SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1994
Commission File Number 1-8895
HEALTH CARE PROPERTY INVESTORS, INC.
(Exact name of registrant as specified in its charter)
Maryland 33-0091377
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10990 Wilshire Boulevard, Suite 1200
Los Angeles, California 90024
(Address of principal executive offices)
Registrant's telephone number: (310) 473-1990
------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock* New York Stock Exchange
*The Common Stock has stock purchase rights attached which are registered
pursuant to Section 12(b) of the Act and listed on the New York Stock Exchange.
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 and (2) has been subject to such filing
requirements for the past 90 days. Yes \x\ No \ \
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. \ \
As of March 24, 1995 there were 28,509,254 shares of Common Stock
outstanding. The aggregate market value of the shares of Common Stock held by
non-affiliates of the registrant, based on the closing price of these shares
on March 24, 1995 on the New York Stock Exchange, was approximately
$859,000,000. Portions of the definitive Proxy Statement for the registrant's
1995 Annual Meeting of Stockholders have been incorporated by reference into
Part III of this Report.
<PAGE>
PART I
Item 1. BUSINESS
Health Care Property Investors, Inc. (the "Company"), a Maryland
corporation, was organized in March 1985 to qualify as a real estate investment
trust. The Company was organized to invest in health care related real estate
located throughout the United States, including long term care facilities,
acute care and rehabilitation hospitals, psychiatric facilities, substance
abuse recovery centers, congregate care and assisted living centers, medical
office buildings and physician group practice clinics. At December 31, 1994,
the Company owned an interest in 170 properties located in 32 states, which are
leased pursuant to long-term leases (the "Leases") to 33 health care providers
(the "Lessees"), including Beverly Enterprises, Inc. ("Beverly"), Continental
Medical Systems, Inc., Columbia/HCA Healthcare Corp. ("Columbia"), Healthsouth
Corporation ("Healthsouth"), HealthTrust, Inc. -- The Hospital Company
("HealthTrust"), The Hillhaven Corporation ("Hillhaven"), Horizon Healthcare
Corporation ("Horizon"), National Medical Enterprises, Inc. (which has recently
announced a name change to Tenet Healthcare Corporation ("Tenet")), NovaCare,
Inc. and PhyCor, Inc. ("PhyCor"). Of the Lessees, only Hillhaven and Beverly
account for more than 10% of the Company's rental income as of December 31,
1994. The Company also holds mortgage loans on 11 properties that are owned
and operated by eight health care providers including Columbia and OrNda
Healthcorp ("OrNda"). The gross acquisition price of the Company's 181 leased
or mortgaged properties (the "Properties"), including partnership acquisitions
and mortgage loan acquisitions, was approximately $718.7 million. The average
age of the Properties is 16 years.
The Properties
Of the 181 health care facilities in which the Company has an investment,
the Company directly owns 126 facilities, including 101 long term care
facilities, one acute care hospital, two rehabilitation hospitals, 11
congregate care and assisted living centers, nine medical office buildings and
two physician group practice clinics.
The Company has provided mortgage loans on 11 properties, including six
long term care facilities, three acute care hospitals and two medical office
buildings that are secured by the Properties.
The Company also has varying percentage interests in several partnerships
that together own 44 facilities, as further discussed below:
1. A 77% interest in a partnership which owns two acute care
hospitals, one psychiatric facility and 21 long term care
facilities.
2. A 50% interest in a partnership that owns 11 long term care
facilities.
3. Interests of between 90% and 97% in four partnerships, each of which
owns a comprehensive rehabilitation hospital.
4. A 50% interest in five partnerships, each of which owns a congregate
care living center.
LONG TERM CARE FACILITIES. The Company and the partnerships in which it
participates own or hold mortgage loan interests in 139 long term care
facilities. These facilities are leased to various health care providers.
Such long term care facilities offer restorative, rehabilitative and custodial
nursing care for people not requiring the more extensive and sophisticated
treatment available at acute care hospitals. Many long-term care facilities
have experienced significant growth in ancillary revenues over the past several
years. Ancillary revenues are derived from providing services to residents
beyond room and board care and include occupational, physical, speech,
respiratory and IV therapy, as well as, sales of pharmaceutical products and
other services. Such revenues currently relate primarily to Medicare and
private pay residents. Long-term care facilities are designed to
supplement hospital care; many have transfer agreements with one or more acute
care hospitals. These facilities depend to some degree upon referrals from
practicing physicians and hospitals. Such services are paid for either from
private sources of the patient or the patient's family, or through the federal
Medicare and state Medicaid programs.
Patients in long term care facilities are generally provided with
accommodations, all meals, medical and nursing care, and rehabilitation
services including speech, physical and occupational therapy.
ACUTE CARE HOSPITALS. The Company has an interest in six acute care
hospitals, of which two each are operated by Tenet and Columbia and one each
by OrNda and Dynamic Health Care, Inc.
Acute care hospitals generally offer a wide range of services such as
general and specialty surgery, intensive care units, clinical laboratories,
physical and respiratory therapy, nuclear medicine, magnetic resonance imaging,
neonatal and pediatric care units, outpatient units and emergency departments.
Such services are paid for either from private sources of the patient or the
patient's family, or through the federal Medicare and state Medicaid programs.
REHABILITATION HOSPITALS. The Company has an investment in six
rehabilitation hospitals. These hospitals provide inpatient and outpatient
care for patients who have sustained traumatic injuries or illnesses, such as
spinal cord injuries, strokes, head injuries, orthopedic problems, work related
disabilities and neurological diseases, as well as treatment for amputees and
patients with severe arthritis. Rehabilitation programs encompass physical,
occupational, speech and inhalation therapies, rehabilitative nursing and
other specialties. Such services are paid for either from private sources of
the patient or the patient's family, or through the federal Medicare program.
Three rehabilitation hospitals are leased to Continental Medical Systems,
Inc., two hospitals are leased to Healthsouth and one is leased to NovaCare,
Inc.
CONGREGATE CARE AND ASSISTED LIVING CENTERS. The Company and its
partnerships have investments in 16 congregate care and assisted living
centers. Congregate care centers typically contain studio and one and two
bedroom apartments which are rented on a month-to-month basis by individuals,
primarily over 75 years of age. Residents, who must be ambulatory, are
provided meals and eat in a central dining area; they may also be assisted with
some daily living activities. These centers offer programs and services that
allow residents certain conveniences and make it possible for them to live
independently; staff is also available when residents need assistance and for
group activities.
Assisted living centers serve elderly persons who require more assistance
with daily living activities than congregate care residents, but who do not
require the constant supervision nursing homes provide. Services include
personal supervision and assistance with eating, bathing, grooming and
administering medication. Assisted living centers typically contain larger
common areas for dining, group activities and relaxation to encourage social
interaction. Residents rent studio and one bedroom units on a month-to-month
basis.
Charges for room and board and other services in both congregate care and
assisted living centers are paid from private sources.
MEDICAL OFFICE BUILDINGS. The Company has investments in 11 medical
office buildings. These buildings are generally located adjacent to,
or a short distance from, acute care hospitals. Medical office buildings
contain physicians' offices and examination rooms, and may also include
pharmacies, hospital ancillary service space and day-surgery operating rooms.
Medical office buildings require more extensive plumbing, electrical, heating
and cooling capabilities than commercial office buildings for sinks, brighter
lights and special equipment physicians typically use. The medical office
buildings owned by the Company are master leased to a lessee which then
subleases office space to physicians or other medical practitioners.
PHYSICIAN GROUP PRACTICE CLINICS. The Company has investments in two
physician group practice clinics. Physician group practice clinics generally
provide a broad range of medical services through organized physician groups
representing various medical specialties.
The Knoxville Orthopedic Clinic is a 37,900 square foot facility located
in Knoxville, Tennessee and is leased to Knoxville Orthopedic Clinic P.A.
The Holt-Krock Clinic includes 294,000 square feet comprised of four main
clinic buildings, several satellite offices and 33 acres of land located
primarily in Fort Smith, Arkansas. Approximately 141 physicians practice
primary care and 30 specialties at the clinic. Additionally, the clinic sold
certain of its non-real estate assets to PhyCor and entered into a services
agreement whereby PhyCor will provide management and administrative services
to the physician group.
PSYCHIATRIC FACILITY. Brawner Psychiatric Hospital, located in Smyrna,
Georgia, offers comprehensive, multidisciplinary adult and adolescent care.
A substance abuse program is offered in a separate unit of the hospital.
Although the facility is a qualified Medicare provider, substantially all of
Brawner's patient revenue in 1994 has been from private sources.
COMPETITION. The Company competes for property acquisitions with health
care providers, other health care related real estate investment trusts, real
estate partnerships and other investors.
The Company's Properties are subject to competition from the properties
of other health care providers. Certain of these other operators have capital
resources substantially in excess of those of the operators of the Company's
facilities. In addition, the extent to which the Properties are utilized
depends upon several factors, including the number of physicians using the
health care facilities or referring patients there, competitive systems of
health care delivery and the area population, size and composition. Private,
federal and state payment programs and the effect of other laws and regulations
may also have a significant effect on the utilization of the Properties.
Virtually all of the Properties operate in a competitive environment and
patients and referral sources, including physicians, may change their
preferences for a health care facility from time to time.
The following table shows, with respect to each Property, the location by
state, the number of beds/units, recent occupancy levels, patient revenue mix,
recent 12 months revenues, and information regarding lease terms by property
type.
<TABLE>
<CAPTION>
Average
Number Private
Number Of Beds/ Patient Annual Average
Of Units Average Revenue Base Rents/ Remaining
Facility Location Facilities <F1> Occupancy <F5> <F2> Interest Term
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Long Term Care Facilities
Alabama 1 174 98% 26% $ 420 3
Arizona 1 128 83% 56% 248 4
Arkansas 9 866 85% 48% 1,561 3
California 22 2,028 88% 42% 5,712 5
Colorado 3 420 92% 63% 1,469 5
Connecticut 1 121 97% 44% 436 5
Florida 11 1,267 95% 55% 5,191 4
Illinois 2 201 97% 47% 425 2
Indiana 11 1,509 84% 40% 5,157 11
Iowa 1 201 93% 32% 481 4
Kansas 3 325 89% 48% 1,307 4
Kentucky 1 100 100% 53% 324 7
Louisiana 1 120 96% 23% 401 5
Maryland 3 438 93% 30% 2,740 3
Massachusetts 5 615 97% 44% 2,154 2
Michigan 3 286 90% 45% 579 6
Mississippi 1 120 99% 7% 285 7
Missouri 11 1,492 73% 54% 4,146 3
Montana 1 80 61% 37% 252 4
New Mexico 1 102 99% 13% 259 3
North Carolina <F3> 5 564 93% 35% 1,633 7
Ohio 9 1,226 95% 46% 4,030 6
Oklahoma 2 207 87% 71% 1,013 4
Oregon 1 110 86% 52% 288 3
Tennessee 10 1,754 97% 33% 4,082 7
Texas 11 1,242 68% 34% 2,043 5
Washington 1 84 88% 54% 225 4
Wisconsin 8 1,143 92% 51% 2,973 4
-------------------------------------------------------------------------------------------------------------------------------
Sub-Total 139 16,923 88% 44% 49,834 5
-------------------------------------------------------------------------------------------------------------------------------
Acute Care Hospitals
California 1 182 45% 94% 2,856 4
Florida 1 285 36% 91% 1,161 9
Louisiana 2 325 55% 72% 4,070 8
Texas 2 210 51% 97% 5,020 6
---------------------------------------------------------------------------------------------------------------------------------
Sub-Total 6 1,002 47% 85% 13,107 7
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
Page Totals 145 17,925 86% 45% $ 62,941 5
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION> Average
Number Private
Number Of Beds/ Patient Annual Average
Of Units Average Revenue Base Rents/ Remaining
Facility Location Facilities <F1> Occupancy <F5> <F2> Interest Term
---------------------------------------------------------------------------------------------------------------------------------
(Thousands) (Years)
<S> <C> <C> <C> <C> <C> <C>
(Totals From Previous Page) 145 17,925 86% 45% $ 62,941 5
------------------------------------------------------------------------------------------------------
Rehabilitation Facilities
Arizona 1 60 49% 100% 1,245 4
Arkansas 1 60 78% 100% 1,457 6
Colorado 1 60 61% 100% 1,192 6
Kansas 1 80 72% 100% 1,818 4
Texas 2 234 53% 100% 4,144 6
------------------------------------------------------------------------------------------------------
Sub-Total 6 494 60% 100% 9,856 6
------------------------------------------------------------------------------------------------------
Physician Group Practice Clinics
Arkansas 1 --- --- 94% 2,353 15
Tennessee 1 --- --- 94% 470 15
------------------------------------------------------------------------------------------------------
Sub-Total 2 --- --- 94% 2,823 15
------------------------------------------------------------------------------------------------------
Psychiatric Facility
Georgia 1 108 39% 100% 561 3
------------------------------------------------------------------------------------------------------
Congregate Care and
Assisted Living Centers
Arkansas 1 17 94% 100% 97 4
California <F4> 1 65 --- --- --- ---
Colorado 1 98 92% 100% 508 4
Florida 2 162 82% 100% 624 8
Kansas 1 110 93% 100% 525 4
Louisiana 2 209 99% 100% 1,158 5
Maryland <F4> 1 86 --- --- --- ---
Missouri 1 73 95% 100% 339 7
New Mexico 1 135 92% 100% 778 14
Oregon 1 58 95% 100% 357 14
Rhode Island 1 172 98% 100% 1,526 6
Texas 1 130 97% 100% 833 5
Texas <F4> 1 98 --- --- --- --
Virginia <F5> 1 65 49% 100% 561 15
------------------------------------------------------------------------------------------------------
Sub-Total 16 1,478 91% 100% 7,306 8
------------------------------------------------------------------------------------------------------
Medical Office Buildings
California 1 --- --- 100% 732 14
Texas 9 --- --- 100% 4,283 12
Utah <F4> 1 --- --- --- --- ---
------------------------------------------------------------------------------------------------------
Sub-Total 11 --- --- 100% 5,015 12
------------------------------------------------------------------------------------------------------
TOTAL FACILITIES 181 20,005 84% 50% $ 88,502 7
======================================================================================================
<F1> Congregate Care and Assisted Living centers are measured in units, all
other facilities are measured by bed count. Physician Group Practice
Clinics and Medical Office Buildings are measured in square feet and
encompass 501,850 and 331,900 square feet, respectively.
<F2> All revenues including Medicare revenues but excluding Medicaid revenues
are included in "Private Patient" revenues.
<F3> For two new facilities, revenues are annualized from the most recent
available financial information.
<F4> Under construction.
<F5> Physician group practice clinics and medical office buildings lessees have
use of the leased facilities for their own use or for the use of sub-
lessees.
</TABLE>
The following summary of the Company's Properties shows certain pertinent
information grouped by type of facility as of December 31, 1994:
<TABLE>
<CAPTION>
Equity Number Number Total
Interest of of Beds/ Investments Annual Base
Facility Type Percentage Facilities Units<F1> <F2> Rents/Interest
--------------------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
<S> <C> <C> <C> <C> <C>
Long Term Care Facilities 100 107 13,183 $324,725 $38,776
Long Term Care Facilities 77 21 2,438 56,672 8,074
Long Term Care Facilities 50 11 1,302 23,109 2,984
Acute Care Hospitals 100 4 646 47,906 7,278
Acute Care Hospitals 77 2 356 42,807 5,829
Rehabilitation Hospitals 100 2 186 27,171 3,636
Rehabilitation Hospitals 97 3 200 32,380 4,467
Rehabilitation Hospital 90 1 108 15,113 1,753
Congregate Care & Assisted Living Centers 100 11 869 36,824 3,280
Congregate Care & Assisted Living Centers 50 5 609 33,219 4,026
Medical Office Buildings <F3> 100 11 --- 47,790 5,015
Physician Group Practice Clinics <F4> 100 2 --- 27,112 2,823
Psychiatric Facility 77 1 108 3,919 561
--- ------ -------- -------
181 20,005 $718,747 $88,502
=== ====== ======== =======
<F1> Congregate care and assisted living centers are stated in units; all other facilities are stated in beds.
<F2> Includes partnership investments, and incorporates all partners' assets and construction commitments.
<F3> The Medical Office Buildings encompass 501,850 square feet.
<F4> The Physician Group Practice Clinics encompass 331,900 square feet.
</TABLE>
RELATIONSHIP WITH MAJOR OPERATORS
At December 31, 1994, the Company owned an interest in 170 properties
which are leased pursuant to long term leases to 33 Lessees. Listed below are
the Company's major Lessees and the percentage of total current revenue from
these Lessees.
<TABLE>
<CAPTION>
Percentage
of Total
Lessee Facilities Revenue Revenue
------ ---------- ------- -----------
<S> <C> <C> <C>
Hillhaven 63 $22,747,000 23%
Beverly 26 $11,393,000 12%
Tenet 3 $ 8,089,000 8%
Healthsouth 2 $ 5,101,000 5%
Columbia 4 $ 3,692,000 4%
Horizon 5 $ 3,654,000 4%
HealthTrust 8 $ 3,389,000 3%
</TABLE>
All Properties leased by the Company to Hillhaven are unconditionally
guaranteed by Tenet, which is a major stockholder of Hillhaven. Based upon
public reports, Hillhaven's net operating revenue and net income for the six
months ended November 30, 1994 were approximately $775 million and $27 million,
respectively; and Hillhaven's total assets and stockholders' equity as of
November 30, 1994 were approximately $1.2 billion and $393 million,
respectively. For the year ended May 31, 1994, Hillhaven reported net
operating revenue and net income of approximately $1.4 billion and $57 million,
respectively. On January 26 and March 7, 1995, Horizon announced bids to
acquire Hillhaven for stock in a proposed merger. The Company leases five
Properties to Horizon and rental income from these Properties accounted for 4%,
4% and 3% of the Company's total revenues for the years ended December 31,
1994, 1993 and 1992, respectively. Based upon public reports, Horizon's total
operating revenues and net income for the six months ended November 30, 1994
were approximately $292.9 million and $13.7 million, respectively; and
Horizon's total assets and stockholders' equity as of November 30, 1994 were
approximately $614.2 million and $375.6 million, respectively. For the year
ended May 31, 1994, Horizon reported total operating revenues and net income
of $375 million and $16.6 million, respectively. On March 21, 1995 Hillhaven
said that a special committee of its board of directors had established a
process to evaluate all alternatives to Hillhaven including whether any
proposal to acquire Hillhaven is in the best interests of Hillhaven and its
shareholders. On March 21, 1995, Horizon's bid to acquire Hillhaven expired.
