<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Earliest Event Reported: December 31, 1996
CAPSTONE CAPITAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Maryland
(State or Other Jurisdiction of Incorporation)
1-11345 63-1115479
(Commission File Number) (I.R.S. Employer Identification No.)
1000 Urban Center Drive
Suite 630
Birmingham, Alabama 35242
(Address of Principal Executive Offices/Zip Code)
(205) 967-2092
(Registrant's Telephone Number)
<PAGE> 2
Item 7. Financial Statements and Exhibits.
The audited financial statements to be included in the Capstone
Capital Corporation Annual Report to Shareholders for the
Fiscal Year Ended December 31, 1996, and listed in the
accompanying index to the consolidated financial statements are
filed herewith as Exhibit 10.1
Exhibits.
10.1 Financial Statements for fiscal year ended December 31,
1996.
10.2 Press Release of Capstone Capital Corporation, dated
December 12, 1996.
10.3 Press Release of Capstone Capital Corporation, dated
January 8, 1997.
10.4 Press Release of Capstone Capital Corporation, dated
January 9, 1997.
10.5 Press Release of Capstone Capital Corporation, dated
February 9, 1997.
23.1 Consent of KPMG Peat Marwick LLP.
2
<PAGE> 3
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: March 4, 1997
CAPSTONE CAPITAL CORPORATION
By: /s/ Andrew L. Kizer
----------------------------
Andrew L. Kizer, Vice-President,
Chief Financial Officer,
Secretary and Treasurer
3
<PAGE> 1
EXHIBIT 10.1
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
Capstone Capital Corporation:
We have audited the accompanying consolidated balance sheets of Capstone
Capital Corporation as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
years ended December 31, 1996 and 1995 and for the period from June 30, 1994
(inception) to December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above, present fairly, in
all material respects, the financial position of Capstone Capital Corporation
as of December 31, 1996 and 1995, and the results of its operations and its
cash flows for the years ended December 31, 1996 and 1995 and for the period
from June 30, 1994 (inception) to December 31, 1994, in conformity with
generally accepted accounting principles.
Birmingham, Alabama
January 20, 1996
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
<PAGE> 2
<PAGE> 3
CAPSTONE CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS Dec. 31, 1996 Dec. 31, 1995
------------- -------------
<S> <C> <C>
Real estate properties
Land $ 30,952,673 $ 24,669,023
Land improvements 2,350,309 2,350,309
Buildings and improvements 269,261,047 185,771,380
Construction in progress 12,650,780 37,409
------------- ------------
315,214,809 212,828,121
Less accumulated depreciation (11,217,391) (5,570,953)
------------- ------------
Real estate properties, net 303,997,418 207,257,168
Mortgage notes receivable 39,325,621 24,988,753
Cash 1,122,241 675,568
Accrued rental income 4,689,976 2,518,323
Other assets 7,559,860 5,185,071
------------- ------------
Total assets $ 356,695,116 $240,624,883
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Convertible subordinated debentures $17,657,000 $43,947,000
Bank credit facility 68,500,000 30,225,000
Mortgage note payable 23,228,417 -
Accrued expenses and other liabilities 5,754,180 2,706,228
------------- ------------
Total liabilities 115,139,597 76,878,228
------------- ------------
Stockholders' equity
Preferred stock, $.001 par value,
10,000,000 shares authorized;
none issued - -
Common stock, $.001 par value,
50,000,000 shares authorized;
14,247,947 shares and 9,929,732 shares
issued and outstanding, respectively 14,247 9,929
Additional paid-in-capital 240,832,943 162,735,711
Loans to officers to finance stock purchases (286,944) (286,944)
Retained Earnings 995,273 1,287,959
------------- ------------
Total stockholders' equity 241,555,519 163,746,655
------------- ------------
Total liabilities and stockholders' equity $ 356,695,116 $240,624,883
============= ============
</TABLE>
The accompanying notes are an integral part of this financial statement
F-1
<PAGE> 4
CAPSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For period from
Year ended Year ended Inception to
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenues:
Rental income $31,959,674 $22,774,371 $7,674,494
Mortgage interest income 3,159,228 1,819,725 455,844
Gain from sale of property 197,191 - -
Other income 636,243 113,176 109,824
----------- ----------- ----------
Total income 35,952,336 24,707,272 8,240,162
----------- ----------- ----------
Expenses:
General and administrative 1,669,678 1,515,130 536,662
