<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1998
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 1-9321
UNIVERSAL HEALTH REALTY INCOME TRUST
(Exact name of registrant as specified in its charter)
MARYLAND 23-6858580
(State or other jurisdiction of (I. R. S. Employer
Incorporation or Organization) Identification No.)
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PENNSYLVANIA 19406
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (610) 265-0688
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 / /
Number of common shares of beneficial interest outstanding at October 31, 1998 -
8,954,840
Page One of Fourteen Pages
<PAGE> 2
UNIVERSAL HEALTH REALTY INCOME TRUST
I N D E X
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C>
Item 1. Financial Statements
Condensed Statements of Income
Three and Nine Months Ended -- September 30, 1998 and 1997.................. Three
Condensed Balance Sheets -- September 30, 1998
and December 31, 1997....................................................... Four
Condensed Statements of Cash Flows
Nine Months Ended September 30, 1998 and 1997............................... Five
Notes to Condensed Financial Statements.......................................... Six, Seven, and Eight
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations ............................................ Nine, Ten, Eleven & Twelve
PART II. OTHER INFORMATION AND SIGNATURE ....................................... Thirteen & Fourteen
</TABLE>
Page Two of Fourteen Pages
<PAGE> 3
PART I. FINANCIAL INFORMATION
UNIVERSAL HEALTH REALTY INCOME TRUST
Condensed Statements of Income
(amounts in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1998 1997 1998 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Revenues (Note 2):
Base rental - UHS facilities $3,443 $ 3,432 $10,320 $10,298
Base rental - Non-related parties 1,597 1,437 4,749 4,064
Bonus rental 652 617 2,269 2,179
Interest 2 74 6 488
------ ------- ------- -------
5,694 5,560 17,344 17,029
------ ------- ------- -------
EXPENSES:
Depreciation & amortization 962 961 2,946 2,806
Interest expense 892 702 2,540 2,146
Advisory fees to UHS 291 276 854 819
Other operating expenses 485 357 1,395 1,020
------ ------- ------- -------
2,630 2,296 7,735 6,791
------ ------- ------- -------
Income before equity in limited liability companies 3,064 3,264 9,609 10,238
Equity in income of limited liability companies 407 78 959 312
------ ------- ------- -------
NET INCOME $3,471 $ 3,342 $10,568 $10,550
====== ======= ======= =======
NET INCOME PER SHARE - BASIC $ 0.39 $ 0.37 $ 1.18 $ 1.18
====== ======= ======= =======
NET INCOME PER SHARE - DILUTED $ 0.39 $ 0.37 $ 1.18 $ 1.18
====== ======= ======= =======
Weighted average number of shares outstanding - basic 8,952 8,952 8,952 8,952
Weighted average number of share equivalents 18 23 21 14
------ ------- ------- -------
Weighted average number of shares and equivalents outstanding - diluted 8,970 8,975 8,973 8,966
====== ======= ======= =======
The accompanying notes are an integral part of these financial statements.
</TABLE>
Page Three of Fourteen Pages
<PAGE> 4
UNIVERSAL HEALTH REALTY INCOME TRUST
Condensed Balance Sheets
(amounts in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
ASSETS: 1998 1997
--------- ---------
(unaudited)
<S> <C> <C>
REAL ESTATE INVESTMENTS
Buildings & improvements $ 142,870 $ 143,600
Accumulated depreciation (33,065) (30,280)
--------- ---------
109,805 113,320
Land 21,009 20,255
Reserve for investment losses (138) (89)
--------- ---------
Net Real Estate Investments 130,676 133,486
OTHER ASSETS:
Cash 490 1,238
Bonus rent receivable from UHS 650 653
Rent receivable from non-related parties 8 80
Investments in limited liability companies 23,644 11,075
Deferred charges and other assets, net 167 223
--------- ---------
$ 155,635 $ 146,755
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Bank borrowings $ 50,800 $ 41,200
Note payable to UHS 1,198 1,147
Accrued interest 322 217
Accrued expenses & other liabilities 1,220 1,130
Tenant reserves, escrows, deposits and prepaid rental 460 268
Minority interest 90 101
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred shares of beneficial interest,
$.01 par value; 5,000,000 shares authorized;
none outstanding -- --
Common shares, $.01 par value;
95,000,000 shares authorized; issued
and outstanding: 1998 - 8,954,840
1997 - 8,954,840 90 90
Capital in excess of par value 128,668 128,650
Cumulative net income 122,686 112,121
Cumulative dividends (149,899) (138,169)
--------- ---------
Total Shareholders' Equity 101,545 102,692
--------- ---------
$ 155,635 $ 146,755
========= =========
</TABLE>
See accompanying notes to these condensed financial statements.
