Registration No. 333-47815
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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HEALTH AND RETIREMENT PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
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Maryland 04-6558834
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
400 Centre Street
Newton, Massachusetts 02158
(617) 332-3990
(Address, including zip code, and telephone number, including area
code, of registrant's principal executive offices)
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David J. Hegarty, President
Health and Retirement Properties Trust
400 Centre Street
Newton, Massachusetts 02158
(617) 332-3990
(Name, address, including zip code, telephone number,
including area code, of agent for service)
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Copy to:
Alexander A. Notopoulos, Jr., Esq.
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
(617) 338-2800
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Approximate date of commencement of proposed sale to the public: From
time to time or at one time after the effective date of the Registration
Statement as determined by the Selling Shareholders. All of the Shares offered
hereby are for the respective accounts of the Selling Shareholders.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
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If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_| _____________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
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The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion
Preliminary Prospectus Dated May 4, 1998
PROSPECTUS
2,612,806 Shares
Health and Retirement Properties Trust
Common Shares of Beneficial Interest
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This Prospectus relates to the reoffer and resale by certain selling
shareholders described herein (the "Selling Shareholders") of common shares of
beneficial interest, par value $.01 per share ("Common Shares"), of Health and
Retirement Properties Trust (the "Company"). The Company is a real estate
investment trust ("REIT") which invests primarily in healthcare related real
estate and in office buildings leased to various agencies of the United States
government. The Common Shares offered hereby (the "Offered Shares") are being
reoffered and resold for the account of the Selling Shareholders, and the
Company will not receive any of the proceeds from such reoffering and resale.
The Selling Shareholders have advised the Company that the resale of the
Offered Shares may be effected from time to time in one or more transactions on
the New York Stock Exchange (the "NYSE"), in negotiated transactions or
otherwise at market prices prevailing at the time of the sale or at prices
otherwise negotiated. The Selling Shareholders may effect such transactions by
selling the Offered Shares to or through broker-dealers who may receive
compensation in the form of discounts, concessions or commissions from the
Selling Shareholders and/or the purchasers of the Offered Shares for whom such
broker-dealers may act as agent or to whom they sell as principal, or both
(which compensation as to a particular broker-dealer may be in excess of
customary commissions). Any broker-dealer acquiring the Offered Shares from the
Selling Shareholders may sell such securities in its normal market making
activities, through other brokers on a principal or agency basis, in negotiated
transactions, to its customers or through a combination of such methods. See
"Plan of Distribution".
The Company will bear all expenses incurred by it in connection with the
reoffering and resale of the Offered Shares, excluding any fees and
disbursements of underwriters, brokers or dealers, underwriting discounts and
commissions, broker or dealer discounts, concessions or commissions and certain
expenses of the Selling Shareholders. The Company's estimated expenses aggregate
$110,000, and the Selling Shareholders have advised the Company that their
estimated expenses aggregate $5,000.
The Common Shares are traded on the NYSE under the symbol "HRP." On April
29, 1998, the last sale price for the Common Shares on the NYSE was $19.3125.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM-
MISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------
The date of this Prospectus is May ___, 1998.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus in connection with the offer contained in this Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company, the Selling Shareholders or any
underwriters, agents or dealers. This Prospectus does not constitute an offer to
sell or solicitation of an offer to buy securities in any jurisdiction to any
person to whom it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create an implication that there has been no change in the
affairs of the Company and its subsidiaries since the date hereof or the
information contained or incorporated by reference herein is correct at any time
subsequent to the date hereof.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C., a registration statement on Form S-3
(together with all exhibits, schedules and amendments thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Offered Shares. This Prospectus, which is a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement. Statements in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and in each instance
reference is made to the copy of such contract or other documents filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference and the exhibits and schedules thereto. For
further information concerning the Company and the Offered Shares, reference is
made to the Registration Statement. Copies of the Registration Statement may be
obtained from the Commission at its principal office in Washington, D.C. upon
payment of the prescribed fee.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Commission. The
Registration Statement, the exhibits and schedules forming a part thereof and
the reports, proxy statements and other information filed by the Company with
the Commission can be inspected and copies obtained at the public reference
facilities maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: Chicago Regional Office, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661-2511; and New York Regional Office, Seven World Trade
Center, New York, New York 10048. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission at its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the site is
http://www.sec.gov. The Company's Common Shares are traded on the NYSE under the
symbol "HRP," and similar information concerning the Company may be inspected at
the office of the NYSE at 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission pursuant
to the Exchange Act, are hereby incorporated in this Prospectus and specifically
made a part hereof by reference: (i) the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997 (the "Annual Report"), (ii) the
Company's Current Reports on Form 8-K dated February 11, 1998, February 12,
1998, February 17, 1998, February 18, 1998, February 19, 1998, February 27,
1998, March 19, 1998, March 24, 1998, March 30, 1998, April 10, 1998 and April
14, 1998; (iii) the combined financial statements of New Marriott MI, Inc. (to
be renamed "Marriott International, Inc.") ("New Marriott"), Commission No.
1-13881, at and for the fiscal year ended January 2, 1998, as contained in New
Marriott's Annual Report on Form 10-K for the year ended January 2, 1998, and
(iv) the description of the Company's Common Shares contained in the Company's
Registration Statement on Form 8-A dated November 8, 1986, as amended by Form 8
dated July 30, 1991. All documents filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act (i) subsequent to the date of this
Prospectus and prior to the termination of the offering of the Offered Shares
and (ii) subsequent to the date of filing of the registration statement of which
this Prospectus forms a part and prior to effectiveness of such registration
statement
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<PAGE>
shall be deemed to be incorporated by reference into this Prospectus and to be a
part hereof from the respective dates of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
or in any subsequently filed document that also is or is deemed to be
incorporated herein by reference, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom this Prospectus is delivered, upon the written or oral request of such
person, a copy of any and all of the information that has been incorporated by
reference in this Prospectus (excluding exhibits unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be made to the Company at its
principal executive offices, 400 Centre Street, Newton, Massachusetts 02158,
Attention: Investor Relations, telephone (617) 332-3990.
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<PAGE>
THE COMPANY
The Company is one of the largest publicly traded REITs in the United
States with an equity market capitalization of approximately $2.0 billion at
December 31, 1997. The Company has investments of approximately $2.2 billion in
217 properties located in 33 states and the District of Columbia. The Company
principally invests in healthcare related real estate and office buildings
leased to various agencies of the United States Government. In addition, 5% of
the Company's assets, at cost, is an equity investment in Hospitality Properties
Trust ("HPT"), a NYSE listed REIT formed by the Company which invests in hotels.
The Company is organized as a Maryland real estate investment trust. The
Company's principal place of business is 400 Centre Street, Newton,
Massachusetts 02158 and its telephone number is (617) 332-3990.
USE OF PROCEEDS
The Company will receive no proceeds from the sale of the Offered Shares by
the Selling Shareholders. All proceeds will be received by the Selling
Shareholders.