The Company cannot predict whether Hillhaven will be acquired by any company
or remain independent.
Five Properties (two acute care hospitals, two rehabilitation hospitals
and one psychiatric facility) were leased to subsidiaries of Tenet at December
31, 1993. In January 1994, subsidiaries of Tenet assigned the leases for the
two rehabilitation hospitals to Healthsouth. Tenet remains financially
responsible to the Company under its unconditional guarantee on the five
Properties. Tenet is one of the nation's largest health care services
companies, providing a broad range of services through the ownership and
management of health care facilities. Based upon public reports, Tenet's net
operating revenue and net income for the six months ended November 30, 1994
were approximately $1.3 billion and $110 million, respectively; and Tenet's
total assets and stockholders' equity as of November 30, 1994 were
approximately $3.3 billion and $1.4 billion, respectively. For the year ended
May 31, 1994, Tenet reported net operating revenue and net loss of
approximately $3.0 billion and $425 million, respectively. The following
discussion is derived from public reports distributed by Tenet: Tenet has been
involved in certain significant legal proceedings and investigations related
principally to its psychiatric business and has settled the most significant
of these matters. Tenet expects that additional lawsuits alleging malpractice
at its psychiatric facilities and the existence of a corporate-wide conspiracy
to commit wrongful acts may be filed from time to time. Tenet believes that
its remaining reserves established for these matters are adequate to cover its
ultimate liability. In the event such reserves are not adequate, the adverse
determination of these matters could have a material adverse effect on Tenet's
financial condition and results of operation. On March 1, 1995, National
Medical Enterprises, Inc. (as Tenet was formerly known) and American Medical
Holdings, Inc. jointly announced a definitive merger, at which time the
combined company owned 85 general hospitals in the U.S. and overseas. Tenet
is the second largest investor-owned hospital management company.
The Company leases 25 long term care facilities and one congregate care
living center to subsidiaries of Beverly, which is the largest provider of long
term care in the United States. Based upon public reports, Beverly's net
operating revenue and net income for the nine months ended September 30, 1994
were approximately $2.2 billion and $57.6 million, respectively; Beverly's
total assets and shareholders' equity as of September 30, 1994 were
approximately $2.1 billion and $811 million, respectively. For the year ended
December 31, 1993, Beverly reported net operating revenue and net income of
approximately $2.9 billion and $58 million, respectively.
The Company holds two first mortgage loans totaling $27.1 million to First
Texas Medical, Inc. and LMH Investment Company (the "Mortgage Loans"). The
Mortgage Loans provide for escalating interest rates and are secured by the 92
bed HCA Denton Community Hospital and a related medical office building in
Denton, Texas, and the 118 bed HCA Lewisville Memorial Hospital of Lewisville,
Texas. Both hospitals are managed by and leased to HCA Health Services of
Texas, Inc., a wholly-owned subsidiary of Columbia, pursuant to a long-term
lease with a primary term of 10 years. The Mortgage Loans have a nine year
term with payments based on an 11 year amortization schedule. Based upon
public reports, Columbia's net operating revenue and net income for the nine
months ended September 30, 1994 were approximately $8.2 billion and $403
million, respectively; and Columbia's total assets and shareholders' equity as
of September 30, 1994 were approximately $11.8 billion and $4.8 billion,
respectively. For the year ended December 31, 1993, Columbia reported net
operating revenue and net income of approximately $10.2 billion and $507
million, respectively.
The Company has provided or has committed to provide approximately $41.0
million in acquisition or construction funds for seven medical office buildings
which are leased or are to be leased by HealthTrust. At December 31, 1994, six
of the seven facilities were completed and paying rent, and the Company had
outstanding commitments for further expenditures on tenant improvements and
completion of the seventh building of $8.2 million. HealthTrust, based upon
public reports, had net operating revenue and net income of approximately $970
million and $50 million, respectively, for the three months ended November 30,
1994; and HealthTrust's total assets and shareholders' equity as of November
30, 1994 were approximately $4.0 billion and $1.1 billion, respectively. For
the year ended August 31, 1994, HealthTrust reported net operating revenue and
net income of $3.0 billion and $173 million, respectively. On October 4, 1994,
Columbia and HealthTrust announced an agreement for the merger of the two
companies in 1995. On February 28, 1995, both companies announced that they
would merge, as soon as FTC approval was received.
Hillhaven, Horizon, Tenet, Healthsouth, Beverly, Columbia and HealthTrust
are subject to the informational filing requirements of the Securities Exchange
Act of 1934, as amended, and accordingly file financial statements on Form 10-K
and Form 10-Q with the Securities and Exchange Commission and the New York
Stock Exchange. For additional financial data with respect to Tenet see
Appendix I attached hereto. All of the financial and other information
presented herein with respect to such companies was obtained from such public
reports.
THE LEASES
The Leases provide for initial base rental rates which generally range
from 8.77% to 15.03% per annum of the acquisition price of the related
Property. Rental rates vary by Lease, taking into consideration many factors,
including, but not limited to, credit of the Lessee, operating performance of
the facility, interest rates at the commencement of the Lease and location,
type and physical condition of the facility. Most of the Leases provide for
additional rents which are based upon a percentage of increased revenue over
specific base period revenue of the leased Properties. The remainder of the
Leases have annual fixed rent increases or rent increases based on inflation
indices. Additional rents and interest (see Note 2 to the Consolidated
Financial Statements in this Annual Report on Form 10-K) received for the years
ended December 31, 1994, 1993 and 1992 were $16.7 million, $14.7 million and
$12.5 million, respectively. The primary or fixed terms of the Leases
generally range from 10 to 15 years, and generally have one or more five-year
renewal options. The average remaining base lease term on the Company's
portfolio of properties is approximately seven years.
Most Leases contain security provisions through guarantees, as well as
grouped lease renewals, grouped purchase options, and cross default and cross
collateralization features that may be employed when multiple facilities are
leased to individual operators. Obligations under the Leases, in most cases,
have corporate guarantees, and 81 leases are backed by irrevocable letters of
credit from various financial institutions which cover from six to eighteen
months of Lease payments. The Lessees are required to renew such letters of
credit during the Lease term in amounts which may change based upon the passage
of time, improved operating cash flows, or improved credit ratings. Currently,
the Company has approximately $32 million in irrevocable standby letters of
credit from commercial banks. The letters of credit relating to an individual
Lessee may be drawn upon, to the extent of damages incurred by the Company, in
the event of a Lessee's default under terms of a Lease. Amounts available
under letters of credit change from time to time; such changes may be material.
The Company believes that the security features discussed above provide
it with significant protection for its investment portfolio. The Company is
currently receiving rents in a timely manner from all Lessees as provided under
the terms of the Leases. Based upon information provided to the Company by
Lessees, certain facilities that are current with respect to monthly rents are
presently underperforming financially. Individual facilities may underperform
as a result of inadequate Medicaid reimbursement, low occupancy, less than
optimal patient mix, excessive operating costs, other operational issues or
capital needs. Management believes that, even if these facilities remain at
current levels of performance, the lease provisions contain sufficient security
to assure that material rental obligations will continue to be met for the
remainder of the Lease terms. In the future it is expected that the Company
will have certain properties with respect to which the Lessees may choose not
to renew their Leases at existing rental rates (see Table below).
Lessees generally have the right of first refusal to purchase the
Properties during the Lease terms. Most Leases provide one or more five-year
renewal options at existing Lease rates and continuing additional rent
formulas; certain Leases provide for Lease renewals at fair market value. The
Lessees also have options to purchase the Properties, generally for fair market
value, and generally at the expiration of the base Lease term and/or any
renewal term under the Lease. Many of the Company's Leases have provisions for
grouped renewal options and grouped purchase options. If options are
exercised, such provisions require Lessees to purchase or renew several
facilities together, precluding the possibility of Lessees purchasing or
renewing only those facilities with the best financial outcomes. Twenty-five
properties purchased in 1985 and 1986 are not subject to purchase options until
2010 or later. An additional 11 properties do not have any purchase options.
A table recapping lease expirations, mortgage maturities, properties
subject to purchase options and financial underperformance follows:
<TABLE>
<CAPTION>
Current Annualized Revenues of
-----------------------------------------------------
Properties Subject to Possible Revenue Loss
Lease Expirations Properties Subject to at Underperforming
Year and Mortgage Maturities <F1> Purchase Options <F2> Properties <F3>
----- ----------------------- ----------------------- ------------------
% Amount
----- -----------
<S> <C> <C> <C> <C>
1995 $ 661,000 $ 228,000 0% $ ---
1996 5,124,000 4,536,000 1 500,000
1997 3,510,000 2,306,000 1 1,200,000
1998 16,220,000 8,687,000 2 1,800,000
1999 27,536,000 18,294,000 2 1,900,000
Thereafter 50,139,000 54,914,000 1 1,200,000
------------ ----------- --- ----------
Total $103,190,000 $88,965,000 7% $6,600,000
============ =========== === ==========
<F1> This column includes the revenue impact by year and the total annualized
rental and interest income associated with the Properties subject to
Lessees' renewal options and/or purchase options and mortgage maturities.
<F2> This column includes the revenue impact by year and the total annualized
rental and interest income associated with Properties subject to purchase
options. If a purchase option is exercisable at more than one date, the
convention used in the table is to show the revenue subject to the
purchase option at the earliest possible purchase date. The total for
this column is a component of the total current annualized revenue of
properties subject to lease expirations and mortgage maturities
($103,190,000).
<F3> Based on current market conditions, management estimates that there could
be a revenue loss upon the expiration of the current term of the Leases
in the percentages and amounts shown in the table for underperforming
Properties. The percentages are computed by taking the possible revenue
loss as a percentage of 1994 Total Revenue.
</TABLE>
There are numerous factors that could have an impact on Lease renewals or
purchase options, including the financial strength of the Lessee, expected
facility operating performance, the relative level of interest rates and
individual lessee financing options. Based upon management expectations of the
Company's continued growth, the facilities subject to renewal and/or purchase
options and mortgage maturities and any possible rent loss therefrom should
represent a smaller percentage of revenue in the year of renewal or purchase.
Total revenue of the Company has grown at a compound annual growth rate of 9.6%
in the past five years. No attempt has been made to show the possibility of
expected gains, if any, on Properties which might offset a portion of the
possible revenue loss shown above.
Each Lease is a "net" lease and the Lessee is responsible thereunder, in
addition to the minimum and additional rents, for all additional charges,
including charges related to non-payment or late payment thereof, all taxes and
assessments, all governmental charges with respect to the leased property and
all utility and other charges incurred with the operation of the leased
property.
Each Lessee is required, at its expense, to maintain its leased property
in good order and repair, except for ordinary wear and tear. The Company and
its affiliates are not required to repair, rebuild or maintain the Properties.
Each Lessee, at its expense, may make non-capital additions, modifications
or improvements to its leased property. All such alterations, replacements and
improvements must comply with the terms and provisions of the Lease, and become
the property of the Company or its affiliates upon termination of the Lease.
Each Lease requires the Lessee to maintain adequate insurance on the leased
property, naming the Company or its affiliates and any mortgagees as additional
insureds. In certain circumstances, the Lessee may self-insure pursuant to a
prudent program of self-insurance if the Lessee or the guarantor of its Lease
obligations has substantial net worth. In addition, each Lease requires the
Lessee to indemnify the Company or its affiliates against certain liabilities
in connection with the leased property.
DEVELOPMENT PROGRAM
The Company has a number of "build-to-suit" type agreements that by their
terms require conversion to lease agreements upon the completion of the
development of the facilities. During the construction of the projects, funds
are advanced pursuant to draw requests made by the developers in accordance
with the terms and conditions of the applicable development agreements which
require site visits prior to each advancement of funds.
Since 1987 the Company has committed to the development of 23 facilities,
including five rehabilitation hospitals, seven congregate care and assisted
living centers, four long term care facilities and seven medical office
buildings representing an aggregate investment of $158.7 million. As of
December 31, 1994, 19 facilities at a total cost of $131.1 million have been
completed. Simultaneously with the commencement of each of these development
programs, the Company enters into a lease agreement with the
developer/operator. The base rent under the lease is established at a rate
equivalent to a specified number of basis points over the ten-year United
States Treasury securities' yield at the conclusion of development.
The development program generally includes a variety of additional forms
of security and collateral beyond those provided by the Leases. During the
development period, the Company generally requires additional security and
collateral in the form of more than one of the following: (a) irrevocable
letters of credit from financial institutions; (b) payment and performance
completion bonds; or (c) completion guarantees by either one or a combination
of the developer's parent entity, other affiliates or one or more of the
individual principals who control the developer. In addition, prior to any
advance of funds by the Company under the development agreement, the developer
must provide (a) satisfactory evidence in the form of an endorsement to the
Company's title insurance policy that no intervening liens have been placed on
the property since the date of the Company's previous advance; (b) a
certificate executed by the project architect that indicates that all
construction work completed on the project conforms with the requirements of
the applicable plans and specifications; (c) a certificate executed by the
general contractor that all work requested for reimbursement has been
completed; and (d) satisfactory evidence that the funds remaining unadvanced
are sufficient for the payment of all costs necessary for the completion of the
project in accordance with the terms and provisions of the agreement. As a
further safeguard during the development period, the Company generally will
retain 10% of construction funds incurred until it has received satisfactory
evidence that the project has been fully completed in accordance with the
applicable plans and specifications. The Company also monitors the progress
of the development of each project and the accuracy of the developer's draw
requests by having its own in-house inspector perform regular on-site
inspections of the project prior to the release of any requested funds.
FUTURE ACQUISITIONS
The Company anticipates acquiring additional health care related
facilities and leasing them to health care operators or investing in mortgages
secured by health care facilities.
TAXATION OF THE COMPANY
Management of the Company believes that the Company has operated in such
a manner as to qualify for taxation as a "real estate investment trust" under
Sections 856 to 860 of the Internal Revenue Code of 1986, as amended (the
"Code"), commencing with its taxable year ended December 31, 1985, and the
Company intends to continue to operate in such a manner. No assurance can be
given that it has operated or will be able to continue to operate in a manner
so as to qualify or to remain so qualified. This summary is qualified in its
entirety by the applicable Code provisions, rules and regulations promulgated
thereunder, and administrative and judicial interpretation thereof.
If the Company qualifies for taxation as a real estate investment trust,
it will generally not be subject to Federal corporate income taxes on its net
income that is currently distributed to stockholders. This treatment
substantially eliminates the "double taxation" (i.e. at the corporate and
stockholder levels) that generally results from investment in a corporation.
However, the Company will continue to be subject to federal income tax under
certain circumstances.
The Code defines a real estate investment trust as a corporation, trust
or association (i) which is managed by one or more trustees or directors; (ii)
the beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest; (iii) which would be taxable,
but for Sections 856 through 860 of the Code, as a domestic corporation; (iv)
which is neither a financial institution nor an insurance company subject to
certain provisions of the Code; (v) the beneficial ownership of which is held
by 100 or more persons; (vi) during the last half of each taxable year not more
than 50% in value of the outstanding stock of which is owned, actually or
constructively, by five or fewer individuals; and (vii) which meets certain
other tests, described below, regarding the amount of its distributions and the
nature of its income and assets. The Code provides that conditions (i) to
(iv), inclusive, must be met during the entire taxable year and that condition
(v) must be met during at least 335 days of a taxable year of 12 months, or
during a proportionate part of a taxable year of less than 12 months.
There are three gross income requirements. First, at least 75% of the
Company's gross income (excluding gross income from Prohibited Transactions as
defined below) for each taxable year must be derived directly or indirectly
from investments relating to real property or mortgages on real property or
from certain types of temporary investment income. Second, at least 95% of the
Company's gross income (excluding gross income from Prohibited Transactions)
for each taxable year must be derived from income that qualifies under the 75%
test and all other dividends, interest and gain from the sale or other
disposition of stock or securities. Third, short-term gains from the sale or
other disposition of stock or securities, gains from Prohibited Transactions
and gains on the sale or other disposition of real property held for less than
four years (apart from involuntary conversions and sales of foreclosure
property) must represent less than 30% of the Company's gross income for each
taxable year. A Prohibited Transaction is a sale or other disposition of
property (other than foreclosure property) held for sale to customers in the
ordinary course of business.
The Company, at the close of each quarter of its taxable year, must also
satisfy three tests relating to the nature of its assets. First, at least 75%
of the value of the Company's total assets must be represented by real estate
assets (including its allocable share of real estate assets held by
partnerships in which the Company owns an interest and including stock or debt
instruments held for not more than one year, purchased with the proceeds of a
stock offering or long-term (more than five years) public debt offering of the
Company), cash, cash items and government securities. Second, not more than
25% of the Company's total assets may be represented by securities other than
those in the 75% asset class. Third, of the investments included in the 25%
asset class, the value of any one issuer's securities owned by the Company may
not exceed 5% of the value of the Company's total assets and the Company may
not own more than 10% of any one issuer's outstanding voting securities.
