(LOGO)
NATIONAL HEALTH REALTY, INC.
NOTICE OF FIRST ANNUAL MEETING OF STOCKHOLDERS
April 26, 1999
To the Stockholders:
The First Annual Meeting of the Stockholders (the "Meeting")
of National Health Realty, Inc. (the "Company") will be held at
City Center, 14th Floor, 100 Vine Street, Murfreesboro, Tennessee
on Monday, April 26, 1999, at 5:30 p.m. C.D.T., for the following
purposes:
1. To re-elect two directors;
2. To ratify the selection of Arthur Andersen LLP as
independent accountants for the year ending December 31, 1999;
and
3. To transact such other business as may properly come
before the meeting or any adjournments thereof.
The nominees for re-election as directors are Ernest G.
Burgess, III and W. Andrew Adams. They currently serve as
directors of the Company.
The Board of Directors has fixed the close of business on
Friday, January, 29, 1999, as the record date for the
determination of stockholders who are entitled to notice of and
to vote at the Annual Meeting of the Stockholders or any
adjournments thereof.
We encourage you to attend the Meeting. Whether you are
able to attend or not, we urge you to indicate your vote on the
enclosed proxy card FOR the re-election of Messrs. Burgess and
Adams as directors and FOR ratification of the selection of
Arthur Andersen LLP as independent accountants for the year
ending December 31, 1999. Please sign, date, and return the
proxy card promptly in the enclosed envelope. If you attend the
Meeting, you may vote in person even if you have previously
mailed a proxy card.
By Order of the Board of Directors
Richard F. LaRoche, Jr.
March 1, 1999 Secretary
Murfreesboro, Tennessee
NATIONAL HEALTH REALTY, INC.
100 Vine Street
Murfreesboro, Tennessee 37130
-------------------------
PROXY STATEMENT
-------------------------
FIRST ANNUAL MEETING OF STOCKHOLDERS
April 26, 1999
The accompanying proxy is solicited by the Board of
Directors of National Health Realty, Inc., (the "Company") to be
voted at the Annual Meeting of the Stockholders (the "Meeting")
to be held on Monday, April 26, 1999, commencing at 5:30 p.m.
C.D.T. and at any adjournments of the Meeting. The Meeting will
be held at the City Center, 14th Floor, Murfreesboro, Tennessee.
It is anticipated that this proxy material will be mailed on or
about March 1, 1999, to all stockholders of record on January 29,
1999.
A copy of the Annual Report of the Company for the year
ended December 31, 1998, including financial statements, is
enclosed herewith. THE COMPANY WILL PROVIDE WITHOUT CHARGE TO
ANY PERSON SOLICITED HEREBY, UPON THE WRITTEN REQUEST OF SUCH
PERSON, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1998, AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION. SUCH REQUESTS SHOULD BE DIRECTED TO
RICHARD F. LaROCHE, JR., SHAREHOLDER RELATIONS-SUITE 600, 100
VINE STREET, MURFREESBORO, TENNESSEE 37130.
A stockholder giving a proxy has the power to revoke it at
any time before it is exercised. A proxy may be revoked by
filing with the Secretary of the Company (i) an instrument
revoking the proxy or (ii) a duly executed proxy bearing a later
date. The powers of the proxy holders will be suspended if the
person executing the proxy is present at the Meeting and elects
to vote in person. If the proxy is neither revoked nor
suspended, it will be voted by those therein named.
Votes Required
Shares of common stock represented in person or by proxy at
the Meeting (including shares which abstain or do not vote with
respect to one or more of the matters presented at the Meeting)
will be tabulated by the Company's Secretary who will determine
whether or not a quorum is present. Abstentions will be counted
as shares that are present and entitled to vote for purposes of
determining the number of shares that are present and entitled to
vote with respect to any particular matter, but will not be
counted as votes in favor of such matter. Accordingly, an
abstention from voting on Proposals I and II will have the same
legal effect as a vote "against" the matter even though the
stockholder or interested parties analyzing the results of the
voting may interpret such vote differently. If a broker holding
stock in "street name" indicates on the proxy that it does not
have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present
and entitled to vote with respect to that matter. Accordingly, a
"broker non-vote" may effect establishment of a quorum, but, once
a quorum is established, will have no effect on the voting on
such matter.
