-----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, VtF97qdeF/Y/f9zz2nInlthkT77AFdflpBMUzwd0MLywOuk08vqXCZXV8Zg6vdnI oeoGdzryglmzhiouYdRg/Q== 0000908737-99-000158.txt : 19990517 0000908737-99-000158.hdr.sgml : 19990517 ACCESSION NUMBER: 0000908737-99-000158 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HRPT 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: SEC FILE NUMBER: 001-09317 FILM NUMBER: 99622847 BUSINESS ADDRESS: STREET 1: 400 CENTRE ST CITY: NEWTON STATE: MA ZIP: 02458 BUSINESS PHONE: 6173323990 MAIL ADDRESS: STREET 1: 400 CENTRE STREET CITY: NEWTON STATE: MA ZIP: 02458 FORMER COMPANY: FORMER CONFORMED NAME: HEALTH & RETIREMENT PROPERTIES TRUST DATE OF NAME CHANGE: 19940811 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, 1999 OR [ ] 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 1-9317 HRPT 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 02458 (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 May 12, 1999: 131,894,237 shares of beneficial interest, $.01 par value.
HRPT PROPERTIES TRUST FORM 10-Q MARCH 31, 1999 INDEX Page PART I Financial Information Item 1. Consolidated Financial Statements (Unaudited) Consolidated Balance Sheets - March 31, 1999 and December 31, 1998 1 Consolidated Statements of Income - Three Months Ended March 31, 1999 and 1998 2 Consolidated Statements of Cash Flows - Three Months Ended March 31, 1999 and 1998 3 Notes to Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk 11 PART II Other Information Item 2. Changes in Securities 12 Item 6. Exhibits and Reports on Form 8-K 12 Signatures 14
HRPT PROPERTIES TRUST CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share amounts) (unaudited) March 31, December 31, 1999 1998 ------------ ------------ ASSETS Real estate properties, at cost (including properties leased to affiliates with a cost of $38,270 and $113,594, respectively): Land $ 364,228 $ 369,770 Buildings and improvements 2,501,146 2,586,712 ----------- ----------- 2,865,374 2,956,482 Less accumulated depreciation 167,501 169,811 ----------- ----------- 2,697,873 2,786,671 Real estate mortgages and notes, net (including note from an affiliate of $1,000 in 1998) 125,827 69,228 Investment in Hospitality Properties Trust 109,842 110,554 Cash and cash equivalents 32,575 15,643 Interest and rents receivable 34,305 36,229 Other assets, net 50,263 45,732 ----------- ----------- $ 3,050,685 $ 3,064,057 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Bank notes payable $-- $ 100,000 Senior notes payable, net 892,476 802,439 Mortgage notes payable 24,611 24,779 Convertible subordinated debentures 204,863 204,863 Accounts payable and accrued expenses 39,547 44,446 Deferred rents 33,957 34,162 Security deposits 18,435 18,383 Due to affiliates 11,145 7,192 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: 150,000,000 shares authorized, 131,893,126 shares and 131,547,178 shares issued and outstanding, respectively 1,319 1,315 Additional paid-in capital 1,971,146 1,964,878 Cumulative net income 612,417 564,814 Dividends (753,592) (703,214) Unrealized holding losses on investments (5,639) -- ----------- ----------- Total shareholders' equity 1,825,651 1,827,793 ----------- ----------- $ 3,050,685 $ 3,064,057 =========== =========== See accompanying notes
1
HRPT PROPERTIES TRUST CONSOLIDATED STATEMENTS OF INCOME (amounts in thousands, except per share amounts) (unaudited) Three Months Ended March 31, ------------------------------- 1999 1998 -------- -------- Revenues: Rental income $101,313 $ 66,894 Interest and other income 3,090 5,058 -------- -------- Total revenues 104,403 71,952 -------- -------- Expenses: Operating expenses 24,006 13,502 Interest 19,437 13,651 Depreciation and amortization 18,831 12,658 General and administrative 4,841 3,619 -------- -------- Total expenses 67,115 43,430 -------- -------- Income before equity in earnings of Hospitality Properties Trust and gain on sale of properties 37,288 28,522 Equity in earnings of Hospitality Properties Trust 2,008 1,327 Gain on equity transaction of Hospitality Properties Trust -- 1,532 -------- -------- Income before gain on sale of properties 39,296 31,381 Gain on sale of properties 8,307 -- -------- -------- Net income $ 47,603 $ 31,381 ======== ======== Weighted average shares outstanding 131,660 101,471 ======== ======== Basic and diluted earnings per common share: Income before gain on sale of properties $ 0.30 $ 0.31 ======== ======== Net income $ 0.36 $ 0.31 ======== ======== See accompanying notes
2
