HEALTHCARE REALTY TRUST INCORPORATED - FORM 8-K/A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K/A

(Amendment No. 1)

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

     Date of Report (Date of earliest event reported) July 20, 2004 (July 19, 2004)

HEALTHCARE REALTY TRUST INCORPORATED

(Exact name of registrant as specified in its charter)

         
Maryland   1-11852   62-1507028
(State or other jurisdiction
of incorporation)
  (Commission
File Number)
  (IRS Employer
Identification No.)

3310 West End Avenue

Suite 700

Nashville, Tennessee 37203
(Address of principal executive offices)

(615) 269-8175

(Registrant’s telephone number, including area code)



 


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Item 5. Other Events
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Pro Forma Financial Information
Consent of KPMG LLP
BAYLOR HEALTH CARE SYSTEM PROPERTIES
ASCENSION DETROIT PROPERTIES
EX-99.1 CONSENT OF KMPG LLP


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This Amendment No. 1 to the Current Report on Form 8-K, originally filed with the Securities and Exchange Commission on July 19, 2004, is being filed in order to include the reference to KPMG LLP as experts and its consent thereto.

Item 5. Other Events and Regulation FD Disclosure

For the fiscal year 2004, through the date of this report, Healthcare Realty Trust Incorporated (the “Company”) has acquired or it is probable that it will acquire real estate properties totalling approximately $299.1 million.

During the first quarter of 2004, the Company acquired a medical office building from Advocate Healthcare and acquired three medical office buildings in Michigan and four medical office buildings in Arizona from affiliates of Ascension Health, Inc. for approximately $18.1 million, $20.9 million and $9.0 million, respectively.

During the second quarter of 2004, the Company acquired six medical office buildings in Tennessee from affiliates of Ascension Health, Inc. and acquired four medical office buildings from MedStar Health in Washington, D.C. and Maryland for approximately $70.8 million and $41.3 million, respectively.

On July 6, 2004, the Company entered into an agreement with Baylor Health Care System to acquire a portfolio of 20 medical office buildings in and around Dallas, Texas for approximately $133 million. This transaction is expected to close in the third quarter of 2004.

As a result of the transactions discussed above, the Company is providing audited combined historical summaries of gross income and direct operating expenses for the year ended December 31, 2003 for a majority of the acquisitions described above in accordance with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission. The audited combined historical summaries of gross income and direct operating expenses are not necessarily representative of the entire operations of the properties for the periods presented as certain revenues will change and certain expenses as described in the notes thereto have been excluded, and may not be indicative of future operations.

EXPERTS

The Combined Historical Summary of Gross Income and Direct Operating Expenses for the year ended December 31, 2003 for Ascension Detroit Properties and for Baylor Health Care System Properties have been incorporated by reference into the registration statement (No. 333-109306) on Form S-3 in reliance upon the reports of KPMG LLP, independent accountants, and upon the authority of said firm as experts in accounting and auditing.

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits

(a)   Financial Statements Under Rule 3-14 of Regulation S-X

(1) Combined Historical Summary of Gross Income and Direct Operating Expenses for the Baylor Health Care System Properties

(i) Report of Independent Auditors

(ii) Combined Historical Summary of Gross Income and Direct Operating Expenses for the Three Months Ended March 31, 2004 (unaudited), and for the Year Ended December 31, 2003

(iii) Notes to Combined Historical Summary of Gross Income and Direct Operating Expenses

(2) Combined Historical Summary of Gross Income and Direct Operating Expenses for the Ascension Detroit Properties

(i) Report of Independent Auditors

(ii) Combined Historical Summary of Gross Income and Direct Operating Expenses for the Three Months Ended March 31, 2004 (unaudited), and for the Year Ended December 31, 2003

 


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(iii)   Notes to Combined Historical Summary of Gross Income and Direct Operating Expenses

(b)   Pro Forma Financial Information

(1)   Introduction to Unaudited Pro Forma Consolidated Financial Statements of the Company

