<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to _____________________
Commission file number 1-9028
NATIONWIDE HEALTH PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland 95-3997619
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
610 Newport Center Drive, Suite 1150
Newport Beach, California 92660
(Address of principal executive offices)
(714) 718-4400
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
------ ------
Shares of registrant's common stock, $.10 par value, outstanding at October
31, 1997 - 43,127,908.
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<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
FORM 10-Q
September 30, 1997
TABLE OF CONTENTS
Part I--Financial Information
<TABLE>
<CAPTION>
Page
----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets.................................. 2
Condensed Consolidated Statements of Operations........................ 3
Condensed Consolidated Statements of Cash Flows........................ 4
Notes to Condensed Consolidated Financial Statements................... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................. 7
Part II--Other Information
Item 2. Changes in Securities and Use of Proceeds.............................. 10
Item 6. Exhibits and Reports on Form 8-K....................................... 11
</TABLE>
1
<PAGE>
PART I
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
----------- -----------
(Unaudited)
(Dollars in thousands)
<S> <C> <C>
Investments in real estate
Real estate properties:
Land ............................................... $ 113,081 $ 75,252
Buildings and improvements.......................... 766,600 574,544
Construction in progress............................ 13,929 2,213
---------- --------
893,610 652,009
Less accumulated depreciation ...................... (101,410) (89,967)
---------- --------
792,200 562,042
Mortgage loans receivable, net........................ 209,131 160,464
---------- --------
1,001,331 722,506
Cash and cash equivalents............................... 37,919 11,709
Receivables............................................. 5,125 4,321
Other assets............................................ 8,955 6,448
---------- --------
$1,053,330 $744,984
========== ========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Bank borrowings......................................... $ -- $ 32,300
Senior notes due 2000-2037.............................. 355,000 190,000
Convertible debentures.................................. 64,534 64,920
Notes and bonds payable................................. 48,908 9,229
Accounts payable and accrued liabilities................ 30,836 19,947
Stockholders' equity:
Preferred stock $1.00 par value;
5,000,000 shares authorized;....................... 100,000 --
Issued and outstanding:
1997-1,000,000; 1996-none,
stated at
liquidation preference of $100
per share
Common stock $.10 par value;
100,000,000 shares authorized;
Issued and outstanding:
1997-43,127,908, 1996-41,785,001.................. 4,313 4,179
Capital in excess of par value....................... 490,610 462,534
Cumulative net income................................ 346,290 300,079
Cumulative dividends................................. (387,161) (338,204)
---------- ---------
Total stockholders' equity..................... 554,052 428,588
---------- ---------
$1,053,330 $ 744,984
========== =========
</TABLE>
See accompanying notes.
2
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
-------------------------------------------------------------
Revenues:
<S> <C> <C> <C> <C>
Minimum rent...................... $19,876 $16,792 $56,623 $49,431
Interest and other income......... 5,891 4,314 15,986 12,242
Additional rent and additional
interest......................... 3,529 3,198 10,187 8,862
------- ------- ------- -------
29,296 24,304 82,796 70,535
Expenses:
Interest and amortization of
deferred financing costs......... 7,873 4,808 20,639 15,539
Depreciation and non-cash charges. 4,749 4,198 14,001 12,454
General and administrative........ 961 843 2,774 2,499
------- ------- ------- -------
13,583 9,849 37,414 30,492
------- ------- ------- -------
Net income before gain on sale of
properties.......................... $15,713 $14,455 $45,382 $40,043
Gain on sale of properties........... 829 -- 829 --
------- ------- ------- -------
Net income........................... 16,542 14,455 46,211 40,043
Preferred stock dividends............ (43) -- (43) --
------- ------- ------- -------
Net income available to common
stockholders........................ $16,499 $14,455 $46,168 $40,043
======= ======= ======= =======
Net income before gain on sale of
properties.......................... $ .37 $ .35 $ 1.08 $ 1.00
======= ======= ======= =======
Net income per share................. $ .39 $ .35 $ 1.10 $ 1.00
======= ======= ======= =======
Net income available to common
stockholders per share.............. $ .39 $ .35 $ 1.10 $ 1.00
======= ======= ======= =======
Dividends paid per share............. $ .39 $ .37 $ 1.17 $ 1.11
======= ======= ======= =======
Weighted average shares outstanding.. 41,910 41,781 41,838 39,899
======= ======= ======= =======
</TABLE>
See accompanying notes.
