<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
UNIVERSAL HEALTH REALTY INCOME TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:(1)
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fees paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
- ---------------
(1)Set forth the amount on which the filing fee is calculated and state how
it was determined.
<PAGE> 2
UNIVERSAL HEALTH REALTY INCOME TRUST
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PENNSYLVANIA 19406
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 1, 1999
Notice is hereby given that the Annual Meeting of Shareholders of Universal
Health Realty Income Trust (the "Trust") will be held on Tuesday, June 1, 1999
at 10:00 AM, at the offices of the Trust, Universal Corporate Center, 367 South
Gulph Road, King of Prussia, Pennsylvania for the following purposes:
(1) To have the holders of Trust Shares elect two Class I Trustees,
both Trustees to serve for a term of three years, until the annual
election of Trustees in the year 2002 and election and
qualification of their successors.
(2) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on April 21, 1999 are
entitled to vote at the Annual Meeting.
All shareholders are cordially invited to attend the meeting in person. IN
ANY EVENT, PLEASE MARK YOUR VOTES, THEN DATE AND SIGN THE ENCLOSED FORM OF PROXY
AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE WHETHER OR NOT YOU
CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING. YOU MAY REVOKE YOUR PROXY IF YOU
DECIDE TO ATTEND THE ANNUAL MEETING AND WISH TO VOTE YOUR SHARES IN PERSON.
BY ORDER OF THE BOARD OF TRUSTEES
/s/ Kirk E. Gorman
KIRK E. GORMAN
Secretary
King of Prussia, Pennsylvania
April 30, 1999
<PAGE> 3
UNIVERSAL HEALTH REALTY INCOME TRUST
UNIVERSAL CORPORATE CENTER
367 SOUTH GULPH ROAD
KING OF PRUSSIA, PA 19406
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished to the shareholders of Universal Health
Realty Income Trust, a real estate investment trust organized under the laws of
the State of Maryland (the "Trust"), in connection with the solicitation of
Proxies by the Board of Trustees for use at the Annual Meeting of Shareholders,
to be held at Universal Corporate Center, 367 South Gulph Road, King of Prussia,
Pennsylvania on Tuesday, June 1, 1999 at 10:00 AM, and at any adjournment
thereof. This Proxy Statement and related form of Proxy were first sent to
shareholders of the Trust on or about April 30, 1999. The Annual Meeting is
being held to: (1) elect two Class I Trustees of the Trust, both of whom will
serve for a term of three years until the annual election of Trustees in the
year 2002 and the election and qualification of their successors; and (2)
transact such other business as may properly be brought before the meeting or
any adjournment thereof.
A form of Proxy for use at the meeting is enclosed. Any shareholder may
revoke a Proxy at any time before the authority granted by it is exercised by
giving written notice of revocation to the Secretary of the Trust, by submitting
another executed Proxy to the Secretary of the Trust bearing a later date (but
prior to the voting of such Proxy), or by attending the meeting and asking
(prior to the voting of such Proxy) for the return of such Proxy. Unless
otherwise indicated on the Proxy, shares represented by any Proxy will, if the
Proxy is properly executed and received by the Trust prior to the Annual
Meeting, be voted FOR the nominees for Trustees.
Only holders of record of the shares of beneficial interest of the Trust,
par value $.01 per share (the "Shares"), at the close of business on April 21,
1999 will be entitled to vote at the meeting. On that date, there were 8,955,465
Shares outstanding. Each Share is entitled to one vote on each of the matters to
be presented at the meeting. Shareholders entitled to vote for the election of
the Trustees can withhold authority to vote for them. Each nominee will be
elected if he receives a plurality of the votes cast. Broker non-votes are
treated as shares as to which the beneficial owners have withheld voting
authority and therefore are shares not entitled to vote on the matter. As of
April 21, 1999, the Trust's current trustees and officers as a group owned of
record or beneficially 128,612 Shares, representing 1.4% of the outstanding
Shares.
A copy of the Trust's Annual Report to Shareholders, including financial
statements for the year ended December 31, 1998, is enclosed.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of February 26, 1999, the number of
Shares and the percentage of outstanding Shares owned beneficially, within the
meaning of Securities and Exchange Commission Rule 13d-3, (i) by each person who
is known by the Trust to own beneficially more than 5% of its Shares (ii) by
each Trustee and each executive officer named in the Summary Compensation Table
and (iii) by all Trustees and executive officers of the Trust as a group.
1
<PAGE> 4
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP OUTSTANDING SHARES
------------------- -------------------- ------------------
<S> <C> <C>
Universal Health Services, Inc. ("UHS") 698,692(2) 7.8%
367 South Gulph Road
King of Prussia, PA 19406
Private Capital Management, Inc. 529,120(3) 5.9%
3003 Tamiami Trail North
Naples, FL 33940
Idanta Partners, Ltd. 557,919(4) 6.2%
4660 La Jolla Village Dr., Suite 850
San Diego, CA 92122
Miles L. Berger 1,000 (7)
Heitman Financial Ltd.
