<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1994
REGISTRATION NO. 33-52875
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
HEALTH AND REHABILITATION
PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 04-6558834
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
</TABLE>
400 CENTRE STREET, NEWTON, MASSACHUSETTS 02158
(617) 332-3990
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
MARK J. FINKELSTEIN
400 CENTRE STREET
NEWTON, MASSACHUSETTS 02158
(617) 332-3990
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies to:
<TABLE>
<S> <C>
LENA G. GOLDBERG, ESQ. HOWARD G. GODWIN JR., ESQ.
SULLIVAN & WORCESTER BROWN & WOOD
ONE POST OFFICE SQUARE ONE WORLD TRADE CENTER
BOSTON, MASSACHUSETTS 02109 NEW YORK, NEW YORK 10048
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
reinvestment plans, please check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus, one to be
used in connection with an offering in the United States and Canada (the "U.S.
Prospectus") and one to be used in a concurrent offering outside the United
States and Canada (the "International Prospectus"). The two prospectuses will be
identical in all respects, except for the front cover page, the section entitled
"Federal Income Tax and ERISA Considerations", the section entitled
"Underwriting" and the outside back cover page.
The form of the U.S. Prospectus is included herein and the form of the
front cover page, "Federal Income Tax and ERISA Considerations" section,
"Underwriting" section and outside back cover page of the International
Prospectus are included following the back cover page of the U.S. Prospectus as
pages X-1 through X-7.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS, DATED MAY 5, 1994
PROSPECTUS
- -----------------
11,000,000 SHARES
HEALTH AND REHABILITATION PROPERTIES TRUST
COMMON SHARES OF BENEFICIAL INTEREST
------------------------
Health and Rehabilitation Properties Trust (the "Company" or "HRP") is a
real estate investment trust which invests primarily in retirement communities,
assisted living centers, nursing homes and other long term care facilities. On
April 29, 1994, the last reported sale price for the Shares on the New York
Stock Exchange was $15 1/8.
Of the 11,000,000 Shares offered by the Company, 9,500,000 Shares are being
offered in the United States and Canada by the U.S. Underwriters and 1,500,000
Shares are being offered in a concurrent offering outside the United States and
Canada by the International Managers (collectively, the "Offerings").
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
================================================================================================
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................. $ $ $
- ------------------------------------------------------------------------------------------------
Total(3)................... $ $ $
================================================================================================
<FN>
(1) The Company has agreed to indemnify the several U.S. Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
See "Underwriting".
(2) Before deducting expenses payable by the Company estimated at $598,349.
</TABLE>
(3) The Company has granted the U.S. Underwriters and the International Managers
an option, exercisable by the U.S. Representatives for 30 days from the date
of this Prospectus, to purchase up to 1,650,000 additional Shares solely to
cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting".
------------------------
The Shares offered hereby are offered by the several U.S. Underwriters,
subject to prior sale, when, as and if issued to and accepted by them and
subject to approval of certain legal matters by counsel for the U.S.
Underwriters, and to certain other conditions. The U.S. Underwriters reserve the
right to withdraw, cancel or modify such offer and to reject orders in whole or
in part. It is expected that delivery of the Shares offered hereby will be made
in New York, New York on or about May , 1994.
------------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
PAINEWEBBER INCORPORATED
SMITH BARNEY SHEARSON INC.
------------------------
The date of this Prospectus is , 1994.
<PAGE> 4
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C., a registration statement on Form S-3
(together with all exhibits, schedules and amendments thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Common Shares of Beneficial Interest (the "Shares") to be
offered by the Company. This Prospectus, which is a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement. For further information concerning the Company and the Shares offered
by the Company, reference is made to the Registration Statement. Copies of the
Registration Statement may be obtained from the Commission at its principal
office in Washington, D.C. upon payment of the prescribed fee.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Commission. Reports,
proxy statements and other information filed by the Company with the Commission
can be inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following regional offices of the Commission: Chicago
Regional Office, Suite 1400, 500 West Madison Street, Chicago, Illinois
60661-2511; and New York Regional Office, Seven World Trade Center, New York,
New York 10048. Copies of such material can be obtained at prescribed rates from
the Public Reference Section of the Commission at its principal office at 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, reports, proxy material
and other information concerning the Company may be inspected at the offices of
The New York Stock Exchange ("NYSE"), 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents, which have been filed with the Commission pursuant
to the Exchange Act, are hereby incorporated in this Prospectus and specifically
made a part hereof by reference: (i) the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993 dated March 22, 1994, as amended by
Form 10-K/A, dated March 29, 1994; and (ii) the Company's Registration Statement
on Form 8-A dated November 8, 1986, as amended by Form 8 dated July 30, 1991.
The consolidated financial statements of Greenery Rehabilitation Group, Inc.
("Greenery"), Commission file number 1-10577, at and for the fiscal year ended
September 30, 1993, are incorporated herein by reference from Greenery's Annual
Report on Form 10-K for the fiscal year ended September 30, 1993 dated January
13, 1994; the consolidated financial statements of Horizon Healthcare
Corporation ("Horizon"), Commission file number 1-9369, at and for the periods
ended May 31, 1993 and February 28, 1994, are incorporated herein by reference
from Horizon's Annual Report on Form 10-K/A - Amendment No. 3 for the fiscal
year ended May 31, 1993, dated October 5, 1993, and Quarterly Report on Form
10-Q for the quarter ended February 28, 1994 dated April 13, 1994, as amended by
Form 10-Q/A dated May 2, 1994; the consolidated financial statements of
GranCare, Inc. ("GranCare"), Commission file number 1-19571, at and for the
period ended December 31, 1993, is incorporated herein by reference from
GranCare's Annual Report on Form 10-K for the year ended December 31, 1993 dated
March 30, 1994; and the consolidated financial statements of Marriott
International, Inc. ("Marriott"), Commission file number 1-12188, at and for the
fiscal year ended December 31, 1993 are incorporated herein by reference from
Marriott's Annual Report on Form 10-K for the fiscal year ended December 31,
1993 dated March 30, 1994. All documents filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of the Shares
offered by the Company shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the respective dates of filing of such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated herein by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein, or in any other subsequently filed document that also is or is
deemed to be incorporated herein by reference, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any and all of the information that has been incorporated by reference in
this Prospectus (excluding exhibits unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be made to the Company at its
principal executive offices, 400 Centre Street, Newton, Massachusetts 02158,
Attention: Investor Relations, telephone (617) 332-3990.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON SHARES
OF BENEFICIAL INTEREST OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT
OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE
NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 5
SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements appearing elsewhere or incorporated by
reference in this Prospectus. Unless otherwise noted, all references to, and
adjustments based upon, Shares offered hereby include all Shares offered
pursuant to the Offerings but exclude the Shares subject to the over-allotment
option. Unless otherwise noted, all information presented herein assumes
completion of the transaction described in "Recent Developments -- The Marriott
Transaction".
THE COMPANY
The Company is a real estate investment trust ("REIT") which invests
primarily in retirement communities, assisted living centers, nursing homes and
other long term care facilities. The Company recently agreed to acquire 14
retirement communities (the "Marriott Properties") leased to and operated by a
subsidiary of Marriott International, Inc. (including its subsidiaries,
"Marriott") for $320 million (the "Marriott Transaction"). The Marriott
Properties will be acquired subject to the existing leases which are fully
guaranteed by Marriott. The Marriott Properties contain a total of 3,932
residences or beds and are located in seven states. Upon completion of the
Marriott Transaction: Marriott will be the Company's largest single tenant and
will operate 38% of the Company's investment portfolio of properties; the
Company will have gross real estate investments totalling $834 million, in 154
properties, located in 29 states and operated by 37 separate companies;
approximately 70% of the Company's total investments will be in properties
operated by seven NYSE listed companies; and 97% of the Company's investments
will be in retirement communities, assisted living centers, nursing homes and
other long term care facilities.
HRP LESSEES AND MORTGAGORS
[PIE CHART -- SEE APPENDIX TO ELECTRONIC FORMAT DOCUMENT]
Since commencing operations seven years ago in December 1986, the Company
has paid 28 consecutive quarterly dividends and has increased its quarterly
dividend eight times. The regular quarterly dividend of $.33 per Share for the
period ended March 31, 1994, is expected to be paid on or about May 31, 1994 to
Shareholders of record on May 16, 1994; purchasers of the Shares offered hereby
who hold such Shares as of the record date will receive that dividend.
HRP DIVIDEND GROWTH
[DIVIDEND CHART -- SEE APPENDIX TO ELECTRONIC FORMAT DOCUMENT]
Dividends shown in the chart above are dividends declared and paid with
respect to the years or quarter shown. With respect to dividends shown in the
chart above for 1987, 1988, 1989, 1990, 1991, 1992 and 1993, $.281, $.147,
$.317, $.226, $.132, $.247 and $.292 (including an estimate of $.04 for the
dividend with respect to the fourth quarter of 1993), respectively, represented
a return of capital.
3
<PAGE> 6
<TABLE>
THE OFFERINGS
<S> <C>
Shares to be offered
U.S. Offering......................... 9,500,000
International Offering................ 1,500,000
-----------
Total......................... 11,000,000
Shares to be outstanding after the
Offerings............................. 55,722,500
Use of Proceeds......................... To fund the Marriott Transaction or to repay
indebtedness and/or for working capital and other
general corporate purposes.
NYSE symbol............................. HRP
</TABLE>
<TABLE>
SUMMARY HISTORICAL AND ADJUSTED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED
-------------------------------------------------------- DECEMBER 31, 1993
1989 1990 1991 1992 1993 AS ADJUSTED(1)
-------- -------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Total revenues.............................. $ 23,233 $ 32,872 $ 43,835 $ 48,735 $ 56,485 $ 94,622
Income before extraordinary item............ 7,900 14,280 22,079 27,243 37,738 58,630
Net income.................................. 7,900 14,280 22,079 27,243 33,417(2) --
Dividends(3)................................ 13,137 18,927 27,179 33,079 44,869 --
Per Share:
Income before extraordinary item.......... .76 .89 1.01 1.02 1.10 1.05
Net income................................ .76 .89 1.01 1.02 .97(2) --
Dividends(3).............................. 1.14 1.17 1.23 1.26 1.30 --
Average Shares outstanding.................. 10,425 16,088 21,834 26,760 34,407 55,723
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------- DECEMBER 31, 1993
1989 1990 1991 1992 1993 AS ADJUSTED(1)
-------- -------- -------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate properties, net................. $144,347 $188,352 $262,557 $310,882 $349,842 $ 650,348
Real estate mortgages, net.................. 45,304 87,061 31,760 47,173 157,281 158,241
Total assets................................ 205,638 290,099 340,718 374,468 527,662 826,826
Total borrowings............................ 70,000 125,500 103,000 138,500 73,000 206,607
Total shareholders' equity.................. 131,851 147,760 234,427 228,301 441,135 611,192
OTHER DATA:
Funds from Operations(4).................. 12,561 19,467 30,059 36,853 47,578 77,794
- ---------------
<FN>
(1) Adjusted to give effect to the sale of the Shares offered pursuant to the
Offerings, the use of proceeds therefrom as set forth in "Use of Proceeds",
and the consummation of the Marriott Transaction. See "Unaudited Adjusted
Balance Sheet and Unaudited Adjusted Statement of Income".
(2) Includes, as an extraordinary item, the write-off of $4.3 million in
deferred finance charges (approximately $.13 per Share) resulting from
prepayment of debt with proceeds from the Company's Share offerings in 1993.
(3) Amounts represent dividends declared with respect to the periods shown.
(4) Industry analysts generally consider Funds from Operations to be an
appropriate measure of the performance of an equity REIT. Funds from
Operations does not represent cash generated from operating activities in
accordance with generally accepted accounting principles and should not be
considered as an alternative to net income as an indication of the Company's
performance or to cash flow as a measure of liquidity. Funds from Operations
means net income (computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from debt restructuring and sales
of property, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures will be calculated to reflect
funds from operations on the same basis. Distributions in excess of net
income generally constitute a return of capital for income tax purposes.
</TABLE>
4
<PAGE> 7
RECENT DEVELOPMENTS
The Marriott Transaction. On March 17, 1994, the Company agreed to acquire
14 retirement communities from affiliates of Host Marriott Corporation ("HMT")
for $320 million, subject to adjustment. The Marriott Properties are presently
leased to and operated by Marriott and will be acquired by the Company subject
to the existing leases. The Marriott Properties are located in the following
seven states: Florida - five; Virginia - three; Arizona - two; California - one;
Illinois - one; Maryland - one; and Texas - one. The retirement communities
offer a continuum of services including independent living residences, assisted
living and on-site skilled nursing facilities. The Marriott Properties contain a
total of 3,932 residences or beds and are triple net leased to Marriott for
initial terms expiring on December 31, 2013, with renewal options extending for
an additional 20 years. The leases provide for fixed rent aggregating
approximately $28 million 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. In addition to the 14 retirement communities to be acquired by the
Company, the Company and HMT have agreed to negotiate for the possible
assumption by the Company of HMT's obligations to invest in additional
retirement and skilled nursing facility projects to be operated by Marriott;
however, there are presently no agreements or understandings concerning
assumption of the obligations relating to any specific projects. Upon completion
of the Marriott Transaction, Marriott will become the Company's largest single
tenant.
