Form 10-Q

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LuhQqg3HFMch0wIu+rX7mCw0HFJQ7687fQJt9m88xyHSUI9sbXqaPd2MPVFkuCgr xsTg7pb1+kcwkG1L15bEGA== 0001017062-03-001199.txt : 20030513 0001017062-03-001199.hdr.sgml : 20030513 20030513163849 ACCESSION NUMBER: 0001017062-03-001199 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONWIDE HEALTH PROPERTIES INC CENTRAL INDEX KEY: 0000780053 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 953997619 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09028 FILM NUMBER: 03696007 BUSINESS ADDRESS: STREET 1: 610 NEWPORT CENTER DR STREET 2: STE 1150 CITY: NEWPORT BEACH STATE: CA ZIP: 92660-6429 BUSINESS PHONE: 9497184400 MAIL ADDRESS: STREET 1: 610 NEWPORT CENTER DR STREET 2: STE 1150 CITY: NEWPORT BEACH STATE: CA ZIP: 92660-6429 FORMER COMPANY: FORMER CONFORMED NAME: BEVERLY INVESTMENT PROPERTIES INC DATE OF NAME CHANGE: 19890515 10-Q 1 d10q.htm FORM 10-Q Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003.

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 1-9028

NATIONWIDE HEALTH PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

Maryland		95-3997619
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

610 Newport Center Drive, Suite 1150

Newport Beach, California 92660

(Address of principal executive offices)

(949) 718-4400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Rule 12b-2). Yes x No ¨

Shares of registrant’s common stock, $0.10 par value, outstanding at May 12, 2003—58,797,216.

NATIONWIDE HEALTH PROPERTIES, INC.

FORM 10-Q

March 31, 2003

TABLE OF CONTENTS

		Page
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets	2

	Condensed Consolidated Statements of Operations	3

	Condensed Consolidated Statement of Stockholders’ Equity	4

	Condensed Consolidated Statements of Cash Flows	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21

Item 4.	Controls and Procedures	21

	PART II. OTHER INFORMATION

Item 6.	Exhibits and Reports on Form 8-K	22

SIGNATURES		23

CERTIFICATIONS		24

Part I. Financial Information

Item 1. Financial Statements

NATIONWIDE HEALTH PROPERTIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2003			December 31, 2002
	(Unaudited)
	(Dollars in thousands)
ASSETS
Investments in real estate
Real estate properties:
Land	$	155,878		$	154,563
Buildings and improvements		1,317,007			1,299,625

		1,472,885			1,454,188
Less accumulated depreciation		(234,867	)		(224,400	)

		1,238,018			1,229,788
Mortgage loans receivable, net		99,074			99,292
Investment in unconsolidated joint venture		15,516			16,115

		1,352,608			1,345,195
Cash and cash equivalents		9,834			8,387
Receivables		4,613			4,429
Assets held for sale		8,397			9,682
Other assets		43,208			42,240

	$	1,418,660		$	1,409,933

LIABILITIES AND STOCKHOLDERS’ EQUITY

Borrowings under unsecured revolving credit facility	$	122,000		$	107,000
Senior notes due 2003-2038		614,750			614,750
Notes and bonds payable		110,953			111,303
Accounts payable and accrued liabilities		53,684			47,740

Stockholders’ equity:
Preferred stock $1.00 par value; 5,000,000 shares authorized; 1,000,000 shares issued and outstanding at March 31, 2003 and December 31, 2002, stated at liquidation preference of $100 per share		100,000			100,000
Common stock $0.10 par value; 100,000,000 shares authorized; 49,172,216 and 49,160,216 issued and outstanding at March 31, 2003 and December 31, 2002, respectively		4,917			4,916
Capital in excess of par value		610,237			610,173
Cumulative net income		693,421			680,511
Cumulative dividends		(891,302	)		(866,460	)

Total stockholders’ equity		517,273			529,140

	$	1,418,660		$	1,409,933

See accompanying notes.

NATIONWIDE HEALTH PROPERTIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,
	2003			2002
	(In thousands, except per share amounts)
Revenues:
Rental income	$	37,774		$	32,669
Interest and other income		3,261			4,281
Income from unconsolidated joint venture		493			—

		41,528			36,950
Expenses:
Interest and amortization of deferred financing costs		15,130			12,501
Depreciation and amortization		10,674			8,072
General and administrative		1,861			2,008
Impairment of assets		—			12,472

		27,665			35,053

Income from continuing operations		13,863			1,897
Discontinued operations		(953	)		(2,031	)

Net income (loss)		12,910			(134	)
Preferred stock dividends		(1,919	)		(1,919	)

Income (loss) available to common stockholders	$	10,991		$	(2,053	)

Per share amounts:
Basic/diluted income from continuing operations available to common stockholders	$	0.24		$	—

Basic/diluted loss from discontinued operations available to common stockholders	$	(0.02	)	$	(0.04	)

Basic/diluted income (loss) available to common stockholders	$	0.22		$	(0.04	)

Dividends paid per share	$	0.46		$	0.46

Diluted weighted average common shares outstanding		49,169			47,977

See accompanying notes.

NATIONWIDE HEALTH PROPERTIES, INC.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(Unaudited)

	Preferred stock			Common stock			Capital in excess of par value		Cumulative net income		Cumulative dividends			Total stockholders’ equity
	Shares	Amount		Shares	Amount		Capital in excess of par value		Cumulative net income		Cumulative dividends			Total stockholders’ equity
	(In thousands)
Balances at December 31, 2002	1,000	$	100,000	49,160	$	4,916	$	610,173	$	680,511	$	(866,460	)	$	529,140
Issuance of common stock	—		—	12		1		34		—		—			35
Stock option amortization	—		—	—		—		30		—		—			30
Net income	—		—	—		—		—		12,910		—			12,910
Preferred dividends	—		—	—		—		—		—		(1,919	)		(1,919	)
Common dividends	—		—	—		—		—		—		(22,923	)		(22,923	)

Balances at March 31, 2003	1,000	$	100,000	49,172	$	4,917	$	610,237	$	693,421	$	(891,302	)	$	517,273

See accompanying notes.

NATIONWIDE HEALTH PROPERTIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
	2003			2002
	(In thousands)
Cash flows from operating activities:
Net income	$	12,910		$	(134	)
Depreciation and amortization		10,674			8,342
Depreciation and amortization in discontinued operations		—			225
Impairment of assets		—			12,472
Impairment of assets in discontinued operations		645			2,065
Amortization of deferred financing costs		330			236
Additional distributions from unconsolidated joint venture		599			—
Net change in operating assets and liabilities		4,085			8,345

Net cash provided by operating activities		29,243			31,551

Cash flows from investing activities:
Investment in real estate facilities		(18,697	)		(2,552	)
Disposition of real estate facilities		640			270
Principal payments on mortgage loans receivable		480			7,302

Net cash provided by (used in) investing activities		(17,577	)		5,020

Cash flows from financing activities:
Borrowings under unsecured revolving credit facility		44,000			6,000
Repayment of borrowings under unsecured revolving credit facility		(29,000	)		(41,000	)
Repayments of senior unsecured debt		—			(15,000	)
Principal payments on notes and bonds		(316	)		(220	)
Issuance of common stock		—			34,609
Dividends paid		(24,842	)		(24,267	)
Other, net		(61	)		(33	)

Net cash used in financing activities		(10,219	)		(39,911	)

Increase (decrease) in cash and cash equivalents		1,447			(3,340	)
Cash and cash equivalents, beginning of period		8,387			9,062

Cash and cash equivalents, end of period	$	9,834		$	5,722

See accompanying notes.

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2003

(Unaudited)

1. Organization

Nationwide Health Properties, Inc., a Maryland corporation organized in 1985, is a real estate investment trust (REIT) specializing in investments in health care related senior housing and long-term care facilities. Whenever we refer herein to “the Company” or to “us” or use the terms “we” or “our,” we are referring to Nationwide Health Properties, Inc. and its subsidiaries.

We believe we have operated in such a manner as to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. We intend to continue to qualify as such and therefore to distribute at least ninety percent (90%) of our REIT taxable income to our stockholders. If we qualify for taxation as a REIT, we will generally not be subject to federal income taxes on our income that is distributed to stockholders. Accordingly, no provision has been made for federal income taxes.

As of March 31 2003, we had investments in 389 facilities in 38 states, consisting of:

•

185 skilled nursing facilities;

•

137 assisted and independent living facilities;

•

12 continuing care retirement communities;

•

one rehabilitation hospital;

•

one long-term acute care hospital;

•

four buildings held for sale; and

•

49 assisted living facilities operated by an unconsolidated joint venture in which we have a 25% interest.

Our facilities are operated by 69 different operators, including the following publicly traded companies:

•

Alterra Healthcare Corporation (Alterra);

•

American Retirement Corporation (ARC);

•

Beverly Enterprises, Inc.;

•

Harborside Healthcare Corporation;

•

HEALTHSOUTH Corporation;

•

Integrated Health Services, Inc.;

•

Mariner Health Care, Inc.; and

•

Sun Healthcare Group, Inc.

Of the operators of our facilities, only Alterra, which accounted for 14% and ARC, which accounted for 11%, of our revenues for the three months ended March 31, 2003, account for 10% or more of our revenues.

2. Summary of Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements include our accounts, the accounts of our wholly owned subsidiaries and our investment in our majority owned and controlled joint ventures. All material intercompany

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

accounts and transactions have been eliminated. Certain items in prior period financial statements have been reclassified to conform to current year presentation, including those required by Statement of Financial Accounting Standards (SFAS) No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS No. 144).

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

We have prepared the condensed consolidated financial statements included herein without audit. These financial statements include all adjustments that are, in the opinion of management, necessary for a fair presentation of the results of operations for the three-month periods ended March 31, 2003 and 2002 pursuant to the rules and regulations of the Securities and Exchange Commission. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to these rules and regulations. Although we believe that the disclosures in the financial statements included herein are adequate to make the information presented not misleading, these condensed consolidated financial statements should be read in conjunction with our financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange Commission. The results of operations for the three-month periods ending March 31, 2003 and 2002 are not necessarily indicative of the results for a full year.

