-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, gbSNVt8h+dr0XG2MocJSwWA1ycFGpUmnBXNIXHypnrPx7OL5p90dUjFHEz5TzJUc R0btyHQ44XtPd5g9v6lXNA== 0000950135-94-000319.txt : 19940509 0000950135-94-000319.hdr.sgml : 19940509 ACCESSION NUMBER: 0000950135-94-000319 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19940506 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEALTH & REHABILITATION PROPERTIES TRUST CENTRAL INDEX KEY: 0000803649 STANDARD INDUSTRIAL CLASSIFICATION: 6798 IRS NUMBER: 046558834 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-52875 FILM NUMBER: 94526279 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 S-3/A 1 HEALTH AND REHABILITATION TRUST AMENDMENT NO.2 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1994 REGISTRATION NO. 33-52875 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 3 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ HEALTH AND REHABILITATION PROPERTIES TRUST (Exact name of registrant as specified in its charter) MARYLAND 04-6558834 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number)
400 CENTRE STREET, NEWTON, MASSACHUSETTS 02158 (617) 332-3990 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) MARK J. FINKELSTEIN 400 CENTRE STREET NEWTON, MASSACHUSETTS 02158 (617) 332-3990 (Name, address, including zip code, and telephone number, including area code, of agent for service) ------------------------ Copies to: LENA G. GOLDBERG, ESQ. HOWARD G. GODWIN JR., ESQ. SULLIVAN & WORCESTER BROWN & WOOD ONE POST OFFICE SQUARE ONE WORLD TRADE CENTER BOSTON, MASSACHUSETTS 02109 NEW YORK, NEW YORK 10048
------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this Registration Statement. If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or reinvestment plans, please check the following box. / / THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 EXPLANATORY NOTE This Registration Statement contains two forms of prospectus, one to be used in connection with an offering in the United States and Canada (the "U.S. Prospectus") and one to be used in a concurrent offering outside the United States and Canada (the "International Prospectus"). The two prospectuses will be identical in all respects, except for the front cover page, the section entitled "Federal Income Tax and ERISA Considerations", the section entitled "Underwriting" and the outside back cover page. The form of the U.S. Prospectus is included herein and the form of the front cover page, "Federal Income Tax and ERISA Considerations" section, "Underwriting" section and outside back cover page of the International Prospectus are included following the back cover page of the U.S. Prospectus as pages X-1 through X-7. 3 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS, DATED MAY 5, 1994 PROSPECTUS - ----------------- 11,000,000 SHARES HEALTH AND REHABILITATION PROPERTIES TRUST COMMON SHARES OF BENEFICIAL INTEREST ------------------------ Health and Rehabilitation Properties Trust (the "Company" or "HRP") is a real estate investment trust which invests primarily in retirement communities, assisted living centers, nursing homes and other long term care facilities. On April 29, 1994, the last reported sale price for the Shares on the New York Stock Exchange was $15 1/8. Of the 11,000,000 Shares offered by the Company, 9,500,000 Shares are being offered in the United States and Canada by the U.S. Underwriters and 1,500,000 Shares are being offered in a concurrent offering outside the United States and Canada by the International Managers (collectively, the "Offerings"). ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO PUBLIC DISCOUNT(1) COMPANY(2) - ------------------------------------------------------------------------------------------------ Per Share.................. $ $ $ - ------------------------------------------------------------------------------------------------ Total(3)................... $ $ $ ================================================================================================ (1) The Company has agreed to indemnify the several U.S. Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriting". (2) Before deducting expenses payable by the Company estimated at $598,349.
(3) The Company has granted the U.S. Underwriters and the International Managers an option, exercisable by the U.S. Representatives for 30 days from the date of this Prospectus, to purchase up to 1,650,000 additional Shares solely to cover over-allotments, if any. If such option is exercised in full, the total Price to Public, Underwriting Discount and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting". ------------------------ The Shares offered hereby are offered by the several U.S. Underwriters, subject to prior sale, when, as and if issued to and accepted by them and subject to approval of certain legal matters by counsel for the U.S. Underwriters, and to certain other conditions. The U.S. Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the Shares offered hereby will be made in New York, New York on or about May , 1994. ------------------------ MERRILL LYNCH & CO. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION PAINEWEBBER INCORPORATED SMITH BARNEY SHEARSON INC. ------------------------ The date of this Prospectus is , 1994. 4 ADDITIONAL INFORMATION The Company has filed with the Securities and Exchange Commission (the "Commission") in Washington, D.C., a registration statement on Form S-3 (together with all exhibits, schedules and amendments thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"), with respect to the Common Shares of Beneficial Interest (the "Shares") to be offered by the Company. This Prospectus, which is a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement. For further information concerning the Company and the Shares offered by the Company, reference is made to the Registration Statement. Copies of the Registration Statement may be obtained from the Commission at its principal office in Washington, D.C. upon payment of the prescribed fee. The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports and other information with the Commission. Reports, proxy statements and other information filed by the Company with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following regional offices of the Commission: Chicago Regional Office, Suite 1400, 500 West Madison Street, Chicago, Illinois 60661-2511; and New York Regional Office, Seven World Trade Center, New York, New York 10048. Copies of such material can be obtained at prescribed rates from the Public Reference Section of the Commission at its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, reports, proxy material and other information concerning the Company may be inspected at the offices of The New York Stock Exchange ("NYSE"), 20 Broad Street, New York, New York 10005. INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The following documents, which have been filed with the Commission pursuant to the Exchange Act, are hereby incorporated in this Prospectus and specifically made a part hereof by reference: (i) the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 dated March 22, 1994, as amended by Form 10-K/A, dated March 29, 1994; and (ii) the Company's Registration Statement on Form 8-A dated November 8, 1986, as amended by Form 8 dated July 30, 1991. The consolidated financial statements of Greenery Rehabilitation Group, Inc. ("Greenery"), Commission file number 1-10577, at and for the fiscal year ended September 30, 1993, are incorporated herein by reference from Greenery's Annual Report on Form 10-K for the fiscal year ended September 30, 1993 dated January 13, 1994; the consolidated financial statements of Horizon Healthcare Corporation ("Horizon"), Commission file number 1-9369, at and for the periods ended May 31, 1993 and February 28, 1994, are incorporated herein by reference from Horizon's Annual Report on Form 10-K/A - Amendment No. 3 for the fiscal year ended May 31, 1993, dated October 5, 1993, and Quarterly Report on Form 10-Q for the quarter ended February 28, 1994 dated April 13, 1994, as amended by Form 10-Q/A dated May 2, 1994; the consolidated financial statements of GranCare, Inc. ("GranCare"), Commission file number 1-19571, at and for the period ended December 31, 1993, is incorporated herein by reference from GranCare's Annual Report on Form 10-K for the year ended December 31, 1993 dated March 30, 1994; and the consolidated financial statements of Marriott International, Inc. ("Marriott"), Commission file number 1-12188, at and for the fiscal year ended December 31, 1993 are incorporated herein by reference from Marriott's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 dated March 30, 1994. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of the offering of the Shares offered by the Company shall be deemed to be incorporated by reference into this Prospectus and to be a part hereof from the respective dates of filing of such documents. Any statement contained herein or in a document incorporated or deemed to be incorporated herein by reference shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein, or in any other subsequently filed document that also is or is deemed to be incorporated herein by reference, modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom this Prospectus is delivered, upon the written or oral request of such person, a copy of any and all of the information that has been incorporated by reference in this Prospectus (excluding exhibits unless such exhibits are specifically incorporated by reference into the information that this Prospectus incorporates). Requests for such copies should be made to the Company at its principal executive offices, 400 Centre Street, Newton, Massachusetts 02158, Attention: Investor Relations, telephone (617) 332-3990. ------------------------ IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON SHARES OF BENEFICIAL INTEREST OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. 2 5 SUMMARY The following summary is qualified in its entirety by the detailed information and financial statements appearing elsewhere or incorporated by reference in this Prospectus. Unless otherwise noted, all references to, and adjustments based upon, Shares offered hereby include all Shares offered pursuant to the Offerings but exclude the Shares subject to the over-allotment option. Unless otherwise noted, all information presented herein assumes completion of the transaction described in "Recent Developments -- The Marriott Transaction". THE COMPANY The Company is a real estate investment trust ("REIT") which invests primarily in retirement communities, assisted living centers, nursing homes and other long term care facilities. The Company recently agreed to acquire 14 retirement communities (the "Marriott Properties") leased to and operated by a subsidiary of Marriott International, Inc. (including its subsidiaries, "Marriott") for $320 million (the "Marriott Transaction"). The Marriott Properties will be acquired subject to the existing leases which are fully guaranteed by Marriott. The Marriott Properties contain a total of 3,932 residences or beds and are located in seven states. Upon completion of the Marriott Transaction: Marriott will be the Company's largest single tenant and will operate 38% of the Company's investment portfolio of properties; the Company will have gross real estate investments totalling $834 million, in 154 properties, located in 29 states and operated by 37 separate companies; approximately 70% of the Company's total investments will be in properties operated by seven NYSE listed companies; and 97% of the Company's investments will be in retirement communities, assisted living centers, nursing homes and other long term care facilities. HRP LESSEES AND MORTGAGORS [PIE CHART -- SEE APPENDIX TO ELECTRONIC FORMAT DOCUMENT] Since commencing operations seven years ago in December 1986, the Company has paid 28 consecutive quarterly dividends and has increased its quarterly dividend eight times. The regular quarterly dividend of $.33 per Share for the period ended March 31, 1994, is expected to be paid on or about May 31, 1994 to Shareholders of record on May 16, 1994; purchasers of the Shares offered hereby who hold such Shares as of the record date will receive that dividend. HRP DIVIDEND GROWTH [DIVIDEND CHART -- SEE APPENDIX TO ELECTRONIC FORMAT DOCUMENT] Dividends shown in the chart above are dividends declared and paid with respect to the years or quarter shown. With respect to dividends shown in the chart above for 1987, 1988, 1989, 1990, 1991, 1992 and 1993, $.281, $.147, $.317, $.226, $.132, $.247 and $.292 (including an estimate of $.04 for the dividend with respect to the fourth quarter of 1993), respectively, represented a return of capital. 3 6 THE OFFERINGS Shares to be offered U.S. Offering......................... 9,500,000 International Offering................ 1,500,000 ----------- Total......................... 11,000,000 Shares to be outstanding after the Offerings............................. 55,722,500 Use of Proceeds......................... To fund the Marriott Transaction or to repay indebtedness and/or for working capital and other general corporate purposes. NYSE symbol............................. HRP
SUMMARY HISTORICAL AND ADJUSTED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEAR ENDED DECEMBER 31, YEAR ENDED -------------------------------------------------------- DECEMBER 31, 1993 1989 1990 1991 1992 1993 AS ADJUSTED(1) -------- -------- -------- -------- -------- ----------------- OPERATING STATEMENT DATA: Total revenues.............................. $ 23,233 $ 32,872 $ 43,835 $ 48,735 $ 56,485 $ 94,622 Income before extraordinary item............ 7,900 14,280 22,079 27,243 37,738 58,630 Net income.................................. 7,900 14,280 22,079 27,243 33,417(2) -- Dividends(3)................................ 13,137 18,927 27,179 33,079 44,869 -- Per Share: Income before extraordinary item.......... .76 .89 1.01 1.02 1.10 1.05 Net income................................ .76 .89 1.01 1.02 .97(2) -- Dividends(3).............................. 1.14 1.17 1.23 1.26 1.30 -- Average Shares outstanding.................. 10,425 16,088 21,834 26,760 34,407 55,723
DECEMBER 31, -------------------------------------------------------- DECEMBER 31, 1993 1989 1990 1991 1992 1993 AS ADJUSTED(1) -------- -------- -------- -------- -------- ----------------- BALANCE SHEET DATA: Real estate properties, net................. $144,347 $188,352 $262,557 $310,882 $349,842 $ 650,348 Real estate mortgages, net.................. 45,304 87,061 31,760 47,173 157,281 158,241 Total assets................................ 205,638 290,099 340,718 374,468 527,662 826,826 Total borrowings............................ 70,000 125,500 103,000 138,500 73,000 206,607 Total shareholders' equity.................. 131,851 147,760 234,427 228,301 441,135 611,192 OTHER DATA: Funds from Operations(4).................. 12,561 19,467 30,059 36,853 47,578 77,794 - --------------- (1) Adjusted to give effect to the sale of the Shares offered pursuant to the Offerings, the use of proceeds therefrom as set forth in "Use of Proceeds", and the consummation of the Marriott Transaction. See "Unaudited Adjusted Balance Sheet and Unaudited Adjusted Statement of Income". (2) Includes, as an extraordinary item, the write-off of $4.3 million in deferred finance charges (approximately $.13 per Share) resulting from prepayment of debt with proceeds from the Company's Share offerings in 1993. (3) Amounts represent dividends declared with respect to the periods shown. (4) Industry analysts generally consider Funds from Operations to be an appropriate measure of the performance of an equity REIT. Funds from Operations does not represent cash generated from operating activities in accordance with generally accepted accounting principles and should not be considered as an alternative to net income as an indication of the Company's performance or to cash flow as a measure of liquidity. Funds from Operations means net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis. Distributions in excess of net income generally constitute a return of capital for income tax purposes.