3
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------
1997 1996
<S> <C> <C>
Cash flow from operating activities:
Net income............................. $ 46,211 $ 40,043
Gain on sale of properties............. (829) --
Depreciation and non-cash charges...... 14,001 12,453
Amortization of deferred financing
costs................................. 581 573
Net decrease in other assets and
liabilities........................... 6,951 1,891
--------- ---------
Net cash provided by operating
activities........................ 66,915 54,960
Cash flow from investing activities:
Acquisition of real estate
properties............................ (182,656) (38,082)
Disposition of real estate
properties............................ 4,827 --
Investment in mortgage loans
receivable............................ (43,898) (26,350)
Principal payments on mortgage
loans receivable...................... 1,542 5,180
--------- ---------
Net cash used in investing
activities........................ (220,185) (59,252)
Cash flow from financing activities:
Bank borrowings........................ 244,100 96,050
Repayment of bank borrowings........... (276,400) (141,750)
Issuance of senior unsecured debt...... 165,000 50,000
Issuance of common stock............... 1 60,905
Issuance of preferred stock............ 97,250 --
Dividends paid......................... (48,957) (44,121)
Principal payments on notes and
bonds................................. (60) (14,115)
Other, net............................. (1,454) (540)
--------- ---------
Net cash provided by financing
activities......................... 179,480 6,429
--------- ---------
Increase in cash and cash equivalents...... 26,210 2,137
Cash and cash equivalents, beginning of
period.................................... 11,709 7,937
--------- ---------
Cash and cash equivalents, end of period... $ 37,919 $ 10,074
========= =========
</TABLE>
See accompanying notes.
4
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
(i) The condensed consolidated financial statements included herein have
been prepared by the Company, without audit, and include all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
results of operations for the three-month and nine-month periods ended September
30, 1997 and 1996 pursuant to the rules and regulations of the Securities and
Exchange Commission. All of such adjustments are of a normal recurring nature.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. Although
the Company believes that the disclosures in such financial statements are
adequate to make the information presented not misleading, these condensed
consolidated financial statements should be read in conjunction with the
Company's financial statements and the notes thereto included in the Company's
1996 Annual Report on Form 10-K filed with the Securities and Exchange
Commission. The results of operations for the three-month and nine-month periods
ended September 30, 1997 and 1996 are not necessarily indicative of the results
for a full year.
(ii) Net income per share is calculated by dividing net income by the
weighted average common shares outstanding during the period. The effect of
common stock options is immaterial. The effect of convertible debentures in 1996
is anti-dilutive and in 1997 is immaterial.
(iii) The Company qualifies as a real estate investment trust under Sections
856 through 860 of the Internal Revenue Code of 1986, as amended. The Company
intends to continue to qualify as such and therefore to distribute at least
ninety-five percent (95%) of its taxable income to its stockholders.
Accordingly, no provision has been made for federal income taxes.
(iv) The Company invests in health care related real estate and, as of
September 30, 1997, had investments in 277 facilities, including 195 long-term
health care facilities, 69 assisted living facilities, 10 continuing care
retirement communities, two rehabilitation hospitals and one medical clinic.
The Company's facilities are operated by 61 different operators.
The Company's facilities which are owned and leased under "net" leases
are accounted for as operating leases. The leases have initial terms ranging
from 10 to 19 years, and the leases generally have two or more multiple-year
renewal options. The Company earns fixed monthly minimum rents and may earn
periodic additional rents. The additional rent payments are generally computed
as a percentage of facility net patient revenues in excess of base amounts
and/or increases in the Consumer Price Index. The base amounts, in most cases,
are net patient revenues for the first year of the lease. Certain of the leases
contain provisions such that the percentage of further revenue increases due to
the Company as additional rent is limited to 1% at such time as additional rent
exceeds 41% of base rent. Under the terms of the leases, the lessee is
responsible for all maintenance, repairs, taxes and insurance on the leased
properties. Forty-one of the facilities were leased to and operated by
subsidiaries of Beverly Enterprises, Inc.
(v) During the nine-month period ended September 30, 1997, the Company
acquired 21 assisted living facilities, nine long-term health care facilities,
four continuing care retirement communities and one medical clinic in 26
separate transactions for an aggregate purchase price of approximately
$204,048,000. The acquisitions were funded by bank borrowings on the Company's
bank line of credit, approximately $39,739,000 of debt assumption, 1,315,686
shares of the Company's common stock and cash on hand. The facilities were
concurrently leased under terms generally similar to the Company's existing
leases. In addition, during the nine-month period ended September 30, 1997 the
Company completed the development of one long-term health care facility and two
5
<PAGE>
assisted living facilities for an aggregate cost of approximately $13,245,000,
provided new construction financing of approximately $23,619,000 and provided
capital improvement funding of approximately $11,932,000 in accordance with
certain existing lease agreements.
