<PAGE> 1
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THIS
PROSPECTUS SUPPLEMENT SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
File Pursuant to Rule 424(b)(2)
Registration No. 333-19801
PROSPECTUS SUPPLEMENT SUBJECT TO COMPLETION
(TO PROSPECTUS DATED FEBRUARY 4, 1997) AUGUST 6, 1997
$50,000,000
HEALTH CARE REIT LOGO
% NOTES DUE 2007
------------------
Interest on the % Notes due 2007 (the "Notes") is payable on February
1 and August 1 of each year, commencing February 1, 1998. See "Description of
Notes." The Notes do not provide for a sinking fund. The Notes are unsecured
obligations of the Company and will rank equally with all other unsecured and
unsubordinated indebtedness of the Company. The Notes are redeemable at any time
by the Company, in whole or in part, at a redemption price equal to the sum of
(i) the principal amount of the Notes being redeemed plus accrued interest to
the redemption date and (ii) the Make-Whole Amount (as defined herein), if any.
The Notes will contain certain restrictions on the Company's ability to incur
additional indebtedness. See "Description of Notes -- Certain Covenants."
The Notes will be represented by one or more Global Securities (defined in
the accompanying Prospectus dated February 4, 1997) registered in the name of
The Depository Trust Company ("DTC") or its nominee. Interests in the Global
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by DTC and its Participants. Except as described in
the Prospectus Supplement in "Description of the Notes -- Book-Entry System,"
Notes in definitive form will not be issued. The Notes will trade in DTC's
Same-Day Funds Settlement System until maturity, and secondary market trading
activity in the Notes will therefore settle in immediately available funds. See
"Description of the Notes -- Book-Entry System" in the Prospectus Supplement.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=========================================================================================================
PRICE UNDERWRITING DISCOUNTS PROCEEDS TO
TO PUBLIC AND COMMISSIONS(1) COMPANY(2)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note........................... % % %
- ---------------------------------------------------------------------------------------------------------
Total.............................. $ $ $
=====================================================================================================
</TABLE>
(1) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting estimated expenses of $100,000 payable by the Company.
------------------
The Notes are offered by the Underwriter when, as and if delivered to and
accepted by the Underwriter and subject to various conditions, including the
right to reject orders in whole or in part. It is expected that delivery of the
Notes will be made against payment of immediately available funds through the
facilities of DTC, in book-entry form on or about August , 1997.
------------------
BT SECURITIES CORPORATION
------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS AUGUST , 1997
<PAGE> 2
PROPERTIES
The following table sets forth certain information regarding the facilities
that comprise the Company's investments as of June 30, 1997.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF TOTAL ANNUALIZED
FACILITY LOCATION FACILITIES BEDS/UNITS INVESTMENT(1) INCOME(2)
------------------------------------------------ --------- --------- ------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
NURSING FACILITIES:
Arizona....................................... 3 351 17,037 2,015
California.................................... 1 122 3,886 446
Colorado...................................... 1 180 6,324 668
Connecticut................................... 8 1,208 39,762 4,593
Florida....................................... 3 420 9,298 1,083
Idaho......................................... 3 404 20,673 2,228
Indiana....................................... 1 50 1,151 168
Kentucky...................................... 1 92 4,549 514
Massachusetts................................. 11 1,658 69,636 7,344
Michigan...................................... 2 250 4,777 581
Missouri...................................... 3 320 11,173 1,236
New York...................................... 1 200 7,421 807
Ohio.......................................... 7 762 28,282 3,285
Oregon........................................ 1 121 5,820 636
Pennsylvania.................................. 2 287 13,001 1,613
Texas......................................... 7 1,120 20,470 2,305
West Virginia................................. 1 65 1,285 224
--- ------ ------- ------
Total Nursing............................... 56 7,610 264,545 29,746
ASSISTED LIVING:
Alabama....................................... 1 71 3,208 339
Florida....................................... 9 590 31,145 3,291
Massachusetts................................. 1 131 11,370 1,124
Maryland...................................... 2 151 8,972 987
New Jersey.................................... 1 314 22,597 2,329
New Mexico.................................... 2 159 8,085 882
New York...................................... 5 606 42,234 4,392
North Carolina................................ 9 424 24,467 2,631
Ohio.......................................... 4 327 18,173 1,877
Oklahoma...................................... 17 577 25,630 2,688
Pennsylvania.................................. 5 541 37,094 4,077
Texas......................................... 22 1,441 80,221 8,606
Virginia...................................... 4 245 9,489 1,141
--- ------ ------- ------
Total Assisted Living....................... 82 5,577 322,685 34,364
RETIREMENT CENTERS:
Arizona....................................... 1 164 2,409 301
California.................................... 1 92 2,409 301
Illinois...................................... 2 320 13,034 536
Indiana....................................... 1 61 1,936 206
Missouri...................................... 1 195 5,137 655
New Mexico.................................... 1 150 8,397 368
North Carolina................................ 2 159 17,500 1,845
Ohio.......................................... 2 200 3,250 68
Texas......................................... 1 58 4,536 480
--- ------ ------- ------
Total Retirement Centers.................... 12 1,399 58,608 4,760
SPECIALTY CARE:
Arkansas...................................... 1 117 29,000 3,347
California.................................... 2 416 32,270 3,800
Minnesota..................................... 1 0 604 75
Texas......................................... 1 70 13,750 1,431
Washington D.C. .............................. 1 110 17,204 1,992
--- ------ ------- ------
Total Specialty Care........................ 6 713 92,828 10,645
BEHAVIORAL CARE:
Florida....................................... 2 294 6,473 0
--- ------ ------- ------
Total Behavioral Care....................... 2 294 6,473 0
--- ------ ------- ------
TOTAL ALL FACILITIES:....................... 158 15,593 745,139 79,515
=== ====== ======= ======
</TABLE>
- ---------------
(1) Reflects gross investment plus unfunded commitments for which funding has
commenced less specified allowance for losses.
(2) Reflects contract rate of annual base rent or interest received or to be
received upon completion of funding.
------------------------
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
STABILIZING AND SYNDICATE COVERING TRANSACTIONS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
S-2
<PAGE> 3
THE COMPANY
Health Care REIT, Inc. (the "Company") is a self-administered real estate
investment trust that invests in health care facilities, primarily nursing
homes, assisted living facilities and retirement centers. The Company also
invests in specialty care facilities. As of June 30, 1997, nursing homes,
assisted living facilities and retirement centers comprised approximately 84% of
the investment portfolio. Founded in 1970, the Company was the first real estate
investment trust to invest exclusively in health care facilities.
As of June 30, 1997, the Company had $655,984,000 of real estate
investments, including credit enhancements, in 158 facilities located in 28
states and managed by 49 different operators. At that date, the portfolio
included 56 nursing homes, 82 assisted living facilities, 12 retirement centers,
six specialty care facilities and two behavioral facilities. At June 30, 1997,
the Company had approximately $238,819,000 in unfunded commitments.
The Company seeks to increase funds from operations and enhance shareholder
value through relationship investing with public and emerging health care
chains. The primary components of this strategy are set forth below.
Relationship Investing. The Company establishes relationships with emerging
health care companies and seeks to provide financing throughout their growth
cycles. The Company targets companies with experienced management teams,
substantial inside ownership interests, venture capital backing and significant
growth potential.
By maintaining close ties to health care operators, the Company is able to
provide value added services and monitor its investments on an ongoing basis.
Investments are designed to support the operator's business plan. Features
typically include a two to three year, multi-facility financing with common
terms and maturities, and periodic review of the program's continued efficacy.
Economic terms typically include annual rate increases and fair market value
based purchase options in operating leases, and may include contingent interest
for mortgage loans. For certain investments, the Company receives warrants or
other similar equity instruments that provide the Company with the opportunity
to share in the operator's enterprise value. In connection with the Company's
initial investment in Sterling House Corporation in June 1994, the Company
received warrants that were converted into 87,823 shares of Sterling House
Corporation stock at the time of its initial public offering. As of June 30,
1997, the Sterling House Corporation shares were recorded on the Company's
balance sheet at a value of $1,438,000.
By maintaining relationships within the health care venture capital
community, management identifies potential new investment opportunities. In
turn, because of management's experience, knowledge and contacts within various
sectors of the health care industry, they are able to assist venture capital
firms in identifying new portfolio company investment opportunities.
Portfolio Management. Portfolio strength is derived from diversity by
investment type, health care sector, operator and geographic location. The
Company emphasizes investment structures that result in a predictable asset base
with attendant recurring income and funds from operations. Generally, operating
leases extend for a minimum ten-year period and mortgage loans provide five to
seven years of prepayment protection. Portfolio strength is also evidenced by an
operator base that includes an increasing percentage of public companies and
emerging privately held health care chains. At June 30, 1997, approximately 36%
of the Company's real estate investments were with publicly held companies.
In addition, the Company believes that the portfolio has been strengthened
by management's ability to identify early trends in the health care sector. In
1991, the Company initiated a review and analysis of the assisted living
industry and made its first investment in this sector in 1992. The Company's
investment portfolio currently includes such leading assisted living operators
as Alternative Living Services, Inc., ARV Assisted Living, Inc., Atria
Communities, Inc., CareMatrix Corporation, Emeritus Corporation, Kapson Senior
Quarters and Sterling House Corporation.
Depth of Management. The management team is comprised of six individuals
who have an aggregate of over 80 years of experience in health care real estate
finance. George L. Chapman has been a member of
S-3
<PAGE> 4
senior management for over five years and in 1996 became Chairman and Chief
Executive Officer of the Company. Mr. Chapman and the management team have
successfully implemented the Company's investment strategy of emphasizing
relationship financings with established and emerging health care operators.
This strategy has resulted in gross investments of over $700,000,000 during the
past five years.
THE PORTFOLIO
The following table reflects the Company's portfolio as of June 30, 1997.
<TABLE>
<CAPTION>
NUMBER
PERCENTAGE NUMBER OF INVESTMENT NUMBER NUMBER
TYPE OF INVESTMENTS OF OF BEDS/ PER BED/ OF OF
FACILITY (1)(2)(3) PORTFOLIO FACILITIES UNITS UNIT(4) OPERATORS STATES(5)
-------- -------------- ---------- ---------- ------ ---------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Nursing Homes................ $253,341 39% 56 7,610 $ 34,763 25 17
Assisted Living Facilities... 246,521 37 82 5,577 57,860 16 13
Retirement Centers........... 50,821 8 12 1,399 41,893 7 9
Specialty Care Facilities.... 92,828 14 6 713 130,194 3 5
Behavioral Care Facilities... 12,473 2 2 294 42,425 1 1
--------- --- --- ------
Totals..................... $655,984 100% 158 15,593
========= === === ======
</TABLE>
- ---------------
(1) Investments include real estate investments and credit enhancements which
amounted to $637,169,000 and $18,815,000, respectively.
(2) Investments do not include $95,155,000 in unfunded commitments for which
initial funding has commenced and $143,664,000 in commitments for financings
for which the Company has not yet commenced funding.
(3) Due to a number of factors, it is possible that some portion of the
commitments for financings will not result in permanent financing.
(4) Investment Per Bed/Unit was computed by using the total investment amount of
$751,139,000 which is composed of $637,169,000 in real estate related
investments, $95,155,000 in unfunded commitments for which initial funding
has commenced, and $18,815,000 in credit enhancements.
(5) The Company has investments in properties located in 28 states.
From December 31, 1996, to June 30, 1997, the Company's net real estate
investments increased 22%, to $627,082,000 from $512,894,000. During the same
period, operating leases increased 38%, to $211,638,000 from $153,623,000, and
mortgage and construction loans increased 15%, to $407,451,000 from
$353,455,000. The Company provides construction financing in conjunction with
permanent financing.
In determining whether to finance a facility, the Company places primary
emphasis on the experience of the operator, the feasibility of the project, the
financial strength of the borrower or lessee, the amount of security available
to support the financing and the amount of capital that is being committed to
the project by the borrower or lessee. In addition, the Company considers a
variety of other factors, including the site's suitability, facility appraisal
and environmental reports and the existence of certificate of need procedures or
other barriers that limit the entry of competing facilities into the community.
The Company regularly monitors its investments through a variety of methods
depending on the operator and type of facility. These procedures include the
receipt and review of facility and guarantor financial statements, periodic site
visits, property reviews and conferences with operators. Such reviews of
operators and facilities generally encompass licensure and regulatory compliance
materials and reports, contemplated building improvements and other material
developments.
Investments are typically structured using mortgage loans or operating
leases which are normally secured by guarantees and/or letters of credit. The
Company typically finances up to 90% of the appraised value of the property.
The Company's executive offices are located at One SeaGate, Suite 1500,
Toledo, Ohio, 43604, and the telephone number is (419) 247-2800.
S-4
<PAGE> 5
RECENT DEVELOPMENTS
In July 1997, Moody's Investors Service, Inc. ("Moody's") assigned a rating
of 'Ba-1' to the Company's Notes and its other senior unsecured indebtedness,
with a "positive outlook" noted. This rating is in addition to the rating of
'BBB-' assigned to the Company's Notes and its other senior unsecured
indebtedness by Duff & Phelps Credit Rating Service, Inc. ("Duff & Phelps") in
March 1997. See "Description of the Notes -- Rating."
