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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] JOINT ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER
31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD FROM
_____________ TO ___________
Commission file number 0-9109 Commission file number 0-9110
MEDITRUST CORPORATION MEDITRUST OPERATING COMPANY
--------------------- ---------------------------
(Exact name of registrant as specified (Exact name of registrant as specified
in its charter) in its charter)
Delaware Delaware
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(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
95-3520818 95-3419438
---------- ----------
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
197 First Avenue, Suite 300 197 First Avenue, Suite 100
Needham Heights, Massachusetts 02194-9127 Needham Heights, Massachusetts 02194-9127
----------------------------------------- -----------------------------------------
(Address of principal executive (Address of principal executive
offices including zip code) offices including zip code)
(781) 433-6000 (781) 453-8062
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(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
MEDITRUST CORPORATION MEDITRUST OPERATING COMPANY
--------------------- ---------------------------
Title of Each Class and Name of Title of Each Class and Name of
--------------------------------- ----------------------------------
Each Exchange on Which Registered Each Exchange on Which Registered
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Common Stock $.10 Par Value, Common Stock $.10 Par Value,
New York Stock Exchange New York Stock Exchange
9% Convertible Debentures due 2002,
New York Stock Exchange
7 1/2% Convertible Debentures due 2001,
New York Stock Exchange
7.375% Notes due 2000,
New York Stock Exchange
7.6% Notes due 2001,
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None None
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Yes __X___ No _______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K.
---
Aggregate market value of the paired voting stock of Meditrust Corporation and
of Meditrust Operating Company held by non-affiliates as of December 31, 1997
was $3,227,685,000. The number of shares of common stock, par value $.10 per
share, outstanding as of December 31, 1997 for Meditrust Corporation was
89,433,302 and Meditrust Operating Company was 88,127,925.
The following documents are incorporated by reference into the indicated Part of
this Form 10-K.
Document Part
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Current Report on Form 8-K dated February 26, 1998 II
Definitive Proxy Statement for the May 28, 1998 Annual Meeting of
Shareholders, to be filed pursuant to Regulation 14A III
2
PART I
Item 1.
BUSINESS
General
Certain matters discussed may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Although The Meditrust Companies (the "Companies") consisting of Meditrust
Corporation ("Realty") and Meditrust Operating Company ("Operating"), believe
the statements are based on reasonable assumptions, the Companies can give no
assurance that their expectations will be attained. Actual results and timing of
certain events could differ materially from those projected in or contemplated
by the forward-looking statements due to a number of factors, including, without
limitation, general economic and real estate conditions, the availability of
equity and debt financing for acquisitions and renovations, interest rates,
competition for hotel services in a given market, the enactment of legislation
impacting the Companies' status as a paired share real estate investment trust
("REIT") or Realty's status as a REIT and other risks detailed from time to time
in the filings of Realty and Operating with the Securities and Exchange
Commission, including, without limitation, quarterly reports on Form 10-Q,
reports on Form 8-K, and annual reports on Form 10-K.
On September 26, 1997, Meditrust funded $43,662,000 to create Meditrust
Acquisition Company ("MAC"). On October 3, 1997, Meditrust paid a stock dividend
to shareholders of record on that date of one share of beneficial interest,
without par value, of its wholly-owned subsidiary MAC, a Massachusetts business
trust, for each share of beneficial interest of Meditrust. MAC was organized to
accomplish the merger described below and has conducted no business other than
in connection with the merger prior to November 5, 1997.
On November 5, 1997, Meditrust merged with Santa Anita Realty
Enterprises, Inc. ("SAE"), with SAE as the surviving corporation, and MAC merged
with Santa Anita Operating Company ("SAO" and together with SAE, "Santa Anita"),
with SAO as the surviving corporation (the "Mergers"). Upon completion of the
Mergers, SAE changed its corporate name to "Meditrust Corporation" and SAO
changed its corporate name to "Meditrust Operating Company". The Mergers were
accounted for as reverse acquisitions whereby Meditrust and MAC were treated as
the acquirers for accounting purposes. Accordingly, the financial history is
that of Meditrust and Meditrust Acquisition Company prior to the Mergers.
Shareholders of Meditrust and MAC received 1.2016 paired common shares
("Shares") for each paired share of beneficial interest of Meditrust and MAC
they owned in a tax-free exchange of shares and approximately 12,366,000 Shares
were held and retained by former Santa Anita shareholders.
Realty and Operating are two separate companies, the shares of which
trade as a single unit under a stock-pairing arrangement on the New York Stock
Exchange (symbol MT). Realty and Operating were each incorporated in 1979. As
used herein, the terms "Realty" and "Operating" include wholly owned
subsidiaries of Realty and Operating unless the context requires otherwise.
References to "The Meditrust Companies" or "Companies" refer to Realty and
Operating, collectively. This document constitutes the annual report on Form
10-K for both Realty and Operating.
3
In 1979, prior to the pairing of the stock of Realty and Operating, the
Internal Revenue Service ("IRS") issued a private letter ruling (the "Ruling")
in which the IRS held, in effect, that the stock-pairing arrangement between the
Companies and the operation of a business by an Operating subsidiary would not
preclude Realty's qualification as a REIT. Subsequent to the issuance of the
Ruling, Congress amended the Internal Revenue Code (the "Amendment") to prohibit
a stock-pairing arrangement between a REIT and an operating company. However,
the Amendment does not apply to the Companies since they were paired prior to
June 30, 1983, the effective date of the legislation. Furthermore, the Amendment
does not affect Realty's Ruling. Realty is one of only three continuing
publicly-traded REITs whose stock was paired with an operating company prior to
1983 and is thus not subject to the Amendment pursuant to the "grandfathering"
effect of the Amendment.
Unless otherwise specified, information regarding the Companies'
business is given as of December 31, 1997.
REALTY
Realty operates as a REIT under the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"). Realty invests primarily in (i) health
care facilities throughout the United States, (ii) entities which invest in
health care facilities abroad and (iii) in the thoroughbred horse racing
industry. Realty recently entered into definitive merger agreements that, if
completed, would broaden investments into the hospitality and golf industries.
The objective of Realty is to enable shareholders to participate in the
investment in real estate facilities held primarily for the production of income
to be distributed to shareholders. In meeting this objective, Realty invests in
high quality facilities that are managed by experienced operators and achieves
diversity in its health care property portfolio by sector of the health care
industry, geographic location, operator and form of investment.
Realty was organized to qualify, and intends to continue to operate, as a
REIT in accordance with federal tax laws and regulations. So long as Realty
complies, with limited exceptions, Realty will not be taxed under federal income
tax laws on that portion of its taxable income that it distributes to its
shareholders. Realty has distributed, and intends to continue to distribute,
substantially all of its real estate investment trust taxable income to
shareholders.
A REIT is subject to certain taxes on net income from "foreclosure
property" (which is, in general, property acquired on default of a lease of such
property), income from the sale of property held primarily for sale to customers
in the ordinary course of business and excessive unqualified income. In order to
qualify as a REIT, among other things, the rental income received by Realty from
Operating must qualify as "rents from real property" for REIT purposes. One
requirement for such qualification is that Realty may not own, directly or
constructively, 10% or more of the outstanding voting power or total number of
shares of stock of Operating. Realty would be treated as owning shares of stock
in Operating in violation of this 10% limit if any person owns, directly or
constructively, 10% or more by value of the shares of stock of Realty and
Operating. In such an event, the rent paid to Realty by Operating could not
qualify as income of the type that can be received by a REIT. In order to
prevent such a situation, which would likely result in Realty's disqualification
as a REIT, the by-laws of Realty and Operating preclude any transfer of shares
which would cause any person to own, actually or constructively, shares of stock
of the Companies in violation of the above limitation.
As of December 31, 1997, Realty had investments in 518 facilities
consisting of 282 long-term care facilities, 172 retirement and assisted living
facilities, 28 medical office buildings, 26 rehabilitation hospitals, six
alcohol and substance abuse treatment facilities and psychiatric hospitals, one
acute care hospital campus, one racetrack, a 50% interest in a mall and land
held for development. Included in the 518 facilities are 55 properties under
construction which are expected to be completed during the next 12
4
to 18 months. Realty's investments take the form of permanent mortgage loans,
sale/leaseback transactions and development projects. Generally, Realty enters
into development projects where, upon completion of the facility, development
funding is to be replaced by either a permanent mortgage loan from Realty or a
sale/leaseback transaction with Realty.
Realty had a net increase in gross real estate investments of
$774,444,000 during 1997 as a result of the Mergers, entering into
sale/leaseback transactions and making permanent mortgage loans and development
loans as described below. Total investments, including real estate assets
acquired from the Mergers, were $3,060,604,000 at December 31, 1997.
Assets acquired from the Mergers. Realty acquired and recorded assets
using appraised values, including a racetrack valued at $117,000,000, a 50%
ownership in a joint venture holding a mall valued at $30,000,000 which is
located on land owned by Realty valued at $11,500,000, a medical office building
valued at $14,128,000 and a retail mall valued at $6,173,000. In addition,
Realty acquired land held for development of an entertainment center valued at
$45,223,000, land held for future development valued at approximately
$13,330,000 and real estate loans receivable totaling $5,477,000. All properties
and notes are located or secured by property in California.
Sale/Leaseback Transactions. During 1997, Realty acquired 59 assisted
living facilities, one long-term care facility and one medical office building
for $188,047,000. In addition, during 1997, Realty provided net funding of
$43,610,000 for the construction of 18 assisted living facilities and $2,100,000
for additions to four long-term care facilities and one medical office building
already in the portfolio. Realty also provided net funding of $58,850,000 for
ongoing construction of facilities already in the portfolio prior to 1997.
Permanent Mortgage Loans. During 1997, Realty provided permanent mortgage
financing of $60,637,000 for four long-term care facilities, 20 assisted living
facilities, one retirement living facility and one medical office building.
Realty also provided $13,308,000 in additions to facilities securing
existing permanent mortgage financing entered into prior to 1997.
Development Loans. During 1997, Realty commenced new development funding
of $156,377,000 relating to six long-term care facilities, seven medical office
buildings and eight assisted living facilities. Realty also provided $69,539,000
for ongoing construction of facilities already in development prior to 1997.
Other Transactions. During 1997, Realty received principal payments on
real estate mortgages of $54,618,000 and received $6,173,000 from the sale of a
retail mall in California.
Conversion of Development Financing to Sale/Leaseback Transactions.
During 1997, Realty provided development financing of $31,195,000 and completed
construction resulting in aggregate financing of $89,914,000 of 14 assisted
living facilities in Florida and one long-term care facility in Florida.
5
Conversion of Development Financing to Permanent Mortgage Loans. During
1997, Realty provided on-going development financing of $27,412,000, resulting
in aggregate funding of $76,914,000 for five long-term care facilities in
Florida, Idaho, Massachusetts and Pennsylvania, one assisted living facility in
Florida and one medical office building in Texas.
Capital Raising Transactions. On August 7, 1997, Realty completed the
sale of $160,000,000 of 7% notes due August 15, 2007. Realty also completed the
sale of $100,000,000 in notes due August 15, 2002 bearing interest at LIBOR plus
.45%. Such interest is subject to reset quarterly during the first year of the
loan. Subsequent to the first year of the loan, the character and duration of
the interest rate will be determined periodically by Realty and the underwriter.
Realty also completed the sale of $150,000,000 of 7.114% notes due August 15,
2011. The notes were sold to a trust from which exercisable put option
securities due August 15, 2004, each representing a fractional undivided
beneficial interest in the trust, were issued. The trust has entered a call
option pursuant to which the callholder has the right to purchase the notes from
the trust on August 15, 2004 at par value. The trust also has a put option,
which it is required to exercise if the callholder does not exercise the call
option, pursuant to which Realty must repurchase the notes at par value on
August 15, 2004. A portion of the net proceeds from the sale of the notes
described above was used to repay the outstanding balance on the unsecured
revolving line of credit and other unsecured short-term borrowings.
Realty has two unsecured revolving lines of credit ("Lines") in the
aggregate amount of $365,000,000. Both Lines bear interest at the lender's prime
rate (8.5%) or LIBOR plus .875% (6.5% at February 13, 1998). One of the Lines
totaling $315,000,000 expires September 23, 1999 and another, totaling
$50,000,000, expires December 12, 1999. A total of approximately $106,000,000
was available under Realty's Lines at February 13, 1998. In addition, the
Companies have filed a shelf registration statement with the Securities and
Exchange Commission under which the Companies may issue, upon effectiveness,
$2,000,000,000 of securities including Shares, Preferred Shares, debt, series
common stock, convertible debt and warrants to purchase Shares, Preferred
Shares, debt, series common stock and convertible debt.
On February 26, 1998, the Companies completed two transactions and
received funds from Merrill Lynch International, a UK-based broker/dealer
subsidiary of Merrill Lynch & Co., Inc. ("MLI"). Pursuant to the terms of a
stock purchase agreement, MLI agreed to purchase 8,500,000 shares of Series A
Non-Voting Convertible Common Stock from each of the Companies at a purchase
price of $32.625 per share. The Series A Non-Voting Convertible Common Stock is
non-voting paired common stock that will convert to Shares on the earlier of (a)
the business day following the date on which the stockholders of the Companies
have approved the La Quinta merger transaction or (b) the date of any
termination of the La Quinta merger agreement. Net proceeds from this private
placement of securities of approximately $272,000,000 were used by the Companies
to repay existing indebtedness. Separately, the Companies and MLI entered into a
purchase price adjustment agreement under which the Companies will, within one
year from the date of MLI's purchase, adjust the original $32.625 purchase price
per Share based on the market price of the Shares at the time of the adjustment,
by receiving Shares from MLI or by issuing additional Shares to MLI.
Realty believes that various sources of capital available over the next
twelve months are adequate to finance pending acquisitions, mortgage financings
and dividends. During 1998, as Realty identifies appropriate investment
opportunities, Realty may raise additional capital through the sale of common
shares or preferred shares, the use of a forward equity transaction, the
issuance of additional long-term debt or through a securitization transaction.
6
Equity Investments and Proposed Mergers. On July 25, 1996, Realty invested
approximately $13,509,000 in exchange for 7,936,000 shares of common stock,
representing a 19.99% interest in Nursing Home Properties Plc ("NHP Plc"), a
property investment group that specializes in the financing, through sale and
leaseback transactions, of nursing homes located in the United Kingdom. On
December 19, 1997, Realty purchased an additional 6,349,000 shares of NHP Plc
common stock for $13,473,000 in order to maintain its investment at 19.99%.
Realty does not have the right to vote more than 9.99% of the shares of NHP Plc.
As of its fiscal year ended September 30, 1997, NHP Plc had invested or
committed to invest approximately $288,000,000 in 92 nursing homes, totaling
5,289 beds. The facilities are leased to 13 United Kingdom nursing home
operators on terms and conditions similar to those contained in Realty's leases.
As of December 31, 1997, the market value of this investment was $30,551,000 and
is included in the Companies' financial statements. The resulting difference
between the current market value and cost, $3,569,000, is included in
shareholders' equity in the Companies' financial statements.
On January 3, 1998, the Companies signed a definitive merger agreement
with La Quinta Inns, Inc. ("La Quinta") providing for, among other transactions,
the merger of La Quinta with and into Realty. The total consideration for the
transaction will amount to $26.00 per share of La Quinta, in a combination of
newly issued Shares in the Companies and cash, subject to certain cap and collar
mechanisms. The transaction is expected to close in the second quarter of 1998.
During the last week of January 1998, the Companies' stock price decreased which
may result in more Shares being issued by the Companies to complete the
transaction than was originally expected. Depending upon how many additional
Shares, if any, are issued, the transaction may not be as accretive, on a per
Share basis, as had previously been disclosed.
On January 11, 1998, Realty signed a definitive merger agreement with
Cobblestone Holdings, Inc., parent of Cobblestone Golf Group, Inc.
("Cobblestone"), under which Realty will acquire all of the outstanding
preferred and common stock of Cobblestone for Shares valued at approximately
$241,000,000. In addition, under the terms of the agreement, approximately
$154,000,000 of Cobblestone debt and associated costs will be either refinanced
or assumed as a condition of closing. The transaction is anticipated to close in
the second quarter of 1998.
Recent Legislative Developments
On March 26, 1998, Representative William Archer, Chairman of the House
Ways and Means Committee, and Senator William V. Roth, Jr., Chairman of the
Senate Finance Committee, introduced identical legislation to limit the
"grandfathering" effect of the Amendment. Under the proposed legislation, the
anti-pairing rules provided in the Code would apply to real property interests
acquired after March 26, 1998 by The Meditrust Companies, or a subsidiary or
partnership in which a ten percent or greater interest is owned by The Meditrust
Companies (collectively, the "REIT Group"), unless (1) the real property
interests are acquired pursuant to a written agreement which was binding on
March 26, 1998 and all times thereafter or (2) the acquisition of such real
property interests was described in a public announcement or in a filing with
the SEC on or before March 26, 1998.
