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 June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES 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 August 8,
1997: 98,838,340 shares of beneficial interest, $.01 par value.
<PAGE>
FORM 10-Q
JUNE 30, 1997
INDEX
PART I Financial Information Page
Item 1. Consolidated Financial Statements (Unaudited)
Consolidated Balance Sheets - June 30, 1997 and
December 31, 1996 1
Consolidated Statements of Income - Three and Six
Months Ended June 30, 1997 and 1996 2
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1997 and 1996 3
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
7
PART II Other Information
Item 2. Changes in Securities 10
Item 4. Submission of Matters to a Vote of Securities Holders 10
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)
(unaudited)
June 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Real estate properties, at cost (including properties leased to
affiliates with a cost of $110,885 and $109,843, respectively):
Land $ 183,449 $ 93,522
Buildings and improvements 1,413,774 912,217
----------
----------
1,597,223 1,005,739
Less accumulated depreciation 92,284 76,921
---------- ----------
1,504,939 928,818
Real estate mortgages and notes, net (including note from an affiliate
of $2,365) 144,588 150,205
Investment in Hospitality Properties Trust 102,707 103,062
Cash and cash equivalents 39,962 21,853
Interest and rents receivable 16,544 11,612
Deferred interest and finance costs, net, and other assets 13,191 13,972
---------- ----------
$1,821,931 $1,229,522
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank notes payable $ 145,000 $ 140,000
Senior notes and bonds payable, net 124,508 124,385
Mortgage notes payable 27,106 --
Convertible subordinated debentures 211,650 227,790
Accounts payable and accrued expenses 30,404 10,711
Prepaid rents 7,113 7,608
Security deposits 4,428 8,387
Due to affiliates 2,253 2,593
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, 98,741,152 shares and 66,888,917 shares
issued and outstanding, respectively 987 669
Additional paid-in capital 1,369,037 795,263
Cumulative net income 353,555 306,298
Dividends (454,110) (394,182)
----------- -----------
Total shareholders' equity 1,269,469 708,048
----------- -----------
$ 1,821,931 $ 1,229,522
=========== ===========
</TABLE>
See accompanying notes
1
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
(unaudited)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 46,613 $ 24,137 $ 77,292 $ 47,819
Interest and other income 5,894 5,488 11,099 10,286
-------- -------- -------- --------
Total revenues 52,507 29,625 88,391 58,105
-------- -------- -------- --------
Expenses:
Operating 6,689 798 8,756 1,542
Interest 7,898 5,285 15,746 10,246
Depreciation and amortization 9,283 5,319 16,238 10,501
General and administrative 2,968 1,600 4,839 3,073
-------- -------- -------- --------
Total expenses 26,838 13,002 45,579 25,362
-------- -------- -------- --------
Income before equity in earnings of Hospitality
Properties Trust and extraordinary item
25,669 16,623 42,812 32,743
Equity in earnings of Hospitality Properties Trust 2,189 2,236 4,445 4,328
Gain on equity transaction of Hospitality
Properties Trust -- 3,603 -- 3,603
-------- -------- -------- --------
Income before extraordinary item 27,858 22,462 47,257 40,674
Extraordinary item - early extinguishment of debt -- -- -- (2,443)
-------- -------- -------- --------
Net income $ 27,858 $ 22,462 $ 47,257 $ 38,231
======== ======== ======== ========
Weighted average shares outstanding 98,722 66,199 85,388 66,177
======== ======== ======== ========
Per share amounts:
Income before extraordinary item $ 0.28 $ 0.34 $ 0.55 $ 0.61
======== ======== ======== ========
Net income $ 0.28 $ 0.34 $ 0.55 $ 0.58
======== ======== ======== ========
</TABLE>
See accompanying notes
2
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
For the Six Months Ended June 30,
1997 1996
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 47,257 $ 38,231
Adjustments to reconcile net income to cash provided by operating
activities:
Gain on equity transaction of Hospitality Properties Trust -- (3,603)
Equity in earnings of Hospitality Properties Trust (4,445) (4,328)
Dividends from Hospitality Properties Trust 4,800 4,640
Extraordinary item -- 2,443
Depreciation 15,363 10,198
Amortization 875 303
Amortization of deferred interest costs 645 856
Change in assets and liabilities:
Decrease (increase) in interest and rents receivable and
other assets 1,791 (6,346)
(Decrease) increase in security deposits (3,959) 34
Increase (decrease) in accounts payable and accrued expenses 11,197 (652)
(Decrease) increase in prepaid rents (495) 19
Increase (decrease) in due to affiliates 270 (1,175)
--------- ---------
Cash provided by operating activities 73,299 40,620
--------- ---------
Cash flows from investing activities:
Real estate acquisitions (179,482) (38,608)
Acquisition of business, less cash acquired (307,989) --
Investments in mortgage loans (526) (15,782)
Proceeds from repayment of notes and mortgage loans, net of discounts 6,043 6,997
Repayment and advance of loan to affiliate -- 200
--------- ---------
Cash used for investing activities (481,954) (47,193)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of common shares 483,153 6,995
Proceeds from borrowings 145,000 64,000
Payments on borrowings (140,482) (17,620)
Deferred finance costs incurred (979) (711)
Dividends paid (59,928) (46,328)
--------- ---------
Cash provided by financing activities 426,764 6,336
--------- ---------
Increase (decrease) in cash and cash equivalents 18,109 (237)
Cash and cash equivalents at beginning of period 21,853 18,640
--------- ---------
Cash and cash equivalents at end of period $ 39,962 $ 18,403
========= =========
Supplemental cash flow information:
Interest paid $ 15,568 $ 10,176
========= =========
</TABLE>
See accompanying notes
3
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
For the Six Months Ended June 30,
1997 1996
---------- ----------
<S> <C> <C>
Non-cash financing activities:
Issuance of shares $ 16,375 $ --
Conversion of convertible subordinated debentures, net (15,765) --
Acquisition of business, less cash acquired:
Real estate acquisitions $ 412,002 $ --
Working capital, other than cash (1,861) --
Liabilities assumed (27,588) --
Net cash used to acquire business (307,989) --
----------
Issuance of shares $ 74,564 $ --
========= ==========
</TABLE>
See accompanying notes
4
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
Note 1. Basis of Presentation
The 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. Certain prior year amounts have been reclassified to conform to the
current year's presentation.
