SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 11, 1998
HEALTH AND RETIREMENT PROPERTIES TRUST
(Exact name of registrant as specified in charter)
Maryland 1-9317 04-6558834
(State or other (Commission file (IRS employer
jurisdiction of number) identification no.)
incorporation)
400 Centre Street, Newton, Massachusetts 02158
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: 617-332-3990
<PAGE>
THIS CURRENT REPORT CONTAINS FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS
ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED OR PROJECTED. INVESTORS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS WHICH
SPEAK ONLY AS OF THE DATE HEREOF. THE REGISTRANT UNDERTAKES NO OBLIGATION TO
PUBLISH REVISED FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES
AFTER THE DATE OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(b) Unaudited Pro forma Consolidated Fianncial statements (set forth beginning
on page F-1).
(c) Exhibits.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Arthur Andersen LLP.
23.3 Consent of Ernst & Young LLP.
99 Consent of Nominee Trustee.
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
Unaudited Pro Forma Consolidated Financial Statements
The following unaudited pro forma consolidated balance sheet at March
31, 1998 is intended to present the consolidated financial position of the
Company as if the transactions described in the notes hereto were consummated at
March 31, 1998. The following unaudited pro forma consolidated statements of
income are intended to present the consolidated results of operations of the
Company as if the transactions described in the notes had been consummated as of
the beginning of the periods presented. These unaudited pro forma consolidated
financial statements should be read in conjunction with, and are qualified in
their entirety by reference to, the separate consolidated financial statements
of the Company for the year ended December 31, 1997, incorporated herein by
reference from the Company's Current Report on Form 8-K dated February 27, 1998
and the Company's unaudited consolidated financial statements for the quarter
ended March 31, 1998, incorporated herein by reference from the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998. These
unaudited pro forma consolidated financial statements are not necessarily
indicative of the expected consolidated financial position or results of
operations of the Company for any future period. Differences would result from,
among other considerations, future changes in the Company's portfolio of
investments, changes in interest rates, changes in the capital structure of the
Company, delays in the acquisition of certain properties and changes in property
level operating expenses.
F-1
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
Pro Forma Consolidated Balance Sheet
March 31, 1998
(dollars in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Recent Proposed
Historical Acquisition (A) Offering (B) Pro Forma
---------- --------------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
Real estate properties, at cost:
Land $ 288,933 $ 3,165 $ - $ 292,098
Buildings and improvements 1,958,782 28,485 - 1,987,267
----------- -------- --------- -----------
2,247,715 31,650 - 2,279,365
Less accumulated depreciation (123,652) - - (123,652)
----------- -------- --------- -----------
2,124,063 31,650 - 2,155,713
Real estate mortgages and notes, net 84,195 - - 84,195
Investment in Hospitality Properties Trust 111,433 - - 111,433
Cash and cash equivalents 21,678 (6,650) 291,930 306,958
Interest and rents receivable 20,419 - - 20,419
Deferred interest and finance costs, net, and other assets 27,463 - - 27,463
----------- -------- --------- -----------
$ 2,389,251 $ 25,000 $ 291,930 $ 2,706,181
=========== ======== ========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank notes payable $ 160,000 $ 25,000 $ (185,000) $ -
Senior notes payable, net 499,851 - - 499,851
Mortgage notes payable 26,157 - - 26,157
Convertible subordinated debentures 209,818 - - 209,818
Accounts payable and accrued expenses 32,371 - - 32,371
Deferred rents 33,448 - - 33,448
