Real Estate Investments, Net, Assets Held for Sale, and Discontinued Operations

6 Months Ended

Jun. 30, 2011

Real Estate Investments, Net, Assets Held for Sale, and Discontinued Operations [Abstract]

Real Estate Investments, Net, Assets Held for Sale, and Discontinued Operations

3.  Real Estate Investments, Net, Assets Held for Sale, and Discontinued Operations

Investment in Operating Properties

Our investments in our consolidated operating properties consisted of the following as of June 30, 2011 and December 31, 2010:

	June 30, 2011			December 31, 2010
Land	$	165,767,000		$	164,821,000
Building and improvements		1,743,494,000			1,711,054,000
Furniture and equipment		10,000			10,000
		1,909,271,000			1,875,885,000
Less: accumulated depreciation		(135,012,000	)		(102,962,000	)
Total	$	1,774,259,000		$	1,772,923,000

Depreciation expense related to our portfolio of operating properties for the three months ended June 30, 2011 and 2010 was $16,148,000 and $11,524,000, respectively. Depreciation expense related to our portfolio of operating properties for the six months ended June 30, 2011 and 2010 was $32,173,000 and $22,042,000, respectively.

Assets Held for Sale and Discontinued Operations

Assets and liabilities of properties sold or to be sold are classified as held for sale, to the extent not sold, on the Company’s interim condensed consolidated balance sheets, and the results of operations of such properties are included in discontinued operations on the Company’s interim condensed consolidated statements of operations for all periods presented. Properties classified as held for sale at June 30, 2011 and December 31, 2010 include four buildings within our Senior Care 1 portfolio, which is a portfolio consisting of six buildings located in various cities throughout Texas and California. Pursuant to a master lease agreement in effect at the time of our purchase of this portfolio, the lessee of the four buildings within the portfolio that are located in Texas was afforded the option to purchase these buildings after the June 30, 2011 anniversary of the first five years of the ten year lease term. On December 31, 2010, the lessee opened escrow with a deposit of 5% of the minimum repurchase price and provided us with timely notice, as required by the agreement, of its intent to exercise this option. As a result of these actions, in accordance with ASC 360-10-45-9, Property, Plant, and Equipment — Overall — Other Presentation Matters — Long Lived Assets Classified as Held for Sale, we determined that these four buildings met the criteria for held for sale designation as of December 31, 2010 and continue to meet such criteria as of June 30, 2011. We have therefore separately presented the assets and liabilities of these buildings on our interim condensed consolidated balance sheet.

The table below reflects the assets and liabilities of properties classified as held for sale as of June 30, 2011 and December 31, 2010:

Assets: Real Estate Investments, net

	June 30, 2011		December 31, 2010
Land	$	2,302,000	$	2,302,000
Building and improvements, net of accumulated depreciation of $2,161,000 as of June 30, 2011 and December 31, 2010		22,238,000		22,238,000
Total real estate investments of properties held for sale, net	$	24,540,000	$	24,540,000

Depreciation expense related to our properties classified as held for sale for the three months ended June 30, 2011 and 2010 was $0 and $197,000, respectively. Depreciation expense related to our properties classified as held for sale for the six months ended June 30, 2011 and 2010 was $0 and $393,000, respectively.

Assets: Identified Intangible Assets, net

	June 30, 2011		December 31, 2010
In place leases, net of accumulated amortization of $824,000 as of June 30, 2011 and December 31, 2010	$	1,648,000	$	1,648,000
Tenant relationships, net of accumulated amortization of $376,000 as of June 30, 2011 and December 31, 2010		2,120,000		2,120,000
Total identified intangible assets of properties held for sale, net	$	3,768,000	$	3,768,000

Amortization expense recorded on the identified intangible assets related to our properties classified as held for sale for the three months ended June 30, 2011 and 2010 was $0 and $109,000, respectively. Amortization expense recorded on the identified intangible assets related to our properties classified as held for sale for the six months ended June 30, 2011 and 2010 was $0 and $218,000, respectively.

