<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration No. 33-97888
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 2, 1995)
FEBRUARY 11, 1997
4,500,000 SHARES
(LOGO) HEALTHCARE REALTY TRUST
COMMON STOCK
------------------------
Healthcare Realty Trust Incorporated ("Healthcare Realty" or the "Company")
is a self-managed and self-administered real estate investment trust ("REIT")
that integrates owning, acquiring, managing and developing income-producing real
estate properties related to healthcare services throughout the United States.
As of December 31, 1996, the Company owned, either directly or through
consolidated entities, 80 properties containing approximately 3.9 million square
feet in 38 markets nationwide. In addition, the Company is currently managing 83
properties nationwide, of which 27 are owned by the Company.
All of the shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), offered hereby (the "Shares") are being issued and sold by
the Company. The Common Stock is listed on the New York Stock Exchange ("NYSE")
under the symbol "HR." On February 11, 1997, the last reported sale price for
the Common Stock on the NYSE was $27.25 per share. See "Price Range of Common
Stock and Distributions."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
=========================================================================================================
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................. $27.25 $1.47 $25.78
Total(3).................................. $122,625,000 $6,615,000 $116,010,000
=========================================================================================================
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deducting expenses payable by the Company estimated at $309,375.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an aggregate of 675,000 additional Shares at the Price to the Public, less
Underwriting Discounts and Commissions, solely to cover over-allotments, if
any. If such option is exercised in full, the total Price to the Public,
Underwriting Discounts and Commissions and Proceeds to the Company will be
$141,018,750, $7,607,250 and $133,411,500, respectively. See
"Underwriting."
The Shares offered hereby are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to reject orders in whole
or in part. It is expected that delivery of the Shares offered hereby will be
made against payment therefor in New York, New York on or about February 14,
1997.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
A.G. EDWARDS & SONS, INC.
EQUITABLE SECURITIES CORPORATION
LEHMAN BROTHERS
SMITH BARNEY INC.
<PAGE> 2
photo of Spring Branch Professional Building
Houston, Texas
photo of Life Care Center of Aurora
Aurora, Colorado
photo of Huebner Medical Centers I & II
San Antonio, Texas
photo of Coral Gables Medical Plaza
Coral Gables, Florida
photo of Candler Regional Heart Center and Professional Office Building
Savannah, Georgia
photo of Palms of Pasedena Medical Plaza
St. Petersburg, Florida
photo of Oregon Medical Building
El Paso, Texas
photo of Valley View Surgery Center
Las Vegas, Nevada
<PAGE> 3
HEALTHCARE REALTY TRUST
PROPERTIES
(Map of Continental United States
Showing Approximate Location of 80 properties)
The Company's current portfolio consists of 80 properties, comprised of seven
facility types, in 38 markets nationwide, under contractual arrangements with 16
healthcare providers. The Company is currently managing 83 properties
nationwide, of which 27 are owned by the Company.
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
------------------------
FOR UNITED KINGDOM PURCHASERS: THE SHARES MAY NOT BE OFFERED OR SOLD IN THE
UNITED KINGDOM EXCEPT TO PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE THEM IN
ACQUIRING, HOLDING, MANAGING OR DISPOSING OF INVESTMENTS (AS PRINCIPAL OR
AGENT), FOR THE PURPOSES OF THEIR BUSINESSES OR OTHERWISE, IN CIRCUMSTANCES
WHICH HAVE NOT RESULTED AND WILL NOT RESULT IN AN OFFER TO THE PUBLIC IN THE
UNITED KINGDOM WITHIN THE MEANING OF THE PUBLIC OFFERS OF SECURITIES REGULATIONS
1995, AND THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS TO WHICH IT RELATES MAY
ONLY BE ISSUED OR PASSED ON TO ANY PERSON IN THE UNITED KINGDOM IF THAT PERSON
IS OF A KIND DESCRIBED IN ARTICLE 11 (3) OF THE FINANCIAL SERVICES ACT 1986
(INVESTMENT ADVERTISEMENT) (EXEMPTIONS) ORDER 1996, AS AMENDED, OR IS A PERSON
TO WHOM SUCH DOCUMENT MAY OTHERWISE LAWFULLY BE ISSUED OR PASSED ON.
<PAGE> 4
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in,
or incorporated by reference into, this Prospectus Supplement and the Prospectus
to which it relates. Unless otherwise noted, the information contained in this
Prospectus Supplement and the Prospectus assumes no exercise of the
Underwriters' overallotment option. Unless the context otherwise requires, all
references to the "Company" or "Healthcare Realty" include Healthcare Realty
Trust Incorporated, its wholly-owned subsidiaries, and other entities in which
Healthcare Realty Trust Incorporated or its subsidiaries own an interest.
THE COMPANY
Healthcare Realty is a self-managed and self-administered REIT that
integrates owning, acquiring, managing and developing income-producing real
estate properties related to healthcare services throughout the United States.
Since commencing operations in June 1993, the Company has invested or committed
to invest ("Investments"), directly and indirectly, over $460 million in 80
income-producing real estate properties related to the delivery of healthcare
services, containing over 3.9 million square feet. The Company's portfolio is
comprised of seven facility types, located in 38 markets nationwide, and
operated pursuant to contractual arrangements with 16 healthcare providers. The
Company is currently managing 83 healthcare-related properties nationwide
totalling over 3.2 million square feet, including 27 which are owned by the
Company. The Company intends to maintain a portfolio of properties that are
focused predominantly on the outpatient services segment of the healthcare
industry and are diversified by tenant, geographic location and facility type.
Healthcare Realty believes that it has a competitive advantage in the
healthcare real estate industry as a result of its use of innovative transaction
structures, the strength of its management expertise and its extensive
experience and client relationships with healthcare providers. Management
believes the Company is the largest fully integrated real estate company focused
on income-producing real estate properties related to the delivery of healthcare
services. The Company believes that its experience and client relationships with
a diverse group of healthcare providers and its access to the various capital
markets make it one of a limited number of companies that can acquire, manage
and develop income-producing real estate related to healthcare services on a
national scale. Unlike other healthcare REITs, the Company seeks to generate
internal growth by actively managing the properties within its portfolio and by
controlling and minimizing operating expenses with respect to its properties,
and providing management services for properties owned by healthcare provider
clients.
RECENT DEVELOPMENTS
The Company completed several acquisitions and developments in the fourth
quarter of 1996 (the "Recent Developments"), including: (1) a $44 million
acquisition of Lewis-Gale Building Corporation, which includes ten properties
affiliated with PhyCor, Inc. in the Roanoke/Salem, Virginia area; (2) a $3.8
million acquisition of an ancillary hospital facility affiliated with First
Physician Care, Inc., in West Palm Beach, Florida; (3) a $3.1 million
acquisition of two ancillary hospital facilities affiliated with Methodist
Healthcare System of San Antonio, Ltd., in San Antonio, Texas; (4) a $16.9
million development of two long-term care facilities affiliated with Life Care
Centers of America in Wichita, Kansas and Fort Worth, Texas; (5) a $10.1 million
development of an ancillary hospital facility affiliated with Columbia/HCA
Healthcare Corporation in Overland Park, Kansas; and (6) an $11.3 million
development of a comprehensive ambulatory care center affiliated with OrNda
HealthCorp located in Coral Gables, Florida.
The Company also has amended its unsecured bank credit facility (the
"Credit Facility"), primarily to increase the availability from $75 to $100
million, extend the maturity date from August 1997 to December 1999, and
decrease the interest rate and fees.
S-1
<PAGE> 5
STRATEGY
Healthcare Realty's strategy is to be a full service provider of integrated
real estate solutions to quality healthcare providers. Consistent with this
strategy, the Company seeks to provide a full spectrum of services needed to
own, acquire, manage and develop healthcare properties, including leasing,
development, management, market research, budgeting, accounting, collection,
construction management, tenant coordination and financial services. The
Company's development activities are primarily accomplished through pre-leased
build-to-suit projects.
Healthcare Realty was formed as an independent, unaffiliated healthcare
REIT. The Company acquires income-producing real estate properties associated
with a diverse group of quality healthcare provider clients in markets where the
respective healthcare provider maintains a strong presence. Management believes
that because the Company is not affiliated with any of its clients and does not
expect to be affiliated with potential clients, the Company will have a
strategic advantage in providing its services to a more diverse group of
healthcare providers.
INVESTMENTS BY CLIENT
Management believes that diversification among clients reduces the
Company's potential exposure to unsuccessful healthcare service strategies and
to a concentration of credit with any one healthcare provider. Approximately 68%
of the Company's investments, at cost, are in properties associated with
publicly-traded companies or private companies with an investment grade credit
rating. The Company's largest healthcare provider client is Columbia/HCA. The
following chart represents the Company's current Investments by healthcare
provider client.
[PIE CHART SHOWING INVESTMENTS BY CLIENT]
S-2
<PAGE> 6
INVESTMENTS BY PROPERTY TYPE
Healthcare Realty focuses predominantly on outpatient healthcare
facilities, which are designed to provide medical services outside of
traditional inpatient hospital or nursing home settings. Management believes the
outpatient services segment of healthcare provides the most cost-effective
delivery setting and, because of increasing cost pressures, this segment of the
healthcare related real estate market offers the greatest potential for future
growth. The following chart represents the Company's current Investments by
healthcare facility type.
[PIE CHART SHOWING INVESTMENTS BY PROPERTY TYPE]
Ancillary hospital facilities are located on or contiguous to hospital
campuses and contain a variety of outpatient medical services (such as
diagnostic, surgery and rehabilitation), physician offices and selected hospital
support services. Long-term care facilities contain extended care services
provided to elderly and chronically ill patients. Comprehensive ambulatory care
centers contain medical services, such as surgical procedures, rehabilitation
and diagnostic (provided on an outpatient basis) and physician offices.
Physician clinics contain a broad range of medical services provided through
organized physician groups representing various medical specialties. Medical
office buildings are associated with a healthcare provider, but not located on
or contiguous to a hospital campus, and contain office and examination space for
physicians. Clinical laboratories contain medical laboratory services provided
to healthcare providers. Ambulatory surgery centers contain various surgical
procedures provided on an outpatient basis.
S-3
<PAGE> 7
DISTRIBUTIONS
Since commencing operations in June 1993, the Company has consistently
increased its regular quarterly distributions each quarter. The Company paid a
distribution for the third quarter of 1996 of $0.485 per share, or $1.94 per
share on an annualized basis. No assurance can be given that the Company will
increase its quarterly distributions in the future.
[CHART SHOWING QUARTERLY DISTRIBUTIONS]
INVESTMENT POLICIES
The Company seeks to generate stable and increasing cash flow and dividends
through a portfolio management program that seeks to maintain diversity and
expand the Company's real estate portfolio. The Company's investment objectives
are to (i) generate current income for shareholders, (ii) provide increased
returns to investors through acquisition and development of additional
properties, (iii) provide increased returns to investors through actively
managing the properties within its portfolio, tenant lease increases,
controlling and minimizing operating expenses with respect to its properties,
and rent increase provisions in the Company's contractual arrangements (e.g.,
master leases and other agreements that are substantially the economic
equivalent) with its clients ("Leases"), (iv) provide increased cash flow and
establish additional relationships with clients through its third-party property
management business, (v) provide the opportunity to realize capital growth
resulting from appreciation, if any, in the value of facilities acquired, and
(vi) preserve and protect stockholders' capital. No assurance can be given that
any of these objectives will be realized.
THE OFFERING
Shares to be offered....... 4,500,000 Shares
Common Stock to be
outstanding after the
offering................. 18,388,891 shares(1)
Use of Proceeds............ To repay outstanding indebtedness, to fund the
Company's acquisition and development activities
and for general corporate purposes.
NYSE symbol................ HR
- ---------------
(1) Excludes 2,081,894 shares of Common Stock reserved for issuance under the
Company's 1993 Employee Stock Incentive Plan and 1995 Restricted Stock Plan
for Non-Employee Directors, and 960,655 shares of Common Stock reserved for
issuance under the Company's Dividend Reinvestment Plan.
S-4
<PAGE> 8
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table sets forth certain financial information with respect
to the Company which is derived from the audited and unaudited financial
statements of the Company incorporated herein by reference or in the Unaudited
Pro Forma Financial Statements included elsewhere in this Prospectus Supplement
and should be read in conjunction with those financial statements and the
accompanying footnotes.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------- ------------------------------------------
HISTORICAL PRO FORMA(1) HISTORICAL PRO FORMA(1)
------------------------------------------ ------------ --------------------------- ------------
1993(2) 1994 1995 1995 1995 1996 1996
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total revenues.......... $ 7,135,004 $ 24,226,423 $ 33,361,161 $52,655,083 $ 24,248,810 $ 27,627,468 $ 40,444,244
Interest expense........ 314,167 1,116,436 5,083,172 6,658,195 3,387,295 4,946,790 4,989,100
Net income.............. 3,950,034 15,715,588 18,257,616 29,917,183 13,550,840 14,624,351 23,206,732
Dividends paid.......... 3,408,266 19,410,538 23,726,926 33,220,448 17,694,434 18,566,441 26,186,314
PER SHARE:
Net income.............. $ 0.64 $ 1.33 $ 1.41 $ 1.65 $ 1.05 $ 1.11 $ 1.27
Dividends paid.......... 0.55 1.75 1.83 1.83 1.37 1.43 1.43
Average shares
outstanding........... 6,185,600 11,830,197 12,967,132 18,154,849 12,964,850 13,155,689 18,343,406
OTHER DATA:
Funds from
operations(3)......... $ 5,773,571 $ 20,918,679 $ 25,490,401 $40,665,274 $ 19,061,431 $ 20,602,529 $ 31,468,976
Funds from operations,
per share(3).......... $ 0.93 $ 1.77 $ 1.97 $ 2.24 $ 1.47 $ 1.57 $ 1.72
BALANCE SHEET DATA AT
PERIOD END:
Real estate properties,
net................... $133,392,751 $280,767,098 $318,480,336 $311,562,457 $356,877,093 $443,259,453
Total assets............ 134,069,694 283,189,771 336,777,677 333,480,910 368,400,436 464,044,630
Senior notes............ -- -- 90,000,000 90,000,000 90,000,000 90,000,000
Credit Facility......... 21,000,000 37,300,000 -- -- 36,300,000 --
Other debt.............. -- 3,075,000 2,970,000 2,970,000 2,855,000 --
Total stockholders'
equity................ $108,190,254 $236,340,287 $234,447,793 $233,647,084 $231,127,463 $362,902,888
</TABLE>
- ---------------
(1) Pro forma operating data is presented for the year ended December 31, 1995
and the nine months ended September 30, 1996, giving effect to the
transactions referred to under "Recent Developments," the Prior Acquisitions
and Developments (as hereinafter defined), and to this offering and the
application of the proceeds therefrom, as if such transactions had occurred,
and as if the respective Leases had been in effect, on January 1, 1995. Pro
forma balance sheet data is presented as of September 30, 1996, giving
effect to such transactions, as if such had occurred, and as if the Leases
had been in effect, at that date. The pro forma information incorporates
certain assumptions that are included in the notes to the Unaudited Pro
Forma Financial Statements included elsewhere in this Prospectus Supplement.
The pro forma information does not purport to represent what the actual
financial position or results of operations of the Company would have been
as of or for the periods indicated, nor does it purport to represent any
future financial position or results of operations for any future period.
(2) The Company commenced operations on June 3, 1993.
