American Health Properties, Inc. Meets Deadline to Identify Investments Required to Complete Kendall 1031 Exchange.

DENVER--(BUSINESS WIRE)--June 1, 1999--

Over $100 Million of Transactions Expected to be

Completed by August 1999

Financial Position Strong With

Interest Coverage Ratio More Than Four Times

American Health Properties, Inc. (NYSE:AHE) today announced that, in connection with its previously announced disposition of the Kendall Regional Medical Center for a purchase price of $105 million, it has identified 20 potential replacement properties, consisting of medical office and other integrated health care system facilities collectively valued at approximately $200 million in total. The identified properties are occupied by a range of tenants from large institutional-grade health systems to individual physician practices.

On April 16, 1999, the Company sold the Kendall facility to an affiliate of Columbia/HCA Healthcare Corporation in a disposition structured as a deferred Section 1031 tax-free exchange of like kind property. To complete the exchange, the Company was required to identify all potential exchange properties prior to the close of business on May 28, 1999. Tax regulations allow the Company to identify replacement properties worth up to 200% of the value of the Kendall facility and, as permitted under those regulations, the Company timely identified approximately $200 million worth of potential exchange properties for acquisition.

The Company has entered into binding contracts to acquire approximately $85 million of the replacement properties identified by the Company. Contracts are under negotiation for the acquisition of an additional approximately $20 million of identified replacement properties. The Company anticipates completing definitive agreements for those properties in the next few weeks.

The Company's principal objective is to acquire sufficient properties to complete the 1031 exchange so as to cause no tax to be paid on the gain from the sale of the Kendall facility. Following the completion of those transactions, the Company intends to continue with its investment program, subject to conditions in both the investment market and the capital markets. The Company will continue to focus primarily on investments in integrated health care delivery systems, consistent with the Company's current portfolio. More than 80% of the Company's portfolio is comprised of medical office buildings, clinical facilities and acute care hospitals, with less than 12% consisting of skilled nursing properties. The Company will evaluate additional potential investments, which may include some of the remaining $100 million of properties it has identified in connection with the exchange.

The Company anticipates closing approximately $95 million of the properties it has identified by the end of July. Those properties have an average anticipated first-year yield of approximately 9.8%, with growth anticipated in future years. The Company also expects to complete the acquisition of up to an additional $10 million of properties in connection with the exchange, with closing anticipated to occur in August. If that occurs, the Company will avoid taxation on all of the gain of over $50 million recognized for book purposes, and expects to replace nearly all of the annualized funds from operation (FFO) generated by the Kendall facility prior to disposition. Although no assurances can be given that the purchase of any particular property will be completed as currently anticipated, the Company believes that it has developed a sufficiently large pool of replacement properties to allow the Company to complete the 1031 exchange in the near term. The proceeds from the Kendall transaction remain invested by the qualified intermediary holding the funds in short-term investments pending the closing of acquisitions of the replacement properties.

Joseph P. Sullivan, Chairman, President and Chief Executive Officer of the Company, stated: "The Kendall transaction has resulted in the recognition of over $50 million of gain for book purposes which has been added to the Company's equity capital. If, as we expect, we successfully complete our investment in the exchange properties identified by the Company, we will not pay tax on the transaction and will have acquired a diverse portfolio of properties replacing the single investment in the Kendall facility. By replacing one acute care asset with approximately ten replacement properties, this transaction will diversify our portfolio. The replacement properties are anticipated to produce annual FFO which is nearly the same as the FFO produced by the Kendall facility. In addition, they provide greater potential for future growth in FFO. This transaction will result in enhanced value and growth potential for the Company's shareholders."

Mr. Sullivan also stated: "Based on our first-quarter results, the Company's financial position remains very strong, with interest charge coverage of its debt in the first quarter of over four times, and fixed charge coverage (including preferred stock) of over three times. Upon the reinvestment of the Kendall proceeds, our dividend payout ratio should remain at 86%, the same as existed in the first quarter."

American Health Properties, Inc., is a real estate investment trust (REIT) specializing in quality health care facilities. The Company currently has in excess of $810 million of investments in health care properties located in 21 states.

Cautionary Statement Regarding Future Results and Forward-Looking Statements 

This press release includes statements that are not purely historical and are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements regarding the Company's expectations, beliefs, intentions or strategies regarding the future. All statements other than historical fact contained in this press release are forward-looking statements. All forward-looking statements included in this press release are based on information available to the Company on the date hereof, and the Company assumes no obligation to update such forward-looking statements. Although the Company believes that the assumptions and expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct or that the Company will take any actions that may presently be planned.