<PAGE> 1
Filed Pursuant to Rule 424(b)(2)
Registration Statement Number 33-97888
PROSPECTUS SUPPLEMENT
(To Prospectus dated November 2, 1995)
October 15, 1998
HEALTHCARE REALTY TRUST INCORPORATED
A Maximum of 2,950,000 Shares of Common Stock
Healthcare Realty Trust Incorporated is a self-managed and
self-administered real estate investment trust which integrates owning, managing
and developing income-producing real estate properties associated with the
delivery of healthcare services throughout the United States.
Under a Plan and Agreement of Merger, dated as of June 8, 1998,
Capstone Capital Corporation is expected to become a wholly owned subsidiary of
Healthcare Realty. Healthcare Realty will assume Capstone's obligations with
respect to its 10 1/2% Convertible Subordinated Debentures due 2002 and its
6.55% Convertible Subordinated Debentures due 2002. This Prospectus Supplement
relates to the issuance, from time to time, of up to an aggregate of 2,950,000
shares of Healthcare Realty's common stock upon the conversion of such
Debentures into shares of Healthcare Realty common stock.
The Healthcare Realty common stock is listed on the New York Stock
Exchange under the symbol "HR."
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK
FACTORS" IN HEALTHCARE REALTY'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1997.
---------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
<PAGE> 2
The following information 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 accompanying Prospectus. Unless the context otherwise requires, all
references to "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 incorporated in Maryland and is a self-managed and
self-administered real estate investment trust that integrates owning, managing
and developing income-producing real estate properties associated with the
delivery of healthcare services throughout the United States. As of September
30, 1998, Healthcare Realty's portfolio was comprised of eight facility types,
located in 48 markets nationwide, and operated pursuant to contractual
arrangements with 18 healthcare providers. From the commencement of operations
in June 1993 to September 30, 1998, Healthcare Realty invested or committed to
invest over $590 million in 95 income-producing real estate properties totaling
over 4.4 million square feet. At September 30, 1998, Healthcare Realty provided
property management services for 148 properties, totaling over 4.0 million
square feet, and third-party asset management services for 194 properties,
totaling over 1.2 million square feet.
RECENT DEVELOPMENTS
Healthcare Realty has entered into a Plan and Agreement of Merger,
dated as of June 8, 1998, with Capstone Capital Corporation, a Maryland
corporation ("Capstone"). Under the Merger Agreement, HR Acquisition I
Corporation, a wholly owned subsidiary of Healthcare Realty, is expected to be
merged with and into Capstone, with Capstone becoming a wholly owned subsidiary
of Healthcare Realty. The Merger is expected to be completed by the end of
October 1998. As a result of the Merger:
- each share of Capstone common stock will be converted into the
right to receive .8518 shares of Healthcare Realty common stock;
- each share of Capstone 8 7/8% Series A Cumulative Preferred Stock
will be converted into the right to receive one share of
Healthcare Realty 8 7/8% Series A Voting Cumulative Preferred
Stock; and
- all Capstone debentures outstanding at the effective time of the
Merger will remain outstanding in accordance with the Indentures
under which they were issued, as supplemented to reflect the
Merger, and Healthcare Realty will assume all of Capstone's
obligations with respect to Capstone's debentures.
NationsBank, N.A. has provided Healthcare Realty with a commitment,
subject to customary definitive documentation and closing conditions, for a $200
million term loan and a $300 million (of which $265 million will be initially
S-2
<PAGE> 3
available to Healthcare Realty) revolving line of credit. The closing of the
term loan and the revolving line of credit are anticipated to close
simultaneously with the Merger.
On September 29, 1998, Healthcare Realty declared a dividend of $0.525
per share to the holders of its common stock as of the close of business on
October 12, 1998. This dividend related to the period ending September 30, 1998.
USE OF PROCEEDS
Healthcare Realty will not receive any cash proceeds from the
conversion of the Debentures into common stock.