(2)   Unaudited Pro Forma Consolidated Balance Sheet of the Company as of March 31, 2004

(3)   Unaudited Pro Forma Consolidated Income Statement of the Company for the three months ended March 31, 2004

(4)   Unaudited Pro Forma Consolidated Income Statement of the Company for the year ended December 31, 2003

(5)   Notes to Unaudited Pro Forma Consolidated Financial Statements of the Company

Exhibit 99.1   Consent of KPMG LLP

 


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Baylor Health Care System Properties

Combined Historical Summary of Gross Income and Direct Operating Expenses

For the year ended December 31, 2003 and
the Three Months ended March 31, 2004 (unaudited)

(With Report of Independent Auditors Thereon)

 


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Report of Independent Auditors

The Board of Directors
Healthcare Realty Trust Incorporated

We have audited the accompanying Combined Historical Summary of Gross Income and Direct Operating Expenses (“Historical Summary”) of the twenty medical office buildings (the “Properties”) under the purchase agreement dated July 6, 2004 to be acquired by HRT Properties of Texas, Ltd., an affiliate of Healthcare Realty Trust Incorporated (the “Company”), from Baylor Health Care System for the year ended December 31, 2003. This Historical Summary is the responsibility of the Company’s management. Our responsibility is to express an opinion on the Historical Summary for the Properties based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.

The accompanying Historical Summary for the Properties was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in note 2 and is not intended to be a complete presentation of the Properties’ revenues and expenses.

In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in note 2 to the Historical Summary for the year ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

/s/ KPMG LLP

KPMG LLP

July 14, 2004

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Baylor Health Care System Properties

Combined Historical Summary of Gross Income and Direct Operating Expenses

For the year ended December 31, 2003 and the Three Months ended March 31, 2004 (unaudited)

                 
    For the    
    Three Months   For the
    Ended   Year Ended
    Mar. 31, 2004
  Dec. 31, 2003
    (unaudited)        
Gross income:
               
Rental income
  $ 4,419,888     $ 16,767,138  
Other rental revenue and operating expense and real estate tax recoveries
    70,518       393,899  
 
   
 
     
 
 
Total gross income
    4,490,406       17,161,037  
Direct expenses:
               
Property taxes
    423,191       1,692,764  
Utilities
    402,588       1,634,179  
Environmental services
    326,252       1,403,455  
Salaries and administrative expenses
    234,502       825,826  
Other expenses
    196,242       812,671  
Repairs and maintenance
    130,146       574,538  
 
   
 
     
 
 
Total direct operating expenses
    1,712,921       6,943,433  
 
   
 
     
 
 
Excess of gross income over direct operating expenses
  $ 2,777,485     $ 10,217,604  
 
   
 
     
 
 
See accompanying notes to combined historical summary of gross income and direct operating expenses.
               

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Baylor Health Care System Properties

Notes to Combined Historical Summary of Gross Income and Direct Operating Expenses

(1) Business

The twenty medical office buildings (the “Properties”) to be acquired from Baylor Health Care System (“Baylor”), an unaffiliated third-party, are located on and around the Baylor University Medical Campus in and near Dallas, Texas. The Properties consist of approximately 1.1 million gross rentable square feet, were approximately 94% occupied, and were leased to 266 tenants at December 31, 2003.

(2) Basis of Presentation

The accompanying Combined Historical Summary of Gross Income and Direct Operating Expenses (“Historical Summary”) has been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and is not intended to be a complete presentation of the Properties’ revenues and expenses. The Historical Summary has been prepared on the accrual basis of accounting and requires management of the Properties to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates.

All adjustments necessary for a fair presentation have been made to the accompanying unaudited amounts for the three months ended March 31, 2004.

(3) Gross Income

The Properties contain medical office space occupied under various lease agreements with tenants. All leases are accounted for as operating leases. Some of the leases include provisions under which the Properties are reimbursed for common area maintenance and other operating costs, real estate taxes, and insurance. Revenue related to these reimbursed costs is recognized in the period the applicable costs are incurred and billed to tenants pursuant to the lease agreements. Certain leases contain renewal options at various periods at various rental rates.

