<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
Health and Rehabilitation Properties Trust
(Name of Registrant as Specified In Its Charter)
Health and Rehabilitation Properties Trust
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act
Rule 0-11:
4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and state how it
was determined.
/X/ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $125
2) Form, Schedule or Registration Statement No.: Schedule 14A
3) Filing Party: Health and Rehabilitation Properties Trust
4) Date Filed: March 7, 1994
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<PAGE> 2
HEALTH AND REHABILITATION PROPERTIES TRUST
400 CENTRE STREET
NEWTON, MASSACHUSETTS 02158
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 1994
To the Shareholders of
HEALTH AND REHABILITATION PROPERTIES TRUST
Notice is hereby given that the Annual Meeting of Shareholders of Health
and Rehabilitation Properties Trust (the "Company") will be held at 9:30 A.M. on
Tuesday, May 17, 1994, at State Street Bank and Trust Company, 225 Franklin
Street, 33rd Floor, Boston, Massachusetts, for the following purposes:
1. To elect Trustees in Group II of the Company's Board of Trustees.
2. To consider and act upon a proposal to amend the Company's Declaration
of Trust to change the Company's name to "Health and Retirement
Properties Trust".
3. To consider and act upon such other matters as may properly come before
the meeting.
The Board of Trustees has fixed the close of business on March 24, 1994 as
the record date for determination of the shareholders entitled to notice of and
to vote at the meeting.
By Order of the Board of Trustees,
DAVID J. HEGARTY, Secretary
March 25, 1994
WHETHER OR NOT YOU EXPECT TO BE AT THE MEETING, PLEASE SIGN, DATE AND
RETURN YOUR PROXY IN THE ENVELOPE ENCLOSED HEREWITH.
<PAGE> 3
HEALTH AND REHABILITATION PROPERTIES TRUST
400 CENTRE STREET
NEWTON, MASSACHUSETTS 02158
------------------------
PROXY STATEMENT
MARCH 25, 1994
INTRODUCTION
A Notice of the Annual Meeting of Shareholders of the Company (the
"Meeting") is set forth on the preceding page and there is enclosed herewith a
form of proxy solicited by the Board of Trustees of the Company. The cost of
this solicitation will be borne by the Company. In addition to solicitation by
mail, the Trustees and officers of the Company may solicit proxies personally or
by telephone or telegram. This proxy statement is being first sent to
shareholders on or about April 4, 1994. A copy of the Annual Report to
Shareholders for the year ended December 31, 1993 (including audited financial
statements of the Company) is also being mailed herewith.
Only shareholders of record as of the close of business on March 24, 1994
(the "Record Date") are entitled to notice of and to vote at the Meeting and/or
any adjournment thereof. The outstanding stock of the Company on the Record Date
entitled to vote consisted of 44,722,500 Common Shares of Beneficial Interest,
$.01 par value per share (the "Shares"). The holders of the outstanding Shares
are entitled to one vote per Share.
All Shares represented by valid proxies received by the Company prior to
the Meeting will be counted for purposes of determining the presence of a quorum
and will be voted as specified in the proxy. If no specification is made by the
Shareholder, the Shares will be voted FOR the proposals noted below. Each of the
proposals set forth herein requires the affirmative vote of the proportion of
the outstanding Shares set forth therein. A Shareholder marking the proxy
"Abstain" will not be counted as voting in favor of the particular proposal from
which the Shareholder has elected to abstain. If a broker indicates on a proxy
that it does not have discretionary authority as to certain Shares to vote on a
particular proposal, those Shares will not be counted as voting in favor of such
proposal. A Shareholder giving a proxy has the power to revoke it any time prior
to its exercise by delivering to the Secretary of the Company a written
revocation or a duly executed proxy bearing a later date, or by attending the
Meeting and voting his or her Shares in person. Adoption of any of the proposals
presented in this Proxy Statement would not give rise to appraisal rights or
other dissenters rights under Maryland law.