The Company, in order to qualify as a real estate investment trust, is
required to distribute dividends (other than capital gain dividends) to its
stockholders in an amount at least equal to (A) the sum of (i) 95% of the
Company's "real estate investment trust taxable income" (computed without
regard to the dividends paid deduction and the Company's net capital gain) and
(ii) 95% of the net income, if any (after tax), from foreclosure property,
minus (B) the sum of certain items of non-cash income. Such distributions must
be paid in the taxable year to which they relate, or in the following taxable
year if declared before the Company timely files its tax return for such year,
if paid on or before the first regular dividend payment date after such
declaration and if the Company so elects and specifies the dollar amount in its
tax return. To the extent that the Company does not distribute all of its net
long-term capital gain or distributes at least 95%, but less than 100%, of its
"real estate investment trust taxable income," as adjusted, it will be subject
to tax thereon at regular corporate tax rates. Furthermore, if the Company
should fail to distribute during each calendar year at least the sum of (i) 85%
of its real estate investment trust ordinary income for such year, (ii) 95% of
its real estate investment capital gain income for such year, and (iii) any
undistributed taxable income from prior periods, the Company would be subject
to a 4% excise tax on the excess of such required distributions over the
amounts actually distributed.
If the Company fails to qualify for taxation as a real estate investment
trust in any taxable year, and certain relief provisions do not apply, the
Company will be subject to tax (including any applicable alternative minimum
tax) on its taxable income at regular corporate rates. Distributions to
stockholders in any year in which the Company fails to qualify will not be
deductible by the Company nor will they be required to be made. Unless entitled
to relief under specific statutory provisions, the Company will also be
disqualified from taxation as a real estate investment trust for the four
taxable years following the year during which qualification was lost. It is
not possible to state whether in all circumstances the Company would be
entitled to the statutory relief. Failure to qualify for even one year could
substantially reduce distributions to stockholders and could result in the
Company's incurring substantial indebtedness (to the extent borrowings are
feasible) or liquidating substantial investments in order to pay the resulting
taxes.
Distributions made to the Company's stockholders out of current or
accumulated earnings and profits will be taken into account by them as ordinary
income. Such distributions will not be eligible for the dividends received
deductions for corporations as long as the Company qualifies as a real estate
investment trust. Distributions that are designated as capital gain dividends
will be taxed as long-term capital gains to the extent they do not exceed the
Company's actual net capital gain for the taxable year, although corporate
stockholders may be required to treat up to 20% of any such capital gain
dividend as ordinary income. Distributions in excess of current or accumulated
earnings and profits will not be taxable to a stockholder to the extent that
they do not exceed the adjusted basis of the stockholder's shares. To the
extent that such distributions exceed the adjusted basis of a stockholder's
shares they will be included in income as long-term or short-term capital gain
(as described below with respect to the sale or exchange of the shares)
assuming the shares are held as a capital asset in the hands of the
stockholder. Stockholders may not include in their individual income tax
returns any net operating losses or capital losses of the Company.
In general, any gain or loss upon a sale or exchange of shares by a
stockholder who has held such shares as a capital asset will be long-term or
short-term depending on whether the stock was held for more than one year;
provided however, any loss on the sale or exchange of shares that have been
held by such stockholder for six months or less will be treated as a long-term
capital loss to the extent of distributions from the Company required to be
treated by such stockholder as long-term capital gain.
The Company and its stockholders may be subject to state or local taxation
in various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of the Company
and its shareholders may not conform to the federal income tax consequences
discussed above.
GOVERNMENT REGULATION
The Company is indirectly affected by government regulation of the health
care industry in that the Company's additional rents are generally based on the
Lessees' gross revenues from operations. Aggressive efforts by health insurers
and governmental agencies to limit the cost of hospital services and to reduce
utilization of hospital and other health care facilities may reduce future
revenues or slow revenue growth from inpatient facilities and shift utilization
from inpatient to outpatient facilities.
In addition, contingent or percentage rent arrangements are subject to
federal and state laws and regulations governing illegal rebates and kickbacks
where the Company's co-investors are physicians or others in a position to
refer patients to the facilities. The goal of these laws and regulations is
to prohibit, through the imposition of criminal and civil penalties that may
include exclusion from reimbursement programs, payment arrangements that
include compensation for patient referrals. Although only limited interpretive
or enforcement guidance is available, the Company has structured its rent
arrangements in a manner which it believes complies with such laws and
regulations.
Health care facilities are also subject to a wide variety of federal,
state and local environmental and occupational health and safety laws and
regulations which affect facility operations.
Expansion, including the addition of new beds or services or acquisition
of medical equipment, and occasionally the contraction of health care
facilities, may be subject to state and local regulatory approval through
certificate of need ("CON") programs. States vary in their utilization of CON
controls.
Revenues of Lessees are generally derived from payments for patient care.
Such payments are received from the federal Medicare program, state Medicaid
programs, private insurance carriers, health care service plans, health
maintenance organizations, preferred provider arrangements, self-insured
employers and directly from patients. Medicare payments for psychiatric, long
term and rehabilitative care are based on allowable costs plus a return on
equity for proprietary facilities. Medicare payments to acute care hospitals
for inpatient services are made pursuant to the Prospective Payment System
("PPS") under which a hospital is paid a prospectively established rate based
on the category of the patient's diagnosis ("Diagnostic Related Groups" or
"DRG's"). In 1991, Medicare began to phase in over a period of years
reimbursement to hospitals for capital-related inpatient costs under PPS using
a federal rate rather than the cost-based reimbursement system previously used.
DRG rates are subject to adjustment on an annual basis as part of the federal
budget reconciliation process. For example, as a part of the Omnibus Budget
Reconciliation Act, the 1993 Congress provided for over $50 billion in cuts to
the Medicare program over the next five years, including approximately $23
billion in cuts in Medicare spending for hospitals.
Medicaid programs generally pay for acute, rehabilitative and psychiatric
care based on reasonable costs at fixed rates; long term care facilities are
generally reimbursed using fixed daily rates. Both Medicare and Medicaid
payments are generally below retail rates for Lessee-operated facilities.
Increasingly, states have experimented with the introduction of managed care
contracting techniques in the administration of Medicaid programs. Such
mechanisms could have the impact of reducing utilization of or reimbursement
to Lessee-operated facilities.
Third party payors in various states and areas base payments on costs,
retail rates or, increasingly, negotiated rates, including discounts from
normal charges, fixed daily rates and prepaid capitated rates.
LONG TERM CARE FACILITIES. Regulation of long term care facilities is
exercised primarily through the licensing of such facilities. Regulatory
authorities and licensing standards vary from state to state, and in some
instances from locality to locality. These standards are constantly reviewed
and revised. Agencies periodically inspect the facilities, at which time
deficiencies may be identified which must be corrected as a condition to
continued licensing or certification and participation in government
reimbursement programs. Depending on the nature of such deficiencies, remedies
can be routine or costly. Similarly, compliance with regulations which cover
a broad range of areas such as patients' rights, staff training, quality of
life and quality of resident care may increase facility start-up and operating
costs.
ACUTE CARE HOSPITALS. Acute care hospitals are subject to extensive
federal, state and local regulation. Acute care hospitals undergo periodic
inspections regarding standards of medical care, equipment and hygiene as a
condition of licensure. Various licenses and permits also are required for
purchasing and administering narcotics, operating laboratories and pharmacies
and the use of radioactive materials and certain equipment. Each of the
Company's facilities, the operation of which requires accreditation, is
accredited by the Joint Commission on Accreditation of Healthcare
Organizations. Such accreditation is generally required for continued
licensing and for participation in government sponsored provider programs.
Acute care hospitals must comply with requirements for various forms
of utilization review. In addition, under PPS, each state must have a
Professional Review Organization carry out federally mandated reviews of
Medicare patient admissions, treatment and discharges in acute care hospitals.
PSYCHIATRIC AND REHABILITATION HOSPITALS. Psychiatric and rehabilitation
hospitals are subject to extensive federal, state and local legislation,
regulation, inspection and licensure requirements similar to those of acute
care hospitals. For psychiatric hospitals, there are specific laws regulating
civil commitment of patients and disclosure of information. Many states have
adopted a "patient's bill of rights" which sets forth certain higher standards
for patient care that are designed to decrease restrictions and enhance dignity
in treatment. Insurance reimbursement for psychiatric treatment generally is
more limited than for general health care.
PHYSICIAN GROUP PRACTICE CLINICS. Physician group practice clinics are
subject to extensive federal, state and local legislation and regulation.
Every state imposes licensing requirements on individual physicians and on
facilities and services operated by physicians. In addition, federal and state
laws regulate health maintenance organizations and other managed care
organizations with which the physician groups may have contracts. Many states
require regulatory approval, including certificates of need, before
establishing certain types of physician-directed clinics, offering certain
services or making expenditures in excess of statutory thresholds for
healthcare equipment, facilities or programs. In connection with the expansion
of existing operations and the entry into new markets, physician clinics and
affiliated practice groups may become subject to compliance with additional
regulation.
HEALTH CARE REFORM. In recent years, an increasing number of legislative
initiatives have been introduced or proposed in Congress and in state
legislatures that would effect major changes in the health care system, either
nationally or at the state level. Among the proposals under consideration are
price controls on hospitals, insurance market reforms to increase the
availability of group health insurance to small businesses, requirements that
all businesses offer health insurance coverage to their employees and the
creation of a government health insurance plan or plans that would cover all
citizens.
In 1993, President Clinton introduced a comprehensive health care reform
bill. Key elements in the President's proposal and other competing health care
reform proposals included various insurance market reforms, the requirement
that businesses provide health insurance coverage for their employees,
reductions or lesser increases in future Medicare and Medicaid reimbursements
and more stringent government cost controls. None of these proposals have been
adopted.
There continue to be efforts at the federal level to introduce various
insurance market reforms, expanded fraud and abuse and anti-referral
legislation and further reductions in Medicare and Medicaid reimbursement. A
broad range of both similar and more comprehensive health care reform
initiatives is likely to be considered at the state level. The Company cannot
predict whether any of the above proposals or any other proposals will be
adopted, and if adopted, no assurance can be given that the implementation of
such reforms will not have an adverse effect on the ability of the Company's
Lessees to generate revenues and, thereby, on the Company's additional rents.
OBJECTIVES AND POLICIES
The Company is organized to invest in income-producing health care related
facilities. In evaluating potential investments, the Company considers such
factors as (1) the geographic area, type of property and demographic profile;
(2) the location, construction quality, condition and design of the property;
(3) the current and anticipated cash flow and its adequacy to meet operational
needs and lease obligations and to provide a competitive market return on
equity to the Company's investors; (4) the potential for capital appreciation,
if any; (5) the growth, tax and regulatory environment of the communities in
which the properties are located; (6) occupancy and demand for similar health
facilities in the same or nearby communities; (7) an adequate mix of private
and government sponsored patients; (8) potential alternative uses of the
facilities; and (9) prospects for liquidity through financing or refinancing.
There are no limitations on the percentage of the Company's total assets
that may be invested in any one property or partnership. The Investment
Committee of the Board of Directors may establish limitations as it deems
appropriate from time to time. No limits have been set on the number of
properties in which the Company will seek to invest, or on the concentration
of investments in any one facility or any one city or state. The Company
acquires its investments primarily for income.
Since its inception, the Company has issued four classes of securities
which are senior to the Common Stock, of which three classes are outstanding
at December 31, 1994. In 1986, the Company issued $60,000,000 of 9-1/2% Senior
Notes due December 1, 1996. In 1988, the Company issued $75,000,000 of 9-7/8%
Senior Notes due February 15, 1998. In April 1989, the Company authorized a
$75,000,000 Medium Term Note program (Series A MTN) in accordance with which
it has issued $55,000,000 of unsecured Medium Term Notes at coupon rates of
8.00% to 10.56% due 1999 - 2003. In September 1993, the Company authorized a
$75,000,000 Medium Term Note Program (Series B MTN), out of a $200,000,000
combined debt and equity shelf filed in August 1993. As of March 8, 1995 the
Company has issued $48,000,000 of Series B MTNs at coupon rates ranging from
6.10% to 9.10% due 1998-2015. In November 1993, the Company issued
$100,000,000 in 6% Convertible Subordinated Notes due 2000. Proceeds of these
Notes were utilized to redeem without penalty the $60,000,000 of 9 1/2% Senior
Notes due December 1, 1996, on which the Company had a call provision as of
December 1, 1993. On March 13, 1995, the Company used the net proceeds of the
offering of 1,725,000 shares of common stock (approximately $47,000,000) and
$27,000,000 principal amount of the Series B MTNs issued in February and March
1995 to redeem without penalty or premium the $75,000,000 of 9-7/8% Senior
Notes due February 15, 1998 on which the Company had a call provision as of
February 15, 1995. The Company may, in the future, issue debt securities which
will be senior to the Common Stock. The Company has no present plans to issue
senior equity securities, although the Board of Directors is authorized to
issue up to 50,000,000 shares of preferred stock. The Company has authority
to offer shares of its capital stock in exchange for investments which conform
to its standards and to repurchase or otherwise acquire its shares or other
securities, but does not presently intend to do so.
The Company may incur additional indebtedness when, in the opinion of its
management and Directors, it is advisable. For short-term purposes the Company
from time to time negotiates lines of credit, or arranges for other short-term
borrowings from banks or otherwise. The Company may arrange for long-term
borrowings through public offerings or from institutional investors. Under its
Bylaws, the Company is subject to various restrictions with respect to
borrowings.
In addition, the Company may incur additional mortgage indebtedness on
real estate which it has acquired through purchase, foreclosure or otherwise.
Where leverage is present on terms deemed favorable, the Company invests in
properties subject to existing loans, or secured by mortgages, deeds of trust
or similar liens on the properties. The Company also may obtain non-recourse
or other mortgage financing on unleveraged properties in which it has invested
or may refinance properties acquired on a leveraged basis.
In July, 1990, the Company adopted a Rights Agreement whereby Company
stockholders received, for each share of Common Stock owned, one right to
purchase shares of Common Stock of the Company, or securities of an acquiring
entity, at one-half market value (the "Rights"). The Rights will be
exercisable only if and when certain circumstances occur, including the
acquisition by a person or group of 15% or more of the Company's outstanding
common shares, or the making of a tender offer for 30% or more of the Company's
common shares. The Rights are intended to protect stockholders of the Company
from takeover tactics that could deprive them of the full value of their
shares.
The Company will not, without the prior approval of a majority of
Directors, acquire from or sell to any Director, officer or employee of the
Company, or any affiliate thereof, as the case may be, any of the assets or
other property of the Company.
The Company provides to its stockholders annual reports containing audited
financial statements and quarterly reports containing unaudited information.
The policies set forth herein have been established by the Board of
Directors of the Company and may be changed without stockholder approval.
PROHIBITED INVESTMENTS AND ACTIVITIES
The Bylaws of the Company impose certain prohibitions and restrictions on
various investment practices of the Company, including prohibitions against:
(i) investing in any junior mortgage loan unless (a) the capital
invested in such mortgage loan is adequately secured on the basis of the
equity of the borrower in the property underlying such investment and the
ability of the borrower to repay the mortgage loan, (b) the total amount
of the junior mortgage loan, taken together with all other indebtedness
secured by the underlying real property, does not exceed 100% of the value
of the security therefor, (c) the total amount of the junior mortgage
loan, taken together with all other indebtedness secured by the underlying
real property which is senior or pari passu with that held by the Company,
does not exceed 90% of the value of the security therefor, and (d) total
junior mortgage loans do not exceed 20% of the Company's total assets;
(ii) investing in commodities or commodity futures contracts or
effecting short sales of commodities or securities, except that investing
in interest rate futures or short sales, when used solely for hedging
purposes, is not prohibited;
(iii) investing more than 1% of the Company's total assets in contracts
for the sale of real estate unless such contracts are recordable in the
chain of title;
(iv) underwriting or distributing as agent securities issued by others;
(v) investing more than 10% of the Company's assets in unimproved real
property;
(vi) engaging in trading, as compared with investment activities;
(vii) allowing aggregate borrowings of the Company to exceed 100% of
the net assets of the Company, unless the Board of Directors determines
that a higher level of borrowing is appropriate and in the interest of the
Company except that no such higher level of borrowing shall be made which,
if secured, exceeds 300% of net assets;
(viii) acquiring securities in any company holding investments or
engaging in activities prohibited by the Company's Bylaws, and
(ix) any activity that would disqualify the Company as a real estate
investment trust under the provisions of the Internal Revenue Code.
Item 2. PROPERTIES
See Item 1. for details.
Item 3. LEGAL PROCEEDINGS
During 1994, the Company was not a party to any material legal
proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is listed on the New York Stock Exchange. Set
forth below for the fiscal quarters indicated are the reported high and low
sales prices of the Company's Common Stock on the New York Stock Exchange
restated for the two for one stock split as of May 20, 1992.
<TABLE>
<CAPTION>
1994 1993 1992
High Low High Low High Low
------------------ ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $32 $27 1/4 $32 $24 $25 1/4 20 3/4
Second Quarter 32 5/8 29 1/2 32 1/4 27 1/4 24 1/4 22
Third Quarter 31 1/4 27 7/8 31 5/8 28 1/4 27 1/4 23
Fourth Quarter 30 7/8 26 1/4 33 5/8 25 27 3/8 22 1/2
</TABLE>
As of March 17, 1995 there were approximately 1,820 stockholders of
record and in excess of 32,500 beneficial stockholders of the Company's Common
Stock.
It has been the Company's policy to declare quarterly dividends to the
holders of its shares of Common Stock so as to comply with applicable sections
of the Internal Revenue Code governing real estate investment trusts. The cash
dividends per share paid by the Company are set forth below:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
First Quarter $ .4800 $ .4500 $ .4200
Second Quarter .4900 .4575 .4275
Third Quarter .5000 .4650 .4350
Fourth Quarter .5100 .4725 .4425
------- ------- -------
$1.9800 $1.8450 $1.7250
======= ======= =======
</TABLE>
Item 6. SELECTED FINANCIAL DATA
Set forth below is selected financial data with respect to the Company
for the years ended December 31, 1994, 1993, 1992, 1991, and 1990.