4 7 RECENT DEVELOPMENTS The Marriott Transaction. On March 17, 1994, the Company agreed to acquire 14 retirement communities from affiliates of Host Marriott Corporation ("HMT") for $320 million, subject to adjustment. The Marriott Properties are presently leased to and operated by Marriott and will be acquired by the Company subject to the existing leases. The Marriott Properties are located in the following seven states: Florida - five; Virginia - three; Arizona - two; California - one; Illinois - one; Maryland - one; and Texas - one. The retirement communities offer a continuum of services including independent living residences, assisted living and on-site skilled nursing facilities. The Marriott Properties contain a total of 3,932 residences or beds and are triple net leased to Marriott for initial terms expiring on December 31, 2013, with renewal options extending for an additional 20 years. The leases provide for fixed rent aggregating approximately $28 million per year and additional rentals equal to 4.5% of annual revenues from operations in excess of base amounts determined on a facility by facility basis. All of the leases are subject to cross default provisions. In addition to the 14 retirement communities to be acquired by the Company, the Company and HMT have agreed to negotiate for the possible assumption by the Company of HMT's obligations to invest in additional retirement and skilled nursing facility projects to be operated by Marriott; however, there are presently no agreements or understandings concerning assumption of the obligations relating to any specific projects. Upon completion of the Marriott Transaction, Marriott will become the Company's largest single tenant. Management believes that the Marriott Transaction will materially improve the diversity, security and growth potential of the Company's investment portfolio for the following reasons: - Approximately 38% of the Company's total investments will be in properties leased to Marriott under 20 year triple net, non-cancellable leases; - Marriott has fully guaranteed the leases; - Marriott is a public company with annual revenues of approximately $7.4 billion, whose senior unsecured debt obligations are rated A- by Standard and Poor's Corporation and Baa-1 by Moody's Investors Service, Inc.; - The Company anticipates that it will receive significant and increasing percentage rents under the leases beginning in 1994 and continuing throughout the lease term; the leases contain no cap or other limitation on the amounts of percentage rents; - Over 85% of Marriott's revenues from the Marriott Properties have been derived from private as opposed to governmental sources making such revenues less susceptible to the uncertainties of governmental funding and cost containment efforts; - The Marriott Properties have attracted strong occupancies and those open more than one year average in excess of 90% occupancy; - Ten of the 14 Marriott Properties have been constructed and opened in the past four years and the Company believes these properties represent state of the art in construction quality; - The Company's investment portfolio will be increased from approximately $514 million to approximately $834 million; - After completion of the Marriott Transaction, approximately 81% of the Company's investments will be in equity ownership of properties and 19% will be in mortgages; - Upon completion of the Marriott Transaction, approximately 70% of the Company's investment portfolio will be in properties leased to or operated by seven NYSE listed companies; the balance of the Company's investment portfolio is leased to or operated by a diverse group of 30 separate private companies. The Marriott Transaction is subject to conditions and contingencies customary in transactions of this type, including health care and other regulatory approvals, and although no assurance can be given that the Marriott Transaction will be consummated, the Company expects the Marriott Transaction to close in June 1994. The Company intends to fund the Marriott Transaction with the net proceeds of the Offerings, available 5 8 cash, funds available to be drawn under credit facilities, proceeds of future debt financing, and assumption of $17.6 million of industrial revenue bonds encumbering certain of the Marriott Properties. See "Recent Developments -- New Revolving Credit Facility". On April 19, 1994, the Company filed a shelf registration statement with the Commission relating to the offering of up to $345 million of debt securities, preferred shares of beneficial interest, common shares of beneficial interest and common share warrants. The shelf registration statement has not yet been declared effective. To provide for the contingency that the Marriott Transaction may close prior to completion of the Offerings or the availability of other permanent funding, the Company has had discussions with Merrill Lynch Mortgage Capital, Inc. ("MLMCI") and others to provide an interim credit facility (the "MLMCI Facility") to fund the acquisition of the Marriott Properties. No assurance can be given that these discussions will result in an agreement to provide interim funding or that the required funding will be available in a timely manner to the Company from other sources. New Revolving Credit Facility. In February 1994, the Company closed a new $110 million revolving credit facility from a syndicate of banks (the "New Credit Facility"). The New Credit Facility replaced the Company's $40 million revolving credit facility which was scheduled to mature in January 1995. The New Credit Facility will mature in 1997, unless extended by the parties. Borrowings under the New Credit Facility bear interest, at the Company's option, at prime or a spread over LIBOR. The Company has drawn on the New Credit Facility to repay the Company's $33 million term loan and is presently discussing with its lenders amendments to the New Credit Facility which would increase the amount available thereunder, to lower the interest rate charged on borrowings and otherwise to change certain terms. No assurance can be given that these discussions will result in any changes in the New Credit Facility. Other Pending Transactions. In the ordinary course of its business, the Company regularly evaluates investment opportunities and enters into contracts to purchase and lease or mortgage finance health care related real estate. Several such possible investments are currently under consideration and at various stages of the contractual process. Similarly, since January 1, 1994, the Company has received principal prepayments of outstanding mortgages totalling approximately $9.6 million and the Company is now engaged in negotiations regarding the sale of two properties subject to leases scheduled to expire during 1994. The Company does not believe that consummation of any one or all of these various pending transactions would have a material impact upon its financial condition or operations. 6 9 THE COMPANY HRP invests in retirement communities, assisted living centers, nursing homes and other income producing health care related real estate. The Company, a Maryland real estate investment trust, commenced operations in December 1986. The Company's principal executive offices are located at 400 Centre Street, Newton, Massachusetts 02158, and its telephone number is (617) 332-3990. At March 31, 1994, including the Marriott Transaction, the Company had total real estate investments of approximately $834 million in 154 properties ("Properties") located in 29 states operated by 37 separate companies. LOCATION OF HRP PROPERTIES (DOLLARS IN THOUSANDS) [MAP -- SEE APPENDIX TO ELECTRONIC FORMAT DOCUMENT]
NO. OF TOTAL NO. OF TOTAL STATE PROPERTIES INVESTMENT STATE PROPERTIES INVESTMENT - ------------------------- ---------- ---------- ------------------------- ---------- ---------- Alabama.................. 2 $ 3,601 Michigan................. 2 $ 9,400 Arizona.................. 5 25,377 Missouri................. 2 3,178 California............... 16 80,082 Nebraska................. 12 16,925 Colorado................. 10 32,990 North Carolina .......... 9 20,761 Connecticut.............. 9 83,802 Ohio..................... 9 27,259 Florida.................. 6 116,560 Pennsylvania............. 2 18,490 Georgia.................. 5 8,053 South Carolina .......... 1 886 Illinois................. 2 21,233 South Dakota............. 3 7,589 Indiana.................. 7 19,965 Tennessee................ 1 1,077 Iowa..................... 10 14,175 Texas.................... 8 21,000 Kansas................... 4 8,521 Virginia................. 3 67,336 Kentucky................. 2 19,735 Washington............... 1 5,125 Louisiana................ 5 32,403 Wisconsin................ 9 33,260 Maryland................. 1 46,928 Wyoming.................. 3 6,459 --- -------- Massachusetts............ 5 82,058 154 $834,228 === ========
7 10 DISTRIBUTIONS The Company has paid 28 consecutive quarterly dividends since its initial public offering in December 1986. Dividends for 1987, 1988, 1989, 1990, 1991, 1992 and 1993 totalled $1.06, $1.12, $1.14, $1.17, $1.23, $1.26 and $1.30, respectively. The regular quarterly dividend of $.33 per Share for the period ended March 31, 1994 will be paid on or about May 31, 1994 to Shareholders of record on May 16, 1994; purchasers of the Shares offered hereby who hold such Shares as of the record date will receive that dividend. The Company intends to continue to declare and pay future dividends on a quarterly basis, but may, from time to time, declare and pay special dividends. There can be no assurance that the Company will be able to increase its quarterly dividend or maintain it at the current level. Payment of dividends by the Company is subject to continued compliance with certain restrictions contained in the Company's loan agreements. In the past, the Company's dividends have been based upon funds from operations, which has exceeded earnings. The Company is required to pay distributions in cash. Cash available for distribution may not necessarily equal funds from operations as the cash flow of the Company is affected by other factors not included in the funds from operations calculation. Management expects that the Company will continue to pay dividends based upon funds from operations and that such dividends may exceed earnings. Accordingly, the Company expects a portion of the Company's dividends may be considered a return of capital which may not be subject to income tax until the Shares are sold. See "Federal Income Tax and ERISA Considerations". Information about dividends on a quarterly basis is summarized in the following table: HRP DIVIDENDS PER SHARE(1)
1987 1988 1989 1990 1991 1992 1993 ----- ---- ---- ---- ---- ---- ---- First Quarter........................... $.275(2) $.28 $.28 $.29 $.30 $.31 $.32 Second Quarter.......................... .26 .28 .28 .29 .31 .31 .32 Third Quarter........................... .27 .28 .29 .29 .31 .32 .33 Fourth Quarter.......................... .28 .28 .29 .30 .31 .32 .33 - --------------- (1) Dividends shown in the chart above are dividends declared and paid with respect to the years or quarter shown. With respect to dividends shown in the chart above for 1987, 1988, 1989, 1990, 1991, 1992 and 1993, $.281, $.147, $.317, $.226, $.132, $.247 and $.292 (including an estimate of $.04 for the dividend with respect to the fourth quarter of 1993), respectively, represented a return of capital. (2) Includes $.025 for the period from December 23, 1986 (commencement of the Company's operations) through December 31, 1986.
8 11 CAPITALIZATION The capitalization of the Company as of December 31, 1993 and as adjusted to give effect to the consummation of the Marriott Transaction, the completion of the Offerings and the use of the net proceeds therefrom is as follows (see "Unaudited Adjusted Balance Sheet"):
DECEMBER 31, 1993 ------------------------- ACTUAL AS ADJUSTED --------- ----------- (DOLLARS IN THOUSANDS) Borrowings........................................................... $ 73,000 $ 206,607 Shareholders' equity: Preferred Shares of Beneficial Interest, par value $.01 per Share; 50,000,000 authorized, none issued.............................. -- -- Common Shares of Beneficial Interest, par value $.01 per Share; 100,000,000 Shares authorized; 44,121,000 Shares and 55,722,500 Shares, as adjusted, issued and outstanding..................... 441 557 Additional paid-in capital......................................... 470,572 635,280 Cumulative net income.............................................. 118,889 124,122 Distributions of funds from operations............................. (148,767) (148,767) --------- ----------- Total shareholders' equity................................. 441,135 611,192 --------- ----------- Total capitalization....................................... $ 514,135 $ 817,799 ========= ===========
USE OF PROCEEDS The net proceeds to the Company from the Offerings are estimated to be approximately $ million ($ million if the over-allotment option is exercised in full). If the Offerings are completed prior to the closing of the Marriott Transaction, net proceeds of the Offerings will be used to fund the Marriott Transaction. If the Marriott Transaction is consummated prior to completion of the Offerings and the Company utilizes borrowings to fund the Marriott Transaction, net proceeds of the Offerings will be used to repay amounts outstanding under such borrowings, and/or to reduce amounts outstanding under the Company's credit facilities or for working capital and other general corporate purposes. In the event that the Marriott Transaction is not consummated by the Company, net proceeds of the Offerings will be used to reduce amounts outstanding under the New Credit Facility or for working capital or other general corporate purposes. As described in "Recent Developments--The Marriott Transaction", the Company is presently negotiating the MLMCI Facility. In the event that funds are drawn under the MLMCI Facility, interest on such borrowings is expected to be based on LIBOR plus a premium. Of the amounts outstanding under the New Credit Facility, $40 million was borrowed to repay all amounts outstanding under the Company's prior revolving credit facility and $33 million has been borrowed to repay the amounts outstanding under the Company's term loan. Amounts outstanding under the New Credit Facility are due in 1997. The weighted average interest rate on outstanding debt which may be repaid with proceeds of the Offerings will be approximately 5.5%. Pending utilization as set forth above, the proceeds from the Offerings may be utilized to repay amounts outstanding under the New Credit Facility and/or will be invested in short term investments, including repurchase agreements. Such investments may not be investment grade. 9 12 INVESTMENT AND FINANCING POLICY The population of the United States is aging. According to information from the U.S. Census Bureau, the segment of the U.S. population age 65 and over is increasing and will increase sharply through the year 2020. The Company believes that the demand for services provided at retirement communities, assisted living centers and nursing homes should increase as the population ages. Moreover, during the past ten years the intensity of medical services offered in nursing homes has become an important factor increasing nursing facility revenues and the value of facilities. Recently proposed federal healthcare reform legislation seeks, in part, to control future expenditures for acute care hospitals by providing increased funding for subacute care in nursing homes. For these reasons the Company has focused its investments in retirement communities, assisted living centers and nursing homes. Although the Company has and will in the future invest in other types of health care real estate, the Company expects to continue its focus on retirement communities, assisted living centers and nursing homes. The Company considers equity offerings when, in the Company's judgment, doing so will improve the Company's capital structure, while not materially adversely affecting the market value of its Shares or impeding the Company's ability to increase regularly its per Share dividend rate. In addition to the use of equity, the Company utilizes short term and long term borrowings to finance investments and to pay operating expenses. When variable rate debt is utilized the Company regularly purchases interest rate futures contracts to hedge against changes in interest rates. At March 31, 1994, the Company had outstanding term and revolving debt totalling $73 million. After this offering and assuming the use of proceeds from this offering and additional debt to fund the consummation of the Marriott Transaction, the Company's total debt outstanding will be approximately $207 million. The Company's borrowing guidelines established in the New Credit Facility and by its Board of Trustees prohibit the Company from maintaining a debt to equity ratio of greater than 1 to 1, except in certain limited circumstances. As of March 31, 1994, the Company's debt to equity ratio was .16 to 1. After these Offerings and assuming the use of proceeds described herein and consummation of the Marriott Transaction, the Company's debt to equity ratio on a pro forma basis will be approximately .34 to 1. The present debt to equity limitations may be changed in the future. There can be no assurance that equity or debt capital will be available in the future on reasonable terms to fund the Company's operations or growth. HRP CAPITAL STRUCTURE BEFORE SALE OF SHARES AFTER SALE OF SHARES AND MARRIOTT TRANSACTION AND MARRIOTT TRANSACTION
[PIE CHARTS-see appendix to electronic format document.] 10 13 SELECTED FINANCIAL DATA Set forth below are selected financial data for the Company for the periods and dates indicated which have been derived from audited and unaudited financial statements. This data should be read in conjunction with, and is qualified in its entirety by reference to, the financial statements and accompanying notes incorporated by reference in this Prospectus and with Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K incorporated by reference in this Prospectus. Amounts are in thousands, except per Share information.
