Filed Pursuant to Rule 424B(5)
Registration No. 333-56051
PROSPECTUS SUPPLEMENT
- ---------------------
(To prospectus dated June 15, 1998)
$130,000,000
HRPT Properties Trust
8-1/2% Monthly Income Senior Notes due 2013
The notes bear interest at the rate of 8-1/2% per year. Interest on the
notes is payable monthly on the 15th day of each month beginning January 15,
1999. The notes mature on November 15, 2013. We may not redeem the notes prior
to November 15, 2003. From and after November 15, 2003, we may redeem some or
all of the notes from time to time before they mature. The redemption price
will equal the outstanding principal of the notes being redeemed plus accrued
interest. The notes do not have the benefit of any sinking fund.
The notes are unsecured and rank equally with all of our other unsecured
senior indebtedness. The notes will be issued only in registered form in
denominations of $1,000.
----------------
<TABLE>
<CAPTION>
Per Note Total
-------- -----
<S> <C> <C>
Public Offering Price (1) .......................... 100% $130,000,000
Underwriting Discount .............................. 3% $ 3,900,000
Proceeds, before expenses, to HRPT Properties Trust 97% $126,100,000
</TABLE>
(1) Purchasers will also be required to pay accrued interest from November
30, 1998, if settlement occurs after that date.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
We have granted the Underwriters a 30-day option to purchase additional
notes in an aggregate principal amount up to $19,500,000 on the same terms and
conditions as these notes in order to satisfy overallotments, if any.
We expect that the notes will be ready for delivery in book-entry form
only through The Depository Trust Company on or about November 30, 1998.
----------------
Merrill Lynch & Co.
Donaldson, Lufkin & Jenrette
A.G. Edwards & Sons, Inc.
Legg Mason Wood Walker
Incorporated
Morgan Stanley Dean Witter
PaineWebber Incorporated
Prudential Securities Incorporated
Salomon Smith Barney
----------------
The date of this prospectus supplement is November 24, 1998.
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Prospectus Supplement
Summary .................................................................. S-3
Recent Developments ...................................................... S-7
Capitalization ........................................................... S-9
Use of Proceeds .......................................................... S-9
The Company .............................................................. S-9
Financing Policy ......................................................... S-12
Lease Expirations ........................................................ S-13
The Tenants .............................................................. S-14
Management ............................................................... S-16
Description of the Notes ................................................. S-18
Certain Federal Income Tax Considerations ................................ S-24
Underwriting ............................................................. S-27
Ratings .................................................................. S-29
Legal Matters ............................................................ S-29
Incorporation of Certain Information by Reference ........................ S-30
Where You Can Find More Information ...................................... S-30
Forward-Looking Statements ............................................... S-31
Glossary ................................................................. S-32
Index to Consolidated Financial Statements ............................... F-1
Prospectus
Available Information .................................................... ii
Incorporation of Certain Documents by Reference .......................... ii
The Company .............................................................. 1
Use of Proceeds .......................................................... 1
Ratio of Earnings to Fixed Charges ....................................... 1
Description of Debt Securities ........................................... 1
Description of Shares .................................................... 10
Description of Preferred Shares .......................................... 11
Description of Depositary Shares ......................................... 17
Description of Warrants .................................................. 19
Description of Convertible Subordinated Debentures ....................... 20
Limitation of Liability; Shareholder Liability ........................... 20
Redemption; Business Combinations and Control Share Acquisitions ......... 21
Plan of Distribution ..................................................... 24
Legal Matters ............................................................ 25
Experts .................................................................. 25
</TABLE>
In this prospectus supplement, the term "HRP" includes HRPT Properties
Trust and its consolidated subsidiaries. Unless otherwise noted, the
information contained in this prospectus supplement is as of October 31, 1998
and assumes that the transactions described below in "Recent
Developments--Investments" have been completed, including the acquisition of
the three office properties that we have not yet acquired. This offering of
notes is not contingent on the completion of these transactions, and we cannot
assure you that they will be completed.
In presenting "adjusted" information in this prospectus supplement, we
have assumed that the offering has been completed and that we have applied the
net proceeds of the notes as we currently intend. In presenting "adjusted pro
forma" information, we have made the same assumptions and have also assumed
that we have completed all the transactions described in the Unaudited Adjusted
Pro Forma Consolidated Financial Statements that are included and incorporated
by reference in this prospectus supplement. Unless we state otherwise, we have
assumed throughout this prospectus supplement that the Underwriters'
overallotment option is not exercised.
S-2
<PAGE>
SUMMARY
This summary may not contain all of the information that is important to
you. You should carefully read this entire prospectus supplement and the
accompanying prospectus. You should also read the documents to which we have
referred you in "Incorporation of Certain Information by Reference."
THE COMPANY
HRPT Properties Trust ("HRP") is a real estate investment trust ("REIT")
that acquires, owns and leases office buildings and healthcare properties. We
currently own or have entered agreements to acquire a total of 257 properties
costing $3.1 billion, which are located in 36 states and the District of
Columbia. Sixty-eight percent (68%) of our investments are commercial office
buildings. We have a total market capitalization of $3.2 billion, including
$2.1 billion of equity.
[Tabular Representation of Pie Charts]
HRP Investment Portfolio HRP Capitalization
(at cost, dollars in millions) (book basis, dollars in millions)
Office $2,113 68% Equity $1,839 63%
Healthcare $ 895 29% Debt $1,093 37%
Other $ 100 3%
Our ability to pay debt depends primarily upon our receipt of rents from
tenants. Our largest tenant is the U.S. Government, which rents 29 office
buildings that we purchased for $454 million. Our largest commercial tenant is
Marriott International, Inc., an investment grade rated company, which rents 14
retirement communities purchased for $325.5 million. Almost 74% of our rents
come from companies that are rated investment grade or are publicly owned.
Moreover, only 26% of our revenues come from leases that expire before 2003.
HRP Tenant Strength
Percentage of
Tenant Total Revenues
------ --------------
U.S. Government ................ 16.9%
Marriott International ......... 7.4
Other Investment Grade
Tenants ...................... 23.6
Other Publicly Owned Tenants 25.8
Other Tenants .................. 26.3
-----
Total .......................... 100.0%
=====
HRP Lease Maturities
Percentage of
Year Total Revenues
---- --------------
1998 ........................... 2.7%
1999 ........................... 3.8
2000 ........................... 4.0
2001 ........................... 10.8
2002 ........................... 4.9
2003-2008 ...................... 38.4
After 2008 ..................... 35.4
-----
Total .......................... 100.0%
=====
S-3
<PAGE>
FINANCING POLICIES
Throughout our operating history we have maintained a conservative balance
sheet:
Debt as a Percentage of Total Capital
Book Basis Market Basis
---------- ------------
Since inception ................ 32.3% 25.2%
Past 10 years .................. 32.3% 24.9%
Past 5 years ................... 31.6% 24.1%
Past year ...................... 35.8% 28.8%
At September 30, 1998 .......... 34.9% 31.7%
Since 1994 Moody's Investor Service, Standard & Poor's Rating Services and
Fitch IBCA, Inc. have rated our debt investment grade. In June 1998 Moody's
upgraded the rating on our outstanding subordinated convertible debt to
investment grade. At the same time Moody's affirmed our senior debt rating at
Baa2. Also in June 1998 Standard & Poor's and Fitch affirmed the ratings on our
senior debt as BBB and BBB+, respectively; and Standard & Poor's placed our
senior debt on "positive outlook."
The notes have the benefit of financial covenants. The following table
shows the financial ratios contained in these covenants for HRP at September
30, 1998 and on an adjusted pro forma basis assuming the completion of this
offering, the application of the net proceeds from this offering and the
completion of the other transactions described in the Unaudited Adjusted Pro
Forma Consolidated Financial Statements.
<TABLE>
<CAPTION>
Historical at Adjusted Pro Forma
Covenant Required Ratio September 30, 1998 at September 30, 1998
-------- -------------- ------------------ ----------------------
<S> <C> <C> <C>
Debt/Adjusted Total Assets ......... no more than 60% 31.0% 34.7%
Secured Debt/Adjusted
Total Assets ...................... no more than 40% less than 1% less than 1%
Consolidated Income Available
for Debt Service/Annual
Debt Service ...................... at least 1.5x 4.3x 4.0x
Total Unencumbered Assets/
Unsecured Debt .................... at least 200% 312.9% 291.0%
</TABLE>
S-4
<PAGE>
THE OFFERING
The following is a brief summary of certain terms of this offering. For a
more complete description of the terms of the notes, including capitalized
terms, see "Description of the Notes" and "Glossary" in this prospectus
supplement and "Description of Debt Securities" in the accompanying prospectus.
<TABLE>
<S> <C>
Total Principal Amount ......... $130,000,000
Maturity Date .................. The notes will mature on November 15, 2013, unless previously
redeemed.
Interest Payment Dates ......... The 15th day of each calendar month beginning on January 15, 1999.
Ranking ........................ The notes are senior obligations of HRP. They are not secured by any of
our property or assets, and as a result you will be one of our unsecured
creditors. The notes are not obligations of any of our Subsidiaries. The
notes will rank equally with all of our other unsecured senior
indebtedness, including indebtedness we incur in the future. However, the
notes will be effectively subordinated to any mortgages and other secured
indebtedness we incur, and to all indebtedness of our Subsidiaries.
Optional Redemption ............ We may not redeem any of the notes prior to November 15, 2003. From
and after November 15, 2003, we may redeem some or all of the notes
from time to time before they mature. The redemption price will equal the
outstanding principal of the notes being redeemed plus accrued interest.
The notes will not have the benefit of a sinking fund.
Use of Proceeds ................ We estimate that our net proceeds from the offering will be approximately
$125.9 million. We intend to use these proceeds to repay part of our bank
borrowings and for general business purposes.
Limitations on Incurrence
of Debt ....................... Various covenants will apply to the notes, including the following:
(1) We will not incur Debt if the new Debt would cause total Debt to be more
than 60% of Adjusted Total Assets.
(2) We will not incur Secured Debt if the new Secured Debt would cause total
Secured Debt to be more than 40% of Adjusted Total Assets.
(3) We will not incur Debt if the new Debt would cause the ratio of
Consolidated Income Available for Debt Service to Annual Debt Service for
our most recently completed four fiscal quarters to be less than 1.5 to
1, determined on a pro forma basis after giving effect to certain
assumptions.
(4) We will maintain Total Unencumbered Assets of at least 200% of Unsecured
Debt.
</TABLE>
S-5
<PAGE>
SUMMARY HISTORICAL AND ADJUSTED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following table contains certain summary financial information with
respect to HRP. This information is derived from our audited and unaudited
consolidated financial statements and the Unaudited Adjusted Pro Forma
Consolidated Financial Statements that are included or incorporated by
reference in this prospectus supplement. Those statements and their footnotes
contain more detailed information that you should read in order to fully
understand the following summary information. For definitions of certain
capitalized terms see "Glossary" in this prospectus supplement. We consider FFO
to be a measure of the financial performance of an equity REIT that provides a
relevant basis for comparison among REITs. FFO does not represent cash flow
from operating activities (as determined in accordance with GAAP) and should
not be considered as an alternative to net income as an indicator of HRP's
financial performance or to cash flows as a measure of liquidity.