Page Four of Fourteen Pages
<PAGE> 5
UNIVERSAL HEALTH REALTY INCOME TRUST
CONDENSED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS, UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,568 $ 10,550
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation & amortization 2,946 2,806
Amortization of interest rate cap 93 93
Changes in assets and liabilities:
Rent receivable 75 (72)
Accrued expenses & other liabilities 90 192
Tenant escrows, deposits & deferred rents 192 9
Accrued interest 105 10
Deferred charges & other 3 (45)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 14,072 13,543
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in limited liability companies (13,329) (1,926)
Acquisition of real property (121) (1,358)
Cash distributions in excess of income from LLCs 760 405
Payments made for construction in progress -- (2,466)
Advances under construction note receivable -- (3,535)
Repayments under mortgage note receivable -- 6,457
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (12,690) (2,423)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additional borrowings 9,600 300
Dividends paid (11,730) (11,414)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (2,130) (11,114)
-------- --------
(Decrease) Increase in cash (748) 6
Cash, beginning of period 1,238 137
-------- --------
CASH, END OF PERIOD $ 490 $ 143
======== ========
===============================================================================================
Supplemental disclosures of cash flow information:
Interest paid $ 2,291 $ 1,994
===============================================================================================
</TABLE>
See accompanying notes to these condensed financial statements.
Page Five of Fourteen Pages
<PAGE> 6
UNIVERSAL HEALTH REALTY INCOME TRUST
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(unaudited)
(1) GENERAL
The financial statements included herein have been prepared by the Trust,
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission and reflect all adjustments which, in the opinion of the
Trust, are necessary to fairly present results for the interim periods. 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 Trust
believes that the accompanying disclosures are adequate to make the information
presented not misleading. It is suggested that these financial statements be
read in conjunction with the financial statements, accounting policies and the
notes thereto included in the Trust's Annual Report on Form 10-K for the year
ended December 31, 1997. Certain prior year amounts have been reclassified to
conform with current year financial statement presentation.
In February 1997, the Financial Accounts Standards Board issued Statement No.
128, "Earnings per Share" (SFAS 128). SFAS 128 establishes standards for
computing and presenting earnings per share (EPS). Basic earnings per share are
based on the weighted average number of common shares outstanding during the
year. Diluted earnings per share are based on the weighted average number of
common shares outstanding during the year adjusted to give effect to common
stock equivalents. The per share amounts for the three and nine months ended
September 30, 1997 have been restated to conform to SFAS 128.
(2) RELATIONSHIP WITH UNIVERSAL HEALTH SERVICES, INC.
Approximately 72% and 73% for the three month periods ended September 30, 1998
and 1997 and 71% and 72% for the nine month periods ended September 30, 1998 and
1997, respectively, of the Trust's revenues were earned under the terms of the
leases with wholly-owned subsidiaries of Universal Health Services, Inc.
