HEALTH & RETIREMENT PROPERTIES TRUST
DEF 14A, 1997-03-28
REAL ESTATE INVESTMENT TRUSTS
Previous: MARINA LIMITED PARTNERSHIP, 10-K405, 1997-03-28
Next: CARLYLE REAL ESTATE LTD PARTNERSHIP XVII, 10-K405, 1997-03-28







                   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 Rule 14a-11(c) or Rule 14a-12


                     HEALTH AND RETIREMENT PROPERTIES TRUST
                (Name of Registrant as Specified in its Charter)



     -----------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)


Payment of Filing Fee (Check the appropriate box):

[x]  No fee required.

[ ]  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
     (set forth the amount on which the filing fee is calculated and state how
     it was determined):


(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 its was determined):

     -----------------------------------------------------------------------

(4)  Proposed maximum aggregate value of transaction:

     -----------------------------------------------------------------------

(5)  Total fee paid:

     -----------------------------------------------------------------------


[ ]  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, 
     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>

                    HEALTH AND RETIREMENT PROPERTIES TRUST 

                              400 Centre Street 
                         Newton, Massachusetts 02158 

                   NOTICE OF ANNUAL MEETING OF SHAREHOLDERS 
                           TO BE HELD MAY 13, 1997 

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 13, 1997, 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 II of the Company's Board of Trustees. 

   2. 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, 1997 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 31, 1997 

WHETHER OR NOT YOU EXPECT TO BE AT THE MEETING, PLEASE SIGN, DATE AND RETURN 
YOUR PROXY IN THE ENVELOPE ENCLOSED HEREWITH. 


<PAGE> 

                    HEALTH AND RETIREMENT PROPERTIES TRUST 

                              400 Centre Street 
                         Newton, Massachusetts 02158 

                               PROXY STATEMENT 

                        ANNUAL MEETING OF SHAREHOLDERS 

                     To Be Held on Tuesday, May 13, 1997 

                                  -----------

                                 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 March 31, 1997, together with a copy 
of the Annual Report to Shareholders for the year ended December 31, 1996 
(including audited financial statements of the Company). 

   Only shareholders of record as of the close of business on March 21, 1997 
(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 94,838,259 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 proposal 
set forth below. If a broker indicates on a proxy that it does not have 
discretionary authority as to certain Common Shares to vote on the proposal, 
those Common Shares will not be counted as voting in favor of the 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 proposal 
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 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 Amended and Restated Declaration of 
Trust, as amended (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. 

   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 


<PAGE> 

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 
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. The Company does not have a Compensation 
Committee or a Nominating Committee. 

   During 1996, the Board of Trustees held seven meetings. During 1996, 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 Audit Committee held three 
meetings during 1996. 

   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. 

   The present Trustees in Group II are the Rev. Justinian Manning and Gerard 
M. Martin. If re-elected, the Rev. Manning and Mr. Martin will hold office 
until the Company's 2000 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 the Rev. Manning and Mr. Martin 
as the Group II Trustees. Advisors, which has voting control over 3,859,822 
Common Shares (approximately 4.1%) of Common Shares outstanding and entitled 
to vote) intends to vote in favor of the election of the Rev. Manning and Mr. 
Martin as the Group II Trustees. The Rev. Manning's and Mr. Martin's 
principal occupations for the past five years and their ages as of the Record 
Date 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. 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 and 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. The 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.


GERARD M. MARTIN Age: 62 

     Mr. Martin is a Managing Trustee of the Company. Mr. Martin is a private
investor in real estate and has been a Trustee of HRP since its organization in
1986. From 1985 until the merger of Greenery Rehabilitation Group, Inc.
("Greenery") into Horizon Healthcare Corporation (now known as Horizon/CMS
Healthcare Corporation) ("HHC") in February 1994, he served as the Chief
Executive Officer and Chairman of the Board of Directors of Greenery. Mr. Martin
served as a Director of HHC until his resignation in July 1996. 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, Connecticut Subacute
Corporation ("CSC") and Connecticut Subacute Corporation II ("CSCII"), a
Director and 33-1/3% shareholder of each of Vermont Subacute Corpo-

                                      2 
<PAGE> 

ration ("VSC") and New Hampshire Subacute Corporation ("NHSC") and a Managing 
Trustee of Hospitality Properties Trust ("HPT"). Mr. Martin was re-elected as 
a Group II Trustee at the 1994 Annual Meeting of Shareholders. 

