<PAGE> 1
Pursuant to Rule 424(b)(2)
Registration No. 33-97888
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED NOVEMBER 2, 1995)
FEBRUARY 18, 1998
867,679 SHARES
HEALTHCARE REALTY TRUST INCORPORATED
COMMON STOCK
Healthcare Realty Trust Incorporated ("Healthcare Realty" or the
"Company") is a self-managed and self-administrated real estate investment trust
("REIT") that integrates owning, acquiring, managing and developing
income-providing real estate properties related to healthcare services
throughout the United States. As of January 31, 1998, the Company owned and
operated, either directly or through consolidated entities, 87 properties
containing approximately 4.4 million square feet in 44 markets nationwide. In
addition, as of January 31, 1998, the Company provided property management
services for 130 healthcare-related properties nationwide and third-party asset
management services for 251 properties nationwide.
All of the shares of the Company's common stock, par value $.01 per
share (the "Common Stock"), offered hereby are being issued and sold by the
Company (the "Offering"). The Common Stock is listed on the New York Stock
Exchange (the "NYSE") under the symbol "HR." On February 18, 1998, the last
reported sale price of the Common Stock on the NYSE was $28.8125 per share. See
"Price Range of Common Stock and Distributions."
SEE "CAUTIONARY STATEMENTS" IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1996, WHICH IS INCORPORATED BY REFERENCE INTO
THE ACCOMPANYING PROSPECTUS, FOR CERTAIN FACTORS RELEVANT TO AN INVESTMENT IN
THE COMMON STOCK.
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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. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
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PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
THE PUBLIC AND COMMISSIONS (2) THE COMPANY (1)(3)
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<S> <C> <C> <C>
PER SHARE...................... (1) (1) $27.3725
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TOTAL.......................... (1) (1) $23,750,543.43
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</TABLE>
(1) The Underwriter has agreed to purchase 867,679 shares of the Common
Stock from the Company at a price of $27.3725 per share, resulting in
aggregate proceeds to the Company of $23,750,543.43, before deducting
expenses payable by the Company estimated at $50,000, subject to the
terms and conditions of an Underwriting Agreement. The Underwriter
intends to sell the shares of Common Stock to the sponsor of a newly
formed unit investment trust (the "Trust") at an aggregate purchase
price of $24,000,521.75, resulting in an aggregate underwriting
discount of $249,978.32. See "Underwriting". Such sponsor intends to
deposit the shares of Common Stock into the Trust in exchange for units
in the Trust. The units of the Trust will be sold to investors at a
price based upon the net asset value of securities in the Trust. For
purposes of this calculation, the value of the Common Stock as of the
evaluation time for units of the Trust on February 18, 1998 was the
last reported sale price of the Common Stock on the NYSE, which was
$28.8125 per share.
(2) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $50,000.
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The shares of Common Stock are offered by the Underwriter, subject to
prior sale, to withdrawal, cancellation or modification of the offer without
notice, to delivery and acceptance by the Underwriter and to certain further
conditions. It is expected that delivery of the Common Shares will be made on or
about February 23, 1998 at the offices of A.G. Edwards & Sons, Inc., One North
Jefferson Avenue, St. Louis, Missouri 63103.
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A.G. EDWARDS & SONS, INC.
<PAGE> 2
THE UNDERWRITER MAY ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR
OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SPECIFICALLY, THE UNDERWRITER
MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND PURCHASE,
SHARES OF COMMON STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
S-2
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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 the context otherwise requires, as used herein the
terms "Company" or "Healthcare Realty" include Healthcare Realty Trust
Incorporated, its 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.
From the commencement of its operations in June 1993 through January 31, 1998,
the Company has invested or committed to invest, directly and indirectly, over
$525 million in 87 income-producing real estate properties related to the
delivery of healthcare services, containing over 4.4 million square feet. As of
January 31, 1998, the Company's portfolio was comprised of seven facility types,
located in 44 markets nationwide, and operated pursuant to contractual
arrangements with 18 healthcare providers. At January 31, 1998, the Company
provided property management services for 130 healthcare-related properties
nationwide, totaling over 3.9 million square feet, and third-party asset
management services for 251 properties nationwide, totaling over 1.3 million
square feet. 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.
RECENT DEVELOPMENTS
Acquisitions. In December 1997, Healthcare Realty completed a $12.5
million acquisition of an 80,000 square foot ancillary hospital facility under
development and additional building sites located adjacent to the 251-bed
Bradley County Memorial Hospital in Cleveland, Tennessee. Upon completion of the
development, which is expected to occur in June 1998, the ancillary hospital
facility is expected to be occupied by physician practices and affiliated
hospital services and support functions, including diagnostic imaging,
laboratory services and an ambulatory surgery center. The development is
situated on 8.5 acres that contain two additional sites for further development.
Operating Results and Distributions. Funds from operations ("FFO") for
the year ended December 31, 1997 increased 51.1% to $42.3 million, from $28.0
million for the year ended December 31, 1996. FFO for the three months ended
December 31, 1997 increased 52.7% to $11.3 million, from $7.4 million for the
three months ended December 31, 1996. The Company generally considers FFO a
widely used and appropriate measure of performance for an equity REIT which
provides a relevant basis for comparison among REITs.
