-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, LMAuJ/yoIghUXRQM1n9x4GcHsFcGsOc35cO1/MdYYeCTLZEIhJJgQEcsEcwmLdeD HeL4n42fBkqxrIZ+7fipjQ== 0000898430-95-000111.txt : 19950515 0000898430-95-000111.hdr.sgml : 19950515 ACCESSION NUMBER: 0000898430-95-000111 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19950206 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTH CARE PROPERTY INVESTORS INC CENTRAL INDEX KEY: 0000765880 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 330091377 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B2 SEC ACT: 1933 Act SEC FILE NUMBER: 033-66676 FILM NUMBER: 95505618 BUSINESS ADDRESS: STREET 1: 10990 WILSHIRE BLVD STE 1200 CITY: LOS ANGELES STATE: CA ZIP: 90024 BUSINESS PHONE: 3104731990 424B2 1 PROSPECTUS SUPPLEMENT FILED PURSUANT TO RULE 424(b)(2) REGISTRATION NO. 33-66676 PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED FEBRUARY 2, 1995) 1,500,000 SHARES HEALTH CARE PROPERTY INVESTORS, INC. COMMON STOCK --------------- Health Care Property Investors, Inc. (the "Company") was organized to qualify as a "real estate investment trust" to invest in health care related real estate located throughout the United States, including long term care facilities, acute care and rehabilitation hospitals, psychiatric facilities, substance abuse recovery centers, congregate and assisted living facilities, medical office buildings and physician clinics. The Company's common stock ("Common Stock") is listed on the New York Stock Exchange (the "NYSE") under the symbol HCP. On February 2, 1995, the last reported sale price on the NYSE of the Common Stock was $29. --------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PRICE TO UNDERWRITING PROCEEDS TO PUBLIC DISCOUNT(1) COMPANY(2) - ------------------------------------------------------------------------------- Per Share............. $29.00 $1.52 $27.48 - ------------------------------------------------------------------------------- Total(3).............. $43,500,000 $2,280,000 $41,220,000
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (1) The Company has agreed to indemnify the several Underwriters against certain liabilities under the Securities Act of 1933. See "Underwriting." (2) Before deducting expenses payable by the Company estimated at $300,000. (3) The Company has granted the Underwriters an option to purchase up to an additional 225,000 shares of Common Stock to cover over-allotments. If all of such shares are purchased, the total Price to Public, Underwriting Discount and Proceeds to Company will be $50,025,000, $2,622,000 and $47,403,000, respectively. See "Underwriting." --------------- THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRE- SENTATION TO THE CONTRARY IS UNLAWFUL. --------------- The shares of Common Stock 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. The Underwriters reserve the right to reject orders in whole or in part. It is expected that delivery of the shares will be made in New York, New York on or about February 9, 1995. --------------- MERRILL LYNCH & CO. ALEX. BROWN & SONS INCORPORATED DEAN WITTER REYNOLDS INC. --------------- The date of this Prospectus Supplement is February 2, 1995. THE COMPANY Health Care Property Investors, Inc. (the "Company"), a Maryland corporation, was organized in March 1985 to qualify as a real estate investment trust. The Company was organized to invest in health care related real estate located throughout the United States, including long term care facilities, acute care and rehabilitation hospitals, psychiatric facilities, substance abuse recovery centers, congregate and assisted living facilities, medical office buildings and physician clinics. At September 30, 1994, the Company owned an interest in 167 properties located in 32 states, which are leased pursuant to long-term leases (the "Leases") to 32 health care providers (the "Lessees"), including Beverly Enterprises, Inc. ("Beverly"), Continental Medical Systems, Inc., Columbia/HCA Healthcare Corp. ("HCA"), Healthsouth Corporation, Healthtrust, Inc.--The Hospital Company ("Healthtrust"), The Hillhaven Corporation ("Hillhaven"), Horizon Healthcare Corporation ("Horizon Healthcare"), National Medical Enterprises, Inc. ("NME") and NovaCare, Inc. Of the Lessees, only Hillhaven and Beverly account for more than 10% of the Company's rental income as of September 30, 1994. The Company also holds mortgage loans on 11 properties that are owned and operated by eight health care providers, including HCA and OrNda Healthcare ("OrNda"). The gross acquisition price of the Company's 178 leased or mortgaged properties (the "Properties"), including partnership acquisitions and mortgage loan acquisitions, was approximately $692.3 million. The Leases provide for initial base rental rates which generally range from 8.77% to 15.03% per annum of the acquisition price of the related Property. Rental rates vary by Lease, taking into consideration many factors, including, but not limited to, credit of the Lessee, operating performance of the facility, interest rates at the commencement of the Lease and location, type and physical condition of the facility. Most of the Leases provide for additional rents which are based upon a percentage of increased revenue over specific base period revenue of the leased Properties. The remainder of the Leases have annual fixed rent increases or rent increases based on inflation indices. Additional rents and interest received for the years ended December 31, 1993, 1992 and 1991 were $14.7 million, $12.5 million and $8.8 million, respectively. The primary or fixed terms of the Leases generally range from 10 to 15 years, and generally have one or more five-year renewal options. The average remaining base lease term on the Company's portfolio of properties is approximately seven years. Obligations under the Leases, in most cases, have corporate guarantees, and 78 leases are backed by irrevocable letters of credit from various financial institutions which cover from six to 18 months of Lease payments. The Lessees are required to renew such letters of credit during the Lease term in amounts which may change based upon the passage of time, improved operating cash flows or improved credit ratings. Of the Company's 178 Properties, 63 are currently leased to Hillhaven, which is the second largest long term care provider in the United States. Rental income from these 63 Properties accounted for 24%, 24%, 27% and 27% of the Company's total revenue for the nine months ended September 30, 1994, and for the years ended December 31, 1993, 1992 and 1991, respectively. All Properties leased by the Company to Hillhaven are unconditionally guaranteed by NME, which is a major stockholder of Hillhaven. Based upon public reports, Hillhaven's net operating revenue and net income for the six months ended November 30, 1994 were approximately $775 million and $27 million, respectively; and Hillhaven's total assets and stockholders' equity as of November 30, 1994 were approximately $1.2 billion and $393 million, respectively. For the year ended May 31, 1994, Hillhaven reported net operating revenue and net income of approximately $1.4 billion and $57 million, respectively. On January 26, 1995, Horizon Healthcare announced an unsolicited bid to acquire Hillhaven for stock in a proposed merger. The Company leases five Properties to Horizon Healthcare, and rental income from these Properties accounted for 5%, 4%, 3% and 3% of the Company's total revenues for the nine months ended September 30, 1994, and for the years ended December 31, 1993, 1992 and 1991, respectively. Based upon public reports, Horizon Healthcare's total operating revenues and net income for the six months ended November 30, 1994 were approximately $292.9 million and $13.7 million, respectively; and Horizon Healthcare's total assets and stockholders' equity as of November 30, 1994 were approximately $614.2 million and $375.6 million, respectively. For the year ended May 31, 1994, Horizon Healthcare reported total operating revenues and net income of $375 million and $16.6 million, respectively. The Company cannot predict whether Hillhaven will be acquired by Horizon Healthcare or effect any other business combination. S-2 Five Properties (two acute care hospitals, two rehabilitation hospitals and one psychiatric facility) were leased to subsidiaries of NME at December 31, 1993. Rental income from these five Properties accounted for 14%, 16% and 17% of the Company's total revenue for the years ended December 31, 1993, 1992 and 1991, respectively. In January 1994, subsidiaries of NME assigned the leases for the two rehabilitation hospitals to Healthsouth Corporation. These two facilities contributed 5% of the Company's rental income for the nine months ended September 30, 1994. Rental income from the three remaining Properties operated by NME accounted for 8% of the Company's rental income for the nine months ended September 30, 1994. NME remains financially responsible to the Company under its unconditional guarantee on the five properties. NME is one of the nation's largest health care services companies, providing a broad range of services through the ownership and management of health care facilities. Based upon public reports, NME's net operating revenue and net income for the six months ended November 30, 1994 were approximately $1.3 billion and $110 million, respectively; and NME's total assets and stockholders' equity as of November 30, 1994 were approximately $3.3 billion and $1.4 billion, respectively. For the year ended May 31, 1994, NME reported net operating revenue and net loss of approximately $3.0 billion and $425 million, respectively. The following discussion is derived from public reports distributed by NME: NME has been involved in certain significant legal proceedings and investigations related principally to its psychiatric business and has settled the most significant of these matters. NME expects that additional lawsuits alleging malpractice at its psychiatric facilities and the existence of a corporate-wide conspiracy to commit wrongful acts may be filed from time to time. NME believes that its remaining reserves established for these matters are adequate to cover its ultimate liability. In the event such reserves are not adequate, the adverse determination of these matters could have a material adverse effect on NME's financial condition and results of operation. On October 11, 1994, NME and American Medical Holdings, Inc. jointly announced the signing of a definitive merger agreement; the transaction is expected to close in the first part of 1995, at which time the combined company will own 85 general hospitals in the U.S. and overseas and be the second largest investor-owned hospital management company. No assurance can be given that the merger will occur, or if it does occur, what impact, if any, it may have on the Company. The Company leases 25 long term care facilities and one congregate care living center to subsidiaries of Beverly, which is the largest provider of long term care in the United States. Rental income from these leases represented approximately 12% of the Company's total revenue for the year ended December 31, 1993. Based upon public reports, Beverly's net operating revenue and net income for the nine months ended September 30, 1994 were approximately $2.2 billion and $57.6 million, respectively; and Beverly's total assets and shareholders' equity as of September 30, 1994 were approximately $2.1 billion and $811 million, respectively. For the year ended December 31, 1993, Beverly reported net operating revenue and net income of $2.9 billion and $58 million, respectively. The Company holds two first mortgage loans initially totaling $32.0 million to First Texas Medical, Inc. and LMH Investment Company (the "Mortgage Loans"). The Mortgage Loans provide for escalating interest rates and are secured by the 92 bed HCA Denton Community Hospital and a related medical office building in Denton, Texas, and the 118 bed HCA Lewisville Memorial Hospital of Lewisville, Texas. Both hospitals are managed by and leased to HCA Health Services of Texas, Inc., a wholly-owned subsidiary of HCA, pursuant to a long-term lease with a primary term of 10 years. The Mortgage Loans have a nine year term with payments based on an 11 year amortization schedule. Based upon public reports, HCA's net operating revenue and net income for the nine months ended September 30, 1994 were approximately $8.2 billion and $403 million, respectively; and HCA's total assets and shareholders' equity as of September 30, 1994 were approximately $11.8 billion and $4.8 billion, respectively. For the year ended December 31, 1993, HCA reported net operating revenue and net income of approximately $10.2 billion and $507 million, respectively. The Company has provided or has committed to provide approximately $41.0 million in acquisition or construction funds for seven medical office buildings which are leased or are to be leased by Healthtrust. At September 30, 1994, six of the seven facilities were completed and paying rent, and the Company had outstanding commitments for future expenditures on tenant improvements and completion of the seventh building of $9.4 million. Healthtrust, based upon public reports, had net operating revenue and net income S-3 of approximately $970 million and $50 million, respectively, for the three months ended November 30, 1994; and Healthtrust's total assets and shareholders' equity as of November 30, 1994 were approximately $4.0 billion and $1.1 billion, respectively. For the year ended August 31, 1994, Healthtrust reported net operating revenue and net income of $3.0 billion and $173 million, respectively. On October 4, 1994, Columbia/HCA Healthcare Corporation and Healthtrust announced an agreement for the merger of the two companies in 1995. No assurance can be given that such merger will occur, or if it does occur, what impact, if any, it may have on the Company. Since 1987 the Company has committed to the development of 21 facilities, including five rehabilitation hospitals, five congregate care and assisted living facilities, four long term care facilities and seven medical office buildings representing an aggregate investment of $153.4 million. As of September 30, 1994, 19 facilities totaling $140.1 million have been completed. The completed facilities comprise five rehabilitation hospitals, four congregate care and assisted living facilities, four long term care facilities and six medical office buildings. The remaining development projects are scheduled for completion in 1995. Simultaneously with the commencement of each of these development programs, the Company enters into a lease agreement with the developer/operator. The base rent under the lease is established at a rate equivalent to a specified number of basis points over the ten-year United States Treasury securities' yield at the conclusion of development. The Company anticipates acquiring additional health care related facilities and leasing them to health care operators or investing in mortgages secured by health care facilities. References herein to the Company include Health Care Property Investors, Inc. and its wholly-owned subsidiaries, unless the context otherwise requires. The Company's principal offices are located at 10990 Wilshire Boulevard, Suite 1200, Los Angeles, California 90024, and its telephone number is (310) 473- 1990. RECENT DEVELOPMENTS The Company recently announced operating results for the year ended December 31, 1994. Net income for the year ended December 31, 1994 totaled $50.0 million or $1.87 per share, on revenue of $99.0 million compared to net income of $44.1 million or $1.66 per share, on revenue of $92.5 million for the prior year. The 1994 per share results represent an increase of 12.7% over the 1993 results. Funds from operations of $67.0 million ($2.51 per share) for the year ended December 31, 1994 were up from $61.4 million ($2.31 per share) for the prior year, an increase of 8.7% on a per share basis. PROPERTIES Of the 178 health care facilities in which the Company has an investment, the Company directly owns 123 facilities, including 101 long term care facilities, two rehabilitation hospitals, nine congregate care and assisted living centers, one acute care hospital, nine medical office buildings and one physician clinic. The Company has provided mortgage loans on 11 Properties, including six long term care facilities, three acute care hospitals and two medical office buildings that are secured by the Properties. The Company also has varying percentage interests in several partnerships that together own 44 facilities, as further discussed below: 1. A 77% interest in a joint venture which owns two acute care hospitals, one psychiatric facility and 21 long term care facilities. 2. A 50% interest in a partnership that owns 11 long term care facilities. 3. Interests of between 90% and 97% in four joint ventures, each of which was formed to own a comprehensive rehabilitation hospital. 4. A 50% interest in five partnerships, each of which owns a congregate care living center. S-4 The following summary of the Company's Properties shows certain pertinent information grouped by type of facility as of September 30, 1994.
