e424b5
The
information in this prospectus supplement is not complete and
may be changed. This prospectus supplement and the accompanying
prospectus are not an offer to sell these securities, and we are
not soliciting offers to buy these securities, in any
jurisdiction where the offer or sale is not permitted.
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Filed Pursuant to Rule 424(b)(5)
Registration No. 333-159040
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PROSPECTUS
SUPPLEMENT |
SUBJECT
TO COMPLETION |
PRELIMINARY PROSPECTUS SUPPLEMENT DATED FEBRUARY 28,
2011 |
(To
Prospectus dated May 7, 2009)
12,500,000 Shares
%
Series I Cumulative Convertible Perpetual Preferred
Stock
We are offering 12,500,000 shares
of % Series I Cumulative
Convertible Perpetual Preferred Stock (the Series I
preferred stock). The annual dividend on each share of
Series I preferred stock is $
and is payable, when, as and if declared by our board of
directors, quarterly in cash, in arrears, on each
January 15, April 15, July 15 and October 15,
commencing on July 15, 2011. Each share of Series I
preferred stock has a liquidation preference of $50.00 per share
and is convertible, at the holders option at any time,
initially
into shares
of our common stock (equal to an initial conversion price of
approximately $ per share),
subject in each case to specified adjustments as set forth in
this prospectus supplement. The Series I preferred stock is
not redeemable by us. If a fundamental change occurs, we may be
required to pay a make-whole premium on Series I preferred
stock converted in connection therewith, as described in this
prospectus supplement. On or after April 20, 2018, we may
at our option cause all outstanding shares of the Series I
preferred stock to be automatically converted into that number
of shares of common stock for each share of Series I
preferred stock equal to the then-prevailing conversion rate if
the Daily VWAP of our common stock equals or exceeds 130% of the
then-prevailing conversion price for at least 20 trading days in
a period of 30 consecutive trading days, including the last
trading day of such
30-day
period.
We have filed an application to list the Series I preferred
stock on the New York Stock Exchange, or NYSE, under the symbol
HCN PrI. If the application is approved, trading of
the Series I preferred stock is expected to begin within
30 days after the date of initial delivery of the
Series I preferred stock. Our common stock is traded on the
NYSE under the symbol HCN. On February 25,
2011, the last sale price of our common stock as reported on the
NYSE was $50.86 per share.
Concurrently with this public offering of Series I
preferred stock, we are offering 25,000,000 shares (or
28,750,000 shares if the underwriters exercise their
overallotment option in full) of our common stock pursuant to a
separate public offering. This prospectus supplement shall not
be deemed an offer to sell or a solicitation of an offer to buy
any of our common stock in the concurrent offering of our common
stock. The completion of this offering of Series I
preferred stock is not subject to the completion of the
concurrent offering of our common stock and the completion of
the concurrent offering of our common stock is not subject to
the completion of this offering of Series I preferred
stock. See The AcquisitionThe Financing
TransactionsThe Common Stock Offering.
Investing in our securities involves risk. You
should carefully consider each of the factors described under
Risk factors beginning on
page S-14
of this prospectus supplement, as well as the accompanying
prospectus and the documents we have filed with the Securities
and Exchange Commission that are incorporated by reference
herein for more information, before you make any investment in
our Series I preferred stock.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus supplement or the accompanying prospectus. Any
representation to the contrary is a criminal offense.
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Per
share
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Total
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Public offering
price(1)
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$
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$
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Underwriting discounts and commissions
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$
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$
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Proceeds, before expenses, to us
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$
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$
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(1) |
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Plus accrued dividends, if any,
from the original date of issuance. |
We have granted the underwriters a
30-day
option to purchase up to an additional 1,875,000 shares of
our Series I preferred stock from us on the same terms and
conditions set forth above if the underwriters sell more than
12,500,000 shares in this offering.
The underwriters expect to deliver the shares on or
about ,
2011.
Joint
Book-Running Managers
Co-Lead
Manager
KeyBanc
Capital Markets
The date of this prospectus supplement
is ,
2011.
You should rely only on the information contained or
incorporated by reference in this prospectus supplement, the
accompanying prospectus and any free writing
prospectus we authorize to be delivered to you. We have
not, and the underwriters have not, authorized anyone to provide
you with additional information or information different from
that contained in this prospectus supplement, the accompanying
prospectus and any such free writing prospectus. We
are not, and the underwriters are not, making an offer to sell
these securities in any jurisdiction where the offer or sale of
these securities is not permitted. You should not assume that
the information appearing in this prospectus supplement, the
accompanying prospectus, any such free writing
prospectus or the documents incorporated therein by
reference is accurate as of any date other than their respective
dates. Our business, financial condition, results of operations
and prospects may have changed since those dates.
TABLE OF
CONTENTS
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Prospectus supplement
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S-1
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S-10
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S-13
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S-31
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S-32
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S-33
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S-34
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S-37
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S-38
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S-47
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S-70
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S-71
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S-79
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S-82
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S-86
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S-86
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S-87
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Base prospectus
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About this prospectus
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1
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Cautionary statement concerning forward-looking statements and
risk factors
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1
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Where you can find additional information
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2
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Documents incorporated by reference
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3
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The company
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4
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Use of proceeds
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4
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Ratios of earnings to fixed charges and earnings to combined
fixed charges and preferred stock dividends
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4
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General description of the offered securities
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5
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Description of debt securities
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5
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Description of our common stock
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11
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Description of our preferred stock
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12
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Description of depositary shares
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16
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Description of warrants
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19
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Description of units
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20
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Restrictions on transfer of securities
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20
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Description of certain provisions of our certificate of
incorporation and by-laws
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21
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Plan of distribution
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22
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Legal opinions
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24
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Experts
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24
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S-i
This document is in two parts. The first part is the prospectus
supplement, which adds to and updates information contained in
the accompanying prospectus. The second part, the prospectus,
provides more general information, some of which may not apply
to this offering. Generally, when we refer to this prospectus,
we are referring to both parts of this document combined. To the
extent there is a conflict between the information contained in
this prospectus supplement, on the one hand, and the information
contained in the accompanying prospectus, on the other hand, you
should rely on the information in this prospectus supplement.
Before purchasing any securities, you should carefully read this
prospectus supplement, the accompanying prospectus and any
free writing prospectus we authorize to be delivered
to you, together with the additional information described under
the heading, Where you can find more information, in
this prospectus supplement.
In this prospectus supplement, unless otherwise indicated herein
or the context otherwise indicates:
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Ø
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the terms we, us, our, the
Company, or similar terms refer to Health Care REIT,
Inc. together with its consolidated subsidiaries;
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Ø
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the term FC-GEN refers to FC-GEN Investment, LLC
together with its consolidated subsidiaries, which is a joint
venture between affiliates of Formation Capital, LLC and JER
Partners;
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Ø
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the term FC-GEN Acquisition Holding refers to FC-GEN
Acquisition Holding, LLC, a wholly owned subsidiary of FC-GEN,
together with its consolidated subsidiaries;
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Ø
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the term OpCo refers to FC-GEN Operations
Investment, LLC, a wholly owned subsidiary of FC-GEN Acquisition
Holding, together with its consolidated subsidiaries;
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Ø
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the term Tenant refers to Genesis Operations, LLC,
an indirect subsidiary of FC-GEN;
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Ø
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the term Acquisition refers to the acquisition by
the Company of all of the equity interests of FC-GEN Acquisition
Holding, pursuant to the purchase agreement, dated as of
February 28, 2011, by and among the Company, FC-GEN and
OpCo;
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Ø
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the term Common Stock Offering refers to the
Companys offering of 25,000,000 shares of common
stock conducted concurrently with this offering of Series I
preferred stock; and
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Ø
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the term Financing Transactions refers to this
offering, the $2.4 billion bridge loan facility and the
Common Stock Offering related to the Acquisition, each as
described elsewhere in this prospectus supplement. See The
AcquisitionThe Financing Transactions.
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S-ii
This summary highlights selected information about us and
this offering. This information is not complete and does not
contain all of the information you should consider before
investing in our Series I preferred stock. You should read
this entire prospectus supplement and the accompanying
prospectus carefully, including Risk factors and
Forward-looking statements contained in this
prospectus supplement and Cautionary Statement Concerning
Forward-Looking Statements and Risk Factors, contained in
the accompanying prospectus and the financial statements and the
other information incorporated by reference in this prospectus
supplement and the accompanying prospectus, including the
information contained in our Current Reports on
Form 8-K
filed on February 28, 2011 (except for that information
furnished pursuant to Item 7.01 and the exhibits related to
such information, which are not incorporated into this
prospectus supplement), before making an investment decision.
The closing of this offering is not conditioned upon the
closing of the Acquisition or the completion of the Common Stock
Offering. Unless otherwise indicated, this prospectus supplement
does not give pro forma effect to the Acquisition and the
related transactions. Unless otherwise indicated, references to
fiscal year refer to the fiscal year of the Company,
which ends on December 31. Our financial results on a pro
forma basis for the Acquisition for the fiscal year ended
December 31, 2010 are set forth below under Unaudited
pro forma condensed consolidated financial statements.
ABOUT OUR
COMPANY
We are a real estate investment trust that has been at the
forefront of senior housing and health care real estate since
the Company was founded in 1970. We are an S&P
500 company headquartered in Toledo, Ohio and our portfolio
spans the full spectrum of senior housing and health care real
estate, including senior housing communities, skilled nursing
facilities, medical office buildings, inpatient and outpatient
medical centers and life science facilities. Our capital
programs, when combined with comprehensive planning, development
and property management services, make us a single-source
solution for acquiring, planning, developing, managing,
repositioning and monetizing real estate assets. As of
December 31, 2010, our broadly diversified portfolio
consisted of 683 properties in 41 states.
Our principal executive offices are located at 4500 Dorr Street,
Toledo, Ohio 43615, and our telephone number is
(419) 247-2800.
Our website address is www.hcreit.com. The information on our
website is not part of this prospectus supplement or the
accompanying prospectus.
OUR
STRATEGY
Our primary objectives are to protect stockholder capital and
enhance stockholder value. We seek to pay consistent cash
dividends to stockholders and create opportunities to increase
dividend payments to stockholders as a result of annual
increases in rental and interest income and portfolio growth. To
meet these objectives, we invest across the full spectrum of
senior housing and health care real estate and diversify our
investment portfolio by property type, operator/tenant and
geographic location.
S-1
The
portfolio
The following table summarizes our portfolio as of
December 31, 2010:
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Number of
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Percentage of
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Number of
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beds/units
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Investment per
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Type of
property
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Investments
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investments
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properties
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or Sq.
Ft.
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metric(1)
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States
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(in
thousands)
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Senior housing facilities
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$
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4,403,208
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49.0
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%
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303
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27,863 units
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$
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162,210 per unit
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36
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Skilled nursing facilities
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1,257,719
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14.0
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%
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180
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24,064 beds
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52,266 per bed
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26
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Hospitals
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782,879
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8.7
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%
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31
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1,857 beds
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446,846 per bed
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13
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Medical office
buildings(2)
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2,195,435
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24.4
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%
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162
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9,047,167 sq. ft.
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254 per sq. ft.
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28
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Life science
buildings(2)
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346,562
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3.9
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%
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7
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n/a
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1
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Totals
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$
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8,985,803
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100
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%
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683
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41
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(1) |
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Investment per metric was computed by using the total
investment amount of $8,860,164,000, which includes net real
estate investments and unfunded construction commitments for
which initial funding has commenced which amounted to
$8,592,109,000 and $268,055,000, respectively. |
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(2) |
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Includes our share of unconsolidated joint venture
investments. Please see Note 7 to our audited financial
statements included in our Annual Report on
Form 10-K
for the year ended December 31, 2010 for additional
information. |
We invest in senior housing and health care real estate. In
determining whether to invest in a property, we focus on the
following: (1) the experience of the obligors
management team; (2) the historical and projected financial
and operational performance of the property; (3) the credit
of the obligor; (4) the security for the lease or loan; and
(5) the capital committed to the property by the obligor.
We conduct market research and analysis for all potential
investments. In addition, we review the value of all properties,
the interest rates and covenant requirements of any debt to be
assumed and the anticipated sources of repayment of any existing
debt that is not to be assumed.
We monitor our investments through a variety of methods
determined by the type of property. Our asset management process
for senior housing and care properties generally includes review
of monthly financial statements and other operating data for
each property, periodic review of obligor creditworthiness,
periodic property inspections and review of covenant compliance
relating to licensure, real estate taxes, letters of credit and
other collateral. Our internal property management division
actively manages and monitors the medical office building
portfolio with a comprehensive process including tenant
relations, tenant lease expirations, the mix of health service
providers, hospital/health system relationships, property
performance, capital improvement needs and market conditions
among other things. In monitoring our portfolio, our personnel
use a proprietary database to collect and analyze
property-specific data. Additionally, we conduct extensive
research to ascertain industry trends and risks.
Through asset management and research, we evaluate the operating
environment in each propertys market to determine whether
payment risk is likely to increase. When we identify
unacceptable levels of payment risk, we seek to mitigate,
eliminate or transfer the risk. We categorize the risk as
obligor, property or market risk. For obligor risk, we typically
find a substitute operator/tenant to run the property. For
property risk, we usually work with the operator/tenant to
institute property-level management changes to address the risk.
Finally, for market risk, we often encourage an obligor to
change its capital structure, including refinancing the property
or raising additional equity. Through these asset management and
research efforts, we are generally able to intervene at an early
stage to
S-2
address payment risk, and in so doing, support both the
collectability of revenue and the value of our investment.
The
Acquisition
On February 28, 2011, we entered into a definitive purchase
agreement (the Purchase Agreement) with FC-GEN and
OpCo to acquire 100% of the equity interests of FC-GEN
Acquisition Holding. FC-GEN Acquisition Holding indirectly owns
(1) 140 senior housing and care facilities (137 in fee
simple and three pursuant to ground leases) and (2) the
leasehold interests in and option to purchase seven senior
housing and care facilities in 11 states in the Northeast and
Mid-Atlantic operating under the name Genesis HealthCare. Prior
to closing, FC-GEN Acquisition Holding will (a) contribute the
assets, liabilities and equity interests relating to
(i) the business of operating and managing senior housing
and care facilities, (ii) joint venture entities and
(iii) other ancillary businesses to OpCo, and then (b)
distribute all of the equity interests of OpCo to FC-GEN. The
purchase price for the equity interests of FC-GEN Acquisition
Holding is $2.4 billion (subject to adjustment).
Immediately after the closing of the Acquisition, a subsidiary
of the Company will enter into a master lease (the Master
Lease) with Tenant under which Tenant will operate the 140
owned and ground leased facilities and will enter into a pass
through master sub-sublease with an affiliate of Tenant under
which such affiliate will operate the seven leased facilities.
The Master Lease is supported by a guaranty from OpCo. See
The Acquisition for additional information.
The Acquisition is expected to close in the second quarter of
2011, and will be subject to the fulfillment or waiver of
various conditions to closing, the failure of which to occur
could delay the closing or result in the Acquisition not closing.
In addition, in conjunction with the Acquisition, the Company
will have the option to acquire a 9.9% ownership interest in
OpCo for a fixed price equal to $47 million at any time
during the initial
15-year term
of the Master Lease.
In connection with the Acquisition, we obtained a commitment for
a bridge loan facility in the aggregate amount of up to
$2.4 billion, which may be used to finance all or part of
the purchase price of the Acquisition. However, we currently
anticipate using the proceeds of this offering, the Common Stock
Offering, cash on hand and any amounts raised in future capital
raising activities or refinancings in lieu of some of or all
borrowings available under the $2.4 billion bridge loan
facility. See Description of bridge loan facility
for additional information.
Concurrent
offering of common stock
Concurrently with this offering, we are offering
25,000,000 shares of our common stock (or
28,750,000 shares if the underwriters exercise their
overallotment option in full) pursuant to a separate public
offering (the Common Stock Offering). The completion
of this offering of Series I preferred stock is not subject
to the completion of the Common Stock Offering and the
completion of the Common Stock Offering is not subject to the
completion of this offering of Series I preferred stock.
See The AcquisitionThe Financing
TransactionsThe Common Stock Offering for additional
information.
This prospectus supplement shall not be deemed to be an offer to
sell or a solicitation of an offer to buy our common stock in
the Common Stock Offering and we cannot assure you that the
Common Stock Offering will be completed or completed for the
amount or on the terms contemplated.
Recent
developments
In January 2011, we formed a $298 million partnership with
Silverado Senior Living structured as a RIDEA investment. We
acquired a 95% interest to own and operate 18 senior housing
facilities with 1,454 beds located primarily in California and
Texas. Silverado will continue to manage the facilities
S-3
and own the remaining 5% interest. The partnership assumed
$55.9 million in secured debt at an average rate of 6.9%.
We have entered into a purchase agreement and expect to complete
an acquisition of four combination senior housing facilities
located in the Chicago and New York metro areas totaling
628 units. Our $141 million investment will include
the assumption of $48 million in secured debt at an average
rate of 6.5%. The investment will be structured as a
triple-net
lease with Capital Senior Living (NYSE:CSU) with an initial term
of 15 years and an initial rental yield of 7.25% with
annual escalators of 3%. The transaction is expected to close in
March 2011.
We have entered into a purchase agreement and expect to form an
$890 million partnership with Benchmark Senior Living
structured as a RIDEA investment. We will acquire a 95% interest
to own and operate 34 senior housing facilities located
primarily in New England. Benchmark will continue to manage the
facilities and own the remaining 5% interest. The partnership
will assume $509 million in secured debt at an average rate
of 5.3%. We have obtained a $400 million bridge loan
commitment from UBS Loan Finance, LLC to complete this
acquisition. The transaction is expected to close in March or
April 2011.
Other
information
The SEC maintains an Internet website at
http://www.sec.gov
that contains our annual reports on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and proxy statements, and all amendments thereto. All reports
that we file with the SEC may be read and copied at the
SECs Public Reference Room at 100 F Street,
N.E., Washington, DC 20549. Information about the operation of
the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330.
S-4
The offering
The following is a brief summary of some of the terms of this
offering. As used in this section, the terms we,
us or our refer to Health Care REIT,
Inc. and not any of its subsidiaries. For a more complete
description of our Series I preferred stock, see
Description of Series I preferred stock in this
prospectus supplement.
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Securities Offered |
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12,500,000 shares of % Series
I preferred stock (14,375,000 shares if the underwriters
exercise their option to purchase additional Series I preferred
stock to cover overallotments in full). |
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Liquidation Preference |
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$50.00 per share, plus unpaid accrued and accumulated dividends. |
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Dividends |
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Cumulative annual dividends of $
per share payable in cash quarterly on each January 15,
April 15, July 15 and October 15, commencing on
July 15, 2011, when, as and if declared by the board of
directors. Dividends will accumulate and be paid in arrears on
the basis of a
360-day year
consisting of twelve
30-day
months. Dividends on the Series I preferred stock will
accumulate and be cumulative from the most recent date to which
dividends have been paid, or if no dividends have been paid,
from the original issue date of the Series I preferred
stock (expected to
be ,
2011). Accumulated dividends on the Series I preferred
stock will not bear interest. See Description of
Series I preferred stockDividends. |
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Ranking |
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The Series I preferred stock, with respect to dividend
rights and rights upon our liquidation, dissolution or
winding-up
of our affairs, ranks: |
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Ø senior
to all of our common stock and all of our other capital stock
issued in the future, unless the terms of that stock expressly
provide that it ranks senior to, or on a parity with, the
Series I preferred stock;
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Ø on
a parity with our outstanding Series D preferred stock,
Series F preferred stock and Series H convertible
preferred stock and any of our capital stock issued in the
future the terms of which expressly provide that it will rank on
a parity with the Series I preferred stock; and
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Ø junior
to all of our capital stock issued in the future, the terms of
which expressly provide that such stock will rank senior to the
Series I preferred stock.
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We currently have 4,000,000 outstanding shares of Series D
preferred stock (liquidation preference $25.00 per share),
7,000,000 outstanding shares of Series F preferred stock
(liquidation preference $25.00 per share) and 349,854
outstanding shares of Series H convertible preferred stock
(liquidation preference $25.00 per share) |
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Maturity |
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The Series I preferred stock has no maturity date, and will
not be redeemable by us. Accordingly, the Series I
preferred stock will remain outstanding indefinitely unless you
decide to convert your shares, we exercise our mandatory
conversion right or the Series I preferred shares are
otherwise repurchased or acquired by us. |
|
Conversion Rights |
|
Each share of Series I preferred stock will be convertible,
at any time, at the option of the holder thereof at an initial
conversion |
S-5
|
|
|
|
|
rate
of shares
of our common stock per share of
Series I preferred stock (which represents an initial
conversion price of approximately
$ per share of common stock),
subject to adjustment as described under Description of
Series I preferred stockConversion rate
adjustment. In certain circumstances, holders of the
Series I preferred stock may be restricted in their ability
to convert their Series I preferred stock. See
Ownership and Transfer Restrictions. |
|
Mandatory Conversion |
|
At any time on or after April 20, 2018, we may at our
option cause all (but not less than all) outstanding shares of
the Series I preferred stock to be automatically converted
into common stock at the then-prevailing conversion rate if the
Daily VWAP of our common stock is equal to or exceeds 130% of
the then-prevailing conversion price for at least 20 trading
days in a period of 30 consecutive trading days, including the
last trading day of such
30-day
period, ending on the trading day prior to our issuance of a
press release announcing the mandatory conversion as described
under Description of Series I preferred
stockMandatory conversion. |
|
Fundamental Change |
|
If a holder converts its Series I preferred stock at any
time beginning at the opening of business on the trading day
immediately following the effective date of a fundamental change
(as described under Description of Series I preferred
stockSpecial Rights Upon a Fundamental Change) and
ending at the close of business on the 30th trading day
immediately following such effective date, the holder will
automatically receive a number of shares of our common stock
equal to the greater of: |
|
|
|
Ø the
sum of (i) a number of shares of our common stock, as
described under Description of Series I preferred
stockConversion rights and subject to adjustment as
described under Description of Series I preferred
stockConversion Rate Adjustment and (ii) the
make-whole premium, if any, described under Description of
Series I preferred stockDetermination of the
make-whole premium; and
|
|
|
|
Ø a
number of shares of our common stock equal to the lesser of
(i) the liquidation preference divided by the average of
the volume-weighted average prices of our common stock for ten
days preceding the effective date of a fundamental change and
(ii) (subject to adjustment).
|
|
Voting Rights |
|
Except as required by law and the certificate of designation for
the Series I preferred stock, the holders of Series I
preferred stock will have no voting rights. In the event
dividends payable on the Series I preferred stock are in
arrears for six or more quarterly dividends, the holders of the
Series I preferred stock, voting as a single class with the
holders of any other series of our preferred stock having
similar voting rights, will be entitled at the next regular or
special meeting of our stockholders to elect two directors and
the number of directors that comprise our board will be
increased by the number of directors so elected. These voting
rights and the terms of the directors so elected will continue
until such time as the dividend arrearage on the Series I
preferred stock has been paid in full. |
S-6
|
|
|
|
|
In addition, subject to certain exceptions, the affirmative vote
or consent of holders of at least
662/3%
of the outstanding Series I preferred stock will be
required for: (i) the authorization, creation or issuance,
or increase in the authorized or issued amount of any stock with
certain rights senior to the Series I preferred stock or
the reclassification of any of our authorized stock into stock
with such senior rights, or the creation, authorization or
issuance of any obligation or security convertible into or
evidencing the right to purchase stock with such senior rights
or (ii) the repeal, amendment, alteration or any other
change of the certificate of designation or our certificate of
incorporation in any manner (whether by merger, consolidation or
otherwise) that adversely affects the powers, preferences, or
other special rights or privileges of the Series I
preferred stock or its holders. |
|
Concurrent Offering |
|
Concurrently with this public offering of Series I
preferred stock, we are offering 25,000,000 shares (or
28,750,000 shares if the underwriters exercise their
overallotment option in full) of our common stock pursuant to a
separate public offering (the Common Stock
Offering). The completion of this offering of
Series I preferred stock is not subject to the completion
of the Common Stock Offering and the completion of the Common
Stock Offering is not subject to the completion of this offering
of Series I preferred stock. See The
AcquisitionThe Financing TransactionsThe Common
Stock Offering. |
|
Use of Proceeds |
|
Assuming the consummation of this offering at the amount and on
the terms presently contemplated, we estimate the net proceeds
from this offering will be approximately $605.5 million
($696.4 million if the underwriters exercise their
overallotment option in full), after deducting underwriting
discounts and commissions and estimated offering expenses. The
net proceeds to us from the Common Stock Offering are expected
to be approximately $1.2 billion ($1.4 billion if the
underwriters exercise their overallotment option in full), after
deducting underwriting discounts and commissions and estimated
offering expenses. We intend to use the net proceeds from this
offering, the Common Stock Offering, cash on hand and any
amounts raised in future capital raising activities or
refinancings to finance the aggregate purchase price of the
Acquisition, including the repayment of any amounts drawn on the
$2.4 billion bridge loan facility. See The
AcquisitionThe Financing Transactions. If the
Acquisition is not consummated, we intend to use the net
proceeds from this offering for general corporate purposes,
including investing in health care and senior housing properties
and repaying borrowings under our unsecured line of credit and
other outstanding indebtedness. Pending such use, the net
proceeds may be invested in short-term, investment grade,
interest-bearing securities, certificates of deposit or indirect
or guaranteed obligations of the United States. The Common Stock
Offering may not be completed or, if completed, may not be
completed for the amount or on the terms contemplated.
Accordingly, the amounts described above may differ materially |
S-7
|
|
|
|
|
from the actual amounts we receive. The completion of this
offering of Series I preferred stock is not subject to the
completion of the Common Stock Offering and the completion of
the Common Stock Offering is not subject to the completion of
this offering of Series I preferred stock. See Use of
proceeds. |
|
Ownership and Transfer Restrictions |
|
Our by-laws and the certificate of designation for the
Series I preferred stock provide that no person may acquire
securities of us that would result in the direct or indirect
beneficial ownership of more than 9.8% of our common stock or
more than 9.8% in aggregate market value of all of our
outstanding capital stock (calculated in accordance with our
by-laws and the certificate of designation). Any acquisition by
you of Series I preferred stock (whether in this offering
or following completion of the offering) or other classes of our
capital stock (including our common stock) that result in you
exceeding either the 9.8% common stock ownership threshold or
the 9.8% aggregate market value threshold may not be valid. In
addition, no holder of Series I preferred stock will be
entitled to convert Series I preferred stock into our
common stock (whether in connection with a voluntary conversion
by the holder, upon mandatory conversion by us or otherwise) to
the extent that receipt of our common stock would cause the
holder to exceed either of the 9.8% ownership thresholds
(calculated in accordance with our by-laws and the certificate
of designation). See Description of Series I
preferred stockRestrictions on Ownership and
Transfer. |
|
U.S. Federal Income Tax Consequences |
|
For a discussion of the U.S. federal income tax consequences of
purchasing, owning and disposing of the Series I preferred
stock and any common stock received upon conversion, see
Certain U.S. federal income tax income
considerations. Prospective investors are urged to consult
their own tax advisors regarding these matters in light of their
personal investment circumstances. |
|
Listing |
|
We have filed an application to list the Series I preferred
stock on the NYSE under the symbol HCN PrI. If the
application is approved, trading of the Series I preferred
stock is expected to begin within 30 days after the date of
initial delivery of the Series I preferred stock. |
|
Book Entry, Delivery and Form |
|
The Series I preferred stock will be represented by one or
more global certificates in definitive, fully registered form
deposited with a custodian for, and registered in the name of, a
nominee of the Depository Trust Company. |
|
Risk Factors |
|
You should carefully consider the information set forth in the
section of this prospectus supplement entitled Risk
factors as well as the other information included and
incorporated by reference in this prospectus supplement and the
accompanying prospectus before deciding whether to invest in our
Series I preferred stock. |
|
Common Stock |
|
Our common stock is listed for trading on the NYSE under the
symbol HCN. |
S-8
Summary selected
historical consolidated financial data
The summary selected historical consolidated financial data set
forth below should be read in conjunction with the sections of
this prospectus supplement entitled Capitalization
and Prospectus supplement summary, as well as the
other information that we have filed with the SEC and
incorporated by reference herein. The summary selected
historical consolidated financial data for each of the years in
the three-year period ended December 31, 2010 have been
derived from our audited consolidated financial statements. Our
audited consolidated financial statements have been audited by
Ernst & Young LLP, our independent registered public
accounting firm. This information is only a summary, and should
be read together with, and is qualified in its entirety by
reference to, our historical consolidated financial statements
and notes thereto and the section entitled
Managements Discussion and Analysis of Financial
Condition and Results of Operations included in our Annual
Report on
Form 10-K
for the year ended December 31, 2010, which is incorporated
by reference herein. See Unaudited pro forma condensed
consolidated financial statements for a presentation of
the effect on a pro forma basis of this offering, the Common
Stock Offering and the Acquisition on our consolidated financial
statements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
amounts are in
thousands, except per share data
|
|
|
Operating Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
504,525
|
|
|
$
|
546,092
|
|
|
$
|
680,530
|
|
Income from continuing operations attributable to common
stockholders
|
|
|
105,260
|
|
|
|
127,387
|
|
|
|
62,350
|
|
Net income attributable to common stockholders
|
|
|
260,098
|
|
|
|
171,190
|
|
|
|
106,882
|
|
Per Share Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to common
stockholders
|
|
$
|
1.12
|
|
|
$
|
1.12
|
|
|
$
|
0.49
|
|
Net income attributable to common stockholders
|
|
$
|
2.77
|
|
|
$
|
1.50
|
|
|
$
|
0.84
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to common
stockholders
|
|
$
|
1.12
|
|
|
$
|
1.11
|
|
|
$
|
0.49
|
|
Net income attributable to common stockholders
|
|
$
|
2.76
|
|
|
$
|
1.49
|
|
|
$
|
0.83
|
|
Dividends declared and paid per common share
|
|
$
|
2.70
|
|
|
$
|
2.72
|
|
|
$
|
2.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
|
|
amounts are in
thousands
|
|
|
Balance Sheet Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Net real estate investments
|
|
$
|
5,854,179
|
|
|
$
|
6,080,620
|
|
|
$
|
8,590,833
|
|
Total assets
|
|
|
6,215,031
|
|
|
|
6,367,186
|
|
|
|
9,451,734
|
|
Total long-term obligations
|
|
|
2,847,676
|
|
|
|
2,414,022
|
|
|
|
4,469,736
|
|
Total liabilities
|
|
|
2,976,746
|
|
|
|
2,559,735
|
|
|
|
4,714,081
|
|
Total preferred stock
|
|
|
289,929
|
|
|
|
288,683
|
|
|
|
291,667
|
|
Total equity
|
|
|
3,238,285
|
|
|
|
3,807,451
|
|
|
|
4,733,100
|
|
S-9
On February 28, 2011, we entered into a definitive purchase
agreement (the Purchase Agreement) with FC-GEN and
OpCo to acquire 100% of the equity interests of FC-GEN
Acquisition Holding. FC-GEN Acquisition Holding indirectly owns
(1) 140 senior housing and care facilities (137 in fee
simple and three pursuant to ground leases) and (2) the
leasehold interests in and option to purchase seven senior
housing and care facilities in 11 states in the Northeast and
Mid-Atlantic operating under the name Genesis HealthCare. Prior
to closing, FC-GEN Acquisition Holding will (a) contribute the
assets, liabilities and equity interests relating to
(i) the business of operating and managing senior housing
and care facilities, (ii) joint venture entities and
(iii) other ancillary businesses to OpCo, and then (b)
distribute all of the equity interests of OpCo to FC-GEN. The
purchase price for the equity interests of FC-GEN Acquisition
Holding is $2.4 billion (subject to adjustment).
In addition, in conjunction with the Acquisition, the Company
will have the option to acquire a 9.9% ownership interest in
OpCo for a fixed purchase price equal to $47 million at any
time during the initial
15-year term
of the Master Lease.
In connection with the Acquisition, we obtained a commitment for
a bridge loan facility in the aggregate amount of up to
$2.4 billion, which may be used to finance all or part of
the purchase price of the Acquisition. However, we currently
anticipate using the proceeds of this offering, the Common Stock
Offering, cash on hand and any amounts raised in future capital
raising activities or refinancings to fund the Acquisition in
lieu of some of or all borrowings available under the
$2.4 billion bridge loan facility. See Description of
bridge loan facility for additional information.
The Acquisition is subject to the fulfillment or waiver of
various closing conditions, including, among other things,
obtaining certain governmental and regulatory approvals and
landlord consents, the absence of laws, regulations or orders of
a governmental body prohibiting the Acquisition, the accuracy of
the representations and warranties made by, and the absence of a
material breach in the performance of covenants by, FC-GEN and
us in the Purchase Agreement. The parties have also made
customary representations, warranties and covenants in the
Purchase Agreement, including among others, FC-GENs
covenant not to solicit acquisition proposals or participate in
discussions relating to an acquisition proposal. The Acquisition
is expected to close in the second quarter of 2011; however, we
cannot assure you that the Acquisition will close or, if it
does, when such closing will occur. See Risk
factorsRisks Related to the Offering and the
Acquisition. The Acquisition is not subject to a financing
contingency.
This offering is not conditioned upon the consummation of the
Acquisition.
MASTER
LEASE
Immediately after the closing of the Acquisition, a subsidiary
of the Company will enter into a master lease (the Master
Lease) with Tenant under which Tenant will operate the
140 owned or ground leased facilities and will enter into a
pass through master sub-sublease with an affiliate of Tenant
under which such affiliate will operate the seven leased
facilities. The Master Lease is supported by a guaranty from
OpCo.
The initial term will be 15 years (the Initial
Term). Tenant will have one option to renew for an
additional term of 15 years. The renewal option is
exercisable as to all facilities in the aggregate only.
The Master Lease will provide that the base rent for the first
year will be $198 million, and will increase at least 1.75%
but no more than 3.50% (subject to CPI changes) for each of the
years two through six during the Initial Term and at least 1.50%
but no more than 3.00% per year thereafter (subject to CPI
changes).
S-10
The
Acquisition
Tenant
and/or OpCo
will be subject to certain financial covenants, including
requirements to maintain a minimum payment coverage ratio, a
minimum net worth, a minimum cash balance, a minimum current
ratio and a maximum leverage ratio. Tenant will grant the
Company the exclusive right and option to own any facilities
that Tenant or its affiliates develop or acquire during the
Initial Term.
The seven senior housing and care facilities leased by FC-GEN
Acquisition Holding (the Leased Facilities) are each
subject to a fixed price purchase option (each an
Option). Pursuant to the Acquisition, the benefit of
the Options will be transferred to the Company. If the Company
exercises an Option and acquires a Leased Facility (a
Purchased Facility), the Purchased Facility will be
leased to Tenant pursuant to the terms of the Master Lease.
The Master Lease will be structured so that Tenant will be
responsible for all operating costs associated with the
facilities, including the payment of operating expenses, real
estate taxes, insurance, building repairs and maintenance and
all payments due under the three ground leases. Tenant will also
provide indemnities against liabilities associated with the
operation of the facilities.
The Company will have the right of first offer on the sale of
any direct interest comprising less than a 20% ownership
interest in OpCo, other than (1) a transfer between any
direct or indirect owners as of the closing date, or
(2) transfers in connection with an initial public offering
of OpCo.
THE FINANCING
TRANSACTIONS
The
$2.4 Billion Bridge Loan Facility
On February 28, 2011, the Company obtained a commitment
from UBS Loan Finance, LLC and UBS Loan Finance LLC, UBS
Securities LLC, as joint lead arranger, Bank of America, N.A.,
as co-syndication agent, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, as joint lead arranger,
Barclays Bank PLC, as co-syndication agent, Barclays Capital
Inc., as joint lead arranger, Deutsche Bank AG Cayman Islands
Branch, Deutsche Bank Securities Inc., as joint lead arranger
and co-documentation agent, JPMorgan Chase Bank, N.A., as
co-syndication agent, J.P. Morgan Securities LLC, as joint
lead arranger, Wells Fargo Bank, N.A., as co-documentation
agent, Wells Fargo Securities, LLC, as joint lead arranger,
KeyBank National Association, as senior managing agent, and
KeyBanc Capital Markets Inc. to provide a bridge loan facility
to the Company in an aggregate amount of up to $2.4 billion
subject to certain customary terms and conditions. No borrowings
have been made under the $2.4 billion bridge loan facility
as of the date of this prospectus supplement, and the
commitments thereunder are available until May 31, 2011.
See Description of bridge loan facility.
The Common Stock
Offering
Concurrently with this offering, we are offering
25,000,000 shares of our common stock (or
28,750,000 shares if the underwriters exercise their
overallotment option in full) pursuant to a separate public
offering (the Common Stock Offering). If we complete
the Common Stock Offering, we expect to use the proceeds from
that offering and from this offering as described in Use
of proceeds. The completion of this offering of
Series I preferred stock is not subject to the completion
of the Common Stock Offering and the completion of the Common
Stock Offering is not subject to the completion of this offering
of Series I preferred stock.
This prospectus supplement shall not be deemed to be an offer to
sell or a solicitation of an offer to buy our common stock in
the Common Stock Offering and we cannot assure you that the
Common Stock Offering will be completed or completed for the
amount or on the terms contemplated.
Sources and Uses
of Funds for the Acquisition
The following table sets forth the expected sources and uses of
funds upon completion of the Acquisition, assuming a closing
date in the second quarter of 2011 and assuming only the use of
S-11
The
Acquisition
financing sources announced or for which we have a commitment as
of the date of this prospectus supplement. No assurances can be
given that the information in the following table will not
change depending on the nature of our financing arrangements
and/or
whether the Acquisition will be consummated in accordance with
the anticipated timing or at all. See Risk
factorsRisks Related to the Offering and the
Acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sources
|
|
Amount
|
|
|
Uses
|
|
Amount
|
|
|
|
|
|
|
|
|
(in
millions)
|
|
|
|
|
(in
millions)
|
|
|
|
|
|
Preferred Stock Offering
|
|
$
|
605,500
|
(1)
|
|
Cash portion of purchase price
|
|
$
|
2,400,000
|
|
|
|
|
|
Common Stock Offering
|
|
|
1,219,500
|
(2)
|
|
Estimated fees and expenses
|
|
|
70,800
|
(3)
|
|
|
|
|
Bridge Loan Facility
|
|
|
575,000
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
70,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,470,800
|
|
|
|
|
$
|
2,470,800
|
|
|
|
|
|
|
|
|
(1) |
|
After deducting underwriting discounts and commissions and
our estimated offering expenses. |
|
(2) |
|
Assuming a public offering price per share of $50.86 (the
last reported sale price of our common stock on the NYSE on
February 25, 2011) and after deducting underwriting
discounts and commissions and our estimated offering
expenses. |
|
(3) |
|
Our estimated fees and expenses include advisory fees
($6,000,000), legal fees ($2,000,000), due diligence and other
closing costs ($28,000,000) and fees associated with the bridge
loan financing ($34,800,000). Assuming the completion of this
offering and the Common Stock Offering, our estimated fees
associated with the bridge loan financing will be $21,113,000,
and as a result, our total estimated fees and expenses will be
$57,113,000. |
S-12
An investment in our Series I preferred stock involves
risks. You should carefully consider the following risk factors,
together with all of the other information included in this
prospectus supplement and the accompanying prospectus or
incorporated by reference into this prospectus supplement and
the accompanying prospectus, including the section entitled
Risk Factors included in our Annual Report on
Form 10-K
for the year ended December 31, 2010, in evaluating an
investment in our Series I preferred stock.
RISKS RELATED TO
THIS OFFERING AND THE ACQUISITION
There can be no
assurance that the Acquisition will be consummated in accordance
with the anticipated timing or at all, and the closing of this
offering is not conditioned on the consummation of the
Acquisition
Although the Company expects to close the Acquisition in the
second quarter of 2011, there can be no assurance that the
Acquisition will be completed in accordance with the anticipated
timing or at all. In order to consummate the Acquisition, the
Company and FC-GEN must obtain certain regulatory and other
approvals and consents in a timely manner. If these approvals or
consents are not received, or they are not received on terms
that satisfy the conditions set forth in the Purchase Agreement,
then the Company
and/or
FC-GEN will not be obligated to complete the Acquisition. The
Purchase Agreement also contains certain other closing
conditions, which may not be satisfied or waived. In addition,
under circumstances specified in the Purchase Agreement, the
Company or FC-GEN may terminate the Purchase Agreement.
The closing of this offering is not conditioned on the
consummation of the Acquisition. Therefore, upon the closing of
this offering, you will become a holder of the Companys
Series I preferred stock irrespective of whether the
Acquisition is consummated or delayed. If the Acquisition is not
completed, the Companys Series I preferred stock that
you have purchased in this offering will not reflect any
interest in FC-GEN Acquisition Holding, and if the Acquisition
is delayed, this interest will not be reflected during the
period of delay. If this offering is consummated and the
Acquisition does not occur, our earnings available to pay
dividends may be less than what might be expected to be
available if the Acquisition were completed. Also, the price of
the Companys Series I preferred stock may decline to
the extent that the current market price of the Companys
Series I preferred stock reflects a market assumption that
the Acquisition will be consummated and that the Company will
realize certain anticipated benefits of the Acquisition.
If the Company is
unable to raise sufficient proceeds through this offering, the
Common Stock Offering, cash on hand and any amounts raised in
future capital raising activities or refinancings, the Company
may draw down on the $2.4 billion bridge loan facility in
order to close the Acquisition, which would significantly
increase our indebtedness. If the Company elects not to
consummate the financing under the $2.4 billion bridge loan
facility, the Company may seek alternative sources of financing
for the Acquisition, the terms of which are unknown to us and
could limit our ability to operate our business
The offering of the Series I preferred stock forms part of
a larger financing plan for the Acquisition described elsewhere
in this prospectus supplement. See The
AcquisitionThe Financing Transactions. Concurrently
with this offering, the Company has obtained a commitment for a
bridge loan facility pursuant to which the bridge lenders have
committed to provide, subject to certain conditions, the
additional financing required for the Acquisition through a
$2.4 billion bridge loan facility in the event that
sufficient proceeds are not raised from this offering, the
Common Stock Offering, cash on hand and any amounts raised in
future capital raising activities or refinancings. See
Description of bridge
S-13
Risk
factors
loan facility. The Company may use this bridge loan
facility to finance all or part of the Acquisition. See
Use of proceeds. The Companys obligations
under the Purchase Agreement are not conditioned upon the
consummation of any or all of the Financing Transactions.