HRPT PROPERTIES TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited) Three Months Ended March 31, ---------------------------------- 1999 1998 ---------- --------- Cash flows from operating activities: Net income $ 47,603 $ 31,381 Adjustments to reconcile net income to cash provided by operating activities: Gain on sale of properties (8,307) -- Gain on equity transaction of Hospitality Properties Trust -- (1,532) Equity in earnings of Hospitality Properties Trust (2,008) (1,327) Dividends from Hospitality Properties Trust 2,720 2,560 Depreciation 18,217 12,128 Amortization 614 530 Amortization of bond discount 37 6 Change in assets and liabilities: Increase in interest and rents receivable and other assets (6,828) (6,554) (Decrease) increase in accounts payable and accrued expenses (265) 4,506 (Decrease) increase in deferred rents (205) 3,359 Increase (decrease) in security deposits 52 (949) Increase in due to affiliates 5,266 3,078 --------- --------- Cash provided by operating activities 56,896 47,186 --------- --------- Cash flows from investing activities: Real estate acquisitions and improvements (2,814) (278,647) Proceeds from repayment of notes and mortgage loans, net 2,618 18,678 Proceeds from sale of real estate 22,177 5,565 Loans to affiliate 1,000 1,365 --------- --------- Cash provided by (used for) investing activities 22,981 (253,039) --------- --------- Cash flows from financing activities: Proceeds from issuance of common shares -- 133,073 Proceeds from borrowings 131,500 334,945 Payments on borrowings (141,668) (225,172) Deferred finance costs incurred (2,399) (1,070) Dividends paid (50,378) (36,600) --------- --------- Cash (used for) provided by financing activities (62,945) 205,176 --------- --------- Increase (decrease) in cash and cash equivalents 16,932 (677) Cash and cash equivalents at beginning of period 15,643 22,355 --------- --------- Cash and cash equivalents at end of period $ 32,575 $ 21,678 ========= ========= Supplemental cash flow information: Interest paid $ 22,797 $ 13,775 ========= ========= See accompanying notes
3
HRPT PROPERTIES TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited) Three Months Ended March 31, ----------------------------- 1999 1998 ------- -------- Non-cash investing activities: Investment in real estate mortgages $60,000 $-- Issuance of common shares 4,959 5,705 Non-cash financing activities: Issuance of common shares $ 1,313 $ 2,828 Conversion of convertible subordinated debentures, net -- (1,788) See accompanying notes
4 HRPT PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share data) Note 1. Basis of Presentation The financial statements of HRPT Properties Trust and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles 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. The Financial Accounting Standards Board issued Financial Accounting Standards Board Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities ("FAS 133") in 1998. FAS 133 must be adopted for our year 2000 financial statements. We anticipate that FAS 133 will have no impact on our reported financial condition or results of operations. Note 2. Comprehensive Income The following is a reconciliation of net income to comprehensive income for the three months ended March 31, 1999 and 1998: 1999 1998 --------- -------- Net income $47,603 $31,381 Other comprehensive loss: Unrealized holding losses (5,639) -- --------- -------- Comprehensive income $41,964 $31,381 ========= ======== Note 3. Shareholders' Equity During the three months ended March 31, 1999, we issued 256,246 common shares in connection with the 1997 acquisition of office properties leased to agencies of the United States government and issued 89,702 common shares as the incentive advisory fee for the year ended December 31, 1998. On April 12, 1999, our trustees declared a dividend on our common shares with respect to the quarter ended March 31, 1999 of $0.38 per share, or approximately $50,100, which will be distributed on or about May 22, 1999 to shareholders of record as of April 26, 1999. Note 4. Real Estate Properties During the three months ended March 31, 1999, we disposed of 14 healthcare properties, including 12 healthcare properties leased to an affiliate, for $82,737 and recognized a gain of $8,307. As part of the sale of 12 healthcare properties, we provided a $60,000 mortgage loan secured by the 12 healthcare properties. During the three months ended March 31, 1999, we funded $2,814 of improvements to our existing properties. At March 31,1999, we had outstanding commitments aggregating approximately $18,507 to acquire properties or to provide financing. The acquisition of these properties is subject to various closing conditions customary in real estate transactions and no assurances can be given as to when or if these properties will be acquired. Note 5. Investment in Hospitality Properties Trust At March 31, 1999, we owned four million shares of the common stock of Hospitality Properties Trust ("HPT") with a carrying value of $109,842 and a quoted market value of $108,250. As of March 31, 1999, our percentage ownership of HPT was 8.8%. 