During the nine-month period ended September 30, 1997, the Company provided
six mortgage loans secured by five long-term health care facilities, three
assisted living facilities and two continuing care retirement communities in six
separate transactions in the aggregate amount of approximately $42,675,000. The
loans were funded by bank borrowings under the Company's bank line of credit and
cash on hand.
During June 1997, the Company sold two long-term health care facilities for
an aggregate purchase price of approximately $6,863,000. The Company received a
mortgage note in the amount of the purchase price, which is secured by the two
facilities. The related gain of approximately $1,676,000 on such sale will be
recognized into income on a deferred basis in proportion to the receipt of
principal payments on the mortgage loans provided by the Company.
During August 1997, the Company sold one long-term health care facility to
the lessee of such facility pursuant to a purchase option provision in the
respective lease for a purchase price of approximately $4,829,000 resulting in a
gain of approximately $829,000. The proceeds of the sale were used to repay bank
borrowings on the Company's bank line of credit.
During the nine months ended September 30, 1997, the Company issued
$165,000,000 in medium-term notes. The notes bear fixed interest at a weighted
average rate of 7.12% and have a weighted average maturity of 19 years. The
proceeds were used to reduce borrowings on the Company's bank line of credit.
In September 1997, the Company sold 1,000,000 shares of 7.677% Series A
Cumulative Preferred Step-Up REIT securities ("Preferred Stock") with a
liquidation preference of $100 per share. Dividends on the Preferred Stock are
cumulative from the date of original issue and are payable quarterly in arrears,
commencing December 31, 1997 at the rate of 7.677% per annum of the liquidation
preference per share (equivalent to $7.677 per annum per share) through
September 30, 2012 and at a rate of 9.677% of the liquidation preference per
annum per share (equivalent to $9.677 per annum per share) thereafter. The
Preferred Stock is not redeemable prior to September 30, 2007. On or after
September 30, 2007, the Preferred Stock may be redeemed for cash at the option
of the Company, in whole or in part, at a redemption price of $100 per share,
plus accrued and unpaid dividends, if any, thereon.
6
<PAGE>
NATIONWIDE HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
September 30, 1997
Operating Results
Nine Months 1997 Compared to Nine Months 1996
Revenues for the nine months ended September 30, 1997 increased $12,261,000 or
17% over the same period in 1996. The increase is due to increased minimum rent
and interest income resulting from additional investments in real estate
properties and mortgage loans receivable during the last twelve months. The
increase was also attributable to increased additional rent and additional
interest earned under the Company's existing leases and mortgage loans
receivable based on increases in the facility revenues and the Consumer Price
Index.
Total expenses for the nine-month period ended September 30, 1997 increased
$6,922,000 or 23% over the same period in 1996. The increase is due to
increased interest expense as a result of the issuance of fixed rate medium-term
notes during the last twelve months and to increased depreciation in connection
with the acquisition of additional facilities during the last twelve months.
Third Quarter 1997 Compared to Third Quarter 1996
Revenues for the three months ended September 30, 1997 increased $4,992,000 or
21% over the same period in 1996. The increase is primarily due to increased
minimum rent and interest income resulting from investments in additional
facilities during the last twelve months. The increase was also attributed to
increased additional rent and additional interest earned under the Company's
existing leases and mortgage loans receivable based on increases in the facility
revenues and Consumer Price Index.
Total expenses for the three months ended September 30, 1997 increased
$3,734,000 or 38% over the same period in 1996. The increase is primarily due
to increased interest expense as a result of the issuance of fixed rate medium
term notes during the last twelve months and to a lesser extent to increased
depreciation in connection with the acquisition of additional facilities during
the last twelve months.
In addition, during the three months ended September 30, 1997, the Company
recognized a gain of approximately $829,000 from the sale of a long-term health
care facility.
The Company expects increased rental revenues and interest income due to the
addition of facilities to its property base and mortgage loans receivable over
the last twelve months. The Company also expects increased additional rent and
additional interest because the Company's leases and mortgages generally contain
provisions under which additional rents or interest income increase with
increases in facility revenues and/or increases in the Consumer Price Index.