DESCRIPTION OF THE DEBENTURES
After Healthcare Realty assumes all of Capstone's obligations with
respect to the Debentures at the completion of the Merger, the Debentures will
have substantially identical terms, rights and preferences as prior to the
Merger. As of October 14, 1998, $7,414,000 in principal amount of Capstone's 10
1/2% Convertible Subordinated Debentures due 2002 and $74,737,000 in principal
amount of Capstone's 6.55% Convertible Subordinated Debentures due 2002 were
outstanding. As used in this Prospectus Supplement, the term "Debentures" refers
to both the 10 1/2% Debentures and the 6.55% Debentures.
The following is a summary of certain information relating to the
Debentures and material terms and provisions of the Debentures that will be
materially different upon the completion of the Merger. The terms of the
Debentures include those set forth in the Indentures (as defined below) and
those made part of the Indentures by reference to the Trust Indenture Act of
1939, as amended. The Debentures are subject to all such terms.
The following summary is not complete. The Debentures are more fully
described in Healthcare Realty's Registration Statement on Form S-4
(Registration No. 333-59907) filed in connection with the Merger. If a term is
capitalized but is not defined in this document, it will have the same meaning
as in the Indentures. When we use the term "Healthcare Realty" in this section,
we mean Healthcare Realty Trust Incorporated but not including its subsidiaries
and partnerships.
The following summary assumes completion of the Merger and assumption
of Capstone's obligations under the Debentures by Healthcare Realty. THE MERGER
IS SUBJECT TO APPROVAL BY THE STOCKHOLDERS OF HEALTHCARE REALTY, APPROVAL BY THE
STOCKHOLDERS OF CAPSTONE AND CERTAIN OTHER CONDITIONS AS DESCRIBED IN THE MERGER
AGREEMENT.
GENERAL
GOVERNING LAW
The Indentures and the Debentures are governed by and construed in
accordance with the laws of the State of New York, without giving effect to such
State's conflicts of laws principles.
S-3
<PAGE> 4
INFORMATION CONCERNING THE TRUSTEE
When the Debentures were originally issued, AmSouth Bank of Alabama was
the Trustee under both Indentures. Effective October 9, 1998, The Bank of New
York purchased AmSouth's trust business and became the substitute trustee.
Healthcare Realty and its subsidiaries may maintain deposit accounts and conduct
other banking transactions with the Trustee in the ordinary course of business.
The Trustee serves as trustee with respect to Healthcare Realty 10 1/2%
Debentures and Healthcare Realty 6.55% Debentures and may act as trustee with
respect to additional debt issuances by Healthcare Realty in the future.
TRANSFER AGENT AND EXCHANGE LISTING
The transfer agent and registrant for the Debentures is The Bank of New
York. The Debentures are listed on the NYSE.
PROTECTION OF REIT STATUS
To protect Healthcare Realty's status as a REIT, a Person may not own
or convert any Debenture if such ownership or conversion, in the good faith
opinion of the Board of Directors,
- might cause Healthcare Realty to fail to comply with any
requirement necessary for the continued qualification of
Healthcare Realty as a REIT, or
- would result in a single Person owning more than 9.9% of
Healthcare Realty's outstanding stock (the "Ownership Limit")
within the meaning of the Internal Revenue Code of 1986, as
amended (the "Code").
A Person owns shares of Healthcare Realty stock if
- such shares are owned directly by such Person (held of record by
such Person or such Person's nominee or nominees), or
- if such shares are owned indirectly by such Person (including
shares of common stock issuable upon conversion of the
Debentures)
pursuant to Sections 542, 544 and 856 of the Code and the regulations
promulgated thereunder.
Prior to the Merger, holders of the Debentures are subject to an
Ownership Limit of 9.8%. Upon completion of the Merger, the Ownership Limit will
become 9.9% in order to conform the Ownership Limit to the applicable provisions
of the Healthcare Realty Articles of Incorporation, as amended.
THE 6.55% DEBENTURES
The 6.55% Debentures are unsecured obligations of Capstone and, upon
completion of the Merger, will become unsecured obligations of Healthcare
Realty. Capstone issued the 6.55% Debentures on March 14, 1997, under an
Indenture between Capstone and the Trustee (the "6.55% Indenture" and together
with the 10 1/2% Indenture, the "Indentures").