Although certain leases may provide for tenant occupancy during periods for which no rent is due and/or increases exist in minimum lease payments over the term of the lease, rental and other revenues are recorded when earned, which is not materially different than on a straight-line basis.

At December 31, 2003, Baylor and its affiliates occupied approximately 568,000 gross rentable square feet (49.8% of the gross rentable area of the Properties) some of which was leased through inter-company lease arrangements. Base rental income reported in the Historical Summary from these lease arrangements represented approximately $6.5 million for the year ended December 31, 2003. Simultaneous with the closing of the acquisition of the Properties, formal lease agreements are expected to be entered into between HRT Properties of Texas, Ltd., an affiliate of Healthcare Realty Trust Incorporated, and Baylor at rental rates specified in the purchase agreement with lease terms of approximately 4.4 years. Base rents received from tenants not affiliated with Baylor represented approximately $9.7 million of base rental income for the year ended December 31, 2003. These leases have an average remaining life of approximately 1.6 years. As leases expire, new leases are expected to be entered into at current market rates.

(4) Direct Operating Expenses

Direct operating expenses include only those costs expected to be comparable to the proposed future operations of the Properties. Environmental service expense includes sanitation expenses. Repairs and maintenance expenses are charged to operations as incurred. Costs such as depreciation, amortization, management fees, and professional fees are excluded from the Historical Summary.

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Ascension Detroit Properties

Combined Historical Summary of Gross Income and Direct Operating Expenses

For the year ended December 31, 2003 and
the Three Months ended March 31, 2004 (unaudited)

(With Report of Independent Auditors Thereon)

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Report of Independent Auditors

The Board of Directors
Healthcare Realty Trust Incorporated

We have audited the accompanying Combined Historical Summary of Gross Income and Direct Operating Expenses (“Historical Summary”) of the three medical office buildings (the “Properties”) acquired by HR Acquisition I Corporation, an affiliate of Healthcare Realty Trust Incorporated (the “Company”), from St. John Health System, an affiliate of Ascension Health, Inc. for the year ended December 31, 2003. This Historical Summary is the responsibility of the Company’s management. Our responsibility is to express an opinion on the Historical Summary for the Properties based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Historical Summary is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the Historical Summary. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the Historical Summary. We believe that our audit provides a reasonable basis for our opinion.

The accompanying Historical Summary for the Properties was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in note 2 and is not intended to be a complete presentation of the Properties’ revenues and expenses.

In our opinion, the Historical Summary referred to above presents fairly, in all material respects, the gross income and direct operating expenses described in note 2 to the Historical Summary for the year ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.

/s/ KPMG LLP

KPMG LLP

July 14, 2004

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Ascension Detroit Properties

Combined Historical Summary of Gross Income and Direct Operating Expenses

For the year ended December 31, 2003 and the Three Months ended March 31, 2004 (unaudited)

                 
    For the    
    Three Months   For the
    Ended   Year Ended
    Mar. 31, 2004
  Dec. 31, 2003
    (unaudited)        
Gross income:
               
Rental income
  $ 972,166     $ 3,311,069  
Other rental revenue and operating expense and real estate tax recoveries
    19,647       14,665  
 
   
 
     
 
 
Total gross income
    991,813       3,325,734  
Direct expenses:
               
Purchased Services
    178,109       584,673  
Property taxes
    122,681       490,726  
Utilities
    168,518       467,405  
Salaries and administrative expenses
    77,390       291,361  
Other expenses
    17,492       12,318  
 
   
 
     
 
 
Total direct operating expenses
    564,190       1,846,483  
 
   
 
     
 
 
Excess of gross income over direct operating expenses
  $ 427,623     $ 1,479,251  
 
   
 
     
 
 
See accompanying notes to combined historical summary of gross income and direct operating expenses.
               