Historically, revenues at the Company's facilities and the Consumer Price Index
generally have increased; although, there are no assurances that they will
continue to increase in the future. Sales of facilities or repayments of
mortgages would serve to offset the aforementioned revenue increases. Additional
investments in health care facilities would also increase rental and/or interest
income. As additional investments in facilities are made, depreciation and/or
interest expense could also increase. Any such increases, however, are expected
to be more than offset by rents or interest income associated with the
investments.
Statement of Financial Accounting Standards ("SFAS") No. 128 Earnings per
Share and SFAS No. 129 Disclosure of Information about Capital Structure were
issued in February 1997 and are effective for periods ending after December 15,
1997. The Company will adopt SFAS No. 128 and SFAS No. 129 for the period
ending December 31, 1997 and anticipates that such adoption will not materially
impact the Company's financial statements.
7
<PAGE>
SFAS No. 130 Reporting Comprehensive Income and SFAS No. 131 Disclosures about
Segments of an Enterprise and Related Information were issued in June 1997. The
Company will adopt SFAS No. 130 and SFAS No. 131 in 1998 and anticipates that
such adoption will not materially impact the Company's financial statements.
Liquidity and Capital Resources
During the nine-month period ended September 30, 1997, the Company acquired
21 assisted living facilities, nine long-term health care facilities, four
continuing care retirement communities and one medical clinic in 26 separate
transactions for an aggregate purchase price of approximately $204,048,000. The
acquisitions were funded by bank borrowings on the Company's bank line of
credit, approximately $39,739,000 of debt assumption, 1,315,686 shares of the
Company's common stock and cash on hand. The facilities were concurrently
leased under terms generally similar to the Company's existing leases.
In addition, during the nine-month period ended September 30, 1997, the
Company provided new construction financing of approximately $23,619,000 for 15
assisted living facilities, three medical clinics and one long-term care
facility. During the nine-month period ended September 30, 1997, three
properties completed the construction phase of the Company's investment process.
The facilities were completed in three separate transactions for a total
investment of $13,245,000 and included the construction of one long-term health
care facility and two assisted living facilities. The facilities were leased
under terms generally similar to the Company's existing leases. The Company
also funded approximately $11,932,000 in capital improvements in accordance with
certain existing lease agreements. Such capital improvements will result in an
increase in the minimum rent rents earned by the Company. The construction
advances and capital improvement advances were funded by bank borrowings on the
Company's bank line of credit and by cash on hand.
During the nine-month period ended September 30, 1997, the Company provided
six mortgage loans secured by five long-term health care facilities, three
assisted living facilities and two continuing care retirement communities in six
separate transactions in the aggregate amount of approximately $42,675,000. The
loans were funded by bank borrowings under the Company's bank line of credit and
cash on hand.
During June 1997, the Company sold two long-term health care facilities for
an aggregate purchase price of approximately $6,863,000. The Company received a
mortgage note in the amount of the purchase price, which is secured by the two
facilities. The related gain of approximately $1,676,000 on such sale will be
recognized into income on a deferred basis in proportion to the receipt of
principal payments on the mortgage loans provided by the Company.
During August 1997, the Company sold one long-term health care facility to
the lessee of such facility pursuant to a purchase option provision in the
respective lease for a purchase price of approximately $4,829,000 resulting in a
gain of approximately $829,000. The proceeds of the sale were used to repay bank
borrowings on the Company's bank line of credit.
During the nine months ended September 30, 1997, the Company issued
$165,000,000 in medium-term notes. The notes bear fixed interest at a weighted
average rate of 7.12% and have a weighted average maturity of 19 years. The
proceeds were used to reduce borrowings on the Company's bank line of credit.
In September 1997, the Company sold 1,000,000 shares of 7.677% Series A
Cumulative Preferred Step-up REIT securities ("Preferred Stock") with a
liquidation preference of $100 per share. Dividends on the Preferred Stock are
cumulative from the date of original issue and are payable quarterly in arrears,
commencing December 31, 1997 at the rate of 7.677% per annum of the liquidation
preference per share (equivalent to $7.677 per annum per share) through
September 30, 2012 and at a rate of 9.677% of the liquidation preference per
annum per share (equivalent to $9.677 per annum per share) thereafter. The
Preferred Stock is not redeemable prior to September 30, 2007. On or after
September 30, 2007, the Preferred Stock may be redeemed for cash at the option
of the Company, in whole or in part, at a redemption price of $100 per share,
plus accrued and unpaid dividends, if any, thereon.