Revenue Recognition

Rental income from operating leases is accrued as earned over the life of the lease agreements in accordance with accounting principles generally accepted in the United States. The majority of our leases do not contain step rent provisions. Interest income on real estate mortgages is recognized using the effective interest method based upon the expected payments over the lives of the mortgages. Additional rent, included in the caption “Rental income,” and additional interest, included in the caption “Interest and other income,” are generally computed as a percentage of facility net patient revenues in excess of base amounts or as a percentage of the increase in the Consumer Price Index. Additional rent and interest are generally calculated and payable monthly or quarterly, and the majority of our leases contain provisions so that total rent cannot decrease from one year to the next. While the calculations and payments of additional rents contingent upon revenue are generally made on a quarterly basis, SEC Staff Accounting Bulletin No. 101 Revenue Recognition in Financial Statements (“SAB No. 101”) does not allow for the recognition of this revenue until all possible contingencies have been eliminated. Most of our leases with additional rent contingent upon revenue are structured as quarterly calculations so that all contingencies have been eliminated at each of our quarterly reporting dates.

We have historically deferred the payment of rent for the first few months on leases for certain buildings we have constructed. These deferred amounts are repaid over the remainder of the lease term. During 2001, we began, in certain instances, to provide similar terms for leases on buildings that we have taken or received back from certain operators. Although the payment of cash rent is deferred, rental income is recorded on a straight-line basis over the life of the lease. We recognized approximately $265,000 of revenues in excess of cash received during the three months ended March 31, 2003 and $561,000 of revenues in excess of cash received during the three months ended March 31, 2002. There is approximately $9,244,000 at March 31, 2003 and $8,979,000 at December 31, 2002 of deferred rent receivables, net of reserves, recorded under the caption “Other assets” on the

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

balance sheet. We evaluate the collectibility of the deferred rent balances on an ongoing basis and provide reserves against receivables we believe may not be fully recoverable. The ultimate amount of deferred rent we realize could be less than amounts recorded.

Accounting for Stock-Based Compensation

In 1999, we adopted the accounting provisions of SFAS No. 123 Accounting for Stock-Based Compensation (SFAS No. 123). SFAS No. 123 established a fair value based method of accounting for stock-based compensation. Accounting for stock-based compensation under SFAS No. 123 causes the fair value of stock options granted to be amortized as an expense over the vesting period of the stock and causes any dividend equivalents earned to be treated as dividends for financial reporting purposes. Net income includes stock-based compensation expense of approximately $64,000 for the period ended March 31, 2003 and $62,000 for the period ended March 31, 2002.

Impact of New Accounting Pronouncements

There are presently no new accounting pronouncements that we expect will have a material impact on our financial condition or the results of our operations.

3. Real Estate Properties

As of March 31, 2003, we had direct ownership of 160 skilled nursing facilities, 133 assisted living facilities, 11 continuing care retirement communities, one rehabilitation hospital, one long-term acute care hospital and four buildings classified as assets held for sale. Substantially all of our owned facilities are leased under “triple-net” leases that are accounted for as operating leases. The leases generally have initial terms ranging from 5 to 21 years, and generally have two or more multiple-year renewal options. Approximately 79% of our facilities are leased under master leases. In addition, the majority of our leases contain cross- collateralization and cross-default provisions tied to other leases with the same tenant, as well as grouped lease renewals and grouped purchase options. Leases covering 250 facilities are secured by security deposits consisting of irrevocable letters of credit or cash, most of which cover from three to six months of initial monthly minimum rents. Under the terms of the leases, the tenant is responsible for all maintenance, repairs, taxes, insurance and capital expenditures on the leased properties.

During the three months ended March 31, 2003, we acquired two skilled nursing facilities, and one assisted and independent living facility in two separate transactions for an aggregate investment of approximately $13,663,000. We also funded approximately $5,034,000 in capital improvements at certain facilities in accordance with existing lease provisions. Such capital improvements generally result in an increase in the minimum rents earned by us on these facilities. At March 31, 2003, we have committed to fund additional capital improvements of approximately $26,000,000.

Five of our tenant operators remain involved in Chapter 11 reorganization bankruptcy proceedings, as described below. Generally speaking, a tenant in bankruptcy can assign, affirm or reject a lease. Until a lease is rejected, the tenant is obligated to comply with the terms of the lease post-filing, including the timely payment of rent. Moreover, if the lease ultimately is assigned or affirmed, the tenant (or its assignee) is obligated to accept the lease without modification and to cure all pre-filing breaches. In our experience, whether or not the leased property is providing positive cash flow is usually a key factor in the tenant’s decision to assign, affirm or reject a lease. All of these tenants are current in their post-filing rent payments and, with the exception of one of the remaining Alpha Healthcare Foundation (Alpha) properties and one of the Alterra properties, we believe all of

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

the facilities involved in these bankruptcy proceedings are generating positive cash flows. We also believe that with the exception of those two facilities, in the event the leases ultimately are rejected we should be able to re-lease the facilities to new operators at rates substantially consistent with the rates we currently receive.

•

Integrated Health Services, Inc. (IHS) (Filed February 2000) and SV/Home Office Inc. and Certain Affiliates (SV) (Filed November 2001). The bankruptcy court approved our final settlement with IHS in April 2002 and our pre-negotiated settlement with SV in March 2003. As a result, IHS assumed amended leases on five facilities and rejected two leases, and SV assumed one facility lease, rejected another and received a five-year extension on its mortgage secured by one facility after we allowed it to sell a second closed facility previously securing the mortgage.

•

Alpha (Filed October 2002). Alpha leased five facilities that were formerly operated by Beverly Enterprises, Inc. One of these leases was rejected and the facility was closed in January 2003. This facility was classified as held for sale and written down to its fair value less costs to sell in 2002. Alpha has advised us it intends to reject one additional lease and affirm the other three remaining leases.

•

Alterra (Filed January 2003). Alterra operates 59 of our facilities, 52 of which are under a master lease with six other individual leases and one mortgage loan receivable cross-defaulted to it. It also operates all 49 of the facilities owned by our unconsolidated joint venture which are under two master leases. We understand that Alterra has been restructuring out of court for over two years with a goal of going into the final bankruptcy phase with a selected portfolio of properties that is intended to be the core of its restructured business. Alterra filed its largely pre-negotiated Plan of Reorganization (the Plan) with the bankruptcy court on March 27, 2003, in which it states it plans to affirm its leases with us and with our unconsolidated joint venture in an “unimpaired” manner. Based on the Plan and discussions we have had with Alterra, we expect that it will continue to pay the rent on and affirm all of our leases.

•

Lexington Healthcare, Inc. (Lexington) (Filed April 2003). Lexington operates two of our facilities under a master lease and has advised us it intends to continue to pay the rent on and affirm the master lease.

In addition, Sun Healthcare Group, Inc. (Sun), which emerged from bankruptcy in 2002 with five of our facilities under a master lease, announced in February 2003 that it had begun another restructuring of its lease portfolio with a goal of obtaining rent moratoriums, rent concessions or lease terminations for certain of its leased facilities. We have agreed to amend the master lease to remove two facilities and reduce the rent on the remaining three by approximately $100,000 per year. We have entered into agreements in principle with operators interested in leasing the two facilities removed from the lease for approximately $200,000 per year less than the current rent. These transactions will result in a total rent reduction of approximately 10% of what Sun previously paid us.

4. Mortgage Loans Receivable

As of March 31, 2003, we held 24 mortgage loans receivable secured by 25 skilled nursing facilities, four assisted living facilities and one continuing care retirement community. As of March 31, 2003, the mortgage loans receivable had a net book value of approximately $99,074,000 with individual outstanding balances ranging from approximately $36,000 to $12,993,000 and maturities ranging from 2003 to 2031.

5. Investment in Unconsolidated Joint Venture

During 2001, we entered into a joint venture with an institutional investor that may invest up to $130,000,000 in health care facilities similar to those already owned by us. We are a 25% equity partner in the

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

venture. The financial statements of the joint venture are not consolidated with our financial statements and our investment is accounted for using the equity method. No investments were made by or into this joint venture prior to the second quarter of 2002.

The joint venture owns 49 assisted living facilities in 12 states that are leased to Alterra. The joint venture was financed with secured non-recourse debt of approximately $60,860,000, capital contributions from our joint venture partner of approximately $49,100,000 and capital contributions from us of approximately $16,400,000. We do not expect to make any additional contributions to the joint venture related to the facilities it acquired during 2002.

In addition to our 25% share of the income from the joint venture, we receive a management fee of 2.5% of the joint venture revenues. This fee is included in our income from unconsolidated joint venture and in the general and administrative expenses below on the joint venture’s income statement.

The balance sheet and income statement for the joint venture below present its financial position as of March 31, 2003 and December 31, 2002 and its results of operations for the three months ended March 31, 2003 in thousands. The joint venture did not have any operations during the three months ended March 31, 2002.

BALANCE SHEET

(Unaudited)

	March 31, 2003			December 31, 2002
Assets

Investment in real estate:
Land	$	13,410		$	13,410
Buildings and improvements		107,829			107,720

		121,239			121,130
Less accumulated depreciation		(2,693	)		(1,944	)

		118,546			119,186
Cash and cash equivalents		6,092			8,312
Other assets		1,596			1,697

	$	126,234		$	129,195

Liabilities and Equity

Notes and bonds payable	$	60,822		$	60,831
Accounts payable and accrued liabilities		3,349			3,904
Equity:
Capital contributions		65,501			65,501
Distributions		(8,900	)		(4,900	)
Cumulative net income		5,462			3,859

Total equity		62,063			64,460

	$	126,234		$	129,195

NATIONWIDE HEALTH PROPERTIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

INCOME STATEMENT

(Unaudited)

	Three Months Ended March 31, 2003
Rental income	$	3,693
Expenses:
Interest and amortization of deferred financing costs		1,196
Depreciation and amortization		749
General and administrative		145

		2,090

Net income	$	1,603

6. Assets Held for Sale

During 2002, we classified ten unoccupied buildings and eight land parcels as assets held for sale. As required by SFAS No. 144, the net book values of these assets were transferred to assets held for sale and the operations of these assets have been included in discontinued operations for all periods presented. See Note 9 for the detail of the amounts classified or reclassified as discontinued operations.

