Debt

6 Months Ended

Jun. 30, 2012

Debt

Debt

5. Debt

Payments on mortgage notes are generally due in monthly installments of principal amortization and interest. The following table sets forth a summary of the Company’s outstanding indebtedness, including mortgage notes payable and borrowings under the Company’s secured corporate revolving credit facility (the “Credit Facility”) as of June 30, 2012 and December 31, 2011 (dollars in thousands):

Loan	Interest Rate(1)	Principal outstanding as of June 30, 2012		Principal outstanding as of December 31, 2011		Current Maturity
Wells Fargo Master Loan—Fixed Amount	LIBOR + 3.00%	$	124,808	$	134,066	Oct-31-2013
CIGNA-1 Facility	6.50%	60,013		60,369		Feb-1-2018
CIGNA-2 Facility	5.75%	61,282		59,186		Feb-1-2018
CIGNA-3 Facility	5.88%	17,150		17,150		Oct-1-2019
Bank of America, N.A	7.05%	—		8,324		Aug-1-2027
Credit Facility	LIBOR + 2.50%	5,000		—		Apr-20-2014
Union Fidelity Life Insurance Co.(2)	5.81%	7,064		7,227		Apr-30-2017
Webster Bank National Association	4.22%	6,056		6,128		Aug-4-2016
Webster Bank National Association(3)	3.66%	3,243		—		May-29-2017
Webster Bank National Association(4)	3.64%	3,493		—		May-31-2017
Sun Life Assurance Company of Canada (U.S.)(5)	6.05%	4,205		4,329		Jun-1-2016
		$	292,314	$	296,779

(1)Current interest rate as of June 30, 2012. At June 30, 2012 and December 31, 2011, the one-month LIBOR rate was 0.246% and 0.295%, respectively.

(2)This loan was assumed at the acquisition of the Berkeley, MO property and the principal outstanding includes an unamortized fair market value premium of $0.2 million as of June 30, 2012.

(3)This loan was entered into on May 29, 2012 with an outstanding principal amount of $3.25 million. The loan is collateralized by a property located in Portland, ME.

(4)This loan was entered into on May 31, 2012 with an outstanding principal amount of $3.5 million. The loan is collateralized by a property located in East Windsor, CT.

(5)Principal outstanding includes an unamortized fair market value premium of $0.3 million as of June 30, 2012.

On June 27, 2012, the Company paid down the principal outstanding on the Bank of America, N.A. loan in the amount of $8.1 million.  The early extinguishment of the loan resulted in a gain of $18 thousand as a result of the acceleration of an unamortized fair market value premium.  There were no pre-payment penalties associated with the loan.

The Credit Facility was secured by equity interests and mortgages in the Company’s various indirect subsidiaries that own 31 properties at June 30, 2012.  The Company pays an unused commitment fee equal to 0.50% of the unused portion of the Credit Facility if the usage is less than 50% of the capacity and 0.35% if usage is greater than 50%.  During the three and six months ended June 30, 2012 and the period April 20, 2011 to June 30, 2011, the Company incurred $0.1 million, $0.2 million, and $0.1 million in unused fees, respectively, which is included in interest expense on the Consolidated Statements of Operations.  At June 30, 2012, the outstanding balance on the Credit Facility was $5.0 million and the remaining availability was $95.0 million. The Credit Facility was utilized throughout the six months ended June 30, 2012 to fund the acquisitions of properties and general corporate purposes.

The Company was in compliance with all financial covenants as of June 30, 2012 and December 31, 2011.

The fair value of the Company’s debt was determined by discounting the future cash flows using the current rates at which loans would be made to borrowers with similar credit ratings for loans with similar remaining maturities and similar loan-to-value ratios. The discount rate ranged from 2.746% to 5.88% and was applied to each individual debt instrument based on the debt’s collateral, remaining term and loan to value ratios.  The fair value of the Company’s debt is based on Level 3 inputs.  The three-tier value hierarchy is explained in Note 6.  The following table presents the aggregate carrying value of the Company’s debt and the corresponding estimate of fair value as of June 30, 2012 and December 31, 2011 (in thousands):

	June 30, 2012				December 31, 2011
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Mortgage notes payable	$	287,314	$	289,127	$	296,779	$	298,417
Credit facility	$	5,000	$	5,000	$	—	$	—