SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 5, 1997
HEALTH AND RETIREMENT PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
Maryland 1-9317 04-6558834
(State or other (Commission (IRS Employer
jurisdiction of ) File Number) Identification No.)
incorporation)
400 Centre Street, Newton, MA 02158
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 617-332-3990
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements Under Rule 3-14 of Regulation S-X
Audited Statement of Revenue and Certain Expenses for Bridge Square for
the Year Ended December 31, 1996
As previously disclosed on Form 8-K dated December 19, 1997,
Health and Retirement Properties Trust and subsidiaries (the "Company")
acquired Bridgepoint Square an office complex containing five
commercial office properties with approximately 441,145 square foot
located in Austin, Texas. Neither the Company nor its affiliates were
related to the seller of this property. The factors considered by the
Company in determining the purchase price paid for this property
include, among others, the following: (i) the historical and projected
rents received and likely to be received from the property,
(ii) the historic and expected operating expenses, including real
estate taxes, incurred and expected to be incurred at the
property,
(iii) the credit quality and nature of the existing tenants
(iv) the existing lease terms and renewal options of the leases in
place,
(v) the market demand for similar space, the rent rates being paid
compared to existing rents being paid in the building, and
opportunities for alternative and new tenancies,
(vi) the physical location and condition of the property, the need
for repairs and likely cost of repairs,
(vii) the expected tenant inducements (such as free rent, tenant
improvement allowances, etc.) which might be necessary to fill
vacant space or renew leases, and
(viii) the pricing of comparable properties as evidenced by recent
arms-length market sales.
The Company, after investigation of the properties, is not
aware of any material factors, other than those enumerated above, which
would cause the financial information reported not to be necessarily
indicative of future operating results.
(b) Pro Forma Financial and Other Data
Pro Forma Balance Sheet as of September 30, 1997
Pro Forma Statement of Income for the Nine Months Ended September 30,
1997
Pro Forma Statement of Income for the Year Ended December 31, 1996
(c) Exhibits
23.1 Consent of Price Waterhouse LLP
- 2 -
<PAGE>
Report of Independent Accountants
January 9, 1998
To the Board of Trustees of Health &
Retirement Properties Trust:
We have audited the accompanying historical statement of gross income and direct
operating expenses of Bridgepoint Square (the Property), an office building
complex , for the year ended December 31, 1996. This historical statement is the
responsibility of the Property's management. Our responsibility is to express an
opinion on this historical statement based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the historical statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the historical statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the historical
statement. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying historical statement of gross income and direct operating
expenses was prepared in compliance with the rules and regulations of the
Securities and Exchange Commission (for inclusion in Form 8-K of Health &
Retirement Properties Trust) as described in Note 1, and is not intended to be a
complete presentation of the Property's revenue and expenses.
In our opinion, the historical statement referred to above presents fairly, in
all material respects, the gross income and direct operating expenses, as
described in Note 1, of Bridgepoint Square for the year ended December 31, 1996
in conformity with generally accepted accounting principles.
Price Waterhouse LLP
Dallas, Texas
F - 1
<PAGE>
BRIDGEPOINT SQUARE
Historical Statement of Gross Income and
Direct Operating Expenses
For the Year Ended December 31, 1996
Gross Income
Rental income $2,085,112
Reimbursement of operating costs 85,173
Total 2,170,285
Direct Operating Expenses
Rental property operating expenses 526,017
Real estate taxes and insurance 309,037
General and administrative 105,164
----------
940,218
Gross Income In Excess Of Direct Operating Costs $1,230,067
==========
See accompanying notes to this historical statement.