In the event that the Company is unable to raise sufficient
proceeds through the consummation of this offering, the Common
Stock Offering cash on hand and any amounts raised in future
capital raising activities or refinancings, the Company may draw
down on the bridge loan facility, in whole or in part, in order
to finance all or part of the Acquisition. See Description
of bridge loan facility. In the event of such draw down,
we would be significantly more highly leveraged, which means we
will have a larger amount of indebtedness in relation to our
equity. Our interest expense would significantly increase.
In the event that the Company elects not to consummate the
financing under the $2.4 billion bridge loan facility or
fails to satisfy certain of the various conditions pursuant to
which the bridge lenders have committed to fund the
Companys $2.4 billion bridge loan facility, it could
seek alternative sources of financing for the Acquisition. There
can be no assurance as to the terms on which the Company would
issue future additional securities or borrow funds.
We will incur
substantial expenses and payments even if the Acquisition is not
completed
We have incurred substantial legal, accounting, financial
advisory and other costs and our management has devoted
considerable time and effort in connection with the Acquisition.
If the Acquisition is not completed, we will bear certain fees
and expenses associated with the Acquisition without realizing
the benefits of the Acquisition. The fees and expenses may be
significant and could have an adverse impact on our results of
our operations.
The intended
benefits of the Acquisition may not be realized, which could
have a negative impact on the market price of the Companys
Series I preferred stock and common stock after the
Acquisition
The closing of the Acquisition poses risks for the ongoing
operations of the Company, including that:
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the FC-GEN Acquisition Holdings portfolio may not perform as
well as the Company anticipates;
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Genesis Operations, LLC (Tenant) may not be able to
achieve and maintain occupancy and rate levels that will enable
it to meet all its obligations to us, which may result in the
bankruptcy or insolvency of Tenant, or Tenant may become subject
to bankruptcy or insolvency proceedings for other
reasons; and
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unforeseen difficulties may arise in integrating FC-GEN
Acquisition Holdings assets into the Companys portfolio.
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If the Company fails to realize the intended benefits of the
Acquisition, the market price of the Companys
Series I preferred stock and common stock could decline
from its market price before the Acquisition.
We cannot assure
you that the Common Stock Offering will be completed on the
terms contemplated
Concurrently with this public offering of Series I
preferred stock, we are offering 25,000,000 shares (or
28,750,000 shares if the underwriters exercise their
overallotment option in full) of our common stock pursuant to a
separate public offering (the Common Stock
Offering). The completion of this offering of
Series I preferred stock is not subject to the completion
of the Common Stock Offering and the completion of the Common
Stock Offering is not subject to the completion of this offering
of Series I preferred stock. We cannot assure you that the
Common Stock Offering will be completed or, if completed, that
it will be completed for the amount or on the terms contemplated.
S-14
Risk
factors
RISKS RELATED TO
OUR BUSINESS
Our expected
results may not be achieved
Our expected results may not be achieved, and actual results may
differ materially from our expectations. This may be a result of
various factors, including, but not limited to: the status of
the economy; the status of capital markets, including
availability and cost of capital; issues facing the health care
industry, including compliance with, and changes to, regulations
and payment policies, responding to government investigations
and punitive settlements and operators/tenants
difficulty in cost-effectively obtaining and maintaining
adequate liability and other insurance; changes in financing
terms; competition within the health care, senior housing and
life science industries; negative developments in the operating
results or financial condition of operators/tenants, including,
but not limited to, their ability to pay rent and repay loans;
our ability to transition or sell facilities with profitable
results; the failure to make new investments as and when
anticipated; acts of God affecting our properties; our ability
to re-lease space at similar rates as vacancies occur; our
ability to timely reinvest sale proceeds at similar rates to
assets sold; operator/tenant or joint venture partner
bankruptcies or insolvencies; the cooperation of joint venture
partners; government regulations affecting Medicare and Medicaid
reimbursement rates and operational requirements; regulatory
approval and market acceptance of the products and technologies
of life science tenants; liability or contract claims by or
against operators/tenants; unanticipated difficulties
and/or
expenditures relating to future acquisitions; environmental laws
affecting our properties; changes in rules or practices
governing our financial reporting; and other legal and
operational matters, including REIT qualification and key
management personnel recruitment and retention.
Risk factors
related to our operators revenues and expenses
Our investment property operators revenues are primarily
driven by occupancy, Medicare and Medicaid reimbursement, if
applicable, and private pay rates. Expenses for these facilities
are primarily driven by the costs of labor, food, utilities,
taxes, insurance and rent or debt service. Revenues from
government reimbursement have, and may continue to, come under
pressure due to reimbursement cuts and state budget shortfalls.
Liability insurance and staffing costs continue to increase for
our operators. To the extent that any decrease in revenues
and/or any
increase in operating expenses result in a property not
generating enough cash to make payments to us, the credit of our
operator and the value of other collateral would have to be
relied upon.
The recent credit and liquidity crisis, and the weakened
economy, may have a lingering adverse effect on our operators
and tenants, including their ability to access credit or
maintain occupancy rates. If the operations, cash flows or
financial condition of our operators are materially adversely
impacted by economic conditions, our revenue and operations may
be adversely affected.
Increased
competition may affect our operators ability to meet their
obligations to us
The operators of our properties compete on a local and regional
basis with operators of properties and other health care
providers that provide comparable services. We cannot be certain
that the operators of all of our facilities will be able to
achieve and maintain occupancy and rate levels that will enable
them to meet all of their obligations to us. Our operators are
expected to encounter increased competition in the future that
could limit their ability to attract residents or expand their
businesses.
Risk factors
related to obligor bankruptcies
We are exposed to the risk that our obligors may not be able to
meet the rent, principal and interest or other payments due us,
which may result in an obligor bankruptcy or insolvency, or that
an obligor might become subject to bankruptcy or insolvency
proceedings for other reasons. Although our operating lease
agreements provide us with the right to evict a tenant, demand
immediate payment of
S-15
Risk
factors
rent and exercise other remedies, and our loans provide us with
the right to terminate any funding obligation, demand immediate
repayment of principal and unpaid interest, foreclose on the
collateral and exercise other remedies, the bankruptcy and
insolvency laws afford certain rights to a party that has filed
for bankruptcy or reorganization. An obligor in bankruptcy or
subject to insolvency proceedings may be able to limit or delay
our ability to collect unpaid rent in the case of a lease or to
receive unpaid principal and interest in the case of a loan, and
to exercise other rights and remedies.
We may be required to fund certain expenses (e.g., real estate
taxes and maintenance) to preserve the value of an investment
property, avoid the imposition of liens on a property
and/or
transition a property to a new tenant. In some instances, we
have terminated our lease with a tenant and relet the property
to another tenant. In some of those situations, we have provided
working capital loans to and limited indemnification of the new
obligor. If we cannot transition a leased property to a new
tenant, we may take possession of that property, which may
expose us to certain successor liabilities. Should such events
occur, our revenue and operating cash flow may be adversely
affected.
Transfers of
health care facilities may require regulatory approvals and
these facilities may not have efficient alternative
uses
Transfers of health care facilities to successor operators
frequently are subject to regulatory approvals or notifications,
including, but not limited to, change of ownership approvals
under certificate of need (CON) laws, state
licensure laws and Medicare and Medicaid provider arrangements,
that are not required for transfers of other types of real
estate. The replacement of a health care facility operator could
be delayed by the approval process of any federal, state or
local agency necessary for the transfer of the facility or the
replacement of the operator licensed to manage the facility.
Alternatively, given the specialized nature of our facilities,
we may be required to spend substantial time and funds to adapt
these properties to other uses. If we are unable to timely
transfer properties to successor operators or find efficient
alternative uses, our revenue and operations may be adversely
affected.
Risk factors
related to government regulations
Our obligors businesses are affected by government
reimbursement and private payor rates. To the extent that an
operator/tenant receives a significant portion of its revenues
from government payors, primarily Medicare and Medicaid, such
revenues may be subject to statutory and regulatory changes,
retroactive rate adjustments, recovery of program overpayments
or set-offs, administrative rulings, policy interpretations,
payment or other delays by fiscal intermediaries or carriers,
government funding restrictions (at a program level or with
respect to specific facilities) and interruption or delays in
payments due to any ongoing government investigations and audits
at such property. In recent years, government payors have frozen
or reduced payments to health care providers due to budgetary
pressures. Health care reimbursement will likely continue to be
of paramount importance to federal and state authorities. We
cannot make any assessment as to the ultimate timing or effect
any future legislative reforms may have on the financial
condition of our obligors and properties. There can be no
assurance that adequate reimbursement levels will be available
for services provided by any property operator, whether the
property receives reimbursement from Medicare, Medicaid or
private payors. Significant limits on the scope of services
reimbursed and on reimbursement rates and fees could have a
material adverse effect on an obligors liquidity,
financial condition and results of operations, which could
adversely affect the ability of an obligor to meet its
obligations to us. See
Item 1BusinessCertain Government
RegulationsReimbursement included in our Annual
Report on
Form 10-K
for the year ended December 31, 2010.
Our operators and tenants generally are subject to extensive
federal, state, local, and industry-regulated licensure,
certification and inspection laws, regulations, and standards.
Our operators or tenants failure to comply with any
of these laws, regulations, or standards could result in loss of
accreditation, denial of reimbursement, imposition of fines,
suspension or decertification from federal and state health
S-16
Risk
factors
care programs, loss of license or closure of the facility. Such
actions may have an effect on our operators or
tenants ability to make lease payments to us and,
therefore, adversely impact us. See
Item 1BusinessCertain Government
RegulationsOther Related Laws included in our Annual
Report on
Form 10-K
for the year ended December 31, 2010.
Many of our properties may require a license, registration,
and/or CON
to operate. Failure to obtain a license, registration, or CON,
or loss of a required license, registration, or CON would
prevent a facility from operating in the manner intended by the
operators or tenants. These events could materially adversely
affect our operators or tenants ability to make rent
payments to us. State and local laws also may regulate the
expansion, including the addition of new beds or services or
acquisition of medical equipment, and the construction or
renovation of health care facilities, by requiring a CON or
other similar approval from a state agency. See
Item 1BusinessCertain Government
RegulationsLicensing and Certification included in
our Annual Report on
Form 10-K
for the year ended December 31, 2010.
The American Recovery and Reinvestment Act of 2009
(ARRA), which was signed into law on
February 17, 2009, provides $87 billion in additional
federal Medicaid funding for states Medicaid expenditures
between October 1, 2008 and December 31, 2010. On
August 10, 2010, the President signed into law H.R. 1586,
which mandates a six-month extension of the increase in federal
Medicaid funding for states through June 30, 2011, although
the enhanced federal Medicaid funding is scaled back for the
first two quarters of 2011. Under both the ARRA and H.R. 1586,
states meeting certain eligibility requirements will temporarily
receive additional money in the form of an increase in the
federal medical assistance percentage (FMAP). Thus,
for a limited period of time, the share of Medicaid costs that
are paid for by the federal government will go up, and each
states share will go down. We cannot predict whether
states are, or will remain, eligible to receive the additional
federal Medicaid funding, or whether the states will have
sufficient funds for their Medicaid programs. We also cannot
predict the impact that such broad-based, far-reaching
legislation will have on the U.S. economy or our business.
Risk factors
related to liability claims and insurance costs
In recent years, skilled nursing and seniors housing operators
have experienced substantial increases in both the number and
size of patient care liability claims. As a result, general and
professional liability costs have increased in some markets.
However, a recent report and state survey found that the
liability insurance market is beginning to stabilize in most
markets. In 2008, national average liability loss costs were
stable for the first time in nearly a decade. State-led tort
reform efforts have greatly contributed to decreasing costs. In
some markets general and professional liability insurance
coverage continues to be restricted or very costly, which in
some cases has caused operators to self-insure. These
developments may adversely affect the property operators
future operations, cash flows and financial condition, and may
have a material adverse effect on the property operators
ability to meet their obligations to us.
Risk factors
related to acquisitions
We are exposed to the risk that some of our acquisitions may not
prove to be successful. We could encounter unanticipated
difficulties and expenditures relating to any acquired
properties, including contingent liabilities, and acquired
properties might require significant management attention that
would otherwise be devoted to our ongoing business. If we agree
to provide construction funding to an operator/tenant and the
project is not completed, we may need to take steps to ensure
completion of the project. Moreover, if we issue equity
securities or incur additional debt, or both, to finance future
acquisitions, it may reduce our per share financial results.
These costs may negatively affect our results of operations.
S-17
Risk
factors
Risk factors
related to joint ventures
We have entered into, and may continue in the future to enter
into, partnerships or joint ventures with other persons or
entities. Joint venture investments involve risks that may not
be present with other methods of ownership, including the
possibility that our partner might become insolvent, refuse to
make capital contributions when due or otherwise fail to meet
its obligations, which may result in certain liabilities to us
for guarantees and other commitments; that our partner might at
any time have economic or other business interests or goals that
are or become inconsistent with our interests or goals; that we
could become engaged in a dispute with our partner, which could
require us to expend additional resources to resolve such
disputes and could have an adverse impact on the operations and
profitability of the joint venture; and that our partner may be
in a position to take action or withhold consent contrary to our
instructions or requests. In addition, our ability to transfer
our interest in a joint venture to a third party may be
restricted. In some instances, we
and/or our
partner may have the right to trigger a buy-sell arrangement,
which could cause us to sell our interest, or acquire our
partners interest, at a time when we otherwise would not
have initiated such a transaction. Our ability to acquire our
partners interest may be limited if we do not have
sufficient cash, available borrowing capacity or other capital
resources. In such event, we may be forced to sell our interest
in the joint venture when we would otherwise prefer to retain
it. Joint ventures may require us to share decision-making
authority with our partners, which could limit our ability to
control the properties in the joint ventures. Even when we have
a controlling interest, certain major decisions may require
partner approval, such as the sale, acquisition or financing of
a property.
Risk factors
related to life sciences facilities
Our tenants in the life sciences industry face high levels of
regulation, expense and uncertainty that may adversely affect
their ability to make payments to us. Research, development and
clinical testing of products and technologies can be very
expensive and sources of funds may not be available to our life
sciences tenants in the future. The products and technologies
that are developed and manufactured by our life sciences tenants
may require regulatory approval prior to being made, marketed,
sold and used. The regulatory process can be costly, long and
unpredictable. Even after a tenant gains regulatory approval and
market acceptance, the product still presents regulatory and
liability risks, such as safety concerns, competition from new
products and eventually the expiration of patent protection.
These factors may affect the ability of our life sciences
tenants to make timely payments to us, which may adversely
affect our revenue and operations.
Risk factors
related to indebtedness
Permanent financing for our investments is typically provided
through a combination of public and private offerings of debt
and equity securities and the incurrence or assumption of
secured debt. The incurrence or assumption of indebtedness,
including each of our bridge loan facilities, may cause us to
become more leveraged, which could (1) require us to
dedicate a greater portion of our cash flow to the payment of
debt service, (2) make us more vulnerable to a downturn in
the economy, (3) limit our ability to obtain additional
financing, or (4) negatively affect our credit ratings or
outlook by one or more of the noted rating agencies.
Our debt agreements contain various covenants, restrictions and
events of default. Among other things, these provisions require
us to maintain certain financial ratios and minimum net worth
and impose certain limits on our ability to incur indebtedness,
create liens and make investments or acquisitions. Breaches of
these covenants could result in defaults under the instruments
governing the applicable indebtedness, in addition to any other
indebtedness cross-defaulted against such instruments. These
defaults could have a material adverse impact on our business,
results of operations and financial condition.
S-18
Risk
factors
Risk factors
related to our credit ratings
We plan to manage the Company to maintain a capital structure
consistent with our current profile, but there can be no
assurance that we will be able to maintain our current credit
ratings. Any downgrades in terms of ratings or outlook by any or
all of the noted rating agencies could have a material adverse
impact on our cost and availability of capital, which could in
turn have a material adverse impact on our consolidated results
of operations, liquidity
and/or
financial condition.
Risk factors
related to interest rate swaps
We enter into interest rate swap agreements from time to time to
manage some of our exposure to interest rate volatility. These
swap agreements involve risks, such as the risk that
counterparties may fail to honor their obligations under these
arrangements. In addition, these arrangements may not be
effective in reducing our exposure to changes in interest rates.
When we use forward-starting interest rate swaps, there is a
risk that we will not complete the long-term borrowing against
which the swap is intended to hedge. If such events occur, our
results of operations may be adversely affected.
Risk factors
related to environmental laws
Under various federal and state laws, owners or operators of
real estate may be required to respond to the presence or
release of hazardous substances on the property and may be held
liable for property damage, personal injuries or penalties that
result from environmental contamination or exposure to hazardous
substances. We may become liable to reimburse the government for
damages and costs it incurs in connection with the
contamination. Generally, such liability attaches to a person
based on the persons relationship to the property. Our
tenants or borrowers are primarily responsible for the condition
of the property. Moreover, we review environmental site
assessments of the properties that we own or encumber prior to
taking an interest in them. Those assessments are designed to
meet the all appropriate inquiry standard, which we
believe qualifies us for the innocent purchaser defense if
environmental liabilities arise. Based upon such assessments, we
do not believe that any of our properties are subject to
material environmental contamination. However, environmental
liabilities may be present in our properties and we may incur
costs to remediate contamination, which could have a material
adverse effect on our business or financial condition or the
business or financial condition of our obligors.
Risk factors
related to facilities that require entrance fees
Certain of our senior housing facilities require the payment of
an upfront entrance fee by the resident, a portion of which may
be refundable by the operator. Some of these facilities are
subject to substantial oversight by state regulators relating to
these funds. As a result of this oversight, residents of these
facilities may have a variety of rights, including, for example,
the right to cancel their contracts within a specified period of
time and certain lien rights. The oversight and rights of
residents within these facilities may have an effect on the
revenue or operations of the operators of such facilities and
therefore may negatively impact us.
Risk factors
related to facilities under construction or
development
At any given time, we may be in the process of constructing one
or more new facilities that ultimately will require a CON and
license before they can be utilized by the operator for their
intended use. The operator also may need to obtain Medicare and
Medicaid certification and enter into Medicare and Medicaid
provider agreements
and/or third
party payor contracts. In the event that the operator is unable
to obtain the necessary CON, licensure, certification, provider
agreements or contracts after the completion of construction,
there is a risk that we will not be able to earn any revenues on
the facility until either the initial operator obtains a license
or certification to operate the new facility and the
S-19
Risk
factors
necessary provider agreements or contracts or we can find and
contract with a new operator that is able to obtain a license to
operate the facility for its intended use and the necessary
provider agreements or contracts.
In connection with our renovation, redevelopment, development
and related construction activities, we may be unable to obtain,
or suffer delays in obtaining, necessary zoning, land-use,
building, occupancy and other required governmental permits and
authorizations. These factors could result in increased costs or
our abandonment of these projects. In addition, we may not be
able to obtain financing on favorable terms, which may render us
unable to proceed with our development activities, and we may
not be able to complete construction and
lease-up of
a property on schedule, which could result in increased debt
service expense or construction costs.
Additionally, the time frame required for development,
construction and
lease-up of
these properties means that we may have to wait years for
significant cash returns. Because we are required to make cash
distributions to our stockholders, if the cash flow from
operations or refinancing is not sufficient, we may be forced to
borrow additional money to fund such distributions. Newly
developed and acquired properties may not produce the cash flow
that we expect, which could adversely affect our overall
financial performance.
In deciding whether to acquire or develop a particular property,
we make assumptions regarding the expected future performance of
that property. In particular, we estimate the return on our
investment based on expected occupancy and rental rates. If our
financial projections with respect to a new property are
inaccurate, and the property is unable to achieve the expected
occupancy and rental rates, it may fail to perform as we
expected in analyzing our investment. Our estimate of the costs
of repositioning or redeveloping an acquired property may prove
to be inaccurate, which may result in our failure to meet our
profitability goals. Additionally, we may acquire new properties
that are not fully leased, and the cash flow from existing
operations may be insufficient to pay the operating expenses and
debt service associated with that property.
We do not know if
our tenants will renew their existing leases, and if they do
not, we may be unable to lease the properties on as favorable
terms, or at all
We cannot predict whether our tenants will renew existing leases
at the end of their lease terms, which expire at various times.
If these leases are not renewed, we would be required to find
other tenants to occupy those properties or sell them. There can
be no assurance that we would be able to identify suitable
replacement tenants or enter into leases with new tenants on
terms as favorable to us as the current leases or that we would
be able to lease those properties at all.
Our ownership of
properties through ground leases exposes us to the loss of such
properties upon breach or termination of the ground
leases
We have acquired an interest in certain of our properties by
acquiring a leasehold interest in the property on which the
building is located, and we may acquire additional properties in
the future through the purchase of interests in ground leases.
As the lessee under a ground lease, we are exposed to the
possibility of losing the property upon termination of the
ground lease or an earlier breach of the ground lease by us.
Illiquidity of
real estate investments could significantly impede our ability
to respond to adverse changes in the performance of our
properties
Real estate investments are relatively illiquid. Our ability to
quickly sell or exchange any of our properties in response to
changes in economic and other conditions will be limited. No
assurances can be given that we will recognize full value for
any property that we are required to sell for liquidity reasons.
Our inability to respond rapidly to changes in the performance
of our investments could
S-20
Risk
factors
adversely affect our financial condition and results of
operations. In addition, we are exposed to the risks inherent in
concentrating investments in real estate, and in particular, the
seniors housing and health care industries. A downturn in the
real estate industry could adversely affect the value of our
properties and our ability to sell properties for a price or on
terms acceptable to us.
Risk factors
related to reinvestment of sale proceeds
From time to time, we will have cash available from (1) the
proceeds of sales of our securities, (2) principal payments
on our loans receivable and (3) the sale of properties,
including non-elective dispositions, under the terms of master
leases or similar financial support arrangements. In order to
maintain current revenues and continue generating attractive
returns, we expect to re-invest these proceeds in a timely
manner. We compete for real estate investments with a broad
variety of potential investors. This competition for attractive
investments may negatively affect our ability to make timely
investments on terms acceptable to us.
Failure to
properly manage our rapid growth could distract our management
or increase our expenses
We have experienced rapid growth and development in a relatively
short period of time and expect to continue this rapid growth in
the future. This growth has resulted in increased levels of
responsibility for our management. Future property acquisitions
could place significant additional demands on, and require us to
expand, our management, resources and personnel. Our failure to
manage any such rapid growth effectively could harm our business
and, in particular, our financial condition, results of
operations and cash flows, which could negatively affect our
ability to make distributions to stockholders. Our growth could
also increase our capital requirements, which may require us to
issue potentially dilutive equity securities and incur
additional debt.
We might fail to
qualify or remain qualified as a REIT
We intend to operate as a REIT under the Internal Revenue Code
and believe we have and will continue to operate in such a
manner. If we lose our status as a REIT, we will face serious
income tax consequences that will substantially reduce the funds
available for satisfying our obligations and for distribution to
our stockholders because:
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we would not be allowed a deduction for distributions to
stockholders in computing our taxable income and would be
subject to U.S. federal income tax at regular corporate
rates;
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we could be subject to the federal alternative minimum tax and
possibly increased state and local taxes; and
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unless we are entitled to relief under statutory provisions, we
could not elect to be subject to tax as a REIT for four taxable
years following the year during which we were disqualified.
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Since REIT qualification requires us to meet a number of complex
requirements, it is possible that we may fail to fulfill them,
and if we do, our earnings will be reduced by the amount of
U.S. federal and other income taxes owed. A reduction in
our earnings would affect the amount we could distribute to our
stockholders. If we do not qualify as a REIT, we would not be
required to make distributions to stockholders since a non-REIT
is not required, in order to maintain REIT status or avoid an
excise tax, to pay dividends to stockholders. See
Item 1BusinessTaxationFederal
Income Tax Considerations of our Annual Report on
Form 10-K
for the year ended December 31, 2010, for a discussion of
the provisions of the Internal Revenue Code that apply to us and
the effects of failure to qualify as a REIT.
In addition, if we fail to qualify as a REIT, all distributions
to stockholders would continue to be treated as dividends to the
extent of our current and accumulated earnings and profits,
although
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Risk
factors
corporate stockholders may be eligible for the dividends
received deduction, and individual stockholders may be eligible
for taxation at the rates generally applicable to long-term
capital gains (currently at a maximum rate of 15%) with respect
to distributions.
As a result of all these factors, our failure to qualify as a
REIT also could impair our ability to implement our business
strategy and would adversely affect the value of our common
stock.
Qualification as a REIT involves the application of highly
technical and complex Internal Revenue Code provisions for which
there are only limited judicial and administrative
interpretations. The determination of various factual matters
and circumstances not entirely within our control may affect our
ability to remain qualified as a REIT. Although we believe that
we qualify as a REIT, we cannot assure you that we will continue
to qualify or remain qualified as a REIT for U.S. federal
income tax purposes. See
Item 1BusinessTaxationFederal
Income Tax Considerations of our Annual Report on
Form 10-K
for the year ended December 31, 2010.
The 90% annual
distribution requirement will decrease our liquidity and may
limit our ability to engage in otherwise beneficial
transactions
To comply with the 90% distribution requirement applicable to
REITs and to avoid the nondeductible excise tax, we must make
distributions to our stockholders. See
Item 1BusinessTaxationFederal
Income Tax ConsiderationsQualification as a
REITAnnual Distribution Requirements included in our
Annual Report on
Form 10-K
for the year ended December 31, 2010. Although we
anticipate that we generally will have sufficient cash or liquid
assets to enable us to satisfy the REIT distribution
requirement, it is possible that, from time to time, we may not
have sufficient cash or other liquid assets to meet the 90%
distribution requirement, or we may decide to retain cash or
distribute such greater amount as may be necessary to avoid
income and excise taxation. This may be due to timing
differences between the actual receipt of income and actual
payment of deductible expenses, on the one hand, and the
inclusion of that income and deduction of those expenses in
arriving at our taxable income, on the other hand. In addition,
non-deductible expenses such as principal amortization or
repayments or capital expenditures in excess of non-cash
deductions may cause us to fail to have sufficient cash or
liquid assets to enable us to satisfy the 90% distribution
requirement. In the event that timing differences occur, or we
deem it appropriate to retain cash, we may borrow funds, issue
additional equity securities (although we cannot assure you that
we will be able to do so), pay taxable stock dividends, if
possible, distribute other property or securities or engage in
another transaction intended to enable us to meet the REIT
distribution requirements. This may require us to raise
additional capital to meet our obligations.
The amount of additional indebtedness we may incur is limited by
the terms of our line of credit arrangement and the indentures
governing our senior unsecured notes. In addition, adverse
economic conditions may impact the availability of additional
funds or could cause the terms on which we are able to borrow
additional funds to become unfavorable. In those circumstances,
we may be required to raise additional equity in the capital
markets. Our access to capital depends upon a number of factors
over which we have little or no control, including rising
interest rates, inflation and other general market conditions
and the markets perception of our growth potential and our
current and potential future earnings and cash distributions and
the market price of the shares of our capital stock. We cannot
assure you that we will be able to raise the capital necessary
to make future investments or to meet our obligations and
commitments as they mature.
The lease of
qualified health care properties to a taxable REIT subsidiary is
subject to special requirements
We intend to lease certain qualified health care properties we
acquire from operators to a taxable REIT subsidiary (or a
limited liability company of which the taxable REIT subsidiary
is a member), which
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Risk
factors
lessee will contract with such operators (or a related party) to
operate the health care operations at these properties. The
rents from this taxable REIT subsidiary lessee structure will be
treated as qualifying rents from real property if (1) they
are paid pursuant to an arms-length lease of a qualified health
care property with a taxable REIT subsidiary and (2) the
operator qualifies as an eligible independent contractor. If any
of these conditions are not satisfied, then the rents will not
be qualifying rents. See
Item 1BusinessTaxationFederal
Income Tax ConsiderationsQualification as a
REITIncome Tests included in our Annual Report on
Form 10-K
for the year ended December 31, 2010.
If certain
sale-leaseback transactions are not characterized by the IRS as
true leases, we may be subject to adverse tax
consequences
We may purchase properties and lease them back to the sellers of
such properties. We intend for any such sale-leaseback
transaction to be structured in such a manner that the lease
will be characterized as a true lease, thereby
allowing us to be treated as the owner of the property for
U.S. federal income tax purposes. However, depending on the
terms of any specific transaction, the Internal Revenue Service
(IRS) might take the position that the transaction
is not a true lease but is more properly treated in
some other manner. In the event any sale-leaseback transaction
is challenged and successfully re-characterized by the IRS, we
would not be entitled to claim the deductions for depreciation
and cost recovery generally available to an owner of property.
Furthermore, if a sale-leaseback transaction were so
re-characterized, we might fail to satisfy the REIT asset tests
or income tests and, consequently, could lose our REIT status
effective with the year of re-characterization. See
Item 1BusinessTaxationFederal
Income Tax ConsiderationsQualification as a
REITAsset Tests and Income Tests
included in our Annual Report on
Form 10-K
for the year ended December 31, 2010. Alternatively, the
amount of our REIT taxable income could be recalculated, which
may cause us to fail to meet the REIT annual distribution
requirements for a taxable year. See
Item 1BusinessTaxationFederal
Income Tax ConsiderationsQualification as a
REITAnnual Distribution Requirements included in our
Annual Report on
Form 10-K
for the year ended December 31, 2010.
Other risk
factors
We are also subject to other risks. First, our certificate of
incorporation and by-laws contain anti-takeover provisions
(staggered board provisions, restrictions on share ownership and
transfer and super majority stockholder approval requirements
for business combinations) that could make it more difficult for
or even prevent a third party from acquiring us without the
approval of our incumbent Board of Directors. Provisions and
agreements that inhibit or discourage takeover attempts could
reduce the market value of our common stock.
Additionally, we are dependent on key personnel. Although we
have entered into employment agreements with our executive
officers, losing any one of them could, at least temporarily,
have an adverse impact on our operations. We believe that losing
more than one could have a material adverse impact on our
business.
RISKS RELATED TO
THE SERIES I PREFERRED STOCK AND OUR COMMON STOCK
The Series I
preferred stock ranks junior to all of our indebtedness and
other liabilities and is effectively junior to all indebtedness
and other liabilities of our subsidiaries
In the event of our bankruptcy, liquidation, dissolution or
winding-up
of our affairs, our assets will be available to pay obligations
on the Series I preferred stock, including the conversion
of your shares of the Series I preferred stock into cash,
if we so elect, upon a fundamental change, only after all of our
indebtedness and other liabilities have been paid. The rights of
holders of the Series I preferred stock to participate in
the distribution of our assets will rank junior to the prior
claims of our creditors and any
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Risk
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future series or class of preferred stock that ranks senior to
the Series I preferred stock. In addition, the
Series I preferred stock effectively ranks junior to all
existing and future indebtedness and other liabilities of (as
well as any preferred equity interests held by others in) our
subsidiaries. Our subsidiaries, which owned approximately 69.0%
of our real estate investments at December 31, 2010, are
separate legal entities and have no legal obligation to pay any
amounts to us in respect of dividends due on the Series I
preferred stock. If we are forced to liquidate our assets to pay
our creditors, we may not have sufficient assets to pay amounts
due on any or all of the Series I preferred stock then
outstanding. We and our subsidiaries may incur substantial
amounts of additional debt and other obligations that will rank
senior to the Series I preferred stock.
We may not be
able to pay dividends on the Series I preferred
stock
Our revolving credit facility prohibits us from paying cash
dividends on the Series I preferred stock and our common
stock if we default under the credit facility, and other
financing agreements that we enter into in the future also may
limit our ability to pay cash dividends on our capital stock. If
we default under the revolving credit facility or future
financing agreements restrict our ability to pay cash dividends,
we will be unable to pay cash dividends on the Series I
preferred stock unless we can refinance amounts outstanding
under those agreements.
Under Delaware law, cash dividends on capital stock may only be
paid from surplus or, if there is no
surplus, from the corporations net profits for
the then-current or the preceding fiscal year. Unless we operate
profitably, our ability to pay cash dividends on the
Series I preferred stock would require the availability of
adequate surplus, which is defined as the excess, if
any, of our net assets (total assets less total liabilities)
over our capital. Further, even if adequate surplus is available
to pay cash dividends on the Series I preferred stock, we
may not have sufficient cash to pay dividends on the
Series I preferred stock.
In addition, no payment or adjustment will be made upon
conversion for any undeclared or, subject to limited exceptions,
unpaid dividends.
Our ability to pay dividends may be impaired if any of the risks
described in this prospectus supplement and the accompanying
prospectus or incorporated by reference herein and in the
accompanying prospectus, were to occur. In addition, payment of
our dividends depends upon our earnings, our financial
condition, maintenance of our REIT status and other factors as
our board of directors may deem relevant from time to time.
The price of our
common stock may fluctuate significantly, which will affect the
price of the Series I preferred stock and may make it
difficult for you to resell the Series I preferred stock or
common stock issuable upon conversion of the Series I
preferred stock when you want or at prices you find
attractive
The price of our common stock on the NYSE has historically
fluctuated significantly. Between January 1, 2009 and
February 25, 2011, the trading price of our common stock
has ranged from $25.86 to $52.06 per share. We expect that the
market price of our common stock will continue to fluctuate for
many reasons, including: our financial condition, performance
and prospects; general economic and financial market conditions;
changes in estimates by analysts; the market for similar
securities issued by real estate investment trusts; and our
ability to meet analysts estimates. The market price of
our common stock also may be affected by future sales of our
securities, including additional issuances of common stock and
securities convertible into common stock. In addition, the stock
markets in general and companies operating in the real estate
industry have experienced extreme volatility that has often been
unrelated to the operating performance of particular companies.
These factors, among others, could significantly depress the
trading price of our common stock. Because the Series I
preferred stock is convertible into shares of our common stock,
volatility or depressed prices for our common
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Risk
factors
stock could have a similar effect on the trading price of the
Series I preferred stock. Holders who receive common stock
pursuant to the terms of the Series I preferred stock also
will be subject to the risk of volatility and depressed prices.
Market interest
rates may affect the price of our Series I preferred
stock
One of the factors that will influence the price of our
Series I preferred stock will be the dividend yield on our
Series I preferred stock relative to market interest rates.
An increase in market interest rates could cause the market
price of Series I preferred stock to go down. The trading
price of the shares of our Series I preferred stock also
will depend on many other factors, which may change from time to
time, including:
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the market for similar securities;
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the attractiveness of REIT securities in comparison to the
securities of other companies, taking into account, among other
things, the higher tax rates imposed on dividends paid by REITs;
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government action or regulation;
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general economic conditions or conditions in the financial or
real estate markets; and
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our financial condition, performance and prospects.
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The Series I
preferred stock will rank equally as to dividend rights and
rights upon liquidation with our outstanding Series D
preferred stock, Series F preferred stock and Series H
convertible preferred stock, and we may issue additional series
of preferred stock that rank equally to the Series I
preferred stock as to dividend rights, rights upon liquidation
or voting rights
We currently have 4,000,000 outstanding shares of Series D
preferred stock ($100 million in aggregate liquidation
value) and 7,000,000 outstanding shares of Series F
preferred stock ($175 million in aggregate liquidation
value) and 349,854 outstanding shares of Series H
convertible preferred stock (approximately $9 million in
aggregate liquidation), all of which will rank equally with the
Series I preferred stock as to dividend rights and rights
upon our liquidation, dissolution or winding up of our affairs.
We also are allowed to issue additional series of preferred
stock that would rank equally to the Series I preferred
stock as to dividend payments and rights upon our liquidation,
dissolution or winding up of our affairs pursuant to our
certificate of incorporation and the certificate of designation
for the Series I preferred stock. The issuance of
additional shares of preferred stock could have the effect of
reducing the amounts available to the Series I preferred
stock issued in this offering upon our liquidation, dissolution
or winding up of our affairs. It also may reduce dividend
payments on the Series I preferred stock if we do not have
sufficient funds to pay dividends on all Series I preferred
stock outstanding and other classes of stock with equal priority
with respect to dividends.
In addition, although holders of Series I preferred stock
are entitled to limited voting rights, as described in
Description of Series I preferred stockVoting
Rights, with respect to such matters, the Series I
preferred stock will vote separately as a class along with all
other series of our preferred stock upon which like voting
rights have been conferred and are exercisable (which may
include holders of our Series D preferred stock, our
Series F preferred stock and our Series H preferred
stock, as well of holders of any series of preferred stock we
may issue in the future). As a result, the voting rights of
holders of Series I preferred stock may be significantly
diluted, and the holders of such other series of preferred stock
may be able to control or significantly influence the outcome of
any vote.
Future issuances and sales of preferred stock, or the perception
that such issuances and sales could occur, may cause prevailing
market prices for the Series I preferred stock and our
common stock to decline and may adversely affect our ability to
raise additional capital in the financial markets at times and
prices favorable to us.
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Risk
factors
Ownership
limitations in our by-laws and the certificate of designation
for the Series I preferred stock may impair the ability of
holders to convert Series I preferred stock into our common
stock
In order to assist us in maintaining our qualification as a REIT
for U.S. federal income tax purposes, no person may own, or
be deemed to own by virtue of the attribution rules of the
Internal Revenue Code, more than 9.8% of our common stock or
more than 9.8% in value of all of our outstanding capital stock,
subject to certain exceptions. For this purpose, all options,
warrants, convertible securities (including the Series I
preferred stock) and other rights to acquire our common stock
will be treated as if all such rights had been exercised.
Notwithstanding any other provision of the Series I
preferred stock, no holder of Series I preferred stock will
be entitled to convert such stock into our common stock to the
extent that receipt of our common stock would cause the holder
to exceed the ownership limit contained in our by-laws and in
the certificate of designation for the Series I preferred
stock. See Restrictions on Ownership and Transfer in
this prospectus supplement and Restrictions on Transfer of
Securities in the accompanying prospectus.
The conversion
rate of the Series I preferred stock may not be adjusted
for all dilutive events that may occur
As described under Description of Series I preferred
stockConversion Rate Adjustment, we will adjust the
conversion rate of the Series I preferred stock for certain
events, including, among others:
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the issuance of stock dividends on our common stock;
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the issuance of certain rights, options or warrants;
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the distribution of capital stock, indebtedness or assets,
securities or property;
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certain subdivisions and combinations of our capital stock;
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certain cash dividends on our common stock; and
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certain tender or exchange offers.
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We will not adjust the conversion rate for other events, such as
an issuance of common stock for cash or in connection with an
acquisition, which may adversely affect the trading price of the
Series I preferred stock or our common stock. If we engage
in any of these types of transactions, the value of the common
stock into which the Series I preferred stock may be
convertible may be diluted. In addition, it is possible that an
event will adversely affect the value of the Series I
preferred stock or common stock but does result in an adjustment
to the conversion rate.
The additional
shares of our common stock payable on our Series I
preferred stock in connection with a fundamental change may not
adequately compensate you for the lost option time value of your
shares of our Series I preferred stock or otherwise make
you whole as a result of such fundamental change
If a fundamental change occurs, you may be entitled to receive,
in certain circumstances, in addition to the number of shares
equal to the applicable conversion rate, an additional number of
shares upon conversion as described under Description of
Series I preferred stockDetermination of the
make-whole premium. The number of additional shares of our
common stock will be determined based on the date on which the
fundamental change becomes effective, and the price paid per
share of common stock in the fundamental change transaction as
described under Description of Series I preferred
stockSpecial Rights Upon a Fundamental Change. While
the additional shares of our common stock upon conversion is
designed to compensate you for the lost option time value of
your shares of Series I preferred stock as a result of the
fundamental change, the increase is only an approximation of
this lost value and may not adequately compensate you for your
loss.
S-26
Risk
factors
In addition, in certain other circumstances involving a
fundamental change, you may be entitled to receive a number of
shares of our common stock for each share of Series I
preferred stock you convert equal to the lesser of (i) the
liquidation preference divided by the Market Value (as defined
below) of our common stock on the effective date of the
fundamental change and
(ii) shares
of common stock (subject to adjustment) as described under
Description of Series I preferred stockSpecial
Rights Upon a Fundamental Change. To the extent the Market
Value of our common stock is less than
$ per share at the time of such a
fundamental change, the number of shares receivable by you upon
conversion in such circumstances will be limited by
the share
cap, and the value of the shares received by you will likely be
less than $50 per share of Series I preferred stock.
Further, the fundamental change provisions will not afford
protection to holders of the Series I preferred stock in
the event of certain transactions. For example, transactions
such as leveraged recapitalizations, refinancings,
restructurings or acquisitions initiated by us may not
constitute a fundamental change. In the event of any such
transaction, the holders of the Series I preferred stock
would not have the rights described under Description of
Series I preferred stockSpecial Rights Upon a
Fundamental Change, even though each of these transactions
could significantly increase the amount of our leverage, or
otherwise adversely affect our capital structure, thereby
adversely affecting the holders of the Series I preferred
stock.
Our obligation to issue shares in excess of the conversion rate
in connection with a fundamental change as described above could
be considered a penalty, in which case its enforceability would
be subject to general principles of reasonableness of economic
remedies.
The value of the
conversion right associated with the Series I preferred
stock may be substantially decreased or eliminated if we are
party to a merger, consolidation, or other similar
transaction
If we are party to a consolidation, merger, share exchange or
sale or lease of all or substantially all of our assets pursuant
to which our common shares are converted into the right to
receive cash, securities or other property, at the effective
time of the transaction, the right to convert the Series I
preferred stock into our common shares will be changed into a
right to convert such shares into the kind and amount of cash,
securities or other property which the holder would have
received if the holder had converted its shares of Series I
preferred stock immediately prior to the transaction. This
change could substantially lessen or eliminate the value of the
conversion privilege associated with the Series I preferred
stock in the future. For example, if all of our outstanding
common shares were acquired for cash in a merger transaction,
each of the shares of Series I preferred stock would become
convertible solely into cash and would no longer be convertible
into securities whose value would vary depending on our future
prospects and other factors.
An active trading
market for the Series I preferred stock does not exist and
may not develop
The Series I preferred stock is a new issue of securities
with no established trading market. Although we have applied to
list the Series I preferred stock on the NYSE, we cannot
assure you that the Series I preferred stock will be
approved for listing or that a trading market will exist for
those securities. Listing of the Series I preferred stock
on the NYSE does not guarantee that a trading market for the
Series I preferred stock will develop or, if a trading
market for the Series I preferred stock does develop, the
depth or liquidity of that market or the ability of the holders
to sell their Series I preferred stock.
There may be
future sales or other dilution of our equity, which may
adversely affect the market price of our common stock and the
Series I preferred stock
Except as described under Underwriting with respect
to the
lock-up
arrangements that we will be subject to for a short period of
time following this offering and the Common Stock Offering, we
are not
S-27
Risk
factors
restricted from issuing additional common stock, including
securities that are convertible into or exchangeable for, or
that represent the right to receive, common stock, or additional
preferred stock. The issuance of additional shares of our common
stock upon conversion of the Series I preferred stock or
other issuances of our common stock or convertible securities,
including outstanding options, or otherwise will dilute the
ownership interest of our common stockholders.