("UHS"). UHS has unconditionally guaranteed the obligations of its subsidiaries
under the leases. Below is the detailed listing of the revenues received from
UHS and other non-related parties for the three and nine months ended September
30, 1998 and 1997:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS ENDED
ENDED SEPTEMBER 30, SEPTEMBER 30,
------------------------ --------------------------
1998 1997 1998 1997
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Base rental - UHS facilities $3,443,000 $3,432,000 $10,320,000 $10,298,000
Base rental - Non-related parties 1,597,000 1,437,000 4,749,000 4,064,000
---------- ---------- ----------- -----------
Total base rental 5,040,000 4,869,000 $15,069,000 14,362,000
---------- ---------- ----------- -----------
Bonus rental - UHS facilities 652,000 617,000 2,040,000 1,950,000
Bonus rental - Non-related parties 0 0 229,000 229,000
---------- ---------- ----------- -----------
Total bonus rental 652,000 617,000 2,269,000 2,179,000
---------- ---------- ----------- -----------
Interest - Non-related parties 2,000 74,000 6,000 488,000
---------- ---------- ----------- -----------
Total revenues $5,694,000 $5,560,000 $17,344,000 $17,029,000
========== ========== =========== ===========
</TABLE>
Page Six of Fourteen Pages
<PAGE> 7
At the end of July, 1998, wholly-owned subsidiaries of UHS exercised five-year
renewal options on four hospitals owned by the Trust which were scheduled to
expire in 1999 through 2001 (Virtue Street Pavilion, The Bridgeway, Inland
Valley Regional Medical Center and Wellington Regional Medical Center). The
leases on these facilities were renewed at the same lease rates and terms as the
initial leases and these renewals remove the majority of the previously
disclosed uncertainty regarding the lease renewals with subsidiaries of UHS. As
part of the renewal agreement, the Trust also agreed to grant additional fixed
rate renewal options to a wholly-owned subsidiary of UHS commencing in 2022 on
the real property of McAllen Medical Center. Management of the Trust can not
predict whether the leases with subsidiaries of UHS, which have renewal options
at existing lease rates, or any of the Trust's other leases, will be renewed at
the end of their initial term or first five-year renewal term.
UHS owned approximately 8% percent of the Trust's outstanding shares of
beneficial interest as of September 30, 1998. The Trust has granted UHS an
option to purchase Trust shares in the future at fair market value to enable UHS
to maintain a 5% interest in the Trust. The Trust has no salaried employees and
the Trust's officers are all employees of UHS and receive no cash compensation
from the Trust. The Trust's officers and directors have received options to
purchase shares of beneficial interest and associated dividend equivalent rights
pursuant to the terms of a plan which has been unanimously approved by the
Trust's Board of Trustees and approved by the shareholders.
(3) DIVIDENDS
A dividend of $.44 per share or $3.9 million in the aggregate was declared by
the Board of Trustees on September 2, 1998 and was paid on September 30, 1998 to
shareholders of record as of September 16, 1998.
(4) SUBSEQUENT EVENTS
During October 1998, the Trust paid $4.8 million for a 95% interest in a limited
liability company that owns the Pacifica Palms Medical Plaza. The Pacifica Palms
Medical Plaza is a multi-tenant medical office building located on the campus of
the Torrance Memorial Medical Center in Torrance, California.
(5) NEW ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities". The Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or liability measured at its fair value. The Statement
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate, and assess the effectiveness of transactions
that receive hedge accounting.
Page Seven of Fourteen Pages
<PAGE> 8
Statement 133 is effective as of the beginning of fiscal years beginning after
June 15, 1999. A company may also implement the Statement as of the beginning of
any fiscal quarter after the issuance. Statement 133 cannot be applied
retroactively. Statement 133 must be applied to: (a) derivative instruments,
and; (b) certain derivative instruments embedded in hybrid contracts that were
issued, acquired, or substantially modified after December 31, 1997 (and at the
company's election, before January 1, 1998).
The Trust has not yet quantified the impact of adopting Statement 133 on its
financial statements and has not determined the timing of or method of adoption
of Statement 133. However, the Statement could increase the volatility in
earnings and other comprehensive income.
Page Eight of Fourteen Pages
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Trust has investments in twenty-nine facilities located in thirteen states.
The Trust invests in healthcare and human service related facilities including
acute care hospitals, behavioral healthcare facilities, rehabilitation
hospitals, sub-acute care facilities, surgery centers, child-care centers and
medical office buildings.