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
----------------------------------------------------------------
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Total Revenue $ 98,996 $ 92,549 $ 83,727 $ 79,417 $ 72,046
Net Income 49,977 44,087 35,715 26,451 23,174
Funds From Operations 66,966 61,427 53,580 45,075 38,702
Dividends Paid 52,831 49,030 44,136 37,299 33,180
Total Assets 573,826 549,638 509,150 458,579 476,469
Debt Obligations 271,463 245,291 205,760 212,431 222,909
Stockholders' Equity 269,403 269,873 271,375 211,274 219,921
Net Income Per Share 1.87 1.66 1.38 1.15 1.03
Dividends Paid Per Share 1.9800 1.8450 1.7250 1.6175 1.5175
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994 VS. YEAR ENDED DECEMBER 31, 1993
Funds from Operations totaled $66,966,000 for the year ended December 31,
1994, an increase of 9.0% or $5,539,000 over the $61,427,000 for the prior
year. Net Income for the year ended December 31, 1994 was $49,977,000, or
$1.87 per share, on revenues of $98,996,000, compared to net income of
$44,087,000, or $1.66 per share, on revenues of $92,549,000 for the prior year.
These increases were primarily attributable to higher base rents and from
higher levels of additional rental and interest income. Additionally, both the
years ended December 31, 1994 and 1993 were favorably influenced by non-
recurring income items totalling $1,000,000 and $2,000,000, respectively.
The increase in base rents of $4,422,000 to $64,811,000 was based on rents
received in 1994 from newly acquired facilities and from a full year's rents
on 1993 acquisitions.
Additional rental and interest income increased by $2,009,000 over the
prior year to $16,707,000, from across-the-board increases at most of the
facilities that are eligible to pay such rents and interest.
Interest expense increased by $405,000 to $20,133,000 stemming primarily
from higher long term borrowings. In November 1993, the Company issued
$100,000,000 of 6% Convertible Subordinated Notes. A portion of that offering
was utilized early in December 1993 to redeem, without penalty, the $60,000,000
of 9-1/2% Senior Notes that were due in 1996. The remaining $40,000,000
supported the Company's acquisitions and construction projects in 1994.
YEAR ENDED DECEMBER 31, 1993 VS. YEAR ENDED DECEMBER 31, 1992
Funds from Operations totaled $61,427,000 for the year ended December 31,
1993, an increase of 14.6% or $7,847,000 over the $53,580,000 for the prior
year. This increase was attributable to higher base and additional rental and
interest income on the Company's investment portfolio, and to non-recurring
income of approximately $2,000,000 but, offset in part by increases in
administrative expenses.
Net Income for the year ended December 31, 1993 was $44,087,000, or $1.66
per share, on revenues of $92,549,000, compared to net income of $35,715,000,
or $1.38 per share, on revenues of $83,727,000 for the prior year. These
increases parallel the changes noted above and were augmented by depreciation
and non-cash charges that are $200,000 lower than in the prior year.
The increase in base rental income of $2,063,000 to $60,389,000 was the
result of rents received in 1993 from newly completed facilities that were
under construction in 1992, and from a full year's rents on 1992 acquisitions.
Additional rental and interest income increased by $2,187,000 to
$14,698,000 for 1993. Additional rental and interest income is a function of
increases in facility revenue over specified base year revenue, increases based
on inflation indices and/or fixed increases in rent and interest. The majority
of the Company's investments, other than new facilities, contributed to this
increase.
Interest and Other Income increased by $4,265,000 to $15,188,000.
Approximately half of this increase resulted from mortgage loans acquired in
1992. The balance of the increase came from distributions from a partnership
interest written off in 1989, and the receipt of a portion of the proceeds from
a Lessee's assignment of its leasehold interest.
The decrease of $52,000 to $19,728,000 in Interest Expense is due to
higher capitalized interest on projects that were under construction in 1993
offset by interest on the $100,000,000 Convertible Subordinated Notes, the
proceeds of which were used in part to pay down the $60,000,000 Senior Notes
due 1996 during December 1993.
During the second half of 1993, the Company completed the construction of
four medical office buildings and two long term care facilities. In the last
two months of 1993, the Company purchased an existing loan on an acute care
hospital owned and operated by OrNda, an existing lease on a medical office
building leased to a Columbia subsidiary and an assisted living facility.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1994, the Company's portfolio of Properties, consisting
of investments in 181 medical facilities located in 32 states, was comprised
of 139 long term care facilities, six acute care hospitals, six rehabilitation
hospitals, one psychiatric facility, 16 congregate care and assisted living
centers, 11 medical office buildings and two physician group practice clinics.
During 1994, the Company expended a net amount of $61,383,000 in investing
activities, which included investments in 10 new health care facilities.
The Company believes it has a strong financial position with approximately
$269,403,000 in stockholders' equity as of December 31, 1994, a total debt-to-
equity ratio of approximately 1.01:1 and committed and unused bank lines of
credit aggregating $88,800,000.
The Company has financed its acquisitions through the sale of Common
Stock, the issuance of long-term debt, the assumption of mortgage notes
payable, the use of short-term bank credit lines and through internally
generated cash flows. In November 1993, the Company issued $100 million 6%
Subordinated Convertible Notes due 2000. With these proceeds, the Company
redeemed $60,000,000 9-1/2% Senior Notes due 1996 without penalty. This
financing enabled the Company to significantly reduce its average borrowing
rates. Between November 18, 1994 and March 8, 1995, the Company utilized its
Series B Medium Term Note Program to issue $42,000,000 in notes, bringing the
total issued under such program to $48,000,000 and under all MTN programs to
$103,000,000. Of the amounts raised through the MTN program, $27,000,000 was
raised between February 1, 1995 and March 8, 1995. Such amounts in addition
to approximately $47,000,000 raised from the sale of 1,725,000 shares of common
stock on February 8, 1995 were utilized to redeem without penalty the Company's
$75,000,000 9-7/8% Senior Notes due 1998 on which the Company had a call
without penalty or premium as of February 15, 1995. On February 28, 1995, the
maturity of the Company's $100,000,000 revolving line of credit with a group
of seven banks was extended to March 31, 1998.
As of December 31, 1994, the Company had commitments to purchase and
construct health care facilities totaling $48,000,000 which are expected to be
funded during 1995 and 1996. Facilities under construction are generally
financed by means of short-term borrowings under the Company's existing bank
lines. In the future, the Company may use its MTN program to finance a portion
of the construction. At the completion of construction and commencement of the
lease, the bank lines are refinanced with new long term debt or equity
offerings.
The Company currently has approximately $32,000,000 in irrevocable letters
of credit from commercial banks to back the obligations of many of its Lessees'
Lease and borrowers' loan obligations. The Company may draw upon the letters
of credit if there are any defaults under the Leases and/or loans. Amounts
available under letters of credit change from time to time; such changes may
be material.
The Company has unconditional guarantees from Tenet in respect of Lease
obligations of subsidiaries of Tenet (three facilities), subsidiaries of
Healthsouth (two facilities) and subsidiaries of Hillhaven (63 facilities),
which are discussed in Note (3) to the consolidated financial statements.
The Company paid a dividend of $0.52 per share on February 20, 1995 to
stockholders of record on January 23, 1995. Dividends paid or payable as a
percentage of funds from operations were 79%, 80% and 82% for the years ended
December 31, 1994, 1993 and 1992, respectively. Since commencing business in
1985, the Company has paid dividends equal to approximately 82% of funds from
operations.
The impact of recent low rates of inflation has not been significant to
the Company's operations, except for the positive effects that low inflation
has had on reducing the Company's interest cost. Inflation, inflationary
expectations and their effects on interest rates may affect the Company in the
future by changing the underlying value of the Company's real estate or by
affecting the Company's costs of financing its operations. The effects could
be either positive or negative depending on the circumstances at the time.
Management believes that the Company's liquidity and sources of capital
are adequate to finance its operations as well as its future investments in
additional facilities during the remainder of 1995.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's Consolidated Balance Sheets as of December 31, 1994 and 1993
and its Consolidated Statements of Income, Stockholders' Equity, and Cash Flows
for the years ended December 31, 1994, 1993 and 1992, together with the report
of Arthur Andersen LLP, independent public accountants, are included
elsewhere herein. Reference is made to the "Index to Consolidated Financial
Statements".
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company were as follows on March 20, 1995:
<TABLE>
<CAPTION>
Name Age Position
--------------------------- ----- -------------------------------------------------
<S> <C> <C>
Kenneth B. Roath 59 Chairman, President and Chief Executive Officer
James G. Reynolds 43 Executive Vice President and Chief Financial Officer
Devasis Ghose 41 Senior Vice President - Finance and Treasurer
Edward J. Henning 42 Senior Vice President, General Counsel and Corporate Secretary
Stephen R. Maulbetsch 38 Senior Vice President - Property and Acquisitions Analysis
</TABLE>
There is hereby incorporated by reference the information appearing under
the captions "Board of Directors and Officers" and "Compliance with Section
16(a) of the Securities Exchange Act of 1934" in the Registrant's definitive
proxy statement dated March 17, 1995 relating to its Annual Meeting of
Stockholders to be held on April 20, 1995.
Item 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information under the
caption "Executive Compensation" in the Registrant's definitive proxy statement
dated March 17, 1995 relating to its Annual Meeting of Stockholders to be held
on April 20, 1995.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There is hereby incorporated by reference the information under the
captions "Principal Stockholders" and "Board of Directors and Officers" in the
Registrant's definitive proxy statement dated March 17, 1995 relating to its
Annual Meeting of Stockholders to be held on April 20, 1995.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information under the
caption "Certain Transactions" in the Registrant's definitive proxy statement
dated March 17, 1995 relating to its Annual Meeting of Stockholders to be held
on April 20, 1995.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
a) Financial Statements:
1) Report of Independent Public Accountants
2) Financial Statements
Consolidated Balance Sheets - December 31, 1994 and 1993
Consolidated Statements of Income - for the years ended December
31, 1994, 1993 and 1992
Consolidated Statements of Stockholders' Equity - for the years
ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows - for the years ended
December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
Note - All schedules have been omitted because the required
information is presented in the financial statements and the
related notes or because the schedules are not applicable.
b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the fourth
quarter of 1994.
c) Exhibits
1.1 Amendment No. 1 to the Distribution Agreement dated September
9, 1993 to the Company's Series B Medium-Term Notes.
3.(i) Articles of Amendment and Restatement of the Company.
3.(ii) Amended Bylaws of the Company. 1/
4.3 Indenture dated as of April 1, 1989 between the Company and
The Bank of New York for Debt Securities. 2/
4.4 Form of Fixed Rate Note. 2/
4.5 Form of Floating Rate Note. 2/
10.1 Amendment No. 1, dated as of May 30, 1985, to Partnership
Agreement of Health Care Property Partners, a California
general partnership ("HCPP"), the general partners of which
consist of the Company and certain affiliates of Tenet
Healthcare Corporation ("Tenet"). 3/
10.9 Corporate Guaranty of Obligations of Subsidiaries Pursuant to
Leases, Percentage Rent Agreement and Contract of Acquisition,
dated as of May 30, 1985, from Tenet in favor of HCPP. 3/
10.10 Deferred Compensation Plan of the Company. 3/
10.27 Employment Agreement dated April 28, 1988 between the Company
and Kenneth B. Roath. 5/
10.28 Health Care Property Investors, Inc. Executive Retirement
Plan. 4/
10.29 Health Care Property Investors, Inc. Amended Stock Incentive
Plan, as amended. 8/
10.30 Health Care Property Investors, Inc. Directors Stock Incentive
Plan, as amended. 8/
10.32 Rights Agreement, dated as of July 5, 1990 between Health Care
Property Investors, Inc., and Manufacturers Hanover Trust
Company of California. 6/
10.34 First Amendment to Employment Agreement dated February 1, 1990
between the Company and Kenneth B. Roath. 6/
10.36 Retirement Plan for Outside Directors of Health Care Property
Investors, Inc. as of January 1, 1991. 7/
10.37 Revolving Credit Agreement dated as of March 31, 1994 among
Health Care Property Investors, certain banks and The Bank of
New York as agent. 9/
10.38 Letter from The Bank of New York and banks that are
signatories to Revolving Credit Agreement extending
commitment.
10.39 Amendment No. 1 to Health Care Property Investors, Inc.
Executive Retirement Plan.
21.1 List of Subsidiaries.
23.1 Consent of Independent Public Accountants.
1/ This exhibit is incorporated by reference to the exhibit
numbered 4.2 in the Company's Form S-3 Registration Statement
dated October 17, 1989.
2/ This exhibit is incorporated by reference to exhibit 4.1, 4.2
and 4.3 in the Company's Form S-3 Registration Statement dated
March 20, 1989.
3/ This exhibit is incorporated by reference to the corresponding
numbered exhibit in the Company's annual report on Form 10-K
for the year ended December 31, 1985.
4/ This exhibit is incorporated by reference to the corresponding
numbered exhibit in the Company's annual report on Form 10-K
for the year ended December 31, 1987.
5/ This exhibit is incorporated by reference to the corresponding
numbered exhibit in the Company's annual report on Form 10-K
for the year ended December 31, 1988.
6/ This exhibit is incorporated by reference to Appendix B of the
Company's Form 10-K for the year ended December 31, 1990.
7/ This exhibit is incorporated by reference to Appendix B of the
Company's Form 10-K for the year ended December 31, 1991.
8/ This exhibit is incorporated by reference to the corresponding
numbered exhibit in the Company's annual report on Form 10-K
for the year ended December 31, 1992.
9/ The exhibit is incorporated by reference to the corresponding
numbered exhibit in the Company's Form 8-K as of February 8,
1995.
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned registrant hereby undertakes as follows, which undertaking shall
be incorporated by reference into registrant's Registration Statement on Form
S-8 Nos. 33-28483 (filed May 11, 1989):
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 29, 1995
HEALTH CARE PROPERTY INVESTORS, INC.
(Registrant)
KENNETH B. ROATH
---------------------------------------------------
Kenneth B. Roath, Chairman of the Board of
Directors, President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date Signature and Title
---- -------------------
March 29, 1995 /s/ KENNETH B. ROATH
-------------------------------------------------
Kenneth B. Roath, Chairman of the Board of
Directors, President and Chief Executive Officer
(Principal Executive Officer)
March 29, 1995 /s/ JAMES G. REYNOLDS
-------------------------------------------------
James G. Reynolds, Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
March 29, 1995 /s/ DEVASIS GHOSE
-------------------------------------------------
Devasis Ghose, Senior Vice President- Finance
and Treasurer (Principal Accounting Officer)
March 29, 1995 /s/ PAUL V. COLONY
-------------------------------------------------
Paul V. Colony, Director
March 29, 1995 /s/ ROBERT R. FANNING, JR.
-------------------------------------------------
Robert R. Fanning, Jr., Director
March 29, 1995 /s/ MICHAEL D. MCKEE
-------------------------------------------------
Michael D. McKee, Director
March 29, 1995 /s/ ORVILLE E. MELBY
-------------------------------------------------
Orville E. Melby, Director
March 29, 1995 /s/ HAROLD M. MESSMER, JR.
-------------------------------------------------
Harold M. Messmer, Jr., Director
March 29, 1995 /s/ PETER L. RHEIN
-------------------------------------------------
Peter L. Rhein, Director
<PAGE>
EXHIBIT INDEX
Ex. 1.1 Amendment No. 1 to the Distribution Agreement dated September
9, 1993 to the Company's Series B Medium-Term Notes
Ex. 3.(i) Articles of Amendment and Restatement of the Company
Ex. 10.38 Letter from the Bank of New York and banks that are
signatories to Revolving Credit Agreement extending commitment
Ex. 10.39 Amendment No. 1 to Health Care Property Investors, Inc.