The Company's payout ratio, based on FFO, has decreased from
approximately 90% for the year ended December 31, 1996 to approximately 87% for
the year ended December 31, 1997, and from approximately 88% for the three
months ended December 31, 1996 to approximately 85% for the three months ended
December 31, 1997.
FFO, 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 ("GAAP"), excluding gains or losses
from debt restructuring and sales of property, plus depreciation and
amortization of real estate assets, and after adjustments for unconsolidated
partnerships and joint ventures. FFO does not represent cash provided by
operating activities, as defined by GAAP, should not be considered as an
alternative to net income (determined in accordance with GAAP) as an indication
of operating performance and is not indicative of cash available to fund all
cash flow needs, including the Company's ability to make cash distributions.
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THE OFFERING
Shares to be offered .............. 867,679 Shares
Common Stock to be outstanding
after the Offering............... 20,298,635 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
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(1) Excludes an aggregate of 1,978,154 shares of Common Stock reserved for
issuance under the Company's 1993 Employee Stock Incentive Plan, 1995 Restricted
Stock Plan for Non-Employee Directors and 1995 Employee Stock Purchase Plan, and
940,495 shares of Common Stock reserved for issuance under the Company's
Dividend Reinvestment Plan, as of February 18, 1998.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of the
Common Stock offered hereby, after deducting underwriting discounts and
commissions and estimated expenses of this Offering, are approximately $23.7
million. The Company intends to use the net proceeds of this Offering to repay
outstanding indebtedness under the Company's unsecured bank credit facility, to
fund the Company's acquisition and development activities and for working
capital and general corporate purposes.
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 and
the distributions paid per share by the Company with respect to the periods
indicated.
<TABLE>
<CAPTION>
DISTRIBUTIONS
HIGH LOW PER SHARE
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<S> <C> <C> <C>
1996
First Quarter....................................... $23.1250 $20.8750 $.475
Second Quarter...................................... 23.7500 21.5000 .480
Third Quarter....................................... 24.1250 21.5000 .485
Fourth Quarter...................................... 26.8750 23.0000 .490
1997
First Quarter....................................... 29.2500 25.7500 .495
Second Quarter...................................... 27.8750 25.3750 .500
Third Quarter....................................... 29.3125 27.1250 .505
Fourth Quarter...................................... 30.0000 27.4375 .510
1998
First Quarter (through February 18, 1998)........... 29.9375 28.2500 --
</TABLE>
On February 18, 1998, the closing price for the Company's Common Stock
on the NYSE was $28.8125 per share. As of February 18, 1998, there were
approximately 1,676 holders of record of the Company's Common Stock. The Company
has increased its distribution's $.005 per share in each full fiscal quarter
since it commenced operations in June 1993. The Company's current indicated
annualized distribution is $2.04 per share.
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The Company has implemented a Dividend Reinvestment Plan (the "Plan"),
which permits shareholders 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. 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 cash 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 accumulated earnings
and profits for federal income tax purposes will be taxable to shareholders as
ordinary dividend income. Distributions in excess of earnings and profits
generally will be treated as non-taxable return of capital. Such distributions
have the effect of deferring taxation until the sale of a shareholder's Common
Stock. In order to maintain its qualification as a REIT, the Company must make
annual distributions to shareholders of at least 95% of its taxable income.
Under certain circumstances, which management of the Company does not expect to
occur, the Company could be required to make distributions in excess of cash
available for distribution in order to meet such requirements.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
On February 2, 1998, the Clinton Administration announced its revenue
proposals for the 1998/1999 Federal budget. These proposals contain certain
provisions that, if enacted, would significantly modify the REIT-related Code
provisions. The following list sets forth the major changes that have been
proposed: (i) limit the grandfathered status of existing stapled, or
paired-share, REITs by treating the stapled entities as one entity with respect
to properties acquired and activities or services performed relating to such
properties after the effective date; (ii) restrict impermissible businesses
indirectly conducted by REITs by prohibiting REITs from acquiring stock that
represents more than 10% of the vote and value of all classes of stock of a
corporation after the effective date (subject to certain grandfather
provisions); (iii) modify the treatment of closely held REITs by imposing as an
additional requirement for initial REIT qualification that no person can own
stock of a REIT possessing more than 50% of the total combined voting power of
all classes of voting stock or more than 50% of the total value of shares of all
classes of stock; and (iv) effectively eliminate the tax-free conversions of
large C corporations to REITs by repealing Code Section 1374 and requiring the
conversion to be treated as a liquidation of the C corporation followed by a
contribution of the assets to a REIT. If enacted, the effective date of each of
these provisions will generally be the first date of committee action. At this
time, it is uncertain whether any or all of these provisions, or additional
provisions, will be enacted, or if enacted, to what extent, if any, they will
materially affect the Company.
