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):
November 12, 1998
MEDITRUST CORPORATION
(Exact Name of Registrant as specified in its charter)
Delaware 0-8131 95-3520818
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
197 First Avenue, Suite 300, Needham, MA 02494
(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 0-8132 95-3419438
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation) Number) Identification No.)
197 First Avenue, Suite 100, Needham, MA 02494
(Address of principal executive offices and zip code)
(781) 453-8062
(Registrant's telephone number, including area code)
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Item 5. Other Events.
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The Meditrust Companies issued the press release attached hereto as Exhibit
99.1 regarding a comprehensive restructuring plan.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(c) Exhibits
Exhibit No. Description
- - ----------- -----------
99.1 Press release announcing the Registrant's comprehensive
restructuring plan.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
Dated: November 16, 1998 MEDITRUST CORPORATION
By: /s/ Michael S. Benjamin
--------------------------------
Name: Michael S. Benjamin
Title: Senior Vice President
MEDITRUST OPERATING COMPANY
By: /s/ William C. Baker
--------------------------------
Name: William C. Baker
Title: Interim President
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Exhibit 99.1
Meditrust Announces Comprehensive
Restructuring Plan
NEEDHAM HEIGHTS, Mass., Nov. 12 /PRNewswire/ -- The Meditrust Companies
("Meditrust" or "the Companies") (NYSE: MT - news) announced today that the
boards of directors of Meditrust Corporation and Meditrust Operating Company
have unanimously approved a comprehensive restructuring plan for its $7 billion
real estate portfolio. The plan is designed to strengthen Meditrust's financial
position and clarify its investment and operating strategy by focusing on the
healthcare and lodging business segments.
Meditrust will implement a comprehensive plan that includes:
-- Pursuing the separation of its primary businesses, healthcare and
lodging, by creating two separately traded publicly listed real estate
investment trusts ("REITs"). Meditrust intends to spin off its healthcare
financing business into a stand-alone REIT during the latter part of
1999;
-- Continuing to operate its healthcare and lodging businesses using the
existing paired-share REIT structure until the healthcare spin-off takes
place;
-- Selling more than $1 billion of non-strategic assets, including its
portfolio of golf-related real estate and operating properties
("Cobblestone Golf Group"), the Santa Anita Racetrack and approximately
$550 million of non-strategic healthcare properties;
-- Using the proceeds from these asset sales to achieve significant
near-term debt reduction;
-- Settling fully its forward equity investment transaction ("FEIT") with
Merrill Lynch;
-- Reducing capital investments to reflect current industry operating
conditions;
-- Resetting its annual dividend to $1.84 per paired common share, an amount
that is sustainable and comparable to its peer groups; and
-- Recording non-recurring charges of $248 million in the third quarter of
1998 and up to $200 million primarily in the fourth quarter.
Thomas M. Taylor, interim chairman of the boards of directors of The Meditrust
Companies, said, "This restructuring makes strategic sense. We believe it will
focus Meditrust on its core competencies, provide financial and operating
flexibility, and enhance shareholder value."
"Our message is clear: We will remain a REIT. Meditrust has redefined itself and
is dedicated to focusing on its strengths in healthcare financing and lodging.
These are the businesses we know best, and these are the businesses from which
we can create significant long-term value for our shareholders," concluded Mr.
Taylor.
<PAGE>
Mr. Taylor is president of Thomas M. Taylor & Company, an investment-consulting
firm associated with certain members of the Bass family of Fort Worth, Texas,
which owns in the aggregate in excess of 9% of Meditrust. Mr. Taylor noted that,
consistent with Meditrust's continuing qualification as a paired-share REIT, the
Companies will call a special shareholder meeting at which a proposal will be
put forth to allow the Bass/Taylor interests the flexibility to increase their
ownership up to a total of 13%.
Pursuing the Separation of Healthcare and Lodging
Meditrust will pursue the separation of its primary businesses, healthcare and
lodging, by creating two separately traded publicly listed REITs. Depending upon
capital market conditions, Meditrust intends to spin off to its shareholders its
healthcare financing business into a stand-alone REIT during the latter part of
1999. The spin-off of the healthcare division would create one of the nation's
largest publicly traded REITs focused entirely on healthcare investments. In
addition, upon separation, Meditrust's lodging business would be able to retain
the paired-share REIT structure and continue to own and operate its portfolio of
more than $2.5 billion of lodging real estate investments, consisting of La
Quinta Inns and La Quinta Inn & Suites hotels.