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Ascension Detroit Properties

Notes to Combined Historical Summary of Gross Income and Direct Operating Expenses

(1) Business

The three medical office buildings (the “Properties”) purchased from St. John Health System, an affiliate of Ascension Health, Inc. (“Ascension”), an unaffiliated third-party, are located on and around the St. John’s Medical Campus in and near Detroit, Michigan. The Properties consist of approximately 198,300 gross rentable square feet, were approximately 98% occupied, and were leased to 75 tenants at December 31, 2003.

(2) Basis of Presentation

The accompanying Combined Historical Summary of Gross Income and Direct Operating Expenses (“Historical Summary”) has been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and is not intended to be a complete presentation of the Properties’ revenues and expenses. The Historical Summary has been prepared on the accrual basis of accounting and requires management of the Properties to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates.

All adjustments necessary for a fair presentation have been made to the accompanying unaudited amounts for the three months ended March 31, 2004.

(3) Gross Income

The Properties contain medical office space occupied under various lease agreements with tenants. All leases are accounted for as operating leases. Some of the leases include provisions under which the Properties are reimbursed for common area maintenance and other operating costs, real estate taxes, and insurance. Revenue related to these reimbursed costs is recognized in the period the applicable costs are incurred and billed to tenants pursuant to the lease agreements. Certain leases contain renewal options at various periods at various rental rates.

Although certain leases may provide for tenant occupancy during periods for which no rent is due and/or increases exist in minimum lease payments over the term of the lease, rental and other revenues are recorded when earned, which is not materially different than on a straight-line basis.

At December 31, 2003, St. John’s Medical System occupied approximately 47,038 square feet (23.7% of the gross rentable area of the Properties) some of which was leased through inter-company lease arrangements. Base rental income reported in the Historical Summary from these lease arrangements represented approximately $153,000 for the year ended December 31, 2003. Formal lease agreements have been entered into between HR Acquisition I Corporation, an affiliate of Healthcare Realty Trust Incorporated, and these tenants with lease terms of approximately 5 years. Base rental income to be received from tenants not affiliated with St. John’s represented approximately $3.0 million of base rental income for the year ended December 31, 2003. These leases have an average remaining life of approximately 4.3 years. As leases expire, new leases are expected to be entered into at current market rates.

(4) Direct Operating Expenses

Direct operating expenses include only those costs expected to be comparable to the proposed future operations of the Properties. Purchased services include janitorial services, landscape maintenance, and other services that are provided by third parties. Repairs and maintenance expenses are charged to operations as incurred. Costs such as depreciation, amortization, management fees, and professional fees are excluded from the Historical Summary. Certain overhead operating costs are allocated to the buildings by Ascension. These allocations are included in the Historical Summary.

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Introduction to Unaudited Pro Forma Consolidated Financial Statements of Healthcare Realty Trust Incorporated

The following unaudited pro forma consolidated balance sheet as of March 31, 2004, reflects the financial position of the Company as if the transactions described in the Notes to the Unaudited Pro Forma Financial Statements were completed on March 31, 2004. The unaudited pro forma consolidated income statements for the three months ended March 31, 2004 and the twelve months ended December 31, 2003, present the results of operations of the Company as if the transactions described in the Notes to the Unaudited Pro Forma Financial Statements were completed on January 1, 2003. These unaudited pro forma consolidated financial statements should be read in connection with, and are qualified in their entirety by reference to, the financial statements of the Company for the three months ended March 31, 2004, included in the Company’s Quarterly Report on Form 10-Q, the financial statements of the Company for the year ended December 31, 2003, included in the Company’s Annual Report on Form 10-K, and the financial statements included in Item 7(a) of this Form 8-K. These unaudited pro forma financial statements include management’s estimates and assumptions of, including among other items, future revenues and expenses and purchase price allocations of the disclosed properties, interest rates, capital financing requirements, and are not necessarily indicative of the expected results of operations of the Company for any future period. These pro forma financial statements include assumptions related only to transactions described in the Notes to the Unaudited Pro Forma Financial Statements and do not attempt to forecast actual expected results of operations of the Company for any future period.