(3) Funds from operations, as defined by the National Association of Real Estate
Investment Trusts, Inc. ("NAREIT") 1995 White Paper, means net income
(computed in accordance with generally accepted accounting principles),
excluding gains (or losses) from debt restructuring and sales of property,
plus depreciation and amortization, and after adjustments for unconsolidated
partnerships and joint ventures. Historical funds from operations and funds
from operations per share have been adjusted to conform to the NAREIT 1995
White Paper. Distributions in excess of net income generally constitute a
return of capital. Management considers funds from operations to be an
informative measure of the performance of an equity REIT and consistent with
measures used by analysts to evaluate equity REITs. Funds from operations
does not represent cash generated from operating activities in accordance
with generally accepted accounting principles, is not necessarily indicative
of cash available to fund cash needs and should not be considered as an
alternative to net income, as an indicator of the Company's operating
performance, as an alternative to cash flow or as a measure of liquidity.
S-5
<PAGE> 9
CAPITALIZATION
The following sets forth the capitalization of the Company as of September
30, 1996 and on a pro forma basis to reflect the transactions described under
"Recent Developments," this offering and the application of proceeds therefrom.
See "Use of Proceeds" and the "Unaudited Pro Forma Financial Statements."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
---------------------------
ACTUAL PRO FORMA(2)
------------ ------------
<S> <C> <C>
Cash and cash equivalents................................... $ 1,440,371 $ 11,020,811
============ ============
Indebtedness:
Senior notes.............................................. $ 90,000,000 $ 90,000,000
Credit Facility........................................... 36,300,000 --
Other..................................................... 2,855,000 --
------------ ------------
Total indebtedness................................ $129,155,000 $ 90,000,000
Stockholders' equity:
Preferred Stock, $.01 par value; 50,000,000 shares
authorized; none outstanding........................... -- --
Common Stock, $.01 par value; 150,000,000 shares
authorized; 13,201,174 issued and outstanding;
18,388,891 issued and outstanding, pro forma(1)........ $ 132,012 $ 183,889
Additional paid-in capital................................ 248,451,336 380,174,884
Deferred compensation..................................... (4,663,927) (4,663,927)
Cumulative net income..................................... 52,547,589 52,547,589
Cumulative dividends...................................... (65,339,547) (65,339,547)
------------ ------------
Total stockholders' equity........................ $231,127,463 $362,902,888
------------ ------------
Total capitalization........................................ $360,282,463 $452,902,888
============ ============
</TABLE>
- ---------------
(1) Excludes 2,081,894 shares of Common Stock reserved for issuance under the
Company's 1993 Employee Stock Incentive Plan and 1995 Restricted Stock Plan
for Non-Employee Directors, and 960,655 shares of Common Stock reserved for
issuance under the Company's Dividend Reinvestment Plan.
(2) In connection with the transactions described under "Recent Developments,"
the Company issued 687,717 shares of Common Stock, increasing Common Stock
by $6,877 and Additional paid-in capital by $16,067,923, and, for pro forma
purposes, indebtedness increased by $66,832,551 (of which approximately $40
million has been borrowed at February 11, 1997 and approximately $27 million
remains to be funded).
S-6
<PAGE> 10
USE OF PROCEEDS
The net proceeds from the sale of the Shares offered hereby, after
deducting underwriting discounts and commissions and estimated expenses of this
offering, are estimated to be approximately $115.7 million ($133.1 million if
the Underwriters' over-allotment option is exercised in full). The Company
intends to use approximately $79 million of the net proceeds to repay the
outstanding balance under the Credit Facility and other debt, approximately $27
million to fund previous development and acquisition commitments and
approximately $9.7 million to fund future development and acquisition activities
and for general corporate purposes. The Company may borrow up to $100 million
under the Credit Facility, which is unsecured and matures in December 1999. As
of February 11, 1997, the Credit Facility had an outstanding principal balance
of approximately $72 million. Borrowings under the Credit Facility, as amended,
bear interest, at the Company's option, at: (1) one of the lenders' prime rates,
or (2) the LIBOR rate for one, two, three, or six month dollar deposits plus
1.125%.
If the Underwriters' over-allotment option is exercised in whole or in
part, any balance of the net proceeds will be used for one or more of the
following: (i) to fund current development or acquisition projects, (ii) to
develop and acquire new properties or (iii) for general corporate purposes. Any
net proceeds not used to repay the Credit Facility will be invested initially in
short-term investment grade instruments, interest-bearing bank accounts or
certificates of deposit pending application as set forth above.
S-7
<PAGE> 11
PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS
The Common Stock is listed on the NYSE under the symbol "HR." The following
table sets forth the range of high and low sale prices on the NYSE from the
first quarter of 1995 through February 11, 1997 and the distributions paid per
share by the Company with respect to the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW DISTRIBUTIONS PAID
------- ------- ------------------
<S> <C> <C> <C>
1995
First Quarter..................................... $21.000 $18.750 $.455
Second Quarter.................................... 20.750 18.375 .460
Third Quarter..................................... 20.750 19.000 .465
Fourth Quarter.................................... 23.000 20.000 .470
1996
First Quarter..................................... 23.125 20.875 .475
Second Quarter.................................... 23.750 21.500 .480
Third Quarter..................................... 24.125 21.500 .485
Fourth Quarter.................................... 26.875 23.000 --
1997
First Quarter (through February 11, 1997)......... 29.166 25.750 --
</TABLE>
On February 11, 1997, the closing price for the Company's Common Stock on
the NYSE was $27.25 per share. As of December 31, 1996, there were approximately
1,117 holders of record of the Company's Common Stock. The Company has increased
its distributions $.005 per share in each full fiscal quarter since it commenced
operations in June 1993. The Company's current indicated annualized distribution
is $1.96 per share. The Company has declared a distribution of $.490 per share,
payable on February 17, 1997 to holders of record on January 28, 1997.
Purchasers of the Shares offered hereby will not be entitled to such
distribution.
The Company has implemented a Dividend Reinvestment Plan (the "Plan"),
which permits stockholders to acquire additional shares of Common Stock by
automatically reinvesting cash distributions at a modest discount and making
optional cash purchases without payment of any broker commissions or service
charges. Stockholders who do not participate in the Plan continue to receive
cash distributions, as paid.
The Company intends to continue to pay regular quarterly distributions to
stockholders. Purchasers of Shares in this offering will not receive such
distribution. No assurance can be given that the Company will increase its
quarterly dividend in the future. Future distributions will be declared and paid
at the discretion of the board of directors and will depend upon cash generated
by operating activities, the Company's financial condition, capital
requirements, annual distribution requirements under the REIT provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), and such other factors
as the board of directors deems relevant.
The Company anticipates that funds available for distribution will be
greater than earnings and profits, as a result of non-cash expenses, comprised
primarily of depreciation and amortization, to be incurred by the Company.
Distributions by the Company to the extent of its current or accumulated
earnings and profits for federal income tax purposes will be taxable to
stockholders as ordinary dividend income. Distributions in excess of earnings
and profits generally will be treated as non-taxable return of capital to the
extent thereof. Such distributions have the effect of deferring taxation until
the sale of a stockholder's Common Stock. Approximately 22.3% of the Company's
distributions paid from 1995 income were a return of capital for federal income
tax purposes. Management of the Company estimates that approximately 10% to 20%
of the Company's distributions paid from 1996 income will be a return of capital
for federal income tax purposes. In order to maintain its qualification as a
REIT, the Company must make annual distributions to stockholders of at least 95%
of its taxable income. Under certain circumstances, the Company could be
required to make distributions in excess of funds from operations in order to
meet such requirements.
S-8
<PAGE> 12
THE COMPANY
Healthcare Realty is a self-managed and self-administered REIT that
integrates owning, acquiring, managing and developing income-producing real
estate properties related to healthcare services throughout the United States.
Since commencing operations in June 1993, the Company has invested or committed
to invest, directly and indirectly, over $460 million in 80 income-producing
real estate properties related to the delivery of healthcare services,
containing over 3.9 million square feet. The Company's portfolio is comprised of
seven facility types, located in 38 markets nationwide, and operated pursuant to
contractual arrangements with 16 healthcare providers. The Company is currently
managing 83 healthcare-related properties nationwide totalling over 3.2 million
square feet, including 27 which are owned by the Company. The Company intends to
maintain a portfolio of properties that are focused predominantly on the
outpatient services segment of the healthcare industry and are diversified by
tenant, geographic location and facility type.
Healthcare Realty believes that it has a competitive advantage in the
healthcare real estate industry as a result of its use of innovative transaction
structures, the strength of its management expertise and its extensive
experience and client relationships with healthcare providers. Management
believes the Company is the largest fully integrated real estate company focused
on income-producing real estate properties related to the delivery of healthcare
services. The Company believes that its experience and client relationships with
a diverse group of healthcare providers and its access to the various capital
markets make it one of a limited number of companies that can acquire, manage
and develop income-producing real estate related to healthcare services on a
national scale. Unlike other healthcare REITs, the Company seeks to generate
internal growth by actively managing the properties within its portfolio and by
controlling and minimizing operating expenses with respect to its properties,
and providing management services for properties owned by healthcare provider
clients.
Healthcare Realty's strategy is to be a full service provider of integrated
real estate solutions to quality healthcare providers. Consistent with this
strategy, the Company seeks to provide a spectrum of services needed to own,
acquire, manage and develop healthcare properties, including leasing,
development, management, market research, budgeting, accounting, collection,
construction management, tenant coordination and financial services. The
Company's development activities are primarily accomplished through pre-leased
build-to-suit projects.
Healthcare Realty was formed as an independent, unaffiliated healthcare
REIT. The Company acquires income-producing real estate properties associated
with a diverse group of quality healthcare provider clients in markets where the
respective healthcare provider maintains a strong presence. Management believes
that because the Company is not affiliated with any of its clients and does not
expect to be affiliated with potential clients, the Company will have a
strategic advantage in providing its services to a more diverse group of
healthcare providers.
Management believes that diversification among clients reduces the
Company's potential exposure to unsuccessful healthcare service strategies and
to a concentration of credit with any one healthcare provider. Approximately 68%
of the Company's investments, at cost, are in properties associated with
publicly-traded companies or private companies with an investment grade credit
rating. The Company's largest healthcare provider client is Columbia/HCA,
accounting for approximately 26% of the Company's current Investments.
Healthcare Realty focuses predominantly on outpatient healthcare
facilities, which are designed to provide medical services outside of
traditional inpatient hospital or nursing home settings. Management believes the
outpatient services segment of healthcare provides the most cost-effective
delivery setting and, because of increasing cost pressures, this segment of the
healthcare related real estate market offers the greatest potential for future
growth.
S-9
<PAGE> 13
RECENT DEVELOPMENTS
RECENT FINANCIAL RESULTS FOR THE FOURTH QUARTER OF 1996 AND THE YEAR ENDED
DECEMBER 31, 1996
On February 7, 1997, the Company announced financial results for the year
ended December 31, 1996. Total revenues for the fourth quarter of 1996 were
$10.9 million, a 20% increase over the prior year's $9.1 million. Net income for
the fourth quarter of 1996 was $5.1 million, or $0.38 per share, compared with
$4.7 million, or $0.36 per share, for the fourth quarter of 1995. Funds from
operations for the fourth quarter of 1996 was $7.4 million, or $0.55 per share,
a 10% per share increase over the $6.4 million, or $0.50 per share recorded for
the fourth quarter of 1995.
Total revenues for the year ended December 31, 1996 were $38.6 million, a
16% increase over the prior year's $33.4 million. Net income for the year ended
December 31, 1996 was $19.7 million, or $1.49 per share, compared with $18.3
million, or $1.41 per share, for the year ended December 31, 1995. Funds from
operations for the year ended December 31, 1996 was $28.0 million, or $2.12 per
share, an 8% per share increase over the $25.5 million, or $1.97 per share
recorded for the year ended December 31, 1995.
AMENDED CREDIT FACILITY
Effective December 26, 1996, the Company amended its Credit Facility with
four member banks to increase the Credit Facility from $75 to $100 million and
to extend the maturity date from August 1997 to December 1999, with two one-year
extensions. Other modifications include a reduction in the interest rate to
112.5 basis points over LIBOR with the opportunity for lower interest rates if
the Company's credit rating is upgraded.
PROPERTY ACQUISITION ACTIVITY
During the fourth quarter of 1996 the Company invested approximately $50.8
million in acquisitions, comprised of the following:
Acquisition of Lewis-Gale Building Corporation in Roanoke,
Virginia. On November 15, 1996, the Company acquired Lewis-Gale Building
Corporation, which included two ancillary hospital facilities located
adjacent to the Lewis-Gale Medical Center, operated by Columbia/HCA, two
medical office buildings and six physician clinics in the Roanoke/Salem,
Virginia area. The buildings are either leased to Lewis-Gale Clinic,
L.L.C., a Virginia limited liability corporation (the "Clinic"), or are
under leases guaranteed by the Clinic, and are managed by the Company.
PhyCor, Inc., a physician practice management company, owns the related
physician practice assets and has guaranteed the direct lease obligations
of the Clinic to the Company. The Company's Investment in these properties,
which consists of the issuance of Common Stock and the assumption of
liabilities, is approximately $44 million.
Purchase of Ancillary Hospital Facility in West Palm Beach,
Florida. On October 18, 1996, the Company acquired an ancillary hospital
facility located adjacent to Columbia Hospital, operated by Columbia/HCA,
in West Palm Beach, Florida. The clinic is leased to an affiliate of and is
guaranteed by First Physician Care, Inc., a physician practice management
company. The Company's Investment in this ancillary hospital facility,
which was funded from proceeds borrowed under the Credit Facility, is
approximately $3.8 million.
Purchase of Two Ancillary Hospital Facilities in San Antonio,
Texas. On November 18, 1996, the Company acquired two ancillary hospital
facilities contiguous to Northeast Methodist Hospital in San Antonio,
Texas. The buildings are either leased to or are under leases guaranteed by
Methodist Healthcare System of San Antonio, Ltd., a joint venture of
Methodist Health Care Ministries of South Texas, Inc. and Columbia/HCA, and
are managed by the Company. The Company's Investment in these ancillary
hospital facilities, which was funded from proceeds borrowed under the
Credit Facility, is approximately $3.1 million.
S-10
<PAGE> 14
In addition, the Company has entered into an agreement to purchase an
ancillary hospital facility in Fountain Valley, California. The facility,
currently under construction and financed by a commercial bank, will be
purchased upon completion. The Company currently owns five other properties
located on the campus of Fountain Valley Regional Medical Center, which is
operated by OrNda. The Company's Investment in this ancillary hospital facility,
which will be funded from proceeds of this offering, will be approximately $15
million.
COMPLETED PROPERTY DEVELOPMENT ACTIVITY
During the fourth quarter of 1996 the Company completed the development of
the following four properties:
Ancillary Hospital Facility in Overland Park, Kansas. On October 18,
1996, the Company received the Temporary Certificate of Occupancy for
Overland Park Medical Plaza, an ancillary hospital facility located on the
campus of Overland Park Regional Medical Center, which is operated by
Columbia/ HCA. The Company's Investment in Overland Park Medical Plaza,
funded from proceeds under the Credit Facility, is approximately $10.1
million.
Completion of Long-Term Care Facility in Wichita, Kansas. On December
6, 1996, the Company received the Certificate of Occupancy for Life Care
Center of Wichita, a long-term care facility operated by Life Care Centers
of America. The Company's Investment in Life Care Center of Wichita, funded
from proceeds under the Credit Facility, is approximately $7.5 million.
Completion of Long-Term Care Facility in Fort Worth, Texas. On
November 26, 1996, the Company received the Certificate of Occupancy for
Garden Terrace of Fort Worth, a long-term care facility operated by Life
Care Centers of America. The Company's Investment in Garden Terrace of Fort
Worth, funded from proceeds under the Credit Facility, is approximately
$9.5 million.
Completion of Comprehensive Ambulatory Care Center in Coral Gables,
Florida. On December 16, 1996, the Company received the Certificate of
Occupancy for Five Points Medical Plaza, a comprehensive ambulatory care
center operated by OrNda. The Company's Investment in Five Points Medical
Plaza, funded from proceeds under the Credit Facility, is approximately
$11.3 million.