Management believes that the Marriott Transaction will materially improve
the diversity, security and growth potential of the Company's investment
portfolio for the following reasons:
- Approximately 38% of the Company's total investments will be in
properties leased to Marriott under 20 year triple net, non-cancellable
leases;
- Marriott has fully guaranteed the leases;
- Marriott is a public company with annual revenues of approximately $7.4
billion, whose senior unsecured debt obligations are rated A- by Standard
and Poor's Corporation and Baa-1 by Moody's Investors Service, Inc.;
- The Company anticipates that it will receive significant and increasing
percentage rents under the leases beginning in 1994 and continuing
throughout the lease term; the leases contain no cap or other limitation
on the amounts of percentage rents;
- Over 85% of Marriott's revenues from the Marriott Properties have been
derived from private as opposed to governmental sources making such
revenues less susceptible to the uncertainties of governmental funding
and cost containment efforts;
- The Marriott Properties have attracted strong occupancies and those open
more than one year average in excess of 90% occupancy;
- Ten of the 14 Marriott Properties have been constructed and opened in the
past four years and the Company believes these properties represent state
of the art in construction quality;
- The Company's investment portfolio will be increased from approximately
$514 million to approximately $834 million;
- After completion of the Marriott Transaction, approximately 81% of the
Company's investments will be in equity ownership of properties and 19%
will be in mortgages;
- Upon completion of the Marriott Transaction, approximately 70% of the
Company's investment portfolio will be in properties leased to or
operated by seven NYSE listed companies; the balance of the Company's
investment portfolio is leased to or operated by a diverse group of 30
separate private companies.
The Marriott Transaction is subject to conditions and contingencies
customary in transactions of this type, including health care and other
regulatory approvals, and although no assurance can be given that the Marriott
Transaction will be consummated, the Company expects the Marriott Transaction to
close in June 1994. The Company intends to fund the Marriott Transaction with
the net proceeds of the Offerings, available
5
<PAGE> 8
cash, funds available to be drawn under credit facilities, proceeds of future
debt financing, and assumption of $17.6 million of industrial revenue bonds
encumbering certain of the Marriott Properties. See "Recent Developments -- New
Revolving Credit Facility". On April 19, 1994, the Company filed a shelf
registration statement with the Commission relating to the offering of up to
$345 million of debt securities, preferred shares of beneficial interest, common
shares of beneficial interest and common share warrants. The shelf registration
statement has not yet been declared effective. To provide for the contingency
that the Marriott Transaction may close prior to completion of the Offerings or
the availability of other permanent funding, the Company has had discussions
with Merrill Lynch Mortgage Capital, Inc. ("MLMCI") and others to provide an
interim credit facility (the "MLMCI Facility") to fund the acquisition of the
Marriott Properties. No assurance can be given that these discussions will
result in an agreement to provide interim funding or that the required funding
will be available in a timely manner to the Company from other sources.
New Revolving Credit Facility. In February 1994, the Company closed a new
$110 million revolving credit facility from a syndicate of banks (the "New
Credit Facility"). The New Credit Facility replaced the Company's $40 million
revolving credit facility which was scheduled to mature in January 1995. The New
Credit Facility will mature in 1997, unless extended by the parties. Borrowings
under the New Credit Facility bear interest, at the Company's option, at prime
or a spread over LIBOR. The Company has drawn on the New Credit Facility to
repay the Company's $33 million term loan and is presently discussing with its
lenders amendments to the New Credit Facility which would increase the amount
available thereunder, to lower the interest rate charged on borrowings and
otherwise to change certain terms. No assurance can be given that these
discussions will result in any changes in the New Credit Facility.
Other Pending Transactions. In the ordinary course of its business, the
Company regularly evaluates investment opportunities and enters into contracts
to purchase and lease or mortgage finance health care related real estate.
Several such possible investments are currently under consideration and at
various stages of the contractual process. Similarly, since January 1, 1994, the
Company has received principal prepayments of outstanding mortgages totalling
approximately $9.6 million and the Company is now engaged in negotiations
regarding the sale of two properties subject to leases scheduled to expire
during 1994. The Company does not believe that consummation of any one or all of
these various pending transactions would have a material impact upon its
financial condition or operations.
6
<PAGE> 9
THE COMPANY
HRP invests in retirement communities, assisted living centers, nursing
homes and other income producing health care related real estate. The Company, a
Maryland real estate investment trust, commenced operations in December 1986.
The Company's principal executive offices are located at 400 Centre Street,
Newton, Massachusetts 02158, and its telephone number is (617) 332-3990.
At March 31, 1994, including the Marriott Transaction, the Company had
total real estate investments of approximately $834 million in 154 properties
("Properties") located in 29 states operated by 37 separate companies.
<TABLE>
LOCATION OF HRP PROPERTIES
(DOLLARS IN THOUSANDS)
[MAP -- SEE APPENDIX TO ELECTRONIC FORMAT DOCUMENT]
<CAPTION>
NO. OF TOTAL NO. OF TOTAL
STATE PROPERTIES INVESTMENT STATE PROPERTIES INVESTMENT
- ------------------------- ---------- ---------- ------------------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Alabama.................. 2 $ 3,601 Michigan................. 2 $ 9,400
Arizona.................. 5 25,377 Missouri................. 2 3,178
California............... 16 80,082 Nebraska................. 12 16,925
Colorado................. 10 32,990 North Carolina .......... 9 20,761
Connecticut.............. 9 83,802 Ohio..................... 9 27,259
Florida.................. 6 116,560 Pennsylvania............. 2 18,490
Georgia.................. 5 8,053 South Carolina .......... 1 886
Illinois................. 2 21,233 South Dakota............. 3 7,589
Indiana.................. 7 19,965 Tennessee................ 1 1,077
Iowa..................... 10 14,175 Texas.................... 8 21,000
Kansas................... 4 8,521 Virginia................. 3 67,336
Kentucky................. 2 19,735 Washington............... 1 5,125
Louisiana................ 5 32,403 Wisconsin................ 9 33,260
Maryland................. 1 46,928 Wyoming.................. 3 6,459
--- --------
Massachusetts............ 5 82,058 154 $834,228
=== ========
</TABLE>
7
<PAGE> 10
DISTRIBUTIONS
The Company has paid 28 consecutive quarterly dividends since its initial
public offering in December 1986. Dividends for 1987, 1988, 1989, 1990, 1991,
1992 and 1993 totalled $1.06, $1.12, $1.14, $1.17, $1.23, $1.26 and $1.30,
respectively. The regular quarterly dividend of $.33 per Share for the period
ended March 31, 1994 will be paid on or about May 31, 1994 to Shareholders of
record on May 16, 1994; purchasers of the Shares offered hereby who hold such
Shares as of the record date will receive that dividend.
The Company intends to continue to declare and pay future dividends on a
quarterly basis, but may, from time to time, declare and pay special dividends.
There can be no assurance that the Company will be able to increase its
quarterly dividend or maintain it at the current level. Payment of dividends by
the Company is subject to continued compliance with certain restrictions
contained in the Company's loan agreements. In the past, the Company's dividends
have been based upon funds from operations, which has exceeded earnings. The
Company is required to pay distributions in cash. 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. Management expects that the Company will continue to pay
dividends based upon funds from operations and that such dividends may exceed
earnings. Accordingly, the Company expects a portion of the Company's dividends
may be considered a return of capital which may not be subject to income tax
until the Shares are sold. See "Federal Income Tax and ERISA Considerations".
Information about dividends on a quarterly basis is summarized in the following
table:
<TABLE>
HRP DIVIDENDS PER SHARE(1)
<CAPTION>
1987 1988 1989 1990 1991 1992 1993
----- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
First Quarter........................... $.275(2) $.28 $.28 $.29 $.30 $.31 $.32
Second Quarter.......................... .26 .28 .28 .29 .31 .31 .32
Third Quarter........................... .27 .28 .29 .29 .31 .32 .33
Fourth Quarter.......................... .28 .28 .29 .30 .31 .32 .33
- ---------------
<FN>
(1) Dividends shown in the chart above are dividends declared and paid with
respect to the years or quarter shown. With respect to dividends shown in
the chart above for 1987, 1988, 1989, 1990, 1991, 1992 and 1993, $.281,
$.147, $.317, $.226, $.132, $.247 and $.292 (including an estimate of $.04
for the dividend with respect to the fourth quarter of 1993), respectively,
represented a return of capital.
(2) Includes $.025 for the period from December 23, 1986 (commencement of the
Company's operations) through December 31, 1986.
</TABLE>
8
<PAGE> 11
<TABLE>
CAPITALIZATION
The capitalization of the Company as of December 31, 1993 and as adjusted
to give effect to the consummation of the Marriott Transaction, the completion
of the Offerings and the use of the net proceeds therefrom is as follows (see
"Unaudited Adjusted Balance Sheet"):
<CAPTION>
DECEMBER 31, 1993
-------------------------
ACTUAL AS ADJUSTED
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Borrowings........................................................... $ 73,000 $ 206,607
Shareholders' equity:
Preferred Shares of Beneficial Interest, par value $.01 per Share;
50,000,000 authorized, none issued.............................. -- --
Common Shares of Beneficial Interest, par value $.01 per Share;
100,000,000 Shares authorized; 44,121,000 Shares and 55,722,500
Shares, as adjusted, issued and outstanding..................... 441 557
Additional paid-in capital......................................... 470,572 635,280
Cumulative net income.............................................. 118,889 124,122
Distributions of funds from operations............................. (148,767) (148,767)
--------- -----------
Total shareholders' equity................................. 441,135 611,192
--------- -----------
Total capitalization....................................... $ 514,135 $ 817,799
========= ===========
</TABLE>
USE OF PROCEEDS
The net proceeds to the Company from the Offerings are estimated to be
approximately $ million ($ million if the over-allotment
option is exercised in full). If the Offerings are completed prior to the
closing of the Marriott Transaction, net proceeds of the Offerings will be used
to fund the Marriott Transaction. If the Marriott Transaction is consummated
prior to completion of the Offerings and the Company utilizes borrowings to fund
the Marriott Transaction, net proceeds of the Offerings will be used to repay
amounts outstanding under such borrowings, and/or to reduce amounts outstanding
under the Company's credit facilities or for working capital and other general
corporate purposes. In the event that the Marriott Transaction is not
consummated by the Company, net proceeds of the Offerings will be used to reduce
amounts outstanding under the New Credit Facility or for working capital or
other general corporate purposes.
As described in "Recent Developments--The Marriott Transaction", the
Company is presently negotiating the MLMCI Facility. In the event that funds are
drawn under the MLMCI Facility, interest on such borrowings is expected to be
based on LIBOR plus a premium. Of the amounts outstanding under the New Credit
Facility, $40 million was borrowed to repay all amounts outstanding under the
Company's prior revolving credit facility and $33 million has been borrowed to
repay the amounts outstanding under the Company's term loan. Amounts outstanding
under the New Credit Facility are due in 1997. The weighted average interest
rate on outstanding debt which may be repaid with proceeds of the Offerings will
be approximately 5.5%.
Pending utilization as set forth above, the proceeds from the Offerings may
be utilized to repay amounts outstanding under the New Credit Facility and/or
will be invested in short term investments, including repurchase agreements.
Such investments may not be investment grade.
9
<PAGE> 12
INVESTMENT AND FINANCING POLICY
The population of the United States is aging. According to information from
the U.S. Census Bureau, the segment of the U.S. population age 65 and over is
increasing and will increase sharply through the year 2020. The Company believes
that the demand for services provided at retirement communities, assisted living
centers and nursing homes should increase as the population ages. Moreover,
during the past ten years the intensity of medical services offered in nursing
homes has become an important factor increasing nursing facility revenues and
the value of facilities. Recently proposed federal healthcare reform legislation
seeks, in part, to control future expenditures for acute care hospitals by
providing increased funding for subacute care in nursing homes. For these
reasons the Company has focused its investments in retirement communities,
assisted living centers and nursing homes. Although the Company has and will in
the future invest in other types of health care real estate, the Company expects
to continue its focus on retirement communities, assisted living centers and
nursing homes.
The Company considers equity offerings when, in the Company's judgment,
doing so will improve the Company's capital structure, while not materially
adversely affecting the market value of its Shares or impeding the Company's
ability to increase regularly its per Share dividend rate. In addition to the
use of equity, the Company utilizes short term and long term borrowings to
finance investments and to pay operating expenses. When variable rate debt is
utilized the Company regularly purchases interest rate futures contracts to
hedge against changes in interest rates. At March 31, 1994, the Company had
outstanding term and revolving debt totalling $73 million. After this offering
and assuming the use of proceeds from this offering and additional debt to fund
the consummation of the Marriott Transaction, the Company's total debt
outstanding will be approximately $207 million. The Company's borrowing
guidelines established in the New Credit Facility and by its Board of Trustees
prohibit the Company from maintaining a debt to equity ratio of greater than 1
to 1, except in certain limited circumstances. As of March 31, 1994, the
Company's debt to equity ratio was .16 to 1. After these Offerings and assuming
the use of proceeds described herein and consummation of the Marriott
Transaction, the Company's debt to equity ratio on a pro forma basis will be
approximately .34 to 1. The present debt to equity limitations may be changed in
the future. There can be no assurance that equity or debt capital will be
available in the future on reasonable terms to fund the Company's operations or
growth.
HRP CAPITAL STRUCTURE
<TABLE>
<S> <C>
BEFORE SALE OF SHARES AFTER SALE OF SHARES
AND MARRIOTT TRANSACTION AND MARRIOTT TRANSACTION
</TABLE>
[PIE CHARTS-see appendix to electronic format document.]
10
<PAGE> 13
<TABLE>
SELECTED FINANCIAL DATA
Set forth below are selected financial data for the Company for the periods
and dates indicated which have been derived from audited and unaudited financial
statements. This data should be read in conjunction with, and is qualified in
its entirety by reference to, the financial statements and accompanying notes
incorporated by reference in this Prospectus and with Management's Discussion
and Analysis of Financial Condition and Results of Operations in the Company's
Annual Report on Form 10-K incorporated by reference in this Prospectus. Amounts
are in thousands, except per Share information.