ITEM 1. ELECTION OF TRUSTEES IN GROUP II OF THE BOARD OF TRUSTEES
The number of Trustees of the Company currently is fixed at five and the
Board of Trustees currently is divided into three groups with two Trustees in
Group I, two Trustees in Group II and one Trustee in Group III. Trustees in each
Group are elected to three-year terms.
The business of the Company is conducted under the general direction of the
Board of Trustees as provided by the Declaration of Trust and the By-Laws of the
Company and the laws of the State of Maryland, the state of the Company's
organization on October 9, 1986.
Three of the Trustees, the Rev. Justinian Manning, C.P., John L.
Harrington, and Arthur G. Koumantzelis, are the Company's "Independent
Trustees"; that is, Trustees who are not otherwise affiliated with the Company,
HRPT Advisors, Inc., a Delaware corporation ("Advisors"), or any other person or
entity
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that holds in excess of 8.5% of the issued and outstanding Shares of the
Company. The Independent Trustees also comprise the Company's Audit Committee.
The Company does not have a Compensation Committee or a Nominating Committee.
During 1993, the Board of Trustees held five meetings. During 1993, each
Trustee attended 75% or more of the total number of meetings of the Board and
any Committee of which he was a member. The standing Audit Committee meets with
the Company's independent auditors to discuss the procedures for conducting, and
the results of, audits of the Company's financial records, and recommends to the
Board of Trustees the hiring or retention of independent auditors. It held two
meetings during 1993.
Each Independent Trustee receives an annual fee of $17,000 for services as
a Trustee, plus $1,000 for each meeting of the Board or Board committee attended
by such Trustee, up to a maximum of $4,000 per year. The Chairperson of the
Audit Committee receives an additional $2,000 annually; such position rotates
annually among the Independent Trustees. Each Independent Trustee also receives
annual 500 Share grants under the Company's 1992 Incentive Share Award Plan. The
Company reimburses all Trustees for travel expenses incurred in connection with
their duties as Trustees of the Company. The Company has also agreed to pay any
Independent Trustee who brings a property to the attention of the Company a fee
equal to one percent of any investment made by the Company in the property. No
fees have been earned to date by any Independent Trustee with respect to any
investments by the Company.
The present Trustees in Group II are Rev. Justinian Manning, C.P. and
Gerard M. Martin. If re-elected, Rev. Manning and Mr. Martin will hold office
until the Company's 1997 Annual Meeting of Shareholders. To be elected, each
nominee for Trustee must receive the vote of a majority of the Shares issued and
outstanding. It is the intention of the persons authorized by the enclosed proxy
to nominate and elect Rev. Manning and Mr. Martin as the Group II Trustees.
Advisors, which has voting control over 1,996,250 Shares (approximately 4.5% of
Shares outstanding and entitled to vote) intends to vote in favor of the
election of Rev. Manning and Mr. Martin as Group II Trustees. Rev. Manning and
Mr. Martin have served on the Board since the Company's organization in 1986.
Their principal occupations for the past five years and their ages as of March
25, 1994 are as follows:
REV. JUSTINIAN MANNING, C.P. AGE: 68
The Reverend Justinian Manning, C.P., has been, since September 1990, the
pastor of St. Gabriel's parish in Brighton, Massachusetts. From 1984 until
September 1990, he was the Treasurer of the Provincial Council of the Passionist
Provincialate. He is also on the Board of Directors of Charlesview, a low and
moderate income housing program, and St. Elizabeth's Hospital Foundation. He is
past Treasurer and a former Director of St. Paul's Benevolent, Educational and
Missionary Institute, a New Jersey corporation, which oversees foundations in
Massachusetts, Connecticut, New York, Pennsylvania, Maryland, Florida and the
Institute's Overseas Missions. He was formerly on the Board of Directors of St.