180 North LaSalle St.
Chicago, IL 60601
Daniel M. Cain 3,321(6) (7)
Cain Brothers & Company, LLC
452 Fifth Avenue, 25th Floor
New York, NY 10018
James E. Dalton, Jr. 625(6) (7)
Quorum Health Group
103 Continental Place
Brentwood, TN 37027
Myles H. Tanenbaum 5,625(6) (7)
Arbor Enterprises
Four Tower Bridge, Suite 400
200 Barr Harbor Drive
W. Conshohocken, PA 19428
Alan B. Miller 75,750(5)(6) (7)
Kirk E. Gorman 24,228(6) (7)
Charles F. Boyle 3,982(6) (7)
Cheryl K. Ramagano 3,883(6) (7)
Timothy J. Fowler 10,198(6) (7)
3525 Piedmont Rd., N.E.
Atlanta, GA 30305
All Trustees & Executive Officers as a group (10 128,612(6) 1.4%
persons)
</TABLE>
- ---------------
(1) Unless otherwise shown, the address of each beneficial owner is c/o
Universal Health Realty Income Trust, Universal Corporate Center, 367 South
Gulph Road, King of Prussia, PA 19406.
(2) UHS has an option to maintain ownership of 5% of the outstanding Shares of
the Trust.
(3) Shares are held by Private Capital Management, Inc., a registered investment
adviser. Information is based on Amendment No. 5 to Schedule 13G dated
February 12, 1998.
(4) Shares are held by Idanta Partners, Ltd., a Texas limited partnership, and
its General Partner, David J. Dunn.
(5) Includes 12,000 shares of beneficial interest beneficially owned by the Alan
B. Miller Family Foundation, Alan B. Miller, as Trustee.
(6) Includes shares issuable pursuant to stock options to purchase shares of
beneficial interest held by officers of the Trust and exercisable within 60
days of February 26, 1999 as follows: Alan B. Miller (56,250); Kirk E.
Gorman (3,125); Charles F. Boyle (1,875); Daniel M. Cain (625); James E.
Dalton, Jr. (625); Cheryl K. Ramagano (1,875); Myles H. Tanenbaum (625) and
Timothy J. Fowler (9,899).
(7) Less than 1%.
2
<PAGE> 5
PROPOSAL NO. 1
ELECTION OF TRUSTEES
The Trust was organized under the laws of the State of Maryland as a real
estate investment trust on August 6, 1986. Trustees of the Trust, Mr. Miller,
and Mr. Cain, assumed their positions with the Trust at the inception of the
Trust. Mr. Tanenbaum was elected in November 1990, Mr. Gorman was elected in
December 1994, Mr. Dalton was elected in December 1997, and Mr. Berger was
elected in December 1998. Pursuant to the Declaration of Trust, the Trustees of
the Trust have been divided into three classes, with staggered terms. The terms
of the Trustees in Class I expire at the 1999 Annual Meeting, the terms of the
Trustees in Class II expire at the 2000 Annual Meeting, and the terms of the
Trustees in Class III expire at the 2001 Annual Meeting. At each Annual Meeting,
Trustees are elected for a term of three years to succeed those in the class
whose term is expiring at such Annual Meeting.
The persons listed below currently constitute the Trust's Board of
Trustees. The terms of the Class I Trustees, Alan B. Miller and Myles H.
Tanenbaum, expire at the 1999 Annual Meeting. They have been nominated to be
elected for three-year terms. The Trustees have no reason to believe that the
nominees will be unavailable for election; however, if the nominees become
unavailable for any reason, the Shares represented by the Proxy will be voted
for the persons, if any, who are designated by the Board of Trustees to replace
the nominees. The nominees have consented to be named and have indicated their
intent to serve if elected.
Pursuant to the Declaration of Trust, a majority of the Trust's Trustees
must be "Independent Trustees" with each class of Trustees containing at least
one Independent Trustee. The Declaration of Trust defines an "Independent
Trustee" as a Trustee who is not an affiliate of Universal Health Services, Inc.
("UHS"), the parent company of the Trust's Advisor, and does not perform any
services for the Trust, except as Trustee.
The following information is furnished with respect to the nominee for
election as a Trustee and each member of the Board of Trustees whose term of
office will continue after the meeting.
<TABLE>
<CAPTION>
CLASS OF PRINCIPAL OCCUPATIONS TRUSTEE
NAME TRUSTEE AGE DURING THE LAST FIVE YEARS SINCE
---- -------- --- -------------------------- -------
<S> <C> <C> <C> <C>
NOMINEES FOR TERMS
EXPIRING IN 1999
Alan B. Miller I 61 Chairman of the Board and Chief Executive 1986
Officer of the Trust since 1986. Chairman
of the Board, President and Chief
Executive Officer of UHS since 1978.
Director of CDI Corp., Genesis Health
Ventures and Penn Mutual Life Insurance
Company.