SELLING SHAREHOLDERS
The following table sets forth certain information as of April 29, 1998
with respect to the number of Common Shares beneficially owned by each Selling
Shareholder prior to the offering and the maximum number of Common Shares being
offered hereby. Because the Selling Shareholders may offer all, a portion or
none of the Common Shares offered pursuant to this Prospectus, no estimate can
be given as to the number of Common Shares that will be held by each Selling
Shareholder upon termination of the offering. See "Plan of Distribution." To the
extent required, the names of any agent, dealer, broker or underwriter
participating in any such sales and any applicable commission or discount with
respect to the sale will be set forth in a supplement to this Prospectus. The
Common Shares offered by means of this Prospectus may be offered from time to
time by the Selling Shareholders named in the following table:
<TABLE>
<CAPTION>
Number of Common Shares Maximum Number of
Beneficially Owned Prior to the Common Shares Being
Name of Selling Shareholder Offering Offered
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Government Property Investors, Inc. 1,488,936 1,236,937
("GPI") (1)(2)
The 1818 Fund II, L.P. ("The 1818 Fund") 1,375,869 1,375,869
(1)(3)
<FN>
(1) The 1818 Fund and Rosecliff Realty, L.P. ("RRLP"), collectively, own substantially all of the outstanding capital stock of GPI.
In addition, pursuant to GPI's Plan of Liquidation, designees of The 1818 Fund and RRLP are the liquidators of GPI. As a
result, in addition to the Common Shares owned by The 1818 Fund directly, The 1818 Fund may be deemed to have joint voting and
investment power with RRLP with respect to the Common Shares owned by GPI.
(2) RRLP is a Delaware limited partnership controlled by its general partner, Rosecliff-GovProp Holdings, Inc., which is 100% owned
by Peter T. Joseph. Accordingly, Mr. Joseph may be deemed to beneficially own the Common Shares beneficially owned by RRLP.
(3) The 1818 Fund is a Delaware limited partnership. The general and managing partner of The 1818 Fund is Brown Brothers Harriman &
Co., a New York partnership, which has designated its partners T. Michael Long and Lawrence C. Tucker as the sole and exclusive
partners having voting power and investment power with respect to the Common Shares that are held by The 1818 Fund.
</FN>
</TABLE>
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<PAGE>
THE MERGER
The Merger and the Merger Agreement. The Offered Shares were originally
issued by the Company to GPI in a private placement pursuant to an Agreement of
Merger (as amended, the "Merger Agreement"), between the Company and GPI. The
Merger Agreement provided for the merger (the "Merger") of Government Property
Holdings Trust (together with its subsidiaries, except where the context
otherwise requires, "GPH"), a Maryland real estate investment trust which was a
wholly owned subsidiary of GPI, with and into a wholly owned subsidiary of the
Company ("HRP Merger Sub"). As a result of the Merger, all of the outstanding
shares of GPH converted into the right to receive the merger consideration
described below.
Through the Merger and pursuant to provisions of the Merger Agreement
contemplating additional acquisitions by the Company, the Company acquired or
agreed to acquire up to 30 office buildings containing approximately 3.4 million
square feet, substantially all of which is leased to various agencies of the
United States government. As of December 31, 1997, the Company had acquired 29
properties (containing approximately 3.3 million square feet), one of which is
under construction, and elected not to acquire one property. Subsequent to
December 31, 1997, one of the 29 properties was sold.
The consideration to be paid under the Merger Agreement was payable in two
portions, the "First Closing Consideration" and the "Second Closing
Consideration." The First Closing Consideration was payable in approximately 4.2
million Common Shares, subject to adjustment as provided in the Merger
Agreement, issuable in part on the date of the Merger and in part on subsequent
closing dates in respect of properties which GPH had a right to acquire or was
developing at the time of the Merger; the assumption by the Company through
subsidiaries of approximately $28 million of debt secured by mortgages on four
acquired properties and by the net cash payment of approximately $335 million to
retire other debt and pay certain obligations of GPI and its subsidiaries
assumed by the Company's subsidiaries at the time of the Merger.
Through March 1, 1998, the Company has issued an aggregate of 4,019,429
Common Shares as part of the First Closing Consideration. The Merger occurred on
March 25, 1997 (the "First Closing Date"), at which time the Company issued to
GPI 3,862,716 Common Shares. GPI transferred a portion of such Common Shares to
GovProp Sub-Debt Partners, L.P. and The 1818 Fund in repayment of certain
indebtedness owed to them by GPI. Subsequent closings occurred in respect of
three properties in respect of which the Company issued to GPI an aggregate of
156,713 Common Shares. Pursuant to the arrangements discussed more fully below
under "The Merger -- Registration Rights Agreement," the Company previously
registered for resale an aggregate of 3,985,028 of such Common Shares, and the
holders thereof have advised the Company that, through March 1, 1998, such
holders had disposed of an aggregate of 1,406,623 Common Shares pursuant to such
registered resale. The remaining 2,612,806 Common Shares issued on the First
Closing Date and such subsequent closing dates constitute the Offered Shares.
In addition to the First Closing Consideration, the Company has agreed to
pay the Second Closing Consideration in an amount equal to the greater of $8
million or 3% of the aggregate cost of certain additional properties acquired by
the Company from GPI as described in the Merger Agreement prior to the first
anniversary of the First Closing Date (the "Second Closing Date") by the
issuance of Common Shares valued at the arithmetic average of the closing sales
prices for the Common Shares as reported by the NYSE for the 20 trading days
immediately prior to the Second Closing Date.
The Second Closing Consideration payable in Common Shares is to be adjusted
(i) if the amounts paid to GPI or its successor pursuant to the Service Contract
(as hereafter defined) (the "Service Contract Payment") are less than the
amounts actually paid by GPI or its successor for office expenses, salaries and
other operating expenses through July 31, 1997, by the addition of an amount of
up to the difference between such amounts, provided that such amount shall not
exceed the difference between $974,935 and the Service Contract Payment; (ii) if
the aggregate amount funded or anticipated to be funded by the Company
subsequent to the consummation of the Merger to complete one of the GPI
properties located in Golden, Colorado (including interest thereon) exceeds
$9,046,823, by the deduction of one-half of such excess; and (iii) if the
aggregate amount funded or anticipated to be funded by the Company subsequent to
the consummation of the Merger to complete one of the GPI properties
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<PAGE>
located in San Diego, California (including interest thereon) exceeds
$1,063,264, by the deduction of one-half of such excess. The Company has issued
to GPI 251,999 Common Shares in respect of the Second Closing Consideration.
Additional Common Shares may be payable in respect of the Second Closing
Consideration, the amount of which is still being determined.
A copy of the Merger Agreement is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part. The description of the Merger
set forth herein describes certain provisions of the Merger Agreement, but does
not purport to be complete and is subject to, and qualified in its entirety by
reference to, all of the provisions of the Merger Agreement, including the
definition of certain terms therein.
Pursuant to the Merger Agreement, the agreements described below (the
"Additional Agreements") were also entered into by certain parties to the Merger
Agreement and others. A copy of the form of each Additional Agreement and each
of certain other related agreements is filed as a schedule to the Merger
Agreement. The descriptions of the Additional Agreements describe the material
provisions of each of the Additional Agreements, but do not purport to be
complete and are subject to, and qualified in their entirety by reference to,
all of the provisions of each of the Additional Agreements, including the
definition of certain terms therein.