Under this legislation as currently proposed, the properties to be
acquired from La Quinta and Cobblestone would not be subject to these
anti-pairing rules. However, there can be no assurance that the legislation will
be adopted in its current form, with a consequence that the properties to be
acquired from La Quinta and Cobblestone or other properties of The Meditrust
Companies could become subject to the anti-pairing rules of the Code in the
future. In addition, the proposed legislation also provides that a property held
by The Meditrust Companies that is not subject to the anti-pairing rules would
become subject to such rules in the event of an improvement placed in service
after December 31, 1999 that changes the use of the property and the cost of
which is greater than 200 percent of (1) the undepreciated cost of the property
(prior to the improvement) or (2) in the case of property acquired where there
is a substituted basis (e.g., the properties to be acquired from La Quinta and
Cobblestone), the fair market value of the property on the date it was acquired
by The Meditrust Companies. There is an exception for improvements placed in
service before January 1, 2004 pursuant to a binding contract in effect on
December 31, 1999 and at all times thereafter. This proposed restriction on
property improvements would apply to the properties to be acquired from La
Quinta and Cobblestone, as well as all other properties owned by The Meditrust
Companies, and would limit the ability of The Meditrust Companies to improve or
change the use of those properties after December 31, 1999.
If adopted in its present form, the restrictions on the activities of a
grandfathered REIT provided in the proposed legislation may in the future make
it impractical or undesirable for The Meditrust Companies to continue to
maintain their paired share structure.
7
Real Estate Investment and Other Policies
Realty invests in income-producing health care related and other real
estate related facilities which may include long-term care facilities,
rehabilitation hospitals, retirement and assisted living facilities, medical
office buildings, alcohol and substance abuse treatment facilities, psychiatric
hospitals, and other health care related facilities. Realty also invests in
other entities which invest in similar facilities abroad and owns a racetrack in
southern California. These investments are made primarily for the production of
income. Because Realty had invested primarily in health care related facilities,
Realty was not in a position to diversify its investment portfolio to include
assets selected to reduce the risks associated with investment in improved real
estate in a single industry. However, Realty has signed definitive merger
agreements in the hospitality and golf industries and may consider acquisitions
of other real estate investments in the future. Realty intends to continue to
diversify its portfolio by broadening its geographic base, providing financing
to more operators, diversifying the type of health care and other facilities in
its portfolio and diversifying the types of financing methods provided. This may
also include acquisitions of other real estate investment trusts.
In evaluating potential investments, Realty considers such factors as:
(1) the current and anticipated cash flow and its adequacy to meet operational
needs and other obligations and to provide a competitive market return on equity
to Realty's shareholders; (2) the geographic area, type of property and
demographic profile; (3) the location, construction quality, condition and
design of the property; (4) the potential for capital appreciation, if any; (5)
the growth and regulatory environment of the communities in which the properties
are located; (6) occupancy and demand for similar health care or other
facilities in the same or nearby communities; (7) for health care investments,
an adequate mix of private and governmental-sponsored patients; (8) potential
alternative uses of the facilities; and (9) prospects of liquidity through
financing or refinancing.
Management reviews and verifies market research for a significant amount
of potential investments on behalf of Realty. Management also reviews the value
of the property, the interest rates and debt service coverage requirements of
any debt to be assumed and the anticipated sources of repayment for such debt.
Realty will not, without the prior approval of a majority of Directors,
including a majority of the independent Directors of Realty, acquire from or
sell to any Director, officer or employee of Realty, or any affiliate thereof,
any of the assets or other property of Realty.
Realty provides its shareholders on request with annual reports
containing audited financial statements and quarterly reports containing
unaudited financial information.
8
Reinvestment of Sales Proceeds
In the event Realty sells or otherwise disposes of any of its
properties, the independent Directors will determine whether and to what extent
Realty will acquire additional properties or distribute the proceeds to the
shareholders.
Short-Term Investments
Realty invests its cash in certain short-term investments during interim
periods between the receipt of revenues and distributions to shareholders. Cash
not invested in facilities may be invested in interest-bearing bank accounts,
certificates of deposit, short-term money-market securities, short-term United
States government securities, mortgage-backed securities guaranteed by the
Government National Mortgage Association, mortgages insured by the Federal
Housing Administration or guaranteed by the Veterans Administration, mortgage
loans, mortgage loan participations, and certain other similar investments.
Realty's ability to make certain of these investments may be limited by tax
considerations. Realty's return on these short-term investments may be more or
less than its return on real estate investments.
Borrowing Policies
Realty may incur additional indebtedness when, in the opinion of the
Directors, it is advisable. For short-term purposes, Realty may, from time to
time, negotiate lines of credit, arrange for other short-term borrowings from
banks or others or issue commercial paper. Realty may arrange for long-term
borrowing from banks, insurance companies, public offerings or private
placements to institutional investors.
In addition, Realty may incur mortgage indebtedness on real estate which
it has acquired through purchase, foreclosure or otherwise. When terms are
deemed favorable, Realty may invest in properties subject to existing loans or
mortgages. Realty also may obtain financing for unleveraged properties in which
it has invested or may refinance properties acquired on a leveraged basis. There
is no limitation on the number or amount of mortgages which may be placed on any
one property, but overall restrictions on mortgage indebtedness are provided
under documents pertaining to certain existing indebtedness.
Competition
For health care investments, Realty competes, primarily on the basis of
knowledge of the industry, economics of the transaction and flexibility of
financing structure, with real estate partnerships, other real estate investment
trusts, banks and other investors generally in the acquisition, leasing and
financing of health care related facilities.
The operators of the facilities compete on a local and regional basis
with other operators of comparable facilities. They compete with independent
operators as well as companies managing multiple facilities, some of which are
substantially larger and have greater resources than the operators of the
facilities. Some of these facilities are operated for profit while others are
owned by governmental agencies or tax-exempt not-for-profit organizations.
For other real estate investments, Realty competes primarily on the
basis of economics and demographics. With respect to the racetrack, competition
is regulated by racing dates granted by a governing body (see Operating).
9
Employees
As of December 31, 1997, the operations of Realty were maintained by 44
employees. Realty has not experienced any significant labor problems and
believes that its employee relations are good.
Government Regulation
Realty recognizes a portion of revenue from percentage, supplemental
and/or additional rent or interest. This revenue can be a contractual amount or
be based on the health care facility operator's gross revenues, which, in most
cases, is subject to changes in the reimbursement and licensure policies of
federal, state and local governments. In addition, the acquisition of health
care facilities is generally subject to state and local regulatory approval.
Medicare, Medicaid, Blue Cross and Other Payors
Certain of the health care operators receive payments for patient care
from federal Medicare programs for elderly and disabled patients, state Medicaid
programs for medically indigent and cash grant patients, private insurance
carriers, employers and Blue Cross plans, health maintenance organizations,
preferred provider organizations and directly from patients. In general,
Medicare payments for long-term care services, psychiatric care, and
rehabilitative care are based on allowable costs plus a return on equity for
proprietary facilities. Payments from state Medicaid programs for psychiatric
care are based on reasonable costs or are at fixed rates. Long-term care
facilities are generally paid by the Medicaid programs at fixed rates. Most
Medicare and Medicaid payments are below retail rates. Payments from other
payors are generally also below retail rates. Blue Cross payments in different
states and areas are based on costs, negotiated rates or retail rates.
Long-Term Care Facilities
Regulation of long-term care facilities is exercised primarily through
the licensing of such facilities. The particular agency having regulatory
authority and the license qualification standards vary from state to state and,
in some instances, from locality to locality. Licensure standards are constantly
under review and undergo periodic revision. Governmental authorities generally
have the power to review the character, competence and community standing of the
operator and the financial resources and adequacy of the facility, including its
plant, equipment, personnel and standards of medical care. Long-term care
facilities are certified under the Medicare program and all are eligible to
qualify under state Medicaid programs, although not all participate in the
Medicaid programs.
Rehabilitation Hospitals
Rehabilitation hospitals are also subject to extensive federal, state
and local legislation and regulation. Rehabilitation hospitals are subject to
periodic inspections and licensure requirements. Inpatient rehabilitation
facilities are cost-reimbursed, receiving the lower of reasonable costs or
reasonable charges. Typically, the fiscal intermediary pays a set rate per day
based on the prior year's costs for each facility. Annual cost reports are filed
with the operator's fiscal intermediary and adjustments are made, if necessary.
10
Medical Office Buildings
The individual physicians, groups of physicians and health care
providers which occupy medical office buildings are subject to a variety of
federal, state and local regulations applicable to their specific areas of
practice. Since medical office buildings may contain numerous types of medical
services, a wide variety of regulations may apply. In addition, medical office
buildings must comply with the requirements of municipal building codes, health
codes and local fire departments.
Acute Care Hospitals
Acute care hospitals are subject to extensive federal, state and local
legislation and regulation relating to among other things the adequacy of
medical care, equipment, personnel, hygiene, operating policies and procedures,
fire prevention, rate-setting and compliance with building codes and
environmental protection laws. Hospitals must maintain strict standards in order
to obtain their state hospital licenses from a department of health or other
applicable agency in each state. In granting and renewing licenses, a department
of health considers, among other things, the physical buildings and equipment,
the qualifications of the administrative personnel and nursing staff, the
quality of care and continuing compliance with the laws and regulations relating
to the operation of the facilities. State licensing of facilities is a
prerequisite to certification under the Medicare and Medicaid programs. Various
other licenses and permits also are required in order to dispense narcotics,
operate pharmacies, handle radioactive materials and operate certain equipment.
Hospital facilities are subject to periodic inspection by governmental and other
authorities to assure continued compliance with the various standards necessary
for their licensing and accreditation.
Retirement and Assisted Living
Residential communities such as retirement and assisted living facilities
are subject to varying degrees of regulation and licensing by local and state
health and social service agencies, and other regulatory authorities specific to
their location. Typically these regulations and licensing requirements relate to
fire safety, sanitation, staff training, staffing levels and living
accommodations, as well as requirements specific to certain health related
services offered. Levels of service provided and corresponding regulation vary
considerably from operator to operator as some are similar to long-term care
facilities, while others fall into the relatively unregulated care of a
retirement community.
Alcohol and Substance Abuse Treatment Facilities
Alcohol and substance abuse treatment facilities must comply with the
licensing requirements of federal, state and local health agencies and with the
requirements of municipal building codes, health codes and local fire
departments. In granting and renewing a facility's license, a state health
agency considers, among other things, the physical buildings and equipment, the
qualifications of the administrative personnel and health care staff, the
quality of nursing and other services and the continuing compliance of such
facility with the laws and regulations applicable to its operations.
Psychiatric Hospitals
Psychiatric hospitals generally are subject to extensive federal, state
and local legislation and regulation. Licensing for psychiatric hospitals is
subject to periodic inspections regarding standards of medical care, equipment
and hygiene. In addition, there are specific laws regulating civil commitment of
patients and disclosure of information regarding patients being treated for
chemical dependency. Many
11
states have adopted a "patient's bill of rights" which sets forth standards,
such as using the least restrictive treatment, allowing patient access to the
telephone and mail, allowing the patient to see a lawyer and requiring the
patient to be treated with dignity. Insurance reimbursement for psychiatric
treatment generally is more limited than for general health care.
Health Care Reform and Regulation
Many of the operators with which Realty does business rely on government
reimbursement, primarily Medicare and Medicaid, for a significant portion of
their operating revenues. During the 1994 session of the United States Congress,
there was active consideration of various proposals for national health care
reform, including the administration's proposal to cap national health care
spending and the future growth of Medicare and Medicaid funding. Other proposals
discussed in the 1995 and 1996 sessions of Congress included replacement of the
current Medicaid program with block grants to the states and other limitations
on Medicaid spending. No such legislation was passed during the 1994, 1995, 1996
or 1997 sessions of Congress. Some of these proposals, if enacted, could have
had an impact on operators doing business with Realty. It is not possible to
predict whether and when health care reform legislation will be passed by
Congress and, if passed, what features such legislation will contain or the
effect it may have on the nursing home, assisted living or rehabilitation care
industries, the reimbursement levels available to health care providers or on
the health care industry in general.
From time to time, Medicaid, Medicare and other governmental payors
have reviewed the billing practices of many health care facilities operators
including certain of the operators with which Realty does business. It is
unclear what impact such reviews may have on these operators. Realty does not
believe, however, that any adverse findings against these operators would
materially affect Realty's financial position.
OPERATING
Operating is engaged in thoroughbred horse racing. The thoroughbred
horse racing operation is conducted by a wholly owned subsidiary of Operating,
Los Angeles Turf Club, Incorporated ("LATC"), which leases the Santa Anita
Racetrack in Arcadia, California from Realty. LATC has sublet the racetrack to
Oak Tree Racing Association ("Oak Tree") to conduct Oak Tree's annual
thoroughbred horse racing meet.
Operating records operating revenues associated with thoroughbred horse
racing at Santa Anita Racetrack on a daily basis, except for season admissions
which are recorded ratably over the racing season. Costs and expenses associated
with thoroughbred horse racing revenues are charged against income in those
interim periods in which the thoroughbred horse racing revenues are recognized.
Other costs and expenses are recognized as they actually occur throughout the
year. The rental fee paid by Operating to Realty is recognized by both Realty
and Operating as it is earned.
Seasonal Variations in the Business
Operating is subject to significant seasonal variation. LATC conducts an
annual meet commencing the day after Christmas and continuing through mid-April.
For the period from the date of the Mergers (November 5, 1997) through December
31, 1997, live racing was held for five business days.
12
Operating Employee and Labor Relations
During the year ended December 31, 1997, Operating regularly employed
approximately 1,550 employees. Substantially all are employed on a seasonal
basis in connection with live thoroughbred horse racing or satellite meets at
Santa Anita Racetrack. During the relatively short periods when live or
satellite racing meets at Santa Anita Racetrack are not being conducted,
Operating maintains a staff of approximately 500 employees, most of whom are
engaged in maintaining or improving the physical facilities at Santa Anita
Racetrack or are engaged in preparing for the next live or satellite meet.
All of LATC's employees, except for approximately 80 full-time
management and clerical employees, are covered by collective bargaining
agreements with labor unions. Fifteen of the seventeen labor agreements covering
racetrack employees were renegotiated in 1995. The two remaining labor
agreements were renegotiated in 1996.
Wagering Commissions
The State of California has vested administrative authority for racing
and wagering at horse racing meets with the California Horse Racing Board. The
California Horse Racing Board, which consists of seven members appointed by the
governor of the State, is charged with the responsibility of regulating the form
of wagering, the length and conduct of meets and the distribution of the
pari-mutuel wagering within the limits set by the California legislature. The
California Horse Racing Board is also charged with the responsibility of
licensing horse racing associations on an annual basis to conduct horse racing
meets and of licensing directors, officers and persons employed by the
associations to operate such meets. California law specifies the percentage
distribution of pari-mutuel wagering with the percentage varying based upon the
total wagering for the meet, breed of horse and type of wager.
Competitive and other Conditions
The Southern California area offers a wide range of leisure time
spectator activities, including professional and college teams which participate
in all major sports. LATC and Oak Tree compete with such sporting events for
their share of the leisure time market and with other numerous leisure time
activities available to the community, some of which are broadcast on
television.
As an outdoor activity, horse racing is more susceptible to inclement
weather than some other leisure time activities. This is particularly true of
the Santa Anita meet which is held during the winter. Between 1952 and 1992,
LATC had never lost a racing day due to inclement weather. During the 1992-1993
meet, LATC lost two full days and two partial days of racing because of
inclement weather. During the 1994-1995 meet, LATC lost two days of racing
because of inclement weather. There have been no racing days lost to inclement
weather since the 1994-1995 meet.
A local Arcadia ordinance limits live horse racing to daylight hours but
allows the importation of a horse racing broadcast signal two weekend evenings
per week.
The California Horse Racing Board has annually licensed LATC and Oak Tree
to conduct racing meets at Santa Anita Racetrack. At present, the California
Horse Racing Board has not licensed other thoroughbred racetracks in Southern
California to conduct racing during these meets. Since 1972, however, night
harness racing and night quarter horse meets have been conducted at other
racetracks in Southern California during portions of these meets. LATC and Oak
Tree could be adversely affected by legislative or California Horse Racing Board
action which would increase the number of competitive
13
racing days, reduce the number of racing days available to LATC and Oak Tree, or
authorize other forms of wagering.
The California State Lottery Act of 1984, which provided for the
establishment of a state-operated lottery, was implemented in 1985. In the
opinion of management, the State lottery has had an adverse impact and will
continue to have an adverse impact on total attendance and pari-mutuel wagering
at Santa Anita Racetrack.
