-----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, AiPq8TkYMiXbUHN992TvhX9YUf+X0rZG8ttFEKgRUC2mQfGtimG7xG+GN70kO6tc rjRMkRhdtfbPxEdKUE+/Lg== 0000908737-96-000114.txt : 19960517 0000908737-96-000114.hdr.sgml : 19960517 ACCESSION NUMBER: 0000908737-96-000114 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTH & RETIREMENT PROPERTIES TRUST CENTRAL INDEX KEY: 0000803649 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 046558834 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09317 FILM NUMBER: 96565946 BUSINESS ADDRESS: STREET 1: 400 CENTRE ST CITY: NEWTON STATE: MA ZIP: 02158 BUSINESS PHONE: 6173323990 MAIL ADDRESS: STREET 1: 400 CENTRE STREET CITY: NEWTON STATE: MA ZIP: 02158 FORMER COMPANY: FORMER CONFORMED NAME: HEALTH & REHABILITATION PROPERTIES TRUST DATE OF NAME CHANGE: 19920703 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 OR [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File Number 1-9317 HEALTH AND RETIREMENT PROPERTIES TRUST (Exact name of registrant as specified in its charter) Maryland 04-6558834 - ---------------------------- -------------------------------- (State or other jurisdiction (IRS Employer Identification No.) of incorporation) 400 Centre Street, Newton, Massachusetts 02158 (Address of principal executive offices) (Zip Code) 617-332-3990 (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 [ ] Number of Common Shares outstanding at the latest practicable date May 14, 1996: 66,200,726 shares of beneficial interest, $.01 par value. HEALTH AND RETIREMENT PROPERTIES TRUST FORM 10-Q MARCH 31,1996 INDEX PART I Financial Information Page Item 1. Financial Statements (Unaudited) Balance Sheets - March 31, 1996 and December 31, 1995 1 Statements of Income - Three Months Ended March 31, 1996 and 1995 2 Statements of Cash Flows - Three Months Ended March 31, 1996 and 1995 3 Note to Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 6 PART II Other Information Item 6 Exhibits and Reports on Form 8-K 7 Signatures 8
HEALTH AND RETIREMENT PROPERTIES TRUST BALANCE SHEETS (dollars in thousands, except per share amounts) (unaudited) March 31, December 31, 1996 1995 ---------------- ---------------- ASSETS Real estate properties, at cost (including properties leased to affiliates with a cost of $104,309 and $103,324, respectively): Land....................................................... $ 73,323 $ 72,124 Buildings and improvements................................. 718,288 706,087 ----------- 791,611 778,211 Less accumulated depreciation............................... 60,906 55,855 ----------- ----------- 730,705 722,356 Real estate mortgages and notes, net (including note to affiliate of $1,565)................................................ 156,821 141,307 Investment in Hospitality Properties Trust...................... 99,731 99,959 Cash and cash equivalents....................................... 20,824 18,640 Interest and rents receivable................................... 8,209 7,895 Deferred interest and finance costs, net, and other assets...... 7,356 9,520 ----------- ---------- $ 1,023,646 $ 999,677 =========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Bank notes payable ............................................. $ 80,000 $ 53,000 Senior notes and bonds payable, net............................. 216,820 216,759 Accounts payable and accrued expenses........................... 11,546 11,597 Security deposits............................................... 6,020 7,386 Due to affiliates............................................... 1,070 2,351 Dividends payable............................................... -- 22,992 Commitments and contingencies Shareholders' equity: Preferred shares of beneficial interest, $.01 par value: 50,000,000 shares authorized, none issued.................. -- -- Common shares of beneficial interest, $.01 par value: 100,000,000 shares authorized, 66,165,166 shares and 65,690,166 shares issued and outstanding, respectively .... 662 657 Additional paid-in capital .................................. 782,678 775,688 Cumulative net income........................................ 248,813 233,044 Dividends ................................................... (323,963) (323,797) Total shareholders' equity................................. 708,190 685,592 ----------- ------------ $ 1,023,646 $ 999,677 =========== ============
See accompanying notes 1