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Healthcare Realty Trust Incorporated
Unaudited Pro Forma Consolidated Balance Sheet
As of March 31, 2004

(Dollars in thousands)

                         
            Pro Forma    
    Historical
  Adjustments
  Pro Forma
 
            (A )        
ASSETS
                       
Real estate properties:
                       
Land
  $ 140,387     $ 5,013     $ 145,400  
Buildings, improvements and lease intangibles
    1,460,458       235,210       1,695,668  
Personal property
    14,268       54       14,322  
Construction in progress
    15,220       0       15,220  
 
   
 
     
 
     
 
 
 
    1,630,333       240,277       1,870,610  
Less accumulated depreciation
    (243,178 )     0       (243,178 )
 
   
 
     
 
     
 
 
Total real estate properties, net
    1,387,155       240,277       1,627,432  
Cash and cash equivalents
    59,125       (59,125 )     0  
Mortgage notes receivable
    93,057       0       93,057  
Other assets, net
    108,476       10,914       119,390  
 
   
 
     
 
     
 
 
Total assets
  $ 1,647,813     $ 192,066     $ 1,839,879  
 
   
 
     
 
     
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                       
Liabilities:
                       
Notes and bonds payable
  $ 716,872     $ 63,884     $ 780,756  
Accounts payable and accrued liabilities
    20,342       0       20,342  
Other liabilities
    15,784       (33 )     15,751  
 
   
 
     
 
     
 
 
Total liabilities
    752,998       63,851       816,849  
 
   
 
     
 
     
 
 
Commitments
    0       0       0  
Stockholders’ equity:
                       
Preferred stock
    0       0       0  
Common stock
    430       35       465  
Additional paid-in capital
    1,062,864       128,180       1,191,044  
Deferred compensation
    (24,976 )     0       (24,976 )
Cumulative net income
    533,471       0       533,471  
Cumulative dividends
    (676,974 )     0       (676,974 )
 
   
 
     
 
     
 
 
Total stockholders’ equity
    894,815       128,215       1,023,030  
 
   
 
     
 
     
 
 
Total liabilities and stockholders’ equity
  $ 1,647,813     $ 192,066     $ 1,839,879  
 
   
 
     
 
     
 
 

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Healthcare Realty Trust Incorporated
Unaudited Pro Forma Consolidated Statement of Income
For The Three Months Ended March 31, 2004

(Dollars in thousands, except per share data)

                                 
            Pro Forma Adjustments
   
    Historical
  Acquisitions
  Financing
  Pro Forma
 
            (B)     (E)     (D)
REVENUES:
                               
Master lease rental income
  $ 23,010     $ 112     $ 0     $ 23,122  
Property operating income
    24,764       8,777       0       33,541  
Straight line rent
    182       0       0       182  
Mortgage interest income
    2,814       0       0       2,814  
Interest and other income
    894       0       0       894  
 
   
 
     
 
     
 
     
 
 
 
    51,664       8,889       0       60,553  
EXPENSES:
                               
General and administrative
    3,417       0       0       3,417  
Property operating expenses
    10,362       4,735       0       15,097  
Interest
    8,973       0       2,683       11,656  
Depreciation
    11,087       1,964       0       13,051  
Amortization
    13       50       0       63  
 
   
 
     
 
     
 
     
 
 
 
    33,852       6,749       2,683       43,284  
 
   
 
     
 
     
 
     
 
 
INCOME FROM CONTINUING OPERATIONS
  $ 17,812     $ 2,140     $ (2,683 )   $ 17,269  
 
   
 
     
 
     
 
     
 
 
INCOME FROM CONTINUING OPERATIONS
PER COMMON SHARE — BASIC
  $ 0.43                     $ 0.38  
 
   
 
                     
 
 
INCOME FROM CONTINUING OPERATIONS
PER COMMON SHARE — DILUTED
  $ 0.42                     $ 0.38  
 
   
 
                     
 
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING — BASIC
    41,668,173               3,500,000       45,168,173  
 
