SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
February 24, 1998
MEDITRUST CORPORATION
(Exact Name of Registrant as specified in its charter)
Delaware 0-9109 95-3520818
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
197 First Avenue, Suite 300, Needham, MA 02194
(Address of principal executive offices and zip code)
(781) 433-6000
(Registrant's telephone number, including area code)
MEDITRUST OPERATING COMPANY
(Exact Name of Registrant as specified in its charter)
Delaware 0-9110 96-3419438
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
197 First Avenue, Suite 100, Needham, MA 02194
(Address of principal executive offices and zip code)
(781) 453-8062
(Registrant's telephone number, including area code)
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Certain statements in this Form 8-K and in oral statements made by or with the
approval of an authorized executive officer of the Company, constitute
"forward-looking statements" as that term is defined under the Private
Securities Litigation Reform Act of 1995 (the "Act") and releases issued by the
Securities and Exchange Commission. The words "believe," "expect," "anticipate,"
"intend," "estimate" and other expressions which are predictions of or indicate
future events and trends and which do not relate to historical matters identify
forward-looking statements. Reliance should not be placed on forward-looking
statements because they involve known and unknown risks, uncertainties and other
factors, which may cause the actual results, performance or achievements of
Meditrust Corporation and Meditrust Operating Company, which are collectively
referred to as "The Meditrust Companies," to differ materially from anticipated
future results, performance or achievements expressed or implied by such
forward-looking statements. Certain factors that might cause such a difference
or that might adversely affect The Meditrust Companies are discussed in the
Annual Reports on Form 10-K for each of Meditrust (which was merged with and
into Santa Anita Realty Enterprises, Inc. on November 5, 1997), Santa Anita
Realty Enterprises, Inc. and Santa Anita Operating Company for the year ended
December 31, 1996, in the Quarterly Reports on Form 10-Q for each such entity
for the quarters ended March 31 and June 30, 1997 and in the Quarterly Reports
on Form 10-Q for Meditrust Corporation and Meditrust Operating Company for the
quarter ended September 30, 1997. In addition, recently proposed legislation, if
adopted as currently proposed, may materially impact the operating activities of
paired-share real estate investment trusts, such as The Meditrust Companies. The
Meditrust Companies undertake no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information, future events
or otherwise.
Item 5. Other Events
On February 24, 1998, Meditrust Corporation and Meditrust Operating Company
set forth the following information with respect to their collective
diversification and growth strategy:
The Meditrust Companies Diversification Strategy
General. Set forth below is a discussion of The Meditrust Companies
strategy for near-term growth. The Meditrust Companies believe that this
strategy offers unique synergies for The Meditrust Companies and its existing
and future properties and operations. The Meditrust Companies have recently
entered into agreements to acquire Cobblestone Holdings, Inc., parent of one of
the nation's leading developers and operators of golf courses and related
facilities ("Cobblestone"), and La Quinta Inns, Inc., a fully integrated lodging
company currently operating in the mid-priced segment of the lodging industry
("La Quinta"). Upon consummation of the acquisitions of Cobblestone and La
Quinta, as well as the further implementation of The Meditrust Companies' growth
and diversification strategy, The Meditrust Companies will own, operate and
manage a diverse portfolio of real estate properties, operations and interests,
including the following:
Health Care Related:
o Investments in more than 500 geographically dispersed health
care related facilities operated by a diverse group of nearly
20 operators.
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o A diverse portfolio of health care related properties,
including long-term care, retirement and assisted living
facilities, rehabilitation hospitals and medical office
buildings.
o Investments in in-patient and out-patient health care
facilities.
Entertainment:
o Ownership of 25 golf related facilities with 29 golf courses
in major golf markets in Arizona, California, Florida,
Georgia, Texas and Virginia.
o Santa Anita Park, one of the nation's premier thoroughbred
horse racing facilities.
o Approximately 85 acres of land at the Santa Anita facility
which The Meditrust Companies intend to improve in order to
begin generating funds from operations with this property.
Current proposals to improve this land include an
entertainment center, a health club and/or a medical office
building.
Lodging:
o Approximately 35,000 rooms, excluding rooms in facilities
currently under development by La Quinta. Many of these
existing rooms have recently undergone substantial
refurbishment, which will limit near-term capital expenditures
on these rooms.
o Recognized brand names in the mid-priced segment, including La
Quinta(R) Inns and La Quinta(R) Inns & Suites.
o Properties which will be available for operation and marketing
as time sharing, or interval vacation ownership, facilities.