Sales of a substantial number of shares of our common stock or
other equity-related securities in the public market could
depress the market price of the Series I preferred stock,
our common stock, or both, and impair our ability to raise
capital through the sale of additional equity securities. We
cannot predict the effect that future sales of our common stock
or other equity-related securities would have on the market
price of our common stock or the value of the Series I
preferred stock. The price of our common stock could be affected
by sales of our common stock by investors who view the
Series I preferred stock as a more attractive means of
equity participation in our company and by hedging or arbitrage
trading activity that we expect to develop involving our common
stock as a result of this offering. The hedging or arbitrage
could, in turn, affect the market price of the Series I
preferred stock.
The market price of our common stock may be affected by future
sales of our securities, including those made pursuant to the
separate equity distribution agreements with each of UBS
Securities LLC, RBS Securities Inc., KeyBanc Capital Markets
Inc. and Credit Agricole Securities (USA) Inc. and other
additional issuances of common stock and securities convertible
into common stock. We also are required to issue common stock to
the holders of the 4.75% Convertible Senior Notes due 2026,
the 4.75% Convertible Senior Notes due 2027, the
3.00% Convertible Senior Notes due 2029 and the
Series H Cumulative Convertible and Redeemable Preferred
Stock if and when the holders exercise their conversion rights.
The number of shares of common stock that we may issue upon
conversion could be significant and dilutive to our existing
stockholders.
If you hold
shares of our Series I preferred stock, you will not be
entitled to any rights with respect to our common stock, but you
will be subject to all changes made with respect to our common
stock
If you hold shares of our Series I preferred stock, you
will not be entitled to any rights with respect to our common
stock (including, without limitation, voting rights and rights
to receive any dividends or other distributions on our common
stock), but you will be subject to all changes affecting the
common stock. You will have rights with respect to our common
stock only if and when we deliver shares of common stock to you
upon conversion of your shares of Series I preferred stock
and, in certain cases, under the conversion rate adjustments
applicable to our Series I preferred stock.
Provisions in the
certificate of designation relating to the Series I
preferred stock or our organizational documents could delay or
prevent a change in control of our company, which could
adversely affect the price of our common stock and the
Series I preferred stock
If a fundamental change occurs, we may be required to increase
the number of shares issuable upon conversion of the
Series I preferred stock as described under
Description of Series I preferred
stockDetermination of the make-whole premium and
Description of Series I preferred stockSpecial
Rights Upon a Fundamental Change. In addition, our
certificate of incorporation and by-laws contain anti-takeover
provisions, including provisions for a classified board of
directors, restrictions on share ownership and transfer and
super majority stockholder approval requirements for business
combinations, that could make it more difficult for or even
prevent a third party from acquiring us without the approval of
our incumbent board of directors. Provisions like these, as well
as certain terms in our credit facilities and other
indebtedness, could reduce the market value of our common stock
or the Series I preferred stock and inhibit or discourage
takeover attempts, even where a takeover could be beneficial to
you.
S-28
Risk
factors
Recent regulatory
actions may adversely affect the trading price and liquidity of
the Series I preferred stock
We expect that many investors in, and potential purchasers of,
the Series I preferred stock will employ, or seek to
employ, a convertible arbitrage strategy with respect to the
Series I preferred stock. Investors that employ a
convertible arbitrage strategy with respect to convertible
instruments often implement that strategy by selling short the
common stock underlying the convertible instrument and
dynamically adjusting their short position while they hold the
convertible instrument. Investors also may implement this
strategy by entering into swaps on the common stock in lieu of
or in addition to short selling the common stock. As a result,
any specific rules regulating equity swaps or short selling of
securities or other governmental action that interferes with the
ability of market participants to effect short sales or equity
swaps with respect to our common stock could adversely affect
the ability of investors in, or potential purchasers of, the
Series I preferred stock to conduct the convertible
arbitrage strategy that we believe they may seek to employ with
respect to the Series I preferred stock. This could, in
turn, adversely affect the trading price and liquidity of the
Series I preferred stock.
Recent regulatory actions that could affect the ability to
successfully execute convertible arbitrage and hedging
strategies include the SECs adoption in February 2010 of
new short sale-related restrictions through an amendment to
Rule 201 of Regulation SHO, the Financial Industry
Regulatory Authoritys and stock exchanges circuit
breaker pilot that commenced in June 2010, and the July 2010
enactment of the Dodd-Frank Wall Street Reform and Consumer
Protection Act. Although the direction and magnitude of the
effect that these actions and any additional regulations may
have on the trading price and the liquidity of the Series I
preferred stock will depend on a variety of factors, many of
which cannot be determined at this time, past regulatory actions
have had a significant impact on the trading prices and
liquidity of convertible debt instruments. For example, in
September 2008, the SEC issued emergency orders generally
prohibiting short sales in the common stock of a variety of
financial services companies while Congress worked to provide a
comprehensive legislative plan to stabilize the credit and
capital markets. The orders made the convertible arbitrage
strategy that many convertible debt investors employ difficult
to execute and adversely affected both the liquidity and trading
price of convertible preferred stock issued by many of the
financial services companies subject to the prohibition. Any
governmental actions that restrict the ability of investors in,
or potential purchasers of, the Series I preferred stock to
effect short sales in our common stock or to implement hedging
strategies, including the recently adopted amendments to
Regulation SHO, the circuit breaker pilot or the
implementation of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, could similarly adversely affect the trading
price and the liquidity of the Series I preferred stock or
our common stock.
An adverse rating
of the Series I preferred stock may cause their trading
price to decrease
If a rating agency rates the Series I preferred stock, it
may assign a rating that is lower than anticipated. If a rating
is assigned to the Series I preferred, that rating may be
lowered in the future. If rating agencies assign a
lower-than-expected
rating or reduce, or indicate that they may reduce, their
ratings in the future, the trading price of the Series I
preferred stock could significantly decline.
You may have
taxable income if we adjust the conversion rate in certain
circumstances, even if you do not receive any cash
We will adjust the conversion rate of the Series I
preferred stock for stock splits and combinations, stock
dividends, certain cash dividends and certain other events that
affect our capital structure. See Description of
Series I preferred stockConversion Rate
Adjustment. If we adjust the conversion rate, or if we
fail to make certain adjustments, you may be treated as having
received a constructive distribution from us, resulting in
taxable income to you for U.S. federal income tax purposes,
even though you would not receive any cash in connection with
the conversion rate adjustment and even though you might not
exercise your conversion right. In the case of a
non-United
States holder, we may,
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Risk
factors
at our option, withhold U.S. federal income tax with
respect to any such deemed distribution from cash payments of
dividends and any other payments in respect of the Series I
preferred stock. See Certain U.S. federal income tax
considerations.
We may not have
sufficient earnings and profits in order for distributions on
the Series I preferred stock to be treated as
dividends
The dividends payable by us on the Series I preferred stock
may exceed our current and accumulated earnings and profits, as
calculated for U.S. federal income tax purposes, at the
time of payment. If that were to occur, it would result in the
amount of dividends that exceed our earnings and profits being
treated first as a return of capital to the extent of the
holders adjusted tax basis in the Series I preferred
stock and then, to the extent of any excess over such adjusted
tax basis, as capital gain. See Certain U.S. federal
income tax considerationsU.S. Federal Income
Taxation of Holders of our Series I Preferred Stock or
Common Stock Treatment of U.S.
Stockholders Distributions with respect to our
Series I Preferred Stock or Common Stock.
We believe that
the Series I preferred stock and any common stock received
upon your conversion of the Series I preferred stock do not
constitute U.S. real property interests and
therefore we would not generally be required to withhold from
payments to
non-U.S.
holders under the Foreign Investment in Real Property Act, or
FIRPTA. We cannot assure you, however, that the Series I
preferred stock or our common stock will not constitute U.S.
real property interests
Although we are not currently aware of any facts that would
cause our conclusion to change, depending on the facts in
existence at the time of any sale, repurchase, conversion, or
retirement of Series I preferred stock or our common stock,
it is possible that the Series I preferred stock and common
stock could constitute U.S. real property interests. If so,
non-U.S. holders
of Series I preferred stock or common stock would be
subject to withholding on payments in connection with such a
sale, repurchase, conversion, or retirement regardless of
whether such
non-U.S. holders
provide certification documenting their
non-U.S. status.
See Item 1 Business Taxation
of our Annual Report on Form 10-K for the year ended
December 31, 2010.
If you convert
your Series I preferred stock into shares of our common
stock and we decide to pay taxable stock dividends on our common
stock to meet the REIT distribution requirements, your tax
liability with respect to our common stock may be greater than
the amount of cash you receive
The IRS has issued Revenue Procedure
2010-12,
which provides that the IRS will treat stock dividends declared
on or before December 31, 2012, for taxable years ending
before December 31, 2011, as distributions for purposes of
satisfying the REIT distribution requirements, if each
stockholder can elect to receive the distribution in cash or
stock, even if the aggregate cash amount paid to all
stockholders is limited, provided certain requirements are met.
Taxable holders of our common stock receiving such dividends
will be required to include the full amount of the dividend as
income for U.S. federal income tax purposes to the extent
of our current and accumulated earnings and profits.
Accordingly, if we decide to pay a stock dividend in accordance
with Revenue Procedure
2010-12, as
a holder of our common stock your tax liability with respect to
such dividend may be significantly greater than the amount of
cash you receive. If you decide to sell the stock received as a
dividend in order to pay this tax, the sales proceeds you
receive may be less than the amount you are required to include
in income with respect to the dividend, depending on the market
price of the stock at the time of the sale. With respect to
foreign stockholders, we may be required to withhold
U.S. tax with respect to such dividends, including in
respect of all or a portion of such dividend that is payable in
stock. In addition, if a significant number of our stockholders
sell shares of stock in order to pay taxes owed on dividends,
such sales may put downward pressure on the trading price of our
stock.
S-30
This prospectus supplement, the accompanying prospectus and the
documents incorporated by reference contain
forward-looking statements as that term is defined
in the federal securities laws. These forward-looking statements
include, but are not limited to, those regarding:
|
|
Ø
|
the possible expansion of our portfolio;
|
|
Ø
|
the sale of properties;
|
|
Ø
|
the performance of our operators/tenants and properties;
|
|
Ø
|
our ability to enter into agreements with new viable tenants for
vacant space or for properties that we take back from
financially troubled tenants, if any;
|
|
Ø
|
our occupancy rates;
|
|
Ø
|
our ability to acquire, develop
and/or
manage properties;
|
|
Ø
|
our ability to make distributions to stockholders;
|
|
Ø
|
our policies and plans regarding investments, financings and
other matters;
|
|
Ø
|
our tax status as a real estate investment trust;
|
|
Ø
|
our critical accounting policies;
|
|
Ø
|
our ability to appropriately balance the use of debt and equity;
|
|
Ø
|
our ability to access capital markets or other sources of funds;
|
|
Ø
|
our ability to meet our earnings guidance;
|
|
Ø
|
our ability to finance and complete, and the effect of, future
acquisitions, including the Acquisition, as discussed in this
prospectus supplement; and
|
|
Ø
|
our ability to complete the Common Stock Offering on the terms
contemplated.
|
When we use words such as may, will,
intend, should, believe,
expect, anticipate, project,
pro forma, estimate or similar
expressions, we are making forward-looking statements.
Forward-looking statements are not guarantees of future
performance and involve risks and uncertainties. Our expected
results may not be achieved, and actual results may differ
materially from our expectations. This may be a result of
various factors, including, but not limited to, the risks
discussed above and the risks discussed in the sections
captioned Risk factors in this prospectus supplement
and Cautionary Statement Concerning Forward-Looking
Statements and Risk Factors in the accompanying prospectus
and the documents that are incorporated herein by reference. We
assume no obligation to update or revise any forward-looking
statements or to update the reasons why actual results could
differ from those projected in any forward-looking statements.
S-31
Assuming the consummation of this offering at the amount and on
the terms presently contemplated, we estimate the net proceeds
from this offering will be approximately $605.5 million
($696.4 million if the underwriters exercise their
overallotment option in full), after deducting underwriting
discounts and commissions and estimated offering expenses. The
net proceeds to us from the Common Stock Offering are expected
to be approximately $1.2 billion ($1.4 billion if the
underwriters exercise their overallotment option in full), after
deducting underwriting discounts and commissions and estimated
offering expenses. We intend to use the net proceeds from this
offering, the Common Stock Offering, cash on hand and any
amounts raised in future capital raising activities or
refinancings to finance the aggregate purchase price of the
Acquisition, including the repayment of any amounts drawn on the
$2.4 billion bridge loan facility for which we have
obtained a commitment from UBS Loan Finance LLC, UBS Securities
LLC, as joint lead arranger, Bank of America, N.A., as
co-syndication agent, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, as joint lead arranger, Barclays Bank PLC, as
co-syndication agent, Barclays Capital Inc., as joint lead
arranger, Deutsche Bank AG Cayman Islands Branch, Deutsche Bank
Securities Inc., as joint lead arranger and co-documentation
agent, JPMorgan Chase Bank, N.A., as co-syndication agent, J.P.
Morgan Securities LLC, as joint lead arranger, Wells Fargo Bank,
N.A., as co-documentation agent, Wells Fargo Securities, LLC, as
joint lead arranger, KeyBank National Association, as senior
managing agent, and KeyBanc Capital Markets Inc. See The
AcquisitionThe Financing Transactions. If the
Acquisition is not consummated, we intend to use the net
proceeds from this offering for general corporate purposes,
including investing in health care and senior housing properties
and repaying borrowings under our unsecured line of credit and
other outstanding indebtedness. Pending such use, the net
proceeds may be invested in short-term, investment grade,
interest-bearing securities, certificates of deposit or indirect
or guaranteed obligations of the United States. The Common Stock
Offering may not be completed or, if completed, may not be
completed for the amount or on the terms contemplated.
Accordingly, the amounts described above may differ materially
from the actual amounts we receive. The completion of this
offering of Series I preferred stock is not subject to the
completion of the Common Stock Offering and the completion of
the Common Stock Offering is not subject to the completion of
this offering of Series I preferred stock. As of
February 25, 2011, we had an outstanding balance of
$495 million under our unsecured line of credit and a zero
balance under the $2.4 billion bridge loan facility and the
$400 million bridge loan facility for which we have
obtained a commitment from UBS Loan Finance, LLC in connection
with our purchase agreement with Benchmark Senior Living LLC.
See Prospectus supplement summaryRecent
developments. Affiliates of certain of the underwriters
are lenders under our unsecured line of credit, under our
$2.4 billion bridge loan facility and under our
$400 million bridge loan facility. If some of the net
proceeds of this offering are used to repay any borrowings under
our unsecured line of credit, our $2.4 billion bridge loan
facility or our $400 million bridge loan facility, proceeds
of this offering may be received by the underwriters or their
affiliates. See UnderwritingConflicts of
Interest.
S-32
Our common stock is traded on the New York Stock Exchange under
the symbol HCN. As of December 31, 2010, there
were 4,999 holders of record of our common stock. The following
table sets forth, for the periods shown, the high and low sale
prices of our common stock as reported by the NYSE, for the
periods indicated, and cash dividends per share. On
February 25, 2011, the last reported sale price of our
common stock as reported by the NYSE was $50.86 per share.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Price of
shares
|
|
|
Dividends
|
|
|
|
High
|
|
|
Low
|
|
|
per
share
|
|
|
|
|
Year ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
42.32
|
|
|
$
|
25.86
|
|
|
$
|
0.68
|
|
Second quarter
|
|
|
36.41
|
|
|
|
29.62
|
|
|
|
0.68
|
|
Third quarter
|
|
|
44.40
|
|
|
|
32.64
|
|
|
|
0.68
|
|
Fourth quarter
|
|
|
46.74
|
|
|
|
40.53
|
|
|
|
0.68
|
|
Year ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter
|
|
$
|
46.79
|
|
|
$
|
39.82
|
|
|
$
|
0.68
|
|
Second quarter
|
|
|
46.44
|
|
|
|
38.42
|
|
|
|
0.69
|
|
Third quarter
|
|
|
48.54
|
|
|
|
40.85
|
|
|
|
0.69
|
|
Fourth quarter
|
|
|
52.06
|
|
|
|
44.07
|
|
|
|
0.69
|
|
Year ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
First quarter (through February 25, 2011)
|
|
$
|
50.86
|
|
|
$
|
46.75
|
|
|
$
|
0.69
|
|
Our board of directors approved an increase in the dividend to
$0.715 per quarter, or $2.86 per year, per share of common
stock, beginning with the quarterly dividend expected to be paid
in May 2011.
Under the real estate investment trust rules of the Internal
Revenue Code of 1986, as amended, in order to maintain our
status as a REIT, our deduction for dividends paid must be
generally equal to at least 90% of our taxable income for the
taxable year (determined without regard to the deduction for
dividends paid and excluding any net capital gain). The
declaration of dividends is at the discretion of our board of
directors and depends upon our distributable funds, financial
requirements, tax considerations and other factors. Decisions
with respect to the distribution of capital gains are made on a
case-by-case
basis. A portion of our dividends paid may be deemed either
capital gain income or a return of capital, or both, to our
stockholders. We provide our stockholders an annual statement
which designates the taxability of their dividends.
We have a dividend reinvestment and stock purchase plan under
which stockholders of record may invest all or a portion of
their dividends and up to an additional $5,000 per month to
purchase additional shares. Additionally, investors who are not
stockholders of the company may use this plan to make an initial
investment in the companys shares of up to $5,000. We have
the discretion to grant waivers for purchases in excess of
$5,000.
S-33
The table below sets forth our capitalization as of
December 31, 2010:
|
|
Ø
|
on an actual basis;
|
|
Ø
|
on an as adjusted basis to give effect to the issuance of shares
of Series I preferred stock offered by this prospectus
supplement (assuming the consummation of this offering at the
amount and on the terms presently contemplated with no exercise
of the underwriters overallotment option) and application
of the net proceeds;
|
|
Ø
|
on an as further adjusted basis to give effect to the Common
Stock Offering (assuming no exercise of the underwriters
overallotment option) and the application of the net proceeds;
|
|
Ø
|
on a pro forma basis to give effect to the consummation of the
Acquisition, as if it had occurred on December 31, 2010;
|
|
Ø
|
on a pro forma as adjusted basis to give effect to the issuance
of shares of Series I preferred stock offered by this
prospectus supplement (assuming no exercise of the
underwriters overallotment option) and application of the
net proceeds and the Acquisition, as if they had occurred on
December 31, 2010; and
|
|
Ø
|
on a pro forma as further adjusted basis to give effect to the
issuance of shares of Series I preferred stock offered by
this prospectus supplement (assuming no exercise of the
underwriters overallotment option) and application of the
net proceeds, the Common Stock Offering (assuming no exercise of
the underwriters overallotment option) and application of
the net proceeds and the Acquisition, as if they had occurred on
December 31, 2010.
|
The table below is unaudited and should be read in conjunction
with Summary historical consolidated financial data,
The Acquisition, Use of proceeds, and
Unaudited pro forma condensed consolidated financial
statements, contained elsewhere in this prospectus
supplement, and the consolidated annual and interim financial
statements and the notes thereto included in the documents
incorporated by reference in this prospectus supplement and the
accompanying prospectus. No assurances can be given that the
information in the table below will not change depending on the
nature of our financings. In addition, no assurances can be
given that the Acquisition will be consummated in accordance
with the anticipated timing or at all, or that the Common Stock
Offering will be completed for the amount or on the terms
contemplated or at all. The consummation of this offering is not
conditioned upon the consummation of the Acquisition or the
Common Stock Offering.
S-34
Capitalization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As further
|
|
|
|
|
|
|
As
|
|
|
As further
|
|
|
|
|
|
Adjusted
|
|
|
adjusted
|
|
|
|
Actual
|
|
|
adjusted(6)
|
|
|
adjusted(6)
|
|
|
Pro
forma(7)
|
|
|
pro
forma(7)
|
|
|
pro
forma(7)
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
131,570
|
|
|
$
|
437,070
|
|
|
$
|
1,656,570
|
|
|
$
|
60,770
|
|
|
$
|
65,311
|
|
|
$
|
74,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under unsecured line of
credit(1)
|
|
|
300,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
300,000
|
|
Borrowings under $2.4 billion bridge loan
facility(2)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,400,000
|
|
|
|
1,794,500
|
|
|
|
575,000
|
|
Senior notes due 2012
|
|
|
76,853
|
|
|
|
76,853
|
|
|
|
76,853
|
|
|
|
76,853
|
|
|
|
76,853
|
|
|
|
76,853
|
|
Senior notes due 2013
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
300,000
|
|
Senior notes due 2015
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
250,000
|
|
Senior notes due 2016
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
300,000
|
|
Senior notes due 2017
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
450,000
|
|
Senior notes due 2020
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
450,000
|
|
Senior notes due 2021
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
450,000
|
|
|
|
450,000
|
|
4.75% convertible senior notes due
2026(3)
|
|
|
125,588
|
|
|
|
125,588
|
|
|
|
125,588
|
|
|
|
125,588
|
|
|
|
125,588
|
|
|
|
125,588
|
|
4.75% convertible senior notes due
2027(3)
|
|
|
168,086
|
|
|
|
168,086
|
|
|
|
168,086
|
|
|
|
168,086
|
|
|
|
168,086
|
|
|
|
168,086
|
|
3.00% convertible senior notes due
2029(3)
|
|
|
494,403
|
|
|
|
494,403
|
|
|
|
494,403
|
|
|
|
494,403
|
|
|
|
494,403
|
|
|
|
494,403
|
|
Secured debt
|
|
|
1,133,716
|
|
|
|
1,133,716
|
|
|
|
1,133,716
|
|
|
|
1,133,716
|
|
|
|
1,133,716
|
|
|
|
1,133,716
|
|
Capital lease obligation
|
|
|
8,881
|
|
|
|
8,881
|
|
|
|
8,881
|
|
|
|
85,692
|
|
|
|
85,692
|
|
|
|
85,692
|
|
Unamortized premiums/discounts and fair value adjustments
|
|
|
(37,791
|
)
|
|
|
(37,791
|
)
|
|
|
(37,791
|
)
|
|
|
(37,791
|
)
|
|
|
(37,791
|
)
|
|
|
(37,791
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
debt(4)
|
|
|
4,469,736
|
|
|
|
4,169,736
|
|
|
|
4,169,736
|
|
|
|
6,946,547
|
|
|
|
6,341,047
|
|
|
|
5,121,547
|
|
Redeemable noncontrolling interests
|
|
|
4,553
|
|
|
|
4,553
|
|
|
|
4,553
|
|
|
|
4,553
|
|
|
|
4,553
|
|
|
|
4,553
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock, $1.00 par value;
authorized50,000,000 shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series D Cumulative Redeemable Preferred Stock;
4,000,000 shares issued and outstanding
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
100,000
|
|
Series F Cumulative Redeemable Preferred Stock;
7,000,000 shares issued and outstanding
|
|
|
175,000
|
|
|
|
175,000
|
|
|
|
175,000
|
|
|
|
175,000
|
|
|
|
175,000
|
|
|
|
175,000
|
|
Series H Cumulative Convertible and Redeemable Preferred
Stock; 349,854 shares issued and outstanding
|
|
|
16,667
|
|
|
|
16,667
|
|
|
|
16,667
|
|
|
|
16,667
|
|
|
|
16,667
|
|
|
|
16,667
|
|
Series I Cumulative Convertible Perpetual Preferred Stock;
12,500,000 shares issued and outstanding
|
|
|
0
|
|
|
|
625,000
|
|
|
|
625,000
|
|
|
|
0
|
|
|
|
625,000
|
|
|
|
625,000
|
|
Common Stock, $1.00 par value;
authorized225,000,000 shares; 147,381,191 shares
issued and 147,097,381 shares outstanding, actual;
172,381,191 shares issued and 172,097,381 shares
outstanding, as
adjusted(5)
|
|
|
147,155
|
|
|
|
147,155
|
|
|
|
172,155
|
|
|
|
147,155
|
|
|
|
147,155
|
|
|
|
172,155
|
|
Capital in excess of par value
|
|
|
4,932,468
|
|
|
|
4,912,968
|
|
|
|
6,107,468
|
|
|
|
4,932,468
|
|
|
|
4,912,968
|
|
|
|
6,107,468
|
|
Treasury stock
|
|
|
(11,352
|
)
|
|
|
(11,352
|
)
|
|
|
(11,352
|
)
|
|
|
(11,352
|
)
|
|
|
(11,352
|
)
|
|
|
(11,352
|
)
|
Cumulative net income
|
|
|
1,676,196
|
|
|
|
1,676,196
|
|
|
|
1,676,196
|
|
|
|
1,640,196
|
|
|
|
1,676,196
|
|
|
|
1,676,196
|
|
Cumulative dividends
|
|
|
(2,427,881
|
)
|
|
|
(2,427,881
|
)
|
|
|
(2,427,881
|
)
|
|
|
(2,427,881
|
)
|
|
|
(2,427,881
|
)
|
|
|
(2,427,881
|
)
|
Accumulated other comprehensive income
|
|
|
(11,099
|
)
|
|
|
(11,099
|
)
|
|
|
(11,099
|
)
|
|
|
(11,099
|
)
|
|
|
(11,099
|
)
|
|
|
(11,099
|
)
|
Other equity
|
|
|
5,697
|
|
|
|
5,697
|
|
|
|
5,697
|
|
|
|
5,697
|
|
|
|
5,697
|
|
|
|
5,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Health Care REIT, Inc. stockholders equity
|
|
|
4,602,851
|
|
|
|
5,208,351
|
|
|
|
6,427,851
|
|
|
|
4,566,851
|
|
|
|
5,172,351
|
|
|
|
6,391,851
|
|
Noncontrolling interests
|
|
|
130,249
|
|
|
|
130,249
|
|
|
|
130,249
|
|
|
|
130,249
|
|
|
|
130,249
|
|
|
|
130,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
4,733,100
|
|
|
|
5,338,600
|
|
|
|
6,558,100
|
|
|
|
4,697,100
|
|
|
|
5,302,600
|
|
|
|
6,522,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
$
|
9,207,389
|
|
|
$
|
9,512,889
|
|
|
$
|
10,732,389
|
|
|
$
|
11,648,200
|
|
|
$
|
11,648,200
|
|
|
$
|
11,648,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
$495 million was outstanding under our unsecured line of
credit at February 25, 2011. |
|
(2) |
|
Zero amounts were outstanding under the $2.4 billion
bridge loan facility at February 28, 2011. |
(footnotes continued on
following page)
S-35
Capitalization
|
|
|
(3) |
|
The amounts shown do not reflect original issue discount
pursuant to ASC 470-20, Debt with Conversion Other Options.
Under ASC 470, an entity must separately account for the
liability and equity components of the convertible debt
instruments (such as the convertible senior notes) that may be
settled entirely or partially in cash upon conversion in a
manner that reflects the issuers economic interest cost.
The effect of ASC 470 on the accounting for the convertible
senior notes is that the equity component is included in the
capital in excess of par value section of stockholders
equity on our consolidated balance sheet and the value of the
equity component is treated as original issue discount for
purposes of accounting for the debt component of the convertible
senior notes. The original issue discount for the convertible
senior notes is included in Unamortized premiums/discounts
and fair value adjustments. |
|
(4) |
|
Does not include any secured indebtedness incurred in 2011 in
connection with our other acquisitions, transactions or
investments, or the $400 million bridge loan facility with
UBS Loan Finance, LLC we obtained to complete the transaction
with Benchmark Senior Living LLC. See Prospectus
supplement summaryRecent developments. |
|
(5) |
|
Excludes: (i) 1,207,372 shares of common stock
reserved for issuance that relate to outstanding options under
the 1995 Stock Incentive Plan, Stock Plan for Non-Employee
Directors, 2005 Long-Term Incentive Plan and Windrose Medical
Properties Trust 2002 Stock Incentive Plan;
(ii) 8,511,532 shares of common stock reserved for
issuance under our dividend reinvestment and stock purchase
plan; (iii) 2,655,860 shares of common stock reserved
for issuance that relate to the $125,588,000 aggregate principal
amount of 4.75% Convertible Senior Notes due 2026;
(iv) 3,380,411 shares of common stock reserved for
issuance that relate to the $168,086,000 aggregate principal
amount of 4.75% Convertible Senior Notes due 2027;
(v) 9,648,126 shares of common stock reserved for
issuance that relate to the $494,403,000 aggregate principal
amount of 3.00% Convertible Senior Notes due 2029;
(vi) 349,854 shares of common stock reserved for
issuance upon conversion of the Series H Cumulative
Convertible and Redeemable Preferred Stock;
(vii) 10,685,770 shares of common stock reserved for
issuance upon conversion of the Series I Cumulative
Convertible Perpetual Preferred Stock; and (viii) shares of
common stock that may be issued upon conversion of the
convertible senior notes or the Series I preferred stock as
a make-whole
premium (or similar consideration) upon the occurrence of a
make-whole
fundamental change or fundamental change (as applicable). |
|
(6) |
|
Does not reflect the expected use of the estimated
$605.5 million net proceeds from this offering or the
estimated $1.2 billion net proceeds from the Common Stock
Offering. |
|
(7) |
|
See Unaudited pro forma condensed consolidated
financial statements beginning on page S-39 for a
discussion of the pro forma adjustments. |
You should read this table in conjunction with the sections
entitled Managements Discussion and Analysis of
Financial Condition and Results of Operations included in
our Annual Report on
Form 10-K
for the year ended December 31, 2010 and our consolidated
financial statements, related notes and other financial
information that we have incorporated by reference into this
prospectus supplement and the accompanying prospectus.
S-36
The table below sets forth our ratios of earnings to fixed
charges and earnings to combined fixed charges and preferred
stock dividends for the periods indicated. The ratio of earnings
to fixed charges was computed by dividing earnings by our fixed
charges. The ratio of earnings to combined fixed charges and
preferred stock dividends was computed by dividing earnings by
our combined fixed charges and preferred stock dividends. For
purposes of calculating these ratios, earnings
includes income from continuing operations before extraordinary
items, excluding the equity earnings in a less than 50% owned
subsidiary, plus fixed charges and reduced by capitalized
interest. Fixed charges consists of interest on all
indebtedness and the amortization of loan expenses or interest
expensed and capitalized and the amortized premiums, discounts
and capitalized expenses related to indebtedness.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
|
|
Consolidated ratio of earnings to fixed charges (unaudited)
|
|
|
1.75
|
|
|
|
1.61
|
|
|
|
1.75
|
|
|
|
1.87
|
|
|
|
1.42
|
|
Consolidated ratio of earnings to combined fixed charges and
preferred stock dividends (unaudited)
|
|
|
1.44
|
|
|
|
1.38
|
|
|
|
1.52
|
|
|
|
1.61
|
|
|
|
1.26
|
|
In computing the ratio of earnings to combined fixed charges and
preferred stock dividends, preferred stock dividends consist of
dividends on the following:
|
|
Ø
|
4,000,000 shares of
77/8%
Series D Cumulative Redeemable Preferred Stock issued in
July 2003.
|
|
Ø
|
1,060,000 shares of 6% Series E Cumulative Convertible
and Redeemable Preferred Stock issued in September 2003. The
holders of the Series E Cumulative Convertible and
Redeemable Preferred Stock converted their shares into common
stock between September 2003 and September 2010, leaving no such
shares outstanding at September 30, 2010.
|
|
Ø
|
7,000,000 shares of
75/8%
Series F Cumulative Redeemable Preferred Stock issued in
September 2004.
|
|
Ø
|
2,100,000 shares of 7.5% Series G Cumulative
Convertible Preferred Stock issued in December 2006. Certain
holders of the G Cumulative Convertible Preferred Stock
converted their shares into common stock between December 2006
and September 2010. All remaining shares of Series G
Cumulative Convertible Preferred Stock were redeemed by the
Company on September 30, 2010, leaving no such shares
outstanding.
|
|
Ø
|
349,854 shares of 6% Series H Cumulative Convertible
and Redeemable Preferred Stock issued in December 2010.
|
S-37
Unaudited pro forma
condensed consolidated financial statements
The following is an excerpt of information contained in
Item 8.01 and the related exhibit to our Current Report on
Form 8-K
as filed with the SEC on February 28, 2011 and incorporated
herein by reference. You should read and consider the
information in the documents to which we have referred you in
Incorporation by Reference, including the foregoing
Current Report of
Form 8-K,
before purchasing these securities.
The accompanying unaudited pro forma condensed consolidated
financial statements presented below have been prepared based on
certain pro forma adjustments to the historical consolidated
financial statements of Health Care REIT, Inc. (the
Company) as of and for the year ended
December 31, 2010 and FC-GEN Acquisition Holding, LLC
(Acquisition Holding) as of September 30, 2010
and the twelve months ended September 30, 2010. The
historical consolidated financial statements of the Company are
contained in its Annual Report on
Form 10-K
for the year ended December 31, 2010. The historical
consolidated financial statements of Acquisition Holding are
included as Exhibits 99.2 and 99.3 to this Current Report
on
Form 8-K.
The accompanying unaudited pro forma condensed consolidated
financial statements give effect to (i) the proposed
acquisition by the Company of 100% of the equity interests in
Acquisition Holding, which indirectly owns (1) 140 senior
housing and care facilities (137 of fee simple and three
pursuant to ground leases) and (2) the leasehold interests
in and options to purchase seven senior housing and care
facilities, for approximately $2.4 billion (collectively,
the Acquisition) and (ii) the proposed lease by
the Company to Genesis Operations, LLC (Tenant)
under which the Tenant will operate the acquired facilities (the
Master Lease). Prior to closing, FC-GEN Operations
Investment, LLC (OpCo) will be a direct subsidiary
of Acquisition Holding. Prior to the closing date, Acquisition
Holding will contribute the assets, liabilities and equity
interests relating to (i) the business of operating and
managing senior housing and care facilities, (ii) joint
venture entities and (iii) other ancillary businesses to
OpCo and then distribute all of the equity interests in OpCo to
FC-GEN Investment, LLC (FC-GEN). Tenant is a
wholly-owned subsidiary of OpCo. All obligations under the
Master Lease will be guaranteed by OpCo. In addition, in
conjunction with the Acquisition, Company will have the option
to acquire a 9.9% ownership interest in OpCo for a fixed price
equal to $47 million at any time during the initial term of
the Master Lease. The unaudited pro forma condensed consolidated
balance sheet as of December 31, 2010 has been prepared as
if the Acquisition had occurred as of that date. The unaudited
pro forma condensed consolidated statement of income for the
year ended December 31, 2010 has been prepared as if the
Acquisition had occurred as of January 1, 2010. Such
statements also give effect to certain capital transactions
undertaken by the Company in order to finance part of the
Acquisition.
The allocation of the purchase price of Acquisition Holding
reflected in these unaudited pro forma condensed consolidated
financial statements has been based upon preliminary estimates
of the fair value of assets ultimately acquired and liabilities
ultimately assumed. A final determination of the fair values of
Acquisition Holdings assets and liabilities, which cannot
be made prior to the completion of the Acquisition, will be
based on the actual valuation of the tangible and intangible
assets and liabilities of Acquisition Holding that exist as of
the date of completion of the Acquisition. Consequently, amounts
preliminarily allocated to identifiable tangible and intangible
assets and liabilities could change significantly from those
used in the pro forma condensed consolidated financial
statements presented below and could result in a material change
in amortization of tangible and intangible assets and
liabilities. Additionally, the common and preferred stock
proceeds assumed in the pro forma as adjusted columns are
predicated on anticipated sales of equity securities by the
Company. There can be no assurance that such sales will occur on
the terms estimated or at all.
S-38
Unaudited pro
forma condensed consolidated financial statements
In the opinion of the Companys management, the pro forma
condensed consolidated financial statements include all
significant necessary adjustments that can be factually
supported to reflect the effects of the Acquisition. The
unaudited pro forma condensed consolidated financial statements
are provided for informational purposes only. The unaudited pro
forma condensed consolidated financial statements are not
necessarily and should not be assumed to be an indication of the
results that would have been achieved had the Acquisition been
completed as of the dates indicated or that may be achieved in
the future. The completion of the valuation, the allocation of
the purchase price, the impact of ongoing integration
activities, the timing of completion of the Acquisition and
other changes in Acquisition Holding tangible and intangible
assets and liabilities that occur prior to completion of the
Acquisition could cause material differences in the information
presented. Furthermore, following consummation of the
Acquisition, the Company expects to apply its own methodologies
and judgments in accounting for the assets and liabilities
acquired in the Acquisition, which may differ from those
reflected in Acquisition Holdings historical consolidated
financial statements and the pro forma condensed consolidated
financial statements.
S-39
Health Care REIT,
Inc.
Unaudited
pro forma condensed consolidated balance sheet
December 31,
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Holding
|
|
|
Pro Forma
|
|
|
Company
|
|
|
Pro Forma
|
|
|
|
Historical
|
|
|
Historical(A)
|
|
|
Adjustments(B)
|
|
|
Pro
Forma
|
|
|
As
Adjusted(N)
|
|
|
|
|
|
(in
thousands)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real property, net
|
|
$
|
8,155,529
|
|
|
$
|
1,753,406
|
|
|
$
|
723,405
|
(D)
|
|
$
|
10,632,340
|
|
|
$
|
10,632,340
|
|
Real estate loans receivable, net
|
|
|
435,304
|
|
|
|
|
|
|
|
|
|
|
|
435,304
|
|
|
|
435,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net real estate investments
|
|
|
8,590,833
|
|
|
|
1,753,406
|
|
|
|
723,405
|
|
|
|
11,067,644
|
|
|
|
11,067,644
|
|
Goodwill
|
|
|
51,207
|
|
|
|
119,090
|
|
|
|
(119,090
|
)(C)
|
|
|
51,207
|
|
|
|
51,207
|
|
Deferred loan expenses
|
|
|
32,960
|
|
|
|
12,545
|
|
|
|
(467
|
)(C)
|
|
|
67,760
|
|
|
|
54,073
|
(N)
|
|
|
|
|
|
|
|
|
|
|
|
22,722
|
(E)
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
131,570
|
|
|
|
113,152
|
|
|
|
(113,152
|
)(C)
|
|
|
60,770
|
|
|
|
74,457
|
(N)
|
|
|
|
|
|
|
|
|
|
|
|
(70,800
|
)(B)
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
645,164
|
|
|
|
629,848
|
|
|
|
(587,855
|
)(C)
|
|
|
645,164
|
|
|
|
645,164
|
|
|
|
|
|
|
|
|
|
|
|
|
(41,993
|
)(F)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
9,451,734
|
|
|
$
|
2,628,041
|
|
|
$
|
(187,230
|
)
|
|
$
|
11,892,545
|
|
|
$
|
11,892,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under unsecured line of credit arrangement
|
|
$
|
300,000
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
Bridge loan
|
|
|
|
|
|
|
|
|
|
|
2,400,000
|
(G)
|
|
|
2,400,000
|
|
|
|
575,000
|
(N)
|
Senior unsecured notes
|
|
|
3,034,949
|
|
|
|
|
|
|
|
|
|
|
|
3,034,949
|
|
|
|
3,034,949
|
|
Secured debt
|
|
|
1,125,906
|
|
|
|
1,713,920
|
|
|
|
(43,357
|
)(C)
|
|
|
1,125,906
|
|
|
|
1,125,906
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,670,563
|
)(G)
|
|
|
|
|
|
|
|
|
Capital lease obligations
|
|
|
8,881
|
|
|
|
160,820
|
|
|
|
(84,454
|
)(C)
|
|
|
85,692
|
|
|
|
85,692
|
|
|
|
|
|
|
|
|
|
|
|
|
445
|
(H)
|
|
|
|
|
|
|
|
|
Accrued expenses and other liabilities
|
|
|
244,345
|
|
|
|
735,827
|
|
|
|
(487,868
|
)(C)
|
|
|
244,345
|
|
|
|
244,345
|
|
|
|
|
|
|
|
|
|
|
|
|
(247,959
|
)(F)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
4,714,081
|
|
|
|
2,610,567
|
|
|
|
(133,756
|
)
|
|
|
7,190,892
|
|
|
|
5,365,892
|
|
Redeemable noncontrolling interests
|
|
|
4,553
|
|
|
|
|
|
|
|
|
|
|
|
4,553
|
|
|
|
4,553
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock
|
|
|
291,667
|
|
|
|
|
|
|
|
|
|
|
|
291,667
|
|
|
|
916,667
|
(N)
|
Common stock
|
|
|
147,155
|
|
|
|
|
|
|
|
|
|
|
|
147,155
|
|
|
|
172,155
|
(N)
|
Capital in excess of par value
|
|
|
4,932,468
|
|
|
|
|
|
|
|
|
|
|
|
4,932,468
|
|
|
|
6,107,468
|
(N)
|
Other equity
|
|
|
(768,439
|
)
|
|
|
|
|
|
|
(36,000
|
)(B)
|
|
|
(804,439
|
)
|
|
|
(804,439
|
)
|
Total members equity (deficit)
|
|
|
|
|
|
|
10,613
|
|
|
|
(10,613
|
)(I)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Company stockholders equity
|
|
|
4,602,851
|
|
|
|
10,613
|
|
|
|
(46,613
|
)
|
|
|
4,566,851
|
|
|
|
6,391,851
|
|
Noncontrolling interests
|
|
|
130,249
|
|
|
|
6,861
|
|
|
|
(6,861
|
)(C)
|
|
|
130,249
|
|
|
|
130,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
4,733,100
|
|
|
|
17,474
|
|
|
|
(53,474
|
)
|
|
|
4,697,100
|
|
|
|
6,522,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity
|
|
$
|
9,451,734
|
|
|
$
|
2,628,041
|
|
|
$
|
(187,230
|
)
|
|
$
|
11,892,545
|
|
|
$
|
11,892,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an
integral part of these unaudited pro forma condensed
consolidated financial statements.
S-40
Health Care REIT,
Inc.
