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                                                                    EXHIBIT 13.2

                            MANAGEMENT'S DISCUSSION

OVERVIEW

         The Company is an indefinite life REIT which was incorporated in
Maryland on March 31, 1994. The Company commenced operations on June 30, 1994,
with the receipt of proceeds from the sale of 5,980,000 shares of common stock.
The Company invests in a diversified portfolio of income-producing,
healthcare-related real estate, which it leases, and provides mortgage financing
to healthcare operators. The Company believes that it is an important source of
capital for the healthcare industry and intends to continue investing in a high
quality portfolio of properties managed by established operators of
rehabilitation, alternate-site care, long-term care and acute-care facilities.
The Company diversifies its portfolio by operator, geography, facility type and
healthcare industry segment. The Company's primary objective is to provide
current income for distribution to stockholders.

         The Company incurs operating and administrative expenses, principally
compensation expense for its officers and other employees, office rent and
occupancy costs and various expenses incurred in connection with acquiring
additional facilities or providing additional mortgage financing. The Company is
"self-administered" and managed by its executives and staff, and does not engage
a separate advisor for administrative or investment services, although the
Company does engage legal, accounting, tax and financial advisors from time to
time. All taxes, maintenance and other operating costs associated with leased
properties are generally paid by the lessees. The Company intends to continue to
declare and pay quarterly dividends to its stockholders in amounts not less than
the amounts required to maintain REIT status under the Internal Revenue Code.
The Company's ability to pay dividends will depend upon its cash available for
distribution.

RESULTS OF OPERATIONS

Year Ended 1997 compared to the Year Ended 1996

         In 1997, the Company reported net income of $28.9 million, or $1.76
basic earnings per common share and $ 1.75 diluted earnings per common share,
compared to $18.9 million, or $1.71 basic earnings per common share and $ 1.68
diluted earnings per common share in 1996. The increase in net income is
attributable to increases in rental and mortgage income from property
acquisitions and additional mortgage fundings. However, a portion of the revenue
from significant acquisitions in 1997 was offset by a $6 million increase in
interest expense.

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         Total income increased $21.2 million, or 58.9%, to $57.2 million in
1997 over the previous year's total income of $36.0 million. The increase is due
primarily to rental income increasing $14.2 million in 1997 to $46.2 million
from 1996's total of $32.0 million. The Company acquired 39 additional
properties during the year and also recognized a full year's rental income on
eight properties acquired in 1996. Additionally, mortgage interest income
increased $7.0 million, or 221.2%, to $10.1 million in 1997 from $3.2 million in
1996 due to net mortgage fundings of $130.7 million during 1997.

         Total expenses in 1997 were $28.3 million compared to $17.0 million in
1996, an increase of $11.3 million or 66.0%. This is primarily attributable to
an increase in interest expense of $6.0 million resulting from the issuance of
$74.8 million principal amount in 6.55% debentures and $104.4 million of draws
against the Bank Credit Facility. Depreciation expense increased $2.8 million in
1997 resulting from the Company's acquisition of 39 properties during the year
and the recognition of a full year's depreciation expense on the eight
properties that were acquired in 1996. General and administrative expenses also
increased $1.2 million due to the growth in the number of employees and
associated benefits.

Year Ended 1996 compared to the Year Ended 1995

         In 1996, the Company reported net income of $18.9 million, or $1.71
basic earnings per common share and $1.68 diluted earnings per common share,
compared to $9.7 million, or $1.55 basic earnings per common share and $1.55
diluted earnings per common share in 1995. The increase in net income is
attributable to increases in rental and mortgage income from property
acquisitions and additional mortgage fundings, while total interest expense
experienced only a minor increase due to conversions of the Company's debentures
to common stock and a decrease in the weighted average interest rate of the Bank
Credit Facility during 1996.

         Total income increased $11.3 million, or 45.5%, to $36.0 million in
1996 over the previous year's total income of $24.7 million. The increase is due
primarily to rental income increasing $9.2 million in 1996 to $32.0 million from
1995's total of $22.8 million. The Company acquired eight additional properties
during the year and also recognized a full year's rental income on the twelve
properties acquired in 1995. Additionally, mortgage interest income increased
$1.4 million, or 73.6%, to $3.2 million in 1996 from $1.8 million in 1995 due to
additional mortgage fundings of $14.5 million during 1996.



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         Total expenses in 1996 were $17.0 million compared to $15.0 million in
1995, an increase of $2.0 million or 13.6%. This is primarily attributable to an
increase in depreciation expense of $1.8 million in 1996 resulting from the
Company's acquisition of eight properties during the year and the recognition of
a full year's depreciation expense on the twelve properties that were acquired
in 1995. Interest expense experienced only a slight increase for 1996 due to
$26.3 million in conversions of the Company's debentures to common stock and to
a decrease in the weighted average interest rate of the Bank Credit Facility.