During the three-month period ended March 31, 2003, we sold one building for net proceeds of $610,000, or approximately its net book value, that had previously been written down to its estimated fair value less costs to sell during 2002 and received approximately $30,000 from the sale of equipment at another building that served to reduce our basis in that facility. In addition, we recorded an impairment of assets charge of $645,000 related to three of these assets, as discussed in more detail below in Note 8. During the three-month period ended March 31, 2003, we did not classify any additional assets as held for sale.

At March 31, 2003, four buildings and seven land parcels remain in assets held for sale. At December 31, 2002, there were five buildings and seven land parcels classified as assets held for sale.

7. Earnings Per Share (EPS)

Basic EPS is computed by dividing income from continuing operations available to common stockholders by the weighted average common shares outstanding. Income from continuing operations available to common stockholders is calculated by deducting dividends declared on preferred stock from income from continuing operations. Diluted EPS includes the effect of any potential shares outstanding, which for us is only comprised of dilutive stock options. The table below details the components of the basic and diluted earnings per share from continuing operations available to common stockholders calculations:

	Three months ended March 31,
	2003				2002
	Income			Shares	Income (loss)			Shares
	(In thousands)
Income from continuing operations	$	13,863			$	1,897
Less: preferred stock dividends		(1,919	)			(1,919	)

Amounts used to calculate Basic EPS		11,944		49,169		(22	)	47,913
Effect of dilutive securities:
Stock options		—		—		—		64

Amounts used to calculate Diluted EPS	$	11,944		49,169	$	(22	)	47,977

8. Impairment of Assets

During the three months ended March 31, 2003, we recorded an impairment of assets charge of $645,000 in discontinued operations related to three of our assets held for sale. During the quarter, we entered into agreements to sell two assets for less than our net book value and became aware of facts and circumstances indicating another asset had become impaired.

During the first quarter of 2002, we became aware of facts and circumstances indicating that certain assets had become impaired. After analyzing the assets and the facts, we recorded an impairment of assets charge in continuing operations of $12,472,000. As a result of lower than expected operating results for the first quarter at ten facilities operated by Senior Services of America that were previously operated by Balanced Care Corporation prior to its default on its leases in December 2000 and six facilities operated by another operator, we changed our estimate of the recoverability of the deferred rent related to these facilities at the end of March 2002. We determined that the most appropriate method of recognizing revenues for these facilities, given the recent operating results, is to record revenues only to the extent cash rent is actually received. Accordingly, we fully reserved the deferred rent balance outstanding and all related notes receivable outstanding, totaling $8,305,000, as part of the impairment of assets charge in continuing operations. In addition, the impairment of assets charge reported in continuing operations also included $4,167,000 to fully reserve a loan previously made to the operator of a large continuing care retirement community in Florida. The collectibility of that loan became uncertain due to developments at the facility during the first quarter of 2002 that we believed might necessitate a change in operators. During the second quarter of 2002, we entered into an agreement with a new operator to take over the facility effective September 1, 2002.

During the first quarter of 2002, we elected to classify seven unoccupied buildings and eight land parcels as assets held for sale and transferred the net book values of these assets to assets held for sale on the balance sheet as required by SFAS No. 144. We recorded an impairment of assets charge in discontinued operations during the first quarter of 2002, totaling $2,065,000, that represents the write-down of four of these properties to their individual estimated fair values less costs to sell.

9. Discontinued Operations

SFAS No. 144 requires the operating results of any assets with their own identifiable cash flows that are disposed of or held for sale be removed from income from continuing operations and reported as discontinued operations. The operating results for any such assets for any prior periods presented must also be reclassified as discontinued operations. See Note 6 and Note 8 for more detail regarding the facilities sold and classified as held for sale during 2003 and 2002. The following table details the amounts reclassified to discontinued operations for the periods presented:

	Three months ended March 31,
	2003			2002
	(In thousands)
Rental income	$	40		$	702
Interest and other income		—			38

		40			740

Depreciation and amortization		—			495
General and administrative		348			211
Impairment of assets		645			2,065

		993			2,771

Discontinued operations	$	(953	)	$	(2,031	)

10. Subsequent Event

In order to enhance our capital base and improve our liquidity, we sold, on May 2, 2003, 9,625,000 shares of common stock at a price of $12.00 per share that resulted in net proceeds to us of approximately $113,000,000 after placement agent, legal and other fees of approximately $2,500,000. The net proceeds were used to repay borrowings under our unsecured revolving credit facility. In conjunction with this offering, we reduced our quarterly dividend payable to $0.37 per share, representing a reduction of $0.09 per share, or approximately 20%, from the rate we had previously paid dividends.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Policies

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and assumptions, including those that impact our most critical accounting policies. We base our estimates and assumptions on historical experience and on various other factors that we believe are reasonable under the circumstances. Actual results may differ from these estimates. We believe the following are our most critical accounting policies.

Revenue Recognition

Our rental revenue is accounted for in accordance with Statement of Financial Accounting Standards (SFAS) No. 13 Accounting for Leases (SFAS No. 13) and SEC Staff Accounting Bulletin No. 101 Revenue Recognition in Financial Statements (SAB No.101) among other authoritative pronouncements. These pronouncements require us to account for the rental income on a straight-line basis unless a more appropriate method exists. Straight-line accounting requires us to calculate the total fixed rent to be paid over the life of the lease and recognize that revenue evenly over that life. In a situation where a lease calls for fixed rental increases during the life of a lease or there is a period of free rent at the beginning of a lease, rental income recorded in the early years of a lease is higher than the actual cash rent received which creates an asset on the balance sheet called deferred rent receivable. At some point during the lease, depending on the rent levels and terms, this reverses and the cash rent payments received during the later years of the lease are higher than the rental income recognized, which reduces the deferred rent receivable balance to zero by the end of the lease. The majority of our leases do not contain fixed increases or provide for free or reduced rent at the beginning of the lease term. However, certain leases for facilities we have constructed have free rent for the first three to six months and certain leases we have entered into, primarily with regard to facilities returned to us by operators in bankruptcy, have reduced or free rent in the early months of the lease or fixed increases in future years. We record the rent for these facilities on a straight-line basis in accordance with SFAS No. 13. However, we also assess the collectibility of the deferred portion of the rent that is to be collected in a future period in accordance with SAB No. 101. This assessment is based on several factors, including, among other things, the financial strength of the lessee and any guarantors, the historical operations and operating trends of the facility, the historical payment pattern of the facility and whether we intend to continue to lease the facility to the current operator. If our evaluation of these factors indicates we may not receive the rent payments due in the future, we provide a reserve against the current rental income as an offset to revenue, and depending on the circumstances, we may provide a reserve against the existing deferred rent balance for the portion, up to its full value, that we estimate will not be recovered. This assessment requires us to determine whether there are factors indicating the future rent payments may not be fully collectible and to estimate the amount of the rent that will not be collected. If our assumptions or estimates regarding a lease change in the future, we may have to record a reserve to reduce or further reduce the rental revenue recognized and/or deferred rent receivable balance.

Additional rents are generally computed as a percentage of facility net patient revenues in excess of base amounts or as a percentage of the increase in the Consumer Price Index. Additional rents are generally calculated and payable monthly or quarterly, and most of our leases contain provisions so that total rent cannot decrease from one year to the next. While the calculations and payments of additional rents contingent upon revenue are generally made on a quarterly basis, SAB No. 101 does not allow for the recognition of this revenue until all possible contingencies have been eliminated. Most of our leases with additional rents contingent upon revenue are structured as quarterly calculations so that all contingencies for revenue recognition have been eliminated at each of our quarterly reporting dates.

Depreciation and Useful Lives of Assets

We calculate depreciation on our buildings and improvements using the straight-line method based on estimated useful lives ranging up to 40 years, generally from 30 to 40 years. A significant portion of the cost of each property is allocated to building (generally approximately 90%). The allocation of the cost between land and building, and the determination of the useful life of a property, are based on management’s estimates. We calculate depreciation and amortization on equipment and lease costs using the straight-line method based on estimated useful lives of up to five years or the lease term, whichever is appropriate. We review and adjust useful lives periodically. If we do not allocate appropriately between land and building or we incorrectly estimate the useful lives of our assets, our computation of depreciation and amortization will not appropriately reflect the usage of the assets over future periods.

Asset Impairment

We review our long-lived assets individually on a quarterly basis to determine if there are indicators of impairment in accordance with SFAS No. 144 Accounting for the Impairment of Disposal of Long-Lived Assets (SFAS No. 144). Indicators may include, among others, the tenant’s inability to make rent payments, operating losses or negative operating trends at the facility level, notification by the tenant that it will not renew its lease, a decision to dispose of an asset or changes in the market value of the property. For operating assets, if indicators of impairment exist, we compare the undiscounted cash flows from the expected use of the property to its net book value to determine if impairment exists. If the sum of the undiscounted cash flows is higher than the current net book value, in accordance with SFAS No. 144, we conclude no impairment exists. If the sum of the undiscounted cash flows is lower than the current net book value, we recognize an impairment loss for the difference between the net book value of the asset and its estimated fair market value. To the extent we decide to sell an asset, we recognize an impairment loss if the current net book value of the asset exceeds its fair value less costs to sell. The above analyses require us to determine whether there are indicators of impairment for individual assets, to estimate the most likely stream of cash flows from operating assets and to determine the fair value of assets that are impaired or held for sale. If our assumptions, projections or estimates regarding an asset change in the future, we may have to record an impairment charge to reduce or further reduce the net book value of the asset.

Collectibility of Receivables

We evaluate the collectibility of our mortgage and other receivables on a regular basis. We evaluate the collectibility of the receivables based on factors including, among others, payment history, the financial strength of the borrower and any guarantors, the value of the underlying collateral, the operations and operating trends of the underlying collateral, if any, and current economic conditions. If our evaluation of these factors indicates we may not recover the full value of the receivable, we provide a reserve against the portion of the receivable that we estimate will not be recovered. This analysis requires us to determine whether there are factors indicating a receivable may not be fully collectible and to estimate the amount of the receivable that will not be collected. If our assumptions or estimates regarding the collectibility of a receivable change in the future, we may have to record a reserve to reduce or further reduce the carrying value of the receivable.

Impact of New Accounting Pronouncements

There are presently no new accounting pronouncements that we expect will have a material impact on our financial condition or the results of our operations.