A majority of the issued and outstanding shares of common
stock entitled to vote constitutes a quorum at the Meeting. The
affirmative vote of the holders of a majority of the votes cast
at the Meeting is required for the election of directors, while
the ratification of the appointment of the Company's independent
accountants requires the affirmative vote of the holders of a
majority of the issued and outstanding shares of common stock.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The Board of Directors has fixed the close of business on
January 29, 1999 as the record date. The outstanding voting
securities of the Company as of December 31, 1998, consisted of
9,447,693 shares of common stock, par value $.01 per share
("Common Stock"). Stockholders of record as of the record date
are entitled to notice of and to vote at the Meeting or any
adjournments thereof. Each holder of the shares of Common Stock
is entitled to one vote per share on all matters properly brought
before the Meeting. Stockholders are not permitted to cumulate
votes for the purpose of electing directors or otherwise.
The following information is based upon filings made by the
entities identified below with the Securities and Exchange
Commission. Except as set forth below, on December 31, 1998 no
person was known to the Company to own beneficially more than 5%
of the outstanding Common Stock:
<TABLE>
<CAPTION>
Shares Beneficially Percent of
Name and Address Owned on 12/31/98 Shares on 12/31/98
- - --------------------------------------------------------------------------
<S> <C> <C>
National Health Corporation 1,238,924 <F1> 13.1%
P. O. Box 1398
Murfreesboro, TN 37133
W. Andrew Adams 1,067,064 <F1> 11.3%
100 Vine Street
Murfreesboro, TN 37130
The Nicholas Fund, Inc. 1,176,342 <F2> 12.4%
and Albert O. Nicholas
700 North Water Street
Milwaukee, WI 53202
T. Rowe Price Assoc., Inc. and 1,169,563 <F3> 12.4%
T. Rowe Price Small-Cap V.Fund
P. O. Box 17218
Baltimore, MA 21297-7218
- - ----------------------------------
<FN>
<F1> Included as shares beneficially owned are units of limited
partnership interest in NHR/OP, L.P., the Company's operating
subsidiary. Although these units cannot vote, they may be
exchanged for shares of the Company's common stock. This
exchange has income tax consequences to the holder, but not the
Company.
<F2> These securities are owned by an individual investor and by
various mutual funds. For purposes of the reporting requirements
of the Securities Exchange Act of 1934, The Nicholas Fund is
deemed to be a beneficial owner of such securities; however, The
Nicholas Fund expressly disclaims that it is, in fact, the
beneficial owner of such securities.
<F3> These securities are owned by various individual and
institutional investors [T. Rowe Price Associates, Inc. owns
619,563 shares and T. Rowe Price Small-Cap Value Fund, Inc. owns
550,000 shares] which T. Rowe Price Associates, Inc. (Price
Associates) serves as investment adviser with power to direct
investments and/or sole power to vote the securities. For
purposes of the reporting requirements of the Securities Exchange
Act of 1934, Price Associates is deemed to be a beneficial owner
of such securities; however, Price Associates expressly disclaims
that it is, in fact, the beneficial owner of such securities.
</TABLE>
PROPOSAL I
ELECTION OF DIRECTORS
Pursuant to the Company's Articles of Incorporation, the
directors have been divided into three groups. At the April 26,
1999 Meeting, two directors will be elected to hold office each
for a term of three years or until their successor has been duly
elected and qualified.
The nominees for election to the positions of director to be
voted upon at the Meeting are Ernest G. Burgess, III and W.
Andrew Adams, currently directors of the Company. Unless
authority to vote for the election of directors has been
specifically withheld, the persons named in the accompanying
proxy intend to vote for the election of Mr. Burgess and Mr.
Adams to hold office as directors, each for terms of three years
or until their successor has been duly elected and qualified.
If a nominee becomes unavailable for any reason (which event
is not anticipated), the shares represented by the enclosed proxy
may (unless such proxy contains instructions to the contrary) be
voted for such other person as may be determined by the holders
of such proxies.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES.
The following information relates to the nominees for
election as directors of the Company and the other persons whose
terms as directors continue after the Meeting, as well as
officers and directors of the Company as a group:
<TABLE>
<CAPTION>
Common Percent
Stock of
Expiration Beneficially Shares
of term as Owned at Outstanding
Name Age Position Director 12/31/98<F1> 12/31/98
- - -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ernest G. Burgess, III 58 Director 1999 184,320 1.9%
W. Andrew Adams 53 Director &
President 1999 1,067,064 11.3%
Olin O. Williams 68 Director 2000 108,645 1.1%
Robert G. Adams 52 Director &
Sr. V.P. 2000 440,592 4.7%
J. K. Twilla 72 Director 2001 78,392 *
Richard F. LaRoche, Jr. 53 Secretary &
Sr. V.P. 378,341 4.0%
All Directors and Executive Officers
as a group (6 people) 2,257,354 23.9%
- - --------------------------
*Less than 1%
<FN>
<F1> Except as otherwise noted, all shares are owned beneficially
with sole voting and investment power. Included in the amounts
above are 5,000 shares to Mr. Burgess, 5,000 shares to Dr.