HEALTH AND RETIREMENT PROPERTIES TRUST STATEMENTS OF INCOME (Amounts in thousands, except per share amounts) (unaudited) Three Months Ended March 31, ----------------------------------- 1996 1995 ---------------- ------------- Revenues: Rental income.................................................. $ 22,938 $ 19,530 Interest income................................................ 4,798 6,462 Total revenues............................................... 27,736 25,992 --------------- ------------ Expenses: Interest....................................................... 4,961 4,131 Depreciation and amortization.................................. 5,182 4,615 General and administrative..................................... 1,473 1,414 Total expenses............................................... 11,616 10,160 --------------- ------------ Income before equity in earnings of Hospitality Properties Trust, gain on sale of property and extraordinary item 16,120 15,832 Equity in earnings of Hospitality Properties Trust 2,092 -- --------------- ------------ Income before gain on sale of property and extraordinary item 18,212 15,832 .................................................................. Gain on sale of property.......................................... - 2,476 --------------- ------------ Income before extraordinary item.................................. 18,212 18,308 Extraordinary item - early extinguishment of debt................. (2,443) -- Net income........................................................ $15,769 $ 18,308 =============== ============ Weighted average share outstanding................................ 66,155 58,554 =============== ============ Per share amounts: Income before gain on sale of properties and extraordinary item $0.28 $0.27 =============== ============ Income before extraordinary item............................... $0.28 $0.31 =============== ============ Net income..................................................... $0.24 $0.31 =============== ============
See accompanying notes 2
HEALTH AND RETIREMENT PROPERTIES TRUST STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited) For the Three Months Ended March 31, ----------------------------- 1996 1995 ---------- --------- Cash flows from operating activities: Net income $ 15,769 $ 18,308 Adjustments to reconcile net income to cash provided by operating activities: Gain on sale of property -- (2,476) Equity in earnings of Hospitality Properties Trust (2,092) -- Extraordinary item 2,443 -- Depreciation and amortization 5,182 4,615 Amortization of deferred interest costs 428 266 Change in assets and liabilities: Increase in interes(662) rents recei(6,186)nd other assets (662) (6,186) Increase (decrease) in security deposits (1,366) 1,000 Decrease in accounts payable and accrued expenses (51) (3,414) Decrease in due to affiliate (1,281) (1,091) --------- --------- Cash provided by operating activities 18,370 11,022 --------- --------- Cash flows from investing activities: Real estate acquisitions (13,400) (170,861) Investments in mortgage loans (15,293) (11,743) Proceeds from repayment of notes and mortgage loans -- 8,110 Proceeds from sale of real estate -- 5,000 Dividend from Hospitality Properties Trust 2,320 -- --------- --------- Cash used for investing activities (26,373) (169,494) --------- --------- Cash flows from financing activities: Proceeds from issuance of common shares 6,995 -- Proceeds from borrowings 27,000 150,000 Deferred finance costs (650) (919) Dividends paid (23,158) (19,511) --------- --------- Cash provided by financing activities 10,187 129,570 --------- --------- Increase (decrease) in cash 2,184 (28,902) Cash and cash equivalents at beginning of period 18,640 59,766 --------- --------- Cash and cash equivalents at end of period $ 20,824 $ 30,864 ========= ========= Supplemental cash flow information: Interest paid $ 5,058 $ 3,302 ========= ========= Non-cash investing and financing activities: Purchase of real estate $ -- $ (42,384) Sale of real estate -- 19,550 Issuance of shares -- 24,684 Investment in mortgage loan -- (19,500) Increase in security deposit -- 17,940
See accompanying notes 3 HEALTH AND RETIREMENT PROPERTIES TRUST NOTES TO FINANCIAL STATEMENTS (dollars in thousands, except per share data) Note 1. Basis of Presentation The financial statements of Health and Retirement Properties Trust (the "Company") have been prepared in accordance with generally accepted accounting principals for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. Note 2. Shareholders' Equity On April 10, 1996, the Trustees declared a dividend on the Company's common shares of beneficial interest with respect to the quarter ended March 31, 1996, of $0.35, which will be distributed on or about May 21, 1996 to shareholders of record as of April 25, 1996. In January, 1996, the Company issued 475,000 shares, resulting in net proceeds of approximately $6,995, from the underwriters exercise of the over-allotment option pursuant to the December 1995 equity offering by the Company. In addition, in April, 1996, the Company issued 35,560 restricted shares of common stock to HRPT Advisors, Inc. (the "Advisor"), an affiliate, as compensation for the incentive fee earned for the year ended December 31, 1995. Note 3. Real Estate Properties In February 1996, the Company purchased for approximately $12,059 a medical building located in New York pursuant to a twenty year lease. The Company also provided $1,341 of improvement financing to existing tenants, of which $987 was funded to an affiliate of the Company. These transactions were funded with cash on hand and a $12,000 draw on the Company's revolving credit facility. At March 31, 1996, 31% of the Company's real estate properties, net, and mortgage receivables were in properties leased to Marriott