UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ______________ Commission File Number 1-9317 HRPT PROPERTIES TRUST (Exact name of registrant as specified in its charter) Maryland 04-6558834 (State or other jurisdiction of incorporation) (IRS Employer Identification No.) 400 Centre Street, Newton, Massachusetts 02458 (Address of principal executive offices) (Zip Code) 617-332-3990 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Number of Common Shares outstanding at May 10, 2000: 131,935,847 shares of beneficial interest, $0.01 par value.
HRPT PROPERTIES TRUST FORM 10-Q MARCH 31, 2000 INDEX PART I Financial Information Page Item 1. Financial Statements (unaudited) Consolidated Balance Sheets - March 31, 2000 and December 31, 1999 1 Consolidated Statements of Income - Three Months Ended March 31, 2000 and 1999 2 Consolidated Statements of Cash Flows - Three Months Ended March 31, 2000 and 1999 3 Notes to Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Quantitative and Qualitative Disclosures About Market Risk 9 PART II Other Information Item 1. Legal Proceedings 11 Item 2. Changes in Securities 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 14 Signatures 16
<TABLE> <CAPTION> HRPT PROPERTIES TRUST CONSOLIDATED BALANCE SHEETS (dollars in thousands, except per share amounts) March 31, December 31, 2000 1999 ------------ ------------- (unaudited) (note 1) <S> <C> <C> ASSETS Real estate properties, at cost: Land $ 354,649 $ 354,173 Buildings and improvements 2,305,333 2,302,171 ----------- ----------- 2,659,982 2,656,344 Less accumulated depreciation 121,714 106,859 ----------- ----------- 2,538,268 2,549,485 Real estate mortgages and notes receivable, net 6,866 10,373 Equity investments 306,210 311,113 Cash and cash equivalents 5,214 13,206 Interest and rents receivable 37,925 36,683 Other assets, net 39,898 32,448 ----------- ----------- $ 2,934,381 $ 2,953,308 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Bank notes payable $ 139,000 $ 132,000 Senior notes payable, net 957,623 957,586 Mortgage notes payable 55,145 55,441 Convertible subordinated debentures 204,863 204,863 Accounts payable and accrued expenses 42,699 53,851 Deferred rents 7,484 9,005 Security deposits 7,174 7,041 Due to affiliates 14,303 11,054 Shareholders' equity: Preferred shares of beneficial interest, $0.01 par value: 50,000,000 shares authorized, none issued -- -- Common shares of beneficial interest, $0.01 par value: 150,000,000 shares authorized, 131,934,347 shares and 131,908,126 shares issued and outstanding, respectively 1,319 1,319 Additional paid-in capital 1,971,581 1,971,366 Cumulative net income 705,126 678,676 Distributions (1,163,744) (1,121,533) Unrealized holding losses on investments (8,192) (7,361) ----------- ----------- Total shareholders' equity 1,506,090 1,522,467 ----------- ----------- $ 2,934,381 $ 2,953,308 =========== =========== </TABLE> See accompanying notes 1
<TABLE> <CAPTION> HRPT PROPERTIES TRUST CONSOLIDATED STATEMENTS OF INCOME (amounts in thousands, except per share amounts) (unaudited) Three Months Ended March 31, ---------------------------- 2000 1999 -------- -------- <S> <C> <C> Revenues: Rental income $ 99,395 $101,313 Interest and other income 859 3,090 -------- -------- Total revenues 100,254 104,403 -------- -------- Expenses: Operating expenses 33,827 24,006 Interest 25,098 19,437 Depreciation and amortization 15,874 18,831 General and administrative 4,697 4,841 -------- -------- Total expenses 79,496 67,115 -------- -------- Income before equity in earnings of equity investments and gain on sale of properties 20,758 37,288 Equity in earnings of equity investments 5,692 2,008 -------- -------- Income before gain on sale of properties 26,450 39,296 Gain on sale of properties, net -- 8,307 -------- -------- Net income $ 26,450 $ 47,603 ======== ======== Weighted average shares outstanding 131,921 131,660 ======== ======== Basic and diluted earnings per common share: Income before gain on sale of properties $ 0.20 $ 0.30 ======== ======== Net income $ 0.20 $ 0.36 ======== ======== </TABLE> See accompanying notes 2
<TABLE> <CAPTION> HRPT PROPERTIES TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in thousands) (unaudited) Three Months Ended March 31, ------------------------------- 2000 1999 ---------- ----------- <S> <C> <C> Cash flows from operating activities: Net income $ 26,450 $ 47,603 Adjustments to reconcile net income to cash provided by operating activities: Gain on sale of properties, net -- (8,307) Equity in earnings of equity investments (5,692) (2,008) Distributions from equity investments 10,445 2,680 Depreciation 14,855 18,217 Amortization 1,019 614 Amortization of bond discounts 37 37 Change in assets and liabilities: Increase in interest and rents receivable and other assets (10,387) (6,788) Decrease in accounts payable and accrued expenses (11,152) (265) Decrease in deferred rents (1,521) (205) Increase