8
<PAGE>
Proceeds from the sale of the Preferred Stock were used to repay bank borrowings
under the Company's bank line of credit and will be used for general corporate
purposes, including the funding of additional investments.
During April 1997, the Company's $100,000,000 bank line of credit was amended
to, among other things, extend its maturity to March 31, 2000 and reduce its
current LIBOR borrowing margin from .90% to .75%.
At September 30, 1997, the Company had the maximum amount of $100,000,000
available under its bank line of credit. The Company has effective shelf
registrations on file with the Securities and Exchange Commission under which
the Company may issue (a) up to $245,000,000 in aggregate principal amount of
medium term notes and (b) up to approximately $233,122,000 of securities
including debt, convertible debt, common and preferred stock. The Company
anticipates issuing securities under such shelf registrations to repay
borrowings under the Company's bank line of credit.
The Company anticipates making additional investments in health care related
facilities. Financing for such future investments may be provided by borrowings
under the Company's bank line, private placements or public offerings of debt or
equity, and the assumption of secured indebtedness. The Company believes it has
sufficient liquidity and financing capability to finance future investments as
well as repay borrowings at or prior to their maturity.
Statement Regarding Forward Looking Disclosure
Certain information contained in this report includes forward looking
statements, which can be identified by the use of forward looking terminology
such as "may," "will," "expect," "should" or comparable terms or the negative
thereof. These statements involve risks and uncertainties that could cause
actual results to differ materially from those described in the statements.
These risks and uncertainties include (without limitation) the following: the
effect of economic and market conditions and changes in interest rates, changes
in the health care industry, government regulations, including changes in
reimbursement levels under the Medicare and Medicaid programs, changes in the
ratings of the Company's debt securities or preferred stock, the amount and
timing of any additional investments made by the Company, and access to capital
markets.
9
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PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
(b) The Preferred Stock is senior to the Company's Common Stock with respect
to dividends and amounts paid at liquidation. Except in certain circumstances,
unless full cumulative dividends on the Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods and the then
current dividend period, no dividends (other than in shares of Common Stock or
other capital stock ranking junior to the Preferred Stock as to dividends and
upon liquidation) may be declared or paid or set aside for payment, nor may any
shares of Common Stock or any other capital stock of the Company ranking junior
to or on a parity with the Preferred Stock as to dividends or amounts upon
liquidation be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any such stock) by the Company (except by conversion into or
exchange for other capital stock of the Company ranking junior to the Preferred
Stock as to dividends and amounts upon liquidation).
Upon any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Company, then, before any distribution or payment may be
made to the holders of any shares of Common Stock, the holders of Preferred
Stock are entitled to receive out of assets of the Company legally available for
distribution to stockholders, liquidation distributions in the amount of the
liquidation preference of $100.00 per share, plus an amount equal to all
dividends accrued and unpaid thereon.
10
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Amendment Number Six to Credit Agreement dated August 15, 1997
between the Company and Wells Fargo Bank, National Association, the
Sumitomo Bank Limited, The Bank of New York, Sanwa Bank California and
BHF-Bank Aktiengesellschaft.
27 FINANCIAL DATA SCHEDULE
(b) Reports on Form 8-K
A Form 8-K dated August 18, 1997 was filed with respect to the
acquisition of assets during the period January 1, 1997 through August
4, 1997, including audited proforma statements of income for the
acquired facilities and unaudited pro forma financial statements for
the Company giving effect to the acquisitions.
A Form 8-K dated August 19, 1997 was filed to include certain exhibits
related to the issue and sale by the Company of its Medium-Term Notes,
Series C.
A Form 8-K dated September 24, 1997 was filed to include certain
exhibits related to the issue and sale by the Company of $1,000,000
shares of its 7.677% Series A Cumulative Preferred Step-Up REIT
Securities.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 12, 1997
NATIONWIDE HEALTH PROPERTIES, INC.
By /s/MARK L. DESMOND
----------------------------------------
Mark L. Desmond
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
12
<PAGE>
EXHIBIT 10.1
AMENDMENT NUMBER SIX AND WAIVER TO CREDIT AGREEMENT
---------------------------------------------------
This AMENDMENT NUMBER SIX AND WAIVER TO CREDIT AGREEMENT, dated as of
August 15, 1997 (this "Amendment"), is entered into among NATIONWIDE HEALTH
PROPERTIES, INC., a Maryland corporation (the "Borrower"), the financial
institutions which are signatories to the Credit Agreement (each a "Bank" and,
collectively, the "Banks"), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as agent
for the Banks thereunder (in such capacity, the "Agent").