EQUITY NUMBER TOTAL INTEREST NUMBER OF OF BEDS/ INVESTMENTS ANNUAL BASE FACILITY TYPE (PERCENTAGE) FACILITIES UNITS (1) (2) RENTS/INTEREST - ------------- ------------ ---------- --------- ----------- -------------- (DOLLAR AMOUNTS IN THOUSANDS) Long Term Care Facilities 100 107 13,182 $324,276 $38,725 Long Term Care Facilities 77 21 2,438 56,672 8,074 Long Term Care Facilities 50 11 1,302 23,109 2,984 Acute Care Hospitals 100 4 646 48,399 7,277 Acute Care Hospitals 77 2 356 42,807 5,829 Rehabilitation Hospitals 100 2 186 27,171 3,636 Rehabilitation Hospitals 97 3 200 32,380 4,468 Rehabilitation Hospital 90 1 108 15,113 1,753 Congregate Care and Assisted Living Centers 100 9 718 33,258 3,265 Congregate Care and Assisted Living Centers 50 5 609 33,219 4,026 Medical Office Buildings (3) 100 11 -- 46,681 4,934 Physician Clinic (4) 100 1 -- 5,253 470 Psychiatric Facility 77 1 108 3,919 561 --- ------ -------- ------- 178 19,853 $692,257 $86,002 === ====== ======== =======
- -------- (1) Congregate care and assisted living facilities are stated in units; all other facilities are stated in beds. (2) Includes partnership investments, and incorporates all partners' assets and construction commitments. (3) The medical office buildings encompass 501,850 square feet. (4) The physician clinic encompasses 37,900 square feet. Long Term Care Facilities. The Company and the partnerships in which it participates own or hold mortgage loan interests in 139 long term care facilities. These facilities are leased to various health care providers. Such long term care facilities offer restorative, rehabilitative and custodial nursing care for people not requiring the more extensive and sophisticated treatment available at acute care hospitals. The facilities are designed to supplement hospital care; many have transfer agreements with one or more acute care hospitals. These facilities depend to some degree upon referrals from practicing physicians and hospitals. Such services are paid for either from private sources of the patient or the patient's family, or through the federal Medicare and state Medicaid programs. Patients in long term care facilities are generally provided with accommodations, all meals, medical and nursing care and rehabilitation services including speech, physical and occupational therapy. Acute Care Hospitals. The Company has an interest in six acute care hospitals, of which two each are operated by NME and HCA and one each by OrNda and Dynamic Health Care, Inc. Acute care hospitals generally offer a wide range of services such as general and specialty surgery, intensive care units, clinical laboratories, physical and respiratory therapy, nuclear medicine, magnetic resonance imaging, neonatal and pediatric care units, outpatient units and emergency departments, among others. Such services are paid for either from private sources of the patient or the patient's family, or through the federal Medicare and state Medicaid programs. Rehabilitation Hospitals. The Company has an investment in six rehabilitation hospitals. These hospitals provide inpatient and outpatient care for patients who have sustained traumatic injuries or illnesses, such as spinal cord injuries, strokes, head injuries, orthopedic problems, work related disabilities and neurological S-5 diseases, as well as treatment for amputees and patients with severe arthritis. Rehabilitation programs encompass physical, occupational, speech and inhalation therapies, rehabilitative nursing and other specialties. Such services are paid for either from private sources of the patient or the patient's family, or through the federal Medicare program. Three rehabilitation hospitals are leased to Continental Medical Systems, Inc., two hospitals are leased to Healthsouth Corporation and one is leased to NovaCare, Inc. Congregate Care and Assisted Living Centers. The Company and its partnerships have investments in 14 congregate care and assisted living centers. Congregate care centers typically contain studio and one and two bedroom apartments which are rented on a month-to-month basis by individuals, primarily those over 75 years of age. Residents, who must be ambulatory, are provided meals and eat in a central dining area; they may also be assisted with some daily living activities. These centers offer programs and services that allow residents certain conveniences and make it possible for them to live independently; staff is also available when residents need assistance and for group activities. Assisted living centers serve elderly persons who require more assistance with daily living activities than congregate care residents, but who do not require the constant supervision nursing homes provide. Services include personal supervision, assistance with eating, bathing, grooming and administering medication. Assisted living centers typically contain larger common areas for dining, group activities and relaxation to encourage social interaction. Residents rent studio and one bedroom units on a month-to-month basis. Charges for room and board and other services in both congregate care and assisted living centers are paid for from private sources. Medical Office Buildings. The Company has investments in 11 medical office buildings. These buildings are generally located adjacent to or a short distance from acute care hospitals. Medical office buildings contain physicians' offices and examination rooms, and may also include pharmacies, hospital ancillary service space and day-surgery operating rooms. Medical office buildings require more extensive plumbing, electrical, heating and cooling capabilities than commercial office buildings for sinks, brighter lights and special equipment physicians typically use. The Company's owned medical office buildings are master leased to a lessee who then subleases office space to physicians or other medical practitioners. Physician Clinic. The Company has an investment in one physician clinic. Physician clinics generally provide a broad range of medical services through organized physician groups representing various medical specialties. Psychiatric Facility. Brawner Psychiatric Hospital, located in Smyrna, Georgia, offers comprehensive, multidisciplinary adult and adolescent care. A substance abuse program is offered in a separate unit of the hospital. Although the facility is a qualified Medicare provider, substantially all of Brawner's patient revenue in 1994 has been from private sources. Competition. The Company competes for property acquisitions with health care providers, other health care related real estate investment trusts, real estate partnerships and other investors. The Company's Properties are subject to competition from the properties of other health care providers. Certain of these other operators have capital resources substantially in excess of those of the operators of the Company's facilities. In addition, the extent to which the Properties are utilized depends upon several factors, including the number of physicians using the health care facilities or referring patients there, competitive systems of health care delivery and the area population, size and composition. Private, federal and state payment programs and the effect of other laws and regulations may also have a significant effect on the utilization of the Properties. Virtually all of the Properties operate in a competitive environment and patients and referral sources, including physicians, may change their preferences for a health care facility from time to time. S-6 USE OF PROCEEDS The net proceeds to the Company from the sale of the Common Stock offered hereby will be approximately $40.9 million ($47.1 million if the Underwriters' over-allotment option is exercised in full). The Company intends to use such proceeds to reduce short-term bank debt, if any, and to retire a portion of its $75 million 9 7/8% Senior Unsecured Notes due 1998, which may be called for redemption in whole or in part at par plus accrued interest on or after February 15, 1995. Pending such use, the Company plans to invest such proceeds in short-term money market obligations. PRICE RANGE OF COMMON STOCK AND DIVIDENDS The Company's Common Stock is listed on the NYSE under the symbol HCP. Set forth below for the fiscal quarters indicated are the reported high and low sales prices of the Company's Common Stock taken from the New York Stock Exchange Composite Tape for the periods indicated and the cash dividends per share paid in such periods. The last reported sale price of the Common Stock on the NYSE on February 2, 1995 was $29 per share.
STOCK PRICE ----------- DIVIDENDS HIGH LOW PAID ---- --- --------- 1993 First Quarter............................... $32 $24 $0.4500 Second Quarter.............................. 32 1/4 27 1/4 0.4575 Third Quarter............................... 31 5/8 28 1/4 0.4650 Fourth Quarter.............................. 33 5/8 25 0.4725 1994 First Quarter............................... 32 27 1/4 0.4800 Second Quarter.............................. 32 5/8 29 1/2 0.4900 Third Quarter............................... 31 1/4 27 7/8 0.5000 Fourth Quarter.............................. 30 7/8 26 1/4 0.5100 1995 First Quarter (through February 2).......... 30 3/8 28
On January 13, 1995, the Board of Directors of the Company declared a dividend of $0.5200 per share of Common Stock, payable on February 20, 1995 to stockholders of record on January 23, 1995. Purchasers of the shares of Common Stock being offered hereby will not receive this dividend in respect of the shares of Common Stock being offered hereby. The Company has increased the dividend by $.0100 per share for each of the last four quarters, $.0075 for each of the previous eight quarters, $.0063 for each of the preceding 16 quarters, and prior to that by $.0050 per share for each of the nine quarters since the inception of the Company in 1985. The dividend increases have been adjusted for the two-for-one stock split effective May 20, 1992. The Company has declared and paid 37 consecutive quarterly dividends aggregating approximately $301,000,000. The Company maintains a Dividend Reinvestment Plan pursuant to which stockholders may have cash dividends on all or a portion of their Common Stock automatically reinvested in Common Stock. S-7 CAPITALIZATION The following table sets forth the capitalization of the Company as of September 30, 1994 and as adjusted to give effect to the issuance of 1,500,000 shares of Common Stock by the Company (assuming the Underwriters' over- allotment option is not exercised) and the application of the net proceeds therefrom.
SEPTEMBER 30, 1994 (AMOUNTS IN THOUSANDS) -------------------------- ACTUAL AS ADJUSTED ----------- ------------- Bank Notes Payable............................... $ 2,000 $ -- Mortgage Notes Payable........................... 10,024 10,024 8.00%-10.57% Senior Notes due 1998-2003(1)....... 135,873 96,953 6% Convertible Subordinated Notes due 2000....... 100,000 100,000 Minority Interests in Joint Ventures............. 19,653 19,653 Preferred Stock, $1.00 par value: Authorized--50,000,000 shares; None Outstand- ing........................................... -- -- Common Stock, $1.00 par value: Authorized--100,000,000 shares; Outstanding 26,671,574 shares (28,171,574 shares as ad- justed)(2).................................... 26,671 28,171 Additional Paid-in Capital....................... 303,746 343,166 Cumulative Net Income............................ 225,963 225,963 Dividends Paid................................... (287,808) (287,808) ----------- ----------- Total Capitalization............................. $536,122 $536,122 =========== ===========
- -------- (1) Net of unamortized debt discount in an amount equal to $127,000. The Company's senior debt currently has the following credit ratings: Standard & Poor's Ratings Group assigns a BBB+ rating, Moody's Investors Service, Inc. assigns a Baa1 rating and Duff & Phelps Credit Rating Co. assigns an A- rating. At February 2, 1995, there was approximately $173 million principal amount of Senior Notes outstanding. (2) Does not include up to 2,500,000 shares reserved for issuance upon grants of incentive stock awards or the exercise of options granted or to be granted pursuant to the Company's Amended Stock Incentive Plan and Directors Stock Incentive Plan, up to 2,645,083 shares reserved for issuance upon conversion of the Company's 6% Convertible Subordinated Notes due 2000 and up to 31,816,657 shares reserved for issuance upon exercise of rights issued pursuant to the Company's Rights Plan (33,316,657 shares as adjusted). See "Description of Common Stock-- Stockholder Rights Plan" in the accompanying Prospectus. S-8 SELECTED CONSOLIDATED FINANCIAL DATA Set forth below is selected consolidated financial data with respect to the Company for the years ended December 31, 1991, 1992 and 1993, and for the nine months ended September 30, 1993 and 1994. The selected consolidated financial information should be read in conjunction with the Consolidated Financial Statements of the Company and Notes thereto included in the Company's 1934 Act Reports which are incorporated by reference into this Prospectus Supplement and the accompanying Prospectus.