in security deposits 133 52 Increase in due to affiliates 3,464 5,266 --------- --------- Cash provided by operating activities 27,651 56,896 --------- --------- Cash flows from investing activities: Real estate acquisitions and improvements (3,638) (2,814) Proceeds from repayment of real estate mortgages and notes receivable 3,507 2,618 Proceeds from sale of real estate -- 22,177 Proceeds from repayment of loans to affiliate -- 1,000 --------- --------- Cash (used for) provided by investing activities (131) 22,981 --------- --------- Cash flows from financing activities: Proceeds from borrowings 35,000 131,500 Payments on borrowings (28,296) (141,668) Deferred finance costs incurred (5) (2,399) Distributions (42,211) (50,378) --------- --------- Cash used for financing activities (35,512) (62,945) --------- --------- (Decrease) increase in cash and cash equivalents (7,992) 16,932 Cash and cash equivalents at beginning of period 13,206 15,643 --------- --------- Cash and cash equivalents at end of period $ 5,214 $ 32,575 ========= ========= Supplemental cash flow information: Interest paid $ 27,504 $ 22,797 ========= ========= Non-cash investing activities: Investment in real estate mortgages receivable $-- $ 60,000 Issuance of common shares -- 4,959 Non-cash financing activities: Issuance of common shares $ 215 $ 1,313 </TABLE> See accompanying notes 3
HRPT PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Note 1. Basis of Presentation The financial statements of HRPT Properties Trust and its subsidiaries (the "Company") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year. Reclassifications have been made to the prior years' financial statements to conform to the current year's presentation. Note 2. Comprehensive Income The following is a reconciliation of net income to comprehensive income for the three months ended March 31, 2000 and 1999: Three Months Ended March 31, ----------------------------- 2000 1999 ---------- ----------- Net income $ 26,450 $ 47,603 Other comprehensive loss: Unrealized holding losses on investments (831) (5,639) -------- -------- Comprehensive income $ 25,619 $ 41,964 ======== ======== Note 3. Shareholders' Equity During the three months ended March 31, 2000, 26,221 common shares were issued as the incentive advisory fee for the year ended December 31, 1999. On April 10, 2000, the Company declared a distribution on its common shares with respect to the quarter ended March 31, 2000 of $0.32 per share, which will be distributed on or about May 26, 2000, to shareholders of record as of April 20, 2000. Note 4. Equity Investments At March 31, 2000, the Company had the following equity investments: Ownership Equity in Equity Percentage Earnings Investments ----------- --------- ----------- Senior Housing Properties Trust 49.3% $3,727 $197,873 Hospitality Properties Trust 7.1% 1,965 108,337 -------- -------- $5,692 $306,210 ======== ======== At March 31, 2000, the Company owned 12,809,237 common shares of Senior Housing Properties Trust ("SNH") with a carrying value of $197,873 and a fair value based on quoted market prices, of $131.3 million. At March 31, 2000, the Company owned four million common shares of Hospitality Properties Trust ("HPT") with a carrying value of $108,337 and a fair value based on quoted market prices, of $81,000. 4
HRPT PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Note 5. Real Estate Properties, Mortgages and Notes Receivable, net During the three months ended March 31, 2000, the Company funded $3,638 of improvements to its existing properties, and received scheduled principal payments of $5 and repayment of a mortgage secured by one property totaling $3,502. Note 6. Indebtedness In April 2000, the Company retired $27.5 million of its outstanding Remarketed Reset Notes. Note 7. Segment Information The following is a summary of the Company's reportable segments as of or for the three months ended March 31, 2000 and 1999: <TABLE> <CAPTION> Three Months Ended March 31, 2000 Three Months Ended March 31, 1999 ----------------------------------------- ----------------------------------------- Senior Senior Housing Office Total Housing Office Total ----------------------------------------- ----------------------------------------- <S> <C> <C> <C> <C> <C> <C> Revenues $ 448 $ 99,748 $ 100,196 $ 26,131 $ 77,661 $ 103,792 Operating expenses -- (33,827) (33,827) -- (24,006) (24,006) Depreciation -- (14,855) (14,855) (6,296) (11,921) (18,217) ---------------------------------------- ----------------------------------------- Net operating income $ 448 $ 51,066 $ 51,514 $ 19,835 $ 41,734 $ 61,569 ======================================== ========================================= Real estate investments $ 6,866 $ 2,659,982 $ 2,666,848 $ 858,128 $ 2,133,073 $ 2,991,201 Real estate acquired during the year $-- $ 3,638 $ 3,638 $-- $ 2,814 $ 2,814 </TABLE> The following tables reconcile the reported segment