Unaudited
pro forma condensed consolidated statement of income
Year Ended
December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Holding
|
|
|
Pro Forma
|
|
|
Company
|
|
|
Pro Forma
|
|
|
|
Historical
|
|
|
Historical(J)
|
|
|
Adjustments(B)
|
|
|
Pro
Forma
|
|
|
As
Adjusted(N)
|
|
|
|
|
|
(in thousands,
except per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
|
$
|
581,424
|
|
|
$
|
|
|
|
$
|
222,429
|
(K)
|
|
$
|
803,853
|
|
|
$
|
803,853
|
|
Resident fees and services
|
|
|
51,006
|
|
|
|
2,460,737
|
|
|
|
(2,460,737
|
)(C)
|
|
|
51,006
|
|
|
|
51,006
|
|
Interest income
|
|
|
40,855
|
|
|
|
|
|
|
|
|
|
|
|
40,855
|
|
|
|
40,855
|
|
Other income
|
|
|
7,245
|
|
|
|
2,340
|
|
|
|
(2,340
|
)(C)
|
|
|
7,245
|
|
|
|
7,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
680,530
|
|
|
|
2,463,077
|
|
|
|
(2,240,648
|
)
|
|
|
902,959
|
|
|
|
902,959
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
157,108
|
|
|
|
142,296
|
|
|
|
(11,555
|
)(C)
|
|
|
341,404
|
|
|
|
217,063
|
(O)
|
|
|
|
|
|
|
|
|
|
|
|
53,555
|
(L)
|
|
|
|
|
|
|
|
|
Property operating expenses
|
|
|
83,120
|
|
|
|
2,080,426
|
|
|
|
(2,080,426
|
)(C)
|
|
|
83,120
|
|
|
|
83,120
|
|
Depreciation and amortization
|
|
|
197,118
|
|
|
|
86,668
|
|
|
|
(24,844
|
)(C)
|
|
|
260,651
|
|
|
|
260,651
|
|
|
|
|
|
|
|
|
|
|
|
|
1,709
|
(M)
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
54,626
|
|
|
|
118,543
|
|
|
|
(118,543
|
)(C)
|
|
|
54,626
|
|
|
|
54,626
|
|
Transaction costs
|
|
|
46,660
|
|
|
|
|
|
|
|
|
|
|
|
46,660
|
|
|
|
46,660
|
|
Impairment of assets
|
|
|
|
|
|
|
14,492
|
|
|
|
(14,492
|
)(C)
|
|
|
|
|
|
|
|
|
Loss (gain) on extinguishment of debt
|
|
|
34,171
|
|
|
|
(1,057
|
)
|
|
|
1,057
|
(C)
|
|
|
34,171
|
|
|
|
34,171
|
|
Provision for loan losses
|
|
|
29,684
|
|
|
|
|
|
|
|
|
|
|
|
29,684
|
|
|
|
29,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
602,487
|
|
|
|
2,441,368
|
|
|
|
(2,193,539
|
)
|
|
|
850,316
|
|
|
|
725,975
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes and income
from unconsolidated joint ventures
|
|
|
78,043
|
|
|
|
21,709
|
|
|
|
(47,109
|
)
|
|
|
52,643
|
|
|
|
176,984
|
|
Income tax (expense) benefit
|
|
|
(364
|
)
|
|
|
(8,113
|
)
|
|
|
8,113
|
(F)
|
|
|
(364
|
)
|
|
|
(364
|
)
|
Income from unconsolidated joint ventures
|
|
|
6,673
|
|
|
|
(219
|
)
|
|
|
219
|
(C)
|
|
|
6,673
|
|
|
|
6,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
84,352
|
|
|
|
13,377
|
|
|
|
(38,777
|
)
|
|
|
58,952
|
|
|
|
183,293
|
|
Less: Preferred stock dividends
|
|
|
21,645
|
|
|
|
|
|
|
|
|
|
|
|
21,645
|
|
|
|
63,833
|
(P)
|
Net income (loss) attributable to noncontrolling interests
|
|
|
357
|
|
|
|
3,066
|
|
|
|
(3,066
|
)(C)
|
|
|
357
|
|
|
|
357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to common
stockholders
|
|
$
|
62,350
|
|
|
$
|
10,311
|
|
|
$
|
(35,711
|
)
|
|
$
|
36,950
|
|
|
$
|
119,103
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average number of common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
127,656
|
|
|
|
|
|
|
|
|
|
|
|
127,656
|
|
|
|
152,656
|
(Q)
|
Diluted
|
|
|
128,208
|
|
|
|
|
|
|
|
|
|
|
|
128,208
|
|
|
|
153,208
|
(Q)
|
Income from continuing operations attributable to common
stockholders per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.49
|
|
|
|
|
|
|
|
|
|
|
$
|
0.29
|
|
|
$
|
0.78
|
(Q)
|
Diluted
|
|
|
0.49
|
|
|
|
|
|
|
|
|
|
|
|
0.29
|
|
|
|
0.78
|
(Q)
|
The accompanying notes are an
integral part of these unaudited pro forma condensed
consolidated financial statements.
S-41
Health Care REIT,
Inc.
HEALTH CARE REIT,
INC. NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The unaudited pro forma condensed consolidated financial
statements should be read in conjunction with the respective
historical financial statements and the notes thereto of the
Company for the year ended December 31, 2010 and of
Acquisition Holding as of September 30, 2010 and for the
nine months ended September 30, 2010 and September 30,
2009 included herein.
(A) As of the date of this Current Report on
Form 8-K,
Acquisition Holding, a private company, has not completed its
audit for the year ended December 31, 2010. As such, the
Company has elected to use the historical unaudited condensed
consolidated financial statements of Acquisition Holding as of
September 30, 2010 which have been presented based on the
financial statement classifications utilized by the Company.
(B) On February 28, 2011, the Company entered
into a definitive agreement to acquire Acquisition Holding for a
total cash purchase price of $2,400,000,000. The total purchase
price of $2,476,811,000 is comprised of the cash consideration
and the fair value of capital lease obligations totaling
$76,811,000 (see Note H). Immediately after the
Acquisition, Tenant will lease the facilities acquired from
Acquisition Holding from the Company pursuant to the Master
Lease (see Note K). All obligations under the lease will be
guaranteed by OpCo. In connection with the Acquisition, the
Company estimates it will pay approximately $70,800,000 of fees
and costs including advisory fees ($6,000,000), legal fees
($2,000,000), due diligence and other closing costs
($28,000,000) and fees associated with bridge loan financing
($34,800,000). Fees associated with bridge loan financing will
be deferred and amortized over the term of the loan. The other
$36,000,000 of costs are directly attributable to the
Acquisition and represent non-recurring costs; therefore, the
anticipated impact on the results of operations was excluded
from the pro forma condensed consolidated statement of income.
(C) Prior to closing, OpCo will be a direct
subsidiary of Acquisition Holding. Immediately before the
closing date, certain subsidiaries of Acquisition Holding will
transfer the assets, liabilities and equity interests relating
to (i) the business of operating and managing senior
housing and care facilities, (ii) joint venture entities
and (iii) other ancillary businesses to OpCo and then
distribute all of the equity interests in OpCo to FC-GEN. The
parties intend that under no circumstances shall the Company be
deemed the owner of, or otherwise have control over, OpCo, its
subsidiaries or the assets, liabilities and equity thereof for
any period of time. As such, all relevant amounts relating to
OpCo have been eliminated from Acquisition Holding. Adjustments
identified represent assets, liabilities, revenues and expenses
of OpCo that were not retained in the Acquisition. Subsequent to
the Acquisition, the Company will have primarily acquired 140
senior housing and care facilities and the leasehold interests
in and options to purchase seven other senior housing and care
facilities.
S-42
Health Care REIT,
Inc.
(D) Adjustments to real property follow (in
thousands):
|
|
|
|
|
Real property not acquired:(1)
|
|
|
|
|
Land and land improvements
|
|
$
|
(16,342
|
)
|
Buildings and improvements
|
|
|
(275,830
|
)
|
Construction in progress
|
|
|
(2,565
|
)
|
Accumulated depreciation and amortization
|
|
|
72,684
|
|
|
|
|
|
|
Total real property not acquired
|
|
|
(222,053
|
)
|
Fair value adjustments:(2)
|
|
|
|
|
Land and land improvements
|
|
|
(97,578
|
)
|
Buildings and improvements
|
|
|
859,810
|
|
Construction in progress
|
|
|
(2,409
|
)
|
Accumulated depreciation and amortization
|
|
|
185,635
|
|
|
|
|
|
|
Total real property fair value adjustments
|
|
|
945,458
|
|
|
|
|
|
|
Net real property asset adjustments
|
|
$
|
723,405
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Note C. |
|
(2) |
|
Acquisition Holdings real property assets have been
adjusted to their preliminary estimated fair values and the
related historical balances of accumulated depreciation and
construction in progress are eliminated when in-service real
property assets are recorded at fair value. |
(E) Adjustments represent the deferral of $34,800,000
of fees associated with bridge financing (see
Note B) offset by the elimination of Acquisition
Holdings deferred loan costs of $12,078,000.
(F) Adjustments represent elimination of deferred tax
assets and liabilities of Acquisition Holding. As a result of
the Acquisition, we are subject to corporate level taxes for any
asset acquired in the Acquisition and subsequently sold for a
period of 10 years subsequent to closing (built-in
gains tax). The amount of income potentially subject to
this special corporate level tax is generally equal to
(i) the excess of the fair value of the asset as of the
date of closing over its adjusted tax basis as of the date of
closing, or (ii) the actual amount of gain, whichever of
(i) and (ii) is lower. We have not recorded a deferred
tax liability as a result of the potential built-in gains tax
based on our intentions with respect to such assets and
available tax planning strategies. Additionally, at the closing
of the Acquisition, 100% of the real estate of Acquisition
Holding will be acquired by a subsidiary of the Company;
accordingly, assuming the Acquisition was effective
January 1, 2010, all of the amounts of the income tax
expense would then be eliminated.
(G) The Company expects to fund $2,400,000,000 of
cash consideration and other associated costs of the Acquisition
primarily with short-term financing and available cash. The
Company has obtained a commitment for a
364-day
bridge loan of $2,400,000,000. Although the Company intends to
finance the Acquisition through the current offerings of common
and preferred stock, cash on hand and future capital raising
activities or refinancings, for purposes of these unaudited pro
forma consolidated financial statements we have initially
assumed a drawdown of $2,400,000,000 under the bridge loan at
the closing of the Acquisition. Any draw downs under the bridge
loan are expected to be repaid after the Acquisition with
proceeds from the issuance of new securities (see Note N).
Approximately $1,670,563,000 of Acquisition Holdings
long-term debt is expected to be settled or repaid at closing.
(H) At closing, Company will assume existing leases
at seven properties. Acquisition Holding has historically
recognized these leases as capital leases due to bargain
purchase options. Company has adjusted the capital lease
obligations to estimated fair values.
S-43
Health Care REIT,
Inc.
(I) Adjustment to the total members equity
represents the elimination of such balance of Acquisition
Holding.
(J) As discussed in Note A, Acquisition Holding
has not completed its audit for the year ended December 31,
2010. As such, the following represents Acquisition
Holdings unaudited condensed consolidated results from
continuing operations for the twelve months ended
September 30, 2010 as derived from the audited and
unaudited condensed consolidated financial statements of
Acquisition Holding (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deduct:
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
Nine
|
|
|
Nine
|
|
|
Twelve
|
|
|
|
Year
|
|
|
Months
|
|
|
Months
|
|
|
Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2009
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Resident fees and services
|
|
$
|
2,376,967
|
|
|
$
|
1,766,127
|
|
|
$
|
1,849,897
|
|
|
$
|
2,460,737
|
|
Other income
|
|
|
2,145
|
|
|
|
2,026
|
|
|
|
2,221
|
|
|
|
2,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
2,379,112
|
|
|
|
1,768,153
|
|
|
|
1,852,118
|
|
|
|
2,463,077
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
138,008
|
|
|
|
99,973
|
|
|
|
104,261
|
|
|
|
142,296
|
|
Property operating expenses
|
|
|
2,003,989
|
|
|
|
1,478,145
|
|
|
|
1,554,582
|
|
|
|
2,080,426
|
|
Depreciation and amortization
|
|
|
85,151
|
|
|
|
63,488
|
|
|
|
65,005
|
|
|
|
86,668
|
|
General and administrative
|
|
|
117,742
|
|
|
|
88,959
|
|
|
|
89,760
|
|
|
|
118,543
|
|
Impairment of assets
|
|
|
17,358
|
|
|
|
17,358
|
|
|
|
14,492
|
|
|
|
14,492
|
|
Loss (gain) on extinguishment of debt
|
|
|
12,306
|
|
|
|
12,956
|
|
|
|
(407
|
)
|
|
|
(1,057
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
2,374,554
|
|
|
|
1,760,879
|
|
|
|
1,827,693
|
|
|
|
2,441,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes and income
from unconsolidated joint ventures
|
|
|
4,558
|
|
|
|
7,274
|
|
|
|
24,425
|
|
|
|
21,709
|
|
Income tax expense
|
|
|
(17,105
|
)
|
|
|
(18,469
|
)
|
|
|
(9,477
|
)
|
|
|
(8,113
|
)
|
Income from unconsolidated joint ventures
|
|
|
435
|
|
|
|
332
|
|
|
|
(322
|
)
|
|
|
(219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(12,112
|
)
|
|
|
(10,863
|
)
|
|
|
14,626
|
|
|
|
13,377
|
|
Less: Net income attributable to noncontrolling interests
|
|
|
1,367
|
|
|
|
1,100
|
|
|
|
2,799
|
|
|
|
3,066
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations attributable to common
stockholders
|
|
$
|
(13,479
|
)
|
|
$
|
(11,963
|
)
|
|
$
|
11,827
|
|
|
$
|
10,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(K) Immediately after the closing of the Acquisition,
a subsidiary of the Company will lease the acquired facilities
to Tenant pursuant to the Master Lease. In addition to rent, the
triple net Master Lease requires Tenant to pay all operating
costs, utilities, real estate taxes, insurance, building
repairs, maintenance costs and all obligations under the ground
leases. All obligations under the Master Lease will be
guaranteed by OpCo. The initial term will be fifteen years.
Tenant will have one option to renew for an additional term of
fifteen years. The Master Lease will provide that the base rent
for the first year will be $198,000,000 and will increase at
least 1.75% but no more than 3.50% (subject to CPI changes) for
each of the years two through six during the initial term and at
least 1.50% but no more than 3.00% per year thereafter (subject
to CPI changes). The adjustment to rental income
S-44
Health Care REIT,
Inc.
represents the estimated straight-line rent the Company expects
to recognize based on the minimum rent escalators during the
initial term.
(L) The pro forma increase in interest expense as a
result of the bridge loan financing in the Acquisition is
calculated using market rates management believes would have
been available to the Company for the borrowings assumed to have
been issued as of February 25, 2011 (the last business date
before the date that the definitive agreement was executed to
acquire Acquisition Holding) pursuant to the bridge loan
commitment. The all-in cost of bridge financing is estimated to
be 7.51%. Each
1/8 of 1%
increase in the annual interest rate assumed with respect to the
debt would increase pro forma interest expense by $3,000,000 for
the year ended December 31, 2010. Adjustments to interest
expense are as follows (in thousands):
|
|
|
|
|
Elimination of Acquisition Holdings interest expense
|
|
$
|
(130,741
|
)
|
Interest expense and fees associated with bridge loan
|
|
|
145,518
|
|
Amortization of deferred fees associated with bridge loan
(Note B)
|
|
|
34,800
|
|
Interest expense on capital lease obligations (Note H)
|
|
|
3,978
|
|
|
|
|
|
|
Total
|
|
$
|
53,555
|
|
|
|
|
|
|
(M) Adjustments to depreciation and amortization
represent the elimination of Acquisition Holdings
historical depreciation ($61,824,000) offset by depreciation
expense as a result of the recording of Acquisition
Holdings real property at its estimated fair value
($63,533,000). Estimated useful lives of 40 years and
15 years were assumed to compute depreciation for buildings
and improvements, respectively, on a straight-line basis.
(N) Adjustments represent the anticipated issuance of
25,000,000 shares of Company common stock and
12,500,000 shares of Company cumulative convertible
perpetual preferred stock with an assumed dividend rate of 6.75%
and the application of the estimated proceeds therefrom of
$1,825,000,000 to reduce the funds necessary to draw under the
bridge loan. Further, as a result of reduced bridge financing,
the Company would only pay bridge fees of $21,113,000 rather
than $34,800,000. The common and preferred stock proceeds
assumed are predicated on anticipated sales of equity securities
by the Company. There can be no assurance that such sales will
occur on the terms estimated herein or at all. The shares of
Company common and preferred stock assumed to be issued are
valued as follows (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
Common
|
|
|
Preferred
|
|
|
|
|
Number of shares issued
|
|
|
25,000
|
|
|
|
12,500
|
|
Assumed
price(1)
|
|
$
|
50.86
|
|
|
$
|
50.00
|
|
|
|
|
|
|
|
|
|
|
Gross value of shares issued
|
|
|
1,271,500
|
|
|
|
625,000
|
|
Less: Underwriting discounts
|
|
|
(50,860
|
)
|
|
|
(18,750
|
)
|
Less: Share registration and issuance costs
|
|
|
(1,140
|
)
|
|
|
(750
|
)
|
|
|
|
|
|
|
|
|
|
Total value of shares issued
|
|
$
|
1,219,500
|
|
|
$
|
605,500
|
|
|
|
|
|
|
|
|
|
|
The total value of the shares issued is presented as follows:
|
|
|
|
|
|
|
|
|
Common Stock: Par value, $1.00 per share
|
|
$
|
25,000
|
|
|
|
|
|
Preferred Stock: Liquidation preference, $50.00 per share
|
|
|
|
|
|
$
|
625,000
|
|
Capital in excess of par value
|
|
|
1,194,500
|
|
|
|
(19,500
|
)
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,219,500
|
|
|
$
|
605,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Common stock price based on the last reported sale price of
the Companys common stock on February 25, 2011.
Preferred stock price represents liquidation value per share. |
S-45
Health Care REIT,
Inc.
(O) Adjustments to interest expense represent
$124,341,000 reduction in interest and fees associated with the
bridge loan resulting from the use of proceeds as discussed in
Note N. See Note L for a discussion of the interest
rate assumptions. Assuming a bridge loan balance of
$575,000,000, the all-in rate is approximately 9.74% and each
1/8
of 1% increase in the annual interest rate assumed with respect
to the debt would increase adjusted pro forma interest expense
by $719,000 for the year ended December 31, 2010.
(P) Adjustment represents the dividend on the
issuance of 12,500,000 shares of the Companys
cumulative convertible perpetual preferred stock (see
Note N) with an assumed dividend rate of 6.75%.
(Q) The calculations of basic and diluted earnings
per share are as follows (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
Historical
|
|
|
Pro
Forma
|
|
|
As
Adjusted
|
|
|
|
|
Income from continuing operations
|
|
$
|
84,352
|
|
|
$
|
58,952
|
|
|
$
|
183,293
|
|
Preferred stock dividends
|
|
|
(21,645
|
)
|
|
|
(21,645
|
)
|
|
|
(63,833
|
)
|
Net income attributable to noncontrolling interests
|
|
|
(357
|
)
|
|
|
(357
|
)
|
|
|
(357
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to common
stockholders
|
|
$
|
62,350
|
|
|
$
|
36,950
|
|
|
$
|
119,103
|
|
Weighted-average shares used to calculate earnings per common
shareBasic(1)
|
|
|
127,656
|
|
|
|
127,656
|
|
|
|
152,656
|
|
Effect of dilutive securities
|
|
|
552
|
|
|
|
552
|
|
|
|
552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted weighted-average shares used to calculate earnings per
common shareDiluted
|
|
|
128,208
|
|
|
|
128,208
|
|
|
|
153,208
|
|
Income from continuing operations attributable to common
stockholders per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.49
|
|
|
$
|
0.29
|
|
|
$
|
0.78
|
|
Diluted
|
|
|
0.49
|
|
|
|
0.29
|
|
|
|
0.78
|
|
|
|
|
(1) |
|
The pro forma as adjusted weighted-average shares outstanding
are the historical weighted-average shares of the Company
adjusted for the assumed issuance of 25,000,000 shares of
Company common stock (see Note N). The convertible
preferred stock discussed in Note N were excluded as the
effect of the conversion would be anti-dilutive. |
S-46
Description of
Series I preferred stock
The following is a summary of certain provisions of the
certificate of designation of our Series I preferred stock.
As used in this section, the terms we,
us or our refer to Health Care REIT,
Inc. and not any of its subsidiaries. Please read
Description of Common Stock, Description of
Preferred Stock and Description of Certain
Provisions of our Certificate of Incorporation and By-laws
in the accompanying prospectus for a description of general
terms applicable to the Series I preferred stock, a
description of our common stock and certain provisions of our
corporate documents and Delaware law.
GENERAL
Under our certificate of incorporation and our by-laws, our
board of directors is authorized, without further stockholder
action, to issue up to 50,000,000 shares of preferred
stock, par value $1.00 per share, in one or more series, with
such designations, preferences, voting powers and relative,
participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as may be
expressed in our certificate of incorporation or any amendment
thereto (including in any certificate of designation relating to
such preferred stock), or as shall be set forth in the
resolutions of our board of directors or a duly authorized
committee providing for the issue of such preferred stock. We
currently have outstanding 4,000,000 shares of
Series D preferred stock, 7,000,000 shares of
Series F preferred stock and 349,854 shares of
Series H convertible preferred stock. In connection with
this offering, we will issue 12,500,000 shares of
Series I preferred stock. In addition, we have granted the
underwriters a
30-day
option to purchase up to 1,875,000 additional shares of
Series I preferred stock to cover overallotments in
connection with this offering. When issued, the Series I
preferred stock and any common stock issued upon the conversion
of the Series I preferred stock will be fully paid and
nonassessable. The holders of the Series I preferred stock
will have no preemptive rights. The transfer agent, registrar,
conversion and dividend disbursing agent for shares of the
Series I preferred stock is BNY Mellon Shareowner Services.
The Series I preferred stock is subject to mandatory
conversion, as described below in Mandatory
Conversion, and is not redeemable by us.
RANKING
The Series I preferred stock, with respect to dividend
rights or rights upon our liquidation,
winding-up
or dissolution, ranks:
|
|
Ø
|
senior to all classes of our common stock and each other class
of capital stock or series of preferred stock established after
the original issue date of the Series I preferred stock
(which we refer to as the Issue Date), the terms of
which do not expressly provide that such class or series ranks
senior to or on a parity with the Series I preferred stock
as to dividend rights or rights upon our liquidation,
winding-up
or dissolution (which we refer to collectively as Junior
Stock);
|
|
Ø
|
on a parity, in all respects, with our outstanding Series D
preferred stock, Series F preferred stock and Series H
convertible preferred stock and any class of capital stock or
series of preferred stock established after the Issue Date, the
terms of which expressly provide that such class or series will
rank on a parity with the Series I preferred stock as to
dividend rights or rights upon our liquidation,
winding-up
or dissolution (which we refer to collectively as Parity
Stock); and
|
|
Ø
|
junior to each class of capital stock or series of preferred
stock established after the Issue Date, the terms of which
expressly provide that such class or series will rank senior to
the Series I preferred stock as to dividend rights or
rights upon our liquidation,
winding-up
or dissolution (which we refer to collectively as Senior
Stock).
|
The Series I preferred stock will rank on a parity with our
Series D preferred stock, Series F preferred stock and
Series H convertible preferred stock. While any shares of
Series I preferred stock are outstanding, we may not
authorize or issue any class or series of Senior Stock (or any
security
S-47
Description of
Series I preferred stock
convertible into Senior Stock) without the affirmative vote or
consent of the holders of at least
662/3%
of the outstanding shares of Series I preferred stock.
Without the consent of any holder of Series I preferred
stock, however, we may authorize, increase the authorized amount
of, or issue any class or series of Parity Stock or Junior
Stock. See Voting Rights below.
DIVIDENDS
Holders of shares of Series I preferred stock will be
entitled to receive, when, as and if declared by our board of
directors out of funds legally available for payment of
dividends, cumulative cash dividends at a rate per annum
of % per share on the liquidation
preference of $50.00 per share of Series I preferred stock
(equivalent to $ per annum per
share). Dividends on the Series I preferred stock will be
payable in cash quarterly on January 15, April 15,
July 15 and October 15 of each year, commencing on July 15,
2011 (each, a Dividend Payment Date) at such annual
rate, and shall accumulate from the most recent date to which
dividends have been paid, or if no dividends have been paid,
from the original issue date of the Series I preferred
stock (expected to
be ,
2011).
Dividends will be payable to holders of record as they appear in
our share records at the close of business on the March 31,
June 30, September 30 and December 31 immediately preceding
each Dividend Payment Date (each, a Record Date).
Unpaid dividends on shares of Series I preferred stock will
not bear interest. Dividends payable on the Series I
preferred stock for any period less than a full dividend period
(based upon the number of days elapsed during the period) will
be computed on the basis of a
360-day year
consisting of twelve
30-day
months.
No dividends or other distributions (other than a dividend or
distribution payable solely in shares of Parity Stock or Junior
Stock (in the case of Parity Stock) or Junior Stock (in the case
of Junior Stock) and cash in lieu of fractional shares) may be
declared, made or paid, or set apart for payment upon, any
Parity Stock or Junior Stock, nor may any Parity Stock or Junior
Stock be redeemed, purchased or otherwise acquired for any
consideration (or any money paid to or made available for a
sinking fund for the redemption of any Parity Stock or Junior
Stock) by us or on our behalf (except by conversion into or
exchange for shares of Parity Stock or Junior Stock (in the case
of Parity Stock) or Junior Stock (in the case of Junior Stock))
unless all accumulated and unpaid dividends have been or
contemporaneously are declared and paid, or are declared and a
sum sufficient for the payment thereof is set apart for such
payment, on the Series I preferred stock and all classes or
series of our capital stock ranking on a parity with the
Series I preferred stock as to dividends (Dividend
Parity Stock) for all dividend payment periods ending on
or prior to the date of such declaration, payment, redemption,
purchase or acquisition. The foregoing restriction will not
limit our acquisition of shares of our common stock solely to
the extent necessary to preserve our status as a real estate
investment trust for U.S. federal income tax purposes.
Notwithstanding the immediately preceding paragraph, if full
dividends have not been paid on the Series I preferred
stock and any Dividend Parity Stock, dividends may be declared
and paid on the Series I preferred stock and such Dividend
Parity Stock so long as the dividends are declared and paid pro
rata so that the amounts of dividends declared per share on the
Series I preferred stock and such Dividend Parity Stock
will in all cases bear to each other the same ratio that
accumulated and unpaid dividends per share on the shares of the
Series I preferred stock and such Dividend Parity Stock
bear to each other.
Holders of shares of the Series I preferred stock will not
be entitled to any dividend, whether payable in cash, property
or stock, in excess of full cumulative dividends.
If, for any taxable year, we elect to designate any portion of
the distributions, within the meaning of the Internal Revenue
Code, paid or made available for the year to holders of all
classes of our shares of
S-48
Description of
Series I preferred stock
capital stock as capital gain dividends, as defined
in Section 857 of the Internal Revenue Code, then the
portion of the distributions designated as capital gain
dividends that will be allocable to the record holders of our
Series I preferred stock will be the portion of the
distributions designated as capital gain dividends multiplied by
a fraction, the numerator of which will be the total
distributions paid or made available to such record holders of
our Series I preferred stock for the year and the
denominator of which will be the total distributions paid or
made available for the year to holders of all classes of our
shares of capital stock. We will make a similar allocation for
each taxable year with respect to any undistributed long-term
capital gains that are to be included in each record
holders long-term capital gains, based on the allocation
of the capital gains dividend that would have resulted if such
undistributed long-term capital gains had been distributed as
capital gains dividends by us to the record holders.
Our existing revolving credit facility prohibits us from
distributing to our stockholders, including holders of shares of
our preferred stock, dividends if we are in default under our
credit facility, except as necessary to enable us to qualify as
a REIT for U.S. federal income tax purposes. As a result,
if we were to default under the revolving credit facility, we
may not be able to pay all or a portion of the dividends payable
to holders of shares of our Series I preferred stock on
such Dividend Payment Date without further violating the terms
of the revolving credit facility.
Any dividend, distribution or other payment required to be made
on any day that is not a Business Day (which, as used herein,
means any day other than a Saturday, Sunday or other day on
which commercial banks in The City of New York are authorized or
required by law or executive order to close) shall be made on
the next succeeding Business Day without interest or additional
payment for such delay.
LIQUIDATION
PREFERENCE
In the event of our voluntary or involuntary liquidation,
dissolution or
winding-up
of our affairs, each holder of Series I preferred stock
will be entitled to receive and to be paid out of our assets
legally available for distribution to our stockholders, before
any payment or distribution is made to holders of Junior Stock
(including our common stock), a liquidation preference of $50.00
per share (the liquidation preference), plus unpaid
accrued and accumulated dividends on the shares to the date
fixed for liquidation, dissolution or
winding-up
of our affairs. If, upon our voluntary or involuntary
liquidation, dissolution or winding up of our affairs, the
amounts payable with respect to the liquidation preference of
the Series I preferred stock and all Parity Stock are not
paid in full, the holders of the Series I preferred stock
and the Parity Stock will share ratably in any distribution of
our assets in proportion to the respective amounts that would be
payable to such holders if our assets were sufficient to permit
payment in full. Holders of the Series I preferred stock
will be entitled to notice of any event triggering the right to
receive a distribution in connection with any voluntary or
involuntary liquidation, dissolution or winding up of our
affairs not less than 30 calendar days and not more than 60
calendar days prior to the distribution payment date. After
payment of the full amount of the liquidation preference and
unpaid accrued and accumulated dividends to which they are
entitled, the holders of the Series I preferred stock will
have no right or claim to any of our remaining assets. Neither
our consolidation nor our merger with or into any other
corporation, nor the voluntary sale, lease or conveyance of all
or substantially all of our property or business, shall be
deemed to constitute a liquidation, dissolution or winding up of
our affairs. The certificate of designation will not contain any
provision requiring funds to be set aside to protect the
liquidation preference of the Series I preferred stock even
though it is substantially in excess of the par value thereof.
VOTING
RIGHTS
The holders of the Series I preferred stock will have no
voting rights except as set forth below or as otherwise required
by law from time to time.
S-49
Description of
Series I preferred stock
Whenever dividends on any Series I preferred stock are in
arrears for six or more quarterly dividends (whether or not
consecutive), the number of directors then constituting our
board of directors will increase by two (if not already
increased by reason of a similar arrearage with respect to any
Parity Voting Preferred (as defined below)). In the event of
such an increase in the number of directors, the holders of the
Series I preferred stock will be entitled to vote (voting
separately as a class with holders of all other series of our
preferred stock ranking on a parity with the Series I
preferred stock as to dividends or upon liquidation upon which
like voting rights have been conferred and are exercisable
(collectively, Parity Voting Preferred)), in order
to fill the vacancies thereby created, for the election of a
total of two additional directors (the Preferred Stock
Directors) at a special meeting called by the holders of
record of at least 25% of the Series I preferred stock or
by holders of any such other series of Parity Voting Preferred
(unless such request is received less than 90 days before
the date fixed for the next annual meeting of stockholders) or
at the next annual meeting of stockholders, and at each
subsequent annual meeting until all dividends accumulated on the
Series I preferred stock for the past dividend periods and
the dividend for the then current dividend period either have
been fully paid or have been declared and a sum sufficient for
the payment thereof set aside for payment. The Preferred Stock
Directors will be elected by a plurality of the votes cast in
the election for a one-year term, and each Preferred Stock
Director will serve until his successor is duly elected and
qualified or until the directors right to hold the office
terminates, whichever occurs earlier. If there is a vacancy in
the office of a Preferred Stock Director, then the vacancy may
only be filled by a vote of the holders of the outstanding
shares of Series I preferred stock when they have the
voting rights described above (voting separately as a class with
all series of Parity Voting Preferred upon which like voting
rights have been conferred and are exercisable). Each Preferred
Stock Director will be entitled to one vote (two votes in the
aggregate for the Preferred Stock Directors) on any matter with
respect to which our board of directors votes.
Such voting rights and the terms of the directors so elected in
respect of the Series I preferred stock will continue until
such time as the dividend arrearage on the Series I
preferred stock has been paid in full and the dividend for the
then current dividend period shall have been fully paid or
declared and a sum sufficient for the payment thereof set aside
for payment. Upon the termination of such voting rights, the
term of office for any directors appointed by the Series I
preferred stockholders and any Parity Voting Preferred will
terminate and the size of our board of directors will decrease
accordingly. Such voting rights will re-vest in the event that
thereafter dividends on any Series I preferred stock are
once again in arrears for six or more quarterly dividends
(whether or not consecutive).
Any Preferred Stock Director may be removed at any time with or
without cause by, and shall not be removed otherwise than by the
vote of, the holders of record of a majority of the outstanding
shares of Series I preferred stock when they have the
voting rights described above (voting separately as a class with
all series of Parity Voting Preferred upon which like voting
rights have been conferred and are exercisable).
In addition, the affirmative vote or consent of the holders of
at least
662/3%
of the outstanding Series I preferred stock will be
required for: (i) the authorization, creation or issuance,
or increase in the authorized or issued amount of any Senior
Stock or the reclassification of any of our authorized stock
into Senior Stock, or the creation, authorization or issuance of
any obligation or security convertible into or evidencing the
right to purchase any Senior Stock or (ii) the repeal,
amendment, alteration or any other change of the certificate of
designation or our certificate of incorporation (as each may
then be amended) in any manner (whether by merger, consolidation
or otherwise) that adversely affects the powers, preferences, or
other special rights or privileges of the Series I
preferred stock or its holders, except that increases in the
amount of our authorized preferred stock, the creation or
issuance of other series of Parity Stock or of Junior Stock, or
any increase in the amount of authorized shares of Parity Stock
or Junior Stock will not require the consent of the holders of
the Series I preferred stock, and will
S-50
Description of
Series I preferred stock
not be deemed to affect adversely the powers, preferences, or
other special rights or privileges of the holders of the
Series I preferred stock.
The immediately foregoing paragraph notwithstanding, in the
event of a merger or consolidation involving us, a sale of all
or substantially all of the assets of us or of us and our
subsidiaries on a consolidated basis or a statutory share
exchange (any such transaction, an Extraordinary
Transaction), so long as (a) the Series I
preferred stock remains outstanding following consummation of
such Extraordinary Transaction with the terms thereof materially
unchanged, taking into account that, upon the occurrence of such
an Extraordinary Transaction, we may not be the surviving entity
(in which case, the Series I preferred stock may be
converted into or exchanged for preferred stock of the surviving
entity having terms materially the same as the Series I
preferred stock) and, if applicable, with any changes to the
terms of the Series I preferred stock required pursuant to
and made in compliance with the provisions described under
Recapitalizations, Reclassifications and
Changes of our Common Stock in connection with such
Extraordinary Transaction and (b) if such transaction also
constitutes a fundamental change, the provisions under
Special Rights Upon a Fundamental Change are
complied with, then the occurrence of such Extraordinary
Transaction shall not be deemed to adversely affect the powers,
preferences, or other special rights or privileges of the
Series I preferred stock or its holders and in such case
such holders shall not have any voting rights with respect to
the occurrence of such Extraordinary Transaction pursuant to
clause (ii) of the immediately preceding paragraph.
In all cases in which the holders of Series I preferred
stock shall be entitled to vote, each share of Series I
preferred stock shall be entitled to one vote, unless
outstanding Parity Voting Preferred has similar vested and
continuing voting rights, in which case the number of votes that
each share of Series I preferred stock and any Parity
Voting Preferred participating in the votes described above
shall have shall be one vote for each $25.00 of liquidation
preference.
REDEMPTION
The Series I preferred stock will not be redeemable by us.
However, under certain circumstances, we may at our option cause
all outstanding shares of the Series I preferred stock to
be automatically converted into shares of common stock as
described below under Mandatory Conversion.
Subject to applicable law, we may purchase Series I
preferred stock, at any time, in the open market, by tender or
by private agreement. Any Series I preferred stock that we
reacquire will be retired and reclassified as authorized but
unissued shares of preferred stock, without designation as to
class or series, and may thereafter be reissued as any class or
series of preferred stock.
CONVERSION
RIGHTS
Each share of Series I preferred stock will be convertible,
at any time, at the option of the holder thereof at an initial
conversion rate
of shares
of our common stock per share of Series I preferred stock
(the Conversion Rate) (which represents an initial
conversion price of approximately
$ per share of common stock). The
Conversion Rate, and thus the conversion price, will be subject
to adjustment as described below under Conversion
Rate Adjustment.
The holders of shares of Series I preferred stock at the
close of business on a Record Date will be entitled to receive
the dividend payment on those shares on the corresponding
Dividend Payment Date notwithstanding the conversion of such
shares following that Record Date or our default in payment of
the dividend due on that Dividend Payment Date. However, shares
of Series I preferred stock surrendered for conversion at
the option of the holder during the period between the close of
business on any Record Date and the close of business on the
Business Day immediately preceding the applicable Dividend
Payment Date must be accompanied by payment of an amount equal
to the dividend payable on such shares on that Dividend Payment
Date. A holder of shares of Series I preferred stock on a
S-51
Description of
Series I preferred stock
Record Date who (or whose transferee) surrenders any shares for
conversion on the corresponding Dividend Payment Date will
receive the dividend payable by us on the Series I
preferred stock on that date, and the converting holder need not
include payment in the amount of such dividend upon surrender of
shares of Series I preferred stock for conversion. Except
as provided above with respect to a voluntary conversion and as
provided under Mandatory Conversion and
Special Rights upon a Fundamental Change, we
will make no payment or allowance for unpaid dividends, whether
or not in arrears, on converted shares or for dividends on the
shares of common stock issued upon conversion.
The certificate of designation will require that we at all times
reserve and keep available for issuance upon conversion of the
Series I preferred stock a sufficient number of authorized
and unissued shares of our common stock to permit the conversion
of all outstanding shares of Series I preferred stock and
that we take all action required to increase the authorized
number of shares of common stock if at any time there are
insufficient unissued shares of common stock to permit such
reservation or to permit the conversion of all outstanding
shares of Series I preferred stock.
In addition, the certificate of designation will provide that
any common stock issued upon conversion of the Series I
preferred stock will be validly issued, fully paid and
nonassessable and that we will use our reasonable best efforts
to list the common stock required to be delivered upon
conversion of the Series I preferred stock, prior to such
delivery, upon each national securities exchange, if any, upon
which the outstanding common stock is listed at the time of
delivery.
RESTRICTIONS ON
OWNERSHIP AND TRANSFER
Your right to convert Series I preferred stock into Common
Stock and your right to the benefits of the Series I
preferred stock may be limited by certain provisions of our
by-laws and the certificate of designation, as described below.
For us to qualify as a real estate investment trust for
U.S. federal tax purposes, not more than 50% in value of
our outstanding capital stock may be owned, directly or
indirectly, by five or fewer individuals at any time during the
last half of our taxable year. In order to ensure that this
requirement is satisfied, the certificate of designation
provides that all holders of Series I preferred stock will
be subject to Article VI of our
by-laws,
which provides that no person may acquire securities that would
result in the direct or indirect beneficial ownership of more
than 9.8% of our common stock or more than 9.8% in aggregate
market value (as defined in Article VI of our
by-laws) of all of our outstanding capital stock. For purposes
of application of these limitations to any person, all options,
warrants, convertible securities or other rights to acquire our
common stock held directly or indirectly by such person are
treated as if all such rights had been exercised.
Any acquisition by you of Series I preferred stock (whether
in this offering or following completion of the offering) or
other classes of our capital stock that result in you exceeding
either the 9.8% common stock ownership threshold or the 9.8%
aggregate market value threshold may not be valid.
In addition, no holder of Series I preferred stock will be
entitled to convert the Series I preferred stock into our
common stock to the extent that receipt of our common stock
would cause the holder (together with the holders
affiliates) to exceed either of the 9.8% ownership thresholds.
Under our by-laws and, consequently, the certificate of
designation for the Series I preferred stock, if any
securities in excess of the 9.8% thresholds are issued or
transferred to any person, such issuance or transfer shall be
valid only with respect to such amount of securities as does not
exceed the threshold, and such issuance or transfer will be void
with respect to the excess. Our board of directors may grant a
limited exemption from the ownership restrictions to specified
persons if the board determines that each such limited exemption
is in the best interests of us and our stockholders; however,
our board of directors is not obligated to do so.
S-52
Description of
Series I preferred stock
Our by-laws and the certificate of designation further provide
that, if the foregoing stock ownership limitations are
determined to be invalid by virtue of any legal decision,
statute, rule or regulation, then the transferee of the shares
or other securities will be deemed to have acted as our agent in
acquiring the shares or other securities that are in excess of
the limit, and will be deemed to hold such excess shares or
securities on our behalf. As the equivalent of treasury
securities for such purposes, the excess securities will not be
entitled to any voting rights, will not be considered to be
outstanding for quorum or voting purposes, and will not be
entitled to receive dividends, interest or any other
distribution with respect to such securities. Any person who
receives dividends, interest or any other distribution in
respect of the excess securities will hold the same as our agent
and for the transferee of the excess securities following a
permitted transfer.
In addition, under our by-laws and, consequently, the
certificate of designation, we may refuse to transfer any
shares, passing either by voluntary transfer, by operation of
law, or under the last will and testament of any stockholder, if
such transfer would or might, in the opinion of our board of
directors or counsel, disqualify us as a real estate investment
trust for U.S. federal tax purposes.
Any person who violates these restrictions in acquiring actual
or constructive ownership of shares of Series I preferred
stock is required to provide us with notice of such violation
immediately and also provide us with any additional information
as we may request in order to determine the effect of such
acquisition on our status as a REIT.
CONVERSION
PROCEDURES
On the date of any conversion at the option of the holders, if a
holders interest is a beneficial interest in a global
certificate representing Series I preferred stock, the
holder must comply with the Depositarys procedures for
converting a beneficial interest in a global security. The
Depositary Trust Company initially will act as Depositary.
If a holders interest is in certificated form, a holder
must do each of the following in order to convert:
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complete and manually sign the conversion notice provided by the
conversion agent, or a facsimile of the conversion notice, and
deliver this irrevocable notice to the conversion agent;
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Ø
|
surrender the shares of Series I preferred stock to the
conversion agent;
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Ø
|
if required, furnish appropriate endorsements and transfer
documents;
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Ø
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if required, pay any stock transfer, documentary, stamp or
similar taxes not payable by us; and
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Ø
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if required, pay funds equal to any declared and unpaid dividend
payable on the next Dividend Payment Date to which such holder
is entitled.
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The date on which a holder complies with the foregoing
procedures is the conversion date.
The conversion agent for the Series I preferred stock is
initially the transfer agent. A holder may obtain copies of the
required form of the conversion notice from the conversion
agent. The conversion agent will, on a holders behalf,
convert the Series I preferred stock into shares of our
common stock, in accordance with the terms of the notice
delivered by us. A stock certificate or certificates
representing the shares of common stock to be delivered in
connection with the conversion, together with, if applicable,
any payment of cash in lieu of fractional shares, will be
delivered by us to the holder, or in the case of global
certificates, a book-entry transfer through the Depositary will
be made by the conversion agent. Such delivery will be made as
promptly as practicable, but in no event later than three
Business Days following the conversion date.