USE OF PROCEEDS
The net proceeds from the sale of the Notes are estimated to be
approximately $ million. The proceeds will be used to invest in
additional health care property investments. Pending such use, the proceeds will
be used primarily to repay borrowings under the Company's revolving lines of
credit arrangements, which had an outstanding balance of $56 million at July 31,
1997.
PRICE RANGE OF SHARES AND DISTRIBUTION HISTORY
Shares of the Company's Common Stock (the "Shares") are traded on the New
York Stock Exchange ("NYSE") under the symbol "HCN." As of June 30, 1997, there
were approximately 5,590 holders of record of the Shares. The following table
sets forth for the periods shown the high and low sale prices for the Shares as
reported on the NYSE composite tape and the distributions paid by the Company
during the periods shown. On August 6, 1997, the last reported sale price of the
shares as reported by the NYSE was $26 1/8 per Share.
<TABLE>
<CAPTION>
PRICE OF
SHARES
----------- DISTRIBUTIONS
HIGH LOW PER SHARE
--- --- ------------
<S> <C> <C> <C>
1995
First Quarter...................... $22 3/8 $19 7/8 $0.515
Second Quarter..................... 23 1/8 20 3/8 0.52
Third Quarter...................... 21 1/2 15 1/2 0.52
Fourth Quarter..................... 19 1/8 15 3/4 0.52
1996
First Quarter...................... $22 5/8 $17 7/8 $ 0.52
Second Quarter..................... 23 20 1/2 0.52
Third Quarter...................... 23 1/4 20 7/8 0.52
Fourth Quarter..................... 25 1/8 23 0.52
1997
First Quarter...................... 25 1/2 23 5/8 0.52
Second Quarter..................... 25 22 1/4 0.525
Third Quarter (through August 6)... 26 7/16 24 1/4 *
</TABLE>
* The current annualized dividend rate is $2.12. The next quarterly dividend to
be paid to shareholders of record as of August 4, 1997 will be paid on August
20, 1997 and will represent the 105th consecutive quarterly dividend of the
Company.
Under the real estate investment trust rules of the Internal Revenue Code,
the Company is required to pay at least 95% of its ordinary taxable income as
dividends in order to avoid taxation as a corporation. The declaration of
dividends is discretionary with the Board of Directors and depends upon the
Company's distributable funds, financial requirements, tax considerations and
other factors. Decisions with respect to the distribution of capital gains are
made on a case-by-case basis. A portion of the Company's dividends paid may be
deemed either capital gain income or a return of capital, or both, to its
shareholders. The Company annually provides its shareholders a statement as to
its designation of the taxability of its dividends.
The Company has a dividend reinvestment plan under which shareholders of
record may invest all or a portion of their dividends and up to an additional
$5,000 per quarter to purchase additional shares.
S-5
<PAGE> 6
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1997 as adjusted to give effect to the Notes and the application of the net
proceeds therefrom as described under "Use of Proceeds."
<TABLE>
<CAPTION>
JUNE 30, 1997
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Borrowings under line of credit arrangements(1)....................... $ 44,600 $ 0
1993 Senior Notes..................................................... 52,000 52,000
1996 Senior Notes..................................................... 30,000 30,000
1997 Senior Notes (April)............................................. 80,000 80,000
1997 Senior Notes (August)............................................ 0 50,000
Other long-term obligations........................................... 10,073 10,073
Shareholders' equity:
Preferred Stock, $1.00 par value; Authorized -- 10,000,000 shares
Issued and outstanding -- none
Common Stock, $1.00 par value; Authorized -- 40,000,000 shares
Issued and outstanding -- 22,042,468 as adjusted(2).............. 22,042 22,042
Capital in excess of par value...................................... 379,866 379,866
Undistributed net income............................................ 8,724 8,724
Unrealized gains on investment securities available for sale........ 1,438 1,438
Unamortized restricted stock........................................ (2,608) (2,608)
-------- --------
Total shareholders' equity............................................ 409,462 409,462
-------- --------
Total capitalization.................................................. $626,135 $ 631,535
======== ========
</TABLE>
- ---------------
(1) The Company has a $175,000,000 unsecured line of credit arrangement with a
consortium of 12 banks and a $10,000,000 of unsecured line of credit with
one other bank. See "Recent Developments" and "Description of Other
Indebtedness -- Credit Facility."
(2) Excludes: (i) 125,268 Shares reserved for issuance pursuant to the Company's
1985 Incentive Stock Option Plan; (ii) 1,893,015 Shares reserved for
issuance pursuant to the Company's 1995 Stock Incentive Plan; and (iii)
969,362 Shares reserved for issuance under the Company's dividend
reinvestment plan.
S-6
<PAGE> 7
SELECTED FINANCIAL INFORMATION
The following selected financial data for the five years ended December 31,
1996 are derived from the audited consolidated financial statements of Health
Care REIT, Inc. The financial data for the six months ended June 30, 1997 and
1996 are derived from unaudited financial statements. The unaudited financial
statements include all adjustments, consisting of normal recurring accruals,
which the Company considers necessary for a fair presentation of the financial
position and the results of operations for these periods. Operating results for
the six months ended June 30, 1997 are not necessarily indicative of the results
that may be expected for the entire year ending December 31, 1997. The data
should be read in conjunction with the consolidated financial statements,
related notes, and other financial information incorporated by reference herein.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30
---------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Revenues............................ $ 28,908 $ 36,018 $ 42,732 $ 44,596 $ 54,402 $ 25,515 $ 35,017
Expenses:
Interest expense.................. 8,160 10,817 9,684 12,752 14,635 7,560 7,763
Provision for depreciation........ 382 790 1,385 1,580 2,427 1,030 2,461
General and administrative
expenses(1)...................... 3,851 4,356 6,710 10,835 6,664 2,679 3,039
Settlement of management
contract(2)...................... -- -- -- 5,794 -- -- --
------- ------- ------- ------- ------- ------- -------
Total expenses...................... 12,393 15,963 17,779 30,961 23,726 11,269 13,263
------- ------- ------- ------- ------- ------- -------
Net income.......................... $ 16,515 $ 20,055 $ 24,953 $ 13,635 $ 30,676 $ 14,246 $ 21,754
======= ======= ======= ======= ======= ======= =======
PER SHARE
Net income.......................... $1.91 $2.15 $2.17 $1.16 $2.18 $1.130 $1.050
Cash distributions.................. $1.85 $1.93 $2.01 $2.075 $2.08 $1.040 $1.045
BALANCE SHEET DATA
Real estate investments, net........ $223,126 $276,858 $318,433 $351,924 $512,894 $426,714 $627,082
Total assets........................ 226,207 285,024 324,102 358,092 519,831 434,477 637,595
Total debt.......................... 103,719 96,311 128,273 162,760 184,395 184,671 216,673
Total liabilities................... 107,259 100,892 134,922 170,494 194,295 194,181 228,133
Total shareholders' equity.......... 118,948 184,132 189,180 187,598 325,536 240,297 409,462
OTHER DATA
Average number of shares
outstanding....................... 8,629 9,339 11,519 11,710 14,093 12,555 20,638
Cash available for
distribution(3)................... $ 18,654 $ 22,780 $ 31,697 $ 27,938 $ 37,075 $ 16,575 $ 25,501
Consolidated ratio of earnings to
fixed charges (unaudited)(4)...... 2.97x 2.80x 3.42x 2.01x 2.93x 2.79x 3.60x
</TABLE>
- ---------------
(1) General and administrative expenses include loan expense, management fees
through November 30, 1995, provision for losses, expenses related to
disposition of investments and other operating expenses.
(2) On November 30, 1995, the Company's advisor merged into the Company.
Consideration for this transaction totaled approximately $5,048,000 which
was solely comprised of 282,407 shares of Common Stock. In addition, the
Company acquired approximately $46,000 in net assets and incurred
approximately $792,000 of related transaction expenses. The consideration,
plus related transaction expenses, were accounted for as a settlement of a
management contract.
(3) Cash available for distribution is defined as net cash provided from
operating activities, but does not consider the effects of changes in
operating assets and liabilities such as other receivables and accrued
expenses. The Company uses cash available for distribution in evaluating
investments and the Company's operating performance. Cash available for
distribution 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 as an indicator of the Company's
operating performance or as an alternative to cash flow as a measure of
liquidity.
(4) For purposes of calculating the unaudited ratio of earnings to fixed charges
of the Company for the periods indicated, "earnings" include net income plus
fixed charges and capitalized interest. "Fixed Charges" consists of interest
on all indebtedness and the amortization of loan expenses.
S-7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company's net real estate investments totaled
approximately $627,082,000, which included 56 skilled nursing facilities, 82
assisted living facilities, 12 retirement centers, six specialty care facilities
and two behavioral care facilities. The Company funds its investments through a
combination of long-term and short-term financing, utilizing both debt and
equity.
As of June 30, 1997, the Company had shareholders' equity of $409,462,000
and a total outstanding debt balance of $216,673,000, which represents a debt to
equity ratio of 0.53 to 1.0.
In January 1997, in connection with the underwriters' exercise of an over
allotment option associated with the Company's December 18, 1996 offering of
2,200,000 shares of common stock, the Company issued 330,000 shares of Common
Stock, $1.00 par value per share, at the price of $23.875 per share, which
generated net proceeds of $7,485,000 to the Company.
During the six months ended June 30, 1997, the Company issued 3,150,000
shares of Common Stock, $1.00 par value per share, at the price of $24.375 per
share, which generated net proceeds to the Company of $72,261,000.
In April 1997, the Company completed the sale of $80 million of Senior
Unsecured Notes. The Company priced $20 million of notes due 2000, $20 million
of notes due 2002 and $40 million of notes due 2004. The notes have a weighted
average interest rate of 7.91%.
During the six months ended June 30, 1997, the proceeds derived from the
Company's capital raising activities were used to reduce bank debt under the
Company's revolving lines of credit arrangements.
In March 1997, the Company closed a $175 million unsecured credit facility
which replaced the Company's then existing secured credit facility. Simultaneous
with the closing of the new credit facility, all senior noteholders released
collateral which had served as security for the Company's then outstanding $82
million of senior indebtedness.
As of June 30, 1997, the Company had approximately $238,819,000 in unfunded
commitments. Under the Company's line of credit arrangements, available funding
totaled $140,400,000. The Company believes its liquidity and various sources of
available capital are sufficient to fund operations, finance future investments,
and meet debt service and dividend requirements.
RESULTS OF OPERATIONS
Revenues for the three months ended June 30, 1997, were $18,448,000 as
compared with $14,625,000 for the three months ended June 30, 1996. Revenue
growth resulted primarily from increased interest income of $2,323,000 and
increased operating lease income of $3,197,000 as a result of additional real
estate investments made during the past twelve months.
Revenues for the six months ended June 30, 1997 were $35,017,000 as
compared with $25,515,000 for the six months ended June 30, 1996, an increase of
$9,502,000 or 37%. Revenue growth resulted primarily from increased interest
income of $4,835,000 and increased operating lease income of $6,199,000 as a
result of additional real estate investments made during the past twelve months.
The growth in interest and rental income for the three and six month
periods ended June 30, 1997 was offset by a high incidence of prepayment fees
and gains on the exercise of purchase options earned during the second quarter
of 1996, which totaled $2,117,000 as compared to $477,000 for the same period in
1997.
Expenses for the three months ended June 30, 1997 totaled $6,520,000, an
increase of $464,000 from expenses of $6,056,000 for the same period in 1996.
The increase in total expenses was primarily related to additional expense
associated with the provision for depreciation, which was offset by a decrease
in interest expense.
S-8
<PAGE> 9
Expenses for the six months ended June 30, 1997 totaled $13,263,000, an
increase of $1,994,000 from expenses of $11,269,000 for the same period in 1996.
The increase in total expenses was primarily related to an increase in interest
expense, additional expense associated with the provision for depreciation and
an increase in general and administrative expenses.
Interest expense for the three months ended June 30, 1997 was $3,752,000 as
compared with $4,049,000 for the same period in 1996. The decrease in the 1997
period was primarily due to lower average borrowings under the Company's lines
of credit arrangements, which was offset by the issuance of $80,000,000 Senior
Unsecured Notes in April 1997.
Interest expense for the six months ended June 30, 1997 was $7,763,000 as
compared with $7,560,000 for the same period in 1996. The increase in the 1997
period was primarily due to the issuance of $80,000,000 Senior Unsecured Notes
in April 1997.
The provision for depreciation for the three and six month periods ended
June 30, 1997 totaled $1,276,000 and $2,461,000 respectively, an increase of
$721,000 and $1,431,000 over the comparable periods in 1996 as a result of
additional investments in properties owned directly by the Company.
General and administrative expense for the three and six month periods
ended June 30, 1997 totaled $1,181,000 and $2,361,000 respectively, as compared
with $1,100,000 and $1,990,000 for the same periods in 1996. The expenses for
the three and six month periods in 1997 were 6.40% and 6.74% of revenues as
compared with 7.52% and 7.80% for the same periods in 1996.