Registration Rights Agreement. Pursuant to an investment and registration
rights agreement between the Company and GPI (the "Registration Rights
Agreement"), the Company agreed to file with the Securities and Exchange
Commission a registration statement relating to the offer and sale of Common
Shares delivered on the First Closing Date to GPI pursuant to the Merger
Agreement by the holders thereof. The Company has also agreed to amend such
registration statement from time to time to include additional Common Shares
delivered after the First Closing Date to GPI and its successors pursuant to the
Merger Agreement. The Company is required to use its best efforts to have such
registration statement declared effective as soon as reasonably practicable
after filing and to maintain the continuous effectiveness of such registration
statement for three years from the First Closing Date or such shorter period as
will terminate when all such Common Shares have been sold. The Company has filed
the registration statement of which this Prospectus forms a part pursuant to the
Registration Rights Agreement. The Registration Rights Agreement provides for
suspension periods when the registration statement is not effective and for
block out periods in connection with other offerings of the securities of the
Company, each on customary terms and conditions. The Registration Rights
Agreement also provides certain cross-indemnities between the Company and
sellers of the Common Shares subject to the Registration Rights Agreement. Such
indemnities may be unenforceable, in whole or in part, under federal or state
securities laws or certain public policies.
Indemnification Agreement. Pursuant to an indemnification agreement between
the Company and GPI (the "Indemnification Agreement"), GPI will indemnify the
Company and other related parties for certain losses arising out of any breach
of any warranty or representation made by GPI in the Merger Agreement, the
Registration Rights Agreement or the Indemnification Agreement; provided that,
any claim for indemnification must be made by December 31, 1997. The
Indemnification Agreement provides that GPI shall be liable only for losses in
excess of $1,500,000 in the aggregate (except for certain losses related to the
property located in College Park, Maryland) and that GPI shall have no liability
for losses in excess of the Second Closing Consideration.
Voting Agreement. At the time of the Merger, the Company and The 1818 Fund
and RRLP (the "Principal Stockholders") entered into the voting agreement (the
"Voting Agreement"), pursuant to which each Principal Stockholder agreed that it
will not, until the occurrence of a Change in Management (as defined in the
Voting Agreement) or until such Principal Stockholder, with its affiliates, owns
less than 25% of the aggregate Common Shares issued pursuant to the Merger
Agreement, unless otherwise approved by the Board of Trustees of the Company,
(i) transfer any Common Shares held by Principal Stockholder to any person who,
to the Principal Stockholders' knowledge, holds directly, or is an affiliate of
a person who holds, 5% or more of the aggregate Common Shares at the time
outstanding; (ii) make directly or indirectly or participate in an unsolicited
offer to purchase any Common Shares; (iii) vote (or direct to be voted) any
Common Shares or any other shares of equity interest in the Company as to which
either has direct or indirect voting power or control in favor of any
transaction that could result in a Change of Control (as defined in the Voting
Agreement) of the Company; or (iv) present any shareholder proposal dealing with
a Change of Control of the Company.
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<PAGE>
Information Access Agreement. At the time of the Merger, the Company and
the Principal Stockholders entered into an information access agreement pursuant
to which the Company agreed upon request to permit the Principal Stockholders to
inspect the Company's properties, provide certain financial information, make
certain of the Company's officers available for consultation and inform the
Principal Stockholders of significant corporate actions. Each Principal
Stockholder has agreed to hold all such information in confidence. Such
information access agreement will terminate on the third anniversary of the
First Closing Date.
Service Contract. At the time of the Merger, GPI and M&P Partners Limited
Partnership ("M&P"), an affiliate of HRPT Advisors, Inc. ("Advisors"), the
Company's investment advisor at the time of the Merger, which is owned by
Advisors and Messrs. Gerard M. Martin and Barry M. Portnoy, the Managing
Trustees of the Company, entered into a service contract (the "Service
Contract"), pursuant to which certain employees of GPI provide administrative
and support services to HRP Merger Sub until July 31, 1997. HRP Merger Sub was
required to reimburse GPI for such employees' compensation and for rent payments
for GPI's office space in Washington, D.C. until July 31, 1997 in an amount not
to exceed $700,000.
DESCRIPTION OF SHARES
The Declaration of Trust ("Declaration") authorizes the Company to issue an
aggregate of 175,000,000 shares of beneficial interest in the Company
("Shares"), including (i) 125,000,000 Common Shares, par value $.01 per share,
and (ii) 50,000,000 Preferred Shares, par value $.01 per share ("Preferred
Shares"). The Declaration permits the Company's Board of Trustees (the
"Trustees") to amend the Declaration to increase or decrease the authorized
shares of beneficial interest of the Company without the requirement of
shareholder approval.
The Declaration authorizes the Trustees, without shareholder approval, from
time to time to divide the Preferred Shares into classes or series and to set
(or change, if the class or series has been previously established) the par
value, if any, preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms and
conditions of redemption of such Preferred Shares as are not prohibited by the
Declaration or applicable law. In connection with the adoption of the Company's
shareholders rights plan (see "Redemption; Business Combinations and Control
Share Acquisitions -- Rights Plan," below), the Trustees established an
authorized but unissued class of 1,250,000 Preferred Shares, par value $.01 per
share (the "Junior Participating Preferred Shares"), described more fully below,
and as of April 29, 1998 no other class or series of Preferred Shares had been
established.
As of April 29, 1998 there were 106,521,956 Shares outstanding, all of
which were Common Shares. The Company also had outstanding as of such date
approximately $205.0 million aggregate principal amount convertible subordinated
debentures of various series, all of which are convertible into Common Shares at
an exercise price equal on such date to $18 per share.
The following descriptions do not purport to be complete and are subject
to, and qualified in their entirety by reference to, the more complete
descriptions thereof set forth in the Declaration. Capitalized terms not defined
herein are as defined in the Declaration.
Except as otherwise determined by the Trustees with respect to any class or
series of Preferred Shares, all Shares: (i) will participate equally in
dividends payable to shareholders when, as and if declared by the Trustees and
ratably in net assets available for distribution to shareholders on liquidation
or dissolution; (ii) will have one vote per share on all matters submitted to a
vote of the shareholders, (iii) will not have cumulative voting rights in the
election of Trustees; and (iv) will have no preference, conversion, exchange,
sinking fund, redemption rights or preemptive or similar rights.
Upon issuance in accordance with the Declaration and applicable law, the
Offered Shares will be fully paid and nonassessable. The holders of Shares do
not have preemptive rights with respect to the issuance of additional Shares or
other securities of the Company.
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<PAGE>
The authorized but unissued Shares will be available for issuance from time
to time by the Company at the sole discretion of its Board of Trustees for any
proper trust purpose, which could include raising capital, providing
compensation or benefits to employees and others, paying stock dividends or
acquiring companies, businesses or properties. The issuance of such unissued
Shares could have the effect of diluting the earnings per share and book value
per share of currently outstanding Shares.