Myles H. Tanenbaum* I 68 Chairman of the Board of Arbor Enterprises 1990
since 1989. Formerly President and CEO of
both Arbor Property Trust (NYSE)
(successor to EQK Green Acres, L.P.),
1986-1997, and EQK Realty Investors
(NYSE), 1985-89. Director of Pep Boys
(NYSE) and The Benjamin Franklin
Institute, and member of the Board of
Trustees of the University of
Pennsylvania.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
CLASS OF PRINCIPAL OCCUPATION TRUSTEE
NAME TRUSTEE AGE DURING THE LAST FIVE YEARS SINCE
---- -------- --- -------------------------- -------
<S> <C> <C> <C> <C>
TRUSTEES WHOSE TERMS
EXPIRE IN 2000
Daniel M. Cain* II 54 President and CEO, Cain Brothers & 1986
Company, LLC. Prior thereto, senior
partner in Cain Brothers & Company since
1982.
James E. Dalton, Jr.* II 56 President, Chief Executive Officer and 1997
Director of Quorum Health Group, Inc.
since 1990. Prior thereto, Regional Vice
President of Health Trust, Inc., Division
Vice President of Hospital Corporation of
America, and Regional Vice President of
HCA Management Company. Director of
AmSouth Bancorporation, the Nashville
Branch of The Federal Reserve Bank of
Atlanta, the Nashville Health Care
Council, and the Federation of American
Health Systems.
TRUSTEES WHOSE TERMS
EXPIRE IN 2001
Kirk E. Gorman III 48 President and Chief Financial Officer of 1994
the Trust since 1990, Secretary of the
Trust since December 1994 and Vice
President and Chief Financial Officer of
the Trust since 1987. Senior Vice
President, Treasurer and Chief Financial
Officer of UHS since December 1992.
Miles L. Berger* III 68 Vice Chairman of the Board of Heitman 1998
Financial Services, Ltd. and Chairman of
the Board of Berger Financial Services
Corp, Berger Management Services, and
MidTown Bank and Trust Company of Chicago;
Director, Franklin Capital Corp; Trustee,
Innkeepers Trust USA.
</TABLE>
- ---------------
* Independent Trustee
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Trust's
trustees and executive officers, and persons who own more than ten percent of a
registered class of the Trust's equity securities, to file with the Securities
and Exchange Commission and the New York Stock Exchange initial reports of
ownership and reports of changes in ownership of the Shares and other equity
securities of the Trust. Based on reports filed with the Trust, the Trust
believes all required reports of executive officers and Trustees were filed in a
timely manner.
4
<PAGE> 7
EXECUTIVE COMPENSATION
The Trust's officers are all employees of UHS of Delaware, Inc. ("UHS") and
as of December 31, 1998, the Trust had no salaried employees and paid no cash
compensation in 1998, 1997 and 1996. In 1999, the Trustees awarded a $50,000
bonus to Mr. Kirk E. Gorman, President, Chief Financial Officer, Secretary and
Trustee of the Trust. UHS reduced the 1999 advisory fee paid by the Trust by
$50,000. The following tables set forth various information with respect to the
compensation of the five most highly compensated officers of the Trust.
UNIVERSAL HEALTH REALTY INCOME TRUST
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------------------- -----------------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL
FISCAL SALARY COMPENSATION AWARDS OPTIONS OTHER
NAME AND PRINCIPAL POSITION YEAR ($) BONUS($) ($)(A) ($)(B) (#) COMPENSATION
--------------------------- ------ ------ -------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alan B. Miller, 1998 -- -- $43,875 -- -- --
Chairman of the Board and 1997 -- -- 21,375 -- -- --
Chief Executive Officer 1996 -- -- -- -- -- --
Kirk E. Gorman, 1998 -- -- $21,938 -- -- --
President, Chief Financial 1997 -- -- 10,688 $46,563 -- --
Officer, Secretary and Trustee 1996 -- -- -- -- -- --
Charles F. Boyle, 1998 -- -- $13,163 -- -- --
Vice President and Controller 1997 -- -- 6,413 -- -- --
1996 -- -- -- -- -- --
Cheryl K. Ramagano, 1998 -- -- $13,163 -- -- --
Vice President and Treasurer 1997 -- -- 6,413 -- -- --
1996 -- -- -- -- -- --
Timothy J. Fowler, 1998 -- -- $13,163 -- -- --
Vice President, 1997 -- -- 6,413 -- -- --
Acquisition and Development 1996 -- -- -- -- -- --
</TABLE>
- ---------------
(a) Other Annual Compensation in 1998 and 1997 for Messrs. Miller, Gorman, Boyle
and Fowler and Ms. Ramagano consists of dividend equivalent rights accrued
in connection with the Trust's 1997 Incentive Plan. As of December 31, 1998
and 1997, Messrs. Miller, Gorman, Boyle and Fowler and Ms. Ramagano held
25,000, 12,500, 7,500, 7,500 and 7,500 dividend equivalent rights,
respectively. The Other Annual Compensation amounts shown above were
computed by multiplying each participants dividend equivalent rights by the
declared dividends per share of $1.755 in 1998, and $.425 per share for the
third quarter of 1997 and $.43 per share for the fourth quarter of 1997.
