<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
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
Health and Retirement Properties Trust
(Name of Registrant as Specified In Its Charter)
Health and Retirement Properties Trust
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2) or
Item 22 (a)(2) of Schedule 14A.
/ / $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 (Set forth the amount on which the filing fee
is calculated and state how it was determined.):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
HEALTH AND RETIREMENT PROPERTIES TRUST
400 CENTRE STREET
NEWTON, MASSACHUSETTS 02158
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1996
To the Shareholders of
Health and Retirement Properties Trust
Notice is hereby given that the Annual Meeting of Shareholders of Health
and Retirement Properties Trust (the "Company") will be held at 10:00 A.M. on
Tuesday, May 14, 1996, at State Street Bank and Trust Company, 225 Franklin
Street, 33rd Floor, Boston, Massachusetts, for the following purposes:
1. To elect two Trustees in Group I of the Company's Board of Trustees.
2. To consider and act upon a proposal to amend the Declaration of
Trust to allow the Board of Trustees to increase or decrease the
authorized capital stock of the Company.
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 21, 1996 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
April 10, 1996
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 RETIREMENT PROPERTIES TRUST
400 CENTRE STREET
NEWTON, MASSACHUSETTS 02158
------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, MAY 16, 1996
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 11, 1996, together with a copy of the Annual
Report to Shareholders for the year ended December 31, 1995 (including audited
financial statements of the Company).
Only shareholders of record as of the close of business on March 21, 1996
(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 66,165,166 common shares of beneficial interest,
$.01 par value per share (the "Common Shares"). The holders of the outstanding
Common Shares are entitled to one vote per Common Share.
All Common 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 Common Shares will be voted FOR the proposals set
forth in Items 1 and 2 below. The proposals set forth in Items 1 and 2 below
require the affirmative vote of a majority of the Common Shares issued and
outstanding. If a broker indicates on a proxy that it does not have
discretionary authority as to certain Common Shares to vote on the proposal set
forth in Item 2 below, those Common 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 Common Shares in person. Adoption of
the proposals presented in this Proxy Statement does not give rise to appraisal
rights or other dissenter's rights under Maryland law.
ITEM 1. ELECTION OF TRUSTEES IN GROUP I 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 Amended and Restated Declaration of Trust
(the "Declaration of Trust") and the Amended and Restated By-Laws of the Company
and the laws of the State of Maryland, the state of the Company's organization
on October 9, 1986.
<PAGE> 4
Three of the Trustees, Bruce M. Gans, M.D., the Rev. Justinian Manning,
C.P. and Ralph J. Watts are the Company's "Independent Trustees"; that is,
Trustees who are not otherwise affiliated with the Company, HRPT Advisors, Inc.,
a Delaware corporation which is the Company's investment advisor ("Advisors"),
or any other person or entity that holds in excess of 8.5% of the issued and
outstanding Common 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 1995, the Board of Trustees held six meetings. During 1995, each
Trustee attended 75% or more of the total number of meetings of the Board and
any Committee of which he was a member, except that Dr. Gans attended one of the
two meetings held between his election in October and the end of the year. 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 three meetings during 1995.
Each Independent Trustee receives an annual fee of $20,000 for services as
a Trustee, plus $500 for each meeting of the Board or Board committee attended
by such Trustee. 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 Common 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.
In connection with the initial public offering of the Company's then
wholly-owned subsidiary, Hospitality Properties Trust ("HPT"), in August 1995,
Trustees John L. Harrington and Arthur G. Koumantzelis resigned from their
positions with the Company and were elected as Trustees of HPT. John G. Murray
resigned his positions as Executive Vice President and Chief Financial Officer
with the Company and was elected Treasurer and Secretary of and performed the
duties of Chief Financial Officer for HPT. Mr. Murray is currently President of
and performs the duties of Chief Operating Officer for HPT.
The present Trustees in Group I are Bruce M. Gans, M.D. and Barry M.
Portnoy. If re-elected, Dr. Gans and Mr. Portnoy will hold office until the
Company's 1999 Annual Meeting of Shareholders. To be elected, each nominee for
Trustee of the Company 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 Dr. Gans and Mr. Portnoy as the Group I Trustees.
Advisors, which has voting control over 3,791,416 Common Shares (approximately
5.73% of Common Shares outstanding and entitled to vote) intends to vote in
favor of the election of Dr. Gans and Mr. Portnoy as the Group I Trustees. Dr.
