<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended March 31, 1999.
OR
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from ...... to ......
Commission file number 1-8895
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HEALTH CARE PROPERTY INVESTORS, INC.
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
Maryland 33-0091377
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
4675 MacArthur Court, Suite 900
Newport Beach, CA 92660
(Address of principal executive offices)
(949) 221-0600
(Registrant's telephone number, including area code)
-----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes [X] No [_]
As of April 30, 1999 there were 31,044,176 shares of $1.00 par value common
stock outstanding.
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<PAGE>
HEALTH CARE PROPERTY INVESTORS, INC.
INDEX
PART I. FINANCIAL INFORMATION
PAGE NO.
-------
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
March 31, 1999 and December 31, 1998............................... 2
Condensed Consolidated Statements of Income
Three Months Ended March 31, 1999 and 1998......................... 3
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1999 and 1998......................... 4
Notes to Condensed Consolidated Financial Statements............... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................... 12
PART II. OTHER INFORMATION
Signatures.................................................................. 23
1
<PAGE>
Health Care Property Investors, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- ----------
<S> <C> <C>
ASSETS
Real Estate Investments
Buildings and Improvements $1,232,388 $1,143,077
Accumulated Depreciation (200,389) (190,941)
----------- ----------
1,031,999 952,136
Construction in Progress 25,488 26,938
Land 155,892 152,045
----------- ----------
1,213,379 1,131,119
Loans Receivable 161,411 154,363
Investments in and Advances to Joint Ventures 53,892 54,478
Other Assets 15,380 12,148
Cash and Cash Equivalents 4,252 4,504
----------- ----------
TOTAL ASSETS $1,448,314 $1,356,612
----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank Notes Payable $ 100,500 $ 88,000
Senior Notes Payable 524,141 499,162
Convertible Subordinated Notes Payable 100,000 100,000
Mortgage Notes Payable 55,219 21,883
Accounts Payable, Accrued Expenses and Deferred Income 34,497 28,758
Minority Interests in Joint Ventures 42,910 23,390
Stockholders' Equity:
Preferred Stock 187,847 187,847
Common Stock 31,040 30,987
Additional Paid-In Capital 434,724 433,309
Cumulative Net Income 551,304 531,926
Cumulative Dividends (613,868) (588,650)
----------- ----------
Total Stockholders' Equity 591,047 595,419
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,448,314 $1,356,612
========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
and Management's Discussion and Analysis of Financial Condition
and Results of Operations.
2
<PAGE>
Health Care Property Investors, Inc.
Condensed Consolidated Statements of Income
(Unaudited)
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
-----------------------------
1999 1998
------- -------
<S> <C> <C>
Revenue
Rental Income $41,552 $30,288
Tenant Reimbursements 2,051 496
Interest and Other Income 6,018 5,550
------- -------
49,621 36,334
------- -------
Expense
Interest Expense 12,360 7,633
Depreciation/Non Cash Charges 10,176 7,392
Facility Operating Expenses 3,751 797
Other Expenses 2,515 1,886
------- -------
28,802 17,708
------- -------
Income From Operations 20,819 18,626
Minority Interests (1,441) (1,148)
------- -------
Net Income $19,378 $17,478
Dividends to Preferred Stockholders 4,109 1,181
------- -------
Net Income Applicable to Common Shares $15,269 $16,297
======= =======
Basic/Diluted Earnings Per Common Share $ 0.49 $ 0.54
======= =======
Weighted Average Shares Outstanding - Basic 31,021 30,237
======= =======
Weighted Average Shares Outstanding - Diluted 31,119 30,576
======= =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
and Management's Discussion and Analysis of Financial Condition
and Results of Operations.
3
<PAGE>
Health Care Property Investors, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Amounts in thousands)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 19,378 $ 17,478
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Real Estate Depreciation 9,386 6,645
Non Cash Charges 790 747
Joint Venture Adjustments 336 (228)
Changes in:
Operating Assets (545) (591)
Operating Liabilities 7,089 3,250
-------- --------
Net Cash Provided By Operating Activities 36,434 27,301
-------- --------
Cash Flows From Investing Activities:
Acquisition of Real Estate, Net (57,752) (11,443)
Advances to Joint Ventures --- (18,890)
Other Investments and Loans (8,529) (880)
-------- --------
Net Cash Used In Investing Activities (66,281) (31,213)
-------- --------
Cash Flows From Financing Activities:
Net Change in Bank Notes Payable 12,500 15,100
Repayment of Senior Notes Payable --- (10,000)
Issuance of Senior Notes Payable 24,938 19,900
Cash Proceeds from Issuing Common Stock 44 ---
Increase (Decrease) in Minority Interests 19,092 (1,000)
Periodic Payments on Mortgages (545) (249)
Dividends Paid (25,218) (20,539)
Other Financing Activities (1,216) (199)
-------- --------
Net Cash Provided By Financing Activities 29,595 3,013
-------- --------
Net Decrease In Cash And Cash Equivalents (252) (899)
Cash And Cash Equivalents, Beginning Of Period 4,504 4,084
-------- --------
Cash And Cash Equivalents, End Of Period $ 4,252 $ 3,185
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
and Management's Discussion and Analysis of Financial Condition
and Results of Operations.
4
<PAGE>
HEALTH CARE PROPERTY INVESTORS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
(Unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES
We, the management of Health Care Property Investors, Inc., believe that
the unaudited financial information contained in this report reflects all
adjustments that are necessary to state fairly the financial position, the
results of operations, and cash flows of the Company. Unless the context
otherwise indicates, the Company or HCPI means Health Care Property Investors,
Inc. and its affiliated subsidiaries and joint ventures. We presume that users
of this interim financial information have read or have access to the audited
financial statements and Management's Discussion and Analysis of Financial
Condition and Results of Operations for the preceding fiscal year ended December
31, 1998. Therefore, notes to the financial statements and other disclosures
that would repeat the disclosures contained in our most recent annual report to
security holders have been omitted. This interim financial information does not
necessarily represent a full year's operations for various reasons including
acquisitions, changes in rents and interest rates, and the timing of debt and
equity financings.
Facility Operations:
During 1997 and 1998, we purchased 90 - 100 percent ownership interests in
23 medical office buildings ("MOBs") that are operated by independent property
management companies on our behalf. During the first quarter of 1999, we
purchased 50 percent ownership interest in 14 additional MOBs. We lease these
facilities to multiple tenants. Amounts recovered from tenants under such
leases are recorded as Tenant Reimbursements. Expenses related to the operation
of these facilities are recorded as Facility Operating Expenses.
Reclassifications:
We have made reclassifications, where necessary, for comparative financial
statement presentations.
(2) MAJOR OPERATORS
As of March 31, 1999, 88 operators in 43 states operated our properties. In
addition, 232 tenants conducted business in the multi-tenant buildings. Listed
below are our major operators, the number of facilities operated by these
operators, the annualized revenue and the percentage of annualized revenue for
the three months ended March 31, 1999 from these operators and their
subsidiaries:
5
<PAGE>
<TABLE>
<CAPTION>
Annualized Percentage
Revenue for the of Our
Number of Three Months Ended Annualized
Operators Facilities March 31, 1999 Revenue
- --------------------------------------------------------------------------------------------
(Amounts in thousands)
<S> <C> <C> <C>
HealthSouth Corporation ("HealthSouth") 6 $12,335 7%
Beverly Enterprises Inc. ("Beverly") 26 11,485 6
Vencor, Inc. ("Vencor") 22 11,445 6
Emeritus Corporation ("Emeritus") 23 11,288 6
Columbia/HCA Healthcare Corp. ("Columbia") 12 10,355 6
Centennial Healthcare Corp. ("Centennial") 18 8,365 4
Tenet Healthcare Corporation ("Tenet") 2 7,860 4
</TABLE>
Certain facilities have been subleased to other operators with the original
lessees remaining liable on the leases. The number of facilities, annualized
revenue, and percentages of our total annualized revenue applicable to these
sublessees are not included above. The percentage of our total annualized
revenue on subleased facilities relating to Vencor leases was 3% for the quarter
ended March 31, 1999. As discussed in more detail below, rent obligations under
most Vencor leases are guaranteed by Tenet.
All these major operators are subject to the informational filing
requirements of the Securities Exchange Act of 1934 and accordingly file
periodic financial statements on Form 10-K and Form 10-Q with the Securities and
Exchange Commission.
Vencor
On May 1, 1998, Vencor completed a spin-off transaction. As a result, it
became two publicly held entities--Ventas, Inc., a real estate company which
intends to qualify as a REIT, and Vencor, a health care company which at March
31, 1999 leased 38 of HCPI's properties. As of March 31, 1999, 6% of our
annualized revenue was from facilities leased to and operated by Vencor;
additionally, 3% of our revenue is from facilities leased to Vencor which were
subleased and operated by other providers. Both Ventas and Vencor are
responsible for payments due under the Vencor leases, including subleased
facilities. Tenet guarantees the rent payments on most of the Vencor leases (see
discussion under Tenet below).
According to a press release issued by Vencor, Vencor reported a net loss
of $605.9 million or $8.68 per share for the quarter ended December 31, 1998,
and a net loss from operations of $572.9 million, or $8.39 per share, for the
year ended December 31, 1998. Vencor also announced that it is currently in
discussion with its senior lenders, Ventas and other creditors regarding an
amendment or restructuring of its bank debt, leases and other obligations.
Vencor has reported that as a result of the uncertainties related to Vencor's
ability to amend or restructure its obligations, approximately $461 million of
amounts due under Vencor's bank credit agreement and $300 million of senior
subordinated notes have been classified as current liabilities in its
consolidated balance sheet at December 31, 1998. The report of Vencor's
independent auditors with respect to its condensed consolidated financial
statements for the periods ended December 31, 1998 has an explanatory paragraph
regarding Vencor's ability to continue as a going concern.