Depreciation 6,021,811 4,180,868 1,416,574
Amortization 293,267 515,970 85,332
Interest (net of $552,686 capitalized in 1996,
$466,668 in 1995, and $94,858 in 1994) 8,812,170 8,786,913 1,438,860
Property operations 241,721 - -
----------- ----------- ----------
Total expenses 17,038,647 14,998,881 3,477,428
----------- ----------- ----------
Net income $18,913,689 $9,708,391 $4,762,734
=========== ========== ==========
Net Income Per Common Share $ 1.71 $ 1.55 $ 0.80
=========== ========== ==========
Weighted Averages Shares
Outstanding 11,086,086 6,271,242 5,980,000
=========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this financial statement
F-2
<PAGE> 5
CAPSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For period from
Year ended Year ended Inception to
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 18,913,689 $ 9,708,391 $ 4,762,734
Gain from sale of property (197,191) - -
Depreciation 6,021,811 4,180,868 1,416,574
Amortization 293,267 515,970 85,332
Increase in accrued rental income (2,398,760) (1,881,926) (636,397)
Construction funding deposit (768,423) - -
Increase in receivables and other assets (1,568,075) (282,847) (934,482)
Increase in accrued expenses and other liabilities 2,129,026 1,800,831 474,685
------------- ------------ ------------
Net cash provided by operating activities 22,425,344 14,041,287 5,168,446
------------- ------------ ------------
Cash flows from investing activities:
Acquisition of real estate properties (102,025,229) (60,088,309) (152,739,813)
Proceeds from sale of properties 8,206,289 - -
Investment in mortgage notes receivable (22,769,689) (11,764,523) (13,224,230)
Collections on mortgage notes receivable 2,189,430
Payment of earnest money deposit - (2,900,000) -
------------- ------------ ------------
Net cash used in investing activities (114,399,199) (74,752,832) (165,964,043)
------------- ------------ ------------
Cash flows from financing activities:
Increase(decrease) in bank credit facility 38,275,000 (37,275,000) 67,500,000
Proceeds from mortgage note payable 19,907,321 - -
Principal payments on mortgage note payable (71,583) - -
Proceeds from issuance of common stock 53,103,356 62,531,250 96,360,228
Costs related to common stock offering (338,827) (3,882,543) -
Proceeds from issuance of convertible
subordinated debentures - 52,000,000 -
Financing costs related to issuance of
convertible subordinated debentures - (2,017,934) -
Capital contributions from minority interests 687,611 430,711 -
Payment of dividends (19,206,375) (10,641,666) (2,541,500)
Proceeds from dividend reinvestment plan 64,025 6,108 -
Increase in loans to finance stock purchases - (94,467) (192,477)
------------- ------------ ------------
Net cash provided by financing activities 92,420,528 61,056,459 161,126,251
------------- ------------ ------------
Increase in cash 446,673 344,914 330,654
Cash, beginning of period 675,568 330,654 -
------------- ------------ ------------
Cash, end of period $ 1,122,241 $ 675,568 $ 330,654
============= ============ ============
</TABLE>
The accompanying notes are an integral part of this financial statement
F-3
<PAGE> 6
CAPSTONE CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
LOANS TO
OFFICERS
TO
ADD'L FINANCE TOTAL
COMMON STOCK PAID-IN STOCK RETAINED STOCKHOLDERS'
SHARES AMT. CAPITAL PURCHASES EARNINGS EQUITY
-------------------- ----------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Proceeds from initial
public offering 5,980,000 $5,980 $96,354,248 - - $96,360,228
Loans to finance stock purchases - - - (192,477) - (192,477)
Net Income 4,762,734 4,762,734
Dividends paid during 1994
($0.425 per share) - - - - (2,541,500) (2,541,500)
BALANCE
DECEMBER 31, 1994 5,980,000 5,980 96,354,248 ($192,477) 2,221,234 98,388,985
Shares issued in conversion of
convertible debentures to
common stock 499,404 499 8,052,384 - - 8,052,883
Convertible debenture issuance
costs related to conversion of
debentures to common stock - - (322,296) - - (322,296)
Proceeds from sale of 3,450,000
shares less related expenses
of $3,882,543 3,450,000 3,450 58,645,267 - - 58,648,717
Proceeds from issuance of
shares under the dividend
reinvestment plan 328 - 6,108 - - 6,108
Loans to finance stock purchases - - - (94,467) - (94,467)
Net income - - - - 9,708,391 9,708,391
Dividends paid during 1995
($1.74 per share) - - - - (10,641,666) (10,641,666)
--------- ------- ----------- ---------- ----------- ------------
BALANCE
DECEMBER 31, 1995 9,929,732 9,929 162,735,711 (286,944) 1,287,959 163,746,655
Shares issued in conversion of
convertible debentures to
common stock 1,630,310 1,630 26,288,370 - - 26,290,000