As a result of the various factors mentioned above, net income for the
three and six month periods ended June 30, 1997 was $11,928,000, or $0.54 per
share, and $21,754,000, or $1.05 per share, respectively, as compared with
$8,569,000, or $0.66 per share, and $14,246,000, or $1.13 per share, for the
comparable periods in 1996. Net income for the three months ended June 30, 1996
included $2,117,000, or $0.16 per share, of prepayment fees and gains on the
exercise of purchase options, as compared with $477,000, or $0.02 per share, for
the same period in 1997.
RESULTS OF OPERATIONS DECEMBER 31, 1996 VS. DECEMBER 31, 1995
Revenues for the year ended December 31, 1996, were $54,402,000 compared to
$44,596,000 for the year ended December 31, 1995, an increase of $9,806,000 or
22%. Revenue growth resulted primarily from increased interest income of
$5,457,000, operating lease income of $3,496,000 and loan and commitment fees of
$941,000 resulting primarily from additional real estate investments made during
the past twelve to fifteen months.
Expenses for the year ended December 31, 1996, totaled $23,726,000, a
decrease of $7,235,000 from expenses of $30,961,000 for the year ended December
31, 1995. Expenses for the year ended December 31, 1995, were negatively
influenced by nonrecurring charges, primarily related to a $4,800,000 provision
for losses and a $5,794,000 charge for the settlement of the management
contract, an expense associated with the merger of the Company's advisor into
the Company.
The provision for depreciation for the year ended December 31, 1996,
totaled $2,427,000, an increase of $848,000 over the year ended 1995 as a result
of additional operating lease investments.
Interest expense for the year ended December 31, 1996, was $14,635,000
compared to $12,752,000 for the year ended December 31, 1995. The increase in
interest expense during 1996 was primarily due to the issuance of $30,000,000
Senior Notes in April 1996 and higher average borrowings under the Company's
line of credit arrangements, which were offset by lower interest rates.
General and administrative expense for the year ended December 31, 1996
totaled $4,448,000 as compared to $5,284,000 for the year ended December 31,
1995. The expenses for the year ended December 31, 1996 were 8.18% of revenues
as compared to 11.85% for the year ended December 31, 1995.
It is the Company's intention to systematically eliminate its investments
in behavioral care facilities. As a result, at September 30, 1996, the Company
declared a disposition of investment associated with its behavioral
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care portfolio. As a result, any gains realized through the repayment or sale of
investments associated with the Company's behavioral care facilities will be
added to the Company's general allowance for losses and applied against any
losses incurred through the repayment or sale of behavioral care related
investments. During the year ended December 31, 1996, the Company recorded an
$808,000 disposition of investment expense as an offset to an $808,000
prepayment fee received from the repayment of two behavioral care related
mortgage loans. Additionally, the Company's general allowance for losses was
reduced by $481,000, resulting from the repayment of these loans.
As a result of the various factors mentioned above, net income for the year
ended December 31, 1996, was $30,676,000 as compared to $13,635,000 for the year
ended December 31, 1995. Net income per share for the year ended December 31,
1996, was $2.18 versus $1.16 for the year ended December 31, 1995. The per share
increase resulted from an increase in net income offset by an increase in
average shares outstanding during 1996.
RESULTS OF OPERATIONS DECEMBER 31, 1995 VS. DECEMBER 31, 1994
Revenues for the year ended December 31, 1995, were $44,596,000 compared to
$42,732,000 for the year ended December 31, 1994, an increase of $1,864,000 or
4.4%. Revenue growth resulted primarily from increased interest income of
$6,731,000 and increased operating lease income of $872,000 resulting primarily
from additional real estate investments made during the previous twelve months.
The growth in interest income and rental income was offset by a high incidence
of prepayment fees and gains on the exercise of purchase options earned during
1994, which totaled $6,982,000 as compared to $4,082,000 for 1995.
Expenses for the year ended December 31, 1995, totaled $30,961,000, an
increase of $13,182,000 from expenses of $17,779,000 for the year ended December
31, 1994. Expenses for the year ended December 31, 1995, were negatively
influenced by nonrecurring charges, primarily related to a $4,800,000 provision
for losses and a $5,794,000 charge for the settlement of the management
contract, an expense associated with the merger of the Company's advisor into
the Company.
The provision for depreciation for the year ended December 31, 1995,
totaled $1,580,000, an increase of $194,000 over the year ended December 31,
1994 as a result of additional operating lease investments.
Interest expense for the year ended December 31, 1995, was $12,752,000
compared to $9,684,000 for the year ended December 31, 1994. The increase in
interest expense during 1995 was primarily due to higher average borrowings
under the Company's line of credit arrangements, and higher costs of borrowing.
General and administrative expense for the year ended December 31, 1995
totaled $5,284,000 as compared to $5,072,000 for the year ended December 31,
1994. The expenses for the year ended December 31, 1995 were 11.85% of revenues
as compared to 11.87% for the year ended December 31, 1994.
As a result of the various factors mentioned above, net income for the year
ended December 31, 1995, was $13,635,000 as compared to $24,953,000 for the year
ended December 31, 1994. Net income per share for the year ended December 31,
1995, was $1.16 versus $2.17 for the year ended December 31, 1994. The per share
decrease resulted from a decrease in net income.
IMPACT OF INFLATION
During the past three years, inflation has not significantly affected the
earnings of the Company because of the moderate inflation rate. Additionally,
earnings of the Company are primarily long-term investments with fixed interest
rates. These investments are mainly financed with a combination of equity,
senior notes and borrowings under the revolving lines of credit, of which a
portion is hedged with interest rate swaps. During inflationary periods, which
generally are accompanied by rising interest rates, the Company's ability to
grow may be adversely affected because the yield on new investments may increase
at a slower rate than new borrowing cost. Presuming the current inflation rate
remains moderate and long-term interest rates do not increase significantly, the
Company believes that equity and debt financing will be available.
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<PAGE> 11
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The following table sets forth certain information regarding the Executive
Officers and Directors of the Company:
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
NAME AGE OFFICE
- --------------------------- --- ---------------------------------------------------------
<S> <C> <C>
George L. Chapman.......... 50 Chairman of the Board, Chief Executive Officer and
President
Raymond W. Braun........... 39 Vice President, Chief Operating Officer
Edward F. Lange, Jr........ 37 Vice President, Chief Financial Officer and Treasurer
Erin C. Ibele.............. 35 Vice President and Corporate Secretary
</TABLE>
BOARD OF DIRECTORS
<TABLE>
<CAPTION>
NAME AGE OCCUPATION
- --------------------------- --- ---------------------------------------------------------
<S> <C> <C>
William C. Ballard, Jr..... 56 Of Counsel, Greenebaum, Doll & McDonald PLLC and
Director, United Healthcare Corporation, Atria
Communities, Inc., Vencor, Inc., Mid-America Bancorp.,
LG&E Energy Corp. and American Safety Razor Co.
Pier C. Borra.............. 57 Chairman, President and Chief Executive Officer of Arbor
Health Care Company, Lima, Ohio
George L. Chapman.......... 50 Chairman of the Board, Chief Executive Officer and
President of the Company
Bruce Douglas.............. 64 Chairman and Chief Executive Officer of The Douglas
Company, Toledo, Ohio
Richard C. Glowacki........ 64 President of The Danberry Management Company, Toledo,
Ohio
Sharon M. Oster............ 48 Professor of Management, Yale School of Management, Yale
University and Director, Aristotle Corporation
Bruce G. Thompson.......... 67 President and Director of First Toledo Corporation,
Toledo, Ohio and Director, Arbor Health Care Company
Richard A. Unverferth...... 73 Chairman of Unverferth Manufacturing Company, Inc. and
Chairman of the Board of H.C.F. Inc., Kalida, Ohio
Frederic D. Wolfe.......... 67 Chairman of the Board and Director of First Toledo
Corporation, Toledo, Ohio
</TABLE>
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<PAGE> 12
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes supplements,
and to the extent inconsistent therewith replaces, the description of the
general terms and provisions of the Debt Securities set forth in the Prospectus,
to which reference is hereby made. The following summary is qualified in its
entirety by reference to the Indenture referred to in the Prospectus.
Capitalized terms not otherwise defined herein shall have the meanings given
them in the Prospectus.
GENERAL
The Notes due 2007 will be issued as a separate series of Debt Securities
under a Supplemental Indenture, dated as of August , 1997 (the "Supplemental
Indenture"), between the Company and Fifth Third Bank (the "Trustee"). The Notes
will be limited in aggregate principal amount to $50 million. The Notes will
bear interest from August , 1997 at the rate per annum shown on the front
cover of this Prospectus Supplement payable semiannually on February 1 and
August 1 of each year, commencing February 1, 1998 to the person in whose name
the Note (or any predecessor) is registered at the close of business on February
1, 1998, as the case may be, next preceding such interest payment date. The
Notes will be unsecured and unsubordinated obligations of the Company and will
rank equal with all other unsecured and unsubordinated indebtedness of the
Company, including amounts outstanding under the Company's revolving credit
facility and its other senior notes payable. See "Description of Other
Indebtedness."
RATINGS
The Notes have been rated 'Ba-1' by Moody's with a positive outlook noted
and 'BBB-' by Duff & Phelps. The rating of the Notes should be evaluated
independently from similar ratings on other types of securities. A rating is not
a recommendation to buy, sell or hold the Notes, inasmuch as such rating does
not comment as to market price or suitability for a particular investor. The
ratings assigned to the Notes address the likelihood of payment of principal and
interest on the Notes pursuant to their terms. A rating may be subject to
revision or withdrawal at any time by the assigning rating agency.
CERTAIN COVENANTS
The Notes will not be secured by mortgage, pledge or other lien. The
Company will covenant in the Supplemental Indenture not to pledge or otherwise
subject to any lien, any property or assets of the Company or its subsidiaries
unless the Notes of such series are secured by such pledge or lien equally and
ratably with all other obligations secured thereby so long as such obligations
shall be so secured; provided, however, that such covenant will not apply to
liens securing obligations which do not in the aggregate at any one time
outstanding exceed 10% of Consolidated Net Tangible Assets (as defined below) of
the Company and its consolidated subsidiaries. In addition, this covenant will
not apply to:
(a) Pledges or deposits by the Company or its subsidiaries under
workers' compensation laws, unemployment insurance laws, social security
laws, or similar legislation, or good faith deposits in connection with
bids, tenders, contracts (other than for the payment of Indebtedness (as
defined below) of the Company or its subsidiaries), or leases to which the
Company or any of its subsidiaries is a party, or deposits to secure public
or statutory obligations of the Company or its subsidiaries or deposits of
cash or United States Government Bonds to secure surety, appeal,
performance or other similar bonds to which the Company or any of its
subsidiaries is a party, or deposits as security for contested taxes or
import duties or for the payment of rent;
(b) Liens imposed by law, such as carriers', warehousemen's,
materialmen's and mechanics' liens, or Liens arising out of judgments or
awards against the Company or any of its subsidiaries which the Company or
such subsidiary at the time shall be currently prosecuting an appeal or
proceeding for review;
(c) Liens for taxes not yet subject to penalties for non-payment and
Liens for taxes the payment of which is being contested in good faith and
by appropriate proceedings;
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<PAGE> 13
(d) Minor survey exceptions, minor encumbrances, easements or
reservations of, or rights of, others for rights of way, highways and
railroad crossings, sewers, electric lines, telegraph and telephone lines
and other similar purposes, or zoning or other restrictions as to the use
of real properties;
(e) Liens incidental to the conduct of the business of the Company or
any subsidiary or to the ownership of their respective properties that were
not incurred in connection with Indebtedness of the Company or such
subsidiary, all of which Liens referred to in this clause (e) do not in the
aggregate materially impair the value of the properties to which they
relate or materially impair their use in the operation of the business
taken as a whole of the Company and its subsidiaries, and as to all of the
foregoing referenced in clauses (a) through (e), only to the extent arising
and continuing in the ordinary course of business;
(f) Purchase money Liens on property acquired or held by the Company
or its subsidiaries in the ordinary course of business, securing
Indebtedness incurred or assumed for the purpose of financing all or any
part of the cost of such property; provided, that (i) any such Lien
attaches concurrently with or within 20 days after the acquisition thereof,
(ii) such Lien attaches solely to the property so acquired in such
transaction, (iii) the principal amount of the Indebtedness secured thereby
does not exceed 100% of the cost of such property, and (vi) the aggregate
amount of all such Indebtedness on a consolidated basis for the Company and
its subsidiaries shall not at any time exceed $1,000,000;
(g) Liens existing on the Company's balance sheet of December 31,
1996; and
(h) Any extension, renewal or replacement (or successive extensions,
renewals or replacements), as a whole or in part, of any Lien referred to
in the foregoing clauses (a) through (g) inclusive; provided, however, that
the amount of any and all obligations and Indebtedness secured thereby
shall not exceed the amount thereof so secured immediately prior to the
time of such extension, renewal or replacement and that such extension,
renewal or replacement shall be limited to all or a part of the property
which secured the Lien so extended, renewed or replaced (plus improvements
on such property).