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1989 1990 1991 1992 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Total revenues........................... $ 23,233 $ 32,872 $ 43,835 $ 48,735 $ 56,485
Income before extraordinary item......... 7,900 14,280 22,079 27,243 37,738
Net income............................... 7,900 14,280 22,079 27,243 33,417(1)
Dividends(2)............................. 13,137 18,927 27,179 33,079 44,869
Per Share:
Income before extraordinary item....... $ .76 $ .89 $ 1.01 $ 1.02 $ 1.10
Net income............................. .76 .89 1.01 1.02 .97(1)
Dividends(2)........................... 1.14 1.17 1.23 1.26 1.30
Average Shares outstanding............... 10,425 16,088 21,834 26,760 34,407
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
1989 1990 1991 1992 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate properties, net.............. $144,347 $188,352 $262,557 $310,882 $349,842
Real estate mortgages, net............... 45,304 87,061 31,760 47,173 157,281
Total assets............................. 205,638 290,099 340,718 374,468 527,662
Total borrowings......................... 70,000 125,500 103,000 138,500 73,000
Total shareholders' equity............... 131,851 147,760 234,427 228,301 441,135
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1989 1990 1991 1992 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Funds from Operations(3)............... $ 12,561 $ 19,467 $ 30,059 $ 36,853 $ 47,578
</TABLE>
<TABLE>
<CAPTION>
1993
-----------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA:
Total revenues..................................... $ 12,650 $ 13,763 $ 14,727 $ 15,345
Income before extraordinary item................... 8,409 9,536 9,739 10,054
Net income(1)...................................... 5,017 9,536 9,739 9,125
Funds from Operations(3)........................... 10,737 11,895 12,187 12,759
Dividends(2)....................................... 10,804 11,236 11,239 11,590
Per Share:
Income before extraordinary item................. $ .27 $ .27 $ .28 $ .28
Net income(1).................................... .16 .27 .28 .26
Dividends(2)..................................... .32 .32 .33 .33
Average Shares outstanding......................... 31,731 35,114 35,121 35,610
- ---------------
<FN>
(1) Includes, as an extraordinary item, the write-off of $4.3 million in
deferred finance charges (approximately $.13 per Share) resulting from
prepayment of debt with proceeds from the Share offerings in 1993.
(2) Amounts represent dividends declared with respect to the periods shown.
(3) Industry analysts generally consider Funds from Operations to be an
appropriate measure of the performance of an equity REIT. Funds from
Operations does not represent cash generated from operating activities in
accordance with generally accepted accounting principles and should not be
considered as an alternative to net income as an indication of the Company's
performance or to cash flow as a measure of liquidity. Funds from Operations
means net income (computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from debt restructuring and sales
of property, plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures will be calculated to reflect
funds from operations on the same basis. Distributions in excess of net
income generally constitute a return of capital for income tax purposes.
</TABLE>
11
<PAGE> 14
PROPERTIES
After the Marriott Transaction the Company will have gross real estate
investments totalling $834 million, in 154 Properties, located in 29 states and
operated by 37 separate companies. Ninety-seven percent of the Company's
investments will be in 152 retirement communities, assisted living centers,
nursing homes and other long term care facilities. Approximately 81% of the
investments are in Properties owned by the Company and leased to operators.
TYPE OF PROPERTIES
TYPE OF INVESTMENTS
[PIE CHARTS -- See appendix to electronic format document]
12
<PAGE> 15
THE LESSEES AND THE MORTGAGORS
The Company's financial condition depends in large part upon the financial
condition of the operators of the Company's Properties. After the Marriott
Transaction, approximately 70% of the Company's total investments will be in
Properties operated by seven NYSE listed companies. In addition to these seven
public companies, the remaining HRP Properties are operated by 30 privately held
companies. Certain information about publicly owned operators of the Company's
Properties contained in their filings with the Commission or other public
sources, or provided by these companies is set forth in the chart below.
<TABLE>
HRP PUBLIC COMPANY FACILITY OPERATORS
(DOLLARS IN THOUSANDS)
<CAPTION>
OPERATOR DATA
-----------------------------------------------------
TOTAL TOTAL SHARE- HRP HRP
OPERATOR FACILITIES ANNUAL HOLDERS' NET FACILITIES FACILITIES
(STOCK SYMBOL) (BEDS) REVENUES EQUITY INCOME (BEDS) OCCUPANCY
- -------------------------------------------- ---------- ---------- -------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Marriott International...................... 787 $7,430,000 $696,000 $ 126,000 14 90%(3)
(NYSE:MAR) (174,951)(2) (3,932)
Horizon Healthcare(1)....................... 104 232,199 217,994 7,716 12 91%
(NYSE:HHC) (11,883) (1,738)
GranCare.................................... 83 507,970 70,757 10,884 27 91%
(NYSE:GC) (11,300) (3,908)
Sun Healthcare Group........................ 47 191,711 69,586 9,749 4 95%
(NYSE:SHG) (5,272) (605)
Beverly Enterprises......................... 817 2,885,881 739,009 57,924 2 92%
(NYSE:BEV) (86,865) (201)
Integrated Health Services.................. 67 282,160 176,133 15,471 1 96%
(NYSE:IHS) (8,731) (120)
Hillhaven(1)................................ 284 1,248,106 348,174 39,079 1 98%
(NYSE:HIL) (35,149) (120)
<FN>
- ---------------
(1) All operators have fiscal years ended December 31 except Horizon Healthcare
and Hillhaven which have fiscal years ended May 31. Annual revenues and net
income for Horizon Healthcare and Hillhaven are for the year ended May 31,
1993 and may not be indicative of the results which can be expected for the
year ended May 31, 1994; moreover, annual revenues and net income shown for
Horizon Healthcare do not reflect the Horizon/Greenery merger consummated in
February 1994.
(2) Includes approximately 770 operated or franchised hotels with more than
170,000 rooms and 17 retirement complexes with 4,951 units, including
independent and assisted living apartments and beds for nursing homes.
(3) Occupancy is aggregate average occupancy for facilities opened for more than
one year.
</TABLE>
Additional Security. In addition to fee ownership of the leased properties
and mortgage liens on the mortgaged properties, certain of the Company's leases
and mortgages contain additional security features. Generally, with respect to
investments originated by the Company, each obligation of an operator to HRP is
subject to cross default provisions with respect to all other obligations of
that operator to HRP and any collateral pledged by an operator to HRP
constitutes collateral for all obligations of that operator. Certain operators
have pledged additional collateral or provided corporate guarantees, security
deposits, or, in some cases, personal guarantees.
13
<PAGE> 16
<TABLE>
MANAGEMENT
The Trustees and executive officers of the Company are as follows:
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Mark J. Finkelstein.................. 47 President and Chief Executive Officer
John L. Harrington................... 58 Trustee
David J. Hegarty..................... 37 Executive Vice President, Chief Financial Officer
and Secretary
Arthur G. Koumantzelis............... 63 Trustee
Rev. Justinian Manning, C.P.......... 68 Trustee
Gerard M. Martin..................... 59 Trustee
John G. Murray....................... 33 Treasurer
Barry M. Portnoy..................... 48 Trustee
</TABLE>
Mark J. Finkelstein has been President and Chief Executive Officer of the
Company since its organization. Mr. Finkelstein is a past President of the
American College of Health Care Administrators.
John L. Harrington is the President of JRY Corporation (the principal owner
of the Boston Red Sox baseball club) and is Executive Director and Trustee of
the Yawkey Foundation and a trustee of the JRY Trust. Mr. Harrington is also a
Director of Shawmut Bank, N.A.
David J. Hegarty, a certified public accountant, became Executive Vice
President of the Company in July 1993. He has been the Chief Financial Officer
of the Company since July 1987, when he joined the Company as Treasurer and
Secretary.
Arthur G. Koumantzelis is the Senior Vice President and Chief Financial
Officer of Cumberland Farms, Inc., a private company engaged in the convenience
store business in the northeastern United States and Florida and, through its
interest in the partnership operating its Gulf Oil Division, in the distribution
and retail sale of gasoline in the northeastern United States.
The Reverend Justinian Manning, C.P., is the pastor of St. Gabriel's Parish
in Brighton, Massachusetts. He is also on the Board of Directors of Charlesview,
a low and moderate income housing program, and St. Elizabeth's Hospital
Foundation. He belongs to the Provincial Council of the Passionist Provincialate
and is the former Director of Consolidation for the Community.
Gerard M. Martin is a real estate investor. Prior to the merger of Horizon
Healthcare Corporation ("Horizon") and Greenery Rehabilitation Group, Inc.
("Greenery") in February 1994, he had been the Chairman and Chief Executive
Officer of Greenery and its predecessors since 1975. Mr. Martin is a Director of
Horizon.
John G. Murray, a certified public accountant, joined the Company in July
1993 as Treasurer. Mr. Murray was employed by Fidelity Brokerage Services, Inc.
prior to joining the Company, most recently as Director of Finance, Business
Analysis and Planning.
Barry M. Portnoy has been a partner in the law firm of Sullivan &
Worcester, counsel to the Company, since 1978. Mr. Portnoy was a Director of
Greenery until February 1994 and is a Director of Horizon.
Mr. Harrington, Mr. Koumantzelis and Fr. Manning are the Company's
Independent Trustees, that is Trustees who are not affiliated with any of the
Company's lessees or mortgagors or with HRPT Advisors, Inc. (the "Advisor").
Under the Company's Declaration of Trust, a majority of the Company's Trustees
will at all times consist of Independent Trustees. All investment and policy
decisions affecting the Company are made by its Board of Trustees. All day to
day operations of the Company are conducted by the Advisor pursuant to an
investment advisory contract. The Advisor is owned by Messrs. Martin and
Portnoy. Messrs. Finkelstein, Hegarty and Murray, as well as all other personnel
involved in the Company's operations are employees of the Advisor. The Advisor
is paid an annual advisory fee calculated on the basis of total assets under
management (.7% of the first $250 million, plus .5% of additional assets) and an
annual incentive fee calculated on the basis of increases in operating cash flow
per Share above threshold amounts (15% of cash flow above the threshold amount
of $1.37/Share in 1994, which threshold increases by $.05/Share annually
thereafter), but no more
14
<PAGE> 17
than $.01/Share. The Advisor currently owns approximately one million Shares
which were purchased in 1989. All incentive fees which may be earned by the
Advisor will be paid in Shares. The Company believes that its total
administrative costs, measured as a percentage of assets under management, are
below the average for its industry.
FEDERAL INCOME TAX AND ERISA CONSIDERATIONS
The following description of certain Federal income tax matters and
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
considerations relating to the Company is qualified in its entirety by reference
to the more detailed description thereof contained in the Company's Annual
Report on Form 10-K, which is incorporated herein by reference. Sullivan &
Worcester, Boston, Massachusetts, has rendered its opinion that the discussion
in this section and in the Form 10-K in the sections captioned "Federal Income
Tax Considerations" and "ERISA Plans, Keogh Plans and Individual Retirement
Accounts" in all material respects is accurate and fairly summarizes the federal
income tax and ERISA issues which are material to an investment in the Shares
and that the opinions of counsel referred to in those sections represent
Sullivan & Worcester's opinions on those subjects. Specifically, subject to
qualifications and assumptions contained in its opinion and in the Form 10-K,
Sullivan & Worcester has opined to the effect (a) that the Company has been
organized in conformity with the requirements for federal tax qualifications as
a REIT, has qualified as a REIT for its 1987, 1988, 1989, 1990, 1991 and 1992
taxable years, and that the Company's current and anticipated investments and
its plan of operation will enable it to continue to meet the requirements for
federal tax qualification and taxation as a REIT and (b) that, under the "plan
assets" regulations promulgated by the Department of Labor under ERISA, the
Shares are publicly offered securities and the assets of the Company will not be
deemed to be "plan assets" under ERISA.
The Company is and intends to remain qualified as a REIT under the Internal
Revenue Code of 1986, as amended (the "Code"). As a REIT, the Company's net
income which is distributed as dividends to shareholders will be exempt from
Federal taxation. Distributions to the Company's shareholders generally will be
includable in their income; however, dividends distributed which are in excess
of current or accumulated earnings will be treated for tax purposes as a return
of capital to the extent of a shareholder's basis, and will reduce the basis of
shareholders' Shares. Approximately 26% of dividends distributed in calendar
1993 were treated as a return of capital.
The Company intends to conduct its affairs so that the assets of the
Company will not be deemed to be "plan assets" of any individual retirement
account, employee benefit plan subject to Title I of ERISA, or other qualified
retirement plan subject to Section 4975 of the Code which acquires its Shares.
The Company believes that, under present law, its distributions do not create so
called "unrelated business taxable income" to tax exempt entities such as
pension trusts, subject, however, to certain new rules which apply to pension
trusts holding more than 10% of the Shares.
EACH PROSPECTIVE PURCHASER OF THE SHARES OFFERED HEREBY IS ADVISED TO
CONSULT HIS OWN PROFESSIONAL ADVISOR REGARDING THE SPECIFIC FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX AND ERISA CONSEQUENCES TO HIM OF THE PURCHASE,
OWNERSHIP AND SALE OF THE SHARES OFFERED HEREBY.
15
<PAGE> 18
<TABLE>
UNDERWRITING
The Underwriters named below (the "U.S. Underwriters"), for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), Donaldson, Lufkin &
Jenrette Securities Corporation, PaineWebber Incorporated and Smith Barney
Shearson Inc. are acting as representatives (the "U.S. Representatives"), have
severally agreed, subject to the terms and conditions of the U.S. Purchase
Agreement (the "U.S. Purchase Agreement") with the Company relating to 9,500,000
Shares offered in the United States and Canada (the "U.S. Offering"), to
purchase from the Company the respective number of Shares set forth opposite
their names below.
<CAPTION>
NUMBER
U.S. UNDERWRITER OF SHARES
---------------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................................
Donaldson, Lufkin & Jenrette Securities Corporation...............
PaineWebber Incorporated..........................................
Smith Barney Shearson Inc. .......................................