(b) Restricted stock awards in 1997 for Mr. Kirk E. Gorman represents the value
of 2,500 shares of beneficial interest based on the closing sale price of
the shares on the date of grant, issued in connection with the 1988 Key
Employees' Restricted Share Purchase Plan. The restrictions on one-third of
these shares lapse on each of the three, four and five year anniversary
dates from the date of grant. The value of these shares as of December 31,
1998 was $49,063 based on the closing sale price of the shares on that date.
5
<PAGE> 8
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF STOCK
GRANTED TO EXERCISE PRICE APPRECIATION FOR
OPTIONS OFFICERS PER SHARE OPTION TERM
GRANTED IN FISCAL PRICE EXPIRATION -----------------------
NAME (#) YEAR ($/SH) DATE 5%($) 10%($)
---- ------- ------------- --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Miller.............. 0 0% $0.000 N/A $0 $0
Kirk E. Gorman.............. 0 0% $0.000 N/A $0 $0
Charles F. Boyle............ 0 0% $0.000 N/A $0 $0
Cheryl K. Ramagano.......... 0 0% $0.000 N/A $0 $0
Timothy J. Fowler........... 0 0% $0.000 N/A $0 $0
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alan B. Miller.............. 0 0 56,250 18,750 $143,750 $18,750
Kirk E. Gorman.............. 0 0 3,125 9,375 $ 3,125 $ 9,375
Charles F. Boyle............ 0 0 1,875 5,625 $ 1,875 $ 5,625
Cheryl K. Ramagano.......... 0 0 1,875 5,625 $ 1,875 $ 5,625
Timothy J. Fowler........... 0 0 9,899 5,625 $ 29,959 $ 5,625
</TABLE>
- ---------------
(1) Based on the difference between the exercise price and the closing price of
the share of beneficial interest on the New York Stock Exchange on December
31, 1998 of $19.625 per share.
REPORT OF EMPLOYEE BENEFITS COMMITTEE
The Trust has established incentive plans to incentivize those persons to
render greater service to the Trust. During 1997, the Trust's Board of Trustees
approved the Universal Health Realty Income Trust 1997 Incentive Plan ("The
Plan"), which is a newly created stock option and dividend equivalents rights
plan for the employees of the Trust, including officers and directors. There are
400,000 shares reserved for issuance under the Plan. In connection with this
plan, stock options and dividend equivalent rights were granted on June 23, 1997
as follows: Mr. Alan B. Miller was granted 25,000 stock options and 25,000
dividend equivalent rights; Mr. Kirk E. Gorman was granted 12,500 stock options
and 12,500 dividend equivalent rights; Mr. Charles F. Boyle was granted 7,500
stock options and 7,500 dividend equivalent rights; Ms. Cheryl K. Ramagano was
granted 7,500 stock options and 7,500 dividend equivalent rights and Mr. Timothy
J. Fowler was granted 7,500 stock options and 7,500 dividend equivalent rights.
Mr. Daniel M. Cain, Mr. Myles H. Tanenbaum, Mr. James E. Dalton, Jr. and Mr.
Miles L. Berger each received 2,500 stock options and 2,500 dividend equivalents
rights pursuant to the terms of the Plan. The stock options granted pursuant to
this Plan were granted with an exercise price of $18.625 per share representing
the closing sale price of the Trust's
6
<PAGE> 9
shares of beneficial interest on the New York Stock Exchange on June 23, 1997.
Also during 1997, Mr. Kirk E. Gorman was granted 2,500 shares of beneficial
interest issued in connection with the 1988 Key Employees' Restricted Share
Purchase Plan. The restrictions on one-third of these shares lapse on each of
the three, four and five year anniversary dates from the date of grant. The
value of these shares as of December 31, 1998 was $49,063 based on the closing
sale price of the Trust's shares on that date. No awards were made in 1996.
During 1998, 5,000 stock options and 5,000 dividend equivalent rights were
granted to an officer of the Trust at an exercise price of $18.375 per share,
representing the closing sale price of the Trust's shares of beneficial interest
on the date of grant.
The Employee Benefits Committee, which is composed of independent trustees
of the Trust, believes that in the general absence of cash compensation, it is
important to provide the officers of the Trust, including the chief executive
officer, an incentive to increase shareholder value by awarding equity based
compensation. Because the substantial portion of the return of real estate
investment trusts like the Trust is comprised of the dividend payable on the
shares rather than share price appreciation the committee believes that the 1997
Incentive Plan with its dividend equivalent rights feature provides the
appropriate incentive for officers and directors of the Trust. The Committee
believes that Mr. Gorman's special efforts on behalf of the Trust merit a
special cash bonus of $50,000. As Mr. Gorman is compensated by UHS which, as the
Trust's advisor, received an advisory fee, however, UHS has elected to reduce
this advisory fee by the amount of Mr. Gorman's bonus thus resulting in no net
cost to the Trust. The Employee Benefits Committee will evaluate from time to
time the compensation payable to its officers in light of the performance of the
Trust, the individuals involved and competitive factors.
EMPLOYEE BENEFITS COMMITTEE
Daniel M. Cain
Myles H. Tanenbaum
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Daniel M. Cain has from time to time performed investment banking
services for the Trust. No compensation was paid to him for any services in
1998.