Security deposits 17,818 - - 17,818
Due to affiliates 7,141 - - 7,141
Dividend payable 40,377 - - 40,377
Shareholders' equity:
Preferred shares of beneficial interest,
$.01 par value; 50,000,000 authorized; none issued - - - -
Common shares of beneficial interest, $.01 par value;
125,000,000 and 150,000,000 shares authorized and
pro forma, 106,256,403 and 131,256,403
shares issued and outstanding and pro forma 1,063 - 250 1,313
Additional paid-in capital 1,512,767 - 476,680 1,989,447
Cumulative net income 451,679 - - 451,679
Dividends (603,239) - - (603,239)
----------- -------- --------- -----------
Total shareholders' equity 1,362,270 - 476,930 1,839,200
----------- -------- --------- -----------
$ 2,389,251 $ 25,000 $ 291,930 $ 2,706,181
=========== ======== ========= ===========
</TABLE>
F-2
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
Pro Forma Consolidated Statement of Income
For the Three Months Ended March 31, 1998
(amounts in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
1998 1600 Market Recent Proposed
Historical Acquisitions(C) Street (D) Acquisition (C) Other (E) Offering (F) Pro Forma
---------- ---------------- ------------ --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income $ 66,894 $ 2,455 $ 4,721 $ 1,130 $ - $ - $ 75,200
Interest and other income 5,058 - - - - - 5,058
--------- --------
--------- --------- -------- --------- -----------
Total revenues 71,952 2,455 4,721 1,130 - - 80,258
--------- --------- -------- --------- --------- -------- -----------
Expenses:
Operating expenses 13,502 338 1,915 339 - - 16,094
Interest 13,651 1,028 1,869 406 (1,291) (3,006) 12,657
Depreciation and amortization 12,658 479 650 178 - - 13,965
General and administrative 3,619 104 145 40 - - 3,908
--------- --------- -------- --------- --------- -------- ----------
Total expenses 43,430 1,949 4,579 963 (1,291) (3,006) 46,624
--------- --------- -------- --------- --------- -------- -----------
Income before equity in earnings of
Hospitality Properties Trust 28,522 506 142 167 1,291 3,006 33,634
Equity in earnings of Hospitality
Properties Trust 1,327 - - - - - 1,327
Gain on equity transaction of
Hospitality Properties Trust 1,532 - - - - - 1,532
--------- --------- -------- --------- --------- -------- -----------
Income (loss) before
extraordinary item $ 31,381 $ 506 $ 142 $ 167 $ 1,291 $ 3,006 $ 36,493
========= ========= ======== ========= ========= ======== ===========
Weighted average shares outstanding 101,471 130,941
========= ==========
Basic and diluted earnings
per common share:
Income (loss) before
extraordinary item $ 0.31 $ 0.28
========= ==========
</TABLE>
F-3
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST Pro Forma Consolidated Statement of
Income For the Year Ended December 31, 1997 (amounts in thousands, except per
share data) (unaudited)
<TABLE>
<CAPTION>
Second Quarter Third Quarter West 34th Franklin
Historical GPI (G) CSMC (H) Acquisitions (I) Acquisitions (I) Street (J) Plaza (K)
---------- --------- -------- ---------------- ---------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income $ 188,000 $ 11,959 6,831 $ 2,948 $ 3,179 $ 10,771 $ 9,614
Interest and other income 20,863 (366) - - - - -
---------- --------- ------- -------- -------- -------- --------
Total revenues 208,863 11,593 6,831 2,948 3,179 10,771 9,614
---------- --------- ------- -------- -------- -------- --------
Expenses:
Operating expenses 26,765 2,053 1,910 - 954 3,641 4,904
Interest 36,766 (1,216) 3,232 1,087 1,463 2,876 2,486
Depreciation and amortization 39,330 4,156 1,119 627 501 1,869 1,334
General and administrative 11,670 2,105 249 139 111 415 296
---------- --------- ------- -------- -------- -------- --------
Total expenses 114,531 7,098 6,510 1,853 3,029 8,801 9,020
---------- --------- ------- -------- -------- -------- --------
Income (loss) before equity in
earnings of Hospitality
Properties Trust, gain on
sale of properties and
extraordinary item 94,332 4,495 321 1,095 150 1,970 594
Equity in earnings of Hospitality
Properties Trust 8,590 - - - - - -
Gain on equity transaction of
Hospitality Properties Trust 9,282 - - - - - -
