FILED PURSUANT TO RULE 424(b)(2)
REGISTRATION NO. 333-17061
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED AUGUST 19, 1998)
869,565 SHARES
NHP
NATIONWIDE HEALTH PROPERTIES, INC.
COMMON STOCK
__________________________
Nationwide Health Properties, Inc., a Maryland corporation (the
"Company"), was organized in 1985 to qualify as a real estate investment trust
to invest in healthcare related real estate located throughout the United
States, including skilled nursing facilities, assisted living facilities,
continuing care retirement communities and rehabilitation hospitals.
The Company's shares of common stock, par value $0.10 per share (the
"Common Stock"), are listed on the New York Stock Exchange (the "NYSE") under
the symbol "NHP." On February 25, 2002, the last reported sale price of the
Common Stock as reported by the NYSE was $19.58 per share. The Company is hereby
offering (the "Offering") 869,565 shares of the Company's Common Stock. All of
the shares of the Common Stock offered hereby (the "Shares") are being sold by
the Company.
__________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
__________________________
Salomon Smith Barney Inc. (the "Underwriter") has agreed to purchase
the Shares from the Company at a price of $18.61 per share, resulting in
aggregate proceeds to the Company of $16,182,604 before payment of expenses by
the Company estimated to be $75,000 subject to the terms and conditions set
forth in the Underwriting Agreement. The Underwriter intends to deposit the
Shares with the trustee of The Equity Focus Trusts--REIT Portfolio Series,
2002-A (the "Trust") in exchange for units in the trust. The Underwriter may
also purchase up to an additional 130,435 shares at the price of $18.61 per
share within 30 days of the date of this Prospectus Supplement. See
"Underwriting."
__________________________
The Shares are offered by the Underwriter when, as and if delivered to
and accepted by the Underwriter and subject to various prior conditions. It is
expected that delivery of the Share certificates will be made in New York, New
York on or about February 28, 2002.
Salomon Smith Barney
__________________________
The date of this Prospectus Supplement is February 25, 2002.
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STATEMENT REGARDING FORWARD LOOKING DISCLOSURE
CERTAIN INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS INCLUDES FORWARD LOOKING STATEMENTS. FORWARD LOOKING
STATEMENTS INCLUDE STATEMENTS REGARDING OUR EXPECTATIONS, BELIEFS, INTENTIONS,
PLANS, OBJECTIVES, GOALS, STRATEGIES, FUTURE EVENTS OR PERFORMANCE AND
UNDERLYING ASSUMPTIONS AND OTHER STATEMENTS WHICH ARE OTHER THAN STATEMENTS OF
HISTORICAL FACTS. THESE STATEMENTS MAY BE IDENTIFIED, WITHOUT LIMITATION, BY THE
USE OF FORWARD LOOKING TERMINOLOGY SUCH AS "MAY", "WILL", "ANTICIPATES",
"EXPECTS", "BELIEVES", "INTENDS", "SHOULD" OR COMPARABLE TERMS OR THE NEGATIVE
THEREOF. ALL FORWARD LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS SUPPLEMENT
AND THE ACCOMPANYING PROSPECTUS ARE BASED ON INFORMATION AVAILABLE TO US ON THE
DATE HEREOF. SUCH STATEMENTS SPEAK ONLY AS OF THE DATE HEREOF AND WE ASSUME NO
OBLIGATION TO UPDATE SUCH FORWARD LOOKING STATEMENTS. THESE STATEMENTS INVOLVE
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE DESCRIBED IN THE STATEMENTS. THESE RISKS AND UNCERTAINTIES INCLUDE
(WITHOUT LIMITATION) THE FOLLOWING: THE EFFECT OF ECONOMIC AND MARKET CONDITIONS
AND CHANGES IN INTEREST RATES; THE GENERAL DISTRESS OF THE HEALTHCARE INDUSTRY;
GOVERNMENT REGULATIONS, INCLUDING CHANGES IN THE REIMBURSEMENT LEVELS UNDER THE
MEDICARE AND MEDICAID PROGRAMS; CONTINUED DETERIORATION OF THE OPERATING RESULTS
OR FINANCIAL CONDITION, INCLUDING BANKRUPTCIES, OF OUR TENANTS; THE ABILITY OF
OUR OPERATORS TO REPAY DEFERRED RENT IN FUTURE PERIODS; OUR ABILITY TO ATTRACT
NEW OPERATORS FOR CERTAIN FACILITIES; OCCUPANCY LEVELS AT CERTAIN FACILITIES;
OUR ABILITY TO SELL CERTAIN FACILITIES FOR THEIR BOOK VALUE; THE AMOUNT AND
YIELD OF ANY ADDITIONAL INVESTMENTS; CHANGES IN TAX LAWS AND REGULATIONS
AFFECTING REAL ESTATE INVESTMENT TRUSTS; ACCESS TO THE CAPITAL MARKETS AND THE
COST OF CAPITAL; CHANGES IN THE RATINGS OF OUR DEBT SECURITIES; AND THE RISK
FACTORS SET FORTH UNDER THE CAPTION "RISK FACTORS" IN ITEM 1 OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2001.
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THE COMPANY
Nationwide Health Properties, Inc., a Maryland corporation, is a real
estate investment trust ("REIT") that invests primarily in healthcare related
facilities and provides financing to health care providers. Whenever we refer
herein to "the Company" or to "us" or use the terms "we" or "our," we are
referring to Nationwide Health Properties, Inc. and subsidiaries. At December
31, 2001, we had investments in 309 facilities located in 37 states that were
operated by 60 healthcare providers. The facilities include 165 skilled nursing
facilities, 128 assisted living facilities, 13 continuing care retirement
communities, one rehabilitation hospital, one long-term acute care hospital and
one medical clinic.
As of December 31, 2001, we had direct ownership of 135 skilled nursing
facilities, 121 assisted living facilities, nine continuing care retirement
communities, one rehabilitation hospital, one long-term acute care hospital and
one medical clinic. Substantially all of our owned facilities are leased under
"triple-net" leases, which are accounted for as operating leases, to 52
healthcare providers. Of our lessees, only Alterra Healthcare Corporation
("Alterra") is expected to account for more than 10% of our revenues in 2002.
The leases generally have initial terms ranging from 5 to 21 years, and
generally have two or more multiple-year renewal options. We earn fixed monthly
minimum rents and may earn periodic additional rents. The additional rent
payments are generally computed as a percentage of facility net patient revenues
in excess of base amounts or as a percentage of the increase in the Consumer
Price Index. Additional rents are generally calculated and payable monthly or
quarterly. While the calculations and payments are generally made on a quarterly
basis, SEC Staff Accounting Bulletin No. 101 Revenue Recognition in Financial
Statements ("SAB No. 101"), which we adopted during the fourth quarter of 2000
does not allow for the recognition of this revenue until all possible
contingencies have been eliminated. Most of our leases with additional rents
contingent upon revenue are structured as quarterly calculations so that all
contingencies for revenue recognition have been eliminated at each of our
quarterly reporting dates. Also, most of our leases contain provisions that the
total rent cannot decrease from one year to the next. Approximately 41% of our
facilities are leased under master leases. In addition, most of our leases
contain cross collateralization and cross-default provisions tied to other
leases with the same lessee, as well as grouped lease renewals and grouped
purchase options. Obligations under our leases have corporate guarantees, and
leases covering 195 facilities are backed by irrevocable letters of credit or
security deposits that cover up to 12 months, most of which cover from three to
six months, of monthly minimum rents. Under the terms of the leases, the lessee
is generally responsible for all maintenance, repairs, taxes and insurance on
the leased properties.
During 2001, we completed the construction of one assisted living
facility in which our total aggregate investment was approximately $10,438,000.
Additionally, we funded approximately $6,270,000 in capital improvements at
certain facilities in accordance with certain existing lease provisions. These
capital improvements generally result in an increase in the minimum rents we
earn on these facilities.
At December 31, 2001, we held 29 mortgage loans secured by 30 skilled
nursing facilities, seven assisted living facilities and four continuing care
retirement communities. These loans had an aggregate outstanding principal
balance of approximately $144,289,000 and a net book value of approximately
$140,474,000 at December 31, 2001, net of an aggregate discount and reserve
totaling approximately $3,815,000. The mortgage loans have individual
outstanding balances ranging from approximately $185,000 to $16,104,000 and have
maturities ranging from 2002 to 2024.
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We have historically provided lease or mortgage financing for
healthcare facilities to qualified operators and acquired additional healthcare
related facilities, including skilled nursing facilities, assisted living
facilities, rehabilitation hospitals and long-term acute care hospitals.
Financing for these investments was provided by borrowings under our bank line
of credit, private placements or public offerings of debt or equity and the
assumption of secured indebtedness.
We believe we have operated in such a manner as to qualify for taxation
as a "real estate investment trust" under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended, and we intend to continue to operate
in such a manner. If we qualify for taxation as a real estate investment trust,
we will generally not be subject to federal corporate income taxes on our net
income that is currently distributed to stockholders. This treatment
substantially eliminates the "double taxation"(e.g. at the corporate and
stockholder levels) that usually results from investment in the stock of a
corporation.
The Company's principal executive offices are located at 610 Newport
Center Drive, Suite 1150, Newport Beach, California 92660 and our telephone
number is (949) 718-4400.
USE OF PROCEEDS
We intend to use the net proceeds from the Offering (after paying the
fees and expenses of the offering) of approximately $16,107,604 to make
investments in healthcare properties. Pending such use, the proceeds will be
used for the repayment of indebtedness outstanding under our $100,000,000
revolving bank line of credit and the balance will be invested in short-term
income producing investments. As of February 25, 2002, the aggregate amount of
such indebtedness was approximately $10,000,000, having an interest rate of
approximately 3.15% and a maturity date of March 31, 2003.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
THE FOLLOWING SUMMARY OF MATERIAL FEDERAL INCOME TAX CONSIDERATIONS IS
BASED ON CURRENT LAW AND DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF TAXATION
THAT MAY BE RELEVANT TO PARTICULAR HOLDERS OF COMMON STOCK IN LIGHT OF THEIR
PERSONAL INVESTMENT OR TAX CIRCUMSTANCES, OR TO CERTAIN TYPES OF COMMON STOCK
HOLDERS (INCLUDING INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS, FINANCIAL
INSTITUTIONS OR BROKER-DEALERS, FOREIGN CORPORATIONS AND PERSONS WHO ARE NOT
CITIZENS OR RESIDENTS OF THE UNITED STATES) SUBJECT TO SPECIAL TREATMENT UNDER
THE FEDERAL INCOME TAX LAWS.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT ITS OWN TAX ADVISOR,
REGARDING THE SPECIFIC TAX CONSEQUENCES TO IT OF THE PURCHASE, OWNERSHIP AND
SALE OF COMMON STOCK IN AN ENTITY ELECTING TO BE TAXED AS A REIT, INCLUDING THE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE,
OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
General
The Company has made an election to be taxed as a REIT under Sections
856 through 860 of the Internal Revenue Code of 1986, as amended (the "Code"),
commencing with its taxable year ending December 31, 1985. The Company believes
that it is organized and has operated in such a manner as to qualify for
taxation as a REIT under the Code and its proposed future method of operation
will enable it to continue to so qualify. No assurances, however, can be given
that the Company has operated in a manner so as to qualify as a REIT or that the
Company will continue to operate in such a manner in the future. Qualification
and taxation as a REIT depends on the Company's ability to meet on a continuing
basis, through actual annual operating results, distribution levels and
diversity of stock ownership, the various qualification tests imposed under the
Code on REITs, some of which are summarized below. While the Company intends to
operate so that it qualifies as a REIT, given the highly complex nature of the
rules governing REITs, the ongoing importance of factual determinations, and the
possibility of future changes in circumstances of the Company, no assurance can
be given that the Company satisfies the REIT tests or will continue to do so.
See "Failure to Qualify" below.
The sections of the Code relating to qualification and operation as a
REIT, and the federal income tax treatment of a REIT and its securityholders,
are highly technical and complex. The following discussion sets forth only the
material aspects of those sections. This summary is qualified in its entirety by
the applicable Code provisions, rules and regulations promulgated thereunder,
and administrative and judicial interpretations thereof.
Taxation of the Company
In any year in which the Company qualifies as a REIT, in general, it
will not be subject to federal income tax on that portion of its taxable income
or capital gain which is distributed to stockholders. The Company will, however,
be subject to tax at normal corporate rates upon any taxable income or capital
gain not distributed.
Notwithstanding its qualification as a REIT, the Company may also be
subject to taxation in certain other circumstances. If the Company should fail
to satisfy the 75% or the 95% gross income test (as discussed below), and
nonetheless maintains its qualification as a REIT because certain other
requirements are met, it will be subject to a 100% tax on the greater of (i) the
amount by which the Company fails the 75% test, or (ii) the excess of 90% of the
gross income of the Company over the amount of such income attributable to
sources that qualify under the 95% test, multiplied by a fraction intended to
reflect the Company's profitability. The Company will also be subject to a tax
of 100% on net income from "prohibited transactions" (which are, in general,
certain sales or other dispositions of property held primarily for sale to
customers in the ordinary course of business, other than foreclosure property)
and, if the Company has (i) net income from the sale or other disposition of
"foreclosure property" (generally, property acquired by reason of a default on
indebtedness or a lease) which is held primarily for sale to customers in the
ordinary course of business or (ii) other non-qualifying income from foreclosure
property, it will be subject to tax on such income from foreclosure property at
the highest corporate rate. If the Company should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year, (ii) 95% of its REIT
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capital gain net income for such year, and (iii) any undistributed taxable
income from prior years, the Company would be subject to a 4% excise tax on the
excess of such required distribution over the amounts actually distributed. In
addition, if the Company acquires any asset from a "C corporation" (that is, a
corporation generally subject to the full corporate level tax) in a transaction
in which the basis of the asset in its hands is determined by reference to the
basis of the asset in the hands of the C corporation, and the Company recognized
gain on the disposition of such asset during a ten-year period beginning on the
date the Company acquired the asset, then the asset's "built in" gain will be
subject to tax at the highest regular corporate rate. The Company may also be
subject to the corporate "alternative minimum tax," on its items of tax
preference, as well as tax in certain situations not presently contemplated. The
Company uses the calendar year for federal income tax purposes and for financial
reporting purposes.