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
------------------------------------------------------------------------ ----------------------------
1993 1994 1995 1996 1997 1997 1998
------------- ------------- -------------- -------------- -------------- -------------- -------------
(in thousands, except per share amounts) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Total revenues .............. $ 56,485 $ 86,683 $ 113,322 $ 120,183 $ 208,863 $ 145,695 $ 252,203
Net income .................. 33,417 49,919 64,236 73,254 114,000 77,477 105,304
Dividends ................... 44,869 76,317 83,954 94,299 144,271 107,684 140,353
Per Share:
Net income (basic and
diluted) .................. $ 0.97 $ 0.95 $ 1.08 $ 1.11 $ 1.24 $ 0.86 $ 0.91
Dividends ................... 1.30 1.33 1.38 1.42 1.46 1.09 1.14
Average shares outstanding .. 34,407 52,738 59,227 66,255 92,168 89,918 115,931
Other Data:
FFO ......................... $ 46,566 $ 71,851 $ 84,638 $ 99,106 $ 146,312 $ 105,241 $ 153,228
FFO per basic share ......... 1.35 1.36 1.43 1.50 1.59 1.17 1.32
FFO per diluted share ....... 1.35 1.36 1.43 1.49 1.57 1.16 1.30
Ratio of Earnings to Fixed
Charges ................... 6.8x 6.7x 3.4x 4.3x 3.9x 3.9x 3.3x
</TABLE>
<TABLE>
<CAPTION>
December 31, September 30, 1998
----------------------------------------------------------------- ------------------------
Adjusted
1993 1994 1995 1996 1997 Actual Pro Forma
Balance Sheet Data: ----------- ----------- ------------- ------------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate investments, cost ......... $542,092 $806,560 $1,019,477 $1,259,006 $2,184,445 $2,967,970 $3,119,299
Real estate investments, net .......... 507,123 766,990 963,622 1,182,085 2,072,776 2,814,833 2,966,162
Total assets .......................... 527,662 840,206 999,677 1,229,522 2,135,963 2,926,096 3,034,096
Total borrowings ...................... 73,000 216,513 269,759 492,175 787,879 984,664 1,092,664
Total shareholders' equity ............ 441,135 602,039 685,592 708,048 1,266,260 1,838,568 1,838,568
</TABLE>
S-6
<PAGE>
RECENT DEVELOPMENTS
From January 1, 1998 through the date hereof, we have engaged in the
following significant activities.
Investments
1998 Investments. We have purchased 53 properties with 7.5 million square
feet for $970 million:
<TABLE>
<CAPTION>
Investments Over $20 Million (dollars in 000's)
Location Major Tenants Investment Square Feet
-------- ------------- ---------- -----------
<S> <C> <C> <C>
Philadelphia, PA ...................... Mellon Bank, FMC Corporation $ 247,530 1,258,560
Philadelphia, PA ...................... PNC Bank 115,408 825,374
Washington, D.C. ...................... Inter-American Development Bank 59,791 187,832
Wilmington, DE ........................ Chase Manhattan Bank 44,146 256,924
Austin, TX ............................ Motorola, Inc. 40,700 210,682
Austin, TX ............................ Solectron Corporation 34,837 456,135
Rockville, MD ......................... U.S. Food and Drug Administration 32,528 187,616
Quincy, MA (2 buildings) .............. Putnam Investments, Inc. 31,885 222,726
Austin, TX ............................ Raytheon Company 24,913 422,646
Memphis, TN ........................... U.S. Bankruptcy Court 22,057 203,931
Other Investments (dollars in 000's)
Location (metro area) Number of Buildings Investment Square Feet
--------------------- ------------------- ---------- -----------
Austin, TX ............................ Six buildings $ 61,754 615,126
Minneapolis, MN ....................... Three buildings 38,580 511,994
Pittsburgh, PA ........................ Three buildings 34,793 427,424
Philadelphia, PA ...................... Three buildings 15,878 126,019
Boston, MA ............................ Two buildings 15,590 138,111
Cincinnati, OH ........................ One building 15,283 156,175
Dallas, TX ............................ Two buildings 13,915 133,750
Other locations ....................... 20 buildings 120,577 1,151,428
</TABLE>
Committed Acquisitions. We have entered purchase agreements to acquire
three properties for $20.6 million. We expect to buy these properties during
the remainder of 1998 or in early 1999.
Other Investment Activities. In the normal course of our business we
regularly evaluate opportunities to acquire properties. We currently have
several such investment opportunities under consideration. However, other than
the transactions described above, none of these investment opportunities has
matured to the point where we have entered into a purchase agreement. We may
agree to acquire additional properties involving material amounts before the
end of 1998.
Financing
Common Stock. During February and March 1998 we sold 6,977,575 common
shares in four offerings to unit investment trusts sponsored by certain
investment banks. In June 1998 we sold 25 million shares in a public offering.
These offerings raised a total of $612.4 million in gross proceeds ($580.3
million net of expenses and underwriting discount).
S-7
<PAGE>
Unsecured Debt. During February 1998 we issued $100 million of unsecured
6.70% Senior Notes that mature in February 2005 and $50 million of unsecured
Remarketed Reset Notes that mature in July 2007. The Remarketed Reset Notes
currently bear interest at LIBOR (reset quarterly) plus a spread, but the
spread, interest reset period and other terms may change in July 1999. In
August 1998 we issued $160 million of unsecured 6.875% Senior Notes that mature
in August 2002.
Bank Credit Facility. We use our bank credit facility (the "Bank Credit
Facility") for interim acquisition funding and for working capital until we
raise equity or long term debt. At January 1, 1998, the Bank Credit Facility
permitted borrowings up to $450 million and was scheduled to mature in March
2001. In April 1998 the Bank Credit Facility was expanded to permit borrowings
up to $500 million and its maturity was extended to April 2002. At November 24,
1998, there was $223.5 million drawn on the Bank Credit Facility.
Asset Sales
$44.4 Million of Healthcare Properties Sold. Since January 1, 1998, we
have sold four nursing homes for $11.4 million. During this period we have also
received full repayments for $33.0 million of mortgages secured by eight
nursing homes.
Possible Disposition of Other Healthcare Real Estate. We are currently in
negotiations for the possible sale of certain additional nursing homes where
the tenant revenues are highly dependent upon government payment programs such
as Medicare and Medicaid. The majority of our remaining healthcare real estate
investments are concentrated in retirement housing, assisted living facilities
and traditional nursing homes where we receive tenant revenues from private
(non-Government) payors or where the net tenant revenues substantially exceed
our rents. We are now considering various possibilities to separately finance
these remaining, high quality, healthcare facilities. We can not assure you
that these sale negotiations or possible healthcare financing strategies will
be successfully completed.
Other Matters
Improving Investment Grade Ratings. In June 1998 Moody's upgraded the
rating on our subordinated convertible debt to investment grade (Baa3). At the
same time, Moody's affirmed our senior debt rating at Baa2. Also in June of
1998, Standard & Poor's and Fitch affirmed our senior debt ratings as BBB and
BBB+, respectively; and Standard & Poor's placed our senior debt on "positive
outlook."
Change of Name to "HRPT Properties Trust." On July 1, 1998, we changed our
name from "Health and Retirement Properties Trust" to "HRPT Properties Trust."
This name change is intended to call attention to the fact that we invest in
commercial office properties as well as healthcare related real estate.
Addition of New Trustee. On June 16, 1998, Patrick F. Donelan was elected
as a Trustee. Mr. Donelan filled a vacancy created by the death of Ralph J.
Watts. Mr. Donelan is currently Executive Vice President of Dresdner Kleinwort
Benson North America LLC of New York, a subsidiary of Dresdner Bank AG of
Germany.
S-8
<PAGE>
CAPITALIZATION
The following table sets forth HRP's capitalization at September 30, 1998
and on an adjusted pro forma basis assuming completion of this offering and
completion of the transactions described in the Unaudited Adjusted Pro Forma
Consolidated Financial Statements.
<TABLE>
<CAPTION>
September 30, 1998
-------------------------------
(dollars in thousands,
except per share amounts)
Adjusted
Actual Pro Forma
-------------- --------------
<S> <C> <C>
Debt:
Bank Credit Facility ....................................... $ 95,000 $ 73,000
Mortgage debt payable ...................................... 25,399 25,399
8.5% Monthly Income Senior Notes due 2013 .................. -- 130,000
Senior notes payable, net .................................. 659,402 659,402
7.25% Convertible Subordinated Debentures due 2001 ......... 40,000 40,000
7.5% Convertible Subordinated Debentures due 2003 .......... 164,863 164,863
---------- ----------
Total debt .............................................. 984,664 1,092,664
---------- ----------
Shareholders' equity:
Preferred shares of beneficial interest, par value $.01
per share; 50,000,000 authorized; none issued ............. -- --
Common shares of beneficial interest, par value $.01
per share; 150,000,000 shares authorized; 131,547,178
shares issued and outstanding ............................. 1,315 1,315
Additional paid-in capital ................................. 1,964,878 1,964,878
Cumulative net income ...................................... 525,602 525,602
Dividends .................................................. (653,227) (653,227)
---------- ----------
Total shareholders' equity .............................. 1,838,568 1,838,568
---------- ----------
Total capitalization ......................................... $2,823,232 $2,931,232
========== ==========
</TABLE>
USE OF PROCEEDS
We estimate that the net proceeds of this offering will be approximately
$125.9 million. We expect to use the net proceeds of this offering to repay
amounts outstanding under the Bank Credit Facility and for general business
purposes. The Bank Credit Facility bears interest at LIBOR plus a spread and
matures in April 2002. At November 3, 1998, the effective interest rate on the
Bank Credit Facility was 6.0% per annum.
THE COMPANY
HRP is a REIT that acquires, owns and leases office buildings and
healthcare properties. HRP is organized as a Maryland real estate investment
trust. Our principal place of business is 400 Centre Street, Newton,
Massachusetts 02458 and our telephone number is (617) 332-3990.
HRP is one of the largest publicly traded REITs in the United States. We
have a total market capitalization of $3.2 billion, including $2.1 billion of
equity. We currently own or have entered agreements to acquire a total of 257
properties costing $3.1 billion, which are located in 36 states and the
District of Columbia. Three percent of our assets, at cost, is an investment in
another REIT, Hospitality Properties Trust ("HPT"), a NYSE listed company that
we formed in 1995.
S-9
<PAGE>
PROPERTIES
We have investments totaling $3.1 billion in 257 properties located in 36
states and the District of Columbia.
Location of HRP Properties
[GRAPHIC OF MAP OF THE UNITED STATES SHOWING LOCATIONS OF HRP PROPERTIES]
<TABLE>
<CAPTION>
Number of Investment
State Properties (in thousands)
----- ---------- --------------
<S> <C> <C>
Alaska ....................... 1 $ 1,000
Arizona ...................... 9 64,854
California ................... 31 328,471
Colorado ..................... 11 56,155
Connecticut .................. 10 106,702
Delaware ..................... 1 44,146
District of Columbia ......... 5 207,257
Florida ...................... 10 148,670
Georgia ...................... 5 15,234
Illinois ..................... 2 98,743
Iowa ......................... 7 8,204
Kansas ....................... 4 8,452
Louisiana .................... 1 19,042
Maryland ..................... 8 191,299
Massachusetts ................ 34 251,404
Michigan ..................... 2 9,204
Minnesota .................... 3 38,580
Missouri ..................... 3 11,564
Nebraska ..................... 10 10,722
New Hampshire ................ 1 3,754
New Jersey ................... 5 42,949
New Mexico ................... 2 11,011
New York ..................... 6 184,732
North Carolina ............... 5 9,197
Ohio ......................... 4 26,970
Oklahoma ..................... 1 24,762
Pennsylvania ................. 16 546,590
Rhode Island ................. 1 8,010
South Dakota ................. 3 7,589
Tennessee .................... 1 22,057
Texas ........................ 24 282,830
Vermont ...................... 8 29,768
Virginia ..................... 6 90,380
Washington ................... 4 40,931
West Virginia ................ 1 4,898
Wisconsin .................... 8 33,902
Wyoming ...................... 4 17,564
-- ----------
Total Properties ............. 257 3,007,597
Investment in HPT ............................ 100,000
----------
Total Investments ............................ $3,107,597
==========
</TABLE>
S-10
<PAGE>
Commercial Office Properties
We began to invest in multi-tenant medical office buildings in the early
1990s. After the acquisition of a portfolio of 28 properties leased to the U.S.
Government, we developed the infrastructure to acquire and manage office
buildings on a nationwide basis. We believe that certain current business
trends have created favorable investment opportunities for commercial office
properties: institutional investors have begun disposing of their direct
ownership of properties and investing in more liquid real estate securities;
purchasers of distressed properties in the early 1990s are now divesting their
improved assets; and many businesses are selling their owned real estate to
invest proceeds in core activities. Although there are other REITs and
companies that specialize in acquiring and owning commercial office properties,
we believe that these trends will afford us numerous investment opportunities
at attractive prices for several years. Moreover, unlike most REITs that focus
exclusively upon commercial office properties, our focus to date has been to
acquire stabilized office properties with long term leases to strong credit
tenants, rather than properties that afford immediate turnaround potential
because of vacancies or short term leases.
