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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 20, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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HEALTH CARE PROPERTY INVESTORS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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MARYLAND 33-0091377
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
4675 MACARTHUR COURT, 9TH FLOOR
NEWPORT BEACH, CALIFORNIA 92660
(949) 221-0600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
KENNETH B. ROATH
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
4765 MACARTHUR COURT, 9TH FLOOR
NEWPORT BEACH, CALIFORNIA 92660
(949) 221-0600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JEFFREY T. PERO, ESQ. PAMELA B. KELLY, ESQ.
LATHAM & WATKINS LATHAM & WATKINS
505 MONTGOMERY STREET, SUITE 1900 633 WEST FIFTH STREET, SUITE 4000
SAN FRANCISCO, CALIFORNIA 94111 LOS ANGELES, CALIFORNIA 90071
(415) 391-0600 (213) 485-1234
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this From are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
AMOUNT TO BE AGGREGATE PRICE OFFERING AMOUNT OF
TITLE OF SHARES TO BE REGISTERED REGISTERED PER SHARE(2) PRICE(3) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $1.00 per
share and related Rights....... 168,350(1) $31.5938 $5,318,807.81 $1,480.00
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(1) Including Common Stock purchase rights (the "Rights") attached to all
outstanding shares of Common Stock.
(2) Based upon the average of the high and low prices of the shares of Common
Stock reported on the New York Stock Exchange on November 18, 1998,
pursuant to Rule 457(c) of the Securities Act of 1933.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 of the Securities Act of 1933.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY +
+NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN +
+OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE +
+SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 20, 1998
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PROSPECTUS
HEALTH CARE PROPERTY INVESTORS, INC.
168,350 SHARES
COMMON STOCK
-----------
This prospectus relates to our possible issuance of up to 168,350 shares of our
common stock, par value $1.00 per share, from time to time to Cambridge Medical
Center of San Diego, LLC ("Cambridge") or any permitted transferee of Cambridge
(the "Selling Holders") if and to the extent the Selling Holders elect to
exchange units of non-managing member interest in Cambridge Medical Properties,
LLC ("CMP") for shares of our common stock. This prospectus also relates to the
possible offer and sale of those shares of common stock from time to time by
the Selling Holders. This registration does not necessarily mean that we will
issue any shares of our common stock or that the Selling Holders will offer or
sell any of the shares of common stock.
The non-managing member units were issued to the Selling Holders on November
21, 1997 in connection with our formation of CMP and the contribution of
certain real property assets by Cambridge to CMP. Beginning on November 21,
1998, the non-managing member units held by Cambridge may be exchanged by
Cambridge for our common stock on a one-to-one basis, subject to adjustment in
the event we pay a dividend or distribution on our common stock in shares of
common stock, split or subdivide our outstanding common stock, or effect a
reverse stock split or other combination of our common stock into a smaller
number of shares. In lieu of issuing common stock upon the exchange of the non-
managing member units, we may, at our option, deliver cash in an amount equal
to the market value of an equivalent number of shares of our common stock. We
anticipate, however, that we will elect to issue common stock rather than pay
cash in exchange for the non-managing member units tendered for exchange, if
any. The terms and conditions associated with the exchange of the non-managing
member units are more fully described later in this Prospectus under the
heading "Exchange of Non-Managing Member Units."
We are filing the Registration Statement of which this Prospectus is a part
pursuant to a contractual obligation. We will not receive any proceeds from the
issuance of the shares of our common stock to the Selling Holders but will
acquire the non-managing member units currently held by the Selling Holders
tendered in exchange for shares of our common stock. We have agreed to pay
certain registration expenses in connection with the issuance, and subsequent
sale by the Selling Holders, of the shares of common stock. With the
acquisition of non-managing member units, our ownership interest in CMP will
increase.
Our shares of Common Stock are traded on the New York Stock Exchange (the
"NYSE") under the symbol "HCP."
To assist us in qualifying as a REIT, the transfer of shares of our capital
stock is restricted, and beneficial ownership by any person is limited to 9.9%
of the number of our voting shares of capital stock.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is November , 1998
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TABLE OF CONTENTS
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PAGE
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Where You Can Find More Information........................................ 2
Incorporation of Certain Documents by Reference ........................... 3
Forward-Looking Statements................................................. 4
The Company................................................................ 5
Use of Proceeds............................................................ 5
Description of Capital Stock............................................... 5
Exchange of Non-Managing Member Units...................................... 10
Comparison of Cambridge Medical Properties and Our Company................. 13
Certain Federal Income Tax Considerations.................................. 22
Selling Holders............................................................ 34
Plan of Distribution....................................................... 34
Legal Matters.............................................................. 35
Experts.................................................................... 35
</TABLE>
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Act of 1934,
as amended (the "Exchange Act") and thus have filed all the appropriate
reports, proxy statements and other information with the Securities and
Exchange Commission (the "SEC"). Such materials can be inspected and copied at
Room 1024 of the offices of the SEC, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, the regional offices of the SEC located at 7 World
Trade Center, 13th Floor, New York, New York 10048, and at Suite 1400, Citicorp
Center, 500 West Madison Street, Chicago, Illinois 60661 at their prescribed
rates. The SEC maintains a World Wide Web site at http://www.sec.gov that
contains reports, proxy and other information regarding registrants that file
electronically with the SEC. You may also inspect reports, proxy materials and
other information concerning us at the offices of the New York Stock Exchange,
20 Broad Street, New York, New York 10005.
We have filed with the SEC a Registration Statement on Form S-3 (together with
all amendments and exhibits thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus is
part of the Registration Statement that we filed with the SEC and does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
SEC. You may inspect the Registration Statement and the related exhibits,
without charge at the public reference facilities maintained by the SEC at the
Public Reference Room of the SEC, Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and you may obtain copies from the SEC upon
payment of the prescribed fees.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by
referring you to those documents.
We incorporate by reference the documents listed below:
(i) Annual Report on Form 10-K for the fiscal year ending December 31, 1997;
(ii) Amendment No. 1 to Annual Report on Form 10-K/A for the fiscal year ending
December 31, 1997;
(iii) Amendment No. 2 to Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1997;
(iv) Proxy statement dated March 30, 1998;
(v) Quarterly Report on Form 10-Q for the quarter ending March 31, 1998;
(vi) Amendment to Quarterly Report on Form 10-Q for the quarter ended March 31,
1998;
(vii) Quarterly Report on Form 10-Q for the quarter ended June 30, 1998;
(viii) Amendment to Quarterly Report on Form 10-Q for the quarter ended June
30, 1998;
(ix) Quarterly Report on Form 10-Q for the quarter ended September 30, 1998;
(x) Current Report on Form 8-K dated April 23, 1998;
(xi) Current Report on Form 8-K dated April 30, 1998;
(xii) Current Report on Form 8-K dated June 3, 1998;
(xiii) Current Report on Form 8-K dated June 17, 1998;
(xiv) Amendment to Current Report on Form 8-K dated June 17, 1998;
(xv) Current Report on Form 8-K dated August 17, 1998;
(xvi) Current Report on Form 8-K dated November 5, 1998; and
(xvii) The description of the Common Stock contained in our Registration
Statement on Form 10, dated May 7, 1985 (File No. 1-8895), including
amendments dated May 20, 1985 and May 23, 1985.
All documents that we file with the SEC pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act subsequent to the date on the Prospectus and prior
to the termination of the Offering of the Common Stock shall be deemed to be
incorporated by reference into this Prospectus and to be part hereof from the
date of filing such documents. Any statement contained in this Prospectus or in
a document incorporated or deemed to be incorporated by reference in this
Prospectus shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document, as the case may be, which also is or is deemed to
be incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Copies of these documents (not including the exhibits unless specifically
incorporated by reference) will be provided without charge to you or any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request. Copies of this Prospectus, as amended or supplemented from time to
time, and any other documents (or parts of documents) that constitute part of
this Prospectus
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under Section 10(a) of the Securities Act will also be provided without charge
to you, upon written or oral request. Requests for such copies should be
directed to:
James G. Reynolds
Executive Vice President and Chief Financial Officer
Health Care Property Investors, Inc.
4675 MacArthur Court, 9th Floor, Newport Beach, California 92660
(949) 221-0600.
FORWARD-LOOKING STATEMENTS
Some of the information included or incorporated by reference in this
Prospectus contains forward-looking statements including statements that are
not historical or factual. We intend such forward looking statements to be
covered by the safe harbor provisions for forward looking statements contained
in the Private Securities Litigation Reform Act of 1995 and we are including
this paragraph for purposes of complying with these safe harbor provisions. The
forward looking statements include, among other things, statements regarding
our intent, belief or expectations of our Company and its officers. You can
identify these statements by the use of terminology such as "may," "will,"
"expect," "believe," "intend," "plan," "estimate," "should" and other
comparable terms or the negative thereof. In addition, we, through our senior
management, from time to time make forward looking oral and written public
statements concerning our expected future operations and other developments.
Holders of our Common Stock and other investors are cautioned that, while
forward looking statements reflect our good faith beliefs and best judgment
based upon current information, they are not guarantees of future performance
and are subject to known and unknown risks and uncertainties. Actual results
may differ materially from the expectations contained in the forward looking
statements as a result of various factors. Such factors include (i)
legislative, regulatory, or other changes in the health care industry at the
local, state or federal level which increase the costs of or otherwise affect
the operations of our lessees; (ii) changes in the reimbursement available to
the our lessees and mortgagors by governmental or private payors, including
changes in Medicare and Medicaid payment levels and the availability and cost
of third party insurance coverage; (iii) competition for lessees and
mortgagors, including with respect to new leases and mortgages and the renewal
or roll-over of existing leases; (iv) competition for the acquisition and
financing of health care facilities; (v) the ability of the our lessees and
mortgagors to operate our properties in a manner sufficient to maintain or
increase revenues and to generate sufficient income to make rent and loan
payments; (vi) changes in national or regional economic conditions, including
changes in interest rates and the availability and cost of capital to us; (vii)
the general uncertainty inherent in the Year 2000 issue, particularly the
uncertainty of the Year 2000 readiness of third parties who are material to the
Company's business, such as public or private health care reimbursers, over
whom the Company has no control with the result that the Company cannot ensure
its ability to timely and cost-effectively avert or resolve problems associated
with the Year 2000 issue that may affect its operations and business.
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Unless otherwise indicated or unless the context otherwise requires, all
references in this Prospectus to "we", "us", "our" or the "Company" means
Health Care Property Investors, Inc. and its subsidiaries.
THE COMPANY
Health Care Property Investors, Inc. is a Maryland corporation which was
organized in March 1985 for the purpose of qualifying as a real estate
investment trust ("REIT"). We invest in health care related real estate located
throughout the United States, including long-term care facilities, congregate
care and assisted living facilities, acute care and rehabilitation hospitals,
medical office buildings, physician group practice clinics and psychiatric
facilities. We are the second oldest REIT specializing in health care real
estate and are one of the largest health care REITs in terms of market value of
Common Stock. The market value of our outstanding Common Stock is approximately
$1 billion as of November 10, 1998.
As of September 30, 1998 our portfolio of properties, including equity
investments, consisted of 302 facilities located in 42 states. These facilities
are comprised of 145 long-term care facilities, 83 congregate care and assisted
living facilities, 39 physician group practice clinics, 21 medical office
buildings, seven acute care hospitals, six freestanding rehabilitation
facilities and one psychiatric care facility. The gross acquisition price of
the properties, which includes joint venture acquisitions, was approximately
$1,343,000,000 at September 30, 1998.
Our executive offices are located at 4675 MacArthur Court, 9th Floor, Newport
Beach, California, 92660 and our telephone number is (949) 221-0600.
USE OF PROCEEDS
We will not receive any proceeds from the issuance of the shares of our common
stock to the Selling Holders or from the sale of the shares of our common stock
by the Selling Holders but we have agreed to pay certain registration expenses.
We will acquire additional non-managing member interests in CMP in exchange for
any shares of common stock that we may issue to Selling Holders pursuant to
this prospectus.
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our authorized capital stock consists of 100,000,000 shares of common stock,
par value $1.00 per share (the "Common Stock"), and 50,000,000 shares of
preferred stock, par value $1.00 per share (the "Preferred Stock"). The
following description is qualified in all respects by reference to our Articles
of Restatement of the Company (the "Charter Documents"), a copy of which was
filed as an exhibit to our Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, the Amended and Restated Bylaws (the "Bylaws"), a copy of
which was filed as an exhibit to our Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995, and the Rights Agreement (the "Rights
Agreement") between ourselves and the Bank of New York (successor to Chemical
Trust Company of California), as Rights Agent.