7
<PAGE> 10
STOCK PRICE PERFORMANCE GRAPH
The Stock Price Performance Graph below shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Trust specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
(THE TRUST, S&P 500, PEER GROUP)
'[CHART]'
<TABLE>
<CAPTION>
UNIVERSAL HEALTH
REALTY INCOME TRUST S&P 500 PEER GROUP OLD PEER GROUP
------------------- ------- ---------- --------------
<S> <C> <C> <C> <C>
'1993' 100.00 100.00 100.00 100.00
'1994' 108.70 101.32 104.24 102.19
'1995' 131.01 139.40 129.87 127.53
'1996' 163.95 171.40 160.23 160.27
'1997' 189.95 228.59 191.24 189.06
'1998' 185.94 293.91 162.66 134.91
</TABLE>
The total cumulative return on investment (change in the year-end stock
price plus reinvested dividends) for each of the periods for the Trust, the peer
group and the S&P 500 Composite is based on the stock price or composite index
at the end of fiscal 1993.
The above graph compares the performance of the Trust with that of the S&P
500 and a group of peer companies and a group of old peer companies with the
investment weighted on market capitalization. Companies in the peer group are as
follows: Health Care Property Investors, Inc., Nationwide Health Properties,
Inc., American Health Properties, Inc., Omega Healthcare Investors (acquired
Health Equity Properties, Incorporated in December 1994), Health Care REIT,
Inc., G&L Realty Corp., Healthcare Realty Trust Incorporated, LTC Properties,
Inc., National Health Investors, Inc. and National Health Realty, Inc. Companies
in the old peer group are as follows: American Health Properties, Inc, Health
Care Property
8
<PAGE> 11
Investors, Inc., Health Care REIT, Inc., Health Equity Properties, Incorporated
(acquired by Omega Healthcare Investors in December 1994), HRPT Property Trust
(formerly Health and Retirement Properties Trust), Meditrust Companies and
Nationwide Health Properties, Inc.
During 1998, the Trust removed HRPT Properties Trust and MediTrust
Companies from its peer group because they expanded into diversified REITs and
are no longer focused on healthcare properties, thereby reducing the number of
remaining companies in the old peer group to five. Therefore, the Trust added
G&L Realty Corp., Healthcare Realty Trust Incorporated, LTC Properties, Inc.,
National Health Investors, Inc. and National Health Realty, Inc. The Trust
believes the new peer group of healthcare REITs to be more representative of its
current competitors.
BOARD OF TRUSTEES
MEETINGS OF THE BOARD
Regular meetings of the Trustees are generally held quarterly, while
special meetings are called when necessary. Before each meeting, Trustees are
furnished with an agenda and background materials relating to matters to be
discussed. During 1998, there were eight Board meetings. All Trustees attended
at least 75% of the meetings.
COMPENSATION OF TRUSTEES
Each Independent Trustee is paid by the Trust annual compensation of
$10,000 for service as a Trustee plus $500 for attendance, in person, at each
meeting of the Board of Trustees or Committee meeting thereof on a day on which
the Board of Trustees does not meet. In addition, the Trust reimburses all
Trustees for travel expenses incurred in connection with their duties as
Trustees of the Trust. In 1992, the Board of Trustees and the shareholders
adopted a Share Compensation Plan For Outside Trustees, pursuant to which
Trustees may elect to receive their annual compensation in the form of Shares in
lieu of cash. No Trustee elected to receive Shares in 1998. During 1997, the
Trust's Board of Trustees approved the Universal Health Realty Income Trust 1997
Incentive Plan ("The Plan"), which is a stock option and dividend equivalents
rights plan for the employees of the Trust, including officers and directors.
The Plan was adopted by the shareholders at the 1998 Annual Shareholders
Meeting. There are 400,000 shares reserved for issuance under the Plan. In
connection with this plan, Messrs. Daniel M. Cain and Myles H. Tanenbaum each
received 2,500 stock options and 2,500 dividend equivalents rights with an
exercise price of $18.625 per share representing the closing sale price of the
Trust's shares of beneficial interest on the New York Stock Exchange on June 23,
1997. In December 1998, Miles L. Berger received 2,500 stock options and 2,500
dividend equivalent rights, with an exercise price of $19.625 per share
representing the closing sale price of the Trust's shares of beneficial interest
on the New York Stock Exchange on December 1, 1998.
AUDIT COMMITTEE
The Audit Committee is responsible for providing assistance to the Board of
Trustees in fulfilling its responsibilities relating to corporate accounting and
reporting practices and in maintaining a direct line of communication between
the Trustees and the independent accountants. It recommends the firm to be
appointed independent auditor, reviews the scope and results of the audit with
the independent auditors and considers the adequacy of the internal accounting
and control procedures of the Company. The Audit Committee met once in 1998.
Members of this Committee are Daniel M. Cain and James E. Dalton, Jr.