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. The Company estimates that adoption of FAS 128 will
have no impact on reported results.
Note 2. Shareholders' Equity
During the six months ended June 30, 1997, the Company issued
27,025,000 common shares in a public offering, raising net proceeds of
approximately $483,153, issued 3,898,840 common shares in a private placement
for the purchase of real estate, issued 895,549 common shares due to the
conversion of $16,140 of its convertible subordinated debentures and issued
32,846 common shares to HRPT Advisors, Inc., (the "Advisor") an affiliate, as
the incentive fee earned for the year ended December 31, 1996.
On July 1, 1997, the Trustees declared a dividend on the Company's
common shares with respect to the quarter ended June 30, 1997 of $.36, which
will be distributed on or about August 22, 1997 to shareholders of record as of
July 25, 1997.
In July 1997, 9,500 shares were granted to officers of the Company and
certain employees of the Advisor under the 1992 Incentive Share Award Plan. In
June 1997, the three independent Trustees, as part of their annual fee, were
also each granted 500 shares under such plan. The shares granted to the officers
and certain employees of the Advisor vest over a three year period. The shares
granted to the Trustees vest immediately.
Note 3. Real Estate Properties
During the six months ended June 30, 1997, the Company purchased two
medical office buildings, one retirement community and 20 medical clinics for
approximately $177,632. The medical office buildings are managed by M&P Partners
Limited Partnership ("M&P"), an affiliate of the Company.
During the first quarter of 1997, the Company entered into an agreement
to acquire 30 office buildings (the "Government Properties"), leased to various
agencies of the United States Government. At June 30, 1997, the Company had
completed the purchase of 27 of the Government Properties for approximately
$412,002. The acquisition of the Government Properties was funded, in part, with
the proceeds from the issuance of the Company's common shares pursuant to a
public offering, the issuance of 3,898,840 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.
At June 30, 1997, 17% 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 June 20, 1997.
During the six months ended June 30, 1997, the Company provided $1,850
of improvement financing to existing tenants. At June 30 ,1997, the Company had
total outstanding commitments aggregating approximately $38,532 to acquire three
of the Government Properties, and to finance improvements to certain properties
leased or mortgaged by the Company. Subsequent to June 30, 1997, the Company
acquired one of those three Government Properties for approximately $10,500,
paid for with cash and the issuance of 86,188 common shares of the Company.
5
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)
Note 4. Investment in Hospitality Properties Trust
At June 30, 1997, the Company owned four million shares of the common
stock of Hospitality Properties Trust ("HPT") with a carrying value of $102,707
and market value of $122,500. The Company's percentage ownership of HPT is
14.9%.
Note 5. Real Estate Mortgages and Notes Receivable, net
During the six months ended June 30, 1997, the Company provided
improvement financing for existing properties totaling approximately $526. In
addition, the Company received regularly scheduled principal payments and
prepayments of mortgages secured by three nursing facilities totaling $6,733.
Note 6. Indebtedness
In March 1997, the Company extended and modified its $250,000 unsecured
revolving bank credit facility. Subsequent to June 30, 1997, the Company
expanded the credit facility to $450,000. The credit facility matures in 2001
and bears interest at LIBOR plus a premium. At June 30, 1997, $145,000 was
outstanding under the credit facility.
During July 1997, the Company issued Senior Unsecured Remarketed Reset
Notes aggregating $200,000. The notes are due in 2007 and the initial interest
rate is LIBOR plus a premium, reset quarterly. Subsequent to the first year, the
interest rate and interest period on the notes may be fixed for the balance of
the term at the Company's option and the notes are subject to remarketing.
Proceeds from the issuance of the notes were used to prepay $125,000 of the
Company's Floating Rate Senior Notes, Series B, due 1999 and $75,000 outstanding
under the Company's bank credit facility. In connection with this refinancing,
the Company will recognize a loss from the write-off of deferred finance fees of
approximately $1,192.
Note 7. Pro Forma Information
The following pro forma summary presents the results of operations of
the Company as if the Government Properties transaction had occurred at the
beginning of January 1996. These pro forma results are not necessarily
indicative of the expected results of operation of the Company 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.
Six Months ended June 30,
---------------------------
1997 1996
-------- --------
Revenues $104,300 $ 88,089
Expenses 54,321 40,450
-------- --------
49,979 47,639
Equity in earnings of HPT 4,445 4,328
-------- --------
Net income $ 54,424 $ 51,967
======== ========
Average shares outstanding 98,741 97,065
======== ========
Net income per share $ .55 $ .54
======== ========
6
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Quarter Ended June 30, 1997 Versus 1996
Total revenues for the quarter ended June 30, 1997, increased to $52.5
million, from $29.6 million for the quarter ended June 30, 1996. Rental income
increased by $22.5 million and interest income increased by $406,000. Rental
income increased because of new real estate investments subsequent to June 30,
1996 and partly as a result of the Company's increased investments in "gross
leased" real estate assets during the 1997 period as compared to the 1996
period. As the Company's investment in such "gross leased " assets increases,
the Company anticipates rental income and the corresponding operating expenses
from such leases to increase during subsequent periods. Interest income
increased slightly as a result of earnings on the Company's short term
investments due to higher cash balances in the quarter ended June 30, 1997
compared to the quarter ended June 30, 1996, which was off-set, in part, by a
decrease in mortgage interest income.