information to the consolidated financial statements for the three months ended March 31, 2000 and 1999: Three Months Ended March 31, ---------------------------- 2000 1999 ---------------------------- Revenues: Total per reportable segment $ 100,196 $ 103,792 Unallocated other income 58 611 -------------------------- Total consolidated revenues $ 100,254 $ 104,403 ========================== Net operating income: Total per reportable segment $ 51,514 $ 61,569 Unallocated amounts: Other income 58 611 Interest expense (25,098) (19,437) Amortization expense (1,019) (614) General and administrative expenses (4,697) (4,841) -------------------------- Total consolidated income before equity in earnings of equity investments and gain on sale of properties $ 20,758 $ 37,288 ========================== 5
HRPT PROPERTIES TRUST NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands, except per share amounts) Note 8. Pro Forma Information On October 12, 1999, the Company spun-off 50.7% of a 100% owned subsidiary, SNH, to its shareholders (the "Spin-Off"). Also, during 1999, the Company sold 21 nursing homes for gross proceeds of approximately $96,200. The following unaudited pro forma consolidated statement of income for the three months ended March 31, 1999, is presented to reflect the effects of the Spin-Off and the disposition of nursing home assets during 1999, as if these transactions had occurred on January 1, 1999. This pro forma information does not purport to present actual results of operations if these transactions had occurred on such date or project operating results for any future period. Pro Forma Unaudited Consolidated Statement of Income (amounts in thousands, except per share amounts) Three Months Ended March 31, 1999 ---------------- Revenues: Rental income $ 77,366 Interest and other income 1,374 -------- Total revenues 78,740 -------- Expenses: Operating expenses 24,006 Interest 15,159 Depreciation and amortization 12,685 General and administrative 3,602 -------- Total expenses 55,452 -------- Income before equity in earnings of equity investments and gain on sale of properties 23,288 Equity in earnings of equity investments 7,974 -------- Income before gain on sale of properties $ 31,262 ======== Weighted average shares outstanding 131,660 ======== Income before gain on sale of properties per basic share $ 0.24 ======== Pro forma funds from operations, on a diluted basis, were $52.3 million, or $0.37 per share for the three months ended March 31, 1999. 6
HRPT PROPERTIES TRUST Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999 Total revenues for the three months ended March 31, 2000, decreased $4.1 million to $100.3 million from $104.4 million for the three months ended March 31, 1999. Revenues from our office segment increased $22.1 million and revenues from our senior housing segment decreased $25.7 million. The increase in revenues from our office segment is due to office building acquisitions made subsequent to March 31, 1999. The decrease in revenues from our senior housing segment is due primarily to the Spin-Off of our former subsidiary, SNH, in October 1999, and the sale of some senior housing properties in 1999. For the three months ended March 31, 2000, rental income decreased $1.9 million and interest and other income decreased $2.2 million compared to the prior period. Rental income decreased primarily because of the Spin-Off of SNH, offset by acquisitions made subsequent to March 31, 1999. Interest and other income decreased primarily as a result of the Spin-Off of SNH. Total expenses for the three months ended March 31, 2000, increased to $79.5 million from $67.1 million for the three months ended March 31, 1999. Operating expenses increased by $9.8 million as a result of our increased investment in office buildings made subsequent to March 31, 1999. Interest expense increased by $5.7 million as a result of increased borrowings outstanding during 2000 compared to the prior year period. Depreciation and amortization, and general and administrative expenses decreased by $3.0 million and $144,000, respectively, primarily as a result of the Spin-Off of SNH. Equity in earnings of equity investments increased in 2000 by $3.7 million from the 1999 period due to the Spin-Off of SNH in October 1999. Net income decreased to $26.5 million, or $0.20 per basic and diluted share, for the 2000 period, from $47.6 million, or $0.36 per basic and diluted share, for the 1999 period. The change in net income is due primarily to the Spin-Off of SNH and the sale of some senior housing properties in 1999, offset by office building acquisitions made subsequent to March 31, 1999. Funds from operations for the three months ended March 31, 2000, were $46.1 million, or $0.35 per basic share, and $59.7 million, or $0.45 per basic share, for the 1999 period. Diluted funds from operations for the three months ended March 31, 2000, were $50.2 million, or $0.35 per