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COMMON STOCK
As of November 12, 1998, there were 30,986,736 shares of Common Stock
outstanding. All shares of Common Stock participate equally in dividends
payable to holders of Common Stock when and as declared by the Board of
Directors and in net assets available for distribution to holders of Common
Stock on liquidation, dissolution, or winding up of our Company. Each
outstanding share of Common Stock entitles the holder to one vote on all
matters submitted to a vote of the stockholders. Holders of Common Stock do not
have cumulative voting rights in the election of directors. All issued and
outstanding shares of Common Stock are, and the Common Stock offered hereby
will be upon issuance, validly issued, fully paid and nonassessable. As a
Holder of the Common Stock you do not have preference, conversion, exchange or
preemptive rights. The Common Stock is listed on the New York Stock Exchange
(NYSE Symbol: HCP).
TRANSFER AGENT
The Transfer Agent and Registrar for our Common Stock is Bank of New York.
STOCKHOLDER RIGHTS PLAN
On July 5, 1990, the Board of Directors of our Company declared a dividend
distribution of one right (each, a "Right") for each outstanding share of
Common Stock of the Company to stockholders of record at the close of business
on July 30, 1990. When exercisable, each Right entitles the registered holder
to purchase from our Company one share of the Common Stock at a price of $47.50
per share, subject to adjustment. Initially, the Rights will be attached to all
outstanding shares of Common Stock, and no separate Rights Certificates will be
distributed. The Board also authorized the issuance of one Right with respect
to each share of Common Stock that shall become outstanding between July 30,
1990 and the earliest of the Distribution Date, the Redemption Date and the
Final Expiration Date (all as defined in the Rights Agreement). Each share of
Common Stock offered hereby will have upon issuance one Right attached.
The Rights will become exercisable and will detach from the Common Stock upon
the earlier of (i) the tenth day after the public announcement that any person
or group has acquired beneficial ownership of 15% or more of our Company's
Common Stock, or (ii) the tenth day after any person or group commences, or
announces an intention to commence, a tender or exchange offer which, if
consummated, would result in the beneficial ownership by a person or group of
30% or more of our Company's Common Stock (the earlier of (i) and (ii) being
the "Distribution Date"). If such person or group acquires beneficial ownership
of 15% or more of the Common Stock (except pursuant to certain cash tender
offers for all outstanding Common Stock approved by the Board of Directors) or
if our Company is the surviving corporation in a merger and the Common Stock is
not changed or exchanged, each Right will entitle the holder to purchase, at
the Right's then current exercise price, that number of shares of the Common
Stock having a market value equal to twice the exercise price. Similarly, if
after the Rights become exercisable, our Company merges or consolidates with,
or sells 50% or more of its assets or earning power to, another person, each
Right will then entitle the holder to purchase, at the Right's then current
exercise price, that number of shares of the stock of the acquiring company
which at the time of such transaction would have a market value equal to twice
the exercise price.
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The Rights may be redeemed in whole, but not in part, at a price of $0.01 per
Right by the Board of Directors at any time until ten days following the public
announcement that a person or group has acquired beneficial ownership of 15% or
more of our Company's outstanding Common Stock. The Board of Directors may,
under certain circumstances, extend the period during which the Rights are
redeemable or postpone the Distribution Date. The Rights will expire on July
30, 2000, unless earlier redeemed.
TRANSFER RESTRICTIONS, REDEMPTION AND BUSINESS COMBINATION PROVISIONS
Because our Company's Board of Directors believes it is essential for our
Company to continue to qualify as a REIT, our Charter Documents contain
restrictions on the ownership and transfer of capital stock of our Company
which are intended to assist our Company in complying with these requirements.
The Ownership Limit relating to Common Stock set forth in the Charter Documents
provides that, if the Board of Directors shall, at any time and in good faith,
be of the opinion that direct or indirect ownership of more than 9.9% or more
of the voting shares of capital stock has or may become concentrated in the
hands of one beneficial owner, the Board of Directors shall have the power (i)
by lot or other means deemed equitable by it to call for the purchase from any
stockholder of our Company 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 capital stock of such beneficial owner to a level
of no more than 9.9% of the outstanding voting shares of our Company's capital
stock, and (ii) to refuse to transfer or issue voting shares of capital stock
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 by that
person of more than 9.9% of the outstanding voting shares of capital stock of
our Company. Further, 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 voting shares shall be deemed void ab
initio and the intended transferee shall be deemed never to have had an
interest therein.
The purchase price for any voting shares of capital stock so redeemed 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 acquisitions are sent by our Company, 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. 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, except the right to
payment of the purchase price for the shares.
The Charter Documents require that, except in certain circumstances, Business
Combinations (as defined below) between our Company and a beneficial holder of
10% or more of our Company's outstanding voting stock (a "Related Person") be
approved by the affirmative vote of at least 90% of
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the outstanding voting shares of our Company. A Business Combination is defined
in the Charter Documents as (a) any merger or consolidation of our Company 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 defined below) of the assets of
our Company (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 our Company, (d) any sale, lease, exchange, transfer or
other disposition of all or any Substantial Part of the assets of a Related
Person to our Company, (e) the issuance of any securities (other than by way of
pro rata distribution to all stockholders) of our Company to a Related Person,
and (f) any agreement, contract or other arrangement providing for any of the
transactions described in the definition of Business Combination. The term
"Substantial Part" shall mean more than 10% of the book value of the total
assets of our Company as of the end of its most recent fiscal year ending prior
to the time the determination is being made.
The foregoing provisions of the Charter Documents and certain other matters may
not be amended without the affirmative vote of at least 90% of the outstanding
voting shares of our Company.
The Rights and the foregoing provisions may have the effect of discouraging
unilateral tender offers or other takeover proposals which certain stockholders
might deem to be in their interests or in which they might receive a
substantial premium. The Board of Directors' authority to issue and establish
the terms of currently authorized Preferred Stock, without stockholder
approval, may also have the effect of discouraging takeover attempts. See
"Preferred Stock." The Rights and the foregoing provisions could also have the
effect of insulating current management against the possibility of removal and
could, by possibly reducing temporary fluctuations in market price caused by
accumulations of shares of Common Stock, deprive stockholders of opportunities
to sell at a temporarily higher market price. However, the Board of Directors
believes that inclusion of the Business Combination provisions in the Charter
Documents and the Rights may help assure fair treatment of stockholders and
preserve the assets of our Company.
The foregoing summary of certain provisions of the Rights and the Charter
Documents does not purport to be complete or to give effect to provisions of
statutory or common law. The foregoing summary is subject to, and qualified in
its entirety by reference to, the provisions of applicable law and, the Charter
Documents and the Rights Agreement, copies of which are incorporated by
reference as exhibits to the Registration Statement of which this Prospectus is
a part.
PREFERRED STOCK
Under the Charter Documents, the Board of Directors of the Company is
authorized without further stockholder action to establish and issue, from time
to time, up to 50,000,000 shares of preferred stock of the Company, in one or
more series, with such designations, preferences, powers and relative
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereon, including, but not limited to, dividend
rights, dividend rate or rates, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions), the redemption price
or prices, and the liquidation preferences as shall be stated in the resolution
providing for the issue of a series of such stock, adopted, at any time or from
time to time, by the Board of Directors of the Company.
8
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As of November 20, 1998 the Company has outstanding 2,400,000 shares of 7 7/8%
Series A Cumulative Redeemable Preferred Stock (the "Series A Preferred Stock")
with a liquidation preference of $60,000,000 and 5,385,000 shares of 8.70%
Series B Cumulative Redeemable Preferred Stock (the "Series B Preferred Stock")
with a liquidation preference of $134,625,000. Certain terms of the Series A
Preferred Stock and Series B Preferred Stock are described below.
SERIES A PREFERRED STOCK
Maturity; Redemption The Series A Preferred Stock has no stated maturity, will
not be subject to any sinking fund or mandatory redemption and is not
convertible into any other securities of the Company. It is not redeemable
prior to September 30, 2002 after which date, the Company may, at its option,
redeem the Series A Preferred Stock at par ($25 a share or $60,000,000 in the
aggregate), plus all accrued and unpaid dividends thereon.
Rank With respect to dividend rights, rights upon liquidation, dissolution or
winding up, holders of the Series A Preferred Stock ranks (i) senior to all
classes or series of our Common Stock, and to all equity securities ranking
junior to the Series A Preferred Stock; and (ii) on a parity with the Series B
Preferred Stock and with all equity securities issued by us, the terms of which
specifically provide that such equity securities rank on a parity with the
Series A Preferred Stock; and (iii) junior to all equity securities issued by
us, the terms of which specifically provide that such equity securities rank
senior to the Series A Preferred Stock.
Dividends Holders of the Series A Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors, out of our funds legally
available for the payment of dividends, cumulative preferential cash dividends
at the rate of 7 7/8% of the liquidation preference per annum per share. These
dividends are cumulative from the date of original issue and are payable
quarterly in arrears on or about the last day of each March, June, September
and December. Dividends will accrue whether or not we have earnings, whether or
not there are funds legally available for the payment of such dividends and
whether or not such dividends are declared.
Voting Rights the Series A Preferred Stock does not have any voting rights,
except if the dividends shall be in arrears for six or more quarterly periods.
In that case they may vote as a class for the election of a total of two
additional directors of our Company.
Restrictions on Ownership and Transfer Subject to certain exceptions and as
more fully described in the articles supplementary relating to the Series A
Preferred Stock, no person or entity may own, or be deemed to own by virtue of
the applicable constructive ownership provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), more than 9.9% (by number or value, whichever
is more restrictive) of the outstanding shares of Series A Preferred Stock. The
foregoing restrictions on ownership and transfer of the Series A Preferred
Stock are intended to assist us in maintaining our status as a REIT.
SERIES B PREFERRED STOCK
Maturity; Redemption The Series B Preferred Stock has no stated maturity, will
not be subject to any sinking fund or mandatory redemption and is not
convertible into any other securities of the Company. It is not redeemable
prior to September 30, 2002 after which date the Company may, at its
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option, redeem the Series B Preferred Stock at par ($25 per share or
$134,625,000 in the aggregate), plus accrued and unpaid dividends thereon.
Rank With respect to dividend rights, rights upon liquidation, dissolution or
winding up, the Series B Preferred Stock ranks (i) senior to all classes or
series of our Common Stock and to all equity securities ranking junior to the
Series B Preferred Stock; (ii) on a parity with the Series A Preferred Stock
and all equity securities issued by us the terms of which specifically provide
that such equity securities rank on a parity with the Series B Preferred Stock;
and (iii) junior to all equity securities issued by us the terms of which
specifically provide that such equity securities rank senior to the Series B
Preferred Stock.
Dividends Holders of the Series B Preferred Stock are entitled to receive,
when, as and if declared by the Board of Directors, out of our funds legally
available for the payment of dividends, cumulative preferential cash dividends
at the rate of 8.70% of the liquidation preference per annum per share. These
Dividends are cumulative from the date of original issue and are payable
quarterly in arrears on or about the last day of each March, June, September
and December. Dividends will accrue whether or not we have earnings, whether or
not there are funds legally available for the payment of such dividends and
whether or not such dividends are declared.
Voting Rights the Series B Preferred Stock does not have any voting rights,
except if the dividends shall be in arrears for six or more quarterly periods.
In that case they may vote as a class for the election of a total of two
additional directors of our Company.
Restrictions on Ownership and Transfer Subject to certain exceptions and as
more fully described in the articles supplementary relating to the Series B
Preferred Stock, no person or entity may own, or be deemed to own by virtue of
the applicable constructive ownership provisions of the Code, more than 9.9%
(by number or value, whichever is more restrictive) of the outstanding shares
of Series B Preferred Stock. The foregoing restrictions on ownership and
transfer of the Series B Preferred Stock are intended to assist us in
maintaining our status as a REIT.
EXCHANGE OF NON-MANAGING MEMBER UNITS
The description of the exchange rights of a holder of units of non-managing
member interests in CMP (the "Non-Managing Member Units") provided below does
not purport to be complete and is subject to and qualified in its entirety by
reference to the Amended and Restated Limited Liability Company Agreement of
CMP dated November 21, 1997, as the same may be amended (the "Operating
Agreement"), which is incorporated by reference as an exhibit to the
Registration Statement of which this Prospectus is a part.