In connection with the adoption of the Company's shareholders rights plan,
the Trustees established an authorized but unissued class of 1,250,000 Junior
Participating Preferred Shares. See "Redemption; Business Combinations and
Control Share Acquisitions" below. Certain powers, preferences and rights and
certain qualifications, limitations and restrictions of the Junior Participating
Preferred Shares, when and if issued, are as follows. The statements below with
respect to the Junior Participating Preferred Shares are in all respects subject
to and qualified in their entirety by reference to the applicable provisions of
the Declaration (including the applicable articles supplementary) and By-Laws.
The holder of each Junior Participating Preferred Share is entitled to
quarterly dividends in the greater amount of $5.00 or 100 times the quarterly
per share dividend, whether cash or otherwise, declared upon the Common Shares.
Dividends on the Junior Participating Preferred Shares are cumulative. Whenever
dividends on the Junior Participating Preferred Shares are in arrears, the
Company, among other things, is prohibited from declaring or paying dividends,
making other distributions on, or redeeming or repurchasing Common Shares or
other Shares ranking junior to the Junior Participating Preferred Shares, and
upon failure of the Company to pay such dividends for six quarters, the holders
of the Junior Participating Preferred Shares will be entitled to elect two
Trustees. The holder of each Junior Participating Preferred Share is entitled to
100 votes on all matters submitted to a vote of the shareholders, voting (unless
otherwise provided in the Declaration or by law) together with holders of Common
Shares as one class. Upon liquidation, dissolution or winding up of the Company,
the holders of Junior Participating Preferred Shares are entitled to a
liquidation preference of $100 per share plus the amount of any accrued and
unpaid dividends and distributions thereon (the "Liquidation Preference"), prior
to payment of any distribution in respect of the Common Shares or any other
Shares ranking junior to the Junior Participating Preferred Shares. Following
payment of the Liquidation Preference, the holders of Junior Participating
Preferred Shares are not entitled to further distributions until the holders of
Common Shares shall have received an amount per share (the "Common Share
Adjustment") equal to the Liquidation Preference divided by 100 (adjusted to
reflect events such as stock splits, stock dividends and recapitalizations
affected the Common Shares) (the "Adjustment Number"). Following the payment of
the full amount of the Liquidation Preference and the Common Share Adjustment,
holders of Junior Participating Preferred Shares are entitled to participate
proportionately on a per share basis with holders of Common Shares in the
distribution of the remaining assets to be distributed in respect of Shares in
the ratio of the Adjustment Number to one, respectively. The powers, preferences
and rights of the Junior Participating Preferred Shares are subject to the
superior powers, preferences and rights of any senior series or class of
Preferred Shares which the Trustees shall, from time to time, authorize and
issue.
For certain other information with respect to the Shares, see "Limitation
of Liability; Shareholder Liability" and "Redemption; Business Combinations and
Control Share Acquisitions" below.
LIMITATION OF LIABILITY; SHAREHOLDER LIABILITY
Maryland law permits a REIT to provide, and the Declaration provides, 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, and that, as far as practicable, each written agreement of
the Company is to contain a provision to that effect. Despite these facts,
counsel has advised the Company that in some jurisdictions the possibility
exists that shareholders of a non-corporate entity such as the Company may be
held liable for acts or obligations of the Company. Counsel has advised the
Company that the State of Texas may not give effect to the limitation of
shareholder liability afforded by Maryland law, but that Texas law would likely
recognize contractual limitations of liability such as those discussed above.
The Company intends to conduct its business in a manner designed to minimize
potential shareholder liability by, among other things, inserting appropriate
provisions in written agreements of the Company; however, no assurance can be
given that shareholders can avoid liability in all instances in all
jurisdictions.
8
<PAGE>
The Declaration provides that, upon payment by a shareholder of any such
liability, the shareholder will be entitled to indemnification by the Company.
There can be no assurance that, at the time any such liability arises, there
will be assets of the Company sufficient to satisfy the Company's
indemnification obligation. The Trustees intend to conduct the operations of the
Company, with the advice of counsel, in such a way as to minimize or avoid, as
far as practicable, the ultimate liability of the shareholders of the Company.
The Trustees do not intend to provide insurance covering such risks to the
shareholders.
REDEMPTION; BUSINESS COMBINATIONS AND CONTROL SHARE ACQUISITIONS
Redemption and Business Combinations
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), in any taxable year, not more than 50% in value
of its outstanding Shares may be owned, directly or indirectly, by five or fewer
individuals during the last six months of such year, and the shares must be
owned by 100 or more persons during at least 335 days of a taxable year or a
proportionate part of a taxable year less than 12 months. In order to meet these
and other requirements, the Trustees have the power to redeem or prohibit the
transfer of a sufficient number of Shares to maintain or bring the ownership of
the Shares into conformity with such requirements. In connection with the
foregoing, if the Trustees shall, at any time and in good faith, be of the
opinion that direct or indirect ownership of shares representing more than 8.5%
in value of the total Shares outstanding (the "Excess Shares") has or may become
concentrated in the hands of one beneficial owner, other than Excepted Persons,
as defined in the Declaration, the Trustees shall have the power (i) to purchase
from any shareholder of the Company such Excess Shares, and (ii) to refuse to
transfer or issue Shares to any person whose acquisition of such Shares would,
in the opinion of the Trustees, result in the direct or indirect beneficial
ownership by any person of Shares representing more than 8.5% in value of the
outstanding Shares. Any transfer of Shares, options, or other securities
convertible into Shares that would create a beneficial owner (other than any of
the Excepted Persons) of Shares representing more than 8.5% in value of the
total Shares outstanding shall be deemed void ab initio, and the intended
transferee shall be deemed never to have had an interest therein. Further the
Declaration provides that transfers or purported acquisitions, directly,
indirectly or by attribution, of Shares, or securities convertible into Shares,
that could result in disqualification of the Company as a REIT are null and void
and permits the Trustees to repurchase Shares or other securities to the extent
necessary to maintain the Company's status as a REIT. The purchase price for any
Shares so purchased shall be determined by the price of the Shares on the
principal exchange on which they are then traded, or if no such price is
available, then the purchase price shall be equal to the net asset value of such
Shares as determined by the Trustees in accordance with applicable law. From and
after the date fixed for purchase by the Trustees, and so long as payment of the
purchase price for the Shares to be so redeemed shall have been made or duly
provided for, the holder of any Excess Shares so called for purchase shall cease
to be entitled to distributions, voting rights and any and all other benefits
with respect to such Shares, except the right to payment of the purchase price
for the Shares.
The Declaration also requires that Business Combinations, as defined in the
Declaration, between the Company and a beneficial holder of 10% or more of the
outstanding Shares (a "Related Person") be approved by the affirmative vote of
the holders of at least 75% of the Shares unless (1) the Trustees by unanimous
vote or written consent shall have expressly approved in advance the acquisition
of the outstanding Shares that caused the Related Person to become a Related
Person or shall have approved the Business Combination prior to the Related
Person involved in the Business Combination having become a Related Person; or
(2) the Business Combination is solely between the Company and a 100% owned
affiliate of the Company. As permitted by law, the Company has elected to be
governed by such provisions rather than the provisions of Subtitle 6 of Title 3
of the Corporations and Associations Article of the Annotated Code of Maryland
regarding business combinations.
