UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
OF 1934
For the transition period from ______________ to ______________
Commission File Number 1-9317
HEALTH AND RETIREMENT PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland 04-6558834
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
400 Centre Street, Newton, Massachusetts 02158
(Address of principal executive offices) (Zip Code)
617-332-3990
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Number of Common Shares outstanding at the latest practicable date May 12, 1997:
98,703,918 shares of beneficial interest, $.01 par value.
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FORM 10-Q
MARCH 31,1997
INDEX
Page
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PART I Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - March 31, 1997 and December 31, 1996 1
Consolidated Statements of Income - Three Months Ended March 31, 1997
and 1996 2
Consolidated Statements of Cash Flows - Three Months Ended March 31,
1997 and 1996 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results 6
of Operations
PART II Other Information
Item 2 Changes in Securities 8
Item 5 Other Information 8
Item 6 Exhibits and Reports on Form 8-K 8
Signatures 9
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<TABLE>
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HEALTH AND RETIREMENT PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)
(unaudited)
March 31, December 31,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Real estate properties, at cost (including properties leased to
affiliates with a cost of $110,167 and $109,843, respectively):
Land $ 168,064 $ 93,522
Buildings and improvements 1,235,293 912,217
----------- -----------
1,403,357 1,005,739
Less accumulated depreciation 83,439 76,921
----------- -----------
1,319,918 928,818
Real estate mortgages and notes, net (including note to affiliate
of $2,365) 146,508 150,205
Investment in Hospitality Properties Trust 102,958 103,062
Cash and cash equivalents 81,296 21,853
Interest and rents receivable 16,933 11,612
Deferred interest and finance costs, net, and other assets 11,764 13,972
----------- -----------
$ 1,679,377 $ 1,229,522
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank notes payable $ -- $ 140,000
Senior notes and bonds payable, net 124,446 124,385
Convertible subordinated debentures 211,723 227,790
Mortgage notes payable 27,588 --
Accounts payable and accrued expenses 25,269 10,711
Prepaid rents 6,943 7,608
Security deposits 6,111 8,387
Due to affiliates 916 2,593
Dividends payable 35,532 --
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:
125,000,000 shares and 100,000,000 shares authorized,
respectively, and 98,700,975 shares and 66,888,917 shares
issued and outstanding, respectively 987 669
Additional paid-in capital 1,368,275 795,263
Cumulative net income 325,697 306,298
Dividends (454,110) (394,182)
----------- -----------
Total shareholders' equity 1,240,849 708,048
----------- -----------
$ 1,679,377 $ 1,229,522
=========== ===========
</TABLE>
See accompanying notes
1
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<TABLE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share amounts)
(unaudited)
Three Months Ended March 31,
-----------------------------
1997 1996
-------- --------
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Revenues:
Rental income $ 30,679 $ 23,682
Interest and other income 5,205 4,798
-------- --------
Total revenues 35,884 28,480
-------- --------
Expenses:
Operating 2,067 744
Interest 7,848 4,961
Depreciation and amortization 6,955 5,182
General and administrative 1,871 1,473
-------- --------
Total expenses 18,741 12,360
-------- --------
Income before equity in earnings of Hospitality Properties
Trust and extraordinary item 17,143 16,120
Equity in earnings of Hospitality Properties Trust 2,256 2,092
-------- --------
Income before extraordinary item 19,399 18,212
Extraordinary item - early extinguishment of debt -- (2,443)
-------- --------
Net income $ 19,399 $ 15,769
======== ========
Weighted average share outstanding 71,905 66,155
======== ========
Per share amounts:
Income before extraordinary item $ .27 $ .28
======== ========
Net income $ .27 $ .24
======== ========
</TABLE>
See accompanying notes
2
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<TABLE>
<CAPTION>
HEALTH AND RETIREMENT PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
For the Three Months Ended