TERMS OF EXCHANGE
Exchange Rights. Each holder of Non-Managing Member Units has the right,
beginning on November 21, 1998, to require our Company to acquire all or a
portion of the Non-Managing Member Units held by it in exchange for, at our
election, cash or shares of our Common Stock ("Exchange Rights"). No holder of
Non-Managing Member Units effecting an exchange of all or a portion of the Non-
Managing Member Units held by it (a "Tendering Holder") is entitled to tender
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less than 1,000 Non-Managing Member Units for exchange at any one time unless
such lesser amount is all of the Non-Managing Member Units then owned by the
Tendering Holder. As of the date of this Prospectus, the Selling Holders own
168,350 Non-Managing Member Units. Upon exchange, the Tendering Holder will
receive either that number of exchange shares (the "Exchange Shares")
determined by multiplying the number of Non-Managing Member Units tendered by
an adjustment factor or, at the election of our Company an amount of cash equal
to the market value of such number of Exchange Shares. As of the date of this
Prospectus, the adjustment factor is 1.0; however, the adjustment factor will
be adjusted to account for the economic effect of (i) the payment of any
dividends or other distributions on our Common Stock in shares of Common Stock,
(ii) any split or subdivision in our outstanding Common Stock, and (iii) any
reverse stock split or other combination of our outstanding Common Stock into a
smaller number of shares. If we elect to deliver cash in lieu of all or any
portion of the Exchange Shares, the market value of those shares will be equal
to the average of the closing trading price of the Common Stock for the ten
trading days ending on the trading day immediately prior to the day on which
the Tendering Holder delivers a Notice of Exchange to us. Non-Managing Member
Units that are acquired by our Company pursuant to the exercise of Exchange
Rights will be held by us as Non-Managing Member Units with the same rights and
preferences of Non-Managing Member Units held by non-managing members of CMP.
We anticipate that we will generally elect to acquire any Non-Managing Member
Units tendered to us for exchange by issuing shares of Common Stock. Our
acquisition of the Non-Managing Member Units, whether they are acquired for
shares of Common Stock or cash, will be treated as a sale of the Non-Managing
Member Units to us for Federal income tax purposes. See "Certain Federal Income
Tax Considerations--Tax Consequences of the Exercise of Exchange Rights."
A Tendering Holder effecting an exchange of all or a portion of the Non-
Managing Member Units held by it must deliver to our Company a Notice of
Exchange, substantially in the form of Exhibit B to the Operating Agreement. A
Tendering Holder shall have the right to receive, on the tenth business day
following our receipt of the Notice of Exchange (the "Specified Exchange
Date"), the number of Exchange Shares or, at our election, cash, each in an
amount determined as described above. The Exchange Shares shall be delivered as
duly authorized, validly issued, fully paid and nonassessable shares, free of
any pledge, lien, encumbrance or restriction, other than those provided in our
Company's Articles of Incorporation and Bylaws, the Securities Act, relevant
state securities or blue sky laws and any applicable registration rights
agreement with respect to the Exchange Shares that the Tendering Holder has
entered into. Notwithstanding any delay in delivery, the Tendering Holder shall
be deemed the owner of such shares and vested with all rights of a stockholder
as of the Exchange Date, including, without limitation, the right to vote or
consent, and the right to receive dividends. Correspondingly, the Tendering
Holder's right to receive distributions with respect to the tendered Non-
Managing Member Units will cease as of the Specified Exchange Date.
We will not be obligated to effect an exchange of tendered Non-Managing Member
Units if the issuance of Exchange Shares to the Tendering Holder would be
prohibited under the provisions of our Articles of Incorporation, particularly
those which are intended to protect our qualification as an REIT.
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COMPARISON OF OWNERSHIP OF NON-MANAGING MEMBER UNITS AND COMMON STOCK
Generally, the nature of an investment in our Common Stock is similar in
several respects to an investment in Non-Managing Member Units. However, there
are also differences between ownership of Non-Managing Member Units and
ownership of Common Stock, some of which may be material to investors.
The information below highlights a number of the significant differences
between CMP and us, relating to, among other things, form of organization,
management control, voting rights, compensation and fees, investor rights,
liquidity and Federal income tax considerations. These comparisons are
intended to assist holders of Non-Managing Member Units in understanding how
their investment will be changed if they exchange their Non-Managing Member
Units for shares of our Common Stock. THIS DISCUSSION IS SUMMARY IN NATURE AND
DOES NOT CONSTITUTE A COMPLETE DISCUSSION OF THESE MATTERS. INVESTORS SHOULD
CAREFULLY REVIEW THE BALANCE OF THIS PROSPECTUS AND THE REGISTRATION STATEMENT
OF WHICH THIS PROSPECTUS IS A PART FOR ADDITIONAL IMPORTANT INFORMATION ABOUT
US.
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COMPARISON OF CAMBRIDGE MEDICAL PROPERTIES AND OUR COMPANY
FORM OF ORGANIZATION AND ASSETS OWNED -- CMP
CMP was organized on November 18, 1997 as a Delaware limited liability company.
CMP owns various medical office buildings, including the medical office
buildings located at 7910, 7920, 7930, 8008 and 8010 Frost Street, San Diego,
CA (the "Cambridge Properties"), which are managed by Cambridge Healthcare
Management Corp., an affiliate of Cambridge.
FORM OF ORGANIZATION AND ASSETS OWNED -- THE COMPANY
HCPI is a Maryland corporation. We have elected to be taxed as a REIT under the
Internal Revenue Code, commencing with our taxable year ending December 31,
1985, and intend to maintain our qualification as a REIT. As of September 30,
1998 the Company's portfolio of properties, including equity investments,
consisted of 302 facilities located in 42 states. These facilities are
comprised of 145 long-term care facilities, 83 congregate care and assisted
living facilities, 39 physician group practice clinics, 21 medical office
buildings, seven acute care hospitals, six freestanding rehabilitation
facilities and one psychiatric care facility. The gross acquisition price of
the properties, which includes joint venture acquisitions, was approximately
$1,343,000,000 at September 30, 1998.
PURPOSE -- CMP
CMP's purpose is to own, manage, operate and sell the Cambridge Properties and
any other properties acquired by CMP in a tax-free exchange transaction and to
ultimately distribute funds.
PURPOSE - THE COMPANY
Under our Charter Documents, we may engage in the ownership of real property
and any other lawful act or activity for which corporations may be organized
under the Maryland General Corporation Law ("Maryland Corporation Law").
ADDITIONAL EQUITY -- CMP
CMP is authorized to issue Non-Managing Member Units in exchange for additional
capital contributions, as determined by the Company as its managing member. In
exchange for such capital contributions, CMP may issue Non-Managing Member
Units to our Company, to existing members, and to third parties admitted as
members of CMP upon the transfer by a member of its membership interest to such
third party. The Operating Agreement provides that no additional members may be
admitted as members of CMP except upon the acquisition of a member's interest
in CMP, and only upon our consent. As the managing member, we are solely
responsible for making capital contributions to CMP in amounts sufficient to
fund all necessary capital additions, tenant improvements and leasing
commissions relating to CMP's properties, but may receive additional units of
managing member interest ("Managing Member Units") for additional capital
contributions which, in the aggregate, are in excess of $500,000 and are made
for the purpose of funding capital additions that will add rentable space to
CMP's properties.
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ADDITIONAL EQUITY -- THE COMPANY
Subject to applicable NYSE rules and regulations, the Board of Directors may
issue, in its discretion, additional shares of Common Stock or Preferred
Stock; provided, that the total number of shares issued does not exceed the
authorized number of shares of capital stock set forth in our Articles of
Incorporation (100,000,000 for Common Stock, 50,000,000 for Preferred Stock).
BORROWING POLICIES -- CMP
The Operating Agreement provides that CMP is not permitted to incur or assume
debt, including debt to our Company or our Company's affiliates, without first
obtaining the consent of non-managing members holding in the aggregate more
than 50% of the total number of Non-Managing Member Units outstanding but
excluding our Company to the extent it holds Non-Managing Member Units (the
"Consent of the Non-Managing Members"). CMP may, however, incur or assume
refinancing debt, the repayment of which is secured by all or a portion of the
Properties without the Consent of the Non-Managing Members.
BORROWING POLICIES -- THE COMPANY
Our Company is not restricted under its Charter Documents or Bylaws from
incurring debt.
MANAGEMENT CONTROL -- CMP
All management powers over the business and affairs of CMP are vested in our
Company as the managing member. No non-managing member has any right to
participate in or exercise control or management power over the business and
affairs of CMP, except for certain actions which require the Consent of the
Non-Managing Members. See "--Voting Rights."
MANAGEMENT CONTROL -- THE COMPANY
The Board of Directors has exclusive control over our Company's business
affairs subject only to the applicable provisions of the Maryland Corporation
Law and the provisions in the Company's Charter Documents and Bylaws.
FIDUCIARY DUTIES -- CMP
Under Delaware law, our Company as managing member of CMP, is accountable to
CMP as a fiduciary and, consequently, is required to exercise good faith and
integrity in all of its dealings with respect to CMP's affairs. The Operating
Agreement generally provides that our Company will incur no liability to CMP
or any non-managing member for losses sustained or liabilities incurred as a
result of errors in judgment or of any act or omission if we acted in good
faith. In addition, our Company is not responsible for any misconduct or
negligence on the part of our officers, directors or other agents provided we
appointed such agents in good faith. We may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisors, and any action we take or omit to take in reliance
upon their opinion, as to matters which we reasonably believe to be within
their professional or expert competence, shall be conclusively presumed to
have been done or omitted in good faith and in accordance with their opinion.
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FIDUCIARY DUTIES -- THE COMPANY
Under Maryland Corporation Law, the Board of Directors must perform their
duties in good faith, in a manner that they reasonably believe to be in the
best interests of our Company and with the care of an ordinarily prudent person
in a like position. Directors of our Company who act in such a manner generally
will not be liable to us for monetary damages by reason of being a member of
the Board of Directors.
MANAGEMENT LIABILITY AND INDEMNIFICATION -- CMP
CMP has agreed to indemnify our Company and any director or officer of our
Company from and against all losses, claims, damages, liabilities, joint or
several, expenses (including legal fees and expenses), judgments, fines,
settlements and other amounts incurred in connection with any actions relating
to the operations of CMP in which our Company, or our Company's directors,
officers or agents, are involved, unless (1) the act taken by our Company, or
such directors, officers or agents, was in bad faith and was material to the
action; (2) our Company, or such directors, officers or agents, received an
improper personal benefit; or (3) in the case of any criminal proceeding, our
Company, or such directors, officers or agents, had reasonable cause to believe
the act was unlawful. CMP may reimburse the reasonable expenses incurred by our
Company, or such directors, officers or agents, in advance of the final
disposition of the proceeding if either we, or the directors, officers or
agents, provide CMP with an affirmation of our or their good faith belief that
the standard of conduct necessary for indemnification has been met and an
undertaking to repay the amount of the reimbursed expenses if it is determined
that such standard was not met. No member of CMP, including our Company, is
obligated to make capital contributions to enable CMP to fund these
indemnification obligations.
MANAGEMENT LIABILITY AND INDEMNIFICATION -- THE COMPANY
Our Charter Documents provide that the liability of our directors and officers
to us and our stockholders for money damages is limited to the fullest extent
permitted under Maryland Corporation Law. Maryland Corporation Law presently
permits the liability of directors and officers to a corporation or its
shareholders for money damages to be limited, except (i) to the extent that it
is proved that the director or officer actually received an improper benefit or
profit or (ii) if the judgment or other final adjudication is entered in a
proceeding based on a finding that the directors or officers action, or failure
to act, was a result of active or deliberate dishonesty and was material to the
cause of action adjudicated in the proceeding. The provisions of the Charter
Documents do not limit the ability of us or our shareholders to obtain other
relief, such as injunction or recision.
The Charter Documents provide for indemnification of directors and officers to
the full extent permitted by the laws of the State of Maryland.
Article X of our Amended and Restated By-Laws (the "By-Laws") provides that we
shall indemnify and hold harmless, in the manner and to the fullest extent
permitted by law, any person who is or was a party to, or is threatened to be
made a party to, any threatened, pending or completed action, suit or
proceeding, whether or not by or in the right of our Company, and whether
civil, criminal, administrative, investigative or otherwise, by reason of the
fact that such person is or was a director or officer of our Company, or, as a
director or officer of our Company, is or was serving at the request of us
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as a director, officer, trustee, partner, member, agent or employee of another
corporation, partnership, limited liability company, association, joint venture,
trust, benefit plan or other enterprise.
Article X of the By-Laws further provides that we may, with the approval of the
Board of Directors, provide such indemnification and advancement of expenses as
set forth in the above paragraph to agents and employees of our Company.