Gans' and Mr. Portnoy's principal occupations for the past five years and their
ages as of April 10, 1996 are as follows:
BRUCE M. GANS, M.D. Age: 49
Dr. Gans is President of the Rehabilitation Institute of Michigan, a
specialty hospital affiliated with Wayne State University School of Medicine, a
position he has held since 1989. Dr. Gans is also a Professor and Chairman of
the Department of Physical Medicine and Rehabilitation at Wayne State University
and a Senior Vice President of the Detroit Medical Center. Dr. Gans has been a
Group I Trustee since his election in October 1995 to the seat left vacant by
the resignation of John L. Harrington.
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<PAGE> 5
BARRY M. PORTNOY Age: 50
Barry M. Portnoy has been a partner in the law firm of Sullivan & Worcester
LLP, counsel to the Company, since 1978, and a Trustee of the Company since its
organization in 1986. Mr. Portnoy is a Director and 50% shareholder of Advisors,
Connecticut Subacute Corporation ("CSC") and Connecticut Subacute Corporation II
("CSCII"), a Director and 33 1/3% shareholder of each of Vermont Subacute
Corporation ("VSC") and New Hampshire Subacute Corporation ("NHSC") and a
Managing Trustee of HPT. Mr. Portnoy is also a Director of Horizon/CMS
Healthcare Corp. ("Horizon"). Mr. Portnoy was re-elected as a Group I Trustee at
the 1993 Annual Meeting of Shareholders and has served as a member of the Board
of Trustees since the Company's organization in 1986.
In addition to Dr. Gans and Mr. Portnoy, 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 April
10, 1996, are as follows:
REV. JUSTINIAN MANNING, C.P. Age: 70
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. Reverend Manning
has been a Trustee of the Company since its organization in 1986 and was
re-elected as a Group II Trustee at the 1994 Annual Meeting of Shareholders. His
term will expire at the 1997 Annual Meeting of Shareholders.
GERARD M. MARTIN Age: 61
Gerard M. Martin is a private investor in real estate. Until the merger of
Greenery Rehabilitation Group, Inc. ("Greenery") into 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. In
connection with the merger, Mr. Martin was elected to the Board of Directors of
Horizon. Mr. Martin has been active in the health care and real estate
industries 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 providing respiratory therapy services and supplies to clients in
New England. Mr. Martin is also a Director and 50% shareholder of each of
Advisors, CSC and CSCII, a Director and 33 1/3% shareholder of each of VSC and
NHSC and a Managing Trustee of HPT. Mr. Martin has been a Trustee of the Company
since its organization in 1986 and was re-elected as a Group II Trustee at the
1994 Annual Meeting of Shareholders. His term will expire at the 1997 Annual
Meeting of Shareholders.
RALPH J. WATTS Age: 49
Mr. Watts is President and CEO of Cardiovascular Ventures, Inc., a
privately held company which develops, owns and operates outpatient cardiac
catheterization laboratories and is engaged in physician practice management.
Prior to assuming this position in 1992, Mr. Watts was President and CEO of
Ramsay Health Care, Inc., a publicly owned company which owned and operated 18
hospitals in 13 states and had
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<PAGE> 6
approximately 2,000 employees. Mr. Watts has served on the Board as a Group III
Trustee since October 1995 when he was elected to fill the vacancy left by the
resignation of Arthur G. Koumantzelis. His term will expire at the 1998 Annual
Meeting of Shareholders.
DAVID J. HEGARTY Age: 39
David J. Hegarty, a certified public accountant, joined the Company in July
1987 as Treasurer, became Executive Vice President of the Company in July 1993
and President and Chief Operating Officer of the Company in April 1995. Mr.
Hegarty has also been the Secretary of the Company since 1987. In April 1995, he
also became the President and Chief Operating Officer of Advisors. From January
1984 to July 1987, Mr. Hegarty was an audit manager with Ernst & Young LLP, the
Company's independent auditors.
AJAY SAINI Age: 36
In April 1995, Ajay Saini, a certified public accountant, became the
Treasurer of the Company. He has been Vice President and Chief Accounting
Officer of Advisors since July 1993, and prior to that he served as Controller
of Advisors since June 1990. Following the resignation of John G. Murray in
August 1995, Mr. Saini became Chief Financial Officer of the Company. In April
1995, he became Treasurer of Advisors. Prior to joining Advisors, Mr. Saini was
a senior accountant at Ernst & Young LLP, the Company's independent auditors.
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 DECLARATION OF TRUST TO ALLOW THE BOARD OF
TRUSTEES TO INCREASE OR DECREASE THE AUTHORIZED CAPITAL STOCK OF THE
COMPANY.