In the future, legislation could be enacted to allow casino gaming or
other forms of gaming which are competitive with pari-mutuel wagering at the
Santa Anita Racetrack. Under federal law, certain types of gaming are lawful on
Native American lands if conducted in conformance with a Tribal-State compact,
which the applicable state must negotiate with a Native American tribe in good
faith. Certain Native American tribes seeking to establish gaming in California
have instituted litigation against the State of California to compel the State
to permit them to do so. Federal law provides that states must allow Native
American tribes within its borders to conduct gambling activities that are
otherwise legal within the state, subject to the negotiated compact. If casino
gaming or other forms of gaming are permitted in California, such gaming could
have an adverse impact on LATC.
Income Tax Matters
Operating pays ordinary corporate income taxes on its taxable income.
Any income, net of taxes, will be available for retention in Operating's
business or for distribution to shareholders as dividends. Any dividends
distributed by Operating will be subject to tax at ordinary rates and generally
will be eligible for the dividends received deduction for corporate shareholders
to the extent of Operating's current or accumulated earnings and profits.
However, there is no tax provision which requires Operating to distribute any of
its after-tax earnings and Operating does not expect to pay cash dividends in
the foreseeable future.
14
Item 2.
PROPERTIES
The table sets forth certain information as of December 31, 1997
regarding Realty's facilities:
Purchase Price Annual Base Rent
Number of Number of or Mortgage or
Location Facilities Beds (1) Amount (2) Interest Payment(3)
- - -------- ---------- -------- ---------- -------------------
(dollars in thousands)
LONG-TERM CARE FACILITIES
Alabama 1 230 $ 7,759 $ 941
Arizona 6 1,054 40,273 (4) 4,180
California 7 680 28,388 (4) 2,843
Colorado 14 1,272 54,107 (12) 5,690
Connecticut 16 2,100 118,793 (5) 13,882
Florida 14 1,743 83,987 (6) 8,201
Georgia 1 155 2,629 (4) 281
Idaho 3 518 23,793 (7) 2,453
Illinois 24 2,049 47,667 (4) 1,251
Indiana 13 1,724 60,402 (8) 6,280
Kansas 3 379 8,991 (4) 966
Kentucky 1 228 10,264 (4) 1,110
Maryland 1 170 18,188 1,910
Massachusetts 37 5,412 350,864 (9) 37,114
Michigan 3 403 15,333 (10) 1,843
Missouri 19 2,526 83,599 (11) 9,154
Nebraska 3 413 13,011 (4) 1,414
Nevada 3 444 26,745 (13) 2,737
New Hampshire 6 537 33,135 2,324
New Mexico 1 170 9,390 (4) 901
New Jersey 8 1,386 97,261 (14) 10,537
New York 5 532 51,374 (15) 6,414
North Carolina 1 120 2,149 (4) 232
Ohio 8 956 37,343 (16) 3,953
Pennsylvania 5 662 27,221 (17) 3,252
Rhode Island 2 332 15,042 (4) 1,527
South Carolina 1 88 3,931 (4) 391
15
Purchase Price Annual Base Rent
Number of Number of or Mortgage or
Location Facilities Beds (1) Amount (2) Interest Payment(3)
- - -------- ---------- -------- ---------- -------------------
Long-Term Care, continued
- - -------------------------
Tennessee 9 1,231 39,179 (4) 4,182
Texas 47 4,556 108,792 (4) 5,783
Utah 2 240 10,221 (4) 1,137
Washington 9 1,134 53,849 (4) 5,345
West Virginia 7 615 29,533 (18) 2,913
Wyoming 2 312 14,428 (4) 1,565
Various 20,815 (19) 2,186
------- -------- ----------- ----------
TOTAL LONG-TERM CARE 282 34,371 1,548,456 154,892
-------- -------- ----------- ----------
ASSISTED LIVING
Arkansas 5 255 18,730 1,967
Arizona 1 0 1,093 109
California 3 165 13,383 (20) 1,306
Colorado 1 62 4,718 (21) 472
Delaware 1 100 2,012 206
Florida 31 2,558 174,361 (22) 17,193
Idaho 4 246 16,943 (23) 1,685
Indiana 4 305 20,763 (24) 2,180
Kansas 6 266 17,525 1,747
Massachusetts 1 57 5,423 526
Michigan 9 392 39,593 (25) 3,862
Minnesota 6 0 7,211 659
Mississippi 1 80 6,520 617
North Carolina 6 0 29,630 2,747
New York 1 80 9,120 905
Ohio 10 470 30,117 (26) 3,057
Oklahoma 2 59 3,335 313
Oregon 1 53 3,050 303
Pennsylvania 8 378 37,654 3,770
South Carolina 3 233 20,672 1,962
Tennessee 1 50 3,700 361
Texas 30 1,451 86,935 (27) 8,746
Utah 1 82 4,236 434
Washington 6 401 29,229 (28) 2,875
Wisconsin 24 281 24,119 (29) 2,310
Wyoming 1 60 3,730 370
Various 19,087 (30) 2,005
------ ------ ----------- ----------
TOTAL ASSISTED LIVING 167 8,084 632,889 62,687
------ ----- ----------- ----------
16
Purchase Price Annual Base Rent
Number of Number of or Mortgage or
Location Facilities Beds (1) Amount (2) Interest Payment(3)
- - -------- ---------- -------- ---------- -------------------
REHABILITATION HOSPITALS
Arizona 1 80 9,965 1,196
Arkansas 2 154 17,450 1,442
California 5 358 66,534 (31) 6,944
Colorado 1 117 10,627 (4) 1,116
Kansas 1 80 11,649 752
Kentucky 1 55 10,000 1,050
Louisiana 3 280 30,670 2,196
Massachusetts 1 92 10,859 1,140
Michigan 1 41 7,821 821
New Hampshire 1 99 13,464 1,333
New Jersey 1 70 14,300 1,502
Tennessee 1 60 8,515 (4) 1,064
Texas 5 385 46,137 4,071
Washington 1 52 5,861 615
Wisconsin 1 125 13,888 1,632
------ ------ ----------- ----------
TOTAL REHABILITATION 26 2,048 277,740 26,874
----- ----- ----------- ----------
MEDICAL OFFICE BUILDINGS
Arizona 2 0 17,518 (21) 1,761
California 3 0 27,080 (32) 3,016
Florida 15 120 120,743 (33) 11,818
Massachusetts 1 0 2,550 268
New Jersey 1 0 12,452 (21) 1,307
Nevada 1 0 2,571 (21) 270
Tennessee 1 0 7,966 (4) 703
Texas 4 0 35,964 (34) 3,671
----- ----- ----------- ----------
TOTAL MEDICAL
OFFICE BUILDINGS 28 120 226,844 22,814
----- ---- ----------- ----------
ACUTE CARE HOSPITAL
Arizona 1 492 65,650 7,222
------ ---- ----------- ----------
RETIREMENT LIVING FACILITIES
Colorado 1 220 15,492 (4) 1,665
Florida 1 94 11,364 (4) 1,136
North Carolina 1 190 5,426 (4) 479
Ohio 1 196 6,667 (4) 647
Utah 1 287 9,022 (4) 992
------ ---- ----------- ----------
TOTAL RETIREMENT LIVING 5 987 47,971 4,919
------ ---- ----------- ----------
PSYCHIATRIC HOSPITALS AND
ALCOHOL AND SUBSTANCE ABUSE
California 1 61 5,750 719
Florida, New York and Oklahoma 5 564 32,683 (4) 3,595
------ ---- ----------- ----------
TOTAL PSYCHIATRIC AND ALCOHOL
AND SUBSTANCE ABUSE 6 625 38,433 4,314
------ ----- ----------- ----------
17
Purchase Price Annual Base Rent
Number of Number of or Mortgage or
Location Facilities Beds (1) Amount (2) Interest Payment(3)
- - -------- ---------- -------- ---------- -------------------
RACE TRACK
California 1 0 117,000 (35)
------ ---------- ----------- ----------
RETAIL
California 1 0 41,590 (37)
------ ---------- ----------- ----------
LAND UNDER DEVELOPMENT
California 1 0 64,031 (36) 595
------ --------- ----------- ----------
TOTAL ALL FACILITIES (38) 518 46,727 $3,060,604 $284,317
====== ========= =========== ==========
Other Health Care Investments
- - -----------------------------
During 1996, Realty invested approximately $13,509,000 in exchange for
7,936,000 shares of common stock, representing 19.99% of NHP Plc, a property
investment group that specializes in the financing, through sale and leaseback
transactions, of nursing homes located in the United Kingdom. In 1997, Realty
purchased an additional 6,349,000 shares of NHP Plc common stock for $13,473,000
in order to maintain its investment at 19.99%. Realty does not have the right to
vote more than 9.99% of the shares of NHP Plc. As of September 30, 1997, NHP Plc
had invested or committed to invest approximately $288,000,000 in 92 nursing
homes, totaling 5,289 beds. The facilities are leased to 13 nursing home
operators in the United Kingdom with terms and conditions similar to those
contained in Realty's leases.
(1) Based upon information provided by the operators of the facilities, the
average occupancy of Realty's portfolio of operating health care
facilities, including start-up facilities, for the nine months ended
September 30, 1997, was as follows: long-term care facilities, 82%;
rehabilitation hospitals, 59%; alcohol and substance abuse treatment
facilities, 75%; assisted living, 70%; retirement living facilities, 91%;
acute care hospitals, 59%. Generally, average occupancy rates are
determined by dividing the number of patient days in each period by the
average number of licensed bed days during such period.
(2) Represents purchase price or mortgage amount at December 31, 1997 for
operating facilities and the funded loan amounts for facilities under
construction
(3) The annual base rentals/interest payments under the leases or mortgages are
generally projected to be approximately 9% - 13% of the purchase price or
mortgage amount, in accordance with the terms of the respective agreements.
Base rent excludes additional and percentage rent and interest. Additional
and percentage rent and interest for the year ended December 31, 1997 was
an aggregate of $12,065,000 for all of the facilities. Additional and
percentage rent and interest are calculated based upon a percentage of a
facility's revenues over an agreed upon base amount or an automatic annual
escalation.
(4) Permanent mortgage loans
(5) Includes permanent mortgage loans of $39,585,000
18
(6) Includes permanent mortgage loans of $46,406,000 and a construction loan of
$2,797,000
(7) Includes permanent mortgage loans of $17,945,000 and a construction loan of
$5,848,000
(8) Includes permanent mortgage loans of $46,805,000
(9) Includes permanent mortgage loans of $192,747,000
(10) Includes a permanent mortgage loan of $7,849,000
(11) Includes permanent mortgage loans of $74,801,000
(12) Includes permanent mortgage loans of $50,163,000 and a construction loan of
$3,944,000
(13) Includes permanent mortgage loans of $18,156,000 and a construction loan of
$8,589,000
(14) Includes a permanent mortgage loan of $3,118,000 and construction loans of
$39,786,000
(15) Includes a permanent mortgage loan of $548,000
(16) Includes a construction loan of $1,676,000
(17) Includes permanent mortgage loans of $15,689,000
(18) Includes a permanent mortgage loan of $12,333,000
(19) Includes a line of credit of up to $25,000,000 of which $20,815,000 has
been drawn; the amount outstanding is cross-collateralized by affiliated
facilities of the operator
(20) Includes a permanent mortgage loan of $3,030,000
(21) Construction loan(s)
(22) Includes a permanent mortgage loan of $26,450,000 and construction loans of
$33,320,000
(23) Includes a construction loan of $1,969,000
(24) Includes construction loans of $16,179,000
(25) Includes a permanent mortgage loan of $4,630,000 and a construction loan of
$2,710,000
(26) Includes a permanent mortgage loan of $4,671,000
(27) Includes a permanent mortgage loan of $4,288,000
(28) Includes a construction loan of $3,266,000
(29) Includes a permanent mortgage loan of $5,032,000
19
(30) Includes lines of credit of up to $34,500,000 of which $19,087,000 has been
drawn; the amount outstanding is cross-collateralized by affiliated
facilities of the operator
(31) Includes a permanent mortgage loan of $27,545,000
(32) Includes permanent mortgage loans of $13,052,000
(33) Includes permanent mortgage loans of $44,323,000 and construction loans of
$19,007,000
(34) Includes permanent mortgage loans of $17,844,000 and construction loans of
$18,120,000
(35) Base rental income is based on a percentage of total live on-track wagering
as well as a percentage of revenues from satellite wagering and the
simulcasting of races originating from Santa Anita Racetrack after mandated
payments to the State, horse owners and breeders.
(36) Includes permanent mortgage loans of $5,478,000
(37) The Santa Anita Fashion Park is owned and operated by a partnership, Anita
Associates, of which Realty is a 50% limited partner. Income is in the form
of partnership distributions.
(38) Investments by Realty in facilities operated by Life Care Centers of
America, Inc., Sun Healthcare Group, Inc., Emeritus Corporation,
Alternative Living Services, HealthSouth Rehab, and Springwood/Chur
Associates, represented 19%, 13%, 7%, 6%, 5%, and 4%, respectively, of
Realty's total portfolio as of December 31, 1997.
Long-Term Care Facilities. The long-term care facilities offer
restorative, rehabilitative and custodial nursing care for patients not
requiring more extensive and sophisticated treatment available at acute care
hospitals. The facilities are designed to provide custodial care and to
supplement hospital care and many have transfer agreements with one or more
acute care hospitals.
Assisted Living Facilities. The assisted living facility provides a
combination of housing, supportive services, personalized assistance and health
care designed to respond to individual needs for daily living and instrumental
activities. Support services are generally available 24 hours a day to meet
scheduled and unscheduled needs.
Retirement Living Facilities. The retirement living facilities offer
specially designed residential units for active and ambulatory elderly residents
and provide various ancillary services. They may contain nursing facilities to
provide a continuum of care. The retirement living facilities offer their
residents an opportunity for an independent lifestyle with a range of social and
health services.
Rehabilitation Hospitals. The rehabilitation hospitals provide
treatment to restore physical, psycho-social, educational, vocational and
economic usefulness and independence to disabled persons. Rehabilitation
concentrates on physical disabilities and impairments and utilizes a coordinated
multidisciplinary team approach to help patients attain measurable goals.
20
Medical Office Buildings. Medical office building facilities contain
individual physician, physician group and other health care provider offices for
the administration and treatment of patients, usually in close proximity to the
general service acute care hospital to which the physicians are affiliated. The
types of services provided in a medical office building may include outpatient
therapy, clinics, examination facilities and the provision of other medical
services in a non-hospital setting.
Acute Care Hospitals. Acute care hospitals provide services that
include, among others, general surgery, internal medicine, obstetrics, emergency
room care, radiology, diagnostic services, coronary care, pediatric services and
psychiatric services. On an outpatient basis, the services include, among
others, same day surgery, diagnostic radiology (e.g. magnetic resonance imaging,
CT scanning, X-ray), rehabilitative therapy, clinical laboratory services,
pharmaceutical services and psychiatric services.
Alcohol and Substance Abuse Treatment Facilities. These facilities
provide inpatient treatment for alcohol and substance abuse, including medical
evaluation, detoxification and rehabilitation. Specialized programs offer
treatment for adults, adolescents, families and chronic abusers.
Psychiatric Hospitals. The psychiatric hospitals offer comprehensive,
multidisciplinary adult, adolescent and substance abuse psychiatric programs.
Patients are evaluated upon admission and an individualized treatment plan is
developed. Elements of the treatment plan include individual, group and family
therapy, activity therapy, educational programs and career and vocational
planning.
21
LEASES
Generally, each health care facility (which includes the land,
buildings, improvements, related easements, and rights and fixtures (the "Leased
Properties")) that is owned by Realty is leased pursuant to a long-term triple
net lease (collectively, the "Leases") which typically contains terms as
outlined below. Leased Properties usually do not include major movable
equipment.
The Leases generally have a fixed term of approximately 10 years and
contain multiple renewal options. Some Leases are subject to earlier termination
upon the occurrence of certain contingencies described in the Lease.
Realty's Leased Properties aggregated approximately $1,627,779,000 of
gross real estate investments at December 31, 1997. The base rents range from
approximately 9% to 13% per annum of the Realty's equity investment in the
Leased Properties and many may be adjusted upward during the fifth year of the
Leases to an amount equal to 300 to 500 basis points over the five-year United
States Treasury securities' yield at the time of adjustment. The base rents for
the renewal periods are generally fixed rents for the initial renewal periods
and market rates for later renewal periods. All Leases provide for either an
automatic fixed annual rent escalation or additional variable rents in addition
to the base rent, based on revenues exceeding specified base revenues. Realty
typically also charges a lease commitment fee at the initiation of the
sale/leaseback transaction.
Each Lease is a triple net lease requiring the lessee to pay rent and
all additional charges incurred in the operation of the Leased Property. The
lessees are required to repair, rebuild and maintain the Leased Properties.
The obligations under the Leases are generally guaranteed by the parent
corporation of the lessee, if any, or affiliates or individual principals of the
lessee. Some obligations are further backed by letters of credit, cash
collateral or pledges of certificates of deposit from various financial
institutions which may cover up to one full year's lease payments and which
remain in effect until the expiration of a fixed time period or the fulfillment
of certain performance criteria.