Convertible debenture issuance
costs related to conversion of
debentures to common stock (1,017,004) - - (1,017,004)
Proceeds from sale of 2,684,700
shares less related expenses
of $338,827 2,684,700 2,685 52,761,844 - - 52,764,529
Proceeds from issuance of
shares under the dividend
reinvestment plan 3,205 3 64,022 - - 64,025
Net income - - - - 18,913,689 18,913,689
Dividends paid during 1996
($1.81 per share) - - - - (19,206,375) (19,206,375)
--------- ------- ----------- ---------- ---------- -------------
BALANCE
DECEMBER 31, 1996 14,247,947 $14,247 $240,832,943 ($286,944) $995,273 $ 241,555,519
========= ======= =========== ========== ========== =============
</TABLE>
The accompanying notes are an integral part of this financial statement
F-4
<PAGE> 7
CAPSTONE CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1. ORGANIZATION
Capstone Capital Corporation ( the "Company") is an indefinite life
real estate investment trust ("REIT") which was incorporated in Maryland on
March 31, 1994. The Company commenced operations on June 30, 1994, with the
receipt of proceeds from its initial public offering of 5,980,000 shares of
common stock. The Company owns healthcare related properties which it leases
and it also provides mortgage financing to healthcare operators.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries and its
majority-owned partnerships. Inter-company accounts and transactions have been
eliminated.
Use of Estimates in the Preparation of Financial Statements - The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Real Estate Properties - Real estate properties are recorded at cost.
Acquisition costs and transaction fees are added to the purchase price. No
allowance for investment losses is considered necessary. The cost of real
estate properties acquired is allocated between land, land improvements, and
buildings and improvements based upon estimated market values at the time of
acquisition. Depreciation is provided for on a straight-line basis over an
estimated useful life of 40 years for buildings and improvements and 20 years
for land improvements.
Federal Income Taxes - No provision has been made for federal taxes. The
Company intends at all times to qualify as a REIT under sections 856 through
860 of the Internal Revenue Code of 1986, as amended. The Company must
distribute at least 95% of REIT taxable income to its stockholders and meet
other requirements to continue to qualify as a REIT.
Rental Income - Rental income is recognized as earned over the life of the
lease agreements. Certain of the lease agreements provide for scheduled annual
rent increases. These rent increases are recognized on a straight-line basis
over the term of the lease.
F-5
<PAGE> 8
Mortgage Interest Income - Mortgage interest income is recognized based on the
interest rates and principal amounts outstanding of the mortgage notes
receivable. Certain of the mortgage notes receivable provide for scheduled
annual interest rate increases.
Net Income Per Share - Net income per share is computed using the weighted
average number of shares outstanding during the period.
Prior Year Reclassifications - Certain classifications have been made to the
1995 and 1994 financial statements to conform to the current year presentation.
NOTE 3. REAL ESTATE PROPERTIES
As of December 31, 1996, the Company had investments in 44 leased
real estate properties totaling $302.6 million. These real estate properties
consist of sixteen ancillary hospital facilities, ten physician clinics, six
ambulatory surgery facilities, four inpatient rehabilitation facilities, three
outpatient rehabilitation facilities, two comprehensive mental health
hospitals, two sub-acute care facilities, and one skilled nursing facility.
The properties are located in thirteen states and are leased to ten
healthcare-related entities or their subsidiaries pursuant to long- term
leases. In addition, the Company has invested approximately $12.7 million in
eleven development projects at various stages of completion. The Company has
remaining commitments of approximately $67.2 million for development projects'
completion and expects all projects to be completed by the end of 1997.
The Company's properties are generally leased pursuant to fixed term
operating leases expiring from 2001 to 2012 and provide for options to extend
the lease terms for at least ten years. The leases generally provide the
lessees, during the terms of the leases and for a short period of time
following expiration, with the right of first refusal to purchase the leased
property on the same terms and conditions as the Company may propose to a third
party.