Under the Declaration the number of trustees may be fixed from time to time
by two-thirds of the Trustees or by an amendment of the Declaration by the
shareholders of the Company, with a minimum of three and a maximum of 12
trustees, a majority of whom must be Independent Trustees, as defined in the
Declaration. The Declaration fixes the current number of trustees of the Company
at five and divides the Trustees into three groups. Trustees in each group are
elected to three-year terms. As the trustees' terms expire, replacements are
elected by a majority of the outstanding Shares. The classified nature of the
Trustees may make it more difficult for the
9
<PAGE>
shareholders to remove the management of the Company than if all trustees were
elected on an annual basis. Vacancies may be filled by a majority of the
remaining trustees, except that a vacancy among the Independent Trustees must be
filled by a majority of the remaining Independent Trustees or by majority vote
of the Company's shareholders. Any trustee may be removed for cause by all the
remaining trustees, or without cause by vote of two-thirds of the Shares then
outstanding and entitled to vote thereon.
The provisions regarding business combinations and the classified nature of
the Trustees and certain other matters may not be repealed or amended without
the affirmative vote of at least 75% of the shareholders of the Company,
provided that the Trustees, by two-thirds vote, may, without the approval or
consent of the shareholders, adopt any amendment that they in good faith
determine to be necessary to permit the Company to qualify as a REIT under the
Code.
The foregoing provisions may have the effect of discouraging unilateral
tender offers or other takeover proposals which certain shareholders might deem
in their interests or pursuant to which they might receive a substantial premium
for their Shares. The provisions could also have the effect of insulating
current management against the possibility of removal and could, by possibly
reducing temporary fluctuations in market price caused by accumulations of
Shares, deprive shareholders of opportunities to sell at a temporarily higher
market price. However, the Trustees believe that inclusion of the business
combination provisions in the Declaration may help assure fair treatment of
shareholders and preserve the assets of the Company.
Control Share Acquisition
Maryland law provides for a limitation of voting rights in a "control share
acquisition." The Maryland statute defines a control share acquisition at the
20%, 33 1/3% and 50% acquisition levels, and requires a two-thirds vote
(excluding shares owned by the acquiring person and certain members of
management) to accord voting rights to shares acquired in a control share
acquisition. The statute would require the target company to hold a special
meeting at the request of an actual or proposed control share acquiror subject
to compliance with certain conditions by such acquiror. In addition, unless the
charter, declaration of trust or By-Laws provide otherwise, the statute gives
the Company, within certain time limitations, various redemption rights if there
is a shareholder vote on the issue and the grant of voting rights is not
approved, or if an "acquiring person statement" is not delivered to the target
company within 10 days following a control share acquisition. Moreover, unless
the charter, declaration of trust or By-Laws provide otherwise, the statute
provides that if, before a control share acquisition occurs, voting rights for
control shares are approved at a shareholders' meeting and the acquiror becomes
entitled to vote a majority of the shares entitled to vote, then all other
shareholders may exercise appraisal rights. The statute does not apply to shares
acquired in a merger, consolidation or share exchange if the company is a party
to the transaction. An acquisition of shares may be exempted from the control
share statute provided that a charter, declaration of trust or By-Law provision
is adopted for such purpose prior to the control share acquisition. There are no
such provisions in the Declaration or By-Laws of the Company.
Rights Plan
In October 1994 the Trustees adopted a shareholder rights plan (the "Rights
Plan"). The Rights Plan provides for the distribution of one Junior
Participating Preferred Share purchase right (a "Right") for each Common Share.
Each Right entitles the holder to buy 1/100th of a Junior Participating
Preferred Share (or, in certain circumstances, to receive cash, property, Common
Shares or other securities of the Company) at an exercise price of $50 per
1/100th of a Junior Participating Preferred Share. Certain powers, preferences
and rights and certain qualifications, limitations and restrictions of the
Junior Participating Preferred Shares are summarized above under "Description of
Shares."
Initially, the Rights are attached to certificates representing Common
Shares. The Rights will separate from such Common Shares and a "Distribution
Date" will occur upon earlier of (1) 10 business days (or such later date as the
Trustees may determine before a Distribution Date occurs) following a public
announcement by the Company that a person or group affiliated or associated
persons, with certain exceptions (an "Acquiring Person"), has acquired, or has
obtained the right to acquire, beneficial ownership of 10% or more of the
outstanding Common
10
<PAGE>
Shares (the date of such announcement being a "Share Acquisition Date") or (ii)
10 business days (or such later date as the Trustees may determine before a
Distribution Date occurs) following the commencement of a tender offer or
exchange offer that would result in a person becoming an Acquiring Person.
Until the Distribution Date, (i) the Rights will be evidenced by the
certificates for Common Shares and will be transferred with and only with such
Common Share certificates, (ii) Common Share certificates will contain a
notation incorporating the rights agreement pursuant to which the Rights were
issued (the "Rights Agreement") by reference and (iii) the surrender for
transfer of any certificates for Common Shares outstanding will also constitute
the transfer of the Rights associated with the Common Shares represented by such
certificates.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on October 17, 2004, unless earlier redeemed or
exchanged by the Company as described below. Until a Right is exercised, the
holder thereof, as such, has no rights as a shareholder of the Company,
including, without limitation, the right to vote or to receive dividends.
In the event (a "Flip-In Event") a Person becomes an Acquiring Person
(except pursuant to a tender or exchange offer for all outstanding Common Shares
at a price and on terms which a majority of the Company's Outside Trustees (as
defined in the Rights Agreement) determines to be fair to and otherwise in the
best interests of the Company and its shareholders (a "fair offer")), each
holder of a Right will thereafter have the right to receive, upon exercise of
such Right, Common Shares (or, in certain circumstances, cash, property or other
securities of the Company) having a Current Market Price (as defined in the
Rights Agreement) equal to two times the exercise price of the Right.
Notwithstanding the foregoing, following the occurrence of any Flip-In Event,
all Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person (or by certain
related parties) will be null and void in the circumstances set forth in the
Rights Agreement. However, Rights will not be exercisable following the
occurrence of any Flip-In Event until such time as the Rights are no longer
redeemable by the Company as set forth below.
In the event (a "Flip-Over Event") that, at any time on or after the Share
Acquisition Date, (i) the Company shall take part in a merger or other business
combination transaction (other than certain mergers that follow a fair offer)
and the Company shall not be the surviving entity or (ii) the Company shall take
part in a merger or other business combination transaction in which the Common
Shares are changed or exchanged (other than certain mergers that follow a fair
offer) or (iii) 50% or more of the Company's assets or earning power is sold or
transferred, each holder of a Right (except Rights which previously have been
voided, as set forth above) shall thereafter have the right to receive, upon
exercise, a number of shares of common stock of the acquiring company having a
Current Market Price equal to two times the exercise price of the Right. Flip-In
Events and Flip-Over Events are collectively referred to as "Triggering Events."
The Purchase Price payable and the number of Junior Participating Preferred
Shares (or the amount of cash, property or other securities) issuable upon
exercise of the Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a share dividend on, or a subdivision, combination
or reclassification of, the Junior Participating Preferred Shares, (ii) if
holders of the Junior Participating Preferred Shares are granted certain rights
or warrants to subscribe for Junior Participating Preferred Shares or
convertible securities at less than the Current Market Price of the Junior
Participating Preferred Shares or (iii) upon the distribution to holders of the
Junior Participating Preferred Shares of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above). With certain exceptions, no
adjustment in the Purchase Price will be required until cumulative adjustments
amount to at least 1% of the Purchase Price. The Company is not required to
issue fractional Shares upon the exercise of any Right, and in lieu thereof, a
cash payment will be made.