5 HRPT PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share data) Note 6. Real Estate Mortgages and Notes Receivable, net During the three months ended March 31, 1999, we received regularly scheduled principal payments of $154, and principal repayments of mortgages secured by two healthcare properties totaling $2,973 and principal repayment of $1,000 from a loan to an affiliate. Note 7. Indebtedness During March 1999, we issued $90,000 unsecured 7 7/8% Senior Notes due 2009. Net proceeds of $87,275 were used to repay amounts outstanding under our revolving credit facility. These notes are callable at par on April 15, 2002. Note 8. Segment Information The following is a summary of our reportable segments as of and for the three months ended March 31, 1999 and 1998: Three Months Ended March 31, 1999 -------------------------------------------- Healthcare Office Total -------------------------------------------- Revenues $ 26,131 $ 77,661 $ 103,792 Operating expenses -- 24,006 24,006 -------------------------------------------- Net operating income $ 26,131 $ 53,655 $ 79,786 ============================================ Real estate investments $ 858,128 $2,133,073 $2,991,201 Three Months Ended March 31, 1998 -------------------------------------------- Healthcare Office Total -------------------------------------------- Revenues $ 28,155 $ 43,606 $ 71,761 Operating expenses -- 13,502 13,502 -------------------------------------------- Net operating income $ 28,155 $ 30,104 $ 58,259 ============================================ Real estate investments $ 910,091 $1,421,819 $2,331,910 6 HRPT PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share data) The following tables reconcile the reported segment information to the consolidated financial statements for the three months ended March 31, 1999 and 1998: Three Months Ended March 31, ----------------------------- 1999 1998 ----------------------------- Revenues: Total per reportable segment $ 103,792 $ 71,761 Unallocated other income 611 191 ----------------------------- Total consolidated revenues $ 104,403 $ 71,952 ============================= Net operating income: Total per reportable segment $ 79,786 $ 58,259 Unallocated amounts: Other net income 611 191 Interest expense (19,437) (13,651) Depreciation and amortization expense (18,831) (12,658) General and administrative expenses (4,841) (3,619) ----------------------------- Total consolidated income before equity in earnings of HPT and gain on sale of properties $ 37,288 $ 28,522 ============================= 7 HRPT PROPERTIES TRUST Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Three Months Ended March 31, 1999 Versus 1998 Total revenues for the three months ended March 31, 1999 increased $32.5 million to $104.4 million from $72.0 million for the three months ended March 31, 1998. Revenues from our office segment increased $34.1 million and revenues from our healthcare segment decreased $2.0 million. The increase in revenues from our office segment is due to our increased real estate investment in office properties subsequent to March 31, 1998. The decrease in revenues from our healthcare segment is due to the reduced real estate investment in healthcare properties subsequent to March 31, 1998. Rental income increased by $34.4 million and interest and other income decreased by $2.0 million. Rental income increased primarily because of new real estate investments subsequent to March 31, 1998. Interest and other income decreased primarily as a result of a decrease in mortgage interest income as our mortgage loan investments are repaid. Total expenses for the three months ended March 31, 1999 increased to $67.1 million from $43.4 million for the three months ended March 31, 1998. Operating expenses increased by $10.5 million as a result of our increased investment in "gross leased" real estate assets subsequent to March 31, 1998. Interest expense increased by $5.8 million as a result of higher borrowings outstanding during the 1999 period. Depreciation and amortization, and general and administrative expense increased by $6.2 million and $1.2 million, respectively, primarily as a result of new real estate investments subsequent to March 31, 1998. Net income increased to $47.6 million, or $0.36 per basic and diluted common share, for the 1999 period from $31.4 million, or $0.31 per basic and diluted common share, for the 1998 period. The change in net income is due primarily to the increase in new real estate investments since March 31, 1998 and the gain on sale of properties recognized in 1999. Funds from operations for the three months ended March 31, 1999 were $59.7 million, or $0.45 per basic common share, and $44.3 million, or $0.44 per basic common share, for the 1998 period. Diluted funds from operations for the three months ended March 31, 1999 were $63.7 million, or $0.45 per diluted common share, and $48.4 million, or $0.43 per diluted common share, for the 1998 period. The dividends declared which relate to the three months ended March 31, 1999 and 1998 were $50.1 million, or $0.38 per common share, and $40.4 million, or $0.38 per common share, respectively. The weighted average shares outstanding were 131.7 million in 1999 and 101.5 million in 1998. LIQUIDITY AND CAPITAL RESOURCES During the three months ended March 31, 1999, we disposed of 14 healthcare properties for $82.7 million and recognized a gain of $8.3 million. As part of the sale of 12 healthcare properties, we provided a $60.0 million mortgage loan secured by the 12 healthcare properties. During the three months ended March 31, 1999, we funded $2.8 million of improvements to our existing properties, received $154,000 of regularly scheduled principal payments, received $3.0 million representing principal repayment of a mortgage secured by two healthcare properties, and received $1.0 million from a loan to an affiliate. In May 1999, we purchased one office property for $22.0 million plus closing costs, using cash on hand. At March 31, 1999, we owned 4.0 million, or 8.8%, of the common shares of beneficial interest of HPT with a carrying value of $109.8 million and a market value of $108.3 million. In May 1999, HPT completed a public offering of common shares and our ownership percentage was reduced to 7.1%. During the three months ended March 31, 1999, we issued 256,246 common shares in connection with the 1997 acquisition of office properties leased to agencies of the United States government and 89,702 common shares as the incentive advisory fee for the year ended December 31, 1998. 