Executive Retirement Plan
Ex. 21.1 List of Subsidiaries
Ex. 23.1 Consent of Independent Public Accountants
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants
Consolidated Balance Sheets - as of December 31, 1994 and 1993
Consolidated Statements of Income -
for the years ended December 31, 1994, 1993 and 1992
Consolidated Statements of Stockholders' Equity -
for the years ended December 31, 1994, 1993 and 1992
Consolidated Statements of Cash Flows -
for the years ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Health Care Property Investors, Inc.:
We have audited the accompanying consolidated balance sheets of Health
Care Property Investors, Inc. (a Maryland corporation) as of December 31, 1994
and 1993, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Health Care Property
Investors, Inc. as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Los Angeles, California
January 12, 1995 (except with respect to the matters discussed in Note 12, as
to which the date is March 13, 1995)
<PAGE>
<TABLE>
HEALTH CARE PROPERTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands, except par values)
<CAPTION>
December 31,
1994 1993
-----------------------------------------
<S> <C> <C>
ASSETS
Real Estate Properties
Buildings and Improvements $ 522,847 $ 474,181
Accumulated Depreciation (111,540) (96,350)
------------ ------------
411,307 377,831
Construction in Progress 5,674 4,974
Land 58,814 52,012
------------ ------------
475,795 434,817
Loans Receivable 79,165 70,471
Investments in and Advances to Partnerships 9,642 10,709
Other Assets 6,296 6,431
Cash and Short-Term Investments 2,928 27,210
------------ ------------
TOTAL ASSETS $ 573,826 $ 549,638
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank Notes Payable $ 11,200 $ ---
Senior Notes Due 1998-2004 150,882 135,845
Convertible Subordinated Notes Due 2000 100,000 100,000
Mortgage Notes Payable 9,381 9,446
Accounts Payable and Accrued Expenses 13,483 14,233
Minority Interests in Partnerships 19,477 20,241
Commitments
Stockholders' Equity:
Preferred Stock, $1.00 par value, 50,000,000
shares authorized; none outstanding. --- ---
Common Stock, $1.00 par value; 100,000,000
shares authorized; 26,733,734 and 26,633,184
outstanding as of December 31, 1994 and 1993,
respectively. 26,733 26,633
Additional Paid-In Capital 305,049 302,765
Cumulative Net Income 239,063 189,086
Cumulative Dividends (301,442) (248,611)
------------ ------------
Total Stockholders' Equity 269,403 269,873
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 573,826 $ 549,638
============ ============
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
HEALTH CARE PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share amounts)
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
REVENUE
Base Rental Income $ 64,811 $ 60,389 $ 58,326
Additional Rental and Interest Income 16,707 14,698 12,511
Interest and Other Income 15,042 15,188 10,923
Facility Operating Revenue 2,436 2,274 1,967
-------------- -------------- --------------
98,996 92,549 83,727
-------------- -------------- --------------
EXPENSES
Interest Expense 20,133 19,728 19,780
Depreciation/Noncash Charges 17,521 17,862 18,062
Other Expenses 5,185 5,147 4,950
Facility Operating Expenses 2,595 2,306 1,904
-------------- -------------- --------------
45,434 45,043 44,696
-------------- -------------- --------------
INCOME FROM OPERATIONS 53,562 47,506 39,031
Minority Interests (3,585) (3,419) (3,316)
-------------- -------------- --------------
NET INCOME $ 49,977 $ 44,087 $ 35,715
============== ============== ==============
NET INCOME PER SHARE $ 1.87 $ 1.66 $ 1.38
============== ============== ==============
WEIGHTED AVERAGE SHARES OUTSTANDING 26,679 26,580 25,830
============== ============== ==============
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
HEALTH CARE PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Amounts in thousands)
<CAPTION>
Common Stock
-----------------------------------------
Additional Total
Number Par Value Paid-In Cumulative Cumulative Stockholders'
Of Shares Amount Capital Net Income Dividends Equity
---------- --------- ---------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balances,
December 31, 1991 23,122 $ 23,122 $234,313 $109,284 $(155,445) $211,274
Issuance of Stock 3,204 3,204 63,731 66,935
Exercise of Stock Options 118 118 1,469 1,587
Net Income 35,715 35,715
Dividends (44,136) (44,136)
------- --------- --------- --------- ----------- ----------
Balances,
December 31, 1992 26,444 26,444 299,513 144,999 (199,581) 271,375
Issuance of Stock 30 30 737 767
Exercise of Stock Options 159 159 2,515 2,674
Net Income 44,087 44,087
Dividends (49,030) (49,030)
------- --------- --------- --------- ---------- ----------
Balances,
December 31, 1993 26,633 26,633 302,765 189,086 (248,611) 269,873
Issuance of Stock 17 17 575 592
Exercise of Stock Options 83 83 1,709 1,792
Net Income 49,977 49,977
Dividends (52,831) (52,831)
------- --------- --------- ---------- ----------- -----------
Balances,
December 31, 1994 26,733 $ 26,733 $305,049 $239,063 $(301,442) $269,403
======= ========= ========= ========== ============ ===========
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
HEALTH CARE PROPERTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar Amounts in thousands)
Year Ended December 31,
--------------------------------------------------------------------
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 49,977 $ 44,087 $ 35,715
Depreciation/Noncash Charges 17,521 17,862 18,062
Distributions from Partnerships in Excess
of Income 272 438 917
Distributions to Minority Interests in Excess
of Income (804) (960) (1,114)
---------------- ----------------- -----------------
FUNDS FROM OPERATIONS 66,966 61,427 53,580
Change in Other Assets/Liabilities (1,447) 1,280 (1,572)
---------------- ----------------- -----------------
65,519 62,707 52,008
---------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Outflow for Real Estate Purchases (52,413) (34,195) (30,316)
Advances Repaid by Partnerships 88 14,707 ---
Other Investments and Loans (9,058) (9,827) (38,771)
---------------- ----------------- -----------------
(61,383) (29,315) (69,087)
---------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase/(Decrease) in Bank Notes Payable 11,200 (12,700) (3,600)
Repayment of Senior Notes --- (60,000) ---
Issuance of Senior Notes Due 1998-2004 14,914 15,906 ---
Convertible Subordinated Notes Due 2000 --- 97,500 ---
Cash Proceeds from Issuing Common Stock 1,709 2,674 66,862
Final Payments on Mortgages (1,897) (2,864) (1,868)
Periodic Payments on Mortgages (1,257) (1,259) (1,257)
Dividends Paid (52,831) (49,030) (44,136)
Other Financing Activities (256) 941 644
---------------- ----------------- -----------------
(28,418) (8,832) 16,645
---------------- ----------------- -----------------
NET (DECREASE)/INCREASE IN CASH AND
SHORT-TERM INVESTMENTS $ (24,282) $ 24,560 $ (434)
================ ================= =================
ADDITIONAL CASH FLOW DISCLOSURES
Interest Paid, Net of Capitalized Interest $ 20,127 $ 19,282 $ 19,809
================ ================= =================
Capitalized Interest $ 332 $ 932 $ 163
================ ================= =================
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
HEALTH CARE PROPERTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) THE COMPANY
Health Care Property Investors, Inc. (the "Company"), a Maryland corporation,
was organized in March 1985 to qualify as a real estate investment trust. The
Company was organized to invest in health care related properties located
throughout the United States, including long term care facilities, acute care
and rehabilitation hospitals, psychiatric facilities, substance abuse recovery
centers, congregate care and assisted living centers, medical office buildings
and physician group practice clinics. The Company currently owns interests in
181 properties (the "Properties") located in 32 states and operated by 40
health care providers. The Properties include 139 long term care facilities,
16 congregate care and assisted living centers, six acute care hospitals, six
rehabilitation hospitals, one psychiatric facility, 11 medical office buildings
and two physician group practice clinics.
(2) SIGNIFICANT ACCOUNTING POLICIES
REAL ESTATE:
The Company records the acquisition of real estate at cost and uses the
straight-line method of depreciation for buildings and improvements over
estimated useful lives ranging up to 45 years. The Company provides
accelerated depreciation on certain of its investments based primarily on an
estimation of net realizable value of such investments at the end of the
primary lease terms.
Acquisition, development and construction arrangements are accounted for
as real estate investments/joint ventures or loans based on the characteristics
of the arrangements.
INVESTMENTS IN SUBSIDIARIES AND PARTNERSHIPS:
The Company uses the equity method of accounting for investments in
partnerships which are 50% owned. The Company consolidates the accounts of its
subsidiaries and partnerships which are majority owned and controlled.
CASH AND SHORT-TERM INVESTMENTS:
Money-market investments (which all have maturities of three months or less)
are carried at cost plus accrued interest which approximates market value.
FEDERAL INCOME TAXES:
The Company has operated at all times so as to qualify as a real estate
investment trust under Sections 856 to 860 of the Internal Revenue Code of
1986. As such, the Company is not taxed on its income which is distributed to
stockholders. At December 31, 1994, the tax basis of the Company's net assets
and liabilities exceeds the reported amounts by approximately $14,000,000.
Earnings and profits, which determine the taxability of dividends to
stockholders, differ from net income for financial statements due to the
treatment required under the Internal Revenue Code of certain interest income
and expense items, depreciable lives, basis of assets and timing of rental
income.
ADDITIONAL RENTAL AND INTEREST INCOME:
Additional Rental and Interest Income includes the amounts in excess of the
initial annual base rents and interest. Additional Rental and Interest Income
is generated by a percentage of increased revenue over specified base period
revenue of the properties, fixed increases in rent or interest, and on
increases based on inflation indices.
NET INCOME PER SHARE:
Net Income Per Share is calculated by dividing net income by the weighted
average number of common shares outstanding during the period. The effect of
common stock equivalents is immaterial.
FUNDS FROM OPERATIONS:
In the context of Cash Flows from Operating Activities, the Company has
adopted the following definition for Funds From Operations that has been
prescribed by the National Association of Real Estate Investment Trusts
(NAREIT). Funds From Operations is defined as net income (computed in
accordance with generally accepted accounting principles), excluding gains (or
losses) from debt restructuring and sales of property, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures are
calculated to reflect Funds From Operations on the same basis. Funds From
Operations does not represent cash generated from operating activities in
accordance with generally accepted accounting principles, is not necessarily
indicative of cash available to fund cash needs and should not be considered
as an alternative to net income.
(3) REAL ESTATE INVESTMENTS
The Company was organized to make long-term equity-oriented investments
principally in operating, income-producing health care related properties. The
Company's equity investments have been structured as land and building
leasebacks and are made either directly by the Company or through partnerships
in which the Company is the general partner.
Under the terms of the lease agreements, the Company earns fixed monthly base
rents and may earn periodic additional rents. At December 31, 1994, minimum
future rental income from 146 non-cancellable operating leases was
approximately $72,000,000 in each of the next two years, $71,000,000 in 1997,
$61,000,000 in 1998, $42,000,000 in 1999 and $161,000,000 in the aggregate
thereafter.
The Company has certain real estate investments that allow the Company to
"put" the facilities to the Lessees at lease termination. These financing
leases are classified under Loans Receivable. At December 31, 1994 minimum
future interest income from six non-cancellable financing leases was
approximately $3,000,000 in each of the next four years, $2,000,000 in 1999 and
$2,000,000 in the aggregate thereafter.<PAGE>
(3) REAL ESTATE INVESTMENTS (continued)
The following tabulation lists the Company's total real estate investments at
December 31, 1994 (Dollar amounts in thousands):
<TABLE>
<CAPTION>
Number Buildings &
of Improvements Total Accumulated Mortgage Notes
Facility Type and Location Facilities Land & CIP Investments Depreciation Payable
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LONG TERM CARE FACILITIES
California 17 6,547 25,995 32,542 9,661 ---
Colorado 3 1,541 9,966 11,507 3,459 ---
Florida 11 6,969 33,579 40,548 6,017 ---
Indiana 10 2,707 34,205 36,912 7,267 ---
Kansas 3 788 9,906 10,694 2,571 1,636
Maryland 3 1,287 18,972 20,259 3,846 ---
Massachusetts 5 1,587 16,781 18,368 6,471 ---
North Carolina 4 582 10,790 11,372 1,515 ---
Ohio 6 1,125 23,835 24,960 6,883 1,049
Tennessee 10 1,072 36,541 37,613 7,792 1,476
Texas 11 896 17,839 18,735 4,998 ---
Wisconsin 8 1,597 20,720 22,316 5,293 ---
Others 25 4,359 60,482 64,841 19,246 1,027
-----------------------------------------------------------------------------------------------------------------------------
Total Long Term Care Facilities 116 31,057 319,610 350,667 85,019 5,188
-----------------------------------------------------------------------------------------------------------------------------
ACUTE CARE HOSPITALS
Los Gatos, California 1 3,736 17,139 20,875 5,000 ---
Slidell, Louisiana 1 2,520 19,412 21,932 4,544 ---
Plaquemine, Louisiana 1 770 9,721 10,491 626 ---
-----------------------------------------------------------------------------------------------------------------------------
Total Acute Care Hospitals 3 7,026 46,272 53,298 10,170 ---
-----------------------------------------------------------------------------------------------------------------------------
CONGREGATE CARE AND
ASSISTED LIVING CENTERS 11 4,736 32,089 36,825 2,854 1,173
-----------------------------------------------------------------------------------------------------------------------------
PSYCHIATRIC FACILITY, Georgia 1 738 3,181 3,919 1,203 ---
-----------------------------------------------------------------------------------------------------------------------------
REHABILITATION HOSPITALS
Peoria, Arizona 1 1,565 7,050 8,615 888 ---
Little Rock, Arkansas 1 709 9,599 10,308 978 ---
Colorado Springs, Colorado 1 690 8,346 9,036 802 ---
Overland Park, Kansas 1 2,316 10,719 13,035 1,438 ---
San Antonio/Dallas, Texas 2 3,990 29,679 33,669 7,081 ---
-----------------------------------------------------------------------------------------------------------------------------
Total Rehabilitation Hospitals 6 9,270 65,393 74,663 11,187 ---
-----------------------------------------------------------------------------------------------------------------------------
MEDICAL OFFICE BUILDINGS, primarily
in Texas 9 2,242 38,609 40,851 1,042 ---
-----------------------------------------------------------------------------------------------------------------------------
Physician Group Practice Clinics
Fort Smith, Arkansas 1 3,045 18,808 21,853 --- ---
Knoxville, Arkansas 1 700 4,559 5,259 65 3,020
-----------------------------------------------------------------------------------------------------------------------------
Total Physician Group Practice Clinics 2 3,745 23,367 27,112 65 3,020
-----------------------------------------------------------------------------------------------------------------------------
TOTAL CONSOLIDATED REAL ESTATE OWNED 148 58,814 528,521 587,335 111,540 9,381
-----------------------------------------------------------------------------------------------------------------------------
Partnership Investments,
Including All Partners' Assets 16 --- --- 56,419 --- ---
Financing Leases 6 --- --- 20,595 --- ---
Mortgage Loans 11 --- --- 55,398 --- ---
-----------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO 181 $ 58,814 $ 528,521 $ 718,747 $ 111,540 $ 9,381
=============================================================================================================================
</TABLE>
Listed below are the Company's major Lessees, the investment in Properties
leased to those Lessees, and the percentage of total revenue from these Lessees
for the years ended December 31, 1994, 1993 and 1992.
<TABLE>
<CAPTION>
Percentage of Total Revenue
Year Ended December 31,
Investment at
December 31, 1994 1994 1993 1992
----------------- ---- ---- ----
(Dollar amounts in thousands)
<S> <C> <C> <C> <C>
Leased by The Hillhaven
Corporation and its
subsidiaries $158,422 23% 24% 26%
======== === === ===
Leased by Tenet Healthcare
Corporation and its
subsidiaries $ 46,726 8% 14% 16%
======== === === ===
Leases Guaranteed by
Beverly Enterprises, Inc. $ 56,184 12% 12% 12%
======== === === ===
</TABLE>
Certain of these facilities have been subleased or assigned to other
operators.
The Company and Tenet Healthcare Corporation (hereinafter, together
with its subsidiaries "Tenet"), entered into a joint venture agreement in 1985,
with equity interests of 77% and 23%, respectively, to own and leaseback 24
health care facilities. The Company and its partnerships have leased 44
additional facilities to Tenet and The Hillhaven Corporation and its
subsidiaries ("Hillhaven"). In January 1994, two rehabilitation hospitals with
an investment value of $33,668,000 that had been leased by Tenet were assigned
to Healthsouth Corporation. These facilities constituted 5% of the Company's
total revenue for the year ended December 31, 1994. All of the leases referred
to in this paragraph are unconditionally guaranteed by Tenet.
COMPANY OPERATED FACILITIES:
From time to time, the Company operates facilities as a result of Lease
terminations. The operations of one such facility in 1994, 1993 and 1992, are
included in the Company's consolidated financial statements under Facility
Operating Revenue and Facility Operating Expenses.
(4) INVESTMENTS IN PARTNERSHIPS
The Company is the general partner and a 50% equity interest owner in
Health Care Investors I, a partnership which holds 11 long term care
facilities in Missouri, Illinois and Arkansas and leases them to Hillhaven.
The partnership agreement provides for an allocation of income and expense
items on percentages other than equity interests of the partners. A Director
of the Company is also a limited partner in this partnership.
The Company is the general partner and a 50% equity interest owner in five
partnerships that each developed and lease a congregate care center.
Combined summarized financial information of the partnerships follows:
<TABLE>
<CAPTION>
December 31,
1994 1993
--------------------------------------------------
(Amounts in thousands)
<S> <C> <C>
Real Estate Properties, Net $39,074 $40,978
Other Assets 3,208 3,975
------- -------
Total Assets $42,282 $44,953
======= =======
Notes Payable to Others $31,609 $32,251
Accounts Payable 387 465
Other Partners' Capital 644 1,528
Investments and Advances from the Company 9,642 10,709
------- -------
Total Liabilities and Partners' Capital $42,282 $44,953
======= =======
Rental Income $ 7,756 $ 7,500
======= =======
Net Income $ 1,536 $ 717
======= =======
Company's Equity in Partnership Operations $ 1,318 $ 978
Distributions to the Company 1,590 1,416
------- -------
Distributions from Partnerships in Excess
of Income $ 272 $ 438
======= =======
</TABLE>
(5) LOANS RECEIVABLE
The following is a summary of the loans receivable:
<TABLE>
<CAPTION>
December 31,
1994 1993
---------------------------------------
(Amounts in thousands)
<S> <C> <C>
Mortgage Loans $55,398 $47,545
Financing Leases (see note 3) 20,595 20,481
Equipment and Other Loans 3,172 2,445
------- -------
Total Loans Receivable $79,165 $70,471
======= =======
</TABLE>
<PAGE>
(5) LOANS RECEIVABLE (continued)
The following is a summary of mortgage loans at December 31, 1994:
<TABLE>
<CAPTION>
Final Number Initial
Payment of Principal Carrying
Due Loans Payment Terms Amount Amount
-------------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands)
<S> <C> <S> <C> <C>
1996-2002 5 Monthly payments from $9,900 to $ 7,144 $ 7,070
$27,000 including effective interest
of approximately 17.57% secured by
five long term care facilities located
in California and Arizona.
2001 2 Monthly payments from $104,000 to 31,665 27,150
$338,000 including interest of 11.64%
secured by two acute care hospitals and
an adjacent medical office building leased
and operated by Hospital Corporation of
America.
2003 1 Monthly payment of $97,000 including 10,991 11,002
interest of 9.86% on an acute care
hospital operated by OrNda Health Care.
2009 2 Monthly payments from $38,000 to $61,000 10,228 10,176
including interest of from 10.96% to 11.71%
on one medical office building and a long
term care facility located in California.
--- -------- --------
Totals 10 $60,028 $55,398
=== ======== ========
</TABLE>
During 1994 the Company funded two mortgage loans totaling $10,228,000 which
mature in 2009. Additionally, the Company foreclosed on a loan acquired in
1992 with a carrying value of approximately $640,000 and currently holds this
property for sale.
The estimated fair market value of the Company's mortgage loans at December
31, 1994 is $60,000,000, with loans receivable carried at $55,398,000. Fair
market values are based on the estimates of management and on rates currently
prevailing for comparable loans. At December 31, 1994, minimum future
principal payments from non-cancellable mortgage loans was approximately
$2,500,000 in 1995, $8,300,000 in 1996, $3,000,000 in 1997, $7,500,000 in 1998,
$3,500,000 in 1999 and $35,600,000 in the aggregate thereafter.