WHEREAS, the Borrower has requested that the Banks amend certain
provisions of the Credit Agreement to provide for, among other things, the
revision of covenants in connection with the incurrence of indebtedness by the
Borrower.
WHEREAS, Borrower has informed Banks and Agent that Borrower intends
to enter into a transaction pursuant to which Borrower will acquire five (5)
facilities: a continuing care retirement community in Glendale, Wisconsin, a
continuing care retirement community in Waukesha, Wisconsin, an independent
living facility/assisted living facility in Menomonee Falls, Wisconsin, an
independent living facility in West Allis, Wisconsin, and a nursing home in
Duluth, Minnesota (the "Properties"), and lease the Properties to Laureate
Group, Inc. ("Laureate"), all as more particularly described in a memorandum
(the "Memorandum") from Andy Stokes to Borrower's Board of Directors, dated June
12, 1997, a true and complete copy of which is attached hereto as Exhibit "A"
-----------
(the transaction substantially as described in the Memorandum is referred to
herein as the "Transaction");
WHEREAS, Borrower has requested that Banks and Agent waive Borrower's
compliance with certain covenants set forth in Section 9.4 of the Credit
-----------
Agreement in connection with the consummation of the Transaction; and
WHEREAS, subject to the terms and conditions contained herein, the
Banks are willing to amend such provisions of the Credit Agreement and to waive
Borrower's compliance with certain covenants set forth in Section 9.4 of the
-----------
Credit Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, conditions,
and provisions hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS FOR THIS AMENDMENT;
------------------------------
AMENDMENT OF ARTICLE I OF THE CREDIT AGREEMENT
----------------------------------------------
1.1 Definitions for this Amendment. Any and all initially
------------------------------
capitalized terms used herein shall have the meanings ascribed thereto in the
Credit Agreement unless specifically defined herein. For purposes of this
Amendment, the following initially capitalized terms shall have the following
meanings:
"Agent" shall have the meaning set forth in the introduction to this
-----
Amendment.
<PAGE>
"Amendment" means this Amendment Number Six and Waiver to Credit
---------
Agreement among the Borrower, the Banks, and the Agent.
"Bank" and "Banks" shall have the respective meanings set forth in the
---- -----
introduction to this Amendment.
"Borrower" shall have the meaning set forth in the introduction to
--------
this Amendment.
"Credit Agreement" means that certain Credit Agreement, dated as of
----------------
May 20, 1993, among the Borrower, the Banks, and the Agent, as amended by
that certain Amendment Number One to Credit Agreement dated as of April 28,
1994, that certain Amendment Number Two to Credit Agreement dated as of
July 11, 1995, that certain Amendment Number Three to Credit Agreement
dated as of January 22, 1996, that certain Amendment Number Four and Waiver
to Credit Agreement dated as of December 10, 1996, and that certain
Amendment Number Five to Credit Agreement dated as of April 1, 1997.
1.2 Amendment of Section 1.1 of the Credit Agreement. Section 1.1 of
------------------------------------------------
the Credit Agreement is hereby amended by inserting the following defined terms:
"1997 Indenture" means that certain Indenture, dated as of August 19,
--------------
1997, from the Borrower to The Bank of New York, as Trustee, providing for
the issuance from time to time of unsecured and unsubordinated debentures,
notes or other evidences of indebtedness of the Borrower.
"1997 Indenture Indebtedness" means Indebtedness of the Borrower
---------------------------
incurred under or pursuant to the 1997 Indenture.
ARTICLE 2
AMENDMENT OF CERTAIN PROVISIONS
-------------------------------
OF THE CREDIT AGREEMENT
-----------------------
2.1 Amendment of Section 4.3(b) of the Credit Agreement. Section
---------------------------------------------------
4.3(b) of the Credit Agreement is amended by deleting clause (i) therefrom in
its entirety and substituting therefor the following clause:
(i) If the Borrower shall create or incur Indenture Indebtedness, 1996
Indenture Indebtedness or 1997 Indenture Indebtedness or, with the prior
written consent of the Majority Banks, shall create, incur or assume
Indebtedness pursuant to Sections 9.4(a)(v) or 9.4(a)(vii), the Borrower
---------------------------------
shall pay to the Agent as a prepayment in whole or ratably in part of the
outstanding amount of the Loans, an amount equal to the Net Cash
Proceeds received by the Borrower from such Indebtedness as created,
incurred or assumed (to the extent of the amount of the Loans then
outstanding).