The person or persons entitled to receive the shares of common
stock issuable upon conversion of the Series I preferred
stock will be treated as the record holder(s) of such shares as
of the close of business on the applicable conversion date. On
the Conversion Date, all rights with respect to the shares of
Series I Preferred Stock so converted, including the
rights, if any, to receive notices, will terminate,
S-53
Description of
Series I preferred stock
except only the rights of holders thereof to receive the number
of whole shares of common stock into which such shares of
Series I Preferred Stock have been converted (with such
adjustment or cash payment for fractional shares as we may
elect, as described under No Fractional
Shares) and, if applicable, any additional shares of
common stock or other consideration as may be issuable upon
conversion in payment of a make-whole premium or otherwise as
described under Special Rights Upon a Fundamental
Change or any reference property that may be
issuable in lieu of common stock upon conversion as described
under Recapitalizations, Reclassifications and
Changes of our Common Stock and the rights to which they
are otherwise entitled as holders of common stock or other
property receivable upon conversion. Prior to the close of
business on the applicable conversion date, the shares of common
stock issuable upon conversion of the Series I preferred
stock will not be deemed to be outstanding for any purpose and
you will have no rights with respect to the common stock,
including voting rights, rights to respond to tender offers and
rights to receive any dividends or other distributions on the
common stock, by virtue of holding the Series I preferred
stock.
MANDATORY
CONVERSION
At any time on or after April 20, 2018, we may at our
option cause all (but not less than all) outstanding shares of
the Series I preferred stock to be automatically converted
into a number of shares of common stock for each share of
Series I preferred stock equal to the then-prevailing
Conversion Rate, if the Daily VWAP of our common stock equals or
exceeds 130% of the then-prevailing conversion price for at
least 20 Trading Days in a period of 30 consecutive Trading
Days, including the last Trading Day of such
30-day
period, ending on the Trading Day prior to our issuance of a
press release announcing the mandatory conversion as described
below.
The term Trading Day means a day during which
(i) trading in securities generally occurs on the NYSE or,
if our common stock is not listed on the NYSE, on the other
principal national securities exchange on which our common stock
is then listed or, if our common stock is not listed on a
national securities exchange, on the principal other market on
which our common stock is then traded and (ii) there is no
Market Disruption Event. A Trading Day only includes
those days that have a scheduled closing time of 4:00 p.m.
(New York City time) or the then standard closing time for
regular trading on the relevant exchange or trading system. If
our common stock is not so listed or traded, Trading
Day means a Business Day.
Market Disruption Event means (1) a failure by
the NYSE or, if our common stock is not listed on the NYSE, the
principal U.S. national securities exchange on which our
common stock is listed or, if our common stock is not listed on
a national securities exchange, on the principal other market on
which our common stock is then traded, to open for trading
during its regular trading session or (2) the occurrence or
existence prior to 1:00 p.m. on any Trading Day for our
common stock of an aggregate one half hour period of any
suspension or limitation imposed on trading (by reason of
movements in price exceeding limits permitted by the stock
exchange or otherwise) in our common stock or in any options,
contracts or future contracts relating to our common stock.
Daily VWAP means the average of the per share
volume-weighted average prices of our common stock for each day,
as displayed under the heading Bloomberg VWAP on
Bloomberg page HCN.UN <Equity> AQR (NYSE
VWAP) (or its equivalent successor if such page is not
available) in respect of the period from scheduled open of
trading until the scheduled close of trading of the primary
trading session on each such Trading Day (or if such
volume-weighted average price is unavailable on any such day,
the Closing Sale Price shall be used for such day). The per
share volume-weighted average price on each such day will be
determined without regard to after hours trading or any other
trading outside of the regular trading session trading hours.
The Closing Sale Price of our common stock on any
date means the closing sale price per share (or if no closing
sale price is reported, the average of the closing bid and ask
prices or, if more than one in
S-54
Description of
Series I preferred stock
either case, the average of the average closing bid and the
average closing ask prices) on such date as reported on the NYSE
or, if our common stock is not listed on the NYSE, on the
principal other national securities exchange on which our common
stock is then listed or, if our common stock is not listed on a
national securities exchange, on the principal other market on
which our common stock is then traded. If our common stock is
not so listed, the Closing Sale Price will be an amount
determined in good faith by our board of directors to be the
fair value of the common stock.
To exercise the mandatory conversion right described above, we
must issue a press release for publication on the Dow Jones News
Service or Bloomberg Business News (or if either such service is
not available, another broadly disseminated news or press
release service selected by us) prior to the opening of business
on the first Trading Day following any date on which the
conditions described in the first paragraph of this
Mandatory Conversion section are met, announcing
such a mandatory conversion. We also will give notice by mail or
by publication (with subsequent prompt notice by mail) to the
holders of the Series I preferred stock (not more than four
Business Days after the date of the press release) of the
mandatory conversion announcing our intention to convert the
Series I preferred stock. The conversion date will be the
date (which we refer to as the Mandatory Conversion
Date) that is five Trading Days after the date on which we
issue such press release.
In addition to any information required by applicable law or
regulation, the press release and notice of a mandatory
conversion shall state, as appropriate:
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the Mandatory Conversion Date;
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Ø
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the number of shares of common stock to be issued upon
conversion of each share of Series I preferred stock;
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Ø
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the number of shares of Series I preferred stock to be
converted; and
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Ø
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that dividends on the shares of Series I preferred stock to
be converted will cease to accrue on the Mandatory Conversion
Date.
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On and after the Mandatory Conversion Date, dividends will cease
to accrue on the shares of Series I preferred stock called
for a mandatory conversion and all rights of holders of such
shares of Series I preferred stock will terminate except
for the right to receive the shares of common stock issuable
upon conversion thereof. The dividend payment with respect to
any shares of Series I preferred stock called for a
mandatory conversion on a date during the period between the
close of business on any Record Date for the payment of
dividends to the close of business on the corresponding Dividend
Payment Date will be payable on such Dividend Payment Date to
the record holders of such shares on such Record Date if such
shares have been converted after such Record Date and prior to
such Dividend Payment Date. Except as provided in the
immediately preceding sentence, no payment or adjustment will be
made upon mandatory conversion of any shares of Series I
preferred stock for unpaid accrued and accumulated dividends or
for dividends with respect to the common stock issued upon such
conversion.
We may not authorize or give notice of any mandatory conversion
unless, prior to giving the conversion notice, all accumulated
and unpaid dividends on the Series I preferred stock for
all quarterly dividend periods ending on or prior to the date on
which we give such notice shall have been paid.
In addition to the mandatory conversion provision described
above, if there are fewer than shares of Series I preferred
stock outstanding, we may, at any time on or after
April 20, 2018, at our option, cause all such outstanding
shares of the Series I preferred stock to be automatically
converted into shares of common stock at the greater of
(i) the then-prevailing Conversion Rate and (ii) the
liquidation preference divided by the Market Value of the common
stock as determined on the second Trading Day immediately prior
to the Mandatory Conversion Date. The provisions of the
immediately preceding four paragraphs shall apply to any such
mandatory conversion pursuant to this paragraph; provided,
however, that (1) the Mandatory Conversion Date will not be
less than 15 calendar days nor more than 30 calendar days after
the date on which we issue a press release announcing such
mandatory
S-55
Description of
Series I preferred stock
conversion and (2) the press release and notice of
mandatory conversion will not state the number of shares of
common stock to be issued upon conversion of each share of
Series I preferred stock.
The term Market Value means the average of the Daily
VWAP of our common stock for each day during a 10 consecutive
Trading Day period ending immediately prior to the date of
determination.
CONVERSION RATE
ADJUSTMENT
The applicable Conversion Rate will be subject to adjustment,
without duplication, upon the occurrence of any of the following
events:
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If we issue shares of our common stock as a dividend or
distribution on shares of our common stock, or if we effect a
share split or share combination, the Conversion Rate will be
adjusted based on the following formula:
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where,
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CR0
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=
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the Conversion Rate in effect immediately prior to the open of
business on the Ex-Date for such dividend or distribution, or
the open of business on the effective date of such share split
or share combination, as the case may be;
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CR1
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=
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the Conversion Rate in effect immediately after the open of
business on the Ex-Date for such dividend or distribution, or
the open of business on the effective date of such share split
or share combination, as the case may be;
|
OS0
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=
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the number of shares of our common stock outstanding immediately
prior to the open of business on the Ex-Date for such dividend
or distribution, or the open of business on the effective date
of such share split or share combination, as the case may be; and
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OS1
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=
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the number of shares of our common stock outstanding immediately
after such dividend or distribution, or such share split or
share combination, as the case may be.
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Any adjustment made under this first bullet point shall become
effective immediately after the open of business on the Ex-Date
for such dividend or distribution, or immediately after the open
of business on the effective date for such share split or share
combination. If any dividend or distribution of the type
described in this first bullet point is declared but not so paid
or made, or any share split or combination of the type described
in this first bullet point is announced but the outstanding
shares of our common stock are not split or combined, as the
case may be, the Conversion Rate shall be immediately
readjusted, effective as of the date our board of directors
determines not to pay such dividend or distribution, or not to
split or combine the outstanding shares of our common stock, as
the case may be, to the Conversion Rate that would then be in
effect if such dividend, distribution, share split or share
combination had not been declared or announced.
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If we distribute to all or substantially all holders of our
common stock any rights, options or warrants entitling them, for
a period expiring not more than 60 days immediately
following the record date of such distribution, to purchase or
subscribe for shares of our common stock at a price per share
less than the average of the Daily VWAP of our common stock over
the 10 consecutive
Trading-Day
period ending on the Trading Day immediately preceding the
Ex-Date for such distribution, the Conversion Rate will be
increased based on the following formula:
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CR1
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=
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CR0
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x
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OS0
+ X
OS0
+ Y
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S-56
Description of
Series I preferred stock
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CR0
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=
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the Conversion Rate in effect immediately prior to the open of
business on the Ex-Date for such distribution;
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CR1
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=
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the Conversion Rate in effect immediately after the open of
business on the Ex-Date for such distribution;
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OS0
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=
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the number of shares of our common stock outstanding immediately
prior to the open of business on the Ex-Date for such
distribution;
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X
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=
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the total number of shares of our common stock issuable pursuant
to such rights, options or warrants; and
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Y
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=
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the number of shares of our common stock equal to the aggregate
price payable to exercise such rights, options or warrants
divided by the average of the Daily VWAP of our common stock
over the 10 consecutive Trading-Day period ending on the Trading
Day immediately preceding the Ex-Date for such distribution.
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Any increase made under this second bullet point will be made
successively whenever any such rights, options or warrants are
distributed and shall become effective immediately after the
open of business on the Ex-Date for such distribution. To the
extent that shares of common stock are not delivered after the
expiration of such rights, options or warrants, the Conversion
Rate shall be readjusted to the Conversion Rate that would then
be in effect had the increase with respect to the distribution
of such rights, options or warrants been made on the basis of
delivery of only the number of shares of common stock actually
delivered. If such rights, options or warrants are not so
distributed, the Conversion Rate shall be decreased to be the
Conversion Rate that would then be in effect if such Ex-Date for
such distribution had not occurred.
In determining whether any rights, options or warrants entitle
the holders to subscribe for or purchase shares of our common
stock at less than such average of the Daily VWAP for the 10
consecutive Trading Day period ending on the Trading Day
immediately preceding the Ex-Date for such distribution, and in
determining the aggregate offering price of such shares of our
common stock, there shall be taken into account any
consideration received by us for such rights, options or
warrants and any amount payable on exercise or conversion
thereof, the value of such consideration, if other than cash, to
be determined by our board of directors in its good faith
judgment.
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If we distribute shares of our capital stock, evidences of our
indebtedness or other assets, securities or property, to all or
substantially all holders of our common stock, excluding:
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dividends or distributions referred to in the first and second
bullet points above;
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-
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spin-offs to which the provisions set forth in the latter
portion of this third bullet point shall apply; and
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dividends or distributions paid exclusively in cash referred to
in the fourth bullet point below,
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then the Conversion Rate will be increased based on the
following formula:
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CR1
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=
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CR0
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x
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SP0
SP0
− FMV
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S-57
Description of
Series I preferred stock
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where,
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CR0
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=
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the Conversion Rate in effect immediately prior to the open of
business on the Ex-Date for such distribution;
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CR1
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=
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the Conversion Rate in effect immediately after the open of
business on the Ex-Date for such distribution;
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SP0
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=
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the average of the Daily VWAP of our common stock over the 10
consecutive Trading-Day period ending on the Trading Day
immediately preceding the Ex-Date for such distribution; and
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FMV
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=
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the fair market value (as determined by our board of directors
in its good faith judgment) of the shares of capital stock,
evidences of indebtedness, assets, securities or property
distributable with respect to each outstanding share of our
common stock on the Ex-Date for such distribution.
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If FMV (as defined above) is equal to or greater
than the
SP0
(as defined above), in lieu of the foregoing increase, each
holder of a share of Series I preferred stock shall receive
in respect of each share of Series I preferred stock owned
by it, at the same time and upon the same terms as holders of
our common stock, the amount and kind of our capital stock,
evidences of our indebtedness, other assets, securities or
property of ours that such holder would have received as if such
holder owned a number of shares of common stock equal to the
Conversion Rate in effect on the Ex-Date for the distribution.
Any increase made under the above portion of this third bullet
point will become effective immediately after the open of
business on the Ex-Date for such distribution.
With respect to an adjustment pursuant to this third bullet
point where there has been a payment of a dividend or other
distribution on our common stock of capital stock of any class
or series, or similar equity interests, of or relating to a
subsidiary or other business unit where such capital stock or
similar equity interest is listed or quoted (or will be listed
or quoted upon consummation of the spin-off (as defined below))
on a national securities exchange, which we refer to as a
spin-off, the Conversion Rate in effect immediately
before 5:00 p.m., New York City time, on the tenth Trading
Day immediately following, and including, the Ex-Date for the
spin-off will be increased based on the following formula:
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CR1
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=
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CR0
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x
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FMV +
MP0
MP0
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where,
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CR0
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=
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the Conversion Rate in effect immediately prior to the close of
business on the tenth Trading Day immediately following, and
including, the Ex-Date for the spin-off;
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CR1
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=
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the Conversion Rate in effect immediately after the close of
business on the tenth Trading Day immediately following, and
including, the Ex-Date for the spin-off;
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FMV
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=
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the average of the volume-weighted average sale prices of the
capital stock or similar equity interest distributed to holders
of our common stock applicable to one share of our common stock
over the 10 consecutive Trading-Day period immediately
following, and including, the Ex-Date for the spin-off; and
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MP0
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=
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the average of the Daily VWAP of our common stock over the 10
consecutive Trading-Day period immediately following, and
including, the Ex-Date for the spin-off.
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The adjustment to the Conversion Rate under the preceding
paragraph will occur at the close of business on the tenth
Trading Day immediately following, and including, the Ex-Date
for the spin-off; provided that, for purposes of determining the
Conversion Rate, in respect of any conversion during the 10
Trading Days following, and including, the effective date of any
spin-off, references within the portion of this third bullet
point related to spin-offs to 10 consecutive Trading
Days shall be deemed
S-58
Description of
Series I preferred stock
replaced with such lesser number of consecutive Trading Days as
have elapsed between the effective date of such spin-off and the
relevant conversion date.
If the dividend or distribution described in this third bullet
point is declared but not paid or made, the new Conversion Rate
shall be readjusted to be the Conversion Rate that would then be
in effect if such dividend or distribution had not been declared.
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If any cash dividend or distribution is made to all or
substantially all holders of our common stock (excluding any
dividend or distribution in connection with our liquidation,
dissolution or winding up) during any of our quarterly fiscal
periods in an aggregate amount that, together with other cash
dividends or distributions made during such quarterly fiscal
period, exceeds the product of $0.715, which we refer to as the
reference dividend, multiplied by the number of shares of our
common stock outstanding on the record date for such
distributions, the Conversion Rate will be increased based on
the following formula:
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where,
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CR0
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=
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the Conversion Rate in effect immediately prior to the open of
business on the Ex-Date for such dividend or distribution;
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CR1
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=
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|
the Conversion Rate in effect immediately after the open of
business on the Ex-Date for such dividend or distribution;
|
SP0
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=
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|
the average of the Daily VWAP of our common stock over the 10
consecutive Trading-Day period immediately preceding the Ex-Date
for such dividend or distribution; and
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C
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=
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|
the amount in cash per share of our common stock we distribute
to holders of our common stock that exceeds the reference
dividend.
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Such increase shall become effective immediately after the open
of business on the Ex-Date for such dividend or distribution. If
such dividend or distribution is not so paid, the Conversion
Rate shall be decreased to be the Conversion Rate that would
then be in effect if such dividend or distribution had not been
declared.
If the total per share amount of cash distributed by us as a
dividend or in any other distribution to holders of our common
stock that would require an adjustment pursuant to this fourth
bullet point is equal to or greater than
SP0
(as defined above), in lieu of the foregoing increase, each
holder of shares of Series I preferred stock shall receive
in respect of each share of Series I preferred stock owned
by it, at the same time as holders of our common stock receive
their dividend or other distribution, an amount of cash equal to
C multiplied by the number of shares of common stock equal to
the Conversion Rate in effect on the Ex-Date for such cash
dividend or distribution.
The reference dividend amount is subject to adjustment in a
manner inversely proportional to adjustments to the Conversion
Rate; provided that no adjustment will be made to the reference
dividend amount for any adjustment made to the Conversion Rate
under this fourth bullet point.
Notwithstanding the foregoing, if an adjustment is required to
be made under this fourth bullet point as a result of a
distribution that is not a regular quarterly dividend, the
reference dividend amount will be deemed to be zero.
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If we or any of our subsidiaries makes a payment in respect of a
tender offer or exchange offer for our common stock, if the cash
and value of any other consideration included in the payment per
share of our common stock exceeds the average of the Daily VWAP
of our common stock over the 10 consecutive
Trading-Day
period commencing on, and including, the Trading Day next
succeeding
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S-59
Description of
Series I preferred stock
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the last date on which tenders or exchanges may be made pursuant
to such tender or exchange offer, the Conversion Rate will be
increased based on the following formula:
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CR1
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=
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CR0
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|
x
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|
AC +
(SP1
x
OS1)
OS0
x
SP1
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CR0
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=
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the Conversion Rate in effect immediately prior to the close of
business on the last Trading Day of the 10 consecutive
Trading-Day period commencing on, and including, the Trading Day
next succeeding the date such tender or exchange offer expires;
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CR1
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=
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the Conversion Rate in effect immediately after the close of
business on the last Trading Day of the 10 consecutive
Trading-Day period commencing on, and including, the Trading Day
next succeeding the date such tender or exchange offer expires;
|
AC
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=
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|
the aggregate value of all cash and any other consideration (as
determined in good faith by our board of directors) paid or
payable for shares purchased in such tender or exchange offer;
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OS0
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=
|
|
the number of shares of our common stock outstanding immediately
prior to the date such tender or exchange offer expires;
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OS1
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=
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|
the number of shares of our common stock outstanding immediately
after the date such tender or exchange offer expires (after
giving effect to such tender offer or exchange offer and
excluding fractional shares); and
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SP1
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=
|
|
the average of the Daily VWAP of our common stock over the 10
consecutive Trading-Day period commencing on, and including, the
Trading Day next succeeding the date such tender or exchange
offer expires.
|
The increase to the Conversion Rate under the preceding
paragraph will occur at the close of business on the tenth
Trading Day immediately following, but excluding, the date such
tender or exchange offer expires; provided that, for purposes of
determining the Conversion Rate, in respect of any conversion
during the 10 Trading Days immediately following, but excluding,
the date that any such tender or exchange offer expires,
references within this fifth bullet point to 10 consecutive
Trading Days shall be deemed replaced with such lesser number of
consecutive Trading Days as have elapsed between the date such
tender or exchange offer expires and the relevant conversion
date.
Notwithstanding the foregoing, if (i) a Conversion Rate
adjustment pursuant to any of the foregoing becomes effective on
any Ex-Date as described above and (ii) a holder converting
its Series I preferred stock on or after such Ex-Date and
on or prior to the related record date would be treated as the
record holder of shares of our common stock as of the related
conversion date as described under Conversion
Procedures based on an adjusted Conversion Rate for such
Ex-Date, then, notwithstanding the foregoing Conversion Rate
adjustment provisions, the Conversion Rate adjustment relating
to such Ex-Date will not be made for any holder converting
Series I preferred stock on or after such Ex-Date and on or
prior to the related record date. Instead, such holder will be
treated as if such holder were the record owner of the shares of
our common stock on an un-adjusted basis and participate in the
related dividend, distribution or other event giving rise to
such adjustment.
The Ex-Date as used herein is the first date on
which our common stock trades on the applicable exchange or in
the applicable market, regular way, without the right to receive
the issuance, dividend or distribution in question from us or,
if applicable, from the seller of our common stock on such
exchange or market (in the form of due bills or otherwise) as
determined by such exchange or market.
We are not required to adjust the Conversion Rate for any of the
transactions described in the bullet points above (other than
for share splits or share combinations) if we make provision for
each holder of a share of Series I preferred stock to
participate in the transaction, at the same time as holders of
our common stock participate, without conversion, as if such
holder held a number of shares of our common stock in respect of
each share of Series I preferred stock equal to the
Conversion Rate in effect on the Ex-Date or
effective date.
S-60
Description of
Series I preferred stock
If we issue rights, options or warrants that are only
exercisable upon the occurrence of certain triggering events,
then the Conversion Rate will not be adjusted pursuant to the
second or third bullet point above, as applicable, until the
earliest of these triggering events occurs and the Conversion
Rate shall be readjusted to the extent any of these rights,
options or warrants are not exercised before they expire.
If we have in effect a shareholder rights plan while any of the
Series I preferred stock remains outstanding, holders of
the Series I preferred stock will receive, upon a
conversion of such shares, in addition to such common stock,
rights under our shareholder rights agreement unless, prior to
conversion, the rights have expired, terminated or been redeemed
or unless the rights have separated from shares of our common
stock. If the rights provided for in any rights plan that our
board of directors may adopt have separated from shares of our
common stock in accordance with the provisions of the applicable
shareholder rights agreement so that holders of the
Series I preferred stock would not be entitled to receive
any rights in respect of shares of our common shares that we
deliver upon conversion of the Series I preferred stock, we
will adjust the Conversion Rate at the time of separation as if
we had distributed to all holders of our common stock, evidences
of indebtedness or other assets or property pursuant to the
third bullet point above, subject to readjustment upon the
subsequent expiration, termination or redemption of the rights.
We will not adjust the Conversion Rate pursuant to the bullet
points above unless the adjustment would result in a change of
at least 1% in the then effective Conversion Rate. However, we
will carry forward any adjustment that is less than 1% of the
Conversion Rate and make such carryforward adjustment in any
subsequent adjustment and, regardless of whether the aggregate
adjustment is less than 1%, on the conversion date for any
Series I preferred stock. In addition, at the end of each
fiscal year, beginning with the fiscal year ending
December 31, 2011, we will give effect to any adjustments
that we have otherwise deferred pursuant to this provision, and
those adjustments will no longer be carried forward and taken
into account in any subsequent adjustment. Adjustments to the
Conversion Rate will be calculated to the nearest 1/10,000 of a
share.
To the extent permitted by law and the continued listing
requirements of NYSE (or any stock exchange on which our common
stock may then be listed), we may, from time to time, increase
the Conversion Rate by any amount for a period of at least 20
Business Days or any longer period permitted or required by law,
so long as the increase is irrevocable during that period and
our board of directors determines that the increase is in our
best interests. We will mail a notice of the increase to
registered holders at least 15 calendar days before the day the
increase commences. In addition, we may, but are not obligated
to, increase the Conversion Rate as we determine to be advisable
in order to avoid or diminish taxes to recipients of certain
distributions.
Upon each adjustment to the Conversion Rate, a corresponding
adjustment shall be made to the conversion price, calculated by
dividing the liquidation preference by the adjusted Conversion
Rate.
If certain of the possible adjustments to the Conversion Rate of
the Series I preferred stock are made (or if failures to
make certain adjustments occur), a holder of such shares may be
deemed to have received a taxable distribution from us even
though such holder has not received any cash or property as a
result of such adjustments. In the case of a
non-United
States holder, we may, at our option, withhold U.S. federal
income tax with respect to any such deemed distribution from
cash payments of dividends and any other payments in respect of
the Series I preferred stock. See Certain
U.S. Federal Income Tax Considerations in this
prospectus supplement.
S-61
Description of
Series I preferred stock
EVENTS THAT WILL
NOT RESULT IN ADJUSTMENT
The Conversion Rate will not be adjusted:
|
|
Ø
|
upon the issuance of any shares of our common stock pursuant to
any present or future plan providing for the reinvestment of
dividends or interest payable on our securities;
|
|
Ø
|
upon the issuance of any shares of our common stock, restricted
stock or restricted stock units, nonqualified stock options,
incentive stock options or any other options or rights
(including stock appreciation rights) to purchase shares of our
common stock pursuant to any present or future employee,
director or consultant benefit plan or program of, or assumed
by, us or any of our subsidiaries;
|
|
Ø
|
upon the issuance of any shares of our common stock pursuant to
any option, warrant, right or exercisable, exchangeable or
convertible security not described in the preceding bullet point
and outstanding as of the date the Series I preferred stock
was first issued;
|
|
Ø
|
for unpaid accrued and accumulated dividends, if any;
|
|
Ø
|
upon the repurchase of any shares of our common stock pursuant
to an open-market share repurchase program or other buy-back
transaction that is not a tender offer or exchange offer; or
|
|
Ø
|
for a change in the par value of shares of our common stock.
|
We shall not take any action that would require an adjustment to
the Conversion Rate such that the Conversion Price, as adjusted
to give effect to such action, would be less than the
then-applicable par value per share of our common stock, except
we may undertake a share split or similar event if such share
split results in a corresponding reduction in the par value per
share of our common stock such that the as-adjusted new
effective conversion price per share would not be below the new
as-adjusted par value per share of our common stock following
such share split or similar transaction and the Conversion Rate
is adjusted as provided under the first bullet point (and/or any
such other bullet point(s) as may be applicable) under
Conversion Rate Adjustment above. In addition,
the certificate of designation will provide that we may not take
any action that would result in an adjustment to the Conversion
Rate without complying with any applicable stockholder approval
rules of the NYSE or any other stock exchange on which our
common stock may be listed at the relevant time.
Except as described in this prospectus supplement and as
provided for in the certificate of designation, we will not
adjust the Conversion Rate for any issuance of shares of our
common stock or any securities convertible into or exchangeable
or exercisable for shares of our common stock or rights to
purchase shares of our common stock or such convertible,
exchangeable or exercisable securities.
RECAPITALIZATIONS,
RECLASSIFICATIONS AND CHANGES OF OUR COMMON STOCK
In the case of any recapitalization, reclassification or change
of our common stock (other than changes resulting from a
subdivision or combination), a consolidation, merger or
combination involving us, a sale, lease or other transfer to a
third party of all or substantially all of the assets of us (or
us and our subsidiaries on a consolidated basis), or any
statutory share exchange, in each case as a result of which our
common stock would be converted into, or exchanged for, stock,
other securities, other property or assets (including cash or
any combination thereof), then, at the effective time of the
transaction, the right to convert each share of Series I
preferred stock will be changed into a right to convert such
Series I preferred stock into the kind and amount of shares
of stock, other securities or other property or assets
(including cash or any combination thereof) (the reference
property) that a holder would have received in respect of
common stock issuable upon conversion of such shares immediately
prior to such transaction. If such transaction also constitutes
a fundamental change, a holder of shares of our Series I
preferred stock who converts its shares of our Series I
preferred stock in connection with such fundamental change will,
if applicable, also be entitled to receive additional shares of
our common
S-62
Description of
Series I preferred stock
stock in connection with such conversion as described below
under Special Rights Upon a Fundamental
Change, in which case the converting holder would also
receive reference property in lieu of such additional shares of
common stock. In the event that our common stockholders have the
opportunity to elect the form of consideration to be received in
such transaction, we will make adequate provision whereby the
holders of shares of our Series I preferred stock shall
have a reasonable opportunity to determine the form of
consideration into which all of the shares of our Series I
preferred stock, treated as a single class, shall be convertible
from and after the effective date of such transaction. Such
determination shall be based on the weighted average of
elections made by the holders of shares of our Series I
preferred stock who participate in such determination, shall be
subject to any limitations to which all of our common
stockholders are subject, such as pro rata reductions applicable
to any portion of the consideration payable in such transaction,
and shall be conducted in such a manner as to be completed by
the date which is the earliest of (1) the deadline for
elections to be made by our common stockholders and (2) two
Business Days prior to the anticipated effective date of the
transaction. The certificate of designation will provide that we
may not become a party to any such transaction unless its terms
are consistent with the foregoing.
A change in the conversion right described in this
Recapitalizations, Reclassifications and Changes of our
Common Stock could substantially lessen or eliminate the
value of the conversion right. For example, if a third party
acquires us in a cash merger, each share of Series I
preferred stock would be convertible solely into cash and would
no longer be potentially convertible into securities whose value
could increase depending on our future financial performance,
prospects and other factors. There is no precise, established
definition of the phrase all or substantially all
under applicable law. Accordingly, there may be uncertainty as
to whether the provisions above would apply to a sale, transfer,
lease, conveyance or other disposition of less than all of the
consolidated property or assets of us or us and our subsidiaries.
NO FRACTIONAL
SHARES
No fractional shares of common stock or securities representing
fractional shares of common stock will be issued upon conversion
of the Series I preferred stock, whether voluntary or
mandatory. Instead, we may elect to either make a cash payment
to each holder that would otherwise be entitled to a fractional
share or, in lieu of such cash payment, the number of shares of
common stock to be issued to any particular holder upon
conversion will be rounded up to the nearest whole share.
SPECIAL RIGHTS
UPON A FUNDAMENTAL CHANGE
We must give notice of each fundamental change (as defined
below) to all record holders of the Series I preferred
stock, by the later of 20 Business Days prior to the anticipated
effective date of the fundamental change (the fundamental
change effective date) and the first public disclosure by
us of the anticipated fundamental change. In addition, we must
give notice announcing the effective date of such fundamental
change and certain other matters as set forth under
Determination of Make-Whole Premium. If a
holder converts its Series I preferred stock at any time
beginning at the opening of business on the Trading Day
immediately following the effective date of such fundamental
change and ending at the close of business on the
30th Trading Day immediately following such effective date,
such conversion will be deemed to be in connection with the
fundamental change and the holder will automatically receive for
each share of Series I preferred stock converted, the
greater of:
|
|
Ø |
(i) a number of shares of our common stock, as described
under Conversion Rights and subject to
adjustment as described under Conversion Rate
Adjustment (with such adjustment or cash payment for
fractional shares as we may elect, as described under
No Fractional Shares) plus (ii) the
make-whole premium, if any, described under
Determination of the Make-Whole Premium; and
|
S-63
Description of
Series I preferred stock
|
|
Ø |
a number of shares of our common stock equal to the lesser of
(i) the liquidation preference divided by the Market Value
of the Common Stock on the fundamental change effective date and
(ii) (subject to adjustment).
|
In addition to the number of shares of common stock issuable
upon conversion of each share of Series I preferred stock
at the option of the holder on any conversion date during the
fundamental change conversion period, each converting holder
will have the right to receive an amount equal to all unpaid
accrued and accumulated dividends on such converted shares of
Series I preferred stock, whether or not declared prior to
that date, for all prior dividend periods ending on or prior to
the Dividend Payment date immediately preceding (or, if
applicable, ending on) the conversion date (other than
previously declared dividends on our Series I preferred
stock payable to holders of record as of a prior date), provided
that we are then legally permitted to pay such dividends. The
amount payable in respect of such dividends will be paid in cash.
The foregoing provisions shall only be applicable with respect
to conversions effected at any time beginning at the opening of
business on the Trading Day immediately following the
fundamental change effective date and ending at the close of
business on the 30th Trading Day immediately following such
fundamental change effective date.
In lieu of issuing the number of shares of common stock issuable
upon conversion pursuant to the foregoing provisions, we may, at
our option, make a cash payment equal to the Market Value
determined for the period ending on the fundamental change
effective date for each such share of common stock otherwise
issuable upon conversion. Our notice of fundamental change will
indicate if we will issue common stock or pay cash upon
conversion and whether accumulated and unpaid dividends will be
paid in cash.
A fundamental change will be deemed to have occurred
upon the occurrence of any of the following:
(1) any person is or becomes the
beneficial owner, directly or indirectly, through a
purchase, merger or other transaction, of 50% or more of the
total voting power of all classes of our voting stock;
(2) we consolidate with, or merge with or into, another
person or any person consolidates with
or merges with or into us, or we convey, transfer, lease or
otherwise dispose of all or substantially all of our assets or
all or substantially all of the assets of us and our
subsidiaries on a consolidated basis to any person
(whether in one transaction or a series of related
transactions), other than:
(a) any transaction pursuant to which the holders of our
voting stock immediately prior to the transaction collectively
have the entitlement to exercise, directly or indirectly, 50% or
more of the total voting power of all classes of voting stock of
the continuing or surviving person immediately after the
transaction; or
(b) any merger solely for the purpose of changing our
jurisdiction of incorporation and resulting in a
reclassification, conversion or exchange of outstanding shares
of common stock solely into shares of common stock of the
surviving entity;
(3) the first day on which a majority of the members of our
board of directors does not consist of Continuing
Directors;
(4) we approve a plan of liquidation or dissolution; or
(5) our common stock ceases to be listed on a national
securities exchange.
Continuing Directors means (i) individuals who
on the date of original issuance of the Series I preferred
stock constituted our board of directors or (ii) any new
directors whose election to our board of directors or whose
nomination for election by our stockholders was approved by at
least a majority of our directors then still in office (or a
duly constituted committee thereof) who were either directors
S-64
Description of
Series I preferred stock
on the date of original issuance of the Series I preferred
stock or whose election or nomination for election was
previously so approved.
The term beneficially own as used herein means
beneficial ownership as determined in accordance with
Rule 13d-3
promulgated by the SEC under the Securities Exchange Act of
1934, as amended (the Exchange Act), except that a
person will be deemed to own any securities that such person has
a right to acquire, whether such right is exercisable
immediately or only after the passage of time. The term
person includes any syndicate or group that would be
deemed to be a person under Section 13(d)(3) of
the Exchange Act and the rules of the SEC thereunder.
Voting stock with respect to any person means the
capital stock of such person that is at the time entitled,
without regard to the occurrence of any contingency, to vote in
the election of the board of directors (or comparable governing
body of such person).
Notwithstanding the foregoing, a fundamental change will be
deemed not to have occurred in the case of a merger or
consolidation if (i) at least 90% of the consideration for
our common stock (excluding cash payments for fractional shares
and cash payments pursuant to dissenters appraisal rights)
in the merger or consolidation consists of common stock of a
corporation or other entity organized and existing under the
laws of the United States or any state thereof and traded on a
national securities exchange (or which will be so traded when
issued or exchanged in connection with such transaction)
(publicly traded common stock) and (ii) as a
result of such transaction or transactions the shares of
Series I preferred stock become convertible into such
publicly traded common stock.
There is no precise, established definition of the phrase
all or substantially all under applicable law.
Accordingly, there may uncertainty as to whether the provisions
above would apply to a sale, transfer, lease, conveyance or
other disposition of less than all of the consolidated assets of
us or of us and our subsidiaries.
This fundamental change conversion feature may make more
difficult or discourage a takeover of us and the removal of
incumbent management. We are not, however, aware of any specific
effort to accumulate shares of our common stock or to obtain
control of us by means of a merger, tender offer, solicitation
or otherwise. In addition, the fundamental change conversion
feature is not part of a plan by management to adopt a series of
anti-takeover provisions. Instead, the fundamental change
conversion feature is a result of negotiations between us and
the underwriters.
Our obligation to issue shares in excess of the Conversion Rate
in connection with a fundamental change as described above could
be considered a penalty, in which case its enforceability would
be subject to general principles of reasonableness of economic
remedies.
DETERMINATION OF
THE MAKE-WHOLE PREMIUM
If you elect to convert your shares of Series I preferred
stock upon the occurrence of a fundamental change, in certain
circumstances, we will increase the Conversion Rate (the
make-whole premium) by reference to the table below.
Holders may surrender their shares of Series I preferred
stock for conversion at the increased Conversion Rate only with
respect to shares surrendered for conversion from and after the
opening of business on the Trading Day immediately following the
fundamental change effective date until the close of business on
the 30th Trading Day following such fundamental change
effective date.
The increase in the Conversion Rate will be determined by
reference to the table below, based on the fundamental change
effective date and the stock price (as defined below). If
holders of our common stock receive only cash in the transaction
constituting a fundamental change, the stock price shall be the
cash amount paid per share. Otherwise, the stock price shall be
the average of the Closing Sale Prices of
S-65
Description of
Series I preferred stock
our common stock on the five Trading Days prior to but not
including the effective date of the transaction constituting a
fundamental change.
The following table sets forth the stock price paid, or deemed
paid, per share of our common stock in a transaction that
constitutes the fundamental change, the fundamental change
effective date and the make-whole premium (expressed as the
number of additional shares of common stock that will be added
to the Conversion Rate) to be paid upon a conversion in
connection with a fundamental change:
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Fundamental
Change
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Stock
price(1)
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Effective
date
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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$
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,
2011
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2012
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2013
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2014
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2015
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2016
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2017
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,
2018 and thereafter
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The stock prices set forth in the table will be adjusted as of
any date on which the Conversion Rate of the Series I
preferred stock is adjusted by multiplying the applicable price
in effect immediately before the adjustment by a fraction:
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Ø
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whose numerator is the Conversion Rate immediately before the
adjustment; and
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Ø
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whose denominator is the adjusted Conversion Rate.
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In addition, we will adjust the number of additional shares in
the table at the same time, in the same manner in which, and for
the same events for which, we must adjust the Conversion Rate as
described under Conversion Rate Adjustment.
The exact stock price and fundamental change effective date may
not be set forth on the table, in which case:
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Ø
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if the stock price is between two stock prices on the table or
the fundamental change effective date is between two fundamental
change effective dates on the table, the make-whole premium will
be determined by straight-line interpolation between make-whole
premium amounts set forth for the higher and lower stock prices
and the two effective dates, as applicable, based on a
365-day year;
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Ø
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if the stock price is in excess of
$ per share (subject to adjustment
in the same manner as the stock price) no make-whole premium
will be paid; and
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if the stock price is less than or equal to
$ per share (subject to adjustment
in the same manner as the stock price), no make-whole premium
will be paid.
|
However, we will not increase the Conversion Rate as described
above to the extent the increase will cause the Conversion Rate
to
exceed .
We will adjust this maximum Conversion Rate in the same manner
in which, and for the same events for which, we must adjust the
Conversion Rate as described under Conversion Rate
Adjustment.
Our obligation to pay the make-whole premium could be considered
a penalty, in which case the enforceability thereof would be
subject to general equitable principles of reasonableness of
economic remedies.
S-66
Description of
Series I preferred stock
No later than the third Business Day after the occurrence of a
fundamental change, we will provide to the holders of our
Series I preferred stock and the transfer agent of the
Series I preferred stock a notice of the occurrence of the
fundamental change. Such notice will state:
Arrow Pointing Right the events constituting the fundamental
change;
Arrow Pointing Right the date of the fundamental change;
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Ø
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the last date on which the holder of our Series I preferred
stock may convert shares of Series I preferred stock in
connection with such fundamental change;
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Ø
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the Conversion Rate and, if applicable, the Make-Whole Premium
and/or other consideration issuable upon conversions of shares
of Series I preferred stock in connection with such
fundamental change;
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Ø
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whether we will issue common stock or cash upon conversion of
shares of Series I preferred stock in connection with the
fundamental change and whether any of the consideration issuable
upon a conversion of shares of Series I preferred stock in
connection with such fundamental change will consist of
reference property (and, in such case, specifying such reference
property);
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Ø
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the name and address of the paying agent and the conversion
agent; and
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Ø
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the procedures that the holder of Series I preferred stock
must follow to exercise the fundamental change conversion right.
|
We will also issue a press release for publication on the Dow
Jones News Service or Bloomberg Business News (or if either such
service is not available, another broadly disseminated news or
press release service selected by us), or post notice on our
website containing the information specified above, in any event
prior to the opening of business on the first trading day
following any date on which we provide such notice to the
holders of our Series I preferred stock.
BOOK-ENTRY,
DELIVERY AND FORM
We will initially issue the Series I preferred stock in the
form of one or more global securities. The global securities
will be deposited with, or on behalf of, the Depository and
registered in the name of the Depositary or its nominee. Except
as set forth below, the global securities may be transferred, in
whole and not in part, only to the Depositary or another nominee
of the Depositary. Investors may hold their beneficial interests
in the global securities directly through the Depositary if they
have an account with the Depositary or indirectly through
organizations which have accounts with the Depositary.
Shares of Series I preferred stock that are issued as
described below under Certificated Series I
preferred stock will be issued in definitive form. Upon
the transfer of Series I preferred stock in definitive
form, such Series I preferred stock will, unless the global
securities have previously been exchanged for Series I
preferred stock in definitive form, be exchanged for an interest
in global securities representing the liquidation preference of
Series I preferred stock being transferred.
The Depositary has advised us as follows: The Depositary is a
limited-purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a
clearing corporation within the meaning of the New
York Uniform Commercial Code, and a clearing agency
registered pursuant to the provisions of Section 17A of the
Exchange Act. The Depositary was created to hold securities of
institutions that have accounts with the Depositary
(direct participants) and to facilitate the
clearance and settlement of securities transactions among its
participants in such securities through electronic book-entry
changes in accounts of the participants, thereby eliminating the
need for physical movement of securities certificates. The
Depositarys participants include securities brokers and
dealers (which may include the underwriters), banks, trust
companies, clearing corporations and certain other
organizations. Access to the Depositarys book-entry system
is also available to others such as
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Description of
Series I preferred stock
banks, brokers, dealers and trust companies (indirect
participants) that clear through or maintain a custodial
relationship with a participant, whether directly or indirectly.
We expect that pursuant to procedures established by the
Depositary, upon the deposit of the global securities with, or
on behalf of, the Depositary, the Depositary will credit, on its
book-entry registration and transfer system, the liquidation
preference of the Series I preferred stock represented by
such global securities to the accounts of participants. The
accounts to be credited shall be designated by the underwriters
of such Series I preferred stock. Ownership of beneficial
interests in the global securities will be limited to
participants or persons that may hold interests through
participants. Ownership of beneficial interests in the global
securities will be shown on, and the transfer of those ownership
interests will be effected only through, records maintained by
the Depositary (with respect to participants interests)
and such participants and indirect participants (with respect to
the owners of beneficial interests in the global securities
other than participants). The laws of some jurisdictions may
require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and
laws may impair the ability to transfer or pledge beneficial
interests in the global securities.