6
<PAGE>
Vencor also noted in its press release that it also included in current
liabilities approximately $99 million of overpayments to Vencor from the
Medicare program since the inception of the new prospective payment system for
nursing centers on July 1, 1998. Vencor stated that it was informed on April 9,
1999 by the Health Care Financing Administration ("HCFA") that the Medicare
program has made a demand for repayment of approximately $90 million of the
reimbursement overpayments by April 23, 1999. On April 21, 1999, Vencor
announced that it has reached an agreement with HCFA to extend the repayment of
approximately $90 million of Medicare reimbursement overpayments and will now be
obligated to repay the overpayment over 60 monthly installments. Vencor stated
that, "under the agreement, monthly payments of approximately $1.5 million are
due commencing May 8, 1999. After November, the remaining balance of the
overpayments will bear interest at a statutory rate applicable to Medicare
overpayments, as in effect on November 30, 1999. Assuming that the current rate
of 13.75% is in effect on November 30, 1999, the monthly payment amount will be
approximately $2.0 million through March 2004. If Vencor is delinquent with two
consecutive payments under the repayment plan, the plan will be defaulted and
all subsequent Medicare reimbursement payments to Vencor will be subject to
being withheld." We are unable to predict at this time the effect of any
delinquency of Vencor's Medicare reimbursement payments on its ability to make
its lease payments to us.
With respect to its obligations under its bank credit agreement and
senior subordinated notes, Vencor has announced that it recently obtained a
waiver of certain financial covenants through May 28, 1999 from the lenders
under its credit facility, and that it would not pay the $14.8 million interest
payment due May 3, 1999 on its senior subordinated notes, giving the holders of
the senior subordinated notes the right to accelerate those obligations upon
expiration of a 30 day grace period, and applicable notice periods. Standard &
Poor's downgraded the ratings on Vencor's senior subordinated debt to D
(removing such debt from credit watch) on May 3, 1999 and Moody's downgraded its
ratings on such senior subordinated debt to C on May 5, 1999. On May 10, 1999
Vencor and Ventas announced that Vencor had failed to pay the monthly rent for
May 1999 to Ventas and that the two parties had negotiated an extension of the
rent to June 6, 1999, and an extension of the standstill agreement between them
to June 11, 1999.
In its Annual Report on Form 10-K for the year ended December 31, 1998,
Vencor made a number of cautionary statements regarding its financial condition
and results of operations, and indicated that in the event of certain
circumstances relating to actions by its creditors or its ability to consummate
an alternative financial structure, it "likely would be forced to file for
protection under Chapter 11 of the Bankruptcy Code." If Vencor were to file for
bankruptcy protection, it will have an obligation to pay rent to us during the
pendency of the proceeding. However, Vencor will have the right to assume or
reject its leases with us. If Vencor assumes a lease it must do so pursuant to
the original contract terms, must cure all pre-petition and post-petition
defaults under the lease and provide adequate assurances of future performance.
If Vencor rejects a lease, it may stop paying rent and we may lease the property
to another lessee. However, we cannot assure you, in the event of a Vencor
bankruptcy, that we would be able to recover amounts due under our leases with
Vencor, that we would be able to promptly recover the premises or lease the
property to another lessee or that the rent we would receive from another
7
<PAGE>
lessee would equal amounts due under the Vencor leases. The rents under all but
three of the Vencor leases are guaranteed by Tenet, and on some leases we may
seek direct payment by sublessees of Vencor, which may reduce the risk to us of
a Vencor bankruptcy. However, we cannot assure you that a bankruptcy filing of
Vencor would not have a material adverse effect on our funds from operations or
the market value of our common stock.
Tenet
Tenet is one of the nation's largest health care services companies,
providing a broad range of services through the ownership and management of
health care facilities. Tenet has historically guaranteed Vencor's leases.
However, during 1997 we reached an agreement with Tenet whereby Tenet agreed to
forbear or waive some renewal and purchase options and related rights of first
refusal on facilities leased to Vencor. As part of that same agreement, Tenet
will only guarantee the rent payments on the Vencor leases until the end of
their base term. During the year ended December 31, 1998, 14 Vencor leases
previously guaranteed by Tenet expired. Eleven of the 14 were leased to third
parties and three were retained by Vencor but are no longer guaranteed by Tenet.
The remaining 36 guaranteed leases all expire within three years.
(3) REAL ESTATE INVESTMENTS
During the first quarter of 1999, we acquired 14 MOBs through the purchase
of a 50% managing partner interest in a company in which the non-managing
partner purchased 593,249 non-managing member units. These units which are
recorded under Minority Interest in Joint Ventures are convertible into HCPI
stock on a one-for-one basis beginning in January, 2000.
(4) STOCKHOLDERS' EQUITY
The following tabulation is a summary of the activity for the Stockholders'
Equity account for the three months ended March 31, 1999 (amounts in thousands):
<TABLE>
<CAPTION>
Preferred Stock Common Stock
------------------ ---------------------------------
Par Additional Total
Number of Number of Value Paid In Cumulative Cumulative Stockholders'
Shares Amount Shares Amount Capital Net Income Dividends Equity
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1998 7,785 $187,847 30,987 $30,987 $433,309 $531,926 $(588,650) $595,419
Issuance of Common Stock, Net 53 53 1,415 1,468
Net Income 19,378 19,378
Dividends Paid Preferred
Shares (4,109) (4,109)
Dividends Paid Common Shares (21,109) (21,109)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance,
March 31, 1999 7,785 $187,847 31,040 $31,040 $434,724 $551,304 $(613,868) $591,047
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
(5) EARNINGS PER COMMON SHARE
The Company adopted Statement of Financial Accounting Standards No. 128,
Earnings Per Share, effective December 15, 1997. As a result, both basic and
diluted earnings per common share are presented for each of the quarters ended
March 31, 1999 and 1998. Prior to 1997, only basic earnings per common share
was disclosed. Basic earnings per common share is computed by dividing net
income applicable to common shares by the weighted average number
of shares of common stock outstanding during the period. Diluted earnings per
common share is calculated including the effect of dilutive securities. Options
to purchase shares of common stock that had an exercise price in excess of the
average market price of the common stock during the period were not included
because they are not dilutive.
(Amounts in thousands except per share amounts)
<TABLE>
<CAPTION>
For the Three Months Ended
---------------------------------
Per Share
March 31, 1999 Income Shares Amount
- -------------------------------------- ------ ------ ---------
<S> <C> <C> <C>
Basic Earnings Per Common Share:
Net Income Applicable to Common Shares $15,269 31,021 $0.49
---------
Dilutive Options --- 98
------- ------
Diluted Earnings Per Common Share:
Net Income Applicable to Common
Shares Plus Assumed Conversions 15,269 31,119 $0.49
---------
<CAPTION>
For the Three Months Ended
---------------------------------
Per Share
March 31, 1998 Income Shares Amount
- -------------------------------------- ------ ------ ---------
Basic Earnings Per Common Share:
Net Income Applicable to Common Shares $16,297 30,237 $0.54
---------
Non-Managing Member Units 86 121
Dilutive Options --- 218
------ ------
Diluted Earnings Per Common Share:
Net Income Applicable to Common
Shares Plus Assumed Conversions 16,383 30,576 $0.54
------ ------ ---------
</TABLE>
(6) FUNDS FROM OPERATIONS
Effective in 1998, the Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise, requires that we report information
about our operations on the same basis that is used internally to measure
performance.
We believe that Funds From Operations ("FFO") is our most important
supplemental measure of operating performance. Because the historical cost
accounting convention used for real estate assets requires straight-line
depreciation (except on land) such accounting presentation implies that the
value of real estate assets diminishes predictably over time. Because real
estate values instead have historically risen and fallen with market conditions,
presentations of operating results for a real estate investment trust that uses
historical cost accounting for depreciation could be less informative. The term
FFO was designed by the real estate investment trust industry to address this
problem.
9
<PAGE>
The Company adopted the definition of FFO prescribed by the National
Association of Real Estate Investment Trusts ("NAREIT"). FFO is defined as net
income applicable to common shares (computed in accordance with generally
accepted accounting principles), excluding gains (or losses) from debt
restructuring and sales of property, plus real estate depreciation and real
estate related amortization, and after adjustments for unconsolidated
partnerships and joint ventures. Adjustments for unconsolidated partnerships and
joint ventures are calculated to reflect FFO on the same basis.
FFO does not represent cash generated from operating activities in
accordance with generally accepted accounting principles, is not necessarily
indicative of cash available to fund cash needs and should not be considered as
an alternative to net income. FFO, as defined by the Company, may not be
comparable to similarly entitled items reported by other real estate investment
trusts that do not define it exactly as the NAREIT definition.
Below are summaries of the calculation of FFO and FFO per share of common
stock (all amounts in thousands except per share amounts):
<TABLE>
<CAPTION>
Three Months
Ended March 31,
--------------------
1999 1998
------- -------
<S> <C> <C>
Net Income Applicable to Common Shares $15,269 $16,297
Real Estate Depreciation and Amortization 9,386 6,645
Joint Venture Adjustments 336 (228)
------- -------
Funds From Operations $24,991 $22,714
------- -------
</TABLE>
(7) COMMITMENTS
As of April 27, 1999, the Company has acquired real estate properties and
has outstanding commitments to fund development of facilities on those
properties of approximately $33,000,000.
The Company is also committed to acquire approximately $54,000,000 of
existing health care real estate. The Company expects that a significant portion
of these commitments will be funded; however, experience suggests that some
committed transactions will not close. The letters of intent representing such
commitments permit either party to elect not to go forward with the transaction
under various circumstances. We may not close committed transactions for
various reasons including unsatisfied pre-closing conditions, competitive
financing sources, final negotiation differences or the operator's inability to
obtain required internal or governmental approvals.
10
<PAGE>
(8) NEW PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Statement 133 is
effective for fiscal years beginning after June 15, 1999, although earlier
implementation is allowed.
We have not yet quantified the impact of adopting Statement 133 on our
financial statements and have not determined the timing or method of our
adoption of Statement 133. However, the effect is not expected to be material.
(9) SUBSEQUENT EVENTS
On April 20, 1999 the Board of Directors declared a quarterly dividend of
$0.69 per common share payable on May 20, 1999, to shareholders of record on the
close of business on May 3, 1999.