Paul's Monastery Manor, in Pittsburgh, Pennsylvania, a congregate housing
facility. He belongs to the Provincial Council of the Passionist Provincialate
and is the former Director of Consolidation for the Community.
GERARD M. MARTIN AGE: 59
Gerard M. Martin is a private investor in real estate. Until the merger
(the "Horizon/Greenery Merger") of Greenery Rehabilitation Group, Inc.
("Greenery") into Horizon Healthcare Corporation ("Horizon") in February 1994,
Mr. Martin was the Chief Executive Officer and Chairman of the Board of
Directors and a 51.4% shareholder of Greenery and was the principal owner and
Chief Executive Officer of the predecessors of Greenery since 1975. Subsequent
to the merger, Mr. Martin was elected to the Board of Directors of Horizon. Mr.
Martin has been active in the health care industry for more than 25 years as a
manager, developer and builder. Mr. Martin and his wife are the sole
shareholders of Regional Home Care, Inc., a corporation
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<PAGE> 5
providing respiratory therapy services and supplies to clients in New England.
Mr. Martin is also a Director and 50% shareholder of each of Advisors,
Connecticut Subacute Corporation ("CSC") and Connecticut Subacute Corporation II
("CSCII"). CSC and CSCII are affiliates of the Company and Advisors.
In addition to Rev. Manning and Mr. Martin, the following persons currently
serve on the Board of Trustees or serve as executive officers of the Company.
Their principal occupations for the last five years and their ages as of March
25, 1994 are as follows:
JOHN L. HARRINGTON AGE: 58
John L. Harrington is the President of JRY Corporation, the principal owner
of the Boston Red Sox baseball club, Executive Director and Trustee of the
Yawkey Foundation and a Trustee of the JRY Trust. Mr. Harrington is a Director
of Shawmut Bank, N.A. and a Director of New England Sports Network, a cable
television station. Mr. Harrington was elected to the Board of Trustees in
August 1991 to fill a vacancy created by the death of Phil A. Petitt in May 1991
and was reelected as a Group I Trustee at the 1993 Annual Meeting of
Shareholders. His term will expire at the 1996 Annual Meeting of Shareholders.
BARRY M. PORTNOY AGE: 48
Barry M. Portnoy has been a partner in the law firm of Sullivan &
Worcester, counsel to the Company, since 1978, and a Trustee of the Company
since its organization. Until the Horizon/Greenery Merger, Mr. Portnoy was a
Director and 2.4% shareholder of Greenery, and is a Director and 50% shareholder
of each of Advisors, CSC and CSCII. Subsequent to the Horizon/Greenery merger,
Mr. Portnoy was elected to the Board of Directors of Horizon. Mr. Portnoy was
re-elected as a Group I Trustee at the 1993 Annual Meeting of Shareholders and
his term will expire at the 1996 Annual Meeting of Shareholders.
ARTHUR G. KOUMANTZELIS AGE: 63
Arthur G. Koumantzelis has been, since July 1990, the Senior Vice President
and Chief Financial Officer and, from December 1991 until December 1993, was a
Director of Cumberland Farms, Inc., a private company engaged in the convenience
store business in the northeastern United States and Florida and, through its
interests in the partnership operating its Gulf Oil Division, in the
distribution and retail sale of gasoline in the northeastern United States.
Cumberland Farms filed a voluntary petition under Chapter 11 of the United
States Bankruptcy Code in May 1992, and emerged from bankruptcy proceedings in
December, 1993. Until June 1990, Mr. Koumantzelis was a Senior Partner of Ernst
& Young (formerly Arthur Young & Company), the Company's independent auditors.
He was elected as a Group III Trustee at the 1992 Annual Meeting of Shareholders
and his term will expire at the 1995 Annual Meeting of Shareholders.
MARK J. FINKELSTEIN AGE: 47
Mark J. Finkelstein has been President and Chief Executive Officer of the
Company and President, Chief Executive Officer and a Director of each of
Advisors, CSC and CSCII and Treasurer of CSC and CSCII since their organization.