YEAR ENDED DECEMBER 31, ------------------------------------------------------------ 1989 1990 1991 1992 1993 -------- -------- -------- -------- -------- OPERATING STATEMENT DATA: Total revenues........................... $ 23,233 $ 32,872 $ 43,835 $ 48,735 $ 56,485 Income before extraordinary item......... 7,900 14,280 22,079 27,243 37,738 Net income............................... 7,900 14,280 22,079 27,243 33,417(1) Dividends(2)............................. 13,137 18,927 27,179 33,079 44,869 Per Share: Income before extraordinary item....... $ .76 $ .89 $ 1.01 $ 1.02 $ 1.10 Net income............................. .76 .89 1.01 1.02 .97(1) Dividends(2)........................... 1.14 1.17 1.23 1.26 1.30 Average Shares outstanding............... 10,425 16,088 21,834 26,760 34,407
DECEMBER 31, ------------------------------------------------------------ 1989 1990 1991 1992 1993 -------- -------- -------- -------- -------- BALANCE SHEET DATA: Real estate properties, net.............. $144,347 $188,352 $262,557 $310,882 $349,842 Real estate mortgages, net............... 45,304 87,061 31,760 47,173 157,281 Total assets............................. 205,638 290,099 340,718 374,468 527,662 Total borrowings......................... 70,000 125,500 103,000 138,500 73,000 Total shareholders' equity............... 131,851 147,760 234,427 228,301 441,135
YEAR ENDED DECEMBER 31, ------------------------------------------------------------ 1989 1990 1991 1992 1993 -------- -------- -------- -------- -------- OTHER DATA: Funds from Operations(3)............... $ 12,561 $ 19,467 $ 30,059 $ 36,853 $ 47,578
1993 ----------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- SUPPLEMENTAL DATA: Total revenues..................................... $ 12,650 $ 13,763 $ 14,727 $ 15,345 Income before extraordinary item................... 8,409 9,536 9,739 10,054 Net income(1)...................................... 5,017 9,536 9,739 9,125 Funds from Operations(3)........................... 10,737 11,895 12,187 12,759 Dividends(2)....................................... 10,804 11,236 11,239 11,590 Per Share: Income before extraordinary item................. $ .27 $ .27 $ .28 $ .28 Net income(1).................................... .16 .27 .28 .26 Dividends(2)..................................... .32 .32 .33 .33 Average Shares outstanding......................... 31,731 35,114 35,121 35,610 - --------------- (1) Includes, as an extraordinary item, the write-off of $4.3 million in deferred finance charges (approximately $.13 per Share) resulting from prepayment of debt with proceeds from the Share offerings in 1993. (2) Amounts represent dividends declared with respect to the periods shown. (3) Industry analysts generally consider Funds from Operations to be an appropriate measure of the performance of an equity REIT. Funds from Operations does not represent cash generated from operating activities in accordance with generally accepted accounting principles and should not be considered as an alternative to net income as an indication of the Company's performance or to cash flow as a measure of liquidity. Funds from Operations means net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis. Distributions in excess of net income generally constitute a return of capital for income tax purposes.
11 14 PROPERTIES After the Marriott Transaction the Company will have gross real estate investments totalling $834 million, in 154 Properties, located in 29 states and operated by 37 separate companies. Ninety-seven percent of the Company's investments will be in 152 retirement communities, assisted living centers, nursing homes and other long term care facilities. Approximately 81% of the investments are in Properties owned by the Company and leased to operators. TYPE OF PROPERTIES TYPE OF INVESTMENTS [PIE CHARTS -- See appendix to electronic format document] 12 15 THE LESSEES AND THE MORTGAGORS The Company's financial condition depends in large part upon the financial condition of the operators of the Company's Properties. After the Marriott Transaction, approximately 70% of the Company's total investments will be in Properties operated by seven NYSE listed companies. In addition to these seven public companies, the remaining HRP Properties are operated by 30 privately held companies. Certain information about publicly owned operators of the Company's Properties contained in their filings with the Commission or other public sources, or provided by these companies is set forth in the chart below. HRP PUBLIC COMPANY FACILITY OPERATORS (DOLLARS IN THOUSANDS)
OPERATOR DATA ----------------------------------------------------- TOTAL TOTAL SHARE- HRP HRP OPERATOR FACILITIES ANNUAL HOLDERS' NET FACILITIES FACILITIES (STOCK SYMBOL) (BEDS) REVENUES EQUITY INCOME (BEDS) OCCUPANCY - -------------------------------------------- ---------- ---------- -------- ---------- --------- ------------ Marriott International...................... 787 $7,430,000 $696,000 $ 126,000 14 90%(3) (NYSE:MAR) (174,951)(2) (3,932) Horizon Healthcare(1)....................... 104 232,199 217,994 7,716 12 91% (NYSE:HHC) (11,883) (1,738) GranCare.................................... 83 507,970 70,757 10,884 27 91% (NYSE:GC) (11,300) (3,908) Sun Healthcare Group........................ 47 191,711 69,586 9,749 4 95% (NYSE:SHG) (5,272) (605) Beverly Enterprises......................... 817 2,885,881 739,009 57,924 2 92% (NYSE:BEV) (86,865) (201) Integrated Health Services.................. 67 282,160 176,133 15,471 1 96% (NYSE:IHS) (8,731) (120) Hillhaven(1)................................ 284 1,248,106 348,174 39,079 1 98% (NYSE:HIL) (35,149) (120) - --------------- (1) All operators have fiscal years ended December 31 except Horizon Healthcare and Hillhaven which have fiscal years ended May 31. Annual revenues and net income for Horizon Healthcare and Hillhaven are for the year ended May 31, 1993 and may not be indicative of the results which can be expected for the year ended May 31, 1994; moreover, annual revenues and net income shown for Horizon Healthcare do not reflect the Horizon/Greenery merger consummated in February 1994. (2) Includes approximately 770 operated or franchised hotels with more than 170,000 rooms and 17 retirement complexes with 4,951 units, including independent and assisted living apartments and beds for nursing homes. (3) Occupancy is aggregate average occupancy for facilities opened for more than one year.
Additional Security. In addition to fee ownership of the leased properties and mortgage liens on the mortgaged properties, certain of the Company's leases and mortgages contain additional security features. Generally, with respect to investments originated by the Company, each obligation of an operator to HRP is subject to cross default provisions with respect to all other obligations of that operator to HRP and any collateral pledged by an operator to HRP constitutes collateral for all obligations of that operator. Certain operators have pledged additional collateral or provided corporate guarantees, security deposits, or, in some cases, personal guarantees. 13 16 MANAGEMENT The Trustees and executive officers of the Company are as follows:
NAME AGE POSITION - ------------------------------------- --- ---------------------------------------------------- Mark J. Finkelstein.................. 47 President and Chief Executive Officer John L. Harrington................... 58 Trustee David J. Hegarty..................... 37 Executive Vice President, Chief Financial Officer and Secretary Arthur G. Koumantzelis............... 63 Trustee Rev. Justinian Manning, C.P.......... 68 Trustee Gerard M. Martin..................... 59 Trustee John G. Murray....................... 33 Treasurer Barry M. Portnoy..................... 48 Trustee
Mark J. Finkelstein has been President and Chief Executive Officer of the Company since its organization. Mr. Finkelstein is a past President of the American College of Health Care Administrators. John L. Harrington is the President of JRY Corporation (the principal owner of the Boston Red Sox baseball club) and is Executive Director and Trustee of the Yawkey Foundation and a trustee of the JRY Trust. Mr. Harrington is also a Director of Shawmut Bank, N.A. David J. Hegarty, a certified public accountant, became Executive Vice President of the Company in July 1993. He has been the Chief Financial Officer of the Company since July 1987, when he joined the Company as Treasurer and Secretary. Arthur G. Koumantzelis is the Senior Vice President and Chief Financial Officer of Cumberland Farms, Inc., a private company engaged in the convenience store business in the northeastern United States and Florida and, through its interest in the partnership operating its Gulf Oil Division, in the distribution and retail sale of gasoline in the northeastern United States. The Reverend Justinian Manning, C.P., is the pastor of St. Gabriel's Parish in Brighton, Massachusetts. He is also on the Board of Directors of Charlesview, a low and moderate income housing program, and St. Elizabeth's Hospital Foundation. He belongs to the Provincial Council of the Passionist Provincialate and is the former Director of Consolidation for the Community. Gerard M. Martin is a real estate investor. Prior to the merger of Horizon Healthcare Corporation ("Horizon") and Greenery Rehabilitation Group, Inc. ("Greenery") in February 1994, he had been the Chairman and Chief Executive Officer of Greenery and its predecessors since 1975. Mr. Martin is a Director of Horizon. John G. Murray, a certified public accountant, joined the Company in July 1993 as Treasurer. Mr. Murray was employed by Fidelity Brokerage Services, Inc. prior to joining the Company, most recently as Director of Finance, Business Analysis and Planning. Barry M. Portnoy has been a partner in the law firm of Sullivan & Worcester, counsel to the Company, since 1978. Mr. Portnoy was a Director of Greenery until February 1994 and is a Director of Horizon. Mr. Harrington, Mr. Koumantzelis and Fr. Manning are the Company's Independent Trustees, that is Trustees who are not affiliated with any of the Company's lessees or mortgagors or with HRPT Advisors, Inc. (the "Advisor"). Under the Company's Declaration of Trust, a majority of the Company's Trustees will at all times consist of Independent Trustees. All investment and policy decisions affecting the Company are made by its Board of Trustees. All day to day operations of the Company are conducted by the Advisor pursuant to an investment advisory contract. The Advisor is owned by Messrs. Martin and Portnoy. Messrs. Finkelstein, Hegarty and Murray, as well as all other personnel involved in the Company's operations are employees of the Advisor. The Advisor is paid an annual advisory fee calculated on the basis of total assets under management (.7% of the first $250 million, plus .5% of additional assets) and an annual incentive fee calculated on the basis of increases in operating cash flow per Share above threshold amounts (15% of cash flow above the threshold amount of $1.37/Share in 1994, which threshold increases by $.05/Share annually thereafter), but no more 14 17 than $.01/Share. The Advisor currently owns approximately one million Shares which were purchased in 1989. All incentive fees which may be earned by the Advisor will be paid in Shares. The Company believes that its total administrative costs, measured as a percentage of assets under management, are below the average for its industry. FEDERAL INCOME TAX AND ERISA CONSIDERATIONS The following description of certain Federal income tax matters and Employee Retirement Income Security Act of 1974, as amended ("ERISA"), considerations relating to the Company is qualified in its entirety by reference to the more detailed description thereof contained in the Company's Annual Report on Form 10-K, which is incorporated herein by reference. Sullivan & Worcester, Boston, Massachusetts, has rendered its opinion that the discussion in this section and in the Form 10-K in the sections captioned "Federal Income Tax Considerations" and "ERISA Plans, Keogh Plans and Individual Retirement Accounts" in all material respects is accurate and fairly summarizes the federal income tax and ERISA issues which are material to an investment in the Shares and that the opinions of counsel referred to in those sections represent Sullivan & Worcester's opinions on those subjects. Specifically, subject to qualifications and assumptions contained in its opinion and in the Form 10-K, Sullivan & Worcester has opined to the effect (a) that the Company has been organized in conformity with the requirements for federal tax qualifications as a REIT, has qualified as a REIT for its 1987, 1988, 1989, 1990, 1991 and 1992 taxable years, and that the Company's current and anticipated investments and its plan of operation will enable it to continue to meet the requirements for federal tax qualification and taxation as a REIT and (b) that, under the "plan assets" regulations promulgated by the Department of Labor under ERISA, the Shares are publicly offered securities and the assets of the Company will not be deemed to be "plan assets" under ERISA. The Company is and intends to remain qualified as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"). As a REIT, the Company's net income which is distributed as dividends to shareholders will be exempt from Federal taxation. Distributions to the Company's shareholders generally will be includable in their income; however, dividends distributed which are in excess of current or accumulated earnings will be treated for tax purposes as a return of capital to the extent of a shareholder's basis, and will reduce the basis of shareholders' Shares. Approximately 26% of dividends distributed in calendar 1993 were treated as a return of capital. The Company intends to conduct its affairs so that the assets of the Company will not be deemed to be "plan assets" of any individual retirement account, employee benefit plan subject to Title I of ERISA, or other qualified retirement plan subject to Section 4975 of the Code which acquires its Shares. The Company believes that, under present law, its distributions do not create so called "unrelated business taxable income" to tax exempt entities such as pension trusts, subject, however, to certain new rules which apply to pension trusts holding more than 10% of the Shares. EACH PROSPECTIVE PURCHASER OF THE SHARES OFFERED HEREBY IS ADVISED TO CONSULT HIS OWN PROFESSIONAL ADVISOR REGARDING THE SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX AND ERISA CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND SALE OF THE SHARES OFFERED HEREBY. 15 18 UNDERWRITING The Underwriters named below (the "U.S. Underwriters"), for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), Donaldson, Lufkin & Jenrette Securities Corporation, PaineWebber Incorporated and Smith Barney Shearson Inc. are acting as representatives (the "U.S. Representatives"), have severally agreed, subject to the terms and conditions of the U.S. Purchase Agreement (the "U.S. Purchase Agreement") with the Company relating to 9,500,000 Shares offered in the United States and Canada (the "U.S. Offering"), to purchase from the Company the respective number of Shares set forth opposite their names below.