The Board of Directors also declared a cash dividend of $0.492188 per share
on its Series A cumulative preferred stock and $0.54375 per share on its Series
B cumulative preferred stock. These dividends will be paid on June 30, 1999 to
shareholders of record as of the close of business on June 15, 1999.
On May 3, 1999, the Company issued 1,000,000 shares of Common Stock which
generated net proceeds of approximately $29,600,000 (net of underwriters'
discount and other offering expenses). The proceeds were used to pay off short-
term bank debt.
11
<PAGE>
HEALTH CARE PROPERTY INVESTORS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The Company is in the business of acquiring health care facilities that we
lease on a long-term basis to health care providers. On a more limited basis,
we have provided mortgage financing on health care facilities. As of March 31,
1999, the Company's portfolio of properties, including equity investments,
consisted of 347 facilities located in 43 states. These facilities are
comprised of 157 long-term care facilities, 85 congregate care and assisted
living facilities, 41 physician group practice clinics, 49 medical office
buildings, eight 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
$1,640,000,000 at March 31, 1999.
We have commitments to purchase and construct health care facilities
totaling approximately $87,000,000 for funding during 1999 and 2000. We expect
that a significant portion of these commitments will be funded but that a
portion may not be funded (see Note (7) to the Condensed Consolidated Financial
Statements).
RESULTS OF OPERATIONS
Net Income applicable to common shares for the three months ended March 31,
1999 totaled $15,269,000 or $0.49 of diluted earnings per share on revenue of
$49,621,000. This compares to $16,297,000 or $0.54 of diluted earnings per
share on revenue of $36,334,000, for the same period in 1998. The decrease in
Net Income is attributable to higher interest expense and depreciation/non-cash
charges offset by higher Rental and Interest and Other Income.
Rental Income for the three months ended March 31, 1999 increased by
$11,264,000 to $41,552,000 as compared to the same period in the prior year.
The majority of the increase in Rental Income was generated by new investments
made during 1998 and the first quarter of 1999. Interest and Other Income for
the three months ended March 31, 1999 increased $468,000 to $6,018,000. The
increase was primarily from growth in the lending portfolio.
Interest Expense for the three months ended March 31, 1999 increased by
$4,727,000 to $12,360,000. The increase is primarily the result of an increase
in short-term borrowings used to fund the acquisitions made during 1998 and the
first quarter of 1999, interest related to the MOPPRS senior debt issuance
during June 1998 and interest on mortgage loans assumed on the first quarter
acquisition of 14 MOBs. The increase in Depreciation/Non Cash Charges for the
three months ended March 31, 1999 of $2,784,000 to $10,176,000 is the direct
result of the new investments made during 1997, 1998 and 1999. Facility
Operating Expenses for the three months ended March 31, 1999 increased
$2,954,000 to $3,751,000. The increase is due to the operating expenses on the
newly acquired MOBs and clinics. These facilities are operated by property
management companies on behalf of the Company.
12
<PAGE>
We believe that FFO is an important supplemental measure of operating
performance. (See Note (6) to the Condensed Consolidated Financial Statements.)
FFO for the three months ended March 31, 1999 increased $2,277,000 to
$24,991,000 as compared to the same period in the prior year. The increase is
attributable to increases in Rental Income, and Interest and Other Income, as
offset by increases in Interest Expense and Facility Operating Expenses, which
are discussed above.
FFO does not represent cash generated from operating activities in
accordance with generally accepted accounting principles, is not necessarily
indicative of cash available to fund cash needs and should not be considered as
an alternative to net income. FFO, as we defined it, may not be comparable to
similarly entitled items reported by other real estate investment trusts that do
not use the NAREIT definition.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed acquisitions through the sale of common and
preferred stock, issuance of long-term debt, assumption of mortgage debt, use of
short-term bank lines and through internally generated cash flows. Facilities
under construction are generally financed by means of cash on hand or short-term
borrowings under our existing bank lines. At the completion of construction and
commencement of the lease, short-term borrowings used in the construction phase
are generally refinanced with new long-term debt, including Medium Term Notes
("MTNs"), or with equity offerings.
MTN FINANCINGS
- ---------------
The following table summarizes the MTN financing activities during 1998 and
1999:
<TABLE>
<CAPTION>
Amount
Date Maturity Coupon Rate Issued/(Redeemed)
- ------------------- ----------- ------------- -------------------
<S> <C> <C> <C>
February 1998 --- 9.88% $(10,000,000)
March 1998 5 years 6.66% 20,000,000
April-November 1998 --- 6.10%-9.70% (17,500,000)
November 1998 3-8 years 7.30%-7.88% 28,000,000
February 1999 5 years 6.92% 25,000,000
April 1999 5 years 7.00%-7.48% 37,000,000
</TABLE>
SENIOR DEBT OFFERINGS
- ---------------------
During June 1998, the Company issued $200 million of 6.875% MandatOry Par
Put Remarketed Securities ("MOPPRS") due June 8, 2015 which are subject to
mandatory tender on June 8, 2005. We received total proceeds of approximately
$203,000,000 (including the present value of a put option associated with the
debt) which was used to repay borrowings under our revolving lines of credit.
The weighted average cost of the debt including the amortization of the option
and offering expenses is 6.77%. The MOPPRS are senior, unsecured obligations of
the Company.
13
<PAGE>
EQUITY OFFERINGS
- ----------------
Since September 1997, HCPI has completed five equity offerings, summarized
in the table below:
<TABLE>
<CAPTION>
Shares Equity
Date Issuance Issued Raised Net Proceeds
- -------------- --------------------------------- --------- ------------- ------------
<S> <C> <C> <C> <C>
September 1997 7-7/8% Series A Cumulative 2,400,000 $ 60,000,000 $ 57,810,000
Redeemable Preferred Stock
December 1997 Common Stock at $38.3125/share 1,437,500 $ 55,000,000 $ 51,935,000
April 1998 Common Stock at $33.2217/share to 698,752 $ 23,200,000 $ 23,000,000
a Unit Investment Trust
September 1998 8.70% Series B Cumulative 5,385,000 $135,000,000 $130,000,000
Redeemable Preferred Stock
May 1999 Common Stock at $31.4375/share 1,000,000 $ 31,400,000 $ 29,600,000
</TABLE>
HCPI used the net proceeds from the equity offerings to pay down or pay off
short-term borrowings under its revolving lines of credit. HCPI invested any
excess funds in short-term investments until they were needed for acquisitions
or development.
At March 31, 1999, stockholders' equity totaled $591,047,000 and the debt
to equity ratio was 1.32 to 1.00. For the three months ended March 31, 1999,
FFO (before interest expense) covered Interest Expense 3.02 to 1.00.
AVAILABLE FINANCING SOURCES
- ---------------------------
During June 1998, the Company registered $600,000,000 of debt and equity
securities under a shelf registration statement filed with the Securities and
Exchange Commission. As of May 10, 1999 we had approximately $397,000,000
remaining on shelf filings for future financings. Of that amount, we had
approximately $110,000,000 available under our MTN senior debt programs. We may
issue securities under our universal shelf, including under our MTN program, up
to these amounts from time to time in the future based on Company needs and then
existing market conditions. On September 30, 1998, we renegotiated our lines of
credit with a group of seven banks. We have two revolving lines of credit, one
for $135,000,000 that expires on September 30, 2003 and one for $45,000,000 that
expires on September 30, 1999. As of May 10, 1999, the Company had $108,000,000
available on these lines of credit. Since 1986 the debt rating agencies have
rated our Senior Notes and Convertible Subordinated Notes investment grade.
Current ratings are as follows:
<TABLE>
<CAPTION>
Moody's Standard & Poor's Duff & Phelps
------- ----------------- -------------
<S> <C> <C> <C>
Senior Notes Baa1 BBB+ BBB+
Convertible
Subordinated Notes Baa2 BBB BBB
</TABLE>
On May 13, 1999, we were informed by Duff and Phelps that they are
changing the senior note rating for the Company from A to BBB+, and the
convertible subordinate note rating from BBB+ to BBB.
14
<PAGE>
Since inception in May 1985, the Company has recorded approximately
$715,460,000 in cumulative FFO. Of this amount, we have distributed a total of
$599,981,000 to stockholders as dividends on common stock. We have retained the
balance of $115,479,000 and used it as an additional source of capital.
At March 31, 1999, the Company held approximately $41,000,000 in
irrevocable letters of credit from commercial banks to secure the obligations of
many lessees' lease and borrowers' loan obligations. We may draw upon the
letters of credit if there are any defaults under the leases and/or loans.
Amounts available under letters of credit could change based upon facility
operating conditions and other factors and such changes may be material.
We paid the first quarter 1999 dividend of $0.68 per common share or
$21,109,000 in the aggregate on February 19, 1999. Total dividends paid during
the three months ended March 31, 1999, as a percentage of FFO was 84%. The
Company declared a second quarter dividend of $0.69 per common share or
approximately $22,110,000 in the aggregate, payable on May 20, 1999.
FACILITY ROLLOVERS
- ------------------
HCPI has concluded a significant number of "facility rollover" transactions in
1995, 1996, 1997 and 1998 on properties that have been under long-term leases
and mortgages. Facility rollover transactions principally include lease renewals
and renegotiations, exchanges, sales of properties, and, to a lesser extent,
payoffs on mortgage receivables. The annualized impact was to increase FFO in
1995 by $900,000 and decrease FFO in each of the years 1996 through 1998 by
$1,200,000, $1,600,000 and $3,100,000, respectively. Total rollovers were 20
facilities, 20 facilities, 12 facilities and 44 facilities in each of the years
1995 - 1998.
For the year ending December 31, 1999, HCPI has 17 facilities that are
subject to lease expiration and mortgage maturities. These facilities currently
represent approximately 7% of annualized revenues. For the year ended December
31, 2000, HCPI has seven facilities that are subject to lease expiration and
mortgage maturities. These facilities currently represent approximately 6% of
annualized revenue.
