(4) Acquisitions, Dispositions and New Construction

Nine Months Ended September 30, 2016:

Acquisition:

During the nine months ended September 30, 2016, we spent $52.2 million to:

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purchase the Frederick Memorial Hospital Crestwood, an MOB located in Frederick, Maryland, during the third quarter for approximately $24.3 million. The property, which consists of approximately 62,300 rentable square feet, is fully occupied pursuant to the terms of triple-net leases with an average remaining lease term of approximately twelve years at the time of acquisition.

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purchase the Chandler Corporate Center III located in Chandler, Arizona, during the second quarter for approximately $18.0 million. The property, which consists of 82,000 rentable square feet, is currently 92% occupied by one tenant pursuant to the terms of a twelve year escalating triple-net lease, with a ten year fair-market value renewal option. The lease had a remaining lease term of approximately 11.3 years at the time of acquisition.

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purchase the Madison Professional Office Building located in Madison, Alabama, during the first quarter for approximately $10.1 million (including $150,000 deposit made in 2015). This multi-tenant property consists of approximately 30,100 rentable square feet and is fully occupied with an average remaining lease term of approximately 6.2 years at the time of acquisition.

The aggregate purchase price for these acquisitions was allocated to the assets acquired and liabilities assumed consisting of tangible property and intangible assets and liabilities, based on the fair value estimated or finalized at acquisition as detailed in the table below. Final allocations of the total purchase price for allocations currently estimated will be recorded during the fourth quarter of 2016, pursuant to a third-party appraisal and will be based upon the fair value at acquisition. While they are not expected to be materially different than those shown, any material adjustments to the estimates will be reflected, retroactively, as of the date of acquisition. Previous reported estimated purchase price allocations that have been finalized in the third quarter did not have a material impact on our consolidated financial statements The intangible assets include the value of in-place leases at the properties at the time of acquisition as well as the above market lease values. The value of the in-place leases will be amortized over the average remaining lease terms of approximately 6 to 12 years at the time of acquisition. The above/below market leases, which are reflected below as intangible assets/below-market intangibles will be amortized over the remaining term of the respective leases. The estimated aggregate allocation is as follows:


Land	$6,891
Buildings and improvements	39,647
Intangible assets	7,094
Below-market intangibles	(1,289)
Deposit………………………………………………………………………………………..	(150)

Net cash paid	$52,193

For these properties acquired during 2016, we recorded aggregate net revenue of approximately $723,000 and $1.1 million during the three and nine month periods ended September 30, 2016, respectively, since the date of acquisition. The aggregate net losses generated by these properties since the date of acquisition, including the cost of borrowings and advisory fee expenses was approximately $47,000 and $134,000 during the three and nine month periods ended September 30, 2016, respectively.

Assuming the 2016 acquisitions occurred on January 1, 2015, our pro forma net revenues for the three and nine months ended September 30, 2015, would have been approximately $16.4 million and $50.1 million, respectively, and our pro forma net income for the three and nine months ended September 30, 2015, would have been approximately $3.4 million, or $.25 per diluted share, and $18.7 million, or $1.40 per diluted share, respectively. The Chandler Corporate Center III was not operational during the first nine months of 2015. Assuming these acquisitions occurred on January 1, 2016, our pro forma net revenues for the three and nine months ended September 30, 2016, would have been approximately $17.2 million and $51.7 million, respectively, and the aggregate effect on our net income for the three and nine months ended September 30, 2016 was not material.

New Construction:

During the first quarter of 2016, we committed to invest up to $21.1 million in the development and construction of the Henderson Medical Plaza, an MOB located on the campus of the Henderson Hospital Medical Center which is owned by a UHS subsidiary and opened in late October, 2016. A ground lease has been executed between the limited liability company that owns the MOB and a subsidiary of UHS, the terms of which include a seventy-five year lease term with two ten-year renewal options at the Lessee’s option at an adjusting lease rate. We have invested $4.6 million on the development and construction for this MOB as of September 30, 2016. The MOB is scheduled to be completed and opened during the first quarter of 2017.

Dispositions:

There were no divestitures during the first nine months of 2016.

Nine Months Ended September 30, 2015:

Property Exchange Transaction:

In May, 2015, in exchange for the real property of Sheffield Medical Building (“Sheffield”), a 73,446 square foot medical office building (“MOB”) located in Atlanta, Georgia, we received $2 million in cash and the real property of two MOBs located in Sandy Springs and Vinings, Georgia, from an unrelated third party. In connection with the two MOBs acquired in this transaction, triple net, master lease agreements applicable to 100% of the combined 36,700 rentable square feet of these properties were executed with the counterparty. These master lease agreements have initial terms of 15 years and provide for 3% annual rent increases. We recorded an $8.7 million gain which is included in our Condensed Consolidated Statements of Income for the nine-month period ended September 30, 2015, representing the difference between recorded net book value of Sheffield and the fair values of the properties exchanged, combined with the cash proceeds received.

Acquisitions:

In February, 2015, we purchased the Haas Medical Office Park, two single story buildings having an aggregate of approximately 16,000 rentable square feet, located in Ottumwa, Iowa, for approximately $4.1 million.

In January and February of 2015, we purchased from wholly-owned subsidiaries of UHS, the real property of two newly-constructed and recently opened FEDs located in Weslaco and Mission, Texas, for an aggregate acquisition cost of approximately $12.8 million. Each FED consists of approximately 13,600 square feet and is operated by wholly-owned subsidiaries of UHS. In connection with these acquisitions, ten-year lease agreements with six 5-year renewal terms were executed with UHS for each FED. In connection with the lease agreements, the lessee shall have the option to purchase the leased property upon the expiration of the fixed term and each five-year extended term at the fair market value at that time.

Dispositions:

There were no divestitures during the first nine months of 2015.