Section 2-418 of the Maryland General Corporation Law generally permits
indemnification of any director or officer made a party to any proceedings by
reason of service as a director or officer unless it is established that (i)
the act or omission of such person was material to the matter giving rise to
the proceeding and was committed in bad faith or was the result of active and
deliberate dishonesty; or (ii) such person actually received an improper
personal benefit in money, property or services; or (iii) in the case of any
criminal proceeding, such person had reasonable cause to believe that the act
or omission was unlawful. The indemnity may include judgments, penalties,
fines, settlements and reasonable expenses actually incurred by the director or
officer in connection with the proceeding; provided, however, that if the
proceeding is one by, or in the right of the corporation, indemnification is
not permitted with respect to any proceeding in which the director or officer
has been adjudged to be liable to the corporation. In addition, a director or
officer may not be indemnified with respect to any proceeding charging improper
personal benefit to the director or officer adjudged to be liable on the basis
that personal benefit was improperly received. The termination of any
proceeding by conviction or upon a plea of nolo contendere or its equivalent
creates a rebuttable presumption that the director or officer did not meet the
requisite standard of conduct required for permitted indemnification. The
termination of any proceeding by judgment, order or settlement, however, does
not create a presumption that the director or officer failed to meet the
requisite standard of conduct for permitted indemnification.
ANTI-TAKEOVER PROVISIONS -- CMP
Except in limited circumstances (See "--Voting Rights" below), our Company has
exclusive management power over the business and affairs of CMP. Accordingly,
we may hinder the ability of CMP to engage in a merger transaction or other
business combination. Our Company may not be removed as managing member by the
other members with or without cause. Under the Operating Agreement, we must
obtain the Consent of the Non-Managing Members prior to entering into certain
merger transactions, and the terms of any such transaction must preserve the
rights of non-managing members to exchange their Non-Managing Member Units for
our Common Stock. These limitations may also have the effect of hindering the
ability of CMP to enter into certain business combinations. A non-managing
member may generally transfer all or any portion of its membership interest in
CMP, provided that we have a right of first refusal for any proposed transfer.
Accordingly, we may elect to exercise our right of first refusal to prevent a
membership interest from being transferred to a particular third party.
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Furthermore, upon the transfer by a non-managing member of its membership
interest in CMP, the transferee may become a member of CMP, together with the
rights and benefits of a member, only upon the approval of our Company which we
may give or withhold in our sole and absolute discretion. Until admitted to CMP
as a member, the transferee of a membership interest is not entitled to vote on
any matter submitted to the members for their approval.
ANTI-TAKEOVER PROVISONS -- THE COMPANY
Our Charter Documents and Bylaws contain a number of provisions that may have
the effect of delaying or discouraging an unsolicited proposal for the
acquisition of our Company or the removal of incumbent management. These
provisions include, among others: (1) a staggered Board of Directors; (2)
authorized capital stock that may be issued as Preferred Stock in the
discretion of the Board of Directors, with superior voting rights to the Common
Stock; (3) provisions designed to avoid concentration of share ownership in a
manner that would jeopardize our status as a REIT under the Internal Revenue
Code and (4) super-majority vote for business combinations. See "Description of
Capital Stock."
VOTING RIGHTS -- CMP
Under the Operating Agreement, the non-managing members have voting rights only
as to specified matters including certain amendments to the Operating
Agreement, (1) dissolving CMP or, except in connection with a tax-free
exchange, disposing of all or substantially all of the Properties, but in each
case only so long as the non-managing members who acquired their Non-Managing
Member Units in exchange for the contribution of the Properties own Non-
Managing Member Units representing at least 3% of the number of Non-Managing
Member Units issued upon the contribution of the Properties, (2) amending the
Operating Agreement, except in limited circumstances, (3) confessing a judgment
against CMP, (4) instituting proceedings in bankruptcy on behalf of CMP, making
an assignment for the benefit of creditors, or appointing or acquiescing to the
appointment of any receiver, transferor, assignor, liquidator, or other similar
official for the assets of CMP, (5) approving the transfer of our Company's
membership interest to any person or entity other than CMP, (6) admitting any
additional or substitute managing members, (7) causing CMP to incur any debt as
discussed above under "Borrowing Policies," (8) acquiring additional real
property, (9) maintaining any cash reserve in an amount exceeding the amount
calculated by multiplying the number of rentable square feet in the Properties
by $.50, and (10) entering into certain merger transactions. The non-managing
members do not otherwise have the right to vote on decisions relating to the
operation or management of CMP.
VOTING RIGHTS -- THE COMPANY
The Board of Directors is classified into three classes of directors whose
terms are staggered. At each annual meeting of the stockholders, the
stockholders elect the successors of the class of directors whose three-year
term has expired.
Maryland Corporation Law requires that certain major corporate transactions,
including most amendments to the Company's Charter Documents, may not be
consummated without the approval of stockholders as set forth below. All shares
of Common Stock have one vote per share, and the Company's Charter Documents
permit the Board of Directors to classify and issue Preferred Stock in one or
more series having voting power which may differ from that of the Common Stock.
See "Description of Capital Stock."
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The following is a comparison of the voting rights of the non-managing members
of CMP and the stockholders of our Company as they relate to certain major
transactions:
AMENDMENT OF THE OPERATING AGREEMENT -- CMP
Amendments to the Operating Agreement may be proposed by our Company as
managing member of CMP or by those non-managing members (other than our Company
as holder of Non-Managing Member Units) holding in the aggregate more than 50%
of the number of outstanding Non-Managing Member Units (other than the Non-
Managing Member Units held by our Company). Such proposal, in order to be
effective, must be approved by the holders of a majority of the outstanding
Managing Member Units and Non-Managing Member Units voting together. In
addition, certain amendments that would, among other things, convert a non-
managing member's interest into a managing member interest, modify the limited
liability of any non-managing member, alter the interest of any non-managing
member in profits, losses or distributions, alter or modify the right of a non-
managing member to exchange its Non-Managing Member Units for our Common Stock,
or cause the termination of CMP at a time inconsistent with the terms of the
Operating Agreement must be approved by each non-managing member that would be
adversely affected by any such amendment. Our Company may amend the Operating
Agreement without the Consent of the Non-Managing Members if the purpose or the
effect of such amendment is to make administrative or inconsequential changes,
add to the obligations of our Company as managing member or surrender any right
or power granted to our company as managing member for the benefit of the non-
managing members, comply with any federal or state agency rulings, guidelines
or directives, or as are necessary for our Company to maintain its status as a
REIT.
AMENDMENT OF THE CHARTER -- THE COMPANY
Under Maryland Corporate Law, amendments to the Company's Charter Documents
must be approved by the Board of Directors and by the vote of at least two-
thirds of the votes entitled to be cast at a meeting of stockholders.
The affirmative vote of holders of at least 90% of the voting stock of the
Company is required to repeal or amend the provisions of the Charter Documents
relating to (i) Business Combinations, (ii) the minimum and maximum number of
Directors and (iii) limitations on ownership of the Company's voting capital
stock. See "Description of Capital Stock."
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VOTE REQUIRED TO DISSOLVE; VOTE REQUIRED TO SELL ASSETS OR MERGE -- CMP
The Managing Member is not permitted to dissolve CMP or, except in connection
with a tax-free exchange, sell, dispose of, exchange or transfer all or
substantially all of the Properties prior to November 21, 2003 as long as the
non-managing members who acquired their Non-Managing Member Units in exchange
for the contribution of the Properties to CMP own Non-Managing Member Units
representing at least 3% of the number of Non-Managing Member Units issued upon
the contribution of the Properties. In addition to the foregoing, the sale,
exchange, transfer or other disposition of all or substantially all of the
Properties or the merger or consolidation of CMP also requires the consent of
our Company.
VOTE REQUIRED TO DISSOLVE; VOTE REQUIRED TO SELL ASSETS OR MERGE --THE COMPANY
Under Maryland Corporation Law, our Board of Directors must obtain approval of
holders of at least two-thirds of the outstanding Common Stock in order to
dissolve our Company. The Charter Documents require that, except in certain
circumstances, "Business Combinations" between the Company and a beneficial
holder of 10% or more of the Company's outstanding voting stock be approved by
the affirmative vote of at least 90% of the outstanding voting shares of the
Company. See the disclosure set forth under "Transfer Restrictions, Redemption
and Business Combination Provisions" in this Prospectus. No approval of our
stockholders is required for the sale of less than all or substantially all of
our assets.
COMPENSATION, FEES AND DISTRIBUTIONS -- CMP
Our Company does not receive any compensation for its services as managing
member of CMP. As a holder of Non-Managing Member Units, however, our Company
has the same right to allocations and distributions as other holders of Non-
Managing Member Units. In addition, after the distribution of a preferred
return equal to the greater of $0.62 per Non-Managing Member Unit per quarter
or the amount of the quarterly dividend paid on our Common Stock, we are
entitled to receive a return on our capital contributions to CMP, and a return
on the amounts our Company has funded to CMP in order to pay leasing
commissions and tenant improvements. Of the amount of any distributions
remaining, our Company is entitled to 83% and the remaining 17% is distributed
to the holders of Non-Managing Member Units (including our Company) in
proportion to their respective Non-Managing Member Units. In addition, CMP will
reimburse our Company for all expenses incurred relating to the ongoing
operation of CMP and any other offering of additional interests in CMP or the
capital stock of our Company.
In the event CMP disposes of some, but not all of the Properties in a taxable
disposition, or refinances the Properties, the holders of Non-Managing Member
Units (including our Company) will be entitled to share in a portion of the net
proceeds from such disposition or refinancing, to the extent the net proceeds
result from an appreciation in the value of the Properties sold or refinanced
as compared to the value of those Properties at the time of their contribution
to CMP.
COMPENSATION, FEES AND DISTRIBUTIONS -- THE COMPANY
Our officers and outside directors receive compensation for their services as
more fully set forth in the Proxy Statement incorporated by reference into this
Prospectus.
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LIABILITY OF INVESTORS -- CMP
Under the Operating Agreement and applicable Delaware law, the liability of
the non-managing members for the debts and obligations of CMP is generally
limited to the amount of their investment in CMP, together with their interest
in any undistributed income, if any.
LIABILITY OF INVESTORS -- THE COMPANY
Under Maryland Corporation Law, stockholders are not personally liable for our
debts or obligations.
LIQUIDITY -- CMP
Non-managing members may generally transfer their Non-Managing Member Units
without restriction, provided that our Company has a right of first refusal
for any proposed transfer of any membership interests. We have the right to
receive an opinion of counsel in connection with the transfer of a membership
interest by a non-managing member to the effect that the transfer may be
effected without registration under the Securities Act and will not otherwise
violate any applicable federal or state securities law.
LIQUIDITY -- THE COMPANY
Shares of Common Stock issued pursuant to this Prospectus will be freely
transferable, subject to prospectus delivery and other requirements of the
Securities Act.
Our Common Stock is listed on the NYSE. The breadth and strength of this
secondary market will depend, among other things, upon the number of shares
outstanding, our financial results and prospects, the general interest in our
and other real estate investments, and our dividend yield compared to that of
other debt and equity securities.
TAXES -- CMP
CMP itself is not subject to Federal income taxes. Instead, each holder of
Non-Managing Member Units includes its allocable share of CMP's taxable income
or loss in determining its individual Federal income tax liability. Cash
distributions from CMP are not taxable to a holder of Non-Managing Member
Units except to the extent they exceed such holder's basis in its interest in
CMP (which will include such holder's allocable share of CMP's non-recourse
debt).
Income and loss from CMP generally is subject to the "passive activity"
limitations. Under the "passive activity" rules, income and loss from CMP that
is considered "passive income" generally can be offset against income and loss
from other investments that constitute "passive activities."
Holders of Non-Managing Member Units are required, in some cases, to file
state income tax returns and/or pay state income taxes in the states in which
CMP owns property, even if they are not residents of those states.
TAXES -- THE COMPANY
Distributions made by us to our taxable domestic stockholders out of current
or accumulated earnings and profits will be taken into account by them as
ordinary income. Distributions that are designated as capital gain dividends
generally will be taxed as gains from the sale or disposition of a capital
asset. Distributions in excess of current or accumulated earnings and profits
will be treated as a non-taxable return of
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basis to the extent of a stockholder's adjusted basis in its Common Stock, with
the excess taxed as capital gain. See "Certain Federal Income Tax
Considerations."
Dividends paid by us will be treated as "portfolio" income and cannot be offset
with losses from "passive activities."
Stockholders who are individuals generally will not be required to file state
income tax returns and/or pay state income taxes outside of their state of
residence with respect to our operations and distributions. We may be required
to pay state income taxes in certain states.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain Federal income tax considerations regarding us
and the Common Stock we are registering is based on current law, is for general
information only and is not tax advice. The information set forth below, to the
extent that it constitutes matters of law, summaries of legal matters or legal
conclusions, is the opinion of Latham & Watkins, our tax counsel, as to the
material Federal income tax considerations relevant to purchasers of our Common
Stock. The tax treatment to holders of Common Stock will vary depending on a
holder's particular situation and this discussion does not purport to deal with
all aspects of taxation that may be relevant to a holder of Non-Managing Member
Units or Common Stock in light of his or her personal investments or tax
circumstances, or to certain types of holders subject to special treatment
under the Federal income tax laws, except to the extent discussed under the
headings "--Taxation of Tax-Exempt Stockholders" and "--Taxation of Non-U.S.