During 1997, HCPI reached agreement with Tenet (the holder of substantially
all the option rights of the Vencor leases) whereby Tenet agreed to waive
renewal and purchase options, and related rights of first refusal, on up to 51
facilities. As part of these agreements, HCPI has the right to continue to own
the facilities. HCPI paid Tenet $5,000,000 in cash, accelerated the purchase
option on two acute care hospitals leased to Tenet, and reduced Tenet's
guarantees on the facilities leased to Vencor. Leases on 20 of those 51
facilities had expiration dates through December 31, 2000. HCPI has increased
rents on five of the facilities with leases that have already expired during
1998, and believes it will be able to increase rents on other facilities whose
lease terms expire through 2001. However, there can be no assurance that HCPI
will be able to realize any increased rents on future rollovers. HCPI has
completed certain facility rollovers earlier than the scheduled lease
expirations or mortgage maturities and will continue to pursue such
opportunities where it is advantageous to do so.
15
<PAGE>
Management believes that HCPI's liquidity and sources of capital are
adequate to finance its operations as well as its future investments in
additional facilities.
YEAR 2000 ISSUE
The Year 2000 issue is the result of widely used computer programs that
identify the year by two digits, rather than by four. It is believed that
continued use of these programs may result in widespread computer-generated
malfunctions and miscalculations beginning in the year 2000, when the digits
"00" are interpreted as "1900." Those miscalculations could cause disruption of
operations including the temporary inability to process transactions such as
invoices for payment. Those computer programs that identify the year based on
all four digits are considered "Year 2000 compliant." The statements in the
following section include "Year 2000 readiness disclosure" within the meaning of
the Year 2000 Information and Readiness Disclosure Act of 1998.
Status of Year 2000 Issues with HCPI's Own Information Technology Systems and
Non-IT Systems
HCPI's primary use of information technology ("IT") is in its financial
accounting systems, billing and collection systems and other information
management software. HCPI's operations are conducted out of its corporate
offices in Newport Beach, California where it uses and is exposed to non-IT
systems such as those contained in embedded micro-processors in telephone and
voicemail systems, elevators, heating, ventilation and air conditioning (HVAC)
systems, lighting timers, security systems, and other property operational
control systems.
HCPI believes that it does not have significant exposure to Year 2000
issues with respect to its own accounting and information software systems or
with respect to non-IT systems contained in embedded chips used in its corporate
offices. HCPI has been working with its computer consultants to test and
continually upgrade its management information systems and has reasonable
assurance from its vendors and outside computer consultants that HCPI's
financial and other information systems are Year 2000 compliant. The cost to
bring the management information systems into Year 2000 compliance has not been
material. While any disruption in services at HCPI's corporate offices due to
failure of non-IT systems may be inconvenient and disruptive to normal day-to-
day activities, it is not expected to have a materially adverse effect on HCPI's
financial performance or operations.
Exposure to Third Parties' Year 2000 Issues
Because HCPI believes its own accounting and information systems are
substantially Year 2000 compliant, HCPI does not feel there will be material
disruption to its transaction processing on January 1, 2000. However, HCPI
depends upon its tenants for rents and cash flows, its financial institutions
for availability of working capital and capital markets financing and its
transfer agent to maintain and track investor information. If HCPI's primary
lessees and mortgagors are not Year 2000 compliant, or if they face disruptions
in their cash flows due to Year 2000 issues, HCPI could face significant
temporary disruptions in its cash flows after that date. These disruptions
could be exacerbated if the commercial banks that process HCPI's cash receipts
and disbursements and its lending institutions are not Year 2000 compliant.
16
<PAGE>
Furthermore, to the extent there are broad market disruptions as a result of
widespread Year 2000 issues, HCPI's access to the capital markets to raise cash
for investing activity could be impaired.
To address this concern, during the second quarter of 1998, HCPI commenced
a written survey of all of its major tenants, Bank of New York in its capacity
as agent under HCPI's credit facilities, and as common stock Transfer Agent and
Trustee under its senior debt indenture, each other lender under HCPI's credit
facility, its primary investment banker for HCPI's capital raising activities,
and HCPI's independent public accountants and primary outside legal counsel.
The survey asked each respondent to assess its exposure to Year 2000 issues and
asked what preparations each has made to deal with the Year 2000 issue with
respect to both information technology and non-IT systems. In addition HCPI
asked each respondent to inform it about their exposure to third party vendors,
customers and payers who may not be Year 2000 compliant.
Through this process HCPI has been informed in writing by approximately 95%
of those surveyed that they believe that they have computer systems that are or
will be Year 2000 compliant by the end of 1999. All continue to assess their
own exposure to the issue. However neither HCPI nor its lessees and mortgagors
can be assured that the federal and state governments, upon which they rely for
Medicare and Medicaid revenue, will be in compliance in a timely manner.
HCPI is in the process of assessing its exposure to failures of embedded
microprocessors contained in elevators, electrical and HVAC systems, security
systems and the breakdown of other non-IT systems due to the Year 2000 issue at
the properties operated by its tenants. Under a significant portion of its
leases, HCPI is not responsible for the cost to repair such items and is
indemnified by the tenants for losses caused by their operations on the
property. For the medical office buildings where HCPI may be responsible for
repairing such items, HCPI does not believe that the costs of repair will be
material to HCPI and any such costs will be expensed as incurred.
Risks to HCPI of Year 2000 Issues
HCPI's exposure to the Year 2000 issue depends primarily on the readiness
of its significant tenants and commercial banks, who in turn, are dependent upon
suppliers, payers and other external parties, all of which is outside HCPI's
control. HCPI believes the most reasonably likely worst case scenario faced by
HCPI as a result of the Year 2000 issue is the possibility that reimbursement
delays caused by a failure of federal and state welfare programs responsible for
Medicare and Medicaid could adversely affect its tenants' cash flow, resulting
in their temporary inability to meet their obligations under its leases.
Depending upon the severity of any reimbursement delays and the financial
strength of any particular operator, the operations of HCPI's tenants could be
materially adversely affected, which in turn could have a material adverse
effect on HCPI's results of operations.
17
<PAGE>
In September 1998, the General Accounting Office reported that the Health
Care Financing Administration ("HCFA"), which runs Medicare, is behind schedule
in taking steps to deal with the Year 2000 issue and that it is highly unlikely
that all of the Medicare systems will be compliant in time to ensure the
delivery of uninterrupted benefits and services into the year 2000. The General
Accounting Office also reported in November 1998 that, based upon its survey of
the states, the District of Columbia and three territories, less than 16% of the
automated systems used by state and local government to administer Medicaid are
reported to be Year 2000 compliant. HCPI does not know at this time whether
there will in fact be a disruption of Medicare or Medicaid reimbursements to its
lessees and mortgagors and HCPI is therefore unable to determine at this time
whether the Year 2000 issue will have a material adverse effect on HCPI or its
future operations.
Contingency Plans
If there are severe disruptions in HCPI's cash flow as a result of
disruptions in its tenants' or mortgagors' cash flow, HCPI may be forced to slow
its investment activity, or seek additional liquidity from its lenders.
Readers are cautioned that most of the statements contained in the "Year
2000 Issue" paragraphs are forward looking and should be read in conjunction
with HCPI's disclosures under the heading "Cautionary Language Regarding Forward
Looking Statements" set forth below.
Cautionary Language Regarding Forward Looking Statements
Statements in this Annual Report that are not historical factual statements
are "forward looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The statements include, among other things,
statements regarding the intent, belief or expectations of HCPI and its officers
and can be identified 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, HCPI, through its senior management, from
time to time makes forward looking oral and written public statements concerning
HCPI's expected future operations and other developments. Shareholders and
investors are cautioned that, while forward looking statements reflect HCPI's
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:
(a) Legislative, regulatory, or other changes in the healthcare industry at
the local, state or federal level which increase the costs of or otherwise
affect the operations of HCPI's lessees;
(b) Changes in the reimbursement available to HCPI's 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;
(c) Competition for lessees and mortgagors, including with respect to new
leases and mortgages and the renewal or rollover of existing leases;
(d) Competition for the acquisition and financing of health care facilities;
18
<PAGE>
(e) The ability of HCPI's lessees and mortgagors to operate HCPI's properties
in a manner sufficient to maintain or increase revenues and to generate
sufficient income to make rent and loan payments;
(f) Changes in national or regional economic conditions, including changes in
interest rates and the availability and cost of capital to HCPI; and
(g) General uncertainty inherent in the Year 2000 issue, particularly the
uncertainty of the Year 2000 readiness of third parties who are material
to HCPI's business, such as public or private healthcare reimbursers, over
whom HCPI has no control with the result that HCPI 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.
DISCLOSURES ABOUT MARKET RISK
HCPI is exposed to market risks related to fluctuations in interest rates on
its mortgage loans receivable and on its debt instruments. The following
discussion and table presented below are provided to address the risks
associated with potential changes in HCPI's interest rate environment.
HCPI provides mortgage loans to operators of healthcare facilities in the
normal course of business. All of the mortgage loans receivable have fixed
interest rates or interest rates with periodic fixed increases. Therefore, the
mortgage loans receivable are all considered to be fixed rate loans, and the
current interest rate (the lowest rate) is used in the computation of market
risk provided in the table below if material.
HCPI generally borrows on its short-term bank lines of credit to complete
acquisition transactions. These borrowings are then repaid using proceeds from
subsequent long-term debt and equity offerings. HCPI may also assume mortgage
notes payable already in place as part of an acquisition transaction. Currently
HCPI has two mortgage notes payable with variable interest rates and the
remaining mortgage notes payable have fixed interest rates or interest rates
with fixed periodic increases. HCPI's senior notes and convertible debt are at
fixed rates. The variable rate loans are at interest rates at or below the
current prime rate of 7.75%, and fluctuations are tied to the prime rate or to a
rate currently below the prime rate.
Fluctuation in the interest rate environment will not impact HCPI's future
earnings and cash flows on its fixed rate debt until that debt matures and must
be replaced or refinanced. Interest rate changes will affect the fair value of
the fixed rate instruments. Conversely, changes in interest rates on variable
rate debt would change the future earnings and cash flows of HCPI, but not
affect the fair value on those instruments. Assuming a one percentage point
increase in the interest rate related to the variable rate debt including the
mortgage notes payable and the bank lines of credit, and assuming no change in
the outstanding balance as of the quarter ended March 31, 1999, interest expense
for the coming year would increase by approximately $1,207,000. Approximately
50% of the increase in interest expense related to the bank lines of credit, or
$500,000, would be capitalized into construction projects.