Under the Leases, the Company generally begins receiving rent upon receipt
of the Certificate of Occupancy for a property. However, due to timing of
receipt of invoices, finalization of construction draws and other contractual
arrangements, the Company will have remaining obligations to fund development
projects after it receives a Certificate of Occupancy. At December 31, 1996 the
Company had approximately $7.7 million of remaining obligations to fund related
to completed developments. Such amounts have been included in the Investments of
each respective property.
CONTINUING PROPERTY DEVELOPMENT ACTIVITY
At December 31, 1996 the Company had continuing commitments for the
following properties under development:
Development of Long-Term Care Facility in Houston, Texas. As of
December 31, 1996, the Company continued to fund the development of Garden
Terrace of Houston, a long-term care facility to be operated by Life Care
Centers of America. The Company's Investment in Garden Terrace of Houston,
at completion, will be approximately $9.8 million, of which approximately
$8.5 million had been funded as of December 31, 1996.
Development of Long-Term Care Facility in Westminster, Colorado. As
of December 31, 1996, the Company continued to fund the development of Life
Care Center of Westminster, a long-term care facility to be operated by
Life Care Centers of America. The Company's Investment in Life Care Center
of Westminster, at completion, will be approximately $7.6 million, of which
approximately $4.5 million had been funded as of December 31, 1996.
S-11
<PAGE> 15
PENDING DEVELOPMENTS
Management of Ancillary Hospital Facilities in Fredericksburg,
Virginia. During the fourth quarter of 1996, Healthcare Realty signed a
property management agreement, effective February 1, 1997, with an affiliate of
Mary Washington Hospital. The agreement provides for management of 15 buildings,
owned by the affiliate, consisting of 688,000 square feet of ancillary and
medical office space located in counties surrounding Fredericksburg, Virginia.
Expansion of Comprehensive Ambulatory Care Center in Venice, Florida. As
of December 31, 1996, the Company had plans for an approximately $4.4 million
expansion of the St. Andrews Surgery Center and Center for Sight, a $6.6 million
comprehensive ambulatory care center which the Company acquired during the third
quarter of 1996. The expansion will be located on an adjacent 2.5 acre parcel of
land acquired by the Company simultaneously with the St. Andrews Surgery Center
and Center for Sight.
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<PAGE> 16
PROPERTIES
The following table sets forth, as of December 31, 1996, the Company's
properties by location, type of facility, client/major tenant(s), square
footage, and total Investment:
<TABLE>
<CAPTION>
FACILITY SQUARE
PROPERTY NAME CITY STATE TYPE CLIENT/MAJOR TENANT(S) FEET INVESTMENT
------------- --------------- ----- -------- ---------------------------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Midtown Medical Center Birmingham AL CL Laboratory Corp. of America 129,294 $ 8,789,812
Orange Grove Medical Clinic Tucson AZ AHF Columbia, affiliated physicians 44,230 5,273,993
Bakersfield Surgery Center Bakersfield CA ASC National Surgery Centers 4,913 1,046,229
Fountain Valley -- AHF 1* Fountain Valley CA AHF OrNda, affiliated physicians 51,153 5,516,390
Fountain Valley -- AHF 2* Fountain Valley CA AHF OrNda, affiliated physicians 47,380 5,107,769
Fountain Valley -- AHF 3* Fountain Valley CA AHF OrNda, affiliated physicians 73,770 8,785,363
Fountain Valley -- AHF 4* Fountain Valley CA AHF OrNda, affiliated physicians 72,832 8,989,674
Fountain Valley -- Living
Care Center Fountain Valley CA LTCF OrNda 63,000 12,687,698
Fountain Valley -- AHF 5** Fountain Valley CA AHF OrNda, affiliated physicians 120,000 15,000,000
Clinica Latina Los Angeles CA PC OrNda, affiliated physicians 7,300 724,470
Eaton Canyon* Pasadena CA AHF OrNda, affiliated physicians 33,345 4,444,070
Valley Presbyterian
Hospital -- 15211 Van Nuys CA AHF Valley Pres., affiliated 47,042 7,538,204
physicians
Valley Presbyterian
Hospital -- 6840 Van Nuys CA AHF Valley Pres., affiliated 24,189 5,327,777
physicians
Life Care Center of Aurora Aurora CO LTCF Life Care Centers of America 61,200 6,230,516
Life Care Center of
Westminster Westminster CO LTCF Life Care Centers of America 57,035 7,566,320
Coral Gables Medical Plaza* Coral Gables FL AHF OrNda, affiliated physicians 57,790 11,208,279
Southwest Florida
Orthopaedic Center Fort Myers FL PC Columbia, affiliated physicians 37,674 3,604,186
Southwest Medical Centre
Plaza Fort Myers FL AHF Columbia, affiliated physicians 64,780 8,042,863
Gulf Coast Medical Centre Fort Myers FL AHF Columbia, affiliated physicians 35,752 4,791,941
Southwest Medical Center
Plaza II Fort Myers FL AHF Columbia, affiliated physicians 14,322 1,620,558
East Pointe Medical Plaza Lehigh Acres FL AHF Columbia, affiliated physicians 34,500 4,981,848
Deering Medical Plaza Miami FL AHF Columbia, affiliated physicians 41,046 5,072,041
Five Points Medical
Building* Miami FL CACC OrNda, affiliated physicians 59,516 11,308,884
Life Care Center of Orange
Park Orange Park FL LTCF Life Care Centers of America 57,904 9,592,697
Palms of Pasadena Medical
Plaza* St. Petersburg FL AHF Tenet, affiliated physicians 49,300 5,483,950
Medical and Surgical
Institute of Ft.
Lauderdale Sunrise FL PC OrNda, affiliated physicians 28,861 5,204,476
St. Andrews* Venice FL CACC Columbia, Center For Sight 29,000 6,598,540
Doctor's Clinic Vero Beach FL PC PhyCor 87,404 10,305,181
Palm Beach Medical Group
Building West Palm Beach FL AHF First Physicians Care 26,000 3,766,272
North Fulton Medical Arts
Plaza Atlanta GA AHF Tenet, affiliated physicians 51,586 5,784,500
Northwest Medical Center Atlanta GA AHF Vest Americare, Inc., Columbia 143,660 10,236,246
affiliated physicians
Candler Professional Office
Building* Savannah GA AHF Candler, affiliated physicians 90,000 7,177,853
Candler Parking Garage Savannah GA AHF Candler 175,150 4,169,090
Candler Regional Heart
Center* Savannah GA AHF Candler, affiliated physicians 80,825 9,430,299
Woodstock Clinic Woodstock GA PC Tenet, affiliated physicians 47,858 2,673,879
New Harmonie Healthcare
Center New Harmony IN LTCF Centennial 29,500 3,640,140
Overland Park Regional
Medical Center* Overland Park KS AHF Columbia, affiliated physicians 71,086 10,106,167
Life Care Center of Wichita Wichita KS LTCF Life Care Centers of America 57,035 7,474,565
Fenton Extended Care Center Fenton MI LTCF Centennial 29,103 3,540,495
Meadows Nursing Center Meadows MI LTCF Centennial 43,194 3,284,186
Ovid Convalescent Manor Ovid MI LTCF Centennial 16,500 3,116,710
Westgate Manor Nursing Home St. Louis MI LTCF Centennial 21,567 1,697,049
Wayne Convalescent Center Wayne MI LTCF Centennial 11,308 1,049,353
Puckett Laboratory Hattiesburg MS CL Pathology Laboratories 36,951 4,285,486
Valley View Surgery Center Las Vegas NV ASC National Surgery Centers 16,878 3,800,571
</TABLE>
S-13
<PAGE> 17
<TABLE>
<CAPTION>
FACILITY SQUARE
PROPERTY NAME CITY STATE TYPE CLIENT/MAJOR TENANT(S) FEET INVESTMENT
------------- --------------- ----- -------- ---------------------------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Hendersonville Medical
Office Building Hendersonville TN AHF Columbia, affiliated physicians 25,456 $ 3,138,890
Physicians Daysurgery Center Dallas TX ASC Columbia 10,855 2,039,563
Oregon Medical Building El Paso TX AHF Columbia, affiliated physicians 83,718 18,485,078
Garden Terrace of Fort Worth Fort Worth TX LTCF Life Care Centers of America 64,265 9,452,336
Valley Diagnostic Medical
and Surgical Clinic Harlingen TX PC PhyCor 41,515 4,458,323
Spring Branch Professional
Building Houston TX AHF Columbia, affiliated physicians 109,898 14,301,747
Rosewood Professional
Building Houston TX AHF Columbia, affiliated physicians 70,494 5,252,820
Durham Medical Center* Houston TX PC Humana, Columbia 59,114 8,511,528
Garden Terrace of Houston Houston TX LTCF Life Care Centers of America 64,265 9,847,297
Twelve Oaks Medical Plaza Houston TX AHF Tenet, affiliated physicians 38,500 3,772,050
Trinity Valley Birthing
Center Palestine TX AHF OrNda, affiliated physicians 15,398 3,671,600
Bayshore Doctors Center Pasadena TX AHF Columbia, affiliated physicians 16,955 1,905,817
Lake Pointe Medical Plaza Rowlett TX AHF OrNda, affiliated physicians 12,788 1,737,129
Rowlett Medical Plaza Rowlett TX MOB OrNda, affiliated physicians 18,978 1,976,372
Huebner Medical Center* San Antonio TX CACC Healthsouth, Columbia, MedPartners 90,840 11,928,764
Huebner Medical Center II* San Antonio TX CACC Healthsouth, Columbia, MedPartners 63,459 9,144,537
Judson Professional
Building* San Antonio TX AHF Columbia, affiliated physicians 10,088 712,354
Toepperwein Medical Center* San Antonio TX AHF Columbia, affiliated physicians 44,872 2,363,062
Southwest General Birthing
Center San Antonio TX AHF OrNda, affiliated physicians 16,264 3,236,289
New River Valley Medical
Arts Building Christiansburg VA MOB Columbia, affiliated physicians 5,323 926,022
Valley Medical Center Dublin VA MOB Columbia, affiliated physicians 7,093 1,015,116
Lewis-Gale Family Practice
Center* New Castle VA PC PhyCor 11,265 1,150,333
Chippenham Medical Offices Richmond VA AHF Columbia, affiliated physicians 44,732 3,771,668
Chippenham Medical Offices Richmond VA AHF Healthcare service providers 53,189 4,593,463
Johnston-Willis Medical
Offices Richmond VA AHF Healthcare service providers 78,843 8,773,577
Johnston-Willis Medical
Offices Richmond VA AHF Healthcare service providers 36,000 5,855,715
Lewis-Gale Craig County
Clinic* Roanoke VA PC PhyCor 4,396 182,008
Lewis-Gale Fincastle Clinic* Roanoke VA PC PhyCor 4,199 337,431
Lewis-Gale Valley View* Roanoke VA MOB PhyCor, Columbia 48,433 5,112,593
Lewis-Gale Business & Child
Care Centers* Salem VA MOB PhyCor, Allstate, U.S. Postal 116,387 6,723,060
Service
Lewis-Gale Bent Mountain
Road Clinic* Salem VA PC PhyCor 3,264 349,701
Lewis-Gale Bonsack Clinic* Salem VA PC PhyCor 6,283 673,840
Lewis-Gale Clinic* Salem VA AHF PhyCor, Columbia 237,244 27,139,690
Lewis-Gale Medical
Foundation Building* Salem VA AHF PhyCor 16,400 1,431,526
Lewis-Gale Spartan Drive
Clinic* Salem VA PC PhyCor 8,243 899,816
--------- ------------
All Properties 3,921,749 $460,947,705
========= ============
</TABLE>
- ---------------
* Properties owned and managed by Healthcare Realty.
** Pending acquisition.
KEY:
AHF -- Ancillary Hospital Facility
LTCF -- Long-Term Care Facility
CACC -- Comprehensive Ambulatory Care Center
PC -- Physician Clinic
MOB -- Medical Office Building
CL -- Clinical Lab
ASC -- Ambulatory Surgery Center
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<PAGE> 18
Ancillary hospital facilities are located on or contiguous to hospital
campuses and contain a variety of outpatient medical services (such as
diagnostic, surgery and rehabilitation), physician offices and selected hospital
support services. Long-term care facilities contain extended care services
provided to elderly and chronically ill patients. Comprehensive ambulatory care
centers contain medical services, such as surgical procedures, rehabilitation
and diagnostic (provided on an outpatient basis) and physician offices.
Physician clinics contain a broad range of medical services provided through
organized physician groups representing various medical specialties. Medical
office buildings are associated with a healthcare provider, but not located on
or contiguous to a hospital campus, and contain office and examination space for
physicians. Clinical laboratories contain medical laboratory services provided
to healthcare providers. Ambulatory surgery centers contain various surgical
procedures provided on an outpatient basis.
Healthcare Realty currently provides property management services to nine
different healthcare clients in 14 markets nationwide. Healthcare Realty
currently provides property management for 31 OrNda facilities (seven of which
are owned by the Company), comprising approximately 920,000 square feet. These
facilities are predominantly located in Southern California and South Florida.
Healthcare Realty also provides property management for 15 Columbia/HCA
facilities (four of which are owned by the Company), comprising approximately
450,000 square feet. These facilities are located predominantly in Houston,
Texas.
HEALTHCARE PROVIDER CLIENTS
The following table sets forth, by each healthcare provider client, as of
December 31, 1996, the Company's number of properties, Investment, percentage of
Investment and square footage.
<TABLE>
<CAPTION>
PERCENTAGE SQUARE
PROPERTIES INVESTMENT OF INVESTMENT FOOTAGE
---------- ------------ ------------- ---------
<S> <C> <C> <C> <C>
PUBLIC OR INVESTMENT GRADE CREDIT PROVIDERS:
Columbia/HCA Healthcare Corp. .................. 21 $120,151,613 26.1% 914,946
OrNda HealthCorp................................ 15 99,598,463 21.6 678,375
PhyCor, Inc. ................................... 12 58,763,502 12.7 585,033
Candler Health System........................... 3 20,777,242 4.5 345,975
Tenet Healthcare Corporation.................... 2 8,157,829 1.8 97,158
National Surgery Centers, Inc. ................. 2 4,846,800 1.1 21,791
-- ------------ ----- ---------
55 $312,295,449 67.7% 2,643,278
== ============ ===== =========
OTHER PROVIDERS:
Life Care Centers of America.................... 6 $ 50,163,731 10.9% 361,704
Huebner Medical Center.......................... 2 21,073,301 4.6 154,299
Vest AmeriCare L.C. ............................ 3 19,792,796 4.3 233,746
Centennial Healthcare Corporation............... 6 16,327,933 3.5 151,172
Six other providers............................. 8 41,294,495 9.0 377,550
-- ------------ ----- ---------
25 $148,652,256 32.3% 1,278,471
== ============ ===== =========
Totals................................ 80 $460,947,705 100.0% 3,921,749
== ============ ===== =========
</TABLE>
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<PAGE> 19
LEASE EXPIRATION SCHEDULE
The following table sets forth the number of the Company's Leases that
expire in the indicated years and the annualized net revenue, the percentage of
total annualized net revenue, the square footage and the percentage of total
square footage associated with such leases:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF ANNUALIZED ANNUALIZED SQUARE PERCENTAGE OF
YEAR LEASES NET REVENUE NET REVENUE FOOTAGE SQUARE FOOTAGE
---- --------- ----------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C>
1997................. -- -- -- -- --
1998................. -- -- -- -- --
1999................. -- -- -- -- --
2000................. -- -- -- -- --
2001................. -- -- -- -- --
2002................. -- -- -- -- --
2003................. 3 $ 2,788,402 5.8% 181,129 4.6%
2004................. 7 1,622,760 3.4 164,756 4.2
2005................. 6 1,569,032 3.3 268,391 6.8
2006................. 1 536,529 1.1 36,951 0.9
2007................. 3 962,504 2.0 75,507 1.9
2008................. 12 8,237,489 17.1 645,027 16.4
2009................. 19 14,325,866 29.7 1,162,134 29.6
2010................. 6 1,907,236 4.0 119,502 3.0
2011................. 15 9,105,172 18.9 759,329 19.4
2012................. 2 5,242,024 10.9 357,851 9.1
2013................. 6 1,966,505 4.1 151,172 3.9
-- ----------- ----- --------- -----
Totals..... 80 $48,263,519 100.0% 3,921,749 100.0%
== =========== ===== ========= =====
</TABLE>
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<PAGE> 20
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are:
<TABLE>
<CAPTION>
CURRENT TERM AS
NAME AGE POSITION DIRECTOR EXPIRES:
---- --- -------- -----------------
<S> <C> <C> <C>
David R. Emery(1)................... 52 Chairman of the Board, Chief 1999
Executive Officer and President
Timothy G. Wallace.................. 38 Executive Vice President and Chief
Financial Officer
Roger O. West....................... 52 Executive Vice President and
General Counsel
INDEPENDENT DIRECTORS:
Errol L. Biggs, Ph.D.(2)............ 52 Director 1997
Thompson S. Dent(1)(3).............. 45 Director 1999
Charles Raymond Fernandez, M.D.(2).. 52 Director 1997
Batey M. Gresham, Jr.(3)............ 61 Director 1999
Marliese E. Mooney(2)............... 66 Director 1998
Edwin B. Morris III(3).............. 56 Director 1998
John Knox Singleton(1).............. 47 Director 1998
</TABLE>
- ---------------
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
Mr. Emery has held his current positions with the Company since inception.