Liabilities: Identified Intangible Liabilities, net

	June 30, 2011		December 31, 2010
Below market leases, net of accumulated amortization of $184,000 as of June 30, 2011 and December 31, 2010		369,000		369,000
Total identified intangible liabilities of properties held for sale, net	$	369,000	$	369,000

Amortization expense recorded on the identified intangible liabilities related to our properties classified as held for sale for the three months ended June 30, 2011 and 2010 was $0 and $17,000, respectively. Amortization expense recorded on the identified intangible liabilities related to our properties classified as held for sale for the six months ended June 30, 2011 and 2010 was $0 and $34,000, respectively. Amortization expense on our identified intangible liabilities is recorded to rental income in our accompanying interim condensed consolidated statements of operations.

In accordance with ASC 205-20, Presentation of Financial Statements — Discontinued Operations, the operating results of the buildings classified as held for sale have been reported within discontinued operations for all periods presented in our interim condensed consolidated statements of operations. The table below reflects the results of operations of the properties classified as held for sale at June 30, 2011, which are included within discontinued operations within the Company’s interim condensed consolidated statements of operations for the three and six months ended June 30, 2011 and 2010.

The table below reflects the results of discontinued operations for the three months ended June 30, 2011 and 2010:

	Three Months Ended June 30,
	2011		2010
Revenues:
Rental income	$	790,000	$	806,000
Expenses:
Rental expenses		95,000		89,000
Depreciation and amortization		—		306,000
Total expenses		95,000		395,000
Income before other income (expense)	$	695,000	$	411,000
Other income (expense):
Interest expense:
Interest expense related to mortgage loan payables and credit facility		—		(34,000	)
Income from discontinued operations	$	695,000	$	377,000
Income from discontinued operations per common share — basic and diluted	$	0.00	$	0.00
Weighted average number of shares outstanding
Basic		228,340,776		154,594,418
Diluted		228,800,828		154,815,137

The table below reflects the results of discontinued operations for the six months ended June 30, 2011 and 2010:

	Six Months Ended June 30,
	2011		2010
Revenues:
Rental income	$	1,620,000	$	1,611,000
Expenses:
Rental expenses		181,000		175,000
Depreciation and amortization		—		611,000
Total expenses		181,000		786,000
Income before other income (expense)	$	1,439,000	$	825,000
Other income (expense):
Interest expense:
Interest expense related to mortgage loan payables and credit facility		—		(300,000	)
Gain (loss) on derivative financial instruments		—		141,000
Income from discontinued operations	$	1,439,000	$	666,000
Income from discontinued operations per common share — basic and diluted	$	0.00	$	0.00
Weighted average number of shares outstanding
Basic		221,606,526		149,990,622
Diluted		222,066,578		149,990,622

Property Acquisitions during the six months ended June 30, 2011

During the six months ended June 30, 2011, we completed the acquisition of one two-building property portfolio as well as purchased additional buildings within two of our existing portfolios. The aggregate purchase price of these properties was $36,314,000. See Note 16, Business Combinations, for the allocation of the purchase price of the acquired properties to tangible assets and to identified intangible assets and liabilities based on their respective fair values. A portion of the aggregate purchase price for these acquisitions was initially financed or subsequently secured by $6,581,000 in mortgage loans payable. Total acquisition-related expenses of $1,423,000 include amounts for legal fees, closing costs, due diligence and other costs.

Acquisitions completed during the six months ended June 30, 2011 are set forth below:

								Mortgage
		Date	Ownership			Purchase		Loans
Property	Property Location	Acquired	Percentage			Price		Payable(1)
Phoenix Portfolio — Paseo(2)	Phoenix, AZ	2/11/11		100	%	$	3,762,000	$	2,147,000
Columbia Portfolio — Northern Berkshire(2)	North Adams, MA	2/16/11		100			9,182,000		4,434,000
Holston Medical Portfolio	Bristol, TN	3/24/11		100			23,370,000		—
						$	36,314,000	$	6,581,000

(1)	Represents the amount of the mortgage loan payable assumed or newly placed on the property in connection with the acquisition or secured by the property subsequent to acquisition.
(2)	Represent purchases of additional medical office buildings during the six months ended June 30, 2011 that are within portfolios we had previously acquired.