To facilitate subsequent transfers, all Series I preferred
stock deposited by direct participants with the Depositary are
registered in the name of its nominee. The deposit of
Series I preferred stock with the Depositary and its
registration in the name of the Depositarys nominee do not
effect any change in beneficial ownership. The Depositary has no
knowledge of the actual beneficial owners of the Series I
preferred stock; the Depositarys records reflect only the
identity of the direct participants to whose accounts such
Series I preferred stock is credited, which may or may not
be the beneficial owners. The direct and indirect participants
will remain responsible for keeping account of their holdings on
behalf of their customers.
Purchases of Series I preferred stock under the Depositary
system must be made by or through direct participants, which
will receive a credit for the shares on the Depositarys
records. The ownership interest of each actual purchaser of each
share is in turn to be recorded on the direct and indirect
Participants records. Beneficial owners will not receive
written confirmation from the Depositary of their purchase.
Beneficial owners are, however, expected to receive written
confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the direct or
indirect participant through which the beneficial owner entered
into the transaction. Transfers of ownership interests in the
Series I preferred stock are to be accomplished by entries
made on the books of direct and indirect participants acting on
behalf of beneficial owners.
So long as the Depositary, or its nominee, is the registered
holder and owner of the global securities, the Depositary or
such nominee, as the case may be, will be considered the sole
legal owner and holder of the Series I preferred stock
evidenced by the global certificates for all purposes of such
Series I preferred stock and the certificate of
designation. Except as set forth below, as an owner of a
beneficial interest in the global certificates, you will not be
entitled to have the Series I preferred stock represented
by the global securities registered in your name, will not
receive or be entitled to receive physical delivery of
certificated Series I preferred stock in definitive form
and will not be considered to be the owner or holder of any
Series I preferred stock under the global securities. We
understand that under existing industry practice, in the event
an owner of a beneficial interest in the global securities
desires to take any action that the Depositary, as the holder of
the global securities, is entitled to take, the Depositary will
authorize the participants to take such action, and that the
participants will authorize beneficial owners owning through
such participants to take such action or would otherwise act
upon the instructions of beneficial owners owning through them.
All payments on Series I preferred stock represented by the
global securities registered in the name of and held by the
Depositary or its nominee will be made to the Depositary or its
nominee, as the case may be, as the registered owner and holder
of the global securities.
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Description of
Series I preferred stock
We expect that the Depositary or its nominee, upon receipt of
any payment on the global securities, will credit
participants accounts with payments in amounts
proportionate to their respective beneficial interests in the
liquidation preference of the global securities as shown on the
records of the Depositary or its nominee. We also expect that
payments by participants or indirect participants to owners of
beneficial interest in the global securities held through such
participants or indirect participants will be governed by
standing instructions and customary practices and will be the
responsibility of such participants or indirect participants. We
will not have any responsibility or liability for any aspect of
the records relating to, or payments made on account of,
beneficial ownership interests in the global securities for any
Series I preferred stock or for maintaining, supervising or
reviewing any records relating to such beneficial ownership
interests or for any other aspect of the relationship between
the Depositary and its participants or indirect participants, or
the relationship between such participants or indirect
participants and the owners of beneficial interests in the
global securities owning through such participants or indirect
participants.
Although the Depositary has agreed to the foregoing procedures
in order to facilitate transfers of interests in the global
securities among participants or indirect participants of the
Depositary, it is under no obligation to perform or continue to
perform such procedures, and such procedures may be discontinued
at any time. Neither we nor the transfer agent will have any
responsibility or liability for the performance by the
Depositary or its participants or indirect participants of their
respective obligations under the rules and procedures governing
their operations.
The information in this section concerning the Depositary and
its book-entry system has been obtained from sources that we
believe to reliable, but we take no responsibility for its
accuracy.
CERTIFICATED
SERIES I PREFERRED STOCK
Subject to certain conditions, the Series I preferred stock
represented by the global securities is exchangeable for
certificated Series I preferred stock in definitive form of
like tenor as such Series I preferred stock if (1) the
Depositary notifies us that it is unwilling or unable to
continue as Depositary for the global securities or if at any
time the Depositary ceases to be a clearing agency registered
under the Exchange Act and, in either case, a successor is not
appointed within 90 days or (2) we, in our discretion,
at any time determine not to have all of the Series I
preferred stock represented by the global securities. Any
Series I preferred stock that is exchangeable pursuant to
the preceding sentence is exchangeable for certificated
Series I preferred stock issuable for such number of shares
and registered in such names as the Depositary shall direct.
Subject to the foregoing, the global securities are not
exchangeable, except for global securities representing the same
aggregate number of shares and registered in the name of the
Depositary or its nominee.
S-69
On February 28, 2011, the Company obtained a commitment
from UBS Loan Finance LLC, UBS Securities LLC, as joint lead
arranger, Bank of America, N.A., as co-syndication agent,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as
joint lead arranger, Barclays Bank PLC, as co-syndication agent,
Barclays Capital Inc., as joint lead arranger, Deutsche Bank AG
Cayman Islands Branch, Deutsche Bank Securities Inc., as joint
lead arranger and co-documentation agent, JPMorgan Chase Bank,
N.A., as co-syndication agent, J.P. Morgan Securities LLC,
as joint lead arranger, Wells Fargo Bank, N.A., as
co-documentation agent, Wells Fargo Securities, LLC, as joint
lead arranger, KeyBank National Association, as senior managing
agent, and KeyBanc Capital Markets Inc. to provide a bridge loan
facility to the Company in an aggregate amount of up to
$2.4 billion subject to the terms and conditions set forth
therein. The $2.4 billion bridge loan facility is undrawn
as of the date of this prospectus supplement, and the
commitments thereunder are available until May 31, 2011.
Proceeds from the borrowings under the $2.4 billion bridge
loan facility, if made, will be used to fund all or part of the
consideration for the Acquisition and to pay related fees and
expenses. However, we currently anticipate using the proceeds of
this offering, the Common Stock Offering, cash on hand and any
amounts raised in future capital raising activities or
refinancings in lieu of some of or all borrowings available
under the $2.4 billion bridge loan facility.
Availability under the $2.4 billion bridge loan facility is
subject to the satisfaction of certain conditions precedent
including, but not limited to, (i) the absence of any
continuing default or event of default, (ii) the accuracy
of all representations and warranties customary for transactions
of this type, (iii) receipt of a customary borrowing
notice, and (iv) there being no legal bar to the lenders
making the loan or the issuance. Loans outstanding under the
bridge loan facility will bear interest at a rate per annum
equal to LIBOR plus a margin ranging from 2.0% to 4.0%.
The Companys obligations under the $2.4 billion
bridge loan facility are senior unsecured obligations, ranking
pari passu with other unsecured, unsubordinated general
obligations of the Company.
S-70
GENERAL
The following is a general summary of the material
U.S. federal income tax considerations of the acquisition,
ownership and disposition of our Series I preferred stock
and common stock received upon conversion of our Series I
preferred stock. This summary is only a supplement to, and
should be read in conjunction with, the discussion in our Annual
Report on
Form 10-K
for the year ended December 31, 2010 under the heading
Item 1 Business
Taxation Federal Income Tax Considerations.
The following summary is for general information only and is not
tax advice. This summary deals only with beneficial owners of
our Series I preferred stock or common stock that will hold
the stock as capital assets within the meaning of
Section 1221 of the Internal Revenue Code
(Code) and does not deal with foreign stockholders
(as defined below) that own (actually, beneficially or
constructively) more than 5% of our Series I preferred
stock or 5% of our common stock. This summary assumes that our
Series I preferred stock and our common stock are
regularly traded on an established securities
market. This summary does not address all aspects of taxation
that may be relevant to certain types of holders (including, but
not limited to, insurance companies, tax-exempt entities,
holders subject to the alternative minimum tax, certain
U.S. expatriates, financial institutions or broker-dealers,
persons holding shares of stock as part of a hedging, integrated
conversion, or constructive sale transaction or a straddle,
traders in securities that use a
mark-to-market
method of accounting for their securities,
U.S. stockholders (as defined below) that have a
functional currency other than the U.S. dollar,
partnerships or other pass-through entities for
U.S. federal income tax purposes and individuals who are
not citizens or residents of the United States).
As used in this summary, the term
U.S. stockholder means a beneficial owner of
the Series I preferred stock or common stock received upon
conversion of our Series I preferred stock that is, for
U.S. federal income tax purposes:
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an individual citizen or resident of the United States;
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a corporation, or other entity treated as a corporation, that is
organized in or under the laws of the United States, any state
or the District of Columbia;
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an estate the income of which is subject to U.S. federal
income tax regardless of its source; or
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a trust, if a court within the United States is able to exercise
primary supervision over the trusts administration and one
or more U.S. persons (as defined in
section 7701(a)(30) of the Code) have the authority to
control all substantial decisions of the trust or if it has in
effect a valid election to be treated as a
U.S. person.
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If a partnership, including any entity or arrangement treated as
a partnership for U.S. federal income tax purposes, is a
holder of our Series I preferred stock or the common stock
received upon conversion of our Series I preferred stock,
then the tax treatment of a partner in such partnership will
generally depend upon the status of the partner and the
activities of the partnership. Such partners and partnerships
should consult their tax advisors regarding the
U.S. federal income tax consequences of acquiring, owning
and disposing of our Series I preferred stock or the common
stock received upon conversion of our Series I preferred
stock.
The term foreign stockholder means any beneficial
owner of our Series I preferred stock or the common stock
received upon conversion of our Series I preferred stock
that is neither a U.S. stockholder nor an entity or
arrangement treated as a partnership for U.S. federal
income tax purposes.
S-71
Certain U.S.
Federal Income Tax Considerations
This summary does not discuss all of the aspects of
U.S. federal income taxation that may be relevant to you in
light of your particular investment or other circumstances. In
addition, this summary does not discuss any state, local or
foreign income taxation or other tax consequences. This summary
is based on current U.S. federal income tax law. Subsequent
developments in U.S. federal income tax law, including
changes in law or differing interpretations, which may be
applied retroactively, could have a material effect on the
U.S. federal income tax consequences of purchasing, owning
and disposing of our Series I preferred stock and common
stock received upon conversion of our Series I preferred
stock as set forth in this summary. Before you purchase our
Series I preferred stock, you should consult your own tax
advisor regarding the particular U.S. federal, state, local
and foreign income and other tax consequences of acquiring,
owning and disposing of our Series I preferred stock and
common stock received upon conversion of our Series I
preferred stock.
TAXATION OF THE
COMPANY AS A REIT
We have elected to be treated as a real estate investment
trust or REIT under Sections 856 through
860 of the Code for U.S. federal income tax purposes
commencing with our taxable year ended December 31, 1970.
We believe that we have been organized and have operated in a
manner that qualifies for taxation as a REIT under the Code. We
also believe that we will continue to operate in a manner that
will preserve our status as a REIT. We cannot, however, assure
you of such conclusions.
We have received an opinion from Arnold & Porter LLP,
our special REIT tax counsel, to the effect that we qualified as
a REIT under the Code commencing with our taxable year ended
December 31, 2003, that we have been organized and have
operated in conformity with the requirements for qualification
and taxation as a REIT under the Code and that our proposed
manner of operation will enable us to continue to satisfy the
requirements for qualification as a REIT under the Code for the
calendar year 2011, and thereafter, based upon the
representations made by us in a factual representation letter.
However, you should be aware that opinions of counsel are not
binding on the IRS or on the courts, and, if the IRS were to
challenge these conclusions, no assurance can be given that
these conclusions would be sustained in court. The opinion of
Arnold & Porter LLP is based on various assumptions,
as well as on certain representations made by us as to factual
matters. The rules governing REITs are highly technical and
require ongoing compliance with a variety of tests that depend,
among other things, on future operating results, asset
diversification, distribution levels and diversity of share
ownership.
Arnold & Porter LLP will not monitor our compliance
with these requirements. While we expect to satisfy these tests,
and will use our best efforts to do so, no assurance can be
given that we will qualify as a REIT for any particular year, or
that the applicable law will not change and adversely affect us
and our stockholders.
For a more detailed discussion of the U.S. federal income
taxation of holders of our stock and the U.S. federal
income taxation of REITs, which includes a variety of complex
requirements relating to share ownership, income, assets and
distributions, please see our Annual Report on
Form 10-K
for the year ended December 31, 2010 under the heading
Item 1 Business
Taxation Federal Income Tax Considerations.
U.S. FEDERAL
INCOME TAXATION OF HOLDERS OF OUR SERIES I PREFERRED STOCK
OR COMMON STOCK
Treatment of U.S.
Stockholders
Distributions
with respect to Our Series I Preferred Stock or Common
Stock
As long as we qualify for taxation as a REIT, distributions on
shares of our Series I preferred stock (or common stock
received upon conversion of our Series I preferred stock)
made out of our current or accumulated earnings and profits
allocable to these distributions (and not designated as capital
gain
S-72
Certain U.S.
Federal Income Tax Considerations
dividends) will be includable by you as ordinary income for
U.S. federal income tax purposes. None of these
distributions will be eligible for the dividends received
deduction for corporate U.S. stockholders. Distributions,
if any, in excess of our earnings and profits will first reduce
the adjusted tax basis of a U.S. stockholders shares
on a
dollar-for-dollar
basis and, after that basis has been reduced to zero, will
constitute capital gain. Distributions that are designated as
capital gain dividends generally will be taxable to you as
long-term capital gains (to the extent they do not exceed our
actual net capital gain for the taxable year), without regard to
the period for which you held our stock. For a further
discussion of the U.S. federal income tax treatment of
distributions with respect to shares of our Series I
preferred stock or common stock see
Item 1 Business
Taxation Federal Income Tax
Considerations Federal Income Taxation of Holders of
Our Stock Treatment of Taxable
U.S. Stockholders included in our Annual Report on
Form 10-K
for the year ended December 31, 2010.
Taxable
Dispositions of Our Series I Preferred Stock or Common
Stock
If you sell or dispose of shares of our Series I preferred
stock other than by conversion (or common stock received upon
conversion of our Series I preferred stock), except as set
forth below under Repurchase of Our Series I
Preferred Stock, you will generally recognize gain or loss
for U.S. federal income tax purposes in an amount equal to
the difference between the amount of cash and the fair market
value of any property received on the sale or other disposition
and your adjusted basis in the shares for U.S. federal
income tax purposes. This gain will be treated as capital gain
if you held these shares of our stock as a capital asset and
generally will be treated as long-term capital gain or loss if
your holding period in the shares exceeds one year at the time
of the disposition. Long-term capital gains of non-corporate
taxpayers are subject to reduced rates of taxation. The
deductibility of capital losses is subject to limitations. Any
loss upon a sale or exchange of shares of our Series I
Preferred Stock or common stock which were held for six months
or less (after application of certain holding period rules) will
generally be treated as a long-term capital loss to the extent
of previously received capital gain distributions with respect
to those shares of our stock. For a further discussion of the
treatment of taxable U.S. stockholders see
Item 1 Business
Taxation Federal Income Tax
Considerations Federal Income Taxation of Holders of
Our Stock Treatment of Taxable
U.S. Stockholders included in our Annual Report on
Form 10-K
for the year ended December 31, 2010.
Repurchase of Our
Series I Preferred Stock
If we repurchase any of your shares, the U.S. federal
income tax treatment can only be determined on the basis of
particular facts at the time of the repurchase. A repurchase of
Series I preferred stock will generally be treated as a
distribution taxable as a dividend (to the extent of our current
or accumulated earnings and profits) unless the repurchase
satisfies one of the tests set forth in the Code and is
therefore treated as a sale or exchange of the repurchased
shares. A repurchase characterized as a dividend distribution
would not be eligible for the dividends received deduction for
corporate shareholders. A repurchase will be treated as a sale
or exchange if it (i) is a substantially
disproportionate redemption, (ii) results in a
complete termination of your interest in all classes
of our equity securities, or (iii) is not essentially
equivalent to a dividend with respect to you. In applying
these tests, you must take into account your ownership of all
classes of our equity securities (e.g., common stock and
preferred stock). You also must take into account any equity
securities that are considered to be constructively owned by
you. If you rely on any of these tests at the time of
repurchase, you should consult your tax advisor to determine
their application to the particular situation.
If a repurchase of Series I preferred stock is treated as a
sale or exchange to you, you will recognize gain or loss for
U.S. federal income tax purposes in an amount equal to the
difference between (i) the amount of cash and the fair
market value of any property received (less any portion thereof
attributable
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Certain U.S.
Federal Income Tax Considerations
to accumulated and declared but unpaid dividends, which will be
taxable as a dividend to the extent of our current and
accumulated earnings and profits), and (ii) your adjusted
basis in the Series I preferred stock for U.S. federal
income tax purposes. See the discussion above under the heading
Taxable Dispositions of Our Series I Preferred Stock
or Common Stock.
In addition, under certain circumstances, we may repurchase the
Series I preferred stock for an amount greater than its
issue price. We intend to take the position that the
Series I preferred stock is not issued with a redemption
premium as a result of such rights, and that any payments of
such additional amounts should be taxable to a holder of
Series I preferred stock as described above. This position
is based in part on the assumptions that any such premium is
solely in the nature of a penalty for premature redemption and,
as of the issue date of the Series I preferred stock, the
possibility that we will repurchase shares of Series I
preferred stock is not more likely than not to occur
within the meaning of applicable U.S. Treasury regulations.
However, the IRS may take a position contrary to that described
above, which could affect the timing and character of your
income on the Series I preferred stock.
For a further discussion of the treatment of taxable
U.S. stockholders in connection with a repurchase of the
Series I preferred stock see Item 1
Business Taxation Federal Income Tax
Considerations Federal Income Taxation of Holders of
Our Stock Treatment of Taxable
U.S. Stockholders included in our Annual Report on
Form 10-K
for the year ended December 31, 2010.
Conversion of Our
Series I Preferred Stock
Except as provided below, upon the conversion of your shares of
our Series I preferred stock into common stock, you
generally will not recognize gain or loss upon the conversion.
Your basis in the common stock received upon conversion
generally will be the same as your basis in the converted
Series I preferred stock (but will be reduced by the
portion of adjusted tax basis allocated to any fractional share
of common stock exchanged for cash). Although not entirely free
from doubt, we intend to take the position that any cash payment
you make to us in connection with a conversion of shares of
Series I preferred stock should be added to your basis in
our common shares you receive upon conversion. You should
consult your tax advisor regarding the treatment of any such
payment for U.S. federal income tax purposes. Your holding
period in the shares of common stock received upon conversion
will include the period during which you held the converted
Series I preferred stock.
Cash received upon conversion in lieu of a fractional common
share generally will be treated as a payment in a taxable
exchange for such fractional common share, and gain or loss will
be recognized on the receipt of cash in an amount equal to the
difference between the amount of cash received and the adjusted
tax basis allocable to the fractional common share deemed
exchanged. This gain or loss will generally be treated as
capital gain or loss and will be treated as long-term capital
gain or loss if your holding period in the shares exceeds one
year at the time of the disposition. Long-term capital gains of
non-corporate taxpayers are subject to reduced rates of
taxation. The deductibility of capital losses is subject to
limitations.
Adjustments to
the Conversion Rate of Our Series I Preferred
Stock
The conversion rate of our Series I preferred stock is
subject to adjustment under certain specified circumstances. In
certain circumstances, you may be deemed to have received a
distribution of our stock if and to the extent that the
conversion rate is adjusted, resulting in dividend income to the
extent of our current and accumulated earnings and profits. In
addition, the failure to provide for such an adjustment may also
result in a deemed distribution. Adjustments to the conversion
rate made pursuant to a bona fide reasonable adjustment formula
which has the effect of preventing the dilution of the interests
of the holders of the Series I preferred stock generally
will not be deemed to result in a constructive distribution.
However, certain of the possible adjustments may not qualify as
being made
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Certain U.S.
Federal Income Tax Considerations
pursuant to a bona fide reasonable adjustment formula. If such
non-qualifying adjustments are made, you, as a holder of
Series I preferred stock, will be deemed to have received
constructive distributions from us, even though you have not
received any cash or property as a result of such adjustments.
The U.S. federal income tax consequences of the receipt of
distributions from us with respect to our Series I
preferred stock are described above under the heading
Distributions with respect to Our Series I Preferred
Stock or Common Stock.
Additional Tax on
Net Investment Income
For taxable years beginning after December 31, 2012, if you
are not a corporation, you will generally be subject to a 3.8%
tax (the Medicare tax) on the lesser of
(1) your net investment income for the taxable
year and (2) the excess of your modified adjusted gross
income for the taxable year over a certain threshold. Your net
investment income will generally include any income or gain
recognized by you with respect to our Series I preferred
stock or common stock, unless such income or gain is derived in
the ordinary course of the conduct of your trade or business
(other than a trade or business that consists of certain passive
or trading activities).
Treatment of
Tax-Exempt U.S. Stockholders
Tax-exempt entities, including qualified employee pension and
profit sharing trusts and individual retirement accounts
(Exempt Organizations), generally are exempt
from U.S. federal income taxation. For a discussion of
certain U.S. federal income tax considerations with respect
to Exempt Organizations see Item 1
Business Taxation Federal Income Tax
Considerations Federal Income Taxation of Holders of
Our Stock Treatment of Tax-Exempt
U.S. Stockholders included in our Annual Report on
Form 10-K
for the year ended December 31, 2010.
Backup
Withholding and Information Reporting
In general, backup withholding will apply to
(i) any payments made by us to you in respect of our
Series I preferred stock or common stock, and
(ii) payment of the proceeds of a sale or other disposition
of Series I preferred stock or common stock, if you are a
non-exempt U.S. stockholder and fail to provide a correct
taxpayer identification number and otherwise comply with
applicable requirements of the backup withholding rules.
Backup withholding tax is not an additional tax. Any amounts
withheld under the backup withholding rules may be allowed as a
credit against your U.S. federal income tax liability and
may entitle you to a refund, provided the required information
is timely provided to the IRS.
You will also be subject to information reporting with respect
to payments on our Series I preferred stock and common
stock and proceeds from the sale or other disposition of our
Series I preferred stock and common stock, unless you are
an exempt recipient and appropriately establish that exemption.
Taxation of
Foreign Stockholders
The U.S. federal taxation of foreign persons is a highly
complex matter that may be affected by many considerations. If
you are a foreign person considering purchasing our
Series I Preferred Stock, you should consult your own tax
advisor regarding the particular U.S. federal, state, local
and foreign income and other tax consequences (including
withholding tax considerations) of acquiring, owning and
disposing of our Series I preferred stock and common stock
received upon conversion of our Series I preferred stock.
Distributions
with respect to Our Series I Preferred Stock or Common
Stock
Distributions that are not designated by us as capital gain
dividends (even if they are attributable to gain from sales or
exchanges by us of United States real property
interests (USRPIs)) will generally be
treated as dividends of ordinary income to the extent that they
are made out of our current or
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Certain U.S.
Federal Income Tax Considerations
accumulated earnings and profits. Such distributions ordinarily
will be subject to withholding of U.S. federal income tax
at a 30% rate, or such lower rate as may be specified by an
applicable income tax treaty, unless the distributions are
treated as effectively connected with your conduct of a
U.S. trade or business and you comply with applicable
certification and other requirements. Dividends that are treated
as effectively connected with such a trade or business will be
subject to tax on a graduated basis in the same manner as if you
were a U.S. stockholder and corporate foreign stockholders
may also be subject to branch profits tax. You may obtain a
refund of any excess amounts withheld by timely filing an
appropriate claim for refund with the IRS.
Distributions that we properly designate as capital gain
dividends, other than those arising from the disposition of a
USRPI, generally should not be subject to U.S. federal
income taxation, unless your investment in our stock is treated
as effectively connected with your conduct of a U.S. trade
or business, in which case you will be subject to the same
treatment as U.S. stockholders with respect to such gain,
and a corporate foreign stockholder may also be subject to the
branch profits tax.
For further discussion of the U.S. federal income tax
treatment of distributions to foreign stockholders with respect
to shares of our Series I preferred stock or common stock
see Item 1 Business
Taxation Federal Income Tax
Considerations Federal Income Taxation of Holders of
Our Stock Taxation of Foreign Stockholders
included in our Annual Report on
Form 10-K
for the year ended December 31, 2010.
Taxable
Dispositions of Our Series I Preferred Stock or Common
Stock
If you are a foreign stockholder, a sale of our stock by you
generally will not be subject to U.S. federal income
taxation. For a further discussion of the rules related to our
qualification as a domestically controlled REIT and the
U.S. federal income tax treatment of foreign persons upon a
disposition of our stock, see Item 1
Business Taxation Federal Income Tax
Considerations Federal Income Taxation of Holders of
Our Stock Taxation of Foreign Stockholders
included in our Annual Report on
Form 10-K
for the year ended December 31, 2010.
Repurchase of Our
Series I Preferred Stock
As described above under the heading Treatment of
U.S. Stockholders Repurchase of Our
Series I Preferred Stock, if we repurchase any of
your shares, the U.S. federal income tax treatment can only
be determined on the basis of particular facts at the time of
the repurchase. If the repurchase is treated as a dividend, the
U.S. federal income tax treatment to you will be the same
as described above under Distributions with respect to Our
Series I Preferred Stock or Common Stock. If the
repurchase is treated as a taxable sale or exchange, the
U.S. federal income tax treatment to you will be the same
as described above under Taxable Dispositions of Our
Series I Preferred Stock or Common Stock.
Conversion of Our
Series I Preferred Stock
If you are a foreign stockholder, you generally will not
recognize gain or loss upon the conversion of our Series I
preferred stock into common stock.
Adjustments to
the Conversion Rate of Our Series I Preferred
Stock
As described above under Treatment of
U.S. Stockholders Adjustments to the Conversion
Rate of Our Series I Preferred Stock, under certain
circumstances, if we adjust the conversion rate, or if we fail
to make certain adjustments, you may be treated as having
received a constructive distribution from us, even though you do
not receive any cash in connection with the conversion rate
adjustment and even though you might not exercise your
conversion right. The U.S. federal income tax consequences
to foreign stockholders of the receipt of distributions from us
with respect to our Series I preferred stock are described
above under the heading Distributions with respect to Our
Series I Preferred Stock or Common Stock. We may, at
our option, withhold U.S. federal income tax with respect
to any such
S-76
Certain U.S.
Federal Income Tax Considerations
deemed distribution from cash payments of dividends and any
other payments in respect of the Series I preferred stock.
Foreign Account
Legislation
The Foreign Account Tax Compliance provisions of the Hiring
Incentives to Restore Employment Act generally impose a new
reporting and 30% withholding tax regime with respect to certain
U.S. source income (including dividends and interest) and
gross proceeds from the sale or other disposition of property
that can produce U.S. source interest or dividends (each a
Withholdable Payment). As a general matter, the new
rules are designed to require a U.S. persons direct
or indirect ownership of
non-U.S. accounts
and
non-U.S. entities
to be reported to the IRS, but the provisions apply to all
direct or indirect owners of U.S. source income. The 30%
withholding tax regime applies to Withholdable Payments made
after December 31, 2012, if there is a failure to provide
any required information.
The new withholding and reporting rules provide that payments
from us to any foreign stockholder that are attributable to
Withholdable Payments will be subject to the 30% withholding tax
unless the foreign stockholder provides information,
representations and waivers of
non-U.S. law
as may be required to comply with the provisions of the new
rules, including information regarding certain U.S. direct
and indirect owners of such
non-U.S. Holder.
A foreign stockholder that is treated as a foreign
financial institution as such term is defined in the
legislation generally will be subject to withholding unless it
enters into an agreement with the IRS.
If you are a foreign person considering purchasing our
Series I Preferred Stock, you should consult your own tax
advisor regarding the possible disclosure implications of
acquiring, owning and disposing of our stock.
Backup
Withholding and Information Reporting
Backup withholding and information reporting may apply to
payments made by us (including our paying agents) to you in
respect of our stock, unless you provide an IRS
Form W-8BEN
or otherwise meet documentary evidence requirements for
establishing that you are a foreign stockholder or otherwise
establish an exemption. We (or our paying agent) may, however,
report payments of dividends on our stock.
The gross proceeds from the disposition of your stock may be
subject to information reporting and backup withholding tax at
the applicable rate. If you sell your stock outside the United
States through a foreign office of a foreign broker and the
sales proceeds are paid to you outside the United States, then
the backup withholding and information reporting requirements
will generally not apply to that payment. However, information
reporting, but not backup withholding, will apply to a payment
of sales proceeds, even if that payment is made outside the
United States, if you sell your stock through the foreign office
of a foreign broker that is, for U.S. federal income tax
purposes, a United States person (within the meaning of the
Code), a controlled foreign corporation, a foreign person 50% or
more of whose gross income is effectively connected with a
U.S. trade or business for a specified three-year period or
a foreign partnership with certain connections to the United
States, unless such broker has in its records documentary
evidence that you are not a United States person and certain
other conditions are met, or you otherwise establish an
exemption. In addition, backup withholding may apply to any
payment that the broker is required to report if the broker has
actual knowledge that you are a United States person.
You should consult your own tax advisor regarding the
application of information reporting and backup withholding in
your particular situation, the availability of an exemption from
backup withholding and the procedure for obtaining such an
exemption, if available.
S-77
Certain U.S.
Federal Income Tax Considerations
Backup withholding is not an additional tax. Any amounts
withheld under the backup withholding rules may be allowed as a
credit against your U.S. federal income tax liability and
may entitle you to a refund, provided the required information
is timely furnished to the IRS.
THE PRECEDING DISCUSSION OF CERTAIN U.S. FEDERAL INCOME
TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX
ADVICE AND THE COMPANY MAKES NO REPRESENTATION AS TO THE TAX
CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF THE
SERIES I PREFERRED STOCK AND COMMON STOCK RECEIVED UPON
CONVERSION OF SERIES I PREFERRED STOCK. THE PROPER TAX
TREATMENT OF A HOLDER OF SERIES I PREFERRED STOCK IS
UNCERTAIN IN VARIOUS RESPECTS. ACCORDINGLY, EACH PROSPECTIVE
PURCHASER SHOULD CONSULT ITS OWN TAX ADVISOR AS TO PARTICULAR
TAX CONSEQUENCES TO IT OF PURCHASING, HOLDING, CONVERTING AND
DISPOSING OF THE SERIES I PREFERRED STOCK AND
SHARES OF OUR COMMON STOCK ACQUIRED UPON CONVERSION OF THE
SERIES I PREFERRED STOCK, INCLUDING THE APPLICABILITY AND
EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS, AND OF ANY
PROPOSED CHANGES IN APPLICABLE LAWS.
S-78
UBS Securities LLC, Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Barclays Capital Inc., Deutsche Bank
Securities Inc., J.P. Morgan Securities LLC and Wells Fargo
Securities, LLC are acting as joint book-running managers of the
offering. Subject to the terms and conditions of the
underwriting agreement, the underwriters named below, through
their representatives, UBS Securities LLC, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Barclays Capital
Inc., Deutsche Bank Securities Inc., J.P. Morgan Securities
LLC and Wells Fargo Securities, LLC, have severally agreed to
purchase from us the number of shares of Series I preferred
stock set forth opposite the underwriters name at the
public offering price less the underwriting discounts and
commissions set forth on the cover page of this prospectus
supplement.
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Number of
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Underwriter
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shares
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UBS Securities LLC
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Merrill Lynch, Pierce, Fenner & Smith
Incorporated
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Barclays Capital Inc.
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Deutsche Bank Securities Inc.
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J.P. Morgan Securities LLC
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Wells Fargo Securities, LLC
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KeyBanc Capital Markets Inc.
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Total
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12,500,000
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The underwriting agreement provides that the obligations of the
several underwriters to purchase the shares of Series I
preferred stock offered hereby are subject to certain conditions
precedent and that the underwriters will purchase all of the
shares of the Series I preferred stock offered by this
prospectus supplement, other than those covered by the
overallotment option described below, if any of these shares are
purchased.
We have been advised by the representatives of the underwriters
that the underwriters propose to offer the shares of
Series I preferred stock to the public at the public
offering price set forth on the cover of this prospectus
supplement and to dealers at a price that represents a
concession not in excess of $ per
share under the public offering price. After the initial
offering of the shares of Series I preferred stock, the
representatives of the underwriters may change the public
offering price and other selling terms. Sales of shares of
Series I preferred stock made outside the United States may
be made by affiliates of the underwriters.
Prior to this offering, there has been no public market for our
Series I preferred stock. We have applied to have our
Series I preferred stock listed on the NYSE under the
symbol HCN PrI. The underwriters have advised us
that they intend to make a market in the Series I preferred
stock prior to commencement of any trading on the NYSE, but they
are not obligated to do so and may discontinue market making at
any time without notice. No assurance can be given as to the
liquidity of the trading market for the Series I preferred
stock.
We have granted to the underwriters an option, exercisable not
later than 30 days after the date of this prospectus
supplement, to purchase up to 1,875,000 additional shares
of Series I preferred stock at the public offering price
less the underwriting discounts and commissions set forth on the
cover page of this prospectus supplement. The underwriters may
exercise this option only to cover overallotments made in
connection with the sale of the Series I preferred stock
offered by this prospectus supplement. To the extent that the
underwriters exercise this option, each of the underwriters will
become obligated, subject to conditions, to purchase
approximately the same percentage of these additional shares of
Series I
S-79
Underwriting
preferred stock as the number of shares of Series I
preferred stock to be purchased by it in the above table bears
to the total number of shares of Series I preferred stock
offered by this prospectus supplement. We will be obligated,
pursuant to the option, to sell these additional shares of
Series I preferred stock to the underwriters to the extent
the option is exercised. If any additional shares of
Series I preferred stock are purchased, the underwriters
will offer the additional shares on the same terms as those on
which the shares are being offered.
The underwriting discounts and commissions per share are equal
to the public offering price per share of Series I
preferred stock less the amount paid by the underwriters to us
per share of Series I preferred stock. The underwriting
discounts and commissions are % of
the public offering price. We have agreed to pay the
underwriters the following discounts and commissions, assuming
either no exercise or full exercise by the underwriters of the
underwriters overallotment option:
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Without exercise
of
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With Full
exercise
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Fee
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overallotment
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of
overallotment
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per
share
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option
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option
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Discounts and commissions paid by us
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$
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$
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$
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We estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will
be approximately $750,000.
We have agreed to indemnify the underwriters against some
specified types of liabilities, including liabilities under the
Securities Act of 1933, as amended, and to contribute to
payments the underwriters may be required to make in respect of
any of these liabilities.
We and each of our executive officers have agreed not to offer,
sell or otherwise dispose of any shares of our preferred stock,
common stock or any securities that the executive officers have,
or will have, the right to acquire through the exercise of
options, warrants, subscription or other rights for a period of
30 days after the date of this prospectus supplement
without the prior written consent of UBS Securities LLC, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Barclays
Capital Inc., Deutsche Bank Securities Inc., J.P. Morgan
Securities LLC and Wells Fargo Securities, LLC, subject to
limited exceptions. This consent may be given at any time
without public notice.
In connection with the offering, the underwriters may purchase
and sell shares of our Series I preferred stock in the open
market. These transactions may include short sales, purchases to
cover positions created by short sales and stabilizing
transactions.
Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the
offering. Covered short sales are sales made in an amount not
greater than the underwriters option to purchase
additional shares of Series I preferred stock from us in
the offering. The underwriters may close out any covered short
position by either exercising their option to purchase
additional shares or purchasing shares in the open market.
Naked short sales are any sales in excess of the overallotment
option. The underwriters must close out any naked short position
by purchasing shares in the open market. A naked short position
is more likely to be created if the underwriters are concerned
that there may be downward pressure on the price of the shares
in the open market prior to the completion of the offering. In
determining the source of shares to close out the covered short
position, the underwriters will consider, among other things,
the price of shares available for purchase in the open market as
compared to the price at which they may purchase shares through
the overallotment option.
Stabilizing transactions consist of various bids for or
purchases of our Series I preferred stock made by the
underwriters in the open market prior to the completion of the
offering.
The underwriters may impose a penalty bid. This occurs when a
particular underwriter repays to the other underwriters a
portion of the underwriting discount received by it because the
representatives of
S-80
Underwriting
the underwriters have repurchased shares sold by or for the
account of that underwriter in stabilizing or short covering
transactions.
Purchases to cover a short position and stabilizing transactions
may have the effect of preventing or slowing a decline in the
market price of our Series I preferred stock. Additionally,
these purchases, along with the imposition of a penalty bid, may
stabilize, maintain or otherwise affect the market price of our
Series I preferred stock. As a result, the price of our
Series I preferred stock may be higher than the price that
might otherwise exist in the open market. These transactions may
be effected on the New York Stock Exchange or otherwise and may
be discontinued at any time.
A prospectus supplement in electronic format may be made
available on Internet websites maintained by one or more of the
lead underwriters of this offering and may be made available on
websites maintained by other underwriters. Other than the
prospectus supplement in electronic format, the information on
any underwriters website and any information contained in
any other website maintained by an underwriter is not part of
the prospectus supplement or the registration statement of which
the prospectus supplement forms a part.
Conflicts of
Interest
The underwriters
and/or their
affiliates have provided and in the future may provide
investment banking, commercial banking
and/or
advisory services to us from time to time for which they have
received and in the future may receive customary fees and
expenses and may have entered into and in the future may enter
into other transactions with us. Certain affiliates of UBS
Securities LLC, J.P. Morgan Securities LLC, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Deutsche Bank
Securities Inc., Barclays Capital Inc. Wells Fargo Securities,
LLC and KeyBanc Capital Markets Inc. are lenders under our
Fourth Amended and Restated Loan Agreement dated August 6,
2007. Also, UBS Securities LLC, JPMorgan Chase Bank, N.A., Bank
of America, N.A. and Barclays Bank PLC are documentation agents
under such agreement and KeyBank National Association and
Deutsche Bank Securities Inc. are the administrative and the
syndication agents, respectively under such agreement. In
addition, an affiliate of UBS Securities LLC has committed to be
a lender under our $400 million bridge loan facility and
UBS Securities LLC, J.P. Morgan Securities LLC, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Deutsche Bank
Securities Inc., Barclays Capital Inc., Wells Fargo Securities,
LLC and KeyBanc Capital Markets Inc.
and/or their
affiliates, have committed to be lenders under our
$2.4 billion bridge loan facility. To the extent that any
portion of the net proceeds from this offering is applied to
repay borrowings under our Fourth Amended and Restated Loan
Agreement
and/or
either of our bridge loan facilities, certain of the
underwriters
and/or their
respective affiliates will receive a portion of the net proceeds
so applied through the repayment of borrowings under our Fourth
Amended and Restated Loan Agreement
and/or
either of our bridge loan facilities. If some of the net
proceeds of this offering are used to repay borrowings under our
Fourth Amended and Restated Loan Agreement
and/or
either of our bridge loan facilities, it is possible that more
than 5% of the proceeds of this offering (not including
underwriting discounts and commissions) may be received by any
one underwriter or its affiliates. Nonetheless, in accordance
with the FINRA Rule 5121(f), the appointment of a qualified
independent underwriter is not necessary in connection with this
offering because we, the issuer of the securities in this
offering, are a real estate investment trust. UBS Securities LLC
has acted as our financial advisor in connection with the
Acquisition. Merrill Lynch, Pierce, Fenner & Smith
Incorporated has acted as financial advisor to FC-GEN in
connection with the Acquisition.
S-81
NOTICE TO
PROSPECTIVE INVESTORS IN EUROPEAN ECONOMIC AREA
In relation to each member state of the European Economic Area
that has implemented the Prospectus Directive (each, a relevant
member state), other than Germany, with effect from and
including the date on which the Prospectus Directive is
implemented in that relevant member state (the relevant
implementation date), an offer of securities described in this
prospectus may not be made to the public in that relevant member
state other than:
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Ø
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to any legal entity which is a qualified investor as defined in
the Prospectus Directive;
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by the Bookrunners to fewer than 100, or, if the Relevant Member
State has implemented the relevant provisions of the 2010 PD
Amending Directive, 150, natural or legal persons (other than
qualified investors as defined in the Prospectus Directive), as
permitted under the Prospectus Directive, subject to obtaining
the prior consent of the Bookrunners for any such offer; or
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in any other circumstances falling within Article 3(2) of
the Prospectus Directive.
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provided that no such offer of securities shall require us or
any underwriter to publish a prospectus pursuant to
Article 3 of the Prospectus Directive.
For purposes of this provision, the expression an offer of
securities to the public in any relevant member state
means the communication in any form and by any means of
sufficient information on the terms of the offer and the
securities to be offered so as to enable an investor to decide
to purchase or subscribe for the securities, as the expression
may be varied in that member state by any measure implementing
the Prospectus Directive in that member state, and the
expression Prospectus Directive means Directive
2003/71/EC (and amendments thereto, including the 2010 PD
Amending Directive, to the extent implemented in the Relevant
Member State), and includes any relevant implementing measure in
the Relevant Member State, and includes any relevant
implementing measure in each relevant member state. The
expression 2010 PD Amending Directive means Directive 2010/73/EU.
We have not authorized and do not authorize the making of any
offer of securities through any financial intermediary on their
behalf, other than offers made by the underwriters with a view
to the final placement of the securities as contemplated in this
prospectus. Accordingly, no purchaser of the securities, other
than the underwriters, is authorized to make any further offer
of the securities on behalf of us or the underwriters.
The EEA selling restriction is in addition to any other selling
restrictions set out in this prospectus.
NOTICE TO
PROSPECTIVE INVESTORS IN UNITED KINGDOM
The Issuer constitutes a collective investment
scheme as defined by section 235 of the Financial
Services and Markets Act 2000 (the FSMA). It has not
been authorized or otherwise approved and, as an unregulated
scheme, it cannot be marketed in the United Kingdom to the
general public, except in accordance with section 238 of
the FSMA. Accordingly, this prospectus is only being distributed
in the United Kingdom to, and are only directed at,
(a) investment professionals falling within both
Article 14(5) of the Financial Services and Markets Act
2000 (Promotion of Collective Investment Schemes) Order 2001, as
amended (the CIS Promotion Order) and
Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005, as amended (the
General Promotion Order), and (b) high net
worth companies and other persons falling within both
Article 22(2)(a) to (d) of the CIS Promotion Order and
Article 49(2)(a) to (d) of the General Promotion Order
(all such persons together being referred to as relevant
persons). The shares are only available to, and any
invitation, offer or agreement to subscribe, purchase or
otherwise acquire such securities
S-82
Notice to
investors
will be engaged in only with, relevant persons. Any person who
is not a relevant person should not act or rely on this document
or any of its contents.