Mr. Finkelstein is a past President of the American College of Health Care
Administrators and is a Director of the Foundation of the American College of
Health Care Administrators.
DAVID J. HEGARTY AGE: 37
David J. Hegarty, a certified public accountant, became Executive Vice
President of the Company in July 1993, having joined the Company in July 1987 as
Treasurer. Mr. Hegarty has also been the Secretary of the Company since 1987. He
also serves as Executive Vice President and Secretary of Advisors. From January
1984 to July 1987, Mr. Hegarty was an audit manager with Ernst & Young (formerly
Arthur Young & Company), the Company's independent auditors.
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<PAGE> 6
JOHN G. MURRAY AGE: 33
John G. Murray joined the Company in July 1993 as Treasurer. He also serves
as Treasurer of Advisors. For the three years prior to joining the Company, Mr.
Murray was employed by Fidelity Brokerage Services, Inc., most recently as
Director of Finance, Business Analysis and Planning. Prior to his tenure at
Fidelity, he was a senior manager for Ernst & Young(formerly Arthur Young &
Company), the Company's independent auditors. Mr. Murray is a certified public
accountant.
There are no family relationships among any Trustees and executive officers
of the Company. Executive officers serve at the will of the Board of Trustees.
ITEM 2. PROPOSAL TO AMEND THE COMPANY'S DECLARATION OF TRUST TO CHANGE THE NAME
OF THE COMPANY TO "HEALTH AND RETIREMENT PROPERTIES TRUST".
The Board of Trustees has proposed that the Company's Declaration of Trust
be amended to change the name of the Company to "Health and Retirement
Properties Trust". The Trustees believe that this proposed new name more
accurately reflects the changing focus of the Company's intended future
investments from an emphasis on rehabilitation facilities to an emphasis on
retirement homes and assisted living facilities.
The affirmative vote of the holders of a majority of the outstanding Shares
of the Company entitled to vote at the Meeting is required to authorize this
proposed amendment. THE BOARD OF TRUSTEES HAS UNANIMOUSLY APPROVED AND
RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ADOPTION OF THE AMENDMENT DESCRIBED IN
ITEM 2.
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OTHER INFORMATION
Compensation of Executive Officers
The Company does not have any employees; services which otherwise would be
provided by employees are performed by Advisors. Payments by the Company to
Advisors are described in "Certain Relationships and Related Transactions".
<TABLE>
The following table provides summary compensation information for Mark J.
Finkelstein, an employee of Advisors who performs the duties of chief executive
officer of the Company:
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION -------------------------------------
----------------------------------------- SECURITIES
NAME AND OTHER RESTRICTED UNDERLYING
PRINCIPAL ANNUAL STOCK OPTION LTIP ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS COMPENSATION
------------------------- ------ -------- ------- -------------- ----------- ------------ --------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CEO 1993 None None None $37,875(2) None None None
Mark J. Finkelstein 1992 None None None $35,250(3) None None None
1991 (1) -0-
- ---------------
<FN>
(1) Except with respect to options and incentive share awards, the Company has
not paid and has no current plans to pay compensation to its executive
officers. The Company's Stock Option Plan, originally adopted in 1986, was
terminated by the Trustees in 1992. There are no options outstanding under
such plan. Advisors, which conducts the day-to-day operations of the
Company, compensates Mr. Finkelstein in connection with his services to
Advisors and to the Company. In accordance with the transitional provisions
applicable to the revised rules on executive compensation disclosure
adopted by the Securities and Exchange Commission, certain disclosure for
fiscal year 1991 has been omitted.
(2) On June 29, 1993, Mr. Finkelstein was granted an incentive share award,
pursuant to the Company's 1992 Incentive Share Award Plan, of 3,000 shares,
of which one third vested immediately upon grant and one third of which
will vest on each of the first and second anniversaries of the grant. These
3,000 Shares are entitled to dividends as declared by the Company. The
dollar amount shown represents the 3,000 Shares multiplied by the closing
price for the Shares on the New York Stock Exchange on the date of grant.