Business Strategy. The primary business objective of The Meditrust
Companies is to maximize the long-term total return to their shareholders. This
objective is predicated on the following two factors:
o Positive Spread Investment. Management will seek to maximize
shareholder value through positive spread investment opportunities
which provide an accretive cash flow return. Through its paired share
structure, The Meditrust Companies will be able to acquire operating
companies and assets thereby reducing economic "leakage." The Meditrust
Companies will utilize their sound capital structure to facilitate the
acquisition of growth oriented companies.
o Quality of Management. The Meditrust Companies will seek to employ a
strong management team available for each line of business which is
acquired, properly motivating each team and providing them with
appropriate financial and capital resources. For example, The Meditrust
Companies' acquisitions of Cobblestone and La Quinta bring with them a
group of seasoned professionals in the golf and lodging industries,
respectively.
The key elements of The Meditrust Companies diversification strategy are
the following:
Continue to Expand Core Sale/Leaseback and Mortgage Financing Portfolio
The Meditrust Companies intend to expand their portfolio of investments in
the health care industry by continuing to expand The Meditrust Companies
traditional core business of providing financing to operators of real estate
intensive businesses primarily in the health care industry. The Meditrust
Companies currently
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manage a portfolio of more than $2.8 billion in income-producing, health
care-related facilities, including nursing homes, assisted living facilities,
medical office buildings and other health care-related facilities. The Meditrust
Companies intend to continue to expand and diversify this portfolio through
additional acquisitions in their current geographic base, through providing
financing to additional operators and to other sectors of the health care
related industry and through increasing the number of health care facilities in
their portfolio.
Over its 12-year history, The Meditrust Companies have developed, and
currently maintain, strong relationships with the operators to whom they provide
capital. The Meditrust Companies intend to continue to build and expand those
relationships by providing additional capital to existing and new operators. The
Meditrust Companies historical ability to provide mortgage and sale/leaseback
financing both for operating facilities and for the development of new
facilities has provided them with a competitive advantage in expanding their
core financing business. The Meditrust Companies intend to continue their
practice of structuring transactions to accommodate the unique characteristics
of the operators and their facilities, a practice which The Meditrust Companies
believe has made them an attractive source of financing for operators of health
care related facilities.
Make Strategic Acquisitions of Operating Companies in the Health Care
Sector
The Meditrust Companies' management has significant experience investing in
the health care industry and has developed expertise in key areas, including
knowledge of reimbursement systems and extensive perspective on the fundamental
changes that affect the ways in which health care is delivered. As a paired
share REIT, The Meditrust Companies are able to pursue a wide variety of
strategic acquisitions, including acquisitions of operating companies. The
Meditrust Companies will focus primarily on traditional health care related real
estate such as nursing homes, assisted living facilities and medical office
buildings. The Meditrust Companies also intend to pursue opportunities to
acquire ancillary health care providers such as magnetic resonance imaging
centers and other ancillary modalities.
In evaluating potential strategic acquisitions, The Meditrust Companies
expect to consider such factors as: (i) historical performance of the
acquisition candidate; (ii) the long-term outlook of the sector in which the
candidate operates in terms of sustainable profitability and growth prospects;
(iii) the extent to which such an acquisition candidate complements The
Meditrust Companies' portfolio of then existing investments and business
relationships; (iv) the cost of such an acquisition relative to its expected
contribution to the consolidated earnings and funds from operations of The
Meditrust Companies; and (v) The Meditrust Companies' confidence that an
appropriate management team or partnership structure will be in place to
effectively manage the acquired operations.
Develop and Make Strategic Acquisitions of Senior Living Communities
The Meditrust Companies intend to embark on a program of owning,
developing, operating and managing senior living communities, which will include
nursing homes, assisted living facilities and active adult living communities.
In the case of nursing homes and assisted living facilities, The Meditrust
Companies intend to offer fully integrated self-contained senior living
communities with a continuum of care that will enable residents to age in place.
In the case of active adult living communities, The Meditrust Companies
anticipate addressing the needs of senior adults by developing properties that
offer residents recreational opportunities as well as serving their medical
needs.
The Meditrust Companies believe their continuing care communities will
emerge as a preferred alternative for meeting the growing demands of the elderly
as they do age in place. Continuing care communities require large capital
infusions and companies, such as The Meditrust Companies, that have access to
such capital have a competitive advantage in financing the development,
operation and marketing
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of these continuing care communities. The Meditrust Companies believe that the
stability of future senior housing demand for this sector will be less dependent
on economic and business cycles than many other industries due to the growing
demand of an aging population and the fact that many people will gravitate
towards integrated communities. The industry is need driven rather than
discretionary.