March 31,
---------------------------
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 19,399 $ 15,769
Adjustments to reconcile net income to cash provided by operating activities:
Equity in earnings of Hospitality Properties Trust (2,256) (2,092)
Dividends from Hospitality Properties Trust 2,360 2,320
Extraordinary item -- 2,443
Depreciation 6,518 5,050
Amortization 437 132
Amortization of deferred interest costs 322 428
Change in assets and liabilities:
Decrease (increase) in interest and rents receivable and other assets 5,194 (662)
Decrease in security deposit (2,276) (1,366)
Increase (decrease) in accounts payable and accrued expenses 8,236 (227)
(Decrease) increase in prepaid rents (665) 176
Decrease in due to affiliates (1,068) (1,281)
--------- ---------
Cash provided by operating activities 36,201 20,690
--------- ---------
Cash flows from investing activities:
Real estate acquisitions (6,272) (13,400)
Acquisition of business, less cash acquired (291,935) --
Investments in mortgage loans (268) (15,293)
Proceeds from repayment of notes and mortgage loans, net of discounts 3,915 --
--------- ---------
Cash used for investing activities (294,560) (28,693)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common shares 483,153 6,995
Proceeds from borrowings -- 27,000
Payment on borrowings (140,000) --
Deferred finance costs incurred (955) (650)
Dividends paid (24,396) (23,158)
--------- ---------
Cash provided by financing activities 317,802 10,187
--------- ---------
Increase in cash and cash equivalents 59,443 2,184
Cash and cash equivalents at beginning of period 21,853 18,640
--------- ---------
Cash and cash equivalents at end of period $ 81,296 $ 20,824
========= =========
Supplemental cash flow information:
Interest paid $ 9,070 $ 5,058
========= =========
Non-cash financing activities:
Issuance of shares $ 16,304 $ --
Conversion of convertible subordinated debentures (15,694) --
Acquisition of business, less cash acquired:
Real estate acquisitions $ 391,346 $ --
Working capital, other than cash 2,051 --
Liabilities assumed (27,588) --
Net cash used to acquire business (291,935) --
--------- ---------
Issuance of shares $ 73,874 $ --
========= =========
</TABLE>
See accompanying notes
3
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
Note 1. Basis of Presentation
The consolidated financial statements of Health and Retirement
Properties Trust (the "Company") have been prepared in accordance with generally
accepted accounting principals for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
interim periods are not necessarily indicative of the results that may be
expected for the full year.
Note 2. Shareholders' Equity
In January, 1997, the Company issued 32,846 shares of common stock to
HRPT Advisors, Inc. (the "Advisor"), an affiliate, as the incentive fee earned
for the year ended December 31, 1996. In March, 1997, the Company issued
27,025,000 common shares in a public offering, yielding net proceeds of
approximately $483,153. Proceeds of the offering were used to repay the then
outstanding balance on the Company's revolving credit facility of $140,000 and
to fund the acquisition of real estate. In addition, during March 1997, the
Company issued 3,862,716 shares in a private placement as part of the payment
for the purchase of real estate. During the quarter ended March 31, 1997, the
Company issued 891,496 shares due to the conversion of $16,067 of the Series A
Convertible Subordinated Debentures due 2003.
During the quarter, the Company increased the number of shares
authorized from 100,000,000 to 125,000,000.
The Trustees declared a dividend on the Company's common shares of
beneficial interest with respect to the quarter ended March 31, 1997, of $0.36,
which will be distributed on or about May 20, 1997 to shareholders of record as
of March 31, 1997.
The Financial Accounting Standards Board has issued Financial
Accounting Standards Board Statement No. 128 "Earnings Per Share" ("FAS 128").
The statement is effective for interim and annual financial statements ending
after December 15, 1997. Management estimates that adoption of FAS 128 will have
no impact on reported results.
Note 3. Real Estate Properties
In January, 1997, the Company purchased a medical office building for
approximately $5,544 paid for with cash on hand. The property is managed by M&P
Partners Limited Partnership ("M&P"), an affiliate of the Company.