S-4
<PAGE> 5
Capstone originally offered the 6.55% Debentures in March 1997 at an
original issue discount (the excess of the principal amount of the 6.55%
Debentures at maturity over the issue price) of 9.70% from their principal
amount at maturity. The 6.55% Debentures will mature on March 14, 2002 and bear
interest at the rate of 6.55% per annum. Healthcare Realty will pay interest on
the Debentures on the basis of a 360-day year of twelve 30-day months.
Principal of, premium, if any, and interest on, the 6.55% Debentures
will be payable, and the conversion and transfer of the 6.55% Debentures may be
registered, at the office or agency of Healthcare Realty or the Trustee
maintained for that purpose in New York, New York and at any other office or
agency maintained by Healthcare Realty or the Trustee for this purpose.
CONVERSION RIGHTS
If the Merger is completed, the 6.55% Debentures will be convertible
into Healthcare Realty common stock at any time prior to redemption or final
maturity, initially at a conversion ratio of 33.6251 shares of common stock for
each $1,000 of principal amount of the Debentures. Prior to the completion of
the Merger, the conversion ratio is 39.4754 shares of Capstone common stock for
each $1,000 of principal amount of Debentures. This change in the conversion
ratio reflects the relative prices for Healthcare Realty and Capstone common
stock.
The conversion ratio will be subject to adjustments upon the occurrence
of certain events as currently set forth in the 6.55% Indenture. The rights of
holders of the 6.55% Debentures to convert to Healthcare Realty common stock may
be affected by certain reorganizations, reclassifications, consolidations,
mergers or transfers of assets of Healthcare Realty, as currently described in
the 6.55% Indenture.
Healthcare Realty will not issue fractional shares of common stock upon
conversion. Instead, Healthcare Realty will pay a cash adjustment based upon the
then closing price at the close of business on the day of conversion. If any
6.55% Debentures are surrendered for conversion during the period from the close
of business on any Regular Record Date through and including the next succeeding
Interest Payment Date (except any such 6.55% Debentures called for redemption),
such 6.55% Debentures must be accompanied by payment of an amount equal to the
interest thereon which the registered holder on such Regular Record Date is to
receive. Otherwise, no interest will be payable by Healthcare Realty on
converted 6.55% Debentures with respect to any Interest Payment Date subsequent
to the date of conversion. No other payment or adjustment for interest or
dividends will be made upon conversion.
For further information regarding the 6.55% Debentures see Capstone
Capital's Registration Statement on Form S-3 (Registration No. 33-97926) filed
in connection with the offering of the 6.55% Debentures.
THE 10 1/2% DEBENTURES
The 10 1/2% Debentures are unsecured obligations of Capstone and, upon
completion of the Merger, will become unsecured obligations of Healthcare
Realty. Capstone issued the 10 1/2% Debentures on March 30, 1995 under an
Indenture between Capstone and the Trustee (the "10 1/2% Indenture").
S-5
<PAGE> 6
The 10 1/2% Debentures will mature on April 1, 2002 and bear interest
at the rate of 10 1/2% per annum. Interest on the Debentures will be paid by
Healthcare Realty on the basis of a 360-day year of twelve 30-day months. The 10
1/2% Debentures were originally offered by Capstone in March 1995.
Principal of, premium if any, and interest on, the 10 1/2% Debentures
will be payable, and the conversion and transfer of the 10 1/2% Debentures may
be registered, at the office or the agency of Healthcare Realty or the Trustee
maintained for that purpose in New York, New York and at any other office or
agency maintained by Healthcare Realty or the Trustee for such purpose.
CONVERSION RIGHTS
If the Merger is closed, the 10 1/2% Debentures will be convertible
into Healthcare Realty common stock at any time prior to redemption or stated
maturity, initially at the conversion price of $18.9305 per share. Prior to the
completion of the Merger, the conversion price is $16.125 per share. This change
in the conversion price reflects the relative prices for Healthcare Realty and
Capstone common stock.
The conversion ratio will be subject to adjustments upon the occurrence
of certain events as currently set forth in the 10 1/2% Indenture. The rights of
holders of the 10 1/2% Debentures to convert to Healthcare Realty common stock
may be affected by certain reorganizations, reclassifications, consolidations,
mergers or transfers of assets of Healthcare Realty, as currently described in
the 10 1/2% Indenture. Additionally, Healthcare Realty will be permitted to
reduce the conversion price at its discretion.