Total expenses for the quarter ended June 30, 1997, increased to $26.8
million from $13 million for the quarter ended June 30, 1996. Operating expenses
increased by $6 million as a result of the Company's increased investment in
"gross leased" real estate assets during the 1997 quarter as compared to the
1996 period. Interest expense increased by $2.6 million due to higher borrowings
outstanding during the 1997 quarter and the Company's issuance of convertible
debentures in October 1996. Depreciation and amortization, and general and
administrative expense increased by $4.0 million and $1.4 million, respectively,
primarily as a result of new real estate investments subsequent to June 30,
1996.
Net income for the quarter ended June 30, 1997, increased to $27.9
million or $.28 per share, from $22.5 million or $.34 per share, for the same
quarter in 1996. This increase is primarily a result of new investments since
June 30, 1996. On a per share basis net income decreased due to additional
common shares issued by the Company subsequent to June 30, 1996.
The Company bases its dividend primarily on Funds from Operations
("FFO"). The Company has adopted the National Association of Real Estate
Investment Trust's ("NAREIT") definition of FFO, as income before equity in
earnings of HPT, gain (loss) on sale of real estate and extraordinary items,
plus depreciation and other non-cash charges, plus the Company's proportionate
share of HPT's FFO. FFO for the 1997 quarter was $38.1 million, or $.39 per
share, as compared to $24.8 million, or $.38 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 $35.5 million, or
$.36 per share, in 1997 and $23.2 million, or $.35 per share, in 1996.
Six Months Ended June 30, 1997 Versus 1996
Total revenues for the six months ended June 30, 1997 increased to
$88.4 million from $58.1 million for the six months ended June 30, 1996. Rental
income increased by $29.5 million and interest income increased by $813,000.
Rental income increased because of new real estate investments subsequent to
June 30, 1996 and partly as a result of the Company's increased investments in
"gross leased" real estate assets as compared to "net leased" assets subsequent
to June 30, 1996. As the Company's investment in such "gross leased" assets
increases, the Company anticipates rental income and the corresponding operating
expenses from such leases to increase during subsequent periods. Interest income
increased slightly as a result of earnings on the Company's short term
investments due to higher cash balances in the 1997 period compared to the 1996
period, which was off-set, in part, by a decrease in mortgage interest income.
Total expenses for the six months ended June 30, 1997 increased to
$45.6 million from $25.4 million for the six months ended June 30, 1996.
Operating expenses increased by $7.2 million as a result of the Company's
increased investment in "gross leased" real estate assets during the 1997 period
as compared to the 1996 period. Interest expense increased by $5.5 million due
to higher borrowings outstanding during the 1997 period and the Company's
issuance of convertible debentures in October 1996. Depreciation and
amortization, and general and administrative expense increased by $5.7 million
and $1.8 million, respectively, primarily as a result of new real estate
investments subsequent to June 30, 1996.
7
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Six Months Ended June 30, 1997 Versus 1996 - continued
Net income increased to $47.3 million, or $.55 per share, for the 1997
period from $38.2 million, or $.58 per share, for the 1996 period. The increase
in net income is primarily a result of the new investments since June 30, 1996.
On a per share basis, net income decreased due to additional common shares
issued by the Company subsequent to June 30, 1996.
Funds from operations for the six months ended June 30, 1997, were
$65.1 million, or $.76 per share, and $49 million, or $.74 per share, for the
1996 period. The dividends declared which relate to the six months ended June
30, 1997 and 1996 were $71.1 million, or $.72 per share, and $46.3 million, or
$.70 per share, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Total assets of the Company increased to $1.8 billion at June 30, 1997,
from $1.2 billion at December 31, 1996. The increase is primarily attributable
to new real estate acquisitions since December 31, 1996.
During the six months ended June 30, 1997, the Company purchased two
medical office buildings, one retirement community and 20 medical clinics for
approximately $177.6 million by borrowing on the Company's revolving credit
facility and with cash on hand.
In the first quarter of 1997, the Company entered into an agreement to
acquire 30 office buildings ("Government Properties") leased to the United
States Government. Through June 30, 1997, the Company had purchased 27 of the 30
Government Properties for approximately $412 million. 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 3,898,840 common shares of
the Company in a private placement and the assumption of $27.6 million of debt.
The acquisition of the remaining three properties are subject to various
conditions customary in real estate transactions and are expected to be
substantially completed by March 31, 1998; however, no assurances can be given
if and when these transactions will be completed.
During the six months ended June 30, 1997, the Company provided $2.4
million of improvement financing to existing facilities and received $6.7
million of principal payments on mortgages, including the repayment of three
mortgage loans secured by three long-term care properties.
In March, 1997, the Company issued 27,025,000 common shares in a public
offering yielding net proceeds of approximately $483.2 million. Proceeds of the
offering were used to repay the then outstanding balance on the Company's
revolving credit facility of $140 million and to fund the acquisition of real
estate. During the six months ended June 30, 1997, the Company issued 895,549
common shares due to the conversion of $16.1 million of its convertible
subordinated debentures.
At June 30, 1997, the Company had $40 million of cash and cash
equivalents, and the ability to borrow $105 million under its revolving credit
facility. Subsequent to June 30, 1997 the Company expanded the credit facility
to $450 million. The credit facility matures in 2001 and bears interest at LIBOR
plus a premium. At June 30, 1997, $145 million was outstanding under the credit
facility.
During July 1997, the Company issued Senior Unsecured Remarketed Reset
Notes aggregating $200 million. The notes are due in 2007 and the initial
interest rate is LIBOR plus a premium, reset quarterly. Subsequent to the first
year, the interest rate and interest period on the notes may be fixed for the
balance of the term at the Company's option and notes are subject to
remarketing. Proceeds from the issuance of the notes were used to prepay $125
million of the Company's Floating Rate Senior Notes, Series B, due 1999 and $75
million outstanding under the Company's revolving credit facility. In connection
with this refinancing, the Company will recognize a loss from the write-off of
deferred finance fees of approximately $1.2 million.