Realty also obtains other credit enhancement devices similar to those
it may obtain with respect to permanent mortgage loans. See "Permanent Mortgage
Loans" for description.
With respect to two of the facilities, Realty leases the land pursuant
to ground leases and in turn subleases the land to the operator of the facility.
Such subleases contain terms substantially similar to those found in the Leases.
PERMANENT MORTGAGE LOANS
Realty's permanent mortgage loan program is comprised of secured loans
which are structured to provide Realty with interest income, additional interest
based upon the revenue growth of the operating facility or a fixed rate
increase, principal amortization and commitment fees. Virtually all of the
approximately $1,432,825,000 of permanent mortgage loans as of December 31, 1997
are first mortgage loans.
The interest rates on Realty's investments in permanent mortgage loans
for operating facilities range from approximately 9% to 13% per annum on the
outstanding balances. The yield to Realty on permanent mortgage loans depends
upon a number of factors, including the stated interest rate, average
22
principal amount outstanding during the term of the loan, the amount of the
commitment fee charged at the inception of the loan, the interest rate
adjustments and the additional interest earned.
The permanent mortgage loans for operating facilities made through
December 31, 1997 are generally subject to 10-year terms with up to 30-year
amortization schedules that provide for a balloon payment of the outstanding
principal balance at the end of the tenth year. Some of the mortgages include an
interest adjustment in the fifth year which generally provides for interest to
be charged at the greater of the current interest rate or 300 to 400 basis
points over the five-year United States Treasury securities' yield at the time
of adjustment.
Realty generally requires a variety of additional forms of security and
collateral beyond that which is provided by the lien of the mortgage. For
example, Realty requires one or more of the following items: (a) a guaranty of
the complete payment and performance of all obligations associated with each
mortgage loan from the borrower's parent corporation, if any, other affiliates
of the borrower and/or one or more of the individual principals controlling such
borrower; (b) a collateral assignment from the borrower of the leases and the
rents relating to the mortgaged property; (c) a collateral assignment from the
borrower of all permits, licenses, approvals and contracts relating to the
operation of the mortgaged property; (d) a pledge of all, or substantially all,
of the equity interest held in the borrower; (e) cash collateral or a pledge of
a certificate of deposit, for a negotiated dollar amount typically equal to
three months to one year's principal and interest on the loan (which cash
collateral or pledge of certificate of deposit typically remains in effect until
the later to occur of (i) three years after the closing of the mortgage loan or
(ii) the achievement by the facility of an agreed-upon cash flow debt coverage
ratio for three consecutive fiscal quarters and, in the event that after the
expiration of the letter of credit or pledge of certificate of deposit, the
agreed-upon financial covenants are not maintained throughout the loan term, the
borrower is often required to reinstate the cash collateral or pledge of
certificate of deposit); (f) an agreement by any affiliate of the borrower or
operator of the facility to subordinate all payments due to it from the borrower
to all payments due to Realty under the mortgage loan; and (g) a security
interest in all of the borrower's personal property, including, in some
instances, the borrower's accounts receivable. In addition, the mortgage loans
are generally cross-defaulted and cross-collateralized with any other mortgage
loans, leases or other agreements between the borrower or any affiliate of the
borrower and Realty.
DEVELOPMENT INVESTMENTS AND LOANS
Realty makes development investments or loans which by their terms are
or convert into sale/leaseback transactions or permanent mortgage loans upon the
completion of the facilities. Generally, the interest or yield rates on the
outstanding balances of Realty's developments are up to 300 basis points over
the prime rate of a specified financial institution. Realty also typically
charges a commitment fee at the commencement of the project. The development
period generally commences upon the funding of such investments or loans and
terminates upon the earlier of the completion of development of the applicable
facility or a specific date. This period is generally 12 to 18 months. During
the development term, funds are advanced pursuant to draw requests in accordance
with the terms and conditions of the applicable agreement which require a site
visit prior to the advancement of funds. Monthly payments based on an interest
or yield rate only, are made on the total amount of the investment or loan
proceeds advanced during the development period.
Realty began its development program in August 1987 and since that time
has converted many of these developments into sale/leaseback transactions or
permanent mortgage loans representing an investment of $529,341,000 as of
December 31, 1997. In addition, at December 31, 1997 Realty had outstanding
development financing of $252,774,000 and was committed to providing additional
23
financing of approximately $204,030,000. As with Realty's sale/leaseback
transactions or permanent mortgage financing programs, the developments
generally include a variety of additional forms of security and collateral. See
"Leases" and "Permanent Mortgage Loans." During the development period, Realty
generally requires additional security and collateral in the form of either
payment and performance completion bonds or completion guarantees by either one,
or a combination of, the lessee's or borrower's parent entity, other affiliates,
or one or more of the individual principals.
As a further safeguard during the development period, Realty generally
will retain a portion of the funding equal to 10% of the transaction amount
until it has received satisfactory evidence that the project has been fully
completed in accordance with the applicable plans and specifications and the
period during which liens may be perfected with respect to any work performed,
or labor or materials supplied, in connection with the construction of the
project has expired. Realty also monitors the progress of the development of
each project, the construction budget and the accuracy of the borrower's draw
requests by having its own inspector perform on-site inspections of the project
prior to the release of any requested funds.
SANTA ANITA RACETRACK LEASE ARRANGEMENT
The Santa Anita Racetrack, which is leased by Realty to LATC, a
subsidiary of Operating, is located on approximately 312 acres, 14 miles
northeast of downtown Los Angeles, adjacent to major transportation routes. LATC
conducts one of the largest thoroughbred horse racing meets in the United States
in terms of both average daily attendance and average daily pari-mutuel
wagering.
LATC conducts an annual 17-week thoroughbred horse racing meet which
commences the day after Christmas and continues through mid-April.
LATC leases the Racetrack from Realty for the full year for a fee of
1.5% of total live on-track wagering at Santa Anita Racetrack, including live
on-track wagering during the meet conducted by Oak Tree. In addition, LATC pays
to Realty 26.5% of its revenues from satellite wagering (not to exceed 1.5% of
such wagering) and the simulcasting of races originating from Santa Anita
Racetrack after mandated payments to the State, to horse owners and to breeders.
When LATC operates as a satellite for Hollywood Park Racetrack, Del Mar
Racetrack and Pomona Fairplex, LATC pays to Realty 26.5% of its wagering
commissions as additional rent. The lease with Realty is scheduled to expire on
December 31, 1999. LATC has sublet the racetrack to Oak Tree to conduct Oak
Tree's annual thoroughbred horse racing meet (27 days in 1996), which commences
in late September or early October. Oak Tree normally races five weeks in
even-numbered years and six weeks in odd-numbered years.
Under a sublease which expires December 31, 1999, Oak Tree makes annual
rental payments to LATC equal to 1.5% of the total live on-track pari-mutuel
wagering from its racing meet and 25% of its satellite and simulcast revenues
after mandated payments to the State of California, to horse owners and to
breeders. LATC pays to Realty 26.5% of all satellite and simulcast revenues
received from Oak Tree. In addition, Oak Tree reimburses LATC an amount equal to
0.8% of its on-track pari-mutuel wagering for certain expenses of operating
Santa Anita Racetrack on behalf of Oak Tree. LATC also receives supplemental
rent representing Oak Tree's adjusted profits above an agreed-upon level and
will rebate rent to Oak Tree if Oak Tree's adjusted profits fall below such
level.
24
SANTA ANITA FASHION PARK
Santa Anita Fashion Park is a completely enclosed, climate-controlled
regional mall located adjacent to Santa Anita Racetrack with 1,102,000 square
feet of leasable area. Fashion Park, apart from space occupied by anchor
tenants, is owned and operated by a partnership, Anita Associates, of which
Realty is a 50% limited partner. The general partner of Anita Associates is
Hahn-UPI, which in turn is a limited partnership of which TrizecHahn Centers
Inc., a developer of shopping centers, is the general partner.
Realty has leased the land underlying Fashion Park to Anita Associates
and to three of the major tenants of Fashion Park until 2037, with two
additional ten-year option periods and one additional five-year option period.
The annual ground rent is $795,000 and continues through 2007. During the
remaining 30-year term and the three additional option periods, the annual
ground rent may be increased up to 25% based upon the appraised value of the
land. Under the provisions of the ground leases, Anita Associates is responsible
for real estate taxes and other operating expenses. Robinsons-May, J.C. Penney,
Macy's and Nordstrom pay their own real estate taxes.
LAND
Realty also has land held for development of an entertainment center
valued at $45,223,000. In March 1995, Realty filed an application with the City
of Arcadia for entitlements for a 1.5 million square foot development on
approximately 100 acres of land adjacent to the Santa Anita racetrack and the
Santa Anita Fashion Park. As part of the planned development, Realty is
negotiating a lease with a movie exhibitor for a multiple screen multiplex
theater and negotiations with a variety of prospective tenants, including a book
superstore and other specialty retail stores and restaurants. Realty formed a
community advisory group to facilitate community acceptance of the project and
continued to engage in negotiations with the City government regarding the
entitlement process. Realty also has land held for future development at the
racetrack valued at approximately $13,000,000 that is currently idle and is a
50% partner in French Valley Ventures, a partnership which acquired 24 acres of
unimproved land valued at $330,000 located in Temecula, California. Realty
intends to dispose of its interest in the Temecula property.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and
regulations, an owner of real estate is liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in such property.
Such laws often impose such liability without regard to whether the owner knew
of, or was responsible for, the presence of such hazardous or toxic substances.
The costs of investigation, removal or remediation of such substances may be
substantial, and the presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's ability to sell or
rent such property or to borrow using such property as collateral. Persons who
arrange for the disposal or treatment of hazardous or toxic substances may also
be liable for the costs of removal or remediation of a release of such
substances at a disposal treatment facility, whether or not such facility is
owned or operated by such person. Certain environmental laws impose liability
for release of asbestos-containing materials ("ACMs") into the air and third
parties may seek recovery from owners or operators of real properties for
personal injury associated with ACMs. In connection with the ownership (direct
or indirect), operation, management and development of real properties, the
Companies may be considered an owner or operator of such properties or as having
arranged for the disposal or treatment of hazardous or toxic substances and
therefore, potentially liable for removal or remediation costs, as well as
certain other related costs, including governmental fines and injuries to
persons and property.
25
Item 3.
LEGAL PROCEEDINGS
A purported class action complaint that had been filed by Barbara J.
Gignac in October 1996 in the Superior Court of Los Angeles County, California,
naming as defendants the Companies, certain of their officers and directors and
Colony Capital, Inc. was dismissed.
On November 14, 1997 the matter entitled, Raymond Wechsler
Administrative Trustee of the Towers Financial Corporation Administrative Trust
v. New Medico Holding Co., Inc. et al; in which Realty was named a defendant was
settled and subsequently dismissed as to Realty. In connection with the
settlement, Realty made a payment of $12,100,000 and received accounts
receivable with a face value of approximately $12,000,000 which has been
recorded at a net carrying value of approximately $2,000,000.
On January 8, 1998 the Companies received notice that they were named
as a defendant in an action entitled, Lynn Robbins v. William J. Razzouk, et al;
Civil Action No. 98CI-00192 filed January 7, 1998 in the District Court of Bexar
County, Texas and on January 20 , 1998 the Companies received notice that they
were named as a defendant in an action entitled, Adele Brody v. William J.
Razzouk, et al., Civil Action No. 98CI-00456 filed January 12,1998 in the
District Court of Bexar County, Texas. The complaints which are almost identical
(i) allege, in part, that La Quinta and its directors violated their fiduciary
duty, duty of care and loyalty to La Quinta shareholders by entering into a
merger agreement with the Companies without having first invited other bidders,
and the Companies aided and abetted La Quinta and its directors in the alleged
breaches, and (ii) seek injunctive relief enjoining the merger with La Quinta
and compensatory damages. The Companies are currently investigating these
actions and, at present, believe that the actions are entirely without merit.
The Companies are also a party to a number of other claims and lawsuits
arising out of the normal course of business; the Companies believe that none of
these claims or pending lawsuits, either individually or in the aggregate, will
have a material adverse affect on the Companies' business or on their
consolidated financial position or results of operations.
26
Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Special Meetings of Shareholders of Realty and Operating held on
November 5, 1997, the recorded vote for the Mergers was as follows:
For Against Abstain
--- ------- -------
Meditrust 40,444,723 934,071 497,356
Meditrust Acquisition Company 40,420,587 939,280 516,283
Item 4a.
EXECUTIVE OFFICERS OF THE REGISTRANTS
The following information relative to Realty's executive officers is
given as of March 30, 1998:
Name Age Position with Realty
---- --- --------------------
Abraham D. Gosman 69 Chairman
David F. Benson 48 President and Director
Michael F. Bushee 40 Chief Operating Officer
Michael S. Benjamin 40 Senior Vice President, Secretary
and Corporate Counsel
Laurie T. Gerber 40 Chief Financial Officer
Stephen C. Mecke 35 Vice President of Development
Debora A. Pfaff 34 Vice President of Operations
Stephen H. Press 61 Vice President
John G. Demeritt 38 Controller
Richard W. Pomroy 40 Vice President of Property Management
John E. Ryan, Jr. 48 Vice President of Acquisitions
Abraham D. Gosman has been Chairman of Realty since its organization in
1985 and was the Chief Executive Officer from February 1991 to November 5, 1997.
Mr. Gosman is also Chief Executive Officer of Operating. Mr. Gosman is also
founder, Chairman of the Board, CEO and President of PhyMatrix Corporation, a
provider of managerial/administrative services to a variety of specialized
medical care and treatment providers, which completed its initial public
offering in January 1996 (NASDAQ/PHMX); and founder and Chairman of the Board of
CareMatrix Corporation (Amex: CMD), an operator and developer of assisted living
facilities, which completed its initial public offering in October 1996. Mr.
Gosman was the Chief Executive Officer and Chairman of the Board of The Mediplex
Group, Inc. ("Mediplex"), an operator and developer of health care facilities,
from August 1990 until June 1994, when Mediplex was acquired by Sun Healthcare
Group, Inc. Mr. Gosman has been in the health care and development business for
more than thirty years.
David F. Benson has been President of Realty since September 1991 and
Treasurer since 1996. Prior to that, he was Treasurer of Realty from January
1986 to May 1992. He was Treasurer of Mediplex from January 1986 through June
1987. He was previously associated with Coopers & Lybrand, independent
accountants, from 1979 to 1985. Mr. Benson is also a Trustee of Mid-Atlantic
Realty Trust, a shopping center REIT, traded on the American Stock Exchange, a
Director of Harborside Healthcare
27
Corporation, a long-term care company, and a Director of Nursing Home
Properties, Plc, a UK company specializing in the purchase and leasing of
purpose-built nursing homes.
Michael F. Bushee has been Chief Operating Officer of Realty since
September 1994. He was Senior Vice President of Operations of Realty from
November 1993 through August 1994, Vice President from December 1989 to October
1993, Director of Development from January 1988 to December 1989 and has been
associated with Realty since April 1987. He was previously associated with The
Stop & Shop Companies, Inc., a retailer of food products and general
merchandise, for three years and Wolf & Company, P.C., independent accountants,
for four years.
Michael S. Benjamin has been Senior Vice President, Secretary and
General Counsel of Realty since October 1993. He was Vice President, Secretary
and General Counsel from May 1992 to October 1993, Secretary and General Counsel
from December 1990 to May 1992 and Assistant Counsel to Realty from November
1989 to December 1990. His previous association was with the law firm of Brown,
Rudnick, Freed & Gesmer, from 1983 to 1989.
Laurie T. Gerber, a Certified Public Accountant, joined Realty in
December 1996 as Chief Financial Officer. Prior to joining Realty, she was a
partner in the accounting firm of Coopers & Lybrand, L.L.P., where she worked
for 14 years.
Stephen C. Mecke has been Vice President of Development since October
1995 and has been Realty's Director of Development since June 1992. He was
previously the manager of underwriting at Continental Realty Credit Inc., a
commercial mortgage company, from October 1988 to June 1992.
Debora A. Pfaff has been Vice President of Operations since October
1995 and has been Realty's Director of Operations since September 1992. Ms.
Pfaff was previously Senior Manager with KPMG Peat Marwick where she worked from
1985 to 1992.
Stephen H. Press has been Vice President of Acquisitions of Realty
since October 1993 and previously held this position with Realty from June 1987
to December 1990. He was Vice President of Development and Regulatory Affairs
for Integrated Health Services, Inc., a medical services company, from April
1991 to October 1993.
John G. Demeritt has been Controller of Realty since October 1995.
Prior to that, he was Corporate Controller of CMG Information Services, Inc., an
information service provider, from 1994 to 1995. He was Vice President of
Finance and Treasurer of Salem Sportswear Corporation, a manufacturer and
marketer of licensed sports apparel, from June 1991 to November 1993. He was
Controller of Scitex America Corporation, a manufacturer and distributor of
electronic prepress equipment, from August 1986 to June 1991, and was previously
associated with Laventhol & Horwath, independent accountants, from 1983 to 1986.