Healthcare Realty will not issue fractional shares of common stock upon
conversion. Instead, Healthcare Realty will pay a cash adjustment based upon the
Closing Price at the close of business on the day of conversion. If any 10 1/2%
Debentures are surrendered for conversion during the period from the close of
business on any Record Date through and including the next succeeding Interest
Payment Date (except for 10 1/2% Debentures called for redemption), such 10 1/2%
Debentures must be accompanied by payment of an amount equal to the interest
thereon which the registered Holder on such Record Date is to receive. No such
additional funds will be required from Holders for 10 1/2% Debentures called for
redemption and converted. Healthcare Realty will not pay interest on converted
10 1/2% Debentures with respect to any Interest Payment Date after the
conversion date (except for any 10 1/2% Debenture surrendered for conversion
during the period from the close of business on any Record Date through and
including the next Interest Payment Date). Healthcare Realty will not make any
other payment or adjustment for interest or dividends upon conversion.
For further information regarding the 10 1/2% Debentures see Capstone
Capital's Registration Statement on Form S-11 (Registration No. 33-89756) filed
in connection with the offering of the 10 1/2% Debentures.
PLAN OF DISTRIBUTION
Healthcare Realty plans to issue the common stock offered hereby from
time to time upon conversion of the Debentures until such time as the Debentures
mature or are redeemed by the Company at the applicable conversion price at the
S-6
<PAGE> 7
time of conversion. There will be no brokerage commissions or other fees charged
to holders of Debentures who convert to Healthcare Realty common stock.
CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION
This Prospectus Supplement, the accompanying Prospectus and the
information incorporated herein by reference may contain certain forward-looking
statements about the financial condition, results of operations and business of
Healthcare Realty.
Forward-looking statements are not guarantees of future performance.
They involve risks, uncertainties and assumptions. Many of the factors that
could influence or determine actual results are unpredictable and not within the
control of Healthcare Realty. In addition, Healthcare Realty does not intend to,
and is not obligated to, update these forward-looking statements after this
Prospectus Supplement is distributed, even if new information, future events or
other circumstances have made them incorrect or misleading as of any future
date. For all of these statements, Healthcare Realty claims the protection of
the safe harbor for forward-looking statements provided in the Private
Securities Litigation Reform Act of 1995.
Healthcare Realty has discussed certain factors that may cause its
forward-looking statements not to be realized in its Annual Report for the year
ended December 31, 1997 on Form 10-K.
S-7
<PAGE> 8
-----------------------------------------------------------------
-----------------------------------------------------------------
Prospective investors may rely only on the information contained in this
Prospectus Supplement and the accompanying Prospectus. Healthcare Realty has not
authorized anyone to provide prospective investors with information different
from that contained in this Prospectus Supplement and the accompanying
Prospectus. This Prospectus Supplement is not an offer to sell nor is it seeking
an offer to buy these securities in any jurisdiction where the offer or sale is
not permitted. The information contained in this Prospectus Supplement and the
accompanying Prospectus is correct only as of the date of this Prospectus
Supplement regardless of the time of the delivery of this Prospectus Supplement
or any sale of these securities.
No action is being taken in any jurisdiction outside the United States to permit
a public offering of these securities or possession or distribution of this
Prospectus Supplement and the accompanying Prospectus in any such jurisdiction.
Persons who come into possession of this Prospectus Supplement and the
accompanying Prospectus in jurisdictions outside the United States are required
to inform themselves about and to observe any restrictions as to this offering
and the distribution of this Prospectus Supplement and the accompanying
Prospectus applicable in that jurisdiction.
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
<S> <C>
The Company.........................................S-2
Recent Developments.................................S-2
Use of Proceeds.....................................S-3
Description of the Debentures.......................S-3
Plan of Distribution................................S-6
Cautionary Statement Concerning Forward-Looking
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
</TABLE>
HEALTHCARE REALTY
TRUST INCORPORATED
A Maximum of 2,950,000 Shares of
Common Stock
------------------------
PROSPECTUS SUPPLEMENT
October 15, 1998
------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