In February, 1997, the Company entered into an agreement to acquire 30
office buildings (the "Government Properties"), leased to various agencies of
the United States Government. In March, 1997, the Company purchased 25 of the
Government Properties for approximately $391,346. The acquisition was funded, in
part, with the proceeds from the issuance of the Company's common shares
pursuant to a public offering, the issuance of 3,862,716 unregistered common
shares of the Company in a private placement and the assumption of $27,588 of
debt. The Government Properties are managed by M&P.
The following pro forma summary presents the results of operations of
the Company as if the acquisition of the Government Properties occurred at the
beginning of 1996.
Three Months Ended March 31,
--------------------------------
1997 1996
--------- ---------
Revenue $50,010 $43,472
Net income 25,829 19,904
Net income per share .27 .24
4
<PAGE>
Note 3. Real Estate Properties - continued
These pro forma results are not necessarily indicative of the expected
results of operations for any future period. Differences could result from, but
are not limited to, additional property investments, changes in interest rates
and changes in the capital structure of the Company.
During the quarter ended March 31, 1997, the Company provided $728 of
improvement financing to existing tenants.
At March 31, 1997, 19% of the Company's real estate properties, net,
and mortgage receivables were in properties leased to Marriott International,
Inc. ("Marriott"). The financial statements of Marriott have been filed as a
part of Marriott's Quarterly Report on Form 10-Q, file number 1-12188, for the
quarter ended March 28, 1997.
At March 31, 1997, the Company had total outstanding commitments
aggregating $49,838 to acquire real estate properties, including the five
Government Properties, and to finance improvements to certain properties leased
or mortgaged by the Company. Subsequent to March 31, 1997, the Company entered
into agreements to acquire a retirement living facility and medical office
buildings aggregating $170,350. In May 1997, the Company acquired the retirement
living facility for approximately $14,350 paid for with cash on hand.
Note 4. Investment in Hospitality Properties Trust
At March 31, 1997, the Company owned 4,000,000 shares of the common
stock of Hospitality Properties Trust ("HPT") with a carrying value of $102,958
and market value of $122,500. The Company's percentage of ownership of HPT is
14.9%.
Note 5. Real Estate Mortgages and Notes Receivable, net
During the first quarter of 1997, the Company provided improvement
financing for existing facilities of $268. Also during the quarter, the Company
received $4,260 of principal payments, including the payoff of one mortgage for
$3,858 secured by a long-term care facility.
Note 6. Indebtedness
In March 1997, the Company extended and modified its $250 million
unsecured revolving bank credit facility. The restated credit facility matures
in 2001 and bears interest at LIBOR plus a premium. At March 31, 1997, there
were no amounts outstanding under the credit facility.
5
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Total revenues for the quarter ended March 31, 1997, increased by
$7,404,000 in comparison to the quarter ended March 31, 1996. Rental income
increased by $6,997,000 and interest income increased by $407,000 over the
comparable period. Rental income increased as a result of new real estate
investments subsequent to March 31, 1996. Interest income increased primarily
due to higher cash balances.
Total expenses for the quarter ended March 31, 1997, increased by
$6,381,000 over the quarter ended March 31, 1996. The increase is the result of
increases in operating, interest, depreciation and amortization, and general and
administrative expenses of $1,323,000, $2,887,000, $1,773,000 and $398,000,
respectively. Operating expenses increased due to investments acquired after
March 31, 1996. Interest expense increased due to higher borrowings outstanding
under its revolving credit facility and due to the convertible subordinated
debentures issued in October 1996, offset by the prepayment of the Series A
Senior Notes, also in October 1996. Depreciation and general and administrative
expense increased as a result of new investments since March 31, 1996.
Net income for the quarter ended March 31, 1997 increased to
$19,399,000, or $.27 per share, from $15,769,000, or $.24 per share, for the
same quarter in 1996. The increase is the result of new investments since March
31, 1996, and an extraordinary loss during the quarter ended March 31, 1996 of
$2,443,000 related to the early retirement of debt. Income before extraordinary
item increased to $19,399,000, or $.27 per share, from $18,212,000, or $.28 per
share. On a per share basis, net income has been diluted by the issuance of
additional common shares after March 31, 1996.