NOTICE TO
PROSPECTIVE INVESTORS IN AUSTRALIA
This offering memorandum is not a formal disclosure document and
has not been, nor will be, lodged with the Australian Securities
and Investments Commission. It does not purport to contain all
information that an investor or their professional advisers
would expect to find in a prospectus or other disclosure
document (as defined in the Corporations Act 2001 (Australia))
for the purposes of Part 6D.2 of the Corporations Act 2001
(Australia) or in a product disclosure statement for the
purposes of Part 7.9 of the Corporations Act 2001
(Australia), in either case, in relation to the securities.
The securities are not being offered in Australia to
retail clients as defined in sections 761G and
761GA of the Corporations Act 2001 (Australia). This offering is
being made in Australia solely to wholesale clients
for the purposes of section 761G of the Corporations Act
2001 (Australia) and, as such, no prospectus, product disclosure
statement or other disclosure document in relation to the
securities has been, or will be, prepared.
This offering memorandum does not constitute an offer in
Australia other than to wholesale clients. By submitting an
application for our securities, you represent and warrant to us
that you are a wholesale client for the purposes of
section 761G of the Corporations Act 2001 (Australia). If
any recipient of this offering memorandum is not a wholesale
client, no offer of, or invitation to apply for, our securities
shall be deemed to be made to such recipient and no applications
for our securities will be accepted from such recipient. Any
offer to a recipient in Australia, and any agreement arising
from acceptance of such offer, is personal and may only be
accepted by the recipient. In addition, by applying for our
securities you undertake to us that, for a period of
12 months from the date of issue of the securities, you
will not transfer any interest in the securities to any person
in Australia other than to a wholesale client.
NOTICE TO
PROSPECTIVE INVESTORS IN HONG KONG
Our securities may not be offered or sold in Hong Kong, by means
of this prospectus or any document other than (i) to
professional investors within the meaning of the
Securities and Futures Ordinance (Cap.571, Laws of Hong Kong)
and any rules made thereunder, or (ii) in circumstances
which do not constitute an offer to the public within the
meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong),
or (iii) in other circumstances which do not result in the
document being a prospectus within the meaning of
the Companies Ordinance (Cap.32, Laws of Hong Kong). No
advertisement, invitation or document relating to our securities
may be issued or may be in the possession of any person for the
purpose of issue (in each case whether in Hong Kong or
elsewhere) which is directed at, or the contents of which are
likely to be accessed or read by, the public in Hong Kong
(except if permitted to do so under the securities laws of Hong
Kong) other than with respect to the securities which are or are
intended to be disposed of only to persons outside Hong Kong or
only to professional investors within the meaning of
the Securities and Futures Ordinance (Cap. 571, Laws of Hong
Kong) and any rules made thereunder.
NOTICE TO
PROSPECTIVE INVESTORS IN JAPAN
Our securities have not been and will not be registered under
the Financial Instruments and Exchange Law of Japan (the
Financial Instruments and Exchange Law) and our securities will
not be offered or sold, directly or indirectly, in Japan, or to,
or for the benefit of, any resident of Japan (which term as used
herein means any person resident in Japan, including any
corporation or other entity organized under the laws of Japan),
or to others for re-offering or resale, directly or indirectly,
in Japan, or to a resident of Japan, except pursuant to an
exemption from the registration requirements of, and otherwise
S-83
Notice to
investors
in compliance with, the Financial Instruments and Exchange Law
and any other applicable laws, regulations and ministerial
guidelines of Japan.
NOTICE TO
PROSPECTIVE INVESTORS IN SINGAPORE
The offer or invitation of the securities (the
Securities) of fund name (the Fund),
which is the subject of this Prospectus, does not relate to a
collective investment scheme which is authorized under
Section 286 of the Securities and Futures Act,
Chapter 289 of Singapore (the SFA) or
recognised under Section 287 of the SFA. The Fund is not
authorized or recognized by the Monetary Authority of Singapore
(the MAS) and the Securities are not allowed to be
offered to the retail public. This Prospectus and any other
document or material issued in connection with the offer or sale
is not a prospectus as defined in the SFA. Accordingly,
statutory liability under the SFA in relation to the content of
prospectuses would not apply. You should consider carefully
whether the investment is suitable for you.
This Prospectus has not been registered as a prospectus with the
MAS. Accordingly, this Prospectus and any other document or
material in connection with the offer or sale, or invitation for
subscription or purchase, of Securities may not be circulated or
distributed, nor may Securities be offered or sold, or be made
the subject of an invitation for subscription or purchase,
whether directly or indirectly, to persons in Singapore other
than (i) to an institutional investor under
Section 304 of the SFA, (ii) to a relevant person
pursuant to Section 305(1), or any person pursuant to
Section 305(2), and in accordance with the conditions
specified in Section 305, of the SFA, or
(iii) otherwise pursuant to, and in accordance with the
conditions of, any other applicable provision of the SFA.
Where Securities are subscribed or purchased under
Section 305 by a relevant person which is:
(a) a corporation (which is not an accredited investor (as
defined in Section 4A of the SFA)) the sole business of
which is to hold investments and the entire share capital of
which is owned by one or more individuals, each of whom is an
accredited investor; or
(b) a trust (where the trustee is not an accredited
investor) whose sole purpose is to hold investments and each
beneficiary of the trust is an individual who is an accredited
investor,
securities (as defined in Section 239(1) of the SFA) of
that corporation or the beneficiaries rights and interest
(howsoever described) in that trust shall not be transferred
within six months after that corporation or that trust has
acquired the Securities pursuant to an offer made under
Section 305 except:
(1) to an institutional investor or to a relevant person
defined in Section 305(5) of the SFA, or to any person
arising from an offer referred to in Section 275(1A) or
Section 305A(3)(i)(B) of the SFA;
(2) where no consideration is or will be given for the
transfer;
(3) where the transfer is by operation of law; or
(4) as specified in Section 305A(5) of the SFA.
NOTICE TO
PROSPECTIVE INVESTORS IN SWITZERLAND
The shares may not be publicly offered, distributed or
re-distributed on a professional basis in or from Switzerland
and neither this document nor any other solicitation for
investments in the shares may be communicated or distributed in
Switzerland in any way that could constitute a public offering
within the meaning of Articles 1156/652a of the Swiss Code
of Obligations (CO). This document may not be
copied, reproduced, distributed or passed on to others without
the Offerors prior written consent. This document is not a
prospectus within the meaning of Articles 1156/652a CO and
the shares will not be listed on the SIX Swiss Exchange.
Therefore, this document may not comply with the disclosure
S-84
Notice to
investors
standards of the CO
and/or the
listing rules (including any prospectus schemes) of the SIX
Swiss Exchange. In addition, it cannot be excluded that the
Offeror could qualify as a foreign collective investment scheme
pursuant to Article 119 para. 2 Swiss Federal Act on
Collective Investment Schemes (CISA). The shares
will not be licensed for public distribution in and from
Switzerland. Therefore, the shares may only be offered and sold
to so-called qualified investors in accordance with
the private placement exemptions pursuant to applicable Swiss
law (in particular, Article 10 para. 3 CISA and
Article 6 of the implementing ordinance to the CISA). The
Offeror has not been licensed and is not subject to the
supervision of the Swiss Financial Market Supervisory Authority
(FINMA). Therefore, investors in the shares do not
benefit from the specific investor protection provided by CISA
and the supervision of the FINMA.
NOTICE TO
PROSPECTIVE INVESTORS IN THE DUBAI INTERNATIONAL FINANCIAL
CENTRE
This prospectus relates to an Exempt Offer in accordance with
the Offered Securities Rules of the Dubai Financial Services
Authority (DFSA). This prospectus is intended for
distribution only to persons of a type specified in the Offered
Securities Rules of the DFSA. It must not be delivered to, or
relied on by, any other person. The DFSA has no responsibility
for reviewing or verifying any documents in connection with
Exempt Offers. The DFSA has not approved this prospectus nor
taken steps to verify the information set forth herein and has
no responsibility for the prospectus. The securities to which
this prospectus relates may be illiquid
and/or
subject to restrictions on their resale. Prospective purchasers
of the securities offered should conduct their own due diligence
on the securities. If you do not understand the contents of this
prospectus you should consult an authorized financial advisor.
S-85
Legal matters
Certain legal matters regarding the shares of common stock
offered hereby will be passed upon for us by Shumaker,
Loop & Kendrick, LLP, Toledo, Ohio. Arnold &
Porter LLP will pass upon certain federal income tax matters
relating to us. Calfee, Halter & Griswold LLP,
Cleveland, Ohio will pass upon certain legal matters for the
underwriters. The validity of the Series I preferred stock
offered by this prospectus supplement will be passed upon for
the underwriters by Gibson, Dunn & Crutcher LLP, New
York, New York.
Experts
Ernst & Young LLP, independent registered public
accounting firm, has audited our consolidated financial
statements and schedules included in our Annual Report on
Form 10-K
for the year ended December 31, 2010, and the effectiveness
of our internal control over financial reporting as of
December 31, 2010, included in our Annual Report on
Form 10-K
for the year ended December 31, 2010, as set forth in their
reports, which are incorporated by reference in this prospectus
supplement and the accompanying prospectus. Our financial
statements and schedules are incorporated by reference in
reliance upon Ernst & Young LLPs reports, given
on their authority as experts in accounting and auditing.
The consolidated financial statements of FC-GEN Acquisition
Holding, LLC and subsidiaries (the company)
(formerly FC-GEN Acquisition, Inc. and subsidiaries)
(Successor) as of December 31, 2009 and 2008,
and for the years ended December 31, 2009 and 2008 and for
the period from July 14, 2007 to December 31, 2007
(Successor Periods) and the consolidated financial
statements of Genesis HealthCare Corporation and subsidiaries
(Predecessor) for the period from January 1,
2007 to July 13, 2007 (Predecessor Periods),
have been incorporated by reference herein in reliance upon the
report of KPMG LLP, independent auditors, incorporated by
reference herein, and upon the authority of said firm as experts
in accounting and auditing. KPMG LLPs report on the
December 31, 2009 consolidated financial statements
contains explanatory paragraphs that state: effective
July 14, 2007, FC-GEN Acquisition, Inc. acquired all of the
outstanding stock of Genesis HealthCare Corporation in a
business combination accounted for as a purchase (the
Merger). As a result of the Merger, the consolidated
financial information for the periods after the Merger is
presented on a different cost basis than that for the periods
before the Merger and, therefore, is not comparable; the company
has changed its method of accounting for uncertainty in income
taxes on January 1, 2009 due to the adoption of Accounting
Standard Codification Topic 740, Income Taxes; the
company has changed its method of accounting for noncontrolling
interests on January 1, 2009 due to the adoption of
Accounting Standard Codification Topic 810,
Consolidation; and the company has changed its method of
accounting for fair value measurements for recurring financial
assets and liabilities on January 1, 2008 and for
nonfinancial assets and liabilities that are not required or
permitted to be measured at fair value on a recurring basis on
January 1, 2009 due to the adoption of Accounting Standard
Codification Topic 820, Fair Value Measurements.
S-86
Where you can find
more information
The prospectus supplement and the accompanying prospectus are
part of a registration statement that we filed with the SEC
covering the securities that may be offered under this
prospectus supplement. The registration statement, including the
attached exhibits and schedules, contain additional relevant
information about the securities.
Additionally, we file annual, quarterly and current reports,
proxy statements and other information with the SEC, all of
which are made available, free of charge, on our Internet
website at
http://www.hcreit.com
as soon as reasonably practicable after they are filed with, or
furnished to, the SEC. The information on or connected to our
Internet website is not, and shall not be deemed to be, a part
of, or incorporated into this prospectus supplement. You can
review these SEC filings and the registration statement by
accessing the SECs Internet website at
http://www.sec.gov.
You also may read and copy the registration statement and any
reports, statements or other information on file at the
SECs public reference room at 100 F Street,
N.E., Washington, DC 20549. You can request copies of those
documents upon payment of a duplicating fee to the SEC. Please
call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
room. These filings with the SEC are also available through the
New York Stock Exchange, 20 Broad Street, New York, New
York 10005.
INCORPORATION OF
INFORMATION FILED WITH THE SEC
The SEC allows us to incorporate by reference the
information we file with the SEC, which means:
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we consider incorporated documents to be part of this prospectus
supplement;
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we may disclose important information to you by referring you to
those documents; and
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information we subsequently file with the SEC will automatically
update and supersede the information in this prospectus
supplement.
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DOCUMENTS
INCORPORATED BY REFERENCE
This prospectus incorporates by reference the following
documents we filed with the SEC:
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Annual Report on
Form 10-K
for the year ended December 31, 2010;
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Current Reports on
Form 8-K
filed on January 11, 2011 (including the description
therein of our 6% Series H Cumulative Convertible and
Redeemable Preferred Stock) and February 28, 2011 (except
that the information furnished pursuant to Item 7.01 of
Form 8-K
and the exhibits relating to such information are not
incorporated into this prospectus supplement);
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The description of our common stock as set forth in our
registration statement filed under the Exchange Act on
Form 8-A
on June 17, 1985, including any amendment or report for the
purpose of updating such description;
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Ø
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The description of the rights to purchase our Series A
Junior Participating Preferred Stock, par value $1.00 per share,
associated with our common stock, as set forth in our
registration statement filed under the Exchange Act on
Form 8-A
on August 3, 1994, including any amendment or report for
the purpose of updating such description;
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The description of our
77/8%
Series D Cumulative Redeemable Preferred Stock as set forth
in the registration statement filed under the Exchange Act on
Form 8-A/A
on July 8, 2003, including any amendment or report for the
purpose of updating such description;
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The description of our
75/8%
Series F Cumulative Redeemable Preferred Stock as set forth
in the registration statement filed under the Exchange Act on
Form 8-A
on September 10, 2004, including any amendment or report
for the purpose of updating such description; and
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All subsequent documents filed by us under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act of 1934 after the date of
this prospectus supplement and before the date this offering is
terminated;
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S-87
other than the portions of such documents that by statute or
rule, by designation in such document or otherwise, are not
deemed to be filed with the SEC or are not required to be
incorporated herein by reference.
This prospectus supplement and the accompanying prospectus
summarizes material provisions of contracts and other documents
to which we refer. Since this prospectus supplement and the
accompanying prospectus may not contain all the information that
you may find important, you should review the full text of those
documents. Upon request, we will provide each person receiving
this prospectus supplement and the accompanying prospectus a
free copy, without exhibits, of any or all documents
incorporated by reference into this prospectus supplement and
the accompanying prospectus. You may direct such requests to:
Erin C. Ibele
Senior Vice PresidentAdministration and Corporate Secretary
Health Care REIT, Inc.
4500 Dorr Street
Toledo, Ohio 43615
(419) 247-2800
S-88
HEALTH CARE REIT,
INC.
DEBT SECURITIES
COMMON STOCK
PREFERRED STOCK
DEPOSITARY SHARES
WARRANTS
UNITS
We may periodically offer and sell, in one or more offerings:
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debt securities
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shares of common stock
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shares of preferred stock
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depositary shares
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warrants to purchase debt securities, preferred stock,
depositary shares or common stock
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units consisting of one or more debt securities or other
securities
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We may offer these securities from time to time on terms we will
determine at the time of offering. We will provide the specific
terms of the securities being offered in supplements to this
prospectus prepared in connection with each offering. You should
read this prospectus and the supplement for the specific
security being offered carefully before you invest.
We may offer these securities directly, through agents we
designate periodically, or to or through underwriters or
dealers. If designated agents or underwriters are involved in
the sale of any of the securities, we will disclose in the
prospectus supplement their names, any applicable purchase
price, fee, compensation arrangement between or among them, and
our net proceeds from such sale. See Plan of
Distribution. No securities may be sold without the
delivery of the applicable prospectus supplement describing the
securities and the method and terms of their offering.
Our shares of common stock are listed on the New York Stock
Exchange under the symbol HCN. Our executive offices
are located at One SeaGate, Suite 1500, Toledo, Ohio 43604,
telephone number:
419-247-2800,
facsimile:
419-247-2826,
and website: www.hcreit.com. Unless specifically noted
otherwise in this prospectus, all references to we,
us, our, or the Company
refer to Health Care REIT, Inc. and its subsidiaries.
Investing in our securities involves risk. See
Cautionary Statement Concerning Forward-Looking Statements
and Risk Factors beginning on page 1 of this
prospectus.
The information in this prospectus is not complete and may be
changed. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved these
securities, or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is May 7, 2009.
TABLE OF
CONTENTS
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i
ABOUT
THIS PROSPECTUS
This prospectus is part of a registration statement we filed
with the SEC using a shelf registration process.
Under this shelf process, we may sell any combination of the
securities described in this prospectus from time to time in one
or more offerings. This prospectus provides you only with a
general description of the securities we may offer. Each time we
sell securities, we will provide a prospectus supplement
containing specific information about the terms of that
offering. The prospectus supplement may also add to, update or
change information contained in this prospectus. You should read
both this prospectus and any prospectus supplement together with
additional information described under the heading Where
You Can Find Additional Information and Documents
Incorporated By Reference.
You should rely only on the information contained and
incorporated by reference in this prospectus. Neither we nor the
underwriters have authorized any other person to provide you
with different or inconsistent information from that contained
in this prospectus and the applicable prospectus supplement. If
anyone provides you with different or inconsistent information,
you should not rely on it. You should assume that the
information in this prospectus and the applicable prospectus
supplement, as well as information we previously filed with the
SEC and incorporated by reference, is accurate only as of the
date on the front cover of this prospectus and the applicable
prospectus supplement. Our business, financial condition,
results of operations and prospects may have changed since those
dates.
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
AND RISK FACTORS
This prospectus and the documents incorporated by reference in
this prospectus contain forward-looking statements
as that term is defined under federal securities laws. These
forward-looking statements include, but are not limited to,
those regarding:
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the possible expansion of our portfolio;
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the sale of properties;
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the performance of our operators/tenants and properties;
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our ability to enter into agreements with new viable tenants for
vacant space or for properties that we take back from
financially troubled tenants, if any;
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our occupancy rates;
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our ability to acquire, develop
and/or
manage properties;
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our ability to make distributions to stockholders;
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our policies and plans regarding investments, financings and
other matters;
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our tax status as a real estate investment trust;
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our critical accounting policies;
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our ability to appropriately balance the use of debt and equity;
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our ability to access capital markets or other sources of
funds; and
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our ability to meet earnings guidance.
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When we use words such as may, will,
intend, should, believe,
expect, anticipate, project,
estimate or similar expressions, we are making
forward-looking statements. Forward-looking statements are not
guarantees of future performance and involve risks and
uncertainties. Our expected results may not be achieved, and
actual results may differ materially from our expectations. This
may be a result of various factors, including, but not limited
to:
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the status of the economy;
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the status of capital markets, including availability and cost
of capital;
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1
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issues facing the health care industry, including compliance
with, and changes to, regulations and payment policies,
responding to government investigations and punitive settlements
and operators/tenants difficulty in cost-effectively
obtaining and maintaining adequate liability and other insurance;
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changes in financing terms;
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competition within the health care and senior housing industries;
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negative developments in the operating results or financial
condition of operators/tenants, including, but not limited to,
their ability to pay rent and repay loans;
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our ability to transition or sell facilities with profitable
results;
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the failure to make new investments as and when anticipated;
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acts of God affecting our properties;
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our ability to re-lease space at similar rates as vacancies
occur;
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our ability to timely reinvest sale proceeds at similar rates to
assets sold;
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operator/tenant bankruptcies or insolvencies;
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government regulations affecting Medicare and Medicaid
reimbursement rates and operational requirements;
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liability or contract claims by or against operators/tenants;
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unanticipated difficulties
and/or
expenditures relating to future acquisitions;
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environmental laws affecting our properties;
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changes in rules or practices governing our financial
reporting; and
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legal and operational matters, including real estate investment
trust qualification and key management personnel recruitment and
retention.
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Our business is subject to certain risks, which are discussed in
our most recent Annual Report on
Form 10-K,
as amended or updated, under the headings Business,
Risk Factors and Managements Discussion
and Analysis of Financial Condition and Results of
Operations. Updated information relating to such risks, as
well as additional risks specific to the securities to be
offered hereby, will be set forth in the prospectus supplement
relating to such offered securities. We assume no obligation to
update or revise any forward-looking statements or to update the
reasons why actual results could differ from those projected in
any forward-looking statements.
WHERE YOU
CAN FIND ADDITIONAL INFORMATION
This prospectus is part of a registration statement that we have
filed with the SEC covering the securities that may be offered
under this prospectus. The registration statement, including the
attached exhibits and schedules, contains additional relevant
information about the securities.
Additionally, we file annual, quarterly and current reports,
proxy statements and other information with the SEC, all of
which are made available, free of charge, on our Internet
website at www.hcreit.com as soon as reasonably
practicable after they are filed with, or furnished to, the SEC.
You can review our SEC filings and the registration statement by
accessing the SECs Internet site at
http://www.sec.gov.
You also may read and copy the registration statement and any
reports, statements or other information on file at the
SECs public reference room at 100 F Street,
N.E., Washington, D.C. 20549. You can request copies of
those documents upon payment of a duplicating fee to the SEC.
Please call the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
room. Our filings with the SEC are also available through the
New York Stock Exchange, 20 Broad Street, New York,
New York 10005.
This prospectus does not contain all the information set forth
in the registration statement. We have omitted certain parts
consistent with SEC rules. For further information, please see
the registration statement.
2
DOCUMENTS
INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference the
information we file with the SEC, which means:
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we consider incorporated documents to be part of the prospectus;
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we may disclose important information to you by referring you to
those documents; and
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information we subsequently file with the SEC will automatically
update and supersede the information in this prospectus.
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This prospectus incorporates by reference the following
documents we filed with the SEC; provided, however, that we are
not incorporating any documents or information deemed to have
been furnished and not filed in accordance with SEC rules:
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Annual Report on
Form 10-K
for the year ended December 31, 2008;
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Quarterly Report on
Form 10-Q
for the quarterly period ended March 31, 2009;
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Current Reports on
Form 8-K
filed on January 5, 2009, January 29, 2009 (except
that the information furnished pursuant to Items 2.02 and
7.01 of
Form 8-K
and the exhibits relating to such information are not
incorporated into this prospectus), January 30, 2009
(except that the information furnished pursuant to
Item 7.01 of
Form 8-K
and the exhibit relating to such information are not
incorporated into this prospectus) and May 7, 2009;
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The description of our common stock as set forth in our
registration statement filed under the Exchange Act on
Form 8-A
on June 17, 1985, including any amendment or report for the
purpose of updating such description;
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The description of the rights to purchase our Series A
Junior Participating Preferred Stock, par value $1.00 per share,
associated with our common stock, as set forth in our
registration statement filed under the Exchange Act on
Form 8-A
on August 3, 1994, including any amendment or report for
the purpose of updating such description;
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The description of our
77/8%
Series D Cumulative Redeemable Preferred Stock as set forth
in our registration statement filed under the Exchange Act on
Form 8-A/A
on July 8, 2003, including any amendment or report for the
purpose of updating such description;
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The description of our
75/8%
Series F Cumulative Redeemable Preferred Stock as set forth
in our registration statement filed under the Exchange Act on
Form 8-A
on September 10, 2004, including any amendment or report
for the purpose of updating such description;
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The description of our 7.5% Series G Cumulative Convertible
Preferred Stock as set forth in the registration statement filed
under the Exchange Act on
Form 8-A
on December 18, 2006, including any amendment or report for
the purpose of updating such description; and
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All subsequent documents filed by us under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act of 1934 after the date of
this prospectus and before the termination of the offering.
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other than the portions of such documents that by statute or
rule, by designation in such document or otherwise, are not
deemed to be filed with the SEC or are not required to be
incorporated herein by reference.
This prospectus summarizes material provisions of contracts and
other documents to which we refer. Since this prospectus may not
contain all the information that you may find important, you
should review the full text of those documents. Upon request, we
will provide each person receiving this prospectus a free copy
of any or all documents incorporated by reference into this
prospectus. You may direct such requests to:
Erin C. Ibele
Senior Vice President-Administration and Corporate Secretary
Health Care REIT, Inc.
One SeaGate, Suite 1500
Toledo, Ohio 43604
(419) 247-2800
3
THE
COMPANY
We are a real estate investment trust that invests in senior
housing and health care real estate. We also provide an
extensive array of property management and development services.
Our principal executive offices are located at One SeaGate,
Suite 1500, Toledo, Ohio, 43604, and our telephone number
is
(419) 247-2800.
Our website address is www.hcreit.com. The information on
our website is not part of this prospectus.
Our primary objectives are to protect stockholder capital and
enhance stockholder value. We seek to pay consistent cash
dividends to stockholders and create opportunities to increase
dividend payments to stockholders as a result of annual
increases in rental and interest income and portfolio growth. To
meet these objectives, we invest in the full spectrum of senior
housing and health care real estate and diversify our investment
portfolio by property type, operator/tenant and geographic
location.
For additional information regarding our business, please see
the information under the heading Business in our
most recent Annual Report on
Form 10-K,
which is incorporated by reference in this prospectus.
USE OF
PROCEEDS
Unless otherwise described in a prospectus supplement, we intend
to use the net proceeds from the sale of any securities under
this prospectus for general business purposes, which may include
acquisition of and investment in additional health care and
senior housing properties and the repayment of borrowings under
our credit facilities or other debt. Until the proceeds from a
sale of securities by us are applied to their intended purposes,
they may be invested in short-term, investment grade,
interest-bearing securities, certificates of deposit or direct
or guaranteed obligations of the United States.
RATIOS OF
EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth our ratios of earnings to fixed
charges and earnings to combined fixed charges and preferred
stock dividends for the periods indicated. The ratio of earnings
to fixed charges was computed by dividing earnings by our fixed
charges. The ratio of earnings to combined fixed charges and
preferred stock dividends was computed by dividing earnings by
our combined fixed charges and preferred stock dividends. For
purposes of calculating these ratios, earnings
includes income from continuing operations, excluding the equity
earnings in a less than 50% owned subsidiary, plus fixed charges
and reduced by capitalized interest. Fixed charges
consists of interest expensed and capitalized and the amortized
premiums, discounts and capitalized expenses related to
indebtedness.
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Year Ended December 31,
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Three Months Ended March 31,
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2004
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2005
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2006
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2007
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2008
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2008
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2009
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Consolidated ratio of earnings to fixed charges
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1.89
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1.77
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1.87
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1.71
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1.85
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1.78
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2.18
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Consolidated ratio of earnings to combined fixed charges and
preferred stock dividends
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1.62
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1.41
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1.54
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1.47
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1.61
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1.54
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1.89
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We issued 4,000,000 shares of
77/8%
Series D Cumulative Redeemable Preferred Stock in July
2003. We issued 1,060,000 shares of 6% Series E
Cumulative Convertible and Redeemable Preferred Stock in
September 2003. During the year ended December 31, 2004,
certain holders of our Series E Preferred Stock converted
480,399 shares into 367,724 shares of our common
stock, leaving 350,045 of such shares outstanding at
December 31, 2004. During the year ended December 31,
2005, certain holders of our Series E Preferred Stock
converted 275,056 shares into 210,541 shares of our
common stock, leaving 74,989 of such shares outstanding at
December 31, 2005, 2006, 2007 and 2008 and March 31,
2009. We issued 7,000,000 shares of
75/8%
Series F Cumulative Redeemable Preferred Stock in September
2004. We issued 2,100,000 shares of 7.5% Series G
Cumulative Convertible Preferred Stock in December 2006. During
the year ended December 31, 2007, certain holders of our
Series G Preferred Stock converted 295,000 shares into
211,702 shares of our common stock, leaving 1,804,200 of
such shares outstanding at
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December 31, 2007. During the year ended December 31,
2008, certain holders of our Series G Preferred Stock
converted 1,362,887 shares into 975,397 shares of our
common stock, leaving 441,313 of such shares outstanding at
December 31, 2008. During the quarterly period ended
March 31, 2009, certain holders of our Series G
Preferred Stock converted 40,600 shares into
29,056 shares of our common stock, leaving 400,713 of such
shares outstanding at March 31, 2009.
GENERAL
DESCRIPTION OF THE OFFERED SECURITIES
We may offer under this prospectus one or more of the following
categories of our securities:
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debt securities, in one or more series;
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shares of our common stock, par value $1.00 per share;
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shares of our preferred stock, par value $1.00 per share, in one
or more series;
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depositary shares, representing interests in our preferred
stock, in one or more series;
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warrants to purchase any of the foregoing securities; and
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units consisting of any combination of the foregoing securities.
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The terms of any specific offering of securities, including the
terms of any units offered, will be set forth in a prospectus
supplement relating to such offering.
Our certificate of incorporation authorizes us to issue
225,000,000 shares of common stock and
50,000,000 shares of preferred stock. Of our preferred
stock:
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13,000 shares have been designated as Junior Participating
Preferred Stock, Series A;
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4,000,000 shares have been designated as
77/8%
Series D Cumulative Redeemable Preferred Stock;
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1,060,000 shares have been designated as 6% Series E
Cumulative Convertible and Redeemable Preferred Stock;
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7,000,000 shares have been designated as
75/8%
Series F Cumulative Redeemable Preferred Stock; and
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2,100,000 shares have been designated as 7.5% Series G
Cumulative Convertible Preferred Stock.
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As of March 31, 2009, we had outstanding
111,013,261 shares of common stock, 4,000,000 shares
of Series D Preferred Stock, 74,989 shares of
Series E Preferred Stock, 7,000,000 shares of
Series F Preferred Stock and 400,713 shares of
Series G Preferred Stock.
Our common stock is listed on the New York Stock Exchange under
the symbol HCN. We intend to apply to list any
additional shares of common stock that are issued and sold
hereunder. Our Series D Preferred Stock, Series F
Preferred Stock and Series G Preferred Stock are listed on
the New York Stock Exchange under the symbols HCN
PrD, HCN PrF and HCN PrG,
respectively. We may apply to list shares of any series of
preferred stock or any depositary shares which are offered and
sold hereunder, as described in the applicable prospectus
supplement relating to such preferred stock or depositary shares.
For a discussion of the taxation of the Company and the material
federal tax consequences to you as a holder of our common stock
and debt securities offered under this prospectus, see
Item 1 Business
Taxation Federal Income Tax Considerations
included in our most recent Annual Report on
Form 10-K.
The applicable prospectus supplement delivered with this
prospectus will provide any necessary information about
additional federal income tax considerations, if any, related to
the particular securities being offered.
DESCRIPTION
OF DEBT SECURITIES
The debt securities sold under this prospectus will be our
direct obligations, which may be secured or unsecured, and which
may be senior or subordinated indebtedness. The debt securities
may be guaranteed on a secured or unsecured, senior or
subordinated basis, by one or more of our subsidiaries. The debt
securities will be issued under one or more indentures between
us and a specified trustee. Any indenture will be subject to and
governed by the Trust Indenture Act of 1939, as amended.
The statements made in this prospectus relating to any
indentures and the debt securities to be issued under the
indentures are summaries of certain anticipated provisions of
the indentures.
5
The following is a summary of the material terms of our debt
securities. Because it is a summary, it does not contain all of
the information that may be important to you. If you want more
information, you should read the form of indenture for senior
debt securities and the forms of indentures for senior
subordinated and junior subordinated debt securities which we
have filed as exhibits to the registration statement of which
this prospectus is a part. We will file any final indentures for
senior subordinated and junior subordinated debt securities and
supplemental indentures if we issue debt securities of this
type. See Where You Can Find Additional Information.
This summary is also subject to and qualified by reference to
the descriptions of the particular terms of the securities
described in the applicable prospectus supplement.
General
We may issue debt securities that rank senior,
senior subordinated or junior
subordinated. The debt securities that we refer to as
senior will be our direct obligations and will rank
equally and ratably in right of payment with our other
indebtedness not subordinated. We may issue debt securities that
will be subordinated in right of payment to the prior payment in
full of senior debt, as defined in the applicable prospectus
supplement, and may rank equally and ratably with the other
senior subordinated indebtedness. We refer to these as
senior subordinated securities. We may also issue
debt securities that may be subordinated in right of payment to
the senior subordinated securities. These would be junior
subordinated securities. We have filed with the
registration statement, of which this prospectus is a part, a
form of indenture for senior debt securities and two separate
forms of indenture, one for the senior subordinated securities
and one for the junior subordinated securities. We refer to
senior subordinated and junior subordinated securities as
subordinated.
We may issue the debt securities without limit as to aggregate
principal amount, in one or more series, in each case as we
establish in one or more supplemental indentures. We need not
issue all debt securities of one series at the same time. Unless
we otherwise provide, we may reopen a series, without the
consent of the holders of the series, for issuances of
additional securities of that series.
We anticipate that any indenture will provide that we may, but
need not, designate more than one trustee under an indenture,
each with respect to one or more series of debt securities. Any
trustee under any indenture may resign or be removed with
respect to one or more series of debt securities, and we may
appoint a successor trustee to act with respect to that series.
The applicable prospectus supplement will describe the specific
terms relating to the series of debt securities we will offer,
including, where applicable, the following:
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the title and series designation and whether they are senior
securities, senior subordinated securities or subordinated
securities;
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the aggregate principal amount of the securities;
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the percentage of the principal amount at which we will issue
the debt securities and, if other than the principal amount of
the debt securities, the portion of the principal amount of the
debt securities payable upon maturity of the debt securities;
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if convertible, the securities into which they are convertible,
the initial conversion price, the conversion period and any
other terms governing such conversion;
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the stated maturity date;
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any fixed or variable interest rate or rates per annum;
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if other than at the corporate trust office of the trustee, the
place where principal, premium, if any, and interest will be
payable and where the debt securities can be surrendered for
transfer, exchange or conversion;
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the date from which interest may accrue and any interest payment
dates;
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any sinking fund requirements;
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any provisions for redemption, including the redemption price
and any remarketing arrangements;
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any provisions for denomination or payment of the securities in
a foreign currency or units of two or more foreign currencies;
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the events of default and covenants of such securities, to the
extent different from or in addition to those described in this
prospectus;
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whether we will issue the debt securities in certificated or
book-entry form;
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whether the debt securities will be in registered or bearer form
and, if in registered form, the denominations if other than in
even multiples of $1,000 and, if in bearer form, the
denominations and terms and conditions relating thereto;
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whether we will issue any of the debt securities in permanent
global form and, if so, the terms and conditions, if any, upon
which interests in the global security may be exchanged, in
whole or in part, for the individual debt securities represented
by the global security;
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the applicability, if any, of the defeasance and covenant
defeasance provisions described in this prospectus or any
prospectus supplement;
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any provisions for payment of additional amounts on the
securities in respect of any tax, assessment or governmental
charge and rights for us to redeem the debt securities instead
of making this payment;
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the subordination provisions, if any, relating to the debt
securities;
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if the debt securities are to be issued upon the exercise of
debt warrants, the time, manner and place for them to be
authenticated and delivered;
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whether any of our subsidiaries will be bound by the terms of
the indenture, in particular any restrictive covenants;
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the provisions relating to any security provided for the debt
securities; and
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the provisions relating to any guarantee of the debt securities.
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We may issue debt securities at less than the principal amount
payable at maturity. We refer to these securities as
original issue discount securities. If material or
applicable, we will describe in the applicable prospectus
supplement special U.S. federal income tax, accounting and
other considerations applicable to original issue discount
securities.
Except as may be described in any prospectus supplement, an
indenture will not contain any provisions that would limit our
ability to incur indebtedness or that would afford holders of
the debt securities protection in the event of a highly
leveraged or similar transaction involving us or in the event of
a change of control. You should review carefully the applicable
prospectus supplement for information with respect to events of
default and covenants applicable to the securities being offered.
Denominations,
Interest, Registration and Transfer
Unless otherwise described in the applicable prospectus
supplement, we will issue the debt securities of any series that
are registered securities in denominations that are even
multiples of $1,000, other than global securities, which may be
of any denomination.
Unless otherwise specified in the applicable prospectus
supplement, we will pay the interest, principal and any premium
at the corporate trust office of the trustee. At our option,
however, we may make payment of interest by check mailed to the
address of the person entitled to the payment as it appears in
the applicable register or by wire transfer of funds to that
person at an account maintained within the United States.
If we do not punctually pay or otherwise provide for interest on
any interest payment date, the defaulted interest will be paid
either:
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to the person in whose name the debt security is registered at
the close of business on a special record date the trustee will
fix; or
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in any other lawful manner, all as the applicable indenture
describes.
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You may have your debt securities divided into more debt
securities of smaller denominations or combined into fewer debt
securities of larger denominations, as long as the total
principal amount is not changed. We call this an
exchange. You may exchange or transfer debt
securities at the office of the applicable trustee. The trustee
acts
7
as our agent for registering debt securities in the names of
holders and transferring debt securities. We may change this
appointment to another entity or perform it ourselves.
The entity performing the role of maintaining the list of
registered holders is called the registrar. It will
also perform transfers. You will not be required to pay a
service charge to transfer or exchange debt securities, but you
may be required to pay for any tax or other governmental charge
associated with the exchange or transfer. The registrar will
make the transfer or exchange only if it is satisfied with your
proof of ownership.
Merger,
Consolidation or Sale of Assets
Under any indenture, we are generally permitted to consolidate
or merge with another company. We are also permitted to sell
substantially all of our assets to another company, or to buy
substantially all of the assets of another company. However, we
may not take any of these actions unless the following
conditions are met:
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if we merge out of existence or sell our assets, the other
company must be an entity organized under the laws of one of the
states of the United States or the District of Columbia or under
United States federal law and must agree to be legally
responsible for our debt securities; and
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immediately after the merger, sale of assets or other
transaction, we may not be in default on the debt securities. A
default for this purpose would include any event that would be
an event of default if the requirements regarding notice of
default or continuing default for a specific period of time were
disregarded.
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Certain
Covenants
Existence. Except as permitted and described
above under Merger, Consolidation or Sale of
Assets, we will agree to do all things necessary to
preserve and keep our existence, rights and franchises, provided
that it is in our best interests for the conduct of business.
Provisions of Financial Information. To the
extent permitted by law, we will agree to file all annual,
quarterly and other reports and financial statements with the
SEC and the trustee on or before the applicable SEC filing dates
whether or not we remain required to do so under the Exchange
Act.
Additional Covenants. Any additional or
different covenants or modifications to the foregoing covenants
with respect to any series of debt securities will be described
in the applicable prospectus supplement.
Events of
Default and Related Matters
Events of Default. The term event of
default for any series of debt securities means any of the
following:
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We do not pay the principal or any premium on a debt security of
that series within 30 days after its maturity date.
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We do not pay interest on a debt security of that series within
30 days after its due date.
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We do not deposit any sinking fund payment for that series
within 30 days after its due date.
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We remain in breach of any other term of the applicable
indenture (other than a term added to the indenture solely for
the benefit of another series) for 60 days after we receive
a written notice of default from the trustee or holders of at
least a majority in principal amount of debt securities of the
affected series specifying the breach and requiring it to be
remedied.
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We default under any of our other indebtedness in specified
amounts after the expiration of any applicable grace period,
which default results in the acceleration of the maturity of
such indebtedness. Such default is not an event of default if
the other indebtedness is discharged, or the acceleration is
rescinded or annulled, within a period of 10 days after we
receive a written notice from the trustee or holders of at least
a majority in principal amount of debt securities of the
affected series specifying the default and requiring that we
discharge the other indebtedness or cause the acceleration to be
rescinded or annulled.
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We or one of our significant subsidiaries, if any,
files for bankruptcy or certain other events in bankruptcy,
insolvency or reorganization occur. The term significant
subsidiary means each of our significant subsidiaries, if
any, as defined in
Regulation S-X
under the Securities Act.
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Any other event of default described in the applicable
prospectus supplement occurs.
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8
Remedies if an Event of Default Occurs. If an
event of default has occurred and has not been cured, the
trustee or the holders of at least a majority in principal
amount of the debt securities of the affected series may declare
the entire principal amount of all the debt securities of that
series to be due and immediately payable. If an event of default
occurs because of certain events in bankruptcy, insolvency or
reorganization, the principal amount of all the debt securities
of that series will be automatically accelerated, without any
action by the trustee or any holder. At any time after the
trustee or the holders have accelerated any series of debt
securities, but before a judgment or decree for payment of the
money due has been obtained, the holders of at least a majority
in principal amount of the debt securities of the affected
series may, under certain circumstances, rescind and annul such
acceleration.
The trustee will be required to give notice to the holders of
debt securities within 90 days after a default under the
applicable indenture unless the default has been cured or
waived. The trustee may withhold notice to the holders of any
series of debt securities of any default with respect to that
series, except a default in the payment of the principal of or
interest on any debt security of that series, if specified
responsible officers of the trustee in good faith determine that
withholding the notice is in the interest of the holders.
Except in cases of default, where the trustee has some special
duties, the trustee is not required to take any action under the
applicable indenture at the request of any holders unless the
holders offer the trustee reasonable protection from expenses
and liability. We refer to this as an indemnity. If
reasonable indemnity satisfactory to it is provided, the holders
of a majority in principal amount of the outstanding securities
of the relevant series may direct the time, method and place of
conducting any lawsuit or other formal legal action seeking any
remedy available to the trustee. These majority holders may also
direct the trustee in performing any other action under the
applicable indenture, subject to certain limitations.
Before you bypass the trustee and bring your own lawsuit or
other formal legal action or take other steps to enforce your
rights or protect your interests relating to the debt
securities, the following must occur:
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you must give the trustee written notice that an event of
default has occurred and remains uncured;
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the holders of at least a majority in principal amount of all
outstanding securities of the relevant series must make a
written request that the trustee take action because of the
default, and must offer reasonable indemnity to the trustee
against the cost and other liabilities of taking that
action; and
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the trustee must have not taken action for 60 days after
receipt of the notice and offer of indemnity.
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However, you are entitled at any time to bring a lawsuit for the
payment of money due on your security after its due date.
Every year we will furnish to the trustee a written statement by
certain of our officers certifying that to their knowledge we
are in compliance with the applicable indenture, or else
specifying any default.
Modification
of an Indenture
There are three types of changes we can make to the indentures
and the debt securities:
Changes Requiring Your Approval. First, there
are changes we cannot make to your debt securities without your
specific approval. The following is a list of those types of
changes:
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change the stated maturity of the principal or interest on a
debt security;
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reduce any amounts due on a debt security;
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reduce the amount of principal payable upon acceleration of the
maturity of a debt security following a default;
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change the currency of payment on a debt security;
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impair your right to sue for payment;
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modify the subordination provisions, if any, in a manner that is
adverse to you;
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reduce the percentage of holders of debt securities whose
consent is needed to modify or amend an indenture or to waive
compliance with certain provisions of an indenture;
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reduce the percentage of holders of debt securities whose
consent is needed to waive past defaults or change certain
provisions of the indenture relating to waivers of
default; or
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waive a default or event of default in the payment of principal,
interest, or premium, if any, on the debt securities.