Williams, and 10,000 shares to Dr. Twilla, of which all may be
acquired upon the exercise of stock options granted under the
Company's 1997 Stock Option Plan or pursuant to the National
HealthCare Corporation (NHC) 1994 Unit Option Plan (Dr. Twilla
only).
</TABLE>
Ernest G. Burgess, III is a retired Senior Vice President of
NHC. He has a M.S. degree from the University of Tennessee. He
also serves on the Board of National HealthCare Corporation.
Drs. J. K. Twilla and Olin O. Williams have been physicians
in private practice in Tennessee for more than 25 years each and
are now retired. Dr. Williams is now serving on the Board of the
Bank of Murfreesboro, headquartered in Murfreesboro, Tennessee.
Both serve on the Board of National HealthCare Corporation.
W. Andrew Adams is the President and a director of the
Company and has been the Chief Executive Officer of NHC since
1981, and on its Board since 1974. Mr. Adams currently serves on
the Multi-facility Committee of the American Health Care
Association. He has an MBA degree from Middle Tennessee State
University. Mr. Adams serves on the Board of Trust of David
Lipscomb University, Nashville, Tennessee, is President and on
the Board of Directors of National Health Investors, Inc. and
serves on the Board of Directors of SunTrust Bank, Nashville.
Robert G. Adams is Senior Vice President and a director of
the Company and also serves in those positions for NHC. Mr.
Adams has a B.S. Degree from Middle Tennessee State University.
He is Chief Operating Officer for NHC.
Richard F. LaRoche, Jr. is Senior Vice President and
Secretary of the Company and has also served in those positions
for NHC since 1974 and as General Counsel since 1971. Mr.
LaRoche has a law degree from Vanderbilt University and an A.B.
degree from Dartmouth College. His responsibilities include
legal affairs, acquisitions, and finance. He also serves as a
director and Vice President and Secretary of National Health
Investors, Inc.
Board of Directors and Committees of the Board
The Board of Directors held 4 meetings during 1998. All
directors were present at the meetings of the Board and of
committees on which they served. The Board as a whole serves as
the Audit Committee, and the Compensation Committee is comprised
of non-employee directors (Mr. Burgess, Dr. Twilla and Dr.
Williams).
The Audit Committee, which met one time in 1998, selects the
Company's independent accountants, fixes the compensation to be
paid to such accountants, reports to the Board with respect to
the scope of audit procedures, and determines compliance as to
the company's policies and procedures.
The Compensation Committee did not meet in 1998 since it
currently has no responsibilities. The Company contracts with
NHC to act as its Investment Advisor, one responsibility of which
is to employ and compensate all officers and employees.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
AND CERTAIN TRANSACTIONS
Cash Compensation
Directors not affiliated with NHC, the Company's Investment
Advisor, receive compensation for their Board service in the
amount of $2,500 per meeting attended. The Company reimburses
all directors for travel expenses incurred in connection with
their duties as directors of the Company.
The Company's executive officers (Mr. Andy Adams, Mr. Robert
Adams and Mr. LaRoche) are also employees of NHC. Their
compensation is determined solely by NHC, which allocates a
portion of their annual performance bonus to the Company.
Payment of the allocated amount by the Company is credited
against the Advisory fee paid NHC. Neither Messrs. Adams nor Mr.
LaRoche have yet been allocated any performance bonus for 1998.
The Company paid no other perquisites or bonuses to its executive
officers. Because NHC sets the salaries of the Company's three
executive officers, the Company's Compensation Committee does not
issue a Compensation Committee Report for its proxy statements.
Director and Officer Options
The 1997 Stock Option Plan provides for an automatic grant
to each non-NHC affiliated director of an option to purchase
5,000 shares of Common Stock on the date of the Annual
Stockholder's Meeting at the then fair market value.
The plan permits options to be exercised for cash or by
surrender of shares of Common Stock of the Company valued at the
then fair market value. Unless otherwise specifically provided
in the option agreement, no option or SAR shall be transferable
other than by will, family gift, or the laws of descent and
distribution. All shares which may be issued under either plan
and the exercise prices for outstanding options are subject to
adjustment in the event that the number of outstanding shares of
Common Stock will be changed by reason of stock splits, stock
dividends, reclassifications or recapitalizations. In addition,
upon a merger or consolidation involving the Company,
participants are entitled to shares in the surviving corporation.