NUMBER U.S. UNDERWRITER OF SHARES ---------------- --------- Merrill Lynch, Pierce, Fenner & Smith Incorporated......................................... Donaldson, Lufkin & Jenrette Securities Corporation............... PaineWebber Incorporated.......................................... Smith Barney Shearson Inc. ....................................... Arnold and S. Bleichroeder, Inc................................... Bear, Stearns & Co. Inc........................................... Alex. Brown & Sons Incorporated................................... Dillon, Read & Co. Inc............................................ A.G. Edwards & Sons, Inc.......................................... Kidder, Peabody & Co. Incorporated................................ Lehman Brothers Inc............................................... NatWest Securities Limited........................................ Oppenheimer & Co., Inc............................................ Prudential Securities Incorporated................................ Wertheim Schroder & Co. Incorporated.............................. Advest, Inc....................................................... Robert W. Baird & Co. Incorporated................................ J.C. Bradford & Co................................................ Cowen & Company................................................... Dain Bosworth Incorporated........................................ Equitable Securities Corporation.................................. Fahnestock & Co. Inc.............................................. First Albany Corporation.......................................... First of Michigan Corporation..................................... Interstate/Johnson Lane Corporation............................... Janney Montgomery Scott Inc....................................... Edward D. Jones & Co.............................................. Kemper Securities, Inc............................................ Ladenburg, Thalmann & Co. Inc..................................... Legg Mason Wood Walker, Incorporated.............................. McDonald & Company Securities, Inc................................ Morgan Keegan & Company, Inc...................................... Piper Jaffray Inc................................................. Principal Financial Securities, Inc............................... Ragen MacKenzie Incorporated...................................... Rauscher Pierce Refsnes, Inc...................................... Raymond James & Associates, Inc................................... The Robinson-Humphrey Company, Inc................................ Stephens Inc...................................................... Stifel, Nicolaus & Company, Incorporated.......................... Sutro & Co. Incorporated.......................................... Tucker Anthony Incorporated....................................... Wheat, First Securities, Inc...................................... The Buckingham Research Group Incorporated........................ Crowell, Weedon & Co.............................................. Dickinson & Co....................................................
16 19
NUMBER U.S. UNDERWRITER OF SHARES ---------------- --------- Doft & Co., Inc................................................... Keane Securities Co., Inc......................................... Mesirow Financial, Inc............................................ The Ohio Company.................................................. Parker/Hunter Incorporated........................................ Pennsylvania Merchant Group Ltd................................... Pryor, McClendon, Counts & Co., Inc............................... Raffensperger, Hughes & Co., Inc.................................. The Seidler Companies Incorporated................................ Spencer Trask Securities Incorporated............................. Utendahl Capital Partners, L.P.................................... Wedbush Morgan Securities......................................... --------- Total................................................ 9,500,000 =========
The Company has also entered into the International Purchase Agreement (the "International Purchase Agreement") with certain underwriters (the "International Managers"), for whom Merrill Lynch International Limited, Donaldson, Lufkin & Jenrette Securities Corporation, PaineWebber International (U.K.) Ltd. and Smith Barney Shearson Inc. are acting as representatives (the "Lead Managers"), relating to the Shares offered outside the United States and Canada (the "International Offering"). Subject to the terms and conditions of the International Purchase Agreement, the Company has agreed to sell to the International Managers, and the International Managers have severally agreed to purchase, an aggregate of 1,500,000 Shares. Under certain circumstances, the commitments of non-defaulting U.S. Underwriters and International Managers may be increased. The initial public offering price per Share and the underwriting discount per Share are identical under the U.S. Purchase Agreement and the International Purchase Agreement. In the U.S. Purchase Agreement, the several U.S. Underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all of the Shares being sold pursuant to such agreement if any of the Shares being sold pursuant to such agreement are purchased and in the International Purchase Agreement the several International Managers have agreed, subject to the terms and conditions set forth therein, to purchase all of the Shares being sold pursuant to such agreement if any of the Shares being sold pursuant to such agreement are purchased. The closings with respect to the sale of Shares to be purchased by the U.S. Underwriters and the International Managers are conditioned upon one another. The U.S. Representatives have advised the Company that the U.S. Underwriters propose to initially offer the Shares to the public at the public offering price set forth on the cover page of this Prospectus and to certain dealers at such price less a concession not in excess of $ per Share. The U.S. Underwriters may allow, and such dealers may reallow, a discount not in excess of $ per Share to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed. The Company has granted to the U.S. Underwriters and the International Managers an option, exercisable by the U.S. Representatives for 30 days from the date of this Prospectus, to purchase up to an additional 1,650,000 Shares, solely to cover over-allotments, if any, at a price per Share equal to the initial public offering price less the underwriting discount set forth on the cover page of this Prospectus, and, with respect to any such Shares issued after the record date for the quarterly dividend for the period ended March 31, 1994, less an amount equal to such dividend. If the U.S. Representatives exercise such option, each U.S. Underwriter and International Manager will, subject to certain conditions, have a firm commitment to purchase approximately the same percentage of such option Shares which the number of Shares to be purchased initially by it bears to 11,000,000 Shares. The U.S. Underwriters and the International Managers have entered into an Intersyndicate Agreement (the "Intersyndicate Agreement") that provides for coordination of their activities. Pursuant to the Intersyndicate Agreement, sales may be made between the U.S. Underwriters and the International Managers of such number of Shares as may be mutually agreed. The price of any Shares so sold shall be the initial public offering price, less an amount not greater than the selling concession. 17 20 Under the terms of the Intersyndicate Agreement, the U.S. Underwriters and any dealer to whom they sell Shares will not offer to sell or sell Shares to any non-U.S. or non-Canadian person or to any person they believe intends to resell to any non-U.S. or non-Canadian person, and the International Managers and any dealer to whom they sell Shares will not offer to sell or sell Shares to any U.S. or Canadian person or to any person they believe intends to resell to any U.S. or Canadian person, except, in each case, for transactions pursuant to the Intersyndicate Agreement. The Company has agreed to indemnify the several U.S. Underwriters and the several International Managers against certain liabilities, including liabilities under the Securities Act. The Company and the Advisor have each agreed that, for a period of 90 days after the date of this Prospectus, it will not, without the prior consent of MLPF&S, issue, sell, contract to sell, grant any option for the sale of, or otherwise dispose of any Shares, other than the Shares being sold in connection with the Offerings, pursuant to the Company's 1992 Incentive Share Award Plan, and Shares issued upon exercise of any outstanding options. The Company has agreed that, during such 90 day period, it will not, without the prior consent of MLPF&S, terminate, modify or waive any provision in any agreement to which it is a party that restricts or limits the transferability of any Shares. MLPF&S will be entitled to an advisory fee from the Company upon consummation of the Marriott Transaction. As described under "Recent Developments -- The Marriott Transaction", the Company is also negotiating with MLMCI, a subsidiary of MLPF&S, for provision of the MLMCI Facility which may be used in connection with the Company's consummation of the Marriott Transaction. MLMCI will be entitled to a fee upon consummation of the Marriott Transaction and additional fees if the MLMCI Facility is consummated. In addition, MLPF&S and MLMCI are both presently entitled to reimbursement from the Company for their respective out-of-pocket expenses incurred in advising and assisting the Company in connection with the Marriott Transaction. LEGAL MATTERS Certain legal matters with respect to the Shares offered by the Company will be passed upon for the Company by Sullivan & Worcester, Boston, Massachusetts and for the Underwriters by Brown & Wood, New York, New York. Sullivan & Worcester and Brown & Wood will rely, as to all matters of Maryland law, upon the opinion of Piper & Marbury, Baltimore, Maryland. Sullivan & Worcester has also given its opinion as to certain Federal income tax matters and certain ERISA considerations relating to the Company. See "Federal Income Tax and ERISA Considerations". Barry M. Portnoy, a partner in the firm of Sullivan & Worcester, is a Trustee of the Company, a director and 50% shareholder of each of the Advisor, Connecticut Subacute Corporation ("CSC"), and Connecticut Subacute Corporation II ("CSCII") and a director of Horizon. Sullivan & Worcester represents the Advisor, CSC, CSCII, Gerard M. Martin and certain affiliates of each of the foregoing on various matters. CSC, CSCII and Horizon are tenants of the Company. EXPERTS The financial statements of the Company appearing in the Company's Annual Report (Form 10-K) for the year ended December 31, 1993; the consolidated financial statements of Greenery appearing in the Greenery Annual Report (Form 10-K) for the year ended September 30, 1993; and the consolidated financial statements of GranCare appearing in the GranCare Annual Report (Form 10-K) for the year ended December 31, 1993, have been audited by Ernst & Young, independent auditors, as set forth in their reports thereon included therein and incorporated herein by reference. Such financial statements are incorporated herein by reference in reliance upon such reports given upon the authority of such firm as experts in accounting and auditing. The audited consolidated financial statements and schedules of Horizon incorporated by reference in this Prospectus and elsewhere in the registration statement to the extent and for the periods indicated in their reports, have been audited by Arthur Andersen & Co. and KPMG Peat Marwick, independent public accountants, and are included herein in reliance upon the authority of said firms as experts in giving said reports. 18 21 The consolidated financial statements and schedules of Marriott International, Inc. incorporated by reference in this Prospectus and elsewhere in the registration statement have been audited by Arthur Andersen & Co., independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. Reference is made to said report, which includes an explanatory paragraph with respect to the change in the method of accounting for income taxes as discussed in "Income Taxes" in the notes to the consolidated financial statements. THE DECLARATION OF TRUST ESTABLISHING THE COMPANY, DATED OCTOBER 9, 1986, 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 "HEALTH AND REHABILITATION 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. 19 22 HEALTH AND REHABILITATION PROPERTIES TRUST UNAUDITED ADJUSTED BALANCE SHEET AND UNAUDITED ADJUSTED STATEMENT OF INCOME The following unaudited adjusted balance sheet at December 31, 1993 and the unaudited adjusted statement of income for the year ended December 31, 1993 are intended to present the financial position and results of operations of Health and Rehabilitation Properties Trust as if the transactions described in Note 1 were consummated on December 31, 1993 and January 1, 1993, respectively. The unaudited adjusted financial statements should be read in conjunction with the separate financial statements of Health and Rehabilitation Properties Trust for the year ended December 31, 1993 which are incorporated herein by reference. The unaudited adjusted financial statements are not necessarily indicative of the expected financial position and results of operations for any future period. Differences would result from, but not be limited to, changes in the Company's portfolio of real estate investments, changes in interest rates and changes in the debt and/or equity structure of the Company. F-1 23 HEALTH AND REHABILITATION PROPERTIES TRUST UNAUDITED ADJUSTED BALANCE SHEET DECEMBER 31, 1993 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL ADJUSTMENTS DECEMBER 31, 1993 (NOTES 1(A) TO (I), 2) AS ADJUSTED ----------------- ---------------------- ----------- ASSETS Real estate properties, at cost: Land.................................. $ 33,450 $ 30,694(a),(f) $ 64,144 Buildings and improvements............ 330,988 250,682(a),(f) 581,670 Equipment............................. 20,373 14,805(a),(f) 35,178 ----------------- ----------- ----------- 384,811 296,181 680,992 Less accumulated depreciation......... 34,969 (4,325)(f) 30,644 ----------------- ----------- ----------- 349,842 300,506 650,348 Real estate mortgages and notes, net.... 157,281 960 (b),(f),(i 158,241 Cash and cash equivalents............... 13,887 (2,302)(a),(f),(h) 11,585 Interest and rent receivable............ 3,039 3,039 Deferred interest and finance costs, net, and other assets................. 3,613 3,613 ----------------- ----------- ----------- $ 527,662 $299,164 $ 826,826 ================= =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Borrowings.............................. $ 73,000 $133,607 (a),(b),(i $ 206,607 Security deposits....................... 8,300 (4,500)(f) 3,800 Due to affiliate........................ 709 -- 709 Accounts payable and accrued expenses... 4,518 -- 4,518 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; 44,121,000 and 55,722,500 Shares, as adjusted, issued and outstanding............. 441 116(a),(h) 557 Additional paid-in capital............ 470,572 164,708(a),(h) 635,280 Cumulative net income................. 118,889 5,233 (b),(f),(i 124,122 Distributions of funds from operations......................... (148,767) (148,767) ----------------- ----------- ----------- Total shareholders' equity.... 441,135 170,057 611,192 ----------------- ----------- ----------- $ 527,662 $299,164 $ 826,826 ================= =========== ===========
F-2 24 HEALTH AND REHABILITATION PROPERTIES TRUST UNAUDITED ADJUSTED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 1993 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL DECEMBER 31, ADJUSTMENTS 1993 (NOTES 1(A) TO (I), 2) AS ADJUSTED ------------ ---------------------- ----------- REVENUES: Rental income................. $ 46,069 $ 28,633(a),(c),(d),(e),(f) $74,702 Interest income............... 10,416 9,504(b),(c),(d),(e),(f),(h),(i) 19,920 ------------ ---------- ----------- Total revenues........ 56,485 38,137 94,622 ------------ ---------- ----------- EXPENSES: Interest...................... 6,217 6,449(a),(b),(e),(f),(g),(h),(i) 12,666 Advisory fees................. 2,591 2,101(a),(b),(c),(d),(e),(f),(i) 4,692 Depreciation and amortization............... 9,087 8,695(a),(c),(d),(e),(f),(i) 17,782 General and administrative.... 852 852 ------------ ---------- ----------- Total expenses........ 18,747 17,245 35,992 ------------ ---------- ----------- Income before extraordinary item.......................... $ 37,738 $ 20,892 $58,630 ============ =========== =========== Average shares outstanding...... 34,407 55,723 ============ =========== Per share amounts: Income before extraordinary item....................... $ 1.10 $ 1.05 ============ ===========