Operating Results

Three-Month Period Ended March 31, 2003 vs. Three-Month Period Ended March 31, 2002

Rental income increased $5,105,000, or 16%, over the same period in 2002. The increase was primarily due to rental income from three facilities acquired during 2003 and 46 facilities acquired during 2002, rental income

from five facilities we acquired that previously had an aggregate mortgage loans receivable balance of $29,146,000 during 2002 and rent increases at existing facilities. The increase was partially offset by reserving straight-lined rent on certain facilities discussed below, a reduction in income upon the disposal of one asset held for sale during 2003 and six facilities and six assets held for sale during 2002, and rent reductions on certain facilities that were returned to us and leased to other operators in 2002. Interest and other income decreased $1,020,000, or 24%, from the same period in 2002. The decrease was primarily due to the payoff at par of mortgage loans receivable totaling $17,422,000 securing six facilities and our acquiring title to five facilities previously having an aggregate mortgage loans receivable balance of $29,146,000 during 2002, and regular principal repayments of notes receivable during 2002 and 2003. Income from unconsolidated joint venture in 2003 represents our 25% share of the income generated by the joint venture and our management fee of 2.5% of the revenues of the unconsolidated joint venture. We recognized no income from unconsolidated joint venture for the three months ended March 31, 2002 as the first investments were made in April 2002. Please see the caption “Investment in Unconsolidated Joint Venture” below for more information regarding the unconsolidated joint venture.

Interest and amortization of deferred financing costs increased $2,629,000, or 21%, over the same period in 2002. The increase was primarily due to the issuance of $100,000,000 of fixed rate medium-term notes in the third quarter of 2002, obtaining a $10,000,000 mortgage secured by two existing buildings in the third quarter of 2002 and the assumption of a $14,227,000 mortgage note on one facility acquired during the second quarter of 2002. The increase was partially offset by the payoff of $50,000,000 of fixed rate medium-term notes during 2002 and a reduction in the average interest rates on our $150,000,000 unsecured revolving credit facility. Depreciation and amortization increased $2,602,000, or 32% over the same period in 2002 due primarily to the acquisition of 46 facilities during 2002, the acquisition of three facilities during the three months ended March 31, 2003 and our acquiring title to five facilities previously having an aggregate mortgage loans receivable balance of $29,146,000 during 2002. This increase was partially offset by a reduction in depreciation from the disposal of 11 facilities during 2002.

During the first quarter of 2002, we became aware of facts and circumstances indicating that certain assets may have become impaired. After analyzing the assets and the facts, during the three months ended March 31, 2002, we recorded an impairment of assets charge in continuing operations totaling $12,472,000. As a result of lower than expected operating results for the first quarter of 2002 at ten facilities operated by Senior Services of America that were previously operated by Balanced Care Corporation prior to its default on its leases in December 2000 and six facilities operated by another operator, we changed our estimate of the recoverability of the deferred rent related to these facilities at the end of March 2002. We determined that the most appropriate method of recognizing revenues for these facilities, given the recent operating results, is to record revenues only to the extent cash is actually received. Accordingly, we fully reserved the deferred rent balance outstanding and all related notes receivable outstanding, totaling approximately $8,305,000, as part of the impairment of assets charge in continuing operations. In addition, the impairment of assets charge reported in continuing operations also included $4,167,000 to fully reserve a loan previously made to the operator of a large continuing care retirement community in Florida. The collectibility of that loan became uncertain due to developments at the facility during the first quarter of 2002 that we believed might necessitate a change in operators. A new operator took over the operation of the facility effective September 1, 2002. We did not record any impairment of assets charge in continuing operations for the three months ended March 31, 2003.

During the first quarter of 2002, we classified seven unoccupied buildings and eight land parcels as assets held for sale. During the remainder of 2002, we classified three additional unoccupied buildings as assets held for sale. As required by Statement of Financial Accounting Standards (“SFAS”) No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets, the net book values of these assets have been transferred to assets held for sale and the operations of these assets have been included in discontinued operations for the three-month periods ended March 31, 2003 and March 31, 2002. The impairment of assets charges in discontinued operations totaled $645,000 for the three months ended March 31, 2003 and $2,065,000 for the three months ended March 31, 2002. The impairment of assets charge for the three months ended March 31, 2003 represents the write-down

of three of our assets held for sale to their individual estimated fair values less costs to sell. The impairment of assets charge for the three months ended March 31, 2002 represents the write-down of four of our assets held for sale to their individual estimated fair values less costs to sell. We did not classify any additional assets as held for sale during the three months ended 2003.

The loss in discontinued operations decreased $1,078,000, or 53%, over the same period in 2002. During the three months ended March 31, 2003, we had an impairment of assets charge of $645,000 in discontinued operations compared to $2,065,000 during the same period in 2002, which amounts to a decrease in the loss of $1,420,000. This decrease was partially offset by increases in the losses generated by the facilities that were reclassified to discontinued operations after the facilities were sold or transferred to assets held for sale.

We expect to receive increased rent and interest at individual facilities because our leases and mortgages generally contain provisions under which rents or interest income increase with increases in facility revenues and/or increases in the Consumer Price Index. If revenues at our facilities and/or the Consumer Price Index do not increase, our revenues may not continue to increase. Sales of facilities or repayments of mortgage loans receivable would serve to offset revenue increases, and if sales and repayments exceed additional investments, this could actually reduce revenues. Our leases could renew below or above the aggregate existing rent level, so the impact of lease renewals may cause a decrease or an increase in the total rent we receive. The exercise of purchase options by tenants would also cause a decrease in the total rent we receive. Additional investments in healthcare facilities would increase rental and/or interest income, however, at this time we do not expect any significant additional investments during the coming year. As additional investments in facilities are made, depreciation and/or interest expense will also increase. We expect any such increases to be at least partially offset by rents or interest income associated with the investments.

Information Regarding Certain Operators

•

operates all 49 of the facilities owned by our unconsolidated joint venture which are under two master leases. We understand that Alterra has been restructuring out of court for over two years with a goal of going into the final bankruptcy phase with a selected portfolio of properties that is intended to be the core of its restructured business. Alterra filed its largely pre-negotiated Plan of Reorganization (the Plan) with the bankruptcy court on March 27, 2003, in which it states it plans to affirm its leases with us and with our unconsolidated joint venture in an “unimpaired” manner. Based on the Plan and discussions we have had with Alterra, we expect that it will continue to pay the rent on and affirm all of our leases.

•

Investment in Unconsolidated Joint Venture

During 2001, we entered into a joint venture with an institutional investor that may invest up to $130,000,000, of which over $127,000,000 has already been invested, in healthcare facilities similar to those already owned by us. We are a 25% equity partner in the venture. The financial statements of the joint venture are not consolidated with our financial statements and our investment is accounted for using the equity method. No investments were made by or into this joint venture prior to April 2002.

Liquidity and Capital Resources

During the three months ended March 31, 2003, we acquired two skilled nursing facilities and one assisted and independent living facility in two separate transactions for an aggregate investment of approximately $13,663,000. We also funded approximately $5,034,000 in capital improvements and expansions at certain facilities in accordance with existing lease provisions. Such capital improvements and expansions generally result in an increase in the minimum rents earned by us on these facilities either at the time of funding or upon completion of the project. If rent does not increase until the completion of the project, we generally capitalize interest expense on the investment until it is complete. The acquisitions, capital improvements and expansions were funded by borrowings on our unsecured revolving credit facility and by cash on hand. At March 31, 2003, we have committed to fund additional capital improvements of approximately $26,000,000.

During the three-month period ended March 31, 2003, we sold one asset held for sale for net proceeds of $610,000, or approximately its net book value, that had previously been written down to its estimated fair value less costs to sell during 2002. We also received approximately $30,000 from the sale of equipment at another building that served to reduce our basis in that facility. The proceeds from the sales were used to repay borrowings on our unsecured revolving credit facility.

We have $66,000,000 of medium-term notes maturing in the second and third quarters of 2003. In addition, $40,000,000 of medium-term notes with a rate of 6.59% due in 2038 may be put back to us at their face amounts at the option of the holders on July 7, 2003 and $41,500,000 of medium-term notes with a rate of 7.6% due in 2028 may be put back to us at their face amounts at the option of the holders on November 20, 2003. While we do not expect that these notes will be put back to us, the holders may elect to do so. We anticipate repaying the medium-term notes maturing and any that are put back to us with a combination of proceeds from the issuance of additional medium-term notes under the shelf registration statements discussed below, borrowings on our unsecured revolving credit facility, cash on hand, new mortgage financing on certain facilities, potential asset sales and mortgage loans receivable payoffs, the potential issuance of equity securities under the shelf registration statements discussed below or cash from operations. Our medium-term notes have been investment grade rated since 1994. Our current ratings are Baa3 from Moody’s, BBB- from Standard & Poor’s and BBB from Fitch.

At March 31, 2003, we had $28,000,000 available under our $150,000,000 unsecured revolving credit facility that expires on November 7, 2005. As of March 31, 2003, we had shelf registrations on file with the Securities and Exchange Commission under which we may issue (a) up to $316,000,000 in aggregate principal amount of medium-term notes and (b) up to approximately $123,640,000 of securities including debt, convertible debt, common and preferred stock. After the common stock issuance discussed below, we had $120,000,000 available under our $150,000,000 unsecured revolving credit facility and had shelf registrations remaining of (a) up to $316,000,000 in aggregate principal amount of medium-term notes and (b) up to approximately $8,140,000 of securities including debt, convertible debt, common and preferred stock. We intend to file a new shelf registration statement to register securities including debt, convertible debt, common and preferred stock.

We did not use any off-balance sheet financing arrangements or have any unconsolidated subsidiaries prior to the second quarter of 2002. The only off-balance sheet financing arrangement that we currently utilize is the unconsolidated joint venture discussed above under the caption “Investment in Unconsolidated Joint Venture.”

