SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
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, 1994
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 1-9317
HEALTH AND RETIREMENT PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland No. 04-6558834
(State of Incorporation) (I.R.S. Employer Identification No.)
400 Centre Street, Newton, Massachusetts 02158
(Address of principal executive office) (Zip Code)
(617) 332-3990
(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
Number of Common Shares outstanding at the latest
practicable date, November 10, 1994: 57,385,000 shares of
beneficial interest, $.01 par value.<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
FORM 10-Q/A
(Amendment No. 1)
September 30, 1994
INDEX
PART I Financial Information Page
Item 1. Financial Statements
Balance Sheets - December 31, 1993 and
September 30, 1994 1
Statements of Income - Quarters and Nine Months
Ended September 30, 1993 and 1994 2
Statements of Cash Flows - Nine Months Ended
September 30, 1993 and 1994 3
Notes to Financial Statements 4-8
Item 2. Management's Discussion and Analysis of 9-13
Financial Condition and Results
of Operations
Signatures<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
BALANCE SHEETS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
December 31, September 30,
1993 1994
----------- -------------
ASSETS
<S> <C> <C>
Real estate properties, at cost:
Land $ 33,450 $ 64,749
Buildings and improvements 330,988 585,148
Equipment 20,373 41,869
-------- --------
384,811 691,766
Less accumulated depreciation 34,969 39,728
-------- --------
349,842 652,038
Real estate mortgages and notes, net 157,281 125,224
Cash and cash equivalents 13,887 58,606
Interest and rent receivable 3,039 4,060
Deferred interest and finance costs,
net and other assets 3,613 7,513
-------- --------
$527,662 $847,441
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings $ 73,000 $216,451
Security deposits 8,300 3,800
Due to affiliates 709 362
Accounts payable and accrued expenses 4,518 11,157
Shareholders' equity:
Preferred shares of beneficial
interest, $.01 par value,
50,000,000 shares authorized,
none issued - -
Common shares of beneficial interest,
$.01 par value, 100,000,000 shares
authorized, 44,121,000 shares and
57,385,000 shares issued and
outstanding, respectively 441 574
Additional paid-in capital 470,572 652,989
Cumulative net income 118,889 163,503
Distributions of funds
from operations (148,767) (201,395)
--------- ---------
Total shareholders' equity 441,135 615,671
--------- ---------
$527,662 $847,441
======== ========
See accompanying notes
/TABLE
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
STATEMENTS OF INCOME
(amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months
September 30, Ended September 30,
-------------- ------------------
1993 1994 1993 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Rental income $11,668 $17,864 $34,520 $43,865
Interest income 3,059 5,952 6,620 17,414
------- ------- ------- -------
Total revenues 14,727 23,816 41,140 61,279
------- ------- ------- -------
Expenses:
Interest 1,768 2,887 4,215 5,215
Advisory fees 683 1,066 1,882 2,693
Depreciation and amortization 2,274 3,971 6,703 9,926
General and administrative 263 304 656 873
------- ------- ------- -------
Total expenses 4,988 8,228 13,456 18,707
------- ------- ------- -------
Income before gain on sale of
properties and extraordinary
items 9,739 15,588 27,684 42,572
Gain on sale of properties - - - 3,994
------- ------- ------- -------
Income before extradordinary
items 9,739 15,588 27,684 46,566
Extraordinary items - early
extinguishment of debt and
termination costs of interest
rate hedging arrangements - - ( 3,392) ( 1,953)
------- ------- ------- -------
Net income $ 9,739 $15,588 $24,292 $44,613
======= ======= ======= =======
Weighted average shares
outstanding 35,121 57,384 34,001 51,172
======= ======= ======= =======
Per share amounts:
Income before extraordinary
items $ .28 $ .27 $ .81 $ .91
======= ======= ======= =======
Net income $ .28 $ .27 $ .71 $ .87
======= ======= ======= =======
See accompanying notes
/TABLE
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------
1993 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $24,292 $ 44,613
Adjustments to reconcile net income to