F-3 25 HEALTH AND REHABILITATION PROPERTIES TRUST NOTES TO UNAUDITED ADJUSTED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE 1 -- BASES OF RECORDING THE ADJUSTMENTS For the purposes of the unaudited adjusted balance sheet at December 31, 1993 and the unaudited adjusted statement of income for the year ended December 31, 1993, it has been assumed that the following transactions took place on December 31, 1993 and January 1, 1993, respectively. The adjustments shown on the face of the unaudited adjusted financial statements are the result of the cumulative adjustments described in Notes 1(a) through (i) and are summarized in Note 2. (a) Marriott Transaction and Present Offering. On March 17, 1994, the Company entered into an agreement with Host Marriott Corporation to acquire 14 retirement communities containing 3,932 residences or beds for $320,000, subject to adjustment. The communities are triple net leased through December 31, 2013 to a wholly owned subsidiary of Marriott International, Inc. (Marriott). For purposes of these unaudited adjusted financial statements, minimum annual rent of $27,645 is used, which represents a full year's rent for each facility whether or not the facility was in operation for a full year during 1993. No amount is included in these statements for additional rent, which pursuant to the leases will commence in 1994 at the rate of 4.5% of revenues in excess of base amounts determined on a facility by facility basis. The Company anticipates incurring $5,000 in fees and expenses related to the Marriott Transaction. The leases are cross-defaulted and guaranteed by Marriott. The acquisition is expected to close in June 1994. The Company has filed a Registration Statement with the Securities and Exchange Commission relating to an offering of 11,000,000 Shares (plus a 1,650,000 Share underwriters' over-allotment option). Upon consummation of the offering, the Company will receive approximately $156,626 net proceeds ($180,120, if the underwriters' over-allotment option is exercised in full). The net proceeds have been applied in these statements as funding for the Marriott Transaction. In connection with the execution of the purchase and sale agreement for the Marriott Transaction, the Company provided a $25,000 cash deposit. The remaining purchase price will be funded by the assumption of $17,600 of existing debt bearing interest at 8.75% and with new debt at an assumed interest rate of 6%. Adjustments to the unaudited adjusted financial statements in respect of these transactions are as follows: BALANCE SHEET: INCOME STATEMENT: Land............................ $ 32,500 Rental Income................... $ 27,645 Buildings and improvements...... 276,250 Interest expense................ 9,086 Equipment....................... 16,250 Advisory fee.................... 1,625 Cash and cash equivalents....... (25,000) Depreciation and amortization... 8,260 Borrowings...................... 143,374 Common Shares................... 110 Additional paid-in capital...... 156,516
(b) Mortgage Portfolios. On May 20, 1993, the Company acquired a portfolio of mortgage loans from the Resolution Trust Corporation (RTC) for $72,411. The loans, which are secured by first mortgages on 27 nursing homes, had a face value of approximately $79,883 and have maturities ranging from 1996 to 2001. The acquisition was funded using approximately $18,411 of cash with the balance from a $54,000 borrowing under a repurchase facility. The repurchase facility accrued interest at a floating rate based on LIBOR plus a premium and was repaid in full on December 27, 1993. During March 1994, three of these loans with a balance of $8,617 at March 1, 1994 and $8,662 at December 31, 1993 were paid in full. Cumulative net income has been adjusted on the unaudited adjusted balance sheet by $1,310 which represents the unamortized purchase price discount on the loans prepaid so that the unaudited adjusted statement of income will reflect only normal results of operations. F-4 26 HEALTH AND REHABILITATION PROPERTIES TRUST NOTES TO UNAUDITED ADJUSTED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE 1 -- BASES OF RECORDING THE ADJUSTMENTS -- (CONTINUED) On September 27, 1993, the Company acquired a portfolio of mortgage loans from a group of institutional investors for $16,000. The loans, which are secured by first mortgages on six nursing homes, had a face value of approximately $18,200 and have maturities ranging from 1994 to 1997. The acquisition was funded using approximately $4,100 of cash with the balance borrowed under the repurchase facility referred to above. Adjustments to the unaudited adjusted financial statements in respect of these transactions are as follows: BALANCE SHEET: INCOME STATEMENT: Real estate mortgages and notes, Interest income............. $ 2,307 net........................... $(7,352) Interest expense............ 1,040 Borrowings....................... (8,662) Advisory fee................ 112 Cumulative net income............ 1,310
(c) SAFECO Portfolio. On June 4, 1993, the Company acquired for cash, three long-term care facilities and related improvement loans for $5,778. The facilities are subject to existing leases with terms expiring between 1995 and 2001. Adjustments to the unaudited adjusted financial statements in respect of these transactions are as follows: INCOME STATEMENT: Rental income....................... $313 Interest income..................... (42) Advisory fee........................ 12 Depreciation and amortization....... 54
(d) Sun Healthcare. On November 1, 1993, the Company purchased a 143 bed long-term care facility in Seattle, Washington for $5,125 from Greenery Rehabilitation Group, Inc. (Greenery) and simultaneously leased it to Sun Healthcare Group, Inc. (Sun). In addition, the Company and Sun agreed to extend the lease arrangements on three nursing facilities that had been scheduled to expire in May, 1997, through December, 2005. Minimum annual rent under the new lease for the four properties is approximately $2,537. Adjustments to the unaudited adjusted financial statements in respect of this transaction are as follows: INCOME STATEMENT: Rental income...................... $ 200 Interest income.................... (137) Advisory fee....................... 21 Depreciation and amortization...... 109
(e) Community Care of America. On December 30, 1993, the Company acquired 12 nursing homes and five retirement apartment complexes for $33,400 and leased them to subsidiaries of Community Care of America, Inc. (together with its subsidiaries, CCA). In addition, the Company has agreed to provide improvement financing of $7,300 to CCA. The acquired facilities have been leased on a triple net basis. The minimum annual rent from this transaction will be approximately $3,814. Also, in connection with the CCA purchase-lease transaction described above, the Company provided first mortgage financing on 14 nursing homes and one retirement apartment complex for $19,600 and a $7,000 note secured by a first lien on substantially all of the assets of the borrower at a weighted average interest rate of 10.9%. The notes mature in December 2016. Minimum annual interest from this transaction will be $2,909. Adjustments to the unaudited adjusted financial statements in respect of these transactions are as follows: INCOME STATEMENT: Rental income..................... $3,814 Interest income................... 2,909 Interest expense.................. 3,243 Advisory fee...................... 300 Depreciation and amortization..... 988
F-5 27 HEALTH AND REHABILITATION PROPERTIES TRUST NOTES TO UNAUDITED ADJUSTED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) (f) Horizon/Greenery Merger. On February 11, 1994, in connection with the merger of Greenery into Horizon Healthcare Corporation (Horizon) the Company sold to Horizon for $28,400, three facilities that had been leased to Greenery. The Company realized a capital gain of approximately $3,906 on the sale of these properties. Cumulative net income has been adjusted on the unaudited adjusted balance sheet by the $3,906 gain on the sale of these properties to exclude this gain so that the unaudited adjusted statement of income will reflect only normal results of operations. In addition, Horizon has leased seven facilities previously leased to Greenery, on substantially similar terms except the leases were extended through 2005. The Company has also granted Horizon a ten year option to buy, at the rate of no more than one facility per year, the seven leased facilities. Also, the Company leased the three remaining Greenery facilities to a newly formed corporation, Connecticut Subacute Corporation II (CSCII), an affiliate of HRPT Advisors, Inc. (Advisor). These facilities are being managed by and the lease payments are guaranteed by Horizon for a term of up to five years. The terms of these lease arrangements are substantially similar to the original lease arrangements. In addition, the Company provided Horizon with $9,400 first mortgage financing for two facilities. One of the facilities previously was owned by the Company and leased to Greenery. The mortgage notes bear interest at 11.5% per annum and will mature on December 31, 2000. Adjustments to the unaudited adjusted financial statements in respect of these transactions are as follows: BALANCE SHEET: INCOME STATEMENT: Land............................ $ (1,806) Rental income................... $(3,339) Building and improvements....... (25,568) Interest income................. 1,082 Equipment....................... (1,445) Interest expense................ (524) Accumulated depreciation........ (4,325) Advisory fee.................... (97) Real estate mortgages and notes, Depreciation and amortization... (760) net.......................... 9,400 Cash and cash equivalents....... 14,500 Security deposits............... (4,500) Cumulative net income........... 3,906
(g) January 1993 Share Offering. On January 20, 1993, the Company received approximately $107,315 net proceeds from the public offering of 9,000,000 shares of the Company's stock. The proceeds were used, in part, to repay outstanding borrowings of $70,000 under the Company's term loans and $18,500 under the Company's revolving line of credit. On February 17, 1993, the Company received additional net proceeds of approximately $15,822 and issued 1,350,000 shares of the Company's stock in connection with the exercise of the underwriters' over-allotment option. Adjustments to the unaudited adjusted financial statements in respect of these transactions are as follows: INCOME STATEMENT: Interest expense................... $(401)
(h) December 1993 Share Offering. During the last quarter of 1993, the Company raised approximately $121,655 net proceeds from the public offering of 9,000,000 Shares. The net proceeds were used to repay borrowings under the Company's repurchase facility and to fund the Community Care of America transaction. On January 19, 1994, the underwriters exercised their over-allotment option for 601,500 additional Shares, resulting in additional net proceeds to the Company of approximately $8,300. Adjustments to the unaudited adjusted financial statements in respect of these transactions are as follows: BALANCE SHEET: INCOME STATEMENT: Cash and cash equivalents........ $8,198 Interest income.................. $ 519 Common Shares.................... 6 Interest expense................. (7,681) Additional paid-in capital....... 8,192
(i) Goldome Mortgage Portfolio. On November 19, 1993, the Company was selected as the winning bidder for a portfolio of performing mortgage loans originated by Goldome Credit Corporation. These loans F-6 28 HEALTH AND REHABILITATION PROPERTIES TRUST NOTES TO UNAUDITED ADJUSTED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) NOTE 1 -- BASES OF RECORDING THE ADJUSTMENTS -- (CONTINUED) have a combined principal balance of approximately $29,200, mature between 1994 and 1999, and are secured by mortgages on 18 nursing homes located in eight states. The Company's bid was for approximately $27,800. On December 10, 1993, the Company acquired for $26,600 mortgage loans with a combined principal balance of $27,900 secured by 17 nursing homes. In February 1994, the Company acquired the remaining mortgage loan. Also in February 1994 one loan with a balance of $2,275 at February 15, 1994 and December 31, 1993 was paid in full. Cumulative net income has been adjusted on the unaudited adjusted balance sheet by $17 which represents the unamortized purchase price discount on the loan prepaid so that the unaudited adjusted statement of income will reflect only normal results of operations. Adjustments to the unaudited adjusted financial statements in respect of these transactions are as follows: BALANCE SHEET: INCOME STATEMENT: Real estate mortgages and notes, Interest income.................. $2,866 net........................... $(1,088) Interest expense................. 1,686 Borrowings....................... (1,105) Advisory fee..................... 128 Cumulative net income............ 17 Depreciation and amortization.... 44
NOTE 2 -- SUMMARY OF ADJUSTMENTS
ADJUSTMENT LETTER --------------------------------------------------------------------------------------------------- (A) (B) (C) (D) (E) (F) (G) (H) (I) TOTALS -------- ------- ---- ---- ------ ------- ------ ------ ------- -------- BALANCE SHEET: Land...................... $ 32,500 $(1,806) $ 30,694 Buildings and improvements............ 276,250 (25,568) 250,682 Equipment................. 16,250 (1,445) 14,805 Less accumulated depreciation............ (4,325) (4,325) Real estate mortgages and notes, net.............. $(7,352) 9,400 $(1,088) 960 Cash and cash equivalents............. (25,000) 14,500 $8,198 (2,302) Borrowings................ 143,374 (8,662) (1,105) 133,607 Security deposits......... (4,500) (4,500) Common shares of beneficial interest..... 110 6 116 Additional paid-in capital................. 156,516 8,192 164,708 Cumulative net income..... 1,310 3,906 17 5,233 INCOME STATEMENT: Rental income............. 27,645 $313 $200 $3,814 (3,339) 28,633 Interest income........... 2,307 (42) (137) 2,909 1,082 519 2,866 9,504 Interest expense.......... 9,086 1,040 3,243 (524) $ (401) (7,681) 1,686 6,449 Advisory fees............. 1,625 112 12 21 300 (97) 128 2,101 Depreciation and amortization............ 8,260 54 109 988 (760) 44 8,695
NOTE 3 -- OTHER INFORMATION -- FUNDS FROM OPERATIONS
HISTORICAL DECEMBER 31, 1993 AS ADJUSTED ----------------- ----------- Income before extraordinary item............................... $37,738 $58,630 Depreciation and amortization.................................. 9,087 17,782 Other non-cash charges......................................... 753 1,382 ----------------- ----------- Funds from Operations.......................................... $47,578 $77,794 ================= ===========
F-7 29 ================================================================================ NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE U.S. UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SHARES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE ---- Additional Information................ 2 Incorporation of Certain Information by Reference........................ 2 Summary............................... 3 Recent Developments................... 5 The Company........................... 7 Distributions......................... 8 Capitalization........................ 9 Use of Proceeds....................... 9 Investment and Financing Policy....... 10 Selected Financial Data............... 11 Properties............................ 12 The Lessees and the Mortgagors........ 13 Management............................ 14 Federal Income Tax and ERISA Considerations...................... 15 Underwriting.......................... 16 Legal Matters......................... 18 Experts............................... 18 Unaudited Adjusted Financial Statements.......................... F-1
================================================================================ ================================================================================ 11,000,000 SHARES HEALTH AND REHABILITATION PROPERTIES TRUST COMMON SHARES OF BENEFICIAL INTEREST ------------------------ PROSPECTUS ------------------------ MERRILL LYNCH & CO. DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION PAINEWEBBER INCORPORATED SMITH BARNEY SHEARSON INC. MAY , 1994 ================================================================================ 30 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS, DATED MAY 5, 1994 PROSPECTUS - ----------------- 11,000,000 SHARES HEALTH AND REHABILITATION PROPERTIES TRUST COMMON SHARES OF BENEFICIAL INTEREST ------------------------ Health and Rehabilitation Properties Trust (the "Company" or "HRP") is a real estate investment trust which invests primarily in retirement communities, assisted living centers, nursing homes and other long term care facilities. On April 29, 1994, the last reported sale price for the Shares on the New York Stock Exchange was $15 1/8. Of the 11,000,000 Shares offered by the Company, 1,500,000 Shares are being offered initially outside the United States and Canada by the International Managers and 9,500,000 Shares are being offered in a concurrent offering in the United States and Canada by the U.S. Underwriters (collectively, the "Offerings"). ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO PUBLIC DISCOUNT(1) COMPANY(2) - ------------------------------------------------------------------------------------------------ Per Share.................. $ $ $ - ------------------------------------------------------------------------------------------------ Total(3)................... $ $ $ ================================================================================================ (1) The Company has agreed to indemnify the several International Managers against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriting". (2) Before deducting expenses payable by the Company estimated at $598,349. (3) The Company has granted the International Managers and the U.S. Underwriters an option, exercisable by the U.S. Representatives for 30 days from the date of this Prospectus, to purchase up to 1,650,000 additional Shares solely to cover over-allotments, if any. If such option is exercised in full, the total Price to Public, Underwriting Discount and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting".