The Company will also covenant in the Supplemental Indenture that it will
not create, assume, incur, or otherwise become liable in respect of, any Senior
Debt (as defined below) unless the aggregate outstanding principal amount of
Senior Debt of the Company will not, at the time of such creation, assumption or
incurrence and after giving effect thereto and to any concurrent transactions,
exceed the greater of (i) 150% of Capital Base (as defined below) or (ii) 225%
of Tangible Net Worth (as defined below).
Finally, the Company will also covenant in the Supplemental Indenture that
it will have or maintain, on a consolidated basis, as of the last day of each
fiscal quarter of the Company, Interest Coverage (as defined below) of not less
than 150%.
For purposes of the foregoing covenants, the defined terms have the
following meanings:
"Capital Base" means, at any date, the sum of Tangible Net Worth and
Subordinated Debt.
"Capital Lease" means at any time any lease of property, real or personal,
which, in accordance with generally accepted accounting principles, would at
such time be required to be capitalized on a balance sheet of the lessee.
"Capitalized Lease Obligations" as to any Person, the obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP.
"Consolidated Net Tangible Assets" means the aggregate amount of assets
(less applicable reserves and other properly deductible items) less (i) all
current liabilities and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expenses and other like tangibles of the Company
and its consolidated subsidiaries, all as set forth on the most recent balance
sheet of the Company and its consolidated subsidiaries prepared in accordance
with GAAP.
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<PAGE> 14
"EBITDA" means for any period, with respect to the Company on a
consolidated basis, determined in accordance with GAAP, the sum of net income
(or net loss) for such period plus, the sum of all amounts treated as expenses
for: (a) interest, (b) depreciation, (c) amortization, and (d) all accrued taxes
on or measured by income to the extent included in the determination of such net
income (or net loss); provided, however, that net income (or net loss) shall be
computed without giving effect to extraordinary losses or gains.
"Indebtedness" means with respect to any Person, all: (a) liabilities or
obligations, direct and contingent, which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person at the date as of which Indebtedness is to be
determined, including, without limitation, contingent liabilities that in
accordance with such principles, would be set forth in a specific dollar amount
on the liability side of such balance sheet, and Capitalized Lease Obligations
of such Person; (b) liabilities or obligations of others for which such Person
is directly or indirectly liable, by way of guaranty (whether by direct
guaranty, suretyship, discount, endorsement, take-or-pay agreement, agreement to
purchase or advance or keep in funds or other agreement having the effect of a
guaranty) or otherwise; (c) liabilities or obligations secured by Liens on any
assets of such Person, whether or not such liabilities or obligations shall have
been assumed by it; and (d) liabilities or obligations of such Person, direct or
contingent, with respect to letters of credit issued for the account of such
Person and bankers acceptances created for such Person.
"Interest Coverage" means as at the last day of any fiscal quarter, the
quotient, expressed as a percentage (which may be in excess of 100%), determined
by dividing EBITDA by Interest Expense; all of the foregoing calculated by
reference to the immediately preceding four (4) fiscal quarters of the Company
ending on such date of determination.
"Interest Expense" means for any period, on a combined basis, the sum of
all interest paid or payable (excluding unamortized debt issuance costs) on all
items of Indebtedness of the Company outstanding at any time during such period.
"Liabilities" means, at any date, the items shown as liabilities on the
balance sheet of the Company except any item of deferred income, including
capital gains;
"Lien" any mortgage, deed of trust, pledge, security interest, encumbrance,
lien, claim or charge of any kind (including any agreement to give any of the
foregoing), any conditional sale or other title retention agreement, any lease
in the nature of any of the foregoing, and the filing of or agreement to give
any financing statement under the Uniform Commercial Code of any jurisdiction.
"Person" means an individual, partnership, corporation, joint venture,
association, joint political subdivision thereof.
"Senior Debt" means all Indebtedness other than Subordinated Debt.
"Subordinated Debt" means any unsecured Indebtedness of the Company which
is issued or assumed pursuant to, or evidenced by, an indenture or other
instrument which contains provisions for the subordination of such other
Indebtedness (to which appropriate reference shall be made in the instruments
evidencing such other Indebtedness if not contained therein) to the Notes (and,
at the option of the Company, if so provided, to other Indebtedness of the
Company, either generally or as specifically designated).
"Tangible Net Worth" means the sum of capital surplus, earned surplus and
capital stock, minus deferred charges with GAAP consistently applied.
DEFEASANCE AND COVENANT DEFEASANCE
The Notes are subject to defeasance and covenant defeasance, as described
in the Indenture and the Supplemental Indenture. Specifically, the Company, at
its option (a) will be discharged from any and all obligations in respect of the
Notes (except for certain obligations to register the transfer or exchange of
the Notes, to replace destroyed, stolen, lost or mutilated Notes, and to
maintain an office or agency in respect of the Notes and hold moneys for payment
in trust) or (b) will be released from its obligations to comply with the
Covenants that are specified under "Certain Covenants" above with respect to the
Notes, and the
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<PAGE> 15
occurrence of an Event of Default described in the accompanying Prospectus shall
no longer be an Event of Default if, in either case, the Company irrevocably
deposits with the Trustee, in trust, money or U.S. Government obligations that
through payment of interest thereon and principal thereof in accordance with
their terms will provide money in an amount sufficient to pay all of the
principal of (and premium, if any) and any interest on the Notes on the dates
such payments are due (which may include one or more redemption dates designated
by the Company) in accordance with the terms of such Notes.
Such a trust may only be established if, among other things, (a) no Event
of Default or event which with the giving of notice or lapse of time, or both,
would become an Event of Default under the Indenture shall have occurred and be
continuing on the date of such deposit, (b) the Company shall have delivered an
Opinion of Counsel to the effect that the holders of the Notes of such series
will not recognize gain or loss for United States Federal income tax purposes as
a result of such deposit or defeasance and will be subject to United States
Federal income tax in the same manner as if such defeasance had not occurred. In
the event the Company omits to comply with its remaining obligations under the
Indenture after a defeasance of the Indenture with respect to the Notes and the
Notes are declared due and payable because of the occurrence of any undefeased
Event of Default, the amount of money and U.S. Government obligations on deposit
with the Trustee may be insufficient to pay amounts due on the Notes at the time
of the acceleration resulting from such Event of Default. However, the Company
will remain liable in respect of such payments.
SINKING FUND
The Notes are not entitled to any sinking fund payments.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time at the option of the Company, in
whole or from time to time in part, at a redemption price equal to the sum of
(i) the principal amount of the Notes (or portion thereof) being redeemed plus
accrued interest thereon to the redemption date and (ii) the Make-Whole Amount
(as defined below), if any, with respect to the Notes (or portion thereof) (the
"Redemption Price").
If notice has been given as provided in the Indenture and funds for the
redemption of any Notes (or any portion thereof) called for redemption shall
have been made available on the redemption date referred to in such notice, such
Notes (or any portion thereof) will cease to bear interest on the date fixed for
such redemption specified in such notice and the only right of the Holders of
the Notes will be to receive payment of the Redemption Price.
Notice of any optional redemption of any Notes (or any portion thereof)
will be given to Holders at their addresses, as shown in the security register
for such Notes, not more than 60 nor less than 30 days prior to the date fixed
for redemption. The notice of redemption will specify, among other items, the
Redemption Price and the principal amount of the Notes held by such Holder to be
redeemed.
The Company will notify the Trustee at least 30 days prior to giving notice
of redemption (or such shorter period as is satisfactory to the Trustee) of the
aggregate principal amount of such Notes to be redeemed and their redemption
date. If less than all of the Notes are to be redeemed at the option of the
Company, the Trustee shall select, in such manner as it shall deem fair and
appropriate, the Notes to be redeemed in whole or in part.
As used herein:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Notes, the excess, if any, of (i) the
aggregate present value as of the date of such redemption or accelerated
payment of each dollar of principal being redeemed or paid and the amount
of interest (exclusive of interest accrued to the date of redemption or
accelerated payment) that would have been payable in respect of each such
dollar if such redemption or accelerated payment had not been made,
determined by discounting, on a semi-annual basis, such principal and
interest at the Reinvestment Rate (determined on the third Business Day
preceding the date such notice of redemption is given or declaration of
acceleration is made) from the respective dates on which such principal and
interest would
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<PAGE> 16
have been payable if such redemption or accelerated payment had not been
made, over (ii) the aggregate principal amount of the Notes being redeemed
or paid.
"Reinvestment Rate" means 0.25% plus the arithmetic mean of the yields
under the respective heading "Week Ending" published in the most recent
Statistical Release under the caption "Treasury Constant Maturities" for
the maturity (rounded to the nearest month) corresponding to the remaining
life to maturity, as of the payment date of the principal being redeemed or
paid. If no maturity exactly corresponds to such maturity, yields for the
two published maturities most closely corresponding to such maturity shall
be calculated pursuant to the immediately preceding sentence and the
Reinvestment Rate shall be interpolated or extrapolated from such yields on
a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purpose of calculating the Reinvestment Rate, the
most recent Statistical Release published prior to the date of
determination of the Make-Whole Amount shall be used.
"Statistical Release" means that statistical release designated
"H.15(519)" or any successor publication that is published weekly by the
Federal Reserve System and that establishes yields on actively traded
United States government securities adjusted to constant maturities, or, if
such statistical release is not published at the time of any determination
under the Senior Indenture, then such other reasonably comparable index
that shall be designated by the Company.
BOOK-ENTRY SYSTEM
The Notes will be issued in the form of one or more fully registered global
securities ("Global Securities") that will be deposited with, or on behalf of
DTC, and registered in the name of DTC's nominee, Cede & Co. Except under the
circumstance described below, the Notes will not be issuable in definitive form.
Unless and until it is exchanged in whole or in part for the individual Notes
represented thereby, a Global Security may not be transferred except as a whole
by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of
DTC or by DTC or any nominee of DTC to a successor depository or any nominee of
such successor. See "Description of Debt Securities -- Book-entry System" in the
Prospectus for a complete discussion of the book-entry system.
DTC has advised the Company of the following information regarding DTC: DTC
is a limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code, and a "clearing agency" registered
pursuant to the provisions of Section 17A of the Exchange Act. DTC holds
securities that its Participants deposit with DTC. DTC also facilitates the
settlement among its Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic computerized book-entry
changes in its Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants of DTC include
securities brokers and dealers (including the Underwriter), banks, trust
companies, clearing corporations, and certain other organizations. DTC is owned
by a number of its direct Participants and by the New York Stock Exchange, Inc.
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC System is also available to others such as
securities brokers and dealers, banks and trust companies that clear through or
maintain a custodial relationship with a direct Participant of DTC, either
directly or indirectly ("Indirect Participants"). The Rules applicable to DTC
and its Participants are on file with the Commission.
Purchases of Global Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Securities on
DTC's records. The ownership interest of each actual purchaser of each Global
Security ("Beneficial Owner") is in turn to be recorded on the Direct and
Indirect Participants' records. Beneficial Owners will not receive written
confirmation from DTC of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct or Indirect Participant
through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Global Securities are to be accomplished by entries
made on the books of Participants acting on behalf of Beneficial Owners.
Beneficial
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<PAGE> 17
Owners will not receive certificates representing their ownership interests in
Global Securities, except in the event that use of the book-entry system for the
Global Securities is discontinued.
To facilitate subsequent transfers, all Global Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Global Securities with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Global Securities; DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Global Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Principal and interest payments on the Global Securities will be made to
Cede & Co., as nominee of DTC. DTC's practice is to credit Direct Participants'
accounts, upon DTC's receipt of funds and corresponding detail information from
the Company or the Trustee, on payable date in accordance with their respective
holdings shown on DTC's records. Payments by Participants to Beneficial Owners
will be governed by standing instructions and registered in "street name," and
will be the responsibility of such Participant and not of DTC, the Trustee or
the Company, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal and interest to Cede & Co. is the
responsibility of the Company or the Trustee, disbursement of such payments to
Direct Participants shall be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct and
Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Global Securities at any time by giving reasonable notice to the
Company or the Trustee. Under such circumstances, in the event that a successor
securities depository is not obtained, Global Security certificates are required
to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Global Security certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriter in immediately
available funds. All payments of principal and interest in respect of the Notes
will be made by the Company in immediately available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing house or next-day funds. In contrast, the Notes
will trade in DTC's Same-Day Funds Settlement System until maturity or until the
Notes are issued in certificated form, and secondary market trading activity in
the Notes will therefore be required by DTC to settle in immediately available
funds. No assurance can be given as to the effect, if any, of settlement in
immediately available funds on trading activity in the Notes.
EVENTS OF DEFAULT
The provisions of Section 501 of the Indenture relating to events of
default, which are described in "Description of Debt Securities -- Events of
Default, Notice and Waiver" in the accompanying Prospectus, apply to the Notes.