cash provided by operating activities:
Gain on sale of properties - ( 3,994)
Loss on early extinguishment of debt 3,392 1,953
Depreciation and amortization 6,703 9,926
Amortization of interest costs 406 537
Decrease in security deposits - ( 4,500)
Deferred finance costs ( 401) ( 6,532)
Changes in assets and liabilities:
Increase in interest and
rent receivable and other assets ( 6,387) ( 1,380)
(Decrease) increase in accounts
payable and accrued expenses ( 1,484) 6,639
Increase (decrease) in due
to affiliate 9 ( 347)
--------- ---------
Cash provided by operating
activities 26,530 46,915
--------- ---------
Cash flows from investing activities:
Investment in mortgage loans ( 89,325) ( 13,631)
Repayment of mortgage loans 4,591 45,688
Real estate acquisitions ( 7,458) (335,781)
Sale of real estate - 28,400
--------- ---------
Cash used in
investing activities ( 92,192) (275,324)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of shares, net 123,138 182,366
Proceeds from borrowings 70,600 351,390
Payments on borrowings ( 93,566) (208,000)
Termination costs of debt and
interest rate hedging arrangements ( 2,843) -
Payment related to stock surrender ( 3,000) -
Dividends paid ( 33,279) ( 52,628)
--------- ---------
Cash provided by
financing activities 61,050 273,128
--------- ---------
(Decrease) Increase in cash and
cash equivalents ( 4,612) 44,719
Cash and cash equivalents at
beginning of period 14,104 13,887
--------- ---------<PAGE>
Cash and cash equivalents at end of period $ 9,492 $ 58,606
======== ========
Supplemental cash flow information:
Interest paid $ 4,565 $ 2,381
======== ========
See accompanying notes
/TABLE
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
September 30, 1993 and 1994
(dollars in thousands, except per share data)
(Unaudited)
1. Basis of presentation
The financial statements of Health and Retirement Properties
Trust, formerly known as Health and Rehabilitation Properties
Trust, ("the Company") have been prepared in accordance with
generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for interim periods are
not necessarily indicative of the results that may be expected
for the full year.
2. Tax status
The Company is a real estate investment trust under the
Internal Revenue Code of 1986, as amended. Accordingly, the
Company expects not to be subject to federal income taxes on
amounts distributed to shareholders provided it distributes at
least 95% of its real estate investment trust taxable income and
meets certain other requirements for qualifying as a real estate
investment trust.
3. Dividends
On October 6, 1994, the Trustees declared a dividend on the
Company's common shares of beneficial interest with respect to
the quarter ended September 30, 1994 of $.33 per share, which
will be paid on or about November 30, 1994 to shareholders of
record at the close of business on October 23, 1994.
Dividends are principally based on funds from operations
which means net income excluding gains (or losses) from debt
restructuring and sales of property plus depreciation and
amortization. Dividends in excess of net income are a return of
capital.
4. Leases
On February 11, 1994, in connection with the merger of
Greenery Rehabilitation Group Inc. (Greenery) into Horizon
Healthcare Corporation (Horizon), the Company sold to Horizon for
$28,400, three facilities that had been leased to Greenery. The
Company realized a capital gain of approximately $3,994 on the
sale of these properties. In addition, Horizon has leased seven
facilities previously leased to Greenery, on substantially
similar terms except the leases were extended through 2005. The <PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
September 30, 1993 and 1994
(dollars in thousands, except per share data)
(Unaudited)
4. Leases-continued
Company has also granted Horizon a ten year option to buy, at the
rate of no more than one facility per year, the seven leased
facilities. Also, the Company leased the three remaining
Greenery facilities to a newly formed corporation, Connecticut
Subacute Corporation II (CSC II), an affiliate of HRPT Advisors,
Inc. (Advisor). These facilities are being managed by and the
lease payments are guaranteed by Horizon for a term of up to five
years. The terms of these lease arrangements are substantially
similar to the original lease arrangements.