Arnold and S. Bleichroeder, Inc...................................
Bear, Stearns & Co. Inc...........................................
Alex. Brown & Sons Incorporated...................................
Dillon, Read & Co. Inc............................................
A.G. Edwards & Sons, Inc..........................................
Kidder, Peabody & Co. Incorporated................................
Lehman Brothers Inc...............................................
NatWest Securities Limited........................................
Oppenheimer & Co., Inc............................................
Prudential Securities Incorporated................................
Wertheim Schroder & Co. Incorporated..............................
Advest, Inc.......................................................
Robert W. Baird & Co. Incorporated................................
J.C. Bradford & Co................................................
Cowen & Company...................................................
Dain Bosworth Incorporated........................................
Equitable Securities Corporation..................................
Fahnestock & Co. Inc..............................................
First Albany Corporation..........................................
First of Michigan Corporation.....................................
Interstate/Johnson Lane Corporation...............................
Janney Montgomery Scott Inc.......................................
Edward D. Jones & Co..............................................
Kemper Securities, Inc............................................
Ladenburg, Thalmann & Co. Inc.....................................
Legg Mason Wood Walker, Incorporated..............................
McDonald & Company Securities, Inc................................
Morgan Keegan & Company, Inc......................................
Piper Jaffray Inc.................................................
Principal Financial Securities, Inc...............................
Ragen MacKenzie Incorporated......................................
Rauscher Pierce Refsnes, Inc......................................
Raymond James & Associates, Inc...................................
The Robinson-Humphrey Company, Inc................................
Stephens Inc......................................................
Stifel, Nicolaus & Company, Incorporated..........................
Sutro & Co. Incorporated..........................................
Tucker Anthony Incorporated.......................................
Wheat, First Securities, Inc......................................
The Buckingham Research Group Incorporated........................
Crowell, Weedon & Co..............................................
Dickinson & Co....................................................
</TABLE>
16
<PAGE> 19
<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITER OF SHARES
---------------- ---------
<S> <C>
Doft & Co., Inc...................................................
Keane Securities Co., Inc.........................................
Mesirow Financial, Inc............................................
The Ohio Company..................................................
Parker/Hunter Incorporated........................................
Pennsylvania Merchant Group Ltd...................................
Pryor, McClendon, Counts & Co., Inc...............................
Raffensperger, Hughes & Co., Inc..................................
The Seidler Companies Incorporated................................
Spencer Trask Securities Incorporated.............................
Utendahl Capital Partners, L.P....................................
Wedbush Morgan Securities.........................................
---------
Total................................................ 9,500,000
=========
</TABLE>
The Company has also entered into the International Purchase Agreement (the
"International Purchase Agreement") with certain underwriters (the
"International Managers"), for whom Merrill Lynch International Limited,
Donaldson, Lufkin & Jenrette Securities Corporation, PaineWebber International
(U.K.) Ltd. and Smith Barney Shearson Inc. are acting as representatives (the
"Lead Managers"), relating to the Shares offered outside the United States and
Canada (the "International Offering"). Subject to the terms and conditions of
the International Purchase Agreement, the Company has agreed to sell to the
International Managers, and the International Managers have severally agreed to
purchase, an aggregate of 1,500,000 Shares.
Under certain circumstances, the commitments of non-defaulting U.S.
Underwriters and International Managers may be increased. The initial public
offering price per Share and the underwriting discount per Share are identical
under the U.S. Purchase Agreement and the International Purchase Agreement.
In the U.S. Purchase Agreement, the several U.S. Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
Shares being sold pursuant to such agreement if any of the Shares being sold
pursuant to such agreement are purchased and in the International Purchase
Agreement the several International Managers have agreed, subject to the terms
and conditions set forth therein, to purchase all of the Shares being sold
pursuant to such agreement if any of the Shares being sold pursuant to such
agreement are purchased. The closings with respect to the sale of Shares to be
purchased by the U.S. Underwriters and the International Managers are
conditioned upon one another.
The U.S. Representatives have advised the Company that the U.S.
Underwriters propose to initially offer the Shares to the public at the public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $ per Share.
The U.S. Underwriters may allow, and such dealers may reallow, a discount not in
excess of $ per Share to certain other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
The Company has granted to the U.S. Underwriters and the International
Managers an option, exercisable by the U.S. Representatives for 30 days from the
date of this Prospectus, to purchase up to an additional 1,650,000 Shares,
solely to cover over-allotments, if any, at a price per Share equal to the
initial public offering price less the underwriting discount set forth on the
cover page of this Prospectus, and, with respect to any such Shares issued after
the record date for the quarterly dividend for the period ended March 31, 1994,
less an amount equal to such dividend. If the U.S. Representatives exercise such
option, each U.S. Underwriter and International Manager will, subject to certain
conditions, have a firm commitment to purchase approximately the same percentage
of such option Shares which the number of Shares to be purchased initially by it
bears to 11,000,000 Shares.
The U.S. Underwriters and the International Managers have entered into an
Intersyndicate Agreement (the "Intersyndicate Agreement") that provides for
coordination of their activities. Pursuant to the Intersyndicate Agreement,
sales may be made between the U.S. Underwriters and the International Managers
of such number of Shares as may be mutually agreed. The price of any Shares so
sold shall be the initial public offering price, less an amount not greater than
the selling concession.
17
<PAGE> 20
Under the terms of the Intersyndicate Agreement, the U.S. Underwriters and
any dealer to whom they sell Shares will not offer to sell or sell Shares to any
non-U.S. or non-Canadian person or to any person they believe intends to resell
to any non-U.S. or non-Canadian person, and the International Managers and any
dealer to whom they sell Shares will not offer to sell or sell Shares to any
U.S. or Canadian person or to any person they believe intends to resell to any
U.S. or Canadian person, except, in each case, for transactions pursuant to the
Intersyndicate Agreement.
The Company has agreed to indemnify the several U.S. Underwriters and the
several International Managers against certain liabilities, including
liabilities under the Securities Act.
The Company and the Advisor have each agreed that, for a period of 90 days
after the date of this Prospectus, it will not, without the prior consent of
MLPF&S, issue, sell, contract to sell, grant any option for the sale of, or
otherwise dispose of any Shares, other than the Shares being sold in connection
with the Offerings, pursuant to the Company's 1992 Incentive Share Award Plan,
and Shares issued upon exercise of any outstanding options. The Company has
agreed that, during such 90 day period, it will not, without the prior consent
of MLPF&S, terminate, modify or waive any provision in any agreement to which it
is a party that restricts or limits the transferability of any Shares.
MLPF&S will be entitled to an advisory fee from the Company upon
consummation of the Marriott Transaction. As described under "Recent
Developments -- The Marriott Transaction", the Company is also negotiating with
MLMCI, a subsidiary of MLPF&S, for provision of the MLMCI Facility which may be
used in connection with the Company's consummation of the Marriott Transaction.
MLMCI will be entitled to a fee upon consummation of the Marriott Transaction
and additional fees if the MLMCI Facility is consummated. In addition, MLPF&S
and MLMCI are both presently entitled to reimbursement from the Company for
their respective out-of-pocket expenses incurred in advising and assisting the
Company in connection with the Marriott Transaction.
LEGAL MATTERS
Certain legal matters with respect to the Shares offered by the Company
will be passed upon for the Company by Sullivan & Worcester, Boston,
Massachusetts and for the Underwriters by Brown & Wood, New York, New York.
Sullivan & Worcester and Brown & Wood will rely, as to all matters of Maryland
law, upon the opinion of Piper & Marbury, Baltimore, Maryland. Sullivan &
Worcester has also given its opinion as to certain Federal income tax matters
and certain ERISA considerations relating to the Company. See "Federal Income
Tax and ERISA Considerations". Barry M. Portnoy, a partner in the firm of
Sullivan & Worcester, is a Trustee of the Company, a director and 50%
shareholder of each of the Advisor, Connecticut Subacute Corporation ("CSC"),
and Connecticut Subacute Corporation II ("CSCII") and a director of Horizon.
Sullivan & Worcester represents the Advisor, CSC, CSCII, Gerard M. Martin and
certain affiliates of each of the foregoing on various matters. CSC, CSCII and
Horizon are tenants of the Company.
EXPERTS
The financial statements of the Company appearing in the Company's Annual
Report (Form 10-K) for the year ended December 31, 1993; the consolidated
financial statements of Greenery appearing in the Greenery Annual Report (Form
10-K) for the year ended September 30, 1993; and the consolidated financial
statements of GranCare appearing in the GranCare Annual Report (Form 10-K) for
the year ended December 31, 1993, have been audited by Ernst & Young,
independent auditors, as set forth in their reports thereon included therein and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
The audited consolidated financial statements and schedules of Horizon
incorporated by reference in this Prospectus and elsewhere in the registration
statement to the extent and for the periods indicated in their reports, have
been audited by Arthur Andersen & Co. and KPMG Peat Marwick, independent public
accountants, and are included herein in reliance upon the authority of said
firms as experts in giving said reports.
18
<PAGE> 21
The consolidated financial statements and schedules of Marriott
International, Inc. incorporated by reference in this Prospectus and elsewhere
in the registration statement have been audited by Arthur Andersen & Co.,
independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports. Reference is made to said report, which includes
an explanatory paragraph with respect to the change in the method of accounting
for income taxes as discussed in "Income Taxes" in the notes to the consolidated
financial statements.
THE DECLARATION OF TRUST ESTABLISHING THE COMPANY, DATED OCTOBER 9, 1986, A
COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY
FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE
OF MARYLAND, PROVIDES THAT THE NAME "HEALTH AND REHABILITATION PROPERTIES TRUST"
REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF THE COMPANY SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL PERSONS
DEALING WITH THE COMPANY, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE
COMPANY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
19
<PAGE> 22
HEALTH AND REHABILITATION PROPERTIES TRUST
UNAUDITED ADJUSTED BALANCE SHEET AND
UNAUDITED ADJUSTED STATEMENT OF INCOME
The following unaudited adjusted balance sheet at December 31, 1993 and the
unaudited adjusted statement of income for the year ended December 31, 1993 are
intended to present the financial position and results of operations of Health
and Rehabilitation Properties Trust as if the transactions described in Note 1
were consummated on December 31, 1993 and January 1, 1993, respectively. The
unaudited adjusted financial statements should be read in conjunction with the
separate financial statements of Health and Rehabilitation Properties Trust for
the year ended December 31, 1993 which are incorporated herein by reference. The
unaudited adjusted financial statements are not necessarily indicative of the
expected financial position and results of operations for any future period.
Differences would result from, but not be limited to, changes in the Company's
portfolio of real estate investments, changes in interest rates and changes in
the debt and/or equity structure of the Company.
F-1
<PAGE> 23
<TABLE>
HEALTH AND REHABILITATION PROPERTIES TRUST
UNAUDITED ADJUSTED BALANCE SHEET
DECEMBER 31, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<CAPTION>
HISTORICAL ADJUSTMENTS
DECEMBER 31, 1993 (NOTES 1(A) TO (I), 2) AS ADJUSTED
----------------- ---------------------- -----------
<S> <C> <C> <C>
ASSETS
Real estate properties, at cost:
Land.................................. $ 33,450 $ 30,694(a),(f) $ 64,144
Buildings and improvements............ 330,988 250,682(a),(f) 581,670
Equipment............................. 20,373 14,805(a),(f) 35,178
----------------- ----------- -----------
384,811 296,181 680,992
Less accumulated depreciation......... 34,969 (4,325)(f) 30,644
----------------- ----------- -----------
349,842 300,506 650,348
Real estate mortgages and notes, net.... 157,281 960 (b),(f),(i 158,241
Cash and cash equivalents............... 13,887 (2,302)(a),(f),(h) 11,585
Interest and rent receivable............ 3,039 3,039
Deferred interest and finance costs,
net, and other assets................. 3,613 3,613
----------------- ----------- -----------
$ 527,662 $299,164 $ 826,826
================= =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings.............................. $ 73,000 $133,607 (a),(b),(i $ 206,607
Security deposits....................... 8,300 (4,500)(f) 3,800
Due to affiliate........................ 709 -- 709
Accounts payable and accrued expenses... 4,518 -- 4,518
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 and
55,722,500 Shares, as adjusted,
issued and outstanding............. 441 116(a),(h) 557
Additional paid-in capital............ 470,572 164,708(a),(h) 635,280
Cumulative net income................. 118,889 5,233 (b),(f),(i 124,122
Distributions of funds from
operations......................... (148,767) (148,767)
----------------- ----------- -----------
Total shareholders' equity.... 441,135 170,057 611,192
----------------- ----------- -----------
$ 527,662 $299,164 $ 826,826
================= =========== ===========
</TABLE>
F-2
<PAGE> 24
HEALTH AND REHABILITATION PROPERTIES TRUST
UNAUDITED ADJUSTED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
HISTORICAL
DECEMBER 31, ADJUSTMENTS
1993 (NOTES 1(A) TO (I), 2) AS ADJUSTED
------------ ---------------------- -----------
<S> <C> <C> <C>
REVENUES:
Rental income................. $ 46,069 $ 28,633(a),(c),(d),(e),(f) $74,702
Interest income............... 10,416 9,504(b),(c),(d),(e),(f),(h),(i) 19,920
------------ ---------- -----------
Total revenues........ 56,485 38,137 94,622
------------ ---------- -----------
EXPENSES:
Interest...................... 6,217 6,449(a),(b),(e),(f),(g),(h),(i) 12,666
Advisory fees................. 2,591 2,101(a),(b),(c),(d),(e),(f),(i) 4,692
Depreciation and
amortization............... 9,087 8,695(a),(c),(d),(e),(f),(i) 17,782
General and administrative.... 852 852
------------ ---------- -----------
Total expenses........ 18,747 17,245 35,992
------------ ---------- -----------
Income before extraordinary
item.......................... $ 37,738 $ 20,892 $58,630
============ =========== ===========
Average shares outstanding...... 34,407 55,723
============ ===========
Per share amounts:
Income before extraordinary
item....................... $ 1.10 $ 1.05
============ ===========
</TABLE>
F-3
<PAGE> 25
HEALTH AND REHABILITATION PROPERTIES TRUST
NOTES TO UNAUDITED ADJUSTED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1 -- BASES OF RECORDING THE ADJUSTMENTS
For the purposes of the unaudited adjusted balance sheet at December 31,
1993 and the unaudited adjusted statement of income for the year ended December
31, 1993, it has been assumed that the following transactions took place on
December 31, 1993 and January 1, 1993, respectively. The adjustments shown on
the face of the unaudited adjusted financial statements are the result of the
cumulative adjustments described in Notes 1(a) through (i) and are summarized in
Note 2.