Prior to inception of the Company, he was Managing Partner of The Emery
Partnership, a real estate development partnership that developed office
properties, served as real estate managers and brokers for financial
institutions and consulted on the development and financing of
healthcare-related properties. Mr. Emery has been active in the real estate
industry for 27 years.
Mr. Wallace has held executive positions with the Company since January
1993. Prior to joining the Company he was a Senior Manager in the Nashville,
Tennessee office of Ernst & Young from June 1989 to January 1993. While at Ernst
& Young, Mr. Wallace's primary responsibilities involved healthcare and real
estate.
Mr. West has held executive positions with the Company since May 1994.
Prior to joining the Company he was a partner in the Dallas law firm of Geary,
Porter & West. Mr. West has extensive experience in the areas of real estate,
securities, equity and debt participations and partnership matters.
Dr. Biggs is Director of Programs in Health Administration and a Senior
Lecturer at the University of Colorado. Dr. Biggs has also been President, since
1988, of Biggs & Associates, a consulting company for hospitals and medical
group practices regarding expansion of primary care physician base, board
education and implementation of Total Quality Management programs.
Mr. Dent has been Executive Vice President and director of PhyCor, Inc., a
Nashville, Tennessee based company engaged in the ownership and management of
multi-specialty medical group practices since 1988.
Dr. Fernandez has been Medical Director of the Nalle Clinic, a 114
physician multi-specialty facility in Charlotte, North Carolina since 1981. Dr.
Fernandez is also an author and national speaker on healthcare practice topics.
Mr. Gresham was a founding partner of the architectural and engineering
firm of Gresham, Smith & Partners in Nashville, Tennessee in 1967. The
architectural firm's primary emphasis is on healthcare facility
S-17
<PAGE> 21
design. The firm has a staff of more than 300 with offices Nashville,
Birmingham, Jacksonville, Athens, Atlanta, Richmond, Columbus, Louisville, and
Jackson, Mississippi.
Ms. Mooney has been an independent hospital operations consultant since
1992. From 1988 to 1992, Ms. Mooney was Vice President of Hospital Operations
and a Director for EPIC Healthcare Group, Inc., a hospital operating company
that was acquired by HealthTrust, Inc., which was acquired by Columbia/HCA.
Mr. Morris has been a Managing Director of the real estate financial
consulting firm of Morris & Morse Company, Inc., in Boston, Massachusetts since
1990, prior to which Mr. Morris spent 26 years in various executive positions
including real estate lending, mortgage banking, and real estate investments
with the Bank of Boston.
Mr. Singleton has been President of Inova Health Systems, a comprehensive
healthcare system located in Fairfax, Virginia, since 1983. Mr. Singleton's
experience includes responsibility for the operations of major acute-care
hospitals.
FEDERAL INCOME TAX CONSIDERATIONS
TAXATION OF U.S. STOCKHOLDERS
For information concerning taxation of U.S. stockholders, prospective
purchasers of Shares are referred to Item 5 of the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996, incorporated herein by reference,
under the heading "Federal Income Tax and ERISA Considerations."
TAXATION OF FOREIGN HOLDERS
The following is a discussion of certain anticipated U.S. federal income
tax consequences of the ownership and disposition of Common Stock applicable to
Non-U.S. Holders of such stock. A "Non-U.S. Holder" is any person other than (i)
a citizen or resident of the United States, (ii) a corporation or partnership
created or organized in the United States or under the laws of the United States
or of any state thereof, or (iii) an estate or trust whose income is includable
in gross income for U.S. federal income tax purposes regardless of its source.
The discussion is based on current law and is for general information only. This
discussion addresses only certain and not all aspects of U.S. federal income
taxation. With respect to references in this discussion to the taxation of U.S.
stockholders, prospective purchasers of the Shares should refer to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 referred to
above.
Proposed United States Treasury Regulations were issued on April 15, 1996
(the "Proposed Regulations") which, if adopted, would affect the United States
taxation of dividends paid to a Non-U.S. Holder on Common Stock. The Proposed
Regulations are generally proposed to be effective with respect to dividends
paid after December 31, 1997, subject to certain transition rules. The
discussion below is not intended to be a complete discussion of the provisions
of the Proposed Regulations, and prospective investors are urged to consult
their tax advisors with respect to the effect the Proposed Regulations would
have if adopted.
Distributions From the Company
1. Ordinary Dividends. The portion of dividends received by Non-U.S.
Holders payable out of the Company's earnings and profits that is not
attributable to capital gains of the Company and that is not effectively
connected with a U.S. trade or business of the Non-U.S. Holder will be subject
to U.S. withholding tax at the rate of 30% (unless reduced by treaty). In
general, Non-U.S. Holders will not be considered engaged in a U.S. trade or
business solely as a result of their ownership of stock of the Company. In cases
where the dividend income from a Non-U.S. Holder's investment in stock of the
Company is (or is treated as) effectively connected with the Non-U.S. Holder's
conduct of a U.S. trade or business, the Non-U.S. Holder generally will be
subject to U.S. tax at graduated rates, in the same manner as U.S. stockholders
are taxed with respect to such dividends (and may also be subject to the 30%
branch profits tax in the case of a Non-U.S. Holder that is a foreign
corporation).
S-18
<PAGE> 22
Under the Proposed Regulations, to obtain a reduced rate of withholding
under a treaty, a Non-U.S. Holder would generally be required to provide an
Internal Revenue Service Form W-8 certifying such Non-U.S. Holder's entitlement
to benefits under the treaty. The Proposed Regulations would also provide
special rules to determine whether, for purposes of determining the
applicability of a tax treaty, dividends paid to a Non-U.S. Holder that is an
entity should be treated as paid to the entity or those holding an interest in
that entity.
2. Non-Dividend Distributions. Distributions by the Company which are not
dividends out of the earnings and profits of the Company will not be subject to
U.S. income or withholding tax. If it cannot be determined at the time a
distribution is made whether or not such distribution will be in excess of
current and accumulated earnings and profits, the distribution will be subject
to withholding at the rate applicable to dividends. However, the Non-U.S. Holder
may seek a refund of such amounts from the Internal Revenue Service (the
"Service") if it is subsequently determined that such distribution was, in fact,
in excess of current and accumulated earnings and profits of the Company.
3. Capital Gain Dividends. Under the Foreign Investment in Real Property
Tax Act of 1980 ("FIRPTA"), a distribution made by the Company to a Non-U.S.
Holder, to the extent attributable to gains from dispositions of United States
Real Property Interests ("USRPIs") such as the properties owned, directly or
beneficially, by the Company ("USRPI Capital Gains"), will be considered
effectively connected with a U.S. trade or business of the Non-U.S. Holder and
subject to U.S. income tax at the rate applicable to U.S. individuals and
corporations, without regard to whether such distribution is designated as a
capital gain dividend. In addition, the Company will be required to withhold tax
equal to 35% of the amount of dividends to the extent such dividends constitute
USRPI Capital Gains. Distributions subject to FIRPTA may also be subject to a
30% branch profits tax in the hands of a foreign corporate stockholder that is
not entitled to treaty exemption.
Disposition of Stock of the Company
Unless the Company's stock constitutes a USRPI, a sale of such stock by a
Non-U.S. Holder generally will not be subject to U.S. taxation under FIRPTA. The
stock will not constitute a USRPI if the Company is a "domestically controlled
REIT." A domestically controlled REIT is a REIT in which, at all times during a
specified testing period, less than 50% in value of its shares is held directly
or indirectly by Non-U.S. Holders. The Company believes that it is, and it
expects to continue to be, a domestically controlled REIT, and therefore expects
that the sale of the Company's stock will not be subject to taxation under
FIRPTA. Because the Company's stock is publicly traded, however, no assurance
can be given the Company will continue to be a domestically controlled REIT.
If the Company does not constitute a domestically controlled REIT, a
Non-U.S. Holder's sale of stock generally will still not be subject to tax under
FIRPTA as a sale of a USRPI provided that (i) the stock is "regularly traded"
(as defined by applicable Treasury regulations) on an established securities
market (e.g., the NYSE, on which the Common Stock is listed) and (ii) the
selling Non-U.S. Holder held 5% or less of the Company's outstanding stock at
all times during a specified testing period.
If gain on the sale of stock of the Company were subject to taxation under
FIRPTA, the Non-U.S. Holder would be subject to the same treatment as a U.S.
stockholder with respect to such gain (subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals) and the purchaser of the stock could be required to withhold 10% of
the purchase price and remit such amount to the Service.
Capital gains not subject to FIRPTA will nonetheless be taxable in the
United States to a Non-U.S. Holder in two cases: (i) if the Non-U.S. Holder's
investment in the stock of the Company is effectively connected with a U.S.
trade or business conducted by such Non-U.S. Holder, the Non-U.S. Holder will be
subject to the same treatment as a U.S. stockholder with respect to such gain,
or (ii) if the Non-U.S. Holder is a nonresident alien individual who was present
in the United States for 183 days or more during the taxable year and has a "tax
home" in the United States, the nonresident alien individual will be subject to
a 30% tax on the individual's capital gain.
S-19
<PAGE> 23
Information Reporting and Backup Withholding
The Company must report annually to the Service and to each Non-U.S. Holder
the amount of dividends (including any capital gain dividends) paid to, and the
tax withheld with respect to, each Non-U.S. Holder. These reporting requirements
apply regardless of whether withholding was reduced or eliminated by an
applicable tax treaty. Copies of these returns may also be made available under
the provisions of a specific treaty or agreement with the tax authorities in the
country in which the Non-U.S. Holder resides.
U.S. backup withholding (which generally is imposed at the rate of 31% on
certain payments to persons that fail to furnish the information required under
the U.S. information reporting requirements) and information reporting will
generally not apply to dividends (including any capital gain dividends) paid on
stock of the Company to a Non-U.S. Holder at an address outside the United
States.
The payment of the proceeds from the disposition of stock of the Company to
or through a U.S. office of a broker will be subject to information reporting
and backup withholding unless the owner, under penalties of perjury, certifies,
among other things, its status as a Non-U.S. Holder, or otherwise establishes an
exemption. The payment of the proceeds from the disposition of stock to or
through a non-U.S. office of a non-U.S. broker generally will not be subject to
backup withholding and information reporting.
The Proposed Regulations would, if adopted, alter the foregoing rules in
certain respects. Among other things, the Proposed Regulations would provide
certain presumptions under which a Non-U.S. Holder would be subject to backup
withholding and information reporting unless the Company receives certification
from the Holder of non-U.S. status.
S-20
<PAGE> 24
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below have severally agreed to purchase from the Company, and
the Company has agreed to sell to them, the following respective number of
Shares at the offering price less the underwriting discounts and commissions set
forth on the cover of this Prospectus Supplement.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERWRITER TO BE PURCHASED
----------- ----------------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation......... 750,000
A.G. Edwards & Sons, Inc.................................... 750,000
Equitable Securities Corporation............................ 750,000
Lehman Brothers Inc......................................... 750,000
Smith Barney Inc............................................ 750,000
Alex. Brown & Sons Incorporated............................. 100,000
Credit Suisse First Boston Corporation...................... 100,000
Dean Witter Reynolds Inc.................................... 100,000
Merrill Lynch & Co.......................................... 100,000
NatWest Securities Limited.................................. 100,000
Arnhold and S. Bleichroeder, Inc............................ 50,000
J. C. Bradford & Co......................................... 50,000
Legg Mason Wood Walker, Incorporated........................ 50,000
Morgan Keegan & Company, Inc................................ 50,000
Pennsylvania Merchant Group Ltd............................. 50,000
---------
Total............................................. 4,500,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Shares offered hereby are
subject to approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all the
Shares offered hereby (other than those covered by the over-allotment option
described below) if any of such Shares are taken.
The Company has been advised by the Underwriters that they propose to offer
the Shares to the public at the offering price set forth on the cover of this
Prospectus Supplement and to certain dealers at such price, less a concession
not in excess of $0.88 per Share. The Underwriters may allow, and such dealers
may re-allow, a concession not in excess of $0.10 per Share to certain other
dealers. After the offering, the offering price and other selling terms may be
changed by the Underwriters. The Company has granted to the Underwriters an
option, exercisable not later than 30 calendar days from the date of this
Prospectus Supplement, to purchase up to 675,000 additional Shares at the same
price per Share as the Company receives for the other Shares that the
Underwriters have agreed to purchase.
To the extent that the Underwriters exercise such option to purchase up to
a total of 675,000 Shares, each of the Underwriters will have a firm commitment
to purchase approximately the same percentage thereof that the number of Shares
to be purchased by it shown in the above table bears to the total number of
Shares shown in the above table, and the Company will be obligated, pursuant to
the option, to sell such Shares to the Underwriters. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of the Shares offered hereby. If purchased, the Underwriters will sell such
additional 675,000 Shares on the same terms as those on which the Shares are
being offered.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act.
The Company has agreed that it will not, and shall cause each director and
executive officer of the Company to agree that such person will not, without the
prior written consent of Donaldson, Lufkin & Jenrette Securities Corporation,
register, offer, sell, contract to sell, grant any option to purchase or
otherwise dispose of any shares of Common Stock or any securities convertible
into or exercisable or exchangeable for Common
S-21
<PAGE> 25
Stock, or warrants to purchase Common Stock, for a period of 90 days after the
date of the Underwriting Agreement, other than (i) the Shares offered hereby,
(ii) any shares of Common Stock sold upon the exercise of an option or warrant
or the conversion of a security outstanding on the date hereof or pursuant to
any employee stock option or other benefit plan in existence on the date hereof
or pursuant to the Company's Dividend Reinvestment Plan or Employee Stock
Purchase Plan, and (iii) in connection with a redemption of Common Stock to
maintain its qualification as a REIT under the Code.