Stockholders" below. Holders of Non-Managing Member Units or Common Stock
subject to special treatment include, without limitation, insurance companies,
financial institutions or broker-dealers, tax-exempt organizations,
stockholders holding securities as part of a conversion transaction, or a hedge
or hedging transaction or as a position in a straddle for tax purposes, foreign
corporations or partnerships and persons who are not citizens or residents of
the United States. In addition, the summary below does not consider the effect
of any foreign, state, local or other tax laws that may be applicable to
holders of Non-Managing Member Units or Common Stock.
The information in this section is based on the Code, current, temporary and
proposed Treasury Regulations promulgated under the Code, the legislative
history of the Code, current administrative interpretations and practices of
the Internal Revenue Service (the "IRS") (including its practices and policies
as expressed in certain private letter rulings which are not binding on the IRS
except with respect to the particular taxpayers who requested and received such
rulings), and court decisions, all as of the date of this prospectus. Future
legislation, Treasury Regulations, administrative interpretations and practices
and/or court decisions may adversely affect, perhaps retroactively, the tax
considerations described herein. We have not requested, and do not plan to
request, any rulings from the IRS concerning our tax treatment and the
statements in this prospectus are not binding on the IRS or a court. Thus, we
can provide no assurance that these statements will not be challenged by the
IRS or sustained by a court if challenged by the IRS.
YOU ARE ADVISED TO CONSULT YOUR TAX ADVISOR REGARDING THE SPECIFIC TAX
CONSEQUENCES TO YOU OF THE DISPOSITION OF NON-MANAGING MEMBER UNITS AND THE
ACQUISITION, OWNERSHIP AND SALE OF OUR COMMON STOCK, INCLUDING THE FEDERAL,
STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH DISPOSITION,
ACQUISITION, OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX
LAWS.
TAX CONSEQUENCES OF THE EXERCISE OF EXCHANGE RIGHTS
If you exercise your right to require us to acquire all or part of your Non-
Managing Member Units in connection with your Exchange Rights, your disposition
of Non-Managing Member Units in exchange for Common Stock or cash (an
"Exchange") will be a fully taxable transaction, and you
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will generally recognize gain in an amount equal to the value of the Common
Stock and the amount of cash received pursuant to the Exchange, plus the amount
of liabilities of CMP allocable to the Non-Managing Member Units being
Exchanged, less your tax basis in such Non-Managing Member Units. However, in
the event that the Company pays you cash for some of your Non-Managing Member
Units and the Company receives such cash from CMP in order to make such payment
to you, it is possible that such payment will be treated for Federal income tax
purposes as a redemption by CMP of the Non-Managing Member Units you exchange
for cash, in which case you would recognize gain only to the extent the cash
received for such Non-Managing Member Units, plus the amount of any reduction
of CMP liabilities allocable to you, exceed your adjusted tax basis in all of
your Non-Managing Member Units prior to such payment. The recognition of any
loss resulting from an Exchange is subject to a number of limitations set forth
in the Code. The character of any such gain or loss as capital or ordinary will
depend on the nature of the assets of CMP at the time of the Exchange.
TAXATION OF HEALTH CARE PROPERTY INVESTORS, INC. AS A REIT
General. We elected to be taxed as a REIT under Sections 856 through 860 of the
Code, commencing with our taxable year ended December 31, 1985. We believe we
have been organized and have operated in a manner which allows us to qualify
for taxation as a REIT under the Code commencing with our taxable year ended
December 31, 1985. We intend to continue to operate in this manner. However,
our qualification and taxation as a REIT depends upon our ability to meet
(through actual annual operating results, asset diversification, distribution
levels and diversity of stock ownership) the various qualification tests
imposed under the Code. Accordingly, there is no assurance that we have
operated or will continue to operate in a manner so as to qualify or remain
qualified as a REIT. See "--Failure to Qualify."
The sections of the Code that relate to the qualification and operation as a
REIT are highly technical and complex. The following sets forth the material
aspects of the sections of the Code that govern the Federal income tax
treatment of a REIT and its stockholders. This summary is qualified in its
entirety by the applicable Code provisions, relevant rules and regulations
promulgated under the Code, and administrative and judicial interpretations of
the Code.
If we qualify for taxation as a REIT, we generally will not be subject to
federal corporate income taxes on our net income that is currently distributed
to our stockholders. This treatment substantially eliminates the "double
taxation" (once at the corporate level when earned and once again at the
stockholder level when distributed) that generally results from investment in a
corporation. However, we will be subject to Federal income tax as follows:
First, we will be taxed at regular corporate rates on any undistributed REIT
taxable income, including undistributed net capital gains.
Second, we may be subject to the "alternative minimum tax" on our items of tax
preference under certain circumstances.
Third, if we have (a) net income from the sale or other disposition of
"foreclosure property" (defined generally as property we acquired through
foreclosure or after a default on a loan secured by the property or a lease of
the property) which is held primarily for sale to customers in the ordinary
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course of business or (b) other nonqualifying income from foreclosure property,
we will be subject to tax at the highest corporate rate on this income.
Fourth, we will be subject to a 100% tax on any net income from prohibited
transactions (which are, in general, certain sales or other dispositions of
property held primarily for sale to customers in the ordinary course of
business other than foreclosure property).
Fifth, we will be subject to a 100% tax on an amount equal to (a) the gross
income attributable to the greater of the amount by which we fail the 75% or
95% test multiplied by (b) a fraction intended to reflect our profitability, if
we fail to satisfy the 75% gross income test or the 95% gross income test (as
discussed below), but have maintained our qualification as a REIT because we
satisfied certain other requirements.
Sixth, we would be subject to a 4% excise tax on the excess of the required
distribution over the amounts actually distributed if we fail to distribute
during each calendar year at least the sum of (i) 85% of our REIT ordinary
income for the year, (ii) 95% of our REIT capital gain net income for the year,
and (iii) any undistributed taxable income from prior periods.
Seventh, if we acquire any asset (a "Built-In Gain Asset") from a corporation
which is or has been a C corporation (i.e., generally a corporation subject to
full corporate-level tax) in a transaction in which the basis of the Built-In
Gain Asset in our hands is determined by reference to the basis of the asset in
the hands of the C corporation, and we subsequently recognize gain on the
disposition of the asset during the ten-year period (the "Recognition Period")
beginning on the date on which we acquired the asset, then we will be subject
to tax at the highest regular corporate tax rate on this gain to the extent of
the Built-In Gain (i.e., the excess of (a) the fair market value of the asset
over (b) our adjusted basis in the asset, determined as of the beginning of the
Recognition Period). The results described in this paragraph with respect to
the recognition of Built-In Gain assume that we will make an election pursuant
to IRS Notice 88-19.
Requirements for Qualification as a REIT. The Code defines a REIT as a
corporation, trust or association:
(1) that is managed by one or more trustees or directors;
(2) that issues transferable shares or transferable certificates to evidence
its beneficial ownership;
(3) that would be taxable as a domestic corporation, but for Sections 856
through 859 of the Code;
(4) that is not a financial institution or an insurance company within the
meaning of certain provisions of the Code;
(5) that is beneficially owned by 100 or more persons;
(7) that meets certain other tests, described below, regarding the nature of
its income and assets and the amount of its distributions.
The Code provides that conditions (1) to (4), inclusive, must be met during the
entire taxable year and that condition (5) must be met during at least 335 days
of a taxable year of twelve months, or during a proportionate part of a taxable
year of less than twelve months. Conditions (5) and (6) do not apply until
after the first taxable year for which an election is made to be taxed as a
REIT. For
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purposes of condition (6), pension funds and certain other tax-exempt entities
are treated as individuals, subject to a "look-through" exception with respect
to pension funds.
We believe that we have satisfied conditions (5) and (6). In addition, our
charter provides for restrictions regarding transfer and, in certain cases,
ownership of shares. These restrictions are intended to assist us in continuing
to satisfy the share ownership requirement described in (6) above. These
ownership and transfer restrictions are described above under the heading
"Description of Capital Stock--Transfer Restrictions, Redemption and Business
Combination Provisions." These restrictions, however, may not ensure that we
will, in all cases, be able to satisfy the share ownership requirements
described in (6) above. If we fail to satisfy these share ownership
requirements, our status as a REIT will terminate. However, if we comply with
the rules contained in applicable Treasury Regulations that require us to
ascertain the actual ownership of our shares and we do not know, or would not
have known through the exercise of reasonable diligence, that we failed to meet
the requirement described in condition (6) above, we will be treated as having
met this requirement. See "--Failure to Qualify" below.
In addition, a corporation may not elect to become a REIT unless its taxable
year is the calendar year. We have and will continue to have a calendar taxable
year.
We own, directly or indirectly, interests in various partnerships and limited
liability companies (the "Partnerships"). In the case of a REIT that is a
partner in a partnership or member of a limited liability company which is
taxable as a partnership for Federal income tax purposes, IRS regulations
provide that the REIT will be deemed to own its proportionate share of the
assets of the partnership or limited liability company (as the case may be),
and the REIT will be deemed to be entitled to the income of the partnership or
limited liability company (as the case may be) attributable to such share. The
character of the assets and gross income of the partnership or limited
liability company (as the case may be) retains the same character in the hands
of the REIT for purposes of Section 856 of the Code, including satisfying the
gross income tests and the asset tests. Thus, our proportionate share of the
assets, liabilities and items of income of the Partnerships is treated as our
assets, liabilities and items of income for purposes of applying the
requirements described in this prospectus (including the income and asset tests
described below).
We own a number of properties through subsidiaries. Code Section 856(i)
provides that a corporation which is a "qualified REIT subsidiary" shall not be
treated as a separate corporation, and all assets, liabilities, and items of
income, deduction and credit of a "qualified REIT subsidiary" shall be treated
as assets, liabilities and such items (as the case may be) of the REIT. Thus,
in applying the requirements described herein, our "qualified REIT
subsidiaries" will be ignored, and all assets, liabilities and items of income,
deduction and credit of such subsidiaries will be treated as our assets,
liabilities and such items. A qualified REIT subsidiary will not be subject to
Federal income tax, and our ownership of the voting stock of a qualified REIT
subsidiary will not violate the restrictions against ownership of securities of
any one issuer which constitutes more than 10% of such issuer's voting
securities or more than 5% of the value of our total assets.
Income Tests. We must satisfy two gross income requirements annually to
maintain our qualification as a REIT. First, each taxable year we must derive
directly or indirectly at least 75% of our gross income (excluding gross income
from prohibited transactions) from investments relating to
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real property or mortgages on real property (including "rents from real
property" and, in certain circumstances, interest) or from certain types of
temporary investments. Second, each taxable year we must derive at least 95% of
our gross income (excluding gross income from prohibited transactions) from
these real property investments, dividends, interest and gain from the sale or
disposition of stock or securities (or from any combination of the foregoing).
The term "interest" generally does not include any amount received or accrued
(directly or indirectly) if the determination of the amount depends in whole or
in part on the income or profits of any person. However, an amount received or
accrued generally will not be excluded from the term "interest" solely by
reason of being based on a fixed percentage or percentages of receipts or
sales.
Rents we receive will qualify as "rents from real property" in satisfying the
gross income requirements for a REIT described above only if the following
conditions are met:
. the amount of rent must not be based in whole or in part on the income or
profits of any person. However, an amount received or accrued generally will
not be excluded from the term "rents from real property" solely by reason of
being based on a fixed percentage or percentages of receipts or sales;
. the Code provides that rents received from a tenant will not qualify as
"rents from real property" in satisfying the gross income tests if the REIT,
or an actual or constructive owner of 10% or more of the REIT, actually or
constructively owns 10% or more of the interests in such tenant (a "Related
Party Tenant");
. if rent attributable to personal property, leased in connection with a lease
of real property, is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to personal property will not
qualify as "rents from real property"; and
. for rents received to qualify as "rents from real property," the REIT
generally must not operate or manage the property or furnish or render
services to the tenants of the property (subject to a 1% de minimis
exception), other than through an independent contractor from whom the REIT
derives no revenue. The REIT may, however, directly perform certain services
that are "usually or customarily rendered" in connection with the rental of
space for occupancy only and are not otherwise considered "rendered to the
occupant" of the property.
We do not and will not:
. charge rent for any property that is based in whole or in part on the income
or profits of any person (except by reason of being based on a percentage of
receipts or sales, as described above);
. rent any property to a Related Party Tenant;
. derive rental income attributable to personal property (other than personal
property leased in connection with the lease of real property, the amount of
which is less than 15% of the total rent received under the lease); or
. perform services considered to be rendered to the occupant of the property,
other than through an independent contractor from whom we derive no revenue.