Requirements for Qualification
To qualify as a REIT, the Company must elect to be so treated and must
meet the requirements, discussed below, relating to the Company's organization,
sources of income, nature of assets, and distributions of income to
stockholders.
Organizational Requirements. The Code defines a REIT as a corporation,
trust or association (1) which is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable shares, or by
transferable certificates of beneficial interest; (3) which would be taxable as
a domestic corporation, but for Sections 856 through 860 of the Code; (4) which
is neither a financial institution nor an insurance company subject to certain
provisions of the Code; (5) the beneficial ownership of which is held by 100 or
more persons; (6) during the last half of each taxable year not more than 50% in
value of the outstanding stock of which is owned, directly or indirectly, by
five or fewer individuals (as defined in the Code); and (7) which meets certain
other tests, described below, regarding the nature of its income and assets. The
Code provides that conditions (1) to (4), inclusive, must be met during the
entire taxable year and that condition (5) must be met during at least 335 days
of a taxable year of 12 months, or during a proportionate part of a taxable year
of less than 12 months. For taxable years of the Company beginning on or after
January 1, 1998, the Company will be treated as having satisfied condition (6)
if it complies with the regulatory requirements to request information from its
shareholders regarding their actual ownership of the Company's stock, and does
not know, or exercising reasonable diligence would not have known, that it
failed to satisfy such condition. If the Company fails to comply with these
regulatory requirements for any such taxable year it will be subject to a
penalty of $25,000, or $50,000 if such failure was intentional. However, if the
Company's failure to comply was due to reasonable cause and not willful neglect,
no penalties will be imposed. The Articles of Incorporation provide for
restrictions regarding transfer of the Company's capital stock, in order (among
other purposes) to assist the Company in continuing to satisfy the share
ownership requirements described in (5) and (6) above. Such transfer
restrictions are described in "Description of Common Stock--Redemption and
Business Combination Provisions" in the Prospectus to which this Prospectus
Supplement relates.
Gross Income Tests. In order for the Company to maintain its
qualification as a REIT, there are two requirements relating to the Company's
gross income that must be satisfied annually. First, at least 75% of the
Company's gross income (excluding gross income from prohibited transactions) for
each taxable year must consist of defined types of income derived directly or
indirectly from investments relating to real property or mortgages on real
property (including "rents from real property" and, in certain circumstances,
interest) or temporary investment income. Second, at least 95% of the Company's
gross income (excluding gross income from prohibited transactions) for each
taxable year must be derived from such real property and from dividends, other
types of interest and gain from the sale or disposition of stock or securities
or from any combination of the foregoing. In addition, for each taxable year
beginning before January 1, 1998, short-term gain from the sale or other
disposition of stock or securities, gain from prohibited transactions and gain
on the sale or other disposition of real property held for less than four years
(apart from involuntary conversions and sales of foreclosure property) must have
represented less than 30% of the Company's gross income (including gross income
from prohibited transactions).
In the case of a REIT which is a partner in a partnership, Treasury
Regulations provide that the REIT will be deemed to own its proportionate share
of the assets of the partnership and will be deemed to be entitled to the income
of the partnership attributable to such share. In addition, the character of the
assets and gross income of the partnership will retain the same character in the
hands of the REIT for federal income tax purposes. Thus, the Company's
proportionate share of the assets, liabilities and items of income of the
partnerships in which it has an
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interest will be treated as assets, liabilities and items of income of the
Company for purposes of applying the REIT requirements described herein.
Rents received by the Company will qualify as "rents from real
property" in satisfying the gross income requirements for a REIT described above
only if several conditions are met. First, the amount of rent must not be based
in whole or in part on the income or profits of any person. An amount received
or accrued generally will not be excluded from the term "rents from real
property" solely by reason of being based on a fixed percentage or percentages
of receipts or sales. Second, the Code provides that rents received from a
tenant will not qualify as "rents from real property" in satisfying the gross
income tests if the REIT, or one or more owners of 10% or more of the REIT,
directly or constructively, own in the aggregate 10% or more of such tenant.
Third, if rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as "rents from real property." Finally, for rents received to qualify as
"rents from real property," the REIT generally must not operate or manage the
property or furnish or render services to the tenants of such property, other
than through an independent contractor from whom the REIT derives no revenue,
except that the Company may directly perform certain services other than
services which are not "usually or customarily rendered" in connection with the
rental space for occupancy only and are considered "rendered to the occupant" of
the property. For taxable years of the Company beginning on or after January 1,
1998, a de minimis amount of up to 1% of the gross income received by the
Company from each property is permitted to be from the provision of
non-customary services without disqualifying all other amounts received from
such property as "rents from real property." However, such de minimis amount
itself will not qualify as "rents from real property" for purposes of the 75%
and 95% gross income tests. In addition, for taxable years of the Company
beginning on or after January 1, 2001, the Company may furnish certain services
(including "non-customary" services) through a taxable REIT subsidiary ("TRS").
A TRS includes a corporation other than a REIT in which a REIT directly or
indirectly holds stock and that has made a joint election with the REIT to be
treated as a TRS. A TRS is subject to federal income tax at regular corporate
rates.
The Company typically does not provide services to any lessees under
its leases, and to the extent that it provides services to any such lessee, the
Company believes that any and all such services were and will be of the type
usually or customarily rendered in connection with the rental of space for
occupancy only, and therefore, that the provision of such services did not and
will not cause the rents received with respect to the Centers or newly-acquired
centers to fail to qualify as rents from real property for purposes of the 75%
and 95% gross income tests. If the Company contemplates providing services in
the future that reasonably might be expected not to meet the "usual or
customary" standard, it will arrange to have such services provided by an
independent contractor from which the Company derives no income or by an
affiliated entity that has elected TRS status. It is anticipated that, for
purposes of the gross income tests, the Company's investment in its leases will
in major part give rise to qualifying income in the form of rents and gains on
the sales of leased property.
Even if the Company fails to satisfy one or both of the 75% or 95%
gross income tests for any taxable year, it may nevertheless qualify as a REIT
for such year if it is entitled to relief under certain provisions of the Code.
These relief provisions will be generally available if the Company's failure to
meet such tests is due to reasonable cause and not due to willful neglect, the
Company attaches a schedule of the sources of its income to its return, and any
incorrect information on the schedule was not due to fraud with intent to evade
tax. It is not possible, however, to state whether in all circumstances the
Company would be entitled to the benefit of these relief provisions. As
discussed above in "Certain Federal Income Tax Considerations--Taxation of the
Company," even if these relief provisions apply, a tax would be imposed with
respect to the Company's excess gross income reduced by approximated expenses.
Asset Tests. The Company, at the close of each quarter of its taxable
year, must also satisfy four tests relating to the nature of its assets. First,
at least 75% of the value of the Company's total assets must be represented by
real estate assets (including (i) its allocable share of real estate assets held
by partnerships in which the Company owns an interest and (ii) stock or debt
instruments held for not more than one year purchased with the proceeds of a
stock offering or long-term (at least five years) debt offering of the Company),
cash, cash items and government securities. Second, not more than 25% of the
Company's total assets may be represented by securities other than those in the
75% asset class. Third, of the investments included in the 25% asset class, the
value of any one issuer's securities owned by the Company may not exceed 5% of
the value of the Company's total assets (unless the issuer is a TRS) and the
Company may not own more than 10% of the vote or value of any one issuer's
outstanding securities
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(unless the issuer is a TRS or unless the Company can avail itself of a safe
harbor for "straight debt"). Fourth, not more than 20% of the value of the total
assets of the Company may be represented by securities of one or more TRSs. The
Company's investment in the its leases will constitute qualified assets for
purposes of the 75% asset test.
Annual Distribution Requirements. The Company, in order to qualify as a
REIT, is required to distribute dividends (other than capital gain dividends) to
its stockholders in an amount at least equal to (A) the sum of (i) 90% of the
Company's REIT taxable income (computed without regard to the dividends paid
deduction and the Company's net capital gain) and (ii) 90% of the net income
(after tax), if any, from foreclosure property, minus (B) the sum of certain
items of noncash income. Such distributions must be paid in the taxable year to
which they relate, or in the following taxable year if declared before the
Company timely files its tax return for such year and if paid on or before the
first regular dividend payment after such declaration. To the extent that the
Company does not distribute all of its net capital gain or distributes at least
90%, but less than 100%, of its REIT taxable income, as adjusted, it will be
subject to tax on the undistributed amount at regular ordinary and capital gains
corporate tax rates, as applicable. For taxable years of the Company beginning
on or after January 1, 1998, the Company may designate all or a portion of its
undistributed net capital gains as being includable in the income of its
stockholders as gain from the sale or exchange of a capital asset, which
stockholders would receive an increase in the basis of their stock in the
Company in the amount of such income recognized. Such stockholders would also be
treated as having paid their proportionate share of the capital gains tax
imposed on the Company on such undistributed amounts and would receive a
corresponding decrease in the basis of their stock in the Company. Furthermore,
if the Company should fail to distribute during each calendar year at least the
sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT
capital gain net income for such year, and (iii) any undistributed taxable
income from prior periods, the Company would be subject to a 4% excise tax on
the excess of such required distribution over the amounts actually distributed.
The Company has made and intends to make timely distributions sufficient to
satisfy all annual distribution requirements.
It is possible that, from time to time, the Company may experience
timing differences between (i) the actual receipt of income and actual payment
of deductible expenses and (ii) the inclusion of that income and deduction of
such expenses in arriving at the Company's taxable income. Further, it is
possible that, from time to time, the Company may be allocated a share of net
capital gain attributable to the sale of depreciated property which exceeds its
allocable share of cash attributable to that sale. Additionally, the Company may
incur cash expenditures that are not currently deductible for tax purposes. As
such, the Company may have less cash available for distribution than is
necessary to meet its annual 90% distribution requirement or to avoid tax with
respect to capital gain or the excise tax imposed on certain undistributed
income. To meet the 90% distribution requirement necessary to qualify as a REIT
or to avoid tax with respect to capital gain or the excise tax imposed on
certain undistributed income, the Company may find it appropriate to arrange for
short-term (or possibly long-term) borrowings or to pay distributions in the
form of taxable stock dividends.
Under certain circumstances relating to any Internal Revenue Service
(the "IRS") audit adjustments that increase income, the Company may be able to
rectify a failure to meet the distribution requirement for a year by paying
"deficiency dividends" to stockholders in a later year, which may be included in
the Company's deduction for dividends paid for the earlier year. Thus, the
Company may be able to avoid being taxed on amounts distributed as deficiency
dividends; however, the Company will be required to pay interest based upon the
amount of any deduction taken for deficiency dividends.
Pursuant to applicable Treasury Regulations, in order to be able to
elect to be taxed as a REIT, the Company must maintain certain records and
request certain information from its stockholders designed to disclose the
actual ownership of its stock. The Company has complied and intends to continue
to comply with such requirements.
Failure to Qualify
If the Company fails to qualify for taxation as a REIT in any taxable
year, and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in which the
Company fails to qualify will not be deductible by the Company nor will they be
required to be made. In such event, to the extent of current and accumulated
earnings and profits, all distributions to stockholders will be taxable as
ordinary income, and, subject to
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certain limitations of the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific statutory
provisions, the Company will also be disqualified from taxation as a REIT for
the four taxable years following the year during which the Company ceased to
qualify as a REIT. It is not possible to state whether in all circumstances the
Company would be entitled to such statutory relief.
Taxation of Stockholders
Taxation of Taxable Domestic Stockholders. As long as the Company
qualifies as a REIT, distributions made to the Company's taxable U.S.
stockholders out of current or accumulated earnings and profits (and not
designated as capital gain dividends) will be taken into account by such U.S.
stockholders as ordinary income and will not be eligible for the dividends
received deduction for corporations. Distributions that are designated as
capital gain dividends will be taxed as long-term capital gains (to the extent
they do not exceed the Company's actual net capital gain for the taxable year)
without regard to the period for which the stockholder has held its stock.
However, corporate stockholders may be required to treat up to 20% of certain
capital gain dividends as ordinary income. Distributions in excess of current
and accumulated earnings and profits will not be taxable to a stockholder to the
extent that they do not exceed the adjusted basis of the stockholder's shares,
but rather will reduce the adjusted basis of such shares. To the extent that
distributions in excess of current and accumulated earnings and profits exceed
the adjusted basis of a stockholder's shares, such distributions will be
included in income as long-term capital gain (or short-term capital gain if the
shares have been held for one year or less) assuming the shares are a capital
asset in the hands of the stockholder. In addition, any distribution declared by
the Company in October, November or December of any year payable to a
stockholder of record on a specified date in any such month shall be treated as
both paid by the Company and received by the stockholder on December 31 of such
year, provided that the distribution is actually paid by the Company during
January of the following calendar year. Stockholders may not include in their
individual income tax returns any net operating losses or capital losses of the
Company.
In general, any loss upon a sale or exchange of shares by a stockholder
who has held such shares for six months or less (after applying certain holding
period rules), will be treated as a long-term capital loss to the extent of
distributions from the Company required to be treated by such stockholder as
long-term capital gain.
Backup Withholding. The Company will report to its U.S. stockholders
and the IRS the amount of distributions paid during each calendar year, and the
amount of tax withheld, if any. Under the backup withholding rules, a
stockholder may be subject to backup withholding with respect to distributions
paid unless such holder (a) is a corporation or comes within certain other
exempt categories and when required, demonstrates this fact, or (b) provides a
taxpayer identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules. A stockholder that does not provide the Company with its
correct taxpayer identification number may also be subject to penalties imposed
by the IRS. Any amount paid as backup withholding will be creditable against the
stockholder's income tax liability. In addition, the Company may be required to
withhold a portion of capital gain distributions to any stockholders who fail to
certify their nonforeign status to the Company. See "Certain Federal Income Tax
Considerations--Taxation of Stockholders--Taxation of Foreign Stockholders."