F - 2
<PAGE>
BRIDGEPOINT SQUARE
Notes to Historical Statement
Year Ended December 31, 1996
Note 1 - General Information and Summary of Significant Accounting Policies
Bridgepoint Square (the Property) is an office building complex located in
Austin, Texas, which was developed and managed by Investors Life Insurance
Company of North America (One Bridgepoint - Four Bridgepoint) and Family Life
Insurance Company (Five Bridgepoint). The Property consists of five office
buildings, three of which had been completed and were occupied during the year
ended December 31, 1996. One Bridgepoint was acquired during 1995 and was
operating for the entire 1996 calendar year. Construction on Four Bridgepoint
was completed and occupancy began in July 1996. Three Bridgepoint was completed
during the last week of 1996 and its operations are insignificant to the
December 31, 1996 historical statement. Two Bridgepoint and Five Bridgepoint
were completed during 1997 and are not included in the December 31, 1996
historical statement. The Property also includes three covered parking garages,
two of which had been completed at December 31, 1996. Bridgepoint Square was
sold to Health and Retirement Properties Trust on December 4, 1997.
The accompanying historical statement of gross income and direct operating
expenses has been prepared in accordance with Rule 3-14 of Regulation S-X of the
Securities and Exchange Commission. Accordingly, certain historical expenses
which may not be comparable to the expenses expected to be incurred in the
proposed future operations of the Property have been excluded. Excluded expenses
include depreciation and amortization, interest expense, income taxes and any
other expenses not directly related to the future operations of the Property.
Rental income is recognized on a straight line basis over the terms of the
related leases.
Note 2 - Leases
As of December 31,1996, One Bridgepoint, Three Bridgepoint and Four Bridgepoint
are leased under non-cancelable operating leases. The terms of the leases expire
at various times from 1997 through 2003 and provide for aggregate minimum
rentals as follows:
1997 $ 5,725,059
1998 5,333,521
1999 4,177,268
2000 832,943
2001 808,097
Thereafter 1,688,834
-----------
$18,565,722
===========
The leases also provide for payment by the lessees of certain occupancy related
expenses and certain leases contain renewal and/or cancellation options in
future periods. In addition, one tenant occupies approximately 56% of all
rentable space as of December 31, 1996.
F - 3
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
Unaudited Pro Forma Financial Statements
The following unaudited pro forma balance sheet as of September 30,
1997 and the statement of income for the nine months ended September 30, 1997
and the year ended December 31, 1996, present the financial position and the
results of operations of Health and Retirement Properties Trust (the "Company")
as if the transactions described in the notes to unaudited financial statements
were consummated on January 1, 1996. These unaudited pro forma financial
statements should be read in connection with, and is qualified in its entirety
by reference to, the separate financial statements of the Company and of the
Seller of the Government Office Properties, each for the year ended December 31,
1996, included in the Company's Current Report on Form 8-K dated February 17,
1997, and the financial statements of the Company for the quarter ended
September 30, 1997 included in the Company's Quarterly Report on Form 10-Q.
These unaudited pro forma financial statements are not necessarily indicative of
the financial position and the expected results of operations of the Company for
any future period. Differences could 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 - 4
<PAGE>
<TABLE>
<CAPTION>
Health and Retirement Properties Trust
Pro Forma Balance Sheets
September 30, 1997
(dollars in thousands)
(unaudited)
Recent
West 34th Franklin Bridgepoint Acquisi
Historical Street(A) Plaza(B) Square(C) tions(D) Pro Forma
---------- --------- -------- -------- -------- ----------
ASSETS
Real estate properties, at cost:
<S> <C> <C> <C> <C> <C> <C>
Land, buildings and improvements $1,621,522 $ 110,750 $ 79,000 $ 79,000 $ 90,600 $1,980,872
---------- --------- -------- -------- -------- ----------