Notwithstanding the foregoing, we may have taken and may continue to take
certain of the actions set forth above to the extent these actions will not,
based on the advice of our tax counsel, jeopardize our status as a REIT.
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If we fail to satisfy one or both of the 75% or 95% gross income tests for any
taxable year, we may nevertheless qualify as a REIT for the year if we are
entitled to relief under certain provisions of the Code. Generally, we may
avail ourselves of the relief provisions if:
. our failure to meet these tests was due to reasonable cause and not due to
willful neglect;
. we attach a schedule of the sources of our income to our Federal income tax
return; and
. any incorrect information on the schedule was not due to fraud with intent
to evade tax.
It is not possible, however, to state whether in all circumstances we would be
entitled to the benefit of these relief provisions. For example, if we fail to
satisfy the gross income tests because nonqualifying income that we
intentionally incur exceeds the limits on nonqualifying income, the IRS could
conclude that our failure to satisfy the tests was not due to reasonable cause.
If these relief provisions do not apply to a particular set of circumstances,
we will not qualify as a REIT. As discussed above in "Taxation of Health Care
Property Investors, Inc.--General," even if these relief provisions apply, and
we retain our status as a REIT, a tax would be imposed with respect to our
excess net income. We may not always be able to maintain compliance with the
gross income tests for REIT qualification despite our periodic monitoring of
our income.
Prohibited Transaction Income. Any gain realized by us on the sale of any
property held as inventory or other property held primarily for sale to
customers in the ordinary course of business (including our share of any such
gain realized by any of the Partnerships) will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax. This prohibited
transaction income may also adversely affect our ability to satisfy the income
tests for qualification as a REIT. Under existing law, whether property is held
as inventory or primarily for sale to customers in the ordinary course of a
trade or business is a question of fact that depends on all the facts and
circumstances surrounding the particular transaction. We intend to hold our
properties for investment with a view to long-term appreciation, to engage in
the business of acquiring, developing and owning our properties (and other
properties) and to make occasional sales of our properties as are consistent
with our investment objectives. However, the IRS may contend that that one or
more of these sales is subject to the 100% penalty tax.
Asset Tests. At the close of each quarter of our taxable year, we also must
satisfy three tests relating to the nature and diversification of our assets.
First, at least 75% of the value of our total assets (including assets held by
our qualified REIT subsidiaries and the our allocable share of the assets held
by the Partnerships) must be represented by real estate assets, cash, cash
items and government securities. For purposes of this test, real estate assets
include stock or debt instruments that are purchased with the proceeds of a
stock offering or a long-term (at least five years) public debt offering, but
only for the one-year period beginning on the date we receive such proceeds.
Second, not more than 25% of our total assets may be represented by securities,
other than those securities includable in the 75% asset test. Third, of the
investments included in the 25% asset class, the value of any one issuer's
securities may not exceed 5% of the value of our total assets and we may not
own more than 10% of any one issuer's outstanding voting securities.
After initially meeting the asset tests at the close of any quarter, we will
not lose our status as a REIT for failure to satisfy the asset tests at the end
of a later quarter solely by reason of changes in
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asset values. If we fail to satisfy the asset tests because we acquire
securities or other property during a quarter (including as a result of our
increasing our interest in one or more of the Partnerships if the applicable
Partnership owns non-qualifying assets), we can cure this failure by disposing
of sufficient nonqualifying assets within 30 days after the close of that
quarter. We believe we have maintained and intend to continue to maintain
adequate records of the value of our assets to ensure compliance with the asset
tests and to take such other actions within the 30 days after the close of any
quarter as may be required to cure any noncompliance. If we fail to cure
noncompliance with the asset tests within this time period, we would cease to
qualify as a REIT.
Annual Distribution Requirements. To maintain our qualification as a REIT, we
are required to distribute dividends (other than capital gain dividends) to our
stockholders in an amount at least equal to the sum of 95% of our "REIT taxable
income" (computed without regard to the dividends paid deduction and our net
capital gain) and 95% of our net income (after tax), if any, from foreclosure
property, minus the excess of the sum of certain items of our noncash income
(i.e., income attributable to leveled stepped rents, original issue discount on
purchase money debt, or a like-kind exchange that is later determined to be
taxable) over 5% of our "REIT taxable income" as described above. In addition,
if we dispose of any Built-In Gain Asset during its Recognition Period, we
would be required, pursuant to Treasury Regulations which have not yet been
promulgated, to distribute at least 95% of the Built-In Gain (after tax), if
any, recognized on the disposition of such asset.
These distributions must be paid in the taxable year to which they relate, or
in the following taxable year if they are declared before we timely file our
tax return for such year and if paid on or before the first regular dividend
payment after such declaration. These distributions are taxable to holders of
our capital stock (other than tax-exempt entities, as discussed below) in the
year in which paid. This is so even though these distributions relate to the
prior year for purposes of our 95% distribution requirement. The amount
distributed must not be preferential--e.g., every shareholder of the class of
stock to which a distribution is made must be treated the same as every other
shareholder of that class, and no class of stock may be treated otherwise than
in accordance with its dividend rights as a class. To the extent that we do not
distribute all of our net capital gain or distribute at least 95%, but less
than 100%, of our "REIT taxable income," as adjusted, we will be subject to tax
thereon at regular ordinary and capital gain corporate tax rates. We believe we
have made and intend to continue to make timely distributions sufficient to
satisfy these annual distribution requirements.
We expect that our REIT taxable income will be less than our cash flow due to
the allowance of depreciation and other non-cash charges in computing REIT
taxable income. Accordingly, we anticipate that we will generally have
sufficient cash or liquid assets to enable us to satisfy the distribution
requirements described above. However, from time to time, we may not have
sufficient cash or other liquid assets to meet these distribution requirements
due to timing differences between the actual receipt of income and actual
payment of deductible expenses, and the inclusion of income and deduction of
expenses in arriving at our taxable income.
If these timing differences occur, in order to meet the distribution
requirements, we may need to arrange for short-term, or possibly long-term,
borrowings or need to pay dividends in the form of taxable stock dividends.
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Under certain circumstances, we may be able to rectify a failure to meet the
distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in our deduction for
dividends paid for the earlier year. Thus, we may be able to avoid being taxed
on amounts distributed as deficiency dividends. However, we will be required to
pay interest based upon the amount of any deduction taken for deficiency
dividends.
Furthermore, we would be subject to a 4% excise tax on the excess of the
required distribution over the amounts actually distributed if we should fail
to distribute during each calendar year (or in the case of distributions with
declaration and record dates falling in the last three months of the calendar
year, by the end of January immediately following such year) at least the sum
of 85% of our REIT ordinary income for such year, 95% of our REIT capital gain
income for the year and any undistributed taxable income from prior periods.
Any REIT taxable income and net capital gain on which this excise tax is
imposed for any year is treated as an amount distributed during that year for
purposes of calculating such tax.
TAX RISKS ASSOCIATED WITH THE PARTNERSHIPS
The ownership of an interest in a Partnership may involve special tax risks,
including the possible challenge by the IRS of (i) allocations of income and
expense items, which could affect the computation of our taxable income, and
(ii) the status of a Partnership as a partnership (as opposed to an association
taxable as a corporation) for Federal income tax purposes. If any of the
Partnerships were treated as an association taxable as a corporation for
Federal income tax purposes, the Partnership would be treated as a taxable
entity. In addition, in such a situation, (i) if we owned more than 10% of the
outstanding voting securities of such Partnership, or the value of such
securities exceeded 5% of the value of our assets, we would fail to satisfy the
asset tests described above and would therefore fail to qualify as a REIT, (ii)
distributions from any such Partnership to us would be treated as dividends,
which are not taken into account in satisfying the 75% gross income test
described above and could, therefore, make it more difficult for us to satisfy
such test, (iii) the interest in any such Partnership held by us would not
qualify as a "real estate asset," which could make it more difficult for us to
meet the 75% asset test described above, and (iv) we would not be able to
deduct our share of any losses generated by the Partnership in computing our
taxable income. See "--Failure to Qualify" for a discussion of the effect of
our failure to meet such tests for a taxable year. We believe that each of the
Partnerships will be treated for tax purposes as a partnership (rather than an
association taxable as a corporation). No assurance can be given that the IRS
will not successfully challenge the Federal income tax status of the
Partnerships as partnerships.
FAILURE TO QUALIFY
If we fail to qualify for taxation as a REIT in any taxable year, and the
relief provisions do not apply, we will be subject to tax (including any
applicable alternative minimum tax) on our taxable income at regular corporate
rates. Distributions to stockholders in any year in which we fail to qualify
will not be deductible by us and we will not be required to distribute any
amounts to our stockholders. As a result, our failure to qualify as a REIT
would reduce the cash available for distribution by us to our stockholders. In
addition, if we fail to qualify as a REIT, all distributions to stockholders
will be taxable as ordinary income to the extent of our current and accumulated
earnings and profits, and subject to certain limitations of the Code, corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory
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provisions, we will also be disqualified from taxation as a REIT for the four
taxable years following the year during which we lost our qualification. It is
not possible to state whether in all circumstances we would be entitled to this
statutory relief.
TAXATION OF TAXABLE U.S. STOCKHOLDERS
As used below, the term "U.S. Stockholder" means a holder of shares of Common
Stock who (for United States Federal income tax purposes):
. is a citizen or resident of the United States;
. is a corporation, partnership, or other entity created or organized in or
under the laws of the United States or of any state thereof or in the
District of Columbia, unless, in the case of a partnership, Treasury
Regulations provide otherwise;
. is an estate the income of which is subject to United States Federal income
taxation regardless of its source; or
. is a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States persons who have
the authority to control all substantial decisions of the trust.
Notwithstanding the preceding sentence, to the extent provided in Treasury
Regulations, certain trusts in existence on August 20, 1996, and treated as
United States persons prior to this date that elect to continue to be treated
as United States persons, shall also be considered U.S. Stockholders.
Distributions Generally. As long as we qualify as a REIT, distributions out of
our current or accumulated earnings and profits, other than capital gain
dividends discussed below, will constitute dividends taxable to our taxable
U.S. Stockholders as ordinary income. These distributions will not be eligible
for the dividends-received deduction in the case of U.S. Stockholders that are
corporations. For purposes of determining whether distributions to holders of
Common Stock are out of current or accumulated earnings and profits, our
earnings and profits will be allocated first to the outstanding Series A
Preferred Stock and Series B Preferred Stock and then to the Common Stock.
To the extent that we make distributions, other than capital gain dividends, in
excess of our current and accumulated earnings and profits, these distributions
will be treated first as a tax-free return of capital to each U.S. Stockholder.
This treatment will reduce the adjusted basis which each U.S. Stockholder has
in his shares of stock for tax purposes by the amount of the distribution (but
not below zero). Distributions in excess of a U.S. Stockholder's adjusted basis
in his shares will be taxable as capital gains (provided that the shares have
been held as a capital asset) and will be taxable as long-term capital gain if
the shares have been held for more than one year. Dividends we declare in
October, November, or December of any year and payable to a stockholder of
record on a specified date in any of these months shall be treated as both paid
by us and received by the stockholder on December 31 of that year, provided we
actually pay the dividend on or before January 31 of the following calendar
year. Stockholders may not include in their own income tax returns any of our
net operating losses or capital losses.
Capital Gain Distributions. Distributions that we properly designate as capital
gain dividends will be taxable to taxable U.S. Stockholders as gains (to the
extent that they do not exceed our actual net
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capital gain for the taxable year) from the sale or disposition of a capital
asset. Depending on the period of time we have held the assets which produced
these gains, and on certain designations, if any, which we may make, these
gains may be taxable to non-corporate U.S. stockholders at a 20% or 25% rate.
U.S. Stockholders that are corporations may, however, be required to treat up
to 20% of certain capital gain dividends as ordinary income. For a discussion
of the manner in which that portion of any dividends designated as capital gain
dividends will be allocated among the holders of our Preferred Stock and Common
Stock, see "Description of Capital Stock."
Passive Activity Losses and Investment Interest Limitations. Distributions we
make and gain arising from the sale or exchange by a U.S. Stockholder of our
shares will not be treated as passive activity income. As a result, U.S
Stockholders generally will not be able to apply any "passive losses" against
this income or gain. Distributions we make (to the extent they do not
constitute a return of capital) generally will be treated as investment income
for purposes of computing the investment interest limitation. Gain arising from
the sale or other disposition of our shares, however, will not be treated as
investment income under certain circumstances.