<PAGE>
(6) DEBT
SENIOR NOTES DUE 1998 TO 2004:
The following is a summary of Senior Notes outstanding at December 31, 1994:
<TABLE>
<CAPTION>
Year Prepayment
Issued Amount Interest Rate Maturity Without Penalty
------ ------ ------------- -------- ---------------
<S> <C> <C> <C> <C>
1988 $ 75,000,000 9.875% 1998 1995-1998
1989 10,000,000 10.56% 1999 None
1990 12,500,000 10.20-10.30% 2000 1997-2000
1991 22,500,000 9.44-9.88% 2001 1998-2001
1993 10,000,000 8.00% 2003 2000-2003
1993 6,000,000 6.10-6.70% 1998-2003 None
1994 15,000,000 8.81-9.10% 1999-2004 None
-------------
$151,000,000
Less Unamortized
Original Issue
Discount (118,000)
--------------
$150,882,000
==============
</TABLE>
The weighted average interest rate on the Senior Notes was 9.63% and 9.69%
for 1994 and 1993, respectively, and the weighted average balance of the Senior
Notes borrowings was $137,500,000 and $157,000,000 during 1994 and 1993,
respectively. Each of the Senior Note issues is recorded net of remaining
original issue discounts which aggregate $118,000 at December 31, 1994 and
$155,000 at December 31, 1993. These amounts are amortized over the term of
the Notes. If held to maturity, the first required principal payments would
be $80,000,000 in 1998 (see note 12), $15,000,000 in 1999 and $56,000,000
thereafter.
CONVERTIBLE SUBORDINATED NOTES DUE 2000:
On November 8, 1993, the Company issued $100,000,000 6% Convertible
Subordinated Notes due November 8, 2000. These Notes are prepayable without
penalty after November 8, 1998. The Notes are convertible into shares of
common stock of the Company at a conversion price of $37.806. A total of
2,645,083 shares of common stock have been reserved for such issuance.
MORTGAGE NOTES PAYABLE:
At December 31, 1994, Mortgage Notes Payable were $9,381,000 secured by 15
health care facilities with a net book value of $37,814,000. Interest rates
on the mortgage notes ranged from 4.50% to 10.00%. Required principal payments
on the notes range from $1,153,000 to $1,581,000 per year in the next five
years and $2,784,000 in the aggregate thereafter.
BANK NOTES:
The Company has an unsecured revolving credit line aggregating
$100,000,000 with certain banks. This credit line expires on March 31, 1997
and bears an annual facility fee of 0.25%. These agreements provide for
interest at the Prime Rate, the London Interbank Offered Rate plus 1/2% or at
a rate negotiated with each bank at the time of borrowing. Interest rates
incurred by the Company ranged from 5.00% to 6.25%, and 3.25% to 4.50%, on
maximum short-term bank borrowings of $11,200,000 and $12,700,000 for 1994 and
1993, respectively. The weighted average interest rates were 5.90% and 3.62%
on weighted average short-term bank borrowings of $4,216,000 and $4,448,000 for
the same respective periods.
FAIR MARKET VALUE OF LONG TERM DEBT:
The estimated fair market values at December 31, 1994 of the Company's long-
term debt is $254,000,000 with amounts payable carried at $260,263,000. Fair
market values are based on estimates of management and on current rates offered
to the Company for debt of the same remaining maturities.
(7) STOCKHOLDERS' EQUITY
On April 23, 1992, the Board of Directors of Health Care Property Investors,
Inc. authorized a two-for-one split of the Company's common stock.
(8) STOCK INCENTIVE PLANS
Under the terms of the Company's Directors' Stock Incentive Plan and the
Company's Amended Stock Incentive Plan ("the Plans"), the Company has reserved
for issuance up to 2,500,000 of the outstanding shares of common stock.
Directors, Officers and key employees of the Company are eligible to
participate in the Plans. The following is a list of stock options and awards:
<TABLE>
<CAPTION>
Stock Options Incentive Stock Awards
------------- ----------------------
Number of Shares Exercise Price Number of Shares
---------------- -------------- ----------------
<S> <C> <C> <C>
Outstanding at
January 1, 1991 385,280 $9.50-$15.14
Granted
1992 202,400 $21.50-$22.50 27,100
1993 369,450 $25.53-$27.75 30,550
1994 69,050 $29.13-$30.16 20,550
Cancelled-1994 (19,800) $12.20-$29.13 (3,200)
Exercised
1992 118,040 $9.50-$19.63
1993 158,980 $12.11-$22.50
1994 83,200 $12.11-$25.18
</TABLE>
The incentive stock awards ("Awards") are granted at no cost. The Awards
vest and are amortized over five-year periods. The stock options become
exercisable on either a one-year or a five-year schedule after the date of the
grant.
During the years ended December 31, 1994 and 1993, the Company made loans
totaling $1,596,000 and $2,094,000, respectively, secured by stock in the
Company for the purpose of exercising incentive stock options by Directors,
Officers and key employees. The interest rates charged, based on the
prevailing applicable federal rates, was 7.00% in 1994, and 5.37% to 6.88% in
1993. As of December 31, 1994, $1,752,000 in such loans included under the
caption Loans Receivable were outstanding.
(9) DIVIDENDS
Dividend payment dates are scheduled approximately 50 days following each
calendar quarter. A dividend of $0.52 per share was declared by the Board of
Directors on January 13, 1995, to be paid on February 20, 1995 to stockholders
of record on January 23, 1995.
In order to qualify as a real estate investment trust, the Company must,
among other requirements, distribute at least 95% of its real estate investment
trust taxable income to its stockholders.
Per share dividend payments by the Company to the stockholders were
characterized in the following manner for tax purposes:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Ordinary Income $1.9800 $1.8450 $1.5100
Capital Gain Income ---- ---- ----
Return of Capital ---- ---- .2150
--------- --------- ---------
Total Dividends Paid $1.9800 $1.8450 $1.7250
========= ========= =========
</TABLE>
(10) COMMITMENTS
The Company has remaining outstanding commitments to acquire health care
facilities and fund construction costs aggregating approximately $48,000,000.
(11) QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
(Amounts in thousands, except per share amounts)
1994
----
<S> <C> <C> <C> <C>
Revenue $23,617 $25,389 $24,525 $25,465
Net Income $11,252 $13,208 $12,417 $13,100
Dividends Paid Per Share $ .4800 $ .4900 $ .5000 $ .5100
Net Income Per Share $ .42 $ .50 $ .46 $ .49
1993
----
Revenue $22,723 $22,654 $22,373 $24,799
Net Income $10,598 $10,651 $10,959 $11,879
Dividends Paid Per Share $ .4500 $ .4575 $ .4650 $ .4725
Net Income Per Share $ .40 $ .40 $ .41 $ .45
</TABLE>
<PAGE>
(12) SUBSEQUENT EVENTS
On February 1 and 3, 1995 and March 8, 1995 the Company issued a total of
$27,000,000 of Medium Term Notes (MTN) bearing interest from 8.81% to 9.00% and
maturing between 2000 and 2015. Additionally, on February 9, 1995 the Company
issued 1,725,000 shares of common stock at $29 per share for net proceeds to
the Company of approximately $47,000,000. Proceeds from the MTN issuances and
the issuance of common stock were used to reduce short-term debt and to retire
the $75,000,000 9-7/8% Senior Unsecured Notes due 1998, which were redeemed in
whole at par plus accrued interest on March 13, 1995.
<PAGE>
APPENDIX I
TENET HEALTHCARE CORPORATION
SET FORTH BELOW IS CERTAIN CONDENSED FINANCIAL DATA OF TENET HEALTHCARE
CORPORATION ("TENET") WHICH IS TAKEN FROM TENET'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED MAY 31, 1994 AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION (THE "COMMISSION") UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (THE "EXCHANGE ACT"), AND THE TENET QUARTERLY REPORT ON FORM 10-Q FOR
THE QUARTER ENDED NOVEMBER 30, 1994 AS FILED WITH THE COMMISSION.
The information and financial data contained herein concerning Tenet was
obtained and has been condensed from Tenet's public filings under the Exchange
Act. The Tenet financial data presented includes only the most recent interim
and fiscal year end reporting periods. The Company can make no representation
as to the accuracy and completeness of Tenet's public filings but has no reason
not to believe the accuracy and completeness of such filings. It should be
noted that Tenet has no duty, contractual or otherwise, to advise the Company
of any events which might have occurred subsequent to the date of such publicly
available information which could affect the significance or accuracy of such
information.
Tenet is subject to the information filing requirements of the Exchange
Act, and, in accordance therewith, is obligated to file periodic reports, proxy
statements and other information with the Commission relating to its business,
financial condition and other matters. Such reports, proxy statements and
other information may be inspected at the offices of the Commission at 450
Fifth Street, N.W. Washington D.C., and should also be available at the
following Regional Offices of the Commission: Room 1400, 75 Park Place, New
York, New York 10007 and Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661. Such reports and other information
concerning Tenet can also be inspected at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, Room 1102, New York, New York 10005.
i
<PAGE>
<TABLE>
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollar amounts in millions, except par values)
<CAPTION>
November 30, May 31,
1994 1994
------------ ---------
<S> <C> <C>
A S S E T S
Cash and cash equivalents $ 132 $ 313
Short-term investments 52 60
Accounts and notes receivable, less
allowance for doubtful accounts
($67.2 at November 30 and $77.2 at May 31) 411 385
Inventories of supplies, at cost 55 55
Deferred income taxes 304 372
Assets held for sale 26 204
Other current assets 57 55
---------- --------
Total current assets 1,037 1,444
---------- --------
Long-term receivables 68 73
Investments and other assets 306 309
Property, plant and equipment, at cost 2,623 2,536
Less accumulated depreciation
and amortization 842 772
---------- ----------
Net property, plant and equipment 1,781 1,764
---------- ----------
Intangible assets, at cost
Less accumulated amortization
($47 at November 30 and $54 at May 31) 112 107
---------- ----------
$ 3,304 $ 3,697
========== ===========
ii
</TABLE>
<PAGE>
<TABLE>
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Dollar amounts in thousands, except par values)
<CAPTION>
November 30, May 31,
1994 1994
------------ -------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 495 $ 545
Short-term borrowings and notes 113 66
Accounts payable 139 176
Employee compensation and benefits 83 93
Reserves related to discontinued operations 76 465
Income taxes payable 22 58
Other current liabilities 204 237
----------- ------------
Total current liabilities 1,132 1,640
----------- ------------
Long-term debt, net of current portion 236 223
Other long-term liabilities and minority interests 374 389
Deferred income taxes 126 125
Common stock, $.075 par value; authorized 450,000,000 shares;
185,587,666 shares issued at November 30, 1994
and at May 31, 1994 14 14
Other shareholders equity 1,699 1,588
Treasury stock, at cost, 19,226,212 shares at
November 30, 1994 and 19,507,161 at May 31, 1994 (278) (282)
----------- ------------
Total stockholders' equity 1,435 1,320
----------- ------------
$ 3,303 $ 3,697
=========== ============
iii
</TABLE>
<PAGE>
<TABLE>
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Amounts in millions)
<CAPTION>
Six months ended Year ended
November 30, 1994 May 31, 1994
----------------- ------------
<S> <C> <C>
Net operating revenues $ 1,301 $ 2,967
----------------- ------------
Operating and administrative expenses (1,057) (2,492)
Depreciation and amortization (75) (161)
Interest, net of capitalized portion (35) (70)
----------------- ------------
Total costs and expenses (1,167) (2,723)
----------------- ------------
Investment earnings 10 28
Equity in earnings of unconsolidated affiliates 12 ---
Minority interests in income of consolidated subsidiaries (4) ---
Net (loss)/gain on disposals of facilities
and long-term investments (3) 88
Gain on sale of subsidiary's common stock 32 ---
----------------- ------------
Income from continuing operations before income taxes 183 360
Taxes on income (73) (144)
----------------- ------------
Income from continuing operations 110 216
----------------- ------------
Discontinued operations --- (701)
Cumulative effect of a change in accounting for income taxes --- 60
---------------- ------------
Net income (loss) $ 46 $ (425)
---------------- ------------
iv
</TABLE>
<PAGE>
<TABLE>
TENET HEALTHCARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
<CAPTION>
Six Months Ended Year Ended
November 30, 1994 May 31, 1994
----------------- ------------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES
(including changes in all operating assets and liabilities): $ (320) $ 147
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (60) (185)
Purchase of new businesses, net of cash acquired (9) (5)
Proceeds from sales of facilities, investments and other assets 163 569
Investments in Hillhaven --- (63)
Collections on notes 2 100
Increase in intangible and other assets (16) (24)
Increase in notes receivable (2) (4)
Equity investments in Partnerships --- (11)
Other items (1) 9
------------- -------------
Net cash provided by investing activities 78 386
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (payments of) unsecured lines of credit and reverse 43 (151)
Payments of other borrowings (73) (217)
Proceeds from other borrowings 86 31
Cash dividends paid to shareholders --- (40)
Proceeds from stock options exercised 4 ---
Other items 1 16
------------- -------------
Net cash used in financing activities 61 (361)
------------- -------------
Net (decrease) increase in cash and cash equivalents (181) 172
Cash and cash equivalents at beginning of year 313 141
-------------- --------------
Cash and cash equivalents at end of year $ 132 $ 313
============== ==============
v
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-K FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000765880
<NAME> HEALTH CARE PROPERTY INVESTORS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 2,928
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 587,335
<DEPRECIATION> 111,540
<TOTAL-ASSETS> 573,826
<CURRENT-LIABILITIES> 0
<BONDS> 271,463
<COMMON> 26,733
0
0
<OTHER-SE> 242,670
<TOTAL-LIABILITY-AND-EQUITY> 573,826
<SALES> 0
<TOTAL-REVENUES> 98,996
<CGS> 0
<TOTAL-COSTS> 23,701
<OTHER-EXPENSES> 5,185
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,133
<INCOME-PRETAX> 49,977
<INCOME-TAX> 0
<INCOME-CONTINUING> 49,977
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49,977
<EPS-PRIMARY> 1.87
<EPS-DILUTED> 1.87
</TABLE>
Exhibit 1.1
HEALTH CARE PROPERTY INVESTORS, INC.
MEDIUM-TERM NOTES, SERIES B
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
AMENDMENT NO. 1
TO THE
DISTRIBUTION AGREEMENT DATED SEPTEMBER 9, 1993
December 21, 1994
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower, 10th Floor
New York, N.Y. 10281-1310
Goldman, Sachs & Co.
85 Broad Street
New York, N.Y. 10004
Ladies and Gentlemen:
Reference is made to the Distribution Agreement dated September 9, 1993
(the "Distribution Agreement") between Health Care Property Investors, Inc.,
a Maryland corporation (the "Company"), and Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, with respect to the issuance and sale by
the Company of its Medium-Term Notes described therein. The parties hereto
acknowledge that (i) this Amendment No. 1 ("Amendment No. 1") shall relate only
to the Company's Medium-Term Notes that are issued, or as to which offers to
purchase are accepted by the Company, or as to which potential investors to
purchase the Medium-Term Notes are contacted or solicited by the Agents (as
defined below), on or after the date hereof; and (ii) the Company's Medium-Term
Notes that have been issued and sold, or as to which offers to purchase have
been accepted by the Company, prior to the date hereof shall not be affected
by this Amendment No. 1, but shall instead continue to be governed by the
Distribution Agreement. Terms not otherwise defined herein shall have the
meanings ascribed to them in the Distribution Agreement.
The purpose of this Amendment No. 1 is to add Goldman, Sachs & Co.
("Goldman, Sachs") as a party to the Distribution Agreement and as an Agent (as
defined below) with respect to the issuance and sale by the Company of its
Medium-Term Notes.
With respect to the Medium-Term Notes issuable pursuant to this Amendment
No. 1, references in the Distribution Agreement to the "Agreement" shall be
deemed to mean the Distribution Agreement as amended by this Amendment No. 1,
and references therein to the date of the Agreement or the date hereof shall
be deemed to be to the date of this Amendment No. 1 thereto (except that the
references to "the date hereof" contained in Sections 5(a) and 5(c) of the
Agreement shall mean the date of the Distribution Agreement).
The Distribution Agreement is hereby amended by the parties thereto as
follows:
1. THE NAMES AND ADDRESSES OF THE AGENTS ON THE FIRST PAGE OF THE
DISTRIBUTION AGREEMENT ARE DELETED AND REPLACED WITH THE NAMES AND ADDRESSES OF
THE AGENTS AS THEY APPEAR ON THE FIRST PAGE OF THIS AMENDMENT NO. 1.
2. THE FIRST INTRODUCTORY PARAGRAPH ON PAGE 1 OF THE DISTIRUBTION
AGREEMENT IS DELETED AND REPLACED WITH THE FOLLOWING:
Health Care Property Investors, Inc., a Maryland corporation
(the "Company"), confirms its agreement with Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated and Goldman, Sachs &
Co. (each an "Agent", and collectively the "Agents") with respect to
the issue and sale by the Company of its Medium-Term Notes described
herein (the "Notes"). The Notes are to be issued pursuant to an
indenture (the "Indenture", which term as used herein includes any
instrument establishing the form and terms of the Notes) dated as of
September 1, 1993 between the Company and The Bank of New York, as
trustee (the "Trustee").
UNLESS OTHERWISE SPECIFICED IN THIS AMENDMENT NO. 1, ALL REFERENCES IN THE
DISTRIBUTION AGREEMENT TO "AGENT" SHALL BE DEEMED TO REFER, MUTATIS MUTANDIS,
TO AN AGENTOR TO THE AGENTS, COLLECTIVELY, AS THE CONTEXT REQUIRES.