Government Office Properties
Most U.S. Government office space requirements are managed by the General
Services Administration ("GSA"). Most large GSA leases are written for initial
terms of 10 to 20 years plus tenant renewal options totaling an additional 5 to
20 years. Many GSA leases, including leases for some of our properties, permit
the Government to terminate by notice given any time after a so-called "firm
term." The weighted average remaining firm term for our Government tenants is
approximately six years. From 1980 to September 1996 the amount of space leased
by the GSA increased from 139 million square feet to 146 million square feet.
This increase in U.S. Government leased space occurred despite a declining
civilian Government work force, as federal civilian employment decreased
approximately 9% from 2.2 million employees in 1980 to 2.0 million employees in
1995. We believe that the GSA's long term demand for leased space will continue
to be strong as a result of federal budget pressure to limit capital
expenditures and the need to use funds available for capital expenditures to
modernize the GSA inventory of owned buildings, over half of which exceed 50
years of age. Based upon the Government's investments in tenant improvements to
our properties, the high cost of relocation and the stability of the missions
and space requirements of the Government agencies that occupy our properties,
we believe that there is a high probability of GSA lease renewals for our
properties through their renewal options, and in many cases beyond those
periods. Moreover, because of the locations of many of these Government leased
properties and the high standards to which they have been developed, we may be
able to lease or sell most of these properties to commercial users in the event
the Government terminates or fails to renew any of these leases.
Healthcare Properties
The population of the United States is aging. According to information
from the U.S. Census Bureau, the segment of the U.S. population age 65 and over
is increasing and is expected to increase sharply through the year 2020. We
believe that the demand for services provided at retirement communities,
assisted living centers and nursing homes should increase as the population
ages. Certain recent federal and state legislation seeks to limit the amount of
growth in Government expenditures for Medicare and Medicaid. These limitations
may adversely affect the profitability of healthcare operating companies and
might, in certain circumstances, affect their ability to pay rent or service
debt. These Government funding limitations will likely also make it less
profitable to construct new healthcare facilities and this may increase the
value of existing facilities. We believe that the net effect of these
demographic and legislative changes will be to make it less profitable to
provide services and facilities for Government funded patients and more
profitable to provide
S-11
<PAGE>
services and facilities for non-Government funded patients. We intend to
respond to these changes in three ways: (i) by focusing new investments in
healthcare properties that are not directly dependent upon a high percentage of
Medicaid or Medicare revenues, including retirement housing, assisted living
facilities and nursing homes with a high percentage of private pay revenues;
(ii) by encouraging and making funding available to our tenants to improve the
properties that they lease from us in order to attract a greater amount of
non-Government revenues and (iii) whenever possible, by making new investments
in properties leased to well capitalized operators.
Equity Investment in HPT
HRP has invested $100 million and owns 4,000,000 common shares of
beneficial interest of HPT, which constitute 9.3% of the total HPT shares
outstanding. HPT is a REIT in the business of owning hotels and leasing them to
independent hotel operating companies. HPT was organized in February 1995 as an
outgrowth of our relationship with Host Marriott Corporation and Marriott
International, Inc. ("Marriott"), which arose from our previous investment in
retirement communities leased to Marriott. In August 1995 HPT completed an
initial public offering of shares and on October 31, 1998, had a total equity
market capitalization of $1.1 billion. HPT currently owns or has commitments to
purchase 167 hotels, which are located in 35 states and contain 22,367 rooms.
We receive dividends on our HPT shares at the current annual rate of $2.64 per
share. Our financial reports include our share of HPT's operating results under
the equity method of accounting. HPT shares are listed on the NYSE, and on
November 24, 1998 the last reported sale price for HPT shares was $25-15/16 per
share.
FINANCING POLICY
We consider making equity offerings when, in our judgment, doing so will
improve our capital structure while not materially adversely affecting the
market value of our shares or impeding our ability to increase regularly our
per share dividend rate. In addition to the use of equity, we utilize short
term and long term borrowings to finance investments and to pay operating
expenses. Our unsecured senior indebtedness has been rated investment grade by
Standard & Poor's, Moody's and Fitch. The borrowing guidelines established in
our Bank Credit Facility and by our Board of Trustees prohibit a debt to book
capitalization ratio of greater than .50 to 1, except in certain limited
circumstances. After completion of this offering and the application of the net
proceeds, our as adjusted debt to book capitalization ratio will be
approximately .37 to 1. As of November 24, 1998, approximately $204.9 million
of our total debt consisted of subordinated convertible debentures, convertible
into common shares at $18.00 per share. If these debentures were converted into
common shares, our as adjusted debt to book capitalization ratio would be
approximately .30 to 1. We may in the future choose to modify our debt to book
capitalization guidelines. We cannot assure you that any debentures will be
converted or that equity or debt capital will be available in the future on
reasonable terms to fund our operations or growth.
S-12
<PAGE>
LEASE EXPIRATIONS
The following table sets forth the percentage of our annual revenues
represented by leases and mortgages that expire or mature in the years
indicated.
<TABLE>
<CAPTION>
Adjusted Pro Forma Percentage of
Year Annual Revenues (1) Annual Revenues
---- ------------------- ---------------
(dollars in thousands)
<S> <C> <C>
1998 ............................ $ 10,889 2.7%
1999 ............................ 15,423 3.8
2000 ............................ 16,187 4.0
2001 ............................ 43,432 10.8
2002 ............................ 19,625 4.9
2003 ............................ 39,058 9.7
2004 ............................ 22,750 5.6
2005 ............................ 29,856 7.4
2006 ............................ 38,349 9.5
2007 and thereafter (2) ......... 167,621 41.6
-------- -----
Totals: ......................... $403,190 100.0%
======== =====
</TABLE>
- ---------------------
(1) Adjusted pro forma annual revenues are annualized revenues for the period
ended September 30, 1998, and assume all acquisitions described in "Recent
Developments--Investments" have occurred. Most of our commercial office
buildings and properties leased to the U.S. Government are leased on a
gross or modified gross lease basis. Most of our healthcare properties are
leased on a net lease basis. Accordingly, the revenues received from our
commercial and Government office properties are not necessarily indicative
of net operating income from those properties, and our revenues and
percentage of total revenues are not necessarily indicative of our net
operating income or FFO likely to be realized.
(2) Includes the pro rata share of HPT's FFO. All of HPT's leases expire after
2007. We report income and FFO derived from our investment in HPT using
the equity method of accounting. We believe the pro rata share of HPT's
FFO included above is an appropriate means to reflect our lease
expirations.
S-13
<PAGE>
THE TENANTS
Our financial condition depends, in large part, upon the financial
condition of our tenants. Our largest tenants are the U.S. Government and
Marriott. Almost 48% of our annual revenues are derived from tenants whose
unsecured obligations are rated investment grade. Another 26% of our revenues
come from other public companies that are not rated investment grade but for
whom credit evaluation information is readily available.
<TABLE>
<CAPTION>
Adjusted Pro Forma Percentage of
Tenant Annual Revenues (1) Annual Revenues
------ ------------------- ----------------
(dollars in thousands)
<S> <C> <C>
U.S. Government ...................... $ 68,338 16.9%
Marriott ............................. 29,868 7.4
Other Investment Grade Tenants ....... 94,973 23.6
Other Publicly Owned Tenants (2) ..... 103,996 25.8
-------- -----
Subtotal Investment Grade and Publicly
Owned Tenants ....................... 297,175 73.7
Other Tenants ........................ 106,015 26.3
-------- -----
Totals: .............................. $403,190 100.0%
======== =====
</TABLE>
- ---------------------
(1) Adjusted pro forma annual revenues are annualized revenues for the period
ended September 30, 1998, and assume all acquisitions described in "Recent
Developments--Investments" have occurred. Most of our commercial office
buildings and properties leased to the U.S. Government are leased on a
gross or modified gross lease basis. Most of our healthcare properties are
leased on a net lease basis. Accordingly, the revenues received from our
commercial and Government office properties are not necessarily indicative
of net operating income from those properties, and our revenues and
percentage of total revenues are not necessarily indicative of our net
operating income or FFO likely to be realized.
(2) Includes the $100 million investment in HPT and the pro rata share of HPT's
FFO. HPT's senior debt is rated investment grade by Standard & Poor's
(BBB-) and by Moody's (Baa3). However, our investment in HPT is an equity
investment and not a debt obligation of HPT. We report income and FFO
derived from our investment in HPT using the equity method of accounting.
We believe the pro rata share of HPT's FFO should be included in the
percentage of revenues derived from publicly owned companies, as all of
HPT's hotels are currently operated by affiliates of publicly owned
companies.
U.S. Government. Most of our U.S. Government leases are undertaken by the
GSA and assigned to other Government agencies including the U.S. Department of
Veterans Affairs, Internal Revenue Service, U.S. Department of Agriculture,
National Institute of Standards and Technology, U.S. Defense Information
Systems, and U.S. Department of Energy. All of these leases are general
obligations of the U.S. Government.
Marriott International. Marriott is a NYSE listed company with an equity
market capitalization of $6.9 billion as of November 1, 1998. In addition to
its retirement housing and assisted living properties, some of which are leased
from us, Marriott owns and operates hotels and other businesses on a worldwide
basis and has announced revenues for the first three quarters of 1998 of
approximately $7 billion. Marriott has unconditionally guaranteed its lease
obligations to us. Marriott's senior credit obligations are rated investment
grade by Standard & Poor's (BBB) and Moody's (Baa2).
Investment Grade Tenants. We lease office space to the following
investment grade companies or their subsidiaries: Aetna Inc., AT&T Corp., Bell
Atlantic Corporation, Bristol-Myers Squibb Co., Chase Manhattan Corp., Cigna
Corp., Druck Corporation, Eastman Kodak Co., FedEx Incorporated, FMC
Corporation, Ford Motor Credit Corp., GMAC Corp., Goldman Sachs & Co., Hoechst
AG, IBM Corp., Legg Mason Wood Walker, Incorporated, The Limited, Marriott
International Inc., Marsh McLennan, Inc., Mellon Bank Corp., Merck & Co., Inc.,
Merrill Lynch & Co., Mobile Corp., Motorola, Inc., New York Life Insurance
Company, Northern Telecom Ltd., Oracle Corp., PNC Bank Corp., Raytheon Company,
SBC Communications, Inc., Schering-Plough Corporation, SmithKline Beecham
Corporation, USF&G Corporation, Wells Fargo & Co. and World Financial Network
National Bank.
S-14
<PAGE>
Certain of our properties are leased to not-for-profit entities that are
investment grade rated: two medical office buildings in Boston, Massachusetts
are principally leased to affiliates of Boston's Beth Israel Hospital, Boston's
Children's Medical Center and Harvard Pilgrim Healthcare (a Boston area
not-for-profit health maintenance organization); a medical office building in
Aurora, Colorado is leased to Columbia HealthOne LLC (a joint venture between
Columbia/HCA Healthcare Corporation and HealthOne, Inc., a not-for-profit
healthcare system); and Cedars Sinai Medical Center, a not-for-profit hospital
based in Los Angeles, is the largest tenant in two medical office buildings and
garages (which we own) attached to that hospital.
Other Public Company Tenants. We also lease to the following publicly
owned tenants or their subsidiaries: Advanced Micro Devices, Inc., Alliance
Pharmaceutical Corp., Apollo Group, Inc., ARV Assisted Living Inc., Brookdale
Living Communities, Inc., Cisco Systems, Inc., Concentra Managed Care, Inc.,
Corvas International, Inc., CytoTherapeutics, Inc., Danka Business Systems plc,
Focal, Inc., General Dynamics Corporation, Genesis Health Ventures, Inc., IBAH
Inc., Integrated Health Services, Inc., Laboratory Corp. of America Holdings,
Mariner Post-Acute Network Inc., MedPartners, Inc., National Instrument
Corporation, NCO Group, Inc., Neurocrine Biosciences Inc., Ohio Casualty
Corporation, Owens & Minor, Inc., Paging Network, Inc., Paychex, Inc., PSW
Technologies, Inc., Quest Diagnostics Incorporated, Silicon Graphics, Inc., Sun
Healthcare Group, Inc., Sun Microsystems, Inc., Unilab Corp., United Healthcare
Corporation and Westinghouse Electric Corporation.