Pursuant to the automatic grant provisions of the plan, the
three non-NHC affiliated directors have each received options to
purchase shares at $18.875 on January 5, 1998. The outside
directors have not exercised any of the 1998 grants. There are
currently 461,802 shares available to grant under the 1997 Plan.
Table A and B below set forth information regarding options
which are outstanding, granted or exercised under the 1997 Stock
Option Plan as of December 31, 1998, for the Company's three
executive officers. Table C sets forth information regarding
options outstanding and exercised during 1998 for the executive
officers, all non-NHC affiliated directors and all other NHC
employees as a group. The Company has not granted any SARs, and
no options have been granted to the executive officers.
<TABLE>
TABLE A
Option/SAR Grants in Last Fiscal Year [12-31-98]
<CAPTION>
Potential Realizable Value
at Assumed Rates of Stock
Price Appreciation
Individual Grants for Option Term
- - ----------------------------------------------------------------------------
Percent of
Total
Number of Options/
Securities SARS
underlying Granted
Option/ to Exercise
SARS Employees of Base Expir-
Granted in Fiscal Price ation
(#) Year ($/Sh) Date 5%(%) 10%($)
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
W. Andrew Adams -0- -0- -0- -
Robert G. Adams -0- -0- -0- -
Richard F. LaRoche
Jr. -0- -0- -0- -
</TABLE>
<TABLE>
TABLE B
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-
Options/ Money
SARS at Options/
Fiscal Year- SARs at
Shares Value End Fiscal Year-
Acquired on Realized (#) End($)
Name Exercise(#) ($) Exercisable Exercisable
- - -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
W. Andrew Adams -0- -0- -0-
Robert G. Adams -0- -0- -0-
Richard F. LaRoche, Jr. -0- -0- -0-
</TABLE>
<TABLE>
TABLE C
<CAPTION>
Shares
Under Expir- Options Remaining Exercise
Name of Participant Option: ation Exercised: Options Price
1998 1998
- - ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
W. Andrew Adams -0- -0-
Richard F. LaRoche, -0- -0-
Jr.
Robert G. Adams -0- -0-
All Executive -0- -0-
Officers
All Non-NHC 5,000* 3/15/00 -0- 5,000 $ 8.308
Affiliated 15,000 1/5/03 -0- 15,000 $18.875
Directors (3)
All Other NHC -0- -0-
Employees (11)
- - ----------------------------
* One director has a 5,000 share option held over from the NHC Unit Option Plan.
NHC was the creator of NHR and divested itself of ownership of NHR on 12/31/97.
</TABLE>
The Company's grant or issuance of an incentive stock option
under the 1997 Option Plan has no federal income tax consequences
to either the Company or the optionee. Nor do any federal income
tax consequences occur to either the Company or the Key NHC
Employee optionee upon the optionee's exercise of his or her
incentive stock option and purchase of Common Stock up to
$100,000 per year, except that the difference between the fair
market value of the stock purchased pursuant to the exercise of
the option and the amounts paid upon the option's exercise (the
"Spread") would be included in the optionee's alternative minimum
taxable income for alternative minimum tax purposes. For options
purchased in excess of the $100,000 limit, or for options granted
to non NHC affiliated directors, or which are not held for the
time discussed in the next paragraph, the Spread is taxable as
ordinary income to the Key Employee and deductible by the Company
at the time of exercise.
If the optionee holds the stock purchased upon the exercise
of the option for the requisite period under the Internal Revenue
Code, then upon the optionee's disposition of the stock he or she
will recognize capital gain (or loss) for federal income tax
purposes on the amount of the Spread. The Company would not be
entitled to a deduction upon such a disposition. To be entitled
to such capital gains treatment the optionee must not dispose of
the underlying stock within two (2) years after the date the
option is granted or one (1) year after the option is exercised.
If the optionee disposes of the stock prior to such time,
then the optionee will recognize ordinary income in an amount
equal to the lesser of (i) the difference between the sales
proceeds and the optionee's cost, and (ii) the difference between
the fair market value of the stock on the date of exercise and
the optionee's cost. The balance of the gain on a premature
disposition of the stock, if any, will be capital gain for
federal income tax purposes. Such a premature disposition will
entitle the Company to a deduction equal to the amount of
ordinary income recognized by the optionee.