Richard W. Pomroy has been Vice President of Property Management since
October 1997 and has been Director of Property Management since 1994. Prior to
joining Realty, he was a project manager responsible for the management and
development of construction projects at Continuum Care Corporation, an operator
of nursing homes, subacute health care centers, and rehabilitation facilities.
Mr. Pomroy began his career in the real estate industry as an architectural
project manager, and gained additional property management experience as senior
project manager, and later as vice president of construction, for several Boston
area general contracting firms.
28
John E. Ryan, Jr. has been Vice President of Acquisitions at Realty
since October 1997. Most recently Vice President of Acquisitions for Harborside
Healthcare Corporation, a major regional owner and operator of nursing homes,
Mr. Ryan was responsible for new business development. In this position he
directed the company's rapid growth, leading to an initial public offering in
June 1996. With over 20 years of health care finance and acquisition experience,
Mr. Ryan has previously worked as a commercial and investment banker for several
banking firms. Mr. Ryan is responsible for new business development and
marketing for Realty's health care investments.
The following information relative to Operating's executive officers is
given as of March 31, 1998:
Name Age Position with Operating
---- --- -----------------------
Abraham D. Gosman 69 Chairman and Chief Executive Officer
Abraham D. Gosman has been the Chairman and Chief Executive Officer of
Operating since November 5, 1997. He has been Chairman of Realty since its
organization in 1985 and was Realty's Chief Executive Officer from February 1991
to November 5, 1997. Mr. Gosman is also founder, Chairman of the Board, CEO and
President of PhyMatrix Corporation, a provider of managerial/administrative
services to a variety of specialized medical care and treatment providers, which
completed its initial public offering in January 1996 (NASDAQ/PHMX); and founder
and Chairman of the Board of CareMatrix Corporation (Amex: CMD), an operator and
developer of assisted living facilities, which completed its initial public
offering in October 1996. Mr. Gosman was the Chief Executive Officer and
Chairman of the Board of Mediplex Group, an operator and developer of health
care facilities, from August 1990 until June 1994, when Mediplex was acquired by
Sun Healthcare Group, Inc. Mr. Gosman has been in the health care and
development business for more than thirty years.
29
PART II
Item 5.
MARKET FOR REGISTRANTS' COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
(a) and (b) The Companies' Shares trade together on the New York
Stock Exchange under the symbol MT. The following table sets forth, for the
periods shown, the high and low sales prices for the Shares (as reported on the
New York Stock Exchange Composite Tape) as adjusted for the Mergers:
1997 1996
- - -------------------------------------------- ---------------------------------------------
Quarter High Low Quarter High Low
------- ---- --- ------- ---- ---
First $33.81 $30.48 First $30.48 $27.67
Second $33.19 $29.54 Second $28.61 $26.42
Third $34.54 $31.21 Third $29.44 $27.57
Fourth $39.00 $34.59 Fourth $33.29 $28.71
There were approximately 13,381 holders of record of the Companies'
Shares as of January 31, 1998. Included in the number of shareholders
of record are Shares held in "nominee" or "street" name.
(c) Realty has declared the following distributions during its two most
recent fiscal years, which have been adjusted for the exchange of Shares
pursuant to the Mergers:
Distributions
Period Declared Per Share
------ ------------------
Quarter Ended March 31, 1996.................................. $ .5722
Quarter Ended June 30, 1996................................... .5763
Quarter Ended September 30, 1996.............................. .5805
Quarter Ended December 31, 1996............................... .5846
--------
Total $ 2.3136
========
Quarter Ended March 31, 1997.................................. $ .5888
Quarter Ended June 30, 1997................................... .5930
Quarter Ended September 30, 1997.............................. .5971
Quarter Ended December 31, 1997............................... .6063
--------
Total $ 2.3852
========
Realty intends to distribute to its shareholders on a quarterly basis a
majority of cash flow from operating activities available for distribution.
Cash flow from operating activities available for distribution to shareholders
of Realty will be derived primarily from the rental payments and interest
payments derived from its real estate investments. All distributions will be
made by Realty at the discretion of the Board of Directors and will depend on
the earnings of Realty, its financial condition and such other factors as the
Directors deem relevant. In order to qualify for the beneficial tax treatment
accorded to real estate investment trusts by Sections 856 to 860 of the Internal
Revenue Code, Realty is required to make distributions to holders of its Shares
of at least 95% of its "real estate investment trust taxable income".
30
Item 6. SELECTED FINANCIAL INFORMATION
For the Combined Meditrust Companies
Year Ended December 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands, except per share data)
OPERATING DATA:
Revenue $ 294,355 $ 254,024 $ 209,369 $ 172,993 $150,375
---------- ---------- ---------- ----------- --------
Expenses:
Interest expense..................... 87,428 64,216 64,163 67,479 62,193
Depreciation and amortization........ 27,125 21,651 16,620 15,615 14,721
Amortization of goodwill............. 2,349 1,556 1,556 1,556 1,556
General and administrative expenses.. 10,558 8,625 7,058 7,883 8,269
Horse racing operations.............. 4,473
Loss from unconsolidated joint
venture........................... 10
----------- ---------- ---------- ---------- ---------
Total expenses..................... 131,943 96,048 89,397 92,533 86,739
---------- ---------- ---------- ---------- ---------
Net income before extraordinary item.... 162,412 157,976 119,972 80,460 63,636
Loss on prepayment of debt.............. 33,454
---------- ---------- ---------- ---------- ---------
Net income.............................. $ 162,412 $ 157,976 $ 86,518 $ 80,460 $ 63,636
=========== =========== ========== =========== =========
PER SHARE DATA:
Basic earnings per Paired Common Share
Net income before extraordinary item.... $2.14 $2.21 $2.10 $1.90 $1.69
Loss on prepayment of debt.............. .59
----- ----- ----- ----- -----
Basic earnings per Paired Common Share.. $2.14 $2.21 $1.51 $1.90 $1.69
===== ===== ===== ===== =====
Diluted earnings per Paired Common Share
Net income before extraordinary item.... $2.12 $2.20 $2.09 $1.89 $1.68
Loss on prepayment of debt.............. .58
----- ----- ----- ----- -----
Diluted earnings per Paired Common
Share................................. $2.12 $2.20 $1.51 $1.89 $1.68
===== ===== ===== ===== =====
Distributions paid...................... $2.38 $2.31 $2.25 $2.18 $2.11
===== ===== ===== ===== =====
Basic weighted average shares
outstanding........................... 76,070 71,445 57,151 42,433 37,622
Diluted weighted average shares
outstanding........................... 76,524 71,751 57,457 42,564 37,840
CASH FLOW DATA:
Cash provided by operating activities... $ 185,195 $ 188,551 $ 149,997 $ 100,819 $ 79,291
Cash used in investing activities....... 580,560 437,150 310,135 284,996 208,649
Cash provided by financing activities... 376,698 247,077 164,449 207,808 120,806
31
Item 6. SELECTED FINANCIAL INFORMATION, Continued
For the Combined Meditrust Companies
December 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands)
BALANCE SHEET DATA:
Real estate investments, net............ $ 2,935,772 $ 2,188,078 $1,777,798 $1,484,229 $1,214,308
Total assets............................ 3,323,891 2,316,875 1,891,852 1,595,130 1,310,401
Indebtedness............................ 1,377,438 858,760 762,291 765,752 658,245
Total liabilities....................... 1,498,152 931,934 830,097 824,983 724,606
Total shareholders' equity.............. 1,825,739 1,384,941 1,061,755 770,147 585,795
32
For Meditrust Corporation
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands, except per share data)
OPERATING DATA:
Revenue $ 289,923 $ 254,024 $ 209,369 $ 172,993 $150,375
---------- ---------- ---------- ---------- --------
Expenses:
Interest expense..................... 87,412 64,216 64,163 67,479 62,193
Depreciation and amortization........ 26,954 21,651 16,620 15,615 14,721
Amortization of goodwill............. 2,214 1,556 1,556 1,556 1,556
General and administrative expenses.. 10,111 8,625 7,058 7,883 8,269
Rental property operating............ 210
Loss from unconsolidated joint venture... 10
---------- ---------- ---------- ---------- ---------
Total expenses..................... 126,911 96,048 89,397 92,533 86,739
---------- ---------- ---------- ---------- ---------
Net income before extraordinary item.... 163,012 157,976 119,972 80,460 63,636
Loss on prepayment of debt.............. 33,454
---------- ---------- ----------
Net income.............................. $ 163,012 $ 157,976 $ 86,518 $ 80,460 $ 63,636
========== ========== ========== ========== =========
PER SHARE DATA:
Basic earnings per Common Share:
Net income before extraordinary item.... $2.14 $2.21 $2.10 $1.90 $1.69
Loss on prepayment of debt.............. .59
----- ----- ----- ----- -----
Basic earnings per Common Share......... $2.14 $2.21 $1.51 $1.90 $1.69
===== ===== ===== ===== =====
Diluted earnings per Common Share:
Net income before extraordinary item.... $2.12 $2.20 $2.09 $1.89 $1.68
Loss on prepayment of debt.............. .58
----- ----- ----- ----- -----
Diluted earnings per Common Share....... $2.12 $2.20 $1.51 $1.89 $1.68
===== ===== ===== ===== =====
Distributions paid...................... $2.38 $2.31 $2.25 $2.18 $2.11
===== ===== ===== ===== =====
Basic weighted average shares
outstanding.......................... 76,274 71,445 57,151 42,433 37,622
Diluted weighted average shares
outstanding .......................... 77,007 71,751 57,423 42,564 37,840
CASH FLOW DATA:
Cash provided by operating activities... $ 185,195 $ 188,551 $ 149,997 $ 100,819 $ 79,291
Cash used in investing activities....... 580,560 437,150 310,135 284,996 208,649
Cash provided by financing activities... 376,698 247,077 164,449 207,808 120,806
December 31,
----------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands)
BALANCE SHEET DATA:
Real estate investments, net............ $ 2,935,772 $ 2,188,078 $1,777,798 $1,484,229 $1,214,308
Total assets............................ 3,259,536 2,316,875 1,891,852 1,595,130 1,310,401
Indebtedness............................ 1,377,438 858,760 762,291 765,752 658,245
Total liabilities....................... 1,467,296 931,934 830,097 824,983 724,606
Total shareholders' equity.............. 1,792,240 1,384,941 1,061,755 770,147 585,795
33
For Meditrust Operating Company
Initial Period Ended
December 31,
1997
--------------------
(In thousands, except per Share data)
OPERATING DATA:
Revenue................................................. $ 5,365
Expenses:
Interest expense..................................... 209
Depreciation and amortization........................ 171
Amortization of goodwill............................. 135
General and administrative expenses.................. 447
Horse racing operations.............................. 4,263
Loss from unconsolidated joint venture............... 10
Rent to Meditrust Corporation....................... 740
---------
Total expenses......................................... 5,965
---------
Net loss................................................ $ (600)
=========
PER SHARE DATA:
Basic earnings per common share......................... $ (.01)
======
Diluted earnings per common share....................... $ (.01)
======
Basic weighted average shares outstanding............... 82,490
Diluted weighted average shares outstanding............. 83,223
CASH FLOW DATA:
Cash used in operating activities....................... $ 783
Cash used in investing activities....................... 34,427
Cash provided by financing activities................... 54,883
(in thousands)
BALANCE SHEET DATA:
1997
----
Total assets............................................ $ 120,426
Total liabilities....................................... 62,474
Total shareholders' equity.............................. 57,952
34
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item is incorporated by reference to
the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Current Report on Form 8-K dated
February 26, 1998.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated herein by
reference to the "Consolidated Financial Statements", "Notes to Consolidated
Financial Statements" and "Report of Independent Accountants" in the Current
Report on Form 8-K dated February 26, 1998.
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Shareholders and Directors of The Meditrust Companies:
Our report on the consolidated financial statements of The Meditrust Companies,
Meditrust Corporation and Meditrust Operating Company, has been incorporated by
reference in this Form 10-K from Meditrust's Current Report on Form 8-K dated
February 26, 1998. In connection with our audits of such financial statements,
we have also audited the related financial statement schedules listed in the
index on page 51 of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
Boston, Massachusetts Coopers & Lybrand L.L.P.
January 30, 1998
35
MEDITRUST CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
Additions
Balance at Charged to Additions Balance at
Beginning of Costs and Charged to Other End of
Description Period Expenses Accounts Deductions Period
----------- ------ -------- -------- ---------- ------
Valuation allowance included
in Accrued Expenses
and Other Liabilities
for the year ended
December 31:
1995 $ 4,546,837 $5,167,735 $ 9,714,572
1996 9,714,572 $1,690,000 (B) 8,054,572
1997 8,054,572 8,054,572 (A)
(A) Includes $8,054,572 reclassified as a reduction to Other Assets.
(B) Relates to receivables charged off.
Additions
Charged as
Revenue
Balance at Reductions or Additions Balance at
Beginning of Costs and Charged to Other End of
Description Period Expenses Accounts Deductions Period
----------- ------ -------- -------- ---------- ------
Valuation allowance included
in Other Assets for the
year ended
December 31:
1995 $9,100,000 $13,325,221 $18,192,698 (B) $ 4,232,523
1996 4,232,523 3,075,328 (C) 1,157,195
1997 1,157,195 $ 7,779,772 8,054,572 (A) 8,000,000 (C) 8,991,539
(A) Reclassified from valuation allowance included in Accrued Expenses and Other
Liabilities.
(B) Includes approximately $89,000 relating to the valuation of other assets
and $18,104,000 relating to receivables charged off.
(C) Relates to receivables charged off.