On March 9, 1996, in response to a recent change in Maryland law, the Board
of Trustees approved and recommended for shareholder approval an amendment to
the Declaration of Trust (the "Proposed Amendment") which would allow the Board
of Trustees to amend the Declaration of Trust to increase or decrease the
authorized capital stock of the Company without the requirement of shareholder
approval. The Board of Trustees recommends a vote "for" the Proposed Amendment.
The full text of the Proposed Amendment to Section 6.1 of the Declaration of
Trust is included as Appendix A to this Proxy Statement. If approved by the
shareholders, the Proposed Amendment will become effective upon the filing of an
amendment to the Declaration of Trust with the State Department of Assessments
and Taxation of Maryland, which will occur as soon as reasonably practicable.
PURPOSE AND EFFECT OF THE PROPOSED AMENDMENT
The Proposed Amendment is in response to a change in Maryland law,
effective October 1, 1995, which allows a declaration of trust of a Maryland
real estate investment trust to provide that "the board of trustees may amend
the declaration of trust to increase or decrease the aggregate number of shares
or the number of shares of any class that the trust has authority to issue." The
Board of Trustees believes that the Company's ability to finance its growth
through acquisitions of properties, merger or otherwise is dependent in part
upon ready access to the public equity markets. In order to respond quickly and
on an ongoing basis to opportunities for favorable access to the public markets,
the Company must be able to issue Shares (as defined below) quickly, as the
Board of Trustees deems advisable. In addition, the Company has in the past, and
may in the future, acquire properties for a purchase price payable, in whole or
in part, in Shares. The Proposed Amendment will facilitate the Company's ability
to enter into such transactions. The time and expense of repeated solicitation
of proxies to increase the number of authorized Shares may have a material
negative impact on the Company's ability to do so in the future. The Company has
currently issued 66.17% of its
4
<PAGE> 7
authorized Common Shares. Although the remaining authorized Common Shares,
33,834,834, may be adequate in the near term, it is the belief of the Board of
Trustees that the flexibility provided by the Proposed Amendment is in the best
interests of the Company and its shareholders.
The Company has no present intention, agreement or understanding to
authorize or issue Shares in excess of those currently authorized nor does it
have any present intention, agreement or understanding to decrease the number of
Shares authorized. Assuming adoption of the Proposed Amendment, Shares of the
Company may be authorized and issued or the number of Shares authorized
decreased without further action by the shareholders.
As with any issuance of equity, the issuance of additional Shares now or in
the future could have some dilutive effect upon the earnings per share of the
Company and voting rights of the existing shareholders. Such dilution may be
greater or lesser depending upon whether such additional Shares are Common or
Preferred Shares (as defined below) and, if Preferred Shares, the terms of such
Preferred Shares which may be set by the Board of Trustees in its sole
discretion.
The Proposed Amendment is not intended to have an anti-takeover effect. The
Proposed Amendment is not being recommended in response to any specific effort
of which the Company is aware to obtain control of the Company. The Company is
not aware of any existing or planned effort on the part of any person to
accumulate significant amounts of its Shares, or to acquire control of the
Company by means of a merger, tender offer, proxy solicitation in opposition to
management or otherwise.
For the Company to qualify as a real estate investment trust ("REIT") under
the Internal Revenue Code of 1986, as amended, in any taxable year, not more
than 50% in value of its outstanding Shares may be owned, directly or indirectly
by five or fewer individuals during the last six months of such year, and the
Shares must be owned by 100 or more persons during at least 335 days of a
taxable year or a proportionate part of a taxable year less than 12 months. In
connection with the foregoing, if the Trustees shall, at any time and in good
faith, be of the opinion that direct or indirect ownership of Shares
representing more than 8.5% in value of the total Shares outstanding has or may
become concentrated in the hands of one beneficial owner, other than Excepted
Persons, as defined in the Declaration of Trust, the Trustees shall have the
power to redeem or prohibit the transfer of all or a part of the affected
Shares. Further the Declaration of Trust provides that transfers or purported
acquisitions, directly, indirectly or by attribution, of Shares, or securities
convertible into Shares, that could result in disqualification of the Company as
a REIT are null and void and permits the Trustees to repurchase Shares or other
securities to the extent necessary to maintain the Company's status as a REIT.
The Declaration of Trust also requires that Business Combinations, as
defined in the Declaration of Trust, between the Company and a beneficial holder
of 10% or more of the outstanding Shares (a "Related Person") be approved by the
affirmative vote of the holders of at least 75% of the Shares unless (1) the
Trustees by unanimous vote or written consent shall have expressly approved in
advance the acquisition of the outstanding Shares that caused the Related Person
to become a Related Person or shall have approved the Business Combination prior
to the Related Person involved in the Business Combination having become a
Related Person; or (2) the Business Combination is solely between the Company
and a 100% owned affiliate of the Company. As permitted by law, the Company has
elected to be governed by such provisions rather than the provisions of Subtitle
6 of Title 3 of the Corporations and Associations Article of the Annotated Code
of Maryland regarding business combinations.