9
<PAGE> 12
EMPLOYEE BENEFITS COMMITTEE
The Employee Benefits Committee was established December 1, 1988 and is
responsible for administering the Restricted Share Purchase Plan and the Stock
Option Plan. It has full authority in its discretion from time to time, and at
any time, to select those employees of the Trust, as the term employee is
defined in the plans, to whom Shares or options will be granted, to determine
the number of Shares subject thereto, the times at which such Shares shall be
sold or options granted, the time at which the restrictions on the Shares shall
lapse or the options shall vest, and the terms and conditions of the agreements
to be entered into by the employees with the Trust. The Employee Benefits
Committee did not meet in 1998. Members of this Committee are Daniel M. Cain and
Myles H. Tanenbaum.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
RELATIONSHIP WITH UHS
THE ADVISOR AND THE ADVISORY AGREEMENT
The Trust, with the approval of the Board of Trustees, including all the
Independent Trustees, has entered into an Advisory Agreement with UHS of
Delaware, Inc. (the "Advisor"), a Delaware corporation and wholly owned
subsidiary of UHS, pursuant to which the Advisor will act as advisor to the
Trust with respect to the Trust's operations. Mr. Alan B. Miller serves as
Director and President of the Advisor and of UHS. ; Mr. Kirk E. Gorman serves as
Director and Chief Financial Officer of the Advisor ; Mr. Steve Filton serves as
Director, Vice President and Controller of the Advisor ; Mr. Bruce R. Gilbert
serves as Secretary of the Advisor. Alan B. Miller is Chairman of the Board and
Chief Executive Officer of the Trust, Kirk E. Gorman is President, Chief
Financial Officer, Secretary and Trustee of the Trust, Charles F. Boyle is Vice
President and Controller of the Trust, Cheryl K. Ramagano is Vice President and
Treasurer of the Trust, Timothy J. Fowler is Vice President, Acquisitions and
Development, of the Trust, Alan Hale is Vice President, Acquisitions and
Development, of the Trust, and Bruce R. Gilbert serves as General Counsel to the
Trust. All such persons are also employees of the Advisor. Mr. James Dalton an
Independent Trustee is President and Chief Executive Officer of Quorum Health
Group, Inc. Affiliates of Quorum Health Group, Inc. and UHS are members of a
limited liability company which owns and operates three hospitals. Under the
Advisory Agreement, the Advisor is obligated to present an investment program to
the Trust, to use its best efforts to obtain investments suitable for such
program (although it is not obligated to present any particular investment
opportunity to the Trust), to provide administrative services to the Trust and
to conduct the Trust's day-to-day affairs. In performing its services under the
Advisory Agreement, the Advisor may utilize facilities, personnel and support
services of various UHS affiliates, including accounting, legal and other
services, for which the Advisor will be reimbursed directly by the Trust, but
only if such services are first approved by a majority of the Independent
Trustees. No additional compensation will be paid by the Trust for these
services.
The term of the Advisory Agreement expired on December 31, 1998. The Board
of Trustees, on December 1, 1998, voted to renew the Advisory Agreement for
1999. The Advisory Agreement is renewable annually thereafter by the Trust,
subject to a determination by a majority of the Independent Trustees that the
Advisor's performance has been satisfactory, and subject to the termination
rights of the parties. The Advisory Agreement may be terminated for any reason
upon sixty days' written notice by the Trust or the Advisor.
The Advisory Agreement does not restrict the Advisor from rendering advice
to other investors (including other real estate investment trusts) or from
managing other investments, including those of investors or investments advised,
sponsored or organized by the Advisor. The Advisor also may render such services
to joint ventures and partnerships in which the Trust is a co-venturer or
partner and to the other entities in such joint ventures and partnerships, and
the Advisor is not obligated to present any particular
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investment opportunity to the Trust. There is no restriction on the right of any
director, officer, employee or stockholder of the Advisor, or any affiliate of
UHS, to engage in any other business or to render services of any kind to any
other corporation, partnership or other entity (including competitive business
activities). The Advisor has informed the Board of Trustees that it does not
presently intend to provide advisory services to any other real estate
investment trust and has agreed to inform the Board of any change in such
intention.
Pursuant to the Advisory Agreement, the Trust paid the Advisor $1.2 million
in respect of services rendered by the Advisor to the Trust during fiscal 1998.
UHS has agreed to reduce its 1999 advisory fee by the cash bonus paid by the
Trust to Mr. Kirk Gorman. The Advisory Agreement provides that the Advisor is
entitled to receive an annual advisory fee equal to .60% of the average invested
real estate assets of the Trust, as derived from its consolidated balance sheet
from time to time. In addition, the Advisor will be entitled to an annual
incentive fee equal to 20% of the amount by which cash available for
distribution to shareholders for each year, as defined in the Advisory
Agreement, exceeds 15% of the Trust's equity as shown on its balance sheet,
determined in accordance with generally accepted accounting principles without
reduction for return of capital dividends. No incentive fees were paid during
1998, 1997 or 1996. The advisory fee is payable quarterly, subject to adjustment
at year end based upon audited financial statements of the Trust.