On August 31, 1994, the Company acquired a medical
laboratory building for $3,850. The property was acquired subject
to a triple-net lease with Unilab Corporation with a remaining
term of 12 years. The yield on this transaction is approximately
13%
On September 9, 1994, the Company completed its transaction
with Host Marriott Corporation whereby it acquired 14 retirement
communities containing 3,952 residences or beds for approximately
$320,000. The communities are triple net leased through December
31, 2013 to a wholly owned subsidiary of Marriott International,
Inc. (Marriott). The leases are guaranteed by Marriott. The
acquisition was funded with the proceeds of the equity offering
described in Note 7, borrowings under the Company's revolving
credit facility, assumption of $17,620 of existing debt and part
of the proceeds of the debt offering described in Note 6.
5. Real Estate Mortgages and Notes
On February 11, 1994, in connection with the Horizon -
Greenery merger, the Company provided Horizon with $9,400 first
mortgage financing for two facilities. One of the facilities
previously was owned by the Company and leased to Greenery. The
mortgage notes bear interest at 11.5% per annum and mature
December 31, 2000.
During the first nine months of 1994, mortgage loans,
secured by twenty properties, with outstanding principal balances
totalling $47,559 were repaid.<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
September 30, 1993 and 1994
(dollars in thousands, except per share data)
(Unaudited)
6. Borrowings
December 31, September 30,
1993 1994
------------ -------------
Revolving credit facility $ 73,000 $ -
Floating rate senior
Notes, Series A - 75,000
Floating rate senior
Notes, Series B, net - 123,831
Industrial Development Bonds - 17,620
---------- ---------
Total $ 73,000 $ 216,451
========== =========
---------- ---------
On June 15, 1994, the Company amended its revolving credit
facility, among other things, to reduce the interest rate spread
over LIBOR, to increase the facility to $120,000 and to make the
facility unsecured. During June, the Company borrowed $62,000
under the revolving credit facility to fund a portion of the
Marriott transaction. Such borrowings were repaid in July with
the proceeds of a debt offering described below and cash on hand.
On August 30, 1994, the Company increased the facility to
$170,000.
On July 13, 1994, the Company received net proceeds of
$197,270 from the offering of $200,000 in floating rate senior
notes due in 1999. The notes were issued in two series. The
Series A Notes, in an aggregate principal amount of $75,000, bear
interest at LIBOR plus 105 basis points and may be called by the
Company beginning April 13, 1995. The Series B Notes, in an
aggregate principal amount of $125,000, were issued at a discount
(99.0159% of par), bear interest at LIBOR plus 72 basis points
and may be called by the Company beginning July 13, 1996. A
portion of these proceeds were used to fund part of the Marriott
transaction and to repay borrowings under the Company's revolving
credit facility. The Company expects to apply the balance to fund
future real estate acquisitions.
7. Common Shares of Beneficial Interest
On January 19, 1994, the Company received net proceeds of
approximately $8,301 and issued 601,500 shares of the Company's
stock in connection with the exercise of the underwriter's over-
allotment option granted in connection with a public offering of
the Company's stock in December 1993. The proceeds were used as
part of the initial deposit on the Marriott transaction.<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
September 30, 1993 and 1994
(dollars in thousands, except per share data)
(Unaudited)
7. Common Shares of Beneficial Interest - Continued
On May 13, 1994, the Company received net proceeds of
approximately $174,065 from the public offering of 12,650,000
shares of the Company's stock. These proceeds were used, in
part, to repay $73,000 in borrowings under the Company's
revolving credit facility and the balance to fund part of the
Marriott transaction.
On July 7, 1994, the Board of Trustees granted a total of
12,500 shares under the 1992 Award Plan. An aggregate of 11,000
Shares were granted to the Company's President, Chief Financial
Officer, Treasurer and certain employees of Advisors. These
share awards will vest over a three year period, with one-third
of the shares vesting on the date of grant. Each of the three
Indepenedent Trustees was granted 500 shares as part of his
annual fee. At September 30, 1994, 972,500 shares remain
reserved for issuance under the 1992 Award Plan.