Each lease generally requires the lessee to pay base rent, additional
rent commencing after the first year based on a set percentage increase or an
increase in the consumer price index, and all taxes (including property taxes),
maintenance, and other operating costs associated with the leased property.
Lessees that accounted for more than 10 percent of the Company's
rental income for the year ended December 31, 1996, were: HEALTHSOUTH
Corporation, $11.6 million and Columbia/HCA, $6.8 million.
Future minimum lease payments for the next five years under the
non-cancelable operating leases as of December 31, 1996 are as follows: 1997 -
$32,879,486; 1998 - $33,295,707; 1999 - $33,773,104; 2000 - $34,370,668; and
2001 - $34,022,518. These amounts include only those increases in lease payments
F-6
<PAGE> 9
related to leases that provide for set percentage increases or set minimum
increases in the consumer price index. They do not include those increases in
lease payments which may occur based on the increase in the consumer price
index but without set minimums.
NOTE 4. MORTGAGE NOTES RECEIVABLE
As of December 31, 1996, the Company had provided $39.3 million in
mortgage financing for thirteen properties located in six states. The mortgage
notes receivable are secured by the real estate of eight skilled nursing
facilities, two assisted living facilities, two acute-care hospitals, and one
integrated delivery facility, which are operated by eight healthcare operators.
Two of the facilities (one acute care hospital and one assisted living
facility) are under construction, and the Company has committed a total of
$18.9 million in construction and term loans for these projects. As of
December 31, 1996, the Company had advanced a total of $4.5 million toward
these financing commitments. The Company expects to disburse the remainder of
the committed funds in 1997.
The Company's mortgage notes receivable require monthly installments
of principal and interest, with final payment dates ranging from 2001 to 2012,
and bear rates ranging from 9.25 percent to 11.75 percent at December 31, 1996.
Each mortgage note receivable provides for the initial interest rates to be
increased annually by either a set rate or upon an increase in the consumer
price index.
NOTE 5. MORTGAGE NOTE PAYABLE
On June 26, 1996, the Company entered into a mortgage note with a life
insurance company for a principal amount of $23.3 million ("Mortgage Note").
The Mortgage Note bears interest at 8.5% and is payable in 360 monthly payments
of principal and interest. The Mortgage Note is collateralized by an ancillary
hospital facility purchased in January 1996 for $30 million.
NOTE 6. BANK CREDIT FACILITY
On June 24, 1996, the Company completed an amendment and restatement
of its unsecured line of credit ("Bank Credit Facility") which provides for an
increase to $150 million from its previous principal amount of $100 million, an
extension of the term to June 24, 1999 from June 22, 1997, and an adjustment in
the determination of the interest rate. The Bank Credit Facility is
participated in by a consortium of eight banks. At December 31, 1996, the
Company had drawn $68,500,000 against the Bank Credit Facility for the purchase
of real estate properties and the funding of mortgage loans.
Borrowings under the amended and restated Bank Credit Facility bear an
interest rate chosen by the Company from either the Bank's base rate or the
Eurodollar rate plus a
F-7
<PAGE> 10
percentage rate ranging from 1.00 percent to 1.625 percent depending upon the
Company's senior debt to consolidated total capital ratio for the preceding
fiscal quarter. In addition, the Company pays a commitment fee of 0.20 percent
to 0.25 percent per annum on the unused portion of funds available for
borrowing under the Bank Credit Facility. The commitment fee percentage is
based on the Company's senior debt to total capital ratio.
The Bank Credit Facility contains certain representations, warranties and
financial and other covenants customary in such loan agreements.
NOTE 7. CONVERTIBLE SUBORDINATED DEBENTURES
As of December 31, 1996, the Company had $17,657,000 aggregate
principal amount of 10.50% Convertible Subordinated Debentures (the
"Debentures") outstanding.
The Debentures mature on April 1, 2002, unless redeemed earlier by
the Company or converted by the holders. Payments of interest to the holders
of the Debentures are required each April 1 and October 1, commencing October
1, 1995. The Debentures are convertible into shares of common stock of the
Company at the option of the holder at any time prior to redemption or stated
maturity, at a conversion price of $16.125 per share. The Debentures are
subordinated to all existing and future senior indebtedness of the Company and
subordinated to all existing and future liabilities and obligations of
subsidiaries and partnerships of the Company. The Debentures are redeemable,
at the Company's option, in whole or from time to time in part, at any time
from April 5, 2000, through March 31, 2002, at redemption prices ranging from
101.5% to 103.0%, plus accrued and unpaid interest to and including the
redemption date.