Retention of Net Long-Term Capital Gains. We may elect to retain, rather than
distribute as a capital gain dividend, our net long-term capital gains. If we
make this election, we would pay tax on our retained net long-term capital
gains. In addition, to the extent we designate, a U.S. Stockholder generally
would:
. include its proportionate share of our undistributed long-term capital gains
in computing its long-term capital gains in its return for its taxable year
in which the last day of our taxable year falls (subject to certain
limitations as to the amount that is includable);
. be deemed to have paid the capital gains tax imposed on us on the designated
amounts included in the U.S. Stockholder's long-term capital gains;
. receive a credit or refund for the amount of tax deemed paid by it;
. increase the adjusted basis of its Common Stock by the difference between
the amount of includable gains and the tax deemed to have been paid by it;
and
. in the case of a U.S. Stockholder that is a corporation, appropriately
adjust its earnings and profits for the retained capital gains in accordance
with Treasury Regulations to be prescribed by the IRS.
DISPOSITIONS OF COMMON STOCK
If you are a U.S. Stockholder and you sell or dispose of your shares of Common
Stock, you will recognize gain or loss for Federal income tax purposes in an
amount equal to the difference between the amount of cash and the fair market
value of any property you receive on the sale or other disposition and your
adjusted basis in the shares for tax purposes. This gain or loss will be
capital if you have held the Common Stock as a capital asset and will be long-
term capital gain or loss if you have held the Common Stock for more than one
year. In general, if you are a U.S. Stockholder and you recognize loss upon the
sale or other disposition of Common Stock that you have held for six months or
less (after applying certain holding period rules), the loss you recognize will
be treated as a long-term capital loss, to the extent you received
distributions from us which were required to be treated as long-term capital
gains.
31
<PAGE>
BACKUP WITHHOLDING
We report to our U.S. Stockholders and the IRS the amount of dividends paid
during each calendar year, and the amount of any tax withheld. Under the backup
withholding rules, a stockholder may be subject to backup withholding at the
rate of 31% with respect to dividends paid unless the holder is a corporation
or comes within certain other exempt categories and, when required,
demonstrates this fact, or provides a taxpayer identification number, certifies
as to no loss of exemption from backup withholding, and otherwise complies with
applicable requirements of the backup withholding rules. A U.S. Stockholder
that does not provide us with his correct taxpayer identification number may
also be subject to penalties imposed by the IRS. Backup withholding is not an
additional tax. Any amount paid as backup withholding will be creditable
against the stockholder's income tax liability. In addition, we may be required
to withhold a portion of capital gain distributions to any stockholders who
fail to certify their non-foreign status. See "--Taxation of Non-U.S.
Stockholders."
TAXATION OF TAX-EXEMPT STOCKHOLDERS
The IRS has ruled that amounts distributed as dividends by a qualified REIT do
not constitute unrelated business taxable income ("UBTI") when received by a
tax-exempt entity. Based on that ruling, provided that a tax-exempt shareholder
(except certain tax-exempt shareholders described below) has not held its
shares as "debt financed property" within the meaning of the Code (generally,
shares of Common Stock, the acquisition of which was financed through a
borrowing by the tax exempt stockholder) and the shares are not otherwise used
in a trade or business, dividend income from us will not be UBTI to a tax-
exempt shareholder. Similarly, income from the sale of shares will not
constitute UBTI unless a tax-exempt shareholder has held its shares as "debt
financed property" within the meaning of the Code or has used the shares in its
trade or business.
For tax-exempt shareholders which are social clubs, voluntary employee benefit
associations, supplemental unemployment benefit trusts, and qualified group
legal services plans exempt from Federal income taxation under Code Section
501(c)(7), (c)(9), (c)(17) and (c)(20), respectively, income from an investment
in our shares will constitute UBTI unless the organization is able to properly
deduct amounts set aside or placed in reserve for certain purposes so as to
offset the income generated by its investment in our shares. These prospective
investors should consult their own tax advisors concerning these "set aside"
and reserve requirements.
Notwithstanding the above, however, a portion of the dividends paid by a
"pension held REIT" shall be treated as UBTI as to any trust which:
. is described in Section 401(a) of the Code;
. is tax-exempt under Section 501(a) of the Code; and
. holds more than 10% (by value) of the interests in the REIT.
Tax-exempt pension funds that are described in Section 401(a) of the Code are
referred to below as "qualified trusts."
32
<PAGE>
A REIT is a "pension held REIT" if:
. it would not have qualified as a REIT but for the fact that Section
856(h)(3) of the Code provides that stock owned by qualified trusts shall be
treated, for purposes of the "not closely held" requirement, as owned by the
beneficiaries of the trust (rather than by the trust itself); and
. either at least one such qualified trust holds more than 25% (by value) of
the interests in the REIT, or one or more such qualified trusts, each of
which owns more than 10% (by value) of the interests in the REIT, holds in
the aggregate more than 50% (by value) of the interests in the REIT.
The percentage of any REIT dividend treated as UBTI is equal to the ratio of:
. the UBTI earned by the REIT (treating the REIT as if it were a qualified
trust and therefore subject to tax on UBTI) to
. the total gross income of the REIT.
A de minimis exception applies where the percentage is less than 5% for any
year. The provisions requiring qualified trusts to treat a portion of REIT
distributions as UBTI will not apply if the REIT is able to satisfy the "not
closely held" requirement without relying upon the "look-through" exception
with respect to qualified trusts.
TAXATION OF NON-U.S. STOCKHOLDERS
The preceding discussion does not address the rules governing United States
Federal income taxation of the ownership and disposition of Common Stock by
persons that are not U.S. Stockholders ("Non-U.S. Stockholders"). In general,
Non-U.S. Stockholders may be subject to special tax withholding requirements on
distributions from us and with respect to their sale or other disposition of
our Common Stock, except to the extent reduced or eliminated by an income tax
treaty between the United States and the Non-U.S. Stockholder's country. A Non-
U.S. Stockholder who is a stockholder of record and is eligible for reduction
or elimination of withholding must file an appropriate form with us in order to
claim such treatment. Non-U.S. Stockholders should consult their own tax
advisors concerning the Federal income tax consequences to them of an
acquisition of shares of Common Stock, including the Federal income tax
treatment of dispositions of interests in us and the receipt of distributions
from us.
OTHER TAX CONSEQUENCES
We may be subject to state or local taxation in various state or local
jurisdictions, including those in which we transact business and our
stockholders may be subject to state or location taxation in various state or
local jurisdictions, including those in which they reside. Our state and local
tax treatment may not conform to the Federal income tax consequences discussed
above. In addition, your state and locate tax treatment may not conform to the
Federal income tax consequences discussed above. Consequently, you should
consult your tax advisors regarding the effect of state and local tax laws on a
disposition of Non-Managing Member Units or an investment in our shares.
33
<PAGE>
SELLING HOLDERS
As of November 20, 1998 the only Selling Holder is Cambridge Medical Center of
San Diego, LLC ("Cambridge"), whose only material relationship with the Company
has been the formation of CMP and the ownership of the Non-Managing Member
Units. As of November 20, 1998, the only securities of the Company beneficially
owned by the Selling Holder are 168,350 Non-Managing Member Units. The Non-
Managing Member Units may be exchanged for shares of Common Stock of the
Company on a one-to-one basis, subject to adjustment in the event we pay a
dividend or distribution on our Common Stock in shares of Common Stock, split
or subdivide our outstanding Common Stock, or effect a reverse stock split or
other combination of our Common Stock into a smaller number of shares. In lieu
of issuing Common Stock upon the exchange of the Non-Managing Member Units, we
may, at our option, issue cash in an amount equal to the market value of an
equivalent number of shares of our Common Stock. Assuming the exchange of Non-
Managing Member Units on a one-for-one basis, the maximum number of shares of
Common Stock that may be sold by the Selling Holder is 168,350 shares.
Since the Selling Holder(s) may sell all, some or none of their shares, no
estimate can be made of the aggregate number of shares that are to be offered
by the Selling Holders hereby or that will be owned by each Selling Holder upon
completion of the offering to which this Prospectus relates.
Pursuant to the Operating Agreement, Cambridge may transfer Non-Managing Member
Units under certain circumstances. Such transferees of the Non-Managing Members
may also be Selling Holders under this Prospectus. One or more supplemental
prospectuses will be filed pursuant to Rule 424 under the Securities Act to set
forth the required information regarding any additional Selling Holders.
PLAN OF DISTRIBUTION
This Prospectus relates to (i) the possible issuance by our Company of the
shares or our common stock if, and to the extent that, holders of Non-Managing
Member Units tender such Non-Managing Member Units for exchange and (ii) the
offer and sale from time to time of any shares that may be issued to such Non-
Managing Members. We have registered the shares for sale to provide the holders
thereof with freely tradable securities, but registration of such shares does
not necessarily mean that any of such shares will be offered or sold by the
holders thereof.
We will not receive any proceeds from the offering by the Selling Holders or
from the issuance of shares of our Common Stock to holders of Non-Managing
Member Units upon receiving a notice of exchange (but we may acquire from such
holders the Non-Managing Member Units tendered). Shares of our Common Stock may
be sold from time to time to purchasers directly by any of the Selling Holders.
Alternatively, the Selling Holders may from time to time offer the shares
through dealers or agents, who may receive compensation in the form of
commissions from the Selling Holders and/or the purchasers of shares for whom
they may act as agent. The sale of the shares by Selling Holders may be
effected from time to time in one or more negotiated transactions at negotiated
prices or in transactions on any exchange or automated quotation system on
which the securities may be listed or quoted. The Selling Holders and any
dealers or agents that participate in
34
<PAGE>
the distribution of shares of our common stock may be deemed to be underwriters
within the meaning of the Securities Act and any profit on the sale of shares
of our common stock by them and any commissions received by any such dealers or
agents might be deemed to be underwriting commissions under the Securities Act.
In order to comply with certain states securities laws, if applicable, the
shares of our Common Stock will not be sold in a particular state unless the
shares have been registered or qualified for sale in such state or an exemption
from registration or qualification is available and is complied with.
One or more supplemental prospectuses will be filed pursuant to Rule 424 under
the Securities Act to describe any material arrangements for the distribution
of the shares when such arrangements are entered into by the Selling Holders
and any broker-dealers that participate in the distribution of shares of our
common stock.
LEGAL MATTERS
The legality of the issuance of the shares of our common stock will be passed
upon for our Company by Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland.
Certain tax matters described under "Certain Federal Income Tax Considerations"
will be passed upon for our Company by Latham & Watkins, Los Angeles,
California.
EXPERTS
The consolidated financial statements of Health Care Property Investors, Inc.
as of December 31, 1997, incorporated by reference in this Prospectus and
elsewhere in the Registration Statement, have been audited by Arthur Andersen
LLP, independant public accountants, as indicated in their report with respect
thereto and are included herein in reliance upon the authority of said firm as
experts in accounting and auditing.
35
<PAGE>
HEALTH CARE PROPERTY INVESTORS, INC.
168,350 SHARES
COMMON STOCK
----------------
PROSPECTUS
----------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR IN
DOCUMENTS THAT WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO
PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT.
THIS PROSPECTUS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY
ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED. THIS PROSPECTUS IS
NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SECURITIES TO ANY
PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR
SOLICITATION. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS CORRECT ON ANY DATE AFTER THE DATE ON THE PROSPECTUS, EVEN THOUGH
THIS PROSPECTUS IS DELIVERED OR SHARES ARE SOLD PURSUANT TO THIS PROSPECTUS ON
A LATER DATE.
NOVEMBER , 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14.
The estimated expenses, in connection with this offering are estimated as
follows:
<TABLE>
<S> <C>
SEC Registration Fee............................................... 1,500.00
Blue Sky fees and expense.......................................... 500.00
Printing and shipping expenses..................................... 10,000.00
Legal fees and expenses............................................ 25,000.00
Accounting fees and expenses....................................... 2,000.00
Transfer agent or trustee fees..................................... 1,000.00
Listing Fees....................................................... 17,500.00
Miscellaneous...................................................... 5,000.00
Total............................................................ 62,500.00
</TABLE>
ITEM 15. INDEMNIFICATIONS OF DIRECTORS AND OFFICERS.
Our Articles of Restatement (the "Charter Documents") limit the liability of
the Company's directors and officers to the Company and its shareholders to
the fullest extent permitted by the laws of the State of Maryland. Maryland
Corporation Law presently permits the liability of directors and officers to a
corporation or its shareholders for money damages to be limited, except (i) to
the extent that it is proved that the director or officer actually received an
improper benefit or profit or (ii) if the judgment or other final adjudication
is entered in a proceeding based on a finding that the directors or officers
action, or failure to act, was a result of active or deliberate dishonesty and
was material to the cause of action adjudicated in the proceeding. The
provisions of the Charter Documents do not limit the ability of us or our
shareholders to obtain other relief, such as injunction or recision.
The Charter Documents provide for indemnification of directors and officers
to the full extent permitted by the laws of the State of Maryland.