   In addition to the 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 the Record Date, are as follows: 


BRUCE M. GANS, M.D. Age: 50 

     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 a vacant seat on the
Board. His term will expire at the 1999 Annual Meeting of Shareholders.


BARRY M. PORTNOY Age: 51 

     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 served as a Director of HHC until his
resignation in July 1996. Mr. Portnoy is a Director and 50% shareholder 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. Portnoy was re-elected as a Group I
Trustee at the 1996 Annual Meeting of Shareholders. His term will expire at the
1999 Annual Meeting of Shareholders.


RALPH J. WATTS Age: 50 

     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 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 a vacancy on the Board of Directors. His term will expire at the
1998 Annual Meeting of Shareholders.


DAVID J. HEGARTY Age: 40 

     David J. Hegarty, a certified public accountant, joined the Company in July
1987 as Treasurer, became Executive Vice President in July 1993 and became the
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 a Director and 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: 37 

     In April 1995, Ajay Saini, a certified public accountant, became the
Treasurer of the Company and in August 1995 also become Chief Financial Officer.
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. 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 current executive 
officers of the Company. However, Adam D. Portnoy, who served as Vice 
President of the Company prior to his resignation in January 1997, is the son 
of Barry M. Portnoy. Executive officers serve at the will of the Board of 
Trustees. 

                                      3 
<PAGE> 
                              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". 


   The following table provides summary compensation information for certain 
employees of Advisors who performed the duties of executive officers for the 
Company during 1996: 

SUMMARY COMPENSATION TABLE 

<TABLE>
<CAPTION>
                                         Annual Compensation(1)                              Long-Term Compensation 
                                 --------------------------------------- -----------------------------------------------------------
                                                                           Restricted    Securities 
                                                               Other         Stock       Underlying                      All Other 
  Name and Principal Position    Year    Salary   Bonus    Compensation    Awards(2)    Options/SARs    LTIP Payouts   Compensation 
 ------------------------------  ------ --------  ---------------------- ------------ --------------- ---------------  -------------
<S>                              <C>      <C>      <C>         <C>          <C>             <C>             <C>             <C>
David J. Hegarty                 1996     None     None        None         $51,750         None            None            None 
 President & Chief Operating     1995     None     None        None         $46,125         None            None            None 
 Officer (chief executive        1994     None     None        None         $44,250         None            None            None 
 officer) 
Adam D. Portnoy                  1996     None     None        None         $25,875         None            None            None 
 Vice President(3) 
Ajay Saini, Treasurer            1996     None     None        None         $34,500         None            None            None 
 Treasurer & Chief Financial     1995     None     None        None         $30,750         None            None            None 
 Officer                         1994     None     None        None         $22,125         None            None            None 
</TABLE>

(1) Except with respect to incentive share award, 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 and Portnoy 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, except as described below in Note 3, 
    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. 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 Common Shares which have vested up to the date of his departure. At 
    December 31, 1996, Messrs. Hegarty, Saini and Portnoy held 14,000, 6,000 
    and 1,500 Common Shares granted under annual incentive share awards, 
    respectively, having a value of $269,500, $115,500 and $28,875 
    respectively, based upon a $19-1/4 per share closing price for the 
    Common Shares as reported on the New York Stock Exchange on December 31, 
    1996. Common Shares are entitled to dividends as declared by the Company. 
    The dollar amounts shown represent the number of restricted Common 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. Adam Portnoy, the son of Barry M. Portnoy, served as Vice President 
    during a portion of 1996 until January of 1997. The 1,500 Common Shares 
    held by him under the Plan became fully vested in 1997. 

                                      4 
<PAGE> 

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, 1991) 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 tax-qualified real estate investment trusts 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 and, in the 
case of HRP, that the reinvestment occurred on the dividend payment date. 