2.2 Amendment of Section 8.1 of the Credit Agreement. Section 8.1 of
------------------------------------------------
the Credit Agreement is amended by inserting the following new subsection (u)
immediately
-2-
<PAGE>
following subsection (t) thereof:
(u) Compliance with Securities Laws. Each of the Borrower and its
-------------------------------
Subsidiaries is in compliance in all material respects with all applicable
federal and state securities laws, rules, regulations and orders of any
Governmental Authority with respect to the 1997 Indenture and the
Indebtedness issued and to be issued pursuant to the 1997 Indenture.
2.3 Amendment of Section 9.1(b) of the Credit Agreement. Section
---------------------------------------------------
9.1(b) of the Credit Agreement is amended by deleting clause (xi) therefrom in
its entirety and substituting therefor the following clause:
(xi) as soon as reasonably practical and, in any event, not less
than two days prior to the consummation thereof, written notice of (A) the
proposed incurrence or issuance of Indenture Indebtedness, 1996 Indenture
Indebtedness or 1997 Indenture Indebtedness or (B) any proposed supplement
or amendment to the Indenture, the 1996 Indenture or the 1997 Indenture;
and
2.4 Amendment of Section 9.2 of the Credit Agreement. Section 9.2 of
------------------------------------------------
the Credit Agreement is amended by deleting subsection (a) therefrom in its
entirety and substituting therefor the following subsection:
(a) Leverage Ratio. The Borrower will not permit the ratio of
--------------
Consolidated Total Liabilities to Consolidated Tangible Net Worth to be
greater than 1.3 to 1.0;
2.5 Amendment of Section 9.4(a) of the Credit Agreement. Section
---------------------------------------------------
9.4(a) of the Credit Agreement is amended by deleting the "." at the end of
clause (xi) thereof and inserting in place thereof "; and" and by inserting
immediately thereafter the following new clause (xii):
(xii) 1997 Indenture Indebtedness; provided, however, that: (a)
-------- -------
the maximum aggregate principal amount of 1997 Indenture Indebtedness at
any time outstanding shall not exceed $300,000,000; (b) without the prior
written consent of the Majority Banks, no regularly scheduled principal
payment on any 1997 Indenture Indebtedness shall be required prior to the
fifth (5th) anniversary of the issuance of the debenture, note or other
evidence of indebtedness evidencing such 1997 Indenture Indebtedness
(without regard to the effect of the acceleration provisions set forth in
Section 502 of the 1997 Indenture); (c) all 1997 Indenture Indebtedness
shall be unsecured; (d) in connection with the incurrence or issuance of
any 1997 Indenture Indebtedness, no covenant (financial or otherwise) shall
be imposed upon, or agreed to by, the Borrower that is more restrictive (in
the judgment of the Majority Banks) than the covenants set forth in this
Agreement; and (e) prior to the effectiveness thereof, the Majority Banks
shall have approved, in their sole discretion, each supplement or amendment
to the 1997 Indenture.
-3-
<PAGE>
ARTICLE 3
WAIVERS OF CERTAIN PROVISIONS
-----------------------------
OF THE CREDIT AGREEMENT
-----------------------
3.1 Waiver of Section 9.4(a)(ix) of the Credit Agreement. Banks
----------------------------------------------------
hereby agree to waive compliance by Borrower and its Subsidiaries with
subsection (a)(ix) of Section 9.4 of the Credit Agreement in connection with the
consummation of the Transaction to the extent the Transaction includes the
assumption of Indebtedness in an amount not to exceed $53,004,800 which is
secured by Liens upon the Properties.
3.2 Waiver of Section 9.4(b) of the Credit Agreement. Banks hereby
------------------------------------------------
agree to waive compliance by Borrower and its Subsidiaries with Section 9.4(b)
of the Credit Agreement in connection with the consummation of the Transaction
to the extent the Transaction includes the assumption of Liens upon the
Properties securing Indebtedness in an amount not to exceed $53,004,800.
3.3 Waiver of Section 9.4(d) of the Credit Agreement. Banks hereby
------------------------------------------------
agree to waive compliance by Borrower and its Subsidiaries with Section 9.4(d)
of the Credit Agreement in connection with the consummation of the Transaction
to the extent the Transaction constitutes a merger with, or an acquisition of
all or substantially all of the assets of, any Person.