The third quarter dividend of $.44 per share or $3.9 million in the aggregate
was paid on September 30, 1998.
For the quarters ended September 30, 1998 and 1997, net income totaled
$3,471,000 and $3,342,000 or $.39 and $.37 per share (basic and diluted), on net
revenues of $5,694,000 and $5,560,000, respectively. For the nine months ended
September 30, 1998 and 1997, net income totaled $10,568,000 and $10,550,000 or
$1.18 per share (basic and diluted), for both nine month periods on net revenues
of $17,344,000 and $17,029,000, respectively. The $134,000 increase in net
revenues during the 1998 third quarter as compared to the 1997 quarter was due
primarily to a $160,000 increase in base rentals from non-related parties, and a
$35,000 increase in bonus rental from UHS facilities, partially offset by a
$72,000 decrease in interest income due to the repayment of a construction loan
receivable in December, 1997. The $315,000 increase in net revenue for the nine
months ended September 30, 1998, over the comparable prior year period, was due
primarily to a $685,000 increase in base rentals from non-related parties (due
primarily to the completion of the Cypresswood Professional Center), and a
$90,000 increase in bonus rental income from UHS facilities. These favorable
changes were partially offset by a $482,000 decrease in interest income due to a
mortgage loan receivable which was fully repaid in June, 1997 and a construction
loan receivable which was repaid in December, 1997.
Interest expense increased $190,000 or 27% for the three months ended September
30, 1998 and increased $394,000 or 18% for the nine months ended September 30,
1998, as compared to the comparable prior year periods. The increases in
interest expense are due primarily to increased borrowings used to finance two
new investments in the first quarter of 1998, and the opening of the newly
constructed Cypresswood Professional Center during the third quarter of 1997.
Depreciation and amortization expense was unchanged for the three months ended
September 30, 1998 compared to the comparable prior year period, and increased
$140,000 or 5% for the nine months ended September 30, 1998 over the comparable
prior year periods due primarily to the opening of the newly constructed
Cypresswood Professional Center during the third quarter of 1997.
Other operating expenses increased $128,000 or 36% during the third quarter of
1998 and increased $375,000 or 37% during the 1998 nine month period as compared
to the comparable prior year periods. Included in the Trust's other operating
expenses were the expenses related to the medical office buildings in which the
Trust has a controlling ownership interest which totaled $269,000 and $196,000
for the three month periods ended September 30, 1998 and 1997, respectively, and
$731,000 and $569,000 for the nine month periods ended September 30, 1998 and
1997, respectively. The $73,000 increase for the three months ended September
30, 1998 and the $162,000 increase for the nine months ended September 30, 1998
was due primarily to the operating expenses on the Cypresswood Professional
Center on which construction was
Page Nine of Fourteen Pages
<PAGE> 10
completed during the third quarter of 1997. The majority of the expenses
associated with the medical office buildings are passed on directly to the
tenants and are included as revenues in the Trust's statements of income. Also
included in the Trust's other operating expenses were $75,000 and $40,000 for
the three months ended September 30, 1998 and 1997, respectively, and $225,000
and $120,000 for the nine months ended September 30, 1998 and 1997,
respectively, of expenses related to the maintenance of Lake Shore Hospital.
Included in the Trust's financial results was $407,000 and $78,000 for the three
months ended September 30, 1998 and 1997 and $959,000 and $312,000 for the nine
months ended September 30, 1998 and 1997, respectively, of income generated from
the Trust's ownership in limited liability companies which own medical office
buildings in Arizona, Kentucky and Nevada.