[LINE CHART]
                                        S&P 500 
                      HRP     NAREIT    INDEX
         1991         100      100      100
         1992          95      112      108
         1993         124      133      118
         1994         123      134      120
         1995         164      159      165
         1996         210      215      203
                      
[/LINE CHART]

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, the Rev.
Manning and Mr. Watts) makes recommendations for grants of Common 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, the 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 

     Health and Retirement Properties Trust (the "Company") developed and
implemented its 1992 Incentive Share Award Plan (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) 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 1996, 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 1996, Mr.
Saini, then Treasurer of the Company, received 



                                      5 
<PAGE> 


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 1996, Adam D. Portnoy
received a grant of 1,500 Common Shares under the Plan, 500 Common Shares of
which vested immediately upon grant. Mr. Portnoy resigned his position with the
Company in January of 1997, and the Board of Trustees voted to accelerate fully
the vesting of Mr. Portnoy's Common Shares. The determination of the number of
Common Shares granted to Messrs. Hegarty, Saini and Portnoy and the acceleration
of the vesting schedule for Mr. Portnoy's Common Shares were 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 Common Shares so granted, on the
number of Common Shares previously granted to each such individual, and on 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 Portnoy during
the year.

                                            BOARD OF TRUSTEES 
                                            Bruce M. Gans, M.D. 
                                            Rev. Justinian Manning, C.P. 
                                            Gerard M. Martin 
                                            Barry M. Portnoy 
                                            Ralph J. Watts 



                                      6 
<PAGE> 

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 the Record Date. The address of each of the
Trustees and current officers of the Company is c/o Health and Retirement
Properties Trust, 400 Centre Street, Newton, Massachusetts 02158.

<TABLE>
<CAPTION>
                                                                                 Common 
                                                                                 Shares 
                                                                              Beneficially 
                                    Name                                         Owned        Percentage 
                                    ----                                      ------------    ---------- 
<S>                                                                          <C>             <C>
Bruce M. Gans                                                                        500         * 
David J. Hegarty(1)                                                               14,000         * 
Rev. Justinian Manning, C.P                                                        2,500         * 
Gerard M. Martin(2)                                                            3,859,822         4.1% 
Adam D. Portnoy(3)                                                                 1,500         * 
Barry M. Portnoy(2)                                                            3,859,822         4.1% 
Ajay Saini(4)                                                                      6,515         * 
Ralph J. Watts                                                                       550         * 
All executive officers and Trustees as a group (8 persons)(1)(2)(3)(4)         3,885,387         4.1% 
</TABLE>

- ----------------
* Less than 1% of the Company's outstanding Shares. 

(1)  Includes 3,000 Common Shares awarded under the 1992 Incentive Share Awarded
     Plan which have not yet vested.

(2)  Advisors, which is wholly owned by Messrs. Martin and Portnoy, owns
     1,082,056 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. Neither Mr. Martin nor Mr. Portnoy owns any
     Common Shares directly.

(3)  Mr. Adam Portnoy's address is 56 Kissling Street, San Francisco, CA 94103.

(4)  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 15 Common Shares held by Mr. Saini's minor
     daughter.


Certain Relationships and Related Transactions 

     Messrs. Martin and Barry Portnoy are 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 served as Directors of Horizon/CMS
Healthcare Corporation ("HHC") until their resignation in July of 1996. The
Subacute Entities and HHC are mortgagors or lessees of the Company. The Company
has extended a $4 million line of credit to CSC until June 30, 1998. At December
31, 1996, there was $2.4 million outstanding under this agreement. The lease and
mortgage transactions with HHC and the Subacute Entities 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. Rent and interest paid to the Company by the
Subacute Entities was $13 million in 1996.

    The Company has an agreement with Advisors whereby Advisors provides
investment and administrative services to the Company. Advisors is owned by
Messrs. Martin and Barry Portnoy. The Advisory Agreement provides


                                      7 
<PAGE> 

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, currently 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 $1.47/Share in 1996). All incentive fees which may be 
earned by the Advisor 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 fees paid to Advisors for fiscal year 1996 were $5.3 
million, of which approximately $592,272 was attributable to investments in 
the Subacute Entities. The incentive fee award for fiscal year 1996 was 
$609,618, representing 32,846 Common Shares, having a market value at 
December 31, 1996 of $632,286. During 1996, Advisors received $1.5 million in 
dividends on its owned Common Shares. 