(3) On July 20, 1992, Mr. Finkelstein was granted an incentive share award,
pursuant to the Company's 1992 Incentive Share Award Plan, of 3,000 Shares,
of which one third vested immediately upon grant, one third vested on the
first anniversary of the grant, and one third of which will vest on the
second anniversary of the grant. These 3,000 Shares (a) are entitled to
dividends as declared by the Company, and (b) together with the 3,000
Shares described in footnote 2 above, constitute the total amount of
restricted stock held by Mr. Finkelstein at December 31, 1993. The dollar
amount shown represents the 3,000 Shares multiplied by the closing price
for the Shares on the New York Stock Exchange on the date of grant.
</TABLE>
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Performance Graph -- Comparison of Cumulative Total Return
The graph below shows, for the years indicated, the Company's cumulative
total shareholder return on its Shares (assuming a $100 investment on December
31, 1988) as compared with (a) the Standard & Poor's 500 Index and (b) the
National Association of Real Estate Investment Trust, Inc.'s index of all
publicly traded real estate investment companies listed on the New York Stock
Exchange, the American Stock Exchange and the NASDAQ/National Market System
(NAREIT). The comparison assumes all dividends are reinvested.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) HRP NAREIT S&P
<S> <C> <C> <C>
1988 100 100 100
1989 128 98 131
1990 127 81 127
1991 244 110 166
1992 231 124 179
1993 303 146 196
</TABLE>
Compensation Committee Interlocks and Insider Participation
The Company does not have a standing Compensation Committee; rather, a
committee comprised of the Company's Independent Trustees makes recommendations
for grants of Shares under the Company's 1992 Incentive Share Award Plan (the
"Plan"), and such recommendations are acted upon by the full Board of Trustees.
Barry M. Portnoy, a member of the Board of Trustees, is a partner in the firm of
Sullivan & Worcester, counsel to the Company.
Compensation Committee Report
The Company developed and implemented the Plan in May 1992 in recognition
of the following circumstances. First, the Company's Shares are primarily a
yield vehicle for Shareholders and do not appreciate in value in the same manner
as other equity securities. Therefore, a conventional stock option plan would
not provide appropriate incentives for the Company's management. Second, because
the executive officers of the Company are employees of Advisors and not of the
Company, and receive their salary compensation from Advisors, the Trustees
wished to establish a vehicle which would, among other things, (a) foster a
continuing identity of interest between management of the Company and its
Shareholders, and (b)
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recognize that the Company's executive officers perform certain duties on behalf
of the Company, primarily with regard to shareholder relations and investor
communications, which fall outside of the services covered by the investment
advisory contract between the Company and Advisors (the "Advisory Agreement").
In addition, the Trustees may impose vesting restrictions or other conditions on
the granted Shares, which may further promote continuity of management.
In 1993, Mark J. Finkelstein, chief executive officer of the Company,
received a grant of 3,000 Shares under the Plan, 1,000 Shares of which vested
immediately upon grant and 1,000 Shares of which will vest on each of the first
and second anniversaries of the date of grant. The determination of the number
of Shares granted to Mr. Finkelstein was not specifically based on an estimate
of the Company's performance, but instead was based on the relationship of the
fair market value of the Shares so granted to the value of the "outside"
services to the Company, as discussed above, performed by Mr. Finkelstein during
the year preceding the grant.
JOHN L. HARRINGTON
ARTHUR G. KOUMANTZELIS
REV. JUSTINIAN MANNING, P.C.