NOTE 8. STOCK OPTIONS
During 1995, the Financial Accounting Standards Board issued Financial
Accounting Statement No. 123, "Accounting for Stock-Based Compensation", ("FAS
123"). The Statement defines a fair value based method of accounting for an
employee stock option. It also allows an entity to continue using the
intrinsic value based accounting method prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." The Company has continued to use
this method to account for its stock options. However, FAS 123 requires
entities electing to remain with the intrinsic method of accounting to provide
pro forma disclosures of net income and earnings per share as if the fair value
based method of accounting had been applied. Information about the Company's
stock option plan and the related required disclosures follow.
Pursuant to the Company's 1994 stock incentive plan, 1,063,600 shares
of common stock have been reserved for issuance. Options to acquire 602,500
and 413,000 shares at an exercise price of $18.375 and $16.50, respectively,
were granted in 1995 and 1994, respectively. There is no vesting period for
these options and they may be
F-8
<PAGE> 11
exercised within 10 years from the grant dates. No options had been exercised
as of December 31, 1996.
The pro forma information regarding net income and net income per
common share as required by FAS 123 is provided below. The fair value for
these options was estimated at the date of grant using the Roll-Geske option
pricing model with the following assumptions: Risk free interest rate - 6.33%,
Volatility factor - 16.96% and Weighted average expected life of the options -
8 years.
<TABLE>
<S> <C>
Net Income: 1995
-----
As reported $9,709,391
Pro forma $6,432,598
Net Income per common share:
As reported $1.55
Pro forma $1.03
</TABLE>
NOTE 9. RELATED PARTY TRANSACTIONS
During 1994 and 1995, the Company funded loans to certain officers for
the purpose of acquiring the Company's common stock. The loans, which are due
on demand and collateralized by the stock, totaled $286,944 at December 31,
1996 and bear interest at the prime rate, which was 8.25% at December 31, 1996.
In addition, the Company has other loans to employees totaling $273,000 which
bear interest at the prime rate.
Certain of the Company's directors are directors and/or executive
officers of HEALTHSOUTH Corporation, MedPartners Inc., and Integrated Health
Services, Inc. During 1996, the Company received rental income of $11.6
million, $6.8 million and $3.2 million from HEALTHSOUTH Corporation,
MedPartners Inc. and Integrated Health Services, Inc., respectively.
NOTE 10. DIVIDENDS
In order to qualify as a REIT, the Company must, among other
requirements, distribute at least 95% of its REIT taxable income to its
stockholders. Per share dividend payments by the Company were characterized in
the following manner for income tax purposes:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------
<S> <C> <C> <C>
Ordinary Income $1.56 $1.54 $0.425
Return of Capital 0.25 0.20 -
-----------------------
Total dividends paid $1.81 $1.74 $0.425
</TABLE>
F-9
<PAGE> 12
In 1995 the Company adopted a dividend reinvestment and stock
purchase plan ("Plan") and reserved 1,000,000 shares of common stock for
issuance under the Plan. Participants can automatically reinvest all or a
portion of cash dividends in shares of the Company's common stock and can make
voluntary cash payments for additional shares. The price of the shares
purchased with reinvested dividends will be at 95% of the shares' market value
on the dividend payment date. Under the Plan, the Company received $64,025
during 1996 in exchange for 3,205 shares of stock and $6,108 in exchange for
328 shares of stock during 1995.
F-10
<PAGE> 13
NOTE 11. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental disclosure of cash flow information is as follows:
<TABLE>
<CAPTION>
For Period
For the Year For the Year From Inception
Ended Ended to
Dec. 31, 1996 Dec. 31,1995 Dec. 31, 1994
------------- ------------ -------------
<S> <C> <C> <C>
Cash payments for bank credit
facility interest expense $4,472,210 $5,337,009 $1,359,092
Cash payments for convertible
subordinated debenture interest
expense 3,496,540 2,713,755 -
Convertible subordinated debentures
converted into shares of common
stock:
Convertible subordinated debentures (26,290,000) (8,053,000) -
Financing costs (1,017,006) (322,296) -
Shares of common stock 1,630,310 499,404 -
Additional paid in capital 25,271,364 7,730,088 -
</TABLE>
NOTE 12. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair values of the Company's financial instruments approximate
their carrying values due to the pricing and terms of these instruments and/or
their short term nature, except for the convertible subordinated debentures for
which fair value at December 31, 1996 is $25,867,505 based on the quoted market
price.