In October 1994 the Board of Trustees adopted a shareholder rights plan
(the "Rights Plan") under which one Preferred Share purchase right (a "Right")
was distributed for each Common Share. Each Right entitles the holder to buy
1/100th of a Junior Participating Preferred Share (as defined below) at an
exercise price of $50. Rights will be exercisable ten days after a person or
group acquires beneficial ownership of 10% or
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<PAGE> 8
more of the Common Shares or begins a tender or exchange offer for 10% or more
of the Common Shares or if the Company is involved in certain mergers or
business combinations, in either case subject to various exceptions (certain of
which require the making of determinations by the Company's Independent Trustees
with respect to the proposed transactions). As a general matter, each Right
entitles its holder, other than the acquiring person or group or certain related
parties, to purchase Common Shares (or, in some cases, cash, property or other
securities of the Company) having twice the value of the exercise price. Under
certain circumstances, the Company may redeem Rights at a price of $.01 each.
Subject to certain limitations, the Rights Plan may be amended from time to time
by the Board of Trustees. The Rights are nonvoting and will expire on the tenth
anniversary of the adoption of the Rights Plan, unless exercised or previously
redeemed by the Company.
The provisions of the Declaration of Trust and the Rights Plan and the
grouping of the Company's Board of Trustees into three groups with staggered
terms of office may have the effect of discouraging unilateral tender offers or
other takeover proposals or proxy contests which certain shareholders might deem
in their interests or pursuant to which they might receive a substantial premium
for their Shares. While not proposed for that purpose, the Proposed Amendment
will grant to the Board of Trustees greater authority to authorize and issue
Shares of any series or class. Such authority could be used in order to
discourage, and the existence of such authority could also discourage, such
tender offers, proposals or contests. The current provisions discussed above and
the Proposed Amendment could also have the effect of insulating current
management against the possibility of removal and could, by possibly reducing
temporary fluctuations in market price caused by accumulations of Shares,
deprive shareholders of opportunities to sell at a temporarily higher market
price.
CAPITAL STOCK OF THE COMPANY
The Declaration of Trust currently authorizes the Company to issue an
aggregate of 150,000,000 shares of beneficial interest ("Shares") in the
Company, including (i) 100,000,000 Common Shares, par value $.01 per share, and
(ii) 50,000,000 preferred shares of beneficial interest, par value $.01 per
share (the "Preferred Shares"). As of March 22, 1996, there were 66,165,166
Shares outstanding, all of which were Common Shares. The Declaration of Trust
currently authorizes the Board of Trustees to cause the issuance, without
shareholder approval, of classes or series of Preferred Shares from time to time
and to set (or change, if the class or series has been previously established)
the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms and conditions of
redemption of such Preferred Shares that are not prohibited by the Declaration
of Trust or applicable law.
Except as otherwise determined by the Board of Trustees with respect to any
class or series of Preferred Shares, all Shares: (i) will participate equally in
dividends payable to shareholders when, as and if declared by the Trustees and
ratably in net assets available for distribution to shareholders on liquidation
or dissolution; (ii) will have one vote per share on all matters submitted to a
vote of the shareholders, (iii) will not have cumulative voting rights in the
election of Trustees; and (iv) will have no preference, conversion, exchange,
sinking fund, redemption rights or preemptive or similar rights.
After the approval of the Board of Trustees, on November 4, 1994, the
Declaration of Trust was amended to create an authorized but unissued class of
1,000,000 Preferred Shares (the "Junior Participating Preferred Shares"). The
rights of the Junior Participating Preferred Shares, when and if issued, are as
follows. The holder of each Junior Participating Preferred Share is entitled to
quarterly dividends in the greater amount of $5 or 100 times the quarterly per
share dividend, whether cash or otherwise, declared upon the Common Shares.
Dividends on the Junior Participating Preferred Shares are cumulative, and upon
failure of the Company to pay such dividends for six quarters, the holders of
the Junior Participating Preferred Shares shall be entitled to elect two
Trustees. The holder of each Junior Participating Preferred Share is entitled to
100
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<PAGE> 9
votes on all matters submitted to a vote of the shareholders. The Junior
Participating Preferred Shares have a preference upon liquidation, dissolution
or winding up of the Company of $100 per share. The rights of the Junior
Participating Preferred Shares are subject to the superior rights of any senior
series or class of Preferred Shares which the Board of Trustees shall, from time
to time, authorize and issue.