19
<PAGE>
The principal amount and the average interest rates for the mortgage loans
receivable and debt categorized by the final maturity dates are presented in the
table below. Certain of the mortgage loans receivable and certain of the debt
securities, excluding the convertible debentures, require periodic principal
payments prior to the final maturity date. The fair value estimates for the
mortgage loans receivable are based on the estimates of management and on rates
currently prevailing for comparable loans. The fair market value estimates for
debt securities are based on discounting future cash flows utilizing current
rates offered to HCPI for debt of the same type and remaining maturity.
<TABLE>
<CAPTION>
Maturity
---------------------------------------------------------------------------- ---------
Fair
1999 2000 2001 2002 2003 Thereafter Total Value
---------------------------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Mortgage Loans Receivable $17,565 $ 2,502 $126,413 $146,480 $156,000
13.03% 10.17% 9.79% 10.19%
LIABILITIES
Variable Rate Debt:
Bank Notes Payable 100,500 100,500 100,500
Weighted Average Interest Rate 5.35% 5.35%
Mortgage Notes Payable 13,639 2,593 1,579 4,968 22,779 21,280
Weighted Average Interest Rate 7.75% 7.75% 5.87% 5.75% 7.21%
Fixed Rate Debt:
Senior Notes Payable 15,000 10,000 13,000 17,000 31,000 438,142 524,142 500,000
Weighted Average Interest Rate 9.98% 8.87% 7.88% 8.40% 7.09% 6.85% 7.10%
Convertible Subordinated
Notes Payable 100,000 100,000 100,773
Weighted Average Interest Rate 6.00% 6.00%
Mortgage Notes Payable (103) 103 555 31,886 32,441 34,350
Weighted Average Interest Rate 8.91% 9.00% 9.00% 8.57% 8.60%
</TABLE>
HCPI does not believe that the future market rate risks related to the
above securities will have a material impact on HCPI or the results of its
future operations. Readers are cautioned that most of the statements contained
in these "Disclosures about Market Risk" paragraphs are forward looking and
should be read in conjunction with HCPI's disclosures under the heading
"Cautionary Language Regarding Forward Looking Statements" set forth above.
20
<PAGE>
PART II. OTHER INFORMATION
Item 2. Amendments to Bylaws
--------------------
On April 28, 1999, the Board of Directors of the Company amended the
Amended and Restated Bylaws of the Company in order to (i) establish a 31 day
period for the annual meeting of stockholders in compliance with the
requirements of Maryland corporate law, (ii) raise the percentage of
stockholders required to request a special meeting of the stockholders from 25%
to 50%, (iii) allow the committees of the Board of Directors to consist of one
or more directors instead of two or more, and (iv) provide that upon any default
in the payment of dividends on any class or series of preferred stock or any
other event which would allow the holders of such preferred stock to elect
additional directors, the number of directors may be increased by the number of
additional directors to be elected by such holders, for so long as such holders
have the right to elect additional directors. A copy of the Second Amended and
Restated Bylaws of the Company is attached as an exhibit to this quarterly
report on Form 10-Q.
Amendment to Rights Plan
- ------------------------
On July 5, 1990 the Board of Directors of the 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 and entered into a Rights Agreement. When exercisable, each Right
entitles the registered holder to purchase from the Company one share of the
Company's 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 the
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 the 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 Company's Common Stock (except pursuant to
certain cash tender offers for all outstanding Common Stock approved by the
Board of Directors) or if the Company is the surviving corporation in a merger
and its 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 Company's Common Stock having a market value equal to twice the
exercise price. Similarly, if after the Rights become exercisable, the 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.
21
<PAGE>
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 the Company's outstanding Common Stock. Under the original Rights
Agreement, the Board of Directors could, under certain circumstances, extend the
period during which the Rights are redeemable or postpone the Distribution Date.
In January 1999 we amended our Rights Agreement to provide that Rights
issued under the Rights Agreement may be redeemed, at a price of $.005 per
Rights, until the time that a person or group has acquired beneficial ownership
of 15% or more or our outstanding common stock. As a result of the amendment,
the Board does not have the power to extend the period during which Rights are
redeemable.
The Rights will expire on July 30, 2000, unless earlier redeemed.
A copy of the First Amendment to Rights Agreement dated as of January 28,
1999 is attached as an exhibit to the Company's Annual Report of Form 10-K for
the year ended December 31, 1998.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) Exhibits:
3.2 Second Amended and Restated Bylaws of Health Care Property
Investors, Inc.
27 Financial Data Schedule
b) Reports on Form 8-K:
On January 7, 1999, the Company filed a Report on Form 8-K with the
SEC regarding the acquisition of 12 long-term care facilities and 13
medical office buildings in five separate transactions at an
aggregate purchase price of approximately $125,348,000.
On March 8, 1999, the Company filed a Report on Form 8-K/A which
amended the Form 8-K previously filed on January 7, 1999 in order to
state that neither audited historical financial statements nor pro
forma financial information concerning the acquired properties was
required under Rule 3-05 of Regulation S-X.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 13, 1999 HEALTH CARE PROPERTY INVESTORS, INC.
(REGISTRANT)
/s/ James G. Reynolds
-------------------------------------------
James G. Reynolds
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Devasis Ghose
-------------------------------------------
Devasis Ghose
Senior Vice President-Finance and Treasurer
(Principal Accounting Officer)
23
<PAGE>
As Amended and Restated
April 28, 1999
SECOND AMENDED AND RESTATED BYLAWS
OF
HEALTH CARE PROPERTY INVESTORS, INC.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE -- The registered office of the
Corporation shall be established and maintained at the office of THE CORPORATION
TRUST INCORPORATED, 32 South Street, Baltimore, Maryland 21202, and THE
CORPORATION TRUST INCORPORATED shall be the resident agent of this Corporation.
SECTION 2. OTHER OFFICES -- The Corporation may establish such other
offices, within or without the State of Maryland, at such place or places as the
Board of Directors from time to time may designate, or which the business of the
Corporation may require.
ARTICLE II
STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS -- Annual meetings of stockholders for the
election of directors to succeed directors whose terms are expiring and the
transaction of any business within the powers of the Corporation, shall be held
on a date and at a time between April 15 and May 15, inclusive, as designated by
the Board of Directors at such place, within or without the State of Maryland,
as the Board of Directors by resolution shall determine, and as set forth in the
notice of the meeting.
If the date of the annual meeting shall fall on a legal holiday of the
state in which the meeting is to be held, the meeting shall be held on the next
succeeding business day.
SECTION 2. SPECIAL MEETINGS -- Special meetings of the stockholders,
for any purpose or purposes, may be called by the Chief Executive Officer, the
President, or a majority of the Board of Directors, and shall be called by the
Secretary or any
<PAGE>
other officer upon written request of stockholders holding in the aggregate not
less than 50% of the outstanding shares entitled to vote on the business
proposed to be transacted thereat. Any such request of the stockholders shall
state the purpose of the meeting and the matters proposed to be acted on at such
meeting. The Secretary or other officer of the Corporation shall inform the
requesting stockholders of the reasonably estimated cost of preparing and
mailing notice of the proposed special meeting and, upon payment to the
Corporation of such estimated costs, the Secretary or other officer of the
Corporation shall give notice to each stockholder entitled to notice of the
special meeting. Unless requested by stockholders entitled to cast a majority of
all votes entitled to be cast at a meeting of stockholders, a special meeting
need not be called to consider any matter which is substantially the same as a
matter voted on at any special meeting of the stockholders of the Corporation
held during the preceding twelve months. Special meetings of stockholders may be
held at such time and place, within or without the State of Maryland, as shall
be stated in the notice of the meeting. The notice of a special meeting shall
state the nature of the business to be transacted and no other business shall be
considered at the meeting.
SECTION 3. NOTICE OF MEETINGS -- Written or printed notice, stating
the place, date and time of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called, shall be given to each
stockholder entitled to vote thereat at his address as it appears on the records
of the Corporation by United States mail, postage prepaid, not less than ten
(10) nor more than ninety (90) days before the date of the meeting, unless any
provisions of the laws of the State of Maryland shall prescribe a differing
elapsed period of time. No business other than that stated in the notice shall
be transacted at any special meeting.
SECTION 4. VOTING -- At each annual meeting the stockholders entitled
to vote shall elect directors to succeed the directors whose terms are expiring,
and the stockholders may transact such other corporate business as may be within
the powers of the Corporation. The vote for directors, and, upon the demand of
any stockholder entitled to vote on any such matter, the vote upon any question
before the meeting, shall be by ballot. All elections of directors shall be by
a plurality of the votes cast, and all questions shall be decided by a majority
vote, except as otherwise provided by the Charter of the Corporation or by the
laws of the State of Maryland.
-2-
<PAGE>
The directors may fix a day not more than ninety (90) days nor less
than ten (10) days prior to the holding of any meeting of stockholders as the
date as of which stockholders entitled to notice of and to vote at such meeting
shall be determined; and only stockholders of record on such day shall be
entitled to notice of or to vote at any such meeting.
Each stockholder entitled to vote, in accordance with the terms of the
Charter and the provisions of these Bylaws, shall be entitled to one vote, in
person or by proxy, for each share of stock entitled to vote held by such
stockholder, but no proxy shall be voted after eleven (11) months from its date
unless such proxy provides for a longer period. In no case shall any proxy be
given for a period in excess of ten (10) years from the date of its execution.
SECTION 5. QUORUM -- Except as provided in the next section hereof,
any number of stockholders together holding a majority of the stock issued and
outstanding and entitled to vote thereat, who shall be present in person or
represented by proxy at any meeting duly called, shall constitute a quorum for
the transaction of business. If, at any meeting less than a quorum shall be
present or represented, those present, either in person or by proxy, shall have
the power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until the requisite amount of stock shall be
present, at which time any business may be transacted which might have been
transacted at the meeting as originally noticed.