Funds from operations ("FFO"), which is the sum of net income plus depreciation
expense for consolidated investments and unconsolidated investments and
amortization of interest rate cap expense, increased 8% to $4.9 million for the
three months ended September 30, 1998, as compared to $4.6 million in the
comparable prior year quarter. For the nine months ended September 30, 1998, FFO
increased 4% to $14.7 million as compared to $14.1 million for the nine month
period ended September 30, 1997. FFO may not be calculated in the same manner
for all companies, and accordingly, FFO as presented above may not be comparable
to similarly titled measures by other companies. FFO does not represent cash
flows from operations as defined by generally accepted accounting principles and
should not be considered as an alternative to net income as an indicator of the
Trust's operating performance or to cash flows as a measure of liquidity.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $14.1 million for the nine months
ended September 30, 1998 and $13.5 million for the nine months ended September
30, 1997.
During the first nine months of 1998, the $14.1 million of cash generated from
operating activities, the $760,000 of cash distributions in excess of income
from LLCs and the $9.6 million of additional borrowings were used primarily to:
(i) purchase a 99% interest in a limited liability company that owns the Desert
Springs Medical Plaza located in Las Vegas, Nevada ($9.4 million); (ii) purchase
a 95% equity interest in a limited liability company that owns the Edwards
Medical Plaza in Phoenix, Arizona ($3.8 million), and; (iii) pay dividends
($11.7 million).
During the first nine months of 1997, the $13.5 million of cash generated from
operating activities and the $6.5 million of cash received for the repayment
under a mortgage note receivable was primarily used to: (i) pay dividends ($11.4
million); (ii) finance construction on two new medical office buildings which
are owned by limited liability companies and limited partnerships in which the
Trust owns an equity interest ($6.0 million); (iii) purchase a 75% equity
interest in a limited liability company ($1.9 million), and; (iv) acquire
additional properties ($1.4 million).
As of September 30, 1998, the Trust had approximately $26 million of unused
borrowing capacity under the terms of its $80 million revolving credit
agreement. The agreement matures on June 24, 2003, at which time all amounts
then outstanding are required to be repaid. During the term of the agreement,
the Trust has the option to request an increase in the borrowing capacity to
$100 million.
Page Ten of Fourteen Pages
<PAGE> 11
YEAR 2000 ISSUE
Management of the Trust recognizes the need to evaluate the impact on its
operations of the change to calendar year 2000 and does not expect the total
cost of required building related modifications to have a material impact on its
results of operations. Approximately 71% and 72% of the Trust's revenues for the
nine month periods ended September 30, 1998 and 1997, respectively, were earned
under the terms of the leases with wholly-owned subsidiaries of UHS. UHS has
undertaken steps to identify areas of concern and potential remedies, prioritize
needs, estimate costs and begin work either to repair or replace data processing
software & hardware, certain building infrastructure components (including
elevators, alarm systems and certain HVAC systems) and certain computer aided
medical equipment affected by Year 2000 issues. The solutions either involve
replacement or repair of affected software, hardware and equipment. Some
replacement or upgrade of systems and equipment would take place in the normal
course of business. Several systems, key to UHS's operations, have been
scheduled to be replaced through vendor supplied systems before Year 2000. UHS
presently believes that with modifications to existing software and conversions
to new software, the Year 2000 issue will not pose material operational problems
for its computer systems. However, if such modifications and conversions are not
made, or are not completed timely, the Year 2000 issue could have a material
adverse impact on the operations of UHS and on UHS's ability to meet its
obligations under the terms of its leases with the Trust.
Furthermore, UHS relies heavily on third parties in operating its business. UHS
is relying on software, hardware (including the Company's major outsourcing
vendor which provides the financial and clinical applications for the majority
of UHS's acute care facilities), and other equipment vendors to verify Year 2000
compliance of their products. UHS also depends on: fiscal intermediaries which
process claims and make payments for the Medicare program; health maintenance
organizations, insurance companies and other private payors; vendors of medical
supplies and pharmaceuticals used in patient care, and; providers of utilities
such as electricity, water, natural gas and telephone services. As part of its
Year 2000 strategy, UHS intends to seek assurances from these parties that their
services and products will not be interrupted or malfunction due to the Year
2000 issue. Failure of third parties to resolve their Year 2000 issues could
have a material adverse effect on UHS's results of operations and on its ability
to provide health care services and on UHS's ability to meet its obligations to
the Trust.