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UNDERWRITING
Pursuant to the terms and subject to the conditions of the Underwriting
Agreement (the "Underwriting Agreement") between the Company and A.G. Edwards &
Sons, Inc. (the "Underwriter"), the Underwriter has agreed to purchase from the
Company, and the Company has agreed to sell to the Underwriter, 867,679 shares
of Common Stock.
The Underwriter intends to sell the shares of Common Stock to Nike
Securities L.P., which intends to deposit such shares, together with shares of
common stock of other entities also acquired from the Underwriter, into a
newly-formed unit investment trust (the "Trust") registered under the Investment
Company Act of 1940, as amended, in exchange for units in the Trust. The
Underwriter is not an affiliate of Nike Securities L.P. or the Trust. The
Underwriter intends to sell the shares of Common Stock to Nike Securities L.P.
at an aggregate purchase price of $24,000,521.75. It is anticipated that the
Underwriter will also participate in the distribution of units of the Trust and
will receive compensation therefor.
Pursuant to the Underwriting Agreement, the Company has agreed to
indemnify the Underwriter against certain liabilities under the Securities Act
of 1933, as amended, or to contribute to payments the Underwriter may be
required to make in respect thereof.
Until the distribution of the shares of Common Stock is completed,
rules of the Securities and Exchange Commission may limit the ability of the
Underwriter to bid for and purchase shares of Common Stock. As an exception to
these rules, the Underwriter is permitted to engage in certain transactions that
stabilize the price of the Common Stock. Such transactions consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
Common Stock. It is not currently anticipated that the Underwriter will engage
in any such transactions in connection with this Offering.
If the Underwriter creates a short position in the Common Stock in
connection with this Offering, i.e., if it sells more shares of Common Stock
than are set forth on the cover page of this Prospectus Supplement, the
Underwriter may reduce that short position by purchasing shares in the open
market.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases.
Neither the Company nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above might have on the price of the shares. In addition, neither the
Company nor the Underwriter makes any representation that the Underwriter will
engage in such transactions or that such transaction, once commenced, will not
be discontinued without notice.
In the ordinary course of business, the Underwriter and its affiliates
have engaged and may in the future engage, in investment banking transactions
with the Company.
S-6
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LEGAL MATTERS
The validity of the Common Stock offered hereby, as well as certain
legal matters relating to the Company, will be passed upon for the Company 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 relating to the purchase of properties will be
passed upon for the Company by Baker, Donelson, Bearman & Caldwell, A
Professional Corporation, Nashville, Tennessee. Certain matters relating to
federal income taxation will be passed upon for the Company by Farris, Warfield
& Kanaday, PLC, Nashville, Tennessee. Certain legal matters related to the
Offering will be passed upon for the Underwriter by Chapman and Cutler, Chicago,
Illinois. Waller Lansden Dortch & Davis, A Professional Limited Liability
Company and Chapman and Cutler will rely on the opinion of Brown & Wood LLP,
Washington, D.C. as to certain matters of Maryland law.
AVAILABLE INFORMATION
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 Securities
and Exchange Commission (the "Commission"). Included in such filings are (i) the
Company's Annual Report on Form 10-K for the year ended December 31, 1996; (ii)
the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997; (iii) the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997; (iv) the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997; (v) the Company's Current Report on Form 8-K dated
January 30, 1998; and (vi) the Company's Current Report on Form 8-K dated
February 17, 1998. Such reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following regional offices of the Commission: Seven World
Trade Center, Suite 1300, New York, New York 10048; and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains an Internet website at 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's Common Stock is listed on the New York Stock Exchange.
Reports, proxy statements and other information concerning the Company can also
be inspected at the New York Stock Exchange, Inc., 20 Broad Street, New York,
New York 10005.
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 Annual
Report on Form 10-K for the year ended December 31, 1996.
S-7
<PAGE> 8
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No dealer, salesperson or other individual has been authorized to give any
information or to make any representations other than contained or incorporated
by reference in this Prospectus Supplement and the accompanying Prospectus in
connection with the offer made by this prospectus Supplement and the
accompanying Prospectus. If given or made, such information or representation
must not be relied upon as having been authorized by the Company or the
Underwriters. This Prospectus Supplement and the accompanying Prospectus do not
constitute an offer to sell, or a solicitation of an offer to buy, the shares
offered hereby in any jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer 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, under any circumstances, create an implication
that there has not been any change in the facts set forth in this Prospectus
Supplement and the accompanying Prospectus or in the affairs of the Company
since the date hereof.
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TABLE OF CONTENTS
Page
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PROSPECTUS SUPPLEMENT
The Company.....................................S-3
Recent Developments.............................S-3
The Offering....................................S-4
Use of Proceeds.................................S-4
Price Range of Common Stock and
Distributions...............................S-4
Certain Federal Income Tax
Considerations..............................S-5
Underwriting....................................S-6
Legal Matters...................................S-7
Available Information...........................S-7
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
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867,679 SHARES
HEALTHCARE REALTY TRUST INCORPORATED
COMMON STOCK
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PROSPECTUS SUPPLEMENT
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A.G. EDWARDS & SONS, INC.
FEBRUARY 18, 1998
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