SECTION 6. ACTION WITHOUT MEETING -- Any action to be taken by the
stockholders may be taken without a meeting, if, prior to such action, all
stockholders entitled to vote thereon shall consent in writing to such action
being taken, and such consent shall be treated for all purposes as a vote at a
meeting.
SECTION 7. NOMINATIONS AND STOCKHOLDER BUSINESS
(a) Annual Meetings of Stockholders.
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(1) Nominations of persons for election to the Board of Directors
and the proposal of business to be considered by the stockholders may be made at
an annual meeting of stockholders (i) pursuant to the Corporation's notice of
meeting, (ii) by or at the direction of the Board of Directors or (iii) by any
stockholder of the Corporation who was a stockholder of record at the time of
giving of notice provided for in this Section 7(a), who is entitled to vote at
the meeting and who
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complied with the notice procedures set forth in this Section 7(a).
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (iii) of paragraph (a)(1) of
this Section 7, the stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice shall
be delivered to the Secretary at the principal executive offices of the
Corporation not less than sixty (60) days nor more than ninety (90) days prior
to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than thirty (30) days or delayed by more than sixty (60) days from such
anniversary date, notice by the stockholder to be timely must be so delivered
not earlier than the ninetieth (90th) day prior to such annual meeting and not
later than the close of business on the later of the sixtieth (60th) day prior
to such annual meeting or the tenth (10th) day following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice shall set forth (i) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (ii) as
to any other business that the stockholder proposes to bring before the meeting,
a brief description of the business desired to be brought before the meeting,
the reasons for conducting such business at the meeting and any material
interest in such business of such stockholder and of the beneficial owner, if
any, on whose behalf the proposal is made; and (iii) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made, (x) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial owner and (y) the
class and number of shares of stock of the Corporation which are owned
beneficially and of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(a)(2) of this Section 7 to the contrary, in the event that the number of
directors to be elected to the Board of Directors is increased and there is no
public announcement naming all of the nominees for director or
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specifying the size of the increased Board of Directors made by the Corporation
at least seventy (70) days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section 7(a)
shall also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the Corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
--------------------------------
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) provided that the Board of Directors has determined that
directors shall be elected at such special meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice
provided for in this Section 7(b), who is entitled to vote at the meeting and
who complied with the notice procedures set forth in this Section 7(b). In the
event the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be) for election to such
position as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (a)(2) of this Section 7 (together
with the information and consents required pursuant to clauses (ii) and (iii) of
paragraph (a)(2)) shall be delivered to the Secretary at the principal executive
offices of the Corporation not earlier than the ninetieth (90th) day prior to
such special meeting and not later than the close of business on the later of
the sixtieth (60th) day prior to such special meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting.
(c) General.
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(1) Only such persons who are nominated in accordance with the
procedures set forth in this Section 7 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in
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this Section 7. The presiding officer of the meeting shall have the power and
duty to determine whether a nomination or any business proposed to be brought
before the meeting was made in accordance with the procedures set forth in this
Section 7 and, if any proposed nomination or business is not in compliance with
this Section 7, to declare that such defective nomination or proposal be
disregarded.
(2) For purposes of this Section 7, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Sections
13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding that foregoing provisions of this Section 7,
a stockholder shall also comply with all applicable requirements of state law
and of the Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Section 7. Nothing in this Section 7 shall be
deemed to affect any rights of stockholders to request inclusion of proposals in
the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
(4) This Section 7 shall become effective on May 1, 1995.
SECTION 8. INSPECTORS -- The Board of Directors may, in advance of
any meeting of stockholders, appoint one or more inspectors to act at such
meeting or any adjournment thereof. If the inspectors shall not be so appointed
or if any of them shall fail to appear or act, the chairman of the meeting may,
and on the request of any stockholder entitled to vote thereat shall, appoint
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath to execute faithfully the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
votes, ballots or consents, hear and determine all challenges and questions
arising in connection with the right to vote, count and tabulate all votes,
ballots or consents, determine the result, and do such acts as are proper to
conduct the election or vote with fairness to all stockholders. On request of
the chairman of the meeting or any stockholder entitled to vote thereat, the
inspectors shall make a report in writing of any challenge, request or matter
determined by them and shall execute a certificate of any fact found by them.
No
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director or candidate for the office of director shall act as inspector of an
election of directors. Inspectors need not be stockholders.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM -- The number of directors shall be seven
(7) until changed by amendment to this Section of the Bylaws duly adopted by the
Board of Directors or stockholders. In no case shall the number of directors
ever be less than three (3). Notwithstanding the foregoing, upon the occurrence
of a default in the payment of dividends on any class or series of preferred
stock, or any other event, which will entitle the holders of any class or series
of preferred stock to elect additional directors of the Corporation, the number
of directors of the Corporation will thereupon be increased by the number of
additional directors to be elected by the holders of such class or series of
preferred stock, and such increase in the number of directors shall remain in
effect for so long as the holders of such class or series of preferred stock are
entitled to elect such additional directors.
The Board of Directors of this Corporation shall be classified into
three classes, with the number of directors in each class being as nearly equal
as possible. Initially there shall be two directors in Class 1, two directors
in Class 2, and three directors in Class 3. Each director in Class 1 initially
shall serve for a term ending at the annual meeting of stockholders in 1986;
each director in Class 2 shall serve for an initial term ending at the annual
meeting of stockholders in 1987; and each director in Class 3 shall serve for an
initial term ending at the annual meeting of stockholders in 1988. After the
respective initial terms of the classes indicated, each such class of directors
shall be elected for successive terms ending at the annual meeting of
stockholders the third year after election.
Directors need not be stockholders.
SECTION 2. QUORUM -- A majority of the directors shall constitute a
quorum for the transaction of business. If, at any meeting of the Board, there
shall be less than a quorum present, a majority of those present may adjourn the
meeting, from time to time, until a quorum is obtained, and no further notice
thereof
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need be given other than by announcement at said meeting which shall be so
adjourned.
SECTION 3. FIRST MEETING -- The newly elected directors may hold
their first meeting for the purpose of organization and the transaction of
business, if a quorum is present, immediately after the annual meeting of
stockholders or the time and place of such meeting may be fixed by written
consent of the entire Board.
SECTION 4. ELECTION OF OFFICERS -- At the first meeting, or at any
subsequent meeting called for that purpose, the directors shall elect the
officers of the Corporation, as more specifically set forth in ARTICLE V of
these Bylaws. Such officers shall hold office until the next annual election of
officers, or until their successors are elected and shall have qualified.
SECTION 5. REGULAR MEETINGS -- Regular meetings of the Board of
Directors shall be held at such places and times as shall be determined, from
time to time, by resolution of the Board of Directors without other notice than
such resolution.
SECTION 6. SPECIAL MEETINGS -- Special meetings of the Board of
Directors may be called by the Chief Executive officer, the President, or by the
Secretary on prior notice to each Director. In case such notice is mailed, it
shall be given at least four (4) days prior to the time of the holding of the
meeting. In case such notice is given personally, or by telephone, facsimile
correspondence or telegram, it shall be given at least twenty-four (24) hours
prior to the time of the holding of the meeting.
SECTION 7. PLACE OF MEETINGS -- The directors may hold their
meetings, and have one or more offices, and keep the books of the Corporation
outside the State of Maryland at any office or offices of the Corporation, or at
any other place as they from time to time by resolution may determine.
SECTION 8. DISPENSING WITH NOTICE -- The transactions of any meeting
of the Board of Directors which is not properly called or noticed, regardless of
how called and noticed or wherever held, shall be as valid as though had at A
meeting duly held after regular call and notice if a quorum be present and if,
either before or after the meeting, each of the Directors not present signs a
written waiver of notice, a consent to holding the meeting or an approval of the
minutes thereof. The waiver of notice or consent need not specify the purpose
of the meeting.
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All such waivers, consents and approvals shall be filed with the corporate
records or made a part of the minutes of the meeting. Notice of a meeting need
not be given to any Director who attends the meeting without protesting, prior
thereto or at its commencement, the lack of notice to such Director.
SECTION 9. ACTION WITHOUT MEETING -- Any action required or
permitted to be taken at any meeting of the Board of Directors, or any committee
thereof, may be taken without a meeting if a written consent thereto is signed
by all members of the Board or of such committee, as the case may be, and such
written consent is filed with the minutes of the proceedings of the Board of
Directors or committee.
SECTION 10. TELEPHONIC MEETINGS -- Unless otherwise restricted by the
Charter or these Bylaws, members of the Board of Directors, or any committee
designated by the Board of Directors, may participate in a meeting of the Board
of Directors, or any committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and such participation in a meeting shall
constitute presence in person at such meeting.
SECTION 11. GENERAL POWERS OF DIRECTORS -- The Board of Directors
shall manage the business and affairs of the Corporation, and, subject to the
restrictions imposed by law, exercise all the powers of the Corporation, except
as conferred on or reserved to the stockholders by law or by the Charter or
these Bylaws.
SECTION 12. SPECIFIC POWERS OF DIRECTORS -- Without prejudice to such
general powers, it hereby is expressly declared that the directors shall have
the following powers, to the extent permitted under the laws of the State of
Maryland, subject to the provisions of the Charter and other provisions of these
Bylaws:
(1) To make and change regulations, not inconsistent with these
Bylaws, for the management of the business and affairs of the Corporation.
(2) To purchase or otherwise acquire for the Corporation any
property, rights or privileges which the Corporation is authorized to
acquire.
(3) To pay for any property purchased for the Corporation, either
wholly or partly in money, stock, bonds, debentures or other securities of
the Corporation.
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(4) To borrow money and make and issue notes, bonds and other
negotiable and transferable instruments, mortgages, deeds of trust and
trust agreements, and to do every act and thing necessary to effectuate the
same.
(5) To lease and rent real property whether in the capacity of
lessor or lessee.
(6) To dispose of or transfer property, both real and personal,
in any fashion or by any lawful means, including, without limitation, by
lease and as security for borrowings of the Corporation.