Upon issuance in accordance with the Declaration of Trust and applicable
law, the Company's Shares are fully paid and nonassessable. The holders of
Shares do not have preemptive rights with respect to the issuance of additional
Shares or other securities of the Company. The authorized but unissued Shares
are available for issuance from time to time by the Company at the sole
discretion of its Board of Trustees without further action by the Company's
shareholders, except as may be required by applicable law or the rules of the
New York Stock Exchange or any other stock exchange or national securities
association trading system on which the securities may be listed or traded, for
any proper trust purpose, which could include raising capital, providing
compensation or benefits to employees and others, paying stock dividends or
acquiring companies, businesses or properties.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of the holders of a majority of the Common Shares
issued and outstanding is required to adopt the Proposed Amendment.
THE BOARD OF TRUSTEES RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
PROPOSED AMENDMENT TO THE DECLARATION OF TRUST.
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<PAGE> 10
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 certain
employees of Advisors who performed the duties of executive officers for the
Company during 1995:
SUMMARY COMPENSATION TABLE
<CAPTION>
ANNUAL COMPENSATION(1) LONG-TERM COMPENSATION
------------------------------------- ------------------------------------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARDS (2) OPTIONS/SARS PAYOUTS COMPENSATION
- ------------------ ---- ------- ------ ------------- ---------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David J. Hegarty, President &.. 1995 None None None $ 46,125 None None None
Chief Operating Officer 1994 None None None $ 44,250 None None None
(chief executive officer) 1993 None None None $ 25,250 None None None
Ajay Saini, Treasurer &........ 1995 None None None $ 30,750 None None None
Chief Financial Officer 1994 None None None $ 22,125 None None None
1993 None None None $ 6,313 None None None
Mark J. Finkelstein, President. 1995 None None None -0- None None None
& Chief Executive Officer(3) 1994 None None None $ 44,250 None None None
1993 None None None $ 37,875 None None None
John G. Murray, Executive...... 1995 None None None $ 30,750 None None None
Vice President & Chief 1994 None None None $ 29,500 None None None
Financial Officer(4) 1993 None None None -0- None None None
<FN>
- ---------------
(1) Except with respect to incentive share awards, the Company has not paid and
has no current plans to pay compensation to its executive officers.
Advisors, which conducts the day-to-day operations of the Company,
compensated Messrs. Hegarty, Saini, Finkelstein and Murray in connection
with their services to Advisors and to the Company.
(2) All incentive share awards have been granted pursuant to the Company's 1992
Incentive Share Award Plan and provide that one third of each annual
incentive share award vests immediately upon grant and one third vests on
each of the first and second anniversaries of the grant. As a general
matter, in the event any executive officer who has been granted an incentive
share award ceases to perform the duties of an executive officer of the
Company during the vesting period of such award, that executive officer will
only be entitled to receive the number of Shares which have vested up to the
date of his departure. At December 31, 1995, Messrs. Hegarty and Saini held
10,000 and 4,000 Common Shares granted under annual incentive share awards,
respectively, having a value of $162,500 and $65,000, respectively, based
upon a $16.25 per share closing price for the Common Shares as reported on
the New York Stock Exchange on December 31, 1995. Shares are entitled to
dividends as declared by the Company. The dollar amounts shown represent the
number of restricted Shares which have vested or continue to be subject to
vesting multiplied by the closing price for the Common Shares on the New
York Stock Exchange on the date of grant.
(3) Mr. Finkelstein resigned his position April 1, 1995. Because Mr. Finkelstein
has provided and provides consulting services to the Company, his Shares
continue to vest as scheduled during the period of his consulting
arrangements.
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<PAGE> 11
(4) Mr. Murray resigned in August 1995 in order to take a position with HPT.
Because Mr. Murray has provided and provides consulting services to the
Company, his Shares continue to vest as scheduled during the period of his
consulting arrangements.
</TABLE>
PERFORMANCE GRAPH -- COMPARISON OF CUMULATIVE TOTAL RETURN
The graph below shows, for the years indicated, the Company's cumulative
total shareholder return on its Common Shares (assuming a $100 investment on
December 31, 1990) as compared with (a) the Standard & Poor's 500 Composite
Stock Index and (b) the National Association of Real Estate Investment Trust,
Inc.'s index of all tax-qualified real estate investment trusts listed on the
New York Stock Exchange, the American Stock Exchange and the NASDAQ/National
Market System (NAREIT Index). The comparison assumes all dividends are
reinvested.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) HRP NAREIT Index S&P 500
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 191.00 136.00 131.00
1992 182.00 152.00 141.00
1993 238.00 180.00 154.00
1994 235.00 182.00 157.00
1995 313.00 215.00 215.00
</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 (Dr. Gans, Rev.