GERARD M. MARTIN
BARRY M. PORTNOY
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information with respect to the
beneficial ownership of the Shares by each beneficial owner known to the Company
to hold more than 5% of the Shares, each Trustee, and all officers and Trustees
of the Company as a group, as of March 25, 1994. The address of each of the
Trustees and officers of the Company is c/o Health and Rehabilitation Properties
Trust, 400 Centre Street, Newton, Massachusetts 02158.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
NAME OWNED PERCENTAGE
----------------------------------------------------------- ------------ ----------
<S> <C> <C>
Mark J. Finkelstein(1)..................................... 16,141 *
John L. Harrington......................................... 1,086 *
Arthur G. Koumantzelis..................................... 1,086 *
Rev. Justinian Manning, C.P................................ 1,000 *
Gerard M. Martin(2)........................................ 1,996,250 4.46%
Barry M. Portnoy(2)........................................ 1,996,250 4.46%
All executive officers and Trustees as a group (8
persons)(1)(3)........................................... 2,019,563 4.52%
- ---------------
<FN>
* Less than 1% of the Company's outstanding Shares.
(1) Includes 3,000 Shares held jointly with Mr. Finkelstein's mother, 3,000
Shares held by Mr. Finkelstein's mother, 2,778 Shares held by Mr.
Finkelstein on behalf of his children and 3,000 Shares awarded under the
1992 Award Plan which have not yet vested.
(2) Neither Mr. Martin nor Mr. Portnoy owns any Shares directly. Advisors, which
is wholly owned by Messrs. Martin and Portnoy, owns 996,250 Shares directly
and, solely in its capacity as voting trustee of a voting trust agreement,
exercises voting control over one million Shares owned by AMS Properties,
Inc. ("AMSP") and pledged to the Company to secure the obligations of
GranCare, Inc., AMSP and GCI Healthcare Centers, Inc. to the Company.
Messrs. Martin and Portnoy may be deemed to have beneficial ownership of all
of these Shares.
(3) Includes 5,000 Shares awarded under the 1992 Award Plan which have not yet
vested.
</TABLE>
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<PAGE> 10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In November 1993, the Company acquired a 143 bed nursing home in Seattle,
Washington from Greenery for an appraised value of $5.1 million. The facility
was immediately leased to Sun Healthcare Group, Inc. ("Sun"). The Company
simultaneously extended and adjusted Sun's existing leases for three properties
owned by the Company. The total minimum annual rent payable to the Company for
these four facilities is approximately $2.5 million.
As of December 31, 1993, the Company had invested $185.52 million (34.2% of
total investments) in thirteen properties leased by Greenery and $32.42 million
(5.98% of total investments) in three properties leased by CSC. During 1993,
total rent and interest, including additional rent and additional interest based
on increases in net patient revenues, received by the Company from its
investments in Greenery properties and in CSC properties were $22.53 million and
$4.48 million, respectively. Greenery also held an option, which expired
unexercised on December 31, 1993, to repurchase, individually or in the
aggregate, five properties owned by the Company and leased to Greenery, at the
Company's cost of $73.53 million. In addition, the Company has extended the
working capital facility previously granted to CSC until June 30, 1994 at a
reduced maximum amount of $4 million. The largest amount outstanding under the
facility at any time since January 1, 1991 is $1.22 million, which amount was
still outstanding at March 25, 1994. Amounts outstanding under the facility bear
interest at prime plus 1% per annum.
In February 1994, Horizon acquired Greenery in a stock for stock merger. In
connection with the Horizon/Greenery Merger,
- Horizon became the lessee of seven facilities previously leased by the
Company to Greenery. The rent for these facilities is substantially the
same as that previously paid by Greenery. The initial lease term was
extended through June 30, 2005, and Horizon has renewal options totalling
an additional 20 years.
- The Company granted Horizon options to purchase any or all of the seven
leased facilities. The options may be exercised at a rate of not more
than one facility in any 12 month period and expire December 31, 2003.
The option purchase prices are approximately equal to the Company's
investment in these facilities.