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, (UNAUDITED) ---------------------------- ------------------ 1991 1992 1993 1993 1994 -------- -------- -------- -------- -------- (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenue Base Rental Income.......... $ 56,957 $ 58,326 $ 60,389 $ 44,817 $ 48,238 Additional Rental & Interest Income..................... 8,849 12,511 14,698 10,947 12,233 Interest and Other Income... 7,765 10,923 15,188 10,282 11,341 Facility Operating Revenue.. 5,846 1,967 2,274 1,704 1,719 -------- -------- -------- -------- -------- 79,417 83,727 92,549 67,750 73,531 -------- -------- -------- -------- -------- Expenses Interest Expense............ 20,838 19,780 19,728 14,251 15,058 Depreciation/Noncash Charges.................... 18,524 18,062 17,862 13,074 13,290 Other Expenses.............. 4,313 4,950 5,147 3,860 3,787 Facility Operating Expenses. 5,669 1,904 2,306 1,765 1,805 -------- -------- -------- -------- -------- 49,344 44,696 45,043 32,950 33,940 -------- -------- -------- -------- -------- Income from Operations....... 30,073 39,031 47,506 34,800 39,591 Minority Interests........... (3,622) (3,316) (3,419) (2,592) (2,714) -------- -------- -------- -------- -------- Net Income................... $ 26,451 $ 35,715 $ 44,087 $ 32,208 $ 36,877 ======== ======== ======== ======== ======== Net Income Per Common Share.. $ 1.15 $ 1.38 $ 1.66 $ 1.21 $ 1.38 ======== ======== ======== ======== ======== Funds From Operations........ $ 45,075 $ 53,580 $ 61,427 $ 44,885 $ 49,771 ======== ======== ======== ======== ======== Funds From Operations Per Common Share................ $ 1.96 $ 2.07 $ 2.31 $ 1.69 $ 1.87 ======== ======== ======== ======== ======== Financial Position (at end of Period) Total Assets................ $458,579 $509,150 $549,638 $512,705 $550,283 Notes and Bonds Payable..... 196,131 193,060 245,291 203,250 245,897 Bank Borrowings............. 16,300 12,700 -- 4,900 2,000 Stockholders' Equity........ 211,274 271,375 269,873 270,145 268,572
S-9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Nine Months Ended September 30, 1994 vs. Nine Months Ended September 30, 1993 Net income for the nine months ended September 30, 1994 totaled $36.9 million or $1.38 per share compared to $32.2 million or $1.21 per share for the year earlier nine month period, which represents an increase of 14.1% per share over the 1993 results. For the nine months ended September 30, 1994, funds from operations increased to $49.8 million, compared with $44.9 million for the corresponding period in the prior year. Earnings and funds from operations were higher in 1994 due to increases in rental and interest income. Increases in base rental income and interest income were generated from new investments, including $34.0 million invested in new facilities during the first nine months of the year. Additional rental and interest income increased from $10.9 million for the nine months ended September 30, 1993 to $12.2 million in the corresponding period of 1994, which was attributable to revenue growth at many of the Company's facilities and from interest income increases on other investments. Year Ended December 31, 1993 vs. Year Ended December 31, 1992 Funds from operations totaled $61.4 million for the year ended December 31, 1993, an increase of 14.6% or $7.8 million over the $53.6 million for the prior year. This increase was attributable to higher base and additional rental and interest income on the Company's investment portfolio, and to non-recurring income of approximately $2.0 million offset in part by increases in administrative expenses. Net income for the year ended December 31, 1993 was $44.1 million, or $1.66 per share, on revenues of $92.5 million, compared to net income of $35.7 million, or $1.38 per share, on revenues of $83.7 million for the prior year. These increases parallel the changes noted above and were augmented by depreciation and non-cash charges that were $200,000 lower than in the prior year. The increase in base rental income of $2.1 million to $60.4 million was the result of rents received in 1993 from newly completed facilities that were under construction in 1992, and from a full year's rents on 1992 acquisitions. Additional rental and interest income increased by $2.2 million to $14.7 million for 1993. Additional rental and interest income is a function of increases in facility revenues over specified base year revenues, increases based on inflation indices and/or fixed increases in rent and interest. The majority of the Company's investments, other than new facilities, contributed to this increase. Interest and other income increased by $4.3 million to $15.2 million. Approximately half of this increase resulted from mortgage loans acquired in 1992. The balance of the increase came from distributions from a partnership interest written off in 1989, and the receipt of a portion of the proceeds from a lessee's assignment of its leasehold interest. The decrease of $52,000 to $19.7 million in interest expense was due to higher capitalized interest on projects that were under construction in 1993 offset by interest on the $100 million Convertible Subordinated Notes, the proceeds of which were used in part to pay the $60 million Senior Notes due 1996 during December 1993. During the second half of 1993, the Company completed the construction of four medical office buildings and two long term care facilities. In the last two months of 1993, the Company purchased an existing loan on an acute care hospital owned and operated by OrNda, an existing lease on a medical office building leased to an HCA subsidiary and an assisted living facility. S-10 Year Ended December 31, 1992 vs. Year Ended December 31, 1991 Funds from operations totaled $53.6 million for the year ended December 31, 1992, an increase of 18.9% over the $45.1 million for the prior year. This increase was attributable to higher base rental income and interest income as a result of facilities acquired during 1992 and 1991, lower interest expense and higher additional rents and interest in the Company's investment portfolio. These positive factors were, in part, offset by higher administrative expenses. Net income for the year ended December 31, 1992 was $35.7 million, or $1.38 per share, on revenues of $83.7 million compared with net income of $26.5 million, or $1.15 per share, on revenues of $79.4 million for the year ended December 31, 1991. These increases were due to the factors discussed above and were enhanced by depreciation and non-cash charges that were $462,000 lower than the prior year. The 1992 additional rental and interest income of $12.5 million was $3.7 million higher than the prior year. Most of the Company's investments, other than new facilities, contributed to this increase; however, a significant portion of the growth in additional rental income, $1.4 million, was generated from four newly constructed rehabilitation hospitals, two of which commenced paying additional rent during 1992. Interest and other income of $10.9 million for 1992 was $3.2 million over the year earlier period. This increase related to interest earned from mortgage loans acquired during 1992 and short-term investments, offset, in part, by the non-recurring income generated in 1991 from the Company's investment in senior secured notes which were repurchased from the Company. Interest expense of the Company totaled $19.8 million for 1992, $1.1 million less than that incurred for the prior year. In 1992, interest expense was lower because short-term borrowings were repaid with the proceeds from a March 1992 equity offering. In the last half of 1992, the Company began construction of four medical office buildings. In October 1992, the Company acquired an acute care hospital, and in December 1992, the Company purchased 14 mortgage loans from the Resolution Trust Corporation. The contribution of these new transactions was minimal in 1992. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1994, the Company's portfolio of Properties, consisting of investments in 178 medical facilities located in 32 states, was comprised of 139 long term care facilities, 14 congregate care and assisted living centers, six acute care hospitals, six rehabilitation hospitals, 11 medical office buildings, one psychiatric care facility and one physician clinic. The gross acquisition price of the Properties, which includes partnership acquisitions, was approximately $692.3 million. The Company had a direct investment in 134 facilities; investments in the remaining 44 Properties were owned through partnerships in which the Company is the managing general partner. The Company has financed its acquisitions and loans through the sale of Common Stock, the issuance of long-term debt, the assumption of mortgage notes payable, the use of short-term bank credit lines, and through internally generated cash flow. In November 1993, the Company issued $100 million 6% Subordinated Convertible Notes due 2000. With these proceeds, the Company redeemed $60 million 9 1/2% Senior Notes due 1996, without penalty. This financing enabled the Company to significantly reduce its average borrowing rates. As of September 30, 1994, the Company had issued a total of $61 million under its Medium-Term Note programs. On March 31, 1994, the Company instituted a new $100 million three year revolving line of credit with a group of seven banks. The Company believes it has a strong financial position with $268.6 million in stockholders' equity as of September 30, 1994, a total debt-to-equity ratio of approximately 0.92:1 and committed and unused bank lines of credit aggregating $98 million. S-11 The Company has registered $200 million of debt and equity securities under a shelf registration statement filed with the Securities and Exchange Commission and referred to in the accompanying Prospectus. At the date of this Prospectus Supplement and after giving effect to this offering (assuming the Underwriters' over-allotment option is not exercised), $113.5 million of such securities remain available for issuance from time to time based on Company needs and market conditions. As of September 30, 1994, the Company had commitments to purchase and construct health care facilities totaling $49.0 million which were expected to be funded during 1994 or will be funded during 1995. Facilities under construction are generally financed by means of cash on hand or short-term borrowings under the Company's existing bank lines. In the future, the Company may use its Medium-Term Note program to finance a portion of the construction. At the completion of construction and commencement of the lease, short term borrowings used are generally refinanced with new long-term debt or equity offerings. The Company has the option to prepay without penalty its $75 million 9 7/8% Senior Notes due 1998 at any time on or after February 15, 1995. See "Use of Proceeds." The Company has unconditional guarantees from NME in respect of Lease obligations of subsidiaries of NME (three facilities), subsidiaries of Hillhaven (63 facilities) and Healthsouth Corporation (two facilities). See "The Company." At September 30, 1994, the Company had approximately $30.7 million in irrevocable letters of credit from commercial banks to back the obligations of many of its lessees' lease and borrowers' loan obligations. The Company may draw upon the letters of credit if there are any defaults under the leases and/or loans. Amounts available under letters of credit change from time to time; such changes may be material. The third quarter 1994 dividend of $0.50 per share or $13.3 million in the aggregate was paid onAugust 19, 1994. Total dividends paid during the nine months ended September 30, 1994 as a percentage of funds from operations for the corresponding period was 79%. Management believes that the Company's liquidity and sources of capital are adequate to finance its operations as well as its future investments in additional facilities. FEDERAL INCOME TAX CONSIDERATIONS The following summary of material Federal income tax considerations regarding the offering is based on current law, is for general information only and is not tax advice. This discussion does not purport to deal with all aspects of taxation that may be relevant to particular investors in light of their personal investment circumstances, or to certain types of investors (including insurance companies, tax-exempt organizations, financial institutions or broker-dealers, foreign corporations and persons who are not citizens or residents of the United States) subject to special treatment under the Federal income tax laws. EACH PROSPECTIVE PURCHASER OF THE SHARES OF COMMON STOCK OFFERED HEREBY IS ADVISED TO CONSULT HIS OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND SALE OF SUCH SHARES, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS. TAXATION OF THE COMPANY General Management of the Company believes that the Company has operated in such manner as to qualify for taxation as a "real estate investment trust" under Sections 856 to 860 of the Internal Revenue Code of 1986, as amended (the "Code"), commencing with its taxable year ended December 31, 1985, and the Company S-12 intends to continue to operate in such manner. However, no assurance can be given that it has operated or will be able to continue to operate in a manner so as to qualify or to remain qualified. These sections of the Code are highly technical and complex. The following is a general summary of the sections that govern the Federal income tax treatment of a real estate investment trust and its stockholders. This summary is qualified in its entirety by the applicable Code provisions, rules and regulations promulgated thereunder, and administrative and judicial interpretations thereof. Latham & Watkins has acted as tax counsel to the Company in connection with the organization and operation of the Company and the preparation of the Registration Statement of which this Prospectus Supplement and the accompanying Prospectus are a part. In the opinion of Latham & Watkins, the Company was organized in conformity with the requirements for qualification as a real estate investment trust commencing with its taxable and fiscal year endingDecember 31, 1985, and its proposed method of operation will enable it to meet the requirements for qualification and taxation as a real estate investment trust under the Code. It must be emphasized that this opinion is based on various assumptions and is conditioned upon certain representations made by the Company as to factual matters. In addition, this opinion is based upon the factual representations of the Company as set forth in this Prospectus Supplement and the accompanying Prospectus and assumes that the actions described in this Prospectus Supplement and the accompanying Prospectus are completed in a timely fashion. Moreover, such qualification and taxation as a real estate investment trust depends upon the Company's ability to meet, through actual annual operating results, distribution levels and diversity of stock ownership, the various qualification tests imposed under the Code discussed below, the results of which have not been and will not be reviewed by Latham & Watkins. Accordingly, no assurance can be given that the actual results of the Company's operation of any particular taxable year will satisfy such requirements. See "--Failure to Qualify." If the Company qualifies for taxation as a real estate investment trust, it will generally not be subject to Federal corporate income taxes on its net income that is currently distributed to stockholders. This treatment substantially eliminates the "double taxation" (i.e., at the corporate and stockholder levels) that generally results from investment in a corporation. However, the Company will be subject to Federal income tax as follows: First, the Company will be taxed at regular corporate rates on any undistributed real estate investment trust taxable income, including undistributed net capital gains. Second, under certain circumstances, the Company may be subject to the "alternative minimum tax" on its items of tax preference. Third, if the Company has (i) net income from the sale or other disposition of "foreclosure property" which is held primarily for sale to customers in the ordinary course of business or (ii) other nonqualifying income from foreclosure property, it will be subject to tax at the highest regular corporate rate on such income. Fourth, if the Company has net income from "prohibited transactions" (which are, in general, certain sales or other dispositions of property (other than foreclosure property) held primarily for sale to customers in the ordinary course of business, (i.e., when the Company is acting as a dealer)), such income will be subject to a 100% tax. Fifth, if the Company should fail to satisfy the 75% gross income test or the 95% gross income test (as discussed below), but has nonetheless maintained its qualification as a real estate investment trust because certain other requirements have been met, it will be subject to a 100% penalty tax on an amount equal to (i) the gross income attributable to the greater of the amount by which the Company fails the 75% or 95% test, multiplied by (ii) a fraction intended to reflect the Company's profitability. Sixth, if the Company should fail to distribute each year at least the sum of (i) 85% of its real estate investment trust ordinary income for such year, (ii) 95% of its real estate investment trust capital gain net income for such year, and (iii) any undistributed taxable income from prior periods, the Company will be subject to a 4% excise tax on the excess of such required distribution over the amounts actually distributed. Seventh, if the Company acquires any asset from a C corporation (i.e., generally a corporation subject to full corporate-level tax) in certain transactions in which the basis of the asset in the Company's hands is determined by reference to the basis of the asset (or any other property) in the hands of the C corporation, and the Company recognizes gain on the disposition of such asset during the 10-year period (the "Recognition Period") beginning on the date on which such asset was acquired by the Company, then, to the extent of the built-in gain (i.e., the S-13 excess of the fair market value of such asset on the date such asset was acquired by the Company over the Company's adjusted basis in such asset on such date), such gain will be subject to tax at the highest regular corporate rate pursuant to Treasury Regulations that have not yet been promulgated. Requirements for Qualification The Code defines a real estate investment trust as a corporation, trust or association (i) which is managed by one or more trustees or directors; (ii) the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest; (iii) which would be taxable, but for Sections 856 through 860 of the Code, as a domestic corporation; (iv) which is neither a financial institution nor an insurance company subject to certain provisions of the Code; (v) the beneficial ownership of which is held by 100 or more persons; (vi) during the last half of each taxable year not more than 50% in value of the outstanding stock of which is owned, actually or constructively, by five or fewer individuals (as defined in the Code to include certain entities); and (vii) which meets certain other tests, described below, regarding the amount of its distributions and the nature of its income and assets. The Code provides that conditions (i) to (iv), inclusive, must be met during the entire taxable year and that condition (v) must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months. Certain of the Properties are owned by the Company indirectly through partnerships (the "Partnerships") or "qualified REIT subsidiaries" (as defined in the Code). In the case of a real estate investment trust which is a partner in a partnership, Treasury Regulations provide that the real estate investment trust will be deemed to own its proportionate share of the assets of the partnership and will be deemed to be entitled to the income of the partnership attributable to such share. In addition, the character of the assets and gross income of the partnership will retain the same character in the hands of the real estate investment trust for purposes of Section 856 of the Code, including satisfying the gross income tests and the asset tests. Thus, the Company's proportionate share of the assets, liabilities and items of income of the Partnerships will be treated as assets, liabilities