(a) Marriott Transaction and Present Offering. On March 17, 1994, the
Company entered into an agreement with Host Marriott Corporation to acquire 14
retirement communities containing 3,932 residences or beds for $320,000, subject
to adjustment. The communities are triple net leased through December 31, 2013
to a wholly owned subsidiary of Marriott International, Inc. (Marriott). For
purposes of these unaudited adjusted financial statements, minimum annual rent
of $27,645 is used, which represents a full year's rent for each facility
whether or not the facility was in operation for a full year during 1993. No
amount is included in these statements for additional rent, which pursuant to
the leases will commence in 1994 at the rate of 4.5% of revenues in excess of
base amounts determined on a facility by facility basis. The Company anticipates
incurring $5,000 in fees and expenses related to the Marriott Transaction. The
leases are cross-defaulted and guaranteed by Marriott. The acquisition is
expected to close in June 1994.
<TABLE>
The Company has filed a Registration Statement with the Securities and
Exchange Commission relating to an offering of 11,000,000 Shares (plus a
1,650,000 Share underwriters' over-allotment option). Upon consummation of the
offering, the Company will receive approximately $156,626 net proceeds
($180,120, if the underwriters' over-allotment option is exercised in full). The
net proceeds have been applied in these statements as funding for the Marriott
Transaction. In connection with the execution of the purchase and sale agreement
for the Marriott Transaction, the Company provided a $25,000 cash deposit. The
remaining purchase price will be funded by the assumption of $17,600 of existing
debt bearing interest at 8.75% and with new debt at an assumed interest rate of
6%. Adjustments to the unaudited adjusted financial statements in respect of
these transactions are as follows:
<S> <C> <C> <C>
BALANCE SHEET: INCOME STATEMENT:
Land............................ $ 32,500 Rental Income................... $ 27,645
Buildings and improvements...... 276,250 Interest expense................ 9,086
Equipment....................... 16,250 Advisory fee.................... 1,625
Cash and cash equivalents....... (25,000) Depreciation and amortization... 8,260
Borrowings...................... 143,374
Common Shares................... 110
Additional paid-in capital...... 156,516
</TABLE>
(b) Mortgage Portfolios. On May 20, 1993, the Company acquired a portfolio
of mortgage loans from the Resolution Trust Corporation (RTC) for $72,411. The
loans, which are secured by first mortgages on 27 nursing homes, had a face
value of approximately $79,883 and have maturities ranging from 1996 to 2001.
The acquisition was funded using approximately $18,411 of cash with the balance
from a $54,000 borrowing under a repurchase facility. The repurchase facility
accrued interest at a floating rate based on LIBOR plus a premium and was repaid
in full on December 27, 1993. During March 1994, three of these loans with a
balance of $8,617 at March 1, 1994 and $8,662 at December 31, 1993 were paid in
full. Cumulative net income has been adjusted on the unaudited adjusted balance
sheet by $1,310 which represents the unamortized purchase price discount on the
loans prepaid so that the unaudited adjusted statement of income will reflect
only normal results of operations.
F-4
<PAGE> 26
HEALTH AND REHABILITATION PROPERTIES TRUST
NOTES TO UNAUDITED ADJUSTED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1 -- BASES OF RECORDING THE ADJUSTMENTS -- (CONTINUED)
On September 27, 1993, the Company acquired a portfolio of mortgage loans
from a group of institutional investors for $16,000. The loans, which are
secured by first mortgages on six nursing homes, had a face value of
approximately $18,200 and have maturities ranging from 1994 to 1997. The
acquisition was funded using approximately $4,100 of cash with the balance
borrowed under the repurchase facility referred to above.
<TABLE>
Adjustments to the unaudited adjusted financial statements in respect of
these transactions are as follows:
<S> <C> <C> <C>
BALANCE SHEET: INCOME STATEMENT:
Real estate mortgages and notes, Interest income............. $ 2,307
net........................... $(7,352) Interest expense............ 1,040
Borrowings....................... (8,662) Advisory fee................ 112
Cumulative net income............ 1,310
</TABLE>
<TABLE>
(c) SAFECO Portfolio. On June 4, 1993, the Company acquired for cash,
three long-term care facilities and related improvement loans for $5,778. The
facilities are subject to existing leases with terms expiring between 1995 and
2001. Adjustments to the unaudited adjusted financial statements in respect of
these transactions are as follows:
<S> <C>
INCOME STATEMENT:
Rental income....................... $313
Interest income..................... (42)
Advisory fee........................ 12
Depreciation and amortization....... 54
</TABLE>
<TABLE>
(d) Sun Healthcare. On November 1, 1993, the Company purchased a 143 bed
long-term care facility in Seattle, Washington for $5,125 from Greenery
Rehabilitation Group, Inc. (Greenery) and simultaneously leased it to Sun
Healthcare Group, Inc. (Sun). In addition, the Company and Sun agreed to extend
the lease arrangements on three nursing facilities that had been scheduled to
expire in May, 1997, through December, 2005. Minimum annual rent under the new
lease for the four properties is approximately $2,537. Adjustments to the
unaudited adjusted financial statements in respect of this transaction are as
follows:
<S> <C>
INCOME STATEMENT:
Rental income...................... $ 200
Interest income.................... (137)
Advisory fee....................... 21
Depreciation and amortization...... 109
</TABLE>
(e) Community Care of America. On December 30, 1993, the Company acquired
12 nursing homes and five retirement apartment complexes for $33,400 and leased
them to subsidiaries of Community Care of America, Inc. (together with its
subsidiaries, CCA). In addition, the Company has agreed to provide improvement
financing of $7,300 to CCA. The acquired facilities have been leased on a triple
net basis. The minimum annual rent from this transaction will be approximately
$3,814.
<TABLE>
Also, in connection with the CCA purchase-lease transaction described
above, the Company provided first mortgage financing on 14 nursing homes and one
retirement apartment complex for $19,600 and a $7,000 note secured by a first
lien on substantially all of the assets of the borrower at a weighted average
interest rate of 10.9%. The notes mature in December 2016. Minimum annual
interest from this transaction will be $2,909. Adjustments to the unaudited
adjusted financial statements in respect of these transactions are as follows:
<S> <C>
INCOME STATEMENT:
Rental income..................... $3,814
Interest income................... 2,909
Interest expense.................. 3,243
Advisory fee...................... 300
Depreciation and amortization..... 988
</TABLE>
F-5
<PAGE> 27
HEALTH AND REHABILITATION PROPERTIES TRUST
NOTES TO UNAUDITED ADJUSTED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(f) Horizon/Greenery Merger. On February 11, 1994, in connection with the
merger of 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 $3,906 on the sale of these
properties. Cumulative net income has been adjusted on the unaudited adjusted
balance sheet by the $3,906 gain on the sale of these properties to exclude this
gain so that the unaudited adjusted statement of income will reflect only normal
results of operations. In addition, Horizon has leased seven facilities
previously leased to Greenery, on substantially similar terms except the leases
were extended through 2005. The 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
(CSCII), 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. In addition, 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 will mature on December 31,
2000.
Adjustments to the unaudited adjusted financial statements in respect of
these transactions are as follows:
<TABLE>
<S> <C> <C> <C>
BALANCE SHEET: INCOME STATEMENT:
Land............................ $ (1,806) Rental income................... $(3,339)
Building and improvements....... (25,568) Interest income................. 1,082
Equipment....................... (1,445) Interest expense................ (524)
Accumulated depreciation........ (4,325) Advisory fee.................... (97)
Real estate mortgages and notes, Depreciation and amortization... (760)
net.......................... 9,400
Cash and cash equivalents....... 14,500
Security deposits............... (4,500)
Cumulative net income........... 3,906
</TABLE>
(g) January 1993 Share Offering. On January 20, 1993, the Company received
approximately $107,315 net proceeds from the public offering of 9,000,000 shares
of the Company's stock. The proceeds were used, in part, to repay outstanding
borrowings of $70,000 under the Company's term loans and $18,500 under the
Company's revolving line of credit. On February 17, 1993, the Company received
additional net proceeds of approximately $15,822 and issued 1,350,000 shares of
the Company's stock in connection with the exercise of the underwriters'
over-allotment option. Adjustments to the unaudited adjusted financial
statements in respect of these transactions are as follows:
<TABLE>
<S> <C>
INCOME STATEMENT:
Interest expense................... $(401)
</TABLE>
(h) December 1993 Share Offering. During the last quarter of 1993, the
Company raised approximately $121,655 net proceeds from the public offering of
9,000,000 Shares. The net proceeds were used to repay borrowings under the
Company's repurchase facility and to fund the Community Care of America
transaction. On January 19, 1994, the underwriters exercised their
over-allotment option for 601,500 additional Shares, resulting in additional net
proceeds to the Company of approximately $8,300. Adjustments to the unaudited
adjusted financial statements in respect of these transactions are as follows:
<TABLE>
<S> <C> <C> <C>
BALANCE SHEET: INCOME STATEMENT:
Cash and cash equivalents........ $8,198 Interest income.................. $ 519
Common Shares.................... 6 Interest expense................. (7,681)
Additional paid-in capital....... 8,192
</TABLE>
(i) Goldome Mortgage Portfolio. On November 19, 1993, the Company was
selected as the winning bidder for a portfolio of performing mortgage loans
originated by Goldome Credit Corporation. These loans
F-6
<PAGE> 28
HEALTH AND REHABILITATION PROPERTIES TRUST
NOTES TO UNAUDITED ADJUSTED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1 -- BASES OF RECORDING THE ADJUSTMENTS -- (CONTINUED)
have a combined principal balance of approximately $29,200, mature between 1994
and 1999, and are secured by mortgages on 18 nursing homes located in eight
states. The Company's bid was for approximately $27,800. On December 10, 1993,
the Company acquired for $26,600 mortgage loans with a combined principal
balance of $27,900 secured by 17 nursing homes. In February 1994, the Company
acquired the remaining mortgage loan. Also in February 1994 one loan with a
balance of $2,275 at February 15, 1994 and December 31, 1993 was paid in full.
Cumulative net income has been adjusted on the unaudited adjusted balance sheet
by $17 which represents the unamortized purchase price discount on the loan
prepaid so that the unaudited adjusted statement of income will reflect only
normal results of operations. Adjustments to the unaudited adjusted financial
statements in respect of these transactions are as follows:
<TABLE>
<S> <C>
BALANCE SHEET: INCOME STATEMENT:
Real estate mortgages and notes, Interest income.................. $2,866
net........................... $(1,088) Interest expense................. 1,686
Borrowings....................... (1,105) Advisory fee..................... 128
Cumulative net income............ 17 Depreciation and amortization.... 44
</TABLE>
<TABLE>
NOTE 2 -- SUMMARY OF ADJUSTMENTS
<CAPTION>
ADJUSTMENT LETTER
---------------------------------------------------------------------------------------------------
(A) (B) (C) (D) (E) (F) (G) (H) (I) TOTALS
-------- ------- ---- ---- ------ ------- ------ ------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET:
Land...................... $ 32,500 $(1,806) $ 30,694
Buildings and
improvements............ 276,250 (25,568) 250,682
Equipment................. 16,250 (1,445) 14,805
Less accumulated
depreciation............ (4,325) (4,325)
Real estate mortgages and
notes, net.............. $(7,352) 9,400 $(1,088) 960
Cash and cash
equivalents............. (25,000) 14,500 $8,198 (2,302)
Borrowings................ 143,374 (8,662) (1,105) 133,607
Security deposits......... (4,500) (4,500)
Common shares of
beneficial interest..... 110 6 116
Additional paid-in
capital................. 156,516 8,192 164,708
Cumulative net income..... 1,310 3,906 17 5,233
INCOME STATEMENT:
Rental income............. 27,645 $313 $200 $3,814 (3,339) 28,633
Interest income........... 2,307 (42) (137) 2,909 1,082 519 2,866 9,504
Interest expense.......... 9,086 1,040 3,243 (524) $ (401) (7,681) 1,686 6,449
Advisory fees............. 1,625 112 12 21 300 (97) 128 2,101
Depreciation and
amortization............ 8,260 54 109 988 (760) 44 8,695
</TABLE>
<TABLE>
NOTE 3 -- OTHER INFORMATION -- FUNDS FROM OPERATIONS
<CAPTION>
HISTORICAL
DECEMBER 31, 1993 AS ADJUSTED
----------------- -----------
<S> <C> <C>
Income before extraordinary item............................... $37,738 $58,630
Depreciation and amortization.................................. 9,087 17,782
Other non-cash charges......................................... 753 1,382
----------------- -----------
Funds from Operations.......................................... $47,578 $77,794
================= ===========
</TABLE>
F-7
<PAGE> 29
================================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE U.S. UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SHARES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<S> <C>
Additional Information................ 2
Incorporation of Certain Information
by Reference........................ 2
Summary............................... 3
Recent Developments................... 5
The Company........................... 7
Distributions......................... 8
Capitalization........................ 9
Use of Proceeds....................... 9
Investment and Financing Policy....... 10
Selected Financial Data............... 11
Properties............................ 12
The Lessees and the Mortgagors........ 13
Management............................ 14
Federal Income Tax and ERISA
Considerations...................... 15
Underwriting.......................... 16
Legal Matters......................... 18
Experts............................... 18
Unaudited Adjusted Financial
Statements.......................... F-1
</TABLE>
================================================================================
================================================================================
11,000,000 SHARES
HEALTH AND REHABILITATION
PROPERTIES TRUST
COMMON SHARES OF
BENEFICIAL INTEREST
------------------------
PROSPECTUS
------------------------
MERRILL LYNCH & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
PAINEWEBBER INCORPORATED
SMITH BARNEY SHEARSON INC.