International, Inc. ("Marriott"). The financial statements of Marriott have been filed as a part of Marriott's Quarterly Report on Form 10-Q, file number 1-12188, for the quarter ended March 22, 1996. At March 31, 1996, the Company had total commitments aggregating $13,994 to finance improvements to certain properties leased or mortgaged by the Company and to purchase a medical clinic. Note 4. Investment in Hospitality Properties Trust At March 31, 1996, the Company owned 4,000,000 shares of the common stock of Hospitality Properties Trust ("HPT") with a carrying value of $99,731 and market value of $107,000. During April 1996, HPT completed a public stock offering of 14,250,000 shares of common stock at a per share price of $26.625. After the completion of HPT's public offering, the Company's percentage of ownership of HPT is 14.9%. Pursuant to the HPT offering, the Company will realize a gain of approximately $3,600. Note 5. Real Estate Mortgages and Notes Receivable, net During the first quarter of 1996, the Company provided debt financing totaling $15,281. A $5,000 mortgage loan is secured by a retirement community and a $10,000 note is cross-collateralized by properties under existing mortgages with the Company. These mortgage and notes receivable bear interest between 10.5% and 11% and mature between 2006 and 2008. The financings were funded by $15,000 of drawings on the Company's revolving credit facility. The Company also provided improvement financing for existing facilities of $281. 4 HEALTH AND RETIREMENT PROPERTIES TRUST NOTES TO FINANCIAL STATEMENTS (dollars in thousands, except per share data) Note 6. Indebtedness In March 1996, the Company entered into a new agreement and restructured its $250 million unsecured revolving bank credit facility. The restated credit facility matures in 2000 and bears interest at LIBOR plus 0.875% per annum. In connection with the restructuring, the Company recognized an extraordinary loss of $2,443 from the early extinguishment of debt. At March 31, 1996, $80,000 was outstanding under the credit facility. On April 12, 1996, the Company prepaid the Revenue Refunding Bonds totaling $17,620 with $9,620 cash on hand and an $8,000 draw on its revolving credit facility. 5 HEALTH AND RETIREMENT PROPERTIES TRUST MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS Total revenues for the quarter ended March 31, 1996, increased to $27,736,000 from $25,992,000 for the quarter ended March 31, 1995. Rental income increased to $22,938,000 from $19,530,000, while interest income decreased to $4,798,000 from $6,462,000 during the comparable period. Rental income increased primarily as a result of new real estate investments subsequent to March 31, 1995, the full quarter impact of nine properties acquired during January, 1995, and increases in participating rent. Interest income decreased as a result of mortgage loan payoffs subsequent to March 31, 1995 and lower cash balances compared to the quarter ended March 31, 1995. Total expenses for the quarter ended March 31, 1996, increased to $11,616,000 from $10,160,000 for the quarter ended March 31, 1995. The increase is the result of increases in interest, depreciation and general and administrative expenses of $830,000, $567,000 and $59,000, respectively. Interest expense increased due to higher borrowings outstanding under its revolving credit facility during the comparable periods. Depreciation and general and administrative increased as a result of new investments since March 31, 1995. Net income for the quarter ended March 31, 1996 decreased to $15,769,000, or $.24 per share, from $18,308,000, or $.31 per share, for the same quarter in 1995. The decrease is the result of an extraordinary loss of $2,443,000 related to the early retirement of debt during March 1996, and the $2,476,000 gain on sale of real estate during January 1995. Income before gain on sale of real estate and extraordinary item increased to $18,212,000, or $.28 per share, from $15,832,000, or $.27 per share, primarily as a result of new investments since March 31, 1995, primarily the Company's equity investment in Hospitality Properties Trust. On a per share basis, net income has been diluted by the issuance of additional common shares issued since March 31, 1995. The Company bases its dividend primarily on Funds from Operations ("FFO"). The Company has adopted the National Association of Real Estate Investment Trust's ("NAREIT") definition of FFO, defined as income before equity in earnings of HPT, gain (loss) on sale of real estate and extraordinary items, plus depreciation and the Company's proportionate share of HPT's FFO. FFO for the 1996 quarter was $24,161,000, or $.37 per share, as compared to $20,059,000, or $.34 per share, for the 1995 quarter. Cash available for distribution may not necessarily equal FFO as the cash flow of the Company is affected by other factors not included in the FFO calculation. The dividends declared which relate to these quarters were $23,158,000, or $.35 per share, in 1996 and $20,121,000, or $.34 per share, in 1995. LIQUIDITY AND CAPITAL