After extensive analysis of various structural alternatives with its financial
advisors, J.P. Morgan & Co. and Goldman, Sachs & Co., and its legal advisor,
Goodwin Procter & Hoar LLP, Meditrust has decided to retain the paired-share
REIT structure. Meditrust believes that maintaining the paired-share structure
is optimal for the Companies' focused asset base: It is tax efficient, allows
Meditrust the financial flexibility to continue making accretive investments in
healthcare and lodging, and enables the Companies to avoid undue business
disruption. Under the paired-share structure, Meditrust will be able to take
advantage of both internal and external growth opportunities. Growth within the
healthcare division is unaffected by the paired-share structure. The lodging
division has the long-term capacity, if warranted by market conditions, to add
hundreds of millions of dollars of assets while continuing to comply with the
REIT rules.
Asset Sales
As part of its comprehensive plan, Meditrust expects to raise more than $1
billion in after-tax proceeds through the sale of non-strategic assets. These
asset sales include: Cobblestone Golf Group; the Companies' interest in the
Santa Anita Fashion Park Mall; the Santa Anita Racetrack; and approximately $550
million of non-strategic healthcare properties. Meditrust already has letters of
intent to sell approximately $400 million of healthcare properties at
approximately original investment value. Meditrust is close to signing a
definitive agreement to sell the Santa Anita Racetrack. The sale of Santa Anita
Racetrack is expected to close at the end of 1998, and will not affect
Meditrust's ability to retain the paired-share REIT structure. Meditrust has
also retained Goldman, Sachs & Co. to assist in the sale of Cobblestone Golf
Group.
David F. Benson, president of Meditrust Corporation, said, "These asset sales
will enable us
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to improve our financial position, strengthen our balance sheet, clarify our
strategy and focus the scope of our operations on areas which provide the
greatest opportunities for long-term growth. In addition, the funds available on
our line of credit will enable us to maintain financial flexibility, liquidity
and the continued capacity to operate our core businesses."
Debt Reduction
Meditrust anticipates achieving significant near-term debt reduction by using
the proceeds from the asset sales to pay down approximately $525 million in
debt. This will result in approximately $2.7 billion in total debt, with the
objective of achieving a debt to total book capital ratio of approximately 45%
upon completion of the asset sales and settlement of its FEIT.
Meditrust has reached an agreement with its bank group and is in the process of
amending its $2.25 billion credit facility. The amendment of the credit facility
provides for: Meditrust's cash repayment of a portion of its FEIT; the amendment
of certain financial covenants to accommodate the asset sales, to exclude the
impact of non-recurring charges and to provide for future operating flexibility;
and the pledge of stock of the Companies' subsidiaries. This pledge of
subsidiary stock will also extend on a pro rata basis to entitled bondholders.
Meditrust has also agreed to increase the pricing of the credit facility by
approximately 125 basis points.
Settlement of Forward Equity Investment Transaction
Meditrust has entered into an agreement to fully settle its existing $277
million FEIT with Merrill Lynch International and certain of its affiliates.
Under the agreement, Meditrust has agreed to grant a mortgage of the Santa Anita
Racetrack to Merrill Lynch and anticipates repaying Merrill Lynch approximately
50% of the FEIT obligation in cash generated in part from the sale of certain
assets. It is anticipated that the remaining FEIT obligation will be discharged
from the proceeds of the sale of equity securities of The Meditrust Companies
with terms to be finalized shortly, which, if offered publicly will be offered
pursuant to a prospectus. Merrill Lynch has agreed, subject to the terms of the
settlement agreement, not to sell any shares of the existing FEIT until at least
February 28, 1999 while Meditrust completes the sale of equity securities and
certain assets.
Mr. Benson said, "We believe this arrangement regarding our only forward equity
obligation should remove market uncertainty for Meditrust's paired common stock,
with the ultimate objective of minimizing possible dilution to funds from
operations (FFO) associated with this obligation."
Capital Investment Strategy
Meditrust has reduced its capital investment program over the near term,
reflecting current industry and market conditions. Meditrust believes the asset
sales and its new strategic focus will enable the Companies to grow under a
reduced level of capital investments through 1999 and have the financial
flexibility to respond quickly to new opportunities.
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Healthcare: The projected level of new healthcare investments will be
approximately $200 million for 1999, which Meditrust believes is prudent in the
current capital-constrained market. Meditrust will remain one of the leading
providers of financing to the healthcare industry and will continue to seek
opportunities to invest or acquire in those areas of the healthcare industry
experiencing expansion and profitability. Meditrust will maintain its focus on
investments in the senior living and long-term care sectors, and will continue
to invest in medical office buildings.
Mr. Benson said, "We're going back to basics. Drawing upon 13 years of expertise
in the healthcare financing business, Meditrust will focus its attention on
continuing to grow the healthcare portfolio. We believe we can achieve faster
and more profitable growth with a smaller, more focused platform."