PROPERTIES
The Trust effectively commenced business on December 24, 1986, the closing
date for the purchase of properties from certain subsidiaries of UHS (the
"Subsidiaries"). In exchange for shares of beneficial interest, $.01 par value,
in the Trust, the Trust acquired 10 properties (the "Initial Properties") from
the Subsidiaries having an appraised value of approximately $122,000,000. The
Initial Properties were immediately leased back to the respective Subsidiaries.
In March 1988, the Trust acquired the real property of a 118-bed acute care
hospital operated by a subsidiary of UHS for approximately $9,500,000. The Trust
concurrently leased the hospital to that UHS subsidiary on a long-term basis.
The fixed term of the leases ranges from 10-15 years with up to six additional
five-year renewal options. In 1989, two of these facilities consolidated their
operations. The leases all provide for minimum rents and additional rents are
payable if facility revenues increase. Additional rent is equal to 5% of the
increase in facility revenues over a base period until the facility lease rate
grows to 13.5% of the Trust's original shareholders' equity. Thereafter,
additional rent is equal to 1% of the increase in facility revenues. The
obligations under the leases are guaranteed by UHS.
During 1991, the Trust sold to UHS a 124-bed acute care hospital for its
net book value of approximately $5.7 million, which was higher than its
appraised value. The real property of this hospital was previously leased to
UHS. Also during 1991, the Trust acquired from UHS, for approximately $4.1
million, newly constructed patient buildings on the campus of one of the
behavioral health facilities already owned by the Trust.
In 1992, one of the Subsidiaries of UHS ceased operations at the facility
leased by it from the Trust and, in 1993, UHS purchased the real property of
that facility from the Trust for approximately $3.2 million, the original
purchase price of the facility, which was higher than its appraised value, and
resulted in a $371,000 gain, which was included in the Trust's 1993 first
quarter results. Also during the fourth quarter of 1993, UHS, the former lessee
and operator of Belmont Community Hospital, sold the operations of the facility
to Transitional Hospitals Corporation ("THC"), an unaffiliated third party.
Concurrently, the Trust purchased certain related real property from UHS for $1
million in cash and a note payable with a carrying value of $1.2 million at
December 31, 1998. The note payable has a face value of $1 million and is due on
December 31, 2001. The amount of interest payable on this note is contingent
upon the financial performance of this leased facility and its estimated face
value at the end of the initial lease term. The Trust has estimated the total
amount payable under the terms of this note and has discounted the payments to
their net present value using a 6% rate. In connection with this transaction,
UHS's lease with the Trust was terminated, and the Trust
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entered into an eight year lease agreement with THC for the real property of the
Belmont Community Hospital facility.
During the third quarter of 1995, UHS purchased the assets of Westlake
Medical Center, ("Westlake") a 126-bed hospital of which the majority of real
estate assets were owned by the Trust and leased to UHS. In exchange for the
real estate assets of Westlake and the termination of the lease, the Trust
received substitution properties valued at approximately $19 million (the
Trust's original purchase price of Westlake) consisting of additional real
estate assets which were owned by UHS but related to three acute care
facilities, of which the Trust owns the real estate and which are operated by
UHS (McAllen Medical Center, Inland Valley Regional Medical Center and
Wellington Regional Medical Center). These additional real estate assets
represent major additions and expansions made to these facilities by UHS since
the purchase of the facilities by the Trust from UHS in 1986. The Trust also
purchased from UHS, additional real estate assets related to McAllen Medical
Center for approximately $1.9 million in cash. Total annual base rental payments
from UHS to the Trust on the substituted properties will be $2.4 million which
equals the total base and bonus rental earned by the Trust on the Westlake
facility during 1994 ($2.1 million base and $300,000 bonus). Total annual base
rental payments on the additional real estate assets purchased related to
McAllen Medical Center will be approximately $200,000. Bonus rental on the
substituted and purchased real estate assets will be equal to 1% of the growth
in revenues, in excess of base year amounts, generated by these additional
assets. The guarantee by UHS under the existing leases, as amended to include
the additional property, will continue.
During the third quarter of 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.
Pursuant to the terms of the leases with UHS, the lessees have rights of
first refusal to: (i) purchase the respective leased facilities during and for
180 days after the lease terms expire at the same price, terms and conditions of
any third party offer, or; (ii) renew the lease on the respective leased
facility at the end of, and for 180 days after, the lease term on the same terms
and conditions as to any third party offer. The leases also grant the lessees
options, exercisable on at least six months notice, to purchase the respective
leased facilities at the end of the lease term or any renewal term at the
facility's then fair market value. The terms of the leases also provide that in
the event UHS discontinues operations at the leased facility for more than one
year, or elects to terminate its lease prior to the expiration of its term for
prudent business reasons, UHS is obligated to offer a substitution property. If
the Trust does not accept the substitution property offered, UHS is obligated to
purchase the leased facility back from the Trust at a price equal to the greater
of its then fair market value or the original purchase price paid by the Trust.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP has been retained by the Board of Trustees, on the
recommendation of the Audit Committee, to perform all accounting and audit
services during the 1999 fiscal year. It is anticipated that representatives of
Arthur Andersen LLP will be present at the Annual Meeting and will have an
opportunity to make a statement, if they desire to do so, and to respond to any
appropriate inquiries of the Shareholders or their representatives.