   
 
             
 
     
 
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING — DILUTED
    42,379,283               3,500,000       45,879,283  
 
   
 
             
 
     
 
 

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Healthcare Realty Trust Incorporated
Unaudited Pro Forma Consolidated Statement of Income
For The Twelve Months Ended December 31, 2003

(Dollars in thousands, except per share data)

                                 
            Pro Forma Adjustments
   
    Historical
  Acquisitions
  Financing
  Pro Forma
 
            (C)     (E)     (D)
REVENUES:
                               
Master lease rental income
  $ 88,963     $ 449     $ 0     $ 89,412  
Property operating income
    85,954       41,514       0       127,468  
Straight line rent
    2,553       0       0       2,553  
Mortgage interest income
    10,441       0       0       10,441  
Interest and other income
    4,086       0       0       4,086  
 
   
 
     
 
     
 
     
 
 
 
    191,997       41,963       0       233,960  
EXPENSES:
                               
General and administrative
    11,122       0       0       11,122  
Property operating expenses
    34,876       23,228       0       58,104  
Interest
    34,601       0       12,761       47,362  
Depreciation
    42,142       9,373       0       51,515  
Amortization
    53       198       0       251  
 
   
 
     
 
     
 
     
 
 
 
    122,794       32,799       12,761       168,354  
 
   
 
     
 
     
 
     
 
 
INCOME FROM CONTINUING OPERATIONS
  $ 69,203     $ 9,164     $ (12,761 )   $ 65,606  
 
   
 
     
 
     
 
     
 
 
INCOME FROM CONTINUING OPERATIONS
PER COMMON SHARE — BASIC
  $ 1.71                     $ 1.47  
 
   
 
                     
 
 
INCOME FROM CONTINUING OPERATIONS
PER COMMON SHARE — DILUTED
  $ 1.69                     $ 1.45  
 
   
 
                     
 
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING — BASIC
    41,129,282               3,500,000       44,629,282  
 
   
 
             
 
     
 
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING — DILUTED
    41,780,088               3,500,000       45,280,088  
 
   
 
             
 
     
 
 

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Notes to Unaudited Pro Forma Consolidated Financial Statements

(Dollars in thousands)

(A) Unaudited Pro Forma Consolidated Balance Sheet Adjustments

Represents the impact of the Company’s consummated acquisitions, those pending acquisitions whose consummation is considered by management to be probable, and capital financings related to those acquisitions subsequent to March 31, 2004, and assumes those acquisitions and capital financings were closed on March 31, 2004. These transactions were funded or are expected to be funded with cash on hand, borrowings on the Company’s Unsecured Credit Facility due 2006, and from assumed net proceeds from the anticipated issuance of 3,500,000 common shares in July 2004 at an assumed net proceeds per share amount of $36.63. Actual or probable acquisitions subsequent to March 31, 2004 are included in the table below.

                     
          Real Estate
Date       Number of   Investment (2)
Acquired
  Location
  Buildings
  (in millions)
4/20/04
  Baltimore, MD and Washington, D.C.     4     $ 42.4  
4/23/04
  Nashville, TN     6     $ 70.9  
4/30/04
  Ft. Walton, FL     1     $ 4.8  
 
  Dallas/Ft. Worth Texas area     20
    $
133.0
(1)
 
  Totals     31     $ 251.1  

(1) Estimate as the transaction has not yet closed.
(2) Excludes closing and other costs included in the purchase price.

(B) Unaudited Pro Forma Consolidated Income Statement Acquisition Adjustments for the Three Months Ended March 31, 2004

Represents the impact of the Company’s consummated acquisitions, those pending acquisitions whose consummation is considered by management to be probable, and capital financings throughout 2004 as if those acquisitions and capital financings were in place as of January 1, 2003. These transactions were funded with cash on hand, 5.125% $300.0 million Senior Notes due 2014, borrowings on the Company’s Unsecured Credit Facility due 2006, and from assumed net proceeds from the anticipated issuance of 3,500,000 common shares in July 2004 at an assumed net proceeds per share amount of $36.63.