The Company bases its dividends primarily on Funds from Operations
("FFO"). The Company has adopted the National Association of Real Estate
Investment Trust's ("NAREIT") definition of FFO, defined as income before equity
in earnings of HPT, gain (loss) on sale of real estate and extraordinary items,
plus depreciation and the Company's proportionate share of HPT's FFO. The
Company's FFO for the 1997 quarter was $27,030,000, or $.38 per share, as
compared to $24,161,000, or $.37 per share, for the 1996 quarter. Cash available
for distribution may not necessarily equal FFO as the cash flow of the Company
is affected by other factors not included in the FFO calculation. The dividends
declared which relate to these quarters were $35,532,000, or $.36 per share, in
1997 and $23,158,000, or $.35 per share, in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Assets of the Company increased to $1.7 billion at March 31, 1997 from
$1.2 billion at December 31, 1996. The increase is primarily attributable to new
real estate investments.
In January, 1997, the Company purchased a medical office building for
approximately $5,544,000 paid for with cash on hand. In February, 1997, the
Company entered into an agreement to acquire 30 office buildings ("Government
Properties") leased to the United States Government for cash, unregistered
common shares of the Company and the assumption of certain indebtedness. In
March, 1997, the Company purchased 25 of the 30 Government Properties for
approximately $391,346,000. The acquisition was funded, in part, with the
proceeds from the issuance of the Company's common shares pursuant to a public
offering, the issuance of 3,862,716 unregistered common shares of the Company in
a private placement and the assumption of $27,588,000 of debt. The acquisition
of the remaining five properties are subject to various conditions customary in
real estate transactions and are expected to be substantially consummated by
September 30, 1997, however, no assurances can be given if and when these
transactions will be complete.
During the quarter ended March 1997, the Company provided $996,000 of
improvement financing to existing facilities and received $4,260,000 of
principal payments, including the payoff of one mortgage for $3,858,000 secured
by a long-term care facility.
6
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES - continued
In March, 1997, the Company issued 27,025,000 common shares in a public
offering yielding net proceeds of approximately $483,153,000. Proceeds of the
offering were used to repay the balance on the Company's revolving credit
facility of $140,000,000 and to fund the acquisition of real estate. In
addition, during the quarter ended March 31, 1997, the Company issued 891,496
shares due to the conversion of $16,067,000 of the Series A Convertible
Subordinated Debentures due 2003.
At March 31, 1997, the Company had $81,296,000 of cash and cash
equivalents, and the ability to borrow $250,000,000 under its revolving credit
facility. The facility matures in 2001 and bears interest at a spread over
LIBOR. The effective interest rates on the Company's Senior Notes are capped by
the use of interest rate cap agreements. The interest rate cap agreements
provide for maximum weighted average interest rates of approximately 6.24% on
$200 million of its variable rate debt through 1997.
At March 31, 1997, the Company had outstanding commitments to provide
financing totaling approximately $49,838,000, including the five Government
Properties. Subsequent to March 31, 1997, the Company entered into agreements to
acquire a retirement living facility and medical office buildings aggregating
$170,350,000. In May 1997, the Company acquired the retirement living facility
for approximately $14,350,000 paid for with cash on hand. The acquisition of the
medical office buildings are subject to various conditions customary in real
estate transactions and are expected to be substantially consummated by May 31,
1997, however, no assurances can be given if and when these transactions will be
complete. The Company intends to fund these commitments with a combination of
cash on hand, amounts available under its existing credit facilities and/or
proceeds of mortgage prepayments, if any.
The Company continues to seek new investments to expand and diversify
its portfolio of leased and mortgaged real estate. The Company intends to
balance the use of debt and equity in such a manner that the long term cost of
funds borrowed to acquire or mortgage finance facilities is appropriately
matched, to the extent practicable, with the terms of the investments made with
such borrowed funds. As of March 31, 1997, the Company's debt as a percentage of
total market capitalization was approximately 17 %.