Other Tenants. Our other tenants include over 400 privately owned
businesses located in our office buildings and 12 private companies in our
healthcare buildings.
S-15
<PAGE>
MANAGEMENT
The Trustees and executive officers of HRP are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Barry M. Portnoy 53 Managing Trustee
Gerard M. Martin 64 Managing Trustee
Bruce M. Gans, M.D. 51 Trustee
Rev. Justinian Manning, C.P. 72 Trustee
Patrick F. Donelan 56 Trustee
David J. Hegarty 41 President, Chief Operating Officer and Secretary
Ajay Saini 38 Treasurer and Chief Financial Officer
John A. Mannix 42 Executive Vice President
David M. Lepore 38 Senior Vice President
</TABLE>
Barry M. Portnoy was our founder and has been a Trustee since our
organization in 1986. Mr. Portnoy also serves as a Managing Trustee of HPT. Mr.
Portnoy was a partner in the law firm of Sullivan & Worcester LLP from 1978
through March 1997.
Gerard M. Martin was our founder and has been a Trustee since our
organization in 1986. Mr. Martin also serves as a Managing Trustee of HPT.
Bruce M. Gans, M.D. has been a Professor and Chairman of the Department of
Physical Medicine and Rehabilitation at Wayne State University and a Senior
Vice President of the Detroit Medical Center since 1989.
The Reverend Justinian Manning, C.P. has been, since September 1990, the
pastor of St. Gabriel's parish in Brighton, Massachusetts. He is also on the
Board of Directors of Charlesview, a low and moderate income housing program.
He is past Treasurer and a former Director of St. Paul's Benevolent,
Educational and Missionary Institute, a New Jersey corporation, which oversees
foundations in Massachusetts, Connecticut, New York, Pennsylvania, Maryland and
Florida and the Institute's Overseas Missions. He was formerly on the Board of
Directors of St. Paul's Monastery Manor, in Pittsburgh, Pennsylvania, a
congregate housing facility. He belonged to the Provincial Council of the
Passionist Provincialate and is the former Director of Consolidation for the
Community.
Patrick F. Donelan has been since 1996 Executive Vice President of
Dresdner Kleinwort Benson North America LLC, a New York based banking
institution, which is a subsidiary of Dresdner Bank AG of Germany. Prior to
1996 Mr. Donelan was Chairman of Kleinwort Benson North America, Inc., a
subsidiary of Kleinwort Benson Ltd. of England, which was acquired by Dresdner
Bank AG in 1995.
David J. Hegarty is our President, Chief Operating Officer and Secretary.
He has served us in various capacities since 1987, prior to which he was an
audit manager with Ernst & Young LLP. Mr. Hegarty is a certified public
accountant.
Ajay Saini is our Treasurer and Chief Financial Officer. Mr. Saini has
served us in various capacities since June 1990, prior to which he was employed
by Ernst & Young LLP. Mr. Saini is a certified public accountant.
John A. Mannix is our Executive Vice President. Mr. Mannix served as Vice
President with our investment advisor from 1989 to 1998. Mr. Mannix is
responsible for acquisitions of medical office, biotechnology and commercial
office properties and is active in the leasing of the portfolio. Mr. Mannix is
a member of the Urban Land Institute, Building Owners and Managers Association
("BOMA") and the Greater Boston Real Estate Board's Real Estate Finance
Association.
S-16
<PAGE>
David M. Lepore is our Senior Vice President. Mr. Lepore is responsible
for building operations, leasing and acquisition diligence for our properties.
Mr. Lepore has been employed in various capacities by our investment advisor
since 1992. Prior to 1992 he was employed by The Beacon Companies. Mr. Lepore
is a member of BOMA and is a certified Real Property Administrator.
Our Declaration of Trust provides that a majority of the Board of Trustees
will at all times consist of Independent Trustees. Dr. Gans, Mr. Donelan and
Rev. Manning are our Independent Trustees. The Independent Trustees are not
affiliated with any of our lessees or mortgagors or with our investment
advisor, REIT Management & Research, Inc. (the "Advisor"). All major investment
and policy decisions affecting us are made by our Board of Trustees.
All of our day to day operations are conducted by the Advisor pursuant to
an investment advisory contract. The Advisor is owned by Messrs. Portnoy and
Martin. Messrs. Portnoy, Martin, Hegarty, Saini, Mannix and Lepore, as well as
all other personnel involved in our operations, are employees of the Advisor.
We pay the Advisor an annual advisory fee calculated on the basis of total
assets under management (.7% of the first $250 million, plus .5% of additional
assets), and an annual incentive fee for each year equal to 15% of the annual
increase in our funds from operations (as defined in the investment advisory
contract) per share (but no more than $.01 per share), times the weighted
average number of shares outstanding on a fully diluted basis in such year.
With respect to properties which are gross leased and/or occupied by multiple
tenants, certain property management services, which are beyond the scope of
the investment advisory contract, are provided under property management
contracts by the Advisor. We believe that the fees paid for property management
services (approximately 3% of gross revenues from the affected properties) are
at or below the levels that we would pay on an arms' length basis for similar
services in the market generally. Prior to our decision to invest in commercial
office properties, affiliates of the Advisor had invested in commercial real
estate for their own account. Now that we are investing in these types of
properties, the Advisor has agreed that it will not purchase or sell any
commercial office real estate without first offering it to us. The investment
advisory contract and the various property management contracts have all been
approved on our behalf by our Independent Trustees. All incentive fees earned
by the Advisor are paid in common shares. We believe that our total
administrative costs are at or below industry averages.
S-17
<PAGE>
DESCRIPTION OF THE NOTES
The following description of the particular terms of the notes
supplements, and to the extent inconsistent with, replaces the description of
the general terms and provisions of debt securities set forth under
"Description of Debt Securities" in the accompanying prospectus to which
reference is hereby made. We have provided a Glossary at the end of this
prospectus supplement to define certain capitalized words used in discussing
the terms of the notes.
General
We will issue the notes under an Indenture dated as of July 9, 1997 and a
Supplemental Indenture dated as of November 30, 1998 (together, the
"Indenture") between us and State Street Bank and Trust Company, as Trustee.
The Indenture is subject to, and governed by, the Trust Indenture Act of 1939,
as amended. This prospectus supplement briefly outlines some of the provisions
of the Indenture. These summaries are not complete. If you would like more
information on these provisions, review the copy of the Indenture that we have
filed with the Securities and Exchange Commission. See "Incorporation of
Certain Information By Reference" and "Where You Can Find More Information" in
this prospectus supplement and "Available Information" in the accompanying
prospectus for information about how to locate these documents. You may also
review the Indenture at the Trustee's corporate trust office at Two
International Place, Boston, Massachusetts 02110. All section references
appearing below are to sections of the Indenture.
The notes will be a separate series under the Indenture, initially in the
aggregate principal amount of $130,000,000. This series may be "reopened" and
we may from time to time issue additional notes of the same series. The notes
will mature (unless previously redeemed) on November 15, 2013. The notes will
be issued only in fully registered form without coupons, in denominations of
$1,000 and integral multiples thereof. The notes will be evidenced by a global
note in book-entry form, except under the limited circumstances described below
under "--Book Entry System and Form of Notes."
The notes will be senior unsecured obligations of HRP and will rank
equally with each other and with all of our other unsecured and unsubordinated
indebtedness outstanding from time to time. The notes will be effectively
subordinated to our mortgages and other secured indebtedness, and to
indebtedness and other liabilities of our Subsidiaries. Accordingly, such prior
indebtedness will have to be satisfied in full before you will be able to
realize any value from the secured or indirectly held properties.
As of September 30, 1998, on an adjusted pro forma basis after giving
effect to the issuance of the notes and the application of the proceeds from
the sale of the notes, our total outstanding indebtedness (including under the
Bank Credit Facility) was approximately $1.1 billion, of which approximately
97.7% was unsecured, and the indebtedness of our Subsidiaries was $25 million.
In addition, our Subsidiaries (with certain exceptions) are guarantors of our
Bank Credit Facility. The Bank Credit Facility is currently an unsecured
revolving credit facility in the amount of $500 million. We and our
Subsidiaries may incur additional indebtedness, including secured indebtedness,
subject to the provisions described below under "--Certain
Covenants--Limitations on Incurrence of Debt."
Except as described under "--Certain Covenants" and "--Merger,
Consolidation or Sale" below and under "Description of Debt Securities--Merger,
Consolidation or Sale" and "--Certain Covenants" in the accompanying
prospectus, the Indenture does not contain any other provisions that would
limit our ability to incur indebtedness or that would afford you protection in
the event of (1) a highly leveraged or similar transaction involving us or any
of our affiliates, (2) a change of control, or (3) a reorganization,
restructuring, merger or similar transaction involving us that may
S-18
<PAGE>
adversely affect you. In addition, subject to the limitations set forth under
"--Certain Covenants" and "--Merger, Consolidation or Sale" below or under
"Description of Debt Securities--Merger, Consolidation or Sale" and "--Certain
Covenants" in the accompanying prospectus, we may, in the future, enter into
certain transactions such as the sale of all or substantially all of our assets
or a merger or consolidation that would increase the amount of our indebtedness
or substantially reduce or eliminate our assets, which might have an adverse
effect on our ability to service our indebtedness, including the notes. We have
no present intention of engaging in a highly leveraged or similar transaction.
Interest and Maturity
The notes will bear interest at the rate per annum set forth on the cover
page of this prospectus supplement from November 30, 1998 or from the
immediately preceding Interest Payment Date (as defined below) to which
interest has been paid. Interest is payable in arrears on the 15th of each
month (the "Interest Payment Dates"), commencing January 15, 1999, to the
persons in whose names the notes are registered in the security register
applicable to the notes at the close of business on the first day of each month
(the "Regular Record Dates") immediately before the Interest Payment Dates
regardless of whether the Regular Record Date is a Business Day. Accrued
interest is also payable on the date of maturity or earlier redemption of the
notes (the "Maturity Date"). Interest on the notes will be computed on the
basis of a 360-day year of twelve 30-day months.
Optional Redemption of the Notes
We may not redeem the notes prior to November 15, 2003. From and after
November 15, 2003, we may redeem some or all of the notes from time to time
before they mature. The redemption price will equal the outstanding principal
of the notes being redeemed plus accrued interest.
We are required to give notice of such a redemption not less than 30 days
nor more than 60 days prior to the redemption date by first class mail to each
holder's address appearing in the securities register maintained by the
Trustee. In the event we elect to redeem less than all of the notes, the
particular notes to be redeemed will be selected by the Trustee by such method
as the Trustee shall deem fair and appropriate.
We are not required to make any sinking fund or redemption payments prior
to the stated maturity of the notes.
Certain Covenants
Limitations on Incurrence of Debt. We will not, and will not permit any
Subsidiary to, incur any Debt if, immediately after giving effect to the
incurrence of such additional Debt and the application of the proceeds thereof,
the aggregate principal amount of all outstanding Debt of HRP and its
Subsidiaries on a consolidated basis determined in accordance with GAAP is
greater than 60% of the sum ("Adjusted Total Assets") of (without duplication)
(1) the Total Assets of HRP and its Subsidiaries as of the end of the calendar
quarter covered in HRP's Annual Report on Form 10-K, or the Quarterly Report on
Form 10-Q, as the case may be, most recently filed with the SEC (or, if such
filing is not permitted under the Securities Exchange Act of 1934, as amended,
with the Trustee) prior to the incurrence of such additional Debt and (2) the
purchase price of any real estate assets or mortgages receivable acquired, and
the amount of any securities offering proceeds received (to the extent that
such proceeds were not used to acquire real estate assets or mortgages
receivable or used to reduce Debt), by HRP or any Subsidiary since the end of
such calendar quarter, including those proceeds obtained in connection with the
incurrence of such additional Debt.