3. THE DOLLAR AMOUNT IN SECOND INTRODUCTORY PARAGRAPH ON PAGE 1 OF
THE DISTRIBUTION AGREEMENT IS DELETED AND REPLACED WITH $54,000,000.
4. REFERENCE IS HEREBY MADE TO THE PROCEDURES (AS DEFINED IN SECTION
3(C) ON PAGE 10 OF THE DISTRIBUTION AGREEMENT). UNLESS OTHERWISE SPECIFIED IN
THE PROCEDURES, ALL REFERENCES IN THE PROCEDURES TO "AGENT" SHALL BE DEEMED TO
REFER, MUTATIS MUTANDIS, TO AN AGENT OR TO THE AGENTS, COLLECTIVELY, AS THE
CONTEXT REQUIRES. THE ADDRESS FOR GOLDMAN, SACHS & CO., AS AGENT, FOR PURPOSES
OF THE PROCEDURES PART I, THE SECTIONS ENTITLED "PREPARATION OF PRICING
SUPPLEMENT" AND "SUSPENSION OF SOLICITATION; AMENDMENT OR SUPPLEMENT" AND PART
III, THE SECTION ENTITLED "SETTLEMENT PROCEDURES", IS SET FORTH IN ANNEX A TO
THIS AMENDMENT NO. 1 AND SHALL BE DEEMED TO BE INCLUDED IN THE PROCEDURES. SUCH
ADDRESS SHALL APPLY UNTIL FURTHER NOTICE IS GIVEN IN ACCORDANCE WITH THE
PROCEDURES. THE COMPANY SHALL PROMPTLY PROVIDE A COPY OF THIS AMENDMENT NO. 1
AND SUCH ANNEX A TO THE TRUSTEE AND THE CALCULATION AGENT, WHICH ANNEX A THE
TRUSTEE AND THE CALCULATION AGENT MAY APPEND TO THE PROCEDURES AND TREAT AS A
PART THEREOF.
THE DATE OF THE PROCEDURES SHALL BE DEEMED, FOR PURPOSES OF THIS
AMENDMENT NO. 1, TO BE THE DATE OF THIS AMENDMENT NO. 1.
5. SECTIONS 8 AND 9 BEGINNING ON PAGE 25 OF THE DISTRIBUTION
AGREEMENT ARE DELETED AND REPLACED WITH THE FOLLOWING:
SECTION 8. Indemnification.
---------------
(a) Indemnification of the Agents. The Company agrees to
-----------------------------
indemnify and hold harmless each Agent and each person, if any, who
controls any Agent within the meaning of Section 15 of the 1933 Act as
follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary
to make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in the
Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company; and
(iii) against any and all expense whatsoever (including the
fees and disbursements of counsel chosen by the Agents), as incurred,
reasonably incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or
(ii) above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any
loss, liability, claim, damage or expense to the extent arising out of any
untrue statement or omission or alleged untrue statement or omission made
in reliance upon and in conformity with written information furnished to
the Company by either of the Agents expressly for use in the Registration
Statement (or any amendment thereto), or made in reliance upon the
Trustee's Statement of Eligibility under the 1939 Act filed as an exhibit
to the Registration Statement.
(b) Indemnification of Company. Each Agent severally agrees to
--------------------------
indemnify and hold harmless the Company, its directors, each of its
officers who signed the Registration Statement, and each person, if
any,who controls the Company within the meaning of Section 15 of the
1933 Act against any and all loss, liability, claim, damage and expense
described in the indemnity contained in subsection (a) of this Section,
as incurred, but only with respect to untrue statements or omissions,
or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity
with written information furnished to the Company by such Agent
expressly for use in the Registration Statement (or any amendment
thereto) or the Prospectus (or any amendment or supplement thereto).
(c) General. Each indemnified party shall give prompt
-------
notice to each indemnifying party of any action commenced against it
in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying
party from any liability which it may have otherwise than on account
of this indemnity agreement. An indemnifying party may participate at
its own expense in the defense of such action. In no event shall the
indemnifying parties be liable for the fees and expenses of more than
one counsel (in addition to any local counsel) for all indemnified
parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same
general allegations or circumstances.
SECTION 9. Contribution.
------------
In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in Section
8 hereof is for any reason held to be unavailable to or insufficient
to hold harmless the indemnified parties although applicable in
accordance with its terms, the Company and the Agents shall contribute
to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the
Company and the Agents, as incurred, in such proportions so that each
Agent is severally responsible for that portion represented by the
percentage that the total commissions and underwriting discounts
received by such Agent to the date of such liability bears to the total
sales price from the sale of Notes sold to or through such Agent to the
date of such liability, and the Company is responsible for the balance;
PROVIDED, HOWEVER, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. For purposes of this Section,
each person, if any, who controls an Agent within the meaning of
Section 15 of the 1933 Act shall have the same rights to contribution
as such Agent, and each director of the Company, each officer of the
Company who signed the Registration Statement, and each person, if any,
who controls the Company within the meaning of Section 15 of the 1933
Act shall have the same rights to contribution as the Company.
6. SECTION 13 BEGINNING ON PAGE 30 OF THE DISTRIBUTION AGREEMENT
IS DELETED AND REPLACED WITH THE FOLLOWING:
SECTION 13. Notices.
-------
Unless otherwise provided herein, all notices required under
the terms and provisions hereof shall be in writing, either delivered
by hand, by mail or by telex, telecopier or telegram, and any such
notice shall be effective when received at the address specified below.
If to the Company:
Health Care Property Investors, Inc.
10990 Wilshire Boulevard
Suite 1200
Los Angeles, California 90024
Attention: Kenneth B. Roath,
President and Chief Executive Officer
Fax: (310) 473-1990
With a copy to:
Latham & Watkins
633 West Fifth Street
Suite 4000
Los Angeles, California 90071-8763
Attention: Pamela B. Kelly, Esq.
Fax: (213) 891-8763
If to Merrill Lynch & Co.:
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower - 10th Floor
World Financial Center
New York, New York 10281-1310
Attention: MTN Product Management
Fax: (212) 449-2234
If to Goldman, Sachs & Co.:
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Credit Department
Credit Control, Medium-Term Notes
Fax: (212) 357-8680
or at such other address as such party may designate from time to time
by notice duly given in accordance with the terms of this Section 13.
The obligations of Goldman, Sachs to purchase Notes as principal and
to solicit offers to purchase Notes as an agent of the Company, and the
obligations of any purchasers of the Notes sold through Goldman, Sachs as an
agent, will be further subject to the receipt of the following documents, in
form and substance satisfactory to Goldman, Sachs, delivered in connection with
the execution and delivery of this Amendment No. 1 to the Distribution
Agreement:
(i) Letter, dated the date of this Amendment
No. 1, of Latham & Watkins, counsel to the Company, to Goldman, Sachs
to the effect that Goldman, Sachs may rely, as an addressee, upon their
most recent legal opinion delivered pursuant to Section 7(c) of the
Distribution Agreement, as of the date of such opinion (PROVIDED, that
such reliance letter shall annex thereto the underlying opinion
delivered by Latham & Watkins pursuant to Sections 5(a)(1) and 5(a)(4)
of the Distribution Agreement);
(ii) Letter, dated the date of this Amendment
No. 1, of Latham & Watkins, tax counsel to the Company, to Goldman,
Sachs to the effect that Goldman, Sachs may rely, as an addressee, upon
their most recent legal opinion delivered pursuant to Section 7(c) of
the Distribution Agreement (insofar as it relates to their legal
opinion delivered pursuant to the last paragraph of Section 5(a)(1) the
Distribution Agreement), as of the date of such opinion;
(iii) Letter, dated the date of this Amendment
No. 1, of Brown & Wood, counsel to the Agents, to Goldman, Sachs to the
effect that Goldman, Sachs may rely, as an addressee, upon their legal
opinion delivered pursuant to Sections 5(a)(3) and 5(a)(4) of the
Distribution Agreement, as of the date of such opinion; and
(iv) Letter, dated the date of this Amendment
No. 1, of Arthur Andersen & Co., independent public accountants with
respect to the Company, to Goldman, Sachs to the effect that Goldman,
Sachs may rely, as an addressee, upon (A) their comfort letter
delivered pursuant to Section 5(c) of the Distribution Agreement and
(B) each of their comfort letters delivered pursuant to Section 7(d)
of the Distribution Agreement for the quarterly and annual periods from
and including September 30, 1993; in each case as of the date of such
comfort letters.
The obligations of the Agents to purchase Notes as principal and to
solicit offers to purchase Notes as agents of the Company, and the obligations
of any purchasers of the Notes sold through the Agents as agents, will be
further subject to the receipt of the following documents, delivered in
connection with the execution and delivery of this Amendment No. 1 to the
Distribution Agreement:
(i) Legal opinion, in form and substance
satisfactory to the Agents, dated the date of this Amendment No. 1,
from Latham & Watkins, counsel to the Company, to the effect that this
Amendment No. 1 has been duly authorized, executed and delivered by the
Company;
(ii) Legal opinion, in form and substance
satisfactory to the Agents, dated the date of this Amendment No. 1,
from Brown & Wood, counsel to the Agents, to the effect that this
Amendment No. 1 has been duly authorized, executed and delivered by the
Company (this opinion may be included in the letter delivered from
Brown & Wood pursuant to the preceding paragraph);
(iii) Legal opinion, in form and substance
satisfactory to counsel to the Company and counsel to the Agents, dated
the date of this Amendment No. 1, from Ballard Spahr Andrews &
Ingersoll, special Maryland corporate counsel to the Company, addressed
to Latham & Watkins and Brown & Wood (i) in the form set forth in
Section 5(a)(4) of the Distribution Agreement and (ii) to the effect
that this Amendment No. 1 has been duly authorized, executed and
delivered by the Company;
(iv) Legal opinion, dated the date of this
Amendment No. 1, of Edward J. Henning, Senior Legal Counsel and
Secretary of the Company in the form set forth in Section 5(a)(2) of
the Distribution Agreement; and
(v) Officers' Certificate, dated the date of this
Amendment No. 1, in the form set forth in Section 5(b) of the
Distribution Agreement.
Subsequent to the date of this Amendment No. 1, all documents
periodically delivered by the Company pursuant to Sections 7(b), 7(c) and 7(d)
of the Distribution Agreement shall be addressed to the Agents.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
between the Company and the Agents.
Very truly yours,
Health Care Property Investors, Inc.
By: _______________________________________________
Title: ____________________________________________
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: __________________________________________________________
Title: _______________________________________________________
--------------------------------------------------------------
(Goldman, Sachs & Co.)
Annex A
to Amendment No. 1 to the
Distribution Agreement Dated September 9, 1993
HEALTH CARE PROPERTY INVESTORS, INC.
MEDIUM-TERM NOTES, SERIES B
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
For purposes of the Procedures Part I, the sections entitled
"Preparation of Pricing Supplement" and "Suspension of Solicitation; Amendment
or Supplement" and Part III, the section entitled "Settlement Procedures", the
following address for Goldman, Sachs & Co. shall apply until further notice is
given in accordance with the Procedures:
Goldman, Sachs & Co.
Credit Department Credit Control-Medium Term Notes
85 Broad Street, 27th Floor
New York, N.Y. 10004
Telephone: (212) 902-3711
Fax: (212) 357-8680
The date of the Procedures shall be deemed, for purposes of Amendment
No. 1 to the Distribution Agreement, to be the date of such Amendment No. 1 to
the Distribution Agreement. Unless otherwise specified in the Procedures, all
references in the Procedures to "Agent" shall be deemed to refer, MUTATIS
MUTANDIS, to an Agent or to the Agents, collectively, as the context requires.
Exhibit 3.(i)
ARTICLES OF RESTATEMENT
OF
HEALTH CARE PROPERTY INVESTORS, INC.
Health Care Property Investors, Inc., a Maryland corporation
(hereinafter the "Corporation"), hereby certifies to the Maryland State
Department of Assessments and Taxation (hereinafter the "Department") as
follows:
(a) The Corporation desires to restate in its entirety
the charter of the Corporation (the "Charter") represented by Articles of
Incorporation originally filed on March 21, 1985 with the Department, as
amended and restated by Articles of Amendment and Restatement filed with the
Department on March 29, 1985, April 11, 1985, May 21, 1985, November 8, 1989
and January 31, 1990, corrected by a Certificate of Correction filed with
the Department on February 8, 1990 and amended by Articles of Amendment
dated April 23, 1992 filed with the Department;
(b) The provisions set forth in these Articles of
Restatement are all of the provisions of the Charter currently in effect;
(c) The provisions of these Articles of Restatement
have been approved by a majority of the entire Board of Directors;
(d) The Charter is not amended by these Articles of
Restatement;
(e) The current address of the principal office of the
Corporation in the State of Maryland is c/o The Corporation Trust
Incorporated, 32 South Street, Baltimore, Maryland 21202;
(f) The name and address of the Corporation's current
resident agent is The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202;
(g) There are currently seven directors of the
Corporation and the names of those directors currently in office are as
follows: Kenneth B. Roath, Paul V. Colony, Robert R. Fanning, Jr., Michael
D. McKee, Orville E. Melby, Harold M. Messmer, Jr. and Peter L. Rhein; and
(h) The Charter of the Corporation is hereby restated
to read as hereinbelow set forth in full.
<PAGE>
ARTICLES OF INCORPORATION
OF
HEALTH CARE PROPERTY INVESTORS, INC.
ARTICLE I
NAME
----
The name of this corporation shall be HEALTH CARE PROPERTY
INVESTORS, INC.
ARTICLE II
PURPOSES
--------
The purpose for which this corporation is formed is to engage in the
ownership of real property and any other lawful act or activity for which
corporations may be organized under the General Corporation Law of Maryland
as now or hereinafter in force.
ARTICLE III
PRINCIPAL OFFICE AND RESIDENT AGENT
-----------------------------------
The post office address of the principal office of the corporation
in the State of Maryland is c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202. The name of the resident agent of the
corporation in the State of Maryland is The Corporation Trust Incorporated,
and the post office address is 32 South Street, Baltimore, Maryland 21202,
but this corporation may maintain an office or offices in such other place
or places as may be, from time to time, fixed by its Board of Directors or
as may be fixed by the Bylaws of the corporation.
ARTICLE IV
CAPITAL STOCK
-------------
Section 1. The total number of shares of capital stock which the
---------
corporation shall have authority to issue is One Hundred Fifty Million
(150,000,000), of which One Hundred Million (100,000,000) shall be shares of
Common Stock having a par value of $1.00 per share and Fifty Million
(50,000,000) shall be shares of Preferred Stock having a par value of $1.00
per share. The aggregate par value of all of said shares shall be One
Hundred Fifty Million Dollars ($150,000,000).
Section 2. The Board of Directors shall have authority to issue the
---------
Preferred Stock from time to time in one or more series and by resolution
shall designate with respect to any series of Preferred Stock;
(1) the number of shares constituting such series and the
distinctive designation thereof;
(2) the voting rights, if any, of such series;
(3) the rate of dividends payable on such series, the time or
times when such dividends will be payable, the preference to, or any
relation to, the payment of dividends to any other class or series of stock
and whether the dividends will be cumulative or non-cumulative;
(4) whether there shall be a sinking or similar fund for the
purchase of shares of such series and, if so, the terms and provisions that
shall govern such fund;
(5) the rights of the holders of shares of such series upon the
liquidation, dissolution or winding up of the corporation;
(6) the rights, if any, of holders of shares of such series to
convert such shares into or to exchange such shares for, shares of any other
class or classes or any other series of the same or of any other class or
classes of stock of the corporation, the price or prices or rate or rates of
exchange, with such adjustments as shall be provided, at which such shares
shall be convertible or exchangeable, whether such rights of conversion or
exchange shall be exercisable at the option of the holder of the shares of
the corporation or upon the happening of a specified event, and any other
terms or conditions of such conversion or exchange; and
(7) any other preferences, powers and relative participating,
optional or other special rights and qualifications, limitations or
restrictions of shares of such series.
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING AND REGULATING
------------------------------------------------
CERTAIN POWERS OF THE CORPORATION AND
-------------------------------------
THE BOARD OF DIRECTORS AND STOCKHOLDERS
---------------------------------------
Section 1. The Board of Directors shall have the authority without
---------
stockholder approval to designate capital gain allocation to holders of any
series or all series of Preferred Stock.
Section 2. The affirmative vote of the holders of not less than 90%
---------
of the outstanding shares of "voting stock" (as hereinafter defined) of the
corporation shall be required for the approval or authorization of any
"Business Combination" (as hereinafter defined) of the corporation with any
"Related Person" (as hereinafter defined). However, such 90% voting
requirement shall not be applicable if: (1) the Board of Directors of the
corporation by unanimous vote or written consent shall have expressly
approved in advance the acquisition of outstanding shares of voting stock of
the corporation that caused the Related Person to become a Related Person or
shall have approved the Business Combination prior to the Related Person
involved in the Business Combination having become a Related Person; or (2)
the Business Combination is solely between the corporation and another
corporation, one hundred percent of the voting stock of which is owned
directly or indirectly by the corporation.
For purposes of this Article V, Section 2:
(i) The term "Business Combination" shall mean (a) any
merger or consolidation of the corporation with or into a Related Person,
(b) any sale, lease, exchange, transfer or other disposition, including
without limitation a mortgage or any other security device, of all or any
"Substantial Part" (as hereinafter defined) of the assets of the corporation
(including without limitation any voting securities of a subsidiary) to a
Related Person, (c) any merger or consolidation of a Related Person with or
into the corporation, (d) any sale, lease, exchange, transfer or other
disposition of all or any Substantial Part of the assets of a Related Person
to the corporation, (e) the issuance of any securities (other than by way of
pro rata distribution to all stockholders) of the corporation to a Related
Person, and (f) any agreement, contract or other arrangement providing for
any of the transactions described in this definition of Business
Combination.