S-17
<PAGE> 18
DESCRIPTION OF OTHER INDEBTEDNESS
CREDIT FACILITY
On March 28, 1997, the Company entered into a $175 million unsecured
revolving credit facility (the "Credit Facility") with KeyBank National
Association, as Administrative Agent, and Fleet Bank, N.A. as Syndication Agent,
and the 12 lenders signatory thereto, which matures on March 28, 2000 and bears
annual fees of 20 to 37.5 basis points. The Credit Facility provides for
interest on outstanding borrowings at either LIBOR plus a margin of 75 to 150
basis points or a base rate, plus in certain circumstances, a margin of 50 basis
points. The margins on LIBOR or prime rate borrowings and the annual fees are
dependent upon various conditions, including the Company's debt rating and the
level of borrowings outstanding. At July 31, 1997, the Company was able to
borrow at either LIBOR plus 112.5 basis points or the base rate.
The Credit Facility contains customary affirmative and restrictive
covenants that, among other things, limit the Company and its subsidiaries with
respect to indebtedness, liabilities, liens, dividends, loans, investments,
purchases and fundamental changes to the corporate structure or line of
business. The Company also covenants to maintain a minimum tangible net worth of
$300 million, an interest coverage ratio not less than 200% and a leverage ratio
not more than 1.10, all as defined in the Credit Facility.
The Credit Facility contains customary events of default, including, among
other things, and subject to applicable grace periods, other indebtedness
payment defaults, material misrepresentations, covenant defaults, certain
bankruptcy events and judgment defaults.
SENIOR NOTES PAYABLE
In April 1997, the Company completed the sale of $80 million of Senior
Unsecured Notes. The Company priced $20 million of notes due 2000, $20 million
of notes due 2002 and $40 million of notes due 2004. The notes have a weighted
average interest rate of 7.91%.
In April 1993 the Company sold $52 million of 7.16%, 7.71% and 8.24% Senior
Notes in a private placement. Similarly, in April 1996, the Company sold $30
million of 6.96% and 7.29% Senior Notes in a private placement. As provided
under the terms of the amended note purchase agreements, with respect to all of
the Senior Notes, the interest rates were increased by ten basis points each
effective March 28, 1997, concurrent with the release of all of the collateral
securing the Senior Notes and the assignment of a 'BBB-' rating by Duff & Phelps
Credit Rating Co. to the Company's existing Senior Notes and prospective senior
unsecured note offerings under the Company's mixed-use shelf registration. In
the event that such debt obligations are subsequently upgraded to a 'BBB' rating
by Duff & Phelps, the interest rates on the Senior Notes will automatically
readjust to the original interest rates. Interest is payable semi-annually in
arrears.
TAXATION
The following summary of certain federal income tax considerations to the
Company is based on current law, is for general information only, and is not tax
advice. The tax treatment of a holder of any Notes depends upon the terms of the
Notes, as well as such holder's particular situation, and this discussion does
not attempt to address any aspects of federal income taxation relating to
holders of Notes.
EACH INVESTOR IS ADVISED TO CONSULT SUCH INVESTOR'S OWN TAX ADVISOR
REGARDING THE TAX CONSEQUENCES TO SUCH INVESTOR OF THE ACQUISITION, OWNERSHIP
AND SALE OF THE NOTES, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER
TAX CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP AND SALE AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
Since its inception, the Company has elected to be taxed as a real estate
investment trust ("REIT") under Sections 856 through 860 of the Internal Revenue
Code of 1986, as amended (the "Code"). The Company believes that it was
organized and has operated in such a manner as to qualify for taxation as a
S-18
<PAGE> 19
REIT under the Code, and the Company intends to continue to operate in such a
manner, but no assurance can be given that it will operate in a manner so as to
qualify or remain qualified.
If the Company meets the requirements to be taxed as a REIT, it will not
generally be subject to federal income tax on taxable income and gains that are
currently distributed to its shareholders. Any undistributed taxable income or
gain, however, will be taxed to the Company at regular corporate rates. In
addition, the Company may be subject to special taxes on net income derived from
certain sales or other dispositions of property (other than foreclosure
property) held primarily for sale to customers in the ordinary course of
business by the Company and on certain income derived from foreclosure
properties.
As long as the Company qualifies for taxation as a REIT, distributions out
of current or accumulated earnings and profits will be taxable to the
shareholders as ordinary income, except that distributions of net capital gains
designated by the Company as capital gain dividends will be taxed as long-term
capital gains. None of the distributions from the Company will qualify for the
dividends received deduction generally available to corporations.
If the Company were to fail to qualify as a REIT for any taxable year, and
certain relief provisions did not apply, the Company would be subject to federal
income tax (including the alternative minimum tax) on its taxable income at
regular corporate rates and it would not receive a deduction for dividends paid
to its shareholders. Distributions to shareholders would then be eligible,
subject to certain limitations, for the corporate dividends received deduction,
but there can be no assurance that any such distributions would be made. Failure
to qualify as a REIT could result in a material adverse effect upon holders of
the Notes and the Company significantly reducing its distributions and incurring
substantial indebtedness or liquidating substantial investments in order to pay
the resulting taxes. Any such liabilities could result in the Company being
unable to pay dividends sufficient to meet its REIT status.
The preceding is only a summary of the complex federal income tax rules
governing the taxation of the Company and its shareholders. Moreover, in order
to qualify to be taxed as a REIT, the Company must elect to be taxed as a REIT
and satisfy a variety of complex tests relating to its share ownership, income,
assets and distributions. A summary of these tests and a more detailed
discussion of the federal income taxation of the Company and its shareholders is
provided in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as amended.
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriter, BT Securities Corporation, has agreed to purchase from the Company
the entire aggregate principal amount of the Notes. The Underwriting Agreement
provides that the obligations of the Underwriter are subject to certain
conditions precedent and that the Underwriter will purchase all of the Notes
offered hereby if any of such Notes are purchased.
The Company has been advised that the Underwriter proposes to offer the
Notes to the public at the initial public offering price set forth on the cover
page of this Prospectus Supplement. After the initial offering of the Notes, the
offering price and other selling terms may, from time to time, be varied by the
Underwriter.
The Underwriter may engage in stabilizing and syndicate covering
transactions in accordance with Rule 104 of Regulation M promulgated under the
Securities Exchange Act of 1934. Rule 104 permits stabilizing bids to purchase
the underlying security so long as bids do not exceed a specified maximum.
Syndicate covering transactions involve purchase of Notes in the open market
after the distribution has been completed in order to cover syndicate short
positions. Stabilizing and syndicate covering transactions may cause the prices
of the Notes to be higher than they otherwise would be in the absence of such
transactions. These transactions, if commenced, may be discontinued at any time.
The Company has agreed to indemnify the Underwriter against certain civil
liabilities, including liabilities under the Securities Act of 1933, as amended.
S-19
<PAGE> 20
LEGAL MATTERS
The validity of the Notes offered hereby and certain other legal matters
will be passed upon for the Company by Shumaker, Loop & Kendrick, LLP, Toledo,
Ohio. Calfee, Halter & Griswold LLP, Cleveland, Ohio will pass upon certain
legal matters for the Underwriter.
S-20
<PAGE> 21
PROSPECTUS
- ----------
HEALTH CARE REIT, INC.
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
WARRANTS
------------------
Health Care REIT, Inc. (the "Company") intends to issue from time to time,
in one or more series, its (i) unsecured and senior or subordinated debt
securities ("Debt Securities"); (ii) shares or fractional shares of preferred
stock, $1.00 par value ("Preferred Stock"); (iii) shares of common stock, $1.00
par value ("Common Stock"); and (iv) warrants ("Warrants") to purchase Debt
Securities, Preferred Stock or Common Stock ("Warrants"). The Debt Securities,
the Preferred Stock, the Common Stock and the Warrants offered hereby
(collectively, the "Offered Securities") may be offered, separately or as units
with other offered securities, in separate series and amounts at prices and on
terms to be determined at the time of sale and to be set forth in a supplement
to this Prospectus (a "Prospectus Supplement"), at an aggregate initial public
offering price not to exceed $300,000,000, on terms to be determined at the time
of sale.
The specific terms of the Offered Securities will be set forth in the
applicable Prospectus Supplement and will include, where applicable, (i) in the
case of Debt Securities, the specific designation, aggregate principal amount,
denomination, maturity, priority, interest rate, time of interest, terms of
redemption at the option of the Company or repayment at the option of the holder
or for sinking fund payments, terms for conversion into or exchange for other
Offered Securities and the initial public offering price; (ii) in the case of
Preferred Stock, the series designation, the number of shares, the dividend,
liquidation, redemption, conversion, voting and other rights and the initial
public offering price; (iii) in the case of Common Stock, the specific number of
shares and the initial public offering price; (iv) in the case of Warrants, the
number and terms thereof, the designation and the number of Offered Securities
issuable upon their exercise, the exercise price, any listing of the Warrants or
the underlying Offered Securities on a securities exchange and any other terms
in connection with the offering, sale and exercise; and, (v) in the case of all
Offered Securities, whether such Offered Securities will be offered separately
or as a unit with other Offered Securities. In addition, such specific terms may
include limitations on direct or beneficial ownership and restrictions on
transfer of the Offered Securities, in each case as may be appropriate to
preserve the status of the Company as a qualified real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended (the "Code"). The
applicable Prospectus Supplement will contain information, where applicable,
concerning certain United States Federal income tax considerations relating to,
and any listing on a securities exchange of, the Offered Securities.
The Offered Securities may be offered directly, through agents designated
from time to time by the Company, or to or through underwriters or dealers. If
any designated agents or underwriters are involved in the sale of the Offered
Securities, they will be identified and their compensation will be described in
the applicable Prospectus Supplement. See "Plan of Distribution." Also, the net
proceeds to the Company from such sale will be set forth in the Prospectus
Supplement. No Offered Securities may be sold without the delivery of the
applicable Prospectus Supplement describing such Offered Securities and the
method and terms of the offering thereof.
The shares of Common Stock of the Company are listed on the New York Stock
Exchange under the symbol "HCN." On January 28, 1997, the reported last sale
price of the shares of Common Stock on the New York Stock Exchange was $24.75
per share.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSIONER NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------
THE DATE OF THIS PROSPECTUS IS FEBRUARY 4, 1997
<PAGE> 22
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; and at
its Regional Offices at Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661 and Suite 1300, Seven World Trade
Centre, New York, New York 10048, and can also be inspected and copied at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York,
10005. Copies of such material can be obtained from the public reference section
of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the prescribed fees. The Commission also
maintains a web site (http://www.sec.gov) that contains reports, proxy and
information statements and other information regarding registrants, such as the
Company, that file electronically with the Commission.
This Prospectus is part of a Registration Statement on Form S-3 (together
with all amendments and all exhibits, the "Registration Statement"), filed by
the Company with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules of the Commission. For further information, reference
is made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31, 1995.
2. Quarterly Report on Form 10-Q for the quarterly period ended March 31,
1996.
3. Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1996.
4. Quarterly Report on Form 10-Q for the quarterly period ended September
30, 1996.
5. Current Reports on Form 8-K filed with the Commission on May 16, 1996,
September 5, 1996 and December 12, 1996.
6. All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of the Securities
shall be deemed to be incorporated herein by reference and to be a part of this
Prospectus from the date of filing of each such document.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
and any accompanying Prospectus Supplement relating to a specific offering of
Offered Securities or in any other subsequently filed document, as the case may
be, which also is or is deemed to be incorporated by reference herein, modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or any accompanying Prospectus Supplement. The Company will provide
on request and without charge to each person to whom this Prospectus is
delivered, upon the oral or written request of such person, a copy (without
exhibits) of any or all documents incorporated by reference to this Prospectus.
Requests for such copies should be directed to Erin C. Ibele, Vice President and
Corporate Secretary, Health Care REIT, Inc., One SeaGate, Suite 1500, Toledo,
Ohio 43604, telephone number (419) 247-2800.
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<PAGE> 23
THE COMPANY
Health Care REIT, Inc. (the "Company") is a self-administered real estate
investment trust ("REIT") that invests in health care facilities, primarily
nursing homes, assisted living facilities and retirement centers. As of
September 30, 1996, nursing homes, assisted living facilities and retirement
centers comprised approximately 84% of the investment portfolio. Founded in
1970, the Company was the first real estate investment trust to invest
exclusively in health care facilities.
The Company's objective is to enable stockholders to participate in health
care investments that produce income and preserve principal. Since its
inception, the Company has paid 102 consecutive quarterly dividends.