The level of our new investments has been depressed during the prior four years, although we did make significant acquisitions during 2002. Financing for future investments may be provided by borrowings under our unsecured revolving credit facility, private placements or public offerings of debt or equity, the assumption of secured indebtedness, obtaining mortgage financing on a portion of our owned portfolio or through joint ventures. We anticipate the potential repayment of certain mortgage loans receivable and the possible sale of certain facilities during 2003. In the event that there are mortgage loan receivable repayments or facility sales in excess of new investments, revenues may decrease. We anticipate using the proceeds from any mortgage loans receivable repayments or facility sales to reduce the outstanding balance on our unsecured revolving credit facility, to repay other borrowings as they mature or to provide capital for future investments. Any such reduction in debt levels would result in reduced interest expense that we believe would partially offset any decrease in revenues. We believe we have sufficient liquidity and financing capability to finance anticipated future investments, maintain the dividend level discussed below and repay borrowings at or prior to their maturity, for at least the next twelve months.

Statement Regarding Forward-Looking Disclosure

Certain information contained in this report includes forward-looking statements. Forward-looking statements include statements regarding our expectations, beliefs, intentions, plans, objectives, goals, strategies,

future events or performance and underlying assumptions and other statements which are other than statements of historical facts. These statements may be identified, without limitation, by the use of forward looking terminology such as “may”, “will”, “anticipates”, “expects”, “believes”, “intends”, “should” or comparable terms or the negative thereof. All forward-looking statements included in this report are based on information available to us on the date hereof. These statements speak only as of the date hereof and we assume no obligation to update such forward-looking statements. These statements involve risks and uncertainties that could cause actual results to differ materially from those described in the statements. These risks and uncertainties include (without limitation) the following:

•

continued deterioration of the operating results or financial condition, including bankruptcies, of our tenants;

•

occupancy levels at certain facilities;

•

changes in the ratings of our debt securities;

•

access to the capital markets and the cost of capital;

•

government regulations, including changes in the reimbursement levels under the Medicare and Medicaid programs;

•

the general distress of the healthcare industry;

•

the effect of economic and market conditions and changes in interest rates;

•

the amount and yield of any additional investments;

•

the ability of our operators to repay deferred rent or loans in future periods;

•

our ability to attract new operators for certain facilities;

•

our ability to sell certain facilities for their book value;

•

changes in tax laws and regulations affecting real estate investment trusts; and

•

the risk factors set forth under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2002.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

This market risk exposure discussion is an update of material changes to the Item 7a. Quantitative and Qualitative Disclosures About Market Risk discussion included in our Annual Report on Form 10-K for the year ended December 31, 2002 and should be read in conjunction with that discussion. Readers are cautioned that many of the statements contained in the “Market Risk Exposure” discussion are forward looking and should be read in conjunction with the disclosures under the heading “Statement Regarding Forward Looking Disclosure” set forth above.

We are exposed to market risks related to fluctuations in interest rates on our mortgage loans receivable and debt. We do not utilize interest rate swaps, forward or option contracts on foreign currencies or commodities, or other types of derivative financial instruments.

We provide mortgage loans to operators of healthcare facilities as part of our normal operations. The majority of the loans have fixed rates. Three of our mortgage loans have adjustable rates; however, the rates adjust only once or twice over the loan lives and the minimum adjusted rates are equal to the current rates. Therefore, all mortgage loans receivable are treated as fixed rate notes.

We utilize debt financing primarily for the purpose of making additional investments in healthcare facilities. Historically, we have made short-term borrowings on our variable rate unsecured revolving credit facility to fund our acquisitions until market conditions were appropriate, based on management’s judgment, to issue stock or fixed rate debt to provide long-term financing.

During the three months ended March 31, 2003, the borrowings under our unsecured revolving credit facility have increased from $107,000,000 to $122,000,000.

For fixed rate debt, changes in interest rates generally affect the fair market value, but do not impact earnings or cash flows. Conversely, for variable rate debt, changes in interest rates generally do not impact fair market value, but do affect the future earnings and cash flows. Holding the variable rate debt balance constant, and including the bank borrowings as variable rate debt due to its nature, each one percentage point increase in interest rates would result in an increase in interest expense for the remaining nine months of 2003 of approximately $1,080,000.

Decreases in interest rates during 2002 and 2003 resulted in a decrease in interest expense related to our unsecured revolving credit facility. Any future interest rate increases will increase the cost of borrowings on our unsecured revolving credit facility and any borrowings to refinance long-term debt as it matures or to finance future acquisitions.

Item 4. Controls and Procedures

Within the 90 days prior to the filing date of this report, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures. Disclosure controls and procedures are designed to ensure that information required to be disclosed in our periodic reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. There have been no significant changes in our internal controls or in other factors that could significantly affect internal controls subsequent to the date we carried out this evaluation.

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

3.1		Amended and Restated Bylaws of the Company (refiled to correct a typographical error).

10.1		Form of Indemnity Agreement for officers and directors of the Company including David R. Banks, William K. Doyle, Charles D. Miller, Robert D. Paulson, Keith P. Russell, Jack D. Samuelson, R. Bruce Andrews, David M. Boitano, Donald D. Bradley, Mark L. Desmond, Steven J. Insoft, Don M. Pearson, John J. Sheehan, Jr., and T. Andrew Stokes.

99.1		Section 1350 Certifications.

(b) Reports on Form 8-K

None.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 13, 2003	NATIONWIDE HEALTH PROPERTIES, INC.

	By:	/s/ MARK L. DESMOND
		Mark L. Desmond Senior Vice President and Chief Financial Officer (Principal Financial Officer)

CERTIFICATIONS

I, R. Bruce Andrews, certify that:

I have reviewed this quarterly report on Form 10-Q of Nationwide Health Properties, Inc.;

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 13, 2003

/s/ R. BRUCE ANDREWS

R. Bruce Andrews

President and Chief Executive Officer

I, Mark L. Desmond, certify that:

I have reviewed this quarterly report on Form 10-Q of Nationwide Health Properties, Inc.;

evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: May 13, 2003

/s/ MARK L. DESMOND

Mark L. Desmond

Senior Vice President and Chief Financial Officer

EX-3.1 3 dex31.htm AMENDED AND RESTATED BYLAWS Amended and Restated Bylaws

Exhibit 3.1

BYLAWS

NATIONWIDE HEALTH PROPERTIES, INC.

AS AMENDED AND RESTATED JANUARY 28, 2003

ARTICLE I

OFFICES

Section 1. Registered office. The registered office of the corporation shall be established and maintained at the office of THE CORPORATION TRUST INCORPORATED, 32 South Street, Baltimore, Maryland 21202, and said THE CORPORATION TRUST INCORPORATED be the registered agent of this corporation in charge thereof.

Section 2. Other Offices. The corporation may establish such other offices, within or without the State of Maryland, at such place or places as the Board of Directors from time to time may designate, or which the business of the corporation may require.

ARTICLE II

STOCKHOLDERS

Section 1. Annual Meetings. Annual meetings of stockholders for the election of Directors and for such other business as may be stated in the notice of the meeting, shall be held on a date and at a time designated by the Board of Directors at such place, within or without the State of Maryland, as the Board of Directors by resolution shall determine, and as set forth in the notice of the meeting.

If the date of the annual meeting shall fall on a legal holiday of the state in which the meeting is to be held, the meeting shall be held on the next succeeding business day.

Section 2. Special Meetings. Special meetings of the stockholders, for any purpose or purposes, may be called by the Chairman, the Chief Executive Officer, the President, by a majority of the Board of Directors or by a majority of the Independent Directors and shall be called by an officer upon written request of stockholders holding in the aggregate not less than 10% of the outstanding shares entitled to vote on the business proposed to be transacted thereat. Such meetings may be held at such time and place, within or without the State of Maryland, as shall be stated in the notice of the meeting. The call of a special meeting shall state the nature of the business to be transacted and no other business shall be considered at the meeting. A Special meeting may be called for the purpose of removing a Director.

Section 3. Notice of Meetings. Written or printed notice, stating the place, date and time of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered to each stockholder entitled to vote thereat at his address as it appears on the records of the corporation, by the United States mail, postage prepaid, not less than twenty (20) nor more than ninety (90) days before the date of the meeting. No business other than that stated in the notice shall be transacted at any meeting without the unanimous consent of all stockholders entitled to vote thereat.

Section 4. Voting. At each annual meeting the stockholders entitled to vote shall elect a Board of Directors, and they may transact such other corporate business as shall be stated in the notice of the meeting. The vote for Directors, and, upon the demand of any stockholder, the vote upon any question before the meeting, shall be by ballot. All elections of Directors shall be by a plurality of the votes cast, and all questions shall be decided by a majority vote, except as otherwise provided by the Articles of Incorporation or by the laws of the State of Maryland.

The Directors may fix a day not more than ninety (90) days prior to the holding of any such meeting as the date as of which stockholders entitled to notice of and to vote at such meeting shall be determined; and only stockholders of record on such day shall be entitled to notice of or to vote at any such meeting.

Each stockholder entitled to vote, in accordance with the terms of the Articles of Incorporation and the provisions of these Bylaws, shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such stockholder, but no proxy shall be voted after eleven (11) months from its date unless such proxy provides for a longer period. In no case shall any proxy be given for a period in excess of ten (10) years from the date of its execution.

Section 5. Quorum. Except as provided in the next section hereof, any number of stockholders together holding a majority of the stock issued and outstanding and entitled to vote thereat, who shall be present in person or represented by proxy at any meeting duly called, shall constitute a quorum for the transaction of business. If, at any meeting, less than a quorum shall be present or represented, those present, either in person or by proxy, shall have the power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of stock shall be present, at which time any business may be transacted which might have been transacted at the meeting as originally noticed.

Section 6. Action Without Meeting. Except for the election of Directors, any action to be taken by the stockholders may be taken without a meeting, if, prior to such action, all stockholders entitled to vote thereon shall consent in writing to such action being taken, and such consent shall be treated for all purposes as a vote at a meeting.

ARTICLE III

DIRECTORS

Section 1. Number and Term. The number of Directors shall not be less than five (5) nor more than nine (9) until changed by amendment of these Bylaws. The exact number of Directors shall be seven (7) until changed, within the limit specified, by a Bylaw amending this section duly adopted by the Board of Directors or stockholders. The Directors shall be elected at the annual meeting of stockholders, and each Director shall be elected to serve until his successor shall be elected and shall have qualified. In no case shall the number of Directors be less than five (5), unless changed by an amendment to the Articles of Incorporation.