(ii) The term "Related Person" shall mean and include
any individual, corporation, partnership or other person or entity which,
together with its "Affiliates" and "Associates" (as defined on October 1,
1982 in Rule 12b-2 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), "Beneficially Owns" (as defined on October 1, 1982 in
Rule 13d-3 under the Exchange Act) in the aggregate 10% or more of the
outstanding voting stock of the corporation, and any Affiliate or Associate
of any such individual, corporation, partnership or other person or entity.
(iii)The term "Substantial Part" shall mean more than
10% of the book value of the total assets of the corporation as of the end
of its most recent fiscal year ending prior to the time the determination is
being made.
(iv) Without limitation, any shares of Common Stock of
the corporation that any Related Person has the right to acquire pursuant to
any agreement, or upon exercise of conversion rights, warrants or options,
or otherwise, shall be deemed beneficially owned by the Related Person.
(v) The term "voting stock" shall mean the outstanding
shares of capital stock of the corporation entitled to vote generally in the
election of directors. In a vote required by or provided for in this
Article V, Section 2, each share of voting stock shall have the number of
votes granted to it generally in the election of directors.
Section 3. The number of Board of Directors shall be not less than
---------
three (3) nor more than nine (9) until changed by an amendment to the
Bylaws. Upon action by the initial Board of Directors to elect an
additional four (4) Directors prior to the first annual meeting of
stockholders, the exact number of the Directors shall be seven (7). The
Board of Directors shall thenceforth be classified into three classes, with
two Directors in Class 1, two Directors in Class 2 and three Directors in
Class 3. Each Director in Class 1 initially shall serve for a term ending
at the annual meeting of stockholders in 1986; each Director in Class 2
shall serve for an initial term ending at the annual meeting of stockholders
in 1987; and each Director in Class 3 shall serve for a term ending at the
annual meeting of stockholders in 1988. After the respective initial terms
of the classes indicated, each such class of Directors shall be elected for
successive terms ending at the annual meeting of stockholders the third year
after election.
The number of Directors may be increased or decreased from time to
time in such manner as shall be provided in the Bylaws, provided that the
number shall not be reduced to less than three (3). In case of any increase
in the number of Directors, the additional Directors may be elected by the
stockholders at any annual or special meeting, or by the Directors as shall
be provided by the Bylaws. A Director may be removed by the vote or written
consent of the holders of two-thirds of the outstanding shares or by a
unanimous vote of all other members of the Board of Directors. Special
meetings of the stockholders may be called in a manner consistent with the
Bylaws of the corporation for the purpose of removing a Director.
Section 4. If the Board of Directors shall, at any time and in good
---------
faith, be of the opinion that direct or indirect ownership of at least 9.9%
or more of the voting shares of stock of the corporation has or may become
concentrated in the hands of one "beneficial owner" (as defined on October
1, 1982 in Rule 13d-3 under the Exchange Act), the Board of Directors shall
have the power (i) by lot or other means deemed equitable by them to call
for the purchase from any stockholder of the corporation a number of voting
shares sufficient, in the opinion of the Board of Directors, to maintain or
bring the direct or indirect ownership of voting shares of stock of the
corporation of such beneficial owner to no more than 9.9% of the outstanding
voting shares of stock of the corporation, and (ii) to refuse to transfer or
issue voting shares of stock of the corporation to any person whose
acquisition of such voting shares would, in the opinion of the Board of
Directors, result in the direct or indirect ownership of more than 9.9% of
the outstanding voting shares of stock of the corporation. The purchase
price for any voting shares of stock shall be equal to the fair market value
of the shares reflected in the closing sales price for the shares, if then
listed on a national securities exchange, or the average of the closing
sales prices for the shares if then listed on more than one national
securities exchange, or if the shares are not then listed on a national
securities exchange, the latest bid quotation for the shares if then traded
over-the-counter on the last business day immediately preceding the day on
which notices of such acquisition are sent, or, if no such closing sales
prices or quotations are available, then the purchase price shall be equal
to the net asset value of such stock as determined by the Board of Directors
in accordance with the provisions of applicable law. Payment of the
purchase price shall be made in cash by the corporation at such time and in
such manner as may be determined by the Board of Directors of the
corporation. From and after the date fixed for purchase by the Board of
Directors, the holder of any shares so called for purchase shall cease to be
entitled to distributions, voting rights and other benefits with respect to
such shares, excepting only the right to payment of the purchase price fixed
as aforesaid. Any transfer of shares, options, warrants or other securities
convertible into voting shares that would create a beneficial owner of more
than 9.9% of the outstanding shares of stock of this corporation shall be
deemed void ab initio and the intended transferee shall be deemed never to
-- ------
have had an interest therein. If the foregoing provision is determined to
be void or invalid by virtue of any legal decision, statute, rule or
regulation, then the transferee of such shares, options, warrants or other
securities convertible into voting shares shall be deemed, at the option of
the corporation, to have acted as agent on behalf of the corporation in
acquiring such shares and to hold such shares on behalf of the corporation.
Section 5. The holders of stock of the corporation shall have no
---------
preemptive or preferential right to subscribe for or purchase any stock or
securities of the corporation.
ARTICLE VI
AMENDMENTS
----------
Section 1. Notwithstanding any of the provisions of these Articles or
-------
the Bylaws of the corporation (and notwithstanding the fact that a lesser
percentage may be specified by law, these Articles or the Bylaws of the
corporation) the affirmative vote of the holders of at least 90% of the
"voting stock" of the corporation, voting together as a single class, shall
be required to repeal or amend any provision inconsistent with Section 2,
Section 3 or Section 4 of Article V.
Section 2. The corporation reserves the right from time to time to amend,
---------
alter or repeal any provision contained in these Articles of Incorporation
in the manner now or hereafter prescribed by statute, and all rights
conferred on stockholders herein are subject to this reservation.
ARTICLE VII
PERPETUAL EXISTENCE
-------------------
The period of the existence of the corporation is to be perpetual.
ARTICLE VIII
LIMITATION ON PERSONAL LIABILITY
--------------------------------
OF DIRECTORS AND OFFICERS
------------------------
A director or officer shall not be personally liable to the
corporation or its stockholders for money damages unless (i) it is proved
that the person actually received an improper benefit or profit in money,
property, or services, for the amount of the benefit or profit in money,
property, or services actually received or (ii) a judgment or other final
adjudication adverse to the person is entered in a proceeding, based on a
finding in the proceeding that the person's action, or failure to act, was
the result of active and deliberate dishonesty and was material to the cause
of action adjudicated in the proceeding.
If the General Corporation Law of the State of Maryland is hereafter
amended to authorize corporate action further limiting or eliminating the
personal liability of directors or officers or expanding such liability,
then the liability of directors or officers to the corporation or its
stockholders shall be limited or eliminated to the fullest extent permitted
by the Maryland General Corporation Law, as so amended from time to time.
Any repeal or modification of this Article VIII by the stockholders of the
corporation shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director or officer of the
corporation existing at the time of such repeal or modification.
* * *
IN WITNESS WHEREOF, Health Care Property Investors, Inc. has caused
these Articles of Restatement to be signed in its name and on its behalf by
Kenneth B. Roath, its President, and attested by Lorna M. Mellies, its
Secretary, this 27th day of April, 1992.
HEALTH CARE PROPERTY INVESTORS, INC.,
By: ________________________________
Kenneth B. Roath
President
ATTEST:
By: ______________________________
Lorna M. Mellies
Secretary
<PAGE>
VERIFICATION
THE UNDERSIGNED, President of Health Care Property Investors, Inc.,
a Maryland corporation, who executed on behalf of said Corporation the
foregoing Articles of Restatement, of which this certificate is made a part,
hereby acknowledges the foregoing Articles of Restatement to be the
corporate act of said Corporation and further certifies that, to the best of
his knowledge, information and belief, the matters and facts set forth
therein are true in all material respects, under the penalties of perjury.
____________________________________
Kenneth B. Roath
President
Exhibit 10.38
January 27, 1995
Ms. Lisa Y. Brown
Vice President
The Bank of New York, as agent
10990 Wilshire Blvd. Suite 1700
Los Angeles, CA 90024
Dear Lisa:
Pursuant to Section 11.12 of the Revolving Credit Agreement dated as
of March 31, 1994 among Health Care Property Investors, Inc., certain Banks as
indicated in the Revolving Credit Agreement and The Bank of New York as agent,
we would request that all banks that are party to the agreement extend the
Termination Date of the Agreement by one calendar year to March 31, 1998.
Please indicate your agreement to such one year extension by signing the two
enclosed copies of this letter prior to February 28, 1995. Please do not
hesitate to call me if you need any additional information.
Yours sincerely,
Dev Ghose
Vice President-Finance and Treasurer
Agreement to extend Termination Date by one calendar year to March 31, 1998.
The Bank of New York
By: /s/ Lisa Y. Brown
----------------------
Its: Vice President
---------------------
<PAGE>
January 27, 1995
Ms. Lisa Y. Brown
Vice President
The Bank of New York, as Agent
10990 Wilshire Blvd. Suite 1700
Los Angeles, CA 90024
Dear Lisa:
Pursuant to Section 11.12 of the Revolving Credit Agreement dated as
of March 31, 1994 among Health Care Property Investors, Inc., certain Banks as
indicated in the Revolving Credit Agreement and The Bank of New York as agent,
we would request that all banks that are party to the agreement extend the
Termination Date of the Agreement by one calendar year to March 31, 1998.
Please indicate your agreement to such one year extension by signing the two
enclosed copies of this letter and sending both original copies to The Bank of
New York prior to February 28, 1995. Please do not hesitate to call me if you
need any additional information.
Yours sincerely,
Dev Ghose
Vice President-Finance and Treasurer
Agreement to extend Termination Date by one calendar year to March 31, 1998.
The Bank of New York NationsBank
By: /s/ Lisa Y. Brown By: /s/ Brad W. DeSpain
---------------------- ----------------------
Its: Vice President Its: Vice President
--------------------- ---------------------
<PAGE>
January 27, 1995
Ms. Lisa Y. Brown
Vice President
The Bank of New York, as Agent
10990 Wilshire Blvd. Suite 1700
Los Angeles, CA 90024
Dear Lisa:
Pursuant to Section 11.12 of the Revolving Credit Agreement dated as
of March 31, 1994 among Health Care Property Investors, Inc., certain Banks as
indicated in the Revolving Credit Agreement and The Bank of New York as agent,
we would request that all banks that are party to the agreement extend the
Termination Date of the Agreement by one calendar year to March 31, 1998.
Please indicate your agreement to such one year extension by signing the two
enclosed copies of this letter and sending both original copies to The Bank of
New York prior to February 28, 1995. Please do not hesitate to call me if you
need any additional information.
Yours sincerely,
Dev Ghose
Vice President-Finance and Treasurer
Agreement to extend Termination Date by one calendar year to March 31, 1998.
The Bank of New York Bank of Hawaii
By: /s/ Lisa Y. Brown By: /s/ Marcy E. Fleming
---------------------- ----------------------
Its: Vice President Its: Vice President
--------------------- ---------------------
<PAGE>
January 27, 1995
Ms. Lisa Y. Brown
Vice President
The Bank of New York, as Agent
10990 Wilshire Blvd. Suite 1700
Los Angeles, CA 90024
Dear Lisa:
Pursuant to Section 11.12 of the Revolving Credit Agreement dated as
of March 31, 1994 among Health Care Property Investors, Inc., certain Banks as
indicated in the Revolving Credit Agreement and The Bank of New York as agent,
we would request that all banks that are party to the agreement extend the
Termination Date of the Agreement by one calendar year to March 31, 1998.
Please indicate your agreement to such one year extension by signing the two
enclosed copies of this letter and sending both original copies to The Bank of
New York prior to February 28, 1995. Please do not hesitate to call me if you
need any additional information.
Yours sincerely,
Dev Ghose
Vice President-Finance and Treasurer
Agreement to extend Termination Date by one calendar year to March 31, 1998.
The Bank of New York Wells Fargo Bank
By: /s/ Lisa Y. Brown By: /s/ Margot Golding
---------------------- ---------------------------
Its: Vice President Its: Regional Vice President
---------------------- --------------------------
<PAGE>
January 27, 1995
Ms. Lisa Y. Brown
Vice President
The Bank of New York, as Agent
10990 Wilshire Blvd. Suite 1700
Los Angeles, CA 90024
Dear Lisa:
Pursuant to Section 11.12 of the Revolving Credit Agreement dated as
of March 31, 1994 among Health Care Property Investors, Inc., certain Banks as
indicated in the Revolving Credit Agreement and The Bank of New York as agent,
we would request that all banks that are party to the agreement extend the
Termination Date of the Agreement by one calendar year to March 31, 1998.
Please indicate your agreement to such one year extension by signing the two
enclosed copies of this letter and sending both original copies to The Bank of
New York prior to February 28, 1995. Please do not hesitate to call me if you
need any additional information.
Yours sincerely,
Dev Ghose
Vice President-Finance and Treasurer
Agreement to extend Termination Date by one calendar year to March 31, 1998.
The Bank of New York Kredietbank NV
By: /s/ Lisa Y. Brown By: /s/ Diane M. Grimmig
--------------------- -------------------------
/s/ Robert Snauffer
-------------------------
Its: Vice President Its: Vice President
--------------------- ------------------------
Vice President
------------------------
<PAGE>
January 27, 1995
Ms. Lisa Y. Brown
Vice President
The Bank of New York, as Agent
10990 Wilshire Blvd. Suite 1700
Los Angeles, CA 90024
Dear Lisa:
Pursuant to Section 11.12 of the Revolving Credit Agreement dated as
of March 31, 1994 among Health Care Property Investors, Inc., certain Banks as
indicated in the Revolving Credit Agreement and The Bank of New York as agent,
we would request that all banks that are party to the agreement extend the
Termination Date of the Agreement by one calendar year to March 31, 1998.
Please indicate your agreement to such one year extension by signing the two
enclosed copies of this letter and sending both original copies to The Bank of
New York prior to February 28, 1995. Please do not hesitate to call me if you
need any additional information.
Yours sincerely,
Dev Ghose
Vice President-Finance and Treasurer
Agreement to extend Termination Date by one calendar year to March 31, 1998.
The Bank of New York Long-Term Credit Bank of Japan, Ltd.
By: Lisa Y. Brown By: /s/ Yutaka Kamisawa
---------------------- -------------------------
Its: Vice President Its: Deputy General Manager
--------------------- ------------------------
<PAGE>
January 27, 1995
Ms. Lisa Y. Brown
Vice President
The Bank of New York, as Agent
10990 Wilshire Blvd. Suite 1700
Los Angeles, CA 90024
Dear Lisa:
Pursuant to Section 11.12 of the Revolving Credit Agreement dated as
of March 31, 1994 among Health Care Property Investors, Inc., certain Banks as
indicated in the Revolving Credit Agreement and The Bank of New York as agent,
we would request that all banks that are party to the agreement extend the
Termination Date of the Agreement by one calendar year to March 31, 1998.
Please indicate your agreement to such one year extension by signing the two
enclosed copies of this letter and sending both original copies to The Bank of
New York prior to February 28, 1995. Please do not hesitate to call me if you
need any additional information.
Yours sincerely,
Dev Ghose
Vice President-Finance and Treasurer
Agreement to extend Termination Date by one calendar year to March 31, 1998.
The Bank of New York Sanwa Bank of California
By: /s/ Lisa Y. Brown By: /s/ Del Lorimer
---------------------- ----------------------
Its: Vice President Its: Vice President
--------------------- ---------------------
Exhibit 10.39
AMENDMENT TO THE
HEALTH CARE PROPERTY INVESTORS, INC.
EXECUTIVE RETIREMENT PLAN
Health Care Property Investors, Inc., a corporation organized
under the laws of the State of Maryland, adopted the Health Care Property
Investors, Inc. Executive Retirement Plan (the "Plan") effective as of May 1,
1988.
This Amendment to the Plan has been adopted by a resolution of
the Compensation Committee of the Board of Directors of Health Care Property
Investors, Inc. effective as of January 1, 1993.
1. Section 1.3 of the Plan is hereby amended to read in
its entirety as follows:
1.3 "Basic Plan Benefit" means the amount
---
of benefit payable from the Basic Plan to a Participant in the form of
a straight life annuity. If the Basic Plan includes a defined
contribution plan, the lump sum value will be converted to a straight
life annuity based on actuarial factors selected by the Committee. If
the Basic Plan provides for employee contributions or employer
contributions which are attributable to an employee's deferral of
compensation (other than employer matching contributions), such as
under a cash or deferred arrangement under Section 401(k) of the
Internal Revenue Code of 1986, the Basic Plan Benefit shall not include
benefits which are attributable to such contributions and any earnings
thereon. In addition, the Basic Plan Benefit shall not include
benefits that are attributable to the employer discretionary
contributions and any earnings thereon.
2. Section 1.7 of the Plan is hereby amended to read in
its entirety as follows:
1.7 "Earnings" means total annual cash
---
compensation, including base salary, annual incentives awards, and
deferred compensation. In addition, "Earnings" shall include employer
discretionary contributions under the Basic Plan. Specifically
excluded from "Earnings" shall be the value of stock grants (and
dividends therefrom), stock options and automobile allowances.
3. Section 1.9 of the Plan is hereby amended to read in
its entirety as follows:
1.9 "Other Retirement Income" means the
---
sum of retirement income payable to a Participant from the Basic Plan
Benefit and Social Security Benefit.
Exhibit 21.1
HEALTH CARE PROPERTY INVESTORS, INC.
List of Subsidiaries
Texas HCP, Inc., a Maryland corporation
HCPI Mortgage Corp., a Delaware corporation
HCPI Charlotte, Inc., a Delaware corporation
HCPI Knightdale, Inc., a Delaware corporation
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 10-K of our report dated January 12, 1995 (except with
respect to the matters discussed in Note 12 to the financial statements, as to
which the date is March 13, 1995) included in Registration Statement File No.
33-66676. It should be noted that we have not audited any financial statements
of the company subsequent to December 31, 1994 or performed any audit
procedures subsequent to the dates of our report.
ARTHUR ANDERSEN LLP
Los Angeles
March 29, 1995