Manning and Mr. Watts) 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 (Dr. Gans, Rev. Manning and Messrs.
Watts, Martin and Portnoy). Barry M. Portnoy, a member of the Board of Trustees,
is a partner in the firm of Sullivan & Worcester LLP, counsel to the Company.
EXECUTIVE COMPENSATION REPORT
The Company developed and implemented the Plan in May 1992 in recognition
of the following circumstances. First, the Company's Common 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)
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<PAGE> 12
foster a continuing identity of interest between management of the Company and
its shareholders, and (b) 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 granting incentive share awards, the
Trustees consider factors such as the amount and terms of restricted Common
Shares previously granted to executive officers and the amount of time spent and
complexity of the duties performed by executive officers on behalf of the
Company, speaking at Company conferences, road shows and making additional
presentations, interfacing with analysts and preparing and distributing
shareholder reports, materials, statements and other information. The Trustees
may impose vesting restrictions or other conditions on the granted Common
Shares, which may further promote continuity of management.
In 1995, David J. Hegarty, President and Chief Operating Officer of the
Company, received a grant of 3,000 Common Shares under the Plan, 1,000 Common
Shares of which vested immediately upon grant and 1,000 of which will vest on
each of the first and second anniversaries of the date of grant. In 1995, Mr.
Saini, then Treasurer of the Company, received a grant of 2,000 Common Shares
under the Plan, 667 of which vested immediately upon grant; 667 of which will
vest on the first anniversary of the grant and 666 of which will vest on the
second anniversary thereof. In 1995, Mr. Murray, then Executive Vice President
and Chief Financial Officer of the Company, received a grant of 2,000 Common
Shares under the Plan, 667 of which vested immediately upon grant; 667 of which
will vest on the first anniversary of the grant and 666 of which will vest on
the second anniversary thereof. The determination of the number of Common Shares
granted to Messrs. Hegarty, Saini and Murray was not specifically based on an
estimate of the Company's performance, but instead was based on the
consideration of the fair market value of the Common Shares so granted, the
number of Common Shares previously granted to each such individual, and the
Board's opinion as to the value of the "outside" services to the Company, as
discussed above, performed by each of Messrs. Hegarty, Saini and Murray during
the year preceding the grant.
BOARD OF TRUSTEES
Bruce M. Gans, M.D.
Rev. Justinian Manning, C.P.
Gerard M. Martin
Barry M. Portnoy
Ralph J. Watts
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<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
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, certain persons who were
executive officers of the Company during 1995 and all executive officers and
Trustees of the Company as a group, as of March 22, 1996. The address of each of
the individuals named below is c/o Health and Retirement Properties Trust, 400
Centre Street, Newton, Massachusetts 02158.
<CAPTION>
SHARES
BENEFICIALLY
NAME OWNED PERCENTAGE
- ---- ------------ ----------
<S> <C> <C>
Mark J. Finkelstein(1)................................................ 4,850 *
Bruce M. Gans, M.D. .................................................. 0 *
David J. Hegarty(2)................................................... 11,000 *
Rev. Justinian Manning, C.P. ......................................... 2,000 *
Gerard M. Martin(3)................................................... 3,791,416 5.7%
John G. Murray(4)..................................................... 4,000 *
Barry M. Portnoy(3)................................................... 3,791,416 5.7%
Ajay Saini(5)......................................................... 4,514 *
Ralph J. Watts........................................................ 0 *
All executive officers and Trustees as a group (9
persons)(1)(2)(3)(4)(5)............................................. 3,817,780 5.8%
<FN>
- ---------------
* Less than 1% of the Company's outstanding Shares.
(1) Includes 1,000 Common Shares awarded under the 1992 Incentive Share Award
Plan which have not yet vested and approximately 1,650 Common Shares held by
Mr. Finkelstein's minor children.
(2) Includes 3,000 Common Shares awarded under the 1992 Incentive Share Award
Plan which have not yet vested.
(3) Neither Mr. Martin nor Mr. Portnoy owns any Common Shares directly.
Advisors, which is wholly owned by Messrs. Martin and Portnoy, owns
1,013,650 Common Shares directly and, solely in its capacity as voting
trustee of a voting trust agreement, exercises voting control over 1,000,000
Common 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. Advisors also exercises voting control as
proxy over 1,777,766 Common Shares owned by Berlin C.C., Inc., St. Johnsbury
C.C., Inc., Rochester C.C., Inc., Springfield C.C., Inc., Bennington C.C.,
Inc., Burlington, C.C., Inc., The L.P. Corporation and American Health Care,
Inc. Messrs. Martin and Portnoy may be deemed to have beneficial ownership
of all of these Shares.