and items of income of the Company for purposes of applying the requirements described herein. In addition, Code Section 856(i) provides that a corporation which qualifies as a "qualified REIT subsidiary" will not be treated as a separate corporation, and all assets, liabilities and items of income, deduction and credit of a "qualified REIT subsidiary" will be treated as assets, liabilities and such items of the real estate investment trust. In the opinion of Latham & Watkins, the Company's subsidiaries are "qualified REIT subsidiaries." Thus, in applying the requirements described herein, the Company's subsidiaries will be ignored, and all assets, liabilities and items of income, deduction and credit of such subsidiaries will be treated as assets, liabilities and such items of the Company. Income Tests In order to maintain qualification as a real estate investment trust, there are three gross income requirements that must be satisfied annually. First, at least 75% of the Company's gross income (excluding gross income from prohibited transactions) for each taxable year must be derived directly or indirectly from investments relating to real property or mortgages on real property (including "interest on obligations secured by mortgages on real property" and "rents from real property" as defined in the Code) or from certain types of temporary investment income. Second, at least 95% of the Company's gross income (excluding gross income from prohibited transactions) for each taxable year must be derived from such real property investments, dividends, interest (as defined in the Code) and gain from the sale or disposition of stock or securities or from any combination of the foregoing. Third, short-term gain from the sale or other disposition of stock or securities, gain from prohibited transactions and gain on the sale or other disposition of real property held for less than four years (apart from involuntary conversions and sales of foreclosure property) must represent less than 30% of the Company's gross income for each taxable year. Rents received by the Company will qualify as "rents from real property" in satisfying the gross income requirements for a real estate investment trust if several conditions are met. First, the amount of rent must not be based in whole or in part on the income or profits of any person. However, an amount received or S-14 accrued generally will not be excluded from the term "rents from real property" solely by reason of being based on a fixed percentage or percentages of receipts or sales. Second, the Code provides that rents received from a tenant will not qualify as "rents from real property" in satisfying the gross income tests if the real estate investment trust, or an owner of 10% or more of the real estate investment trust, directly or constructively owns 10% or more of such tenant. Third, if rent attributable to personal property leased in connection with a lease of real property is greater than 15% of the total rent received under the lease, then the portion of rent attributable to such personal property will not qualify as "rents from real property." Finally, for rents received to qualify as "rents from real property," the real estate investment trust generally must not operate or manage the property or furnish or render services to the tenants of such property, other than through an independent contractor from whom the real estate investment trust derives no revenue; provided, however, the Company may directly perform certain services that are "usually or customarily rendered" in connection with the rental of space for occupancy only and are not otherwise considered "rendered to the occupant" of the property. The term "interest" generally does not include any amount received or accrued (directly or indirectly) if the determination of such amount depends in whole or in part on the income or profits of any person. However, any amount received or accrued generally will not be excluded from the term "interest" solely by reason of being based on a fixed percentage or percentages of receipts or sales. If the Company fails to satisfy one or both of the 75% or 95% gross income tests for any taxable year, it may nevertheless qualify as a real estate investment trust for such year if it is entitled to relief under certain provisions of the Code. These relief provisions will be generally available if the Company's failure to meet such tests was due to reasonable cause and not due to wilful neglect, the Company attaches a schedule of the sources of its income to its income tax return, and any incorrect information on the schedule was not due to fraud with intent to evade tax. It is not possible, however, to state whether in all circumstances the Company would be entitled to the benefit of these relief provisions. As discussed above, even if these relief provisions apply, a tax would be imposed on the Company. Asset Tests The Company, at the close of each quarter of its taxable year, must also satisfy three tests relating to the nature of its assets. First, at least 75% of the value of the Company's total assets must be represented by real estate assets (including (i) its allocable share of real estate assets held by partnerships in which the Company owns an interest or held by "qualified REIT subsidiaries" of the Company and (ii) stock or debt instruments held for not more than one year, purchased with the proceeds of a stock offering or long- term (more than five years) public debt offering of the Company), cash, cash items and government securities. Second, not more than 25% of the Company's total assets may be represented by securities other than those in the 75% asset class. Third, of the investments included in the 25% asset class, the value of any one issuer's securities owned by the Company may not exceed 5% of the value of the Company's total assets and the Company may not own more than 10% of any one issuer's outstanding voting securities. The Company currently owns certain properties through subsidiaries. As set forth above, the ownership of more than 10% of the voting securities of any one issuer by a real estate investment trust is prohibited by the asset tests. However, because the Company's subsidiaries are "qualified REIT subsidiaries," such subsidiaries will not be treated as separate corporations for Federal income tax purposes. Thus, the Company's ownership of the stock of a "qualified REIT subsidiary" will not cause the Company to fail the asset tests. Distribution Requirements The Company, in order to qualify as a real estate investment trust, is required to distribute dividends (other than capital gain dividends) to its stockholders in an amount at least equal to (A) the sum of (i) 95% of the Company's "real estate investment trust taxable income" (computed without regard to the dividends S-15 paid deduction and the Company's net capital gain) and (ii) 95% of the net income (after tax), if any, from foreclosure property, minus (B) the sum of certain items of non-cash income. In addition, if the Company disposes of any asset (acquired from a C corporation in certain transactions in which the basis of the asset in the Company's hands is determined by reference to the basis of the asset (or any other property) in the hands of the C corporation) during its Recognition Period, the Company will be required, pursuant to Treasury Regulations which have not yet been promulgated, to distribute at least 95% of the built-in-gain (after tax), if any, recognized on the disposition of such asset. Such distributions must be paid in the taxable year to which they relate, or in the following taxable year if declared before the Company timely files its tax return for such year, if paid on or before the first regular dividend payment date after such declaration and if the Company so elects and specifies the dollar amount in its tax return. To the extent that the Company does not distribute all of its net long-term capital gain or distributes at least 95%, but less than 100%, of its "real estate investment trust taxable income," as adjusted, it will be subject to tax thereon at regular corporate tax rates. Furthermore, if the Company should fail to distribute during each calendar year at least the sum of (i) 85% of its real estate investment trust ordinary income for such year, (ii) 95% of its real estate investment trust capital gain income for such year, and (iii) any undistributed taxable income from prior periods, the Company would be subject to a 4% excise tax on the excess of such required distribution over the amounts actually distributed. The Company intends to make timely distributions sufficient to maintain its tax status as a real estate investment trust. It is possible that the Company, from time to time, may not have sufficient cash or other liquid assets to meet the 95% distribution requirement, due to timing differences between (i) the actual receipt of income and actual payment of deductible expenses and (ii) the inclusion of such income and deduction of such expenses in arriving at taxable income of the Company. The Company will closely monitor the relationship between its real estate investment trust taxable income and cash flows to avoid problems in satisfying the 95% distribution requirement. In the event that timing differences occur, in order to meet the 95% distribution requirement, the Company may find it necessary to arrange for short-term, or possibly long-term, borrowings. Under certain circumstances, the Company may be able to rectify a failure to meet the distribution requirement for a year by paying "deficiency dividends" to stockholders in a later year, which may be included in the Company's deduction for dividends paid for the earlier year. The Company may be able to avoid being taxed on amounts distributed as deficiency dividends; however, the Company will be required to pay interest based upon the amount of any deduction taken for deficiency dividends. In addition, as discussed above, failure to meet certain other distribution requirements may result in the imposition of an excise tax. FAILURE TO QUALIFY If the Company fails to qualify for taxation as a real estate investment trust in any taxable year, and the relief provisions do not apply, the Company will be subject to tax (including any applicable alternative minimum tax) on its taxable income at regular corporate rates. Distributions to stockholders in any year in which the Company fails to qualify will not be deductible by the Company nor will they be required to be made. In such event, to the extent of current and accumulated earnings and profits, all distributions to stockholders will be taxable as ordinary income, and, subject to certain limitations in the Code, corporate distributees may be eligible for the dividends received deduction. Unless entitled to relief under specific statutory provisions, the Company will also be disqualified from taxation as a real estate investment trust for the four taxable years following the year during which qualification was lost. It is not possible to state whether in all circumstances the Company would be entitled to the statutory relief. Failure to qualify for even one year could result in the Company's incurring substantial indebtedness (to the extent borrowings are feasible) or liquidating substantial investments in order to pay the resulting taxes. TAXATION OF STOCKHOLDERS--GENERALLY As long as the Company qualifies as a real estate investment trust, distributions made to the Company's stockholders out of current or accumulated earnings and profits (and not designated as capital S-16 gains dividends) will be taken into account by them as ordinary income and will not be eligible for the dividends received deduction for corporations. Distributions that are properly designated as capital gain dividends will be taxed as long-term capital gains (to the extent they do not exceed the Company's actual net capital gain for the taxable year) without regard to the period for which the stockholder has held its stock. However, stockholders that are corporations may be required to treat up to 20% of any such capital gain dividend as ordinary income. Distributions in excess of current or accumulated earnings and profits will not be taxable to a stockholder to the extent that they do not exceed the adjusted basis of the stockholder's shares, but rather will reduce the adjusted basis of such shares. To the extent that such distributions exceed the adjusted basis of a stockholder's shares they will be included in income as long-term or short-term capital gain (as described below with respect to the sale or exchange of the shares) assuming the shares are held as a capital asset in the hands of the stockholder. In addition, any dividend declared by the Company in October, November or December of any year payable to a stockholder of record on a specified date in any such month shall be treated as both paid by the Company and received by the stockholder on December 31 of such year, provided that the dividend is actually paid by the Company during January of the following calendar year. Stockholders may not include in their individual income tax returns any net operating losses or capital losses of the Company. Distributions made by the Company and gain arising from the sale or exchange by a stockholder of shares of Company stock will not be treated as passive activity income, and, as a result, stockholders generally will not be able to apply any "passive losses" against such income or gain. Distributions made by the Company (to the extent they do not constitute a return of capital) generally will be treated as investment income for purposes of computing the investment income limitation. Gain arising from the sale or other disposition of Company stock, however, will not be treated as investment income unless the stockholder elects to reduce the amount of such stockholder's total net capital gain eligible for the 28% maximum capital gains rate by the amount of such gain with respect to the shares. Upon any sale or other disposition of shares of Company stock, a stockholder will recognize gain or loss for Federal income tax purposes in an amount equal to the difference between (i) the amount of cash and the fair market value of any property received on such sale or other disposition, and (ii) the holder's adjusted basis in the shares for tax purposes. Such gain or loss will be capital gain or loss if the shares have been held by the stockholder as a capital asset, and will be long-term gain or loss if such shares have been held for more than one year. In general, any loss recognized by a stockholder upon the sale or other disposition of shares of the Company that have been held for six months or less (after applying certain holding period rules) will be treated as a long-term capital loss, to the extent of distributions received by such stockholder from the Company which were required to be treated as long- term capital gains. FOREIGN STOCKHOLDERS The preceding discussion does not address the Federal income tax consequences to foreign stockholders of an investment in the Company. Foreign investors should consult their own tax advisors. Federal income taxation of foreign stockholders is a highly complex matter that may be affected by many other considerations, including treaty provisions. BACKUP WITHHOLDING The Company will report to its stockholders and the Internal Revenue Service (the "IRS") the amount of dividends paid during each calendar year, and the amount of tax withheld, if any. Under the backup withholding rules, a stockholder may be subject to backup withholding at the rate of 31% with respect to dividends paid unless such holder (a) is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact, or (b) provides a correct taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with applicable requirements of the backup withholding rules. A stockholder that does not provide the Company with his correct taxpayer S-17 identification number may also be subject to penalties imposed by the IRS. Any amount paid as backup withholding will be creditable against the stockholder's income tax liability. In addition, the Company may be required to withhold a portion of capital gain distributions to any stockholders who fail to certify their non-foreign status to the Company. TAXATION OF TAX-EXEMPT STOCKHOLDERS Generally, a tax-exempt investor that is exempt from tax on its investment income, such as an individual retirement account ("IRA") or a 401(k) plan, that holds the Company stock as an investment will not be subject to tax on dividends paid by the Company. However, if such tax-exempt investor is treated as having purchased its Company stock with borrowed funds, some or all of its dividends will be subject to tax. In addition, after 1993, under some circumstances certain pension plans (including 401(k) plans but not including IRAs and government pension plans) that own more than 10% (by value) of the Company's outstanding stock, including preferred stock, could be subject to tax on a portion of their dividends even if their stock is held for investment and is not treated as acquired with borrowed funds. The ownership limit provisions set forth in the Company's Articles of Restatement, however, should prevent this result in most cases. OTHER TAX CONSEQUENCES Certain of the Company's investments are through the Partnerships, which may involve special tax risks. Such risks include possible challenge by the IRS of (i) allocations of income and expense items, which could affect the computation of taxable income of the Company and (ii) the status of the Partnerships as partnerships (as opposed to associations taxable as corporations) for income tax purposes. If any of the Partnerships is treated as an association, it would be treated as a taxable corporation. In such a situation, if the Company's ownership interest in any of the Partnerships exceeded 10% of the Partnership's voting interests or the value of such interest exceeded 5% of the value of the Company's assets, the Company would cease to qualify as a real estate investment trust. In addition, in such a situation, the Company would not be able to deduct its share of any losses generated by the Partnerships in computing its taxable income. See "Failure to Qualify" above for a discussion of the effect of the Company's failure to meet such tests for a taxable year. The Company believes that each of the Partnerships will be treated for tax purposes as a partnership (and not an association taxable as a corporation). However, no assurance can be given that the IRS may not successfully challenge the tax status of any of the Partnerships. Each share of Common Stock issued in this offering will have one Right (as defined in the accompanying Prospectus) attached. The issuance of Common Stock with Rights attached will not be taxable to the Company or its stockholders. However, stockholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for Common Stock (or other consideration) of the Company or for common stock of the acquiring company as set forth in "Description of Common Stock--Stockholder Rights Plan" in the accompanying Prospectus. In addition, stockholders will recognize taxable income if the Rights are redeemed by the Company or disposed of by stockholders in certain transactions. The Company and its stockholders may be subject to state or local taxation in various state or local jurisdictions, including those in which it or they transact business or reside. The state and local tax treatment of the Company and its stockholders may not conform to the Federal income tax consequences discussed above. Consequently, prospective stockholders should consult their own tax advisors regarding the effect of state and local tax laws on an investment in the Company. S-18 UNDERWRITING Subject to the terms and conditions set forth in a purchase agreement (the "Purchase Agreement"), the Company has agreed to sell to each of the Underwriters named below (the "Underwriters"), and each of the Underwriters severally has agreed to purchase the aggregate number of shares of Common Stock set forth opposite its name below. In the Purchase Agreement, the several Underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all the shares of Common Stock offered hereby if any of the shares of Common Stock are purchased. In the event of a default by an Underwriter, the Purchase Agreement provides that, in certain circumstances, the purchase commitments of the nondefaulting Underwriters may be increased or the Purchase Agreement may be terminated.