1,621,522 110,750 79,000 79,000 90,600 1,980,872
Less accumulated depreciation 99,746 -- -- -- -- 99,746
---------- --------- -------- -------- -------- ----------
1,521,776 110,750 79,000 79,000 90,600 1,881,126
Real estate mortgages, net 116,941 -- -- -- -- 116,941
Investment in Hospitality Properties Trust 102,465 -- -- -- -- 102,465
Cash and cash equivalents 71,765 (46,368) (27,414) (3,000) 5,930 913
Interest and rent receivables 19,722 -- -- -- -- 19,722
Deferred interest and finance costs, net and
other assets 18,625 (4,901) -- -- (250) 13,474
---------- --------- -------- -------- -------- ----------
$1,851,294 $ 59,481 $ 51,586 $ 76,000 $ 96,280 $2,134,641
========== ========= ======== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank notes payable $ 100,000 $ 59,000 $ 51,000 $ 76,000 $ 94,000 $ 380,000
Senior notes and bonds payable, net 200,000 -- -- -- -- 200,000
Mortgage notes payable 26,941 -- -- -- -- 26,941
Convertible subordinated debentures 211,650 -- -- -- -- 211,650
Accounts payable and accrued expenses 35,616 481 586 -- 850 37,533
Prepaid rents 7,077 -- -- -- -- 7,077
Security deposits 2,872 -- -- -- 750 3,622
Due to affiliates 1,336 -- -- -- -- 1,336
Dividend payable 36,571 -- 36,571
Shareholders' equity:
Preferred shares, .01 par value: none issued -- -- -- -- -- --
Common shares of beneficial interest, .01 par value:
125 million shares authorized,
98.7 million shares and 98.8 million pro forma
shares issued and outstanding, respectively 988 -- -- -- -- 988
Additional paid-in capital 1,370,730 -- -- -- 680 1,371,410
Cumulative net income 383,775 -- -- -- -- 383,775
Dividends (526,262) -- -- -- -- (526,262)
---------- --------- -------- -------- -------- ----------
Total shareholders' equity 1,229,231 -- -- -- 680 1,229,911
---------- --------- -------- -------- -------- ----------
$1,851,294 $ 59,481 $ 51,586 $ 76,000 $ 96,280 $2,134,641
========== ========= ======== ======== ======== ==========
-- -- -- -- -- --
</TABLE>
See accompanying notes to unaudited pro forma financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
Health and Retirement Properties Trust
Proforma Statements of Income
Nine months ended September 30, 1997
(amounts in thousands, except per share data)
(unaudited)
Second Third
Quarter Quarter West Bridge Recent
Acquisi Acquisi 34th Franklin -point Acquisi
Historical GPI (E) CSMC(F) tions(G) tions(G) Street(H)Plaza(I) Square(J)tions(K) Pro Forma
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Revenues:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rental income $129,518 $12,235 $ 6,831 $ 2,948 $ 3,179 $10,771 $ 9,614 $ 4,581 $ 8,882 $188,559
Interest income 16,177 (268) -- -- -- -- -- -- 15,909
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total revenues 145,695 11,967 6,831 2,948 3,179 10,771 9,614 4,581 8,882 204,468
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Expenses:
Operating 16,961 3,732 1,910 -- 954 3,641 4,904 1,769 2,733 36,604
Interest 24,955 (1,366) 3,232 1,087 1,463 2,876 2,486 2,631 4,129 41,493
Depreciation and amortization 26,633 3,365 1,119 627 501 1,869 1,334 961 1,348 37,757
General and administrative 8,148 1,579 249 139 111 415 296 214 301 11,452
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total expenses 76,697 7,310 6,510 1,853 3,029 8,801 9,020 5,575 8,511 127,306
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Income before equity in earnings
of income Hospitality Properties
Trust and before extraordinary
item 68,998 4,657 321 1,095 150 1,970 594 (994) 371 77,162
Equity in earnings of Hospitality
Properties Trust 6,683 -- -- -- -- 6,683
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Net income before extraordinary item $ 75,681 $ 4,657 $ 321 $ 1,095 $ 150 $ 1,970 $ 594 $ (994) $ 371 $ 83,845
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Average shares outstanding 89,918 98,838
Per share data:
Net income before extraordinary item $ 0.84 $ 0.85
</TABLE>
See accompanying notes to unaudited pro forma financial statements
F-6
<PAGE>
<TABLE>
<CAPTION>
Health and Retirement Properties Trust
Proforma Statements of Income
Year Ended December 31, 1996
(amounts in thousands, except per share data)
(unaudited)
HRPT GPI
----------------- ---------------- West Frank Bridge Recent
Acquisi Acquisi 34th -lin -point Acquisi Pro Forma
Histo- tions Histo- tions Street Plaza Square tions Adjust