Section 16(a) Disclosure Compliance
Section 16(a) of the Securities and Exchange Act of 1934 as
amended requires officers, directors, and persons who own more
than 10% of the Company's equity securities to file statements of
changes in beneficial ownership (Forms 4 or 5) with the
Securities and Exchange Commission (the SEC) and the New York
Stock Exchange. Officers, directors and greater than 10%
shareholders are required by SEC regulations to furnish the
Company with copies of all such forms they file.
To the Company's knowledge, based solely on the review of
the copies of such forms received by it, the Company believes
that during 1998 all filing requirements applicable to its
officers, directors, and greater than 10% beneficial owners were
complied with and were timely filed.
Investment Advisor
The Company has entered into an Advisory, Administrative
Services and Facilities Agreement (the "Advisory Agreement") with
NHC as Advisor under which NHC will provide management and
advisory services during the term of the Advisory Agreement.
Under the terms of the Advisory Agreement, NHC, as Advisor,
agrees to use its best efforts:
a) To present to the Company a continuing and suitable
investment program consistent with the investment policy of the
Company as adopted by the directors from time to time;
b) To manage the day-to-day affairs and operations of the
Company, including the employment of and compensation to all
personnel; and
c) To provide administrative services and facilities
appropriate for such management.
In performing its obligations under the Agreement, the
Advisor is subject to the supervision of and policies established
by the Company's Board of Directors.
The Advisory Agreement is in effect through December 31,
2003 and thereafter continues on a year to year term, but can be
terminated by either party without cause on 90 days notice on or
after January 1, 2000.
For its services under the Advisory Agreement, the Advisor
is entitled to the greater of i) two percent (2%) of the
Company's consolidated gross revenues calculated according to
generally accepted accounting principles, or ii) the actual
expenses incurred by the Advisor as outlined in the Advisory,
Administrative Services and Facilities Agreement. The Advisor's
compensation is payable in monthly installments on the last day
of each month, adjusted annually upon completion of audit.
$471,000 was earned in 1998 and all payments are current.
Salaries paid by the Company to its executive officers are
credited against these installments.
Comparison of Cumulative Total Return
Since the Company's creation on December 31, 1997, the
Company's cumulative total return as compared with the S & P 500
Index and all other publicly traded real estate investment
companies (NAREIT Hybrid) is as shown in the graph on the last
page of this proxy statement.
PROPOSAL II
RATIFICATION OF APPOINTMENT OF AND
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Company has selected Arthur Andersen LLP as its
independent auditors for fiscal year ending December 31, 1999.
Although a stockholder vote is not required, the Board would like
the approval of stockholders for this appointment. Arthur
Andersen LLP audited the Company's financial statements for the
year ended December 31, 1998.
If the stockholders do not ratify the selection of Arthur
Andersen LLP, the selection of independent accountants will be
reconsidered by the Board of Directors, although the Board of
Directors would not be required to select different independent
accountants for the Company. The Board of Directors retains the
power to select another firm as independent accountants for the
Company to replace the firm whose selection was ratified by the
Company's stockholders in the event the Board of Directors
determines that the best interest of the Company warrants a
change of its independent accountants.
Representatives of Arthur Andersen LLP will be present at
the Annual Meeting and will be given the opportunity to make a
statement if they desire to do so. They will also be available
to respond to appropriate questions from stockholders at the
Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" PROPOSAL II.
STOCKHOLDER PROPOSALS
October 1, 1999, is the date by which proposals of
stockholders intended to be presented at the 2000 Annual Meeting
of Stockholders must be received by the Company for inclusion in
the Company's proxy statement and form of proxy relating to that
meeting.
EXPENSES OF SOLICITATION
The total cost of this solicitation will be borne by the
Company. In addition to use of the mail, proxies may be
solicited by directors and officers of the Company personally and
by telephone, telegraph, or facsimile transmission.
OTHER MATTERS
The Board of Directors knows of no other business to be
presented at the Meeting, but if other matters do properly come
before the Meeting, it is intended that the persons named in the
proxy will vote on such matters in accordance with their best
judgment.
s/Richard F. LaRoche, Jr.
Richard F. LaRoche, Jr., Secretary
March 1, 1999
Murfreesboro, Tennessee
COMPARISON OF CUMULATIVE TOTAL RETURN*
1997 1998
- - ----------------------------------------
NHR 100 76.8
S & P 500 100 128.6
NAREIT 100 66
*Assumes $100 inv. 12/31/97 in NHR, S & P 500, and NAREIT Hybrid