The shares of the common stock of the Company are listed on the New York
Stock Exchange under the symbol "HCN." The Company's executive offices are
located at One SeaGate, Suite 1500, Toledo, Ohio, 43604, and the telephone
number is (419) 247-2800.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the net
proceeds from the sale of the Offered Securities will be used to finance, either
directly or indirectly, the Company's investments in health care facilities and
will allow the Company to pursue additional health care property investments and
complete unfunded commitments.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
the Company for the periods indicated. For purposes of calculating such ratio,
"earnings" includes net income plus fixed charges reduced by the amount of
interest capitalized. "Fixed charges" consists of interest whether expensed or
capitalized and the amortization of loan expenses. The Company did not have any
Preferred Stock outstanding for any period presented. Accordingly, the ratio of
earnings to combined fixed charges and preferred stock dividends is identical to
the ratio of earnings to fixed charges for the periods presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------------------
1996 1995 1994 1993 1992 1991
----------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Consolidated ratio of earnings to fixed
charges (unaudited)....................... 2.80 2.01 3.42 2.80 2.97 2.17
</TABLE>
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities may be issued in one or more series under an Indenture
to be executed by the Company and a trustee (the "Trustee"), a form of which is
included as an exhibit to the Registration Statement of which this Prospectus is
a part (the "Indenture"). The terms of the Debt Securities may include those
stated in the Indenture and those made a part of the Indenture (before any
supplements) by reference to the Trust Indenture Act of 1939, as amended (the
"TIA").
The following is a summary of certain provisions of the Indenture and does
not purport to be complete and is qualified in its entirety by reference to the
detailed provisions of the Indenture, including the definitions of certain terms
therein to which reference is hereby made for a complete statement of such
provisions. Wherever particular provisions or sections of the Indenture or terms
defined therein are referred to herein, such provisions or definitions are
incorporated herein by reference.
TERMS
The Debt Securities will be direct, unsecured obligations of the Company.
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<PAGE> 24
The Indenture provides that the Debt Securities may be issued without limit
as to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Directors of the Company or as established in one or
more indentures supplemental to such Indenture. Debt Securities may be issued
with terms different from those of Debt Securities previously issued. All Debt
Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the Holders
of the Debt Securities of such series, for issuances of additional Debt
Securities of such series.
The Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
the Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect to
such series. In the event that two or more persons are acting as Trustee with
respect to different series of Debt Securities, each such Trustee shall be a
Trustee of a trust under the applicable Indenture separate and apart from the
trust administered by any other Trustee and, except as otherwise indicated
herein, any action described herein to be taken by the Trustee may be taken by
each such Trustee with respect to, and only with respect to, the one or more
series of Debt Securities for which it is Trustee under the applicable
Indenture.
The Prospectus Supplement will describe certain terms of any Debt
Securities offered hereby, including:
(1) the title of such Debt Securities;
(2) the aggregate principal amount of such Debt Securities and any
limit on such principal amount;
(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion of the
principal amount of such Debt Securities that is convertible into Capital
Stock of the Company or the method by which any such portion will be
determined;
(4) if convertible, in connection with the preservation of the
Company's status as a REIT, any applicable limitations on the ownership or
transferability of the Capital Stock of the Company into which such Debt
Securities are convertible;
(5) the date or dates, or the method by which such date or dates will
be determined, on which the principal of such Debt Securities will be
payable and the amount of principal payable thereon;
(6) the rate or rates (which may be fixed or variable) at which such
Debt Securities will bear interest, if any, or the method by which such
rate or rates will be determined, the date or dates from which such
interest will accrue or the method by which such date or dates will be
determined, the Interest Payment Dates on which any such interest will be
payable and the Regular Record Dates for such Interest Payment Dates, or
the method by which such Dates will be determined, and the basis upon which
interest will be calculated if other than that of a 360-day year consisting
of twelve 30-day months;
(7) the place or places where the principal of (and premium or
Make-Whole Amount as defined in the Indenture, if any), interest, if any,
and Additional Amounts, if any, payable in respect of, such Debt Securities
will be payable, where such Debt Securities may be surrendered for
registration of, transfer or exchange and where notices or demands to or
upon the Company in respect of such Debt Securities and the applicable
Indenture may be served;
(8) the period or periods within which, the price or prices (including
premium or Make-Whole Amount, if any) at which, the currency or currencies,
currency unit or units or composite currency or currencies in which and
other terms and conditions upon which such Debt Securities may be redeemed
in whole or in part, at the option of the Company, if the Company is to
have the option;
(9) the obligation, if any, of the Company to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a Holder thereof, and the period or periods
within which or the date or dates on which, the price or prices at which,
the currency or currencies, currency unit or units or composite currency or
currencies in which, and other terms and
4
<PAGE> 25
conditions upon which such Debt Securities will be redeemed, repaid or
purchased, in whole or in part, pursuant to such obligation;
(10) whether such Debt Securities will be in registered or bearer form
and terms and conditions relating thereto, and, if other than $1,000 and
any integral multiple thereof, the denominations in which any registered
Debt Securities will be issuable and, if other than $1,000 the denomination
or denominations in which any bearer Debt Securities will be issuable;
(11) if other than United States dollars, the currency or currencies
in which such Debt Securities will be denominated and payable, which may be
a foreign currency or units of two or more foreign currencies or a
composite currency or currencies;
(12) whether the amount of payments of principal (and premium or
Make-Whole Amount, if any) or interest, if any, on such Debt Securities may
be determined with reference to an index, formula or other method (which
index, formula or method may be based, without limitation, on one or more
currencies, currency units, composite currencies, commodities, equity
indices or other indices), and the manner in which such amounts will be
determined;
(13) whether the principal of (and premium or Make-Whole Amount, if
any) or interest or Additional Amounts, if any, on such Debt Securities are
to be payable, at the election of the Company or a Holder thereof, in a
currency or currencies, currency unit or units or composite currency or
currencies other than that in which such Debt Securities are denominated or
stated to be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made, and the time and manner
of, and identity of the exchange rate agent with responsibility for,
determining the exchange rate between the currency or currencies, currency
unit or units or composite currency or currencies in which such Debt
Securities are denominated or stated to be payable and the currency or
currencies, currency unit or units or composite currency or currencies in
which such Debt Securities are to be so payable;
(14) provisions, if any, granting special rights to the Holders of
such Debt Securities upon the occurrence of such events as may be
specified;
(15) any deletions from, modifications of or additions to the Events
of Default or covenants of the Company with respect to such Debt
Securities, whether or not such Events of Default or covenants are
consistent with the Events of Default or covenants set forth in the
applicable Indenture;
(16) whether such Debt Securities will be issued in certificated or
book-entry form;
(17) the applicability, if any, of the defeasance provisions of the
applicable Indenture;
(18) whether and under what circumstances the Company will pay
Additional Amounts as contemplated in the applicable Indenture on such Debt
Securities in respect of any tax, assessment or governmental charge and, if
so, whether the Company will have the option to redeem such Debt Securities
rather than pay such Additional Amounts (and the terms of any such option);
and
(19) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special United States federal income
tax, accounting and other considerations applicable to Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
CONVERSION RIGHTS
(1) The terms, if any, on which Debt Securities of any series may be
converted into shares of Common Stock or Debt Securities of another series will
be set forth in the Prospectus Supplement relating thereto. To protect the
Company's status as a REIT, the holders of Debt Securities of any series
("Holders") may not convert any Debt Security, and such Debt Security shall not
be convertible by any Holder, if as a result of such conversion any person would
then be deemed to beneficially own, directly or indirectly, 9.8% or more of the
then outstanding shares of Common Stock.
5
<PAGE> 26
(2) The conversion price will be subject to adjustment under certain
conditions, including (a) the payment of dividends (and other distributions) in
shares of Common Stock; (b) subdivisions, combinations and reclassifications of
shares of Common Stock; (c) the issuance to all or substantially all holders of
shares of Common Stock of rights or warrants entitling them to subscribe for or
purchase shares of Common Stock at a price per share (or having a conversion
price per share of Common Stock) less than the then current market price; and
(d) distributions to all or substantially all holders of shares of Common Stock
or shares of any other class, of evidences of indebtedness or assets (including
securities, but excluding those rights, warrants, dividends and distributions
referred to above and dividends and distributions not prohibited under the terms
of the Indenture) of the Company, subject to the limitation that all adjustments
by reason of any of the foregoing would not be made until they result in a
cumulative change in the conversion price of at least 1%. In the event the
Company shall effect any capital reorganization or reclassification of its
shares of Common Stock or shall consolidate or merge with or into any trust or
corporation (other than a consolidation or merger in which the Company is the
surviving entity) or shall sell or transfer substantially all its assets to any
other trust or corporation, the Holders shall, if entitled to convert such Debt
Securities at any time after such transaction, receive upon conversion thereof,
in lieu of each share of Common Stock into which the Debt Securities of such
series would have been convertible prior to such transaction, the same kind and
amount of stock and other securities, cash or property as shall have been
issuable or distributable in connection with such transaction with respect to
each share of Common Stock.
(3) A conversion price adjustment made according to the provisions of the
Debt Securities of any series (or the absence of provision for such an
adjustment) might result in a constructive distribution to the Holders of Debt
Securities of such series or holders of shares of Common Stock that would be
subject to taxation as a dividend. The Company may, at its option, make such
reductions in the conversion price, in addition to those set forth above, as the
Board of Directors of the Company deems advisable to avoid or diminish any
income tax to holders of shares of Common Stock resulting from any dividend or
distribution of shares of Common Stock (or rights to acquire shares of Common
Stock) or from any event treated as such for income tax purposes or for any
other reason. The Board of Directors will also have the power to resolve any
ambiguity or correct any error in the provisions relating to the adjustment of
the conversion price of the Debt Securities of such series and its actions in so
doing shall be final and conclusive.
(4) Fractional shares of Common Stock will not be issued upon conversion,
but, in lieu thereof, the Company will pay a cash adjustment based upon market
price.
(5) The Holders of Debt Securities of any series at the close of business
on an interest payment record date shall be entitled to receive the interest
payable on such Debt Securities on the corresponding interest payment date
notwithstanding the conversion thereof. However, Debt Securities surrendered for
conversion during the period from the close of business on any record date for
the payment of interest to the opening of business on the corresponding interest
payment date must be accompanied by payment of an amount equal to the interest
payable on such interest payment date. Holders of Debt Securities of any series
who convert Debt Securities of such series on an interest payment date will
receive the interest payable by the Company on such date and need not include
payment in the amount of such interest upon surrender of such Debt Securities
for conversion.
CERTAIN COVENANTS
Merger, Consolidation or Sale
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other entity,
provided that (a) either the Company shall be the continuing entity, or the
successor entity (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received the transfer of such
assets is a Person organized and existing under the laws of the United States or
any State thereof and shall expressly assume payment of the principal of (and
premium or Make-Whole Amount, if any) and interest on all of the Debt Securities
and the due and punctual performance and observance of all of the covenants and
conditions contained in each Indenture; (b) immediately after giving effect to
such transaction and treating any indebtedness which becomes an obligation of
the Company or any Subsidiary as a result thereof as having been incurred by the
Company or such Subsidiary at the time of such transaction, no Event of Default
under an Indenture, and no event which,
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after notice or the lapse of time, or both, would become such an Event of
Default, shall have occurred and be continuing; and (c) an Officers' Certificate
and legal opinion covering such conditions shall be delivered to the Trustee.
Optional Redemption
The Debt Securities of any series that are convertible into shares of
Common Stock will be subject to redemption, in whole or from time to time in
part, at any time for certain reasons intended to protect the Company's status
as a REIT at the option of the Company on at least 30 days' prior notice by mail
at a redemption price equal to 100% of the principal amount, plus interest
accrued to the date of redemption. See DESCRIPTION OF CAPITAL
STOCK -- "Redemption and Restrictions on Transfer."
Dividends, Distributions and Acquisitions
The Indenture provides that the Company will not (a) declare or pay any
dividend or make any distribution on its shares of Common Stock or to holders of
its shares of Common Stock (other than dividends or distributions payable in its
shares of Common Stock or other than as the Company determines is necessary to
maintain its status as a REIT) or (b) purchase, redeem or otherwise acquire or
retire for value any of its shares of Common Stock or permit any subsidiary to
do so, if at the time of such action an Event of Default (as defined in the
Indenture) has occurred and is continuing or would exist immediately after
giving effect to such action.
Additional Covenants
Any additional covenants of the Company with respect to a series of the
Debt Securities will be set forth in the Prospectus Supplement relative thereto.
MODIFICATION OF THE INDENTURES
Modifications and amendments of the Indenture may be made with the consent
of the Holders of not less than a majority in principal amount of all
Outstanding Debt Securities issued under such Indenture that are affected by
such modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each such Debt Security
affected thereby, (a) change the Stated Maturity of the principal of (or premium
or Make-Whole Amount, if any), or any installment of principal of or interest or
Additional Amounts payable on, any such Debt Security; (b) reduce the principal
amount of, or the rate or amount of interest on, or any premium or Make-Whole
Amount payable on redemption of, or any Additional Amounts payable with respect
to, any such Debt Security, or reduce the amount of principal of an Original
Issue Discount Security or Make-Whole Amount, if any, that would be due and
payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the Holder
of any such Debt Security; (c) change the Place of Payment, or the coin or
currency, for payment of principal of (and premium or Make-Whole Amount, if
any), or interest on, or any Additional Amounts payable with respect to, any
such Debt Security; (d) impair the right to institute suit for the enforcement
of any payment on or with respect to any such Debt Security; (e) reduce the
percentage of Outstanding Debt Securities of any series necessary to modify or
amend the applicable Indenture, to waive compliance with certain provisions
thereof or certain defaults and consequences thereunder or to reduce the quorum
or voting requirements set forth in the Indenture; or (f) modify any of the
foregoing provisions or any of the provisions relating to the waiver of certain
past defaults or certain covenants, except to increase the required percentage
to effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the Holder of such Debt Security.