- Horizon purchased from the Company three facilities previously leased by
Greenery. The purchase price of $28.4 million was paid $23.3 million in
cash and the balance of $5.1 million in a note secured by a first
mortgage on one of the facilities. The mortgage loan bears interest at
11.5% per annum and matures on December 31, 2000. The Company realized a
gain from these sales of approximately $3.7 million.
- The Company lent Horizon $4.3 million secured by a first mortgage on one
facility which Horizon acquired from Greenery in the Horizon/Greenery
Merger. The mortgage loan bears interest at 11.5% per annum and matures
on December 31, 2000.
- Horizon assumed management responsibility for three of the Company's
facilities in Connecticut previously leased to Greenery. The Company
purchased leasehold improvements made at these facilities by Greenery for
their net book value of approximately $541,000. The existing leases with
Greenery were terminated and the facilities were leased to CSCII. The
lease with CSCII and the management contract with Horizon will continue
for up to five years until the Company locates a substitute operator.
Under the terms of the management contract between Horizon and CSCII,
Horizon will guarantee the lease payments to the Company, which are
approximately equal to the previous lease obligations of Greenery for
these facilities.
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<PAGE> 11
Until the consummation of the Horizon/Greenery Merger, Mr. Martin was
Chairman of the Board and Chief Executive Officer of Greenery and, together with
his wife, owned 51.4% of Greenery's outstanding common stock. Mr. Portnoy was a
Director and 2.4% shareholder of Greenery. As a result of the Horizon/Greenery
Merger, Mr. Martin and his wife hold approximately 4.8% of Horizon's outstanding
common stock. Subsequent to the Horizon/Greenery Merger, Mr. Martin and Mr.
Portnoy were elected to Horizon's Board of Directors. Mr. Martin and Mr. Portnoy
are also each Directors and 50% shareholders of CSC and CSCII. Mr. Finkelstein
is President, Chief Executive Officer, Treasurer and a Director of CSC and
CSCII.
The Advisory Agreement provides for an annual advisory fee equal to 0.70%
of the Company's Average Invested Capital, as defined in the Advisory Agreement,
up to $250 million, and 0.50% of Average Invested Capital equal to or exceeding
$250 million; and an annual incentive fee, which was revised in 1993, calculated
on the basis of increases in the Company's operating cash flow 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 than
$.01/Share. All incentive fees which may be earned by the Advisor will be paid
in Shares. Advisors' fee will be waived to the extent necessary to limit the
Company's total annual operating expenses to the greater of (i) 2% of Average
Invested Capital or (ii) 25% of the Company's Net Income determined as set forth
in the Advisory Agreement. The aggregate advisory fee paid to Advisors for
fiscal year 1993 was $2.59 million, of which approximately $1.08 million was
attributable to investments in Greenery and approximately $225,858 was
attributable to investments in CSC.
Mr. Martin and Mr. Portnoy each may have material interests in the
transactions between Greenery and the Company, between Horizon and the Company,
between Advisors and the Company, between CSC and the Company, and between CSCII
and the Company.
To the extent that the terms of the Company's investments in properties
owned or leased by Greenery, Horizon, CSC and CSCII have been negotiated among
related parties, they have not been determined on an arm's-length basis.
Investment terms, however, have been based upon independent appraisals of the
properties, where available, cash flow available for rent or debt service and,
in some cases, negotiations with the representatives of the underwriters of the
Company's public offerings. All existing business relationships between the
Company, on the one hand, and Greenery (or Horizon, as successor to Greenery by
merger), Advisors, CSC, CSCII and/or their affiliates, on the other hand, have
been approved by, and all such future relationships will be submitted for
approval by, majority vote of the Independent Trustees. Mr. Portnoy is a partner
in the firm of Sullivan & Worcester, counsel to the Company and to Greenery,
Advisors, CSC, CSCII and affiliates of each of the foregoing.
AUDITORS
The Company is not required to submit the selection of its auditor to a
vote of shareholders. The Company's independent auditor since its organization
in 1986 has been Ernst & Young and one of its predecessors, Arthur Young &
Company.