RESOURCES Assets of the Company increased to $1.02 billion at March 31, 1996 from $999.7 million at December 31, 1995. The increase is primarily attributable to new acquisitions and the issuance of additional mortgage loans. In February 1996, the Company purchased for approximately $12,059,000 a medical building located in New York which is leased for twenty years. The Company also provided $1,341,000 of improvement financing to existing tenants, of which $987,000 was funded to an affiliate of the Company. These transactions were funded with cash on hand and a $12,000,000 draw on the Company's revolving credit facility. During the first quarter of 1996, the Company provided debt financing totaling $15,281,000. A $5,000,000 mortgage loan is secured by a retirement community and a $10,000,000 note is cross-collateralized by properties under existing mortgages with the Company. These mortgage and notes receivable bear interest between 10.5% and 11% and mature between 2006 and 2008. The financings were funded by $15,000,000 of drawings on the Company's revolving credit facility. The Company also provided improvement financing for existing facilities of $281,000. In January, 1996, the underwriters from the December, 1995, offering exercised the over-allotment option for 475,000 shares resulting in net proceeds of approximately $6,995,000. 6 HEALTH AND RETIREMENT PROPERTIES TRUST MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES - continued At March 31, 1996, the Company had $20,824,000 of cash and cash equivalents, and the ability to borrow up to an additional $170,000,000 under its revolving credit facility. The facility matures in 2000 and bears interest at a spread over LIBOR. The effective interest rates on the Company's Senior Notes are capped by the use of interest rate cap agreements. The interest rate cap agreements provide for maximum weighted average interest rates of approximately 6.24% on $200 million of its variable rate debt through 1997. At March 31, 1996, the Company had commitments to provide financing totaling approximately $13,994,000. The Company intends to fund these commitments with a combination of cash on hand, amounts available under its existing credit facilities and/or proceeds of mortgage prepayments, if any. The Company continues to seek new investments to expand and diversity its portfolio of leased and mortgaged health care related real estate. The Company intends to balance the use of debt and equity in such a manner that the long term cost of funds borrowed to acquire or mortgage finance facilities is appropriately matched, to the extent practicable, with the terms of the investments made with such borrowed funds. As of March 31, 1996, the Company's debt as a percentage of total market capitalization was approximately 21%. CERTAIN IMPORTANT FACTORS The Company's Quarterly Report on Form 10-Q contains statements which constitute forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Those statements appear in a number of places in this Form 10-Q and include statements regarding the intent, belief or expectations of the Company, its Trustees or its officers with respect to the declaration or payment of dividends, the consummation of additional acquisitions, policies and plans of the Company regarding investments, financings or other matters, the Company's qualification and continued qualification as a real estate investment trust or trends affecting the Company's or any healthcare property's financial condition or results of operations. Readers are cautioned that any such forward looking statements are not guarantees of future performance and involve risks and uncertainties, and that actual results may differ materially from those contained in the forward looking statements as a result of various factors. Such factors include without limitation changes in financing terms, the Company's ability or inability to complete acquisitions and financing transactions, results of operations of the Company's healthcare properties and general changes in economic conditions not presently contemplated. The information contained in this Form 10-Q and the Company's Annual Report on Form 10-K for the year ended December 31, 1995, including the information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations", identifies other important factors that could cause such differences. Part II Other Information Item 6 Exhibits and Reports on Form 8-K (a) Exhibits: 27 Financial Data Schedule (b) Reports on Form 8-K: None. 7 HEALTH AND RETIREMENT PROPERTIES TRUST SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HEALTH AND RETIREMENT PROPERTIES TRUST By: /S/ David J. Hegarty David J. Hegarty President and Chief Operating Officer Dated: May 15, 1996 By: /S/ Ajay Saini Ajay Saini Treasurer and Chief Financial Officer Dated: May 15, 1996 8 EX-27 2
5 1,000 US 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 1 20,824 0 156,821 0 0 0 791,611 60,906 1,023,646 0 296,820 0 0 662 707,528 1,023,646 0 27,736 0 11,616 0 0 4,961 18,212 0 18,212 0 (2,443) 0 15,769 .24 .24
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