Article X of our Amended and Restated By-Laws (the "By-Laws") provides that
we shall indemnify and hold harmless, in the manner and to the fullest extent
permitted by law, any person who is or was a party to, or is threatened to be
made a party to, any threatened, pending or completed action, suit or
proceeding, whether or not by or in the right of our Company, and whether
civil, criminal, administrative, investigative or otherwise, by reason of the
fact that such person is or was a director or officer of our Company, or, as a
director or officer of our Company, is or was serving at the request of us as
a director, officer, trustee, partner, member, agent or employee of another
corporation, partnership, limited liability company, association, joint
venture, trust, benefit plan or other enterprise.
Article X of the By-Laws further provides that we may, with the approval of
the Board of Directors, provide such indemnification and advancement of
expenses as set forth in the above paragraph to agents and employees of our
Company.
Section 2-418 of the Maryland Corporation Law generally permits
indemnification of any director or officer made a party to any proceedings by
reason of service as a director or officer unless it is established that (i)
the act or omission of such person was material to the matter giving rise to
the proceeding and was committed in bad faith or was the result of active and
deliberate dishonesty; or (ii) such person actually received an improper
personal benefit in money, property or services; or (iii) in the case of any
criminal proceeding, such person had reasonable cause to believe that the act
or omission was unlawful. The indemnity may include judgments, penalties,
fines, settlements and reasonable expenses actually incurred by the director
or officer in connection
II-1
<PAGE>
with the proceeding; provided, however, that if the proceeding is one by, or
in the right of the corporation, indemnification is not permitted with respect
to any proceeding in which the director or officer has been adjudged to be
liable to the corporation. In addition, a director or officer may not be
indemnified with respect to any proceeding charging improper personal benefit
to the director or officer adjudged to be liable on the basis that personal
benefit was improperly received. The termination of any proceeding by
conviction or upon a plea of nolo contendere or its equivalent creates a
rebuttable presumption that the director or officer did not meet the requisite
standard of conduct required for permitted indemnification. The termination of
any proceeding by judgment, order or settlement, however, does not create a
presumption that the director or officer failed to meet the requisite standard
of conduct for permitted indemnification. The Company has provided for the
benefit of its directors and officers, a Directors and Officers Liability
Policy.
ITEM 16. EXHIBITS.
See Exhibit Index.
ITEM 17. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act"):
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission (the "SEC") pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20 percent change in the maximum aggregate
offering price set for the in the "Calculation of Registration Fee"
table in the effective Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that the information required to be included in a
post-effective amendment by paragraphs (a)(1)(i) and (a)(1)(ii) above
may be contained in periodic reports filed by the Registrant pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes, that, for purposes of
determining any liability under the Securities Act, each filing the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
<PAGE>
(c) Insofar as indemnification for liabilities arising under the Securities
Act 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 Commission such indemnification is
against public policy as expressed in the Securities Act 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 as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Los
Angeles, State of California, on the 17th day of November, 1998.
HEALTH CARE PROPERTY INVESTORS, INC.
/s/ Kenneth B. Roath
By: _________________________________
Kenneth B. Roath
Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoints Kenneth B. Roath and
James G. Reynolds, and both or either of them, as his true and lawful
attorneys-in-fact and agents with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement and any subsequent Registration
Statement thereto pursuant to Rule 462(b) of the Securities Act, and to file
the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the foregoing, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or either of them or their or his substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on
the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Kenneth B. Roath Chairman, President, Chief November 17, 1998
____________________________________ Executive Officer and
Kenneth B. Roath Director (Principal
Executive Officer)
/s/ James G. Reynolds Chief Financial Officer November 17, 1998
____________________________________ (Principal Financial
James G. Reynolds Officer
/s/ Devasis Ghose Senior Vice President and November 17, 1998
____________________________________ Treasurer (Principal
Devasis Ghose Accounting Officer)
/s/ Paul V. Colony Director November 17, 1998
____________________________________
Paul V. Colony
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert R. Fanning, Jr. Director November 17, 1998
____________________________________
Robert R. Fanning, Jr.
/s/ Michael D. McKee Director November 17, 1998
____________________________________
Michael D. McKee
/s/ Orville E. Melby Director November 17, 1998
____________________________________
Orville E. Melby
/s/ Harold M. Messmer, Jr. Director November 17, 1998
____________________________________
Harold M. Messmer, Jr.
Director November 17, 1998
____________________________________
Peter L. Rhein
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
3.1 Articles of Restatement of Health Care Property Investors, Inc.
(incorporated herein by reference to Exhibit 3.1 to our Annual Report on
Form 10-K for the year ending December 31, 1994).
3.2 Amended and Restated Bylaws of Health Care Property Investors, Inc.
(incorporated herein by reference to Exhibit 3(ii) of our Quarterly
Report on Form 10-Q for the period ended June 30, 1995.)
4.1 Rights Agreement, dated as of July 5, 1990, between Health Care Property
Investors, Inc. and Manufacturers Hanover Trust Company of California,
as Rights Agent (incorporated herein by reference to Exhibit 1 to our
Registration Statement on Form 8-A filed with the Commission on July 17,
1990).
4.2 Articles Supplementary establishing the terms of the 7 7/8% Series A
Cumulative Redeemable Preferred Stock (incorporated herein by reference
from the Company's Form 8-A (File No. 001-08895) filed with the SEC on
September 25, 1997).
4.3 Articles Supplementary establishing and fixing the rights and preferences
of the 8.7% Series B Cumulative Preferred Stock (incorporated herein by
reference to Exhibit 3.3 of the Company's Form 8-A, dated September 2,
1998).
5.1 Opinion of Ballard Spahr as to the validity of the Common Stock being
registered.
8.1 Opinion of Latham & Watkins regarding tax matters.
10.2 Amended and Restated Limited Liability Company Agreement of Cambridge
Medical Properties, LLC (incorporated herein by reference to the Annual
Report on Form 10-K for the year ended December 31, 1998).
10.3 Registration Rights Agreement (incorporated herein by reference to the
Annual Report on Form 10-K for the year ended December 31, 1998).
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ballard Spahr (included in Exhibit 5.1).
23.3 Consent of Latham & Watkins (included in Exhibit 8.1).
24.1 Power of Attorney (contained on page II-4).
</TABLE>
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL]
November 20, 1998
Health Care Property Investors, Inc.
4675 MacArthur Court
9th Floor
Newport Beach, California 92660
Re: Health Care Property Investors, Inc., a Maryland corporation (the
"Company")--Registration Statement on Form S-3 (Registration No. 333-
), pertaining to up to One Hundred Sixty Eight Thousand Three
Hundred Fifty (168,350) shares ("Shares") of common stock, par value one
dollar ($1.00) per share ("Common Stock"), to be issued to certain holders
(the "Selling Holders") of units of non-managing member interest (the
"Units") in Cambridge Medical Properties, LLC, a Delaware limited
liability company ("Cambridge"), upon exchange of such Units
Ladies and Gentlemen:
In connection with the registration of the Shares under the Securities Act
of 1933, as amended (the "Act"), by the Company on Form S-3 filed or to be
filed with the Securities and Exchange Commission (the "Commission") on or
about November 20, 1998 (the "Registration Statement"), you have requested our
opinion with respect to the matters set forth below.
We have acted as special Maryland corporate counsel for the Company, in its
individual capacity and as the managing member of Cambridge, in connection
with the matters described herein. In our capacity as special Maryland
corporate counsel to the Company, we have reviewed and are familiar with
proceedings taken and proposed to be taken by the Company in connection with
the authorization, issuance and delivery of the Shares, and for purposes of
this opinion have assumed such proceedings will be timely completed in the
manner presently proposed. In addition, we have relied upon certificates and
advice from the officers of the Company upon which we believe we are justified
in relying and on various certificates from, and documents recorded with, the
State Department of Assessments and Taxation of Maryland (the "SDAT"),
including the charter of the Corporation (the "Charter"), consisting of
Articles of Restatement filed with the SDAT on April 27, 1992 and Articles
Supplementary filed with the SDAT on September 28, 1997 and September 3, 1998.
We have also examined the Bylaws of the Company, the Amended and Restated LLC
Agreement of Cambridge Medical Properties, LLC dated November 21, 1997 (the
"LLC Agreement") and Resolutions of the Board of Directors of the Company
adopted on or before the date hereof and in full force and effect on the date
hereof; and such laws, records, documents, certificates, opinions and
instruments as we deem necessary to render this opinion.
We have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to the originals of
all documents submitted to us as certified, photostatic or conformed copies.
In addition, we have assumed that each person executing any instrument,
document or certificate referred to herein on behalf of any party is duly
authorized to do so. We have also assumed that none of the Shares will be
issued or transferred to an Interested Stockholder of the Company or an
Affiliate thereof, all as defined in Subtitle 6 of Title 3 of the Maryland
General Corporation Law, or in violation of the provisions of Section 4 of
Article V of the Charter entitled "Provisions for Defining, Limiting and
Regulating Certain Powers of the Corporation and the Board of Directors and
Stockholders".
Based on the foregoing, and subject to the assumptions and qualifications
set forth herein, it is our opinion that when the Shares to be issued and
delivered by the Company to the Selling Holders are duly authorized by
<PAGE>
all necessary corporate action on the part of the Company and when such Shares
are issued and delivered in exchange for Units of Cambridge, pursuant to the
LLC Agreement, such Shares will be duly authorized, validly issued, fully paid
and non-assessable.
We consent to your filing this opinion as an exhibit to the Registration
Statement, and further consent to the filing of this opinion as an exhibit to
the applications to securities commissioners for the various states of the
United States for registration of the Shares. We also consent to the
identification of our firm as Maryland counsel to the Company in the section
of the Prospectus (which is part of the Registration Statement) entitled
"Legal Matters".
The opinions expressed herein are limited to the laws of the State of
Maryland and we express no opinion concerning any laws other than the laws of
the State of Maryland. Furthermore, the opinions presented in this letter are
limited to the matters specifically set forth herein and no other opinion
shall be inferred beyond the matters expressly stated.
Very truly yours,
/s/ Ballard Spahr Andrews &
Ingersoll
2
<PAGE>
EXHIBIT 8.1
[Letterhead of Latham & Watkins]
November 20, 1998
Health Care Property Investors, Inc.
4675 MacArthur Court, 9th Floor
Newport Beach, California 92660
RE: HEALTH CARE PROPERTY INVESTORS, INC.
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have acted as special counsel to Health Care Property Investors, Inc., a
Maryland corporation (the "Company"), in connection with the registration
statement on Form S-3 being filed by the Company with the Securities and
Exchange Commission in connection with the registration, under the Securities
Act of 1933, of 168,350 shares of the Company's common stock, par value $1.00
per share (together with all exhibits thereto and documents incorporated by
reference therein, the "Registration Statement").
In our capacity as such counsel, we have made such legal and factual
examinations and inquiries, including an examination of originals or copies
certified or otherwise identified to our satisfaction of such documents,
corporate records and other instruments, as we have deemed necessary or
appropriate for purposes of this opinion. In our examination, we have assumed
the authenticity of all documents submitted to us as originals, the
genuineness of all signatures thereon, the legal capacity of natural persons
executing such documents and the conformity to authentic original documents of
all documents submitted to us as copies.
We are opining herein as to the effect on the subject transaction only of
the federal income tax laws of the United States and we express no opinion
with respect to the applicability thereto, or the effect thereon, of other
federal laws, the laws of any state or other jurisdiction or as to any matters
of municipal law or the laws of any other local agencies with any state.
Based upon the facts set forth in the Registration Statement, it is our
opinion that the information in the Registration Statement set forth under the
caption "Certain Federal Income Tax Considerations," to the extent that it
constitutes matters of law, summaries of legal matters, documents or
proceedings, or legal conclusions, has been reviewed by us and is correct in
all material respects.
No opinion is expressed as to any matter not discussed herein.
This opinion is only being rendered to you as of the date of this letter,
and we undertake no obligation to update this opinion subsequent to the date
hereof. This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all of which are
subject to change either prospectively or retroactively. Also, any variation
or difference in the facts from those set forth in the Registration Statement
may affect the conclusions stated herein.
This opinion is rendered to you and is solely for your benefit in connection
with the Registration Statement. We hereby consent to the filing of this
opinion as an exhibit to the Registration Statement. This opinion may not be
relied upon by you for any other purpose, or furnished to, quoted to or relied
upon by any other person, firm or corporation for any purpose, without our
prior written consent.
Very truly yours,
/s/ Latham & Watkins
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EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated January 19, 1998
included in Health Care Property Investors, Inc. Form 10-K for the year ended
December 31, 1997 and to all references to our Firm included in this
registration statement.
Arthur Andersen LLP
Orange County, California
November 17, 1998