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities issued under the Indenture have the right to waive compliance by
the Company with certain covenants in the Indenture.
EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default for
30 days in the payment of any installment of interest or Additional Amounts
payable on any Debt Security of such series; (b) default in the payment of the
principal
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of (or premium or Make-Whole Amount, if any, on) any Debt Security of such
series at its Maturity; (c) default in making any sinking fund payment as
required for any Debt Security of such series; (d) default in the performance of
any other covenant of the Company contained in the Indenture (other than a
covenant added to the Indenture solely for the benefit of a series of Debt
Securities issued thereunder other than such series), continued for 60 days
after written notice as provided in the Indenture; (e) default under any bond,
debenture, note, mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company (or by any Subsidiary, the repayment of which the
Company has guaranteed or for which the Company is directly responsible or
liable as obligor or guarantor) having an aggregate principal amount outstanding
of at least $10,000,000, whether such indebtedness now exists or shall hereafter
be created, which default shall have resulted in such indebtedness being
declared due and payable prior to the date on which it would otherwise have
become due and payable, without such acceleration having been rescinded or
annulled within 10 days after written notice as provided in the Indenture; (f)
the entry by a court of competent jurisdiction of one or more judgments, orders
or decrees against the Company or any Subsidiary in an aggregate amount
(excluding amounts fully covered by insurance) in excess of $10,000,000 and such
judgments, orders or decrees remain undischarged, unstayed and unsatisfied in an
aggregate amount (excluding amounts fully covered by insurance) in excess of
$10,000,000 for a period of 30 consecutive days; (g) certain events of
bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee of the Company or any Significant Subsidiary or for all or
substantially all of either of its property; and (h) any other Event of Default
provided with respect to such series of Debt Securities. The term "Significant
Subsidiary" means each significant subsidiary as defined in Regulation S-X
promulgated under the Securities Act of the Company.
If an event of Default under the Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the Trustees or Holders of not less than 25% in principal amount of
the Outstanding Debt Securities of that series may declare the principal amount
(or, if the Debt Securities of that series are Original Issue Discount
Securities or Indexed Securities, such portion of the principal amount as may be
specified in the terms thereof) of, and premium or Make-Whole Amount, if any,
on, all of the Debt Securities of that series to be due and payable immediately
by written notice thereof to the Company and to the Trustee if given by the
Holders. However, at any time after such declaration of acceleration with
respect to Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be) has been made,
but before a judgment or decree for payment of the money due has been obtained
by the Trustee, the Holders of not less than a majority in principal amount of
the Outstanding Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be) may rescind and
annul such declaration and its consequences if (a) the Company shall have
deposited with the Trustee all required payments of the principal of (and
premium or Make-Whole Amount, if any) and interest, and any Additional Amounts,
on the Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be), plus certain
fees, expenses, disbursements and advances of the Trustee and (b) all Events of
Default, other than the nonpayment of accelerated principal (or specified
portion thereof and the premium or Make-Whole Amount, if any) or interest, with
respect to the Debt Securities of such series (or of all Debt Securities then
Outstanding under the applicable Indenture, as the case may be) have been cured
or waived as provided in the Indenture. The Indenture also provides that the
Holders of not less than a majority in principal amount of the Outstanding Debt
Securities of any series (or of all Debt Securities then Outstanding under the
applicable Indenture, as the case may be) may waive any past default with
respect to such series and its consequences, except a default (i) in the payment
of the principal of (or premium or Make-Whole Amount, if any) or interest or
Additional Amounts payable on any Debt Security of such series or (ii) in
respect of a covenant or provision contained in the applicable Indenture that
cannot be modified or amended without the consent of the Holder of each
Outstanding Debt Security affected thereby.
A Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the applicable Indenture; provided, however,
that a Trustee may withhold notice to the Holders of any series of Debt
Securities of any default with respect to such series (except a default in the
payment of the principal of (or premium or Make-Whole Amount, if any) or
interest or Additional Amounts payable on any Debt Security of such series or in
the payment of any sinking fund installment in respect of any Debt Security of
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<PAGE> 29
such series) if the Responsible Officers of such Trustee consider such
withholding to be in the interest of such Holders.
The Indenture provides that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to such Indenture
or for any remedy thereunder, except in the case of failure of the Trustee, for
60 days, to act after it has received a written request to institute proceedings
in respect of an Event of Default from the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities of such series, as well as
an offer of reasonable indemnity. This provision will not prevent, however, any
Holder of Debt Securities from instituting suit for the enforcement of payment
of the principal of (and premium or Make-Whole Amount, if any), interest on and
Additional Amounts payable with respect to, such Debt Securities at the
respective due dates thereof.
BOOK-ENTRY SYSTEM
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of a depository (the "Depository") identified in
the Prospectus Supplement relating to such series. Global Securities may be
issued in fully registered form and may be issued in either temporary or
permanent form. Unless and until it is exchanged in whole or in part for the
individual Debt Securities represented thereby, a Global Security may not be
transferred except as a whole by the Depository for such Global Security to a
nominee of such Depository or by a nominee of such Depository to such Depository
or another nominee of such Depository or by such Depository or any nominee of
such Depository to a successor Depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
such series. The Company expects that unless otherwise indicated in the
applicable Prospectus Supplement, the following provisions will apply to
depository arrangements.
Upon the issuance of a Global Security, the Depository for such Global
Security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depository ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by the Company if such Debt Securities are offered directly by the
Company. Ownership of beneficial interests in such Global Security will be
limited to Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Security will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the Depository for such Global Security or its nominee (with respect to
beneficial interests of Participants) and records of Participants (with respect
to beneficial interests of persons who hold through Participants). The laws of
some states require that certain purchasers of securities take physical delivery
of such securities in definitive form. Such limits and laws may impair the
ability to own, pledge or transfer beneficial interest in a Global Security.
So long as the Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as described below or in the applicable Prospectus
Supplement, owners of beneficial interest in a Global Security will not be
entitled to have any of the individual Debt Securities represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Debt Securities in definitive form and
will not be considered the owners or holders thereof under the applicable
Indenture.
Payments of principal of, any premium or Make-Whole Amount and any interest
on, or any Additional Amounts payable with respect to, individual Debt
Securities represented by a Global Security registered in the name of a
Depository or its nominee will be made to the Depository or its nominee, as the
case may be, as the registered owner of the Global Security. None of the
Company, the Trustee, any Paying Agent or the Security Registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating
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<PAGE> 30
to or payments made on account of beneficial ownership interests in the Global
Security for such Debt Securities or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
The Company expects that the Depository for any Debt Securities or its
nominee, upon receipt of any payment of principal, premium, Make-Whole Amount,
interest or Additional Amounts in respect of the Global Security representing
such Debt Securities will immediately credit Participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Security as shown on the records of such
Depository or its nominee. The Company also expects that payments by
Participants to owners of beneficial interests in such Global Security held
through such Participants will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in street name. Such payments will be the
responsibility of such Participants.
If a Depository for any Debt Securities is at any time unwilling, unable or
ineligible to continue as depository and a successor depository is not appointed
by the Company within 90 days, the Company will issue individual Debt Securities
in exchange for the Global Security representing such Debt Securities. In
addition, the Company may at any time and in its sole discretion, subject to any
limitations described in the Prospectus Supplement relating to such Debt
Securities, determine not to have any of such Debt Securities represented by one
or more Global Securities and in such event will issue individual Debt
Securities in exchange for the Global Security or Securities representing such
Debt Securities. Individual Debt Securities so issued will be issued in
denominations of $1,000 and integral multiples thereof.
GOVERNING LAW
The Indenture and the Debt Securities will be governed by and construed in
accordance with the laws of the State of Ohio.
DESCRIPTION OF WARRANTS
The Company may issue, together with any other series of Securities offered
or separately, Warrants entitling the holder to purchase from or sell to the
Company, or to receive from the Company the cash value of the right to purchase
or sell, Debt Securities, shares of Preferred Stock or Common Stock. The
Warrants are to be issued under a Warrant Agreement (each a "Warrant Agreement")
to be entered into between the Company and a bank or trust company, as warrant
agent (the "Warrant Agent"), all as set forth in the applicable Prospectus
Supplement relating to the particular issue of Warrants. Copies of the form of
Warrant Agreement, including the form of Warrant Certificate representing the
Warrants (the "Warrant Certificates"), are filed as exhibits to the Registration
Statement of which this Prospectus forms a part.
In the case of each series of Warrants, the applicable Prospectus
Supplement will describe the terms of the Warrants being offered thereby,
including the following, if applicable: (a) the offering price; (b) the
currencies in which such Warrants are being offered; (c) the number of Warrants
offered; (d) the securities underlying the Warrants; (e) the exercise price, the
procedures for exercise of the Warrants and the circumstances, if any, that will
cause the Warrants to be deemed to be automatically exercised; (f) the date on
which the right to exercise the Warrants shall commence and the date on which
such right shall expire; (g) U.S. federal income tax consequences; and (h) other
terms of the Warrants.
Warrants may be exercised at the appropriate office of the Warrant Agent or
any other office indicated in the applicable Prospectus Supplement. Prior to the
exercise of Warrants entitling the holder to purchase any securities, holders of
such Warrants will not have any of the rights of holders of the securities
purchasable upon such exercise and will not be entitled to payments made to
holders of such securities.
The Warrant Agreements may be amended or supplemented without the consent
of the holders of the Warrants issued thereunder to effect changes that are not
inconsistent with the provisions of the Warrants and that do not adversely
affect the interests of the holders of the Warrants.
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DESCRIPTION OF COMMON STOCK
AND PREFERRED STOCK
GENERAL
The Company is authorized to issue 40,000,000 shares of Common Stock, $1.00
par value per share. The Company had outstanding 16,079,931 shares of common
stock, $1.00 par value per share (the "Common Stock"), on September 30, 1996.
The shares constitute the only class of outstanding voting securities of the
Company.
The Company is authorized to issue 10,000,000 shares of Preferred Stock,
$1.00 par value per share. No shares of Preferred Stock (the "Preferred Stock")
were outstanding on September 30, 1996. The Company has authorized the issuance
of 13,000 shares of Junior Participating Stock, Series A ("Series A Preferred
Stock") which is discussed below.
The following statements with respect to the capital stock of the Company
are subject to detailed provisions of the Company's Certificate of
Incorporation, as amended (the "Certificate"), and the Company's By-Laws (the
"By-Laws") as currently in effect. These statements do not purport to be
complete, or to give full effect of the terms of the provisions of statutory or
common law, and are subject to, and are qualified in their entirety by reference
to, the terms of the Certificate and By-Laws which are filed as exhibits to the
registration statement.
SERIES A PREFERRED STOCK
On July 19, 1994, the Board of Directors of the Company authorized the
issuance of one preferred share purchase right (a "Right") for each outstanding
share of Common Stock. Under certain conditions, each Right may be exercised to
purchase one one-thousandth of a share of Junior Participation Preferred Stock,
Series A, par value $1.00 per share ("Series A Preferred Stock"), of the Company
at a price of $48. The number of Rights outstanding and Series A Preferred Stock
issuable upon exercise, as well as the Series A Preferred Stock purchase price,
are subject to customary antidilution adjustments.
The Rights are evidenced by the certificates for shares of Common Stock,
and in general are not transferable apart from the Common Stock or exercisable
until after a party has acquired beneficial ownership of, or made a tender offer
for 15% or more of the outstanding Common Stock of the Company (an "Acquiring
Person"), or the occurrence of other events as specified in a Rights Agreement
between the Company and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent. Under certain conditions as specified in the Rights Agreement, including
but not limited to, the acquisition by a party of 15% or more of the outstanding
Common Stock of the Company, or the acquisition of the Company in a merger or
other business combination, each holder of a Right (other than an Acquiring
Person, whose Rights will be void) will receive upon exercise thereof and
payment of the exercise price that number of shares of Common Stock of the
Company, or of the other party, as applicable, having a market value of two
times the exercise price of the Right.
The Rights expire on August 5, 2004, and until exercised, the holder
thereof, as such, will have no rights as a stockholder of the Company. At the
Company's option, the Rights may be redeemed in whole at a price of $.01 per
Right at any time prior to becoming exercisable. In general, the Company may
also exchange the Rights at a ratio of one share of Common Stock per Right after
becoming exercisable but prior to the acquisition of 50% or more of the
outstanding shares of Common Stock by any party.
Series A Preferred Stock issuable upon exercise of the Rights will not be
redeemable. Each share of Series A Preferred Stock will have 1,000 votes and
will be entitled to (a) a minimum preferential quarterly dividend payment equal
to the greater of $25.00 per share or 1,000 times the amount of the dividends
per share paid on the Common Stock, (b) a liquidation preference in an amount
equal to the greater of $100 or 1,000 times the amount per share paid on the
Common Stock, and (c) a payment in connection with a business combination (in
which shares of Common Stock are exchanged) equal to 1,000 times the amount per
share paid on the Common Stock.