---------- --------- ------- -------- -------- -------- --------
Income (loss) before gain on
sale of properties and
extraordinary item 112,204 4,495 321 1,095 150 1,970 594
Gain on sale of properties, net 2,898 - - - - - -
---------- ------- -------- -------- -------- --------
Income (loss) before
extraordinary item $ 115,102 $ 4,495 $ 321 $ 1,095 $ 150 $ 1,970 $ 594
========== ========= ======= ======== ======== ======== ========
Weighted average shares outstanding 92,168
==========
Basic and diluted earnings
per common share:
Income (loss) before
extraordinary item $ 1.25
==========
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
Bridgepoint Fourth Quarter Recent 1600 Market Proposed
Square (L) Acquisitions(I) Acquisitions (N) Street (M) Other (O) Offering (P) Pro Forma
----------- --------------- ---------------- ---------- --------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income $ 5,599 $ 8,461 $ 23,145 $ 18,883 $ - $ - $ 289,390
Interest and other income - - - - - 20,497
--------- -------- --------- --------- -------- --------- -----------
Total revenues 5,599 8,461 23,145 18,883 - - 309,887
--------- -------- --------- --------- -------- --------- -----------
Expenses:
Operating expenses 2,162 2,634 4,715 7,659 - - 57,397
Interest 3,216 4,338 8,125 7,475 (6,395) (12,025) 51,428
Depreciation and amortization 1,175 1,269 4,147 2,601 - - 58,128
General and administrative 262 283 922 578 - - 17,030
--------- -------- --------- -------- --------- -----------
Total expenses 6,815 8,524 17,909 18,313 (6,395) (12,025) 183,983
--------- -------- --------- --------- -------- --------- -----------
Income (loss) before equity in
earnings of Hospitality
Properties Trust, gain on
sale of properties and
extraordinary item (1,216) (63) 5,236 570 6,395 12,025 125,904
Equity in earnings of Hospitality
Properties Trust - - - - - - 8,590
Gain on equity transaction of
Hospitality Properties Trust - - - - - - 9,282
--------- -------- --------- --------- -------- --------- -----------
Income (loss) before gain on
sale of properties and
extraordinary item (1,216) (63) 5,236 570 6,395 12,025 143,776
Gain on sale of properties, net - - - - - - 2,898
--------- -------- --------- --------- -------- --------- -----------
Income (loss) before
extraordinary item $(1,216) $ (63) $ 5,236 $ 570 $ 6,395 $ 12,025 $ 146,674
========= ======== ========= ========= ======== ========= ===========
Weighted average shares outstanding 130,725
==========
Basic and diluted earnings
per common share:
Income (loss) before
extraordinary item $ 1.12
==========
</TABLE>
F-5
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
Notes To Unaudited Pro Forma Consolidated Financial Statements
(dollars in thousands, except per share data)
Consolidated Balance Sheet Adjustments
A. Represents the Company's acquisition in April 1998 of two commercial office
properties located in Massachusetts (the "Recent Acquisition"). This
acquisition was funded with available cash and by drawings under the
Company's revolving line of credit.
B. Represents the proposed public offering of 25,000,000 common shares of
beneficial interest of the Company ("Common Shares") at a per share price
of $20.1875 (the "Proposed Offering"). Net proceeds will be used, in part,
to repay amounts outstanding under the Company's revolving line of credit.
Consolidated Statement of Income Adjustments for the Quarter Ended March 31,
1998
C. Represents the increases in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Recent Acquisition and the Company's acquisitions during January 1998,
February 1998 and March 1998 of two medical office properties and four
commercial office properties located in Pennsylvania, four commercial
office properties located in Texas, a medical office property located in
Massachusetts, a commercial office property located in Maryland, one
medical office property and two commercial office properties located in
Minnesota and three medical office properties and a commercial office
property located in Florida (collectively, "1998 Acquisitions"), and the
increase in interest expense from the use of the Company's revolving line
of credit to fund these acquisitions.
D. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's acquisition on March 30, 1998 of a commercial office property
located at 1600 Market Street in Philadelphia, Pennsylvania ("1600 Market
Street") and the increase in interest expense from the use of the Company's
revolving line of credit to fund this acquisition.
E. Represents the net decrease in interest expense relating to the issuance of
additional Remarketed Reset Notes, the issuance of 6.7% Senior Notes due
2005 in February 1998 (collectively the "1998 Notes") and the issuance of
6,977,575 common shares in February 1998 and March 1998; the proceeds of
these offerings were used to repay amounts then outstanding on the
Company's revolving credit facility.
F. Reflects the decrease in interest expense as a result of the Proposed
Offering and the application of the net proceeds to the Company's revolving
line of credit.
F-6
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
Notes To Unaudited Pro Forma Consolidated Financial Statements
(dollars in thousands, except per share data)
Consolidated Statement of Income Adjustments for the Year Ended December 31,
1997
G. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's acquisition of the government office properties ("Government
Office Properties") from Government Property Investors, Inc ("GPI"). Also
reflects the decrease in interest expense arising from the Company's
issuance of common shares in a March 1997 offering, the proceeds of which
were used in part to repay amounts then outstanding under the Company's
revolving line of credit, net of an increase in interest expense related to
the Company's assumption of certain debt in connection with the acquisition
of the Government Office Properties.
H. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's acquisition of two medical office properties and two parking
structures located in Los Angeles, California ("CSMC"), as well as the
increase in interest expense due to the use of the Company's revolving line
of credit to fund this acquisition.
I. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's acquisition of a) a 200 unit retirement housing property located
in Spokane, Washington and 20 medical office clinics and ancillary
structures located in Massachusetts during the second quarter ("Second
Quarter Acquisitions"), b) three medical and two commercial office
buildings located in Pennsylvania during the third quarter ("Third Quarter
Acquisitions") and c) a medical office property located in Colorado, a
medical office property located in Maryland, a medical office property
located in Rhode Island, three medical office properties located in
California, and a medical office property located in Washington, D.C.
during the fourth quarter ("Fourth Quarter Acquisitions"), as well as the
increase in interest expense due to the use of the Company's revolving line
of credit to fund these acquisitions.
J. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's acquisition of West 34th Street in New York City ("West 34th
Street"), as well as the increase in interest expense due to the use of the
Company's revolving line of credit to fund the acquisition.
K. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's acquisition of Franklin Plaza in Philadelphia, Pennsylvania
("Franklin Plaza"), as well as the increase in interest expense due to the
use of the Company's revolving line of credit to fund the acquisition.
L. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's acquisition of Bridgepoint Square, Austin, Texas ("Bridgepoint
Square"). Bridgepoint Square consists of five properties, of which one
property was under construction at September 30, 1997 and one property was
completed in July 1997. Also represents the increase in interest expense
due to the use of the Company's revolving line of credit to fund the
acquisition.
M. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's acquisition of 1600 Market Street, as well as the increase in
interest expense due to the use of the Company's revolving line of credit
to fund the acquisition.
N. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's Recent Acquisition and 1998 Acquisitions (collectively, "Recent
Acquisitions"), as well as the increase in interest expense due to the use
of the Company's revolving line of credit to fund these acquisitions.
F-7
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
Notes To Unaudited Pro Forma Consolidated Financial Statements
(dollars in thousands, except per share data)
Consolidated Statement of Income Adjustments for the Year Ended December 31,
1997 - continued
O. Represents the net decrease in interest expense relating to the issuance of
Remarketed Reset Notes in July 1997, the issuance of 6.75% Senior Notes in
December 1997, the issuance of the 1998 Notes, the prepayment of Floating
Rate Senior Notes in July 1997, and the issuance of common shares in
February 1998 and March 1998.
P. Reflects the decrease in interest expense as a result of the Company's
Proposed Offering and the application of net proceeds to the Company's
revolving line of credit.