8. Financing Commitments
During the quarter ended September 30, 1994, the Company
provided improvement financing at existing properties of
approximately $2,492. As of September 30, 1994, the Company has
commitments to provide additional improvement financing at
existing properties totalling approximately $14,333.
9. Concentration of Credit Risk
Substantially all of the Company's assets are invested in
income producing health care real estate. At September 30, 1994,
a total of 56% of the Company's real estate properties, net and
real estate mortgages and notes, net were subject to mortgages
and leases with Marriott and Horizon. The financial statements
of Marriott have been filed with the Securities and Exchange
Commission (SEC) as a part of Marriott's Quarterly Form 10-Q,
file number 1-12188, for the quarter ended September 17, 1994.
The financial statements of Horizon have been filed with the SEC
as a part of Horizon's Quarterly Report on Form 10-Q, file number
1-9369, for the quarter ended August 31, 1994.
10. Pro Forma Information (Unaudited)
The following summarized Pro Forma Statements of Income
assume that all of the Company's real estate acquisition and
financing transactions during 1993, both 1993 share offerings,
the January 19, 1994 over-allotment option exercise, the Horizon-
Greenery merger and the Marriott transaction and the related<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
September 30, 1993 and 1994
(dollars in thousands, except per share data)
(Unaudited)
10. Pro Forma Information (Unaudited) - Continued
equity offering completed in May 1994 and debt offering completed
in July 1994, had occurred on January 1, 1993 and give effect
to the Company's borrowing rates throughout the periods indicated.
These pro forma statements are not necessarily indicative of the
expected results of operations or the Company's financial
position for any future period. Differences could result from,
but are not limited to, additional property investments,
prepayments of mortgages, exercise of purchase options by
tenants, changes in interest rates and changes in the debt and/or
equity structure of the Company.<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO FINANCIAL STATEMENTS
September 30, 1993 and 1994
(dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31, September 30,
1993 1993 1994
----------- ------- --------
<S> <C> <C> <C>
Pro Forma Statements of Income
Total revenues $92,424 $69,398 $80,228
Total expenses 27,452 24,908 30,572
------- ------- -------
Net income $64,972 $44,490 $49,656
======= ======= =======
Weighted average shares
outstanding 57,373 57,373 57,373
======= ======= =======
Net income per share $ 1.13 $ .78 $ .87
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
September 30,
1994
-------------
<S> <C>
Pro Forma Balance Sheet
Real estate properties, net $652,038
Real estate mortgages and notes, net 125,224
Other assets 70,179
--------
Total Assets $847,441
========
Borrowings
Other liabilities $216,451
Shareholder's equity 15,319
Total Liabilities and 615,671
--------
Shareholder's Equity $847,441
/TABLE
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Quarter Ended September 30, 1994 versus 1993
Total revenues for the quarter ended September 30, 1994,
increased to $23,816,000 from $14,727,000 for the quarter ended
September 30, 1993. Rental income increased to $17,864,000 from
$11,668,000 and interest income increased to $5,952,000 from
$3,059,000 during the comparable period. Rental income increased
primarily as a result of new investments in real estate
subsequent to September 30, 1993, including the $33,400,000
Community Care of America (CCA) transaction in December 1993 and
the $320,000,000 transaction with Marriott International, Inc.
(Marriott) in 1994. Interest income increased primarily due to
the acquisition of three pools of performing mortgage loans
between May and December, 1993 and the CCA mortgage of
$26,600,000 in December 1993.
Total expenses for the quarter ended September 30, 1994,
increased to $8,228,000 from $4,988,000 for the quarter ended
September 30, 1993. The increase is the result of increases in
interest expense, advisory fees and depreciation and amortization
of $1,119,000, $383,000 and $1,697,000 respectively. Interest
expense increased primarily as a result of the $200,000,000
floating rate senior notes issued in July 1994 in connection with
the Marriott transaction versus average borrowings in the 1993
quarter of $106,746,000.