36
MEDITRUST CORPORATION
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
Gross Amount at Which Carried at Close of Period
Initial Cost ------------------------------------------------
to Company Cost
------------ Capitalized
Building & Subsequent to Building &
Description (1) Encumbrances Improvements Acquisitions Land (2) Improvements Total (5)
- - --------------- ------------ ------------ ------------ ------------ ------------ ---------
Long-term Care
Alabaster, AL....... $5,799,000 $1,810,000 $ 150,000 $ 7,609,000 $ 7,759,000
Cheshire, CT........ 6,770,000 455,000 6,770,000 7,225,000
Danbury, CT......... 5,295,000 305,000 5,295,000 5,600,000
Darien, CT.......... 4,202,477 45,000 4,202,477 4,247,477
Milford, CT......... 5,538,590 5,538,590 5,538,590
Milford, CT......... 10,000,000 10,000,000 10,000,000
Newington, CT....... 8,970,000 430,000 8,970,000 9,400,000
Southbury, CT....... 3,224,151 1,020,000 3,224,151 4,244,151
Southfield, CT...... 7,750,000 750,000 7,750,000 8,500,000
Westport, CT........ 4,970,000 400,000 4,970,000 5,370,000
Wethersfield, CT.... 12,440,000 6,643,218 19,083,218 19,083,218
Bradenton, FL....... $3,355,000 9,900,000 4,100,000 9,900,000 14,000,000
Naples, FL.......... 6,123,616 405,000 26,775 6,528,616 6,555,391
Palm Beach, FL...... 12,300,000 2,700,000 12,300,000 15,000,000
Sarasota, FL........ 4,447,012 1,060,800 4,447,012 5,507,812
Venice, FL.......... 8,592,203 128,500 8,592,203 8,720,703
Indianapolis, IN.... 2,455,612 114,700 2,455,612 2,570,312
New Haven, IN....... 4,553,541 75,000 128,100 4,628,541 4,756,641
W. Lafayette, IN.... 6,030,000 190,000 50,000 6,220,000 6,270,000
Beverly, MA......... 6,300,000 645,000 6,300,000 6,945,000
Concord, MA......... 8,762,000 3,538,000 8,762,000 12,300,000
New Bedford, MA..... 7,492,000 1,008,000 7,492,000 8,500,000
Newton, MA.......... 12,430,000 630,000 12,430,000 13,060,000
Lexington, MA....... 11,210,000 590,000 11,210,000 11,800,000
E. Longmeadow, MA... 12,400,000 3,595,928 400,000 15,995,928 16,395,928
Holyoke, MA......... 11,980,670 684,248 121,600 12,664,918 12,786,518
Lowell, MA.......... 9,897,730 594,621 500,000 10,492,351 10,992,351
Lynn, MA............ 13,293,267 870,248 1,206,734 14,163,515 15,370,249
Millbury, MA........ 2,550,000 2,550,000
Millbury, MA ....... 9,533,000 467,000 9,533,000 10,000,000
Northampton, MA..... 2,709,612 187,500 2,709,612 2,897,112
Peabody, MA......... 7,245,315 805,035 7,245,315 8,050,350
Randolph, MA........ 9,014,760 1,001,640 9,014,760 10,016,400
Weymouth, MA........ 10,719,932 850,000 10,719,932 11,569,932
Wilmington, MA...... 6,689,925 743,325 6,689,925 7,433,250
Accum. Const. Date
Deprec. (4)(5) Date Acquired
- - -------------- ------ --------
$1,780,099 1971 8/87
2,066,244 1975 10/85
1,616,049 1976 10/85
385,220 1975 6/94
473,099 1971 6/94
895,819 1992 6/94
2,737,697 1978 10/85
288,831 1975 6/94
807,298 1993 11/93
1,516,866 1965 10/85
4,026,479 1965 8/86
2,475,000 1985 12/87
307,036 1969 1/96
281,875 1996 4/96
222,360 1982 1/96
429,600 1985 1/96
122,784 1973 1/96
227,844 1982 1/96
1,534,794 1964 1/88
1,922,815 1972 10/85
492,859 1995 11/95
421,416 1995 11/95
3,793,759 1977 10/85
3,179,357 1965 8/86
3,447,168 1986 9/87
1,669,573 1973 9/92
1,382,572 1975 9/92
1,685,007 1960 4/93
12/97
139,020 1996 6/97
242,735 1974 6/94
2,117,553 1987 10/90
1,633,947 1987 10/90
960,319 1994 6/94
1,985,970 1987 10/90
37
MEDITRUST CORPORATION
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
Gross Amount at Which Carried at Close of Period
Initial Cost ------------------------------------------------
to Company Cost
------------ Capitalized
Building & Subsequent to Building &
Description (1) Encumbrances Improvements Acquisitions Land (2) Improvements Total (5)
- - --------------- ------------ ------------ ------------ ------------ ------------ ---------
Long-term Care, continued
Montgomery, MD...... $16,888,000 $1,300,000 $16,888,000 $ 18,188,000
Grand Blanc, MI..... 6,500,000 $ 863,800 120,000 7,363,800 7,483,800
Riverside, MO....... 8,559,900 238,000 8,559,900 8,797,900
Bedford, NH......... $7,330,824 12,691,500 808,500 12,691,500 13,500,000
Keene, NH........... 3,688,917 87,000 3,688,917 3,775,917
Petersborough, NH... 4,779,992 128,700 4,779,992 4,908,692
Milford, NH......... 3,195,288 52,000 3,195,288 3,247,288
Milford, NH......... 4,222,545 82,000 4,222,545 4,304,545
Winchester, NH...... 3,363,325 35,000 3,363,325 3,398,325
Bridgewater, NJ..... 12,208,944 470,000 1,193,400 12,678,944 13,872,344
Bound Brook, NJ..... 1,624,000 1,176,000 1,624,000 2,800,000
Oradell, NJ......... 14,986,000 1,714,000 14,986,000 16,700,000
Camden, NJ.......... 8,334,780 450,250 8,334,780 8,785,030
Marlton, NJ......... 14,060,000 240,000 14,060,000 14,300,000
New Milford, NJ..... 11,110,000 1,090,000 11,110,000 12,200,000
Niskayuna, NY....... 9,708,000 834,537 292,000 10,542,537 10,834,537
Rennsselaer, NY..... 1,400,000 1,400,000 1,400,000
Troy, NY............ 9,967,564 491,673 56,100 10,459,237 10,515,337
Bellbrook, OH....... 2,787,134 212,000 2,787,134 2,999,134
Huber Heights, OH... 3,593,360 174,000 3,593,360 3,767,360
Swanton, OH......... 5,500,000 350,000 5,500,000 5,850,000
Troy, OH............ 5,756,197 450,000 210,600 6,206,197 6,416,797
Medina, OH.......... 6,577,848 10,568,000 232,000 10,568,000 10,800,000
New London, OH...... 2,110,837 22,600 2,110,837 2,133,437
West Carrolton, OH.. 3,483,669 216,400 3,483,669 3,700,069
Erie, PA............ 4,753,000 375,000 335,000 5,128,000 5,463,000
Greensburg, PA...... 5,544,012 525,000 5,544,012 6,069,012
(4) Facilities, WV.. 16,299,400 900,600 16,299,400 17,200,000
Assisted Living
Blytheville, AR..... 3,545,265 3,545,265 3,545,265
Maumelle, AR........ 3,898,879 3,898,879 3,898,879
Mt. Home, AR........ 3,731,421 3,731,421 3,731,421
No. Phoenix, AZ..... 1,093,084 1,093,084 1,093,084
Pocahontas, AR...... 3,482,783 3,482,783 3,482,783
Sherwood, AR........ 4,072,191 4,072,191 4,072,191
Accum. Const. Date
Deprec. (4)(5) Date Acquired
- - -------------- ------ --------
$ 949,943 1994 11/95
1,715,132 1970 5/88
2,086,462 1965 3/88
645,407 1992 1/96
184,440 1965 1/96
238,992 1976 1/96
159,768 1900 1/96
211,128 1972 1/96
168,168 1987 1/96
611,419 1971 1/96
446,559 1963 12/86
842,967 1995 11/95
2,292,043 1984 12/86
790,884 1995 11/95
2,777,519 1971 12/87
1,264,401 1976 3/93
110,846 1975 11/94
1,150,775 1972 8/93
493,572 1981 12/90
636,318 1984 12/90
378,121 1950 4/95
288,746 1970 1/96
2,553,971 1954 4/88
373,809 1985 12/90
616,912 1983 12/90
1,268,844 1977 12/87
843,151 1991 6/90
850,801 1987 12/95
1996 4/96
1996 11/96
1996 11/96
1997 12/97
1996 11/96
1996 11/96
38
MEDITRUST CORPORATION
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
Gross Amount at Which Carried at Close of Period
Initial Cost ------------------------------------------------
to Company Cost
------------ Capitalized
Building & Subsequent to Building &
Description (1) Encumbrances Improvements Acquisitions Land (2) Improvements Total (5)
- - --------------- ------------ ------------ ------------ ------------ ------------ ---------
Assisted Living, continued
Grand Terrace, CA... $3,702,263 $ 450,000 $ 3,702,263 $ 4,152,263
Palm Desert, CA..... 5,415,920 784,080 5,415,920 6,200,000
Newark, DE.......... 2,011,812 2,011,812 2,011,812
Bradenton, FL....... 4,046,153 470,000 4,046,153 4,516,153
Brandon, FL......... 5,404,280 290,000 5,404,280 5,694,280
Deland, FL.......... 2,615,000 275,000 2,615,000 2,890,000
Ft. Myers, FL....... 3,012,558 620,000 3,012,558 3,632,558
Ft. Myers, FL....... 3,252,481 513,000 3,252,481 3,765,481
Jacksonville, FL.... 3,348,171 380,000 3,348,171 3,728,171
Jupiter, FL......... 2,420,000 380,000 2,420,000 2,800,000
Lakeland, FL........ 6,076,053 600,000 6,076,053 6,676,053
Lecanto, FL......... 4,019,365 150,000 4,019,365 4,169,365
Leesburg, FL........ 2,420,000 180,000 2,420,000 2,600,000
Melbourne, FL....... 2,460,000 240,000 2,460,000 2,700,000
Ocala, FL........... 2,555,000 175,000 2,555,000 2,730,000
Orlando, FL......... 6,201,839 3,125,000 6,201,839 9,326,839
Ormond Beach, FL.... 2,580,000 310,000 2,580,000 2,890,000
Pinellas, FL........ 8,785,192 620,000 8,785,192 9,405,192
Port Orange, FL..... 2,435,000 295,000 2,435,000 2,730,000
Port Richey, FL..... 4,602,955 1,322,044 4,602,955 5,924,999
Sarasota, FL........ 5,939,699 540,000 5,939,699 6,479,699
Sarasota, FL........ 7,841,931 7,841,931 7,841,931
Stuart, FL.......... 2,380,000 270,000 2,380,000 2,650,000
Sunrise, FL......... 13,747,273 470,000 13,747,273 14,217,273
Tampa, FL........... 3,366,481 399,000 3,366,481 3,765,481
Tequesta, FL........ 330,582 330,582 330,582
Vero Beach, FL...... 2,380,000 350,000 2,380,000 2,730,000
West Melbourne, FL.. 396,934 396,934 396,934
Chubbock, ID........ 4,472,363 90,000 4,472,363 4,562,363
Coeur d'Alene, ID... 6,712,071 340,000 6,712,071 7,052,071
Pocatello, ID....... 3,200,000 160,000 3,200,000 3,360,000
Carmel, IN.......... 4,584,364 4,584,364 4,584,364
Abilene, KS......... 1,720,000 120,000 1,720,000 1,840,000
Accum. Const. Date
Deprec. (4)(5) Date Acquired
- - -------------- ------ --------
$ 131,121 1989 8/96
124,113 1996 2/87
196,719 1978 3/96
247,698 1991 3/96
21,792 1996 9/97
138,072 1996 3/96
88,088 1982 12/96
13,950 1996 11/97
55,462 1996 6/96
278,476 1991 3/96
167,480 1986 5/96
50,420 1996 3/97
61,500 1996 6/96
37,261 1996 6/97
284,262 1996 3/96
16,125 1996 10/97
311,151 1986 8/96
35,511 1996 6/97
105,490 1996 2/97
272,228 1982 3/96
1989 8/96
59,496 1996 6/96
572,800 1991 5/96
91,182 1997 12/96
1997 12/97
59,496 1996 6/96
158,390 1996 8/96
55,936 1997 6/96
100,005 1996 10/96
1997 5/97
7,166 1996 6/97
39
MEDITRUST CORPORATION
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
Gross Amount at Which Carried at Close of Period
Initial Cost ------------------------------------------------
to Company Cost
------------ Capitalized
Building & Subsequent to Building &
Description (1) Encumbrances Improvements Acquisitions Land (2) Improvements Total (5)
- - --------------- ------------ ------------ ------------ ------------ ------------ ---------
Assisted Living, continued
Hutchinson, KS...... $9,210,000 $ 390,000 $ 9,210,000 $9,600,000
Wichita, KS......... 6,762,000 748,000 6,762,000 7,510,000
Tewksbury, MA....... 4,943,256 480,000 4,943,256 5,423,256
Ann Arbor, MI....... 2,797,488 280,800 2,797,488 3,078,288
Ann Arbor, MI....... 2,313,041 2,313,041 2,313,041
Farmington I, MI.... 3,205,250 215,600 3,205,250 3,420,850
Farmington II, MI... 3,504,592 246,400 3,504,592 3,750,992
Lansing, MI......... 6,518,771 436,000 6,518,771 6,954,771
Shorehaven, MI...... 8,920,000 460,000 8,920,000 9,380,000
Utica, MI........... 3,077,414 277,200 3,077,414 3,354,614
Bartlesville, MN.... 1,125,390 60,000 1,125,390 1,185,390
Faribault, MN....... 1,198,173 86,000 1,198,173 1,284,173
Mankato, MN......... 1,230,173 54,000 1,230,173 1,284,173
Sauk Rapids, MN..... 905,825 82,000 905,825 987,825
Willmar, MN......... 1,123,390 62,000 1,123,390 1,185,390
Winoma, MN.......... 1,200,173 84,000 1,200,173 1,284,173
Ridgeland, MS....... 6,170,000 350,000 6,170,000 6,520,000
Charlotte, NC....... 4,546,973 624,000 4,546,973 5,170,973
Charlotte, NC....... 6,515,381 504,000 6,515,381 7,019,381
Columbia, NC........ 3,562,784 231,800 3,562,784 3,794,584
Eastover, NC........ 2,889,859 2,889,859 2,889,859
Greensboro, NC...... 3,553,509 304,000 3,553,509 3,857,509
Manlius, NY......... $ 998,000 8,610,000 510,000 8,610,000 9,120,000
Greensboro, NC...... 6,321,281 576,000 6,321,281 6,897,281
Bath, OH............ 4,489,367 4,489,367 4,489,367
Bowling Green, OH... 1,845,000 200,000 1,845,000 2,045,000
Cincinnati, OH...... 6,872,605 604,395 6,872,605 7,477,000
Lahanna, OH......... 4,306,645 4,306,645 4,306,645
Lima, OH............ 633,977 633,977 633,977
Mansfield, OH....... 1,148,093 1,148,093 1,148,093
Middleburg, OH...... 2,425,074 2,425,074 2,425,074
Poland, OH.......... 1,954,093 1,954,093 1,954,093
Xenia, OH........... 965,937 965,937 965,937
Bartlesville, OK.... 1,800,000 110,000 1,800,000 1,910,000
Accum. Const. Date
Deprec. (4)(5) Date Acquired
- - -------------- ------ --------
$ 76,752 1989 3/96
309,935 1993 3/96
226,578 1987 3/96
75,764 1995 12/96
1997 9/97
86,814 1994 12/96
94,913 1995 12/96
27,162 11/97
204,413 2/97
83,343 1995 12/96
4,690 11/97
4,992 11/97
5,126 11/97
3,774 11/97
4,680 11/97
5,000 11/97
12,854 1996 6/96
18,946 11/97
27,148 11/97
14,846 11/97
11/97
14,806 11/97
143,504 1994 5/97
26,338 11/97
11,532 1997 10/97
157,498 1997 2/97
1997 10/97
1997 10/97
1997 10/97
1997 9/97
1997 10/97
1997 10/97
7,500 1997 11/97
40
MEDITRUST CORPORATION
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
Gross Amount at Which Carried at Close of Period
Initial Cost ------------------------------------------------
to Company Cost
------------ Capitalized
Building & Subsequent to Building &
Description (1) Encumbrances Improvements Acquisitions Land (2) Improvements Total (5)
- - --------------- ------------ ------------ ------------ ------------ ------------ ---------
Assisted Living, continued
Ontario, OR......... $ 2,940,000 $ 110,000 $ 2,940,000 $ 3,050,000
Altoona, PA......... 3,339,764 3,339,764 3,339,764
Lower Makesfield, PA 4,494,920 504,000 4,494,920 4,998,920
Montgomery, PA...... 4,487,033 480,000 4,487,033 4,967,033
Northhampton, PA.... 9,624,115 1,212,000 9,624,115 10,836,115
North Wales, PA..... 5,636,172 5,636,172 5,636,172
Reading, PA......... 3,545,280 3,545,280 3,545,280
Scranton, PA........ 693,349 693,349 693,349
State College, PA... 3,277,006 360,000 3,277,006 3,637,006
Anderson Place, SC.. 10,499,705 170,000 10,499,705 10,669,705
Charleston, SC...... 3,676,366 399,000 3,676,366 4,075,366
Greenville, SC...... 5,766,684 160,000 5,766,684 5,926,684
Clarksville, TN..... 3,460,000 240,000 3,460,000 3,700,000
Abilene, TX......... 2,134,231 150,000 2,134,231 2,284,231
Amarillo, TX........ 3,460,000 240,000 3,460,000 3,700,000
Texas, ALC.......... 11,155,104 625,000 11,155,104 11,780,104
Beaumont, TX........ 5,475,201 410,000 5,475,201 5,885,201
Big Springs, TX..... 2,037,899 10,000 2,037,899 2,047,899
Carrollton, TX...... 1,620,000 250,000 1,620,000 1,870,000
College Station, TX. 4,257,036 222,000 4,257,036 4,479,036
Kerrville, TX....... 1,766,000 195,000 1,766,000 1,961,000
Lancaster, TX....... 1,500,000 175,000 1,500,000 1,675,000
Lubbock, TX......... 5,362,195 220,000 5,362,195 5,582,195
Midland, TX......... 5,410,000 350,000 5,410,000 5,760,000
Mineral Wells, TX... 5,456,834 240,000 5,456,834 5,696,834
Nacodoches, TX...... 4,968,892 230,000 4,968,892 5,198,892
New Braunfeld, TX... 1,960,000 155,000 1,960,000 2,115,000
Pine Ridge, TX...... 4,922,228 570,000 4,922,228 5,492,228
San Angelo, TX...... 5,342,343 228,544 5,342,343 5,570,887
San Antonio, TX..... 2,450,000 250,000 2,450,000 2,700,000
Temple, TX.......... 1,900,000 250,000 1,900,000 2,150,000
Wichita Falls, TX... 5,338,825 340,000 5,338,825 5,678,825
Odgen, UT........... 4,236,439 4,236,439 4,236,439
Billingham, WA...... 3,327,423 350,000 3,327,423 3,677,423
Accum. Const. Date
Deprec. (4)(5) Date Acquired
- - -------------- ------ --------
$ 49,000 1985 5/97
1996 12/96
121,732 1996 12/96
121,524 1996 12/96
260,650 1990 12/96
1997 7/97
1997 2/97
1997 12/97
27,308 1996 8/96
328,110 1987 10/97
15,318 11/97
12,014 1996 6/96
21,624 1996 7/96
31,122 1996 6/97
50,458 1996 7/96
464,800 1996 5/96
79,847 1996 5/96
29,722 1996 6/97
27,000 1996 5/97
65,848 1996 6/97
29,432 1996 5/97
9,375 1996 10/97
78,199 1996 4/96
78,896 1996 4/96
79,576 1996 6/97
165,632 1996 9/96
28,626 1996 6/97
40,990 9/97
22,382 1996 8/96
35,728 1997 6/97
39,580 1996 3/97
11,123 1996 8/96
1997 4/97
103,980 1996 10/96
41
MEDITRUST CORPORATION
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
Gross Amount at Which Carried at Close of Period
Initial Cost ------------------------------------------------
to Company Cost
------------ Capitalized
Building & Subsequent to Building &
Description (1) Encumbrances Improvements Acquisitions Land (2) Improvements Total (5)