diluted share, and $63.7 million, or $0.45 per diluted share, for the 1999 period. Distributions declared which relate to the three months ended March 31, 2000 and 1999, were $42.2 million, or $0.32 per share, and $50.1 million, or $0.38 per share, respectively. The decrease in distributions reflects the reduced distributions paid after the Spin-Off of SNH. LIQUIDITY AND CAPITAL RESOURCES Total assets were $2.9 billion at March 31, 2000 compared to $3.0 billion at December 31, 1999. During the three months ended March 31, 2000, we funded $3.6 million of improvements to our existing properties, received $5,000 of regularly scheduled principal payments and received a $3.5 million principal repayment of a mortgage secured by one property. 7
HRPT PROPERTIES TRUST Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - continued At March 31, 2000, we owned 12.8 million, or 49.3%, of the common shares of beneficial interest of SNH with a carrying value of $197.9 million and a market value of $131.3 million, and 4.0 million, or 7.1%, of the common shares of beneficial interest of HPT with a carrying value of $108.3 million and a market value of $81.0 million. During January and February of 2000, two of SNH's tenants, accounting for approximately 48% of SNH's revenues, filed for bankruptcy. During March and April 2000, SNH reached conditional agreements with both tenants calling for the cancellation and modification of leases and mortgage obligations and the exchange of certain properties leased to the tenants for cash and other consideration. Also, the level of annual distributions to be paid by SNH to us and other SNH shareholders, was reduced from $2.40 per SNH share to $1.20 beginning with the distribution declared by SNH in April 2000. Under both agreements, SNH will assume operating responsibility for a total of 58 properties. Both of these agreements are subject to final documentation, approval by the bankruptcy court and other contingencies. Therefore, no assurance can be given as to if, and when, these transactions will close, or if all of the terms currently agreed to will be implemented. As a result of these transactions, SNH may recognize additional gains or losses in the future, which will be reflected in our consolidated statement of income through our ownership interest of SNH. In April 2000, we retired $27.5 million of our Remarketed Reset Notes due 2009 at their par value using borrowings under our bank credit facility. At March 31, 2000, we had $5.2 million of cash and cash equivalents, as well as $139 million outstanding and $361 million available for borrowing under our bank credit facility. At March 31, 2000, $2.5 billion was available on our $3 billion effective shelf registration statement. There can be no assurances that debt or equity financing will be available to fund future growth, but we do expect that financing will be available. As of March 31, 2000, our debt as a percentage of total book capitalization was approximately 47%. Year 2000 In prior years, we discussed the nature and progress of our plans to become year 2000 compliant and, in late 1999, we completed our remediation and testing of systems. As a result of these efforts, we experienced no significant disruptions in our information and non-information technology systems, and we believe these systems successfully responded to the year 2000 date change. We are not aware of any material problems resulting from year 2000 issues by our systems or the systems of our tenants and vendors, but we will continue to monitor these systems throughout the year to ensure that any late year 2000 issues that may arise are addressed promptly. Costs incurred to date and anticipated future costs are not material. 8
HRPT PROPERTIES TRUST Item 3. Quantitative and Qualitative Disclosures About Market Risk We are exposed to market changes in interest rates. We manage our exposure to this market risk through our monitoring of available financing alternatives. Our strategy to manage exposure to changes in interest rates is unchanged from December 31, 1999. Furthermore, we do not foresee any significant changes in our exposure to fluctuations in interest rates or in how this exposure is managed in the near future. At March 31, 2000, our total outstanding fixed rate debt consisted of the following: Amount Coupon Maturity Unsecured senior notes: $40.0 million 7.25% 2001 160.0 million 6.875% 2002 150.0 million 6.75% 2002 164.9 million 7.50% 2003 100.0 million 6.7% 2005 90.0 million 7.875% 2009 65.0 million 8.375% 2011 143.0 million 8.5% 2013 Secured notes: $3.5 million 9.12% 2004 11.1 million 8.40% 2007 17.6 million 7.02% 2008 12.2 million 8.00% 2008 10.7 million 7.66% 2009 No principal repayments are due under the unsecured senior notes until maturity. If, at maturity, the unsecured senior notes were to be refinanced at interest rates which are 1/2 percentage point higher than shown above, our per annum interest