S-19
<PAGE>
In addition to the above limitations on the incurrence of Debt, we will
not, and will not permit any Subsidiary to, incur any Secured Debt if,
immediately after giving effect to the incurrence of such additional Secured
Debt and the application of the proceeds thereof, the aggregate principal
amount of all outstanding Secured Debt of HRP and its Subsidiaries on a
consolidated basis is greater than 40% of Adjusted Total Assets.
In addition to the above limitations on the incurrence of Debt, we will
not, and will not permit any Subsidiary to, incur any Debt if the ratio of
Consolidated Income Available for Debt Service to the Annual Debt Service for
the four consecutive fiscal quarters most recently ended prior to the date on
which such additional Debt is to be incurred shall have been less than 1.5x, on
a pro forma basis after giving effect thereto and to the application of the
proceeds therefrom, and calculated on the assumption that (1) such Debt and any
other Debt incurred by HRP and its Subsidiaries since the first day of such
four-quarter period and the application of the proceeds therefrom, including to
refinance other Debt, had occurred at the beginning of such period; (2) the
repayment or retirement of any other Debt by HRP and its Subsidiaries since the
first date of such four-quarter period had been repaid or retired at the
beginning of such period (except that, in making such computation, the amount
of Debt repaid under any revolving credit facility shall be computed based upon
the average daily balance of such Debt during such period); (3) in the case of
Acquired Debt or Debt incurred in connection with any acquisition since the
first day of such four-quarter period, the related acquisition had occurred as
of the first day of such period with appropriate adjustments with respect to
such acquisition being included in such pro forma calculation; and (4) in the
case of any acquisition or disposition by HRP or its Subsidiaries of any asset
or group of assets since the first day of such four-quarter period, whether by
merger, stock purchase or sale, or asset purchase or sale, such acquisition or
disposition or any related repayment of Debt had occurred as of the first day
of such period with the appropriate adjustments with respect to such
acquisition or disposition being included in such as adjusted calculation. If
the Debt giving rise to the need to make the foregoing calculation or any other
Debt incurred after the first day of the relevant four-quarter period bears
interest at a floating rate then, for purposes of calculating the Annual Debt
Service, the interest rate on such Debt will be computed on a pro forma basis
as if the average interest rate which would have been in effect during the
entire such four-quarter period had been the applicable rate for the entire
such period.
Maintenance of Total Unencumbered Assets. We and our Subsidiaries will
maintain Total Unencumbered Assets of not less than 200% of the aggregate
outstanding principal amount of the Unsecured Debt of HRP and its Subsidiaries
on a consolidated basis.
See "Description of Debt Securities--Certain Covenants" in the
accompanying prospectus for a description of additional covenants applicable to
us.
Merger, Consolidation or Sale
We may consolidate with, or sell, lease or convey all or substantially all
of our assets to, or merge with or into, any other entity, provided that:
(1) either we are the continuing entity, or the successor entity (if other
than us) formed by or resulting from any such consolidation or merger or
which shall have received the transfer of such assets is an entity
organized and existing under the laws of the United States or any state
thereof and shall expressly assume the due and punctual payment of the
principal of (and premium, if any, on) and any interest on all of the
notes and the due and punctual performance and observance of all of the
covenants and conditions contained in the Indenture to be performed by
us;
S-20
<PAGE>
(2) immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of HRP or any Subsidiary as a
result thereof as having been incurred by HRP or such Subsidiary at the
time of such transaction, no event of default under the Indenture, and no
event which after notice or the lapse of time, or both, would become such
an event of default, shall have occurred and be continuing; and
(3) an officers' certificate and legal opinion covering such conditions are
delivered to the Trustee.
Events of Default, Notice and Waiver
The Indenture provides that the following events are "events of default"
with respect to the notes:
(1) default for 30 days in the payment of any installment of interest payable
on any note when due and payable;
(2) default in the payment of the principal of (or premium, if any, on) any
note when due and payable;
(3) default in the performance, or breach, of any covenant of HRP contained
in the Indenture (other than a covenant added to the Indenture solely for
the benefit of a series of debt securities other than the notes), which
continues for 60 days after written notice as provided in the Indenture;
(4) default under any bond, debenture, note, mortgage, indenture or
instrument under which there may be issued or by which there may be
secured or evidenced any indebtedness for money borrowed by HRP (or by
any Subsidiary, the repayment of which HRP has guaranteed or for which
HRP is directly responsible or liable as obligor or guarantor) having an
aggregate principal amount outstanding of at least $20,000,000, whether
such indebtedness now exists or shall hereafter be incurred or created,
which default shall have resulted in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise
have become due and payable, without such indebtedness having been
discharged or such acceleration having been rescinded or annulled within
a period of 10 days after written notice to HRP by the Trustee or to HRP
and the Trustee by the holders of at least 25% in principal amount of the
outstanding notes as provided in the Indenture; or
(5) certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of HRP or any
Significant Subsidiary or for all or substantially all of either of their
property.
Upon the acceleration of notes in accordance with the terms of the
Indenture following the occurrence of an event of default, the principal amount
of the notes, plus accrued and unpaid interest thereon will become due and
payable. See "Description of Debt Securities--Events of Default, Notice and
Waiver" in the accompanying prospectus for a description of rights, remedies
and other matters relating to events of default.
Discharge, Defeasance and Covenant Defeasance
The provisions of the Indenture relating to defeasance and covenant
defeasance described under "Description of Debt Securities--Discharge,
Defeasance and Covenant Defeasance" in the accompanying prospectus will apply
to the notes.
S-21
<PAGE>
Book-Entry System and Form of Notes
The notes will be issued in the form of a single fully registered global
note without coupons that will be deposited with The Depository Trust Company,
New York, New York, and registered in the name of its nominee, Cede & Co. This
means that we will not issue certificates to each owner of notes. One global
note will be issued to DTC, which will keep a computerized record of its
participants (for example, your broker) whose clients have purchased the notes.
The participant will then keep a record of its clients who purchased the notes.
Unless it is exchanged in whole or in part for a certificated note, the global
note may not be transferred, except that DTC, its nominees, and their
successors may transfer the global note as a whole to one another.
Beneficial interests in the global note will be shown on, and transfers of
the global note will be made only through, records maintained by DTC and its
participants.
DTC has provided us with the following information: DTC is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the United States Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the provisions of Section 17A of the Securities Exchange Act
of 1934, as amended. DTC holds securities that its participants ("Direct
Participants") deposit with DTC. DTC also records the settlement among Direct
Participants of securities transactions, such as transfers and pledges, in
deposited securities through computerized records for Direct Participants'
accounts. This eliminates the need to exchange certificates. Direct
Participants include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations.
DTC's book-entry system is also used by other organizations such as
securities brokers and dealers, banks and trust companies that work through a
Direct Participant. The rules that apply to DTC and its Direct Participants are
on file with the SEC.
DTC is owned by a number of its Direct Participants and by the NYSE, The
American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc.
We expect that, pursuant to procedures established by DTC, ownership of
beneficial interests in the notes evidenced by the global note will be shown
on, and the transfer of that ownership will be effected only through, records
maintained by DTC or its nominee (with respect to beneficial interests of
Direct Participants) and records of Direct Participants (with respect to
beneficial interests of persons who hold through Direct Participants). Neither
we nor the Trustee will have any responsibility or liability for any aspect of
the records of DTC or for maintaining, supervising or reviewing any records of
DTC or any of its Direct Participants relating to beneficial ownership
interests in the notes. The laws of some states require that certain purchasers
of securities take physical delivery of such securities in definitive form.
Such limits and laws may impair your ability to own, pledge or transfer
beneficial interests in the global note.
So long as DTC or its nominee is the registered owner of the global note,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the notes represented by the global note for all purposes under the
Indenture. Except as described below, as an owner of a beneficial interest in
notes evidenced by the global note you will not be entitled to have any of the
individual notes represented by such global note registered in your name, you
will not receive or be entitled to receive physical delivery of any such notes
in definitive form and you will not be considered the owner or holder thereof
under the Indenture for any purpose, including with respect to the giving of
any direction, instructions or approvals to the Trustee thereunder.
Accordingly, you must rely on the procedures of DTC and, if you are not a
Direct Participant, on the procedures of the Direct Participant through which
you own your interest, to exercise any rights of a "holder" under the
Indenture. We understand that, under existing industry practice, if we request
any action
S-22
<PAGE>
of holders or if an owner of a beneficial interest in a global note desires to
give or take any action which a holder is entitled to give or take under the
Indenture, DTC would authorize the Direct Participants holding the relevant
beneficial interest to give or take such action, and such Direct Participants
would authorize beneficial owners through such Direct Participants to give or
take such actions or would otherwise act upon the instructions of beneficial
owners holding through them.
Payments of principal of, any premium, if any, and any interest or
additional amount on individual notes represented by a global note registered
in the name of the holder of the global note or its nominee will be made by the
Trustee to or at the direction of the holder of the global note or its nominee,
as the case may be, as the registered owner of the global note under the
Indenture. Under the terms of the Indenture, we and the Trustee may treat the
persons in whose name notes, including a global note, are registered as the
owners thereof for the purpose of receiving such payments. Consequently,
neither we nor the Trustee has or will have any responsibility or liability for
the payment of such amounts to beneficial owners of notes (including principal,
premium, if any, and interest or additional amount).
We believe, however, that it is currently the policy of DTC to immediately
credit the accounts of relevant Direct Participants with such payments in
amounts proportionate to their respective holdings of beneficial interests in
the relevant security as shown on the records of DTC. Payments by Direct
Participants to the beneficial owners of notes will be governed by standing
instructions and customary practice and will be the responsibility of DTC's
Direct Participants. Redemption notices with respect to any notes will be sent
to the holder of the global note (i.e., DTC, its nominee or any subsequent
holder). If less than all of the notes of any series are to be redeemed, we
expect the holder of the global note to determine the amount of interest of
each Direct Participant in the notes to be redeemed by lot. Neither we, the
Trustee, any paying agent nor the security registrar for such notes will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in the global note
for such notes.
Neither we nor the Trustee will be liable for any delay by the holder of a
global note or DTC in identifying the beneficial owners of notes and we and the
Trustee may conclusively rely on, and will be protected in relying on,
instructions from the holder of a global note or DTC for all purposes.
The notes, which are represented by the global note, will be exchangeable
for certificated notes with the same terms in authorized denominations only if:
o DTC notifies us that it is unwilling or unable to continue as depositary
or if DTC ceases to be a clearing agency registered under applicable law
and a successor depositary is not appointed by us within 90 days; or
o we determine not to require all of the notes to be represented by a
global note and notify the Trustee of our decision, in which case we will
issue individual notes in denominations of $1,000 and integral multiples
thereof.
Same-Day Settlement and Payment
The Underwriters will make settlement for the notes in immediately
available funds. We will make all payments of principal and interest in respect
of the notes in immediately available funds.
The notes will trade in DTC's Same-Day Funds Settlement System until
maturity or until the notes are issued in certificated form, and secondary
market trading activity in the notes will therefore be required by DTC to
settle in immediately available funds. We expect that secondary trading in the
certificated securities, if any, will also be settled in immediately available
funds. No assurance can be given as to the effect, if any, of settlement in
immediately available funds on trading activity in the notes.
S-23
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the notes is based
upon the Internal Revenue Code of 1986, as amended (the "Tax Code"), United
States treasury regulations, and rulings and decisions now in effect, all of
which are subject to change (including changes in effective dates) or possible
differing interpretations. The following discussion deals only with notes held
as capital assets and does not purport to deal with persons in special tax
situations, such as financial institutions, banks, insurance companies,
regulated investment companies, dealers in securities or currencies, persons
holding notes as a hedge against currency risks or as a position in a
"straddle" for tax purposes, or persons whose functional currency is not the
United States dollar. It also does not deal with holders other than original
purchasers (except where otherwise specifically noted). Before purchasing the
notes, you should consult your own tax advisor concerning the application of
United States Federal income tax laws to your particular situation as well as
any consequences of the purchase, ownership and disposition of the notes
arising under the laws of any other taxing jurisdiction.