Treatment of Tax-exempt Stockholders. Distributions from the Company to
a tax-exempt employee pension trust or other domestic tax-exempt stockholder
generally will not constitute "unrelated business taxable income" ("UBTI")
unless the stockholder has borrowed to acquire or carry the Common Stock.
However, qualified trusts that hold more than 10% (by value) of certain REITs
may be required to treat a certain percentage of such a REIT's distributions as
UBTI. This requirement will apply only if (i) the REIT would not qualify for
federal income tax purposes but for the application of a "look-through"
exception to the "five or fewer" requirement applicable to shares held by
qualified trusts and (ii) the REIT is "predominantly held" by qualified trusts.
A REIT is predominantly held if either (i) a single qualified trust holds more
than 25% by value of the REIT interests or (ii) one or more qualified trusts,
each owning more than 10% by value of the REIT interests, hold in the aggregate
more than 50% by value of the REIT interests. The percentage of any REIT
dividend treated as UBTI is equal to the ratio of (a) the UBTI earned by the
REIT (treating the REIT as if it were a qualified trust and therefore subject to
tax on UBTI) to (b) the total gross income (less certain associated expenses) of
the REIT. A de minimis exception applies where the ratio set forth in the
preceding sentence is less than 5% for any year. For those purposes, a qualified
trust is any trust described in section 401(a) of the Code and exempt from tax
under section 501(a) of the Code. The provisions requiring qualified trusts to
treat a portion of REIT distributions as UBTI will not apply if the REIT is
S-9
able to satisfy the "five or fewer" requirement without relying upon the
"look-through" exception. The restrictions on ownership of the Common Stock in
the Articles of Incorporation will prevent application of the provisions
treating a portion of REIT distributions as UBTI to tax-exempt entities
purchasing the Common Stock, absent approval by the Board of Directors.
Taxation of Foreign Stockholders. The rules governing United States
federal income taxation of nonresident alien individuals, foreign corporations,
foreign partnerships and other foreign stockholders (collectively, "Non-U.S.
Stockholders") are complex and no attempt will be made herein to provide more
than a summary of such rules. Prospective Non-U.S. Stockholders should consult
with their own tax advisors to determine the impact of federal, state and local
income tax laws with regard to an investment in shares, including any reporting
requirements.
Distributions that are not attributable to gain from sales or exchanges
by the Company of United States real property interests and not designated by
the Company as capital gains dividends will be treated as dividends of ordinary
income to the extent that they are made out of current or accumulated earnings
and profits of the Company. Such distributions will ordinarily be subject to a
withholding tax equal to 30% of the gross amount of the distribution unless an
applicable tax treaty reduces or eliminates that tax. However, if income from
the investment in the shares is treated as effectively connected with the
Non-U.S. Stockholder's conduct of a United States trade or business, the
Non-U.S. Stockholder generally will be subject to a tax at graduated rates, in
the same manner as U.S. stockholders are taxed with respect to such
distributions (and may also be subject to the 30% branch profits tax in the case
of a stockholder that is a foreign corporation). The Company expects to withhold
United States income tax at the rate of 30% on the gross amount of any such
distributions made to a Non-U.S. Stockholder unless (i) a lower treaty rate
applies or (ii) the Non-U.S. Stockholder files an IRS Form W-8ECI with the
Company claiming that the distribution is effectively connected income.
Distributions in excess of current and accumulated earnings and profits of the
Company will not be taxable to a stockholder to the extent that such
distributions do not exceed the adjusted basis of a stockholder's shares, but
rather will reduce the adjusted basis of such shares. To the extent that
distributions in excess of current accumulated earnings and profits exceed the
adjusted basis of a Non-U.S. Stockholder's shares, such distributions will give
rise to tax liability if the Non-U.S. Stockholder would otherwise be subject to
tax on any gain from the sale or disposition of its shares in the Company, as
described below. If it cannot be determined at the time a distribution is made
whether or not such distribution will be in excess of current and accumulated
earnings and profits, the distributions will be subject to withholding at the
same rate as dividends. However, amounts thus withheld are refundable if it is
subsequently determined that such distribution was, in fact, in excess of
current and accumulated earnings and profits of the Company.
For any year in which the Company qualifies as a REIT, distributions
that are attributable to gain from sales or exchanges by the Company of United
States real property interests will be taxed to a Non-U.S. Stockholder under the
provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, distributions attributable to gain from sales of
United States real property interests are taxed to a Non-U.S. Stockholder as if
such gain were effectively connected with a United States business. Non-U.S.
Stockholders would thus be taxed at the normal capital gain rates applicable to
U.S. stockholders (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals). Also,
distributions subject to FIRPTA may be subject to a 30% branch profits tax in
the hands of a foreign corporate stockholder not entitled to treaty exemption.
The Company is required by applicable Treasury Regulations to withhold 35% of
any distribution that could be designated by the Company as a capital gains
dividend. This amount is creditable against the Non-U.S. Stockholder FIRPTA tax
liability.
Gain recognized by a Non-U.S. Stockholder upon a sale of shares
generally will not be taxed under FIRPTA if the Company is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of the stock was held directly
or indirectly by foreign persons. It is currently anticipated that the Company
will be a "domestically controlled REIT," although there can be no assurance
that it will retain its status as such. If the Company is not "domestically
controlled," gain recognized by a Non-U.S. Stockholder will continue to be
exempt under FIRPTA if such person at no time owned more than five percent of
the Common Stock of the Company. However, gain not subject to FIRPTA will be
taxable to a Non-U.S. Stockholder if (i) investment in the shares is effectively
connected with the Non-U.S. Stockholder's United States trade or business, in
which case the Non-U.S. Stockholder will be subject to the same treatment as
U.S. stockholders with respect to such gain, or (ii) the Non-U.S. Stockholder is
a nonresident alien individual who was present in the
S-10
United States for more than 182 days during the taxable year and has a "tax
home" in the United States, in which case the nonresident alien individual will
be subject to a 30% tax on the individual's capital gains. If the gain on the
sale of shares were to be subject to taxation under FIRPTA, the Non-U.S.
Stockholder will be subject to the same treatment as U.S stockholders with
respect to such gain (subject to applicable alternative minimum tax and a
special alternative minimum tax in the case of nonresident alien individuals).
If the proceeds of a sale of shares are paid by or through a U.S.
office of a broker, the payment is subject to information reporting and to
backup withholding unless the disposing Non-U.S. Stockholder certifies as to its
name, address and non-U.S. status or otherwise establishes an exemption.
Generally, U.S. information reporting and backup withholding will not apply to a
payment of disposition proceeds if the payment is made outside the U.S. through
a non-U.S. office of a non-U.S. broker. U.S. information reporting requirements
(but not backup withholding) will apply, however, to a payment of disposition
proceeds outside the U.S. if: (i) the payment is made through an office outside
the U.S. of a broker that is: (a) a U.S. person; (b) a foreign person that
derives 50% or more of its gross income for certain periods from the conduct of
a trade or business in the U.S.; or (c) a "controlled foreign corporation" for
U.S. federal income tax purposes; and (ii) the broker fails to initiate
documentary evidence that the shareholder is a Non-U.S. Stockholder and that
certain conditions are met or that the Non-U.S. Stockholder otherwise is
entitled to a exemption.
Tax Aspects of the Company's Investments in Partnerships
The Company holds direct or indirect interests in various partnerships
(each individually a "Partnership" and, collectively, the "Partnerships"). In
general, partnerships are "pass-through" entities which are not subject to
federal income tax. Rather, partners are allocated their proportionate shares of
the items of income, gain, loss, deduction and credit of a partnership, and are
potentially subject to tax thereon, without regard to whether the partners
receive a distribution from the partnership. The Company will include its
proportionate share of the foregoing items of the Partnerships for purposes of
the various REIT income tests and in the computation of its REIT taxable income.
See "Certain Federal Income Tax Considerations--Requirements for
Qualification--Gross Income Tests." Any resultant increase in the Company's REIT
taxable income will increase its distribution requirements (see "Certain Federal
Income Tax Considerations--Requirements for Qualification--Annual Distribution
Requirements"), but will not be subject to federal income tax in the hands of
the Company provided that such income is distributed by the Company to its
stockholders. Moreover, for purposes of the REIT asset tests (see "Certain
Federal Income Tax Considerations--Requirements for Qualification--Asset
Tests"), the Company will include its proportionate share of assets held by the
Partnerships.
Other Tax Considerations
Possible Legislative or Other Actions Affecting Tax Consequences.
Prospective holders of the Common Stock should recognize that the present
federal income tax treatment of investment in the Company may be modified by
legislative, judicial or administrative action at any time and that any such
action may affect investments and commitments previously made. The rules dealing
with federal income taxation are constantly under review by persons involved in
the legislative process and by the IRS and the Treasury Department, resulting in
revisions of regulations and revised interpretations of established concepts as
well as statutory changes. Revisions in federal tax laws and interpretations
thereof could adversely affect the tax consequences of investment in the
Company.
State and Local Taxes. The Company and its holders of the Common Stock
may be subject to state or local taxation in various jurisdictions, including
those in which it or they transact business or reside. The state and local tax
treatment of the Company and its holders of the Common Stock may not conform to
the federal income tax consequences discussed above. Consequently, prospective
holders of the Common Stock should consult their own tax advisors regarding the
effect of state and local tax laws on an investment in the Common Stock.
S-11
UNDERWRITING
Subject to the terms and conditions contained in the underwriting
agreement (the "Underwriting Agreement"), the Company has agreed to sell to the
Underwriter, and the Underwriter has agreed to purchase from the Company,
869,565 shares of the Common Stock. In the Underwriting Agreement, the
Underwriter has agreed, subject to the terms and conditions set forth therein,
to purchase all of the Shares if any of the Shares are purchased.
The Underwriter intends to deposit the Shares offered hereby with the
trustee of the Trust, a newly-formed unit investment trust registered under the
Investment Company Act of 1940, as amended, in exchange for units in the Trust.
The Underwriter is acting as sponsor and depositor of the Trust. The Underwriter
is an affiliate of the Trust.
The Company has granted an option to the Underwriter to purchase up to
130,435 additional shares at the price of $18.61 per share. The Underwriter may
exercise this option for 30 days from the date of this Prospectus Supplement.
Such additional shares will be deposited with the trustee of the Trust.
In the Underwriting Agreement, the Company has agreed to indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or to contribute to payments the Underwriter
may be required to make in respect thereof.
Until the distribution of the Shares is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriter to
bid for and purchase the Common Stock. As an exception to these rules, the
Underwriter is permitted to engage in certain transactions that stabilize the
price of the Common Stock. Such transactions may consist of bids or purchases
for the purpose of pegging, fixing or maintaining the price of the Common Stock.
If the Underwriter creates a short position in the Common Stock in
connection with the offering (i.e., if it sells more shares of the Common Stock
than are set forth on the cover page of this Prospectus Supplement), the
Underwriter may reduce that short position by purchasing the Common Stock in the
open market.
In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases.
Neither the Company nor the Underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor the Underwriter makes any representation that the Underwriter
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
S-12
LEGAL MATTERS
The validity of the issuance of the Shares offered hereby will be
passed upon for the Company by Venable, Baetjer & Howard, LLP, Baltimore,
Maryland. Certain legal matters will be passed upon for the Company by O'Melveny
& Myers LLP, Newport Beach, California, and for the Underwriter by Sidley Austin
Brown & Wood LLP, Los Angeles, California. O'Melveny & Myers LLP and Sidley
Austin Brown & Wood LLP will rely upon Venable, Baetjer & Howard, LLP,
Baltimore, Maryland, as to certain matters of Maryland law. Paul C. Pringle, a
partner of Sidley Austin Brown & Wood LLP, owns 20,591 shares of the Common
Stock.
S-13
Prospectus
----------
NATIONWIDE HEALTH PROPERTIES, INC.
Securities
Nationwide Health Properties, Inc. (the "Company") may offer from time
to time, in one or more series, its unsecured debt securities (the "Debt
Securities"), warrants to purchase Debt Securities (the "Debt Securities
Warrants"), shares of its Preferred Stock, par value $1.00 per share (the
"Preferred Stock"), warrants to purchase Preferred Stock (the "Preferred Stock
Warrants"), warrants to purchase Depositary Shares (as defined below) (the
"Depositary Shares Warrants"), shares of its Common Stock, par value $0.10 per
share (the "Common Stock") and warrants to purchase Common Stock (the "Common
Stock Warrants," and with the Debt Securities Warrants, the Preferred Stock
Warrants and the Depositary Shares Warrants, being collectively referred to
herein as the "Securities Warrants"). The Debt Securities, the Preferred Stock,
the Common Stock and the Securities Warrants are collectively referred to herein
as the "Securities." The Securities will have an aggregate offering price of
$300,000,000 and will be offered on terms to be determined at the time of
offering.
In the case of Debt Securities, the specific title, the aggregate
principal amount, the purchase price, the maturity, the rate and time of payment
of any interest, any redemption or sinking fund provisions, any conversion
provisions and any other specific term of the Debt Securities will be set forth
in the accompanying supplement to this Prospectus (the "Prospectus Supplement").
In the case of Preferred Stock, the specific number of shares, designation,
stated value per share, liquidation preference per share, issuance price,
dividend rate (or method of calculation), dividend payment dates, any redemption
or sinking fund provisions, any conversion rights and other specific terms of
the series of Preferred Stock will be set forth in the accompanying Prospectus
Supplement. In addition, the Prospectus Supplement will describe whether
interests in the Preferred Stock will be represented by depositary shares (the
"Depositary Shares") evidenced by depositary receipts. In the case of Common
Stock, the specific number of shares and issuance price per share will be set
forth in the accompanying Prospectus Supplement. In the case of Securities
Warrants, the duration, offering price, exercise price and detachability, if
applicable, will be set forth in the accompanying Prospectus Supplement. The
Prospectus Supplement will also disclose whether the Securities will be listed
on a national securities exchange and if they are not to be listed, the possible
effects thereof on their marketability.