cost would increase by approximately $4.6 million. The secured notes are secured by 11 of our office properties and require principal and interest payments through maturity. The market prices, if any, of each of our fixed rate obligations as of March 31, 2000, are sensitive to changes in interest rates. Typically, if market rates of interest increase, the current market price of a fixed rate obligation will decrease. Conversely, if market rates of interest decrease, the current market price of a fixed rate obligation will typically increase. Based on the balances outstanding at March 31, 2000, and discounted cash flow analyses, a hypothetical immediate one percentage point change in interest rates would change the fair value of our fixed rate debt obligations by approximately $39.2 million. Each of our obligations for borrowed money has provisions that allow us to make repayments earlier than the stated maturity date. In some cases, we are not allowed to make early repayment prior to a cutoff date and in other cases we are allowed to make prepayments only at a premium to face value. In any event, these prepayment rights may afford us the opportunity to mitigate the risk of refinancing at maturity at higher rates by refinancing at lower rates prior to maturity. At March 31, 2000, we had a $500 million unsecured bank credit facility and unsecured Remarketed Reset Notes (the "Reset Notes") that were subject to floating interest rates. Because these debt instruments are at a floating rate, changes in interest rates will not affect their value. However, changes in interest rates will affect our operating results. For example, the interest rate payable on our outstanding Reset Notes of $250 million at March 31, 2000, was 7.28% per annum. An immediate 10% change in that interest rate, or 73 basis points, would increase or decrease our costs by $1.8 million, or $0.01 per share per year (dollars in thousands): Impact of Changes in Interest Rates ---------------------------------------------- Total Interest Interest Rate Outstanding Expense Per Per Year Debt Year ------------- ----------- ------------- At March 31, 2000 7.28% $250,000 $18,200 10% reduction 6.55% 250,000 16,375 10% increase 8.01% 250,000 20,025 9
HRPT PROPERTIES TRUST Item 3. Quantitative and Qualitative Disclosures About Market Risk - continued The foregoing table presents a so called "shock" analysis which assumes that the interest rate change by 10% is in effect for a whole year. If interest rates were to change gradually over one year the impact would be less. We borrow in U.S. dollars and our current borrowings under our bank credit facility and our Reset Notes are subject to interest at LIBOR plus a premium. Accordingly, we are vulnerable to changes in U.S. dollar based short term rates, specifically LIBOR. During the past few months, short-term U.S. dollar based interest rates have tended to rise. We are unable to predict the direction or amount of interest rate changes during the next year. We have decided not to purchase an interest rate cap or other hedge to protect against future rate increases, but we may enter such agreements in the future. Also, we may incur additional debt at floating or fixed rates, which would increase our exposure to market changes in interest rates. 10
Part II Other Information Item 1. Legal Proceedings In April 2000, the arbitration panel issued an award in the arbitration proceeding described in Item 3 of the Company's Annual Report on Form 10-K, which arose following the Company's commencement in 1995 of an action in Florida state court to collect on a secured indemnity agreement from a former tenant and mortgagor, together with certain related parties. In its award, the arbitration panel dismissed all claims against the Company and awarded the Company $3.2 million in connection with the Company's indemnity claims. The Company has applied to the United States District Court for an order confirming the award. The final outcome of this confirmation process, and the ability of the Company to realize on its award, are not known at this time, and if opposed, a confirmation may be subject to appeal. The previously disclosed related cases filed against the Company and others by creditors or assignees of the former tenant remain pending, and the outcome of those proceedings cannot be predicted. Item 2. Changes in Securities On February 17, 2000, the Company issued 26,221 common shares as an incentive fee of approximately $215,000 for services rendered during 1999, based upon a per common share price of $8.1932. These restricted securities were issued pursuant to the exemption from registration provided under Section 4(2) of the Securities Act. Item 5. Other Information The Company's Board of Trustees has amended and restated the Company's Bylaws. The following is a summary of certain provisions of the Bylaws, as amended. Because it is a summary, it does not contain all