rical (L) rical (M) CSMC(N) (O) (P) (Q) (R) ments Pro Forma
-------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
Revenues:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rental income $ 98,039 $31,212 $ 36,523 $15,055 $15,911 $14,361 $12,818 $ 2,170 $11,841 $ -- $237,930
Interest income 22,144 (396) 780 -- -- -- -- -- -- -- 22,528
-------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
Total revenues 120,183 30,816 37,303 15,055 15,911 14,361 12,818 2,170 11,841 -- 260,458
-------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
Expenses:
Operating 3,776 1,600 8,657 5,605 5,081 4,855 6,538 940 3,643 1,073 (S) 41,768
Interest 22,545 15,947 28,730 8,313 7,053 3,835 3,315 1,596 5,505 (45,086)(T) 51,753
Depreciation and amortization 22,106 6,467 6,357 1,174 2,441 2,492 1,778 583 1,797 932 (U) 46,127
General and administrative 7,055 1,402 5,570 -- 543 554 395 130 401 (3,486)(S) 12,564
-------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
Total expenses 55,482 25,416 49,314 15,092 15,118 11,736 12,026 3,249 11,346 (46,567) 152,212
-------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
Income before equity income and
extraordinary item
64,701 5,400 (12,011) (37) 793 2,625 792 (1,079) 495 46,567 108,246
Equity in earnings of Hospitality
Properties Trust 8,860 8,860
Gain on equity transaction of
Hospitality Properties Trust 3,603 -- -- -- -- -- -- -- -- -- 3,603
-------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
Income before gain (loss) on sale
of properties and extraordinary
item $ 77,164 $ 5,400 $(12,011)$ (37)$ 793 $ 2,625 $ 792 $(1,079) $ 495 $46,567 $120,709
-------- ------- -------- ------- ------- ------- ------- ------- ------- ------- --------
Average shares outstanding 66,255 98,838
Per share data:
Income before gain (loss) on
sale of proper ies and
extraordinary item $ 1.16 $ 1.22
</TABLE>
See accompanying notes to unaudited pro forma financial statements
F-7
<PAGE>
Notes To Unaudited Pro Forma Financial Statements
Pro Forma Balance Sheet Adjustments at September 30, 1997.
A. Represents the acquisition, on October 1, 1997, of a medical office
property located at 7 West 34th Street in New York, New York ("West 34th
Street"). This acquisition was funded with available cash and by drawing
under the Company's existing revolving line of credit.
B. Represents the acquisition, on November 13, 1997, of an office property
located at One Franklin Plaza, Philadelphia, Pennsylvania ("Franklin
Plaza"). This acquisition was funded with available cash and by drawing
under the Company's existing revolving line of credit.
C. Represents the acquisition, on December 5, 1997, of an office complex
containing five commercial office properties located in Austin, Texas
("Bridgepoint Square"). This acquisition was funded with available cash and
by drawing under the Company's existing revolving line of credit.
D. Represents the Company's acquisitions, during November 1997, December 1997
and January 1998, of 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, a medical office property located in Washington, D.C., a
government office property located in Texas and a medical office and
commercial office property located in Pennsylvania (collectively, "Recent
Acquisitions"). The Recent Acquisitions were funded with available cash, by
drawings under the Company's existing revolving line of credit and the
issuance of of the Company's common shares.
Pro Forma Statement of Income adjustments for the Nine months Ended September
30, 1997.
E. 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 ("GPI") from
Government Property Investors, Inc. ("Seller"). Also reflects the decrease
in interest expense arising from the Company's issuance of its shares
pursuant to a common stock offering in March 1997, 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 GPI.
F. 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.
G. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's acquisition of a 200 unit retirement housing property located in
Spokane, Washington and 20 medical office clinics and ancillary structures
located in Massachusetts and three medical and two commercial office
buildings located in Pennsylvania as well as the increase in interest
expense due to the use of the Company's revolving line of credit to fund
these acquisitions.