"U.S. Holder" means a beneficial owner of a note that is for United States
Federal income tax purposes:
(1) a citizen or resident of the United States,
(2) a corporation or partnership (or other entity treated as a corporation or
partnership for United States Federal income tax purposes) created or
organized in or under the laws of the United States, any State thereof or
the District of Columbia (unless otherwise provided by United States
treasury regulations),
(3) an estate the income of which is subject to United States Federal income
taxation regardless of its source,
(4) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of
the trust (or certain electing trusts in existence on August 20, 1996 to
the extent provided in United States treasury regulations), or
(5) any other person whose income or gain in respect of a note is effectively
connected with the conduct of a United States trade or business.
"Non-U.S. Holder" means a beneficial owner of a note that is not a U.S.
Holder.
The Notes
For United States Federal income tax purposes, each note will be treated
as indebtedness issued by HRP.
U.S. Holders
If you are a U.S. Holder:
Payments of Interest. Interest on a note will generally be includible in
your gross income as ordinary interest income at the time such payments are
received or accrued in accordance with your regular method of tax accounting.
Such interest will be treated as U.S. source income for United States Federal
income tax purposes. Purchase price for a note that is allocable to prior
accrued interest may be treated as offsetting a portion of the interest income
from the next scheduled interest payment on the note.
Disposition of a Note. Upon the sale, exchange, redemption, retirement or
other disposition of a note, you generally will recognize taxable gain or loss
in an amount equal to the difference, if any,
S-24
<PAGE>
between the amount realized upon such sale, exchange, redemption, retirement,
or other disposition (other than amounts representing accrued and unpaid
interest which will be taxable as interest income) and your adjusted tax basis
in the note. Such gain or loss generally will be capital gain or loss, and will
be long-term capital gain or loss if you have held the note for more than one
year at the time of disposition; preferential rates of tax may apply to gains
recognized upon the disposition of notes held for more than one year.
Gain or Income Received by a Foreign Corporation. A foreign corporation
whose income or gain in respect of a note is effectively connected with the
conduct of a United States trade or business, in addition to being subject to
regular United States Federal income tax, may be subject to a branch profits
tax equal to 30% of its "effectively connected earnings and profits" within the
meaning of the Tax Code, for the taxable year, as adjusted for certain items,
unless it qualifies for a lower rate under an applicable tax treaty (as
modified by the branch profits tax rules under the Tax Code).
Non-U.S. Holders
If you are a non-U.S. Holder:
General. Generally, you will not be subject to United States Federal
income taxes on payments of principal, premium (if any), or interest on a note,
or on any gain upon disposition or retirement of a note, if (1) you do not own
directly or indirectly 10% or more of the shares of beneficial interest of HRP
and (2) the last United States payor in the chain of payment (the "Withholding
Agent") has received from you in the year in which a payment of interest or
principal occurs, or in either of the two preceding calendar years, a statement
signed by you under penalties of perjury certifying that you are not a U.S.
Holder and providing your name and address. You may make this statement on an
Internal Revenue Service Form W-8 or a substantially similar form, and you must
inform the Withholding Agent of any change in the information on the statement
within 30 days of such change. If you hold a note through a securities clearing
organization or certain other financial institutions, the organization or
institution may provide a signed statement to the Withholding Agent. However,
in such case, the signed statement must be accompanied by a copy of the IRS
Form W-8 or the substitute form you provided to the organization or
institution. Interest received or gain recognized by you which does not qualify
for exemption from taxation will be subject to United States Federal income tax
and withholding tax at a rate of 30% unless reduced or eliminated by an
applicable tax treaty.
New Treasury Regulations. United States treasury regulations issued on
October 6, 1997 alter the withholding rules on interest paid to a non-U.S.
Holder of a note. Under recent administrative guidance, these new regulations
are generally effective with respect to interest paid after December 31, 1999.
Withholding will generally be excused under these new regulations if you own
(directly or indirectly) less than 10% of the shares of beneficial interest of
HRP and if you execute the necessary IRS Form W-8. Moreover, under the new
regulations, to obtain a reduced rate of withholding under an income tax
treaty, you generally will be required to provide an IRS Form W-8 certifying
your entitlement to benefits under the treaty. The new regulations also provide
special rules to determine whether, for purposes of determining the
applicability of a tax treaty, interest paid to a non-U.S. Holder that is an
entity should be treated as paid to the entity or to those holding the
ownership interests in that entity, and whether such entity or such holders in
the entity are entitled to benefits under the tax treaty. The new regulations
also alter the information reporting and backup withholding rules applicable to
non-U.S. Holders and, among other things, provide certain presumptions under
which a non-U.S. Holder is subject to backup withholding and information
reporting until certification of non-U.S. status is received from such non-U.S.
Holder. The foregoing is not intended to be a complete discussion of the new
regulations, and we urge you to consult your tax advisor regarding the effect
of the new regulations on an investment in the notes.
S-25
<PAGE>
Estate Taxes. The notes will not be includable in your estate unless you
own directly or indirectly 10% or more of the shares of beneficial interest of
HRP or, at the time of your death, payments in respect of the notes would have
been effectively connected with your conduct of a trade or business in the
United States.
Backup Withholding
Backup withholding of United States Federal income tax at a rate of 31%
may apply to payments made in respect of the notes if you are not an "exempt
recipient" and you fail to provide certain identifying information (such as
your taxpayer identification number) in the required manner. Generally,
individuals are not exempt recipients, whereas corporations and certain other
entities generally are exempt recipients. If you are a U.S. Holder, payments
made to you in respect of the notes must be reported to the IRS, unless you are
an exempt recipient or establish an exemption. Compliance with the
identification procedures described in the preceding section would establish an
exemption from backup withholding for you if you are a non-U.S. Holder and are
not an exempt recipient.
In addition, if you sell a note through a broker, the broker must withhold
31% of your entire sales proceeds, unless either (1) the broker determines that
the seller is a corporation or other exempt recipient or (2) you provide, in
the required manner, certain identifying information and, if you are a non-U.S.
Holder, you certify that you are a non-U.S. Holder (and certain other
conditions are met). Such a sale must also be reported by the broker to the
IRS, unless either (1) the broker determines that you are an exempt recipient
or (2) you certify your non-U.S. status (and certain other conditions are met).
Certification of your non-U.S. status if you are a non-U.S. Holder would be
made normally on an IRS Form W-8 under penalties of perjury, although in
certain cases it may be possible to submit other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to
you would be allowed as a refund or a credit against your United States Federal
income tax, provided you furnish the required information to the IRS.
S-26
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the purchase agreement,
we have agreed to sell to Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, A.G. Edwards & Sons, Inc.,
Legg Mason Wood Walker, Incorporated, Morgan Stanley & Co. Incorporated,
PaineWebber Incorporated, Prudential Securities Incorporated and Salomon Smith
Barney Inc. (the "Underwriters"), and the Underwriters have severally agreed to
purchase the respective principal amount of notes set forth opposite their
names below. In the purchase agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth in the purchase agreement, to
purchase all of the notes offered in this prospectus supplement if any of the
notes are purchased. In the event of a default by an Underwriter, the purchase
agreement provides that, in certain circumstances, the purchase commitments of
the non-defaulting Underwriters may be increased or the purchase agreement may
be terminated.
<TABLE>
<CAPTION>
Principal
Underwriter Amount of Notes
----------- ---------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated .................................... $ 16,250,000
Donaldson, Lufkin & Jenrette Securities Corporation ......... 16,250,000
A.G. Edwards & Sons, Inc. ................................... 16,250,000
Legg Mason Wood Walker, Incorporated ........................ 16,250,000
Morgan Stanley & Co. Incorporated ........................... 16,250,000
PaineWebber Incorporated .................................... 16,250,000
Prudential Securities Incorporated .......................... 16,250,000
Salomon Smith Barney Inc. ................................... 16,250,000
------------
Total ........................................... $130,000,000
============
</TABLE>
The Underwriters have advised us that they propose initially to offer the
notes to the public at the public offering price set forth on the cover page of
this prospectus supplement, and to certain dealers at such price less a
concession not in excess of 2.5% of the principal amount thereof. The
Underwriters may allow, and those dealers may reallow, a discount not in excess
of 2% of the principal amount thereof on sales to certain other dealers. After
the initial public offering, the public offering price, concession and discount
may be changed.
We have granted to the Underwriters an option to purchase additional notes
up to an aggregate amount of $19,500,000, at the public offering price plus
accrued interest, if any, less the underwriting discount shown on the cover
page of this prospectus supplement, solely to cover overallotments, if any. The
option may be exercised at any time within 30 days after the date of this
prospectus supplement. To the extent that the option is exercised, each
Underwriter will be committed, subject to certain conditions, to purchase
additional notes proportionate to the Underwriter's initial commitment as
indicated in the preceding table.
The following table shows the per note and total underwriting discount to
be paid by us to the Underwriters. This information is presented assuming
either no exercise or full exercise by the Underwriters of their overallotment
option.
<TABLE>
<CAPTION>
Per Note Without Option With Option
-------- -------------- -----------
<S> <C> <C> <C>
Public offering price ...................... 100% $130,000,000 $149,500,000
Underwriting discount ...................... 3% $ 3,900,000 $ 4,485,000
Proceeds, before expenses, to HRP .......... 97% $126,100,000 $145,015,000
</TABLE>
We estimate that we will spend approximately $4.1 million for printing,
rating agency, trustee, legal, accounting, underwriting discount and other
expenses related to the offering of the notes.
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<PAGE>
The notes constitute a new issue of securities with no established trading
market. We do not intend to list the notes on any national securities exchange.
No assurance can be given as to whether or not a trading market for the notes
will develop or as to the liquidity of any trading market for the notes which
may develop.
Until the distribution of the notes is completed, rules of the SEC may
limit the ability of the Underwriters to bid for and purchase the notes. As an
exception to these rules, the Underwriters are permitted to engage in certain
transactions that stabilize the price of the notes. Such transactions consist
of bids or purchases for the purpose of pegging, fixing or maintaining the
price of the notes.
If the Underwriters create a short position in the notes in connection
with this offering, i.e., they sell more notes than are set forth on the cover
page of this prospectus supplement, the Underwriters may reduce that short
position by purchasing notes in the open market.
In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.
Neither we nor any of the Underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the notes. In addition, neither we nor
any of the Underwriters make any representation that the Underwriters will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
We have agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
In the ordinary course of their respective businesses, the Underwriters
and their affiliates have engaged in, and may in the future engage in,
commercial banking and investment banking transactions with us.
S-28
<PAGE>
RATINGS
This prospectus supplement refers to ratings currently assigned to certain
of HRP's debt. A rating assigned to such debt will reflect the applicable
rating agency's assessment of the likelihood that the holders of such debt will
receive the payments of interest and principal required to be made. The rating
will not be a recommendation to purchase, hold, or sell the notes or any other
debt of HRP, and such rating will not comment as to the marketability of the
notes or any other debt of HRP, any market price or suitability for a
particular investor. There is no assurance that any rating will remain for any
given period of time or that any rating will not be lowered or withdrawn
entirely by a rating agency if in such rating agency's judgment circumstances
so warrant. Each rating should be evaluated independently of any other rating.
LEGAL MATTERS
Sullivan & Worcester LLP, Boston, Massachusetts, our lawyers, have issued
an opinion about the legality of the notes. Brown & Wood LLP, New York, New
York, the Underwriters' lawyers, will also issue an opinion for the
Underwriters. Sullivan & Worcester LLP and Brown & Wood LLP will rely, as to
certain matters of Maryland law, upon an opinion of Piper & Marbury L.L.P.,
Baltimore, Maryland. Barry M. Portnoy was a partner in the firm of Sullivan &
Worcester LLP until March 31, 1997 and is one of our Managing Trustees. Mr.