- - --------------- ------------ ------------ ------------ ------------ ------------ ---------
Assisted Living, continued
Federal Way, WA..... $ 5,185,000 $ 590,000 $5,185,000 $5,775,000
Kirkland, WA........ 5,850,000 1,150,000 5,850,000 7,000,000
Moses Lake, WA...... 5,770,000 240,000 5,770,000 6,010,000
Ocean Shores, WA.... 3,201,349 300,000 3,201,349 3,501,349
Brown Deer, WI...... 635,266 72,000 635,266 707,266
Analaska, WI........ 1,205,931 84,000 1,205,931 1,289,931
Eau Claire, WI...... 1,208,173 76,000 1,208,173 1,284,173
Manitowoc, WI....... 1,016,608 70,000 1,016,608 1,086,608
Medford, WI......... 860,802 70,000 860,802 930,802
Menomonie, WI....... 912,000 57,000 912,000 969,000
Middleton, WI....... 1,405,738 76,000 1,405,738 1,481,738
Neenah, WI.......... 1,312,955 70,000 1,312,955 1,382,955
New Richmond, WI.... 696,000 54,000 696,000 750,000
Oshkosh, WI......... 1,016,608 70,000 1,016,608 1,086,608
Plover, WI.......... 2,093,924 140,000 2,093,924 2,233,924
Plymouth, WI........ 706,000 54,000 706,000 760,000
Sun Prairie, WI..... 1,113,390 72,000 1,113,390 1,185,390
Sussex, WI.......... 874,824 86,000 874,824 960,824
Wausau, WI.......... 1,535,443 140,000 1,535,443 1,675,443
Wisconsin Rapids, WI 1,233,123 70,000 1,233,123 1,303,123
Wisconsin Rapids, WI 956,000 64,000 956,000 1,020,000
Casper, WY.......... 3,470,087 260,000 3,470,087 3,730,087
Rehabilitation
Benton, AR.......... 7,865,000 392,410 135,000 8,257,410 8,392,410
Jonesboro, AR....... $4,036,895 8,861,835 196,225 8,861,835 9,058,060
Tucson, AZ.......... 9,965,000 9,965,000 9,965,000
Bakersfield, CA..... 10,907,463 1,522,537 10,907,463 12,430,000
Fresno, CA.......... 7,617,157 14,469,580 2,088,920 14,469,580 16,558,500
Kentfield, CA....... 9,650,000 350,000 9,650,000 10,000,000
Topeka, KS.......... 4,956,395 10,353,741 1,295,499 10,353,741 11,649,240
Bowling Green, KY... 10,000,000 10,000,000 10,000,000
Ruston, LA.......... 3,995,455 10,021,549 321,551 10,021,549 10,343,100
Accum. Const. Date
Deprec. (4)(5) Date Acquired
- - -------------- ------ --------
$ 226,842 1996 4/96
97,504 1996 5/97
96,168 1996 5/97
46,686 1996 8/96
17,212 1995 12/96
32,656 1995 12/96
5,034 1996 11/97
4,236 1996 11/97
3,586 1996 11/97
13,300 1996 11/97
5,858 1996 11/97
5,470 1996 11/97
10,150 6/97
4,236 1996 11/97
8,724 1996 11/97
10,297 1996 11/97
4,640 1996 11/97
23,699 1995 12/96
6,398 1996 11/97
5,138 1996 11/97
13,944 1997 6/97
57,832 1996 5/97
974,031 1967 4/93
1,985,360 1989 2/89
1,847,662 1990 8/90
2,067,882 1990 6/90
2,471,909 1991 3/91
2,352,170 1963 3/88
2,321,497 1989 2/89
895,821 1992 6/94
2,289,520 1988 12/88
42
MEDITRUST CORPORATION
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1997
Gross Amount at Which Carried at Close of Period
Initial Cost ------------------------------------------------
to Company Cost
------------ Capitalized
Building & Subsequent to Building &
Description (1) Encumbrances Improvements Acquisitions Land (2) Improvements Total (5)
- - --------------- ------------ ------------ ------------ ------------ ------------ ---------
Rehabilitation, continued
Baton Rouge, LA..... $ 5,314,342 $ 10,366,008 $ 1,211,000 $ 10,366,008 $ 11,577,008
New Bedford, MA..... 10,000,000 859,303 10,859,303 10,859,303
Battle Creek, MI.... 7,265,913 408,529 146,970 7,674,442 7,821,412
Effingham, NH....... 8,121,200 3,863,645 1,478,800 11,984,845 13,463,645
Cortland, NY........ 26,309,407 1,503,410 263,000 27,812,817 28,075,817
Arlington, TX....... 10,132,662 1,161,338 10,132,662 11,294,000
Ft. Worth, TX....... 5,673,174 10,814,520 1,548,022 10,814,520 12,362,542
Houston, TX......... 5,152,258 10,707,069 525,000 10,707,069 11,232,069
Lake Terrace, WA.... 4,389,224 441,796 1,029,980 4,831,020 5,861,000
Waterford, WI....... 11,515,023 2,093,205 280,000 13,608,228 13,888,228
Acute Care Hospital
Phoenix, AZ......... 63,960,000 1,690,000 63,960,000 65,650,000
Alcohol and Substance Abuse
Treatment Centers and
Psychiatric Facilities
Hollywood, CA....... 4,035,000 1,715,000 4,035,000 5,750,000
Monroe, LA.......... 7,770,000 450,000 530,000 8,220,000 8,750,000
DeSoto, TX.......... 3,934,000 1,775,730 849,270 5,709,730 6,559,000
College Station, TX. 3,650,771 58,122 980,185 3,708,893 4,689,078
Medical Office Buildings
Arcadia, CA......... 7,870,407 10,500,000 28,311 3,500,000 10,528,311 14,028,311
Palm Beach, FL...... 42,412,964 42,412,964 42,412,964
Retail
Arcadia, CA......... 30,000,000 90,197 11,500,000 30,090,197 41,590,197
Land under Development
Arcadia, CA......... 480,000 6,000,000 223,018 52,330,000 6,223,018 58,553,018
Race Track
Arcadia, CA......... 28,000,000 89,000,000 28,000,000 117,000,000
------------ -------------- ----------- ------------ -------------- --------------
TOTAL $ 63,357,755 $1,347,477,045 $30,450,752 $249,852,019 $1,377,927,797 $1,627,779,816(3)
============ ============== =========== ============ ============== ==============
Accum. Const. Date
Deprec. (4)(5) Date Acquired
- - -------------- ------ --------
$ 2,238,557 1988 4/89
947,737 1920 6/94
907,090 1933 4/93
1,375,016 1985 4/93
3,047,416 1971 8/93
1,921,010 1990 6/90
2,005,170 1990 8/90
2,342,157 1989 4/89
436,458 1987 5/93
1,586,484 1968 4/93
4,663,750 1954 2/95
975,097 1957 5/88
1,974,162 1982 5/88
1,376,838 1988 1/88
678,877 1987 5/93
43,750 11/97
1995 5/95
250,000 11/97
11/97
116,667 11/97
- - ------------
$124,831,754
============
43
MEDITRUST CORPORATION
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION, Continued
December 31, 1997
(1) Facility classifications are Long-Term Care (LTC), Retirement Living
(RL), Psychiatric Hospital (Psych), Rehabilitation Hospital (Rehab),
Assisted Living (AL), and Medical Office Buildings (MOB).
(2) Gross amount at which land is carried at close of period also
represents initial cost to Realty.
(3) Cost for federal income tax purposes.
(4) Depreciation is calculated using a 40-year life for all completed
facilities.
(5) Real estate and accumulated depreciation reconciliations for the three
years ended December 31, 1997 are as follows:
Accumulated
Real Estate Depreciation
----------- ------------
(In thousands)
Balance at close of year-- December 31, 1994.................. $ 626,406 $ 65,918
Additions during the period:
Acquisitions.......................................... 91,700
Value of real estate acquired......................... 69,988
Additions to existing properties...................... 2,487
Provision for depreciation............................ 16,283
Deductions:
Lease terminations..................................... (35,602) (3,486)
Sale of real estate.................................... (8,600) (1,512)
------------ -----------
Balance at close of year--December 31, 1995................... 746,379 77,203
Additions during the period:
Acquisitions........................................... 325,789
Value of real estate acquired.......................... 36,875
Additions to existing properties.......................
Provision for depreciation............................. 21,269
Deductions:
Sale of real estate.................................... (4,701) (390)
------------ ----------
Balance at close of year -- December 31, 1996................. 1,104,342 98,082
Additions during the period:
Acquisitions........................................... 292,607
Value of real estate acquired in merger................ 237,003
Provision for depreciation............................. 26,750
Deductions:
Sale of real estate................................... (6,173)
------------ ----------
Balance at close of year -- December 31, 1997................. $ 1,627,779 $ 124,832
============ ==========
44
MEDITRUST CORPORATION
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
December 31, 1997
Interest Final Maturity
Description (A) Rate Date
--------------- ---- ----
Individual mortgages in excess of 3%
of the total carrying amount:
26 long-term care facilities located in 10.50% February 1, 2004
Illinois
23 long-term care facilities located in Texas 10.40% November 1, 2004
18 long-term care facilities located in 10.85% August 23, 2005
Colorado, Florida, Indiana, Kansas, Missouri,
Nebraska, North Carolina, Tennessee and
Washington
Periodic Face Carrying
Payment Amount of Amount of
Terms Mortgages Mortgages (B)
----- --------- -------------
Monthly payments of $ 48,800,000 $ 47,667,000
principal and interest
of $446,000, balloon
payment of $44,588,000
due at maturity
Monthly payments of 46,000,000 45,253,000
principal and interest
of $417,000, balloon
payment of $42,085,000
due at maturity
Monthly payments of 87,940,000 86,998,000
principal and interest
of $825,488, balloon
payment of $80,961,000
due at maturity
45
MEDITRUST CORPORATION
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
December 31, 1997
Interest Final Maturity
Description (A) Rate Date
--------------- ---- ----
17 long-term care facilities located in 10.75% May 21, 2003
Arizona, California, Colorado, Florida,
Georgia, Indiana, Kansas, Tennessee and Utah
Mortgages individually less than 3%
of total carrying amount:
Long-term care facilities, 63 mortgages, face From 8.83% From December 1997 (C)
amounts ranging from $900,000 to to 12.30% to July 2007
$42,000,000, located in Arizona, California,
Colorado, Connecticut, Florida, Idaho,
Indiana, Kentucky, Massachusetts, Michigan,
Missouri, Nebraska, New Jersey, New Mexico,
Nevada, New York, Pennsylvania, Rhode Island,
South Carolina, Tennessee, Texas, Utah,
Washington, West Virginia and Wyoming
Rehabilitation hospitals, 3 mortgages, face From 10.50% From September 2000
amounts ranging from $9,000,000 to to 12.50% to July 2004
$30,975,000, located in California, Colorado
and Tennessee
Periodic Face Carrying
Payment Amount of Amount of
Terms Mortgages Mortgages (B)
----- --------- -------------
Monthly payments of 103,618,000 101,310,000
principal and interest
of $968,000, balloon
payment of $95,501,000
due at maturity
654,676,000
46,687,000
46
MEDITRUST CORPORATION
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
December 31, 1997
Interest Final Maturity
Description (A) Rate Date
--------------- ---- ----
Retirement living facilities, 5 mortgages, From 8.83% From December 1998
face amounts ranging from $5,500,000 to to 11.00% to January 2007
$15,820,000, located in Colorado, Florida,
North Carolina, Ohio and Utah
Alcohol and substance abuse treatment 11.00% September 29, 2005
facility, face amount of $33,300,000, located
in New York
Medical office buildings, 12 mortgages, face From 8.72% From February 2004
amounts ranging from $2,400,000 to to 10.38% to January 2008
$10,655,000, located in California, Florida,
Tennessee and Texas
Assisted living facilities, 9 mortgages, face From 9.02% From September 2005
amounts ranging from $3,030,303 to to 10.61% to December 2007
$30,000,000, located in California, Florida,
Michigan, Missouri, Ohio, Oregon, Texas and
Wisconsin
Other notes secured by real estate in From 8.50%
California to 10.52%
Construction Loans:
Long-term care facilities, 10 loans, amounts From 10.00% (E)
ranging from $1,400,000 to $31,336,000, to 10.50%
located in Colorado, Florida, Idaho,
Michigan, Missouri, New Jersey, Nevada,
Ohio, and Washington
Periodic Face Carrying
Payment Amount of Amount of
Terms Mortgages Mortgages (B)
----- --------- -------------
47,971,000
32,683,000
83,185,000
70,724,000
5,478,000
73,392,000
47
MEDITRUST CORPORATION
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
December 31, 1997
Interest Final Maturity
Description (A) Rate Date
--------------- ---- ----
Medical office buildings, 13 loans, amounts From 10.00% (E)
ranging from $2,750,000 to $33,000,000, to 10.50%
located in Arizona, Florida, Massachusetts,
and Texas
Assisted living facilities, 11 loans, amounts From 10.00% (E)
ranging from $3,387,000 to $19,826,000, to 10.50%
located in Colorado, Florida, Idaho, Indiana,
Michigan and Washington
Periodic Face Carrying
Payment Amount of Amount of
Terms Mortgages Mortgages (B)
----- --------- -------------
74,641,000
62,160,000
--------------
$1,432,825,000 (D)
==============
48
MEDITRUST CORPORATION
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
(A) Virtually all mortgage loans on real estate are first mortgage loans.
(B) No mortgage loan is subject to delinquent principal or interest, except
for one property located in New Jersey.
(C) Mortgage loan term has been extended for a one-year period.
(D) The aggregate cost for federal income tax purposes.
(E) Final maturity date will be determined upon completion of construction.
Reconciliation of carrying amount of mortgage loans for the three years
ended December 31, 1997 is as follows:
(In thousands)
Balance at December 31, 1994........................... $ 923,741
Additions during period:
New mortgage loans............................. 152,216
Construction loan advances..................... 106,946
Other.......................................... 9,953
Deductions during period:
Collection of principal........................ (6,615)
Non-cash deductions............................ (34,386)
Prepayment of mortgage loans................... (43,232)
----------
Balance at December 31, 1995........................... 1,108,623
Additions during period:
New mortgage loans............................. 137,686
Construction loan advances..................... 117,495
Other.......................................... 9,903
Deductions during period:
Collection of principal........................ (33,962)
Non-cash deductions............................ (29,642)
Prepayment of mortgage loans................... (128,285)
----------
Balance at December 31, 1996........................... $1,181,818
Additions during period:
New mortgage loans............................. 139,304
Construction loan advances..................... 160,557
Other.......................................... 5,764
Deductions during period:
Collection of principal........................ (7,629)
Non-cash deductions............................
Prepayment of mortgage loans................... (46,989)
----------
Balance at December 31, 1997......................... $1,432,825
==========
49
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
NOT APPLICABLE.
PART III
Item 10.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated by reference to Item 4a above and the table and the
information following it appearing in the first subsection of the section
entitled "Election of Directors of The Meditrust Companies" and the section
entitled "The Companies -- Surviving Companies -- Executive Officers and
Directors" contained in the Companies' Proxy Statement for its Annual Meeting of
Shareholders ("Annual Meeting Proxy Statement"), to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended
("Regulation 14A"). There are no family relationships among any of the Directors
or executive officers of the Companies.
Incorporated by reference to the section entitled "Certain
Transactions" contained in the Companies' Annual Meeting Proxy Statement, to be
filed pursuant to Regulation 14A.
Item 11.
EXECUTIVE COMPENSATION
Incorporated by reference to the section entitled "Executive
Compensation" contained in the Companies' Annual Meeting Proxy Statement, to be
filed pursuant to Regulation 14A.
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to the table appearing in the first
subsection of the section entitled "Election of Directors of The Meditrust
Companies" and the section entitled "Principal and Management Shareholders of
The Meditrust Companies" contained in the Companies' Annual Meeting Proxy
Statement, to be filed pursuant to Regulation 14A.
Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference to the section entitled "Certain
Transactions" contained in the Companies' Annual Meeting Proxy Statement, to be
filed pursuant to Regulation 14A.
50
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
No financial statements have been filed as a part of this report other
than those incorporated by reference in Item 8.