Lodging: La Quinta will continue to benefit from prior investments of
approximately $270 million to its Inns made during the past three years, the
opening of 52 Inn & Suites hotels during the last two years, and the opening of
the 18 Inn & Suites hotels currently under construction. Upon completion of the
hotels currently under construction, Meditrust will own and operate 233 La
Quinta Inns and 70 La Quinta Inn & Suites hotels, with a total of approximately
39,000 rooms.
Separately, La Quinta has determined that, due to current industry and capital
market conditions, it will terminate all existing Inn & Suites development
projects not currently under construction. La Quinta does not anticipate
developing any new hotels or entering any new segments of the lodging industry
in 1999. Going forward, La Quinta will evaluate development and acquisition
investment opportunities as they arise.
Ezzat Coutry, president and chief executive officer of La Quinta Inns, said,
"This restructuring will allow La Quinta to focus on operating efficiencies at
our existing hotels by building upon our strong customer loyalties and improving
the recognition of our value-oriented brand. The La Quinta portfolio will
continue to provide Meditrust with significant internal growth opportunities,
and we strongly believe in the merits of this focused strategy."
Dividend Policy
Meditrust expects its annual dividend in 1999 to be approximately $1.84 per
paired common share. Meditrust noted that the new dividend is sustainable, is
comparable to its peer groups' payout ratios and will provide approximately $100
million in additional cash from operations. This additional cash from operations
will be used to fulfill existing capital investment commitments and pay down
debt. As previously announced, Meditrust Corporation will pay a dividend of
$0.62125 per paired common share to shareholders of record on October 30, 1998.
This dividend will be paid on November 13, 1998.
Management
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Thomas Taylor will continue to serve as interim chairman of the boards of
directors of Meditrust and David Benson will continue to serve as interim chief
executive officer of Meditrust Corporation throughout the implementation of the
restructuring.
Mr. Taylor said, "Upon the planned separation into two publicly traded REITs, I
expect that David Benson will serve as CEO and president of Meditrust's
healthcare financing business and Ezzat Coutry will remain as CEO and president
of La Quinta Inns."
Restructuring Charges and Earnings Outlook
In connection with the comprehensive restructuring plan, Meditrust will incur
non-recurring charges of $248 million in the third quarter of 1998 and up to
$200 million primarily in the fourth quarter. Approximately $55 million of the
total restructuring charge is expected to represent actual cash costs.
Meditrust also announced today that FFO per share for the first nine months of
1998 is $1.89 per share (Basic) and $1.81 per share (Diluted), compared to the
$1.95 per share reported for the same period in 1997. Diluted FFO per share for
full-year 1998 is expected to be below the $2.50 per share reported for
full-year 1997 by approximately 10% to 15%. The reduced FFO levels can be
attributed to, among other things: Slower RevPAR growth in the lodging sector;
the reduced level of new investments in Cobblestone Golf Group; changes in
accounting treatment of Cobblestone initiation fees and increased debt costs.
Meditrust noted that the difference between basic and diluted FFO per share is a
result of the additional shares outstanding from the FEIT.
Meditrust anticipates that its 1999 FFO per share (Diluted) would be
approximately 10% greater than its 1998 FFO per share, despite a reduction in
EBITDA from the sale of Cobblestone and the Santa Anita Racetrack, the reduced
levels of healthcare investments, and the curtailment of construction and
development in its lodging business.
The Meditrust Companies, with headquarters in Needham Heights, Massachusetts,
consists of Meditrust Corporation, a REIT, and Meditrust Operating Company.
Today's news release, along with other news about The Meditrust Companies, is
available on the Internet at http://www.reit.com.
Certain matters discussed within this press release may constitute
"forward-looking statements" within the meaning of the federal securities laws.
Although The Meditrust Companies believes the statements are based on reasonable
assumptions, it can give no assurance that its expectations will be attained.
Actual results and the timing of certain events could differ materially from
those projected in or contemplated by the forward-looking statements due to a
number of factors, including, without limitation, general economic and real
estate conditions, the documentation of the amendments to the credit facility
consistent with the agreement described above; the conditions of the capital
markets at the time of the proposed spin-off of the health-care division, the
identification of satisfactory prospective buyers for the non-strategic assets
and the availability of financing for such prospective buyers, the
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availability of equity and debt financing for the Companies' capital investment
program, interest rates, competition for hotel services and health care
facilities in a given market and other risks detailed from time to time in the
filings of Meditrust Corporation and Meditrust Operating Company with the
Securities and Exchange Commission, including the Joint Annual Report on Form
10-K/A for the year ended December 31, 1997 and other periodic filings under the
Securities Exchange Act of 1934, as amended.
SOURCE: The Meditrust Companies