8
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES - continued
The effective interest rates on the Company's floating rate debt are
generally capped by the use of interest rate cap agreements. The interest rate
cap agreements provide for a maximum interest rate of 8% per annum on $100
million of its variable rate debt through 1997.
At June 30, 1996, the Company had outstanding commitments to provide
financing totaling approximately $38.5 million. The Company intends to fund
these commitments with a combination of cash on hand, issuance of common shares
of the Company, amounts available under its existing credit facilities and/or
proceeds of mortgage prepayments, if any.
Subsequent to June 30, 1997, the Company acquired one of the Government
Properties for approximately $10.5 million, paid for with cash and the issuance
of 86,188 common shares of the Company.
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 used to acquire or mortgage finance facilities is appropriately matched,
to the extent practicable, with the terms of the investments made with such
funding. As of June 30, 1997, the Company's debt as a percentage of total market
capitalization was approximately 22%.
9
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
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.
The Amended and Restated Declaration of Trust establishing the Company,
dated July 1, 1994, a copy of which, together with all amendments thereto (the
"Declaration"), is duly filed in the Office of the Department of Assessments and
Taxation of the State of Maryland, provides that the name "Health and Retirement
Properties Trust" refers to the trustees under the Declaration collectively as
trustees, but not individually or personally, and that no trustee, officer,
shareholder, employee or agent of the Company shall be held to any personal
liability, jointly or severally, for any obligation of, or claim against, the
Company. All persons dealing with the Company, in any way, shall look only to
the assets of the Company for the payment of any sum or the performance of any
obligation.
Part II Other Information
Item 2. Changes in Securities.
On May 15, 1997, the Company issued an aggregate of 36,124 common
shares of beneficial interest, par value $.01 per share ("Common Shares") in
connection with a subsequent closing on a property which is part of the
Company's previously disclosed acquisition of office properties leased to
agencies of the United States Federal Government and in connection with certain
post-closing adjustments, in both cases pursuant to the Merger Agreement dated
February 17, 1997 between the Company and Government Properties Investors, Inc.,
as amended. The issuance of such Common Shares was made pursuant to the
exemption from registration contained in Section 4(2) of the Securities Act of
1933, as amended.
On May 13, 1997, pursuant to the Company's Incentive Share Award Plan,
each of the Company's independent trustees received a grant of 500 Common Shares
valued at $18.25 per share, the closing price of the Common Shares on the New
York Stock Exchange on May 12, 1997. The grants were made pursuant to the
exemption from registration contained in Section 4(2) of the Securities Act of
1933, as amended.
Item 4. Submission of Matters to a Vote of Securities Holders.
At the Company's Annual Shareholders Meeting on May 13, 1997, the
Reverend Justinian Manning and Mr. Gerard M. Martin, were re-elected to serve as
Trustees, each for a term of three years. There were 87,060,105 and 87,173,683
shares, respectively, voted in favor of, and 861,610 and 748,031 shares,
respectively, withheld from voting for the re-election of Rev. Manning and Mr.
Martin. Messrs. Ralph J. Watts and Barry M. Portnoy and Dr. Bruce M. Gans
continued to serve as Trustees of the Company.
10
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Item 5. Other Information.
The Company recently entered into the Third Amendment to its Amended
and Restated Revolving Loan Agreement, dated as of March 15, 1996, among the
Company, as Borrower, the Lenders named therein, Dresdner Kleinwort Benson North
America LLC, as agent, Wells Fargo Bank, National Association, as administrative
agent, and Fleet National Bank, as co-agent (as amended through and including
the Third Amendment the "Loan Agreement"). Pursuant to the Third Amendment, the
maximum aggregate funds available to the Company to fund acquisitions and
mortgage loans under the Loan Agreement was permitted to be increased to $450
million. Under the terms of the Loan Agreement up to $112.5 million of such $450
million may also be used by the Company for general corporate purposes. The
Company subsequently obtained commitments from lenders under the Loan Agreement
for the entire $450 million amount. As of August 13, 1997, the Company had
aggregate outstanding borrowings under the Loan Agreement of $70 million.
Item 6. Exhibits and Reports on Form 8-K
Exhibits:
10. Third Amendment dated as of July 30, 1997 to the Third
Amended and Restated Revolving Loan Agreement by and among
the Company, as borrower, the lenders named therein,
Kleinwort Benson North America LLC (as successor to
Kleinwort Benson Limited), as agent, Wells Fargo Bank,
National Association, as administrative agent, and Fleet
National Bank (as successor to NatWest Bank), as co-agent.
27. Financial Data Schedule
(b) Reports on Form 8-K:
1. The Company filed a current report on Form 8-K dated
June 23, 1997 relating to a supplemental consent of
Ernst & Young LLP.
2. The Company filed a current report on Form 8-K dated
June 26, 1997 (filed July 3, 1997) regarding (i) the
Third Amendment to the Advisory Agreement by and
between the Company and HRPT Advisors, Inc., (ii)
certain pro forma and other information relating to
the Company, and (iii) the Company's offering of its
Remarketed Reset Notes due July 9, 2007.