H. 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, as well as the increase in
interest expense due to the use of the Company's revolving line of credit
to fund the acquisition.
F - 8
<PAGE>
I. 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, as well as the increase in
interest expense due to the use of the Company's revolving line of credit
to fund the acquisition.
J. 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. 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.
K. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
Company's 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.
Pro Forma Statement of Income adjustments for the Year Ended December 31, 1996.
L. Represents the increase in rental income, operating expenses, interest
expense, depreciation and amortization and general and administrative
expenses arising from the Company's acquisitions completed during 1996 and
certain acquisitions completed during the nine months ended September 30,
1997, assuming the contractual rents were in effect since January 1, 1996.
Property level expense adjustments represent annualized historical
operating expenses for gross leased properties acquired. Depreciation
expense adjustments assume an average building life of 40 years. Also
assumes a reduction in interest income from the use of cash on hand to
fund, in part, these acquisitions.
M. Represents the increase in rental income, operating expenses, interest
expense, depreciation and amortization and general and administrative
expenses arising from the Seller's acquisitions completed during 1996 and
acquisitions completed by the Company during the nine months ended
September 30, 1997, assuming the contractual rents were in effect since
January 1, 1996. Property level expense adjustments are established for the
purpose of this pro-forma presentation as equal to percentage of rents
which is the same percentage of rents as was represented by property level
operating expenses for the properties which were owned by the Seller during
1996. Depreciation expense adjustments assume an average building life of
40 years.
N. Represents the historical rental income and operating expenses for the
Company's acquisition of CSMC. Also represents adjustments resulting from
the acquisition for interest expense due to the use of the Company's
revolving line of credit to fund the acquisition, depreciation expense
adjustments assuming an average building life of 40 years as well as
increases in general and administrative expenses.
O. Represents the historical rental income and operating expenses for the
Company's acquisition of West 34th Street. Also represents adjustments
resulting from the acquisition for interest expense due to the use of the
Company's revolving line of credit to fund the acquisition, depreciation
expense assuming an average building life of 40 years as well as increases
in general and administrative expenses.
P. Represents the historical rental income and operating expenses for the
Company's acquisition of Franklin Plaza. Also represents adjustments
resulting from the acquisition for interest expense due to the use of the
Company's revolving line of credit to fund the acquisition, depreciation
expense assuming an average building life of 40 years as well as increases
in general and administrative expenses.
F - 9
<PAGE>
Q. Represents the historical rental income and operating expenses for the
Company's acquisition of Bridgepoint Square. Bridgepoint Square consists of
five properties, of which two properties were under construction at
December 31, 1996, one property was completed in July 1996, and one
property was completed in December 1996. Also represents adjustments
resulting from the acquisition for interest expense due to the use of the
Company's revolving line of credit to fund the acquisition, depreciation
expense assuming an average building life of 40 years as well as increases
in general and administrative expenses.
R. Represents the increase in rental income, operating expenses, depreciation
and amortization and general and administrative expenses arising from the
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.
S. Represents the net reduction in operating and administrative expenses
arising from the differences in the Company's cost structure (which include
the full year's effect of general and administrative and property
management services) and the cost structure of GPI (which included the
employment of separate property management companies for certain of the
government office properties under separate fee arrangements and cost
related to administrative financial, acquisition and other activities
performed by GPI's management) and the cost structure of the other
properties acquired in 1997.
T. Represents the reduction of interest expense arising from the Company's
repayment of the GPI mortgage and affiliate debt, excluding $27,588 of
mortgage debt that was not repaid in connection with the acquisition of
GPI.
U. Represents the effect on the depreciation expense arising from the
adjustment of GPI's historical basis in existing assets to the Company's
basis at acquisition.
F - 10
<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: January 22, 1998
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements of Health and Retirement Properties Trust on Forms S-3 (Registration
Nos. 333-34823, 333-26887 and 33-62135) of our report dated January 9, 1998
related to the historical statement of gross income and direct operating
expenses of Bridgepoint Square, as included in this Form 8-K.
Price Waterhouse LLP
Dallas, Texas
January 19, 1997