CERTAIN IMPORTANT FACTORS
The Company's Quarterly Report on Form 10-Q contains statements which
constitute forward looking statements within the meaning of the Securities
Exchange Act of 1934, as amended. Those statements appear in a number of places
in this Form 10-Q and include statements regarding the intent, belief or
expectations of the Company, its Trustees or its officers with respect to the
declaration or payment of dividends, the consummation of additional
acquisitions, policies and plans of the Company regarding investments,
financings or other matters, the Company's qualification and continued
qualification as a real estate investment trust or trends affecting the
Company's or any property's financial condition or results of operations.
Readers are cautioned that any such forward looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those contained in the forward looking
statements as a result of various factors. Such factors include without
limitation changes in financing terms, the Company's ability or inability to
complete acquisitions and financing transactions, results of operations of the
Company's properties and general changes in economic conditions not presently
contemplated. The information contained in this Form 10-Q and the Company's
Annual Report on Form 10-K for the year ended December 31, 1996, including the
information under the heading "Management's Discussion and Analysis of Financial
Condition and Results of Operations", identifies other important factors that
could cause such differences.
7
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Part II Other Information
Item 2. Changes in Securities
(c) In January 1997 the Company issued 32,846 common shares of
beneficial interest, par value $.01 per share, ("Common Shares") to HRPT
Advisors, Inc. ("Advisors"), the Company's investment advisor, as an incentive
fee for services rendered during 1996, representing an incentive fee of
$609,622, based upon a per Common Share price of $18.56. These restricted
securities were issued pursuant to the exemption from registration provided
under Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act").
As described above under "Liquidity and Capital Resources" and as
previously reported, in March 1997 the Company issued a total of 3,862,716
Common Shares to Government Properties Investors, Inc. in payment of merger
consideration in connection with the merger of a subsidiary (the "GPI
Subsidiary") of Government Properties Investors, Inc. ("GPI") into a subsidiary
of the Company which survived such merger. As a result, the capital stock of
direct and indirect subsidiaries of GPI Subsidiaries which owned 25 properties
leased to agencies of the United States Government became indirectly owned by
the Company. The related merger agreement also provides for the issuance of
additional Common Shares at a second closing thereunder, if and when certain
other properties owned directly or indirectly by GPI are transferred (directly
or by share transfer) to a subsidiary of the Company. The Common Shares were
valued at an aggregate of $73,874,444, based upon a per Common Share price of
$19.125. Further information with respect to such merger and Common Share
issuance is set forth in Item 5 (Other Events), Part A (GPI Acquisition), of its
Current Report on Form 8-K, dated February 17, 1997, which Part is hereby
incorporated by reference. These restricted securities were issued pursuant to
the exemption from registration provided under Section 4(2) of the Securities.
Among other things, GPI represented to the Company in connection with its
acquisition of such Common Shares that such securities were being acquired for
its own account for investment and not with a view to any distribution or public
offering within the meaning of the Securities Act or any state securities law,
that it is an "accredited investor" within the meaning of Rule 501 promulgated
by the Securities and Exchange Commission pursuant to the Securities Act, and
that transfers of such securities were subject to certain restrictions set forth
in agreements relating to the merger.
Item 5. Other Information
The Board of Trustees increased the number of authorized but unissued
junior participating preferred shares of beneficial interest, par value $.01 per
share (the "Junior Participating Preferred Shares") from 1,000,000 to 1,250,000,
effective May 14, 1997.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
3. Amendment to the Articles Supplementary relating to the
Company's Junior Participating Preferred Shares effective
May 14, 1997.