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COMMON STOCK
Holders of the shares of Common Stock are entitled to receive dividends
when declared by the Board of Directors and after payment of, or provision for,
full cumulative dividends on and any required redemptions of shares of Preferred
Stock then outstanding. Holders of the shares of Common Stock have one vote per
share and noncumulative voting rights, which means that holders of more than 50%
of the shares of voting Common Stock can elect all the directors if they choose
to do so, and, in such event, the holders of the remaining shares of Common
Stock will not be able to elect any directors. In the event of any voluntary or
involuntary liquidation or dissolution of the Company, holders of the shares of
Common Stock are to share ratably in the distributable assets of the Company
remaining after the satisfaction of the prior preferential rights of the holders
of the shares of Preferred Stock and the satisfaction of all debts and
liabilities of the Company. Holders of the shares of Common Stock do not have
preemptive rights. The transfer agent for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.
PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which a
Prospectus Supplement may relate. Specific terms of any series of Preferred
Stock offered by a Prospectus Supplement will be described in that Prospectus
Supplement. The description set forth below is subject to and qualified in its
entirety by reference to the Certificate fixing the preferences, limitations and
relative rights of a particular series of Preferred Stock.
General
Under the Certificate, the Board of Directors of the Company is authorized,
without further stockholder action, to provide for the issuance of up to
10,000,000 shares of Preferred Stock, in one or more series, with such voting
powers and with such designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions, as the Board of Directors shall approve.
The Preferred Stock will have the dividend, liquidation, redemption,
conversion and voting rights set forth below unless otherwise provided in the
Prospectus Supplement relating to a particular series of Preferred Stock.
Reference is made to the Prospectus Supplement relating to the particular series
of Preferred Stock offered thereby for specific terms, including: (a) the title
and liquidation preference per share of such Preferred Stock and the number of
shares offered; (b) the price at which such series will be issued; (c) the
dividend rate (or method of calculation), the dates on which dividends shall be
payable and the dates from which dividends shall commence to accumulate; (d) any
redemption or sinking fund provisions of such series; (e) any conversion
provisions of such series; and (f) any additional dividend, liquidation,
redemption, sinking fund and other rights, preferences, privileges, limitations
and restrictions of such series.
The Preferred Stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the Prospectus Supplement relating to a particular
series of Preferred Stock, each series will rank on a parity as to dividends and
distributions in the event of a liquidation with each other series of Preferred
Stock and, in all cases, will be senior to the shares of Common Stock.
Dividend Rights
Holders of the shares of Preferred Stock of each series will be entitled to
receive, when, as and if declared by the Board of Directors, out of assets of
the Company legally available therefor, cash dividends at such rates and on such
dates as are set forth in the Prospectus Supplement relating to such series of
Preferred Stock. Such rate may be fixed or variable or both and may be
cumulative, noncumulative or partially cumulative.
If the applicable Prospectus Supplement so provides, as long as any shares
of Preferred Stock are outstanding, no dividends will be declared or paid or any
distributions be made on the Common Stock, other than a dividend payable in
shares of Common Stock, unless the accrued dividends on each series of Preferred
Stock have been fully paid or declared and set apart for payment and the Company
shall have set apart all amounts, if any, required to be set apart for all
sinking funds, if any, for each series of Preferred Stock.
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If the applicable Prospectus Supplement so provides, when dividends are not
paid in full upon any series of Preferred Stock and any other series of
Preferred Stock ranking on a parity as to dividends with such series of
Preferred Stock, all dividends declared upon such series of Preferred Stock and
any other series of Preferred Stock ranking on a parity as to dividends will be
declared pro rata so that the amount of dividends declared per share on such
series of Preferred Stock and such other series will in all cases bear to each
other the same ratio that accrued in dividends per share on such series of
Preferred Stock and such other series bear to each other.
Each series of Preferred Stock will be entitled to dividends as described
in the Prospectus Supplement relating to such series, which may be based upon
one or more methods of determination. Different series of Preferred Stock may be
entitled to dividends at different dividend rates or based upon different
methods of determination. Except as provided in the applicable Prospectus
Supplement, no series of Preferred Stock will be entitled to participate
generally in the earnings or assets of the Company.
Rights Upon Liquidation
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of each series of Preferred Stock will be
entitled to receive out of the assets of the Company available for distribution
to stockholders the amount stated or determined on the basis set forth in the
Prospectus Supplement relating to such series, which may include accrued
dividends, if such liquidation, dissolution or winding up is involuntary or may
equal the current redemption price per share (otherwise than for the sinking
fund, if any, provided for such series) provided for such series set forth in
such Prospectus Supplement, if such liquidation, dissolution or winding up is
voluntary, and on such preferential basis as is set forth in such Prospectus
Supplement. If, upon any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the amounts payable with respect to Preferred Stock
of any series and any other shares of stock of the Company ranking as to any
such distribution on a parity with such series of Preferred Stock are not paid
in full, the holders of shares of Preferred Stock of such series and of such
other shares will share ratably in any such distribution of assets of the
Company in proportion to the full respective preferential amounts to which they
are entitled or on such other basis as is set forth in the applicable Prospectus
Supplement. The rights, if any, of the holders of any series of Preferred Stock
to participate in the assets of the Company remaining after the holders of other
series of Preferred Stock have been paid their respective specified liquidation
preferences upon any liquidation, dissolution or winding up the Company will be
described in the Prospectus Supplement relating to such series.
Redemption
A series of Preferred Stock may be redeemable, in whole or in part, at the
option of the Company, and may be subject to mandatory redemption pursuant to a
sinking fund, in each case upon terms, at the times, the redemption prices and
for the types of consideration set forth in the Prospectus Supplement relating
to such series. The Prospectus Supplement relating to a series of Preferred
Stock which is subject to mandatory redemption shall specify the number of
shares of such series that shall be redeemed by the Company in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to any accrued and unpaid dividends
thereon to the date of redemption.
If, after giving notice of redemption to the holders of a series of
Preferred Stock, the Company deposits with a designated bank funds sufficient to
redeem such shares of Preferred Stock, then from and after such deposit, all
shares called for redemption will no longer be outstanding for any purpose,
other than the right to receive the redemption price and the right to convert
such shares into other classes of capital stock of the Company. The redemption
price will be stated in the Prospectus Supplement relating to a particular
series of Preferred Stock.
Except as indicated in the applicable Prospectus Supplement, the Preferred
Stock is not subject to any mandatory redemption at the option of the holder.
Sinking Fund
The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, of a sinking fund for the purchase or redemption of that series.
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Conversion Rights
The Prospectus Supplement for any series of Preferred Stock will state the
terms, if any, on which shares of that series are convertible into shares of
Common Stock or another series of Preferred Stock. The Preferred Stock will have
no preemptive rights.
Voting Rights
Except as indicated in the Prospectus Supplement relating to a particular
series of Preferred Stock, or except as expressly required by Delaware law, a
holder of Preferred Stock will not be entitled to vote. Except as indicated in
the Prospectus Supplement relating to a particular series of Preferred Stock, in
the event the Company issues full shares of any series of Preferred Stock, each
such share will be entitled to one vote on matters on which holders of such
series of Preferred Stock are entitled to vote.
Under Delaware law, the affirmative vote of the holders of a majority of
the outstanding shares of all series of Preferred Stock, voting as a separate
voting group, will be required for (a) the authorization of any class of stock
ranking prior to or on parity with shares of Preferred Stock or the increase in
the number of authorized shares of any such stock, (b) any increase in the
number of authorized shares of shares of Preferred Stock, and (c) certain
amendments to the Articles that may be adverse to the rights of Preferred Stock
outstanding.
Transfer Agent and Registrar
The transfer agent, registrar and dividend disbursement agent for a series
of Preferred Stock will be selected by the Company and be described in the
applicable Prospectus Supplement. The registrar for shares of Preferred Stock
will send notices to stockholders of any meetings at which holders of the shares
of Preferred Stock have the right to vote on any matter.
REDEMPTION AND RESTRICTIONS ON TRANSFER
In order to preserve the Company's status as a REIT as defined in the Code,
the Company can redeem or stop the transfer of its shares. The Company's
Certificate of Incorporation provides that the Company is organized to qualify
as a REIT. Because the Code provides that the concentration of more than 50% in
value of the direct or indirect ownership of its shares in five or fewer
individual stockholders during the last six months of any year would result in
the disqualification of the Company as a REIT, the Company's Certificate of
Incorporation provides that the Company has the power to treat any transfer or
issuance resulting in the 9.8% to be exceeded as null and void and treat the
stockholder as holding the securities on behalf of the Company.
REIT QUALIFICATION
Generally, for each taxable year during which the Company qualifies as a
real estate investment trust, it will not be taxed on the portion of its taxable
income (including capital gains) that is distributed to stockholders. Any
undistributed income or gains will be taxed to the Company at regular corporate
tax rates. The Company will be subject to tax at the highest corporate rate on
its net income from foreclosure property, regardless of the amount of its
distributions. The highest corporate tax rate is currently 35%. Failure to
qualify could result in the Company's incurring indebtedness and perhaps
liquidating investments in order to pay the resulting taxes.
PLAN OF DISTRIBUTION
The Company may sell Offered Securities to or through underwriters or may
sell Offered Securities to investors directly or through designated agents. Any
such underwriter or agent involved in the offer or sale of the Offered
Securities will be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, or from time to time, at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may, from time to time, authorize
underwriters acting as
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agents to offer and sell the Offered Securities upon the terms and conditions
set forth in the Prospectus Supplement. In connection with the sale of the
Offered Securities, underwriters may be deemed to have received compensation
from the Company in the form of underwriting discounts or commissions and may
also receive commissions from purchasers of Offered Securities for whom they may
act as agent. Underwriters may sell Offered Securities to or through dealers,
and such dealers may receive compensation in the form of discounts, concessions
or commissions (which may be changed from time to time) from the underwriters
and or from the purchasers for whom they may act as agents.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities and any discounts,
concessions, or commissions allowed by the underwriters to participating dealers
would be set forth in the applicable Prospectus Supplement. Underwriters,
dealers and agents participating in the distribution of the Offered Securities
may be deemed to be underwriters and any discounts and commissions received by
them and any profit realized by them on resale of the Offered Securities may be
deemed to be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Offered Securities from the Company at the public
offering price set forth in the Prospectus Supplement pursuant to Delayed
Delivery Contracts ("Contracts") providing for payment and delivery on the date
or dates stated in such Prospectus Supplement. Each contract will be for an
amount not less than, and the principal amount of Offered Securities sold
pursuant to Contracts shall not be less or more than the respective amount
stated in such Prospectus Supplement. Institutions with which Contracts, when
authorized, may be made with commercial and savings banks, insurance companies,
pension funds, investment companies, education and charitable institutions and
other institutions, but will in all cases be subject to the approval of the
Company. Contracts will not be subject to any conditions except (a) the purchase
by an institution of the Offered Securities covered by its Contract shall not at
the time of delivery be prohibited under the laws of any jurisdiction in the
United States to which such institution is subject; and (b) the Company shall
have sold to such underwriters the total principal amount of the Offered
Securities less the principal amount thereof covered by Contracts. The
commission indicated in the Prospectus Supplement will be paid to agents and
underwriters soliciting purchases of Offered Securities pursuant to Contracts
accepted by the Company. Agents and underwriters shall have no responsibility in
respect to this delivery or performance of Contracts.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with, and perform services for, the Company in the
ordinary course of business.
LEGAL OPINIONS
The validity of the Offered Securities will be passed upon by Shumaker,
Loop & Kendrick, LLP, Toledo, Ohio.
EXPERTS
The consolidated financial statements of Health Care REIT, Inc. appearing
in Health Care REIT, Inc.'s Annual Report (Form 10-K) for the year ended
December 31, 1995, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
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<PAGE> 36
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
PROSPECTUS SUPPLEMENT
Properties............................ S-2
The Company........................... S-3
Recent Developments................... S-5
Use of Proceeds....................... S-5
Price Range of Shares and Distribution
History............................. S-5
Capitalization........................ S-6
Selected Financial Information........ S-7
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... S-8
Management............................ S-11
Description of the Notes.............. S-12
Description of Other Indebtedness..... S-18
Taxation.............................. S-18
Underwriting.......................... S-19
Legal Matters......................... S-20
PROSPECTUS DATED FEBRUARY 4, 1997
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Use of Proceeds....................... 3
Ratio of Earnings to Fixed Charges.... 3
Description of Debt Securities........ 3
Description of Warrants............... 10
Description of Common Stock and
Preferred Stock..................... 11
Plan of Distribution.................. 14
Legal Opinions........................ 15
Experts............................... 15
</TABLE>
======================================================
======================================================
$50,000,000
HEALTH CARE REIT LOGO
% NOTES DUE 2007
-------------------------------------------
PROSPECTUS SUPPLEMENT
-------------------------------------------
BT SECURITIES CORPORATION
AUGUST , 1997
======================================================