8 HRPT PROPERTIES TRUST Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued At March 31, 1999, we had $32.6 million of cash and cash equivalents, as well as no amounts outstanding and $500.0 million available for borrowing under our bank credit facility. During March 1999, we issued $90.0 million of unsecured 7 7/8% senior notes due 2009. Net proceeds of approximately $87.3 million were used to repay amounts outstanding under our revolving credit facility. These notes are callable by us at par on April 15, 2002. At March 31, 1999, we had outstanding commitments to purchase properties or provide financing totaling approximately $18.5 million. We intend to fund these commitments with a combination of cash on hand and amounts available under our existing credit facility. The acquisition of these properties is subject to various closing conditions customary in real estate transactions, and no assurances can be given as to when and if these properties will be acquired. We continue to seek new investments to expand and diversify our portfolio of leased real estate. As of March 31, 1999, our debt as a percentage of total market capitalization was approximately 39%. Year 2000 Our in-house computer systems environment is limited to software and hardware developed by third parties and installed, operated and monitored by our investment advisor and property manager. All of our computer systems (which are limited to financial reporting, property management and accounting systems) were installed within the last two years and management believes these systems are year 2000 compliant. All costs associated with our computer systems are borne by our investment advisor and property manager. All of our healthcare properties are leased on a triple net lease basis and are not managed by us. These triple net leased properties are dependent upon the efforts of our third party tenants and their affiliates, which operate these properties. Our leases and other contractual relationships require these operators to conduct the daily operations of our properties and the scope of the operators' responsibilities includes ensuring preparedness for the year 2000. Because of this leasing arrangement, the only actions that we can take with respect to these properties is to inquire about and monitor public operators' SEC filings and evaluate our operators' year 2000 preparedness plans. The majority of our triple net leased operators have responded to our inquiries regarding their preparedness for issues related to the year 2000. Based on operator responses to our inquiries, we believe that these operators are in the process of studying their systems and the systems of their vendors, suppliers and service providers to ensure preparedness. Current levels of preparedness are varied and include partially completed inventory and assessment of potential risks, testing, implementation of plans for remediation and reprogramming and compliance. While we believe the efforts of our tenants described in their responses will be or are adequate to address year 2000 concerns, there can be no guarantee that all tenant systems will be year 2000 compliant on a timely basis and will not have a material effect on us. Most of our commercial office properties and properties leased to the U.S. Government are leased on a gross lease or modified gross lease basis and are managed by us. In early 1998, we set out to identify issues associated with year 2000 compliance for these managed properties. We have been contacting and will continue to contact vendors to gather information to assess vendor readiness. In addition, managers and engineers at each of our properties are responsible for gathering and assessing year 2000 issues affecting specific building systems including life safety, elevator, garage, security, and energy management systems. We have also requested our major tenants to provide us with updates of their year 2000 readiness. We expect to complete an overall assessment of year 2000 issues by the end of the second quarter of 1999 and perform necessary system replacements or upgrades, including testing, by third or fourth quarter of 1999. Overall financial risk associated with year 2000 readiness for these properties is not expected to be material, and most of the costs associated with correcting non-compliance are expected to be classified as operating expense that may be reimbursable to us under most tenant leases. 