of the information which may be important to a shareholder or other investor. For more information, the Company refers to the full text of its amended and restated Bylaws which are being filed as an exhibit to this Quarterly Report on Form 10-Q. o The Company has elected to be subject to Section 3-804(b) and (c) and Section 3-805 of Title 3, Subtitle 8 of the Maryland General Corporation Law. Those sections: o provide that the number of trustees may be fixed only by a vote of the Board of Trustees; o provide that vacancies on the Board of Trustees may be filled only by the affirmative vote of a majority of the remaining trustees in office, even if the remaining trustees do not constitute a quorum, and o provide that special meetings of shareholders may be called only by the written request of a majority of all the votes entitled to be cast at the meeting. o The amended Bylaws provide that nomination of persons for election to the Board of Trustees at an annual meeting of shareholders and business to be transacted by the shareholders at an annual meeting of shareholders may be properly brought before the meeting only (1) pursuant to the Company's notice of meeting, (2) by or at the direction of the Board of Trustees, or (3) by any shareholder who is a shareholder of record both at the time of giving of the advance notice described below and at the time of the annual meeting, who is entitled to vote at the meeting and who complies with the advance notice and other applicable terms and provisions set forth in the Bylaws. No business may be transacted at a special meeting of shareholders except as specifically designated in the notice of the meeting. Nominations of persons for election to the Board of Trustees at a special meeting of shareholders at which trustees are to be elected may be made only (1) pursuant to the Company's notice of meeting; (2) by or at the direction of the Board of Trustees, or (3) by any shareholder who is a shareholder of record both at the time of giving of the advance notice described below and at the time of the special meeting, who is entitled to vote at the meeting and who complies with the advance notice and other applicable terms and provisions set forth in the Bylaws. o The amended Bylaws require a shareholder who is nominating a person for election to the Board of Trustees at an annual meeting or proposing business to be transacted at an annual meeting to give notice of such nomination or proposal to the secretary of the Company at the principal executive offices of the Company not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to 11
the first anniversary of the date of mailing of the notice for the preceding year's annual meeting. If the date of mailing of the notice for the annual meeting is advanced or delayed by more than 30 days from the anniversary date of the date of mailing of the notice for the preceding year's annual meeting, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to the date of mailing of the notice for such annual meeting and not later than the close of business on the later of: (1) the 90th day prior to the date of mailing of the notice for such annual meeting or (2) the 10th day following the day on which public announcement of the date of mailing of the notice for such meeting is first made by the Company. The public announcement of a postponement of the mailing of the notice for such annual meeting or of an adjournment or postponement of an annual meeting to a later date or time will not commence a new time period for the giving of a shareholder's notice. If the number of Trustees to be elected to the Board of Trustees is increased and there is no public announcement by the Company of such action or specifying the size of the increased Board of Trustees at least one hundred (100) days prior to the first anniversary of the date of mailing of notice for the preceding year's annual meeting, a shareholder's notice also shall be considered timely, but only with respect to nominees for any new positions created by such increase, if the notice is delivered to the secretary at the Company's principal executive offices not later than the close of business on the 10th day immediately following the day on which such public announcement first is made by the Company. o The amended Bylaws require a shareholder who is nominating a person for election to the Board of Trustees at a special meeting at which trustees are to be elected to give notice of such nomination to the secretary of the Company at its principal executive offices not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of (1) the 90th day prior to such special meeting or (2) the 10th day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Trustees to be elected at such meeting. The public announcement of a postponement or adjournment of a special meeting to a later date or time will not commence a new time period for the giving of a shareholder's