NUMBER OF UNDERWRITER SHARES ----------- --------- Merrill Lynch, Pierce, Fenner & Smith Incorporated............................................. 500,000 Alex. Brown & Sons Incorporated................................... 500,000 Dean Witter Reynolds Inc. ........................................ 500,000 --------- Total........................................................ 1,500,000 =========
The Underwriters have advised the Company that they propose initially to offer the shares to the public at the public offering price set forth on the cover page of this Prospectus Supplement, and to certain dealers at such price less a concession not in excess of $.85 per share. The Underwriters may allow, and such dealers may reallow, a discount not in excess of $.10 per share on sales to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed. The Company has granted the Underwriters an option exercisable for 30 days after the date hereof to purchase up to 225,000 additional shares of Common Stock to cover over-allotments, if any, at the initial public offering price, less the underwriting discount. If the Underwriters exercise this option, each of the Underwriters will have a firm commitment, subject to certain conditions, to purchase approximately the same percentage thereof which the number of shares of Common Stock to be purchased by it shown in the foregoing table is of the 1,500,000 shares of Common Stock initially offered hereby. The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act. S-19 PROSPECTUS HEALTH CARE PROPERTY INVESTORS, INC. SECURITIES Health Care Property Investors, Inc. (the "Company") may offer from time to time, in one or more series, its unsecured debt securities (the "Debt Securities"), shares of its Preferred Stock, par value $1.00 per share (the "Preferred Stock") and shares of its Common Stock, par value $1.00 per share (the "Common Stock"). The Debt Securities, the Preferred Stock and the Common Stock are collectively referred to herein as the "Securities." The Securities will have an aggregate offering price of $200,000,000 and will be offered on terms to be determined at the time of offering. In the case of Debt Securities, the specific title, the aggregate principal amount, the purchase price, the maturity, the rate and time of payment of any interest, any redemption or sinking fund provisions, any conversion provisions and any other specific term of the Debt Securities will be set forth in the accompanying supplement to this Prospectus (the "Prospectus Supplement") and/or a related pricing supplement (the "Pricing Supplement"). In the case of Preferred Stock, the specific number of shares, designation, stated value per share, liquidation preference per share, issuance price, dividend rate (or method of calculation), dividend payment dates, any redemption or sinking fund provisions, any conversion rights and any other specific term of the series of Preferred Stock will be set forth in the accompanying Prospectus Supplement. In the case of Common Stock, the specific number of shares and issuance price per share will be set forth in the accompanying Prospectus Supplement. The Prospectus Supplement will also disclose whether the Securities will be listed on a national securities exchange and if they are not to be listed, the possible effects thereof on their marketability. Securities may be sold directly, through agents from time to time or through underwriters or dealers, which may include Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated. If any agent of the Company or any underwriter is involved in the sale of the Securities, the name of such agent or underwriter and any applicable commission or discount will be set forth in the accompanying Prospectus Supplement. See "Plan of Distribution." The net proceeds to the Company from such sale also will be set forth in the applicable Prospectus Supplement. The Debt Securities, if issued, will rank on parity with all other unsecured and unsubordinated indebtedness of the Company. See "Description of Debt Securities." ---------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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. ---------------- The date of this Prospectus is February 2, 1995. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF SECURITIES OFFERED HEREBY AT LEVELS ABOVE THOSE 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. AVAILABLE INFORMATION The Company is subject to the informational requirements of the Securities 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 can be inspected and copied at Room 1024 of the offices of the Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and is available for inspection and copying at the regional offices of the Commission located at 7 World Trade Center, 13th Floor, New York, New York 10048, and Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such material can be obtained from the principal offices of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. Reports, proxy materials and other information concerning the Company may also be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. The Company has filed with the Commission a Registration Statement on Form S- 3 (together with all amendments and exhibits thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus and any accompanying Prospectus Supplement do not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the Commission. For further information, reference is made to the Registration Statement, which may be examined without charge at the public reference facilities maintained by the Commission at the Public Reference Room of the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. Copies thereof may be obtained from the Commission upon payment of the prescribed fees. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Company's (i) annual report on Form 10-K for the fiscal year ended December 31, 1993, (ii) proxy statement dated March 15, 1994, (iii) quarterly reports on Form 10-Q for the quarters ended March 31, 1994, June 30, 1994 and September 30, 1994, and (iv) the description of the Common Stock contained in the Company's Registration Statement on Form 10, dated May 7, 1985 (File No. 1- 8895), including amendments dated May 20, 1985 and May 23, 1985, in each case as filed with the Commission pursuant to the Exchange Act, are hereby incorporated by reference into this Prospectus and shall be deemed to be a part hereof. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and prior to the termination of the offering of the Securities offered hereby shall be deemed to be incorporated by reference into this Prospectus and to be part hereof from the date of filing 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 other subsequently filed document, as the case may be, 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. 2 Copies of all documents which are incorporated herein by reference (not including the exhibits to such information, unless such exhibits are specifically incorporated by reference in such information) will be provided without charge to each person, including any beneficial owner, to whom this Prospectus is delivered, upon written or oral request. Copies of this Prospectus, as amended or supplemented from time to time, and any other documents (or parts of documents) that constitute part of this Prospectus under Section 10(a) of the Securities Act will also be provided without charge to each such person, upon written or oral request. Requests for such copies should be directed to James G. Reynolds, Executive Vice President and Chief Financial Officer, Health Care Property Investors, Inc., 10990 Wilshire Boulevard, Suite 1200, Los Angeles, California 90024. 3 THE COMPANY Health Care Property Investors, Inc. (the "Company"), a Maryland corporation, was organized in March 1985 to qualify as a real estate investment trust. The Company was organized to invest in health care related real estate located throughout the United States, including long term care facilities, acute care and rehabilitation hospitals, psychiatric facilities, substance abuse recovery centers, congregate and assisted living facilities, medical office buildings and physician clinics. At September 30, 1994, the Company owned an interest in 167 properties located in 32 states, which are leased pursuant to long-term leases (the "Leases") to 32 health care providers (the "Lessees"), including Beverly Enterprises, Inc. ("Beverly"), Continental Medical Systems, Inc., Columbia/HCA Healthcare Corp. ("HCA"), Healthsouth Corporation, Healthtrust, Inc.--The Hospital Company ("Healthtrust"), The Hillhaven Corporation ("Hillhaven"), Horizon Healthcare Corporation ("Horizon Healthcare"), National Medical Enterprises, Inc. ("NME") and NovaCare, Inc. Of the Lessees, only Hillhaven and Beverly account for more than 10% of the Company's rental income as of September 30, 1994. The Company also holds mortgage loans on 11 properties that are owned and operated by eight health care providers, including HCA and OrNda Healthcare ("OrNda"). The gross acquisition price of the Company's 178 leased or mortgaged properties (the "Properties"), including partnership acquisitions and mortgage loan acquisitions, was approximately $692.3 million. The Leases provide for initial base rental rates which generally range from 8.77% to 15.03% per annum of the acquisition price of the related Property. Rental rates vary by Lease, taking into consideration many factors, including, but not limited to, credit of the Lessee, operating performance of the facility, interest rates at the commencement of the Lease and location, type and physical condition of the facility. Most of the Leases provide for additional rents which are based upon a percentage of increased revenue over specific base period revenue of the leased Properties. The remainder of the Leases have annual fixed rent increases or rent increases based on inflation indices. Additional rents and interest received for the years endedDecember 31, 1993, 1992 and 1991 were $14.7 million, $12.5 million and $8.8 million, respectively. The primary or fixed terms of the Leases generally range from 10 to 15 years, and generally have one or more five-year renewal options. The average remaining base lease term on the Company's portfolio of properties is approximately seven years. Obligations under the Leases, in most cases, have corporate guarantees, and 78 leases are backed by irrevocable letters of credit from various financial institutions which cover from six to 18 months of Lease payments. The Lessees are required to renew such letters of credit during the Lease term in amounts which may change based upon the passage of time, improved operating cash flows or improved credit ratings. Of the Company's 178 Properties, 63 are currently leased to Hillhaven, which is the second largest long term care provider in the United States. Rental income from these 63 Properties accounted for 24%, 24%, 27% and 27% of the Company's total revenue for the nine months ended September 30, 1994, and for the years ended December 31, 1993, 1992 and 1991, respectively. All Properties leased by the Company to Hillhaven are unconditionally guaranteed by NME, which is a major stockholder of Hillhaven. Based upon public reports, Hillhaven's net operating revenue and net income for the six months ended November 30, 1994 were approximately $775 million and $27 million, respectively; and Hillhaven's total assets and stockholders' equity as of November 30, 1994 were approximately $1.2 billion and $393 million, respectively. For the year ended May 31, 1994, Hillhaven reported net operating revenue and net income of approximately $1.4 billion and $57 million, respectively. On January 26, 1995, Horizon Healthcare announced an unsolicited bid to acquire Hillhaven for stock in a proposed merger. The Company leases five Properties to Horizon Healthcare, and rental income from these Properties accounted for 5%, 4%, 3% and 3% of the Company's total revenues for the nine months ended September 30, 1994, and for the years ended December 31, 1993, 1992 and 1991, respectively. Based upon public reports, Horizon Healthcare's total operating revenues and net income for the six months ended November 30, 1994 were approximately $292.9 million and $13.7 million, respectively; and Horizon Healthcare's total assets and stockholders' equity as of November 30, 1994 were approximately $614.2 million and $375.6 million, respectively. For the year ended May 31, 1994, 4 Horizon Healthcare reported total operating revenues and net income of $375 million and $16.6 million, respectively. The Company cannot predict whether Hillhaven will be acquired by Horizon Healthcare or effect any other business combination. Five Properties (two acute care hospitals, two rehabilitation hospitals and one psychiatric facility) were leased to subsidiaries of NME at December 31, 1993. Rental income from these five Properties accounted for 14%, 16% and 17% of the Company's total revenue for the years ended December 31, 1993, 1992 and 1991, respectively. In January 1994, subsidiaries of NME assigned the leases for the two rehabilitation hospitals to Healthsouth Corporation. These two facilities contributed 5% of the Company's rental income for the nine months ended September 30, 1994. Rental income from the three remaining Properties operated by NME accounted for 8% of the Company's rental income for the nine months ended September 30, 1994. NME remains financially responsible to the Company under its unconditional guarantee on the five properties. NME is one of the nation's largest health care services companies, providing a broad range of services through the ownership and management of health care facilities. Based upon public reports, NME's net operating revenue and net income for the six months ended November 30, 1994 were approximately $1.3 billion and $110 million, respectively; and NME's total assets and stockholders' equity as of November 30, 1994 were approximately $3.3 billion and $1.4 billion, respectively. For the year ended May 31, 1994, NME reported net operating revenue and net loss of approximately $3.0 billion and $425 million, respectively. The following discussion is derived from public reports distributed by NME: NME has been involved in certain significant legal proceedings and investigations related principally to its psychiatric business and has settled the most significant of these matters. NME expects that additional lawsuits alleging malpractice at its psychiatric facilities and the existence of a corporate-wide conspiracy to commit wrongful acts may be filed from time to time. NME believes that its remaining reserves established for these matters are adequate to cover its ultimate liability. In the event such reserves are not adequate, the adverse determination of these matters could have a material adverse effect on NME's financial condition and results of operation. On October 11, 1994, NME and American Medical Holdings, Inc. jointly announced the signing of a definitive merger agreement; the transaction is expected to close in the first part of 1995, at which time the combined company will own 85 general hospitals in the U.S. and overseas and be the second largest investor-owned hospital management company. No assurance can be given that the merger will occur, or if it does occur, what impact, if any, it may have on the Company. The Company leases 25 long term care facilities and one congregate care living center to subsidiaries of Beverly, which is the largest provider of long term care in the United States. Rental income from these leases represented approximately 12% of the Company's total revenue for the year ended December 31, 1993. Based upon public reports, Beverly's net operating revenue and net income for the nine months ended September 30, 1994 were approximately $2.2 billion and $57.6 million, respectively; and Beverly's total assets and shareholders' equity as of September 30, 1994 were approximately $2.1 billion and $811 million, respectively. For the year ended December 31, 1993, Beverly reported net operating revenue and net income of $2.9 billion and $58 million, respectively. The Company holds two first mortgage loans initially totaling $32.0 million to First Texas Medical, Inc. and LMH Investment Company (the "Mortgage Loans"). The Mortgage Loans provide for escalating interest rates and are secured by the 92 bed HCA Denton Community Hospital and a related medical office building in Denton, Texas, and the 118 bed HCA Lewisville Memorial Hospital of Lewisville, Texas. Both hospitals are managed by and leased to HCA Health Services of Texas, Inc., a wholly-owned subsidiary of HCA, pursuant to a long-term lease with a primary term of 10 years. The Mortgage Loans have a nine year term with payments based on an 11 year amortization schedule. Based upon public reports, HCA's net operating revenue and net income for the nine months ended September 30, 1994 were approximately $8.2 billion and $403 million, respectively; and HCA's total assets and shareholders' equity as of September 30, 1994 were approximately $11.8 billion and $4.8 billion, respectively. For the year ended December 31, 1993, HCA reported net operating revenue and net income of approximately $10.2 billion and $507 million, respectively. 5 The Company has provided or has committed to provide approximately $41.0 million in acquisition or construction funds for seven medical office buildings which are leased or are to be leased by Healthtrust. At September 30, 1994, six of the seven facilities were completed and paying rent, and the Company had outstanding commitments for future expenditures on tenant improvements and completion of the seventh building of $9.4 million. Healthtrust, based upon public reports, had net operating revenue and net income of approximately $970 million and $50 million, respectively, for the three months ended November 30, 1994; and Healthtrust's total assets and shareholders' equity as of November 30, 1994 were approximately $4.0 billion and $1.1 billion, respectively. For the year ended August 31, 1994, Healthtrust reported net operating revenue and net income of $3.0 billion and $173 million, respectively. On October 4, 1994, Columbia/HCA Healthcare Corporation and Healthtrust announced an agreement for the merger of the two companies in 1995. No assurance can be given that such merger will occur, or if it does occur, what impact, if any, it may have on the Company. Since 1987 the Company has committed to the development of 21 facilities, including five rehabilitation hospitals, five congregate care and assisted living facilities, four long term care facilities and seven medical office buildings representing an aggregate investment of $153.4 million. As of September 30, 1994, 19 facilities totaling $140.1 million have been completed. The completed facilities comprise five rehabilitation hospitals, four congregate care and assisted living facilities, four long term care facilities and six medical office buildings. The remaining development projects are scheduled for completion in 1995. Simultaneously with the commencement of each of these development programs, the Company enters into a lease agreement with the developer/operator. The base rent under the lease is established at a rate equivalent to a specified number of basis points over the ten-year United States Treasury securities' yield at the conclusion of development. The Company anticipates acquiring additional health care related facilities and leasing them to health care operators or investing in mortgages secured by health care facilities. References herein to the Company include Health Care Property Investors, Inc. and its wholly-owned subsidiaries, unless the context otherwise requires. The Company's principal offices are located at 10990 Wilshire Boulevard, Suite 1200, Los Angeles, California 90024, and its telephone number is (310) 473- 1990. 6 SELECTED CONSOLIDATED FINANCIAL DATA Set forth below is selected consolidated financial data with respect to the Company for the years ended December 31, 1991, 1992 and 1993, and for the nine months ended September 30, 1993 and 1994. The selected consolidated financial information should be read in conjunction with the Consolidated Financial Statements of the Company and Notes thereto included in the Company's 1934 Act Reports which are incorporated by reference into this Prospectus.