MAY , 1994
================================================================================
<PAGE> 30
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS, DATED MAY 5, 1994
PROSPECTUS
- -----------------
11,000,000 SHARES
HEALTH AND REHABILITATION PROPERTIES TRUST
COMMON SHARES OF BENEFICIAL INTEREST
------------------------
Health and Rehabilitation Properties Trust (the "Company" or "HRP") is a
real estate investment trust which invests primarily in retirement communities,
assisted living centers, nursing homes and other long term care facilities. On
April 29, 1994, the last reported sale price for the Shares on the New York
Stock Exchange was $15 1/8.
Of the 11,000,000 Shares offered by the Company, 1,500,000 Shares are being
offered initially outside the United States and Canada by the International
Managers and 9,500,000 Shares are being offered in a concurrent offering in the
United States and Canada by the U.S. Underwriters (collectively, the
"Offerings").
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
================================================================================================
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.................. $ $ $
- ------------------------------------------------------------------------------------------------
Total(3)................... $ $ $
================================================================================================
<FN>
(1) The Company has agreed to indemnify the several International Managers
against certain liabilities, including liabilities under the Securities Act
of 1933. See "Underwriting".
(2) Before deducting expenses payable by the Company estimated at $598,349.
(3) The Company has granted the International Managers and the U.S. Underwriters
an option, exercisable by the U.S. Representatives for 30 days from the date
of this Prospectus, to purchase up to 1,650,000 additional Shares solely to
cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting".
</TABLE>
------------------------
The Shares offered hereby are offered by the several International
Managers, subject to prior sale, when, as and if issued to and accepted by them
and subject to approval of certain legal matters by counsel for the
International Managers, and to certain other conditions. The International
Managers reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the Shares
offered hereby will be made in New York, New York on or about May , 1994.
------------------------
MERRILL LYNCH INTERNATIONAL LIMITED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
PAINEWEBBER INTERNATIONAL
SMITH BARNEY SHEARSON INC.
BARCLAYS DE ZOETE WEDD LIMITED DEUTSCHE BANK
AKTIENGESELLSCHAFT
KLEINWORT BENSON SECURITIES NOMURA INTERNATIONAL PARIBAS CAPITAL MARKETS
------------------------
The date of this Prospectus is , 1994.
<PAGE> 31
FEDERAL INCOME TAX AND ERISA CONSIDERATIONS
The following description of certain Federal income tax matters and
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
considerations relating to the Company is qualified in its entirety by reference
to the more detailed description thereof contained in the Company's Annual
Report on Form 10-K, which is incorporated herein by reference. Sullivan &
Worcester, Boston, Massachusetts, has rendered its opinion that the discussion
in this section and in the Form 10-K in the sections captioned "Federal Income
Tax Considerations" and "ERISA Plans, Keogh Plans and Individual Retirement
Accounts" in all material respects is accurate and fairly summarizes the federal
income tax and ERISA issues which are material to an investment in the Shares
and that the opinions of counsel referred to in those sections represent
Sullivan & Worcester's opinions on those subjects. Specifically, subject to
qualifications and assumptions contained in its opinion and in the Form 10-K,
Sullivan & Worcester has opined to the effect (a) that the Company has been
organized in conformity with the requirements for federal tax qualifications as
a REIT, has qualified as a REIT for its 1987, 1988, 1989, 1990, 1991 and 1992
taxable years, and that the Company's current and anticipated investments and
its plan of operation will enable it to continue to meet the requirements for
federal tax qualification and taxation as a REIT and (b) that, under the "plan
assets" regulations promulgated by the Department of Labor under ERISA, the
Shares are publicly offered securities and the assets of the Company will not be
deemed to be "plan assets" under ERISA.
The Company is and intends to remain qualified as a REIT under the Internal
Revenue Code of 1986, as amended (the "Code"). As a REIT, the Company's net
income which is distributed as dividends to shareholders will be exempt from
Federal taxation. Distributions to the Company's shareholders generally will be
includable in their income; however, dividends distributed which are in excess
of current or accumulated earnings will be treated for tax purposes as a return
of capital to the extent of a shareholder's basis, and will reduce the basis of
shareholders' Shares. Approximately 26% of dividends distributed in calendar
1993 were treated as a return of capital.
The Company intends to conduct its affairs so that the assets of the
Company will not be deemed to be "plan assets" of any individual retirement
account, employee benefit plan subject to Title I of ERISA, or other qualified
retirement plan subject to Section 4975 of the Code which acquires its Shares.
The Company believes that, under present law, its distributions do not create so
called "unrelated business taxable income" to tax exempt entities such as
pension trusts, subject, however, to certain new rules which apply to pension
trusts holding more than 10% of the Shares.
SPECIAL TAX CONSIDERATIONS FOR FOREIGN SHAREHOLDERS
The rules governing United States income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and foreign trusts and
estates (collectively, "Non-U.S. Shareholders") are complex, and the following
discussion is intended only as a summary of such rules. Prospective Non-U.S.
Shareholders should consult with their own tax advisors to determine the impact
of Federal, state, and local income tax laws on an investment in the Company,
including any reporting requirements.
In general, a Non-U.S. Shareholder will be subject to regular United States
income tax with respect to its investment in the Company if such investment is
"effectively connected" with the Non-U.S. Shareholder's conduct of a trade or
business in the United States, or (subject to limited exceptions) if the
Non-U.S. Shareholder is an individual who is present in the United States for
183 days or more during the taxable year. A corporate Non-U.S. Shareholder that
receives income that is (or is treated as) effectively connected with a U.S.
trade or business may also be subject to the branch profits tax under Section
884 of the Code, which is payable in addition to regular United States corporate
income tax. The following discussion will apply to Non-U.S. Shareholders whose
investment in the Company is not so effectively connected.
A distribution by the Company that is not attributable to gain from the
sale or exchange by the Company of a United States real property interest and
that is not designated by the Company as a capital gain dividend will be treated
as an ordinary income dividend to the extent that it is made out of current or
accumulated earnings and profits. Generally, unless the dividend is effectively
connected with the Non-U.S. Shareholder's conduct of a trade or business, such a
dividend will be subject to a United States withholding tax equal to 30%
X-2
<PAGE> 32
of the gross amount of the dividend unless such withholding is reduced by an
applicable tax treaty (for example, the treaty between the United States and the
United Kingdom provides generally for a maximum rate of withholding of 15% on
dividends). A foreign governmental entity, such as a governmental pension plan,
may qualify for a complete exemption from withholding on such dividends. A
distribution of cash in excess of the Company's earnings and profits will be
treated first as a nontaxable return of capital that will reduce a Non-U.S.
Shareholder's basis in its shares (but not below zero) and then as gain from the
disposition of such shares, the tax treatment of which is described under the
rules discussed below with respect to disposition of shares. The Company is
required to withhold United States income tax at the rate of 30% on the gross
amount of any such distributions made to a Non-U.S. Shareholder unless (i) a
lower tax treaty applies and the required form evidencing eligibility for that
reduced rate is filed with the Company or (ii) the Non-U.S. Shareholder files
IRS Form 4224 with the Company claiming that the distribution is "effectively
connected" income. If it is subsequently determined that such distribution is,
in fact, in excess of current and accumulated earnings and profits, the Non-U.S.
Shareholder may seek a refund from the IRS.
For any year in which the Company qualifies as a REIT, distributions by the
Company that are attributable to gain from the sale or exchange of a United
States real property interest will be taxed to a Non-U.S. Shareholder in
accordance with the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, such distributions are taxed to a Non-U.S. Shareholder
as if such distributions were gains "effectively connected" with a United States
trade or business. Accordingly, a Non-U.S. Shareholder will be taxed at the
normal capital gain rates applicable to a U.S. Shareholder (subject to any
applicable alternative minimum tax and a special alternative minimum tax in the
case of nonresident alien individuals). Distributions subject to FIRPTA may also
be subject to a 30% branch profits tax in the hands of a foreign corporate
shareholder unless a treaty exemption from the branch profits tax is available.
The Company will be required to withhold from distributions to Non-U.S.
Shareholders, and remit to the IRS, 35% of the amount of any distribution that
could be designated as a capital gain dividend.
Tax treaties do not reduce the Company's withholding obligations under
FIRPTA. If the amount of tax withheld by the Company with respect to a
distribution to a Non-U.S. Shareholder exceeds the shareholder's United States
liability with respect to such distribution, the Non-U.S. Shareholder may file
for a refund of such excess from the IRS. It should be noted that the 35%
withholding tax rate on capital gain dividends corresponds to the maximum income
tax rate applicable to corporations but is higher than the 28% maximum rate on
capital gains of individuals.
If the Shares do not constitute a "United States real property interest"
within the meaning of FIRPTA, a sale of the Shares by a Non-U.S. Shareholder
generally will not be subject to United States taxation unless (i) investment in
the Shares is effectively connected with the Non-U.S. Shareholder's United
States trade or business, in which case, as discussed above, the Non-U.S.
Shareholder would be subject to the same treatment as U.S. Shareholders on such
gain or (ii) the Non-U.S. Shareholder is a nonresident alien individual who was
present in the United States for 183 days or more during the taxable year, is
not treated as a resident alien by reason of such presence, and has a "tax home"
in the United States, in which case the nonresident alien individual will be
subject to a 30% tax on the individual's capital gains.
The Shares will not constitute a United States real property interest if
the Company is a "domestically controlled REIT". A domestically controlled REIT
is a REIT in which at all times during a specified testing period less than 50%
in value of its shares is held directly or indirectly by Non-U.S. Shareholders.
It is currently anticipated that the Company will be a domestically controlled
REIT, and therefore that the sale of Shares will not be subject to taxation
under FIRPTA. However, because the Shares will be publicly traded, no assurance
can be given that the Company will continue to be a domestically controlled
REIT. If the Company did not constitute a domestically controlled REIT, a sale
of Shares by a Non-U.S. Shareholder would be subject to tax under FIRPTA unless
the Shares were "regularly traded" (as defined by applicable Treasury
Regulations) on an established securities market (e.g. the New York Stock
Exchange, on which the Shares are listed) and the selling Non-U.S. Shareholder
had at no time during the preceding five years held more than five percent of
the outstanding Shares of the Company. If the gain on the sale of the Shares
were subject to taxation under FIRPTA, the Non-U.S. Shareholder would be subject
to the same treatment as a U.S. Shareholder with respect to such gain (subject
to applicable alternative minimum tax and a special alternative
X-3
<PAGE> 33
minimum tax in the case of nonresident alien individuals). In any event, a
purchaser of Shares from a Non-U.S. Shareholder will not be required under
FIRPTA to withhold on the purchase price if the purchased Shares are "regularly
traded" on an established securities market or if the Company is a domestically
controlled REIT. Otherwise, under FIRPTA, the purchaser of Shares may be
required to withhold 10% of the purchase price and to remit such amount to the
IRS.
FEDERAL ESTATE TAX
Shares owned or treated as owned by an individual who is not a citizen or
resident (as defined for United States federal estate tax purposes) of the
United States at the time of death will be includable in the individual's gross
estate for United States federal estate tax purposes unless an applicable estate
tax treaty provides otherwise.
BACKUP WITHHOLDING AND INFORMATION REPORTING REQUIREMENTS
The Company must report annually to the IRS and to each Non-U.S.
Shareholder the amount of dividends paid to, and the tax withheld with respect
to such holder. These information reporting requirements apply regardless of
whether withholding was reduced or eliminated by an applicable tax treaty.
Copies of these information returns may also be made available under the
provisions of a specific treaty or agreement to the tax authorities in the
country in which the Non-U.S. Shareholder resides. United States backup
withholding tax (which generally is a withholding tax imposed at the rate of 31%
on certain payments to persons that fail to furnish the information required
under the United States information reporting requirements) will generally not
apply to dividends paid on Shares to a Non-U.S. Shareholder at an address
outside the United States.
The payment of the proceeds from the disposition of Shares to or through
the United States office of a broker will be subject to information reporting
and backup withholding at a rate of 31% unless the owner, under penalties of
perjury, certifies, among other things, its status as a Non-U.S. Shareholder, or
otherwise establishes an exemption. The payment of the proceeds from the
disposition of Shares to or through a non-U.S. office of a broker generally will
not be subject to backup withholding and information reporting. In the case of
proceeds from a disposition of Shares paid to or through a non-U.S. office of a
U.S. broker or paid to or through a non-U.S. office of a non-U.S. broker that is
(i) a "controlled foreign corporation" for United States federal income tax
purposes or (ii) a person 50% or more of whose gross income from all sources for
a certain three-year period was effectively connected with a United States trade
or business, (a) backup withholding will not apply unless the broker has actual
knowledge that the owner is not a Non-U.S. Shareholder, and (b) information
reporting will not apply if the broker has documentary evidence in its files
that the owner is a Non-U.S. Shareholder (unless the broker has actual knowledge
to the contrary).
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Shareholder will be refunded (or credited against the Non-U.S.
Shareholder's United States federal income tax liability, if any), provided that
the required information is furnished to the IRS.