Income before gain on sale of properties and extraordinary
item and net income was $15,588,000 or $.27 per share for the
1994 quarter compared with $9,739,000 or $.28 per share for the
1993 quarter. The increase in income before gain on sale of
properties and extraordinary items is primarily a result of the
new investments since September 30, 1993. The lower per share
amounts resulted from the increased total number of shares
outstanding due to the offering in May 1994.
The Company bases its dividend primarily on funds from
operations during the quarter. Funds from operations means net
income excluding gains (or losses) from debt restructuring and
sales of property, plus depreciation and amortization. Cash
available for distribution may not necessarily equal funds from
operations as the cash flow of the Company is affected by other
factors not included in the funds from operations calculation. <PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Quarter Ended September 30, 1994 versus 1993 - Continued
Funds from operations for the 1994 quarter was $19,818,000 or
$.35 per share for the 1994 quarter and $12,187,000 or $.35 per
share, for the 1993 quarter.
The dividends declared which relate to these quarters were
$18,937,000 or $.33 per share in 1994 and $11,239,000 or $.33 per
share in 1993.
Nine Months Ended September 30, 1994 versus 1993
Total revenues for the nine months ended September 30, 1994
increased to $61,279,000 from $41,140,000 for the nine months
ended September 30, 1993. Rental income increased to $43,865,000
from $34,520,000 and interest income increased to $17,414,000
from $6,620,000 during the comparable period. Rental income
increased as a result of new real estate investments, including
the CCA transaction in December 1993 and the $320,000,000
Marriott transaction in 1994. The increase in interest income
reflects the purchases between May and December 1993 of three
pools of performing mortgage loans and the CCA transaction in
December 1993.
Total expenses for the nine months ended September 30, 1994
increased to $18,707,000 from $13,456,000 in 1993. Interest
expense increased by $1,000,000, primarily as a result of the
$200,000,000 floating rate senior notes issued in July 1994 in
connection with the Marriott transaction versus average
borrowings in 1993 of $101,986,000. Advisory fees and
depreciation and amortization increased by $811,000 and
$3,223,000 respectively, in the 1994 period as a result of new
investments, including those mentioned above, that occurred near
the end of, or subsequent to, the 1993 period.
Funds from operations for the nine months ended September
30, 1994 and 1993 was $53,136,000 ($1.04 per share) and
$34,825,000 ($1.02 per share), respectively. Income before gain
on sale of properties and extraordinary items was $42,572,000
($.83 per share) and $27,684,000 ($.81 per share), respectively,
and net income was $44,613,000 ($.87 per share) and $24,292,000
($.71 per share), respectively. Income before gain on sale of
properties and extraordinary items increased primarily as a
result of new investments since September 1993. Dividends
declared relating to the nine months ended September 30, 1994 and
1993 were $52,628,000 ($.99 per share) and $24,292,000 ($.97 per
share), respectively. <PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Assets of the Company increased to $847,441,000 at September
30, 1994, from $527,662,000 at December 31, 1993. The increase
is principally the net result of increases in real estate
properties, net, and cash and cash equivalents of $302,196,000
and $44,719,000, respectively and a decrease in real estate
mortgages and notes, net, of $32,057,000. The increase in real
estate properties is the net result of the acquisition of 14
retirement communities in connection with the Marriott
transaction, and the sale of three properties in connection with
the February 11, 1994 merger of Greenery Rehabilitation Group,
Inc. (Greenery) into Horizon Healthcare Corporation (Horizon).
Cash increased as a result of mortgage prepayments and excess
proceeds from the July debt offering. Real estate mortgages and
notes, net, decreased principally due to the prepayment of
mortgage investments totalling $45,688,000 net of new mortgage
financings of $13,631,000.
During the third quarter, the Company completed its
previously announced transaction with Host Marriott Corporation
to acquire 14 retirement communities containing 3,952 residencies
or beds for $320,000,000 subject to adjustments. The communities
are triple net leased through December 31, 2013 to a wholly owned
subsidiary of Marriott. The leases provide for fixed rent
aggregating approximately $28,000,000 per year and additional
rentals equal to 4.5% of annual revenues from operations in
excess of base amounts determined on a facility by facility
basis. All of the leases are subject to cross default provisions
and are guaranteed by Marriott. This transaction was funded from
cash on hand, the proceeds of an equity offering discussed below,
drawings under the Company's revolving credit facility,
assumption of $17,620,000 of existing debt bearing interest at
7.75%, and a portion of the proceeds from a floating rate note
offering described below.