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LIQUIDITY AND CAPITAL RESOURCES

         The Company requires capital in order to fund investments in healthcare
properties through sale/leaseback transactions or mortgage financings. To fund
these investments, the Company utilizes its cash flow from operations and a
combination of long-term and short-term capital including both equity and debt.
The Company's long-term capital includes equity securities, convertible
debentures, and conventional fixed-rate debt. The Company's short-term capital
is obtained through the use of its Bank Credit Facility. The Company initially
funds investments and working capital needs through borrowings under the Bank
Credit Facility and Short-Term Credit Facility, existing cash and cash
equivalents and cash flow from operations. Thereafter, the Company raises
capital through issuance of additional long-term and short-term indebtedness or
the issuance of its securities in private or public transactions. There can be
no assurance that acceptable financing for future investments can be obtained.

         During the year ended December 31, 1997, the Company invested
approximately $230.8 million to acquire or construct real estate assets and
invested approximately $140.9 million in mortgage loans to healthcare providers.
As of December 31, 1997, the Company's investments totaled $716.1 million,
consisting of real estate properties of $486.1 million, real estate development
projects of $59.9 million and mortgage notes receivable of $170.1 million. These
real estate properties consist of seventeen ancillary hospital facilities,
eighteen physician clinics, six ambulatory surgery facilities, six inpatient
rehabilitation facilities, three outpatient rehabilitation facilities, two
comprehensive mental health hospitals, two sub-acute care facilities, five
integrated delivery facilities, nine skilled nursing facilities and fifteen
assisted living facilities. The properties are located in nineteen states and
are leased to seventeen healthcare-related entities or their subsidiaries
pursuant to long-term leases. There are nineteen real estate development
projects with nine healthcare operators consisting of fifteen assisted living
facilities, three integrated delivery facilities, and one physician clinic. The
mortgage notes receivable are secured by the real estate of thirty skilled
nursing facilities, thirty-five assisted living facilities, one acute-care
hospital, one ambulatory surgery facility, one ancillary hospital facility, and
one specialty hospital, which are operated by thirty-four healthcare operators.

         During March 1995, the Company sold $52 million aggregate principal
amount of 10.50% Convertible Subordinated Debentures (10.50% Debentures) due
2002. The net offering proceeds were used to reduce the outstanding balance of
the Company's Bank Credit Facility. As of December 31, 1996, a total of $34.3
million in the principal amount of the debentures had been converted into 2.1
million common shares, resulting in a decrease of $34.3 million in the
debentures and an increase of $34.3 million in stockholders' equity.



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         During October 1995 the Company filed a registration statement
("Shelf-Registration") with the Securities and Exchange commission to enable the
Company to offer up to an aggregate of $250,000,000 in debt securities,
preferred stock and common stock at prices and terms to be determined at the
time of sale. In December 1995, the Company sold 3.45 million shares of common
stock at a per share price of $18.125. The net offering proceeds of $58.6
million were used to reduce the outstanding balance of the Company's Bank Credit
Facility. Additionally, in November 1996, the Company sold 2.68 million shares
of common stock at a per share price of $20.875. The net offering proceeds of
$52.8 million were also used to reduce the outstanding balance of the Company's
Bank Credit Facility.

         In June 1996, the Company completed an amendment and restatement of its
unsecured line of credit (Bank Credit Facility), increasing the principal amount
to $150 million from its previous principal amount of $100 million, extending
the term to June 24, 1999, from its previous term of June 22, 1997, and
adjusting the determination of the interest rate. At December 31, 1996, the
outstanding balance of the Bank Credit Facility was $68.5 million with a
weighted average interest rate of 6.82%. The maximum availability at year end
was $81.5 million.

         On September 18, 1997, the Company completed an amendment to its
unsecured line of credit ("Bank Credit Facility") which provides for an increase
to $180 million from its previous principal amount of $150 million at December
31, 1996. The Bank Credit Facility is participated in by a consortium of eight
banks and is available until June 24, 2000. At December 31, 1997, the Company
had drawn $172,950,000 against the Bank Credit Facility for the purchase of real
estate properties and the funding of mortgage loans.

         Borrowings under the amended and restated Bank Credit Facility bear an
interest rate chosen by the Company from either the Bank's base rate or the
Eurodollar rate plus a percentage rate ranging from 1.00 percent to 1.625
percent depending upon the Company's senior debt to consolidated total capital
ratio for the preceding fiscal quarter. During September of 1997, the Company
entered into an interest rate swap ("Swap") agreement with NationsBank which,
beginning March 1998, effectively fixed the base rate at 5.959 percent on a $50
million notional amount of borrowings under the Bank Credit Facility. The Swap
will be effective until March 2003 unless NationsBank elects to cancel at the
three year anniversary of the Swap during March 2001.

         The Bank Credit Facility contains certain representations, warranties,
financial and other covenants customary in such loan agreements.

         The Bank Credit Facility is unsecured; however, upon the occurrence of
an event of default under the Bank Credit Facility, at the option of the
lenders, the Bank Credit Facility may become secured by a significant portion of
the assets of the Company, including certain of the leased properties and
mortgage notes receivable.