Portnoy is also a Managing Trustee of HPT and a director and 50% owner of REIT
Management & Research, Inc., the investment advisor to HRP, and a director
and/or significant shareholder of certain of HRP's tenants. Sullivan &
Worcester LLP represents HPT, REIT Management & Research, Inc., such tenants
and certain of their affiliates on various matters.
S-29
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we may disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus supplement, and information that we
subsequently file with the SEC will automatically update and supersede this
information. We incorporate by reference the documents listed below which were
filed with the SEC under the Securities Exchange Act of 1934, as amended
("Exchange Act"):
o Quarterly Reports on Form 10-Q for the quarters ended June 30, 1998 and
September 30, 1998; and
o Current Reports on Form 8-K dated July 1, 1998, August 12, 1998, August
24, 1998, November 12, 1998 and November 24, 1998.
We also incorporate by reference each of the following documents that we
will file with the SEC after the date of this prospectus supplement but before
the end of the notes offering:
o Reports filed under Sections 13(a) and (c) of the Exchange Act;
o Definitive proxy or information statements filed under Section 14 of the
Exchange Act in connection with any subsequent stockholders' meeting; and
o Any reports filed under Section 15(d) of the Exchange Act.
You may request a copy of any of the filings (excluding exhibits), at no
cost, by writing or telephoning us at the following address:
Investor Relations
HRPT Properties Trust
400 Centre Street
Newton, Massachusetts 02458
(617) 332-3990
WHERE YOU CAN FIND MORE INFORMATION
You may read and copy any material that we file with the SEC at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You
may obtain information on the operation of the Public Reference Room by calling
the SEC at 1-800-SEC-0330. You may access our electronic filings on the SEC's
Internet site, http://www.sec.gov, which contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the SEC.
S-30
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus supplement contains forward-looking statements. We have
based these statements on our current expectations or projections about future
events and on assumptions we have made. These forward-looking statements are
subject to certain risks and uncertainties which could cause actual results or
events to differ materially from those we anticipate or project. Prospective
purchasers should not place undue reliance on these forward-looking statements.
We undertake no obligation to update or revise any forward-looking statements
as a result of new information, future events or otherwise.
----------------
You should rely only on the information contained or incorporated by
reference in this prospectus supplement or the accompanying prospectus. We have
not, and the Underwriters have not, authorized any other person to provide you
with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
Underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus supplement or the accompanying
prospectus, as well as information we have previously filed with the SEC and
incorporated by reference, is accurate as of the date on the front cover of
this prospectus supplement only. Our business, financial condition, results of
operations and prospects may have changed since that date.
----------------
The Amended and Restated Declaration of Trust establishing HRP, dated July
1, 1994, a copy of which, together with all amendments thereto, is duly filed
in the office of the Department of Assessments and Taxation of the State of
Maryland, provides that the name "HRPT 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 HRP
shall be held to any personal liability, jointly or severally, for any
obligation of, or claim against, HRP. All persons dealing with HRP, in any way,
shall look only to the assets of HRP for the payment of any sum or the
performance of any obligation.
S-31
<PAGE>
GLOSSARY
"Acquired Debt" means Debt of a person or entity (1) existing at the time
such person or entity becomes a Subsidiary or (2) assumed in connection with
the acquisition of assets from such person or entity, in each case, other than
Debt incurred in connection with, or in contemplation of, such person or entity
becoming a Subsidiary or such acquisition. Acquired Debt is deemed to be
incurred on the date of the related acquisition of assets from any person or
entity or the date the acquired person or entity becomes a Subsidiary.
"Annual Debt Service" as of any date means the maximum amount which is
expensed in any 12-month period for interest on Debt of HRP and its
Subsidiaries.
"Business Day" means any day other than a Saturday or Sunday or a day on
which banking institutions in The City of New York or in the city in which the
Corporate Trust Office of the Trustee is located are required or authorized to
close.
"Capital Stock" means, with respect to any entity, any capital stock
(including preferred stock), shares, interests, participation or other
ownership interests (however designated) of such entity and any rights (other
than debt securities convertible into or exchangeable for capital stock),
warrants or options to purchase any thereof.
"Consolidated Income Available for Debt Service" for any period means
Earnings from Operations of HRP and its Subsidiaries plus amounts which have
been deducted, and minus amounts which have been added, for the following
(without duplication): (1) interest on Debt of HRP and its Subsidiaries, (2)
provision for taxes of HRP and its Subsidiaries based on income, (3)
amortization of debt discount and deferred financing costs, (4) provisions for
gains and losses on properties and property depreciation and amortization, (5)
the effect of any noncash charge resulting from a change in accounting
principles in determining Earnings from Operations for such period and (6)
amortization of deferred charges.
"Debt" of HRP or any Subsidiary means, without duplication, any
indebtedness of HRP or any Subsidiary, whether or not contingent, in respect of
(1) borrowed money or evidenced by bonds, notes, debentures or similar
instruments,
(2) indebtedness for borrowed money secured by any encumbrance existing on
property owned by HRP or any Subsidiary, to the extent of the lesser of
(x) the amount of indebtedness so secured and (y) the fair market value of
the property subject to such encumbrance,
(3) the reimbursement obligations, contingent or otherwise, in connection
with any letters of credit actually issued (other than letters of credit
issued to provide credit enhancement or support with respect to other
indebtedness of HRP or any Subsidiary otherwise reflected as Debt
hereunder) or amounts representing the balance deferred and unpaid of the
purchase price of any property or services, except any such balance that
constitutes an accrued expense or trade payable, or all conditional sale
obligations or obligations under any title retention agreement,
(4) the principal amount of all obligations of HRP or any Subsidiary with
respect to redemption, repayment or other repurchase of any Disqualified
Stock, or
(5) any lease of property by HRP or any Subsidiary as lessee which is
reflected on HRP's consolidated balance sheet as a capitalized lease in
accordance with GAAP, to the extent, in the case of items of indebtedness
under (1) through (3) above, that any such items (other than letters of
credit) would appear as a liability on HRP's consolidated balance sheet in
accordance with GAAP.
Debt also includes, to the extent not otherwise included, any obligation by HRP
or any Subsidiary to be liable for, or to pay, as obligor, guarantor or
otherwise (other than for purposes of collection in the ordinary course of
business), Debt of another person or entity (other than HRP or any Subsidiary)
(it
S-32
<PAGE>
being understood that Debt shall be deemed to be incurred by HRP or any
Subsidiary whenever HRP or such Subsidiary shall create, assume, guarantee or
otherwise become liable in respect thereof).
"Disqualified Stock" means, with respect to any entity, any Capital Stock
of such entity which by the terms of such Capital Stock (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (1) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise
(other than Capital Stock which is redeemable solely in exchange for common
stock or shares), (2) is convertible into or exchangeable or exercisable for
Debt or Disqualified Stock, or (3) is redeemable at the option of the holder
thereof, in whole or in part (other than Capital Stock which is redeemable
solely in exchange for common stock or shares), in each case on or prior to the
stated maturity of the notes.
"Earnings from Operations" for any period means net earnings excluding
gains and losses on sales of investments, extraordinary items and property
valuation losses, as reflected in the financial statements of HRP and its
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP.
"Funds From Operations" or "FFO" means net income (computed in accordance
with GAAP), before gain or loss on sale of properties and extraordinary items,
depreciation and other non-cash items and includes HRP's pro rata share of the
FFO of HPT, a former subsidiary of HRP, which is now a separate publicly traded
REIT in which we maintain a minority equity interest.
"GAAP" means generally accepted accounting principles.
"Ratio of Earnings to Fixed Charges" for any period means HRP's earnings
divided by fixed charges. For this purpose, earnings have been calculated by
adding fixed charges to income before income taxes and extraordinary items.
Fixed charges consist of interest costs including amortization of deferred
financing costs.
"Secured Debt" means Debt secured by any mortgage, lien, charge, pledge or
security interest of any kind.
"Significant Subsidiary" means any Subsidiary which is a "significant
subsidiary" (within the meaning of Regulation S-X, promulgated by the SEC under
the Securities Act of 1933, as amended) of HRP.
"Subsidiary" means any corporation or other entity of which a majority of
(1) the voting power of the voting equity securities or (2) the outstanding
equity interests of which are owned, directly or indirectly, by HRP or one or
more other Subsidiaries of HRP. For the purposes of this definition, "voting
equity securities" means equity securities having voting power for the election
of directors, whether at all times or only so long as no senior class of
security has such voting power by reason of any contingency.
"Total Assets" as of any date means the sum of (1) the Undepreciated Real
Estate Assets and (2) all other assets of HRP and its Subsidiaries determined
in accordance with GAAP (but excluding accounts receivable and intangibles).
"Total Unencumbered Assets" means the sum of (1) those Undepreciated Real
Estate Assets not subject to an encumbrance for borrowed money and (2) all
other assets of HRP and its Subsidiaries not subject to an encumbrance for
borrowed money determined in accordance with GAAP (but excluding accounts
receivable and intangibles).
"Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of HRP and its
Subsidiaries on such date, before depreciation and amortization, determined on
a consolidated basis in accordance with GAAP.
"Unsecured Debt" means Debt which is not secured by any of the properties
of HRP or any Subsidiary.
S-33
<PAGE>
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<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Introduction to Unaudited Adjusted Pro Forma Consolidated Financial Statements .. F-2
Unaudited Adjusted Pro Forma Consolidated Balance Sheet as of September 30, 1998 F-3
Unaudited Adjusted Pro Forma Consolidated Statement of Income for the nine months
ended September 30, 1998 ...................................................... F-4
Unaudited Adjusted Pro Forma Consolidated Statement of Income for the year ended
December 31, 1997 ............................................................. F-5
Notes to Unaudited Adjusted Pro Forma Consolidated Financial Statements ......... F-6
</TABLE>
F-1
<PAGE>
HRPT PROPERTIES TRUST
Introduction to Unaudited Adjusted Pro Forma Consolidated Financial Statements
The following unaudited adjusted pro forma consolidated balance sheet at
September 30, 1998, is intended to present our consolidated financial position
as if the transactions described in the notes hereto were completed on
September 30, 1998. The following unaudited adjusted pro forma consolidated
statements of income are intended to present our consolidated results of
operations as if these transactions were completed as of the beginning of the
periods presented. These unaudited pro forma consolidated financial statements
should be read in conjunction with, and are qualified in their entirety by
reference to, our separate consolidated financial statements for the year ended
December 31, 1997, incorporated herein by reference to our Current Report on
Form 8-K dated February 27, 1998, our unaudited consolidated financial
statements for the quarter ended September 30, 1998, incorporated herein by
reference to our Quarterly Report on Form 10-Q for the quarter ended September
30, 1998, and our unaudited pro forma consolidated financial statements
incorporated herein by reference to our Current Report on Form 8-K dated
November 12, 1998.
In addition to pro forma adjustments relating to properties acquired
during 1997 and 1998, these unaudited adjusted pro forma consolidated financial
statements include adjustments for the results of certain properties which were
under development during 1997 or 1998. See Notes B, G and J. HRP believes that
presentation of combined pro forma and adjusted financial data is meaningful
and relevant to an understanding of the effects of the transactions described
in the notes hereto on HRP. We can give no assurance that these adjusted pro
forma consolidated financial statements reflect the consolidated financial
results which would have been realized if the acquisition and development of
the relevant property were completed as of the beginning of the period
presented.
These unaudited pro forma consolidated financial statements are not
necessarily indicative of what the actual consolidated financial position or
results of operations of HRP would have been as of the date or for the period
indicated, nor do they represent our expected consolidated financial position
or results of operations for any future period. Differences would result from,
among other considerations, future changes in our portfolio of investments,
changes in interest rates, changes in our capital structure, changes in the
occupancy of our properties, changes in rent which we receive, delays in the
acquisition of certain properties and changes in property level operating
expenses.