EACH PROSPECTIVE PURCHASER OF THE SHARES OFFERED HEREBY IS ADVISED TO
CONSULT HIS OWN PROFESSIONAL ADVISOR REGARDING THE SPECIFIC FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX AND ERISA CONSEQUENCES TO HIM OF THE PURCHASE,
OWNERSHIP AND SALE OF THE SHARES OFFERED HEREBY.
X-4
<PAGE> 34
UNDERWRITING
The Managers named below (the "International Managers"), for whom Merrill
Lynch International Limited, Donaldson, Lufkin & Jenrette Securities
Corporation, PaineWebber International (U.K.) Ltd. and Smith Barney Shearson
Inc. are acting as representatives (the "Lead Managers"), have severally agreed,
subject to the terms and conditions of the International Purchase Agreement (the
"International Purchase Agreement") with the Company relating to 1,500,000
Shares offered outside the United States and Canada (the "International
Offering"), to purchase from the Company the respective number of Shares set
forth opposite their names below.
<TABLE>
<CAPTION>
NUMBER
INTERNATIONAL MANAGER OF SHARES
---------
<S> <C>
Merrill Lynch International Limited...............................
Donaldson, Lufkin & Jenrette Securities Corporation...............
PaineWebber International (U.K.) Ltd..............................
Smith Barney Shearson Inc. .......................................
Banque Paribas....................................................
Barclays de Zoete Wedd Limited....................................
Deutsche Bank Aktiengesellschaft..................................
Kleinwort Benson Limited..........................................
Nomura International plc..........................................
---------
Total................................................ 1,500,000
=========
</TABLE>
The Company has also entered into the U.S. Purchase Agreement (the "U.S.
Purchase Agreement") with certain underwriters (the "U.S. Underwriters"), for
whom Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), Donaldson,
Lufkin & Jenrette Securities Corporation, PaineWebber Incorporated and Smith
Barney Shearson Inc. are acting as representatives (the "U.S. Representatives"),
relating to the Shares offered in the United States and Canada (the "U.S.
Offering"). Subject to the terms and conditions of the U.S. Purchase Agreement,
the Company has agreed to sell to the U.S. Underwriters, and the U.S.
Underwriters have severally agreed to purchase, an aggregate of 9,500,000
Shares.
Under certain circumstances, the commitments of non-defaulting
International Managers and U.S. Underwriters may be increased. The initial
public offering price per Share and the underwriting discount per Share are
identical under the International Purchase Agreement and the U.S. Purchase
Agreement.
In the International Purchase Agreement, the several International Managers
have agreed, subject to the terms and conditions set forth therein, to purchase
all of the Shares being sold pursuant to such agreement if any of the Shares
being sold pursuant to such agreement are purchased and in the U.S. Purchase
Agreement the several U.S. Underwriters have agreed, subject to the terms and
conditions set forth therein, to purchase all of the Shares being sold pursuant
to such agreement if any of the Shares being sold pursuant to such agreement are
purchased. The closings with respect to the sale of Shares to be purchased by
the International Managers and the U.S. Underwriters are conditioned upon one
another.
The Lead Managers have advised the Company that the International Managers
propose to initially offer the Shares to the public at the public offering price
set forth on the cover page of this Prospectus and to certain dealers at such
price less a concession not in excess of $ per Share. The International
Managers may allow, and such dealers may reallow, a discount not in excess of
$ per Share to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
The Company has granted to the International Managers and the U.S.
Underwriters an option, exercisable by the U.S. Representatives for 30 days from
the date of this Prospectus, to purchase up to an additional 1,650,000 Shares,
solely to cover over-allotments, if any, at a price per Share equal to the
initial public offering price less the underwriting discount set forth on the
cover page of this Prospectus, and, with respect to any such Shares issued after
the record date for the quarterly dividend for the period ended March 31, 1994,
less an amount equal to such dividend. If the U.S. Representatives exercise such
option, each International Manager and U.S. Underwriter will, subject to certain
conditions, have a firm commitment to
X-5
<PAGE> 35
purchase approximately the same percentage of such option Shares which the
number of Shares to be purchased initially by it bears to 11,000,000 Shares.
The International Managers and the U.S. Underwriters have entered into an
Intersyndicate Agreement (the "Intersyndicate Agreement") that provides for
coordination of their activities. Pursuant to the Intersyndicate Agreement,
sales may be made between the International Managers and the U.S. Underwriters
of such number of Shares as may be mutually agreed. The price of any Shares so
sold shall be the initial public offering price, less an amount not greater than
the selling concession.
Under the terms of the Intersyndicate Agreement, the International Managers
and any dealer to whom they sell Shares will not offer to sell or sell Shares to
any U.S. or Canadian person or to any person they believe intends to resell to
any U.S. or Canadian person, and the U.S. Underwriters and any dealer to whom
they sell Shares will not offer to sell or sell Shares to any non-U.S. or
non-Canadian person or to any person they believe intends to resell to any
non-U.S. or non-Canadian person, except, in each case, for transactions pursuant
to the Intersyndicate Agreement.
Each International Manager has agreed that it has not offered or sold and
will not offer or sell in the United Kingdom, by means of any document, any
Shares offered by the Company other than to persons whose ordinary business it
is to buy or sell shares or debentures, whether as principal or agent (except in
circumstances which do not constitute an offer to the public within the meaning
of the Companies Act 1985).
Each International Manager has agreed that it has complied and will comply
with all applicable provisions of the Financial Services Act 1986 with respect
to anything done by it in relation to the Shares offered by the Company in, from
or otherwise involving the United Kingdom. Each International Manager has also
agreed that it has only issued or passed on and will only issue or pass on to
any person in the United Kingdom any document received by it in connection with
the issue of the Shares offered by the Company if that person is of a kind
described in Article 9(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1988 (as amended) or is a person to whom the
document may otherwise lawfully be issued or passed on.
The Company has agreed to indemnify the several International Managers and
the several U.S. Underwriters against certain liabilities, including liabilities
under the Securities Act.
The Company and the Advisor have each agreed that, for a period of 90 days
after the date of this Prospectus, it will not, without the prior consent of
MLPF&S, issue, sell, contract to sell, grant any option for the sale of, or
otherwise dispose of any Shares, other than the Shares being sold in connection
with the transactions discussed herein, pursuant to the Company's 1992 Incentive
Share Award Plan, and Shares issued upon exercise of any outstanding options.
The Company has agreed that, during such 90 day period, it will not, without the
prior consent of MLPF&S, terminate, modify or waive any provision in any
agreement to which it is a party that restricts or limits the transferability of
any Shares.
MLPF&S will be entitled to an advisory fee from the Company upon
consummation of the Marriott Transaction. As described under "Recent
Developments -- The Marriott Transaction", the Company is also negotiating with
MLMCI, a subsidiary of MLPF&S, for provision of the MLMCI Facility which may be
used in connection with the Company's consummation of the Marriott Transaction.
MLMCI will be entitled to a fee upon consummation of the Marriott Transaction
and additional fees if the MLMCI Facility is consummated. In addition, MLPF&S
and MLMCI are both presently entitled to reimbursement from the Company for
their respective out-of-pocket expenses incurred in advising and assisting the
Company in connection with the Marriott Transaction.
X-6
<PAGE> 36
===============================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR THE INTERNATIONAL MANAGERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SHARES IN
ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
<TABLE>
TABLE OF CONTENTS
<CAPTION>
PAGE
----
<S> <C>
Additional Information............... 2
Incorporation of Certain Information
by Reference....................... 2
Summary.............................. 3
Recent Developments.................. 5
The Company.......................... 7
Distributions........................ 8
Capitalization....................... 9
Use of Proceeds...................... 9
Investment and Financing Policy...... 10
Selected Financial Data.............. 11
Properties........................... 12
The Lessees and the Mortgagors....... 13
Management........................... 14
Federal Income Tax and ERISA
Considerations..................... 15
Underwriting......................... 18
Legal Matters........................ 20
Experts.............................. 20
Unaudited Adjusted Financial
Statements......................... F-1
</TABLE>
===============================================================================
===============================================================================
11,000,000 SHARES
HEALTH AND REHABILITATION
PROPERTIES TRUST
COMMON SHARES OF
BENEFICIAL INTEREST
------------------------
PROSPECTUS
------------------------
MERRILL LYNCH INTERNATIONAL
LIMITED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
PAINEWEBBER INTERNATIONAL
SMITH BARNEY SHEARSON INC.
BARCLAYS DE ZOETE WEDD LIMITED
DEUTSCHE BANK
AKTIENGESELLSCHAFT
KLEINWORT BENSON SECURITIES
NOMURA INTERNATIONAL
PARIBAS CAPITAL MARKETS
MAY , 1994
===============================================================================
X-7
<PAGE> 37
APPENDIX TO ELECTRONIC FORMAT DOCUMENT
PAGE 3:
Pie chart
A pie chart depicting the percentage of the Company's investments which
will be in Properties operated by Marriott International (38%); Other Public
Companies (Horizon Healthcare, GranCare, Sun Healthcare, Integrated Health,
Beverly Enterprises and Hillhaven) (31%); and 30 Private Companies (31%).
Dividend chart
A bar graph depicting HRP Dividend Growth: 1987 - $1.06; 1988 - $1.12;
1989 - $1.14; 1990 - $1.17; 1991 - $1.23; 1992 - $1.26; 1993 - $1.30; Quarter
ended March 31, 1994 annualized - $1.32.
PAGE 7:
Map
A map of the United States with the states listed immediately below the map
shaded and with stars indicating the locations of the Marriott Properties (5 in
Florida, 3 in Virginia, 2 in Arizona, 1 each in California, Illinois, Maryland
and Texas).
PAGE 10:
Pie charts
Two pie charts depicting the HRP Capital Structure before the sale of
Shares and the Marriott Transaction: debt (14%) and equity (86%); after the sale
of Shares and Marriott Transaction: debt (25%) and equity (75%).
PAGE 12:
Pie charts
Two pie charts depicting the division of HRP's portfolio by type of
property: Nursing homes, assisted living and retirement communities (97%) and
two psychiatric facilities (3%); and by type of investment: purchase and lease
(81%) and mortgages (19%).
<PAGE> 38
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
Set forth below is an estimate of the amount of fees and expenses to be
incurred in connection with the issuance and distribution of the Shares
registered hereby, other than underwriting discounts and commissions.
<TABLE>
<S> <C>
Registration Fee Under Securities Act............................. $ 67,887
NASD Filing Fee................................................... 20,187
Blue Sky Fees and Expenses........................................ 25,000
Legal Fees........................................................ 200,000
Accounting Fees................................................... 125,000
Printing and Engraving............................................ 75,000
Listing Application Fees.......................................... 44,275
Transfer Agent Fees............................................... 1,000
Miscellaneous Fees................................................ 40,000
---------
Total................................................... $ 598,349
=========
<FN>
- ---------------
* All expenses are estimated except the SEC registration fee and the NASD filing fee.
</TABLE>
ITEM 15. INDEMNIFICATION OF TRUSTEES AND OFFICERS.
Section 7.4 of the Company's Declaration of Trust, filed as Exhibit 3.1 to
this Registration Statement, which provides for indemnification of Trustees and
officers of the Company, is hereby incorporated by reference.
Reference is made to Section 7 of each Purchase Agreement (Exhibits 1.1 and
1.2 hereto) with respect to certain provisions for indemnification by the
Underwriters of the Company, Trustees, officers and controlling persons under
certain circumstances.
<TABLE>
ITEM 16. EXHIBITS.
<S> <C>
1.1 Form of U.S. Purchase Agreement.(***)
1.2 Form of International Purchase Agreement.(***)
3.1 Declaration of Trust, as amended.(1)
3.2 By-Laws.(2)
5.1 Opinion and Consent of Sullivan & Worcester regarding legality.(*)
5.2 Opinion and Consent of Piper & Marbury.(*)
8.1 Opinion and Consent of Sullivan & Worcester regarding tax matters.(*)
23.1 Consent of Sullivan & Worcester (included in their opinions to be filed as Exhibits
5.1 and 8.1 to this Registration Statement).
23.2 Consent of Piper & Marbury (included in their opinion to be filed as Exhibit 5.2 to
this Registration Statement).
23.3 Consent of Ernst & Young (included as page II-3 of this Registration Statement).(*)
23.4 Consents of Arthur Andersen & Co. (included as pages II-4 and II-5 of this
Registration Statement).(*)
</TABLE>
II-1
<PAGE> 39
<TABLE>
<C> <S>
23.5 Consent of KPMG Peat Marwick (included as page II-5 of this Registration
Statement).(*)
24 Powers of Attorney.(***)
99 Computation of Average Shares Outstanding.(*)
<FN>
- ---------------
(*) Filed herewith.
(***) Previously filed.
(1) Incorporated by reference to the Company's Registration Statement No.
33-71422 on Form S-3 dated November 9, 1993 and amendment thereto.
(2) Incorporated by reference to the Company's Registration Statement No.
33-9412 on Form S-11 dated October 10, 1986 and amendments thereto.
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(b)(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of a registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE> 40
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 3 to the Registration Statement (Form S-3, No. 33-52875) and
related Prospectus of Health and Rehabilitation Properties Trust for the
registration of 12,650,000 of its common shares of beneficial interest and to
the incorporation by reference therein of (a) our report dated February 11, 1994
with respect to the financial statements and schedules of Health and
Rehabilitation Properties Trust included in its Annual Report (Form 10-K) for
the year ended December 31, 1993, (b) our report dated December 30, 1993 with
respect to the consolidated financial statements and schedules of Greenery
Rehabilitation Group, Inc. included in Greenery's Annual Report (Form 10-K) for
the year ended September 30, 1993, and (c) our report dated March 4, 1994 with
respect to the consolidated financial statements and schedules of GranCare, Inc.
included in GranCare's Annual Report (Form 10-K) for the year ended December 31,
1993, all filed with the Securities and Exchange Commission.