The Board of Directors of this corporation shall be classified into three groups. Each group of Directors shall be elected for successive terms ending at the annual meeting of stockholders the third year after election.

Directors need not be stockholders.

Section 2. Independent Directors. At least a majority of the entire Board of Directors shall be Independent Directors. An Independent Director shall mean a Director who is not, directly or indirectly, an Affiliate of the Advisor of the corporation. An Affiliate of the Advisor shall mean a person who: (a) is an officer or director or employee of the Advisor; (b) beneficially owns 5% or more of any class of equity securities of the Advisor because of the power to vote, sell, or exercise a right to acquire such securities; (c) is an officer, director or employee of, or beneficially owns 5% or more of any class of equity securities of, an entity that controls, is controlled by or is under common control with the Advisor; or (d) has a member of his or her immediate family who has one of the foregoing relationships with the Advisor.

Section 3. Quorum. A majority of the Directors shall constitute a quorum for the transaction of business. If, at any meeting of the Board, there shall be less than a quorum present, a majority of those present may adjourn the meeting, from time to time, until a quorum is obtained, and no further notice thereof need be given other than by announcement at said meeting which shall be so adjourned.

Section 4. First Meeting. The newly elected Directors may hold their first meeting for the purpose of organization and the transaction of business, if a quorum is present, immediately after the annual meeting of stockholders or the time and place of such meeting may be fixed by written consent of the entire Board.

Section 5. Election of Officers. At the first meeting, or at any subsequent meeting called for that purpose, the Directors shall

elect the officers of the corporation, as more specifically set forth in ARTICLE V of these Bylaws. Such officers shall hold office until the next annual election of officers, or until their successors are elected and shall have qualified.

Section 6. Regular Meetings. Regular meetings of the Board of Directors shall be held, without notice, at such places and times as shall be determined, from time to time, by resolution of the Board of Directors.

Section 7. Special Meetings. Special meetings of the Board of Directors may be called by the Chairman, the Chief Executive Officer, the President, or by the Secretary on four (4) days’ notice to each Director. In case such notice is delivered personally, or by telephone or telegram, it shall be delivered at least twenty-four (24) hours prior to the time of the holding of the meeting.

Section 8. Place of Meetings. The Directors may hold their meetings, and have one or more offices, and keep the books of the corporation outside the State of Maryland at any office or offices of the corporation, or at any other place as they from time to time by resolution may determine.

Section 9. Dispensing with Notice. The transactions of any meeting of the Board of Directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum be present and if, either before or after the meeting, each of the Directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes thereof. The waiver of notice or consent need not specify the purpose of the meeting. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting need not be given to any Director who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such Director.

Section 10. Action Without Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors, or any committee thereof, may be taken without a meeting if, prior to such action, a written consent thereto is signed by all members of the Board or of such committee, as the case may be, and such written consent is filed with the minutes of the proceedings of the Board of Directors or committee.

Section 11. Telephonic Meetings. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting.

Section 12. Approval By Independent Directors. For all purposes, a transaction which is subject to approval by a majority of the Independent Directors shall be approved if such transaction is approved by a majority of the Directors present and entitled to vote at a meeting at which a quorum is present, provided that the Independent Directors voting to approve the transaction constitute an absolute majority of all independent Directors serving at such time.

Section 13. Duties of Independent Directors and/or Investment Committee. The Independent Directors and/or the Investment Committee of the corporation shall have the special duties described in this section.

(a) The Independent Directors and/or the Investment Committee shall supervise the relationship of the corporation with the Advisor and shall evaluate the capability and performance of the Advisor before entering into or renewing any advisory agreement (“Advisory Agreement”). The criteria used to evaluate the performance of the Advisor shall be set forth in the minutes of a meeting of the Board of Directors. The Independent Directors and/or the Investment Committee shall supervise the performance of the Advisor and the compensation paid to it by the corporation to determine that the provisions of any Advisory Agreement between the corporation and the Advisor are being carried out. The Independent Directors and/or the Investment Committee shall determine at least annually that the compensation which the corporation agrees to pay to the Advisor is reasonable in relation to the nature and the quality of services performed. In connection with the duties set forth in this subsection 13(a), the Independent Directors shall evaluate any competitive relationship among the Company, Beverly Enterprises and the Company’s officers and directors affiliated with Beverly Enterprises.

(b) The Independent Directors and/or the Investment Committee shall review the corporation’s investment policies at least annually to determine that the policies are being followed by the corporation and are in the best interests of its stockholders. The findings of the Independent Directors and/or the Investment Committee shall be set forth in the minutes of meetings of the Board of Directors. Such investment policies may be altered from time to time by the Board of Directors with the consent of a majority of the Independent Directors and/or the Investment Committee and without approval of the stockholders upon a determination that such a change is in the best interests of the corporation and the stockholders.

(c) The Independent Directors and/or the Investment Committee shall determine, from time to time, but at least annually, that the total fees and expenses of the corporation are reasonable in light of the investment experience of the corporation, its net assets, its net income, and the fees and expenses of other comparable advisers in real estate. The findings of the Independent Directors and/or the Investment Committee shall be set forth in the minutes of meetings of the Board of Directors.

(d) A majority of the Independent Directors must approve all matters in which a Beverly Enterprises related entity is involved, and must approve any acquisition from or sale to any director, officer or employee of the Company, or of the Advisor or any affiliate thereof, of any of the assets or other property of the Company.

Section 14. General Powers of Directors. The Board of Directors shall have the management of the business of the corporation, and, subject to the restrictions imposed by law exercise all the powers of the corporation.

Section 15. Specific Powers of Directors. Without prejudice to such general powers, it hereby is expressly declared that the Directors shall have the following powers:

(1) To make and change regulations, not inconsistent with these Bylaws, for the management of the business and affairs of the corporation.

(2) To purchase or otherwise acquire for the corporation any property; rights or privileges which the corporation is authorized to acquire.

(3) To pay for any property purchased for the corporation, either wholly or partly in money, stock, bonds, debentures or other securities of the corporation.

(4) To borrow money and make and issue notes, bonds and other negotiable and transferable instruments, mortgages, deeds of trust and trust agreements, and to do every act and thing necessary to effectuate the same.

(5) To remove any officer for cause, or any officer, other than the President, summarily, without cause, and, in their discretion, from time to time to devolve the powers and duties of any officer upon any other person for the time being.

(6) To appoint and remove or suspend subordinate officer or agents as they may deem necessary, and to determine their duties, and to fix and from time to time to change their salaries or remuneration, and to require security as and when they think fit.

(7) To confer upon any officer of the corporation the power to appoint, remove and suspend subordinate officers and agents.

(8) To determine who shall be authorized, on behalf of the corporation, to make and sign bills, notes, acceptances, endorsements, contracts and other instruments.

(9) To determine who shall be entitled, in the name and on behalf of the corporation, to vote upon or to assign and transfer any shares of stock, bonds or other securities of other corporations held by this corporation.

(10) To delegate any of the powers of the Board, in relation to the ordinary business of the corporation, to any standing or special committee, or to any officer or agent (with power to sub-delegate), upon such terms as they deem fit.

(11) To call special meetings of the stockholders for any purpose or purposes.

(12) To appoint the accountants and attorneys for the corporation.

Section 16. Compensation. Directors shall receive a stated salary for their services as Directors and, by resolution of the Board, a fixed fee and expenses for attendance at each meeting.

Nothing herein contained shall be construed to preclude any Director from serving the corporation in any other capacity as an officer, agent, or otherwise, and as to Independent Directors, receiving compensation therefor.

ARTICLE IV

COMMITTEES

Section 1. Appointments and Powers. The Board of Directors may, by resolution or resolutions passed by a majority of the whole Board, designate one or more committees. The Board of Directors may designate one or more Directors as alternate members of a committee who may replace any absent or disqualified member at any meeting of the committee. Such alternate members shall not be counted for purposes of determining a quorum unless so appointed, in which case they shall be counted in the place of the absent or disqualified member. The committee, to the extent provided in said resolution or resolutions or in these Bylaws, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation and may have power to authorize the seal of the corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be stated in these Bylaws or as may be determined from time to time by resolution adopted by the Board of Directors.

Section 2. Minutes. Committees shall keep regular minutes of their proceedings, and report the same to the Board of Directors when required.

Section 3. Audit Committee. The Audit Committee shall select and engage in behalf of the corporation, and fix the compensation of, a firm of certified public accountants whose duty it shall be to audit the books and accounts of the corporation and its subsidiaries for the fiscal year in which they are appointed, and who shall report to such Committee. The Audit Committee shall confer with the auditors and shall determine, and from time to time shall report to the Board of Directors upon the scope of the auditing of the books and accounts of the corporation and its subsidiaries. The Audit Committee shall also be responsible for determining that the business practices and conduct of employees and other representatives of the corporation and its subsidiaries comply with the policies and procedures of the corporation. None of the members of the Audit Committee shall be officers or employees of the corporation.

Section 4. Investment Committee. The Investment Committee shall consist solely of Independent Directors and shall have the power to approve real estate acquisition and other investments in the best interests of the corporation. The Investment Committee shall have such other powers as may be delegated by the Board of Directors from time to time. The Investment Committee shall also have the special duties described in ARTICLE III, SECTION 13.

ARTICLE V

OFFICERS

Section 1. Officers. The officers shall be elected at the first meeting of the Board of Directors after each annual meeting of stockholders. The Directors shall elect a Chairman, a Chief Executive Officer, a President, a Secretary and a Treasurer and one or more Vice Presidents as they may deem proper. Any person may hold two or more offices.

The Board of Directors may appoint such other officers and agents as it may deem advisable, who shall hold office for such terms and shall exercise such powers and perform such duties as shall from time to time be determined by the Board of Directors.

Section 2. Chairman. The Chairman, if one be elected, shall preside at all meetings of the Board of Directors and stockholders, and he shall have and perform such other duties as from time to time may be assigned to him by the Board of Directors.

Section 3. Chief Executive Officer. The Chief Executive Officer shall have the general powers and duties of supervision and

management usually vested in the office of Chief Executive Officer of a corporation. He shall have general supervision, direction and control of the business of the corporation. Except as the Board of Directors shall authorize the execution thereof in some other manner, he shall execute bonds, mortgages and other contracts on behalf of the corporation, and he shall cause the corporate seal to be affixed to any instrument requiring it, and when so affixed the seal shall be attested by the Secretary or Treasurer, or an Assistant Secretary or an Assistant Treasurer.