11
<PAGE>
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: August 14, 1997
By: /s/ Ajay Saini
Ajay Saini
Treasurer and Chief Financial Officer
Dated: August 14, 1997
12
EXHIBIT 10
EXECUTION COPY
U.S. $450,000,000
THIRD AMENDMENT TO
THIRD AMENDED AND RESTATED REVOLVING LOAN AGREEMENT
among
HEALTH AND RETIREMENT PROPERTIES TRUST,
as Borrower,
THE LENDERS NAMED HEREIN,
DRESDNER KLEINWORT BENSON NORTH AMERICA LLC,
as Agent,
WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Administrative Agent,
FLEET NATIONAL BANK,
as Co-Agent
Dated as of July 30, 1997
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
THIRD AMENDMENT TO
THIRD AMENDED AND RESTATED REVOLVING LOAN AGREEMENT
DATED AS OF JULY 30, 1997
This THIRD AMENDMENT (this "Amendment") is dated as of July 30, 1997
among HEALTH AND RETIREMENT PROPERTIES TRUST, a real estate investment trust
formed under the laws of the State of Maryland ("Borrower"), the several lenders
listed on the signature pages hereof (the "Lenders"), DRESDNER KLEINWORT BENSON
NORTH AMERICA LLC (as successor to Kleinwort Benson Limited), a limited
liability company organized under the laws of Delaware, as agent for itself and
the other Lenders (in such capacity, together with any successor in such
capacity in accordance with the terms of the Loan Agreement, as defined below,
"Agent"), WELLS FARGO BANK, NATIONAL ASSOCIATION, a bank organized under the
laws of the United States of America, as administrative agent (in such capacity,
together with any successor in such capacity in accordance with the terms of the
Loan Agreement, "Administrative Agent"), and FLEET NATIONAL BANK (as successor
to Fleet Bank of Massachusetts) a bank organized under the laws of the United
States of America, as co- agent (in such capacity, Co-Agent"), and is made with
reference to the Third Amended and Restated Revolving Loan Agreement dated as of
March 15, 1996, as amended by a first Amendment dated as of December 15, 1996
and a Second Amendment and Waiver dated as of March 19, 1997 (as amended to date
and from time to time hereafter, the "Loan Agreement") among Borrower, the
Lenders, Agent, Administrative Agent and Co-Agent and, in connection with
Section 9 of the Loan Agreement and the guaranties given therein, HEALTH AND
RETIREMENT PROPERTIES INTERNATIONAL, INC., a Delaware corporation and a direct
wholly-owned Subsidiary of Borrower ("Retirement Properties"), CAUSEWAY HOLDINGS
INC., a Massachusetts corporation and a direct wholly-owned Subsidiary of
Borrower ("Causeway"), SJO CORPORATION, a Massachusetts corporation and a direct
wholly-owned Subsidiary of Borrower ("SJO"), HUB PROPERTIES TRUST, HUB
ACQUISITION TRUST, and HUB LA PROPERTIES TRUST, each a Maryland real estate
investment trust and each a direct wholly-owned Subsidiary of Borrower (the
"Trust Subsidiaries"), HUB REALTY FUNDING, INC., HUB MANAGEMENT, INC., HUB
REALTY COLLEGE PARK, INC., HUB REALTY I, INC., HUB REALTY IV., INC. and HUB
REALTY GOLDEN, INC., each a Delaware corporation and a wholly-owned Subsidiary
of Borrower (the "Delaware Subsidiaries"), and HUB REALTY COLLEGE PARK I, LLC, a
Maryland limited liability company and a wholly-owned Subsidiary of Borrower
(the "LLC"). Capitalized terms used herein without definition shall have the
same meanings herein as set forth in the Loan Agreement.
<PAGE>
WHEREAS, Borrower has advised Lenders that it wishes to amend certain
terms of the Loan Agreement;
WHEREAS, subject to the terms set forth herein, Lenders have agreed to
amend the Loan Agreement.
NOW THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the parties hereto agree as follows:
1. Amendments to Loan Agreement.
(a) The first paragraph of the Loan Agreement is hereby amended by the
addition of the words "or Section 2.1(c)" immediately following the words
"additional lender or lenders pursuant to Section 10.4" thereof.
(b) Section 2.1(b) of the Loan agreement is hereby amended by adding
the following provisos at the end thereof:
"; provided further that the Commitments may be increased up
to an aggregate amount not to exceed $450,000,000 pursuant to
this Section 2.1; and provided further that the Agent, during
the process of increasing the aggregate amount of the
Commitments from $250,000,000 to up to $450,000,000, may one
time only accept a non pro rata reduction in the Commitment of
any one or more Lenders and may reallocate an equivalent
amount among additional lenders or existing Lenders, but in no
event may the aggregate amount of the Commitments be reduced
below $250,000,000 or increased above $450,000,000 thereby,
and the effective date of such non pro rata reduction and
reallocation will be the date agreed upon by the additional
lenders or the existing Lenders whose Commitments are reduced
or increased in connection therewith, and the Agent shall
notify the Lenders and additional lenders of the reallocation
in writing for information purposes only."
(c) Section 2.1 is hereby amended by inserting therein after Section
2.1(b) the following new section:
"(c) The foregoing notwithstanding, if at any time an
additional lender satisfactory to Borrower and Agent shall
execute and deliver to Borrower
2
<PAGE>
and Agent on behalf of the parties hereto counterparts
substantially in the form of this Agreement, with the amount
of such additional lender's Commitment hereunder typed
immediately below its signature on such counterpart, upon
notification of such execution and delivery by Agent to the
other parties hereto, such additional lender shall become a
Lender and its Commitment shall be added to the aggregate
Commitments for all purposes hereunder; and if an existing
Lender shall notify Borrower and Agent of its agreement to
increase its Commitment above its original Commitment and such
agreement is accepted by Borrower and Agent, then upon
notification thereof by Agent to the other parties hereto (or,
if later, upon the effective date for such increase stated in
such notification), such existing Lender's Commitment shall be
increased as set forth in such notification; provided that no
such additional lender shall become a Lender (and no such
increase shall become effective) without the consent of
Borrower and all Lenders if such additional lender's
Commitment (or such increase) would make the aggregate
Commitments exceed $450,000,000. The other terms of this
Agreement notwithstanding, such additional lender or Lender
increasing its Commitment shall, on the first day thereafter
which is the last day of an Interest Period (or on such day if
such day is the last day of an Interest Period), pay to
Administrative Agent (i) its Pro Rata Share of the Loans then
outstanding (if any) or, if less, the amount by which such Pro
Rata Share exceeds its outstandings hereunder (if any), for
distribution to the other Lenders that have funded such Loans,
in accordance with their respective Commitments, and all
rights of such other Lenders with respect to the Pro Rata
Share being assumed by such additional lender or the increased
portion thereof of an existing Lender shall be deemed assigned
(without any further action or authorization being required)
to such additional lender or increasing Lender without
recourse, representation or warranty, and each Lender's share
of the outstanding Loans shall be adjusted accordingly; and
(ii) any other amounts due from it on such date as a Lender
hereunder."