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, (UNAUDITED) ---------------------------- ------------------ 1991 1992 1993 1993 1994 -------- -------- -------- -------- -------- (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenue Base Rental Income.......... $ 56,957 $ 58,326 $ 60,389 $ 44,817 $ 48,238 Additional Rental & Interest Income..................... 8,849 12,511 14,698 10,947 12,233 Interest and Other Income... 7,765 10,923 15,188 10,282 11,341 Facility Operating Revenue.. 5,846 1,967 2,274 1,704 1,719 -------- -------- -------- -------- -------- 79,417 83,727 92,549 67,750 73,531 -------- -------- -------- -------- -------- Expenses Interest Expense............ 20,838 19,780 19,728 14,251 15,058 Depreciation/Noncash Charges.................... 18,524 18,062 17,862 13,074 13,290 Other Expenses.............. 4,313 4,950 5,147 3,860 3,787 Facility Operating Expenses. 5,669 1,904 2,306 1,765 1,805 -------- -------- -------- -------- -------- 49,344 44,696 45,043 32,950 33,940 -------- -------- -------- -------- -------- Income from Operations....... 30,073 39,031 47,506 34,800 39,591 Minority Interests........... (3,622) (3,316) (3,419) (2,592) (2,714) -------- -------- -------- -------- -------- Net Income................... $ 26,451 $ 35,715 $ 44,087 $ 32,208 $ 36,877 ======== ======== ======== ======== ======== Net Income Per Common Share.. $ 1.15 $ 1.38 $ 1.66 $ 1.21 $ 1.38 ======== ======== ======== ======== ======== Funds From Operations........ $ 45,075 $ 53,580 $ 61,427 $ 44,885 $ 49,771 ======== ======== ======== ======== ======== Funds From Operations Per Common Share................ $ 1.96 $ 2.07 $ 2.31 $ 1.69 $ 1.87 ======== ======== ======== ======== ======== Financial Position (at end of Period) Total Assets................ $458,579 $509,150 $549,638 $512,705 $550,283 Notes and Bonds Payable..... 196,131 193,060 245,291 203,250 245,897 Bank Borrowings............. 16,300 12,700 -- 4,900 2,000 Stockholders' Equity........ 211,274 271,375 269,873 270,145 268,572
RATIO OF EARNINGS TO FIXED CHARGES Set forth below is the ratio of earnings to fixed charges for the Company for the periods indicated:
NINE MONTHS YEAR ENDED DECEMBER 31, ENDED ------------------------ SEPTEMBER 30, 1989 1990 1991 1992 1993 1994 ---- ---- ---- ---- ---- ------------- Ratio of Earnings to Fixed Charges....... 1.64 2.21 2.30 2.77 3.06 3.22
- -------- (1) In computing the ratios of earnings to fixed charges: (a) earnings have been based on consolidated income from operations before fixed charges (exclusive of capitalized interest) and (b) fixed charges consist of interest on debt including amounts capitalized and the pro rata share of the partnerships' fixed charges. 7 USE OF PROCEEDS Unless otherwise specified in the Prospectus Supplement which accompanies this Prospectus, the net proceeds from the sale of the Securities offered from time to time hereby will be used for general corporate purposes, including the repayment of outstanding indebtedness, the acquisition of health care related properties and the construction thereof. DESCRIPTION OF THE DEBT SECURITIES The Debt Securities are to be issued under an indenture (the "Indenture") to be executed by the Company and a trustee (the "Trustee"), a form of which has been filed as an exhibit to the Registration Statement of which this Prospectus is a part. The following summaries of certain provisions of the Indenture and the Debt Securities do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all of the provisions of the Indenture to which reference is hereby made for a full description of such provisions, including the definitions therein of certain terms and for other information regarding the Debt Securities. Whenever particular sections or defined terms of the Indenture are referred to, it is intended that such sections or defined terms shall be incorporated herein by reference. Copies of the form of the Indenture are available for inspection during normal business hours at the principal executive offices of the Company, 10990 Wilshire Boulevard, Suite 1200, Los Angeles, California 90024. The following sets forth certain general terms and provisions of the Debt Securities offered by this Prospectus and the accompanying Prospectus Supplement (the "Offered Debt Securities"). Further terms of the Offered Debt Securities are set forth in the applicable Prospectus Supplement and/or an applicable Pricing Supplement. GENERAL The Indenture does not limit the aggregate principal amount of Debt Securities which may be issued thereunder and will provide that the Debt Securities may be issued from time to time in one or more series. All securities issued under the Indenture will rank equally and ratably with all other securities issued under the Indenture. The Debt Securities will be unsecured and will rank on a parity with all other unsecured and unsubordinated indebtedness of the Company. The Debt Securities are not, by their terms, subordinate in right of payment to any other indebtedness of the Company. The Prospectus Supplement and any related Pricing Supplement will describe certain terms of the Offered Debt Securities, including (a) the title of the Offered Debt Securities; (b) any limit on the aggregate principal amount of the Offered Debt Securities and their purchase price; (c) the date or dates on which the Offered Debt Securities will mature; (d) the rate or rates per annum (or manner in which interest is to be determined) at which the Offered Debt Securities will bear interest, if any, and the date from which such interest, if any, will accrue; (e) the dates on which such interest, if any, on the Offered Debt Securities will be payable and the Regular Record Dates for such Interest Payment Dates; (f) any mandatory or optional sinking fund or analogous provisions; (g) additional provisions, if any, for the defeasance of the Offered Debt Securities; (h) the date, if any, after which and the price or prices at which the Offered Debt Securities may, pursuant to any optional or mandatory redemption or repayment provisions, be redeemed and the other detailed terms and provisions of any such optional or mandatory redemption or repayment provisions; (i) whether the Offered Debt Securities are to be issued in whole or in part in registered form represented by one or more registered global securities (a "Registered Global Security") and, if so, the identity of the depositary for such Registered Global Security or Securities; (j) any applicable United States federal income tax consequences; and (k) any other specific terms of the Offered Debt Securities, including any additional events of default or covenants provided for with respect to such Debt Securities, and any terms that may be required by or advisable under applicable laws or regulations. 8 Principal of, premium, if any, and interest, if any, on the Debt Securities will be payable at such place or places as are designated by the Company and set forth in the applicable Prospectus Supplement. Interest, if any, on the Debt Securities will be paid, unless otherwise provided in the applicable Prospectus Supplement, by check mailed to the person in whose names the Debt Securities are registered at the close of business on the record dates designated in the applicable Prospectus Supplement at the address of the related holder appearing on the register of Debt Securities. The Trustee will maintain at an office in the Borough of Manhattan, The City of New York, a register for the registration of transfers of Debt Securities, subject to any restrictions set forth in the applicable Prospectus Supplement relating to the Debt Securities. Unless otherwise provided in the applicable Prospectus Supplement or Pricing Supplement, the Debt Securities will be issued only in fully registered form without coupons, and in denominations of $1,000 or any larger amount that is an integral multiple of $1,000. Debt Securities may be presented for exchange and transfer in the manner, at the places and subject to the restrictions set forth in the Indenture, the Debt Securities and the Prospectus Supplement. Such services will be provided without charge, other than any tax or other governmental charge payable in connection therewith, but subject to the limitations provided in the Indenture. Debt Securities will bear interest at a fixed rate or a floating rate. The Debt Securities may be issued at a price less than their stated redemption price at maturity, resulting in such Debt Securities being treated as issued with original issue discount for federal income tax purposes ("Original Issue Discount Debt Securities"). Such Original Issue Discount Debt Securities may currently pay no interest or interest at a rate which at the time of issuance is below market rates. Special federal income tax and other considerations applicable to any such discounted Notes will be described in the Prospectus Supplement or Pricing Supplement relating thereto. The Indenture will provide that all Debt Securities of any one series need not be issued at the same time and that the Company may, from time to time, issue additional Debt Securities of a previously issued series. In addition, the Indenture will provide that the Company may issue Debt Securities with terms different from those of any other series of Debt Securities and, within a series of Debt Securities, certain terms (such as interest rate or manner in which interest is calculated and maturity date) may differ. CONVERSION RIGHTS The terms, if any, on which Debt Securities of a series may be exchanged for or converted into shares of Common Stock, Preferred Stock or Debt Securities of another series will be set forth in the Prospectus Supplement relating thereto. To protect the Company's status as a REIT, a holder may not convert any Debt Security, and such Debt Security shall not be convertible by any holder, if as a result of such conversion any person would then be deemed to beneficially own, directly or indirectly, 9.9% or more of the Company's Common Stock. GLOBAL DEBT SECURITIES The registered Debt Securities of a series may be issued in the form of one or more fully registered global Securities (a "Registered Global Security") that will be deposited with a depositary (a "Depositary") or with a nominee for a Depositary identified in the Prospectus Supplement relating to such series and registered in the name of the Depositary or a nominee thereof. In such case, one or more Registered Global Securities will be issued in a denomination or aggregate denominations equal to the portion of the aggregate principal amount of outstanding registered Debt Securities of the series to be represented by such Registered Global Security or Securities. Unless and until it is exchanged in whole for Debt Securities in definitive registered form, a Registered Global Security may not be transferred except as a whole by the Depositary for such Registered Security to a nominee of such Depositary or by a nominee of such Depositary to such Depositary or another nominee of such Depositary or by such Depositary or any such nominee to a successor of such Depositary or a nominee of such successor. 9 The specific terms of the depositary arrangement with respect to any portion of a series of Debt Securities to be represented by a Registered Global Security will be described in the Prospectus Supplement relating to such series. The Company anticipates that the following provisions will apply to all depositary arrangements. Ownership of beneficial interests in a Registered Global Security will be limited to persons that have accounts with the Depositary for such Registered Global Security ("participants") or persons that may hold interests through participants. Upon the issuance of a Registered Global Security, the Depositary for such Registered Global Security will credit, on its book-entry registration and transfer system, the participants' accounts with the respective principal amounts of the Debt Securities represented by such Registered Global Security beneficially owned by such participants. The accounts to be credited shall be designated by any dealers, underwriters or agents participating in the distribution of such Debt Securities. Ownership of beneficial interests in such Registered Global Security will be shown on, and the transfer of such ownership interests will be effected only through, records maintained by the Depositary for such Registered Global Security (with respect to interests of participants) and on the records of participants (with respect to interests of persons holding through participants). The laws of some states may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to own, transfer or pledge beneficial interests in Registered Global Securities. So long as the Depositary for a Registered Global Security, or its nominee, is the registered owner of such Registered Global Security, such Depositary or such nominee, as the case may be, will be considered the sole owner or holder of the Debt Securities represented by such Registered Global Security for all purposes under the Indenture. Except as set forth below, owners of beneficial interests in a Registered Global Security will not be entitled to have the Debt Securities represented by such Registered Global Security registered in their names, will not receive or be entitled to receive physical delivery of such Debt Securities in definitive form and will not be considered the owners or holders thereof under the Indenture. Accordingly, each person owning a beneficial interest in a Registered Global Security must rely on the procedures of the Depositary for such Registered Global Security and, if such person is not a participant, on the procedures of the participant through which such person owns its interest, to exercise any rights of a holder under the Indenture. The Company understands that under existing industry practices, if the Company requests any action of holders or if an owner of a beneficial interest in a Registered Global Security desires to give or take any action which a holder is entitled to give or take under the Indenture, the Depositary for such Registered Global Security would authorize the participants holding the relevant beneficial interests to give or take such action, and such participants would authorize beneficial owners owning through such participants to give or take such action or would otherwise act upon the instructions of beneficial owners holding through them. Principal, premium, if any, and interest payments of Debt Securities represented by a Registered Global Security registered in the name of a Depositary or its nominee will be made to such Depositary or its nominee, as the case may be, as the registered owner of such Registered Global Security. None of the Company, the Trustee or any other agent of the Company or agent of the Trustee will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in such Registered Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Company expects that the Depositary for any Debt Securities represented by a Registered Global Security, upon receipt of any payment of principal, premium or interest in respect of such Registered Global Security, will immediately credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in such Registered Global Security as shown on the records of such Depositary. The Company also expects that payments by participants to owners of beneficial interests in such Registered Global Security held through such participants will be governed by standing customer instructions and customary practices, as is now the case with the securities held for the accounts of customers in bearer form or registered in "street name," and will be responsibility of such participants. 10 If the Depositary for any Debt Securities represented by a Registered Global Security is at any time unwilling or unable to continue as Depositary or ceases to be a clearing agency registered under the Exchange Act, and a successor Depositary registered as a clearing agency under the Exchange Act is not appointed by the Company within 90 days, the Company will issue such Debt Securities in definitive form in exchange for such Registered Global Security. In addition, the Company may at any time and in its sole discretion determine not to have any of the Debt Securities of a series represented by one or more Registered Global Securities and, in such event, will issue Debt Securities of such series in definitive form in exchange for the Registered Global Security or Securities representing such Debt Securities. Any Debt Securities issued in definitive form in exchange for a Registered Global Security will be registered in such name or names as the Depositary shall instruct the Trustee. It is expected that such instructions will be based upon directions received by the Depositary from participants with respect to ownership of beneficial interests in such Registered Global Security. CERTAIN COVENANTS OF THE COMPANY Limitation on Borrowing Money The Company covenants in the Indenture that it will not create, assume, incur, or otherwise become liable in respect of, any (a) Senior Debt (as defined below) unless the aggregate principal amount of Senior Debt outstanding of the Company will not, at the time of such creation, assumption or incurrence and after giving effect thereto and to any concurrent transactions, exceed the greater of (i) 300% of Capital Base (as defined below), or (ii) 500% of Tangible Net Worth (as defined below); and (b) Non-Recourse Debt (as defined below) unless the aggregate principal amount of Senior Debt and Non-Recourse Debt outstanding of the Company will not, at the time of such creation, assumption or incurrence and after giving effect thereto and to any concurrent transactions, exceed 500% of Capital Base. For the purpose of this limitation as to borrowing money, "Senior Debt" shall mean all Debt other than Non-Recourse Debt and Subordinated Debt; "Debt," with respect to any Person, shall mean (i) its indebtedness, secured or unsecured, for borrowed money; (ii) Liabilities secured by any existing lien on property owned by such Person; (iii) Capital Lease Obligations, and the present value of all payments due under any arrangement for retention of title (discounted at the implicit rate if known and at 9% otherwise) if such arrangement is in substance an installment purchase or an arrangement for the retention of title for security purposes; and (iv) guarantees of obligations of the character specified in the foregoing clauses (i), (ii) and (iii), to the full extent of the liability of the guarantor (discounted to present value, as provided in the foregoing clause (iii), in the case of guarantees of title retention arrangements); "Capital Lease" shall mean at any time any lease of Property which, in accordance with generally accepted accounting principles, would at such time be required to be capitalized on a balance sheet of the lessee; "Capital Lease Obligation" shall mean at any time the amount of the liability in respect of a Capital Lease which, in accordance with generally accepted accounting principles, would at such time be so required to be capitalized on a balance sheet of the lessee; "Property" shall mean any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible; "Person" shall mean an individual, partnership, joint venture, joint-stock company, association, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof; "Non-Recourse Debt" with respect to any Person, shall mean any Debt secured by, and only by, property on or with respect to which such Debt is incurred where the rights and remedies of the holder of such Debt in the event of default do not extend to assets other than the property constituting security therefor; "Subordinated Debt" shall mean any unsecured Debt of the Company which is issued or assumed pursuant to, or evidenced by, an indenture or other instrument which contains provisions for the subordination of such other Debt (to which appropriate reference shall be made in the instruments evidencing such other Debt if not contained therein) to the Debt Securities (and, at the option of the Company, if so