Section 4. President. The President shall have the general powers and duties of supervision and management usually vested in the office of President of a corporation. He shall have general supervision, direction and control of the business of the corporation. Except as the Board of Directors shall authorize the execution thereof in some other manner, he shall execute bonds, mortgages and other contracts on behalf of the corporation, and he shall cause the corporate seal to be affixed to any instrument requiring it, and when so affixed the seal shall be attested by the Secretary or Treasurer, or an Assistant Secretary or an Assistant Treasurer.

Section 5. Vice Presidents. Each Vice President shall have such powers and shall perform such duties as are usually vested in the office of Vice President of a corporation. He shall have general supervision, direction and control of the business of the corporation. Except as the Board of Directors shall authorize the execution thereof in some other manner, he shall execute bonds, mortgages and other contracts on behalf of the corporation, and he shall cause the corporate seal to be affixed to any instrument requiring it, and when so affixed the seal shall be attested by the Secretary or Treasurer, or an Assistant Secretary or an Assistant Treasurer.

Section 6. Secretary. The Secretary shall give, or cause to be given, notice of all meetings of stockholders and Directors, and all other notices required by law or by these Bylaws, and, in case of his absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the Chairman, the Chief Executive Officer, the President, the Board of Directors, or the stockholders, upon whose requisition the meeting is called as provided in these Bylaws. He shall record all proceedings of meetings of the stockholders and of the Board of Directors in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him by the directors or the President. He shall have custody of the corporate seal, and shall affix said seal to all instruments requiring it, when authorized by the Board of Directors or the President, and shall attest the same.

Section 7. Treasurer. The Treasurer shall have the custody of the corporate funds and securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation. He shall deposit all monies and other valuables in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors.

The Treasurer shall disburse the funds of the corporation as may be ordered by the Board of Directors or the President, taking proper vouchers for such disbursements. He shall render to the President and the Board of Directors, at the regular meetings of the Board, or whenever they may request it, an accounting of all his transactions as Treasurer, and of the financial condition of the corporation.

If required by the Board of Directors, he shall give the corporation a bond for the faithful discharge of his duties, in such amount and with such surety as the Board shall prescribe.

Section 8. Assistant Secretaries and Assistant Treasurers. Assistant Secretaries and Assistant Treasurers, if any, shall be appointed by the Chief Executive Officer, the President or Vice President and shall have such powers and shall perform such duties as shall be assigned to them, respectively, by the Secretary and by the Treasurer.

ARTICLE VI

RESIGNATIONS; FILLING OF VACANCIES;

INCREASE IN NUMBER OF DIRECTORS;

REMOVAL FROM OFFICE

Section 1. Resignations. Any Director, member of a committee, or other officer may resign at any time. Such resignation shall be made in writing, and shall take effect at the time specified therein, and, if no time be specified, at the time of its receipt by the Board of Directors, the President or the Secretary. The acceptance of a resignation shall not be necessary to make it effective.

Section 2. Filling of Vacancies. If the office of any officer, Director or member of a committee becomes vacant, the remaining Directors in office, although less than a quorum, may appoint, by a majority vote, any qualified person to fill such vacancy, who shall hold office for the unexpired term of his predecessor, or until his successor is elected and shall have qualified. Independent Directors shall fill vacancies among the Independent Directors’ positions. Each Independent Director shall hold office for the unexpired term of his predecessor, or until his successor is elected and qualified.

Any vacancy occurring by reason of an increase in the number of Directors may be filled by action of a majority of the entire

Board, for a term of office continuing only until the next election by the stockholders of Directors within the Group to which the new Director is appointed, or may be filled by the affirmative vote of the holders of a majority of the shares then entitled to vote at an election of Directors.

Section 3. Removal From Office. At a meeting of stockholders expressly called for such purpose, any or all members of the Board of Directors may be removed, with or without cause, by a vote of the holders of not less than two-thirds (2/3) of the issued and outstanding capital stock entitled to vote thereon or by a unanimous vote of all other members of the Board of Directors, and said stockholders may elect a successor or successors to fill any resulting vacancies, for the unexpired terms of the removed Directors.

Any officer or agent, or member of a committee elected or appointed by the Board of Directors, may be removed by said Board whenever, in its judgment, the best interests of the corporation shall be served thereby.

ARTICLE VII

CAPITAL STOCK

Section 1. Certificates of Stock. Certificates of stock, numbered, and with the seal of the Corporation affixed, signed by the Chairman, the Chief Executive Officer, the President or a Vice President, and the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer, shall be issued to each stockholder, certifying to the number of shares owned by him in the corporation. Whenever any certificate is countersigned, or otherwise authenticated by a transfer agent or registrar, the signatures of such Chairman, Chief Executive Officer, President or Vice President, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer may be facsimiles.

In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer at the date of its issue.

Section 2. Lost Certificates. A new certificate of stock may be issued in place of any certificate theretofore issued by the corporation and alleged to have been lost or destroyed, and the Directors may, at their discretion, request the owner of the lost or destroyed certificate, or his legal representative, to give the corporation a bond, in such sum as they may direct, but not exceeding double the value of the stock, to indemnify the corporation against any claim that may be made against it on account of the alleged loss of any such certificate.

Section 3. Transfer of Shares. Subject to the restrictions that may be contained in the Articles of Incorporation, the shares of

stock of the corporation shall be transferable only upon its books by the holders thereof in person or by their duly authorized representatives.

Section 4. Dividends. Subject to the provisions of the Articles of Incorporation and the laws of the State of Maryland, the Board of Directors may, at any regular or special meeting, declare dividends upon the capital stock of the corporation, as and when they may deem expedient.

ARTICLE VIII

MISCELLANEOUS PROVISIONS

Section 1. Corporate Seal. The Board of Directors shall adopt a common seal of the corporation. Said seal shall be circular in form and shall contain the name of the corporation, Nationwide Health Properties, Inc., the date of its organization, and the words: “Incorporated-Maryland.” It may be used by causing it or a facsimile thereof to be impressed, affixed, or otherwise reproduced.

Section 2. Fiscal Year. The fiscal year of the corporation shall end on the 31st day of December of each calendar year.

Section 3. Checks, Drafts, Notes. All checks, drafts, or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation, and in such manner as from time to time shall be determined by resolution of the Board of Directors.

Section 4. Corporate Records. The corporation shall keep correct and complete books of account and minutes of the proceedings of its stockholders and Directors.

The corporation shall keep and maintain at its principal offices a certified copy of its Articles of Incorporation and all amendments thereto, a certified copy of its Bylaws and all amendments thereto, a stock ledger or duplicate stock ledger, revised annually, containing the names, alphabetically arranged, of all stockholders, their residence addresses, and the number of shares held by them, respectively. In lieu of the stock ledger or duplicate stock ledger, a statement may be filed in the principal office stating the name of the custodian of the stock ledger or duplicate stock ledger, and the present and complete post office address (including street and number, if any) where such stock ledger or duplicate stock ledger is kept.

The Independent Directors shall take all reasonable steps to assure that a full and correct annual statement of the affairs of the

corporation is prepared annually, including a balance sheet and a financial statement of operations for the preceding fiscal year which shall be certified by independent certified public accountants, and distributed to stockholders within 120 days after the close of the corporation’s fiscal year and a reasonable period of time prior to the annual meeting of stockholders. Such annual statement shall also be submitted at the annual meeting and shall be filed within twenty (20) days thereafter at the principal office of the corporation. The Independent Directors shall also be responsible for scheduling the annual meeting of stockholders.

Section 5. Notice and Waiver of Notice. Whenever, pursuant to the laws of the State of Maryland or these Bylaws, any notice is required to be given, personal notice is not meant unless expressly so stated, and any notice so required shall be deemed to be sufficient if given by depositing the same in the United States mail, postage prepaid, addressed to the person entitled thereto at his address as it appears on the records of the corporation, and such notice shall be deemed to have been given on the day of such mailing. Stockholders not entitled to vote shall not be entitled to receive notice of any meetings except as otherwise provided by statute.

Any notice required to be given may be waived, in writing by the person or persons entitled thereto, whether before or after the time stated therein.

Section 6. Inspectors. The Board of Directors may, in advance of any meeting of stockholders, appoint one or more inspectors to act at such meeting or any adjournment thereof. If the inspectors shall not be so appointed or if any of them shall fail to appear or act, the chairman of the meeting may, and on the request of any stockholder entitled to vote thereat shall, appoint inspectors. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath to execute faithfully the duties of inspector at such meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do such acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting or any stockholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. No Director or candidate for the office of Director shall act as inspector of an election of Directors. Inspectors need not be stockholders.

Section 7. Certain Policies of the Corporation. Notwithstanding any other provisions of these Bylaws, the corporation shall not engage in any of the following activities:

(i) investing in any junior mortgage loan unless by appraisal or other method the Independent Directors determine that (a)

capital invested in any such loan is adequately secured on the basis of the equity of the borrower in the property underlying such investment and the ability of the borrower to repay the mortgage loan or (b) such loan is a financing device entered into by the Company to establish the priority of its capital investment over the capital invested by others investing with the Company in a real estate project;

(ii) investing in commodities or commodity future contracts (other than interest rate futures, when used solely for hedging purposes);

(iii) investing more than 1% of the Company’s total assets in contracts for the sale of real estate unless such contracts are recordable in the chain of title;

(iv) issuing securities that are redeemable at the option of the holders thereof;

(v) granting warrants or options to purchase voting capital stock of the Company unless such warrants or options (a) are issued at an exercise price greater than or equal to the fair market value of the voting capital stock of the Company on the date of the grant and for consideration (including services) that in the judgment of a majority of the Independent Directors has a market value at least equal to the value of the warrant or option on the date of grant, (b) are exercisable within five years from the date of grant and (c) when aggregated with all other outstanding options and warrants are less than 10% of the then outstanding shares of the Company’s voting capital stock on the date of grant; provided that terms of warrants or options that are issued ratably to the holders of all voting capital stock or as part of a financing arrangement need not meet the above restrictions;

(vi) holding equity investments in unimproved, non-income producing real property; except such properties as are currently undergoing development or are presently intended to be developed within one year; together with mortgage loans on such property (other then first mortgage development loans), aggregating to more than 10% of the Company’s assets;

(vii) engaging in trading (as compared with investment activities) or engaging in the underwriting of or distributing as agent the securities issued by others;

(viii) making secured and unsecured borrowings which in the aggregate exceed 300% of the net assets of the Company; unless such borrowing is approved by a majority of the Independent Directors;

(ix) undertaking any activity that would disqualify the Company as a real estate investment trust under the provisions of the

Code as long as a real estate investment trust is accorded substantially that same treatment or benefits under the United States tax laws from time to time in effect as under Sections 856-860 of the Code at the date of adoption of the Company’s Bylaws; and

(x) acquiring any real property unless the consideration paid for such real property is based on the fair market value of the property as determined by a majority of the directors.