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         On December 4, 1997, the Company obtained a $40 million Short-Term
Credit Facility from NationsBank primarily for purposes of funding investments.
Borrowings under the Short-Term Credit Facility bear interest at the Eurodollar
rate plus a percentage that varies from 1.00% to 1.625% and are payable on or
before April 3, 1998. At December 31, 1997 the outstanding balance under the
Short-Term Credit Facility was approximately $27,500,000.

         There can be no assurances that the lenders will renew the Bank Credit
Facility or the Short-Term Credit Facility on terms favorable to the Company or
that the Company will be able to refinance at that time.

         As of December 31, 1997, a total of $13.6 million in the principal
amount of the 10.50 % Debentures had been converted into 845,391 common shares
resulting in a decrease of $13.6 million in the debentures and an increase of
$13.6 million in stockholders' equity.

         During March 1997, the Company issued $74,750,000 aggregate principal
amount of 6.55% Convertible Subordinated Debentures (the " 6.55 % Debentures").
The 6.55% Debentures are due on March 14, 2002 and were issued at a price of
$903 per $1,000 principal amount at maturity, which represents an original issue
discount of 9.70% from the principal amount thereof which is payable at
maturity. Interest on the 6.55% Debentures is payable March 14 and September 14
in each year, and commenced on September 14, 1997. Such rate of interest and
accrual of original issue discount represents a yield to maturity of 9.00% per
annum (computed on a semiannual bond equivalent basis). The 6.55% Debentures are
convertible into common stock of the Company at any time before maturity at an
initial conversion ratio of 39.4754 shares of common stock for each $1,000
principal amount of 6.55% Debentures, subject to adjustment in certain events.
As of December 31, 1997 there had been no conversions of the 6.55 % Debentures.

         During June 1997, the Company raised net proceeds of $29.9 million with
the sale of 1.3 million shares of common stock at $24.25. During July 1997, the
Underwriter exercised its option to purchase an additional 155,400 share for net
proceeds of $3.6 million, which was used to reduce the Bank Credit Facility.
Also during July 1997, the Company filed a registration statement ("Shelf
Registration") with the Securities and Exchange Commission to enable the Company
to offer up to an aggregate of $500,000,000 in debt securities, preferred stock,
common stock, and warrants to purchase any of the foregoing securities at prices
and terms to be determined at the time of sale.

         During September 1997, the Company raised net proceeds of $72.2 million
with the sale of 3.0 million shares of 8.875% Series A cumulative preferred
stock ("Preferred Stock") at $25.00 per share. The dividends are cumulative from
the date of original issue and are payable quarterly, commencing on December 15,
1997. Except in certain circumstances relating to the Company's qualifications
as a REIT, the Preferred Stock is not redeemable prior to September 30, 2002. On
or after September 30, 2002, the



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Preferred Stock may be redeemed for cash at the option of the Company, in whole
or in part, at a redemption price of $25 per share, plus accrued and unpaid
dividends, if any, thereon to the redemption date. The redemption price (other
than the portion thereof consisting of accrued and unpaid dividends) shall be
payable solely out of the sale proceeds of other stock of the Company, which may
include other series of the Company's preferred stock, par value $.001 per
share, and from no other source. The Preferred Stock has no stated maturity and
will not be subject to any sinking fund or mandatory redemption and will not be
convertible into any other securities of the Company except in certain
circumstances relating to the Company's qualification as a REIT.

         In December 1997, the Company sold 615,385 shares of common stock at a
per share price of $24.375 The net offering proceeds of $14.3 million were also
used to reduce the outstanding balance of the Company's Bank Credit Facility.

         The Company has a dividend reinvestment and stock purchase plan
("Plan") under which participants can automatically reinvest all or a portion of
the cash dividends in shares of the Company's common stock and can make
voluntary cash payments for additional shares. Under the Plan, the Company had
received $ 155,413 for the twelve months ended December 31, 1997 in exchange for
6,747 shares of common stock.

COMMITMENTS

         The Company has committed a total of $228.3 million towards the
acquisition and construction of real estate properties and providing mortgage
financing. As of December 31, 1997, the Company had funded approximately $104.0
million towards these commitments, with the balance of $124.3 million expected
to be funded throughout 1998. Financing for these commitments may be provided by
funds from operations, borrowings under the Bank Credit Facility or the
Short-Term Credit Facility, or private placements or public offerings of debt or
equity.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         Any statement contained in this report which is not a historical fact,
or which might otherwise be considered an opinion or projection concerning the
Company or its business, whether express or implied, is meant as and should be
considered a forward-looking statement as that term is defined in the Private
Securities Litigation Reform Act of 1996. Forward-looking statements are based
on assumptions and opinions concerning a variety of known and unknown risks,
including but not necessarily limited to changes in market conditions, natural
disasters and other catastrophic events, increased competition, changes in
availability and cost of reinsurance, changes in governmental regulations, and
general economic conditions, as well as other risks more completely described in
the Company's filings with the Securities and Exchange Commission. If any of
these assumptions or opinions may also prove materially incorrect, any
forward-looking statements made on the basis of such assumptions or opinions may
also prove materially incorrect in one or more respects.