EXPERTS
The consolidated financial statements and schedule of the Company,
incorporated by reference or appearing in the Company's Annual Report (Form
10-K) for the year ended December 31, 1995, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon incorporated or
included therein and incorporated herein by reference. Such consolidated
financial statements and schedule are incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL AVAILABLE INFORMATION
The Securities and Exchange Commission (the "Commission") maintains a web
site (http://www.sec.gov) that contains reports, proxy and information
statements and other information regarding registrants such as the Company which
file electronically with the Commission. The Company is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and, in accordance therewith, files reports and other
information with the Commission. Included in such filings are (i) the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1995; (ii) the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996;
(iii) the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996; (iv) the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996; and (v) the Company's Current Reports on Form 8-K filed on
October 8, 1996, October 10, 1996, and December 2, 1996, as amended by the Form
8-K/A filed with the Commission on January 10, 1997 and the Form 8-K/A filed
with the Commission on February 7, 1997, and the Form 8-K filed with the
Commission on February 7, 1997.
This Prospectus Supplement, the accompanying Prospectus and the information
incorporated herein by reference may contain "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995, which
statements are intended to be covered by the provisions of such act. Investors
are cautioned that all forward-looking statements involve risks and
uncertainties, including the factors contained in this Prospectus Supplement,
the accompanying Prospectus and the information incorporated by reference,
including the cautionary statements contained in the Company's Form 8-K filed
with the Commission on October 8, 1996.
LEGAL MATTERS
The legality of the Shares offered by this Prospectus will be passed upon
by Waller Lansden Dortch & Davis, A Professional Limited Liability Company,
Nashville, Tennessee. Such firm has represented several of the lessees of the
Company's properties. Both the Company and such lessees have consented to these
representations. Certain matters of Maryland law will be passed upon for the
Company by Brown & Wood LLP, Washington, D.C. Certain matters relating to the
purchase of properties and federal income taxation will be passed upon for the
Company by Baker, Donelson, Bearman & Caldwell, Nashville, Tennessee. Davis Polk
& Wardwell, New York, New York will pass upon certain legal matters relating to
the offering for the Underwriters.
S-22
<PAGE> 26
INDEX TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Introduction to Unaudited Pro Forma Financial Statements.... F-2
Unaudited Pro Forma Condensed Consolidated Balance Sheet as
of September 30, 1996..................................... F-3
Unaudited Pro Forma Condensed Consolidated Statement of
Income for the Nine Months Ended September 30, 1996....... F-4
Unaudited Pro Forma Condensed Consolidated Statement of
Income for the Year Ended December 31, 1995............... F-5
Notes to Unaudited Pro Forma Financial Statements........... F-6
</TABLE>
F-1
<PAGE> 27
HEALTHCARE REALTY TRUST INCORPORATED
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following pro forma financial statements are derived from the financial
statements of the Company (the "Historical HR" columns) adjusted to give effect
to (i) the Recent Developments, (ii) the completion of the Prior Acquisitions
and Developments (see (3) in the Notes to Unaudited Pro Forma Financial
Statements) and (iii) this offering and the application of proceeds therefrom.
The pro forma balance sheet as of September 30, 1996 gives effect to the
Recent Developments, the Prior Acquisitions and Developments, and this offering
and the application of proceeds therefrom, as if such had occurred on that date.
The pro forma statement of income for the nine months ended September 30, 1996
and the year ended December 31, 1995 gives effect to the Recent Developments,
the Prior Acquisitions and Developments, and this offering and the application
of proceeds therefrom, as if such had occurred, and as if the related Leases had
been in effect, on January 1, 1995.
The pro forma financial statements are otherwise based upon available
information and assumptions that management believes are reasonable. The pro
forma balance sheet does not purport to represent what the Company's financial
position would actually have been on September 30, 1996, nor do the pro forma
statements of income purport to represent what the Company's results of
operations would actually have been for the nine months ended September 30, 1996
or for the year ended December 31, 1995, if the transactions had occurred on
January 1, 1995. The pro forma financial statements do not otherwise purport to
project the Company's financial position as of any future date or the Company's
results of operations for any future period. Differences would result from,
among other things, delays in the completion of the Prior Acquisitions and
Developments and changes in interest rates.
The pro forma financial statements should be read in conjunction with the
financial statements of the Company and related notes thereto, and other
financial information pertaining to the Company, including information
incorporated herein by reference as well as under the caption "Capitalization"
included elsewhere in this Prospectus Supplement.
F-2
<PAGE> 28
HEALTHCARE REALTY TRUST INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
HR ADJUSTMENTS PRO FORMA
------------ ------------- ------------
<S> <C> <C> <C>
ASSETS
Real estate properties:
Land.................................................... $ 43,649,286 $ 14,455,815(1) $ 58,105,101
Buildings and improvements.............................. 291,199,064 111,643,540(1) 402,842,604
Personal property....................................... 3,042,853 3,042,853
Construction in progress................................ 39,716,995 (39,716,995)(1) 0
------------ ------------- ------------
377,608,198 86,382,360 463,990,558
Less accumulated depreciation............................. (20,731,105) (20,731,105)
------------ ------------- ------------
Real estate properties, net...................... 356,877,093 86,382,360 443,259,453
Cash and cash equivalents................................. 1,440,371 5,196(1) 11,020,811
9,575,244(2)
Restricted cash........................................... 597,000 597,000
Receivables............................................... 1,499,060 58,340(1) 1,557,400
Deferred costs, net....................................... 1,246,803 1,246,803
Other assets.............................................. 6,740,109 (376,946)(1) 6,363,163
------------ ------------- ------------
Total assets..................................... $368,400,436 $ 95,644,194 $464,044,630
============ ============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes and bonds payable................................. $129,155,000 $ 66,832,551(1) $ 90,000,000
(105,987,551)(2)
Security deposits payable............................... 4,172,490 4,172,490
Accounts payable and accrued liabilities................ 3,255,730 3,023,769(1) 6,279,499
Deferred income......................................... 689,753 689,753
Commitments and contingencies........................... 0 0
------------ ------------- ------------
Total liabilities................................ 137,272,973 (36,131,231) 101,141,742
------------ ------------- ------------
Stockholders' equity:
Preferred stock, $.01 par value......................... 0 0
Common stock, $.01 par value............................ 132,012 6,877(1) 183,889
45,000(2)
Additional paid-in capital.............................. 248,451,336 16,067,923(1) 380,174,884
115,655,625(2)
Deferred compensation................................... (4,663,927) (4,663,927)
Cumulative net income................................... 52,547,589 52,547,589
Cumulative dividends.................................... (65,339,547) (65,339,547)
------------ ------------- ------------
Total stockholders' equity....................... 231,127,463 131,775,425 362,902,888
------------ ------------- ------------
Total liabilities and stockholders' equity....... $368,400,436 $ 95,644,194 $464,044,630
============ ============= ============
</TABLE>
F-3
<PAGE> 29
HEALTHCARE REALTY TRUST INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
HR ADJUSTMENTS PRO FORMA
----------- ------------ -----------
<S> <C> <C> <C>
Revenues:
Gross rental income............................. $ 0 $ 6,818,320(3) $ 6,818,320
Net rental income............................... 26,020,223 5,998,456(3) 32,018,679
Management fees................................. 881,938 881,938
Interest and other income....................... 725,307 725,307
----------- ------------ -----------
27,627,468 12,816,776 40,444,244
----------- ------------ -----------
Expenses:
Property operating.............................. 0 1,908,019(3) 1,908,019
General and administrative...................... 1,566,186 1,566,186
Interest........................................ 4,946,790 42,310(4) 4,989,100
Depreciation.................................... 6,239,214 2,284,066(5) 8,523,280
Amortization.................................... 250,927 250,927
----------- ------------ -----------
13,003,117 4,234,395 17,237,512
----------- ------------ -----------
Net Income........................................ $14,624,351 $ 8,582,381 $23,206,732
=========== ============ ===========
Net income per share.............................. $ 1.11 $ 1.27
=========== ===========
Funds from operations............................. $20,602,529 $ 10,866,447(6) $31,468,976
=========== ============ ===========
Funds from operations per share................... $ 1.57 $ 1.72
=========== ===========
Average shares outstanding........................ 13,155,689 5,187,717(7) 18,343,406
=========== ============ ===========
</TABLE>
F-4
<PAGE> 30
HEALTHCARE REALTY TRUST INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
HR ADJUSTMENTS PRO FORMA
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Gross rental income............................. $ 0 $ 9,091,094(3) $ 9,091,094
Net rental income............................... 32,402,507 10,202,828(3) 42,605,335
Management fees................................. 465,766 465,766
Interest and other income....................... 492,888 492,888
----------- ----------- -----------
33,361,161 19,293,922 52,655,083
----------- ----------- -----------
Expenses:
Property operating.............................. 0 2,544,026(3) 2,544,026
General and administrative...................... 2,143,505 2,143,505
Interest........................................ 5,083,172 1,575,023(4) 6,658,195
Depreciation.................................... 7,567,060 3,515,306(5) 11,082,366
Amortization.................................... 309,808 309,808
----------- ----------- -----------
15,103,545 7,634,355 22,737,900
----------- ----------- -----------
Net income........................................ $18,257,616 $11,659,567 $29,917,183
=========== =========== ===========
Net income per share.............................. $ 1.41 $ 1.65
=========== ===========
Funds from operations............................. $25,490,401 $15,174,873(6) $40,665,274
=========== =========== ===========
Funds from operations per share................... $ 1.97 $ 2.24
=========== ===========
Average shares outstanding........................ 12,967,132 5,187,717(7) 18,154,849
=========== =========== ===========
</TABLE>
F-5
<PAGE> 31
HEALTHCARE REALTY TRUST INCORPORATED
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
BALANCE SHEET
(1) Adjustment reflects the Recent Developments, including the assumption of
$24.6 million in bank and other debt, the issuance of 687,717 shares of
Common Stock and additional borrowings of $42.2 million (of which
approximately $15.2 million has been borrowed at January 14, 1997 and
approximately $27.0 million remains to be funded) in connection therewith.
See "Recent Developments."
(2) Adjustment includes the effect of the (i) issuance of 4,500,000 Shares of
Common Stock for $122,625,000 at $27.25 per share, (ii) payment of
underwriting discounts and commissions and offering expenses of $6,924,375,
(iii) payments aggregating $99.3 million to reduce the outstanding balances
of the Credit Facility and the bank debt assumed in connection with the
Recent Developments, and (iv) payment or defeasement of outstanding bond
indebtedness in the principal amount of $6.7 million.
STATEMENTS OF INCOME
(3) Adjustments reflect rental income and expenses related to the Recent
Developments and the "Prior Acquisitions and Developments" (those
acquisitions occurring after the beginning of the respective periods, but
not included in Recent Developments) calculated under the terms of the
Leases, as if such had been in effect on January 1, 1995. The Prior
Acquisitions and Developments aggregate $20.4 million in acquisition cost
and development funding through the third quarter of 1996 to complete the
acquisition of an ancillary hospital facility affiliated with Candler
Health Systems in Savannah, Georgia; a physician clinic and an ancillary
hospital facility affiliated with OrNda in Los Angeles, California and
Pasadena, California, respectively; and an ancillary hospital facility
affiliated with Columbia/HCA in Fort Myers, Florida; and to complete the
development of an ancillary hospital facility affiliated with OrNda in
Palestine, Texas; an ancillary hospital facility affiliated with Candler
Health Systems in Savannah, Georgia; a comprehensive ambulatory care center
affiliated with Huebner in San Antonio, Texas; and a long-term care
facility affiliated with Life Care Centers of America in Orange Park,
Florida.
(4) Increase in interest expense to reflect the effects of (i) the senior notes,
as if such had been outstanding on January 1, 1995, and (ii) the completion
of construction in progress, as if such had occurred on January 1, 1995.
(5) Adjustment to reflect depreciation of the Recent Developments and the Prior
Acquisitions and Developments using the straight-line method over 39-year
periods.
(6) Adjustment to reflect the effect of the Recent Developments and the Prior
Acquisitions and Developments upon funds from operations.
(7) Adjustment to reflect the issuance of 687,717 Shares of Common Stock in
connection with the Recent Developments and the issuance of 4,500,000
Shares of Common Stock in connection with this offering, as if such Shares
were issued on January 1, 1995. Funds from operations, as defined by the
National Association of Real Estate Investment Trusts, Inc. 1995 White
Paper, means net income (computed in accordance with generally accepted
accounting principles), excluding gains (or losses) from debt restructuring
and sales of property, plus depreciation and amortization, and after
adjustments for unconsolidated partnerships and joint ventures. Historical
funds from operations and funds from operations per share have been
adjusted to conform to the NAREIT 1995 White Paper. Distributions in excess
of net income generally constitute a return of capital. Management
considers funds from operations to be an informative measure of the
performance of an equity REIT and consistent with measures used by analysts
to evaluate equity REITs. Funds from operations does not represent cash
generated from operating activities in accordance with generally accepted
accounting principles, is not necessarily indicative of cash available to
fund cash needs and should not be considered as an alternative to net
income, as an indicator of the Company's operating performance, as an
alternative to cash flow or as a measure of liquidity.
F-6
<PAGE> 32
PROSPECTUS
NOVEMBER 2, 1995
[HEALTHCARE REALTY TRUST LOGO]
$250,000,000
Common Stock, Common Stock Warrants,
Preferred Stock and Debt Securities
Healthcare Realty Trust Incorporated (the "Company") is a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended,
which may from time to time offer in one or more series (i) shares of common
stock, par value $.01 per share (the "Common Stock"), (ii) warrants to purchase
Common Stock (the "Common Stock Warrants"), (iii) shares of preferred stock, par
value $.01 per share (the "Preferred Stock"), or (iv) debt securities (the "Debt
Securities"), with an aggregate public offering price of up to $250,000,000 (or
the equivalent thereof in foreign currencies or currency units) on terms to be
determined at the time of any such offering. The Company may offer the Common
Stock, Common Stock Warrants, Preferred Stock, and Debt Securities
(collectively, the "Securities") from time to time, separately or together, in
separate series in amounts, at prices and on terms to be set forth in
supplements to this Prospectus (each a "Prospectus Supplement").
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable: (i) in the case of Common Stock, the specific
number of shares and issuance price per share; (ii) in the case of Common Stock
Warrants, the duration, offering price, exercise price and detachability; (iii)
in the case of Preferred Stock, the specific number of shares, designation, any
dividend, liquidation, redemption, conversion, voting and other rights, and any
initial public offering price; and (iv) in the case of Debt Securities, the
specific title, aggregate principal amount, currency, form, authorized
denominations, maturity, rate (or manner of calculation thereof) and time of
payment of interest, terms for redemption at the option of the Company or
repayment at the option of the Holder, terms for any sinking fund payments,
terms for conversion into Common Stock or Debt Securities of another series, and
any initial public offering price. In addition, such specific terms may include
limitations on direct or beneficial ownership and restrictions on transfer of
the Securities, in each case as may be appropriate to preserve the status of the
Company as a REIT for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain federal income tax considerations relating to, and any
listing on a securities exchange of, the Securities covered by such Prospectus
Supplement.