At any time until 10 business days following the Share Acquisition Date,
the Company may redeem the Rights in whole, but not in part, at a price of $.01
per Right, payable, at the option of the Company, in cash, Common Shares or
other consideration as the Trustees may determine. Immediately upon the
effectiveness of the action of the Trustees ordering redemption of the Rights,
the Rights will terminate and the only right of the holders of Rights will be to
receive the $.01 per Right redemption price.
11
<PAGE>
The term of the Rights, other than key financial terms and the date on
which the Rights expire, may be amended by the Trustees prior to the
Distribution Date. Thereafter, the provisions of the Rights Agreement may be
amended by the Trustees only in order to cure any ambiguity, defect or
inconsistency, to make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person and certain
other related parties) or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to lengthen the time
period governing redemption is permitted to be made at such time as the Rights
are not redeemable.
PLAN OF DISTRIBUTION
The Selling Shareholders have provided the Company with the following
information concerning the reoffer and resale of the Offered Shares. Sales of
the Offered Shares by the Selling Shareholders may be made from time to time in
one or more transactions, including block transactions, on the NYSE or any other
exchange or quotation system on which the Offered Shares may be listed or quoted
pursuant to and in accordance with the applicable rules of the exchanges, or in
the over the counter market, in negotiated transactions or in a combination of
any such methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Offered Shares may be offered directly, to
or through agents designated from time to time, or to or through brokers or
dealers, or through any combination of these methods of sale. Such agents,
brokers or dealers may receive compensation in the form of discounts,
concessions or commissions from the Selling Shareholders and/or the purchasers
of the Offered Shares for whom such broker-dealers may act as agents or to whom
they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). A member firm of an
exchange may be engaged to act as an agent in the sale of Offered Shares by the
Selling Shareholders.
GPI, one of the Selling Shareholders, expects in the near future to, and
may, from time to time, distribute all or a portion of its Offered Shares to its
stockholders. At the time such a distribution is made, to the extent required, a
supplement to this Prospectus will be distributed which will set forth the names
and beneficial ownership of Common Shares of such GPI stockholders receiving
Offered Shares as new Selling Shareholders hereunder.
The Selling Shareholders and any underwriters, dealers or agents that
participate in the distribution of the Offered Shares may be deemed to be
underwriters, and any profit on the sale of such Offered Shares by them and any
discounts, commissions or concessions received by any such underwriters, dealers
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act. At the time a particular underwritten offer of Offered Shares is
made, to the extent required, a supplement to this Prospectus will be
distributed which will set forth the aggregate amount of Offered Shares being
offered and the terms of the offering, including the name or names of any
underwriters, dealers or agents, and discounts, commissions and other items
constituting compensation from the Selling Shareholders and any discounts,
commissions or concessions allowed or reallowed or paid to dealers.
The Company and the Selling Shareholders entered into the Registration
Rights Agreement, pursuant to which the Company agreed to register the Offered
Shares held by the Selling Shareholders and maintain an effective registration
statement for a period of time after the registration statement is declared
effective by the Commission. The Offered Shares registered hereunder are being
registered pursuant to the Registration Rights Agreement. The Company agreed in
the Registration Rights Agreement to bear all expenses incurred by it in
connection with the reoffering and resale of the Offered Shares, excluding any
fees and disbursements of underwriters, brokers or dealers, underwriting
discounts and commissions, broker or dealer discounts, concessions or
commissions and certain expenses of the Selling Shareholders. Under the
Registration Rights Agreement, the Selling Shareholders will be indemnified by
the Company against certain civil liabilities, including liabilities under the
Securities Act, and the Company will be indemnified by the Selling Shareholders
against certain other civil liabilities, including liabilities under the
Securities Act.
12
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the Offered Shares offered hereby
will be passed upon for the Company by Sullivan & Worcester LLP, Boston,
Massachusetts. Sullivan & Worcester LLP, will rely, as to all matters of
Maryland law, upon one or more opinions of Piper & Marbury L.L.P., Baltimore,
Maryland. Barry M. Portnoy, a retired partner of the firm of Sullivan &
Worcester LLP, is a Managing Trustee of the Company and HPT, a director and 50%
shareholder of Advisors and of REIT Management & Research, Inc. ("RMR"), the
Company's investment advisor, and a director and/or significant shareholder of
certain lessees and mortgagors of the Company. Sullivan & Worcester LLP
represents Advisors, RMR, HPT, certain of such lessees and mortgagors and
certain affiliates of each of the foregoing on various matters.
EXPERTS
The consolidated financial statements and financial statement schedules
of the Company included or incorporated by reference in the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
included or incorporated by reference therein and incorporated herein by
reference which, as to the years 1997 and 1996, are based in part on the report
of Arthur Andersen LLP, independent public accountants. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
reports given upon the authority of such firms as experts in accounting and
auditing.
The audited statement of revenues and certain expenses for 1600 Market
Street for the year ended December 31, 1997 included in the Company's Current
Report on Form 8-K dated March 30, 1998 has been audited by Ernst & Young LLP,
independent auditors, as set forth in their report included therein and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The consolidated financial statements of New Marriott MI, Inc. (to be
renamed "Marriott International, Inc.") incorporated by reference in this
Prospectus and elsewhere in the registration statement to the extent and for the
periods indicated in their reports, have been audited by Arthur Andersen LLP,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
FORWARD LOOKING STATEMENTS
THIS PROSPECTUS INCORPORATES 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. PROSPECTIVE PURCHASERS
ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS
WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO
PUBLISH REVISED FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES
AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF PRESENTLY UNANTICIPATED
EVENTS.
-----------------
THE AMENDED AND RESTATED DECLARATION OF TRUST OF 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
13
<PAGE>
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.
14
<PAGE>
INDEX TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Introduction to Unaudited Pro Forma Consolidated Financial Statements.......F-2
Unaudited Pro Forma Consolidated Balance Sheet as of December 31, 1997......F-3
Unaudited Pro Forma Consolidated Statement of Income for the year
ended December 31, 1997................................................F-4
Notes to Unaudited Pro Forma Consolidated Financial Statements..............F-5
F-1
<PAGE>
HEALTH AND RETIREMENT PROPERTIES TRUST
Unaudited Pro Forma Consolidated Financial Statements
The following unaudited pro forma consolidated balance sheet as of December
31, 1997 and the consolidated statement of income for the year ended December
31, 1997, present the consolidated financial position and the results of
operations of Health and Retirement Properties Trust and consolidated
subsidiaries (the "Company") as if the transactions described in the notes to
unaudited pro forma consolidated financial statements were consummated on
January 1, 1997. Additional information with respect to certain of such
transactions is provided in the Company's Annual Report on Form 10-K for its
fiscal year ended December 31, 1997 (and in materials incorporated by reference
therein), which is incorporated by reference into this Prospectus. These
unaudited pro forma consolidated financial statements should be read in
connection 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, included in the Company's Current Report on Form 8-K dated
February 27, 1998, which is incorporated by reference into this Prospectus.