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EXPENSES FOR PROXY SOLICITATION
The principal solicitation of Proxies is being made by mail; however,
certain officers and employees of the Trust and of the Advisor, or its
affiliates, none of whom will receive additional compensation therefor, may
solicit Proxies by telegram, telephone or other personal contact. The Trust will
bear the cost of the solicitation of the Proxies, including postage, printing
and handling and will reimburse the reasonable expenses of brokerage firms and
others for forwarding material to beneficial owners of Shares.
DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS FOR
NEXT YEAR'S ANNUAL MEETING
Any proposal that a Shareholder wishes to present for consideration at the
2000 Annual Meeting must be received by the Trust no later than December 31,
1999. This date provides sufficient time for inclusion of the proposal in the
2000 proxy materials.
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OTHER BUSINESS TO BE TRANSACTED
The Trust has been advised that Culinary Workers Union Local 226, which
represents approximately 100 employees at UHS' Valley Hospital, and is an owner
of 56 Trust Shares, intends to submit a proposal for a vote at the annual
meeting and to solicit proxies with respect to the proposal. The Trust
understands that the proposal relates to a request that the Board of Trustees
adopt and submit for shareholder approval an amendment to the Trust's
Declaration of Trust regarding the qualifications of Independent Trustees. The
Trust is not soliciting proxies with respect to this matter and the persons
appointed as proxies in the form of the proxy included with this proxy statement
cannot and will not exercise the discretionary authority granted to them with
respect to other matters that may come before the meeting to vote on this
proposal if it comes before the meeting.
As of the date of this Proxy Statement, the Board of Trustees knows of no
other business to be presented for action at the Annual Meeting. As for any
other business that may properly come before the Annual Meeting, the Proxies
confer discretionary authority in the persons named therein. Those persons will
vote or act in accordance with their best judgment with respect thereto.
YOU ARE URGED TO VOTE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE AT YOUR EARLIEST CONVENIENCE, WHETHER OR NOT YOU
CURRENTLY PLAN TO ATTEND THE ANNUAL MEETING IN PERSON.
BY ORDER OF THE BOARD OF TRUSTEES
/s/ Kirk E. Gorman
KIRK E. GORMAN
Secretary
King of Prussia, Pennsylvania
April 30, 1999
A COPY OF THE TRUST'S ANNUAL REPORT ON FORM 10-K WILL BE SENT WITHOUT
CHARGE TO ANY SHAREHOLDER REQUESTING IT IN WRITING FROM: INVESTOR RELATIONS,
UNIVERSAL HEALTH REALTY INCOME TRUST, UNIVERSAL CORPORATE CENTER, 367 SOUTH
GULPH ROAD, P.O. BOX 61558, KING OF PRUSSIA, PENNSYLVANIA 19406-0958.
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802-PS-99
<PAGE> 18
DETACH HERE
PROXY
UNIVERSAL HEALTH REALTY INCOME TRUST
This Proxy is Solicited By The Board of Trustees For The Annual Meeting
Of Shareholders To Be Held On June 1, 1999
Alan B. Miller and Kirk E. Gorman, and each of them, as the true and lawful
attorneys, agents and proxies of the undersigned, with full power of
substitution, are hereby authorized to represent and to vote, as designated on
the reverse side, all shares of Universal Health Realty Income Trust held of
record by the undersigned on April 21, 1999 at the Annual Meeting of
Shareholders to be held at 10:00 a.m., on Tuesday, June 1, 1999 at Universal
Corporate Center, 367 South Gulph Road, King of Prussia, Pennsylvania and at
any adjournment thereof. Any and all proxies heretofore given are hereby
revoked.
(This proxy is continued on reverse side)
SEE REVERSE SEE REVERSE
SIDE PLEASE SIGN ON REVERSE SIDE AND RETURN PROMPTLY SIDE
<PAGE> 19
COMPANY HIGHLIGHTS DURING 1998
- - Twelve consecutive years of increased dividends. Current level $1.80 per
share.
- - Invested a total of $18 million in five additional properties increasing the
total investments to thirty-one.
DETACH HERE
Please mark
/ X / votes as in
this example.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED. IF NO CHOICE IS
SPECIFIED, THE PROXY WILL BE VOTED "FOR" ELECTION OF THE NOMINEES FOR TRUSTEES.
1. The Election of Trustees.
Nominees: Alan B. Miller and Myles H. Tanenbaum
For Withheld
/ / Both / / From Both
Nominees Nominees
/ / ________________________________________________
For, except vote withheld from the above nominee:
Discretionary authority is hereby granted with respect to such other
matters as may properly come before the meeting.
The undersigned acknowledges receipt of the Notice of Annual Meeting of
Shareholders and the Proxy Statement furnished herewith.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING / /
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
NOTE: Please sign exactly as name appears hereon. Each joint owner shall
sign. Executors, administrators, trustees, etc. should give full title.
Signature: Date: Shareholder: Date:
_______________________________________________________________________________