notice as described above. o The amended Bylaws provide that a shareholder's notice of a nomination for election to the Board of Trustees or of a proposal of business to be transacted at a shareholders meeting must be in writing and must include: o as to each person whom the shareholder proposes to nominate for election or reelection as a Trustee, (1) the person's name, age, business address and residence address, (2) the class and number of shares of beneficial interest of the Company that are beneficially owned or owned of record by such person and (3) all other information relating to such person that is required to be disclosed in solicitations of proxies for election of Trustees in an election contest, or is otherwise required, in each case pursuant to Regulation 14A or any successor provision under the Securities Exchange Act of 1934, including such person's written consent to being named in the proxy statement as a nominee and to serving as a Trustee if elected; o as to any business that the shareholder proposes to bring before the meeting, a description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any interest of such shareholder in such business (including any anticipated benefit to the shareholder therefrom) and of each beneficial owner, if any, on whose behalf the proposal is made; and o as to the shareholder giving the notice and each beneficial owner, if any, on whose behalf the nomination or proposal is made, (1) the name and address of such shareholder, as they appear on the Company's share ledger and current name and address, if different, of any such beneficial owner and (2) the class and number of shares of the Company which are owned beneficially and of record by such shareholder and any such beneficial owner. o The amended Bylaws provide that, at the same time as or prior to the submission to the Board of Trustees of any shareholder proposal of business to be conducted at an annual or special meeting of the shareholders that, if approved or implemented, would cause the Company to be in breach of a covenant under any existing or proposed debt instrument or agreement with any lender, the proponent shareholder must submit to the secretary of the Company at the principal executive offices of the Company evidence satisfactory to the Board of Trustees of the lender's willingness to waive the breach or a plan for repayment of affected indebtedness which is satisfactory to the Board of Trustees and which specifically identifies the source of funds to be used in the repayment and presents evidence satisfactory to the Board of Trustees that the identified funds could be applied by the Company to the repayment. 12
o The amended Bylaws provide that, at the same time as or prior to the submission to the Board of Trustees of any shareholder proposal of business to be conducted at an annual or special meeting of the shareholders that, if approved, could not be implemented by the Company without notifying or obtaining the consent or approval of any regulatory body, the proponent shareholder must submit to the secretary of the Company at the principal executive offices of the Company evidence satisfactory to the Board of Trustees that any and all required notices, consents or approvals have been given or obtained or a plan, satisfactory to the Board of Trustees, for making the requisite notices or obtaining the requisite consents or approvals, as applicable, prior to the implementation of the proposal. o The amended Bylaws provide that the Company is not required to include in its proxy statement a shareholder nomination of persons for election to the Board of Trustees or a shareholder proposal of business to be brought before an annual or special meeting of shareholders, unless the proponent shareholder has complied with (1) all applicable requirements of state and federal law and the rules and regulations thereunder, including Rule 14a-8 or any successor provision under the Securities Exchange Act of 1934, and (2) the advance notice and the other applicable procedures and requirements set forth in the Bylaws. This Bylaw provision does not affect any right of the Company to omit a shareholder proposal from the Company's proxy statement under the Securities Exchange Act of 1934, including nominations of persons for election to the Board of Trustees and business to be brought before the shareholders at an annual or special meeting of shareholders. o The amended Bylaws include provisions to clarify the organization and conduct of meetings of shareholders. These include, among other things, that o meetings of shareholders will be conducted by an individual appointed by the Trustees to be chairperson of the meeting or, in the absence of such appointment or the absence of the appointed individual, by specified officers of the Company or, in the absence of such officers, a chairperson chosen by the shareholders by the vote of holders of shares of beneficial