(4) Includes 1,999 Common Shares awarded under the 1992 Incentive Share Award
Plan which have not yet vested.
(5) Includes 1,833 Common Shares awarded under the 1992 Incentive Share Award
Plan which have not yet vested, 500 Common Shares in Mr. Saini's IRA account
and approximately 14 Common Shares held by Mr. Saini's minor daughter.
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 24, 1995, the Company's then wholly owned subsidiary, Hospitality
Properties Trust ("HPT"), acquired 21 Courtyard by Marriott(R) hotels for
approximately $179.4 million. HPT's acquisition of these properties was funded
by the Company under a demand loan (the "HRP Loan") of approximately $163.3
million. The Company funded this transaction with working capital reserves and
by drawing
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<PAGE> 14
$140.0 million on its revolving credit facility. In August 1995, HPT completed
its initial public offering (the "HPT IPO") of 8,350,000 common shares of
beneficial interest. HPT used proceeds from the HPT IPO, in part, to repay
amounts outstanding on the HRP Loan. Prior to the HPT IPO, the Company's
investment in HPT was $1 million, representing 40,000 shares. Concurrent with
the completion of the HPT IPO at a price to the public of $25 per share, the
Company acquired an additional 3,960,000 common shares of beneficial interest
HPT at a per share price of $25 by canceling $99 million of the HRP Loan. The
remaining balance of the HRP Loan was repaid to the Company during the fourth
quarter of 1995. At December 31, 1995, the Company owned 4,000,000 shares of
HPT, representing an equity interest in HPT of approximately 32% and a market
value of $107 million.
Messrs. Martin and Portnoy are directors of Horizon/CMS Healthcare
Corporation ("Horizon"); principal shareholders of Connecticut Subacute
Corporation ("CSC"), Connecticut Subacute Corporation II ("CSCII"), New
Hampshire Subacute Corporation ("NHSC") and Vermont Subacute Corporation ("VSC")
(collectively the "Subacute Entities") and were formerly directors of Greenery
Rehabilitation Group, Inc. ("Greenery"), which merged with Horizon in 1994.
Horizon and the Subacute Entities are lessees of the Company. The Company has
extended a $4 million line of credit to CSC until June 30, 1996. At December 31,
1995, there was $1.6 million outstanding under this agreement. The lease and
mortgage transactions with the Subacute Entities and Horizon are based on market
terms and are generally similar to the Company's lease and mortgage agreements
with unaffiliated companies. The former president of the Company is the
president of the Subacute Entities. In January 1995, the Company acquired nine
facilities located in New Hampshire and Vermont. In connection with this
acquisition, the Company leased eight facilities located in Vermont to VSC and
one facility located in New Hampshire to NHSC. Rent and interest paid to the
Company by the Subacute Entities was $12.0 million in 1995.
The Company has an agreement with Advisors whereby Advisors provides
investment, management and administrative services to the Company. Advisors is
owned by Messrs. Martin and Portnoy. 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, 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 Advisors will be paid in Common 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 1995 was $5.2 million, of which
approximately $371,000 was attributable to investments in HPT and approximately
$545,000 was attributable to investments in the Subacute Entities. The incentive
fee award for fiscal year 1995 was $580,000, representing 35,560 Shares, having
a market value at December 31, 1995 of $577,850. During 1995, Advisors received
$1.4 million in dividends on its owned Common Shares.
Mr. Portnoy is a partner in the law firm which provides legal services to
the Company. Advisors is the general partner of M&P Partners Limited Partnership
("M&P"), which provides management services for the Company's recently acquired
medical office buildings and clinics. The Company paid $17,000 in management
fees to M&P in 1995. Messrs. Martin and Portnoy each has material interests in
the transactions between Advisors and the Company, and between the Subacute
Entities and the Company.
To the extent that the terms of the Company's investments in HPT or in
properties owned or leased by the Subacute Entities 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, but the Company has historically placed a greater
emphasis on what it believes to
12
<PAGE> 15
be more determinative factors such as cash flow available for rent and debt
service. In addition, in some cases these negotiations have been with the
representatives of the underwriters of the Company's public offerings. All
existing business relationships between the Company, on the one hand, and HPT,
Horizon, Advisors, the Subacute Entities and/or their affiliates, on the other
hand, have been approved by, and, unless and until any such company no longer
has relationships with the Company or its affiliates which are the same or
similar to those described above, 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 LLP, counsel to the
Company and to HPT, Advisors, the Subacute Entities and affiliates of each of
the foregoing.