During the third quarter of 1998, the Trust conducted a Year 2000 survey of its
non-related tenants and based on the responses received, these tenants do not
expect Year 2000 related issues to have a material impact on their operations.
However, management of the Trust cannot estimate the potential adverse impact on
the Trust's results of operations resulting from failure of its UHS or
non-related party tenants or from their significant suppliers and large payors
to adequately prepare for the Year 2000.
FORWARD-LOOKING STATEMENTS
The matters discussed in this report, as well as the news releases issued from
time to time by the Trust, include certain statements containing the words
"believes", "anticipates", "intends", "expects", and words of similar import,
which constitute "forward-looking statements", within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may cause
Page Eleven of Fourteen Pages
<PAGE> 12
the actual results, performance or achievements of the Trust's or industry
results to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, the following: the fact that a substantial
portion of the Trust's revenues are dependent on one operator, Universal Health
Services, Inc., ("UHS"); a substantial portion of the Trust's leases are
involved in the healthcare industry which is undergoing substantial changes and
is subject to pressure from government reimbursement programs and other third
party payors; the Trust's ability to finance growth on favorable terms; the
impact of Year 2000 issues, and; other factors referenced in the Trust's 1997
10-K or herein. In recent years, an increasing number of legislative initiatives
have been introduced or proposed in Congress and in state legislatures that
would effect major changes in the healthcare system, either nationally or at the
state level. In addition, the healthcare industry has been characterized in
recent years by increased competition and consolidation. Management of the Trust
is unable to predict the effect, if any, these industry factors will have on the
operating results of its lessees, including the facilities leased to
subsidiaries of UHS, or on their ability to meet their obligations under the
terms of their leases with the Trust. Given these uncertainties, prospective
investors are cautioned not to place undue reliance on such forward-looking
statements. The Trust disclaims any obligation to update any such factors or to
publicly announce the result of any revisions to any of the forward-looking
statements contained herein to reflect future events or developments.
Page Twelve of Fourteen Pages
<PAGE> 13
PART II. OTHER INFORMATION
UNIVERSAL HEALTH REALTY INCOME TRUST
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 Amendment No.1 to Lease, made as of July 31, 1998, between
Universal Health Realty Income Trust, a Maryland real estate
investment trust ("Lessor"), and Inland Valley Regional
Medical Center, Inc., a California Corporation ("Lessee"),
amends the lease, made as of December 24, 1986, between Lessor
and Lessee.
10.2 Amendment No. 1 to Lease, made as of July 31, 1998, between
Universal Health Realty Income Trust, a Maryland real estate
investment trust ("Lessor"), and McAllen Medical Center, L.P.
(f/k/a Universal Health Services of McAllen, Inc.), a Texas
Limited Partnership ("Lessee"), amends the lease, made as of
December 24, 1986, between Lessor and Lessee.
27. Financial Data Schedule
All other items of this report are inapplicable.
Page Thirteen of Fourteen Pages
<PAGE> 14
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 11, 1998 UNIVERSAL HEALTH REALTY INCOME TRUST
(Registrant)
/s/ Kirk E. Gorman
--------------------------------------
Kirk E. Gorman, President,
Chief Financial Officer, Secretary and
Trustee
(Principal Financial Officer and Duly
Authorized Officer.)
Page Fourteen of Fourteen Pages
<PAGE> 1
EXHIBIT 10.1
AMENDMENT NO. 1
TO
LEASE
This Amendment No. 1 to Lease ("Amendment No. 1"), made as of July 31,
1998, between Universal Health Realty Income Trust, a Maryland real estate
investment trust ("Lessor"), having its principal office at 367 South Gulph
Road, King of Prussia, Pennsylvania 19406, and Inland Valley Regional Medical
Center, Inc., a California corporation ("Lessee"), which is a subsidiary of
Universal Health Services, Inc., a Delaware corporation, amends the Lease, made
as of December 24, 1986, between Lessor and Lessee (the "Lease"). Capitalized
terms used herein which are not otherwise defined shall have the meanings
assigned to such terms in the Lease.