F-2
<PAGE>
HRPT PROPERTIES TRUST
Unaudited Adjusted Pro Forma Consolidated Balance Sheet
September 30, 1998
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Adjusted
Historical (A) Adjustments Pro Forma
-------------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Real estate properties, at cost:
Land ................................................................... $ 347,408 $ 31,343 $ 378,751
Buildings and improvements ............................................. 2,439,848 119,986 2,559,834
---------- ---------- ----------
2,787,256 151,329 (B) 2,938,585
Less accumulated depreciation .......................................... (153,137) -- (153,137)
---------- ---------- ----------
2,634,119 151,329 2,785,448
Real estate mortgages and notes, net ..................................... 69,369 -- 69,369
Investment in HPT ........................................................ 111,345 -- 111,345
Cash and cash equivalents ................................................ 46,942 (37,279)(C) 9,663
Interest and rents receivable ............................................ 29,557 -- 29,557
Other assets, net ........................................................ 34,764 (6,050)(D) 28,714
---------- ---------- ----------
$2,926,096 $ 108,000 $3,034,096
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Bank notes payable ....................................................... $ 95,000 $ (22,000)(E) $ 73,000
Senior notes payable, net ................................................ 659,402 130,000 (F) 789,402
Mortgage notes payable ................................................... 25,399 -- 25,399
Convertible subordinated debentures ...................................... 204,863 -- 204,863
Accounts payable and accrued expenses .................................... 34,780 -- 34,780
Deferred rents ........................................................... 34,696 -- 34,696
Security deposits ........................................................ 18,143 -- 18,143
Due to affiliates ........................................................ 15,245 -- 15,245
Shareholders' equity:
Preferred shares of beneficial interest, $.01 par value;
50,000,000 shares authorized; none issued ............................. -- -- --
Common shares of beneficial interest, $.01 par
value; 150,000,000 shares authorized; 131,547,178
shares issued and outstanding ......................................... 1,315 -- 1,315
Additional paid-in capital ............................................. 1,964,878 -- 1,964,878
Cumulative net income .................................................. 525,602 -- 525,602
Dividends .............................................................. (653,227) -- (653,227)
---------- ---------- ----------
Total shareholders' equity ............................................ 1,838,568 -- 1,838,568
---------- ---------- ----------
$2,926,096 $ 108,000 $3,034,096
========== ========== ==========
</TABLE>
F-3
<PAGE>
HRPT PROPERTIES TRUST
Unaudited Adjusted Pro Forma Consolidated Statement of Income
For the Nine Months Ended September 30, 1998
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Adjusted
Historical (A) Adjustments Pro Forma
-------------- ----------- ------------
<S> <C> <C> <C>
Revenues:
Rental income .......................................... $239,045 $53,382(G) $292,427
Interest and other income .............................. 13,158 -- 13,158
-------- ------- --------
Total revenues ........................................ 252,203 53,382 305,585
-------- ------- --------
Expenses:
Operating expenses ..................................... 51,535 15,432(G) 66,967
Interest ............................................... 45,788 11,173(G, H) 56,961
Depreciation and amortization .......................... 43,093 9,699(G) 52,792
General and administrative ............................. 12,354 2,082(G) 14,436
-------- ------- --------
Total expenses ........................................ 152,770 38,386 191,156
-------- ------- --------
Income before equity in earnings of HPT .................. 99,433 14,996 114,429
Equity in earnings of HPT ................................ 5,541 -- 5,541
Gain on equity transaction of HPT ........................ 2,470 -- 2,470
-------- ------- --------
Income before extraordinary item ......................... 107,444 14,996 122,440
Extraordinary item--early extinguishment of debt ......... (2,140) -- (2,140)
-------- ------- --------
Net income ............................................... $105,304 $14,996 $120,300
======== ======= ========
Basic FFO ................................................ $153,228 $24,695 $177,923
======== ======= ========
Diluted FFO .............................................. $165,384 $24,695 $190,079
======== ======= ========
Weighted average common shares outstanding ............... 115,931 15,392(I) 131,323
======== ======= ========
Diluted average common shares outstanding ................ 127,437 15,392(I) 142,829
======== ======= ========
Basic and diluted earnings per common share:
Net income ............................................... $ 0.91 $ 0.92
======== ========
Basic FFO ................................................ $ 1.32 $ 1.35
======== ========
Diluted FFO .............................................. $ 1.30 $ 1.33
======== ========
</TABLE>
F-4
<PAGE>
HRPT PROPERTIES TRUST
Unaudited Adjusted Pro Forma Consolidated Statement of Income
For the Year Ended December 31, 1997
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Adjusted
Historical (A) Adjustments Pro Forma
-------------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Rental income .......................................... $ 188,000 $ 192,103(J) $380,103
Interest and other income .............................. 20,863 (366) 20,497
--------- ---------- --------
Total revenues ........................................ 208,863 191,737 400,600
--------- ---------- --------
Expenses:
Operating expenses ..................................... 26,765 58,004(J) 84,769
Interest ............................................... 36,766 36,833(J,K) 73,599
Depreciation and amortization .......................... 39,330 34,356(J) 73,686
General and administrative ............................. 11,670 8,850(J) 20,520
--------- ---------- --------
Total expenses ........................................ 114,531 138,043 252,574
--------- ---------- --------
Income before equity in earnings of HPT, gain on sale
of properties and extraordinary item ................... 94,332 53,694 148,026
Equity in earnings of HPT ................................ 8,590 -- 8,590
Gain on equity transaction of HPT ........................ 9,282 -- 9,282
--------- ---------- --------
Income before gain on sale of properties and
extraordinary item ..................................... 112,204 53,694 165,898
Gain on sale of properties, net .......................... 2,898 -- 2,898
--------- ---------- --------
Income before extraordinary item ......................... 115,102 53,694 168,796
Extraordinary item--early extinguishment of debt ......... (1,102) -- (1,102)
--------- ---------- --------
Net income ............................................... $ 114,000 $ 53,694 $167,694
========= ========== ========
Basic FFO ................................................ $ 146,312 $ 88,050 $234,362
========= ========== ========
Diluted FFO .............................................. $ 162,738 $ 88,050 $250,788
========= ========== ========
Weighted average common shares outstanding ............... 92,168 38,557(L) 130,725
========= ========== ========
Diluted average common shares outstanding ................ 103,952 38,557(L) 142,509
========= ========== ========
Basic and diluted earnings per common share:
Net income ............................................... $ 1.24 $ 1.28
========= ========
Basic FFO ................................................ $ 1.59 $ 1.79
========= ========
Diluted FFO .............................................. $ 1.57 $ 1.76
========= ========
</TABLE>
F-5
<PAGE>
HRPT PROPERTIES TRUST
Notes To Unaudited Adjusted Pro Forma Consolidated Financial Statements
(dollars in thousands)
A. Represents the historical consolidated balance sheet and income statement of
HRP as of and for the periods ending December 31, 1997, and September 30,
1998, respectively.
Consolidated Balance Sheet Adjustments
B. Represents HRP's acquisitions in October 1998 of developable land and five
commercial office properties located in Texas and a commercial office
property located in Maryland (the "Recent Acquisitions") and the proposed
acquisitions of a commercial office property located in California and two
commercial office properties located in Texas (the "Proposed Acquisitions").
The Proposed Acquisitions are subject to various closing conditions customary
in real estate transactions, including, but not limited to, due diligence and
final documentation. We can give you no assurance as to when or if these
Proposed Acquisitions will be consummated. The effects are as follows:
Real estate, at cost ......... $ 20,590
Cash ......................... (22)
Other assets, net ............ (10,068)
---------
Bank notes payable ........... $ 10,500
=========
C. Represents net cash on hand used for the Recent Acquisitions and the expected
cash to be used for the Proposed Acquisitions.
D. Represents deferred financing costs in connection with the issuance of the
notes, offset by deposits relating to the Recent Acquisitions and the
Proposed Acquisitions.
E. Represents proposed net borrowings under HRP's revolving line of credit as
follows:
<TABLE>
<S> <C>
Repayment with proceeds from this offering ........................ $ (126,000)
Drawings to partially fund the Recent Acquisitions and the Proposed
Acquisitions ..................................................... 104,000
----------
$ (22,000)
==========
</TABLE>
F. Represents the issuance of the notes.
Consolidated Statement of Income Adjustments for the Nine Months Ended
September 30, 1998
G. Represents the increases in rental income, operating expenses, interest
expense, depreciation and amortization and general and administrative
expenses arising from the Proposed Acquisitions, the Recent Acquisitions and
HRP's acquisitions during the first nine months of 1998 of two medical office
properties and seven commercial office properties located in Pennsylvania,
two commercial office properties and three medical office properties located
in Texas, a medical office property and three commercial office properties
located in Massachusetts, a commercial office property located in Maryland, a
medical office property located in California, four commercial office
properties located in New Jersey, a commercial office property located in
Connecticut, a commercial office property located in Ohio, a commercial
office property located in Washington D.C., a commercial office property
located in New York, three commercial office properties located in Minnesota,
a commercial office property located in Delaware, a commercial office
property located in Virginia, a commercial office property located in
Tennessee and three medical office properties and a commercial
F-6
<PAGE>
HRPT PROPERTIES TRUST
Notes To Unaudited Adjusted Pro Forma Consolidated Financial Statements
(dollars in thousands)
office property located in Florida (including the Recent Acquisitions and
the Proposed Acquisitions, collectively, the "1998 Acquisitions"). These
acquisitions were funded with available cash and by drawings under our Bank
Credit Facility.
The effects of the Proposed Acquisitions are as follows:
Total revenue ............... $2,558
Total expenses .............. 1,755
------
Net income .................. $ 803
======
H. Represents the net increase in interest expense relating to the issuance of
additional Remarketed Reset Notes and 6.7% Senior Notes due in 2005 (the
"6.7% Notes") in February 1998, the issuance of 6-7/8% Senior Notes due in
2002 (the "6-7/8% Notes") in August 1998, the net decrease in interest
expense arising from HRP's sale of common shares in February 1998, March 1998
and June 1998, and the use of proceeds from this offering to repay amounts
then outstanding on our Bank Credit Facility.
I. Reflects the sale of common shares by HRP during February 1998, March 1998
and June 1998.
Consolidated Statement of Income Adjustments for the Year Ended December 31,
1997
J. Represents the increases in rental income, operating expenses, interest
expense, depreciation and amortization and general and administrative
expenses arising from the 1998 Acquisitions, and the acquisitions during 1997
of the Government leased properties from Government Property Investors, Inc.
("GPI"), two medical office properties and two parking structures located in
California, a 200 unit retirement housing property located in Washington, 20
medical office clinics and ancillary structures located in Massachusetts,
three medical and two commercial office properties located in Pennsylvania, a
medical office property located in Colorado, a medical office property
located in Maryland, a medical laboratory property located in Rhode Island,
three medical office properties located in California and a medical office
property located in Washington D.C. These acquisitions were funded with
available cash and by drawings under our Bank Credit Facility.
The effects of the Proposed Acquisitions are as follows:
Total revenue ............... $11,630
Total expenses .............. 6,623
-------
Net income .................. $ 5,007
=======
K. Represents the net increase in interest expense relating to the issuance of
Remarketed Reset Notes in July 1997 and February 1998, the issuance of 6.75%
Senior Notes due in 2002 in December 1997, the 6.7% Notes, the 6-7/8% Notes,
the assumption of indebtedness pursuant to the acquisition of GPI, the net
decrease in interest expense arising from the prepayment of certain floating
rate senior notes in July 1997, the issuance of common shares pursuant to the
GPI acquisition, the sale of common shares in February 1998, March 1998 and
June 1998, and the use of proceeds from this offering to repay amounts then
outstanding on our Bank Credit Facility.
L. Reflects the issuance of common shares by HRP in March 1997, February 1998,
March 1998 and June 1998.
F-7
<PAGE>
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<PAGE>
================================================================================
$130,000,000
HRPT Properties Trust
8-1/2% Monthly Income Senior Notes due 2013
-------------------------
PROSPECTUS SUPPLEMENT
-------------------------
Merrill Lynch & Co.
Donaldson, Lufkin & Jenrette
A.G. Edwards & Sons, Inc.
Legg Mason Wood Walker
Incorporated
Morgan Stanley Dean Witter
PaineWebber Incorporated
Prudential Securities Incorporated
Salomon Smith Barney
November 24, 1998
================================================================================