9 HRPT PROPERTIES TRUST Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued If our efforts and the efforts of our vendors, customers and tenants to prepare for the year 2000 were ineffective, our properties could be subject to significant adverse effects, including, but not limited to, loss of business and growth opportunities, reduced revenues and increased expenses which might cause operating losses to our tenants as well as operating losses at our gross leased properties. Continued or severe operating losses may cause one or more of our tenants to default on their leases. Numerous lease defaults could jeopardize our ability to maintain our financial results of operations and meet our financial, operating and capital obligations. We do not currently have a contingency plan in place in the event we, or our operators, do not successfully remedy year 2000 compliance issues that are identified in a timely manner or fail to identify any year 2000 issues. We will evaluate the status of our year 2000 compliance plan in mid 1999 and determine whether a plan is necessary. 10 HRPT PROPERTIES TRUST Item 3. Quantitative and Qualitative Disclosures About Market Risk We are exposed to risks associated with interest rate changes. We manage our exposure to this market risk through our monitoring of available financing alternatives. Our strategy to manage exposure to changes in interest rates is unchanged from December 31, 1998. Furthermore, we do not foresee any significant changes in our exposure to fluctuations in interest rates or in how such exposure is managed in the near future. At March 31, 1999, our total outstanding debt for fixed rate notes consisted of the following: Amount Coupon Maturity Unsecured senior notes: $40.0 million 7.25% 2001 $160.0 million 6.875% 2002 $150.0 million 6.75% 2002 $164.9 million 7.50% 2003 $100.0 million 6.7% 2005 $90.0 million 7.875% 2009 $143.0 million 8.5% 2013 Secured notes: $13.1 million 8.00% 2008 $11.5 million 7.66% 2009 No principal repayments are due under the unsecured senior notes until maturity. If, at maturity, the unsecured senior notes were to be refinanced at interest rates which are 1/2 percentage point higher than shown above, our per annum interest cost would increase by approximately $4.2 million. The secured notes are secured by three of our office properties and require principal and interest payments through maturity. As of March 31, 1999, we had two series of senior unsecured notes that were subject to floating interest rates; a $500.0 million bank credit facility and another series of unsecured senior notes totaling $250.0 million. Our bank credit facility bears interest at floating rates and matures in 2002. At March 31, 1999, no amounts were outstanding and $500.0 million was available for drawing under our line of credit. Our line of credit is available to finance our acquisition commitments. As of March 31, 1999, our acquisition commitments required approximately $18.5 million (plus closing costs) of cash. Assuming these commitments were all funded with borrowings under our bank credit facility, and assuming interest rates increased 1/2 percentage point, our annualized interest cost would increase by approximately $92,500. Our unsecured senior notes totaling $250.0 million bear interest at floating rates and mature in 2007. Assuming interest rates increase 1/2 percentage point, our annualized interest costs would increase by approximately $1.3 million. Each of our obligations for borrowed money has provisions that allow us to make repayments earlier than the stated maturity date. In some cases, we are not allowed to make early repayment prior to a cutoff date and in other cases we are allowed to make prepayments only at a premium to face value. In any event, these prepayment rights may afford us the opportunity to mitigate the risk of refinancing at maturity at higher rates, by refinancing at lower rates prior to maturity. From time to time, we may enter into contracts to hedge our interest rate risk. As of March 31, 1999, we have not entered into any of these contracts. The market prices, if any, of each of our fixed rate obligations as of March 31, 1999 are sensitive to changes in interest rates. Typically, if market rates of interest increase, the current market price of a fixed rate obligation will decrease. Conversely, if market rates of interest decrease, the current market price of a fixed rate obligation typically will increase. Based on the balances outstanding at March 31, 1999, a hypothetical immediate one percentage point change in interest rates would change the fair value of our fixed rate debt obligations by approximately $41.7 million (based on discounted cash flow analysis). 