2. Financial Statement Schedules Page(s)
Report of Independent Accountants on Financial Statement Schedules..... 35
II. Valuation and Qualifying Accounts...................... 36
III. Real Estate and Accumulated Depreciation............... 37
IV. Mortgage Loans on Real Estate.......................... 45
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions, are inapplicable or have been disclosed in the
notes to consolidated financial statements, and therefore, have been omitted.
3. Exhibits
Exhibits required as part of this report are listed in the index
appearing on pages 56 through 63.
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
Meditrust Corporation Amended - Incorporated by reference to Exhibit 4.1 to Joint
and Restated 1995 Share Registration Statement on Form S-8 of Meditrust
Award Plan Corporation and Meditrust Operating Company
(File Nos. 333-39771 and 333-39711-01)
Meditrust Operating Company - Incorporated by reference to Exhibit 4.2 to Joint
Amended and Restated 1995 Registration Statement on Form S-8 of Meditrust
Share Award Plan Corporation and Meditrust Operating Company
(File Nos. 333-39771 and 333-39771-01)
Employment Agreement with - Form 10-Q for fiscal quarter ended March 31, 1993,
Abraham D. Gosman Exhibit 10.1
(b) Reports on Form 8-K. Santa Anita and The Meditrust Companies each filed
one report on Form 8-K during the quarter ended December 31, 1997.
(i) Santa Anita
Joint Current Report on Form 8-K, event date October 2, 1997.
(ii) Meditrust Corporation and Meditrust Operating Company. Joint
Current Report on Form 8-K, event date November 5, 1997.
51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrants have duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
MEDITRUST CORPORATION
By: /s/Laurie T. Gerber
------------------------------------------------
Chief Financial Officer
(and Principal Financial and Accounting Officer)
Dated: March 30, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Abraham D. Gosman Chairman of the Board of March 30, 1998
- - -------------------------- Directors
Abraham D. Gosman
/s/ David F. Benson Director, President and March 30, 1998
- - -------------------------- Treasurer (Principal Executive
David F. Benson Officer)
/s/ Donald J. Amaral Director March 30, 1998
- - --------------------------
Donald J. Amaral
/s/ Edward W. Brooke Director March 30, 1998
- - --------------------------
Edward W. Brooke
/s/ James P. Conn Director March 30, 1998
- - --------------------------
James P. Conn
/s/ John C. Cushman Director March 30, 1998
- - --------------------------
John C. Cushman
/s/ C. Gerald Goldsmith Director March 30, 1998
- - --------------------------
C. Gerald Goldsmith
52
Name Title Date
---- ----- ----
/s/ Philip L. Lowe Director March 30, 1998
- - --------------------------
Philip L. Lowe
/s/ Thomas J. Magovern Director March 30, 1998
- - --------------------------
Thomas J. Magovern
/s/ Gerald Tsai, Jr Director March 30, 1998
- - --------------------------
Gerald Tsai, Jr.
53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrants have duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
MEDITRUST OPERATING COMPANY
By: /s/ Abraham D. Gosman
---------------------------------------
Chairman of the Board, Chief Executive
Officer and Treasurer
Dated: March 30, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Abraham D. Gosman Chairman of the Board of March 30, 1998
- - -------------------------- Directors, Chief Executive
Abraham D. Gosman Officer and Treasurer (Principal
Executive, Financial and
Accounting Officer)
/s/ Donald J. Amaral Director March 30, 1998
- - --------------------------
Donald J. Amaral
/s/ William C. Baker Director March 30, 1998
- - --------------------------
William C. Baker
/s/ David F. Benson Director March 30, 1998
- - --------------------------
David F. Benson
/s/ Edward W. Brooke Director March 30, 1998
- - --------------------------
Edward W. Brooke
/s/ C. Gerald Goldsmith Director March 30, 1998
- - --------------------------
C. Gerald Goldsmith
54
Name Title Date
---- ----- ----
/s/ J. Terrence Lanni
- - --------------------------- Director March 30, 1998
J. Terrence Lanni
/s/ Philip L. Lowe Director March 30, 1998
- - --------------------------
Philip L. Lowe
/s/ Thomas J. Magovern Director March 30, 1998
- - --------------------------
Thomas J. Magovern
/s/ Gerald Tsai, Jr Director March 30, 1998
- - --------------------------
Gerald Tsai, Jr.
55
EXHIBITS
Exhibit
No Title Method of Filing
- - ------- ----- ----------------
2.1 Third Amended and Restated Agreement and
Plan of Merger dated as of April 13,
1997, by and among Santa Anita Realty
Enterprises, Inc., Santa Anita Operating
Company, Meditrust and Meditrust
Acquisiton Company.................... Incorporated by reference to Exhibit 2.1 to the Joint
Registration Statement on Form S-3 of Santa Anita Realty
Enterprises, Inc. and Santa Anita Operating Company (File
Nos. 333-34831 and 333-34831-01)
2.2 Agreement and Plan of Merger, dated as
of January 2, 1998 by and among
La Quinta Inns, Inc., Meditrust Corporation
and Meditrust Operating Company....... Incorporated by reference to Exhibit 10.1 to the Joint
Current Report on Form 8-K of Meditrust Corporation and
Meditrust Operating Company, event date January 3, 1998
2.3 Agreement and Plan of Merger dated as of
January 11, 1998 among Meditrust
Corporation, Meditrust Operating Company
and Cobblestone Holdings, Inc......... Incorporated by reference to Exhibit 2 to the Joint Current
Report on Form 8-K of Meditrust Corporation and Meditrust
Operating Company, event date January 11, 1998
3.1 Certificate of Merger merging Meditrust
with and into Santa Anita Realty
Enterprises, Inc. filed with the
Secretary of State of Delaware on
November 5, 1997...................... Incorporated by reference to Exhibit 3.1 to the Joint
Registration Statement on Form S-3 of Meditrust Corporation
and Meditrust Operating Company (File Nos. 333-40055 and
333-40055-1)
56
Exhibit
No Title Method of Filing
- - -------- ----- ----------------
3.2 Certificate of Amendment of Certificate
of Incorporation of Meditrust
Corporation filed with the Secretary of
State of Delaware on November 5, 1997... Incorporated by reference to Exhibit 3.2 to the Joint
Registration Statement on Form S-3 of Meditrust Corporation
and Meditrust Operating Company (File Nos. 333-40055 and
333-40055-1)
3.3 Certificate of Merger merging Meditrust
Acquisiton Company with and into Santa
Anita Operating Company filed with the
Secretary of State of Delaware on
November 5, 1997....................... Incorporated by reference to Exhibit 3.3 to the Joint
Registration Statement on Form S-3 of Meditrust Corporation
and Meditrust Operating Company (File Nos. 333-40055 and
333-40055-1)
3.4 Certificate of Amendment of
Certificate of Incorporation of
Meditrust Operating Company
filed with the Secretary of
State of Delaware on November 5, 1997.. Incorporated by reference to Exhibit 3.4 to the Joint
Registration Statement on Form S-3 of Meditrust Corporation
and Meditrust Operating Company (File Nos. 333-40055 and
333-40055-1)
3.5 Restated Certificate of Incorporation of
Meditrust Corporation filed with the
Secretary of State of Delaware on
March 2, 1998........................... Incorporated by reference to Exhibit 3.2 to the Joint
Registration Statement on Form S-4 of Meditrust Corporation
and Meditrust Operating Company (File Nos. 333-47737 and
333-47737-01)
3.6 Restated Certificate of Incorporation of
Meditrust Operating Company filed with
the Secretary of State of Delaware on
March 2, 1998.......................... Incorporated by reference to Exhibit 3.4 to the Joint
Registration Statement on Form S-4 of Meditrust Corporation
and Meditrust Operating Company (File Nos. 333-47737 and
333-47737-01)
57
Exhibit
No Title Method of Filing
- - -------- ----- ----------------
3.7 Amended and Restated By-laws of
Meditrust Corporation................. Incorporated by reference to Exhibit 3.5 to the Joint
Registration Statement on Form S-4 of Meditrust Corporation
and Meditrust Operating Company (File Nos. 333-47737 and
333-47737-01)
3.8 Amended and Restated By-Laws of
Meditrust Operating Company........... Incorporated by reference to Exhibit 3.6 to the Joint
Registration Statement on Form S-4 of Meditrust Corporation
and Meditrust Operating Company (File Nos. 333-47737 and
333-47737-01)
4.1 Pairing Agreement by and between
Meditrust Corporation (formerly
known as Santa Anita Realty
Enterprises, Inc.) and Meditrust
Operating Company (formerly known as
Santa Anita Operating Company
dated as of December 20, 1979......... Incorporated by reference to Exhibit 5 to Joint
Registration Statement on Form 8-A of Santa Anita Operating
Company filed February 5, 1980
4.2 First Amendment to Pairing Agreement, by
and between Meditrust Corporation and
Meditrust Operating Company, dated
November 6, 1997...................... Incorporated by reference to Exhibit 4.4 to Joint
Registration Statement on Form S-8 of Meditrust Corporation
and Meditrust Operating Company (File Nos. 333-39771 and
333-39771-01
4.3 Second Amendment to Pairing Agreement,
by and between Meditrust Corporation
and Meditrust Operating Company, dated
February, 1998........................ Incorporated by reference to Exhibit 4.3 to the Joint
Registration Statement on Form S-4 of Meditrust Corporation
and Meditrust Operating Company (File Nos. 333-47737 and
333-47737-01)
58
Exhibit
No Title Method of Filing
- - -------- ----- ----------------
4.4 Rights Agreement, dated June 15,
1989, among Meditrust Corporation
(formerly known as Santa Anita
Realty Enterprises, Inc.), Meditrust
Operating Company (formerly known
as Santa Anita Operating
Company), and Boston EquiServe, as
Rights Agent.......................... Incorporated by reference to Exhibit 2.1 to Joint
Registration Statement on Form 8-A of Santa Anita Realty
Enterprises, Inc., filed June 19, 1989)
4.5 Appointment of Boston EquiServe as
Rights Agreement, dated October 24,
1997.................................. Incorporated by reference to Exhibit 4.6 to Joint
Registration Statement on Form S-8 of Meditrust Corporation
and Meditrust Operating Company (File Nos. 333-39771 and
333-39771-01)
4.6 Meditrust Corporation Amended and
Restated 1995 Share Award Plan........ Incorporated by reference to Exhibit 4.1 to Joint
Registration Statement on Form S-8 of Meditrust Corporation
and Meditrust Operating Company (File Nos. 333-39771 and
333-39771-01)
4.7 Meditrust Operating Company Amended and
Restated 1995 Share Award Plan........ Incorporated by reference to Exhibit 4.2 to Joint
Registration Statement on Form S-4 of Meditrust Corporation
and Meditrust Operating Company (File Nos. 333-47737 and
333-47737-01)
59
Exhibit
No Title Method of Filing
- - ------- ----- ----------------
4.8 Form of Fiscal Agency Agreement
dated November 15, 1993 between
Meditrust and Fleet National Bank
as fiscal agent.......................... Incorporated by reference to Exhibit 4.7 to Form 10-K of
Meditrust for the fiscal year ended December 31, 1993
4.9 Form of 6 7/8% Convertible
Debenture due 1998....................... Incorporated by reference to Exhibit 4.8 to Form 10-K
of Meditrust for the fiscal year ended December 31, 1993
4.10 Form of Indenture dated April 23, 1992
between Meditrust and Fleet National
Bank, as trustee ........................ Incorporated by reference to Exhibit 4 to the
Registration Statement on Form S-3 of Mediturst
(File No. 33-45979)
4.11 Form of 9% convertible Debenture
due 2002 ................................ Incorporated by reference to Exhibit 4.1 to the
Registration Statement on Form S-3 of Meditrust
(File No. 33-45979)
4.12 Form of Indenture dated March 9,
1994 between Meditrust and Shawmut
Bank as Trustee.......................... Incorporated by reference to Exhibit 4 to the Registration
Statement on Form S-3 of Meditrust (File No. 33-50835)
60
Exhibit
No Title Method of Filing
- - -------- ----- ----------------
4.13 Form of 7 1/2% Convertible
Debenture due 2001..................... Incorporated by reference to Exhibit 4 to the Registration
Statement on Form S-3 of Meditrust (File No. 33-50835)
4.14 Form of Second Supplemental Indenture
dated as of July 28, 1995 between
Meditrust and Fleet National Bank, as
trustee................................ Incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K of Meditrust dated July 27, 1995
4.15 Form of 8.54% Convertible Senior Note
due July 1, 2000...................... Incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K of Meditrust dated July 27, 1995
4.16 Form of 8.56% Convertible Senior Note
due July 1, 2002...................... Incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K of Meditrust dated July 27, 1995
4.17 Form of Distribution Agreement dated
August 10, 1995 between Meditrust,
Goldman, Sachs & Co. and other
underwriters relating to $200,000,000
of Medium-term Notes.................. Incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K of Meditrust dated August 8, 1995
4.18 Form of Third Supplemental Indenture
dated as of August 10, 1995 between
Meditrust and Fleet National Bank..... Incorporated by reference to Exhibit 4.2 to the Current
Report on Form 8-K of Meditrust dated August 8, 1995
4.19 Form of Fixed Rate Senior Medium-term
Note.................................. Incorporated by reference to Exhibit 4.3 to the Current
Report on Form 8-K of Meditrust dated August 8, 1995
61
Exhibit
No Title Method of Filing
- - ---------- ----- ----------------
4.20 Form of Floating Rate Medium-term
Note ................................ Incorporated by reference to Exhibit 4.4 to the Current
Report on Form 8-K of Meditrust dated August 8, 1995
4.21 Form of First Supplemental Indenture
dated as of July 26, 1995 between
Meditrust and Fleet National Bank..... Incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K of Meditrust dated July 13, 1995
4.22 Form of 7.375% Note due July 15, 2000.. Incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K of Meditrust dated July 13, 1995
4.23 Form of 7.60% Note due July 15, 2001.. Incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K of Meditrust dated July 13, 1995
4.24 Form of Fourth Supplemental Indenture
dated as of September 5, 1996, between
Meditrust and Fleet National Bank .... Incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K of Meditrust dated July 13, 1995
4.25 Form of 7.82% Note due
September 10, 2026 ................... Incorporated by reference to Exhibit 4.1 to the Current
Report on Form 8-K of Meditrust dated July 13, 1995
4.26 Form of Seventh Supplemental Indenture
dated August 12, 1997 between Meditrust
and Fleet National Bank .............. Incorporated by reference to Exhibit 4.1 to the Current Report
on Form 8-K of Meditrust dated July 13, 1995
4.27 Form of Remarketed Reset Note due
August 15, 2002 ....................... Incorporated by reference to Exhibit 4.1 to the Current Report
on Form 8-K of Meditrust dated July 13, 1995
4.28 Form of Fifth Supplemental Indenture
dated as of August 12, 1997 between
Meditrust and Fleet National Bank ..... Incorporated by reference to Exhibit 4.1 to the Current Report on
Form 8-K of Meditrust dated July 13, 1995
4.29 Form of 7% Notes due August 15, 2007 ... Incorporated by reference to Exhibit 4.1 to the Current Report on
Form 8-K of Meditrust dated July 13, 1995
4.30 Form of Sixth Supplemental Indenture
dated as of August 12, 1997 between
Meditrust and Fleet National Bank ...... Incorporated by reference to Exhibit 4.1 to the Current Report
on Form 8-K of Meditrust dated July 13, 1995
4.31 Form of 7.114% Note due
August 15, 2011 ........................ Incorporated by reference to Exhibit 4.1 to the Current Report
on Form 8-K of Meditrust dated July 13, 1995
10.1 Amended and Restated Lease Agreement
between Mediplex of Queens, Inc. and
QPH, Inc. dated December 30, 1986..... Incorporated by reference to Exhibit 2.2 to the Form 8-K of
Meditrust dated January 13, 1987
10.2 Form of Lease for Carmel, New York and
Scotia, New York facilities............ Incorporated by reference to Exhibit 10.5 to the
Registration Statement on Form S-11 (File No. 33-7483)
62
Exhibit
No Title Method of Filing
- - --------- ----- ----------------
10.3 Revolving Credit Agreement dated
as of October 23, 1997 between the
Company and Via Banque................. Filed herewith
10.4 Revolving Credit Agreement dated
September 15, 1997 among the
Company, various financial institutions
and Fleet National Bank, as Agent, and
Morgan Guaranty Trust Company of
New York and First Union National
Bank of North Carolina, as Co-Agents... Filed herewith
11 Statement Regarding Computation of
Per Share Earnings.................... Filed herewith
21 Subsidiaries of the Registrant........ Filed herewith
23 Consent of Coopers & Lybrand L.L.P.... Filed herewith
27 Financial Data Schedule .............. Incorporated by reference to Exhibit 27 to
the Joint Current Report of Meditrust Corporation and
Meditrust Operating Company on Form 8-K, dated
February 26, 1998
63