Securities may be sold directly, through agents from time to time or
through underwriters or dealers. If any agent of the Company or any underwriter
is involved in the sale of the Securities, the name of such agent or underwriter
and any applicable commission or discount will be set forth in the accompanying
Prospectus Supplement. See "Plan of Distribution." The net proceeds to the
Company from such sale also will be set forth in the applicable Prospectus
Supplement.
The Debt Securities, if issued, may rank on parity with all other
unsecured and unsubordinated indebtedness of the Company or may be subordinated
to certain other indebtedness of the Company. See "Description of Debt
Securities."
______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COM-
MISSION NOR HAS THE COMMISSION OR ANY STATE SECURI-
TIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS ANY REP-
RESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
______________
1
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
_________________
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
The date of this Prospectus is August 19, 1998
2
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, files reports, proxy statements and other the information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information can be inspected and copied at the Public
Reference Room of the Commission, Room 1024, at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at 7 World
Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such material can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 at
prescribed rates. In addition, such materials may also be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act").
This Prospectus and any accompanying Prospectus Supplement do not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement, which may
be examined without charge at the public reference facilities maintained by the
Commission at the Public Reference Room of the Commission, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies thereof may be obtained from the
Commission upon payment of the prescribed fees.
________________
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and its Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1998, June 30, 1998 are incorporated in and made a part of this
Prospectus. All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering of the Securities
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing such documents. A statement contained herein, in a
Prospectus Supplement or in a document incorporated or deemed to be incorporated
by reference herein, shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained herein, in a
Prospectus Supplement or in any subsequently filed document which is
incorporated by reference herein, modifies or supersedes such statement. Any
such statements so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, on the request of any such person, a copy of any or all
the documents incorporated herein by reference (other than exhibits to such
documents, unless such exhibits are specifically incorporated by reference into
the documents that this Prospectus incorporates). Requests for such copies
should be directed to Nationwide Health Properties, Inc., 610 Newport Center
Drive, Suite 1150, Newport Beach, California 92660, Attention: Mark L. Desmond
(telephone number (949) 718-4400).
3
THE COMPANY
Nationwide Health Properties, Inc., a Maryland corporation organized in
October 1985 (the "Company"), is a real estate investment trust ("REIT") which
invests primarily in health care related facilities and provides financing to
health care providers. As of June 30, 1998, the Company had investments in 317
facilities located in 32 states. The facilities include 195 skilled nursing
facilities, 90 assisted living facilities, 13 continuing care retirement
communities, 14 residential care facilities for the elderly, 2 rehabilitation
hospitals and 3 medical clinics. The facilities are operated by 60 health care
providers including the following publicly traded companies: Alternative Living
Services, Inc., American Retirement Corporation, ARV Assisted Living, Inc.,
Beverly Enterprises, Inc., Harborside Healthcare Corporation, HEALTHSOUTH
Corporation, Integrated Health Services, Inc., Lexington Healthcare Group, Inc.,
Mariner Health Group, Inc., New Care Health Corporation, Paragon Health Network,
Res-Care, Inc. and Sun Healthcare Group, Inc. Of the operators of the
facilities, only Alternative Living Services, Inc. and Beverly Enterprises, Inc.
account for more than 10% of the Company's revenues.
As of June 30, 1998, the Company had direct ownership of 152 skilled
nursing facilities, 84 assisted living facilities, 8 continuing care retirement
communities, 14 residential care facilities for the elderly, 2 rehabilitation
hospitals and 3 medical clinics. All of the Company's owned facilities are
leased under "net" leases (the "Leases"), which are accounted for as operating
leases.
The Leases have initial terms ranging from 10 to 19 years, and
generally the Leases have two or more multi-year renewal options. The Company
earns fixed monthly minimum rents and may earn periodic additional rents. The
additional rent payments are generally computed as a percentage of facility net
patient revenues in excess of base amounts or as a percentage of the increase in
the consumer price index. Additional rents are generally calculated and payable
monthly or quarterly. Most leases contain provisions such that the total rent
cannot decrease from one year to the next. Most Leases contain cross
collateralization and cross default provisions tied to other Leases with the
same Lessee, as well as grouped lease renewals and grouped purchase options.
Obligations under the Leases have corporate guarantees, and Leases covering 172
facilities are backed by irrevocable letters of credit or security deposits
which cover 1 to 12 months of monthly minimum rents. Under the terms of the
Leases, the Lessee is responsible for all maintenance, repairs, taxes and
insurance on the leased properties.
As of June 30, 1998, the Company held 32 mortgage loans secured by 43
skilled nursing facilities, 6 assisted living facilities and 5 continuing care
retirement communities. As of June 30, 1998, the mortgage loans had a net book
value of approximately $196,472,000 with individual outstanding balances ranging
from approximately $601,000 to $21,400,000 and maturities ranging from 1998 to
2031.
As of June 30, 1998, 49 of the Company's owned facilities and 4 of the
facilities securing the Company's mortgage loans were being operated by
subsidiaries of Beverly Enterprises, Inc. ("Beverly"). Beverly has guaranteed
certain obligations of its subsidiaries and of certain parties unaffiliated with
Beverly in connection with 26 properties operated by such parties. Rental and
interest income from Beverly accounted for 27%, 23% and 17% of the Company's
total revenues for the years ended December 31, 1995, 1996 and 1997,
respectively, and for 15% of the Company's total revenues for the six months
ended June 30, 1998.
As of June 30, 1998, 47 of the Company's owned facilities were leased
to subsidiaries of Alternative Living Services, Inc. ("ALS"). ALS has guaranteed
certain of the obligations of its subsidiaries. Rental income from ALS accounted
for 0.3%, 6%, and 8% of the Company's total revenues for the years ended
December 31, 1995, 1996 and 1997, respectively, and for 12% of the Company's
revenues for the six months ended June 30, 1998.
The Company anticipates providing lease or mortgage financing for
health care facilities to qualified operators and acquiring additional health
care related facilities, including long-term health care
4
facilities, assisted living facilities, acute care hospitals and medical office
buildings. Financing for such future investment may be provided by borrowings
under the Company's bank line of credit, private placements or public offerings
of debt or equity, and the assumption of indebtedness.
The Company operates so as to qualify as a REIT under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended (the "Code"). As a
REIT, the Company distributes to its stockholders substantially all of its cash
flow from operations and, in any event, at least 95% of its taxable income. If
the Company qualifies for taxation as a REIT, it will generally not be subject
to federal corporate income taxes on its net income that is currently
distributed to stockholders. This treatment substantially eliminates the "double
taxation" (e.g., at the corporate and stockholder levels) that generally results
from investment in stock of a corporation.
The Company's principal executive offices are located at 610 Newport
Center Drive, Suite 1150, Newport Beach, California 92660 and its telephone
number is (949) 718-4400.
5
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated financial information of the
Company, restated for the two-for-one stock split effective March 8, 1996, for
each of the five years ended December 31, 1997 is derived from the Company's
audited consolidated financial statements, which have been audited by Arthur
Andersen LLP, independent accountants. The selected consolidated financial
information for the six month periods ended June 30, 1998 and 1997 has been
derived from the unaudited interim consolidated financial statements of the
Company and includes, in the opinion of management, all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of the
financial position and results of operations as of and for such periods. Such
financial information has been derived from financial information included in
the Company's Annual Reports on Form 10-K and the Company's Quarterly Reports on
Form 10-Q. The selected consolidated financial information set forth below
should be read in conjunction with the detailed information, consolidated
financial statements and related notes and applicable "Management's Discussion
and Analysis" included in the 1997, 1996, 1995, 1994 and 1993 Annual Reports on
Form 10-K.
Six Months Ended
June 30, Year Ended December 31,
------------------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------------------------------------------------------------------------
(in thousands, except per share data)
Operating Data:
Revenues:
Minimum rent ........................................ $ 48,536 $ 36,747 $ 79,587 $ 66,536 $ 54,504 $47,805 $ 40,758
Interest and other income ........................... 11,396 10,095 22,454 17,104 14,759 12,413 11,210
Additional rent and additional interest ............. 7,717 6,658 13,664 12,136 11,776 9,767 8,417
------------------------------------------------------------------------
67,649 53,500 115,705 95,776 81,039 69,985 60,385
Expenses:
Interest and amortization of deferred
financing costs ................................... 16,836 12,767 28,899 20,797 14,628 9,921 6,186
Depreciation and non-cash charges ................... 12,803 9,252 19,825 16,723 13,885 12,244 10,115
General and administrative .......................... 2,295 1,812 3,993 3,312 3,144 3,007 3,088
------------------------------------------------------------------------
31,934 23,831 52,717 40,832 31,657 25,172 19,389
------------------------------------------------------------------------
Income from operations .................................. 35,715 29,669 62,988 54,944 49,382 44,813 40,996
Gain on sale of facilities .............................. 2,321 -- 829 -- 989 -- --
Extraordinary charge (1) ................................ -- -- -- -- -- -- (2,004)
------------------------------------------------------------------------
Net income .............................................. 38,036 29,669 63,817 54,944 50,371 44,813 38,992
Preferred stock dividends ............................... (3,839) -- (1,962) -- -- -- --
------------------------------------------------------------------------
Net income available to common stockholders ............. $ 34,197 $ 29,669 $ 61,855 $ 54,944 $ 50,371 $44,813 $ 38,992
========================================================================
Dividends paid on common stock .......................... $ 36,945 $ 32,607 $ 65,734 $ 59,581 $ 53,182 $47,751 $ 42,883
Per Share Data
Basic/ diluted income from operations available
to common stockholders ................................ $ 0.73 $ 0.71 $ 1.45 $ 1.36 $ 1.30 1.23 $ 1.17
Basic/diluted net income available to common
stockholders............................................. 0.78 0.71 1.47 1.36 1.33 1.23 1.11
Dividends paid on common stock .......................... 0.84 0.78 1.56 1.48 1.41 1.31 1.21
Balance Sheet Data:
Investments in real estate, net ......................... $1,174,146 $820,596 $1,053,273 $ 722,506 $ 652,231 $501,862 $ 428,473
Total assets ............................................ 1,207,052 843,939 1,077,394 744,984 670,111 513,809 440,165
Senior unsecured notes due 2000-2037 .................... 375,000 275,000 355,000 190,000 100,000 -- --
Bank borrowings ......................................... 87,700 46,300 19,600 32,300 93,900 80,200 3,800
Convertible debentures .................................. 58,875 64,720 64,512 64,920 65,000 67,920 73,609
Notes and bonds payable ................................. 65,234 9,189 58,297 9,229 23,364 20,520 23,047
Stockholders' equity .................................... 584,250 426,064 553,046 428,588 371,822 336,106 332,927
Other Data:
Net cash provided by operating activities ............... $ 52,666 $ 39,562 $ 86,010 $ 74,129 $ 66,972 $56,756 $ 49,725
Net cash used in investing activities ................... (121,237) (106,282) (267,302) (85,034) (151,476) (83,185) (56,261)
Net cash provided by financing activities ............... 72,293 65,697 179,775 14,667 88,699 26,544 1,882
Funds from operations available to common
stockholders(3).......................................... 44,679 38,921 80,851 71,667 63,267 57,057 51,111
Weighted Average Shares Outstanding ..................... 43,760 41,802 42,164 40,373 37,808 36,356 35,188
_______________
(1) The Company incurred an extraordinary charge representing the write-off of
unamortized deferred financing costs and fees in connection with the
prepayment of a substantial portion of the Company's secured debt.
(2) For per share purposes, income from continuing operations is defined as
income before the effect of any gains or losses on sales of properties.
(3) Industry analysts generally consider funds from operations to be an
alternative measure of the performance of an equity REIT. The Company
therefore discloses funds from operations, although it is a measurement
that is not defined by generally accepted accounting principles. The
Company uses the NAREIT measure of funds from operations, which is
generally defined as income before extraordinary
6
items plus certain non-cash items, primarily real estate depreciation, less
gains on sales of facilities. The NAREIT measure may not be comparable to
similarly titled measures used by other REITs. Consequently, the Company's funds
from operations may not provide a meaningful measure of the Company's
performance as compared to that of other REITs. Funds from operations does not
represent cash generated from operating activities as defined by generally
accepted accounting principles (funds from operations does not include changes
in operating assets and liabilities) and, therefore, should not be considered as
an alternative to net income as the primary indicator of operating performance
or to cash flow as a measure of liquidity.
7
RATIO OF EARNINGS TO FIXED CHARGES
Six Months
Year Ended December 31, Ended
----------------------- June 30,
1993 1994 1995 1996 1997 1998
---- ----- ---- ---- ---- ----
Ratio........ 7.63 5.52 4.44 3.64 3.03 2.88
RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Six Months
Year Ended December 31, Ended
------------------------ June 30,
1993 1994 1995 1996 1997 1998
---- ----- ---- ---- ---- ----
Ratio........ 7.63 5.52 4.44 3.64 2.85 2.61
USE OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement which accompanies
this Prospectus, the net proceeds from the sale of the Securities offered from
time to time hereby will be used for general corporate purposes, including the
repayment of bank lines of credit and investments in health care related
properties. The Company uses its existing revolving bank credit facility
primarily to provide financing for the acquisitions of health care related
facilities. To the extent that the Company has amounts outstanding under the
credit facility at the time it issues Securities, it is currently required to
use the proceeds of such issuance to repay amounts outstanding under the credit
facility.