Make Strategic Acquisitions of Golf and Other Entertainment Facilities
The Meditrust Companies also intend to pursue acquisition and development
opportunities in entertainment focused properties, such as golf courses, which
in some cases will complement their senior living communities or lodging
properties. The Meditrust Companies have agreed to acquire Cobblestone, one of
the leading owners and operators of golf courses in the U.S. Cobblestone has 25
golf related facilities with 29 golf courses in major golf markets in Arizona,
California, Florida, Georgia, Texas and Virginia.
The Meditrust Companies intend to acquire and develop golf course related
properties through a three prong approach. First, The Meditrust Companies will
acquire and develop free standing golf course facilities. These facilities will
be expected to contribute to The Meditrust Companies' funds from operations.
Second, The Meditrust Companies will acquire golf course related properties with
additional land available for future development of residential living
communities. The Meditrust Companies believe that there will be certain
synergies inherent in integrating a senior living community with recreational
opportunities, which may include golf courses and related golf services. Third,
The Meditrust Companies will review opportunities to integrate golf with
hospitality properties, such as hotel, time share and interval ownership
properties.
The Meditrust Companies intend to commit up to one billion dollars to the
development and acquisition of golf related properties as they seek to offer
residents of their communities and guests of their hospitality facilities
additional ancillary services, while also pursuing a business that is intended
to contribute on a stand-alone basis to the Companies' funds from operations.
Make Strategic Acquisitions of Operating Companies in the Lodging Sector.
As a paired share REIT, The Meditrust Companies are currently able to
pursue a wider range of strategic acquisitions in the lodging industry than
traditional REITs. The lodging industry is particularly well suited to the
paired share structure as it is both real estate and operationally intensive.
Lodging REITs have historically owned the real estate upon which hotels are
operated but have been required to pay third parties to operate and manage their
hotels. Currently, as a paired-share REIT, The Meditrust Companies are permitted
to both own the real estate and operate the hotel business.
La Quinta is an example of one of the types of lodging companies that fit
particularly well into the paired share structure as it both owns and operates
its hotels. In this regard, The Meditrust Companies intend to further develop
and grow the La Quinta(R) brand name. This growth will include the further
development of the current La Quinta(R) Suites & Inns product, as well as the
introduction of an upscale version of this product. The Meditrust Companies also
intend to add a La Quinta(R) Resorts product to its portfolio as a set of
destination properties.
The Meditrust Companies intend to continue to identify and evaluate
appropriate acquisition candidates with an objective of acquiring, if and when
available, lodging businesses that are appropriate for the paired share
structure currently available to The Meditrust Companies. The Meditrust
Companies also intend to acquire real estate assets that would fit appropriately
in a traditional REIT operating in the lodging industry.
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The Meditrust Companies intend to integrate their lodging facilities with
other assets, including golf course facilities and senior living communities.
The Meditrust Companies believe that the ability to offer hotel guests added
ancillary services will provide a competitive advantage as the lodging industry
continues to consolidate.
The Meditrust Companies also intend to pursue development, ownership,
operation and management opportunities in the time share, or interval ownership,
industry within their hospitality operations.
Maximize the Value of the Santa Anita Horse Racing and Real Estate Assets
The Meditrust Companies anticipate continuing the historical commitment to
high quality thoroughbred horse racing at Santa Anita Park, as well as
maintaining the Park's leadership in the horse racing industry. The Meditrust
Companies also will seek to maximize the value of the approximately 85 acres of
underutilized land at Santa Anita Park. The Meditrust Companies are currently
considering several proposals to develop this land, including an entertainment
center, a medical office building and a health club.
There is no assurance that The Meditrust Companies will be able to meet any
or all of these objectives. In addition, The Meditrust Companies' acquisition
candidates and joint venture partners may include companies in which Abraham D.
Gosman, the Chairman of the Board of The Meditrust Companies, has an interest.
Any such acquisitions or joint ventures would be subject to the approval of the
disinterested directors of The Meditrust Companies. Depending upon the
circumstances surrounding a particular transaction, The Meditrust Companies may
also obtain a fairness opinion from an investment banking firm.
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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 hereunto duly authorized.
Dated: February 24, 1998 MEDITRUST CORPORATION
By: /s/ David F. Benson
----------------------------
Its: President
MEDITRUST OPERATING COMPANY
By: /s/ Abraham D. Gosman
----------------------------
Its: Chief Executive Officer
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