3.4 Waiver of Section 9.4(f)(iii)(A) of the Credit Agreement. Banks
--------------------------------------------------------
hereby agree to waive compliance by Borrower and its Subsidiaries with
subsection (f)(iii)(A) of Section 9.4 of the Credit Agreement in connection with
the consummation of the Transaction to the extent the Transaction includes the
purchase of the Properties for a consideration which exceeds $30,000,000;
provided, however, that such purchase consideration shall not exceed $96,000,000
- -------- -------
(including assumption of Indebtedness but exclusive of Borrower's transaction
expenses).
3.5 Waiver of Section 9.4(f)(iii)(B) of the Credit Agreement. Banks
--------------------------------------------------------
hereby agree that, for purposes of the computation from time to time of
compliance by Borrower and its Subsidiaries with subsection (f)(iii)(B) of
Section 9.4 of the Credit Agreement during the current fiscal year only, the
purchase consideration payable in connection with the consummation of the
Transaction shall be excluded from the $200,000,000 limitation set forth in such
subsection; provided, however, that such purchase consideration shall not exceed
-------- -------
$96,000,000 (including assumption of Indebtedness but exclusive of Borrower's
transaction expenses).
ARTICLE 4
MISCELLANEOUS
-------------
4.1 Loan Documents. This Amendment shall be one of the Loan
--------------
Documents.
4.2 Execution. This Amendment may be executed in any number of
---------
counterparts, each of which when so executed and delivered shall be deemed an
original. All of such counterparts shall constitute but one and the same
instrument. Delivery of an executed counterpart of the signature pages of this
Amendment by telecopier shall be equally effective as
-4-
<PAGE>
delivery of a manually executed counterpart. Any party delivering an executed
counterpart of the signature pages of this Amendment by telecopier shall
thereafter also promptly deliver a manually executed counterpart, but the
failure to deliver such manually executed counterpart shall not affect the
validity, enforceability, and binding effect of this Amendment.
4.3 Effectiveness. This Amendment shall be effective as of the date
-------------
first written above, when (a) one or more counterparts hereof shall have been
executed by the Borrower, the Banks, and the Agent and shall have been delivered
to the Agent and (b) the Borrower shall have delivered to the Banks and the
Agent an executed copy of the 1997 Indenture.
4.4 No Other Amendment. Except as expressly amended hereby, the
------------------
Credit Agreement shall remain unchanged and in full force and effect. To the
extent any terms or provisions of this Amendment conflict with those of the
Credit Agreement, the terms and provisions of this Amendment shall control.
This Amendment shall be deemed a part of and is hereby incorporated in the
Credit Agreement.
4.5 Governing Law. This Amendment shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the State of California.
[SIGNATURE PAGE FOLLOWS]
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and
delivered as of the date first above written.
WELLS FARGO BANK, NATIONAL SANWA BANK CALIFORNIA
ASSOCIATION, in its individual
capacity and as Agent
By By
---------------------------- ----------------------------------
Title: Vice President Title:
----------------------------
THE SUMITOMO BANK, LIMITED BHF-BANK AKTIENGESELLSCHAFT
By By
---------------------------- ----------------------------------
Title: Title:
---------------------- ----------------------------
By By
---------------------------- ----------------------------------
Title: Title:
---------------------- ----------------------------
THE BANK OF NEW YORK
By
----------------------------
Title:
-----------------------
NATIONWIDE HEALTH PROPERTIES, INC.
By
-----------------------------
Title:
------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 37,919
<SECURITIES> 0
<RECEIVABLES> 5,125
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,955
<PP&E> 893,610
<DEPRECIATION> (101,410)
<TOTAL-ASSETS> 1,053,330
<CURRENT-LIABILITIES> 30,836
<BONDS> 468,442
0
100,000
<COMMON> 4,313
<OTHER-SE> 449,739
<TOTAL-LIABILITY-AND-EQUITY> 1,053,330
<SALES> 0
<TOTAL-REVENUES> 82,796
<CGS> 0
<TOTAL-COSTS> 16,775
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,639
<INCOME-PRETAX> 45,382
<INCOME-TAX> 0
<INCOME-CONTINUING> 45,382
<DISCONTINUED> 0
<EXTRAORDINARY> 829
<CHANGES> 0
<NET-INCOME> 46,211
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
</TABLE>