DESCRIPTION OF DEBT SECURITIES
Debt Securities may be issued from time to time in series under an
Indenture (the "Indenture") to be entered into between the Company and The Bank
of New York, as Trustee (the "Trustee"). As used under this caption, unless the
context otherwise requires, Offered Debt Securities shall mean the Debt
Securities offered by this Prospectus and the accompanying Prospectus
Supplement. The statements under this caption are brief summaries of certain
provisions contained in the Indenture, do not purport to be complete and are
qualified in their entirety by reference to the Indenture, including the
definition therein of certain terms, a copy of which is filed as an exhibit to
the Registration Statement of which this Prospectus is a part. The following
sets forth certain general terms and provisions of the Debt Securities. Further
terms of the Offered Debt Securities will be set forth in the Prospectus
Supplement.
General
The Indenture provides for the issuance of Debt Securities in series, and
does not limit the principal amount of Debt Securities which may be issued
thereunder.
Reference is made to the Prospectus Supplement for the following terms of
the Offered Debt Securities: (1) the specific title of the Offered Debt
Securities; (2) the aggregate principal amount of the Offered Debt Securities;
(3) the percentage of their principal amount at which the Offered Debt
Securities will be issued; (4) the date on which the Offered Debt Securities
will mature; (5) the rate or rates per annum or the method for determining such
rate or rates, if any, at which the Offered Debt Securities will bear interest;
(6) the times at which any such interest will be payable; (7) any provisions
relating to
8
optional or mandatory redemption of the Offered Debt Securities at the option of
the Company or pursuant to sinking fund or analogous provisions; (8) the
denominations in which the Offered Debt Securities are authorized to be issued;
(9) any provisions relating to the conversion or exchange of the Offered Debt
Securities into Common Stock, Preferred Stock or into Debt Securities of another
series; (10) whether the Offered Debt Securities are to be issued in fully
registered form without coupons or in bearer form with interest coupons or both;
(11) the place or places at which the Company will make payments of principal
(and premium, if any) and interest, if any, and the method of payment; (12)
whether the Offered Debt Securities will be issued in whole or in part in global
form; (13) any additional covenants and Events of Default and the remedies with
respect thereto not currently set forth in the Indenture; (13) whether the
Offered Debt Securities will be subordinated to other indebtedness of the
Company; and (14) any other specific terms of the Offered Debt Securities.
One or more series of the Debt Securities may be issued as discounted Debt
Securities (bearing no interest or bearing interest at a rate which at the time
of issuance is below market rates) to be sold at a substantial discount below
their stated principal amount. Tax and other special considerations applicable
to any such discounted Debt Securities will be described in the Prospectus
Supplement relating thereto.
Status of Debt Securities
The Debt Securities will be unsecured obligations of the Company and may be
ranking on a parity with all other unsecured and unsubordinated indebtedness or
may be subordinated to certain other indebtedness of the Company.
Conversion Rights
The terms, if any, on which Debt Securities of a series may be exchanged
for or converted into shares of Common Stock, Preferred Stock or Debt Securities
of another series will be set forth in the Prospectus Supplement relating
thereto. To protect the Company's status as a REIT, a Holder may not convert any
Debt Security, and such Debt Security shall not be convertible by any Holder, if
as a result of such conversion any person would then be deemed to beneficially
own, directly or indirectly, 9.9% or more of the Company's shares of Common
Stock.
Absence of Restrictive Covenants
Except as noted below under "Dividends, Distributions and Acquisitions of
Capital Stock," the Company is not restricted by the Indenture from paying
dividends or from incurring, assuming or becoming liable for any type of debt or
other obligations or from creating liens on its property for any purpose. The
Indenture does not require the maintenance of any financial ratios or specified
levels of net worth or liquidity. Except as may be set forth in the Prospectus
Supplement, there are no provisions of the Indenture which afford holders of the
Debt Securities protection in the event of a highly leveraged transaction
involving the Company.
Optional Redemption
The Debt Securities will be subject to redemption, in whole or from time to
time in part, at any time for certain reasons intended to protect the Company's
status as a REIT, at the option of the Company in the manner specified in the
Indenture at a redemption price equal to 100% of the principal amount, plus
interest accrued to the date of redemption. The Indenture does not contain any
provision requiring the Company to repurchase the Debt Securities at the option
of the Holders thereof in the event of a leveraged buyout, recapitalization or
similar restructuring of the Company, even though the Company's creditworthiness
and the market value of the Debt Securities may decline significantly as a
result of such
9
transaction. The Indenture does not protect Holders of the Debt Securities
against any decline in credit quality, whether resulting from any such
transaction or from any other cause.
Dividends, Distributions and Acquisitions of Capital Stock
The Indenture provides that the Company will not (i) declare or pay any
dividend or make any distribution on its capital stock or to holders of its
capital stock (other than dividends or distributions payable in its capital
stock or other than as the Company determines is necessary to maintain its
status as a REIT) or (ii) purchase, redeem or otherwise acquire or retire for
value any of its capital stock, or any warrants, rights or options or other
securities to purchase or acquire any shares of its capital stock (other than
the Debt Securities) or permit any subsidiary to do so, if at the time of such
action an Event of Default (as defined in the Indenture) has occurred and is
continuing or would exist immediately after giving effect to such action.
Events of Default
An Event of Default with respect to Debt Securities of any series is
defined in the Indenture as being: (a) failure to pay principal of or any
premium on any Debt Security of that series when due; (b) failure to pay any
interest on any Debt Security of that series when due, continued for 30 days;
(c) failure to deposit any sinking fund payment when due, in respect of any Debt
Security of that series; (d) failure to perform any other covenant of the
Company in the Indenture (other than a covenant included in the Indenture solely
for the benefit of one or more series of Debt Securities other than that
series), continued for 60 days after written notice as provided in the
Indenture; (e) certain events of bankruptcy, insolvency, conservatorship,
receivership or reorganization; (f) a default under any mortgage, indenture or
instrument evidencing any indebtedness for borrowed money by the Company
(including the Indenture) resulting in an aggregate principal amount exceeding
$10,000,000 becoming or being declared due and payable prior to its maturity
date or constituting a failure to pay at maturity an aggregate principal amount
exceeding $10,000,000, unless such acceleration has been rescinded or annulled
or such indebtedness has been discharged within 10 days after written notice to
the Company by the Trustee or Holders of at least 25% in aggregate principal
amount of the outstanding Debt Securities declaring a default or the Company is
contesting the validity of such default in good faith by appropriate
proceedings; and (g) any other Event of Default provided with respect to the
Debt Securities of that series.
If an Event of Default with respect to the outstanding Debt Securities of
any series occurs and is continuing, either the Trustee or the Holders of at
least 25% in aggregate principal amount of the outstanding Debt Securities of
that series may declare the principal amount (or, if the Debt Securities of that
series are original issue discount Debt Securities, such portion of the
principal amount as may be specified in the terms of that series) of all the
outstanding Debt Securities of that series to be due and payable immediately. At
any time after the declaration of acceleration with respect to the Debt
Securities of any series has been made, but before a judgment or decree based on
acceleration has been obtained, the Holders of a majority in aggregate principal
amount of the outstanding Debt Securities of that series may, under certain
circumstances, rescind and annul such acceleration.
The Indenture provides that, subject to the duty of the Trustee during
default to act with the required standard of care, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable indemnity. Subject to such provisions for the
indemnification of the Trustee and subject to certain limitations, the Holders
of a majority in aggregate principal amount of the outstanding Debt Securities
of any series will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Debt Securities
of that series.
10
The Company is required to furnish to the Trustee annually a statement as
to the performance by the Company of certain of its obligations under the
Indenture and as to any default in such performance.
Modification and Waiver
Modifications and amendments of the Indenture may be made by the Company
and the Trustee without the consent of any Holders to, among other things, (a)
evidence the succession of another corporation to the Company, (b) add to the
covenants of the Company or surrender any right or power conferred upon the
Company, (c) cure any ambiguity, correct or supplement any provision which may
be defective or inconsistent or make any other provisions with respect to
matters or questions arising under the Indenture, provided that such action does
not adversely affect the interests of the Holders of Debt Securities of any
series in any material respect, or (d) evidence and provide for a successor
Trustee.
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the Holders of a majority in aggregate
principal amount of the outstanding Debt Securities of each series affected by
such modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of each outstanding Debt
Security affected thereby, (a) change the stated maturity date of the principal
of, or any installment of principal of or interest, if any, on any Debt
Security, (b) reduce the principal amount of, or premium or interest if any, on
any Debt Security, (c) reduce the amount of principal of an original issue
discount Debt Security payable upon acceleration of the maturity thereof, (d)
change the currency of payment of the principal of, or premium or interest, if
any, on any Debt Security, (e) impair the right to institute suit for the
enforcement of any payment on or with respect to any Debt Security, (f) modify
the conversion provisions, if any, of any Debt Security in a manner adverse to
the Holder of that Debt Security, or (g) reduce the percentage in principal
amount of the outstanding Debt Security of any series, the consent of whose
Holders is required for modification or amendment of that Indenture or for
waiver of compliance with certain provisions of that Indenture or for waiver of
certain defaults.
The Holders of a majority in aggregate principal amount of the outstanding
Debt Securities of each series may, on behalf of all Holders of the Debt
Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the Indenture.
The Holders of a majority in aggregate principal amount of the outstanding Debt
Securities of each series may, on behalf of all Holders of the Debt Securities
of that series, waive any past default under the Indenture with respect to the
Debt Securities of that series, except a default in the payment of principal or
premium or interest, if any, or a default in respect of a covenant or provision
which under the terms of the Indenture cannot be modified or amended without the
consent of the Holder of each outstanding Debt Security of the series affected.
Consolidation, Merger and Sale of Assets
The Indenture provides that the Company, without the consent of the Holders
of any of the Debt Securities, may consolidate or merge with or into, or
transfer its assets substantially as an entirety to, any corporation organized
under the laws of the United States or any state, provided that the successor
corporation assumes the Company's obligations under the Indenture, that after
giving effect to the transaction no Event of Default, and no event which, after
notice or lapse of time, would become an Event of Default, shall have occurred
and be continuing, and that certain other conditions are met.
Global Securities
The Debt Securities of a series may be issued in whole or in part in global
form (the "Global Securities"). The Global Securities will be deposited with a
depositary (the "Depositary"), or with a
11
nominee for a Depositary, identified in the Prospectus Supplement. In such case,
one or more Global Securities will be issued in a denomination or aggregate
denominations equal to the portion of the aggregate principal amount of
outstanding Debt Securities of the series to be represented by such Global
Security or Securities. Unless and until it is exchanged in whole or in part for
Debt Securities in definitive form, a Global Security may not be transferred
except as a whole by the Depositary for such Global Security to a nominee of
such Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any such nominee to a
successor of such Depositary or a nominee of such successor.
The specific material terms of the depositary arrangement with respect to
any portion of a series of Debt Securities to be represented by a Global
Security will be described in the Prospectus Supplement. The Company anticipates
that the following provisions will apply to all depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of persons that have accounts with such Depositary
("participants"). The accounts to be credited shall be designated by any
underwriters or agents participating in the distribution of such Debt
Securities. Ownership of beneficial interests in a Global Security will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interests in such Global Security will be shown on, and
the transfer of that ownership will be effected only through, records maintained
by the Depositary for such Global Security (with respect to interests of
participants) or by participants or persons that hold through participants (with
respect to interests of persons other than participants). So long as the
Depositary for a Global Security, or its nominee, is the registered owner of
such Global Security, such Depositary or such nominee, as the case may be, will
be considered the sole owner or Holder of the Debt Securities represented by
such Global Security for all purposes under the Indenture; provided, however,
that for purposes of obtaining any consents or directions required to be given
by the Holders of the Debt Securities, the Company, the Trustee and its agents
will treat a person as the holder of such principal amount of Debt Securities as
specified in a written statement of the Depositary. Except as set forth herein
or otherwise provided in the Prospectus Supplement, owners of beneficial
interests in a Global Security will not be entitled to have the Debt Securities
represented by such Global Security registered in their names, will not receive
physical delivery of such Debt Securities in definitive form and will not be
considered the owners or Holders thereof under the Indenture.
Principal, premium, if any, and interest payments on Debt Securities
represented by a Global Security registered in the name of a Depositary or its
nominee will be made to such Depositary or its nominee, as the case may be, as
the registered owner of such Global Security. None of the Company, the Trustee
or any Paying Agent for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in such Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depositary for any Debt Securities represented
by a Global Security, upon receipt of any payment of principal, premium, if any,
or interest will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such Depositary. The
Company also expects that payments by participants will be governed by standing
instructions and customary practices, as is now the case with the securities
held for the accounts of customers registered in "street names" and will be the
responsibility of such participants.
12
If the Depositary for any Debt Securities represented by a Global Security
is at any time unwilling or unable to continue as Depositary and a successor
Depositary is not appointed by the Company within 90 days, the Company will
issue such Debt Securities in definitive form in exchange for such Global
Security. In addition, the Company may at any time and in its sole discretion
determine not to have any of the Debt Securities of a series represented by one
or more Global Securities and, in such event, will issue Debt Securities of such
series in definitive form in exchange for all of the Global Security or
Securities representing such Debt Securities.
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in Debt Securities represented by
Global Securities.
Governing Law
The Indenture and the Debt Securities will be governed by and construed in
accordance with the laws of the State of New York.
13
DESCRIPTION OF PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. Certain other terms of any series of the
Preferred Stock offered by any Prospectus Supplement will be described in such
Prospectus Supplement. The description of certain provisions of the Preferred
Stock set forth below and in any Prospectus Supplement does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Company's Amended and Restated Articles of Incorporation (the "Articles of
Incorporation"), and the articles supplementary (the "Articles Supplementary")
relating to each series of the Preferred Stock which will be filed with the
Commission and incorporated by reference as an exhibit to the Registration
Statement of which this Prospectus is a part at or prior to the time of the
issuance of such series of the Preferred Stock.
General
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, $0.10 par value per share, and 5,000,000 shares of preferred
stock, $1.00 par value per share ("preferred stock of the Company," which term,
as used herein, includes the Preferred Stock offered hereby). See "Description
of Common Stock."