ARTICLE IX

AMENDMENTS TO BYLAWS

Section 1. Amendment of Shareholders. New Bylaws may be adopted or these Bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote.

Section 2. Amendment by Directors. Subject to the right of the shareholders as provided in Section 1 of this Article IX, to adopt, amend, or repeal Bylaws, Bylaws may be adopted, amended, or repealed by the Board of Directors; provided, however, that the provisions of Sections 2, 12 and 13 of Article III and of Section 4 of Article IV with respect to Independent Directors may not be amended by the Board of Directors, and provided further that the Board of Directors may adopt an amendment of a Bylaw changing the authorized number of directors only within the limits specified in the Articles of Incorporation or in Section 1 of Article III of these Bylaws.

ARTICLE X

INDEMNIFICATION OF OFFICERS AND DIRECTORS

Section 1. Indemnification. The corporation shall indemnify and hold harmless, and shall pay expenses incurred by or satisfy a judgement or fine levied against, each officer, director and other person, in the manner and to the full extent permitted by the General Corporation Law of the State of Maryland.

Section 2. Provisions Not Exclusive. This Article shall not be construed as a limitation upon the power of the corporation to enter into contracts or undertakings of indemnity with a director, officer, employee or agent of the corporation, nor shall it be construed as a limitation upon any other rights to which a person seeking indemnification may be entitled under any agreement, vote of stockholders or disinterested directors or otherwise, both as to actions in his official capacity and as to action in another capacity while holding office.

CERTIFICATE OF SECRETARY

I, DON M. PEARSON, Secretary of Nationwide Health Properties, Inc., hereby certify that the attached Bylaws, as Amended and Restated, comprising 16 pages, constitute the Bylaws of this corporation as Amended and Restated, and the same are in full force and effect as of this 28rd day of January, 2003.

IN WITNESS WHEREOF, I have executed this certificate and caused the seal of said corporation to be affixed hereto as of this 28th day of January, 2003.

/s/ DON M. PEARSON

Don M. Pearson

(SEAL)

EX-10.1 4 dex101.htm FORM OF INDEMNITY AGREEMENT Form of Indemnity Agreement

Exhibit 10.1

INDEMNITY AGREEMENT

This Agreement is made as of the day of , by and between Nationwide Health Properties, Inc., a Maryland corporation (“NHP”), and (the “[Director/Officer]”), with reference to the following facts:

The [Director/Officer] has been elected as a [Director/Officer] of NHP and NHP wishes the [Director/Officer] to continue in such capacity. The [Director/Officer] is willing, under certain circumstances, to continue serving as a [Director/Officer] of NHP.

In order to induce the [Director/Officer] to continue to serve as a [Director/Officer] of NHP and in consideration of his continued service, NHP hereby agrees to indemnify the [Director/Officer] as follows:

1. NHP will pay on behalf of the [Director/Officer] and his executors or administrators, any amount which the [Director/Officer] is or becomes legally obligated to pay because of any claim or claims made against him as a result of any act or omission or neglect or breach of duty, including any actual or alleged error or misstatement or misleading statement, which he commits or suffers, or committed or suffered prior to the date hereof, while acting in his capacity as a [Director/Officer] of NHP. The payments which NHP will be obligated to make hereunder shall include judgments, penalties, fines, settlements, and reasonable expenses actually incurred by the [Director/Officer] in connection with the proceeding, including attorney fees, claims or proceedings and appeals therefrom, and costs of attachment or similar bonds; provided, however, that NHP shall not be obligated to make any payment hereunder which it is prohibited from paying as indemnity, or for any other reason, under federal or state securities laws or any other applicable law.

2. If a claim under this Agreement is not paid by NHP, or on its behalf, within thirty days after a written claim has been received by NHP, the [Director/Officer] may at any time thereafter bring suit against NHP to recover the unpaid amount of the claim and if successful in whole or in part, the [Director/Officer] shall be entitled to be paid also the expense of prosecuting such claim. It is specifically understood and agreed that expenses incurred by the [Director/Officer] in defending any claim shall be paid or reimbursed by NHP in advance of the final disposition thereof upon receipt by NHP of (i) a written affirmation by the [Director/Officer] of the [Director/Officer]’s good faith belief that the standard of conduct necessary under Paragraph 4 hereof for indemnification was met, and (ii) a written undertaking by or on behalf of the [Director/Officer] to repay advanced amounts if it shall ultimately be determined by judgment or other final adjudication adverse to the [Director/Officer] that the standard under Paragraph 4 hereof has not been met.

3. In the event of payment under this Agreement, NHP shall be subrogated to the extent of such payment to all of the rights of recovery of the [Director/Officer], who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable NHP effectively to bring suit to enforce such rights.

4. NHP shall not be liable under this Agreement to make any payment in connection with any claim made against the [Director/Officer]:

(a) if the proceeding was one by or in the right of NHP and the [Director/Officer] shall have been adjudged to be liable to NHP.

(b) for which payment is actually made to the [Director/Officer] under a valid and collectible insurance policy, except in respect of any excess beyond the amount of payment under such insurance, and any applicable deductible;

(c) for which the [Director/Officer] is entitled to indemnity and/or payment by reason of having given notice of any circumstance which might give rise to claim under any policy of insurance, the terms of which have expired prior to the effective date of this Agreement;

(d) in any proceeding in which the [Director/Officer] is adjudged to be liable on the basis that a personal benefit in money, property or services was improperly received by the [Director/Officer];

(e) for an accounting of profits made from the purchase or sale by the [Director/Officer] of securities of NHP within the meaning of Section 16(b) of the Securities Exchange Act of 1934 and amendments thereto or

similar provisions of any state statutory law or common law;

(f) where the act or omission of the [Director/Officer] was material to the cause of action in connection with which indemnification is sought and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty; or

(g) where, in the case of any criminal proceeding, the [Director/Officer] had reasonable cause to believe that the act or omission giving rise to the claim for which indemnification is sought was unlawful.

5. The termination of any proceeding by judgment, order, or settlement does not create a presumption that the [Director/Officer] did not meet the requisite standard of conduct. The termination of any proceeding by conviction, or a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the [Director/Officer] did not meet that standard of conduct.

6. The [Director/Officer], as a condition precedent to his right to be indemnified under this Agreement, shall give to NHP notice in writing as soon as practicable of any claim made against him for which indemnity will or could be sought under this Agreement. Notice to NHP shall be given at its principal office (or such other address as NHP shall designate in writing to the [Director/Officer]), and shall be directed to the President; notice shall be sent by certified mail return receipt with postage prepaid, or by facsimile or by courier and shall be deemed received on receipt of facsimile or courier confirmation or as evidenced by a certified mail return receipt. In addition, the [Director/Officer] shall give NHP such information and cooperation as it may reasonably require and as shall be within the [Director/Officer]’s power.

7. This Agreement supersedes and replaces any prior agreement. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one instrument.

8. This Agreement shall be governed by and construed in accordance with Maryland law.

9. Nothing herein shall be deemed to diminish or otherwise restrict the [Director/Officer]’s right to indemnification under any provision of NHP’s Charter or Bylaws and amendments thereto, or under the Maryland General Corporation Law. It is the intent of this Agreement that the [Director/Officer] herein shall be indemnified to the fullest extent possible under the Maryland General Corporation Law, and NHP’s Charter and Bylaws, as the same may be amended from time to time. This Agreement shall in no way limit indemnification to the maximum extent permitted by the Maryland General Corporation Law.

However, to the extent that this Agreement, or NHP’s Charter or Bylaws provides for indemnification or other rights in addition to those of Section 2- 418 of the Maryland General Corporation Law, such indemnification and/or other rights shall be valid under Section 2-418(g) of the Maryland General Corporation Law, unless expressly limited by the Maryland General Corporation Law or other applicable law.

10. In case one or more of the provisions contained in this Agreement (or any portion of any such provision) shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement (or any portion of any such provision), but this Agreement shall be construed as if such invalid, illegal or unenforceable provision (or portion thereof) had never been contained herein.

11. This Indemnity Agreement shall be applicable during [Director/Officer]’s time of service as a [Director/Officer] and for any applicable limitations period thereafter.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and signed as of the day and year first above written.


, [Director/Officer]

NATIONWIDE HEALTH PROPERTIES, INC.

By

Name

Title

EX-99.1 5 dex991.htm 1350 CERTS 1350 Certs

Exhibit 99.1

WRITTEN STATEMENT

PURSUANT TO

18 U.S.C. SECTION 1350

The undersigned, R. Bruce Andrews, the Chief Executive Officer, of Nationwide Health Properties, Inc. (the “Company”), pursuant to 18 U.S.C. §1350, hereby certifies that, to the best of my knowledge:

(i) the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 of the Company (the “Report”) fully complies with the requirements of section 13(a) and 15(d) of the Securities Exchange Act of 1934; and

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 13, 2003

/s/ R. BRUCE ANDREWS

R. Bruce Andrews

President and Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

WRITTEN STATEMENT

PURSUANT TO

18 U.S.C. SECTION 1350

The undersigned, Mark L. Desmond, the Chief Financial Officer, of Nationwide Health Properties, Inc. (the “Company”), pursuant to 18 U.S.C. §1350, hereby certifies that, to the best of my knowledge:

(ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: May 13, 2003

/s/ MARK L. DESMOND

Mark L. Desmond

Senior Vice President and Chief Executive Officer

-----END PRIVACY-ENHANCED MESSAGE-----

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