(7) To lend money and acquire loans made by others, and to
accept, in connection therewith, notes, bonds and other transferable
instruments, mortgages, deeds of trust and trust agreements of others, and
to do every act and thing otherwise necessary in connection therewith.
(8) To make investments from time to time with funds of the
Corporation and to dispose of such investments.
(9) To remove any officer when, in their judgment, the best
interests of the Corporation shall be served thereby, and, in their
discretion, from time to time to devolve the powers and duties of any
officer upon any other officer or person for the time being.
(10) To appoint and remove or suspend subordinate officers,
agents, or factors as they may deem necessary, and to determine their
duties, and to fix and from time to time to change their salaries or
remuneration, and to require security as and when they think fit.
(11) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, agents and factors.
(12) To determine who shall be authorized, on behalf of the
Corporation, to make and sign bills, notes, acceptances, endorsements,
contracts and other instruments.
(13) To determine who shall be entitled, in the name and on
behalf of the Corporation, to vote upon or to assign and transfer any
shares of stock, bonds or other securities of other corporations held by
this Corporation.
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(14) To authorize the Corporation to enter into, and to execute
and deliver, and to modify, amend or terminate, from time to time,
agreements, notes, acceptances, bills of sale, documents of transfer or
other documents or instruments of any kind or nature whatsoever, in
furtherance of or in connection with lawful activities of the Corporation.
(15) To delegate any of the powers of the Board, in relation to
the ordinary business of the Corporation, to any standing or special
committee, or to any officer or agent (with power to sub-delegate), upon
such terms as they deem fit.
(16) To call special meetings of the stockholders for any purpose
or purposes.
SECTION 13. COMPENSATION -- Directors shall receive no stated salary
for their services as directors but, by resolution of the Board, may receive
fixed fees per year and/or per meeting, and expenses of attendance for
attendance at each meeting.
Nothing herein contained shall be construed to preclude any director
from serving the Corporation in any other capacity as an officer, agent, or
otherwise, and receiving compensation therefor.
ARTICLE IV
COMMITTEES
SECTION 1. APPOINTMENTS AND POWERS -- The Board of Directors may, by
resolution or resolutions passed by a majority of the entire Board of Directors,
designate one or more committees, including, without limitation an Audit
Committee, an Investment Committee and a Compensation Committee, each consisting
of one (1) or more directors, to serve at the pleasure of the Board of
Directors. The Board of Directors may designate one or more directors as
alternate members of a committee who may replace any absent or disqualified
member at any meeting of the committee. Such alternate members shall not be
counted for purposes of determining a quorum unless so appointed, in which case
they shall be counted in the place of the absent or disqualified member. The
committee, to the extent provided in said resolution or resolutions or in these
Bylaws and permitted under the laws of the State of Maryland, shall have and may
exercise the powers of the Board of Directors in the management
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of the business and affairs of the Corporation and may have power to authorize
the seal of the Corporation to be affixed to all papers which may require it.
Such committee or committees shall have such name or names as may be stated in
these Bylaws or as may be determined from time to time by resolution adopted by
the Board of Directors.
SECTION 2. MINUTES -- Committees shall keep regular minutes of their
proceedings, and report the same to the Board of Directors when required.
SECTION 3. AUDIT COMMITTEE -- The Audit Committee shall select and
engage on behalf of the Corporation, subject to the consent of the stockholders,
and fix the compensation of, a firm of certified public accountants whose duty
it shall be to audit the books and accounts of the Corporation and its
subsidiaries for the fiscal year for which they are appointed, and who shall
report to such Committee. The Audit Committee shall confer with the auditors
and shall determine, and from time to time shall report to the Board of
Directors upon, the scope of the auditing of the books and accounts of the
Corporation and its subsidiaries. The Audit Committee shall also be responsible
for determining that the business practices and conduct of employees and other
representatives of the Corporation and its subsidiaries comply with the policies
and procedures of the Corporation. None of the members of the Audit Committee
shall be officers or employees of the Corporation.
SECTION 4. INVESTMENT COMMITTEE -- The Investment Committee shall
have the power to approve the acquisition and disposition of real estate and
other investments in the best interests of the Corporation. The Investment
Committee shall have such other powers as may be delegated by the Board of
Directors from time to time.
SECTION 5. COMPENSATION COMMITTEE -- The Compensation Committee shall
establish a general compensation policy for the Corporation and shall have the
responsibility for the approval of increases in directors' fees and in salaries
paid to officers and senior employees earning in excess of an annual salary to
be determined by the Compensation Committee. The Compensation Committee shall
have all of the powers of administration under all of the Corporation's employee
benefit plans, including any stock option plans, bonus plans, retirement plans,
stock purchase plans and medical, dental and insurance plans. In connection
therewith, the Compensation Committee shall determine, subject to the provisions
of the Corporation's plans, the directors, officers and employees of the
Corporation eligible to participate
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in any of the plans, the extent of such participation and the terms and
conditions under which benefits may be vested, received or exercised. All of the
members of the Compensation Committee shall be directors who are not eligible to
receive compensation pursuant to the stock incentive plans administered by the
Compensation Committee.
ARTICLE V
OFFICERS
SECTION 1. OFFICERS -- The officers shall be elected at the first
meeting of the Board of Directors after each annual meeting of stockholders.
The Board of Directors shall elect a Chief Executive Officer, a President, a
Secretary and a Treasurer, and may elect one or more Vice Presidents as they may
deem proper. Any person may hold two or more offices, except that no one person
shall concurrently hold the offices of President and Vice-President.
The Board of Directors may elect such other officers and agents as it
may deem advisable, who shall hold office for such terms and shall exercise such
powers and perform such duties as shall from time to time be determined by the
Board of Directors.
SECTION 2. CHIEF EXECUTIVE OFFICER -- The Chief Executive Officer
shall have the general powers and duties of supervision and management usually
vested in the office of Chief Executive Officer of a corporation. He shall have
general supervision, direction and control of the business of the Corporation.
He shall also exercise such further powers and perform such other duties as may
be conferred upon him by the Bylaws or the Board of Directors from time to time.
Except as the Board of Directors shall authorize the execution thereof in some
other manner, he shall have the power to execute bonds, mortgages and other
contracts on behalf of the Corporation, and he may cause the corporate seal to
be affixed to any instrument or document executed on behalf of the Corporation.
In the event that no other individual shall at that time have been appointed by
the Board of Directors to, and hold, the office of President of the Corporation,
the individual appointed by the Board to the position of Chief Executive Officer
shall also, by virtue of holding such office, be deemed to hold the office of
President, and any action taken by such individual in his capacity as Chief
Executive Officer will also be deemed action of the President.
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SECTION 3. PRESIDENT -- The President shall have the general powers
and duties of supervision and management usually vested in the office of
President of a corporation. He shall have general supervision, direction and
control of the business of the Corporation. He shall also exercise such further
powers and perform such other duties as may be conferred upon him by the Bylaws
or the Board of Directors from time to time. Except as the Board of Directors
shall authorize the execution thereof in some other manner, he shall have the
power to execute bonds, mortgages and other contracts on behalf of the
Corporation, and he may cause the corporate seal to be affixed to any instrument
or document executed on behalf of the Corporation. In the event that no other
individual shall at that time have been appointed by the Board of Directors to,
and hold, the office of President of the Corporation, the individual appointed
by the Board of Directors to the office of Chief Executive Officer shall also,
by virtue of holding such office, be deemed to hold the office of President, and
any action taken by such individual in his capacity as Chief Executive officer
will also be deemed action of the President.
SECTION 4. VICE PRESIDENTS -- Each Vice President shall have such
powers and shall perform such duties as are usually vested in the office of Vice
President of a corporation. Except as the Board of Directors shall authorize
the execution thereof in some other manner, he shall have the power to execute
bonds, mortgages and other contracts on behalf of the Corporation, and he may
cause the corporate seal to be affixed to any instrument or document executed on
behalf of the Corporation.
SECTION 5. SECRETARY -- The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and the Board of Directors, and
all other notices required by law or by these Bylaws, and, in case of his
absence or refusal or neglect so to do, any such notice may be given by any
person thereunto directed by the Chief Executive Officer, the President, the
Board of Directors, or the stockholders upon whose request the meeting is called
as provided in these Bylaws. He shall record all proceedings of meetings of the
stockholders and of the Board of Directors in a book to be kept for that
purpose, and shall perform such other duties as may be assigned to him by the
Directors or the Chief Executive Officer or President. He shall have custody of
the corporate seal, and shall have the power to affix said seal to all
instruments or documents executed on behalf of the Corporation.
SECTION 6. TREASURER -- The Treasurer shall have the custody of the
corporate funds and securities, and shall keep
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full and accurate accounts of receipts and disbursements in books belonging to
the Corporation. He shall deposit all monies and other valuables in the name and
to the credit of the Corporation in such depositories as may be designated by
the Board of Directors.
The Treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors or the President or Chief Executive Officer,
taking proper vouchers for such disbursements. He shall render to the President
or Chief Executive officer and the Board of Directors, at the regular meetings
of the Board, or whenever they may request it, an accounting of all his
transactions as Treasurer, and of the financial condition of the Corporation.
If required by the Board of Directors, he shall give the Corporation a
bond for the faithful discharge of his duties, in such amount and with such
surety as the Board shall prescribe.
SECTION 7. CHAIRMAN -- The Chairman, if one is elected, shall preside
at all meetings of the Board of Directors and stockholders, and shall have and
perform such other duties as from time to time may be assigned to him by the
Board of Directors.
SECTION 8. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS --
Assistant Secretaries and Assistant Treasurers, if any, may be appointed by the
Chief Executive Officer, the President or Vice President and shall have such
powers and shall perform such duties as shall be assigned to them, respectively,
by the Secretary and by the Treasurer.
ARTICLE VI
RESIGNATIONS; FILLING OF VACANCIES; REMOVAL FROM OFFICE
SECTION 1. RESIGNATIONS -- Any director or officer may resign at any
time. Such resignation shall be made in writing, and shall take effect at the
time specified therein, and, if no time be specified, at the time of its receipt
by the Board of Directors, the Chief Executive Officer, the President or the
Secretary. The acceptance of a resignation shall not be necessary to make it
effective.