Under the Articles of Incorporation, the Board of Directors of the Company
is authorized without further stockholder action to provide for the issuance of
up to 5,000,000 shares of preferred stock of the Company, in one or more series,
with such voting, dividend, conversion or liquidation rights, designations,
preferences, powers and relative participating, optional or other special rights
and qualifications, limitations or restrictions of shares of such series as
shall be stated in the resolution providing for the issue of a series of such
stock, adopted, at any time or from time to time, by the Board of Directors of
the Company.
As described under "Description of Depositary Shares," the Company may, at
its option, elect to offer Depositary Shares evidenced by depositary receipts
(the "Depositary Receipts"), each representing a fraction (to be specified in
the Prospectus Supplement relating to the particular series of the Preferred
Stock) of a share of the particular series of the Preferred Stock issued and
deposited with a depositary, in lieu of offering full shares of such series of
the Preferred Stock.
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise provided in a Prospectus
Supplement relating to a particular series of the Preferred Stock. Reference is
made to the Prospectus Supplement relating to the particular series of the
Preferred Stock offered thereby for specific terms, including: (i) the
designation and stated value per share of such Preferred Stock and the number of
shares offered; (ii) the amount of liquidation preference per share; (iii) the
initial public offering price at which such Preferred Stock will be issued; (iv)
the dividend rate (or method of calculation), the dates on which dividends shall
be payable and the dates from which dividends shall commence to cumulate, if
any; (v) any redemption or sinking fund provisions; (vi) any conversion rights;
(vii) whether the Company has elected to offer Depositary Shares as described
below under "Description of Depositary Shares;" and (viii) any additional
voting, dividend, liquidation, redemption, sinking fund and other rights,
preferences, privileges, limitations and restrictions.
The Preferred Stock will, when issued, be fully paid and nonassessable and
will have no preemptive rights. Unless otherwise stated in a Prospectus
Supplement relating to a particular series of the Preferred Stock, each series
of the Preferred Stock will rank on a parity as to dividends and distributions
of assets with each other series of the Preferred Stock. The rights of the
holders of each series of the Preferred Stock will be subordinate to those of
the Company's general creditors.
14
Certain Provisions of the Articles of Incorporation
See "Description of Common Stock--Redemption and Business Combination
Provisions" for a description of certain provisions of the Articles of
Incorporation, including provisions relating to redemption rights and provisions
which may have certain anti-takeover effects.
Dividend Rights
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of funds
of the Company legally available therefor, cash dividends on such dates and at
such rates as are set forth in, or as are determined by the method described in,
the Prospectus Supplement relating to such series of the Preferred Stock. Such
rate may be fixed or variable or both. Each such dividend will be payable to the
holders of record as they appear on the stock books of the Company (or, if
applicable, the records of the Depositary (as hereinafter defined) referred to
under "Description of Depositary Shares") on such record dates, fixed by the
Board of Directors of the Company, as specified in the Prospectus Supplement
relating to such series of Preferred Stock.
Such dividends may be cumulative or noncumulative, as provided in the
Prospectus Supplement relating to such series of Preferred Stock. If the Board
of Directors of the Company fails to declare a dividend payable on a dividend
payment date on any series of Preferred Stock for which dividends are
noncumulative, then the right to receive a dividend in respect of the dividend
period ending on such dividend payment date will be lost, and the Company shall
have no obligation to pay the dividend accrued for such period, whether or not
dividends on such series are declared payable on any future dividend payment
dates. Dividends on the shares of each series of Preferred Stock for which
dividends are cumulative will accrue from the date on which the Company
initially issues shares of such series.
So long as the shares of any series of the Preferred Stock shall be
outstanding, unless (i) full dividends (including if such Preferred Stock is
cumulative, dividends for prior dividend periods) shall have been paid or
declared and set apart for payment on all outstanding shares of the Preferred
Stock of such series and all other classes and series of preferred stock of the
Company (other than Junior Stock, as defined below) and (ii) the Company is not
in default or in arrears with respect to the mandatory or optional redemption or
mandatory repurchase or other mandatory retirement of, or with respect to any
sinking or other analogous fund for, any shares of Preferred Stock of such
series or any shares of any other preferred stock of the Company of any class or
series (other than Junior Stock), the Company may not, other than as the Company
determines is necessary to maintain its status as a REIT, declare any dividends
on any shares of Common Stock of the Company or any other stock of the Company
ranking as to dividends or distributions of assets junior to such series of
Preferred Stock (the Common Stock and any such other stock ranking junior to
such series of Preferred Stock being herein referred to as "Junior Stock"), or
make any payment on account of, or set apart money for, the purchase, redemption
or other retirement of, or for a sinking or other analogous fund for, any shares
of Junior Stock or make any distribution in respect thereof, whether in cash or
property or in obligations or stock of the Company, other than Junior Stock
which is neither convertible into, nor exchangeable or exercisable for, any
securities of the Company other than Junior Stock.
Liquidation Preference
In the event of any liquidation, dissolution or winding up of the Company,
voluntary or involuntary, the holders of each series of the Preferred Stock will
be entitled to receive out of the assets of the Company available for
distribution to stockholders, before any distribution of assets is made to the
holders of Common Stock or any other shares of stock of the Company ranking
junior as to such distribution to such series of Preferred Stock, the amount set
forth in the Prospectus Supplement relating
15
to such series of the Preferred Stock. If, upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the amounts payable with
respect to the Preferred Stock of any series and any other shares of preferred
stock of the Company (including any other series of the Preferred Stock) ranking
as to any such distribution on a parity with such series of the Preferred Stock
are not paid in full, the holders of the Preferred Stock of such series and of
such other shares of preferred stock of the Company will share ratably in any
such distribution of assets of the Company in proportion to the full respective
preferential amounts to which they are entitled. After payment to the holders of
the Preferred Stock of each series of the full preferential amounts of the
liquidating distribution to which they are entitled, the holders of each such
series of the Preferred Stock will be entitled to no further participation in
any distribution of assets by the Company.
Redemption
A series of the Preferred Stock may be redeemable, in whole or from time to
time in part, at the option of the Company, and may be subject to mandatory
redemption pursuant to a sinking fund or otherwise, in each case upon terms, at
the times and at the redemption prices set forth in the Prospectus Supplement
relating to such series. Shares of the Preferred Stock redeemed by the Company
will be restored to the status of authorized but unissued shares of preferred
stock of the Company.
In the event that fewer than all of the outstanding shares of a series of
the Preferred Stock are to be redeemed, whether by mandatory or optional
redemption, the number of shares to be redeemed will be determined by lot or pro
rata (subject to rounding to avoid fractional shares) as may be determined by
the Company or by any other method as may be determined by the Company in its
sole discretion to be equitable. From and after the redemption date (unless
default shall be made by the Company in providing for the payment of the
redemption price plus accumulated and unpaid dividends, if any), dividends shall
cease to accumulate on the shares of the Preferred Stock called for redemption
and all rights of the holders thereof (except the right to receive the
redemption price plus accumulated and unpaid dividends, if any) shall cease.
So long as any dividends on shares of any series of the Preferred Stock or
any other series of preferred stock of the Company ranking on a parity as to
dividends and distribution of assets with such series of the Preferred Stock are
in arrears, no shares of any such series of the Preferred Stock or such other
series of preferred stock of the Company will be redeemed (whether by mandatory
or optional redemption) unless all such shares are simultaneously redeemed, and
the Company will not purchase or otherwise acquire any such shares; provided,
however, that the foregoing will not prevent the purchase or acquisition of such
shares pursuant to a purchase or exchange offer made on the same terms to
holders of all such shares outstanding.
Conversion Rights
The terms, if any, on which shares of Preferred Stock of any series may be
exchanged for or converted (mandatorily or otherwise) into shares of Common
Stock or another series of Preferred Stock will be set forth in the Prospectus
Supplement relating thereto. See "Description of Common Stock."
Voting Rights
Except as indicated below or in a Prospectus Supplement relating to a
particular series of the Preferred Stock, or except as required by applicable
law, the holders of the Preferred Stock will not be entitled to vote for any
purpose.
16
So long as any shares of the Preferred Stock of a series remain
outstanding, the consent or the affirmative vote of the holders of at least
66-2/3% of the votes entitled to be cast with respect to the then outstanding
shares of such series of the Preferred Stock together with any Other Preferred
Stock (as defined below), voting as one class, either expressed in writing or at
a meeting called for that purpose, will be necessary (i) to permit, effect or
validate the authorization, or any increase in the authorized amount, of any
class or series of shares of the Company ranking prior to the Preferred Stock of
such series as to dividends, voting or upon distribution of assets and (ii) to
repeal, amend or otherwise change any of the provisions applicable to the
Preferred Stock of such series in any manner which adversely affects the powers,
preferences, voting power or other rights or privileges qualifications,
limitations and other characteristics of such series of the Preferred Stock. In
case any series of the Preferred Stock would be so affected by any such action
referred to in clause (ii) above in a different manner than one or more series
of the Other Preferred Stock then outstanding, the holders of shares of the
Preferred Stock of such series, together with any series of the Other Preferred
Stock which will be similarly affected, will be entitled to vote as a class, and
the Company will not take such action without the consent or affirmative vote,
as above provided, of at least 66-2/3% of the total number of votes entitled to
be cast with respect to each such series of the Preferred Stock and the Other
Preferred Stock similarly affected, then outstanding, in lieu of the consent or
affirmative vote hereinabove otherwise required.
With respect to any matter as to which the Preferred Stock of any series is
entitled to vote, holders of the Preferred Stock of such series and any other
series of preferred stock of the Company ranking on a parity with such series of
the Preferred Stock as to dividends and distributions of assets and which by its
terms provides for similar voting rights (the "Other Preferred Stock") will be
entitled to cast the number of votes set forth in the Prospectus Supplement with
respect to that series of Preferred Stock. As a result of the provisions
described in the preceding paragraph requiring the holders of shares of a series
of the Preferred Stock to vote together as a class with the holders of shares of
one or more series of Other Preferred Stock, it is possible that the holders of
such shares of Other Preferred Stock could approve action that would adversely
affect such series of Preferred Stock, including the creation of a class of
capital stock ranking prior to such series of Preferred Stock as to dividends,
voting or distributions of assets.
As more fully described below under "Description of Depositary Shares," if
the Company elects to issue Depositary Shares, each representing a fraction of a
share of a series of the Preferred Stock, each such Depositary Share will, in
effect, be entitled to such fraction of a vote per Depositary Share.
Transfer Agent and Registrar
Unless otherwise indicated in a Prospectus Supplement relating thereto, The
Bank of New York will be the transfer agent, dividend and redemption price
disbursement agent and registrar for shares of each series of the Preferred
Stock.
17
DESCRIPTION OF DEPOSITARY SHARES
The description set forth below and in the Prospectus Supplement of certain
provisions of the Deposit Agreement (as defined below) and of the Depositary
Shares and Depositary Receipts do not purport to be complete and are subject to
and qualified in their entirety by reference to the Deposit Agreement and
Depositary Receipts relating to each series of the Preferred Stock which will be
filed with the Commission and incorporated by reference as an exhibit to the
Registration Statement of which this Prospectus is a part at or prior to the
time of the issuance of such series of the Preferred Stock. The forms of Deposit
Agreement and Depositary Receipt are filed as exhibits to the Registration
Statement of which this Prospectus is a part.
General
The Company may, at its option, elect to offer fractional shares of
Preferred Stock rather than full shares of Preferred Stock. In the event such
option is exercised, the Company will issue to the public receipts for
Depositary Shares, each of which will represent a fraction (to be set forth in
the Prospectus Supplement relating to a particular series of the Preferred
Stock) of a share of a particular series of the Preferred Stock as described
below.
The shares of any series of the Preferred Stock represented by Depositary
Shares will be deposited under a separate deposit agreement (the "Deposit
Agreement") among the Company, a bank or trust company selected by the Company
(the "Depositary") and the holders from time to time of the Depositary Receipts.
Subject to the terms of the Deposit Agreement, each owner of a Depositary Share
will in general be entitled, in proportion to the applicable fraction of a share
of Preferred Stock represented by such Depositary Share, to all the rights and
preferences of the Preferred Stock represented thereby (including dividend,
voting, redemption and liquidation rights).
The Depositary Shares relating to any series of the Preferred Stock will be
evidenced by Depositary Receipts issued pursuant to the related Deposit
Agreement. Depositary Receipts will be distributed to those persons purchasing
such Depositary Shares in accordance with the terms of the offering made by the
related Prospectus Supplement.
Upon surrender of Depositary Receipts at the office of the Depositary equal
to one or more whole Depositary Shares and upon payment of the charges provided
in the Deposit Agreement and subject to the terms thereof, a holder of
Depositary Receipts is entitled to have the Depositary deliver to such holder
certificates representing the whole shares of Preferred Stock underlying the
Depositary Shares evidenced by the surrendered Depositary Receipts.
Dividends and Other Distributions
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Stock to the record holders
of Depositary Receipts relating to such Preferred Stock in proportion, insofar
as practicable, to the respective numbers of Depositary Shares evidenced by such
Depositary Receipts held by such holders on the relevant record date. The
Depositary shall distribute only such amount, however, as can be distributed
without attributing to any holder of Depositary Receipts a fraction of one cent,
and any balance not so distributed shall be added to and treated as part of the
next sum received by the Depositary (without liability for the interest
thereon), for distribution to record holders of Depositary Receipts then
outstanding.
In the event of a distribution other than in cash, the Depositary will
distribute such amounts of the securities or property received by it as are, as
nearly as practicable, in proportion to the respective
18
numbers of Depositary Shares evidenced by the Depositary Receipts held by such
holders on the relevant record date, unless the Depositary determines that it is
not feasible to make such distribution, in which case the Depositary may, with
the approval of the Company, adopt such method as it deems equitable and
practicable for the purpose of effecting such distribution, including the sale
of such securities or property.
The Deposit Agreement will also contain provisions relating to the manner
in which any subscription or similar rights offered by the Company to holders of
the Preferred Stock shall be made available to holders of Depositary Receipts.
The amount distributed in all of the foregoing cases will be reduced by any
amounts required to be withheld by the Company or the Depositary on account of
taxes and governmental charges.
Redemption of Depositary Shares
If a series of the Preferred Stock represented by Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the proceeds
received by the Depositary resulting from the redemption, in whole or in part,
of such series of the Preferred Stock held by the Depositary. The Depositary
shall mail notice of redemption not less than 30 and not more than 60 days prior
to the date fixed for redemption to the record holders of the Depositary
Receipts evidencing the Depositary Shares to be so redeemed at their respective
addresses appearing in the Depositary's books. The redemption price per
Depositary Share will be equal to the applicable fraction of the redemption
price per share payable with respect to such series of the Preferred Stock plus
all money and other property, if any, payable with respect to such Depositary
Share, including all amounts payable by the Company in respect of any
accumulated but unpaid dividends; provided, however, the Depositary may deduct
such fees and charges as are expressly provided in the Deposit Agreement for the
account of the holders of Depositary Receipts. Whenever the Company redeems
shares of Preferred Stock held by the Depositary, the Depositary will redeem as
of the same redemption date the number of Depositary Shares representing shares
of Preferred Stock so redeemed. If less than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected by lot or pro
rata (subject to rounding to avoid fractions of Depositary Shares) as may be
determined by the Depositary.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of Depositary Receipts evidencing such Depositary Shares will cease,
except the right to receive without interest the moneys payable upon such
redemption and any money or other property to which such holders were entitled
upon such redemption upon surrender to the Depositary of the Depositary Receipts
evidencing such Depositary Shares.
Voting the Preferred Stock
Upon receipt of notice of any meeting or action to be taken by written
consent at or as to which the holders of the Preferred Stock are entitled to
vote or consent, the Depositary will mail the information contained in such
notice of meeting or action to the record holders of the Depositary Receipts
evidencing the Depositary Shares relating to such Preferred Stock. Each record
holder of such Depositary Receipts on the record date (which will be the same
date as the record date for the Preferred Stock) will be entitled to instruct
the Depositary as to the exercise of the voting rights or the giving or refusal
of consent, as the case may be, pertaining to the number of shares of the
Preferred Stock represented by the Depositary Shares evidenced by such holder's
Depositary Receipts. The Depositary will endeavor, insofar as practicable, to
vote, or give or withhold consent with respect to, the maximum number of whole
shares of the Preferred Stock represented by all Depositary Shares as to which
any particular voting or consent instructions are received, and the Company will
agree to take all action which may be deemed necessary by the Depositary in
order to enable the Depositary to do so. The Depositary will abstain from
voting, or
19
giving consents with respect to, shares of the Preferred Stock to the extent it
does not receive specific instructions from the holders of Depositary Receipts
evidencing Depositary Shares representing such Preferred Stock.
Amendment and Termination of the Deposit Agreement
The form of Depositary Receipt evidencing the Depositary Shares relating to
any series of Preferred Stock and any provision of the related Deposit Agreement
may at any time and from time to time be amended by agreement between the
Company and the Depositary in any respect which they may deem necessary or
desirable.
However, any amendment which imposes or increases any fees, taxes or
charges upon holders of Depositary Shares or Depositary Receipts relating to any
series of Preferred Stock or which materially and adversely alters the existing
rights of such holders will not be effective unless such amendment has been
approved by the record holders of Depositary Receipts evidencing at least a
majority of such Depositary Shares then outstanding. Notwithstanding the
foregoing, no such amendment may impair the right of any holder of Depositary
Shares or Depositary Receipts to receive any moneys or other property to which
such holder may be entitled under the terms of such Depositary Receipts or the
Deposit Agreement at the times and in the manner and amount provided for
therein. A Deposit Agreement may be terminated by the Company or the Depositary
only after (i) all outstanding Depositary Shares relating thereto have been
redeemed and any accumulated and unpaid dividends on the Preferred Stock
represented by the Depositary Shares, together with all other moneys and
property, if any, to which holders of the related Depositary Receipts are
entitled under the terms of such Depositary Receipts or the related Deposit
Agreement, have been paid or distributed as provided in the Deposit Agreement or
provision therefor has been duly made, (ii) there has been a final distribution
in respect of the Preferred Stock of the relevant series in connection with any
liquidation, dissolution or winding up of the Company and such distribution has
been distributed to the holders of the related Depositary Receipts, or (iii) in
the event the Depositary Shares relate to a series of Preferred Stock which is
convertible into shares of Common Stock, all outstanding Depositary Shares have
been converted into shares of Common Stock; provided, however, that resignation
and removal of the Depositary, and appointment of a successor Depositary shall
not constitute a termination of a Deposit Agreement.
Miscellaneous
The Depositary will forward to record holders of Depositary Receipts, at
their respective addresses appearing in the Depositary's books, all reports and
communications from the Company which are delivered to the Depositary and which
the Company is required to furnish to the holders of the Preferred Stock or
Depositary Receipts.
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Depositary in connection with the initial deposit of the
Preferred Stock and the initial issuance of the Depositary Receipts evidencing
the Depositary Shares, any redemption of the Preferred Stock and any withdrawals
of Preferred Stock by the holders of Depositary Shares. Holders of Depositary
Shares will pay other transfer and other taxes and governmental charges and such
other charges as are expressly provided in the Deposit Agreement to be for their
accounts which may be deducted from payments otherwise due to such holders with
respect to their Depositary Receipts.
The Deposit Agreement will contain provisions relating to adjustments in
the fraction of a share of Preferred Stock represented by a Depositary Share in
the event of a change in par or stated value, split-
20
up, combination or other reclassification of the Preferred Stock or upon any
recapitalization, merger or sale of substantially all of the assets of the
Company.
Neither the Depositary nor any of its agents nor any registrar nor the
Company will be (i) liable if it is prevented or delayed by law or any
circumstance beyond its control in performing its obligations under the Deposit
Agreement, (ii) subject to any liability under the Deposit Agreement to holders
of Depositary Receipts other than for the relevant party's gross negligence or
willful misconduct or (iii) obligated to prosecute or defend any legal
proceeding in respect of any Depositary Receipts, Depositary Shares or the
Preferred Stock unless satisfactory indemnity is furnished. They may rely upon
written advice of counsel or accountants, or information provided by holders of
Depositary Receipts or other persons in good faith believed to be competent and
on documents reasonably believed to be genuine.
Resignation or Removal of Depositary
The Depositary may resign at any time by delivering to the Company notice
of its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal.
21
DESCRIPTION OF COMMON STOCK
Common Stock
All shares of Common Stock participate equally in dividends payable to
stockholders of Common Stock when and as declared by the Board of Directors and
in net assets available for distribution to stockholders of Common Stock on
liquidation or dissolution, have one vote per share on all matters submitted to
a vote of the stockholders and do not have cumulative voting rights in the
election of directors. All issued and outstanding shares of Common Stock are,
and the Common Stock offered hereby will be upon issuance, validly issued, fully
paid and nonassessable. Holders of the Common Stock do not have preference,
conversion, exchange or preemptive rights. The Common Stock is listed on the New
York Stock Exchange (NYSE Symbol: NHP).
Redemption and Business Combination Provisions
If the Board of Directors shall, at any time and in good faith, be of the
opinion that direct or indirect ownership of at least 9.9% or more of the voting
shares of capital stock has or may become concentrated in the hands of one
beneficial owner, the Board of Directors shall have the power (i) by lot or
other means deemed equitable by it to call for the purchase from any stockholder
of the Company a number of voting shares sufficient, in the opinion of the Board
of Directors, to maintain or bring the direct or indirect ownership of voting
shares of capital stock of such beneficial owner to a level of no more than 9.9%
of the outstanding voting shares of the Company's capital stock, and (ii) to
refuse to transfer or issue voting shares of capital stock to any person whose
acquisition of such voting shares would, in the opinion of the Board of
Directors, result in the direct or indirect ownership by that person of more
than 9.9% of the outstanding voting shares of capital stock of the Company.
Further, any transfer of shares, options, warrants or other securities
convertible into voting shares that would create a beneficial owner of more than
9.9% of the outstanding voting shares shall be deemed void ab initio and the
intended transferee shall be deemed never to have had an interest therein. The
purchase price for any voting shares of capital stock so redeemed shall be equal
to the fair market value of the shares reflected in the closing sales price for
the shares, if then listed on a national securities exchange, or the average of
the closing sales prices for the shares if then listed on more than one national
securities exchange, or if the shares are not then listed on a national
securities exchange, the latest bid quotation for the shares if then traded
over-the-counter, on the last business day immediately preceding the day on
which notices of such acquisitions are sent by the Company, or, if no such
closing sales prices or quotations are available, then the purchase price shall
be equal to the net asset value of such stock as determined by the Board of
Directors in accordance with the provisions of applicable law. From and after
the date fixed for purchase by the Board of Directors, the holder of any shares
so called for purchase shall cease to be entitled to distributions, voting
rights and other benefits with respect to such shares, except the right to
payment of the purchase price for the shares.
The Articles of Incorporation require that, except in certain
circumstances, Business Combinations (as defined) between the Company and a
beneficial holder of 10% or more of the Company's outstanding voting stock (a
"Related Person") be approved by the affirmative vote of at least 90% of the
outstanding voting shares of the Company.
A Business Combination is defined in the Articles of Incorporation as (a)
any merger or consolidation of the Company with or into a Related Person, (b)
any sale, lease, exchange, transfer or other disposition, including without
limitation a mortgage or any other security device, of all or any "Substantial
Part" (as defined below) of the assets of the Company (including without
limitation any voting securities of a subsidiary) to a Related Person, (c) any
merger or consolidation of a Related Person with or into the Company, (d) any
sale, lease, exchange, transfer or other disposition of all or any
22
Substantial Part of the assets of a Related Person to the Company, (e) the
issuance of any securities (other than by way of pro rata distribution to all
stockholders) of the Company to a Related Person, and (f) any agreement,
contract or other arrangement providing for any of the transactions described in
the definition of Business Combination. The term "Substantial Part" shall mean
more than 10% of the book value of the total assets of the Company as of the end
of its most recent fiscal year ending prior to the time the determination is
being made.
Pursuant to the Articles of Incorporation, the Company's Board of Directors
is classified into three classes. Each class of directors serves for a term of
three years, with one class being elected each year. As of the date of this
Prospectus, there are six directors, divided into three classes consisting of
one, two and three directors, respectively.
The foregoing provisions of the Articles of Incorporation and certain other
matters may not be amended without the affirmative vote of at least 90% of the
outstanding voting shares of the Company.
The foregoing provisions may have the effect of discouraging unilateral
tender offers or other takeover proposals which certain stockholders might deem
in their interests or in which they might receive a substantial premium. The
Board of Directors' authority to issue and establish the terms of currently
authorized Preferred Stock, without stockholder approval, may also have the
effect of discouraging takeover attempts. See "Description of Preferred Stock."
The provisions could also have the effect of insulating current management
against the possibility of removal and could, by possibly reducing temporary
fluctuations in market price caused by accumulations of shares, deprive
stockholders of opportunities to sell at a temporarily higher market price.
However, the Board of Directors believes that inclusion of the Business
Combination provisions in the Articles of Incorporation may help assure fair
treatment of stockholders and preserve the assets of the Company.
The foregoing summary of certain provisions of the Articles of
Incorporation does not purport to be complete or to give effect to provisions of
statutory or common law. The foregoing summary is subject to, and qualified in
its entirety by reference to, the provisions of applicable law and the Articles
of Incorporation, a copy of which is incorporated by reference as an exhibit to
the Registration Statement of which this Prospectus is a part.
Transfer Agent and Registrar
The Bank of New York is the transfer agent and registrar of the Common
Stock.
23
DESCRIPTION OF SECURITIES WARRANTS
The Company may issue Securities Warrants for the purchase of Debt
Securities, Preferred Stock, Depositary Shares or Common Stock. Securities
Warrants may be issued independently or together with Debt Securities, Preferred
Stock, Depositary Shares or Common Stock offered by any Prospectus Supplement
and may be attached to or separate from such Debt Securities, Preferred Stock,
Depositary Shares or Common Stock. Each series of Securities Warrants will be
issued under a separate warrant agreement (a "Securities Warrant Agreement") to
be entered into between the Company and a bank or trust company, as Securities
Warrant agent, all as set forth in the Prospectus Supplement relating to the
particular issue of offered Securities Warrants. The Securities Warrant agent
will act solely as an agent of the Company in connection with the Securities
Warrant certificates relating to the Securities Warrants and will not assume any
obligation or relationship of agency or trust for or with any holders of
Securities Warrant certificates or beneficial owners of Securities Warrants. The
following summaries of certain provisions of the Securities Warrant Agreement
and Securities Warrants do not purport to be complete and are subject to, and
are qualified in their entirety by reference to, all the provisions of the
Securities Warrant Agreement and the Securities Warrant certificates relating to
each series of Security Warrants which will be filed with the Commission and
incorporated by reference as an exhibit to the Registration Statement of which
this Prospectus is a part at or prior to the time of the issuance of such series
of Securities Warrants.
If Securities Warrants are offered, the applicable Prospectus Supplement
will describe the terms of such Securities Warrants, including, in the case of
Securities Warrants for the purchase of Debt Securities, the following where
applicable: (i) the offering price; (ii) the denominations and terms of the
series of Debt Securities purchasable upon exercise of such Securities Warrants;
(iii) the designation and terms of any series of Debt Securities, Preferred
Stock or Depositary Shares with which such Securities Warrants are being offered
and the number of such Securities Warrants being offered with each such Debt
Security, Preferred Stock or Depositary Share; (iv) the date, if any, on and
after which such Securities Warrants and the related series of Debt Securities,
Preferred Stock or Depositary Shares will be transferable separately; (v) the
principal amount of the series of Debt Securities purchasable upon exercise of
each such Securities Warrant and the price at which such principal amount of
Debt Securities of such series may be purchased upon such exercise; (vi) the
date on which the right to exercise such Securities Warrants shall commence and
the date (the "Expiration Date") on which such right shall expire; (vii) whether
the Securities Warrants will be issued in registered or bearer form; (viii) any
special United States Federal income tax consequences; (ix) the terms, if any,
on which the Company may accelerate the date by which the Securities Warrants
must be exercised; and (x) any other terms of such Securities Warrants.
In the case of Securities Warrants for the purchase of Preferred Stock,
Depositary Shares or Common Stock, the applicable Prospectus Supplement will
describe the terms of such Securities Warrants, including the following where
applicable: (i) the offering price; (ii) the aggregate number of shares
purchasable upon exercise of such Securities Warrants, the exercise price, and
in the case of Securities Warrants for Preferred Stock or Depositary Shares, the
designation, aggregate number and terms of the series of Preferred Stock
purchasable upon exercise of such Securities Warrants or underlying the
Depositary Shares purchasable upon exercise of such Securities Warrants; (iii)
the designation and terms of the series of Debt Securities, Preferred Stock or
Depositary Shares with which such Securities Warrants are being offered and the
number of such Securities Warrants being offered with each such Debt Security,
Preferred Stock or Depositary Share; (iv) the date, if any, on and after which
such Securities Warrants and the related series of Debt Securities, Preferred
Stock, Depositary Shares or Common Stock will be transferable separately; (v)
the date on which the right to exercise such Securities Warrants shall commence
and the Expiration Date; (vi) any special United States Federal income tax
consequences; and (vii) any other terms of such Securities Warrants.
24
Securities Warrant certificates may be exchanged for new Securities Warrant
certificates of different denominations, may (if in registered form) be
presented for registration of transfer, and may be exercised at the corporate
trust office of the Securities Warrant agent or any other office indicated in
the applicable Prospectus Supplement. Prior to the exercise of any Securities
Warrant to purchase Debt Securities, holders of such Securities Warrants will
not have any of the rights of holders of the Debt Securities purchasable upon
such exercise, including the right to receive payments of principal of, premium,
if any, or interest, if any, on such Debt Securities or to enforce covenants in
the applicable indenture. Prior to the exercise of any Securities Warrants to
purchase Preferred Stock, Depositary Shares or Common Stock, holders of such
Securities Warrants will not have any rights of holders of such Preferred Stock,
Depositary Shares or Common Stock, including the right to receive payments of
dividends, if any, on such Preferred Stock or Common Stock, or to exercise any
applicable right to vote.
Certain Risk Considerations
Any Securities Warrants issued by the Company will involve a certain degree
of risk, including risks arising from fluctuations in the price of the
underlying securities and general risks applicable to the stock market (or
markets) on which the underlying securities are traded.
Prospective purchasers of the Securities Warrants should recognize that the
Securities Warrants may expire worthless and, thus, purchasers should be
prepared to sustain a total loss of the purchase price of their Securities
Warrants. This risk reflects the nature of a Securities Warrant as an asset
which, other factors held constant, tends to decline in value over time and
which may, depending on the price of the underlying securities, become worthless
when it expires. The trading price of a Securities Warrant at any time is
expected to increase if the price, or, if applicable, dividend rate on the
underlying securities, increases. Conversely, the trading price of a Securities
Warrant is expected to decrease as the time remaining to expiration of the
Securities Warrant decreases and as the price or, if applicable, dividend rate
on the underlying securities, decreases. Assuming all other factors are held
constant, the more a Securities Warrant is "out-of-the-money" (i.e., the more
the exercise price exceeds the price of the underlying securities and the
shorter its remaining term to expiration), the greater the risk that a purchaser
of the Securities Warrant will lose all or part of his or her investment. If the
price of the underlying securities does not rise before the Securities Warrant
expires to an extent sufficient to cover a purchaser's cost of the Securities
Warrant, the purchaser will lose all or part of his or her investment in such
Securities Warrant upon expiration.
In addition, prospective purchasers of the Securities Warrants should be
experienced with respect to options and option transactions and understand the
risks associated with options and should reach an investment decision only after
careful consideration, with their financial advisers, of the suitability of the
Securities Warrants in light of their particular financial circumstances and the
information discussed herein and, if applicable, the Prospectus Supplement.
Before purchasing, exercising or selling any Securities Warrants, prospective
purchasers and holders of Securities Warrants should carefully consider, among
other things, (i) the trading price of the Securities Warrants, (ii) the price
of the underlying securities at such time, (iii) the time remaining to
expiration and (iv) any related transaction costs. Some of the factors referred
to above are in turn influenced by various political, economic and other factors
that can affect the trading price of the underlying securities and should be
carefully considered prior to making any investment decisions.
Purchasers of the Securities Warrants should further consider that the
initial offering price of the Securities Warrants may be in excess of the price
that a purchaser of options might pay for a comparable option in a private, less
liquid transaction. In addition, it is not possible to predict the price at
which the Securities Warrants will trade in the secondary market or whether any
such market will be liquid. The Company may, but is not obligated to, file an
application to list any Securities Warrants issued on a
25
United States national securities exchange. To the extent that any Securities
Warrants are exercised, the number of Securities Warrants outstanding will
decrease, which may result in a lessening of the liquidity of the Securities
Warrants. Finally, the Securities Warrants will constitute direct, unconditional
and unsecured obligations of the Company and as such will be subject to any
changes in the perceived creditworthiness of the Company.
Exercise of Securities Warrants
Each Securities Warrant will entitle the holder thereof to purchase such
principal amount of Debt Securities or number of shares of Preferred Stock,
Depositary Shares or Common Stock, as the case may be, at such exercise price as
shall in each case be set forth in, or calculable from, the Prospectus
Supplement relating to the offered Securities Warrants. After the close of
business on the Expiration Date (or such later date to which such Expiration
Date may be extended by the Company), unexercised Securities Warrants will
become void.
Securities Warrants may be exercised by delivering to the Securities
Warrant agent payment as provided in the applicable Prospectus Supplement of the
amount required to purchase the Debt Securities, Preferred Stock, Depositary
Shares or Common Stock, as the case may be, purchasable upon such exercise
together with certain information set forth on the reverse side of the
Securities Warrant certificate. Securities Warrants will be deemed to have been
exercised upon receipt of payment of the exercise price, subject to the receipt
within five (5) business days, of the Securities Warrant certificate evidencing
such Securities Warrants. Upon receipt of such payment and the Securities
Warrant certificate properly completed and duly executed at the corporate trust
office of the Securities Warrant agent or any other office indicated in the
applicable Prospectus Supplement, the Company will, as soon as practicable,
issue and deliver the Debt Securities, Preferred Stock, Depositary Shares or
Common Stock, as the case may be, purchasable upon such exercise. If fewer than
all of the Securities Warrants represented by such Securities Warrant
certificate are exercised, a new Securities Warrant certificate will be issued
for the remaining amount of Securities Warrants.
Amendments and Supplements to Securities Warrant Agreement
The Securities Warrant Agreements may be amended or supplemented without
the consent of the holders of the Securities Warrants issued thereunder to
effect changes that are not inconsistent with the provisions of the Securities
Warrants and that do not adversely affect the interests of the holders of the
Securities Warrants.
Common Stock Warrant Adjustments
Unless otherwise indicated in the applicable Prospectus Supplement, the
exercise price of, and the number of shares of Common Stock covered by, a Common
Stock Warrant are subject to adjustment in certain events, including (i) payment
of a dividend on the Common Stock payable in capital stock and stock splits,
combinations or reclassifications of the Common Stock, (ii) issuance to all
holders of Common Stock of rights or warrants to subscribe for or purchase
shares of Common Stock at less than their current market price (as defined in
the Securities Warrant Agreement for such series of Common Stock Warrants), and
(iii) certain distributions of evidences of indebtedness or assets (including
securities but excluding cash dividends or distributions paid out of
consolidated earnings or retained earnings or dividends payable in Common Stock)
or of subscription rights and warrants (excluding those referred to above).
No adjustment in the exercise price of, and the number of shares of Common
Stock covered by, a Common Stock Warrant will be made for regular quarterly or
other periodic or recurring cash dividends
26
or distributions or for cash dividends or distributions to the extent paid from
consolidated earnings or retained earnings. No adjustment will be required
unless such adjustment would require a change of at least 1% in the exercise
price then in effect. Except as stated above, the exercise price of, and the
number of shares of Common Stock covered by, a Common Stock Warrant will not be
adjusted for the issuance of Common Stock or any securities convertible into or
exchangeable for Common Stock, or carrying the right or option to purchase or
otherwise acquire the foregoing, in exchange for cash, other property or
services.
In the event of any (i) consolidation or merger of the Company with or into
any entity (other than a consolidation or a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock), (ii) sale, transfer, lease or conveyance of all or substantially
all of the assets of the Company or (iii) reclassification, capital
reorganization or change of the Common Stock (other than solely a change in par
value or from par value to no par value), then any holder of a Common Stock
Warrant will be entitled, on or after the occurrence of any such event, to
receive on exercise of such Common Stock Warrant the kind and amount of shares
of stock or other securities, cash or other property (or any combination
thereof) that the holder would have received had such holder exercised such
holder's Common Stock Warrant immediately prior to the occurrence of such event.
If the consideration to be received upon exercise of the Common Stock Warrant
following any such event consists of common stock of the surviving entity, then
from and after the occurrence of such event, the exercise price of such Common
Stock Warrant will be subject to the same anti-dilution and other adjustments
described in the second preceding paragraph, applied as if such common stock
were Common Stock.
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters for public
offering and sale by them or may sell the Securities to investors directory or
through agents. Any such underwriter or agent involved in the offer and sale of
Securities will be named in the applicable Prospectus Supplement. The Company
has reserved the right to sell Securities directly to investors on its own
behalf in those jurisdictions where and in such manner as it is authorized to do
so.
Underwriters may offer and sell Securities at a fixed price or prices,
which may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Company
also may offer and sell Securities in exchange for one or more of its
outstanding issues of the Securities or other securities. The Company also may,
from time to time, authorize dealers, acting as the Company's agents, to offer
and sell Securities upon the terms and conditions as are set forth in the
applicable Prospectus Supplement. In connection with the sale of Securities,
underwriters may receive compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of the Securities for whom they may act as agent. Underwriters may
sell Securities to or through dealers, and such dealers may receive compensation
in the form of discounts, concessions or commissions from the underwriters
and/or commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Securities, and any discounts, concessions or
commissions allowed by underwriters to participating dealers, will be set forth
in the applicable Prospectus Supplement. Dealers and agents participating in the
distribution of Securities may be deemed to be underwriters, and any discounts
and commissions received by them and any profit realized by them on resale of
the Securities may be deemed to be underwriting discounts and commissions.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities.
27
If so indicated in the Prospectus Supplement, the Company will authorize
dealers acting as the Company's agents to solicit offers by certain institutions
to purchase the Securities from the Company at the public offering price set
forth in the applicable Prospectus Supplement pursuant to delayed delivery
contracts ("Contracts") providing for payment and delivery on the date or dates
stated in such Prospectus Supplement. Each Contract will be for an amount not
less than, and the aggregate principal amount of the Securities sold pursuant to
Contracts shall be not less nor more than, the respective amounts stated in the
applicable Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions but will in all cases be subject to the
approval of the Company. Contracts will not be subject to any conditions except
(i) the purchase by an institution of the Securities covered by its Contracts
shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject, and (ii)
if the Securities are being sold to underwriters, the Company shall have sold to
such underwriters the total principal amount of such Securities less the
principal amount thereof covered by Contracts.
The net proceeds to the Company from the sale of the Securities will be the
purchase price of the Securities less any such discounts or commissions and the
other attributable expenses of issuance and distribution.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for the
Company by O'Melveny & Myers LLP. In addition, O'Melveny & Myers LLP has passed
upon certain federal income tax matters relating to the Company.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1997,
1996, 1995, 1994, and 1993 and the consolidated statements of operations,
stockholders' equity and cash flows for each of the five years in the period
ended December 31, 1997, incorporated by reference in this Prospectus and
elsewhere in the Registration Statement, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are incorporated by reference herein in reliance upon the authority
of said firm as experts in accounting and auditing in giving said reports.
28
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No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus in connection with the offer made by this Prospectus Supplement and
the accompanying Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Company
or any Underwriter, dealer or agent. Neither the delivery of this Prospectus
Supplement and the accompanying Prospectus nor any sale made hereunder shall,
under any circumstances, create an implication that there has been no change in
the affairs of the Company since the date hereof. This Prospectus Supplement and
the accompanying Prospectus do not constitute an offer or solicitation by anyone
in any state in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to
anyone to whom it is unlawful to make such offer or solicitation.
__________________
TABLE OF CONTENTS
Prospectus Supplement
Page
----
The Company .............................................................. S- 3
Use of Proceeds .......................................................... S- 4
Certain Federal Income Tax Consideration ................................. S- 5
Underwriting ............................................................. S-12
Legal matters ............................................................ S-13
Prospectus
Available Information .................................................... 3
Incorporation of Certain Documents by Reference .......................... 3
The Company .............................................................. 4
Selected Consolidated Financial Information .............................. 5
Ratio of Earnings to Fixed Charges ....................................... 8
Use of Proceeds .......................................................... 8
Description of Debt Securities ........................................... 8
Description of Preferred Stock ........................................... 14
Description of Depositary Shares ......................................... 18
Description of Common Stock .............................................. 22
Description of Securities Warrants ....................................... 24
Plan of Distribution ..................................................... 27
Legal Matters ............................................................ 28
Experts .................................................................. 28
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869,565 Shares
NHP
NATIONWIDE HEALTH PROPERTIES, INC.
Common Stock
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PROSPECTUS SUPPLEMENT
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February 25, 2002