provided, to other Debt of the Company, either generally or as specifically designated); "Capital Base" shall 11 mean, at any date, the sum of Tangible Net Worth and Subordinated Debt; "Tangible Net Worth" shall mean, at any date, the net book value (after deducting related depreciation, obsolescence, amortization, valuation, and other proper reserves) of the Tangible Assets of the Company at such date, minus the amount of its Liabilities at such date; "Tangible Assets" shall mean all assets of the Company (including assets held subject to Capital Leases and other arrangements pursuant to which title to the Property has been retained by or vested in some other Person for security purposes) except: (i) deferred assets other than prepaid insurance, prepaid taxes and deposits; (ii) patents, copyrights, trademarks, trade names, franchises, goodwill, experimental expense and other similar intangibles; and (iii) unamortized debt discount and expense; and "Liabilities" shall mean any date the items shown as liabilities on the balance sheet of the Company, except any items of deferred income, including capital gains. Consolidation, Merger and Sale of Assets The Company shall not consolidate or merge with or into, or transfer or lease its assets substantially as an entirety to any person unless the Company shall be the continuing corporation, or the successor corporation or person to which such assets are transferred or leased shall be organized under the laws of the United States or any state thereof or the District of Columbia and shall expressly assume the Company's obligations on the Debt Securities and under such Indenture, and after giving effect to such transaction no Event of Default shall have occurred and be continuing, and certain other conditions are met. Additional Covenants Any additional covenants of the Company with respect to a series of the Debt Securities will be set forth in the Prospectus Supplement and/or Pricing Supplement relating thereto. EVENTS OF DEFAULT The following will be Events of Default under the Indenture with respect to the Debt Securities of any series: (a) failure to pay principal of or any premium on any Debt Security of such series when due; (b) failure to pay any interest on any Debt Security of such series when due, continued for 30 days; (c) failure to deposit any sinking fund payment when due in respect of any Debt Security of such series; (d) failure to perform any other covenant or warranty of the Company in the Indenture (other than a covenant or warranty included in the Indenture solely for the benefit of one or more series of Debt Securities other than that series), continued for 60 days after written notice by the Trustee to the Company or by the holders of at least 25% in aggregate principal amount of the Outstanding Debt Securities of such series to the Company and the Trustee as provided in the Indenture; (e) certain events in bankruptcy, insolvency, conservatorship, receivership or reorganization of the Company; (f) an acceleration of any other indebtedness of the Company, in an aggregate principal amount exceeding $20,000,000, not rescinded or annulled within 10 days after written notice is given as provided in the Indenture; and (g) the occurrence of any other Event of Default provided with respect to the Debt Securities of that series. If an Event of Default with respect to the Outstanding Debt Securities of any series occurs and is continuing, either the Trustee or the holders of at least 25% in aggregate principal amount of the Outstanding Debt Securities of that series may declare the principal amount of all the Outstanding Debt Securities of that series to be due and payable immediately. At any time after the declaration of acceleration with respect to the Debt Securities of any series has been made, but before a judgment or decree based on acceleration has been obtained, the holders of a majority in aggregate principal amount of the Outstanding Debt Securities of that series may, under certain circumstances, rescind and annul such acceleration. The Indenture will provide that the Trustee shall, within 90 days after the occurrence of a default with respect to a series of Debt Securities, give to the holders of the Outstanding Debt Securities of such series notice of all uncured defaults known to it. Except in the case of default in the payment of principal, premium, 12 if any, or interest, if any, on any Debt Securities of a series, the Trustee shall be protected in withholding such notice if the Trustee in good faith determines that the withholding of such notice is in the interest of the holders of Outstanding Debt Securities of such series. The Indenture will provide that, subject to the duty of the Trustee during the continuance of an Event of Default to act with the required standard of care, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request or direction of any of the holders, unless such holders shall have offered to the Trustee reasonable indemnity. Subject to such provisions for the indemnification of the Trustee and subject to certain other limitations, the holders of a majority in aggregate principal amount of the Outstanding Debt Securities of any series will have the right to direct the time, method and place of conducting any proceedings for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Debt Securities of that series. The Company will be required to furnish to the Trustee annually a statement as to the performance by the Company of certain of its obligations under the Indenture and as to any default in such performance. MODIFICATION, WAIVER AND AMENDMENT The Indenture will provide that modifications and amendments may be made by the Company and the Trustee to the Indenture with the consent of the holders of not less than 66-2/3% in aggregate principal amount of the Outstanding Debt Securities of each series affected by such modification or amendment; provided, however, that no such modification or amendment may, without the consent of the holder of each Outstanding Debt Security affected thereby, (a) change the Stated Maturity of the principal of, or any installment of principal of, premium, if any, or interest, if any, on any Debt Security; (b) reduce the principal amount of, premium, if any, or interest, if any, on any Debt Security; (c) reduce the amount of principal of an Original Issue Discount Debt Security payable upon acceleration of the Stated Maturity thereof; (d) change the place or currency of payment of the principal of, premium, if any, or interest, if any, on any Debt Security; (e) impair the right to institute suit for the enforcement of any payment on or with respect to any Debt Security; or (f) reduce the percentage in aggregate principal amount of the Outstanding Debt Securities of any series, the consent of whose holders is required for modification or amendment of the Indenture or for waiver of compliance with certain provisions of the Indenture or for waiver of certain defaults. The holders of a majority in aggregate principal amount of the Outstanding Debt Securities of each series will be able, on behalf of all holders of the Debt Securities of that series, to waive compliance by the Company with certain restrictive provisions of the Indenture, or any past default under the Indenture with respect to the Debt Securities of that series, except a default in the payment of principal, premium, if any, or interest, if any, or in respect of a provision of the Indenture which cannot be amended or modified without the consent of the holder of each Outstanding Debt Security of the series affected. SATISFACTION AND DISCHARGE OF INDENTURE The Indenture, with respect to any and all series of Debt Securities (except for certain specified surviving obligations including, among other things, the Company's obligation to pay the principal of, premium, if any, or interest, if any, on any Debt Securities), will be discharged and cancelled upon the satisfaction of certain conditions, including the payment in full of the principal of, premium, if any, and interest, if any, on all of the Debt Securities of such series or the deposit with the Trustee of an amount of cash sufficient for such payment or redemption, in accordance with the Indenture. DEFEASANCE The Company will be able to terminate certain of its obligations under the Indenture with respect to the Debt Securities of any series on the terms and subject to the conditions contained in the Indenture, by depositing in trust with the Trustee cash or U.S. government obligations (or combination thereof) sufficient to pay the principal of, premium, if any, and interest, if any, on the Debt Securities of such series to their maturity or redemption date in accordance with the terms of the Indenture and such Debt Securities. 13 GOVERNING LAW AND CONSENT TO JURISDICTION The Debt Securities and the Indenture will be governed by and construed in accordance with the laws of the State of California. CONCERNING THE TRUSTEE The Indenture will contain certain limitations on the right of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions with the Company; provided, however, that if the Trustee acquires any conflicting interest it must eliminate such conflict or resign or otherwise comply with the Trust Indenture Act of 1939, as amended. The Indenture will provide that, in case an Event of Default should occur and be continuing, the Trustee will be required to use the degree of care and skill of a prudent person in the conduct of his or her own affairs in the exercise of its powers. DESCRIPTION OF PREFERRED STOCK The following description of the terms of the Preferred Stock sets forth certain general terms and provisions of the Preferred Stock to which any Prospectus Supplement may relate. Certain other terms of any series of the Preferred Stock offered by any Prospectus Supplement will be described in such Prospectus Supplement. The description of certain provisions of the Preferred Stock set forth below and in any Prospectus Supplement does not purport to be complete and is subject to and qualified in its entirety by reference to the Articles of Amendment and Restatement of the Company (the "Charter Documents"), and the Board of Directors' resolution or articles supplementary (the "Articles Supplementary") relating to each series of the Preferred Stock which will be filed with the Commission and incorporated by reference to the Registration Statement of which this Prospectus is a part at or prior to the time of the issuance of such series of Preferred Stock. GENERAL The authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, $1.00 par value per share, and 50,000,000 shares of preferred stock, $1.00 par value per share ("preferred stock of the Company," which term, as used herein, includes the Preferred Stock offered hereby). See "Description of Common Stock." Under the Charter Documents, the Board of Directors of the Company is authorized without further stockholder action to establish and issue, from time to time, up to 50,000,000 shares of preferred stock of the Company, in one or more series, with such designations, preferences, powers and relative participating, optional or other special rights, and the qualifications, limitations or restrictions thereon, including, but not limited to, dividend rights, dividend rate or rates, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price or prices, and the liquidation preferences as shall be stated in the resolution providing for the issue of a series of such stock, adopted, at any time or from time to time, by the Board of Directors of the Company. The Preferred Stock shall have the dividend, liquidation, redemption and voting rights set forth below unless otherwise provided in a Prospectus Supplement relating to a particular series of the Preferred Stock. Reference is made to the Prospectus Supplement relating to the particular series of the Preferred Stock offered thereby for specific terms, including: (i) the designation and stated value per share of such Preferred Stock and the number of shares offered; (ii) the amount of liquidation preference per share; (iii) the initial public offering price at which such Preferred Stock will be issued; (iv) the dividend rate (or method of calculation), 14 the dates on which dividends shall be payable and the dates from which dividends shall commence to cumulate, if any; (v) any redemption or sinking fund provisions; (vi) any conversion rights; and (vii) any additional voting, dividend, liquidation, redemption, sinking fund and other rights, preferences, privileges, limitations and restrictions. The Preferred Stock will, when issued, be fully paid and nonassessable and will have no preemptive rights. Unless otherwise stated in a Prospectus Supplement relating to a particular series of the Preferred Stock, each series of the Preferred Stock will rank on a parity as to dividends and distributions of assets with each other series of the Preferred Stock. The rights of the holders of each series of the Preferred Stock will be subordinate to those of the Company's general creditors. CERTAIN PROVISIONS OF THE CHARTER DOCUMENTS See "Description of Common Stock--Redemption and Business Combination Provisions" for a description of certain provisions of the Charter Documents, including provisions relating to redemption rights and provisions which may have certain anti-takeover effects. DIVIDEND RIGHTS Holders of shares of the Preferred Stock of each series will be entitled to receive, when, as and if declared by the Board of Directors of the Company, out of funds of the Company legally available therefor, cash dividends on such dates and at such rates as will be set forth in, or as are determined by the method described in, the Prospectus Supplement relating to such series of the Preferred Stock. Such rate may be fixed or variable or both. Each such dividend will be payable to the holders of record as they appear on the stock books of the Company on such record dates, fixed by the Board of Directors of the Company, as specified in the Prospectus Supplement relating to such series of Preferred Stock. Such dividends may be cumulative or noncumulative, as provided in the Prospectus Supplement relating to such series of Preferred Stock. If the Board of Directors of the Company fails to declare a dividend payable on a dividend payment date on any series of Preferred Stock for which dividends are noncumulative, then the holders of such series of 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 shall 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 dates. Dividends on the shares of each series of Preferred Stock for which dividends are cumulative will accrue from the date on which the Company initially issues shares of such series. So long as the shares of any series of the Preferred Stock shall be outstanding, unless (i) full dividends (including if such Preferred Stock is cumulative, dividends for prior dividend periods) shall have been paid or declared and set apart for payment on all outstanding shares of the Preferred Stock of such series and all other classes and series of preferred stock of the Company (other than Junior Stock, as defined below) and (ii) the Company is not in default or in arrears with respect to the mandatory or optional redemption or mandatory repurchase or other mandatory retirement of, or with respect to any sinking or other analogous fund for, any shares of Preferred Stock of such series or any shares of any other preferred stock of the Company of any class or series (other than Junior Stock), the Company may not declare any dividends on any shares of Common Stock of the Company or any other stock of the Company ranking as to dividends or distributions of assets junior to such series of Preferred Stock (the Common Stock and any such other stock being herein referred to as "Junior Stock"), or make any payment on account of, or set apart money for, the purchase, redemption or other retirement of, or for a sinking or other analogous fund for, any shares of Junior Stock or make any distribution in respect thereof, whether in cash or property or in obligations or stock of the Company, other than Junior Stock which is neither convertible into, nor exchangeable or exercisable for, any securities of the Company other than Junior Stock. 15 LIQUIDATION PREFERENCE In the event of any liquidation, dissolution or winding up of the Company, voluntary or involuntary, the holders of each series of the Preferred Stock will be entitled to receive out of the assets of the Company available for distribution to stockholders, before any distribution of assets or payment is made to the holders of Common Stock or any other shares of stock of the Company ranking junior as to such distribution or payment to such series of Preferred Stock, the amount set forth in the Prospectus Supplement relating to such series of the Preferred Stock. If, upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, the amounts payable with respect to the Preferred Stock of any series and any other shares of preferred stock of the Company (including any other series of the Preferred Stock) ranking as to any such distribution on a parity with such series of the Preferred Stock are not paid in full, the holders of the Preferred Stock of such series and of such other shares of preferred stock of the Company will share ratably in any such distribution of assets of the Company in proportion to the full respective preferential amounts to which they are entitled. After payment to the holders of the Preferred Stock of each series of the full preferential amounts of the liquidating distribution to which they are entitled, the holders of each such series of the Preferred Stock will be entitled to no further participation in any distribution of assets by the Company. If such payment 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 of 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. For such purposes, the consolidation or merger of the Company with or into any other corporation, or the sale, lease or conveyance of all or substantially all of the property or business of the Company, shall not be deemed to constitute a liquidation, dissolution or winding up of the Company. REDEMPTION A series of the Preferred Stock may be redeemable, in whole or from time to time in part, at the option of the Company, and may be subject to mandatory redemption pursuant to a sinking fund or otherwise, in each case upon terms, at the times and at the redemption prices set forth in the Prospectus Supplement relating to such series. Shares of the Preferred Stock redeemed by the Company will be restored to the status of authorized but unissued shares of preferred stock of the Company. In the event that fewer than all of the outstanding shares of a series of the Preferred Stock are to be redeemed, whether by mandatory or optional redemption, the number of shares to be redeemed will be determined by lot or pro rata (subject to rounding to avoid fractional shares) as may be determined by the Company or by any other method as may be determined by the Company in its sole discretion to be equitable. From and after the redemption date (unless default shall be made by the Company in providing for the payment of the redemption price plus accumulated and unpaid dividends, if any), dividends shall cease to accumulate on the shares of the Preferred Stock called for redemption and all rights of the holders thereof (except the right to receive the redemption price plus accumulated and unpaid dividends, if any) shall cease. So long as any dividends on shares of any series of the Preferred Stock or any other series of 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 or such other series of 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 of such series or of shares of such other series 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 16 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. 