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Changes Requiring A Majority Vote. The second
type of change is the kind that requires the vote of holders of
debt securities owning a majority of the principal amount of the
particular series affected. Most changes fall into this
category, except for clarifying changes and certain other
changes that would not materially adversely affect holders of
the debt securities. We require the same vote to obtain a waiver
of a past default; however, we cannot obtain a waiver of a
payment default or any other aspect of an indenture or the debt
securities listed in the first category described above under
Changes Requiring Your Approval unless we
obtain your individual consent to the waiver.
Changes Not Requiring Approval. The third type
of change does not require any vote by holders of debt
securities. This type is limited to clarifications and certain
other changes that would not materially adversely affect holders
of the debt securities.
Further Details Concerning Voting. Debt
securities are not considered outstanding, and therefore the
holders of debt securities are not eligible to vote on matters
relating thereto, if we have deposited or set aside in trust for
such holders money for payment or redemption of debt securities
or if we or one of our affiliates own the debt securities. The
holders of debt securities are also not eligible to vote if the
debt securities have been fully defeased as described below
under Discharge, Defeasance and Covenant
Defeasance Full Defeasance.
Discharge,
Defeasance and Covenant Defeasance
Discharge. We may discharge some obligations
to holders of any series of debt securities that either have
become due and payable or will become due and payable within one
year, or scheduled for redemption within one year, by
irrevocably depositing with the trustee, in trust, funds in the
applicable currency in an amount sufficient to pay the debt
securities, including any premium and interest.
Full Defeasance. We can, under particular
circumstances, effect a full defeasance of your series of debt
securities. By this we mean we can legally release ourselves
from any payment or other obligations on the debt securities if,
among other things, we put in place the arrangements described
below to repay you and deliver certain certificates and opinions
to the trustee:
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we must deposit in trust for your benefit and the benefit of all
other direct holders of the debt securities a combination of
money or U.S. government or U.S. government agency
notes or bonds or, in some circumstances, depositary receipts
representing these notes or bonds, that will generate enough
cash to make interest, principal and any other payments on the
debt securities on their various due dates;
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under current federal income tax law, the deposit and our legal
release from the debt securities would be treated as though we
redeemed your debt securities in exchange for your share of the
cash and notes or bonds deposited in trust. This treatment would
result in sale or exchange treatment of your notes, which would
cause you to recognize gain or loss equal to the amount
described in Item 1 Business
Taxation U.S. Federal Income Tax
Considerations U.S. Federal Income and Estate
Taxation of Holders of Our Debt Securities
U.S. Holders Sale, Exchange or Other
Disposition of Notes included in our most recent Annual
Report on
Form 10-K; and
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we must deliver to the trustee a legal opinion confirming the
tax law change described above.
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If we did accomplish full defeasance, you would have to rely
solely on the trust deposit for repayment on the debt
securities. You could not look to us for repayment in the
unlikely event of any shortfall. Conversely, the trust deposit
would most likely be protected from claims of our lenders and
other creditors if we ever became bankrupt or insolvent. You
would also be released from any subordination provisions.
Covenant Defeasance. Under current federal
income tax law, we can make the same type of deposit described
above and be released from some of the restrictive covenants in
the debt securities. This is called covenant
defeasance. In that event, you would lose the protection
of those restrictive covenants but would gain the
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protection of having money and securities set aside in trust to
repay the securities and you would be released from any
subordination provisions.
If we did accomplish covenant defeasance, the following
provisions of an indenture and the debt securities would no
longer apply:
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any covenants applicable to the series of debt securities and
described in the applicable prospectus supplement;
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any subordination provisions; and
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certain events of default relating to breach of covenants and
acceleration of the maturity of other debt set forth in any
prospectus supplement.
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If we did accomplish covenant defeasance, you could still look
to us for repayment of the debt securities if a shortfall in the
trust deposit occurred. If one of the remaining events of
default occurred, for example, our bankruptcy, and the debt
securities became immediately due and payable, there may be a
shortfall. Depending on the event causing the default, you may
not be able to obtain payment of the shortfall.
Subordination
We will describe in the applicable prospectus supplement the
terms and conditions, if any, upon which any series of senior
subordinated securities or junior subordinated securities is
subordinated to debt securities of another series or to our
other indebtedness. The terms will include a description of:
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the indebtedness ranking senior to the debt securities being
offered;
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the restrictions, if any, on payments to the holders of the debt
securities being offered while a default with respect to the
senior indebtedness is continuing;
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the restrictions, if any, on payments to the holders of the debt
securities being offered following an event of default; and
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provisions requiring holders of the debt securities being
offered to remit some payments to holders of senior indebtedness.
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Guarantees
Our payment obligations under any series of our debt securities
may be guaranteed by some or all of our subsidiaries. The
guarantees may be secured or unsecured and may be senior or
subordinated obligations. The guarantors will be identified and
the terms of the guarantees will be described in the applicable
prospectus supplement.
Global
Securities
If so set forth in the applicable prospectus supplement, we may
issue the debt securities of a series in whole or in part in the
form of one or more global securities that will be deposited
with a depositary identified in the prospectus supplement. We
may issue global securities in either registered or bearer form
and in either temporary or permanent form. The specific terms of
the depositary arrangement with respect to any series of debt
securities will be described in the prospectus supplement.
DESCRIPTION
OF OUR COMMON STOCK
The following is a summary of certain terms of our common stock.
Because this summary is not complete, you should refer to our
certificate of incorporation and by-laws, which documents
provide additional information regarding our common stock. See
also Description of Certain Provisions of Our Certificate
of Incorporation and By-Laws below. Copies of our
certificate of incorporation and by-laws, as amended, are
incorporated by reference as exhibits to the registration
statement of which this prospectus is a part. This summary is
also subject to and qualified by reference to the description of
the particular terms of the securities described in the
applicable prospectus supplement.
Common stockholders are entitled to receive dividends when
declared by the board of directors and after payment of, or
provision for, full cumulative dividends on and any required
redemptions of shares of preferred stock
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then outstanding. Common stockholders have one vote per share,
and there are no cumulative voting rights. If we are voluntarily
or involuntarily liquidated or dissolved, common stockholders
are to share ratably in our distributable assets remaining after
the satisfaction of all of our debts and liabilities and the
preferred stockholders prior preferential rights. Common
stockholders do not have preemptive rights. The common stock
will be, when issued, fully paid and nonassessable. The common
stock is subject to restrictions on transfer under certain
circumstances described under Restrictions on Transfer of
Securities below. The transfer agent for our common stock
is BNY Mellon Shareowner Services.
The rights, preferences and privileges of holders of our common
stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of our preferred
stock which are outstanding or which we may designate and issue
in the future. See Description of Our Preferred
Stock below.
DESCRIPTION
OF OUR PREFERRED STOCK
The following is a summary description of the material terms of
our shares of preferred stock. Because it is a summary, it does
not contain all of the information that may be important to you.
If you want more information, you should read our certificate of
incorporation and by-laws, copies of which are incorporated by
reference as exhibits to the registration statement of which
this prospectus is a part. This summary is also subject to and
qualified by reference to the description of the particular
terms of the securities described in the applicable prospectus
supplement.
General
Our board of directors or a duly authorized committee thereof
will determine the designations, preferences, limitations and
relative rights of our authorized and unissued preferred shares.
These may include:
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the distinctive designation of each series and the number of
shares that will constitute the series;
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the voting rights, if any, of shares of the series;
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the distribution rate on the shares of the series, any
restriction, limitation or condition upon the payment of the
distribution, whether distributions will be cumulative, and the
dates on which distributions are payable;
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if the shares are redeemable, the prices at which, and the terms
and conditions on which, the shares of the series may be
redeemed;
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the purchase or sinking fund provisions, if any, for the
purchase or redemption of shares of the series;
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any preferential amount payable upon shares of the series upon
our liquidation or the distribution of our assets;
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if the shares are convertible, the price or rates of conversion
at which, and the terms and conditions on which, the shares of
the series may be converted into other securities; and
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whether the series can be exchanged, at our option, into debt
securities, and the terms and conditions of any permitted
exchange.
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The issuance of preferred shares, or the issuance of rights to
purchase preferred shares, could discourage an unsolicited
acquisition proposal. In addition, the rights of holders of
common shares will be subject to, and may be adversely affected
by, the rights of holders of any preferred shares that we may
issue in the future.
The following describes some general terms and provisions of the
preferred shares to which a prospectus supplement may relate.
The statements below describing the preferred shares are in all
respects subject to and qualified in their entirety by reference
to the applicable provisions of our certificate of
incorporation, including any applicable certificate of
designation, and our by-laws.
The prospectus supplement will describe the specific terms as to
each issuance of preferred shares, including:
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the description of the preferred shares;
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the number of preferred shares offered;
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the offering price of the preferred shares;
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the distribution rate, when distributions will be paid, or the
method of determining the distribution rate if it is based on a
formula or not otherwise fixed;
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the date from which distributions on the preferred shares shall
accumulate;
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the voting rights, if any, of the holders of the preferred
shares;
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the provisions for any auctioning or remarketing, if any, of the
preferred shares;
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the provision, if any, for redemption or a sinking fund;
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the liquidation preference per share;
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any listing of the preferred shares on a securities exchange;
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whether the preferred shares will be convertible and, if so, the
security into which they are convertible and the terms and
conditions of conversion, including the conversion price or the
manner of determining it;
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whether interests in the shares of preferred stock will be
represented by depositary shares as more fully described below
under Description of Depositary Shares;
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a discussion of federal income tax considerations;
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the relative ranking and preferences of the preferred shares as
to distribution and liquidation rights;
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any limitations on issuance of any preferred shares ranking
senior to or on a parity with the series of preferred shares
being offered as to distribution and liquidation rights;
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any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate to
preserve our status as a real estate investment trust; and
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any other specific terms, preferences, rights, limitations or
restrictions of the preferred shares.
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As described under Description of Depositary Shares,
we may, at our option, elect to offer depositary shares
evidenced by depositary receipts. If we elect to do this, each
depositary receipt will represent a fractional interest in a
share of the particular series of preferred stock issued and
deposited with a depositary. The applicable prospectus
supplement will specify that fractional interest.
Rank
Unless our board of directors otherwise determines and we so
specify in the applicable prospectus supplement, we expect that
the preferred shares will, with respect to distribution rights
and rights upon liquidation or dissolution, rank senior to all
of our common shares.
Distributions
Holders of preferred shares of each series will be entitled to
receive cash
and/or share
distributions at the rates and on the dates shown in the
applicable prospectus supplement. Even though the preferred
shares may specify a fixed rate of distribution, our board of
directors must authorize and declare those distributions and
they may be paid only out of assets legally available for
payment. We will pay each distribution to holders of record as
they appear on our share transfer books on the record dates
fixed by our board of directors. In the case of shares of
preferred stock represented by depositary receipts, the records
of the depositary referred to under Description of
Depositary Shares will determine the persons to whom
dividends are payable.
Distributions on any series of preferred shares may be
cumulative or noncumulative, as provided in the applicable
prospectus supplement. We refer to each particular series, for
ease of reference, as the applicable series. Cumulative
distributions will be cumulative from and after the date shown
in the applicable prospectus supplement. If our board of
directors fails to authorize a distribution on any applicable
series that is noncumulative, the holders will have no right to
receive, and we will have no obligation to pay, a distribution
in respect of the applicable distribution period, whether or not
distributions on that series are declared payable in the future.
If the applicable series is entitled to a cumulative
distribution, we may not declare, or pay or set aside for
payment, any full distributions on any other series of preferred
shares ranking, as to distributions, on a parity with or junior
to the applicable series, unless we declare, and either pay or
set aside for payment, full cumulative distributions on the
applicable series for all past distribution periods and the then
current distribution period. If the applicable series does not
have a cumulative distribution, we must declare, and pay or set
aside for payment, full distributions for the
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then current distribution period only. When distributions are
not paid, or set aside for payment, in full upon any applicable
series and the shares of any other series ranking on a parity as
to distributions with the applicable series, we must declare,
and pay or set aside for payment, all distributions upon the
applicable series and any other parity series proportionately,
in accordance with accrued and unpaid distributions of the
several series. For these purposes, accrued and unpaid
distributions do not include unpaid distribution periods on
noncumulative preferred shares. No interest will be payable in
respect of any distribution payment that may be in arrears.
Except as provided in the immediately preceding paragraph,
unless we declare, and pay or set aside for payment, full
cumulative distributions, including for the then current period,
on any cumulative applicable series, we may not declare, or pay
or set aside for payment, any distributions upon common shares
or any other equity securities ranking junior to or on a parity
with the applicable series as to distributions or upon
liquidation. The foregoing restriction does not apply to
distributions paid in common shares or other equity securities
ranking junior to the applicable series as to distributions and
upon liquidation. If the applicable series is noncumulative, we
need only declare, and pay or set aside for payment, the
distribution for the then current period, before declaring
distributions on common shares or junior or parity securities.
In addition, under the circumstances that we could not declare a
distribution, we may not redeem, purchase or otherwise acquire
for any consideration any common shares or other parity or
junior equity securities, except upon conversion into or
exchange for common shares or other junior equity securities. We
may, however, make purchases and redemptions otherwise
prohibited pursuant to certain redemptions or pro rata offers to
purchase the outstanding shares of the applicable series and any
other parity series of preferred shares.
We will credit any distribution payment made on an applicable
series first against the earliest accrued but unpaid
distribution due with respect to the series.
Redemption
We may have the right or may be required to redeem one or more
series of preferred shares, as a whole or in part, in each case
upon the terms, if any, and at the times and at the redemption
prices shown in the applicable prospectus supplement.
If a series of preferred shares is subject to mandatory
redemption, we will specify in the applicable prospectus
supplement the number of shares we are required to redeem, when
those redemptions start, the redemption price, and any other
terms and conditions affecting the redemption. The redemption
price will include all accrued and unpaid distributions, except
in the case of noncumulative preferred shares. The redemption
price may be payable in cash or other property, as specified in
the applicable prospectus supplement. If the redemption price
for preferred shares of any series is payable only from the net
proceeds of our issuance of shares of capital stock, the terms
of the preferred shares may provide that, if no shares of such
capital stock shall have been issued or to the extent the net
proceeds from any issuance are insufficient to pay in full the
aggregate redemption price then due, the preferred shares will
automatically and mandatorily be converted into shares of the
applicable capital stock pursuant to conversion provisions
specified in the applicable prospectus supplement.
Liquidation
Preference
The applicable prospectus supplement will show the liquidation
preference of the applicable series. Upon our voluntary or
involuntary liquidation, before any distribution may be made to
the holders of our common shares or any other shares of capital
stock ranking junior in the distribution of assets upon any
liquidation to the applicable series, the holders of that series
will be entitled to receive, out of our assets legally available
for distribution to stockholders, liquidating distributions in
the amount of the liquidation preference, plus an amount equal
to all distributions accrued and unpaid. In the case of a
noncumulative applicable series, accrued and unpaid
distributions include only the then current distribution period.
Unless otherwise provided in the applicable prospectus
supplement, after payment of the full amount of the liquidating
distributions to which they are entitled, the holders of
preferred shares will have no right or claim to any of our
remaining assets. If liquidating distributions shall have been
made in full to all holders of preferred shares, our remaining
assets will be distributed among the holders of any other shares
of capital stock ranking junior to the preferred shares upon
liquidation, according to their rights and preferences and in
each case according to their number of shares.
If, upon any voluntary or involuntary liquidation, our available
assets are insufficient to pay the amount of the liquidating
distributions on all outstanding shares of that series and the
corresponding amounts payable on all shares
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of capital stock ranking on a parity in the distribution of
assets with that series, then the holders of that series and all
other equally ranking shares of capital stock shall share
ratably in the distribution in proportion to the full
liquidating distributions to which they would otherwise be
entitled. For these purposes, our consolidation or merger with
or into any other corporation or other entity, or the sale,
lease or conveyance of all or substantially all of our property
or business, shall not be deemed to constitute a liquidation.
Voting
Rights
Holders of the preferred shares will not have any voting rights,
except as described below or as otherwise from time to time
required by law or as specified in the applicable prospectus
supplement. As more fully described under Description of
Depositary Shares below, if we elect to issue depositary
shares, each representing a fraction of a share of a series of
preferred stock, each holder thereof will in effect be entitled
to a fraction of a vote per depositary share.
Unless otherwise provided for in an applicable series, so long
as any preferred shares are outstanding, we may not, without the
affirmative vote or consent of the holders of a majority of the
shares (or such greater vote or consent as is required by the
then current rules of any stock exchange or trading market on
which we shall have listed the applicable series of preferred
stock for trading or as otherwise provided in our organizational
documents) of each series of preferred shares outstanding at
that time:
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authorize, create or increase the authorized or issued amount of
any class or series of shares of capital stock ranking senior to
that series of preferred shares with respect to distribution and
liquidation rights;
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reclassify any authorized shares of capital stock into a series
of shares of capital stock ranking senior to that series of
preferred shares with respect to distribution and liquidation
rights;
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create, authorize or issue any security or obligation
convertible into or evidencing the right to purchase any shares
of capital stock ranking senior to that series of preferred
shares with respect to distribution and liquidation
rights; and
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amend, alter or repeal the provisions of our certificate of
incorporation relating to that series of preferred shares that
materially and adversely affects the series of preferred shares.
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The authorization, creation or increase of the authorized or
issued amount of any class or series of shares of capital stock
ranking on parity with or junior to a series of preferred shares
with respect to distribution and liquidation rights will not be
deemed to materially and adversely affect that series.
Conversion
Rights
We will describe in the applicable prospectus supplement the
terms and conditions, if any, upon which you may, or we may
require you to, convert shares of any series of preferred shares
into common shares or any other class or series of shares of
capital stock. The terms will include the number of common
shares or other capital stock into which the preferred shares
are convertible, the conversion price or manner of determining
it, the conversion period, provisions as to whether conversion
will be at the option of the holders of the series or at our
option, the events requiring an adjustment of the conversion
price, and provisions affecting conversion upon the redemption
of shares of the series.
Our
Exchange Rights
We will describe in the applicable prospectus supplement the
terms and conditions, if any, upon which we can require you to
exchange shares of any series of preferred shares for debt
securities. If an exchange is required, you will receive debt
securities with a principal amount equal to the liquidation
preference of the applicable series of preferred shares. The
other terms and provisions of the debt securities will not be
materially less favorable to you than those of the series of
preferred shares being exchanged.
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DESCRIPTION
OF DEPOSITARY SHARES
This section describes the general terms and provisions of
shares of preferred stock represented by depositary shares. The
applicable prospectus supplement will describe the specific
terms of the depositary shares offered through that prospectus
supplement and any general terms outlined in this section that
will not apply to those depositary shares.
We have summarized in this section certain terms and provisions
of the deposit agreement, the depositary shares and the receipts
representing depositary shares. The summary is not complete. You
should read the forms of deposit agreement and depositary
receipt that we will file with the SEC at or before the time of
the offering of the depositary shares for additional information
before you buy any depositary shares.
General
We may, at our option, elect to offer fractional interests in
shares of preferred stock, rather than shares of preferred
stock. If we exercise this option, we will appoint a depositary
to issue depositary receipts representing those fractional
interests. Shares of preferred stock of each series represented
by depositary shares will be deposited under a separate deposit
agreement between us and the depositary. The prospectus
supplement relating to a series of depositary shares will
provide the name and address of the depositary. Subject to the
terms of the applicable deposit agreement, each owner of
depositary shares will be entitled to all of the dividend,
voting, conversion, redemption, liquidation and other rights and
preferences of the shares of preferred stock represented by
those depositary shares.
Depositary receipts issued pursuant to the applicable deposit
agreement will evidence ownership of depositary shares. Upon
surrender of depositary receipts at the office of the
depositary, and upon payment of the charges provided in and
subject to the terms of the deposit agreement, a holder of
depositary shares will be entitled to receive the shares of
preferred stock underlying the surrendered depositary receipts.
Distributions
A depositary will be required to distribute all dividends or
other cash distributions received in respect of the applicable
shares of preferred stock to the record holders of depositary
receipts evidencing the related depositary shares in proportion
to the number of depositary receipts owned by the holders.
Fractions will be rounded down to the nearest whole cent.
If the distribution is other than in cash, a depositary will be
required to distribute property received by it to the record
holders of depositary receipts entitled thereto, unless the
depositary determines that it is not feasible to make the
distribution. In that case, the depositary may, with our
approval, sell the property and distribute the net proceeds from
the sale to the holders of depositary shares.
Depositary shares that represent shares of preferred stock
converted or exchanged will not be entitled to distributions.
The deposit agreement also will contain provisions relating to
the manner in which any subscription or similar rights we offer
to holders of shares of preferred stock will be made available
to holders of depositary shares. All distributions will be
subject to obligations of holders to file proofs, certificates
and other information and to pay certain charges and expenses to
the depositary.
Withdrawal
of Shares of Preferred Stock
You may receive the number of whole shares of your series of
preferred stock and any money or other property represented by
your depositary receipts after surrendering your depositary
receipts at the corporate trust office of the depositary.
Partial shares of preferred stock will not be issued. If the
depositary shares that you surrender exceed the number of
depositary shares that represent the number of whole shares of
preferred stock you wish to withdraw, then the depositary will
deliver to you at the same time a new depositary receipt
evidencing the excess number of depositary shares. Once you have
withdrawn your shares of preferred stock, you will not be
entitled to re-deposit those shares of preferred stock under the
deposit agreement in order to receive depositary shares. We do
not expect that there will be any public trading market for
withdrawn shares of preferred stock.
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Redemption
of Depositary Shares
If we redeem a series of the preferred stock underlying the
depositary shares, the depositary will redeem those shares from
the proceeds it receives. The redemption price per depositary
share will be equal to the applicable fraction of the redemption
price per share payable with respect to the series of the
preferred stock. The redemption date for depositary shares will
be the same as that of the preferred stock. If we are redeeming
less than all of the depositary shares, the depositary will
select the depositary shares we are redeeming by lot or pro rata
as the depositary may determine.
After the date fixed for redemption, the depositary shares
called for redemption will no longer be deemed outstanding. All
rights of the holders of the depositary shares and the related
depositary receipts will cease at that time, except the right to
receive the money or other property to which the holders of
depositary shares were entitled upon redemption. Receipt of the
money or other property is subject to surrender to the
depositary of the depositary receipts evidencing the redeemed
depositary shares.
Voting of
the Underlying Shares of Preferred Stock
Upon receipt of notice of any meeting at which the holders of
the preferred stock are entitled to vote, a depositary will be
required to mail the information contained in the notice of
meeting to the record holders of the depositary shares
representing such preferred stock. Each record holder of
depositary receipts on the record date will be entitled to
instruct the depositary as to how the holders depositary
shares will be voted. The record date for the depositary shares
will be the same as the record date for the preferred stock. The
depositary will vote the shares as you instruct. We will agree
to take all reasonable action that the depositary deems
necessary in order to enable it to vote the preferred stock in
that manner. If you do not instruct the depositary how to vote
your shares, the depositary will abstain from voting those
shares. The depositary will not be responsible for any failure
to carry out any voting instruction, or for the manner or effect
of any vote, as long as its action or inaction is in good faith
and does not result from its negligence or willful misconduct.
Liquidation
Preference
Upon our liquidation, whether voluntary or involuntary, each
holder of depositary shares will be entitled to the fraction of
the liquidation preference accorded each share of preferred
stock represented by the depositary shares, as described in the
applicable prospectus supplement.
Conversion
or Exchange of Shares of Preferred Stock
The depositary shares will not themselves be convertible into or
exchangeable for shares of common stock or preferred stock or
any of our other securities or property. Nevertheless, if so
specified in the applicable prospectus supplement, the
depositary receipts may be surrendered by holders to the
applicable depositary with written instructions to it to
instruct us to cause the conversion of the preferred stock
represented by the depositary shares. Similarly, if so specified
in the applicable prospectus supplement, we may require you to
surrender all of your depositary receipts to the applicable
depositary upon our requiring the conversion or exchange of the
preferred stock represented by the depositary shares into our
debt securities. We will agree that, upon receipt of the
instruction and any amounts payable in connection with the
conversion or exchange, we will cause the conversion or exchange
using the same procedures as those provided for delivery of
shares of preferred stock to effect the conversion or exchange.
If you are converting only a part of the depositary shares, the
depositary will issue you a new depositary receipt for any
unconverted depositary shares.
Amendment
and Termination of a Deposit Agreement
We and the applicable depositary are permitted to amend the
provisions of the depositary receipts and the deposit agreement.
However, the holders of at least a majority of the applicable
depositary shares then outstanding (or such greater approval as
is required by the then current rules of any stock exchange or
trading market on which we shall have listed the applicable
underlying series of preferred stock for trading or as otherwise
provided in our organizational documents) must approve any
amendment that adds or increases fees or charges or prejudices
an
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important right of holders. Every holder of an outstanding
depositary receipt at the time any amendment becomes effective,
by continuing to hold the receipt, will be bound by the
applicable deposit agreement, as amended.
Any deposit agreement may be terminated by us upon not less than
30 days prior written notice to the applicable
depositary if (1) the termination is necessary to preserve
our status as a REIT or (2) a majority of each series of
preferred stock affected by the termination consents to the
termination. When either event occurs, the depositary will be
required to deliver or make available to each holder of
depositary receipts, upon surrender of the depositary receipts
held by the holder, the number of whole or fractional shares of
preferred stock as are represented by the depositary shares
evidenced by the depositary receipts, together with any other
property held by the depositary with respect to the depositary
receipts. In addition, a deposit agreement will automatically
terminate if:
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all depositary shares have been redeemed;
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there shall have been a final distribution in respect of the
related preferred stock in connection with our liquidation and
the distribution has been made to the holders of depositary
receipts evidencing the depositary shares underlying the
preferred stock; or
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each related share of preferred stock shall have been converted
or exchanged into securities not represented by depositary
shares.
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Charges
of a Depositary
We will pay all transfer and other taxes and governmental
charges arising solely from the existence of a deposit
agreement. In addition, we will pay the fees and expenses of a
depositary in connection with the initial deposit of the
preferred stock and any redemption of preferred stock. However,
holders of depositary receipts will pay any transfer or other
governmental charges and the fees and expenses of a depositary
for any duties the holders request to be performed that are
outside of those expressly provided for in the applicable
deposit agreement.
Resignation
and Removal of a Depositary
A depositary may resign at any time by providing us notice of
its election to resign. In addition, we may at any time remove a
depositary. Any resignation or removal will take effect when we
appoint a successor depositary and it accepts the appointment.
We must appoint a successor depositary within 60 days after
delivery of the notice of resignation or removal. A depositary
must be a bank or trust company that has its principal office in
the United States and a combined capital and surplus of at least
$50 million.
Miscellaneous
A depositary will be required to forward to holders of
depositary receipts any reports and communications from us that
it receives with respect to the related shares of preferred
stock. Holders of depository receipts will be able to inspect
the transfer books of the depository and the list of holders of
receipts upon reasonable notice. Neither we nor any depositary
will be liable if either party is prevented from or delayed in
performing its obligations under a deposit agreement by law or
any circumstances beyond its control. Our obligations and those
of the depositary under a deposit agreement will be limited to
performing duties in good faith and without gross negligence or
willful misconduct.
Neither we nor any depositary will be obligated to prosecute or
defend any legal proceeding in respect of any depositary
receipts, depositary shares or related shares of preferred stock
unless satisfactory indemnity is furnished. We and each
depositary will be permitted to rely on written advice of
counsel or accountants, on information provided by persons
presenting shares of preferred stock for deposit, by holders of
depositary receipts, or by other persons believed in good faith
to be competent to give the information, and on documents
believed in good faith to be genuine and signed by a proper
party.
If a depositary receives conflicting claims, requests or
instructions from any holder of depositary receipts, on the one
hand, and us, on the other hand, the depositary shall be
entitled to act on the claims, requests or instructions received
from us.
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DESCRIPTION
OF WARRANTS
This section describes the general terms and provisions of the
warrants. The applicable prospectus supplement will describe the
specific terms of the warrants offered through that prospectus
supplement and any general terms outlined in this section that
will not apply to those warrants.
We have summarized in this section certain terms and provisions
of the warrant agreement and the warrants. The summary is not
complete. You should read the forms of warrant and warrant
agreement that we will file with the SEC at or before the time
of the offering of the applicable series of warrants for
additional information before you buy any warrants.
We may issue, together with any other securities being offered
or separately, warrants entitling the holder to purchase from or
sell to us, or to receive from us the cash value of the right to
purchase or sell, debt securities, preferred stock, depositary
shares or common stock. We and a warrant agent will enter into a
warrant agreement pursuant to which the warrants will be issued.
The warrant agent will act solely as our agent in connection
with the warrants and will not assume any obligation or
relationship of agency or trust for or with any holders or
beneficial owners of warrants.
In the case of each series of warrants, the applicable
prospectus supplement will describe the terms of the warrants
being offered thereby. These include the following, if
applicable:
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the offering price;
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the number of warrants offered;
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the securities underlying the warrants;
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the exercise price, the procedures for exercise of the warrants
and the circumstances, if any, that will cause the warrants to
be automatically exercised;
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the date on which the warrants will expire;
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federal income tax consequences;
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the rights, if any, we have to redeem the warrants;
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the name of the warrant agent; and
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the other terms of the warrants.
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Warrants may be exercised at the appropriate office of the
warrant agent or any other office indicated in the applicable
prospectus supplement. Before the exercise of warrants, holders
will not have any of the rights of holders of the securities
underlying the warrants and will not be entitled to payments
made to holders of those securities.
The warrant agreements may be amended or supplemented without
the consent of the holders of the warrants to which the
amendment or supplement applies to effect changes that are not
inconsistent with the provisions of the warrants and that do not
adversely affect the interests of the holders of the warrants.
However, any amendment that materially and adversely alters the
rights of the holders of warrants will not be effective unless
the holders of at least a majority of the applicable warrants
then outstanding (or such greater approval as is required by the
then current rules of any stock exchange or trading market on
which we shall have listed the applicable underlying shares of
capital stock for trading or as otherwise provided in our
organizational documents) approve the amendment. Every holder of
an outstanding warrant at the time any amendment becomes
effective, by continuing to hold the warrant, will be bound by
the applicable warrant agreement, as amended. The prospectus
supplement applicable to a particular series of warrants may
provide that certain provisions of the warrants, including the
securities for which they may be exercisable, the exercise
price, and the expiration date, may not be altered without the
consent of the holder of each warrant.
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DESCRIPTION
OF UNITS
We may, from time to time, issue units comprised of one or more
of the other securities that may be offered under this
prospectus, in any combination. Each unit will be issued so that
the holder of the unit is also the holder of each security
included in the unit. Thus, the holder of a unit will have the
rights and obligations of a holder of each included security.
The unit agreement under which a unit is issued may provide that
the securities included in the unit may not be held or
transferred separately at any time, or at any time before a
specified date.
Any applicable prospectus supplement will describe:
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the material terms of the units and of the securities comprising
the units, including whether and under what circumstances those
securities may be held or transferred separately;
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any material provisions relating to the issuance, payment,
settlement, transfer or exchange of the units or of the
securities comprising the units;
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any special federal income tax considerations applicable to the
units; and
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any material provisions of the governing unit agreement that
differ from those described above.
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RESTRICTIONS
ON TRANSFER OF SECURITIES
For us to qualify as a real estate investment trust, not more
than 50% in value of our outstanding capital stock may be owned,
directly or indirectly, by five or fewer individuals at any time
during the last half of our taxable year. In order to ensure
that this requirement is satisfied, our by-laws (with respect to
our common stock and preferred stock) and our certificates of
designation (for our preferred stock) provide that no person may
acquire securities that would result in the direct or indirect
beneficial ownership of more than 9.8% of our common stock or
more than 9.8% in value of our outstanding capital stock by such
person. For purposes of application of such limitations to any
person, all options, warrants, convertible securities or other
rights to acquire our common stock held directly or indirectly
by such person will be treated as if all such rights had been
exercised. If any securities in excess of this limit are issued
or transferred to any person, such issuance or transfer shall be
valid only with respect to such amount of securities as does not
exceed this limit, and such issuance or transfer will be void
with respect to the excess. The board of directors may grant
limited exemptions from the ownership restrictions set forth in
the by-laws to specified persons if the board determines that
each such limited exemption is in the best interests of us and
our stockholders.
Our by-laws and certificates of designation further provide
that, if the foregoing stock ownership limitations are
determined to be invalid by virtue of any legal decision,
statute, rule or regulation, then the transferee of the shares
or other securities will be deemed to have acted as our agent in
acquiring the shares or other securities that are in excess of
the limit, and will be deemed to hold such excess shares or
securities on our behalf. As the equivalent of treasury
securities for such purposes, the excess securities will not be
entitled to any voting rights, will not be considered to be
outstanding for quorum or voting purposes, and will not be
entitled to receive dividends, interest or any other
distribution with respect to such securities. Any person who
receives dividends, interest or any other distribution in
respect of the excess securities will hold the same as our agent
and for the transferee of the excess securities following a
permitted transfer.
In addition, under our by-laws and certificates of designation,
we may refuse to transfer any shares, passing either by
voluntary transfer, by operation of law, or under the last will
and testament of any stockholder, if such transfer would or
might, in the opinion of our board of directors or counsel,
disqualify us as a real estate investment trust.
20
DESCRIPTION
OF CERTAIN PROVISIONS OF OUR CERTIFICATE OF
INCORPORATION AND BY-LAWS
Anti-Takeover
Provisions
Our certificate of incorporation and by-laws contain provisions
that may have the effect of discouraging persons from acquiring
large blocks of our stock or delaying or preventing a change in
our control. The material provisions that may have such an
effect are:
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Classification of our board of directors into three classes with
the term of only one class expiring each year.
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A provision permitting our board of directors to make, amend or
repeal our by-laws.
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Authorization for our board of directors to issue preferred
stock in series and to fix the rights and preferences of the
series, including, among other things, whether and to what
extent the shares of any series will have voting rights and the
extent of the preferences of the shares of any series with
respect to dividends and other matters (see Description of
Our Preferred Stock above).
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A prohibition on stockholders taking action by written consent
in lieu of a meeting.
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Advance notice procedures with respect to nominations of
directors by stockholders and proposals by stockholders of
business at an annual meeting.
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The grant only to our board of directors of the right to call
special meetings of stockholders.
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Limitations on the number of shares of our capital stock that
may be beneficially owned, directly or indirectly, by any one
stockholder (see Restrictions on Transfer of
Securities above).
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Limitations on transactions that involve us and any stockholder
who beneficially owns 5% or more of our voting stock (see
Limitations on Transactions Involving Us and Our
Stockholders below).
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A provision permitting amendment by the stockholders of certain
of the provisions listed above only by an affirmative vote of
the holders of at least three-quarters of all of the outstanding
shares of our voting stock, voting together as a single class.
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Limitations
on Transactions Involving Us and Our Stockholders
Under our by-laws, in addition to any vote otherwise required by
law, our certificate of incorporation or our by-laws, the
following transactions will require the affirmative vote of the
holders of at least 75% of the voting power of our then
outstanding shares of capital stock entitled to vote generally
in the election of directors, voting together as a single class:
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Our merger or consolidation with or into
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any stockholder that owns 5% or more of our voting stock; or
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any other corporation or entity which is, or after such merger
or consolidation would be, an affiliate of a stockholder that
owns 5% or more of our voting stock.
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Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of substantially all of our assets, in one
transaction or a series of transactions, to or with any
stockholder that owns 5% or more of our voting stock or an
affiliate of any such stockholder.
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Any reclassification of our securities, including any reverse
stock split, or recapitalization or any other transaction that
has the effect, directly or indirectly, of increasing the
proportionate share of the outstanding shares of any class of
our equity securities that is directly or indirectly owned by
any stockholder that owns 5% or more of our voting stock or any
affiliate of such a stockholder, whether or not the transaction
involves such a stockholder.
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The adoption of any plan or proposal for our liquidation or
dissolution proposed by or on behalf of a stockholder that owns
5% or more of our voting stock or any affiliate of such a
stockholder.
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These provisions will not apply to any of the transactions
described above if:
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We are at the time of the consummation of the transaction, and
at all times throughout the preceding twelve months have been,
directly or indirectly, the owner of a majority of each class of
the outstanding equity securities of the 5% stockholder that is
a party to the transaction; or
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The transaction has been approved by a majority of the members
of our board of directors who, at the time such approval is
given, were not affiliates or nominees of the 5%
stockholder; or
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Both of the following conditions have been met:
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the aggregate amount of the cash and the fair market value, as
determined in good faith by our board of directors, of the
consideration other than cash to be received per share by
holders of our voting stock in such transaction shall be at
least equal to the highest per share price paid by the 5%
stockholder for any shares of voting stock acquired by it:
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within the two-year period immediately prior to the first public
announcement of the proposal of the transaction, or
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in the transaction in which it became a 5% stockholder,
whichever is higher; and
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the consideration to be received by holders of a particular
class of outstanding voting stock shall be in cash or in the
same form as the 5% stockholder previously paid for shares of
such voting stock. If the 5% stockholder paid for shares of any
class of voting stock with varying forms of consideration, the
form of consideration to be paid by the 5% stockholder for such
class of voting stock shall be either cash or the form used to
acquire the largest number of shares of such class of voting
stock previously acquired by the stockholder.
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The foregoing summary of certain provisions of our certificate
of incorporation and by-laws 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 our
certificate of incorporation and by-laws, copies of which are
incorporated by reference as exhibits to the registration
statement of which this prospectus is a part.
PLAN OF
DISTRIBUTION
We may sell the securities:
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through underwriters or dealers;
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through agents;
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directly to purchasers; or
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through a combination of any of these methods of sale.
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The applicable prospectus supplement will describe the plan of
distribution of the securities and the terms of the offering and
will name any underwriter or agent involved in the offer and
sale of the securities. Direct sales to investors or our
stockholders may be accomplished through subscription offerings
or through stockholder purchase rights distributed to
stockholders. In connection with subscription offerings or the
distribution of stockholder purchase rights to stockholders, if
all of the underlying securities are not subscribed for, we may
sell any unsubscribed securities to third parties directly or
through underwriters or agents. In addition, whether or not all
of the underlying securities are subscribed for, we may
concurrently offer additional securities to third parties
directly or through underwriters or agents. If securities are to
be sold through stockholder purchase rights, the stockholder
purchase rights will be distributed as a dividend to the
stockholders for which they will pay no separate consideration.
The prospectus supplement with respect to the offer of
securities under stockholder purchase rights will set forth the
relevant terms of the stockholder purchase rights, including:
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whether common stock, preferred stock or some other type of
capital stock, or warrants for those securities, will be offered
under the stockholder purchase rights;
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the number of those securities or warrants that will be offered
under the stockholder purchase rights;
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the period during which and the price at which the stockholder
purchase rights will be exercisable;
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the number of stockholder purchase rights then outstanding;
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any provisions for changes to or adjustments in the exercise
price of the stockholder purchase rights; and
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any other material terms of the stockholder purchase rights.
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Underwriters and our agents may offer and sell the securities at:
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fixed prices, which may be changed;
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prices related to the prevailing market prices at the time of
sale; or
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negotiated prices.
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We also may, from time to time, authorize underwriters and our
agents to offer and sell the securities upon the terms and
conditions as are set forth in the applicable prospectus
supplement. In connection with the sale of securities,
underwriters may be deemed to have received compensation from us
in the form of underwriting discounts, commissions or fees and
may also receive commissions from purchasers of securities for
whom they may act as agent. Underwriters may sell securities to
or through dealers, and these dealers may receive compensation
in the form of discounts, concessions or commissions from the
underwriters or commissions from the purchasers for whom they
may act as agent, or both. The applicable prospectus supplement
will disclose:
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any underwriting compensation we pay to underwriters or agents
in connection with the offering of securities; and
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any discounts, concessions or commissions allowed by
underwriters to participating dealers.
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Under the Securities Act, underwriters, dealers and agents
participating in the distribution of the securities may be
deemed to be underwriters and any discounts, commissions and
fees received by them and any profit realized by them on resale
of the securities may be deemed to be underwriting compensation,
discounts and commissions. We may agree to indemnify
underwriters, dealers and agents against civil liabilities,
including liabilities under the Securities Act, and to make
contribution to them in connection with those liabilities.
If indicated in the applicable prospectus supplement, we may
also offer and sell securities through one or more firms that
will remarket the securities. These firms may act as principals
for their own account or as our agents. These firms may be
deemed to be underwriters in connection with the securities
being remarketed. We may agree to indemnify these firms against
liabilities, including liabilities under the Securities Act.
If indicated in the applicable prospectus supplement, we may
authorize underwriters, agents or dealers to solicit offers by
institutions to purchase securities at the offering price set
forth in that prospectus supplement under delayed delivery
contracts providing for payment and delivery on the dates stated
in the prospectus supplement. Each contract will be for an
amount not less than, and the aggregate principal amount of
securities sold under contracts will 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 our approval. Contracts will not be subject
to any conditions except:
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the purchase by an institution of the securities covered by its
contracts will not at the time of delivery be prohibited under
the laws of any jurisdiction in the United States to which the
institution is subject; and
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if the securities are also being sold to underwriters, we will
have sold to them the total principal amount of the securities
less the principal amount of the securities covered by contracts.
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Underwriters and agents will have no responsibility in respect
of the delivery or performance of contracts.
Some of the underwriters and their affiliates may engage in
transactions with or perform services for us in the ordinary
course of business.
23
LEGAL
OPINIONS
Certain legal matters regarding the securities offered hereby
will be passed upon for us by Shumaker, Loop &
Kendrick, LLP, Toledo, Ohio. As of May 7, 2009, the attorneys of
Shumaker, Loop & Kendrick, LLP participating in the
preparation of this prospectus, the registration statement and
the required legal opinions beneficially held, in the aggregate,
approximately 2,500 shares of our common stock and
1,000 shares of our preferred stock. Arnold &
Porter LLP will pass upon certain federal income tax matters
relating to us. Any underwriters or agents will be represented
by their own legal counsel.
EXPERTS
Ernst & Young LLP, independent registered public
accounting firm, has audited our consolidated financial
statements and schedules included in our Current Report on
Form 8-K
dated May 7, 2009, and the effectiveness of our internal
control over financial reporting as of December 31, 2008,
included in our Annual Report on
Form 10-K
for the year ended December 31, 2008, as set forth in their
reports, which are incorporated by reference in this prospectus
and elsewhere in the registration statement. Our financial
statements and schedules are incorporated by reference in
reliance upon Ernst & Young LLPs reports, given
on their authority as experts in accounting and auditing.
24
12,500,000 Shares
%
Series I Cumulative Convertible Perpetual Preferred
Stock
PROSPECTUS SUPPLEMENT
,
2011
UBS
Investment Bank
BofA
Merrill Lynch
Barclays
Capital
Deutsche
Bank Securities
J.P. Morgan
Wells
Fargo Securities
KeyBanc
Capital Markets