W I T N E S S E T H:
WHEREAS, the Lessor desires to make certain improvements to the Leased
Property, as described in Exhibit 1 attached hereto, which improvements
constitute a Capital Addition pursuant the Master Lease;
WHEREAS, the Lessor and the Lessee desire to amend the Lease as it relates
to the rights and obligations of the parties with respect to such Capital
Addition upon expiration or earlier termination of the Lease;
NOW, THEREFORE, the parties hereto agree as follows:
1. There shall be added to the Lease a new Paragraph 10, which shall read
as follows:
"10. Certain Capital Additions. Notwithstanding any provision
in the Master Lease or this Lease to the contrary, Lessor shall
not be obligated to compensate Lessee pursuant to Section 10.2(c)
of the Master Lease for any costs incurred by Lessee with respect
to the improvements described in Exhibit 1 attached hereto."
2. Except as expressly modified by this Amendment No. 1, all terms and
conditions of the Lease shall remain in full force and effect.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 2
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized partners, trustees or officers as of the date first above written.
LESSOR:
Universal Health Realty Income Trust,
a Maryland real estate investment trust
By: /s/ Cheryl K. Ramagano
LESSEE:
Inland Valley Regional
Medical Center, Inc.,
a California corporation
By: /s/ Steve Filton
<PAGE> 1
EXHIBIT 10.2
AMENDMENT NO. 1
TO
LEASE
This Amendment No. 1 to Lease ("Amendment No. 1"), made as of July 31,
1998, between Universal Health Realty Income Trust, a Maryland real estate
investment trust ("Lessor"), having its principal office at 367 South Gulph
Road, King of Prussia, Pennsylvania 19406, and McAllen Medical Center, L.P.
(f/k/a Universal Health Services of McAllen, Inc.), a Texas Limited Partnership
("Lessee"), which is a subsidiary of Universal Health Services, Inc., a Delaware
corporation, amends the Lease, made as of December 24, 1986, between Lessor and
Lessee (the "Lease"). Capitalized terms used herein which are not otherwise
defined shall have the meanings assigned to such terms in the Lease.
W I T N E S S E T H:
WHEREAS, the Lessor and the Lessee desire to amend the amount of rent to
be paid during certain of the Extended Terms referred to in the Lease;
NOW, THEREFORE, the parties hereto agree as follows:
1. Paragraph 6 of the Lease is hereby amended to read in its entirety as
follows:
"6. Minimum Rent During Extended Terms. The Minimum Rent for
the six (6) Extended Terms shall be at the rental provided for in
Paragraph 5 hereof."
2. Except as expressly modified by this Amendment No. 1, all terms and
conditions of the Lease shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Lease by their duly
authorized partners, trustees or officers as of the date first above written.
LESSOR:
Universal Health Realty Income Trust,
a Maryland real estate investment trust
By: /s/ Cheryl K. Ramagano
LESSEE:
McAllen Medical Center, L.P.
(f/k/a Universal Health Services of
McAllen, Inc.), a Texas
Limited Partnership
By: /s/ Steve Filton
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000798783
<NAME> UNIVERSAL HEALTH REALTY INCOME TRUST
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 490
<SECURITIES> 0
<RECEIVABLES> 5,658
<ALLOWANCES> 5,138
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 163,879
<DEPRECIATION> 33,065
<TOTAL-ASSETS> 155,635
<CURRENT-LIABILITIES> 0
<BONDS> 51,998
0
0
<COMMON> 90
<OTHER-SE> 101,455
<TOTAL-LIABILITY-AND-EQUITY> 155,635
<SALES> 0
<TOTAL-REVENUES> 18,303
<CGS> 0
<TOTAL-COSTS> 2,249
<OTHER-EXPENSES> 2,946
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,540
<INCOME-PRETAX> 10,568
<INCOME-TAX> 0
<INCOME-CONTINUING> 10,568
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,568
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