(d) Section 2.1(c) and (d) are hereby renumbered as Sections 2.1(d) and
(e), respectively.
(e) Section 8.1(a) is hereby amended by replacing the word "Co-Agent"
therein with the words "each Co-Agent".
(f) Section 8.1 is hereby amended by inserting therein after Section
8.1(m) the following new section:
3
<PAGE>
"(n) The Agent may from time to time at its discretion
nominate one or more Lenders as Co-Agent, taking into
consideration the magnitude of the Commitment offered or
undertaken by such Lender."
(g) In accordance with Section 8.1(j), Wells Fargo Bank, National
Association hereby resigns as Administrative Agent. Pursuant to Section 8.1(j),
the Majority Lenders hereby appoint Fleet National Bank as Administrative Agent
(upon which appointment Fleet National Bank will cease to be Co-Agent).
(h) Schedule 1 (Lenders' Commitments) is hereby amended by replacing
the same with Schedule 1 hereto.
2. Conditions to Effectiveness.
Section 1 of this Amendment shall become effective immediately upon the
prior or concurrent satisfaction of the conditions that Borrower shall (i)
deliver to Agent for Lenders (with sufficient originally executed copies for
each Lender) executed copies of this Amendment, executed by Borrower, Retirement
Properties, Causeway, SJO, the Trust Subsidiaries, the Delaware Subsidiaries and
the LLC, Agent, Co-Agent and the Majority Lenders and (ii) deliver to Agent
(with sufficient counterparts for each Lender) a favorable opinion of Sullivan &
Worcester, as counsel to Borrower and its Subsidiaries, addressed to Agent and
the Lenders and dated the effective date of this Amendment, and in form and
substance satisfactory to Agent.
3. Representations and Warranties.
In order to induce Lenders and Agent to enter into this Amendment and
to amend the Loan Agreement in the manner provided herein, Borrower represents
and warrants to each Lender and Agent that the following statements are true,
correct and complete:
(a) Borrower has the power and authority to enter into this Amendment
and to carry out the transactions contemplated by, and perform its obligations
under, the Loan Agreement (as amended by this Amendment the "Amended
Agreement").
(b) The execution and delivery of this Amendment and the performance of
the Amended Agreement have been authorized by all necessary action on the part
of the Borrower.
(c) The execution and delivery by Borrower of this Amendment and the
performance by Borrower of the Amended Agreement and the use of proceeds
thereunder (i) do not violate any Requirement of Law or Contractual Obligation
of Borrower, (ii) will not result in, or require, the creation of imposition of
any Lien on any of its properties or revenues pursuant to
4
<PAGE>
any Requirement of Law or Contractual Obligation of Borrower and (iii) do not
require the consent of any third party.
(d) This Amendment and the Amended Agreement have been duly executed
and delivered by Borrower and are the legally valid and binding obligations of
Borrower, enforceable against Borrower in accordance with their respective
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally.
(e) The representations and warranties contained in Section 3 of the
Loan Agreement are and will be true, correct and complete in all material
respects on and as of the effective date described in Section 2 to the same
extent as though made on and as of that date, except to the extent such
representations and warranties specifically relate to an earlier date, in which
case they were true, correct and complete in all material respects on and as of
such earlier date.
(f) After giving effect to this Amendment, no event has occurred and is
continuing or will result from the consummation of the transactions described in
or otherwise contemplated by this Amendment that would constitute a Default or
an Event of Default.
(g) The Declaration of Trust, By-Laws and other organizational
documents of Borrower have not been amended since May 14, 1997, and the copies
thereof delivered to Lenders under the Loan Agreement are true, correct and
complete copies thereof as in effect on the effective date described in Section
2.
4. Guarantors' Acknowledgement and Consent.
Each of Retirement Properties, Causeway, SJO, the Trust Subsidiaries,
the Delaware Subsidiaries and the LLC (each a "Subsidiary Guarantor") has
guarantied the obligations of Borrower under Section 9 of the Loan Agreement.
Each Subsidiary Guarantor hereby acknowledges that it has reviewed the
terms and provisions of the Loan Agreement and this Amendment and consents to
the amendment of the provisions of the Agreement effected pursuant to this
Amendment. Each Subsidiary Guarantor hereby confirms that its guaranty under the
Loan Agreement will continue to guaranty to the fullest extent possible the
payment and performance of all obligations of Borrower now or hereafter existing
under or in respect of the Amended Agreement and the Notes defined therein. Each
Subsidiary Guarantor acknowledges and agrees that Section 9 of the Loan
Agreement shall continue in full force and effect and that all of its
obligations thereunder shall be valid and enforceable and shall not be impaired
or limited by the execution or effectiveness of this Amendment.
5
<PAGE>
Each Subsidiary Guarantor acknowledges and agrees that (a)
notwithstanding the conditions to effectiveness set forth in this Amendment,
such Subsidiary Guarantor is not required by the terms of the Loan Agreement to
consent to the amendments to the Loan Agreement effected pursuant to this
Amendment and (b) nothing in the Loan Agreement or this Amendment shall be
deemed to require the consent of such Subsidiary Guarantor to any future
amendments or waivers to the Loan Agreement.
5. Reference to and Effect on the Loan Agreement and Other Loan
Documents. Except as specifically amended hereby, the Loan Agreement and the
other Loan Documents shall remain in full force and effect and are hereby
ratified and confirmed.
6. Fees and Expenses. Borrower agrees to pay to Agent on demand all
reasonable costs, fees and expenses incurred by Agent (including, without
llimitation, legal fees and expenses) with respect to this Amendment and the
documents and transactions contemplated hereby.