Certain Litigation. Early in 1995, the Company commenced a foreclosure
action to enforce indemnities given in connection with the surrender of certain
leaseholds to, and the purchase of certain properties by, the Company in 1992.
In May 1995, the defendants in the foreclosure action and parties related to the
Company's former tenants and sellers asserted claims against the Company,
Advisors, Messrs. Martin and Portnoy and others. In November 1995, the Florida
court dismissed the foreclosure defendants' counterclaims and third party
complaints against all parties, except the Company, for lack of jurisdiction. At
this time, the only matter pending in the Florida court appears to be the
original foreclosure action by the Company.
The Company and certain parties brought a declaratory judgment action in
the Massachusetts Superior Court to have all matters raised in the counterclaims
and third party complaints referred to arbitration. On December 4, 1995, an
order was entered by the Massachusetts Superior Court granting the Company's
motion for summary judgment and directing arbitration. On December 19, 1995 the
foreclosure defendants and related parties filed a new complaint in the United
States District Court for the District of Massachusetts realleging many of the
same allegations made in the counterclaims and third-party complaints previously
brought by them in response to the Company's original foreclosure action, and
adding allegations of violations of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and violations of
RICO. Although the outcomes of the new litigation and the arbitration proceeding
are currently indeterminable, the Company and each other defendant named in the
new action believes the claims which have been asserted against it are without
merit and intends to defend and deny the allegations therein, and the Company
intends to pursue the original foreclosure action.
The Declaration of Trust provides that Trustees, officers, employees and
agents of the Company shall be indemnified by the Company against any losses,
judgments, liabilities, expenses and amounts paid in settlement of any claims
asserted against them by reason of their status, provided that such claims were
not the result of willful misfeasance, bad faith, gross negligence or reckless
disregard of duty. Were Messrs. Martin and Portnoy to be held liable in the
proceedings described above, they may therefore have a claim for indemnification
from the Company.
COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Trustees and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of securities with the Securities and
Exchange Commission and the New York Stock Exchange. Executive officers,
Trustees and greater than 10% shareholders are required to furnish the Company
with copies of all forms they file pursuant to Section 16(a). Based solely on
review of the copies of such reports furnished to the Company or written
representations that no other reports were required, the Company believes that,
during the 1995 fiscal year, all filing requirements applicable to its executive
officers, Trustees and greater than 10% shareholders were complied with.
13
<PAGE> 16
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 LLP.
A representative of Ernst & Young LLP 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.
SHAREHOLDER PROPOSALS
The Company's 1997 Annual Meeting is presently expected to be held on or
about May 13, 1997. Proposals of shareholders intended to be presented at the
1997 Annual Meeting must be received not later than December 12, 1996, 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
April 10, 1996
14
<PAGE> 17
APPENDIX A
HEALTH AND RETIREMENT PROPERTIES TRUST
PROPOSED AMENDMENT TO SECTION 6.1
OF THE THIRD AMENDMENT AND RESTATEMENT OF THE DECLARATION OF TRUST
Section 6.1 of the Third Amendment and Restatement of the Declaration of
Trust is hereby amended to add the following sentence at the end of the first
paragraph thereof.
"The Trustees are hereby expressly authorized at any time, and from time to
time, without Shareholder approval, to amend this Declaration to increase
or decrease the aggregate number of Shares or the number of Shares of any
class that the Trust has the authority to issue."
<PAGE> 18
HEALTH AND RETIREMENT PROPERTIES TRUST
400 CENTRE STREET, NEWTON, MASSACHUSETTS
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints GERALD M. MARTIN, BARRY M. PORTNOY, and
DAVID J. HEGARTY, 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 Retirement
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 14, 1996 or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HERE BY
THE UNDERSIGNED SHAREHOLDERS. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1 AND 2.
ADDRESS CHANGE/COMMENTS:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
/X/ PLEASE MARK VOTES AS IN 2.) Amendment to the Declaration to
THIS EXAMPLE allow the Trustees to increase or
decrease the authorized capital
1.) Election of Trustees in Group I: stock of the Company.
FOR ALL
FOR WITHHOLD EXCEPT FOR AGAINST ABSTAIN
/ / / / / / / / / / / /
BRUCE M. GANS BARRY M. PORTNOY
If you do not wish your shares voted
"For" a particular nominee, mark the 3.) In their discretion, the Proxies
"For All Except" box and strike a are authorized to vote upon such
line through the nominee(s) name. other business as may properly come
Your shares will be voted for the before the meeting.
remaining nominee(s).
RECORD DATE SHARES: Mark box at right if
comments or address changes / /
are noted above.
(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.