interest representing a majority of the votes cast by shareholders present in person or represented by proxy; o the order of business and all other matters of procedure at any meeting of shareholders will be determined by the chairperson of the meeting; o the chairperson of the meeting may prescribe such rules, regulations and procedures and take such actions as, in the discretion of such chairperson, are appropriate for the proper conduct of the meeting, including, without limitation: (1) restricting admission to the time set for the commencement of the meeting; (2) limiting attendance at the meeting to shareholders of record of the Company, their duly authorized proxies or other such persons as the chairperson of the meeting may determine; (3) limiting participation at the meeting on any matter to shareholders of record of the Company entitled to vote on such matter, their duly authorized proxies or other such persons as the chairperson of the meeting may determine; (4) limiting the time allotted to questions or comments by participants; (5) maintaining order and security at the meeting; (6) removing any shareholder or other person who refuses to comply with meeting procedures, rules or guidelines as set forth by the chairperson of the meeting; and (7) recessing or adjourning the meeting to a later date and time and place announced at the meeting; and o unless otherwise determined by the chairperson of the meeting, meetings of shareholders are not required to be held in accordance with the rules of parliamentary procedure or any established rules of order. As stated in the Company's proxy statement dated March 23, 2000 relating to the annual meeting of shareholders held on May 9, 2000, shareholder proposals intended to be presented at the Company's 2001 Annual Meeting of Shareholders pursuant to Rule 14a-8 under the Securities Exchange Act of 1934 must be received by the Company at its principal executive offices not later than November 24, 2000. Under the amended Bylaws, in order to be considered "timely" within the meaning of Rule 14a-4(c) under the Securities Exchange Act of 1934, notice of a shareholder proposal intended for presentation at the Company's 2001 Annual Meeting of Shareholders made outside of Rule 14a-8 under the Securities Exchange Act of 1934 must be received by the Company no later than December 26, 2000 and no earlier than November 24, 2000, rather than respective dates which were specified in the Company's proxy statement dated March 23, 2000, and must be made in accordance with the provisions, requirements and procedures set forth in the Company's amended Bylaws. 13
Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 3.1 Articles Supplementary of the Company. (filed herewith) 3.2 Amended and Restated Bylaws of the Company. (filed herewith) 27. Financial Data Schedule. (filed herewith) (b) Reports on Form 8-K: No reports on Form 8-K were filed by the Company during the three months ended March 31, 2000. 14
HRPT PROPERTIES TRUST CERTAIN IMPORTANT FACTORS This Quarterly Report on Form 10-Q contains statements which constitute forward looking statements within the meaning of the Securities Exchange Act of 1934, as amended. Those statements appear in a number of places in this Form 10-Q and include statements regarding our intent, belief or expectations with respect to the declaration or payment of distributions, policies and plans regarding financings and other matters. Readers are cautioned that any forward looking statements are not guaranteed, and that actual results may differ materially from those contained in the forward looking statements as a result of various factors. Such factors include without limitation changes in financing terms, our ability or inability to complete acquisitions and financing transactions, results of operations of our properties and general changes in economic conditions not presently contemplated. The information contained in this Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 1999, including the information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations", identifies other important factors that could cause differences. THE AMENDED AND RESTATED DECLARATION OF TRUST ESTABLISHING THE COMPANY, DATED JULY 1, 1994, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"), IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE STATE OF MARYLAND, PROVIDES THAT THE NAME "HRPT PROPERTIES TRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF THE COMPANY SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL PERSONS DEALING WITH THE COMPANY, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION. 15
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, thereunto duly authorized. HRPT PROPERTIES TRUST By: /s/ John A. Mannix John A. Mannix President and Chief Operating Officer Dated: May 12, 2000 By: /s/ John C. Popeo John C. Popeo Treasurer and Chief Financial Officer Dated: May 12, 2000 16