The Securities may be offered directly, through agents designated from time
to time by the Company, or to or through underwriters or dealers. If any agents
or underwriters are involved in the sale of any of the Securities, their names,
and any applicable purchase price, fee, commission or discount arrangement
between or among them, will be set forth, or will be calculable from the
information set forth, in the applicable Prospectus Supplement. See "Plan of
Distribution." No Securities may be sold without delivery of the applicable
Prospectus Supplement describing the method and terms of the offering of such
series of Securities.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW
YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF
THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
---------------------
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
<PAGE> 33
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of
the Commission: Midwest Regional Office, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; Northeast Regional Office, 7 World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material may
be obtained from the Public Reference Section of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. In addition, the Company's Common Stock is listed on the New York Stock
Exchange and reports, proxy statements and other information concerning the
Company may be inspected at the offices of The New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Securities. The Prospectus and any
accompanying Prospectus Supplement do not contain all of the information
included in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Securities, reference is hereby
made to the Registration Statement, including the exhibits and schedules
thereto. Statements contained in this Prospectus and any accompanying Prospectus
Supplement concerning the provisions or contents of any contract, agreement or
any other document referred to herein are not necessarily complete. With respect
to each such contract, agreement or document filed as an exhibit to the
Registration Statement, reference is made to such exhibit for a more complete
description of the matters involved, and each such statement shall be deemed
qualified in its entirety by such reference to the copy of the applicable
document filed with the Commission. The Registration Statement, including the
exhibits and schedules thereto, may be inspected without charge at the
Commission's principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and copies of it or any part thereof may be obtained from
such office, upon payment of the fees prescribed by the Commission.
---------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have previously been filed by the Company
with the Commission under the Exchange Act (File No. 1-11852) are incorporated
herein by reference: (i) the Annual Report on Form 10-K for the year ended
December 31, 1994, (ii) the Quarterly Reports on Form 10-Q for the quarters
ended March 31, 1995 and June 30, 1995 and (iii) the proxy statement dated March
31, 1995, in connection with its annual meeting of stockholders held on May 16,
1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Securities made hereby shall be deemed to be
incorporated in this Prospectus by reference and to be a part hereof from the
date of filing of such documents. Any statement contained herein, or in a
document incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, on the written
or oral request of any such person, a copy of any or all of the documents
incorporated herein by reference, other than the exhibits to such documents
(unless such exhibits are specifically incorporated by reference in such
documents). Requests for such copies should be directed to the Company, at 3310
West End Avenue, Suite 400, Nashville, Tennessee 37203, Attention: Fredrick M.
Langreck, Treasurer and Comptroller (615) 269-8175.
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<PAGE> 34
THE COMPANY
The Company was organized as a REIT to invest, either directly or through
wholly owned subsidiaries, in, or provide real estate services with respect to,
healthcare related properties throughout the United States. The Company's
objective is to become a valued full service provider of real estate solutions
to quality healthcare providers, focusing predominantly on outpatient (often
referred to as "alternate site") healthcare facilities, which are designed for
the provision of medical services outside of a traditional hospital or nursing
home setting. In an effort to attain this objective, the Company offers a broad
range of services including real estate funding, property management,
build-to-suit development, and real estate advisory work. The Company is the
first fully integrated healthcare REIT and management believes the Company is
the healthcare industry's leading provider of the full range of services
described above.
The Company owns a diversified portfolio of healthcare properties. The
properties are leased to unaffiliated healthcare providers pursuant to long-term
net leases. The Company's strategy is to acquire healthcare facilities
diversified by healthcare provider, facility type, and geographic location. The
Company seeks to develop relationships with well-established, rapidly growing
healthcare companies that present both relatively low risk and opportunities for
future business.
The principal executive offices of the Company are located at 3310 West End
Avenue, Suite 400, Nashville, Tennessee 37203, and its telephone number is (615)
269-8175. Unless the context indicates otherwise, references herein to the
Company include the Company's subsidiaries.
USE OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement accompanying this
Prospectus, the Company intends to use the net proceeds from the sale of the
Securities for general corporate purposes, which may include the repayment of
indebtedness, the acquisition of additional properties, and the funding of
additional lessee developments.
Pending such uses, net proceeds of any offering of Securities will be
invested in short-term, investment grade instruments, interest-bearing bank
accounts or certificates of deposit, consistent with the Company's qualification
as a REIT, the Company's Second Articles of Amendment and Restatement (the
"Articles") and the Company's agreements with its lenders.
RATIO OF EARNINGS TO FIXED CHARGES(1)
Set forth below is the ratio of earnings to fixed charges for the Company for
the periods indicated:
<TABLE>
<CAPTION>
SEVEN MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1993(2) DECEMBER 31, 1994 JUNE 30, 1995
-------------------- ----------------- ------------------
<S> <C> <C> <C>
Ratio of earnings to
fixed charges(3)...... 6.13 10.37 4.51
</TABLE>
DESCRIPTION OF COMMON STOCK
The Company is authorized to issue an aggregate of 200,000,000 shares of
capital stock, which may include 150,000,000 Shares of Common Stock and
50,000,000 shares of Preferred Stock. The following description of the Common
Stock sets forth certain general terms and provisions of the Common Stock to
which any Prospectus Supplement may relate, including a Prospectus Supplement
providing that Common Stock will be issuable upon conversion of Debt Securities
or Preferred Stock of the Company or upon the exercise of Common Stock Warrants
issued by the Company. The statements below describing the Common Stock are in
all respects subject to and qualified in their entirety by reference to the
applicable provisions of the Articles.
- ---------------
(1) Because the Company has not yet issued any shares of Preferred Stock, the
ratio of earnings to combined fixed charges and preferred stock dividends is
identical to the ratio of earnings to fixed charges for each period listed
above.
(2) The Company commenced operations on June 3, 1993.
(3) For the purpose of calculating the ratio of earnings to fixed charges, net
income has been added to fixed charges and that sum has been divided by such
fixed charges. Fixed charges consist of interest expense, capitalized
interest and amortization of debt issue cost.
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<PAGE> 35
Holders of shares of Common Stock are entitled to receive such dividends as
the Board of Directors may declare out of funds legally available for the
payment of dividends. Upon issuance, the shares of Common Stock will be fully
paid and nonassessable and have no preferences or conversion, exchange or
preemptive rights. In the event of any liquidation, dissolution or winding-up of
the Company, the holders of shares of Common Stock are entitled to share ratably
in any of the Company's assets remaining after the satisfaction of all
obligations and liabilities of the Company and after required distributions to
holders of Preferred Stock, if any. The Common Stock is subject to restrictions
on transfer under certain circumstances described under "Restrictions on
Transfer" below. Each share is entitled to one vote on all matters voted upon by
the holders of Common Stock. Holders of shares of Common Stock have no
cumulative voting rights.
TRANSFER AGENT AND EXCHANGE LISTING
The transfer agent and registrar for the Company's Common Stock is The
First National Bank of Boston. The Company's Common Stock is listed on the New
York Stock Exchange under the symbol HR.
RESTRICTIONS ON TRANSFER
For the Company to qualify as a REIT under the Code in any taxable year
after the first year of its election to be treated as a REIT, (i) not more than
50% in value of its outstanding Stock (as defined below) may be owned, directly
or indirectly (after application of certain attribution rules), by five or fewer
individuals at any time during the last half of its taxable year, and (ii) its
Stock must be beneficially owned by 100 or more persons during at least 335 days
of a taxable year of 12 months or during a proportionate part of a shorter
taxable year. In order to ensure that requirement (i) above is satisfied, the
Board of Directors has the power to refuse to transfer shares of Common Stock
and/or Preferred Stock (collectively, the "Stock"), to any person whose
acquisition of such shares would result in the direct or indirect ownership of
more than 9.9% in value of the outstanding Stock (the "Share Limit").
In connection with the foregoing, if the Board of Directors, at any time
and in good faith, believes that direct or indirect ownership (as determined
under applicable federal tax attribution rules) in excess of the Share Limit has
or may become concentrated in the hands of one beneficial owner, the Board of
Directors has the power to refuse to transfer or issue Stock to a person whose
acquisition of such Stock would cause a beneficial holder to hold in excess of
the Share Limit. Further, any transfer of Stock that would cause a beneficial
owner to hold shares of Stock in excess of the Share Limit shall be deemed void,
and the intended transferee shall be deemed never to have had an interest
therein.
If at any time there is a transfer in violation of such restrictions, the
Excess Shares shall be deemed to have been transferred to the Company, as
trustee for the benefit of such persons to whom the Excess Shares are later
transferred. Subject to the Company's right to purchase the Excess Shares, the
interest in the trust representing the Excess Shares shall be freely
transferable by the intended transferee at a price that does not exceed the
price paid by the intended transferee of the Excess Shares. Excess Shares shall
have no voting rights, and shall not be considered for the purpose of any
shareholder vote or determining a quorum, but shall continue to be reflected as
issued and outstanding stock. No dividends shall be paid with respect to Excess
Shares. The Company shall have the right to purchase Excess Shares for the
lesser of the amount paid for the Excess Shares by the intended transferee or
the market price. The market price for any Stock so purchased, shall be equal to
the fair market value of such shares reflected in (i) the closing sales price
for the Stock, if then listed on a national securities exchange, (ii) the
average closing sales price of such Stock, if then listed on more than a
national securities exchange, or (iii) if the Stock is not then listed on a
national securities exchange, the latest bid quotation for the Stock if then
traded over-the-counter, as of the day immediately preceding the date on which
notices of such purchase are sent by the Company. If no such closing sales
prices or quotations are available, the purchase price shall equal the net asset
value of such Stock as determined by the Board of Directors in good faith.
All certificates representing shares of Common Stock bear a legend
referring to other restrictions described above.
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<PAGE> 36
BUSINESS COMBINATIONS
Under the Maryland General Corporation Law, certain "business combinations"
(including a merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance of equity securities) between a
Maryland corporation and any person who beneficially owns 10% of more of the
voting power of the corporation's outstanding voting stock (an "Interested
Shareholder") must be: (a) recommended by the corporation's board of directors;
and (b) approved by the affirmative vote of at least (i) 80% of the
corporation's outstanding shares entitled to vote and (ii) two-thirds of the
outstanding shares entitled to vote which are not held by the Interested
Shareholder with whom the business combination is to be effected, unless, among
other things, the corporation's common shareholders receive a minimum price (as
defined in the statute) for their shares and the consideration is received in
cash or in the same form as previously paid by the Interested Shareholder for
his or her shares. In addition, an Interested Shareholder or any affiliate
thereof may not engage in a "business combination" with the corporation for a
period of five years following the date he or she becomes an Interested
Shareholder. These provisions of Maryland law do not apply, however, to business
combinations that are approved by the board of directors of a Maryland
corporation prior to such person becoming an Interested Shareholder.
CONTROL SHARE ACQUISITIONS
The Maryland General Corporation Law provides that "control shares" of a
Maryland corporation acquired in a "control share acquisition" may not be voted
except to the extent approved by a vote of two-thirds of all the votes entitled
to be cast on the matter by shareholders excluding voting shares owned by the
acquirer, and officers and directors who are also employees of the corporation.
"Control shares" are voting shares which, if aggregated with all other shares
owned by a person or in respect of which that person is entitled to exercise or
direct the exercise of voting power, would entitle the acquirer to vote (i) 20%
or more but less than one-third, (ii) one-third or more but less than a
majority, or (iii) a majority or more of the outstanding voting shares. Control
shares do not include shares the acquiring person is entitled to vote because
shareholder approval has previously been obtained. A "control share acquisition"
means the acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition and
who has obtained a definitive financing agreement with a responsible financial
institution providing for any amount of financing not to be provided by the
acquiring person may compel the corporation's board of directors to call a
special meeting of shareholders to be held within 50 days of demand to consider
the voting rights of the shares. In no request for a meeting is made, the
corporation may itself present the question at any shareholders' meeting.
Subject to certain conditions and limitations, the corporation may redeem
any or all of the control shares, except those for which voting rights have
previously been approved, for fair value determined, without regard to voting
rights, as of the date of the last control share acquisition or as of the date
of any meeting of shareholders at which the voting rights of such shares are
considered and not approved. If voting rights for control shares are approved at
a shareholders' meeting and the acquirer is entitled to vote a majority of the
shares entitled to vote, all other shareholders may exercise appraisal rights.
The fair value of the shares as determined for purposes of such appraisal rights
may not be less than the highest price per share in the control share
acquisition, and certain limitations and restrictions otherwise applicable to
the exercise of dissenter's rights do not apply in the context of a control
share acquisition.
The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to the acquisitions approved or exempted by the articles of
incorporation or bylaws of the corporation prior to a control share acquisition.
The limitation on ownership of Common Stock set forth in the Articles, as
well as the provisions of Maryland law described above, could have the effect of
discouraging offers to acquire the Company and of increasing the difficulty of
consummating any such offer.
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<PAGE> 37
DIVIDEND REINVESTMENT PLAN, EMPLOYEE STOCK PURCHASE PLAN AND TENANT INVESTMENT
PLAN
The Company has adopted and implemented a Dividend Reinvestment Plan to
provide registered owners of the Company's Common Stock with a method of
investing dividends and other distributions paid in cash ("dividends") in
additional shares of the Company's Common Stock. The Company has also adopted an
Employee Stock Purchase Plan and a Tenant Investment Plan to allow employees of
the Company and tenants in the Company's properties to purchase shares of Common
Stock on terms and conditions set forth in such plans. Since such additional
shares of Common Stock will be purchased from the Company, the Company will
receive additional funds which will be used for its general corporate purposes.
DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue Common Stock Warrants for the purchase of Common
Stock. Common Stock Warrants may be issued independently or together with any
other Securities pursuant to any Prospectus Supplement and may be attached to or
separate from such Securities. Each series of Common Stock Warrants will be
issued under a separate warrant agreement (each, a "Warrant Agreement") to be
entered into between the Company and the warrant recipient or, if the recipients
are numerous, a warrant agent identified in the applicable Prospectus Supplement
(the "Warrant Agent"). The Warrant Agent, if engaged, will act solely as an
agent of the Company in connection with the Common Stock Warrants of such series
and will not assume any obligation or relationship of agency or trust for or
with any holders or beneficial owners of Common Stock Warrants. Further terms of
the Common Stock Warrants and the applicable Warrant Agreements will be set
forth in the Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of any Common
Stock Warrants in respect of which this Prospectus is being delivered,
including, where applicable, the following: (1) the title of such Common Stock
Warrants; (2) the aggregate number of such Common Stock Warrants; (3) the price
or prices at which such Common Stock Warrants will be issued; (4) the
designation, number and terms of the shares of Common Stock purchasable upon
exercise of such Common Stock Warrants; (5) the designation and terms of the
other Securities with which such Common Stock Warrants are issued and the number
of such Common Stock Warrants issued with each such offered Security; (6) the
date, if any, on and after which such Common Stock Warrants and the related
Common Stock will be separately transferable; (7) the price at which each share
of Common Stock purchasable upon exercise of such Common Stock Warrants may be
purchased; (8) the date on which the right to exercise such Common Stock
Warrants shall commence and the date on which such right shall expire; (9) the
minimum or maximum amount of such Common Stock Warrants which may be exercised
at any one time; (10) information with respect to book-entry procedures, if any;
(11) a discussion of certain federal income tax considerations; and (12) any
other terms of such Common Stock Warrants, including terms, procedures and
limitations relating to the exchange and exercise of such Common Stock Warrants.
Reference is made to the section captioned "Description of Common Stock"
for a general description of the Common Stock to be acquired upon the exercise
of the Common Stock Warrants and a description of certain restrictions on
transfer of the Common Stock.
DESCRIPTION OF PREFERRED STOCK
GENERAL
The Company is authorized to issue 50,000,000 shares of Preferred Stock.
The following description of the Preferred Stock sets forth certain anticipated
general terms and provisions of the Preferred Stock to which any Prospectus
Supplement may relate. Certain other terms of any series of Preferred Stock
(which terms may be different than those stated below) will be described in the
Prospectus Supplement to which such series relates. The statements below
describing the Preferred Stock are in all respects subject to and qualified in
their entirety by reference to the applicable provisions of the Prospectus
Supplement, the Company's Articles
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<PAGE> 38
(including the amendment describing the designations, rights, and preferences of
each series of Preferred Stock) and the Company's Bylaws.