One of the Company's tenants which leases HRP's two
psychiatric facilities has exercised its option to purchase these
facilities from HRP. Resolution of the option exercise price is
presently being determined by an appraisal of the fair market
value of the properties. In addition, Horizon has filed a
registration statement with the Securities and Exchange
Commission (SEC) in which it has indicated a use of proceeds to
be the acquisition of a long term care facility it currently
leases from HRP. Horizon has the option to acquire this facility
upon 60 days written notice to HRP in connection with an option
agreement entered into pursuant to the Horizon-Greenery merger.
As the appraisal process is ongoing for the psychiatric<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES-Continued
facilities and official written notice of the option exercise has
not yet been provided by Horizon, it is too early for the Company
to predict the economic impact of these transactions. Both
transactions are expected to occur in early 1995. The ultimate
impact will depend on, among other things, the selling price, the
Company's ability to reinvest the sales proceeds, the timing of
such new investments and the yield it obtains on such
investments. Cash and cash equivalents held by the Company do
not generate income comparable to income generated when such
funds are invested in income-producing real estate. The Company
therefore continues to seek new investments with yields
equivalent to or greater than current liquid investments.
On July 13, 1994, the Company received net proceeds of
$197,270,000 from the offering of $200,000,000 in floating rate
senior notes due in 1999. The notes were issued in two series.
The Series A Notes, in an aggregate principal amount of
$75,000,000, bear interest at LIBOR plus 105 basis points and may
be called by the Company beginning April 13, 1995. The Series B
Notes, in an aggregate principal amount of $125,000,000, were
issued at a discount (99.0159% of par), bear interest at LIBOR
plus 72 basis points and may be called by the Company beginning
July 13, 1996. A portion of these proceeds were used to fund
part of the Marriott transaction and to repay $56,000,000 in
borrowings under the Company's revolving credit facility. The
Company expects to apply the balance to future real estate
acquisitions.
This senior note offering was drawn under a shelf
registration statement for the offering of up to $345,000,000 of
debt securities, preferred shares of beneficial interest, common
shares of beneficial interest and common share warrants. An
additional $145,000,000 of securities may be issued under this
registration statement.
At September 30, 1994, the Company had $58,606,000 of cash
and cash equivalents and the ability to borrow up to an
additional $170,000,000 under its revolving credit facility. At
September 30, 1994, the Company had outstanding commitments to
provide $14,333,000 in improvement financing for existing
investments. In addition, at September 30, 1994 the Company had
an outstanding commitment to provide purchase-lease financing of
$35,000,000 for nine skilled nursing facilities in Vermont and
New Hampshire.<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES-Continued
The Company is continuing to seek new investments to expand
and diversify its portfolio of leased and mortgaged health care
related real estate. The Company believes that the new
investments described above substantially improve the quality and
diversity of lessees and mortgagors in its portfolio and also the
security of its future cash flows and dividends. Approximately
70% of the Company's portfolio is leased to or mortgage financed
with seven New York Stock Exchange listed companies. Also,
Marriott, which is an A- investment grade rated company, is the
Company's largest single tenant.
The Company intends to balance the use of debt and equity in
such a manner that the long term cost of funds borrowed to
acquire or mortgage finance facilities is appropriately matched,
to the extent practicable, with the terms of the investments made
with such borrowed funds. As of September 30, 1994, the
Company's debt as a percentage of total capitalization was
approximately 26%. Current expenses and dividends are provided
for by funds from operations.<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
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 duly authorized.
HEALTH AND RETIREMENT
PROPERTIES TRUST
(Registrant)
DATE November 14, 1994 BY /s/ John G. Murray
John G. Murray, Treasurer