------------------------ The Shares offered hereby are offered by the several International Managers, subject to prior sale, when, as and if issued to and accepted by them and subject to approval of certain legal matters by counsel for the International Managers, and to certain other conditions. The International Managers reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the Shares offered hereby will be made in New York, New York on or about May , 1994. ------------------------ MERRILL LYNCH INTERNATIONAL LIMITED DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION PAINEWEBBER INTERNATIONAL SMITH BARNEY SHEARSON INC. BARCLAYS DE ZOETE WEDD LIMITED DEUTSCHE BANK AKTIENGESELLSCHAFT KLEINWORT BENSON SECURITIES NOMURA INTERNATIONAL PARIBAS CAPITAL MARKETS ------------------------ The date of this Prospectus is , 1994. 31 FEDERAL INCOME TAX AND ERISA CONSIDERATIONS The following description of certain Federal income tax matters and Employee Retirement Income Security Act of 1974, as amended ("ERISA"), considerations relating to the Company is qualified in its entirety by reference to the more detailed description thereof contained in the Company's Annual Report on Form 10-K, which is incorporated herein by reference. Sullivan & Worcester, Boston, Massachusetts, has rendered its opinion that the discussion in this section and in the Form 10-K in the sections captioned "Federal Income Tax Considerations" and "ERISA Plans, Keogh Plans and Individual Retirement Accounts" in all material respects is accurate and fairly summarizes the federal income tax and ERISA issues which are material to an investment in the Shares and that the opinions of counsel referred to in those sections represent Sullivan & Worcester's opinions on those subjects. Specifically, subject to qualifications and assumptions contained in its opinion and in the Form 10-K, Sullivan & Worcester has opined to the effect (a) that the Company has been organized in conformity with the requirements for federal tax qualifications as a REIT, has qualified as a REIT for its 1987, 1988, 1989, 1990, 1991 and 1992 taxable years, and that the Company's current and anticipated investments and its plan of operation will enable it to continue to meet the requirements for federal tax qualification and taxation as a REIT and (b) that, under the "plan assets" regulations promulgated by the Department of Labor under ERISA, the Shares are publicly offered securities and the assets of the Company will not be deemed to be "plan assets" under ERISA. The Company is and intends to remain qualified as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"). As a REIT, the Company's net income which is distributed as dividends to shareholders will be exempt from Federal taxation. Distributions to the Company's shareholders generally will be includable in their income; however, dividends distributed which are in excess of current or accumulated earnings will be treated for tax purposes as a return of capital to the extent of a shareholder's basis, and will reduce the basis of shareholders' Shares. Approximately 26% of dividends distributed in calendar 1993 were treated as a return of capital. The Company intends to conduct its affairs so that the assets of the Company will not be deemed to be "plan assets" of any individual retirement account, employee benefit plan subject to Title I of ERISA, or other qualified retirement plan subject to Section 4975 of the Code which acquires its Shares. The Company believes that, under present law, its distributions do not create so called "unrelated business taxable income" to tax exempt entities such as pension trusts, subject, however, to certain new rules which apply to pension trusts holding more than 10% of the Shares. SPECIAL TAX CONSIDERATIONS FOR FOREIGN SHAREHOLDERS The rules governing United States income taxation of nonresident alien individuals, foreign corporations, foreign partnerships, and foreign trusts and estates (collectively, "Non-U.S. Shareholders") are complex, and the following discussion is intended only as a summary of such rules. Prospective Non-U.S. Shareholders should consult with their own tax advisors to determine the impact of Federal, state, and local income tax laws on an investment in the Company, including any reporting requirements. In general, a Non-U.S. Shareholder will be subject to regular United States income tax with respect to its investment in the Company if such investment is "effectively connected" with the Non-U.S. Shareholder's conduct of a trade or business in the United States, or (subject to limited exceptions) if the Non-U.S. Shareholder is an individual who is present in the United States for 183 days or more during the taxable year. A corporate Non-U.S. Shareholder that receives income that is (or is treated as) effectively connected with a U.S. trade or business may also be subject to the branch profits tax under Section 884 of the Code, which is payable in addition to regular United States corporate income tax. The following discussion will apply to Non-U.S. Shareholders whose investment in the Company is not so effectively connected. A distribution by the Company that is not attributable to gain from the sale or exchange by the Company of a United States real property interest and that is not designated by the Company as a capital gain dividend will be treated as an ordinary income dividend to the extent that it is made out of current or accumulated earnings and profits. Generally, unless the dividend is effectively connected with the Non-U.S. Shareholder's conduct of a trade or business, such a dividend will be subject to a United States withholding tax equal to 30% X-2 32 of the gross amount of the dividend unless such withholding is reduced by an applicable tax treaty (for example, the treaty between the United States and the United Kingdom provides generally for a maximum rate of withholding of 15% on dividends). A foreign governmental entity, such as a governmental pension plan, may qualify for a complete exemption from withholding on such dividends. A distribution of cash in excess of the Company's earnings and profits will be treated first as a nontaxable return of capital that will reduce a Non-U.S. Shareholder's basis in its shares (but not below zero) and then as gain from the disposition of such shares, the tax treatment of which is described under the rules discussed below with respect to disposition of shares. The Company is required to withhold United States income tax at the rate of 30% on the gross amount of any such distributions made to a Non-U.S. Shareholder unless (i) a lower tax treaty applies and the required form evidencing eligibility for that reduced rate is filed with the Company or (ii) the Non-U.S. Shareholder files IRS Form 4224 with the Company claiming that the distribution is "effectively connected" income. If it is subsequently determined that such distribution is, in fact, in excess of current and accumulated earnings and profits, the Non-U.S. Shareholder may seek a refund from the IRS. For any year in which the Company qualifies as a REIT, distributions by the Company that are attributable to gain from the sale or exchange of a United States real property interest will be taxed to a Non-U.S. Shareholder in accordance with the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA, such distributions are taxed to a Non-U.S. Shareholder as if such distributions were gains "effectively connected" with a United States trade or business. Accordingly, a Non-U.S. Shareholder will be taxed at the normal capital gain rates applicable to a U.S. Shareholder (subject to any applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals). Distributions subject to FIRPTA may also be subject to a 30% branch profits tax in the hands of a foreign corporate shareholder unless a treaty exemption from the branch profits tax is available. The Company will be required to withhold from distributions to Non-U.S. Shareholders, and remit to the IRS, 35% of the amount of any distribution that could be designated as a capital gain dividend. Tax treaties do not reduce the Company's withholding obligations under FIRPTA. If the amount of tax withheld by the Company with respect to a distribution to a Non-U.S. Shareholder exceeds the shareholder's United States liability with respect to such distribution, the Non-U.S. Shareholder may file for a refund of such excess from the IRS. It should be noted that the 35% withholding tax rate on capital gain dividends corresponds to the maximum income tax rate applicable to corporations but is higher than the 28% maximum rate on capital gains of individuals. If the Shares do not constitute a "United States real property interest" within the meaning of FIRPTA, a sale of the Shares by a Non-U.S. Shareholder generally will not be subject to United States taxation unless (i) investment in the Shares is effectively connected with the Non-U.S. Shareholder's United States trade or business, in which case, as discussed above, the Non-U.S. Shareholder would be subject to the same treatment as U.S. Shareholders on such gain or (ii) the Non-U.S. Shareholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year, is not treated as a resident alien by reason of such presence, and has a "tax home" in the United States, in which case the nonresident alien individual will be subject to a 30% tax on the individual's capital gains. The Shares will not constitute a United States real property interest if the Company is a "domestically controlled REIT". A domestically controlled REIT is a REIT in which at all times during a specified testing period less than 50% in value of its shares is held directly or indirectly by Non-U.S. Shareholders. It is currently anticipated that the Company will be a domestically controlled REIT, and therefore that the sale of Shares will not be subject to taxation under FIRPTA. However, because the Shares will be publicly traded, no assurance can be given that the Company will continue to be a domestically controlled REIT. If the Company did not constitute a domestically controlled REIT, a sale of Shares by a Non-U.S. Shareholder would be subject to tax under FIRPTA unless the Shares were "regularly traded" (as defined by applicable Treasury Regulations) on an established securities market (e.g. the New York Stock Exchange, on which the Shares are listed) and the selling Non-U.S. Shareholder had at no time during the preceding five years held more than five percent of the outstanding Shares of the Company. If the gain on the sale of the Shares were subject to taxation under FIRPTA, the Non-U.S. Shareholder would be subject to the same treatment as a U.S. Shareholder with respect to such gain (subject to applicable alternative minimum tax and a special alternative X-3 33 minimum tax in the case of nonresident alien individuals). In any event, a purchaser of Shares from a Non-U.S. Shareholder will not be required under FIRPTA to withhold on the purchase price if the purchased Shares are "regularly traded" on an established securities market or if the Company is a domestically controlled REIT. Otherwise, under FIRPTA, the purchaser of Shares may be required to withhold 10% of the purchase price and to remit such amount to the IRS. FEDERAL ESTATE TAX Shares owned or treated as owned by an individual who is not a citizen or resident (as defined for United States federal estate tax purposes) of the United States at the time of death will be includable in the individual's gross estate for United States federal estate tax purposes unless an applicable estate tax treaty provides otherwise. BACKUP WITHHOLDING AND INFORMATION REPORTING REQUIREMENTS The Company must report annually to the IRS and to each Non-U.S. Shareholder the amount of dividends paid to, and the tax withheld with respect to such holder. These information reporting requirements apply regardless of whether withholding was reduced or eliminated by an applicable tax treaty. Copies of these information returns may also be made available under the provisions of a specific treaty or agreement to the tax authorities in the country in which the Non-U.S. Shareholder resides. United States backup withholding tax (which generally is a withholding tax imposed at the rate of 31% on certain payments to persons that fail to furnish the information required under the United States information reporting requirements) will generally not apply to dividends paid on Shares to a Non-U.S. Shareholder at an address outside the United States. The payment of the proceeds from the disposition of Shares to or through the United States office of a broker will be subject to information reporting and backup withholding at a rate of 31% unless the owner, under penalties of perjury, certifies, among other things, its status as a Non-U.S. Shareholder, or otherwise establishes an exemption. The payment of the proceeds from the disposition of Shares to or through a non-U.S. office of a broker generally will not be subject to backup withholding and information reporting. In the case of proceeds from a disposition of Shares paid to or through a non-U.S. office of a U.S. broker or paid to or through a non-U.S. office of a non-U.S. broker that is (i) a "controlled foreign corporation" for United States federal income tax purposes or (ii) a person 50% or more of whose gross income from all sources for a certain three-year period was effectively connected with a United States trade or business, (a) backup withholding will not apply unless the broker has actual knowledge that the owner is not a Non-U.S. Shareholder, and (b) information reporting will not apply if the broker has documentary evidence in its files that the owner is a Non-U.S. Shareholder (unless the broker has actual knowledge to the contrary). Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Shareholder will be refunded (or credited against the Non-U.S. Shareholder's United States federal income tax liability, if any), provided that the required information is furnished to the IRS. EACH PROSPECTIVE PURCHASER OF THE SHARES OFFERED HEREBY IS ADVISED TO CONSULT HIS OWN PROFESSIONAL ADVISOR REGARDING THE SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX AND ERISA CONSEQUENCES TO HIM OF THE PURCHASE, OWNERSHIP AND SALE OF THE SHARES OFFERED HEREBY. X-4 34 UNDERWRITING The Managers named below (the "International Managers"), for whom Merrill Lynch International Limited, Donaldson, Lufkin & Jenrette Securities Corporation, PaineWebber International (U.K.) Ltd. and Smith Barney Shearson Inc. are acting as representatives (the "Lead Managers"), have severally agreed, subject to the terms and conditions of the International Purchase Agreement (the "International Purchase Agreement") with the Company relating to 1,500,000 Shares offered outside the United States and Canada (the "International Offering"), to purchase from the Company the respective number of Shares set forth opposite their names below.