These unaudited pro forma consolidated 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-2
<PAGE>
<TABLE>
<CAPTION>
Health and Retirement Properties Trust
Pro Forma Consolidated Balance Sheet
December 31, 1997
(dollars in thousands)
(unaudited)
Recent
Historical 1600 Market Street (A) Acquisitions (B) Pro Forma
-------------- ---------------------- ---------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Real estate properties, at cost $ 1,969,023 $ 115,604 $ 184,301 $ 2,268,928
Less accumulated depreciation 111,669 -- -- 111,669
----------- ----------- ----------- -----------
1,857,354 115,604 184,301 2,157,259
Real estate mortgages and notes, net 104,288 -- -- 104,288
Investment in Hospitality Properties Trust 111,134 -- -- 111,134
Other assets 63,187 (604) (59,301) 3,282
----------- ----------- ----------- -----------
$ 2,135,963 $ 115,000 $ 125,000 $ 2,375,963
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank notes payable $ 200,000 $ 115,000 $ 125,000 $ 440,000
Senior notes payable, net 349,900 -- -- 349,900
Mortgage notes payable 26,329 -- -- 26,329
Convertible subordinated debentures 211,650 -- -- 211,650
Other liabilities 81,824 -- 81,824
Shareholders' equity 1,266,260 -- 1,266,260
----------- ----------- ----------- -----------
$ 2,135,963 $ 115,000 $ 125,000 $ 2,375,963
=========== =========== =========== ===========
See accompanying notes to unaudited pro forma consolidated financial statements
</TABLE>
F-3
<PAGE>
Health and Retirement Properties Trust
Pro Forma Consolidated Statement of Income
Year Ended December 31, 1997
(amounts in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Second Third
Quarter Quarter West
Acquisitions Acquisitions 34th
Historical GPI(C) CSMC(D) (E) (E) Street (F)
----------- ---------- ---------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income $188,000 $ 11,959 $ 6,831 $ 2,948 $ 3,179 $ 10,771
Interest and other income 20,863 (366) -- -- -- --
-------- -------- -------- -------- -------- --------
Total revenues 208,863 11,593 6,831 2,948 3,179 10,771
-------- -------- -------- -------- -------- --------
Expenses:
Operating expenses 26,765 2,053 1,910 -- 954 3,641
Interest 36,766 (1,216) 3,232 1,087 1,463 2,876
Depreciation and amortization 39,330 4,156 1,119 627 501 1,869
General and administrative 11,670 2,105 249 139 111 415
-------- -------- -------- -------- -------- --------
Total expenses 114,531 7,098 6,510 1,853 3,029 8,801
-------- -------- -------- -------- -------- --------
Income (loss) before equity in
earnings of Hospitality
Properties Trust and
extraordinary item 94,332 4,495 321 1,095 150 1,970
Equity in earnings of
Hospitality Properties Trust 8,590
Gain on equity transaction of
Hospitality Properties Trust 9,282 -- -- --
-------- -------- -------- -------- -------- --------
Net income (loss) before
extraordinary item $112,204 $ 4,495 $ 321 $ 1,095 $ 150 $ 1,970
-------- -------- -------- -------- -------- --------
Weighted Average shares
outstanding 92,168
Basic and diluted earnings per
common share:
Net income before extraordinary
item $ 1.22
<CAPTION>
Fourth
Quarter 1600
Franklin Bridgepoint Acquisitions Recent Market
Plaza (G) Square (H) (E) Acquisitions (I) Street (J) Pro Forma
---------- ------------- ------------- ----------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rental income $ 9,614 $ 5,599 $ 8,461 $ 23,145 $ 18,883 $289,390
Interest and other income -- -- -- -- -- 20,497
-------- -------- -------- -------- -------- --------
Total revenues 9,614 5,599 8,461 23,145 18,883 309,887
-------- -------- -------- -------- -------- --------
Expenses:
Operating expenses 4,904 2,162 2,634 4,715 7,659 57,397
Interest 2,486 3,216 4,338 8,125 7,475 69,848
Depreciation and amortization 1,334 1,175 1,269 4,147 2,601 58,128
General and administrative 296 262 283 922 578 17,030
-------- -------- -------- -------- -------- --------
Total expenses 9,020 6,815 8,524 17,909 18,313 202,403
-------- -------- -------- -------- -------- --------
Income (loss) before equity in
earnings of Hospitality
Properties Trust and
extraordinary item 594 (1,216) (63) 5,236 570 107,484
Equity in earnings of
Hospitality Properties Trust -- -- 8,590
Gain on equity transaction of
Hospitality Properties Trust -- -- -- 9,282
-------- -------- -------- -------- -------- --------
Net income (loss) before
extraordinary item $ 594 $ (1,216) $ (63) $ 5,236 $ 570 $125,356
-------- -------- -------- -------- -------- --------
Weighted Average shares
outstanding 98,838
Basic and diluted earnings per
common share:
Net income before extraordinary
item $ 1.27
See accompanying notes to unaudited pro forma consolidated financial statements
</TABLE>
F-4
<PAGE>
Notes to Unaudited Pro Forma Consolidated Financial Statements
Pro Forma Consolidated Balance Sheet Adjustments at December 31, 1997.
A. Represents the Company's acquisition on March 30, 1998 of a commercial
office property located at 1600 Market Street in Philadelphia, Pennsylvania
("1600 Market Street"). This acquisition was funded by drawing under the
Company's existing revolving line of credit.
B. Represents the Company's acquisitions, during January 1998, February 1998,
March 1998 and April 1998 of two medical office properties and three
commercial office properties located in Pennsylvania, four commercial
office properties located in Texas, a medical office property and a
commercial 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, "Recent Acquisitions"). The Recent Acquisitions were funded
with available cash and by drawings under the Company's existing revolving
line of credit.
Pro Forma Consolidated Statement of Income Adjustments for the Year Ended
December 31, 1997.
C. 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 its common shares of beneficial interest 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.
D. 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.
E. 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.
F. 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.
G. 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.
F-5
<PAGE>
H. 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.
I. 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.
J. 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.
F-6
<PAGE>
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer made by this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company or any of the Selling Shareholders. This Prospectus
does not constitute an offer to sell or the solicitation of an offer to buy the
Offered Shares by anyone in any jurisdiction in which such offer or solicitation
is not authorized, or in which the person making such offer or solicitation is
not qualified to do so, or to any person to whom it is unlawful to make such
offer or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create an implication that the
information contained herein is correct as of any time subsequent to the date
hereof.