                     
        Real Estate
Date
Acquired

  Location
  Number of
Buildings

  Investment (2)
(in millions)

3/1/04
  Chicago, IL     1     $ 18.1  
3/3/04
  Detroit, MI     3     $ 20.9  
3/8/04
  Tucson, AZ     4     $ 9.0  
4/20/04
  Baltimore, MD and Washington, D.C.     4     $ 42.4  
4/23/04
  Nashville, TN     6     $ 70.9  
4/30/04
  Ft. Walton, FL     1     $ 4.8  
 
  Dallas/Ft. Worth Texas area     20
    $
133.0
(1)
 
  Totals     39     $ 299.1  

(1) Estimate as the transaction has not yet closed.
(2) Excludes closing and other costs included in the purchase price.

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(C) Unaudited Pro Forma Consolidated Income Statement Acquisition Adjustments for the Twelve Months Ended December 31, 2003

Represents the impact of the Company’s consummated acquisitions, those pending acquisitions whose consummation is considered by management to be probable, and capital financings throughout 2003 and 2004 as if those acquisitions and capital financings were in place as of January 1, 2003. These transactions were funded with cash on hand, 5.125% $300.0 million Senior Notes due 2014, borrowings on the Company’s Unsecured Credit Facility due 2006, and from anticipated net proceeds from the anticipated issuance of 3,500,000 common shares in July 2004 at an assumed net proceeds per share amount of $36.63.

                     
        Number   Real Estate
Date       of   Investment (2)
Acquired
  Seller
  Buildings
  (in millions)
2/28/03
  New Orleans, LA     2     $ 10.8  
9/12/03
  San Antonio, TX     2     $ 26.1  
9/29/03
  Honolulu, HI     2     $ 20.7  
3/1/04
  Chicago, IL     1     $ 18.1  
3/3/04
  Detroit, MI     3     $ 20.9  
3/8/04
  Tucson, AZ     4     $ 9.0  
4/20/04
  Baltimore, MD and Washington, D.C.     4     $ 42.4  
4/23/04
  Nashville, TN     6     $ 70.9  
4/30/04
  Ft. Walton, FL     1     $ 4.8  
 
  Dallas/Ft. Worth Texas area     20
    $
133.0
(1)
 
  Totals     45     $ 356.7  

(1) Estimate as the transaction has not yet closed.
(2) Excludes closing and other costs included in the purchase price.

(D) Depreciation and Amortization Adjustments to the Unaudited Pro Forma Consolidated Statements of Income

As required under Statement of Financial Accounting Standards No. 141, “Business Combinations”, the Company has estimated and allocated the investment in the properties acquired to the various components acquired, including land, building, and lease intangibles and has amortized those assets over the remaining life of each asset acquired. Under this methodology the remaining lives may range from a few months to several years. As such, depreciation and amortization are generally accelerated when compared to the Company’s previous methodology of depreciating over a 31.5 or 39-year life. The amounts of non-cash depreciation and amortization adjustments, included in depreciation, amortization and property operating income in the Unaudited Pro Forma Consolidated Statements of Income for the Three Months Ended March 31, 2004 and the Twelve Months Ended December 31, 2003 are $3.7 million and $17.6 million, respectively.

(E) Interest Expense Adjustments to the Unaudited Pro Forma Consolidated Statements of Income

Represents the pro forma net effect on interest expense resulting from the acquisitions described in Notes (B) and (C) above, the issuance of the 5.125% Senior Notes due 2014, the issuance of 3,500,000 shares of common stock, and the change to the outstanding balance of the Company’s revolving credit facility as if these acquisition and capital financing transactions had occurred on January 1, 2003.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

         
  HEALTHCARE REALTY TRUST INCORPORATED
 
 
  By /s/ Scott W. Holmes    
  Scott W. Holmes   
Date: July 19, 2004  Senior Vice President and Chief Financial Officer   
 

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