Q. The Company has proposed acquisitions, which include a medical office
property located in California, a medical office property and a commercial
office property located in Texas, three commercial office properties
located in Ohio, three commercial office properties located in New Jersey,
two commercial office properties located in Pennsylvania, a commercial
office property located in Connecticut, a commercial office property
located in Delaware, a commercial office property located in Massachusetts
and a commercial office property located in New York (the "Proposed
Acquisitions"), and which also include the Company's proposed acquisition
of a property subject to a mortgage. Upon the consummation of the Proposed
Acquisitions, adjusted pro forma total assets, total real estate
investments, total borrowings and shareholders' equity at March 31, 1998
would be $2,813,501, $2,681,690, $843,146 and $1,839,200, respectively, for
the three months ended March 31, 1998, adjusted pro forma total revenues,
total expenses and net income would be $91,897, $52,669 and $42,087,
respectively, and for the year ended December 31, 1997, adjusted pro forma
total revenues, total expenses and net income would be $362,742, $210,551
and $171,859, respectively. The Proposed Acquisitions are subject to
various closing conditions customary in real estate transactions,
including, but not limited to, due diligence, Board of Trustees approval
and final documentation; in the case of the mortgage, realization on
collateral may involve foreclosure or other judicial proceedings. No
assurances can be given as to when or if these Proposed Acquisitions will
be consummated.
F-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has dully caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ Ajay Saini
-----------------------------------
Ajay Saini, Treasurer and
Chief Financial Officer
Date: May 11, 1998
Exhibit 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference in this prospectus supplement to Health and Retirement Properties
Trust's registration statement on Form S-3 (File No. 333-26887) of our report
dated February 19, 1998 included in New Marriott MI, Inc.'s (subsequently
renamed "Marriott International, Inc.") Form 10-K for the fiscal year ended
January 2, 1998 (File No. 1-13881) and to all references to our Firm included in
the prospectus supplement to such registration statement.
/s/ Arthur Andersen LLP
Washington, D.C.
May 11, 1998
Exhibit 23.2
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation by
reference in this Prospectus Supplement to Health and Retirement Properties
Trust's registration statement on Form S-3 of our report dated January 16, 1998
on Hospitality Properties Trust included in Health and Retirement Properties
Trust's Form 8-K dated February 27, 1998 and incorporated in Health and
Retirement Properties Trust's Form 10-K for the year ended December 31, 1997 and
to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Washington, D.C.
May 11, 1998
Exhibit 23.3
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3 No. 333-26887) and related Prospectus
Supplement of Health and Retirement Properties Trust and to the incorporation by
reference therein of our report dated February 9, 1998, with respect to the
consolidated financial statements of Health and Retirement Properties Trust
incorporated by reference in its Annual Report (Form 10-K) for the year ended
December 31, 1997 and the related financial statement schedules included therein
and our report dated March 26, 1998 with respect to the statement of revenues
and certain expenses of an office building owned by MSA 1600 Associates, L.P.
for the year ended December 31, 1997, included in the Current Report on Form 8-K
of Health and Retirement Properties Trust dated March 30, 1998, both filed with
the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Boston, Massachusetts
May 8, 1998
PATRICK F. DONELAN
12 Hook Road
Rye, New York 10580
May 11, 1998
Board of Trustees
Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
Dear Sirs:
I hereby consent to my being named as nominee to the Board of Trustees
of Health and Retirement Properties Trust (the "Company") (i) in the Company's
Registration Statement No. 333-26887 and any prospectus and prospectus
supplement included therein and any registration statement related thereto filed
by the Company pursuant to Rule 462(b) of the Securities Act of 1933, as
amended, (ii) in the Company's supplemental proxy materials relating to its
Annual Meeting of Shareholders to be commenced on May 12, 1998, (iii) in any of
the Company's filings pursuant to Rule 13, 14 or 15 of the Securities Exchange
Act of 1934, as amended, and (iv) in the Company's Registration Statements Nos.
33-62135, 333-47815 and 333-47817.
Sincerely,
/s/ Patrick F. Donelan
-------------------------
Patrick F. Donelan
