., as co-documentation
agents, with BNY Capital Markets, Inc., as lead arranger and book
manager (incorporated by reference to exhibit 10.23 to HCPI's
annual report on Form 10-K for the year ended December 31, 2001).
* Management Contract or Compensatory Plan or Arrangement.
b) Reports on Form 8-K:
None
27
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.
Date: May 7, 2002 HEALTH CARE PROPERTY INVESTORS, INC.
(REGISTRANT)
/S/ James G. Reynolds
-------------------------------------------
James G. Reynolds
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/S/ Devasis Ghose
-------------------------------------------
Devasis Ghose
Senior Vice President-Finance and Treasurer
(Principal Accounting Officer)
28