ERNST & YOUNG
Boston, Massachusetts
May 2, 1994
II-3
<PAGE> 41
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated July 23, 1993
(except with respect to the matters discussed in Note 15, as to which the date
is August 2, 1993), included in Horizon Healthcare Corporation's Form
10-K/A -- Amendment No. 3 for the year ended May 31, 1993, dated October 5,
1993, and to all references to our Firm included in this registration statement.
ARTHUR ANDERSEN & CO.
Albuquerque, New Mexico
May 2, 1994
II-4
<PAGE> 42
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement (file number 33-52875) of our report
dated January 28, 1994 included in the Marriott International, Inc. Form 10-K
for the year ended December 31, 1993 and to all references to our Firm included
in this registration statement.
ARTHUR ANDERSEN & CO.
Washington, D.C.
April 29, 1994
II-5
<PAGE> 43
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Stockholders
Horizon Healthcare Corporation:
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK
Albuquerque, New Mexico
May 2, 1994
II-6
<PAGE> 44
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment to
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Boston, Commonwealth of Massachusetts on May 5,
1994.
HEALTH AND REHABILITATION
PROPERTIES TRUST
BY: DAVID J. HEGARTY
----------------------------------
David J. Hegarty,
Executive Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement on Form S-3 has been signed by the following persons
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
MARK J. FINKELSTEIN* President and Chief May 5, 1994
- --------------------------------------------- Executive Officer
Mark J. Finkelstein
DAVID J. HEGARTY Executive Vice President May 5, 1994
- --------------------------------------------- and Chief Financial and
David J. Hegarty Accounting Officer
JOHN L. HARRINGTON* Trustee May 5, 1994
- ---------------------------------------------
John L. Harrington
ARTHUR G. KOUMANTZELIS* Trustee May 5, 1994
- ---------------------------------------------
Arthur G. Koumantzelis
REV. JUSTINIAN MANNING, C.P.* Trustee May 5, 1994
- ---------------------------------------------
Rev. Justinian Manning, C.P.
BARRY M. PORTNOY* Trustee May 5, 1994
- ---------------------------------------------
Barry M. Portnoy
GERARD M. MARTIN* Trustee May 5, 1994
- ---------------------------------------------
Gerard M. Martin
*By: DAVID J. HEGARTY
-----------------------------------------
David J. Hegarty
Attorney-in-fact
</TABLE>
II-7
<PAGE> 1
EXHIBIT 5.1
SULLIVAN & WORCESTER
One Post Office Square
Boston, Massachusetts 02109
May 2, 1994
Health and Rehabilitation Properties Trust
400 Centre Street
Newton, MA 02158
Ladies and Gentlemen:
In connection with the registration by Health and Rehabilitation
Properties Trust, a Maryland real estate investment trust (the "Company"), of
12,650,000 Common Shares of Beneficial Interest, $.01 per share, of the Company
(the "Shares"), the following opinion is furnished to you to be filed with the
Securities and Exchange Commission as Exhibit 5.1 to the Company's Registration
Statement (the "Registration Statement") on Form S-3, File No. 33-52875, under
the Securities Act of 1933, as amended (the "Act").
We have acted as counsel for the Company in connection with
preparation of the Registration Statement, and we have examined originals or
copies, certified or otherwise identified to our satisfaction, of the
Registration Statement, the draft U.S. Purchase Agreement among the Company and
Merrill Lynch & Co., Donaldson, Lufkin & Jenrette Securities Corporation,
PaineWebber Incorporated and Smith Barney Shearson Inc., as representatives of
the U.S. underwriters, filed as Exhibit 1.1 to the Registration Statement (the
"U.S. Agreement"), the draft International Purchase Agreement among the Company
and Merrill Lynch International Limited, Donaldson, Lufkin & Jenrette
Securities Corporation, PaineWebber International (U.K.) LTD., and Smith Barney
Shearson Inc., as lead managers of the international managers, filed as Exhibit
1.2 to the Registration Statement (the "International Agreement"), corporate
records, certificates and statements of officers and accountants of the Company
and of public officials, and such other documents as we have considered
necessary in order to furnish the opinion hereinafter set forth. We have
further assumed that the Share price will be determined by the pricing
committee of the Board of Trustees of the Company in accordance with the
parameters established by the Board of Trustees.
<PAGE> 2
Health and Rehabilitation Properties Trust
May 2, 1994
Page 2
We are members of the bar of The Commonwealth of Massachusetts.
Accordingly, we do not purport to be expert on or generally familiar with and
we express no opinion with respect to the laws of any state other than The
Commonwealth of Massachusetts or of any country other than The United States of
America. We have, with your consent, rendered our opinions herein in regard to
certain matters of Maryland law relating to the Shares solely in reliance on,
and solely to the extent covered by, the opinion of Piper & Marbury, a copy of
which is attached hereto.
Based on and subject to the foregoing, we are of the opinion that,
when the Registration Statement has become effective under the Act, upon
issuance and delivery of certificates for the Shares to the underwriters
against payment therefor in accordance with the determination of the pricing
committee of the Board of Trustees and the terms of the U.S. Agreement and the
International Agreement, the Shares will be duly authorized, validly issued,
fully paid and non-assessable by the Company, with no personal liability
attaching to the holders of the Shares except as described in the Company's
Registration Statement on Form 8-A dated November 8, 1986, as amended by Form 8
dated July 30, 1991, and incorporated by reference into the Prospectuses
forming a part of the Registration Statement.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the Prospectuses
forming a part of the Registration Statement. In giving such consent, we do
not thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Act or under the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
Very truly yours,
SULLIVAN & WORCESTER
<PAGE> 1
EXHIBIT 5.2
PIPER & MARBURY
36 South Charles Street
Baltimore, Maryland 21201-3010
May 2, 1994
Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109
Ladies and Gentlemen:
In connection with the registration by Health and Rehabilitation
Properties Trust, a Maryland real estate investment trust (the "Company"), of
up to 14,375,000 Common Shares of Beneficial Interest, $.01 per share, of the
Company (the "Shares"), the following opinion is furnished to you to be filed
with the Securities and Exchange Commission as Exhibit 5.2 to the Company's
Registration Statement, as amended (the "Registration Statement") on Form S-3,
File No. 33-52875, under the Securities Act of 1933, as amended (the "Act").
We have acted as special Maryland counsel for the Company in
connection with matters of Maryland law relevant to preparation of the
Registration Statement and we have examined originals or copies, certified or
otherwise identified to our satisfaction, of (i) the Amended and Restated
Declaration of Trust dated December 23, 1986 as further amended on September
28, 1987, July 23, 1992 and August 4, 1993; (ii) the forms of purchase
agreement among the Company and Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Donaldson, Lufkin & Jenrette Securities
Corporation, PaineWebber Incorporated and Smith Barney Shearson Inc. as
representatives of the underwriters, filed as Exhibits 1.1 and 1.2 to the
Registration Statement (the "Purchase Agreements"); (iii) resolutions adopted
by a unanimous written consent of the Board of Trustees of the Company dated
March 28, 1994; (iv) a Certificate of Good Standing issued by the Maryland
State Department of Assessments and Taxation dated May 2, 1994; (v) the
Certificate of the Secretary of the Company dated the date hereof (the
"Certificate"), and (vi) such other documents as we have considered necessary
in order to furnish the opinion hereinafter set forth.
<PAGE> 2
Sullivan & Worcester
May 2, 1994
Page 2
In rendering this opinion, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies and the authenticity of the originals of such copies. We
have further assumed that the price for the Shares will be determined by the
pricing committee of the Board of Trustees in accordance with the parameters
established by the Board of Trustees.
The opinions expressed below are limited to the law of Maryland,
provided, however, that we express no opinion as to the application of Maryland
securities laws.
Based upon and subject to the foregoing, we are of the opinion that
when the Registration Statement has become effective under the Act, upon
issuance and delivery of the Shares to the underwriters against payment
therefor in accordance with the determination of the pricing committee of the
Board of Trustees and the terms of the Purchase Agreements, the Shares will be
duly authorized, validly issued, fully paid and nonassessable by the Company,
with no personal liability attaching to the holders of the Shares except as
described in the Company's Registration Statement on Form 8-A dated November 8,
1986, as amended by Form 8 dated July 30, 1991 and incorporated by reference
into the Prospectuses forming a part of the Registration Statement.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the Prospectuses
forming a part of the Registration Statement. We further consent to the
reliance on this opinion by your firm in rendering its opinion to the Company.
In giving such consent, we do not hereby admit that we come within the category
of persons whose consent is required under Section 7 of the Act or under the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.
Very truly yours,
PIPER & MARBURY
<PAGE> 1
EXHIBIT 8.1
SULLIVAN & WORCESTER
One Post Office Square
Boston, Massachusetts 02109
May 5, 1994
Health and Rehabilitation Properties Trust
400 Centre Street
Newton, MA 02158
Ladies and Gentlemen:
In connection with the registration by Health and Rehabilitation
Properties Trust, a Maryland real estate investment trust (the "Company"), of
12,650,000 Common Shares of Beneficial Interest, $.01 per share, of the Company
(the "Shares"), the following opinion is furnished to you to be filed with the
Securities and Exchange Commission as Exhibit 8.1 to the Company's Registration
Statement on Form S-3, File No. 33-52875 (the "Registration Statement"), under
the Securities Act of 1933, as amended (the "Act").
We have acted as counsel for the Company in connection with the
Registration Statement and we have examined originals or copies, certified or
otherwise identified to our satisfaction, of the Registration Statement, the
draft U.S. Purchase Agreement among the Company and Merrill Lynch & Co.,
Donaldson, Lufkin & Jenrette Securities Corporation, PaineWebber Incorporated
and Smith Barney Shearson Inc., as representatives of the U.S. underwriters,
filed as Exhibit 1.1 to the Registration Statement (the "U.S. Agreement"), the
draft International Purchase Agreement among the Company and Merrill Lynch
International Limited, Donaldson, Lufkin & Jenrette Securities Corporation,
PaineWebber International (U.K.) LTD., and Smith Barney Shearson Inc., as lead
managers of the international managers, filed as Exhibit 1.2 to the
Registration Statement (the "International Agreement"), corporate records,
certificates and statements of officers and accountants of the Company and of
public officials, and such other documents as we have considered relevant and
necessary in order to furnish the opinion hereinafter set forth. Specifically,
and without limiting the generality of the foregoing, we have reviewed
Amendment No. 2 to the Registration Statement dated May 5, 1994 and the
prospectuses dated May 5, 1994 (the "Prospectuses") which forms a part of the
Registration Statement, the Company's Declaration of Trust and By-Laws, and
the Advisory Agreement (as defined in the Prospectuses). We have reviewed the
sections in the Prospectuses captioned "Federal Income Tax and ERISA
Considerations" and the sections in the Company's Annual Report on Form 10-K
for the year ended December 31, 1993, as amended (the "Form 10-K"), captioned
"Federal Income Tax Considerations" and "ERISA Plans, Keogh Plans and
Individual Retirement Accounts", and we have prepared the opinions of counsel
referred to in such sections. With respect to all questions of fact on which
such opinions are based, we have assumed the accuracy and completeness of and
have relied on the information set forth in the Prospectuses and in the
documents incorporated therein by reference, and on representations made to us
by the Trustees. We have not independently verified such information; nothing
has come to our attention, however, which would lead us to believe that we are
not entitled to rely on such information.
The opinion set forth below is based upon the Internal Revenue Code of
1986, as amended, the Treasury Regulations issued thereunder, administrative
interpretations thereof and judicial decisions with respect thereto, all as of
the date hereof (collectively the "Tax Laws") and upon the Employment
Retirement Income Security Act of 1974, as amended, the Department of Labor
regulations issued thereunder, administrative interpretations thereof and
judicial decisions with respect thereto, all as of the date hereof
(collectively, the "ERISA Laws"). No assurance can be given that the Tax Laws
or the ERISA Laws will not change. In rendering the opinions set forth in the
Form 10-K which are incorporated by reference into the Prospectuses, we have
made certain assumptions and expressed certain conditions and qualifications,
all of which assumptions, conditions and qualifications are incorporated herein
by reference. We have also assumed with your permission that the closing of
the purchase and sale of the Shares will occur as described in the
Prospectuses.
<PAGE> 2
Health and Rehabilitation Properties Trust
May 2, 1994
Page 2
Based upon and subject to the foregoing, we are of the opinion that
the discussions with respect to federal income tax matters in the sections of
the Prospectuses captioned "Federal Income Tax and ERISA Considerations" and in
the sections of the Form 10-K captioned "Federal Income Tax Considerations" and
"ERISA Plans, Keogh Plans and Individual Retirement Accounts", in all material
respects are accurate and fairly summarize the federal income tax issues and
ERISA Laws issues which are material to an investment in the Shares, and hereby
confirm that the opinions of counsel referred to in said sections represent our
opinions on the subject matter thereof.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the Prospectuses
forming a part of the Registration Statement. In giving such consent, we do
not thereby admit that we come within the category of persons whose consent is
required under Section 7 of the Act or under the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
Very truly yours,
SULLIVAN & WORCESTER
<PAGE> 1
<TABLE>
Exhibit 99
Average shares outstanding for 1993 and as adjusted as shown
in the unaudited adjusted financial statements have been
calculated as follows:
<CAPTION>
Average Shares Outstanding for 1993 (000's)
<S> <C>
Balance January 1, 1993 26,764
January 2, 1993 2,000 shares redeemed (1,994)
January 27, 1993 9,000 shares issued 8,334
February 17, 1993 1,350 shares issued 1,176
June 29, 1993 8 shares issued 4
December 27, 1993 9,000 shares issued 123
------
34,407
======
As Adjusted Average Shares (000's)
Balance December 31, 1993 44,121.5
January 19, 1994 Over-allotment option 601.5
New shares to be issued 11,000
------
55,723
======
</TABLE>