NOTE 13. COMMITMENTS AND CONTINGENCIES
The Company has committed a total of $102.8 million towards the acquisition and
construction of real estate properties and providing mortgage financing. As of
December 31, 1996, the Company had funded approximately $21.2 million towards
these commitments, with the balance of $81.6 million expected to be funded
throughout 1997.
NOTE 14. SUBSEQUENT EVENTS
On January 20, 1997, the Company declared a dividend of $0.465 per
share to the holders of common stock on February 3, 1997. The dividend was
paid in cash on February 18, 1997. The dividend related to the quarter ended
December 31, 1996.
F-11
<PAGE> 1
EXHIBITS 10.2
CAPSTONE CAPITAL CORPORATION ANNOUNCES COMMITMENT FOR DEVELOPMENT OF
COMPREHENSIVE MEDICAL CENTER
BIRMINGHAM, Ala., Dec. 12 /PRNewswire/ -- Capstone Capital Corporation
(NYSE: CCT) announced today that it has agreed to commit $22.5 million for the
development of a comprehensive medical center located in Los Angeles,
California. Groundbreaking occurred yesterday on the new 90,000 square foot
Kerlan-Jobe Orthopaedic Clinic, which will combine physician offices with an
outpatient surgical and diagnostic imaging center, and an outpatient
rehabilitation facility. Construction of the five-story clinic and parking
structure is expected to begin in January 1997, with completion in late
November 1997.
Upon completion, the facility will be leased on a long-term basis to
HEALTHSOUTH Corporation (NYSE: HRC) and The Kerlan-Jobe Orthopaedic Clinic.
HEALTHSOUTH, the largest provider of outpatient surgical and rehabilitative
services in America, currently provides sports medicine support to 40
professional sports teams and more than 125 colleges and universities. The
Kerlan-Jobe Clinic is a world-renowned orthopaedic and sports medicine practice,
whose physicians serve as team physicians for several professional teams in
Southern California, including the Los Angeles Lakers, Dodgers and Kings.
John W. McRoberts, President and Chief Executive Officer of Capstone,
commented, "Capstone is proud to announce the development of this
state-of-the-art medical clinic and of our association with HEALTHSOUTH
Corporation and The Kerlan-Jobe Orthopaedic Clinic. This integrated health
care delivery facility is also the newest component of the Howard Hughes Center
in Los Angeles and will provide all the medical components needed for patients
being treated at its location."
Capstone Capital Corporation is a real estate investment trust (REIT)
which currently owns, leases and provides mortgage financing for 56 healthcare
related properties located in 13 states that are diversified as to operator,
facility type and healthcare segment.
<PAGE> 1
EXHIBIT 10.3
CAPSTONE CAPITAL CORPORATION ANNOUNCES NEW INVESTMENTS AND COMMITMENTS TO INVEST
BIRMINGHAM, Ala., Jan. 8 /PRNewswire/ -- Capstone Capital Corporation
(NYSE: CCT) today announced a total of $22.6 million in new investments and
commitments to invest. The new investments include $14.7 million in mortgage
and equity investments in six existing healthcare facilities. The commitments
to invest include $7.9 million in mortgage and equity investments for four
healthcare facilities currently under development. These transactions closed
prior to December 31, 1996.
The $14.7 million in new investments includes $10.3 million in mortgage
financing for one assisted living facility located in California and three
skilled nursing facilities located in California and Tennessee. These
facilities are operated by privately held healthcare companies. Additionally,
the new investments includes $4.4 million for the acquisition of an ambulatory
surgery facility located in Missouri and a physician clinic located in Florida.
These facilities are leased to two publicly traded healthcare companies
pursuant to long-term leases. The $7.9 million in commitments to invest include
$2.7 million in mortgage financing for three assisted living facilities and a
$5.2 million equity investment in an assisted living facility to be located in
Georgia. Two of these facilities will be operated by a publicly traded
healthcare company and two of the facilities by a privately held healthcare
company.
John W. McRoberts, President and Chief Executive Officer of Capstone,
commented, "These transactions bring total new investments and commitments to
invest made during 1996 to $218.6 million. We are proud of our accomplishments
during the year which include record portfolio additions, a $50 million
increase in our bank credit facility and the recently completed equity offering
with proceeds of approximately $56 million. We look forward to 1997 being yet
another year of significant accomplishments."