NUMBER INTERNATIONAL MANAGER OF SHARES --------- Merrill Lynch International Limited............................... Donaldson, Lufkin & Jenrette Securities Corporation............... PaineWebber International (U.K.) Ltd.............................. Smith Barney Shearson Inc. ....................................... Banque Paribas.................................................... Barclays de Zoete Wedd Limited.................................... Deutsche Bank Aktiengesellschaft.................................. Kleinwort Benson Limited.......................................... Nomura International plc.......................................... --------- Total................................................ 1,500,000 =========
The Company has also entered into the U.S. Purchase Agreement (the "U.S. Purchase Agreement") with certain underwriters (the "U.S. Underwriters"), for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated ("MLPF&S"), Donaldson, Lufkin & Jenrette Securities Corporation, PaineWebber Incorporated and Smith Barney Shearson Inc. are acting as representatives (the "U.S. Representatives"), relating to the Shares offered in the United States and Canada (the "U.S. Offering"). Subject to the terms and conditions of the U.S. Purchase Agreement, the Company has agreed to sell to the U.S. Underwriters, and the U.S. Underwriters have severally agreed to purchase, an aggregate of 9,500,000 Shares. Under certain circumstances, the commitments of non-defaulting International Managers and U.S. Underwriters may be increased. The initial public offering price per Share and the underwriting discount per Share are identical under the International Purchase Agreement and the U.S. Purchase Agreement. In the International Purchase Agreement, the several International Managers have agreed, subject to the terms and conditions set forth therein, to purchase all of the Shares being sold pursuant to such agreement if any of the Shares being sold pursuant to such agreement are purchased and in the U.S. Purchase Agreement the several U.S. Underwriters have agreed, subject to the terms and conditions set forth therein, to purchase all of the Shares being sold pursuant to such agreement if any of the Shares being sold pursuant to such agreement are purchased. The closings with respect to the sale of Shares to be purchased by the International Managers and the U.S. Underwriters are conditioned upon one another. The Lead Managers have advised the Company that the International Managers propose to initially offer the Shares to the public at the public offering price set forth on the cover page of this Prospectus and to certain dealers at such price less a concession not in excess of $ per Share. The International Managers may allow, and such dealers may reallow, a discount not in excess of $ per Share to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed. The Company has granted to the International Managers and the U.S. Underwriters an option, exercisable by the U.S. Representatives for 30 days from the date of this Prospectus, to purchase up to an additional 1,650,000 Shares, solely to cover over-allotments, if any, at a price per Share equal to the initial public offering price less the underwriting discount set forth on the cover page of this Prospectus, and, with respect to any such Shares issued after the record date for the quarterly dividend for the period ended March 31, 1994, less an amount equal to such dividend. If the U.S. Representatives exercise such option, each International Manager and U.S. Underwriter will, subject to certain conditions, have a firm commitment to X-5 35 purchase approximately the same percentage of such option Shares which the number of Shares to be purchased initially by it bears to 11,000,000 Shares. The International Managers and the U.S. Underwriters have entered into an Intersyndicate Agreement (the "Intersyndicate Agreement") that provides for coordination of their activities. Pursuant to the Intersyndicate Agreement, sales may be made between the International Managers and the U.S. Underwriters of such number of Shares as may be mutually agreed. The price of any Shares so sold shall be the initial public offering price, less an amount not greater than the selling concession. Under the terms of the Intersyndicate Agreement, the International Managers and any dealer to whom they sell Shares will not offer to sell or sell Shares to any U.S. or Canadian person or to any person they believe intends to resell to any U.S. or Canadian person, and the U.S. Underwriters and any dealer to whom they sell Shares will not offer to sell or sell Shares to any non-U.S. or non-Canadian person or to any person they believe intends to resell to any non-U.S. or non-Canadian person, except, in each case, for transactions pursuant to the Intersyndicate Agreement. Each International Manager has agreed that it has not offered or sold and will not offer or sell in the United Kingdom, by means of any document, any Shares offered by the Company other than to persons whose ordinary business it is to buy or sell shares or debentures, whether as principal or agent (except in circumstances which do not constitute an offer to the public within the meaning of the Companies Act 1985). Each International Manager has agreed that it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Shares offered by the Company in, from or otherwise involving the United Kingdom. Each International Manager has also agreed that it has only issued or passed on and will only issue or pass on to any person in the United Kingdom any document received by it in connection with the issue of the Shares offered by the Company if that person is of a kind described in Article 9(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1988 (as amended) or is a person to whom the document may otherwise lawfully be issued or passed on. The Company has agreed to indemnify the several International Managers and the several U.S. Underwriters against certain liabilities, including liabilities under the Securities Act. The Company and the Advisor have each agreed that, for a period of 90 days after the date of this Prospectus, it will not, without the prior consent of MLPF&S, issue, sell, contract to sell, grant any option for the sale of, or otherwise dispose of any Shares, other than the Shares being sold in connection with the transactions discussed herein, pursuant to the Company's 1992 Incentive Share Award Plan, and Shares issued upon exercise of any outstanding options. The Company has agreed that, during such 90 day period, it will not, without the prior consent of MLPF&S, terminate, modify or waive any provision in any agreement to which it is a party that restricts or limits the transferability of any Shares. MLPF&S will be entitled to an advisory fee from the Company upon consummation of the Marriott Transaction. As described under "Recent Developments -- The Marriott Transaction", the Company is also negotiating with MLMCI, a subsidiary of MLPF&S, for provision of the MLMCI Facility which may be used in connection with the Company's consummation of the Marriott Transaction. MLMCI will be entitled to a fee upon consummation of the Marriott Transaction and additional fees if the MLMCI Facility is consummated. In addition, MLPF&S and MLMCI are both presently entitled to reimbursement from the Company for their respective out-of-pocket expenses incurred in advising and assisting the Company in connection with the Marriott Transaction. X-6 36 =============================================================================== NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE INTERNATIONAL MANAGERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SHARES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS OR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE ---- Additional Information............... 2 Incorporation of Certain Information by Reference....................... 2 Summary.............................. 3 Recent Developments.................. 5 The Company.......................... 7 Distributions........................ 8 Capitalization....................... 9 Use of Proceeds...................... 9 Investment and Financing Policy...... 10 Selected Financial Data.............. 11 Properties........................... 12 The Lessees and the Mortgagors....... 13 Management........................... 14 Federal Income Tax and ERISA Considerations..................... 15 Underwriting......................... 18 Legal Matters........................ 20 Experts.............................. 20 Unaudited Adjusted Financial Statements......................... F-1
=============================================================================== =============================================================================== 11,000,000 SHARES HEALTH AND REHABILITATION PROPERTIES TRUST COMMON SHARES OF BENEFICIAL INTEREST ------------------------ PROSPECTUS ------------------------ MERRILL LYNCH INTERNATIONAL LIMITED DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION PAINEWEBBER INTERNATIONAL SMITH BARNEY SHEARSON INC. BARCLAYS DE ZOETE WEDD LIMITED DEUTSCHE BANK AKTIENGESELLSCHAFT KLEINWORT BENSON SECURITIES NOMURA INTERNATIONAL PARIBAS CAPITAL MARKETS MAY , 1994 =============================================================================== X-7 37 APPENDIX TO ELECTRONIC FORMAT DOCUMENT PAGE 3: Pie chart A pie chart depicting the percentage of the Company's investments which will be in Properties operated by Marriott International (38%); Other Public Companies (Horizon Healthcare, GranCare, Sun Healthcare, Integrated Health, Beverly Enterprises and Hillhaven) (31%); and 30 Private Companies (31%). Dividend chart A bar graph depicting HRP Dividend Growth: 1987 - $1.06; 1988 - $1.12; 1989 - $1.14; 1990 - $1.17; 1991 - $1.23; 1992 - $1.26; 1993 - $1.30; Quarter ended March 31, 1994 annualized - $1.32. PAGE 7: Map A map of the United States with the states listed immediately below the map shaded and with stars indicating the locations of the Marriott Properties (5 in Florida, 3 in Virginia, 2 in Arizona, 1 each in California, Illinois, Maryland and Texas). PAGE 10: Pie charts Two pie charts depicting the HRP Capital Structure before the sale of Shares and the Marriott Transaction: debt (14%) and equity (86%); after the sale of Shares and Marriott Transaction: debt (25%) and equity (75%). PAGE 12: Pie charts Two pie charts depicting the division of HRP's portfolio by type of property: Nursing homes, assisted living and retirement communities (97%) and two psychiatric facilities (3%); and by type of investment: purchase and lease (81%) and mortgages (19%). 38 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.* Set forth below is an estimate of the amount of fees and expenses to be incurred in connection with the issuance and distribution of the Shares registered hereby, other than underwriting discounts and commissions. Registration Fee Under Securities Act............................. $ 67,887 NASD Filing Fee................................................... 20,187 Blue Sky Fees and Expenses........................................ 25,000 Legal Fees........................................................ 200,000 Accounting Fees................................................... 125,000 Printing and Engraving............................................ 75,000 Listing Application Fees.......................................... 44,275 Transfer Agent Fees............................................... 1,000 Miscellaneous Fees................................................ 40,000 --------- Total................................................... $ 598,349 ========= - --------------- * All expenses are estimated except the SEC registration fee and the NASD filing fee.
ITEM 15. INDEMNIFICATION OF TRUSTEES AND OFFICERS. Section 7.4 of the Company's Declaration of Trust, filed as Exhibit 3.1 to this Registration Statement, which provides for indemnification of Trustees and officers of the Company, is hereby incorporated by reference. Reference is made to Section 7 of each Purchase Agreement (Exhibits 1.1 and 1.2 hereto) with respect to certain provisions for indemnification by the Underwriters of the Company, Trustees, officers and controlling persons under certain circumstances. ITEM 16. EXHIBITS. 1.1 Form of U.S. Purchase Agreement.(***) 1.2 Form of International Purchase Agreement.(***) 3.1 Declaration of Trust, as amended.(1) 3.2 By-Laws.(2) 5.1 Opinion and Consent of Sullivan & Worcester regarding legality.(*) 5.2 Opinion and Consent of Piper & Marbury.(*) 8.1 Opinion and Consent of Sullivan & Worcester regarding tax matters.(*) 23.1 Consent of Sullivan & Worcester (included in their opinions to be filed as Exhibits 5.1 and 8.1 to this Registration Statement). 23.2 Consent of Piper & Marbury (included in their opinion to be filed as Exhibit 5.2 to this Registration Statement). 23.3 Consent of Ernst & Young (included as page II-3 of this Registration Statement).(*) 23.4 Consents of Arthur Andersen & Co. (included as pages II-4 and II-5 of this Registration Statement).(*)
II-1 39 23.5 Consent of KPMG Peat Marwick (included as page II-5 of this Registration Statement).(*) 24 Powers of Attorney.(***) 99 Computation of Average Shares Outstanding.(*) - --------------- (*) Filed herewith. (***) Previously filed. (1) Incorporated by reference to the Company's Registration Statement No. 33-71422 on Form S-3 dated November 9, 1993 and amendment thereto. (2) Incorporated by reference to the Company's Registration Statement No. 33-9412 on Form S-11 dated October 10, 1986 and amendments thereto.
ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes that: (a) For purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (b)(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of a registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. II-2 40 CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in Amendment No. 3 to the Registration Statement (Form S-3, No. 33-52875) and related Prospectus of Health and Rehabilitation Properties Trust for the registration of 12,650,000 of its common shares of beneficial interest and to the incorporation by reference therein of (a) our report dated February 11, 1994 with respect to the financial statements and schedules of Health and Rehabilitation Properties Trust included in its Annual Report (Form 10-K) for the year ended December 31, 1993, (b) our report dated December 30, 1993 with respect to the consolidated financial statements and schedules of Greenery Rehabilitation Group, Inc. included in Greenery's Annual Report (Form 10-K) for the year ended September 30, 1993, and (c) our report dated March 4, 1994 with respect to the consolidated financial statements and schedules of GranCare, Inc. included in GranCare's Annual Report (Form 10-K) for the year ended December 31, 1993, all filed with the Securities and Exchange Commission. ERNST & YOUNG Boston, Massachusetts May 2, 1994 II-3 41 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement of our report dated July 23, 1993 (except with respect to the matters discussed in Note 15, as to which the date is August 2, 1993), included in Horizon Healthcare Corporation's Form 10-K/A -- Amendment No. 3 for the year ended May 31, 1993, dated October 5, 1993, and to all references to our Firm included in this registration statement. ARTHUR ANDERSEN & CO. Albuquerque, New Mexico May 2, 1994 II-4 42 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this registration statement (file number 33-52875) of our report dated January 28, 1994 included in the Marriott International, Inc. Form 10-K for the year ended December 31, 1993 and to all references to our Firm included in this registration statement. ARTHUR ANDERSEN & CO. Washington, D.C. April 29, 1994 II-5 43 INDEPENDENT AUDITORS' CONSENT The Board of Directors and Stockholders Horizon Healthcare Corporation: We consent to the use of our report incorporated herein by reference and to the reference to our firm under the heading "Experts" in the prospectus. KPMG PEAT MARWICK Albuquerque, New Mexico May 2, 1994 II-6 44 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment to registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, Commonwealth of Massachusetts on May 5, 1994. HEALTH AND REHABILITATION PROPERTIES TRUST BY: DAVID J. HEGARTY ---------------------------------- David J. Hegarty, Executive Vice President Pursuant to the requirements of the Securities Act of 1933, this Amendment to Registration Statement on Form S-3 has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURES TITLE DATE ---------- ----- ---- MARK J. FINKELSTEIN* President and Chief May 5, 1994 - --------------------------------------------- Executive Officer Mark J. Finkelstein DAVID J. HEGARTY Executive Vice President May 5, 1994 - --------------------------------------------- and Chief Financial and David J. Hegarty Accounting Officer JOHN L. HARRINGTON* Trustee May 5, 1994 - --------------------------------------------- John L. Harrington ARTHUR G. KOUMANTZELIS* Trustee May 5, 1994 - --------------------------------------------- Arthur G. Koumantzelis REV. JUSTINIAN MANNING, C.P.* Trustee May 5, 1994 - --------------------------------------------- Rev. Justinian Manning, C.P. BARRY M. PORTNOY* Trustee May 5, 1994 - --------------------------------------------- Barry M. Portnoy GERARD M. MARTIN* Trustee May 5, 1994 - --------------------------------------------- Gerard M. Martin *By: DAVID J. HEGARTY ----------------------------------------- David J. Hegarty Attorney-in-fact
II-7 EX-5.1 2 OPINION & CONSENT OF SULLIVAN & WORCESTER 1 EXHIBIT 5.1 SULLIVAN & WORCESTER One Post Office Square Boston, Massachusetts 02109 May 2, 1994 Health and Rehabilitation Properties Trust 400 Centre Street Newton, MA 02158 Ladies and Gentlemen: In connection with the registration by Health and Rehabilitation Properties Trust, a Maryland real estate investment trust (the "Company"), of 12,650,000 Common Shares of Beneficial Interest, $.01 per share, of the Company (the "Shares"), the following opinion is furnished to you to be filed with the Securities and Exchange Commission as Exhibit 5.1 to the Company's Registration Statement (the "Registration Statement") on Form S-3, File No. 33-52875, under the Securities Act of 1933, as amended (the "Act"). We have acted as counsel for the Company in connection with preparation of the Registration Statement, and we have examined originals or copies, certified or otherwise identified to our satisfaction, of the Registration Statement, the draft U.S. Purchase Agreement among the Company and Merrill Lynch & Co., Donaldson, Lufkin & Jenrette Securities Corporation, PaineWebber Incorporated and Smith Barney Shearson Inc., as representatives of the U.S. underwriters, filed as Exhibit 1.1 to the Registration Statement (the "U.S. Agreement"), the draft International Purchase Agreement among the Company and Merrill Lynch International Limited, Donaldson, Lufkin & Jenrette Securities Corporation, PaineWebber International (U.K.) LTD., and Smith Barney Shearson Inc., as lead managers of the international managers, filed as Exhibit 1.2 to the Registration Statement (the "International Agreement"), corporate records, certificates and statements of officers and accountants of the Company and of public officials, and such other documents as we have considered necessary in order to furnish the opinion hereinafter set forth. We have further assumed that the Share price will be determined by the pricing committee of the Board of Trustees of the Company in accordance with the parameters established by the Board of Trustees. 2 Health and Rehabilitation Properties Trust May 2, 1994 Page 2 We are members of the bar of The Commonwealth of Massachusetts. Accordingly, we do not purport to be expert on or generally familiar with and we express no opinion with respect to the laws of any state other than The Commonwealth of Massachusetts or of any country other than The United States of America. We have, with your consent, rendered our opinions herein in regard to certain matters of Maryland law relating to the Shares solely in reliance on, and solely to the extent covered by, the opinion of Piper & Marbury, a copy of which is attached hereto. Based on and subject to the foregoing, we are of the opinion that, when the Registration Statement has become effective under the Act, upon issuance and delivery of certificates for the Shares to the underwriters against payment therefor in accordance with the determination of the pricing committee of the Board of Trustees and the terms of the U.S. Agreement and the International Agreement, the Shares will be duly authorized, validly issued, fully paid and non-assessable by the Company, with no personal liability attaching to the holders of the Shares except as described in the Company's Registration Statement on Form 8-A dated November 8, 1986, as amended by Form 8 dated July 30, 1991, and incorporated by reference into the Prospectuses forming a part of the Registration Statement. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm in the Prospectuses forming a part of the Registration Statement. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Act or under the rules and regulations of the Securities and Exchange Commission promulgated thereunder. Very truly yours, SULLIVAN & WORCESTER EX-5.2 3 OPINION & CONSENT OF PIPER & MARBURY 1 EXHIBIT 5.2 PIPER & MARBURY 36 South Charles Street Baltimore, Maryland 21201-3010 May 2, 1994 Sullivan & Worcester One Post Office Square Boston, Massachusetts 02109 Ladies and Gentlemen: In connection with the registration by Health and Rehabilitation Properties Trust, a Maryland real estate investment trust (the "Company"), of up to 14,375,000 Common Shares of Beneficial Interest, $.01 per share, of the Company (the "Shares"), the following opinion is furnished to you to be filed with the Securities and Exchange Commission as Exhibit 5.2 to the Company's Registration Statement, as amended (the "Registration Statement") on Form S-3, File No. 33-52875, under the Securities Act of 1933, as amended (the "Act"). We have acted as special Maryland counsel for the Company in connection with matters of Maryland law relevant to preparation of the Registration Statement and we have examined originals or copies, certified or otherwise identified to our satisfaction, of (i) the Amended and Restated Declaration of Trust dated December 23, 1986 as further amended on September 28, 1987, July 23, 1992 and August 4, 1993; (ii) the forms of purchase agreement among the Company and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation, PaineWebber Incorporated and Smith Barney Shearson Inc. as representatives of the underwriters, filed as Exhibits 1.1 and 1.2 to the Registration Statement (the "Purchase Agreements"); (iii) resolutions adopted by a unanimous written consent of the Board of Trustees of the Company dated March 28, 1994; (iv) a Certificate of Good Standing issued by the Maryland State Department of Assessments and Taxation dated May 2, 1994; (v) the Certificate of the Secretary of the Company dated the date hereof (the "Certificate"), and (vi) such other documents as we have considered necessary in order to furnish the opinion hereinafter set forth. 2 Sullivan & Worcester May 2, 1994 Page 2 In rendering this opinion, we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified or photostatic copies and the authenticity of the originals of such copies. We have further assumed that the price for the Shares will be determined by the pricing committee of the Board of Trustees in accordance with the parameters established by the Board of Trustees. The opinions expressed below are limited to the law of Maryland, provided, however, that we express no opinion as to the application of Maryland securities laws. Based upon and subject to the foregoing, we are of the opinion that when the Registration Statement has become effective under the Act, upon issuance and delivery of the Shares to the underwriters against payment therefor in accordance with the determination of the pricing committee of the Board of Trustees and the terms of the Purchase Agreements, the Shares will be duly authorized, validly issued, fully paid and nonassessable by the Company, with no personal liability attaching to the holders of the Shares except as described in the Company's Registration Statement on Form 8-A dated November 8, 1986, as amended by Form 8 dated July 30, 1991 and incorporated by reference into the Prospectuses forming a part of the Registration Statement. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm in the Prospectuses forming a part of the Registration Statement. We further consent to the reliance on this opinion by your firm in rendering its opinion to the Company. In giving such consent, we do not hereby admit that we come within the category of persons whose consent is required under Section 7 of the Act or under the rules and regulations of the Securities and Exchange Commission promulgated thereunder. Very truly yours, PIPER & MARBURY EX-8.1 4 OPINION & CONSENT OF SULLIVAN & WORCESTER 1 EXHIBIT 8.1 SULLIVAN & WORCESTER One Post Office Square Boston, Massachusetts 02109 May 5, 1994 Health and Rehabilitation Properties Trust 400 Centre Street Newton, MA 02158 Ladies and Gentlemen: In connection with the registration by Health and Rehabilitation Properties Trust, a Maryland real estate investment trust (the "Company"), of 12,650,000 Common Shares of Beneficial Interest, $.01 per share, of the Company (the "Shares"), the following opinion is furnished to you to be filed with the Securities and Exchange Commission as Exhibit 8.1 to the Company's Registration Statement on Form S-3, File No. 33-52875 (the "Registration Statement"), under the Securities Act of 1933, as amended (the "Act"). We have acted as counsel for the Company in connection with the Registration Statement and we have examined originals or copies, certified or otherwise identified to our satisfaction, of the Registration Statement, the draft U.S. Purchase Agreement among the Company and Merrill Lynch & Co., Donaldson, Lufkin & Jenrette Securities Corporation, PaineWebber Incorporated and Smith Barney Shearson Inc., as representatives of the U.S. underwriters, filed as Exhibit 1.1 to the Registration Statement (the "U.S. Agreement"), the draft International Purchase Agreement among the Company and Merrill Lynch International Limited, Donaldson, Lufkin & Jenrette Securities Corporation, PaineWebber International (U.K.) LTD., and Smith Barney Shearson Inc., as lead managers of the international managers, filed as Exhibit 1.2 to the Registration Statement (the "International Agreement"), corporate records, certificates and statements of officers and accountants of the Company and of public officials, and such other documents as we have considered relevant and necessary in order to furnish the opinion hereinafter set forth. Specifically, and without limiting the generality of the foregoing, we have reviewed Amendment No. 2 to the Registration Statement dated May 5, 1994 and the prospectuses dated May 5, 1994 (the "Prospectuses") which forms a part of the Registration Statement, the Company's Declaration of Trust and By-Laws, and the Advisory Agreement (as defined in the Prospectuses). We have reviewed the sections in the Prospectuses captioned "Federal Income Tax and ERISA Considerations" and the sections in the Company's Annual Report on Form 10-K for the year ended December 31, 1993, as amended (the "Form 10-K"), captioned "Federal Income Tax Considerations" and "ERISA Plans, Keogh Plans and Individual Retirement Accounts", and we have prepared the opinions of counsel referred to in such sections. With respect to all questions of fact on which such opinions are based, we have assumed the accuracy and completeness of and have relied on the information set forth in the Prospectuses and in the documents incorporated therein by reference, and on representations made to us by the Trustees. We have not independently verified such information; nothing has come to our attention, however, which would lead us to believe that we are not entitled to rely on such information. The opinion set forth below is based upon the Internal Revenue Code of 1986, as amended, the Treasury Regulations issued thereunder, administrative interpretations thereof and judicial decisions with respect thereto, all as of the date hereof (collectively the "Tax Laws") and upon the Employment Retirement Income Security Act of 1974, as amended, the Department of Labor regulations issued thereunder, administrative interpretations thereof and judicial decisions with respect thereto, all as of the date hereof (collectively, the "ERISA Laws"). No assurance can be given that the Tax Laws or the ERISA Laws will not change. In rendering the opinions set forth in the Form 10-K which are incorporated by reference into the Prospectuses, we have made certain assumptions and expressed certain conditions and qualifications, all of which assumptions, conditions and qualifications are incorporated herein by reference. We have also assumed with your permission that the closing of the purchase and sale of the Shares will occur as described in the Prospectuses. 2 Health and Rehabilitation Properties Trust May 2, 1994 Page 2 Based upon and subject to the foregoing, we are of the opinion that the discussions with respect to federal income tax matters in the sections of the Prospectuses captioned "Federal Income Tax and ERISA Considerations" and in the sections of the Form 10-K captioned "Federal Income Tax Considerations" and "ERISA Plans, Keogh Plans and Individual Retirement Accounts", in all material respects are accurate and fairly summarize the federal income tax issues and ERISA Laws issues which are material to an investment in the Shares, and hereby confirm that the opinions of counsel referred to in said sections represent our opinions on the subject matter thereof. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm in the Prospectuses forming a part of the Registration Statement. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Act or under the rules and regulations of the Securities and Exchange Commission promulgated thereunder. Very truly yours, SULLIVAN & WORCESTER EX-99 5 AVERAGE SHARES OUTSTANDING FOR 1993 1 Exhibit 99 Average shares outstanding for 1993 and as adjusted as shown in the unaudited adjusted financial statements have been calculated as follows:
Average Shares Outstanding for 1993 (000's) Balance January 1, 1993 26,764 January 2, 1993 2,000 shares redeemed (1,994) January 27, 1993 9,000 shares issued 8,334 February 17, 1993 1,350 shares issued 1,176 June 29, 1993 8 shares issued 4 December 27, 1993 9,000 shares issued 123 ------ 34,407 ====== As Adjusted Average Shares (000's) Balance December 31, 1993 44,121.5 January 19, 1994 Over-allotment option 601.5 New shares to be issued 11,000 ------ 55,723 ======
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