Subject to limitations prescribed by Maryland law and the Articles, the
Company's Board of Directors is authorized to fix the number of shares
constituting each series of Preferred Stock and the designations and powers,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, including such provisions
as may be desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and such other subjects or
matters as may be fixed by resolution of the Board of Directors or the duly
authorized committee thereof. The Preferred Stock will, when issued, be fully
paid and nonassessable and will have no preemptive rights.
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including: (1) the title and stated
value of such Preferred Stock; (2) the number of shares of such Preferred Stock
offered, the liquidation preference per share and the offering price of such
Preferred Stock; (3) the dividend rate(s), period(s) and or payment date(s) or
method(s) of calculation thereof applicable to such Preferred Stock; (4) the
date from which dividends on such Preferred Stock shall accumulate, if
applicable; (5) the provision for a sinking fund, if any, for such Preferred
Stock; (6) the provisions for redemption, if applicable, of such Preferred
Stock; (7) any listing of such Preferred Stock on any securities exchange; (8)
the terms and conditions, if applicable, upon which such Preferred Stock will be
convertible into Common Stock, including the conversion price (or manner of
calculation thereof); (9) a discussion of certain federal income tax
considerations applicable to such Preferred Stock; (10) the relative ranking and
preferences of such Preferred Stock as to dividend rights and rights upon
liquidation, dissolution or winding up of the affairs of the Company; (11) any
limitations on issuance of any series of Preferred Stock ranking senior to or on
a parity with such series of Preferred Stock as to dividend rights and rights
upon liquidation, dissolution or winding up of the affairs of the Company; (12)
any limitations on direct or beneficial ownership and restrictions on transfer,
in each case as may be appropriate to preserve the status of the Company as a
REIT; and (13) any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of Common Stock of the Company, and to all equity securities ranking
junior to such Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company; (ii) on a parity with all
equity securities issued by the Company the terms of which specifically provide
that such equity securities rank on a parity with the Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding up
of the Company; and (iii) junior to all equity securities issued by the Company
the terms of which specifically provide that such equity securities rank senior
to the Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company.
DIVIDENDS
Holders of shares of the Preferred Stock of each series shall be entitled
to receive, when, as and if declared by the Board of Directors of the Company,
out of assets of the Company legally available for payment, cash dividends (or
dividends in kind or in other property if expressly permitted and described in
the applicable Prospectus Supplement) at such rates and on such dates as will be
set forth in the applicable Prospectus Supplement. Each such dividend shall be
payable to holders of record as they appear on the stock transfer books of the
Company on such record dates as shall be fixed by the Board of Directors of the
Company.
Dividends on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
Prospectus Supplement. If the Board of Directors of the Company fails to declare
a dividend
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<PAGE> 39
payable on a dividend payment date on any series of the Preferred Stock for
which dividends are noncumulative, then the holders of such series of the
Preferred Stock will have no right to receive a dividend in respect of the
dividend period ending on such dividend payment date, and the Company will have
no obligation to pay the dividend accrued for such period, whether or not
dividends on such series are declared payable on any future dividend payment
date.
Unless otherwise specified in the applicable Prospectus Supplement, if any
shares of the Preferred Stock of any series are outstanding, no full dividends
shall be declared or paid or set apart for payment on the Preferred Stock of the
Company of any other series ranking, as to dividends, on a parity with or junior
to the Preferred Stock of such series for any period unless full dividends
(which include all unpaid dividends in the case of cumulative dividend Preferred
Stock) have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for such payment on the
Preferred Stock of such series.
When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon the shares of Preferred Stock of any series
and the shares of any other series of Preferred Stock ranking on a parity as to
dividends with the Preferred Stock of such series, all dividends declared upon
shares of Preferred Stock of such series and any other series of Preferred Stock
ranking on a parity as to dividends with such Preferred Stock shall be declared
pro rata among the holders of such series. No interest, or sum of money in lieu
of interest, shall be payable in respect of any dividend payment or payments on
Preferred Stock of such series which may be in arrears.
Until required dividends are paid, no dividends (other than in Common Stock
or other capital stock ranking junior to the Preferred Stock of such series as
to dividends and upon liquidation) shall be declared or paid or set aside for
payment or other distribution shall be declared or made upon the Common Stock or
any other capital stock of the Company ranking junior to or on a parity with the
Preferred Stock of such series as to dividends or upon liquidation, nor shall
any Common Stock or any other capital stock of the Company ranking junior to or
on a parity with the Preferred Stock of such series as to dividends or upon
liquidation be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any shares of any such stock) by the Company (except by conversion
into or exchange for other capital stock of the Company ranking junior to the
Preferred Stock of such series as to dividends and upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of Preferred Stock of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the shares of
Preferred Stock will be subject to mandatory redemption or redemption at the
option of the Company, as a whole or in part, in each case upon the terms, at
the times and at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the Prospectus Supplement. If the redemption price for
Preferred Stock of any series is payable only from the net proceeds of the
issuance of capital stock of the Company, the terms of such Preferred Stock may
provide that, if no such capital stock shall have been issued or to the extent
the net proceeds from any issuance are insufficient to pay in full the aggregate
redemption price then due, such Preferred Stock shall automatically and
mandatorily be converted into shares of the applicable capital stock of the
Company pursuant to conversion provisions specified in the applicable Prospectus
Supplement.
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<PAGE> 40
So long as any dividends on shares of any series of the Preferred Stock of
the Company ranking on a parity as to dividends and distributions of assets with
such series of the Preferred Stock are in arrears, no shares of any such series
of the Preferred Stock of the Company will be redeemed (whether by mandatory or
optional redemption) unless all such shares are simultaneously redeemed, and the
Company will not purchase or otherwise acquire any such shares; provided,
however, that the foregoing will not prevent the purchase or acquisition of such
shares of Preferred Stock pursuant to a purchase or exchange offer made on the
same terms to holders of all outstanding shares of Preferred Stock of such
series and, unless the full cumulative dividends on all outstanding shares of
any cumulative Preferred Stock of such series and any other stock of the Company
ranking on a parity with such series as to dividends and upon liquidation shall
have been paid or contemporaneously are declared and paid for all past dividend
periods, the Company shall not purchase or otherwise acquire directly or
indirectly any shares of Preferred Stock of such series (except by conversion
into or exchange for stock of the Company ranking junior to the Preferred Stock
of such series as to dividends and upon liquidation); provided, however, that
the foregoing will not prevent the purchase or acquisition of such shares of
Preferred Stock to preserve REIT status of the Company or pursuant to a purchase
or exchange offer made on the same terms to holders of all outstanding shares of
Preferred Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares held
by such holders (with adjustments to avoid redemption of fractional shares) or
any other equitable method determined by the Company that will not result in the
issuance of any Excess Shares.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of a share of Preferred
Stock of any series to be redeemed. If notice of redemption of any shares of
Preferred Stock has been given and if the funds necessary for such redemption
have been set aside by the Company in trust for the benefit of the holders of
any shares of Preferred Stock so called for redemption, then from and after the
redemption date dividends will cease to accrue on such shares of Preferred
Stock, such shares of Preferred Stock shall no longer be deemed outstanding and
all rights of the holders of such shares will terminate, except the right to
receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of Common Stock, or any other class or series of capital
stock of the Company ranking junior to the Preferred Stock in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each series of Preferred Stock shall be entitled to receive out of
assets of the Company legally available for distribution to shareholders
liquidating distributions in the amount of the liquidation preference per share
(set forth in the applicable Prospectus Supplement), plus an amount equal to all
dividends accrued and unpaid thereon (which shall not include any accumulation
in respect of unpaid dividends for prior dividend periods if such Preferred
Stock does not have a cumulative dividend). After payment of the full amount of
the liquidating distributions to which they are entitled, the holders of shares
of Preferred Stock will have no right or claim to any of the remaining assets of
the Company. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the legally available assets of the
Company are insufficient to pay the amount of the liquidating distributions on
all outstanding shares of Preferred Stock and the corresponding amounts payable
on all shares of other classes or series of capital stock of the Company ranking
on a parity with the Preferred Stock in the distribution of assets upon
liquidation, dissolution or winding up, then the holders of the Preferred Stock
and all other such classes or series of capital stock shall share ratably in any
such distribution of assets in proportion to the full liquidating distributions
to which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
shares of Preferred Stock, the remaining assets of the Company shall be
distributed among the holders of any other classes or series of capital stock
ranking junior to the Preferred Stock upon liquidation, dissolution or winding
up, according to their respective rights and preferences and in each case
according to their respective number of shares.
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<PAGE> 41
VOTING RIGHTS
Holders of Preferred Stock will not have any voting rights, except as set
forth below or as otherwise from time to time required by law or as indicated in
the applicable Prospectus Supplement.
Any series of Preferred Stock may provide that, so long as any shares of
such series of Preferred Stock remain outstanding, the holders of such series
may vote as a separate class on certain specified matters, which may include
changes in the Company's capitalization, amendments to the Articles of
Incorporation, and mergers and dispositions.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption upon proper notice and sufficient funds
shall have been irrevocably deposited in trust to effect such redemption.
The provisions of a series of Preferred Stock may provide for additional
rights, remedies, and privileges if dividends on such series are in arrears for
specified periods, which rights and privileges will be described in the
applicable Prospectus Supplement.
Under Maryland law, notwithstanding anything to the contrary set forth
above, holders of each series of Preferred Stock will be entitled to vote upon a
proposed amendment to the Articles, whether or not entitled to vote thereon by
the Articles, if the amendment would alter the contract rights, as set forth in
the Articles, of their shares of stock.
CONVERSION RIGHTS
The terms and conditions, if any, upon which shares of any series of
Preferred Stock are convertible into Common Stock will be set forth in the
Prospectus Supplement relating thereto. Such terms will include the number of
shares of Common Stock into which the Preferred Stock is convertible, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such Preferred Stock.
RESTRICTIONS ON OWNERSHIP
As discussed above under "Description of Common Stock -- Restrictions on
Transfer," for the Company to qualify as a REIT under the Code, not more than
50% in value of its outstanding Stock may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year, and the Stock must be beneficially owned
by 100 or more persons during at least 335 days of a taxable year of 12 months
or during a proportionate part of a shorter taxable year. Therefore, ownership
and transfer of each series of Preferred Stock will be restricted in the same
manner as the Common Stock.
All certificates representing shares of Preferred Stock will bear a legend
referring to the restrictions described above.
DESCRIPTION OF DEBT SECURITIES
The Company may issue Debt Securities under one or more trust indentures
(each an "Indenture") to be executed by the Company and a specified trustee. The
terms of the Debt Securities will include those stated in the Indenture and
those made a part of the Indenture (before any supplements) by reference to the
Trust Indenture Act of 1939, as amended (the "TIA"). The Indentures will be
qualified under the TIA.
The following description sets forth certain anticipated general terms and
provisions of the Debt Securities to which any Prospectus Supplement may relate.
The particular terms of the Debt Securities offered by any Prospectus Supplement
(which terms may be different than those stated below) and the extent, if any,
to which such general provisions may apply to the Debt Securities so offered
will be described in the
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Prospectus Supplement relating to such Debt Securities. Accordingly, for a
description of the terms of a particular issue of Debt Securities, reference
must be made to both the Prospectus Supplement relating thereto and the
following description. Forms of the Senior Indenture (as defined herein) and the
Subordinated Indenture (as defined herein) have been filed as exhibits to the
Registration Statement of which this Prospectus is a part.
GENERAL
The Debt Securities will be direct obligations of the Company and may be
either senior Debt Securities ("Senior Securities") or subordinated Debt
Securities ("Subordinated Securities"). The indebtedness represented by
Subordinated Securities will be subordinated in right of payment to the prior
payment in full of the Senior Debt (as defined in the applicable Indenture) of
the Company. Senior Securities and Subordinated Securities will be issued
pursuant to separate indentures (respectively, a "Senior Indenture" and a
"Subordinated Indenture"), in each case between the Company and a Trustee.
Except as set forth in the applicable Indenture and described in a
Prospectus Supplement relating thereto, the Debt Securities may be issued
without limit as to aggregate principal amount, in one or more series, secured
or unsecured, in each case as established from time to time in or pursuant to
authority granted by a resolution of the Board of Directors of the Company or as
established in the applicable Indenture. All Debt Securities of one series need
not be issued at the time and, unless otherwise provided, a series may be
reopened, without the consent of the holders of the Debt Securities of such
series, for issuance of additional Debt Securities of such series.
The Prospectus Supplement relating to any series of Debt Securities being
offered will contain the specific terms thereof, including, without limitation:
(1) the title of such Debt Securities and whether such Debt Securities
are Senior Securities or Subordinated Securities;
(2) the aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion of the
principal amount of such Debt Securities which is convertible into Common
Stock or Preferred Stock, or the method by which any such portion shall be
determined;
(4) if convertible, any applicable limitations on the ownership or
transferability of the Common Stock or Preferred Stock into which such Debt
Securities are convertible;
(5) the date or dates, or the method for determining such date or
dates, on which the principal of such Debt Securities will be payable;
(6) the rate or rates (which may be fixed or variable), or the method
by which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(7) the date or dates, or the method for determining such date or
dates, from which any interest will accrue, the interest payment dates on
which any such interest will be payable, the regular record dates for such
interest payment dates, or the method by which any such date shall be
determined, the person to whom such interest shall be payable, and the
basis upon which interest shall be calculated if other than that of a
360-day year of twelve 30-day months;
(8) the place or places where the principal of (and premium, if any)
and interest, if any, on such Debt Securities will be payable, such Debt
Securities may be surrendered for conversion or registration of transfer or
exchange and notices or demands to or upon the Company in respect of such
Debt Securities and the applicable Indenture may be served;
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(9) the period or periods within which, the price or prices at which
and the terms and conditions upon which such Debt Securities may be
redeemed, as a whole or in part, at the option of the Company, if the
Company is to have such an option;
(10) the obligation, if any, of the Company to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, and the period or periods
within which, the price or prices at which and the terms and conditions
upon which such Debt Securities will be redeemed, repaid or purchased, as a
whole or in part, pursuant to such obligation;
(11) if other than U.S. dollars, the currency or currencies in which
such Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(12) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit
or units or composite currency or currencies) and the manner in which such
amounts shall be determined;
(13) any additions to, modifications of or deletions from the terms of
such Debt Securities with respect to the Events of Default or covenants set
forth in the Indenture;
(14) any provisions for collateral security for repayment of such Debt
Securities;
(15) whether such Debt Securities will be issued in certificated
and/or book-entry form;
(16) whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the denominations
thereof and terms and conditions relating thereto;
(17) the applicability, if any, of defeasance and covenant defeasance
provisions of the applicable Indenture;
(18) the terms, if any, upon which such Debt Securities may be
convertible into Common Stock or Preferred Stock of the Company and the
terms and conditions upon which such conversion will be effected,
including, without limitation, the initial conversion price or rate and the
conversion period;
(19) whether and under what circumstances the Company will pay
additional amounts as contemplated in the Indenture on such Debt Securities
in respect of any tax, assessment or governmental charge and, if so,
whether the Company will have the option to redeem such Debt Securities in
lieu of making such payment; and
(20) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special federal income tax, accounting
and other considerations applicable to Original Issue Discount Securities will
be described in the applicable Prospectus Supplement.
Except as set forth in the applicable Indenture, the applicable Indenture
will not contain any provisions that would limit the ability of the Company to
incur indebtedness or that would afford holders of Debt Securities protection in
the event of a highly leveraged or similar transaction involving the Company or
in the event of a change of control. Restrictions on ownership and transfers of
the Company's Common Stock and Preferred Stock are designed to preserve its
status as a REIT and, therefore, may act to prevent or hinder a change of
control. See "Description of Capital Stock -- Restrictions on Ownership."
Reference is made to the applicable Prospectus Supplement for information with
respect to any deletions from, modifications of or additions to the Events of
Default or covenants of the Company that are described below, including any
addition of a covenant or other provision providing event risk or similar
protection.