27. Financial Data Schedule
(b) Reports on Form 8-K:
1. Current Report on Form 8-K dated February 13, 1997 (Item 5)
2. Current Report on Form 8-K dated February 17, 1997 (Item 5,
7) and including pro forma and historical financial
statements of the Company as of and for the year ended
December 31, 1996
3. Current Report on Form 8-K dated March 3, 1997 (Item 7)
4. Current Report on Form 8-K dated March 14, 1997 (Item 5, 7)
and including pro forma financial statement of the Company
as of and for the year ended December 31, 1996. Such pro
forma financial statements modify and supersede the pro
forma financial statements of the Company contained in the
Company's Current Report on Form 8-K dated February 17, 1997
in their entirety.
8
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /S/ David J. Hegarty
David J. Hegarty
President and Chief Operating Officer
Dated: May 15, 1997
By: /S/ Ajay Saini
Ajay Saini
Treasurer and Chief Financial Officer
Dated: May 15, 1997
9
EXHIBIT 3
HEALTH AND RETIREMENT PROPERTIES TRUST
ARTICLES SUPPLEMENTARY
TO
THIRD AMENDMENT AND RESTATEMENT OF
DECLARATION OF TRUST DATED JULY 1, 1994
Health and Retirement Properties Trust, a Maryland real estate
investment trust, having its principal office in Baltimore City, Maryland
(hereinafter called, the "Trust"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:
FIRST: Pursuant to authority expressly vested in the Board of Trustees
of the Trust by Article SIXTH of the Third Amendment and Restatement of
Declaration of Trust, as amended and as supplemented by the Articles
Supplementary (the "Articles Supplementary") creating the series of Junior
Participating Preferred Shares and filed with the State Department of
Assessments and Taxation of Maryland on November 4, 1994, and as further amended
by Articles of Amendment on July 10, 1996 and February 27, 1997 (as amended, the
"Declaration of Trust") the Board of Trustees has duly divided and classified
250,000 additional shares of the authorized preferred shares of beneficial
interest ("Preferred Shares") of the Trust into the series of such class
designated as Junior Participating Preferred Shares, bringing the total number
of authorized shares of such series to 1,250,000.
SECOND: The terms of the Junior Participating Preferred Shares
established by the Board of Trustees are as set forth in the Articles
Supplementary in addition to those set forth in Article SIXTH of the Declaration
of Trust applicable to all classes of Preferred Shares.
IN WITNESS WHEREOF, the Trust has caused these Articles Supplementary
to be signed in its name and on its behalf by the undersigned, being at least a
majority of the Trustees of the Trust, who executed this instrument as of May
13, 1997.
/s/ Bruce M. Gans /s/ Justinian Manning
Bruce M. Gans The Rev. Justinian C. Manning
/s/ Gerard M. Martin /s/ Barry M. Portnoy
Gerard M. Martin Barry M. Portnoy
/s/ Ralph J. Watts
Ralph J. Watts
- 1 -
<PAGE>
COMMONWEALTH OF MASSACHUSETTS)
COUNTY OF SUFFOLK)
On May 13, 1997 before me Julianne Ells, a Notary Public in and for said
Commonwealth, personally appeared Bruce M. Gans, the Reverend Justinian C.
Manning, Gerard M. Martin, Barry M. Portnoy and Ralph J. Watts, known to me or
proved to me on the basis of satisfactory evidence, to be the person whose names
are subscribed to the within instrument and acknowledged that each of them
executed the same.
WITNESS my hand and official seal.
Signature: /s/ Julianne Ells
Notary Public
- 2 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 81,296
<SECURITIES> 0
<RECEIVABLES> 163,441
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,403,357
<DEPRECIATION> 83,439
<TOTAL-ASSETS> 1,679,377
<CURRENT-LIABILITIES> 74,771
<BONDS> 363,757
0
0
<COMMON> 987
<OTHER-SE> 1,239,862
<TOTAL-LIABILITY-AND-EQUITY> 1,679,377
<SALES> 0
<TOTAL-REVENUES> 35,884
<CGS> 0
<TOTAL-COSTS> 10,893
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,848
<INCOME-PRETAX> 19,399
<INCOME-TAX> 0
<INCOME-CONTINUING> 19,399
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,399
<EPS-PRIMARY> .27
<EPS-DILUTED> 0
</TABLE>