A representative of Ernst & Young is expected to be present at the Meeting,
with the opportunity to make a statement if desired, and is expected to be
available to respond to appropriate questions from shareholders who are present
at the Meeting.
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<PAGE> 12
SHAREHOLDER PROPOSALS
The Company's 1995 Annual Meeting is presently expected to be held on or
about May 16, 1995. Proposals of shareholders intended to be presented at the
1995 Annual Meeting must be received not later than November 30, 1994, for
inclusion in the Company's proxy statement and proxy for that meeting.
OTHER MATTERS
As of this time, the Board of Trustees knows of no other matters to be
brought before the Meeting. However, if other matters properly come before the
Meeting or any adjournment thereof, and if discretionary authority to vote with
respect thereto has been conferred by the enclosed proxy, the persons named in
the proxy will vote the proxy in accordance with their best judgment as to such
matters.
By Order of the Board of Trustees
DAVID J. HEGARTY, Secretary
Newton, Massachusetts
March 25, 1994
10
<PAGE> 13
FORM OF FRONT OF PROXY
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[X] PLEASE MARK VOTES AS IN
THIS EXAMPLE
1. ELECTION OF TRUSTEES IN GROUP II.
[ ] FOR [ ] WITHHOLD AUTHORITY [ ] FOR ALL EXCEPT
REV. JUSTINIAN MANNING MR. GERARD M. MARTIN
(If you do not wish your shares voted "For" a particular nominee, mark the "For
All Except" box and strike a line through the nominee(s) name for whom you do
not wish to vote. Your shares will be voted for the remaining nominee(s).
2. PROPOSAL TO AMEND THE COMPANY'S DECLARATION OF TRUST TO CHANGE THE
COMPANY'S NAME TO "HEALTH AND RETIREMENT PROPERTIES TRUST".
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH
OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
MARK BOX AT RIGHT IF COMMENTS OR ADDRESS CHANGE
HAVE BEEN NOTED ON THE REVERSE SIDE OF THIS CARD. [ ]
RECORD DATE SHARES:
(Signature) X: _________________________________ Date:______________________
(Signature) X: _________________________________ Date:______________________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
DETACH CARD BEFORE MAILING
HEALTH AND REHABILITATION PROPERTIES TRUST
Dear Shareholder:
Please take note of the important information enclosed with this Proxy
Ballot. There are a number of issues related to the management and
operation of your Trust that require your immediate attention and approval.
These are discussed in detail in the enclosed proxy materials.
Your vote counts, and you are strongly encouraged to exercise your right to
vote your shares.
Please mark the boxes on the proxy card to indicate how your shares shall
be voted. Then sign the card, detach it and return your proxy vote in the
enclosed postage paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders, May
17, 1994.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Health and Rehabilitation Properties Trust
<PAGE> 14
FORM OF BACK OF PROXY
---------------------
HEALTH AND REHABILITATION PROPERTIES TRUST
400 Centre Street, Newton, Massachusetts
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints GERARD M. MARTIN, BARRY M. PORTNOY and MARK J.
FINKELSTEIN, and each of them, as Proxies of the undersigned, each with the
power to appoint his substitute, and hereby authorizes a majority of them, or
any one if only one be present, to represent and to vote, as designated below,
all the Common Shares of Beneficial Interest of Health and Rehabilitation
Properties Trust held of record by the undersigned or with respect to which the
undersigned is entitled to vote or act, at the Annual Meeting of Shareholders
to be held on May 17, 1994 or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 AND 2.
PLEASE VOTE, DATE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE.
Please sign this proxy exactly as your name appears on the books of the Trust.
Joint owners should each sign personally. Trustees and other fiduciaries
should indicate the capacity in which they sign, and where more than one name
appears, a majority must sign. If a corporation, this signature should be that
of an authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
_________________________________ _________________________________
_________________________________ _________________________________
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