11 HRPT PROPERTIES TRUST Part II Other Information Item 2. Changes in Securities. In February 1999, we issued an aggregate of 256,246 common shares of beneficial interest, par value $.01 per share ("Common Shares") in connection with the previously disclosed acquisition of office properties leased to agencies of the United States Federal Government and in connection with certain post-closing adjustments, in both cases pursuant to the Merger Agreement dated February 17, 1997 between the Company and Government Property Investors, Inc., as amended. The issuance of such Common Shares was made pursuant to the exemption from registration contained in Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act"). In March 1999, we issued 89,702 Common Shares as an incentive fee of $1.3 million for services rendered during 1998, based upon a per Common Share price of $14.642. These restricted securities were issued pursuant to the exemption from registration provided under Section 4(2) of the Securities Act. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 27. Financial Data Schedule (b) Reports on Form 8-K: 1. Current Report on Form 8-K, dated March 5, 1999 relating to (a) the Company's annual audited consolidated financial statements and management's discussion and analysis of financial condition and results of operations for the year ended December 31, 1998, and (b) the issuance of 256,246 common shares to Government Property Investors, Inc. (Items 5 and 7). 2. Current Report on Form 8-K, dated March 11, 1999 relating to (a) the unaudited pro forma consolidated financial statements of the Company as of and for the year ended December 31, 1998, and (b) filing as exhibits, (1) Form of Common Share Certificate, (2) Supplemental Indenture No. 5, dated as of November 30, 1998, by and between the Company and State Street Bank and Trust Company, relating to $130,000,000 in aggregate principal amount of 8 1/2% Monthly Income Senior Notes due 2013, including form thereof, (3) Note Modification Agreement, dated as of June 30, 1998, by and between Connecticut Subacute Corporation and the Company, (4) Second Amendment to Master Lease Agreement General Terms and Conditions and Leases Entered Into Pursuant Thereto, dated as of October 5, 1998, by and between the Company and Connecticut Subacute Corporation, (5) consent of Ernst & Young LLP and (6) consents of Arthur Andersen LLP (Item 7). 3. Current Report on Form 8-K, dated March 19, 1999 relating to (a) the unaudited pro forma consolidated financial statements of the Company as of and for the year ended December 31, 1998, and (b) filing as exhibits, (1) Purchase Agreement, dated as of March 19, 1999, by and among HRPT Properties Trust and the several Underwriters named therein pertaining to $90,000,000 in aggregate principal amount of 7 7/8% Monthly Income Senior Notes due 2009, (2) Form of Supplemental Indenture No. 6, dated as of March 24, 1999, by and between HRPT Properties Trust and State Street Bank and Trust Company, relating to $90,000,000 in aggregate principal amount of 7 7/8% Monthly Income Senior Notes due 2009, including form thereof, (3) opinion of counsel re: tax matters and (4) Computation of Ratio of Earnings to Fixed Charges (Item 7). 12 HRPT PROPERTIES TRUST CERTAIN IMPORTANT FACTORS This Quarterly Report on Form 10-Q contains statements which constitute forward looking statements within the meaning of the Securities Exchange Act of 1934, as amended. Those statements appear in a number of places in this Form 10-Q and include statements regarding our intent, belief or expectations with respect to the declaration or payment of dividends, the consummation of additional acquisitions, policies and plans regarding investments, financings or other matters, our qualification and continued qualification as a real estate investment trust or trends affecting our or any of our 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, our ability or inability to complete acquisitions and financing transactions, results of operations of our properties and general changes in economic conditions not presently contemplated. The information contained in this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 1998, 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. The Amended and Restated Declaration of Trust establishing the Company, dated July 1, 1994, a copy of which, together with all amendments thereto (the "Declaration"), is duly filed in the Office of the Department of Assessments and Taxation of the State of Maryland, provides that the name "HRPT Properties Trust" refers to the trustees under the Declaration collectively as trustees, but not individually or personally, and that no trustee, officer, shareholder, employee or agent of the Company shall be held to any personal liability, jointly or severally, for any obligation of, or claim against, the Company. All persons dealing with the Company, in any way, shall look only to the assets of the Company for the payment of any sum or the performance of any obligation. 13 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. HRPT PROPERTIES TRUST By: /s/ David J. Hegarty David J. Hegarty President and Chief Operating Officer Dated: May 14, 1999 By: /s/ Ajay Saini Ajay Saini Treasurer and Chief Financial Officer Dated: May 14, 1999 14 EX-27 2
5 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 32,575 0 125,827 0 0 0 2,865,374 167,501 3,050,685 0 1,121,950 0 0 1,319 1,824,332 3,050,685 0 104,403 0 67,115 0 0 19,437 39,296 0 39,296 0 0 0 47,603 0.36 0.36
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