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 shares of Preferred Stock to be redeemed at the address shown on the stock transfer books of the Company. After the redemption date, dividends will cease to accrue on the shares of Preferred Stock called for redemption and all rights of the holders of such shares will terminate, except the right to receive the redemption price without interest. CONVERSION RIGHTS The terms, if any, on which shares of Preferred Stock of any series may be exchanged for or converted (mandatorily or otherwise) into shares of Common Stock or another series of Preferred Stock will be set forth in the Prospectus Supplement relating thereto. See "Description of Common Stock." VOTING RIGHTS Except as indicated below or in a Prospectus Supplement relating to a particular series of the Preferred Stock, or except as required by applicable law, the holders of the Preferred Stock will not be entitled to vote for any purpose. So long as any shares of Preferred Stock remain outstanding, the Company shall not, without the consent or the affirmative vote of the holders of a majority of the shares of each series of Preferred Stock outstanding at the time given in person or by proxy, either in writing or at a meeting (such series voting separately as a class) (i) authorize, create or issue, or increase the authorized or issued amount of, any class or series of stock ranking prior to such series of Preferred Stock with respect to payment of dividends, or the distribution of assets on liquidation, dissolution or winding up or reclassifying any authorized stock of the Company into any such shares, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase any such shares and (ii) to repeal, amend or otherwise change any of the provisions applicable to the Preferred Stock of such series in any manner which materially and adversely affects the powers, preferences, voting power or other rights or privileges of such series of the Preferred Stock or the holders thereof; provided, however, that any increase in the amount of the authorized preferred stock or the creation or issuance of other series of preferred stock, or any increase in the amount of authorized shares of such series or of any other series of Preferred Stock, in each case ranking on a parity with or junior to the Preferred Stock of such series, shall not be deemed to materially and adversely affect such rights, preferences, privileges or voting powers. 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 the Preferred Stock shall have been redeemed or called for redemption and sufficient funds shall have been deposited in trust to effect such redemption. TRANSFER AGENT AND REGISTRAR The transfer agent, dividend and redemption price disbursement agent and registrar for shares of each series of the Preferred Stock will be set forth in the Prospectus Supplement relating thereto. 17 DESCRIPTION OF COMMON STOCK The authorized capital stock of the Company consists of 100,000,000 shares of Common Stock, par value $1.00 per share, and 50,000,000 shares of Preferred Stock, par value $1.00 per share. The following description is qualified in all respects by reference to the Charter Documents and Amended Bylaws of the Company, copies of which were filed as exhibits to the Company's Registration Statement on Form S-3 filed with the Commission on October 17, 1989, as amended, and the Rights Agreement between the Company and Chemical Trust Company of California, as Rights Agent, a copy of which was filed as an exhibit to the Company's Registration Statement on Form 8-A filed with the Commission on July 17, 1990. COMMON STOCK All shares of Common Stock participate equally in dividends payable to holders of Common Stock when and as declared by the Board of Directors and in net assets available for distribution to holders of Common Stock on liquidation, dissolution, or winding up of the Company, have one vote per share on all matters submitted to a vote of the stockholders and do not have cumulative voting rights in the election of directors. All issued and outstanding shares of Common Stock are, and the Common Stock offered hereby will be upon issuance, validly issued, fully paid and nonassessable. Holders of the Common Stock do not have preference, conversion, exchange or preemptive rights. The Common Stock is listed on the New York Stock Exchange (NYSE Symbol: HCP). STOCKHOLDER RIGHTS PLAN On July 5, 1990, the Board of Directors of the Company declared a dividend distribution of one right (each, a "Right") for each outstanding share of Common Stock of the Company to stockholders of record at the close of business on July 30, 1990. When exercisable, each Right entitles the registered holder to purchase from the Company one share of the Company's Common Stock at a price of $47.50 per share, subject to adjustment. Initially, the Rights will be attached to all outstanding shares of Common Stock, and no separate Rights Certificates will be distributed. The Board also authorized the issuance of one Right with respect to each share of Common Stock that shall become outstanding between July 30, 1990 and the earliest of the Distribution Date, the Redemption Date and the Final Expiration Date (all as defined in the Rights Agreement). Each share of Common Stock offered hereby will have upon issuance one Right attached. The Rights will become exercisable and will detach from the Common Stock upon the earlier of (i) the tenth day after the public announcement that any person or group has acquired beneficial ownership of 15% or more of the Company's Common Stock, or (ii) the tenth day after any person or group commences, or announces an intention to commence, a tender or exchange offer which, if consummated, would result in the beneficial ownership by a person or group of 30% or more of the Company's Common Stock (the earlier of (i) and (ii) being the "Distribution Date"). If such person or group acquires beneficial ownership of 15% or more of the Company's Common Stock (except pursuant to certain cash tender offers for all outstanding Common Stock approved by the Board of Directors) or if the Company is the surviving corporation in a merger and its Common Stock is not changed or exchanged, each Right will entitle the holder to purchase, at the Right's then current exercise price, that number of shares of the Company's Common Stock having a market value equal to twice the exercise price. Similarly, if after the Rights become exercisable, the Company merges or consolidates with, or sells 50% or more of its assets or earning power to, another person, each Right will then entitle the holder to purchase, at the Right's then current exercise price, that number of shares of the stock of the acquiring company which at the time of such transaction would have a market value equal to twice the exercise price. The Rights may be redeemed in whole, but not in part, at a price of $0.01 per Right by the Board of Directors at any time until ten days following the public announcement that a person or group has acquired beneficial ownership of 15% or more of the Company's outstanding Common Stock. The Board of Directors may, under certain circumstances, extend the period during which the Rights are redeemable or postpone the Distribution Date. The Rights will expire on July 30, 2000, unless earlier redeemed. 18 REDEMPTION AND BUSINESS COMBINATION PROVISIONS If the Board of Directors shall, at any time and in good faith, be of the opinion that direct or indirect ownership of more than 9.9% or more of the voting shares of capital stock has or may become concentrated in the hands of one beneficial owner, the Board of Directors shall have the power (i) by lot or other means deemed equitable by it to call for the purchase from any stockholder of the Company a number of voting shares sufficient, in the opinion of the Board of Directors, to maintain or bring the direct or indirect ownership of voting shares of capital stock of such beneficial owner to a level of no more than 9.9% of the outstanding voting shares of the Company's capital stock, and (ii) to refuse to transfer or issue voting shares of capital stock to any person whose acquisition of such voting shares would, in the opinion of the Board of Directors, result in the direct or indirect ownership by that person of more than 9.9% of the outstanding voting shares of capital stock of the Company. Further, any transfer of shares, options, warrants, or other securities convertible into voting shares that would create a beneficial owner of more than 9.9% of the outstanding voting shares shall be deemed void ab initio and the intended transferee shall be deemed never to have had an interest therein. The purchase price for any voting shares of capital stock so redeemed shall be equal to the fair market value of the shares reflected in the closing sales price for the shares, if then listed on a national securities exchange, or the average of the closing sales prices for the shares if then listed on more than one national securities exchange, or if the shares are not then listed on a national securities exchange, the latest bid quotation for the shares if then traded over-the-counter, on the last business day immediately preceding the day on which notices of such acquisitions are sent by the Company, or, if no such closing sales prices or quotations are available, then the purchase price shall be equal to the net asset value of such stock as determined by the Board of Directors in accordance with the provisions of applicable law. From and after the date fixed for purchase by the Board of Directors, the holder of any shares so called for purchase shall cease to be entitled to distributions, voting rights and other benefits with respect to such shares, except the right to payment of the purchase price for the shares. The Charter Documents require that, except in certain circumstances, Business Combinations (as defined below) between the Company and a beneficial holder of 10% or more of the Company's outstanding voting stock (a "Related Person") be approved by the affirmative vote of at least 90% of the outstanding voting shares of the Company. A Business Combination is defined in the Charter Documents as (a) any merger or consolidation of the Company with or into a Related Person, (b) any sale, lease, exchange, transfer or other disposition, including without limitation a mortgage or any other security device, of all or any "Substantial Part" (as defined below) of the assets of the Company (including without limitation any voting securities of a subsidiary) to a Related Person, (c) any merger or consolidation of a Related Person with or into the Company, (d) any sale, lease, exchange, transfer or other disposition of all or any Substantial Part of the assets of a Related Person to the Company, (e) the issuance of any securities (other than by way of pro rata distribution to all stockholders) of the Company to a Related Person, and (f) any agreement, contract or other arrangement providing for any of the transactions described in the definition of Business Combination. The term "Substantial Part" shall mean more than 10% of the book value of the total assets of the Company as of the end of its most recent fiscal year ending prior to the time the determination is being made. The foregoing provisions of the Charter Documents and certain other matters may not be amended without the affirmative vote of at least 90% of the outstanding voting shares of the Company. The Rights and the foregoing provisions may have the effect of discouraging unilateral tender offers or other takeover proposals which certain stockholders might deem to be in their interests or in which they might receive a substantial premium. The Board of Directors' authority to issue and establish the terms of currently authorized Preferred Stock, without stockholder approval, may also have the effect of discouraging takeover attempts. See "Description of Preferred Stock." The Rights and the foregoing provisions could also have the effect of insulating current management against the possibility of removal and could, by possibly 19 reducing temporary fluctuations in market price caused by accumulations of shares of Common Stock, deprive stockholders of opportunities to sell at a temporarily higher market price. However, the Board of Directors believes that inclusion of the Business Combination provisions in the Charter Documents and the Rights may help assure fair treatment of stockholders and preserve the assets of the Company. The foregoing summary of certain provisions of the Rights and the Charter Documents does not purport to be complete or to give effect to provisions of statutory or common law. The foregoing summary is subject to, and qualified in its entirety by reference to, the provisions of applicable law and, the Charter Documents and the Rights Agreement, copies of which are incorporated by reference as exhibits to the Registration Statement of which this Prospectus is a part. TRANSFER AGENT AND REGISTRAR Chemical Bank, New York, New York, and Chemical Trust Company of California, Los Angeles, California, act as co-transfer agents and co-registrars of the Common Stock. PLAN OF DISTRIBUTION The Company may sell the Securities being offered hereby directly or through agents, underwriters or dealers, which may include Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated. Offers to purchase Securities may be solicited by agents designated by the Company from time to time. Any such agent, who may be deemed to be an underwriter as that term is defined in the Securities Act, involved in the offer or sale of the Securities in respect of which this Prospectus is delivered will be named, and any commissions payable by the Company to such agent set forth, in the Prospectus Supplement. Unless otherwise indicated in the applicable Prospectus Supplement, any such agent will be acting on a best efforts basis for the period of its appointment. The Company may also sell Securities to an agent as principal. Agents may be entitled under agreements which may be entered into with the Company to indemnification by the Company against certain liabilities, including liabilities under the Securities Act, and may be customers of, engage in transactions with or perform services for the Company in the ordinary course of business. If any underwriters are utilized in the sale of Securities in respect of which this Prospectus is delivered, the Company will enter into an underwriting agreement with such underwriters and the names of the underwriters and the terms of the transaction will be set forth in the applicable Prospectus Supplement, which will be used by the underwriters to make resales of the Securities in respect of which this Prospectus is delivered to the public. Underwriters may offer and sell the Securities at a fixed price or prices, which may be changed, or from time to time at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The underwriters may be entitled, under the relevant underwriting agreement, to indemnification by the Company against certain liabilities, including liabilities under the Securities Act, and may be customers of, engage in transactions with or perform services for the Company in the ordinary course of business. If a dealer is utilized in the sale of the Securities in respect of which this Prospectus is delivered, the Company will sell such Securities to the dealer, as principal. The dealer may then resell such Securities to the public at varying prices to be determined by such dealer at the time of resale. Dealers may be entitled to indemnification by the Company against certain liabilities, including liabilities under the Securities Act, and may be customers of, engage in transactions with or perform services for the Company in the ordinary course of business. 20 Securities may also be offered and sold, if so indicated in any Prospectus Supplement, in connection with a remarketing upon their purchase, in accordance with a redemption or repayment pursuant to their terms, or otherwise, by one or more firms ("remarketing firms"), acting as principals for their own accounts or as agents for the Company. Any remarketing firm will be identified and the terms of its agreement, if any, with the Company and its compensation will be described in the applicable Prospectus Supplement. Remarketing firms may be deemed to be underwriters in connection with the Securities remarketed thereby. Remarketing firms may be entitled under agreements which may be entered into with the Company to indemnification by the Company against certain liabilities, including liabilities under the Securities Act, and may be customers of, engage in transactions with or perform services for the Company in the ordinary course of business. If so indicated in any Prospectus Supplement, the Company will authorize agents and underwriters or dealers to solicit offers by certain purchasers to purchase Securities from the Company at the public offering price set forth in the Prospectus Supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. Such contracts will be subject to only those conditions set forth in the applicable Prospectus Supplement, and such Prospectus Supplement will set forth the commission payable for solicitation of such offers. LEGAL MATTERS Certain legal matters with respect to the Securities offered hereby will be passed upon for the Company by Latham & Watkins, Los Angeles, California. Brown & Wood, Los Angeles, California, will act as counsel for any agents or underwriters. Paul C. Pringle is a partner of Brown & Wood and owns 2,000 shares of the Company's Common Stock. EXPERTS The financial statements incorporated by reference in this Prospectus and elsewhere in the Registration Statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are incorporated by reference herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. 21 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OR THE SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK IN ANY JURIDISCTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT AND THE 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 OR THE PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. ---------------- TABLE OF CONTENTS PROSPECTUS SUPPLEMENT
PAGE ---- The Company............................................................... S-2 Recent Developments....................................................... S-4 Properties................................................................ S-4 Use of Proceeds........................................................... S-7 Price Range of Common Stock and Dividends................................. S-7 Capitalization............................................................ S-8 Selected Consolidated Financial Data...................................... S-9 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................... S-10 Federal Income Tax Considerations......................................... S-12 Underwriting.............................................................. S-19
PROSPECTUS
PAGE ---- Available Information...................................................... 2 Incorporation of Certain Documents by Reference............................ 2 The Company................................................................ 4 Selected Consolidated Financial Data ...................................... 7 Ratio of Earnings to Fixed Charges......................................... 7 Use of Proceeds............................................................ 8 Description of the Debt Securities......................................... 8 Description of Preferred Stock............................................. 14 Description of Common Stock................................................ 18 Plan of Distribution....................................................... 20 Legal Matters.............................................................. 21 Experts.................................................................... 21
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 1,500,000 SHARES HEALTH CARE PROPERTY INVESTORS, INC. COMMON STOCK --------------------- PROSPECTUS SUPPLEMENT --------------------- MERRILL LYNCH & CO. ALEX. BROWN & SONS INCORPORATED DEAN WITTER REYNOLDS INC. FEBRUARY 2, 1995 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----