Capstone Capital Corporation is a real estate investment trust (REIT)
which currently owns, leases and provides mortgage financing for 64 healthcare
related properties located in 13 states that are diversified as to operator,
facility type and healthcare segment.
<PAGE> 1
EXHIBIT 10.4
CAPSTONE CAPITAL CORPORATION ANNOUNCES MORTGAGE FINANCING COMMITMENT
BIRMINGHAM, Ala., Jan. 9 /PRNewswire/ -- Capstone Capital Corporation
(NYSE: CCT) announced today that it has committed $30 million for the
development and mortgage financing of up to nine assisted living facilities.
The assisted living facilities will be developed, owned and operated by
Prestige Care, Inc. and will be located primarily in the Pacific Northwest.
The initial facility is currently under construction and all facilities are
expected to be completed over the next 24 months.
Prestige Care, Inc., privately-held, is the largest nursing home
provider in the state of Oregon. The company owns, operates and manages 18
nursing homes totaling 1,897 beds and three assisted living facilities
containing 119 units. Prestige currently has five assisted living facilities
under construction containing 236 units with another 13 facilities under
development.
John W. McRoberts, President and Chief Executive Officer of Capstone
commented, "Prestige Care, Inc. is a respected, well-qualified developer and
operator in the senior housing industry. Our investment in these new projects
and the addition of Prestige Care to our growing list of quality operators is
an example of our continued commitment to the senior housing industry."
Capstone Capital Corporation is a real estate investment trust (REIT)
which currently owns, leases and provides mortgage financing for 65 healthcare
related properties located in 14 states that are diversified as to operation,
facility type and healthcare segment.
<PAGE> 1
EXHIBIT 10.5
CAPSTONE CAPITAL CORPORATION ANNOUNCES $40.1 MILLION IN NEW INVESTMENTS
BIRMINGHAM, Ala., Feb. 9 /PRNewswire/ -- Capstone Capital Corporation
(NYSE: CCT) announced today that it has closed on $40.1 million in new
acquisitions and mortgage financings for ten existing healthcare facilities.
The investments include five skilled nursing facilities totaling 519 beds and
five assisted living facilities totaling 321 beds.
The acquisitions include $21.7 million for two skilled nursing
facilities (103 beds) and five assisted living facilities (321 beds) located in
Pennsylvania which will be leased on a long-term basis to Balanced Care
Corporation. Balanced Care Corporation is a privately held healthcare company
which operates 18 assisted living communities totaling more than 690 beds, 12
skilled nursing facilities with 1,228 beds and also has other healthcare
operations in Pennsylvania, Missouri and Wisconsin.
The mortgage financings include a $9.6 million loan on two skilled
nursing facilities (256 beds) located in Michigan and which will be operated by
Centennial HealthCare Management Corporation (formerly known as WelCare
International). Centennial is an Atlanta, Georgia based healthcare company
which currently owns and operates 77 subacute/long-term care facilities
totaling 8,291 beds located in 19 states and the District of Columbia.
The mortgage financings also include an $8.8 million loan on one
skilled nursing facility totaling 160 beds located in Maryland. The facility
is operated by FutureCare Health and Management Corporation. FutureCare is the
largest privately held provider of post-acute healthcare services in the state
of Maryland.
John W. McRoberts, President and Chief Executive Officer of Capstone,
commented, "The addition of these investments in long-term care facilities
operated by quality companies with strong reputations greatly enhances our
overall portfolio."
Capstone Capital Corporation is a real estate investment trust (REIT)
which currently owns, leases and provides mortgage financing for 75 healthcare
related properties located in 16 states that are diversified as to operator,
facility type and healthcare segment.
<PAGE> 1
EXHIBIT 23.1
Consent of KPMG Peat Marwick LLP
The Board of Directors
Capstone Capital Corporation:
We consent to incorporation by reference in registration statements No.
33-77788 and No. 33-97926 on Form S-3 and No. 333-21581 on Form S-8 of our
report dated January 20, 1997, relating to the consolidated balance sheets of
Capstone Capital Corporation as of December 31, 1996 and 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
years ended December 31, 1996 and 1995, and for the period from June 30, 1994
(inception) to December 31, 1994, which report appears in the Form 8-K of
Capstone Capital Corporation dated March 3, 1997.
Birmingham, Alabama
March 3, 1997
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