SECTION 2. FILLING OF VACANCIES -- If the office of any officer or
director becomes vacant, other than vacancies on the Board of Directors created
by an increase in the number of
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directors, the remaining directors in office, although less than a quorum, may
appoint, by a majority vote, any qualified person to fill such vacancy, who
shall hold office for the unexpired term of his predecessor, or until his
successor is elected or appointed and shall have qualified.
Any vacancy on the Board of Directors occurring by reason of an
increase in the number of directors may be filled by action of a majority of the
entire Board, for a term of office continuing only until the next election of
directors by the stockholders or may be filled by the affirmative vote of the
holders of a majority of the shares then entitled to vote at an election of
directors.
SECTION 3. REMOVAL FROM OFFICE -- A director may be removed from
office only by the stockholders or the Board of Directors of the Corporation in
the manner and by the vote set forth in the Charter of the Corporation. The
stockholders of the Corporation may elect a successor or successors to fill any
vacancy or vacancies which result from the removal of a director or directors,
and each such successor will serve for the unexpired term of the removed
director.
Any officer or agent elected or appointed by the Board of Directors,
may be removed by said Board whenever, in its judgment, the best interests of
the Corporation shall be served thereby.
ARTICLE VII
CAPITAL STOCK
SECTION 1. CERTIFICATES OF STOCK -- Certificates of stock, numbered,
and with the seal of the Corporation affixed, signed by the Chief Executive
Officer (if the Board shall not have then appointed a President in which case
the actions of the Chief Executive Officer shall, for purposes of Maryland law,
be deemed those of the President), the President or a Vice President, and
countersigned by the Secretary or an Assistant Secretary, or the Treasurer or an
Assistant Treasurer, shall be issued to each stockholder, certifying to the
number of shares owned by him in the Corporation. The signatures on
certificates of stock may be either manual or facsimile.
In case any officer who has signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such officer before
such certificate is issued, it may be
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issued by the Corporation with the same effect as if he were such officer at the
date of its issue. Each certificate representing shares of the capital stock of
the Corporation shall bear on its face or back such statements relating to the
authority of the Corporation to issue more than one class of stock, the
designations and other terms and conditions of each such class of stock and
restrictions on transferability of capital stock imposed by the Corporation, or
a statement that such information will be provided on request and without
charge, all as and to the extent which may be required by the laws of the State
of Maryland.
SECTION 2. LOST CERTIFICATES -- A new certificate of stock may be
issued in place of any certificate theretofore issued by the Corporation and
alleged to have been lost or destroyed, and the Board of Directors may, at their
discretion, request the owner of the lost or destroyed certificate, or his legal
representative, to give the Corporation a bond, in such sum as the Board of
Directors may direct, but not exceeding double the value of the stock, to
indemnify the Corporation against any claim that may be made against it on
account of the alleged loss of any such certificate.
SECTION 3. TRANSFER OF SHARES -- Subject to the restrictions that may
be contained in the Charter, the shares of stock of the Corporation shall be
transferable only upon its books by the holders thereof in person or by their
duly authorized representatives.
SECTION 4. DIVIDENDS -- Subject to the provisions of the Charter and
the laws of the State of Maryland, the Board of Directors may, at any regular or
special meeting, declare dividends upon the capital stock of the Corporation, as
and when the Board of Directors may deem expedient.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
SECTION 1. CORPORATE SEAL -- The Board of Directors shall adopt and
may alter a common seal of the Corporation. Said seal shall be circular in form
and shall contain the name of the Corporation, the year of its creation, and the
words: "CORPORATE SEAL, MARYLAND." It may be used by causing it or a facsimile
thereof to be impressed, affixed, or otherwise reproduced.
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SECTION 2. FISCAL YEAR -- The fiscal year of the Corporation shall
end on the 31st day of December of each calendar year.
SECTION 3. CHECKS, DRAFTS, NOTES -- All checks, drafts, or other
orders for the payment of money, notes or other evidences of indebtedness issued
in the name of the Corporation, shall be signed by such officer or officers,
agent or agents of the Corporation, and in such manner, as from time to time
shall be determined by resolution of the Board of Directors or, in the absence
of any specific resolution of the Board of Directors, or if not otherwise
provided by the Board of Directors, may be signed by the Chief Executive
Officer, the President or any Vice President.
SECTION 4. CORPORATE RECORDS -- The Corporation shall keep correct
and complete books of account and minutes of the proceedings of its stockholders
and Board of Directors.
The Corporation shall keep and maintain at its principal office a
certified copy of its Charter and all amendments thereto, a certified copy of
its Bylaws and all amendments thereto, a stock ledger or duplicate stock ledger,
revised annually, containing the names, alphabetically arranged, of all
stockholders, their residence addresses, and the number of shares held by them,
respectively. In lieu of the stock ledger or duplicate stock ledger, a
statement may be filed in the principal office stating the name of the custodian
of the stock ledger or duplicate stock ledger, and the present and complete post
office address (including street and number, if any) where such stock ledger or
duplicate stock ledger is kept.
The Board of Directors shall take all reasonable steps to assure that
a full and correct annual statement of the affairs of the Corporation is
prepared annually, including a balance sheet and a financial statement of
operations for the preceding fiscal year which shall be certified by independent
certified public accountants, and distributed to stockholders within one hundred
and twenty (120) days after the close of the Corporation's fiscal year and a
reasonable period of time prior to the annual meeting of stockholders. Such
annual statement shall also be submitted at the annual meeting and shall be
filed within twenty (20) days thereafter at the principal office of the
Corporation in the State of Maryland. The Board of Directors shall also be
responsible for scheduling the annual meeting of stockholders.
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SECTION 5. NOTICE AND WAIVER OF NOTICE -- Whenever, pursuant to the
laws of the State of Maryland or these Bylaws, any notice is required to be
given, personal notice is not meant unless expressly so stated, and any notice
so required shall be deemed to be sufficient if given by depositing the same in
the United States mail, postage prepaid, addressed to the person entitled
thereto at his address as it appears on the records of the Corporation, and such
notice shall be deemed to have been given on the day of such mailing.
Stockholders not entitled to vote shall not be entitled to receive notice of any
meetings except as otherwise provided by statute.
Any notice required to be given may be waived, in writing, by the
person or persons entitled thereto, whether before or after the time stated
therein.
ARTICLE IX
AMENDMENTS
SECTION 1. AMENDMENTS OF BYLAWS -- The stockholders by the
affirmative vote of the holders of two-thirds (2/3) of the stock issued and
outstanding and entitled to vote, or the directors, by the affirmative vote of a
majority of the entire Board of Directors, may amend or alter any of these
Bylaws. Notwithstanding the foregoing, any amendment to Section 1 of Article
III of the Bylaws which increases the number of directors by more than one (1)
in any twelve (12) month period or increases the total number of directors to
more than nine (9), and any amendment to this Section 1 of Article IX of the
Bylaws, shall require approval by the Board of Directors by unanimous vote or
approval by the stockholders of the Corporation by the affirmative vote of 90%
of all votes entitled to be cast.
ARTICLE X
INDEMNIFICATION OF OFFICERS AND DIRECTORS
SECTION 1. INDEMNIFICATION -- The Corporation shall indemnify and
hold harmless, in the manner and to the fullest extent permitted by law, any
person (or the estate of 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 the Corporation, and whether
civil, criminal, administrative, investigative or otherwise, by reason of the
fact that such person is or was a director or
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officer of the Corporation, or, as a director or officer of the Corporation, is
or was serving at the request of the Corporation 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 (including without limitation service in the administration and
management of any separate, segregated fund established for purposes of
collecting and distributing voluntary employee political contributions to
federal election campaigns pursuant to the Federal Election Campaign Act of
1971, as amended from time to time). To the fullest extent permitted by law, the
indemnification provided herein shall include expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement and any such expenses may
be paid by the Corporation in advance of the final disposition of such action,
suit or proceeding. The Corporation may, with the approval of the Board of
Directors, provide such indemnification and advancement of expenses as set forth
in the preceding sentences of this Section 1 of this Article X of the Bylaws to
agents and employees of the Corporation, other than officers and directors. The
Corporation may, to the fullest extent permitted by law, purchase and maintain
insurance on behalf of any officer or director or employee against any liability
which may be asserted against such person.
SECTION 2. PROVISIONS NOT EXCLUSIVE -- This Article X shall not be
construed as a limitation upon the power of the Corporation to indemnify any
other person for any such expenses to the fullest extent permitted by law, or
upon the power of the Corporation to enter into contracts or undertakings of
indemnity with a director, officer, employee or agent of the Corporation, nor
shall it be construed as a limitation upon any other rights to which a person
seeking indemnification from the Corporation may be entitled under any
agreement, the Charter of the Corporation, or vote of stockholders or
disinterested directors, or otherwise, both as to any action in such person's
official capacity and as to any action in another capacity while holding any
office of the Corporation.
SECTION 3. RESTRICTION ON REPEAL OR MODIFICATION -- Any repeal or
modification of any section of this Article X of the Bylaws by the stockholders
or directors of the Corporation shall be prospective only, and shall not
adversely affect any right to indemnification or advancement of expenses
hereunder existing at the time of such repeal or modification.
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Form
10-Q for the three months ended March 31, 1999 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 4,252
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,413,768
<DEPRECIATION> 200,389
<TOTAL-ASSETS> 1,448,314
<CURRENT-LIABILITIES> 0
<BONDS> 679,360
0
187,847
<COMMON> 31,040
<OTHER-SE> 372,160
<TOTAL-LIABILITY-AND-EQUITY> 1,448,314
<SALES> 0
<TOTAL-REVENUES> 49,621
<CGS> 0
<TOTAL-COSTS> 11,617
<OTHER-EXPENSES> 6,266
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,360
<INCOME-PRETAX> 19,378
<INCOME-TAX> 0
<INCOME-CONTINUING> 19,378
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,378
<EPS-PRIMARY> 0.49
<EPS-DILUTED> 0.49
</TABLE>