7. Execution in Counterparts. This Amendment may be executed in any
number of counterparts, and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts taken together shall constitute but one and
the same instrument.
8. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose or be given any substantive effect.
9. APPLICABLE LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
10. Limitation of Amendment. Without limiting the generality of the
provisions of Section 10.4 of the Loan Agreement, the amendments set forth above
shall be limited precisely as written, and nothing in this Amendment shall be
deemed to prejudice any right or remedy that any Lender may now have (except to
the extent such right or remedy was based upon existing defaults that will not
exist after giving effect to this Amendment) or may have in the future under or
in connection with the Loan Agreement or any other instrument or agreement
referred to therein.
11. Acknowledgment. Borrower acknowledges that there are no existing
claims, defenses, personal or otherwise, or rights of set off whatsoever with
respect to the Amended Agreement or any of the other Loan Documents.
6
<PAGE>
12. NONLIABILITY OF TRUSTEES.
(a) THE DECLARATION OF TRUST ESTABLISHING BORROWER, DATED OCTOBER 9,
1986, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"),
IS DULY FILED WITH THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF
MARYLAND, PROVIDES THAT THE NAME "HEALTH AND RETIREMENT PROPERTIES TRUST" REFERS
TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF BORROWER SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, BORROWER. ALL PERSONS
DEALING WITH BORROWER, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF BORROWER FOR
THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
(b) THE DECLARATIONS OF TRUST ESTABLISHING HUB PROPERTIES TRUST DATED
SEPTEMBER 12, 1996, HUB ACQUISITION TRUST DATED MARCH 14, 1997 AND HUB LA
PROPERTIES TRUST DATED MAY 12, 1997, A COPY OF EACH OF WHICH, TOGETHER WITH ALL
AMENDMENTS THERETO (THE "TRUST SUBSIDIARIES DECLARATIONS"), IS DULY FILED WITH
THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES
THAT THE NAMES "HUB PROPERTIES TRUST", "HUB ACQUISITION TRUST" AND "HUB LA
PROPERTIES TRUST" REFER TO THE RESPECTIVE TRUSTEES UNDER THE RESPECTIVE TRUST
SUBSIDIARIES DECLARATIONS COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR
PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF ANY
OF THE TRUST SUBSIDIARIES SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, SUCH TRUST SUBSIDIARY. ALL
PERSONS DEALING WITH EACH TRUST SUBSIDIARY, IN ANY WAY, SHALL LOOK ONLY TO THE
ASSETS OF SUCH TRUST SUBSIDIARY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF
ANY OBLIGATION.
[Remainder of page intentionally left blank]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.
HEALTH AND RETIREMENT
PROPERTIES TRUST
By: /s/ DAVID J. HEGARTY
Name: DAVID J. HEGARTY
Title: PRESIDENT
DRESDNER KLEINWORT BENSON
NORTH AMERICA LLC (successor to
Kleinwort Benson Limited), as Agent
By: /s/ PETER KETTLE
Name: PETER KETTLE
Title: SENIOR VICE PRESIDENT
By: /s/ T. D. LEIGH
Name: T.D. LEIGH
Title: EXECUTIVE VICE PRESIDENT
WELLS FARGO BANK, NATIONAL
ASSOCIATION, as Administrative Agent
and as a Lender
By: /s/ EDITH R. LIM
Name: EDITH R. LIM
Title: VICE PRESIDENT
By: /s/ MARK HABERECHT
Name: MARK HABERECHT
Title: ASSOCIATE VICE PRESIDENT
S-1
<PAGE>
FLEET NATIONAL BANK (successor to
Fleet Bank of Massachusetts), as
Co-Agent and as a Lender
By: /s/ G. STOLZENTHALER
Name: G. STOLZENTHALER
Title: SENIOR VICE PRESIDENT
THE SUMITOMO BANK, LIMITED,
Chicago Branch, as a Lender
By: /s/ DAN EASTMAN
Name: DAN EASTMAN
Title:VICE PRESIDENT AND MANAGER
By: /s/ ALFRED DE GEMMIS
Name: ALFRED DE GEMMIS
Title: VICE PRESIDENT
MITSU LEASING (USA) INC.,
as a Lender
By: /s/ YUICHI KAMIZAWA
Name: YUICHI KAMIZAWA
Title: VICE PRESIDENT
DRESDNER BANK AG, New York
Branch and Grand Cayman Branch,
as a Lender
By: /s/ NEIL J. CRAWFORD
Name: NEIL J. CRAWFORD
Title: VICE PRESIDENT
By: /s/ FELIX K. CAMACHO
Name: FELIX K. CAMACHO
Title: ASSISTANT TREASURER
S-2
<PAGE>
CREDIT LYONNAIS, Cayman Island
Branch, as a Lender
By: /s/ FARBOUD TAVANGAR
Name: FARBOUD TAVANGAR
Title: AUTHORISED SIGNATURE
BANK OF MONTREAL, as a Lender
By: /s/ JEFF FORSYTHE
Name: JEFF FORSYTHE
Title: DIRECTOR
RIGGS BANK N.A., as a Lender
By: /s/ CRAIG HAVARD
Name: CRAIG HAVARD
Title: VICE PRESIDENT
VIA BANQUE, as a Lender
By: /s/ C PROT
Name: C PROT
Title: SALES DIRECTOR
By: /s/ P ARNOULT
Name: P ARNOULT
Title: DIRECTOR
DG BANK, Deutsche Genossenschafts
Bank, as a Lender
By: /s/ LINDA J. O'CONNELL
Name: LINDA J. O'CONNELL
Title: VICE PRESIDENT
S-3
<PAGE>
By: /s/ PAUL DOLAN
Name: PAUL DOLAN
Title: ASSISTANT VICE PRESIDENT
KEY CORPORATE CAPITAL INC.