TABLE OF CONTENTS
Page
Available Information....................... 2
Incorporation of Certain Documents
By Reference............................. 2
The Company................................. 4
Use of Proceeds............................. 4
Selling Shareholders........................ 4
The Merger.................................. 5
Description of Shares....................... 7
Limitation of Liability; Shareholders
Liability................................ 8
Redemption; Business Combinations
and Control Share Acquisitions........... 9
Plan of Distribution........................ 12
Legal Matters............................... 13
Experts..................................... 13
Forward Looking Statements.................. 13
Index to Pro Forma Consolidated
Financial Statements..................... F-1
2,612,806 Shares
HEALTH AND RETIREMENT
PROPERTIES TRUST
Common Shares of
Beneficial Interest
-----------------------
PROSPECTUS
-----------------------
May __, 1998
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
Set forth below is an estimate (except in the case of the registration
fee) of the amount of fees and expenses to be incurred in connection with the
issuance and distribution of the Offered Shares registered hereby, other than
underwriting discounts and commission, if any, incurred in connection with the
sale of the Offered Shares. Pursuant to the Registration Rights Agreement, all
such amounts (other than certain legal expenses estimated by the Selling
Shareholders to be $5,000) will be borne by the Company.
Registration Fee Under Securities Act $ 14,602.21
Blue Sky Fees and Expenses 1,000.00
Legal Fees and Expenses 45,000.00
Accounting Fees and Expenses 40,000.00
Printing and Engraving 1,500.00
Miscellaneous Fees and Expenses 7,897.79
------------
Total*: $ 110,000.00
- --------------
* Includes an aggregate of $14,402.21 paid as registration fees on Common Shares
carried forward from the Company's Registration Statements on Form S-3 (File
Nos. 333-29675 and 333-34823) pursuant to Rule 429(a) and legal and accounting
fees and expenses and printing expenses pertaining to such Registration
Statement of $66,000.
Item 15. Indemnification of Directors and Officers
Section 7.4 of the Company's Amended and Restated Declaration of Trust,
filed as an Exhibit to the Company's Current Report on Form 8-K dated July 10,
1996, which provides for indemnification of Trustees and officers of the
Company, is hereby incorporated by reference.
Reference is made to the Registration Rights Agreement (included in
Exhibit 10.1 hereto) which contains certain provisions for indemnification by
the Selling Shareholders of the Company, Trustees, officers and controlling
persons under certain circumstances.
Item 16. Exhibits
3.1 Amended and Restated Declaration of Trust as amended by the amendment
approved by the shareholders June 28, 1996 and filed with the Maryland
Department of Assessments and Taxation on July 9, 1996 (Incorporated by
reference to the Company's Current Report on Form 8-K, dated July 10,
1996)
3.2 Amendment, effective March 3, 1997, to Health and Retirement Properties
Trust's Amended and Restated Declaration of Trust providing for an
increase in the authorized common shares of beneficial interest, $.01
par value per share, from 100,000,000 to 125,000,000 (Incorporated by
reference to the Company's Current Report on Form 8-K, dated March 3,
1997)
3.3 Amendment, effective May 14, 1997, to the Articles Supplementary to
Health and Retirement Properties Trust's Amended and Restated
Declaration of Trust providing for an increase in the authorized Junior
Participating Preferred Shares, from 100,000 to 125,000 (Incorporated
by reference to the Company's Quarterly Report on Form 10-Q, dated May
15, 1997)
3.4 Amended and Restated Bylaws (Incorporated by reference to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995)
4.1 Rights Agreement dated October 17, 1994 between the Company and State
Street Bank and Trust Company, as Rights Agent (including the form of
Articles Supplementary relating to the Junior Participating Preferred
Shares annexed as an exhibit thereto) (Incorporated by reference to the
Company's Registration Statement on Form 8-A dated October 24, 1994)
5.1 Opinion of Sullivan & Worcester LLP (Previously filed with this
Registration Statement)
II-1
<PAGE>
5.2 Opinion of Piper & Marbury L.L.P. (Previously filed with this
Registration Statement)
8.1 Opinion of Sullivan and Worcester LLP re: certain tax matters
(Previously filed with this Registration Statement)
10.1 Merger Agreement dated February 17, 1997 between the Company and
Government Property Investors, Inc., including forms of Escrow
Agreement, Investment and Registration Rights Agreement, Voting
Agreement, Information Access Agreement, Indemnification Agreement,
Service Contract and Non- Solicitation Agreement (Incorporated by
reference to the Company's Current Report on Form 8-K dated February
17, 1997)
10.2 Amendment No. 1 to Agreement of Merger dated March 25, 1997 between the
Company and Government Properties Investors, Inc. (Incorporated by
reference to the Company's Registration Statement on Form S-3 (File No.
333-29675) filed with the Commission on June 20, 1997)
23.1 Consent of Ernst & Young LLP (Filed herewith)
23.2 Consent of Arthur Andersen LLP (Filed herewith)
23.3 Consent of Sullivan & Worcester LLP (included in Exhibit 5.1)
23.4 Consent of Piper & Marbury L.L.P. (included in Exhibit 5.2)
23.5 Consent of Arthur Andersen LLP (Filed herewith)
24 Powers of Attorney (Contained on Page II-4 to this Registration
Statement as originally filed)
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in this registration statement.
Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any deviation
from the low or high end of the estimated maximum
offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule
424(b) (Section 230.424(b) of 17 C.F.R.) if, in the
aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
this registration statement or any material change to
such information in this registration statement;
provided, however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by
those paragraphs is contained in the periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
and Exchange Act of 1934 that are incorporated by reference in this
registration statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the Securities
offered herein, and the offering of such Securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective amendment
any of the Securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby further undertakes that, for the
purposes of determining any liability under the Securities Act of 1933,
each filing of the Registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange of 1934 that is
incorporated by reference in this registration statement shall be
deemed to be a new registration statement relating to the Securities
offered herein, and the offering of such Securities at that time shall
be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the provisions described under
Item 15 of this registration statement, or otherwise (other than
insurance), the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in such Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding)
is asserted by such trustee, officer or controlling person in
connection with the Securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in such Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certificates that it has reasonable grounds to believe that it meets
all of the requirements for being on Form S-3 and has duly caused this amendment
to the registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Newton, Commonwealth of Massachusetts,
on May 4, 1998.
HEALTH AND RETIREMENT PROPERTIES TRUST
By: /s/ David J. Hegarty
David J. Hegarty
President and Chief Operating Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amendment to the registration statement has been signed below by the
following persons in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ David J. Hegarty President and Chief May 4, 1998
David J. Hegarty Operating Officer
(principal executive officer)
* Treasurer and Chief Financial May 4, 1998
Ajay Saini Officer
* Trustee May 4, 1998
Bruce M. Gans, M.D.
* Trustee May 4, 1998
Rev. Justinian Manning, C.P.
* Managing Trustee May 4, 1998
Gerard M. Martin
* Managing Trustee May 4, 1998
Barry M. Portnoy
* /s/ David J. Hegarty
David J. Hegarty, Attorney-in-
Fact for such persons
pursuant to powers of
attorney dated March 11,
1998
II-4
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Pre-Effective Amendment No. 2 to the Registration Statement (Form S-3 No.
333-47815) and related Prospectus of Health and Retirement Properties Trust and
to the incorporation by reference therein of (1) 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 (2) 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
ERNST & YOUNG LLP
Boston, Massachusetts
May 1, 1998
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement 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 1, 1998
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in Health and Retirement Properties Trust's registration statement on
Form S-3 (File No. 333-47815) 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 this registration statement.
/s/ Arthur Andersen LLP
Washington, D.C.
April 20, 1998