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MERGER, CONSOLIDATION OR SALE
It is expected that the Indenture will provide that the Company may
consolidate with, or sell, lease or convey all or substantially all of its
assets to, or merge with or into, any other corporation, provided that (a)
either the Company shall be the continuing corporation, or the successor
corporation (if other than the Company) formed by or resulting from any such
consolidation or merger or which shall have received the transfer of such assets
shall expressly assume payment of the principal of (and premium, if any), and
interest on, all of the applicable Debt Securities and the due and punctual
performance and observance of all of the covenants and conditions contained in
the applicable Indenture; (b) immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of the
Company or any subsidiary as a result thereof as having been incurred by the
Company or such subsidiary at the time of such transaction, no Event of Default
under the applicable 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 (c) an officer's certificate and legal opinion covering such
conditions shall be delivered to the Trustee.
COVENANTS
The Indenture will contain covenants requiring the Company to take certain
actions and prohibiting the Company from taking certain actions. The covenants
with respect to any series of Debt Securities will be described in the
Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Each Indenture will describe specific "Events of Defaults" with respect to
any series of Debt Securities issued thereunder. Such "Events of Defaults" are
likely to include (with grace and cure periods): (i) default in the payment of
any installment of interest on any Debt Security of such series; (ii) default in
the payment of principal of (or premium, if any, on) any Debt Security of such
series at its maturity; (iii) default in making any required sinking fund
payment for any Debt Security of such series; (iv) default in the performance or
breach of any other covenant or warranty of the Company contained in the
applicable Indenture (other than a covenant added to the Indenture solely for
the benefit of a series of Debt Securities issued thereunder other than such
series), continued for a specified period of days after written notice as
provided in the applicable Indenture; (v) default in the payment of specified
amounts of indebtedness of the Company or any mortgage, indenture or other
instrument under which such indebtedness is issued or by which such indebtedness
is secured, such default having occurred after the expiration of any applicable
grace period and having resulted in the acceleration of the maturity of such
indebtedness, but only if such indebtedness is not discharged or such
acceleration is not rescinded or annulled and (vi) certain events of bankruptcy,
insolvency or reorganization, or court appointment of a receiver, liquidator or
trustee of the Company or any Significant Subsidiary or either of its property.
If an Event of Default under any Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the holders of not less than 25% of the
principal amount of the outstanding Debt Securities of that series will have the
right to declare the principal amount (or, if the Debt Securities of that series
are Original Issue Discount Securities or indexed securities, such portion of
the principal amounts may be specified in the terms thereof) of all the Debt
Securities of that series to be due and payable immediately by written notice
thereof to the Company (and to the applicable Trustee if given by the holders).
However, at any time after such a declaration of acceleration with respect to
Debt Securities of such series (or of all Debt Securities then outstanding under
any Indenture, as the case may be) has been made, but before a judgement or
decree for payment of the money due has been obtained by the applicable Trustee,
the holders of not less than a majority in principal amount of outstanding Debt
Securities of such series (or of all Debt Securities then outstanding under the
applicable Indenture, as the case may be) may rescind and annul such declaration
and its consequences if (a) the Company shall have deposited with the applicable
Trustee all required payments of the principal of (and premium, if any) and
interest on the Debt Securities of such series (or of all Debt Securities then
outstanding under the applicable Indenture, as the case may be), plus certain
fees, expenses, disbursements and advances of the applicable Trustee and (b) all
events of default, other than the non-payment of accelerated principal (or
specified portion
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thereof), with respect to Debt Securities of such series (or of all Debt
Securities then outstanding under the applicable Indenture, as the case may be)
have been cured or waived as provided in such Indenture. Each Indenture also
will provide that the holders of not less than a majority in principal amount of
the outstanding Debt Securities of any series (or of all Debt Securities then
outstanding under the applicable Indenture, as the case may be) may waive any
past default with respect to such series and its consequences, except a default
(x) in the payment of the principal of (or premium, if any) or interest on any
Debt Security of such series or (y) in respect of a covenant or provision
contained in the applicable Indenture that cannot be modified or amended without
the consent of the holder of each outstanding Debt Security affected thereby.
Each Trustee will be required to give notice to the holders of Debt
Securities within 90 days of a default under the applicable Indenture unless
such default shall have been cured or waived; provided, however, that such
Trustee may withhold notice to the holders of any series of Debt Securities of
any default with respect to such series (except a default in the payment of the
principal of (or premium, if any) or interest on any Debt Security of such
series or in the payment of any sinking fund installment in respect of any Debt
Security of such series) if specified responsible officers of such Trustee
consider such withholding to be in the interest of such holders.
Each Indenture will provide that no holders of Debt Securities of any
series may institute any proceedings, judicial or otherwise, with respect to
such Indenture or for any remedy thereunder, except in the cases of failure of
the applicable Trustee, for 60 days, to act after it has received a written
request to institute proceedings in respect of an Event of Default from the
holders of not less than 25% in principal amount of the outstanding Debt
Securities of such series, as well as an offer of indemnity reasonably
satisfactory to it. This provision will not prevent, however, any holder of Debt
Securities from instituting suit for the enforcement of payment of the principal
of (and premium, if any) and interest on such Debt Securities at the respective
due dates thereof.
Subject to provisions in each Indenture relating to its duties in case of
default, no Trustee will be under any obligation to exercise any of its rights
or powers under an Indenture at the request or direction of any holders of any
series of Debt Securities then outstanding under such Indenture, unless such
holders shall have offered to the Trustee thereunder reasonable security or
indemnity. The holders of not less than a majority in principal amount of the
outstanding Debt Securities of any series (or of all Debt Securities then
outstanding under an Indenture, as the case may be) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the applicable Trustee, or of exercising any trust or power
conferred upon such Trustee. However, a Trustee may refuse to follow any
direction which is in conflict with any law or the applicable Indenture, which
may involve such Trustee in personal liability or which may be unduly
prejudicial to the holders of Debt Securities of such series not joining
therein.
Within 120 days after the close of each fiscal year, the Company will be
required to deliver to each Trustee a certificate, signed by one of several
specified officers, stating whether or not such officer has knowledge of any
default under the applicable Indenture and, if so, specifying each such default
and the nature and status thereof.
MODIFICATION OF THE INDENTURES
It is anticipated that modifications and amendments of an Indenture may be
made by the Company and the Trustee, with the consent of the holders of not less
than a majority in aggregate principal amount of each series of the outstanding
Debt Securities issued under the Indenture which are affected by the
modification or amendment, provided that no such modification or amendment may,
without a consent of each holder of such Debt Securities affected thereby; (1)
change the stated maturity date of the principal of (or premium, if any) or any
installment of interest, if any, on any such Debt Security; (2) reduce the
principal amount of (or premium, if any) or the interest, if any, on any such
Debt Security or the principal amount due upon acceleration of an Original Issue
Discount Security; (3) change the place or currency of payment of principal of
(or premium, if any) or interest, if any, on any such Debt Security; (4) impair
the right to institute suit for the enforcement of any such payment on or with
respect to any such Debt Security; (5) reduce the above-stated percentage of
holders of Debt Securities necessary to modify or amend the Indenture; or (6)
modify the
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foregoing requirements or reduce the percentage of outstanding Debt Securities
necessary to waive compliance with certain provisions of the Indenture or for
waiver of certain defaults. A record date may be set for any act of the holders
with respect to consenting to any amendment.
The holders of not less than a majority in principal amount of outstanding
Debt Securities of each series affected thereby will have the right to waive
compliance by the Company with certain covenants in such Indenture.
Each Indenture will contain provisions for convening meetings of the
holders of Debt Securities of a series to take permitted action.
REDEMPTION OF SECURITIES
The Indenture will provide that the Debt Securities may be redeemed at any
time at the option of the Company, in whole or in part, for certain reasons
intended to protect the Company's status as a REIT. Debt Securities may also be
subject to optional or mandatory redemption on terms and conditions described in
the applicable Prospectus Supplement.
From and after notice has been given as provided in the Indenture, if funds
for the redemption of any Debt Securities called for redemption shall have been
made available on such redemption date, such Debt Securities will cease to bear
interest on the date fixed for such redemption specified in such notice, and the
only right of the holders of the Debt Securities will be to receive payment of
the Redemption Price.
CONVERSION OF SECURITIES
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or Preferred Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Common Stock or Preferred
Stock, the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the holders
or the Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities and any restrictions on conversion, including restrictions directed
at maintaining the Company's REIT status.
SUBORDINATION
Upon any distribution to creditors of the Company in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
any Subordinated Securities will be subordinated to the extent provided in the
applicable Indenture in right of payment to the prior payment in full of all
Senior Securities. No payment of principal or interest will be permitted to be
made on Subordinated Securities at any time if a default in Senior Securities
exists that permits the holders of such Senior Securities to accelerate their
maturity and the default is the subject of judicial proceedings or the Company
receives notice of the default. After all Senior Securities are paid in full and
until the Subordinated Securities are paid in full, holders of Subordinated
Securities will be subrogated to the right of holders of Senior Securities to
the extent that distributions otherwise payable to holders of Subordinated
Securities have been applied to the payment of Senior Securities. By reason of
such subordination, in the event of a distribution of assets upon insolvency,
certain general creditors of the Company may recover more, ratably, than holders
of Subordinated Securities. If this Prospectus is being delivered in connection
with a series of Subordinated Securities, the accompanying Prospectus Supplement
or the information incorporated herein by reference will contain the approximate
amount of Senior Securities outstanding as of the end of the Company's most
recent fiscal quarter.
FEDERAL INCOME TAX AND ERISA CONSIDERATIONS
The following description of certain federal income tax matters and
Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
considerations relating to the Company is qualified in its entirety by reference
to the more detailed description thereof contained in the opinion of Baker,
Donelson,
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<PAGE> 47
Bearman & Caldwell, P.C., Nashville, Tennessee, regarding such matters, which
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
The Company is and intends to remain qualified as a REIT under the Internal
Revenue Code of 1986, as amended (the "Code"). As a REIT, the Company's net
income which is distributed as dividends to shareholders will be exempt from
federal taxation. Distributions to the Company's shareholders generally will be
includable in their income. However, dividends distributed which are in excess
of current or accumulated earnings will be treated for tax purposes as a return
of capital to the extent of a shareholder's basis, and will reduce the basis of
shareholders' Securities with respect to which the distribution is paid or, to
the extent that they exceed such basis, will be taxed in the same manner as gain
from the sale of those Securities.
The Company intends to conduct its affairs so that the assets of the
Company will not be deemed to be "plan assets" of any individual retirement
account, employee benefit plan subject to Title I of ERISA, or other qualified
retirement plan subject to Section 4975 of the Code which acquires its
Securities. The Company believes that, under present law, its distributions do
not create so called "unrelated business taxable income" to tax exempt entities
such as pension trusts, subject, however, to certain new rules which after 1993
will apply to pension trusts holding more than 10% of the Securities.
EACH PROSPECTIVE PURCHASER OF THE SECURITIES IS ADVISED TO CONSULT HIS OWN
PROFESSIONAL ADVISOR REGARDING THE SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX AND ERISA CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND SALE OF
THE SECURITIES.
PLAN OF DISTRIBUTION
The Company may sell Securities through underwriters for public offer and
sale by them, and also may sell Securities offered hereby to investors directly
or through agents. Any such underwriter or agent involved in the offer and sale
of the Securities will be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, at prices related to the prevailing market prices at the
time of sale or at negotiated prices. The Company also may, from time to time,
authorize underwriters acting as the Company's agents to offer and sell
Securities upon terms and conditions set forth in the applicable Prospectus
Supplement. In connection with the sale of the Securities, underwriters may be
deemed to have received compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of the Securities for whom they may act as agent. Underwriters may
sell Securities to or through dealers, and such dealers may receive compensation
in the form of discounts, concessions or commissions from the underwriters
and/or commissions from the purchasers for whom they may act as agent.
Any underwriters or agents in connection with an offering of the
Securities, and any discounts, concessions or commissions allowed by
underwriters to participating dealers, will be set forth in the applicable
Prospectus Supplement. Underwriters, dealers and agents participating in the
distribution of the Securities may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
resale of the Securities may be deemed to be underwriting discounts and
commissions, under the Securities Act. Underwriters, dealers and agents may be
entitled, under agreements to be entered into with the Company, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act or to contributions with respect
to payments which the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may engage in transactions with or perform
services for the Company in the ordinary course of business.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Securities from the Company
at the public offering price set forth in such Prospectus Supplement pursuant to
delayed delivery contracts providing for payment and delivery on the date or
dates stated in such Prospectus Supplement. Each delayed delivery contract will
be for an amount not less than, and the aggregate principal amount of Securities
sold pursuant to delayed delivery contracts shall not be less nor more than, the
respective amounts stated in the applicable Prospectus Supplement. Institutions
with whom delayed delivery contracts,
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<PAGE> 48
when authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions but will in all cases be subject to the
approval of the Company. Delayed delivery contracts will not be subject to any
conditions except (i) the purchase by an institution of the Securities covered
by its delayed delivery contracts shall not at the time of delivery be
prohibited under the laws of any jurisdiction in the United States to which such
institution is subject, and (ii) if the Securities are being sold to
underwriters, the Company shall have sold to such underwriters the total
principal amount of the Securities less the principal amount thereof covered by
delayed delivery contracts.
EXPERTS
The consolidated financial statements and schedule of the Company,
incorporated by reference or appearing in the Company's Annual Report (Form
10-K) for the year ended December 31, 1994, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon incorporated or
included therein and incorporated herein by reference. Such financial statements
and schedule are, and audited financial statements and schedules to be included
in subsequently filed documents will be, incorporated herein in reliance upon
the reports of Ernst & Young LLP pertaining to such financial statements and
schedule (to the extent covered by consents filed with the Securities and
Exchange Commission) given upon the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
The legality of the Securities will be passed upon by Waller Lansden Dortch
& Davis, Nashville, Tennessee. The description of the federal income tax
considerations will be passed upon by Baker, Donelson, Bearman & Caldwell, P.C.,
Nashville, Tennessee.
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======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OF THE UNDERWRITERS. NEITHER THIS PROSPECTUS SUPPLEMENT
NOR THE ACCOMPANYING PROSPECTUS CONSTITUTES AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY THE SHARES OF COMMON STOCK OFFERED HEREBY TO ANY PERSON OR BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
---------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Supplement Summary......... S-1
Capitalization........................ S-6
Use of Proceeds....................... S-7
Price Range of Common Stock and
Distributions....................... S-8
The Company........................... S-9
Recent Developments................... S-10
Pending Developments.................. S-12
Properties............................ S-13
Management............................ S-17
Federal Income Tax Considerations..... S-18
Underwriting.......................... S-21
Experts............................... S-22
Additional Available Information...... S-22
Legal Matters......................... S-22
Index to Unaudited Pro Forma Financial
Statements.......................... F-1
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Use of Proceeds....................... 3
Ratio of Earnings to Fixed Charges.... 3
Description of Common Stock........... 3
Description of Common Stock Warrants.. 6
Description of Preferred Stock........ 6
Description of Debt Securities........ 10
Federal Income Tax and ERISA
Considerations...................... 15
Plan of Distribution.................. 16
Experts............................... 17
Legal Matters......................... 17
</TABLE>
======================================================
======================================================
4,500,000 SHARES
(LOGO) HEALTHCARE REALTY TRUST
COMMON STOCK
------------------------------------------------
PROSPECTUS SUPPLEMENT
------------------------------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
A.G. EDWARDS & SONS, INC.
EQUITABLE SECURITIES
CORPORATION
LEHMAN BROTHERS
SMITH BARNEY INC.
February 11, 1997
======================================================