(formerly Keybank National Association),
as a Lender
By: /s/ CAROLYN BRINER
Name: CAROLYN BRINER
Title: ASSOCIATE VICE PRESIDENT
For the purposes of Section 9: HEALTH AND RETIREMENT
PROPERTIES INTERNATIONAL, INC.
By: /s/ DAVID J. HEGARTY
Name: DAVID J. HEGARTY
Title: PRESIDENT
CAUSEWAY HOLDINGS INC.
By: /s/ DAVID J. HEGARTY
Name: DAVID J. HEGARTY
Title: PRESIDENT
SJO CORPORATION
By: /s/ DAVID J. HEGARTY
Name: DAVID J. HEGARTY
Title: PRESIDENT
S-4
<PAGE>
HUB PROPERTIES TRUST
By: /s/ DAVID J. HEGARTY
Name: DAVID J. HEGARTY
Title: PRESIDENT
HUB ACQUISITION TRUST
By: /s/ DAVID J. HEGARTY
Name: DAVID J. HEGARTY
Title: PRESIDENT
HUB LA PROPERTIES TRUST
By: /s/ DAVID J. HEGARTY
Name: DAVID J. HEGARTY
Title: PRESIDENT
HUB REALTY FUNDINGS, INC.
By: /s/ DAVID J. HEGARTY
Name: DAVID J. HEGARTY
Title: PRESIDENT
HUB MANAGEMENT, INC.
By: /s/ DAVID J. HEGARTY
Name: DAVID J. HEGARTY
Title: PRESIDENT
S-5
<PAGE>
HUB REALTY COLLEGE PARK, INC.
By: /s/ DAVID J. HEGARTY
Name: DAVID J. HEGARTY
Title: PRESIDENT
HUB REALTY I, INC.
By: /s/ DAVID J. HEGARTY
Name: DAVID J. HEGARTY
Title: PRESIDENT
HUB REALTY IV, INC.
By: /s/ DAVID J. HEGARTY
Name: DAVID J. HEGARTY
Title: PRESIDENT
HUB REALTY GOLDEN, INC.
By: /s/ DAVID J. HEGARTY
Name: DAVID J. HEGARTY
Title: PRESIDENT
HUB REALTY COLLEGE PARK I,
LLC
By: /s/ DAVID J. HEGARTY
Name: DAVID J. HEGARTY
Title: PRESIDENT
S-6
<PAGE>
SCHEDULE 1
LENDERS' COMMITMENTS
LENDER COMMITMENT
- ------ ----------
Wells Fargo Bank, National Association $ 20,000,000
The Sumitomo Bank, Limited, Chicago Branch $ 20,000,000
Dresdner Bank AG, New York Branch and Grand
Cayman Branch $ 47,500,000
Credit Lyonnais
Cayman Island Branch $ 20,000,000
Mitsui Leasing (USA) Inc. $ 12,500,000
Bank of Montreal $ 20,000,000
Riggs National Bank $ 15,000,000
Via Banque $ 20,000,000
DG Bank $ 15,000,000
Key Corporate Capital Inc. $ 15,000,000
Fleet National Bank $ 45,000,000
Total $250,000,000
S1-1
<PAGE>
CERTAIN LENDING OFFICES
Wells Fargo Bank, National Association
Corporate Banking
420 Montgomery Street
San Francisco, California 94163
Tel: (415)396-4065
Fax: (415) 421-1352
Attn: Brian O'Melveny
The Sumitomo Bank, Limited, Chicago Branch (USCBD)
233 S. Wacker Drive
Suite 5400
Chicago, Illinois 60606
Tel: (312) 993-6210
Fax: (312) 876-1995
Attn: VP + Manager - Operations
Fleet National Bank
75 State Street
Boston, Massachusetts 02109
Tel: (617) 346-1647
Fax: (617) 346-1634
Attn: Ginger Stolzenthaler
Mitsui Leasing (U.S.A.) Inc.
200 Park Avenue, Suite 3214
New York, New York 10166
Tel: (212) 557-0455
Fax: (212) 490-1684
Attn: Jeff Fishman
S1-2
<PAGE>
Dresdner Bank, New York Branch
and Grand Cayman Branch
75 Wall Street
New York, New York 10005-2889
Tel: (212) 429-2201
Fax: (212) 429-2129
Attn: Andrew Nesi
Credit Lyonnais
Cayman Island Branch
1301 Avenue of the Americas, 20th Floor
New York, New York 10019
Tel: (212) 261-7748
Fax: (212) 261-3440
Attn: Francoise Giacalone
Bank of Montreal
115 S. La Salle Street, 12 West
Chicago, IL 60603
Tel: (312) 750-3874
Fax: (312) 750-4352
Attn: Jeff Forsythe
Riggs National Bank
808 17th Street, N.W.
10th Floor
Washington, DC 20006
Tel: (202) 835-5105
Fax: (202) 835-5977
Attn: Dave Olson
S1-3
<PAGE>
Via Banque
10 Rue Volney
75002 Paris, France
Tel: 011-331-4926-2913
Fax: 011-331-4926-2993
Attn: Christel Prot
Key Corporate Capital Inc.
127 Public Square, 6th Floor
Cleveland, OH 44114-1306
Tel: (216) 689-3247
Fax: (216) 689-5970
Attn: Angela Mago
S1-4
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 39,962
<SECURITIES> 0
<RECEIVABLES> 144,588
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,597,223
<DEPRECIATION> 92,284
<TOTAL-ASSETS> 1,821,931
<CURRENT-LIABILITIES> 0
<BONDS> 508,264
0
0
<COMMON> 987
<OTHER-SE> 1,268,482
<TOTAL-LIABILITY-AND-EQUITY> 1,821,931
<SALES> 0
<TOTAL-REVENUES> 88,391
<CGS> 0
<TOTAL-COSTS> 45,579
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,746
<INCOME-PRETAX> 47,257
<INCOME-TAX> 0
<INCOME-CONTINUING> 47,257
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> 47,257
<EPS-PRIMARY> .55
<EPS-DILUTED> .55
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