   Advisors is the general partner of M&P Partners Limited Partnership 
("M&P"), a partnership which is owned by Advisors and Messrs. Martin and 
Barry Portnoy and which provides management services for the Company's multi-
tenant buildings. The Company paid $355,000 in management fees to M&P in 1996. 
Management fees paid to M&P are based on a percentage of revenues derived 
from the multi-tenant buildings under its management. Messrs. Martin and 
Portnoy each has material interests in the transactions between the Company 
and each of the Subacute Entities, Advisors and M&P. 

   To the extent that the terms of the Company's investments 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 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 HHC, Advisors, M&P, 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, M&P, the Subacute Entities and affiliates of each of the foregoing. 


   Certain Litigation. 

    As previously disclosed, in early 1995 the Company commenced an action in a
Florida state court to collect on a secured indemnity agreement from a former
tenant and mortgagor, together with certain related parties (collectively, the
"Former Tenant"). In May 1995 the Former Tenant filed a counterclaim and
third-party complaint against the Company and others including Messrs. Martin
and Barry Portnoy, Advisors and Sullivan & Worcester, seeking, among other
things, to set aside the indemnity agreement and to recover substantial damages.
After a Massachusetts state court ordered the dispute to arbitration and a
Florida court stayed further proceedings pending arbitration, the Former Tenant
brought a separate action against the Company in the Federal District Court in
Massachusetts and realleged many of the same allegations made in the
counterclaims and third-party complaints previously brought by them in response
to the Company's original 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. In September 1996, the Federal
Court in Massachusetts ordered the case brought by the Former Tenant dismissed
and all disputes between the Former Tenant and the Company referred to
arbitration. The arbitration is proceeding. As the Company has previously
disclosed, certain related cases have also been filed. The amounts of damages
claimed by the Former Tenant and creditors or assignees of the Former Tenant are
material. The Company is pursuing its indemnity claims against the Former Tenant
and is defending the claims of the Former Tenant in the arbitration proceedings.
The Company intends to defend itself in related actions brought and which may be
brought, to attempt to consolidate these cases in the pending arbitration
proceeding or otherwise to pursue such claims and rights which it may have. The
outcome of these pending claims and proceedings cannot be predicted.

   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 

                                        8

<PAGE> 



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 1996 fiscal year, all filing requirements 
applicable to its executive officers, Trustees and greater than 10% 
shareholders were complied with, except that Mr. Watts reported on his 1996 
Annual Statement of Changes in Beneficial Interest a de minimis purchase of 
Common Shares which should have been reported on his 1995 Annual Statement of 
Changes in Beneficial Interest. 

                                   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 or its predecessors. 

   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 1998 Annual Meeting is presently expected to be held on or 
about May 12, 1998. Proposals of shareholders intended to be presented at the 
1998 Annual Meeting and nominations for Trustee must be received not later 
than March 4, 1998, and not earlier than January 13, 1998 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 31, 1997 

                                      9 
<PAGE> 


[FRONT]
                     HEALTH AND RETIREMENT PROPERTIES TRUST
                 400 Centre Street, Newton, Massachusetts 02158

           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES


     The undersigned hereby appoints GERARD 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 13, 1997 or any adjournment or postponement 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 Proposal 1.

PLEASE VOTE, DATE, AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN ENCLOSED
ENVELOPE.

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.

Address Change/Comments:

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------

[REVERSE]

[X]  PLEASE MARK VOTES AS IN THIS EXAMPLE

1.)  Election of Trustees in Group II:

     For                    Against              For All Except
     [ ]                     [ ]                    [ ]

          Justinian Manning and 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. Your shares
will be voted for the remaining nominee(s).

2.)  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 changes are noted
on the reverse side of this card.                                         [ ]


Please be sure to sign and date this Proxy.


DATE: ________________                               RECORD DATE SHARES:


- ---------------------------------           ---------------------------------
Shareholder Sign Here                                Co-owner Sign Here





© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission