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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2001
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________
Commission file number 1-9028
NATIONWIDE HEALTH PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
----------------
Maryland 95-3997619
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
610 Newport Center Drive, Suite 1150
Newport Beach, California 92660
(Address of principal executive offices)
(949) 718-4400
(Registrant's telephone number, including area code)
----------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Shares of registrant's common stock, $.10 par value, outstanding at April 30,
2001--46,240,651.
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NATIONWIDE HEALTH PROPERTIES, INC.
FORM 10-Q
March 31, 2001
TABLE OF CONTENTS
Part I--Financial Information
Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets.......................... 2
Condensed Consolidated Statements of Operations................ 3
Condensed Consolidated Statements of Cash Flows................ 4
Notes to Condensed Consolidated Financial Statements........... 5
Management's Discussion and Analysis of Financial Condition and
Item 2. Results of Operations.......................................... 8
Part II--Other Information
Item 6. Exhibits and Reports on Form 8-K............................... 12
1
PART I
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2001 2000
----------- ------------
(Unaudited)
(Dollars in thousands)
ASSETS
------
Investments in real estate
Real estate properties:
Land.............................................. $ 141,437 $ 142,721
Buildings and improvements........................ 1,175,300 1,182,410
Construction in progress.......................... 8,683 8,478
---------- ----------
1,325,420 1,333,609
Less accumulated depreciation..................... (192,380) (186,206)
---------- ----------
1,133,040 1,147,403
Mortgage loans receivable, net.................... 185,938 185,623
---------- ----------
1,318,978 1,333,026
Cash and cash equivalents............................. 9,205 6,149
Receivables........................................... 8,137 7,607
Other assets.......................................... 35,688 34,225
---------- ----------
$1,372,008 $1,381,007
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Bank borrowings....................................... $ 74,000 $ 79,000
Senior notes due 2001-2038............................ 622,900 627,900
Notes and bonds payable............................... 62,651 62,857
Accounts payable and accrued liabilities.............. 57,690 47,778
Stockholders' equity:
Preferred stock $1.00 par value; 5,000,000 shares
authorized; Issued and outstanding: 2001--
1,000,000; 2000--1,000,000, stated at liquidation
preference of $100 per share....................... 100,000 100,000
Common stock $.10 par value; 100,000,000 shares
authorized; Issued and outstanding: 2001--
46,240,651; 2000--46,226,484....................... 4,624 4,623
Capital in excess of par value...................... 556,772 556,658
Cumulative net income............................... 590,786 575,619
Cumulative dividends................................ (697,415) (673,428)
---------- ----------
Total stockholders' equity........................ 554,767 563,472
---------- ----------
$1,372,008 $1,381,007
========== ==========
See accompanying notes.
2
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands except per share amounts)
Three Months
Ended March 31,
----------------
2001 2000
------- -------
Revenues:
Minimum rent............................................... $32,605 $32,269
Interest and other income.................................. 5,321 6,335
Additional rent and additional interest.................... 3,753 3,817
------- -------
41,679 42,421
Expenses:
Interest and amortization of deferred financing costs...... 14,302 14,560
Depreciation and non-cash charges.......................... 10,491 9,842
General and administrative................................. 1,719 1,497
------- -------
26,512 25,899
------- -------
Net income before gain on sale of properties................. 15,167 16,522
Gain on sale of properties................................... -- 1,016
------- -------
Net income................................................... 15,167 17,538
Preferred stock dividends.................................... (1,919) (1,919)
------- -------
Net income available to common stockholders.................. $13,248 $15,619
======= =======
Per share amounts:
Basic/diluted income from continuing operations available
to common stockholders.................................... $ .29 $ .32
======= =======
Basic/diluted net income available to common stockholders.. $ .29 $ .34
======= =======
Dividends paid per common share............................ $ .46 $ .46
======= =======
Weighted average shares outstanding.......................... 46,235 46,224
======= =======
See accompanying notes.
3
NATIONWIDE HEALTH PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months
Ended March 31,
------------------
2001 2000
-------- --------
(In thousands)
Cash flow from operating activities:
Net income................................................. $ 15,167 $ 17,538
Gain on sale of properties............................... -- (1,016)
Depreciation and non-cash charges........................ 10,491 9,842
Amortization of deferred financing costs................. 240 258
Net increase in other assets and liabilities............. 7,456 12,334
-------- --------
Net cash provided by operating activities.............. 33,354 38,956
Cash flow from investing activities:
Investment in real estate properties..................... (1,222) (7,743)
Disposition of real estate properties.................... 5,275 9,819
Investment in mortgage loans receivable.................. (610) (246)
Principal payments on mortgage loans receivable.......... 626 4,198
-------- --------
Net cash provided by investing activities.............. 4,069 6,028
Cash flow from financing activities:
Bank borrowings.......................................... 44,000 36,500
Repayment of bank borrowings............................. (49,000) (45,800)
Issuance of common stock................................. 59 --
Issuance of senior unsecured debt........................ 15,000 --
Repayments of senior unsecured debt...................... (20,000) (10,000)
Principal payments on convertible debentures, notes and
bonds................................................... (161) (103)
Dividends paid........................................... (23,987) (23,830)
Other, net............................................... (278) (39)
-------- --------
Net cash used in financing activities.................. (34,367) (43,272)
-------- --------
Increase in cash and cash equivalents...................... 3,056 1,712
Cash and cash equivalents, beginning of period............. 6,149 16,139
-------- --------
Cash and cash equivalents, end of period................... $ 9,205 $ 17,851
======== ========
See accompanying notes.
4
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001
(Unaudited)
(i) We have prepared the condensed consolidated financial statements
included herein without audit. These financial statements include all
adjustments that are, in the opinion of management, necessary for a fair
presentation of the results of operations for the three-month periods ended
March 31, 2001 and 2000 pursuant to the rules and regulations of the
Securities and Exchange Commission. All such adjustments are of a normal
recurring nature. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. Although we believe that the disclosures in the
financial statements included herein are adequate to make the information
presented not misleading, these condensed consolidated financial statements
should be read in conjunction with our financial statements and the notes
thereto included in our Annual Report on Form 10-K for the year ended December
31, 2000 filed with the Securities and Exchange Commission ("2000 Annual
Report"). The results of operations for the three-month periods ended March
31, 2001 and 2000 are not necessarily indicative of the results for a full
year.
(ii) Nationwide Health Properties, Inc., a Maryland corporation organized
in October 1985, is a real estate investment trust that invests primarily in
health care 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.
As of March 31, 2001, we had investments in 324 facilities located in 37
states. The facilities include 180 skilled nursing facilities, 128 assisted
living facilities, 13 continuing care retirement communities, 2 rehabilitation
hospitals and 1 medical clinic. Our facilities are operated by 59 different
operators, including the following publicly traded companies: Alterra
Healthcare Corporation ("Alterra"), American Retirement Corporation, ARV
Assisted Living, Inc., Beverly Enterprises, Inc., Harborside Healthcare
Corporation, HEALTHSOUTH Corporation, Integrated Health Services, Inc.,
Mariner Post-Acute Network, Inc. and Sun Healthcare Group, Inc. Of the
operators of the facilities, only Alterra, which accounted for 12% of our
revenues for the three months ended March 31, 2001, accounts for more than 10%
of our revenues.
As of March 31, 2001, we had direct ownership of 144 skilled nursing
facilities, 121 assisted living facilities, 9 continuing care retirement
communities, 2 rehabilitation hospitals and 1 medical clinic. Substantially
all of our owned facilities are leased under "net" leases that are accounted
for as operating leases.
The leases have initial terms ranging from 5 to 19 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 such revenue until all
possible contingencies have been eliminated. For additional information about
the effects of SAB No. 101, please see Footnote 2 "Summary of Significant
Accounting Policies" and Footnote 16 "Quarterly Financial Data" to our
financial statements in our 2000 Annual Report. Most of the leases contain
provisions such that the total rent cannot decrease from one year to the next.
In addition, most of the 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 191 facilities are
backed by irrevocable letters of credit or security deposits that cover from 1
to 12 months of monthly minimum rents. Under the terms of the leases, the
lessees are responsible for all maintenance, repairs, taxes and insurance on
the leased properties.
5
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
March 31, 2001
(Unaudited)
As of March 31, 2001, we held 35 mortgage loans secured by 36 skilled
nursing facilities, 7 assisted living facilities, 4 continuing care retirement
communities and 4 parcels of land. As of March 31, 2001, the mortgage loans
had a net book value of approximately $185,938,000 with individual outstanding
balances ranging from approximately $365,000 to $15,724,000 and maturities
ranging from 2001 to 2025.
(iii) Basic earnings per share is computed by dividing income from
continuing operations available to common stockholders by the weighted average
common shares outstanding. Income available to common stockholders is
calculated by deducting dividends declared on preferred stock from income from
continuing operations and net income. Diluted earnings per share includes the
effect of the potential shares outstanding.
Three months ended March 31,
-----------------------------
2001 2000
-------------- --------------
Income Shares Income Shares
------- ------ ------- ------
(In thousands)
Income before gain on sale of properties......... $15,167 $16,522
Less: preferred stock dividends.................. 1,919 1,919
------- -------
Amounts used to calculate Basic EPS.............. 13,248 46,235 14,603 46,224
Effect of dilutive securities:
Stock options.................................. -- 7 -- --
------- ------ ------- ------
Amounts used to calculate Diluted EPS............ $13,248 46,242 $14,603 46,224
======= ====== ======= ======
(iv) The Company qualifies as a real estate investment trust under Sections
856 through 860 of the Internal Revenue Code of 1986, as amended. The Company
intends to continue to qualify as such and therefore to distribute at least
ninety percent (90%) of its taxable income to its stockholders. Accordingly,
no provision has been made for federal income taxes.
(v) During the three months ended March 31, 2001, we funded approximately
$1,017,000 in capital improvements at certain facilities in accordance with
certain existing lease provisions. Such capital improvements result in an
increase in the minimum rents earned by us on these facilities.
During the three-month period ended March 31, 2001, we disposed of three
skilled nursing facilities and two residential care facilities for the elderly
in five separate transactions for aggregate proceeds of approximately
$5,275,000.
During the three-month period ended March 31, 2001, we repaid $20,000,000
in aggregate principal amount of medium-term notes that bore interest at a
fixed rate of 6.68%. During the three months ended March 31, 2001, we also
issued $15,000,000 in aggregate principal amount of medium-term notes that
bear interest at a fixed rate of 9.75% and mature on March 20, 2008.
(vi) The Company capitalizes interest on facilities under construction.
The capitalization rates used are based on rates for our senior unsecured
notes and bank line of credit, as applicable. Capitalized interest for the
three months ended March 31, 2001 and 2000 was $202,000 and $608,000,
respectively.
(vii) In December 2000, Balanced Care Corporation ("BCC") notified us that
it would only be making a partial payment of its December rent. At the time,
we leased ten facilities in six states to BCC under two master leases. The
facilities were constructed and opened during 1999 and 2000 with an aggregate
investment of approximately $68,712,000. We immediately declared BCC in
default under its master leases and initiated steps
6
NATIONWIDE HEALTH PROPERTIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
March 31, 2001
(Unaudited)
to terminate the leases. BCC agreed to return the facilities to us and the
leases were terminated effective as of January 1, 2001. We have leased the
facilities to a new operator effective April 1, 2001 at straight-lined lease
rates comparable to those previously paid by BCC of approximately $580,000 per
month. BCC managed the facilities on an interim basis on our behalf until we
could get a new lessee in place, and will continue to manage them until the
facility licenses can be transferred to the name of the new operator. We
utilized the forfeited cash security deposits totaling approximately
$2,035,000 to cover the majority of the rent from December through March.
Three operators of nursing homes we own have filed for protection under the
United States bankruptcy laws. Under bankruptcy statutes, the tenant must
either assume our leases or reject them and return the properties to us. If
the tenant assumes the leases, it is required to assume the leases under the
existing terms; the court cannot change the rental amount or other lease
provisions that could financially impact the Company. Our rent has been paid
each month on a timely basis. While there is a possibility that the tenants
may decide to reject the leases on these properties, and while we have
identified parties interested in leasing these facilities, any new leases may
be at a lower rental rate. The table below summarizes the filing dates of the
bankruptcies, the number of our owned facilities operated by each operator,
our investment in facilities subject to the bankruptcies, the percentage of
our revenues for 2001 relating to the facilities operated by each operator and
cash deposits and letters of credit currently held by us as security for each
operator:
Number of Investment Percentage
Bankruptcy Facilities in of 2001 Security
Operator Filing Date Operated Facilities Revenues Deposits
-------- ---------------- ---------- ------------ ---------- ----------
Mariner Post-Acute
Network, Inc........... January 18, 2000 20 $ 60,354,000 5% $2,655,000
Sun Healthcare Group,
Inc.................... October 14, 1999 15 50,349,000 4 1,267,000
Integrated Health
Services, Inc.......... February 2, 2000 7 35,109,000 3 643,000
--- ------------ --- ----------
Totals.................. 42 $145,812,000 12% $4,565,000
=== ============ === ==========
7
NATIONWIDE HEALTH PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
March 31, 2001
Statement Regarding Forward Looking Disclosure
Certain information contained in this report 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 report 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 the Company's tenants; the ability of the Company to attract
new operators for certain facilities; occupancy levels at certain facilities;
the ability of the Company 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 the Company's debt
securities; and the additional risk factors set forth under the caption "Risk
Factors" in our Annual Report on Form 10-K for the year ended December 31,
2000 ("2000 Annual Report").
Operating Results
Three Months 2001 Compared to Three Months 2000
Minimum rent increased $336,000, or 1%, over the same period in 2000. The
increase was primarily due to minimum rent from investments we made in
additional leased facilities during the last twelve months and the conversion
of two mortgage loans to leases during the same period, partially offset by
the disposal of eleven facilities during the last twelve months. Interest and
other income decreased by $1,014,000, or 16%, over the same period in 2000.
The decrease was primarily due to the payoff of three mortgage loans during
the last twelve months, the conversion of two mortgage loans to leases during
the last twelve months and repayments of the principal balance on mortgage
loans and notes receivable during the last twelve months, partially offset by
a mortgage loan provided on one of the facilities sold during the last twelve
months. Additional rent and additional interest decreased by $64,000, or 2%,
over the same period in 2000 after the restatement of the March 31, 2000
additional rent and additional interest amount from $4,212,000 to $3,817,000
caused by the adoption of SEC Staff Accounting Bulletin No. 101 Revenue
Recognition in Financial Statements ("SAB No. 101") in the fourth quarter of
2000. The decrease was primarily due to the disposal of facilities and the
payoff of mortgage loans discussed above, partially offset by increased
additional rent as provided for in the Company's existing leases and mortgage
loans receivable based on increases in the facility revenues or the Consumer
Price Index.
Interest and amortization of deferred financing costs decreased $258,000 or
2% over the same period in 2000. The decrease was primarily due to the payoff
of $40,000,000 of fixed rate medium-term notes during the last twelve months
and decreases in the average interest rates on our $100,000,000 bank line of
credit, partially offset by the issuance of $15,000,000 of fixed rate medium-
term notes during the first quarter of 2001, an increase in the borrowings on
our $100,000,000 bank line of credit, and a reduction in interest capitalized
on construction projects. Depreciation and non-cash charges increased $649,000
or 7% over the same period in 2000. The increase was primarily attributable to
increased depreciation due to the completion of additional
8
facilities over the last twelve months and the write-off of certain
capitalized costs, partially offset by the disposal of facilities during the
same period. General and administrative costs increased $222,000 or 15% over
the same period in 2000. The increase was primarily due to costs related to
the bankruptcy proceedings of three of the operators of our facilities
discussed below, costs related to taking back ten facilities from an operator
that defaulted in December 2000 also discussed below, and increases in
compensation and other general expenses.
We expect to receive increased additional rent and additional interest at
individual facilities because our leases and mortgages generally contain
provisions under which additional rents or interest income increase with
increases in facility revenues and increases in the Consumer Price Index.
Historically, revenues at our facilities and the Consumer Price Index
generally have increased, although there are no assurances that they will
continue to increase in the future. Sales of facilities or repayments of
mortgages would serve to offset the aforementioned revenue increases, and if
sales and repayments exceed additional investments, this would actually reduce
revenues. We expect that additional rent and additional interest may decrease
due to lease renewals that may result in a shift in the characterization of
revenue from additional rent to minimum rent. There is no assurance that
leases will renew at the aggregate existing rent level, so the impact of lease
renewals may be a decrease in the total rent received by the Company.
Additional investments in healthcare facilities would also increase rental
and/or interest income. As additional investments in facilities are made,
depreciation and/or interest expense would also increase. Any such increases,
however, are expected to be at least partially offset by rents or interest
income associated with the investments.
Information Regarding Certain Operators
Over-leveraging and changes in reimbursement levels during 1999 have had an
adverse impact on the financial performance of some of the companies that
operate nursing homes owned by the Company. Three operators have filed for
protection under the United States bankruptcy laws. The table below summarizes
the filing dates of the bankruptcies, the number of our owned facilities
operated by each operator, our investment in facilities subject to the
bankruptcies, the percentage of our revenues for 2001 relating to the
facilities operated by each operator and cash deposits and letters of credit
currently held by us as security for each operator:
Number of Percentage
Bankruptcy Facilities Investment of 2001 Security
Operator Filing Date Operated in Facilities Revenues Deposits
-------- ---------------- ---------- ------------- ---------- ----------
Mariner Post-Acute
Network, Inc. ......... January 18, 2000 20 $ 60,354,000 5% $2,655,000
Sun Healthcare Group,
Inc. .................. October 14, 1999 15 50,349,000 4 1,267,000
Integrated Health
Services, Inc. ........ February 2, 2000 7 35,109,000 3 643,000
--- ------------ --- ----------
Totals.............. 42 $145,812,000 12% $4,565,000
=== ============ === ==========
Under bankruptcy statutes, the tenant must either assume our leases or
reject them and return the properties to us. If the tenant assumes the leases,
it is required to assume the leases under the existing terms; the court cannot
change the rental amount or other lease provisions that could financially
impact the Company. The tenant's decision whether to assume leases is usually
based primarily on whether the properties that are operated by the tenant are
providing positive cash flows. Only a few of the 42 facilities leased to and
operated by these three companies are not providing adequate cash flows on
their own to cover the rent under the leases. Our rent has been paid each
month on a timely basis. While there is a possibility that the tenants may
decide to reject the leases on these properties, and while we have identified
parties interested in leasing these facilities, any new leases may be at a
lower rental rate.
In addition to the above, we have one mortgage loan directly with Mariner
Post-Acute Network in the amount of $7,497,000 that is secured by one
facility. The revenues from this mortgage loan represent approximately .5% of
our revenues for the three months ended March 31, 2001 and the mortgage loan
has a security deposit in the amount of $400,000. We have not received any
payments on this mortgage loan subsequent to March 2000. Under bankruptcy
statutes, the court imposes an automatic stay with respect to
9
our actions to collect or pursue remedies with respect to mortgage loans and
we are precluded from exercising foreclosure or other remedies against the
borrower. Unlike a lease, a mortgage loan is not subject to assumption or
rejection. The mortgage loan may be divided into (i) a secured loan for the
portion of the mortgage loan that does not exceed the value of the property
and (ii) an unsecured loan for the portion of the mortgage loan that exceeds
the value of the property, which unsecured portion would be treated like
general unsecured claims in the bankruptcy estate. We would only be entitled
to the recovery of interest and costs if and to the extent that the value of
the collateral exceeds the amount owed, and we believe it currently does. In
addition, the courts may modify the terms of a mortgage, including the rate of
interest and timing of principal payments.
In December 2000, Balanced Care Corporation ("BCC") notified us that it
would only be making a partial payment of its December rent. At the time, we
leased ten facilities in six states to BCC under two master leases. The
facilities were constructed and opened during 1999 and 2000 with an aggregate
investment of approximately $68,712,000. We immediately declared BCC in
default under its master leases and initiated steps to terminate the leases.
BCC agreed to return the facilities to us and the leases were terminated
effective as of January 1, 2001. We have leased the facilities to a new
operator effective April 1, 2001 at straight-lined lease rates comparable to
those previously paid by BCC of approximately $580,000 per month. BCC has
managed the facilities on an interim basis on our behalf until we could get a
new lessee in place, and will continue to manage them until the facility
licenses can be transferred to the name of the new operator. We utilized the
forfeited cash security deposits totaling approximately $2,035,000 to cover
the majority of the rent from December through March. In general, the
replacement of operators that have defaulted on lease or loan obligations
could be delayed by the approval process of any regulatory agency necessary
for the transfer of the property or the replacement of the operator licensed
to operate the facility.
Liquidity and Capital Resources
During the three months ended March 31, 2001, we funded approximately
$1,017,000 in capital improvements at certain facilities in accordance with
certain existing lease provisions. Such capital improvements result in an
increase in the minimum rents earned by us on these facilities. The
construction advances and capital improvement advances were funded by
borrowings on our bank line of credit and by cash on hand.
During the three-month period ended March 31, 2001, we disposed of three
skilled nursing facilities and two residential care facilities for the elderly
in five separate transactions for aggregate proceeds of approximately
$5,275,000. The proceeds received were used to repay borrowings on our bank
line of credit.
During the three months ended March 31, 2001, we repaid $20,000,000 in
aggregate principal amount of medium-term notes that bore interest at a fixed
rate of 6.68%. The repayment was funded by borrowings on our bank line of
credit, by cash on hand and by the issuance of $15,000,000 in aggregate
principal amount of medium-term notes that bear interest at a fixed rate of
9.75% and mature on March 20, 2008.
At March 31, 2001, we had $26,000,000 available under our $100,000,000 bank
line of credit that expires on March 31, 2003. We have shelf registrations on
file with the Securities and Exchange Commission under which we may issue (a)
up to $427,100,000 in aggregate principal amount of medium term notes and (b)
up to approximately $178,247,000 of securities including debt, convertible
debt, common and preferred stock.
We may make additional investments in healthcare related facilities,
although the level of our new investments has decreased during the last two
years and we do not anticipate making significant additional investments
beyond our current commitments until such time as access to long-term capital
is available under more favorable terms. Financing for future investments may
be provided by borrowings under our bank line of credit, private placements or
public offerings of debt or equity, the assumption of secured indebtedness,
obtaining mortgage financing on a portion of our owned portfolio or through
joint ventures. We believe we have sufficient liquidity and financing
capability to finance anticipated future investments, maintain our current
dividend level and repay borrowings at or prior to their maturity.
10
Market Risk Exposure
This "Market Risk Exposure" discussion is an update of material changes to
the "Market Risk Exposure" discussion included in our 2000 Annual Report and
should be read in conjunction with such discussion. Readers are cautioned that
many of the statements contained in the "Market Risk Exposure" discussion are
forward looking and should be read in conjunction with the disclosures under
the heading "Statement Regarding Forward Looking Disclosure" set forth above.
We are exposed to market risks related to fluctuations in interest rates on
our mortgage loans receivable and debt. The Company does not utilize interest
rate swaps, forward or option contracts on foreign currencies or commodities,
or other types of derivative financial instruments.
We provide mortgage loans to operators of healthcare facilities as part of
our normal operations. The majority of the loans have fixed rates. Four of the
mortgage loans have adjustable rates; however, the rates adjust only once or
twice over the loan lives and the minimum adjusted rate is equal to the
current rate. Therefore, all mortgage loans receivable are treated as fixed
rate notes.
The Company utilizes debt financing primarily for the purpose of making
additional investments in healthcare facilities. Historically, we have made
short-term borrowings on our variable rate bank line of credit to fund our
acquisitions until market conditions were appropriate, based on management's
judgment, to issue stock or fixed rate debt to provide long-term financing.
During the three months ended March 31, 2001, we repaid $20,000,000 of
6.68% fixed rate debt and issued $15,000,000 of 9.75% fixed rate debt. In
addition, the bank borrowings under our bank line of credit have decreased to
$74,000,000 from $79,000,000.
For fixed rate debt, changes in interest rates generally affect the fair
market value, but do not impact earnings or cash flows. Conversely, for
variable rate debt, changes in interest rates generally do not impact fair
market value, but do affect the future earnings and cash flows.
Increases in interest rates during 2000 made it more expensive for us to
access debt capital through our medium-term note program. Decreases in
interest rates during the 2001 have resulted in a decrease in interest expense
related to our bank line of credit, but have not significantly reduced our
cost to access debt capital through our medium-term note program. Any future
interest rate increases may increase the cost of any borrowings to finance
future acquisitions or replace current long-term debt as it matures.
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PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.1 Second Amendment to Employment Agreement of T. Andrew Stokes dated as
of April 20, 2001.
10.2 Second Amendment to Employment Agreement of Mark. L. Desmond dated as
of April 20, 2001.
10.3 Executive Employment Security Policy as Amended and Restated April
20, 2001.
10.4 1989 Stock Option Plan as Amended and Restated April 20, 2001.
(b) Reports on Form 8-K
A Form 8-K dated January 12, 2001 was filed with respect to the
termination of two master leases with Balanced Care Corporation.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 11, 2001
NATIONWIDE HEALTH PROPERTIES, INC.
/s/ Mark L. Desmond
By __________________________________
Mark L. Desmond
Senior Vice President and Chief
Financial Officer
(Principal Financial Officer)
13