10.	Indebtedness

The following table provides details of the Company’s indebtedness as of December 31, 2016 and 2015 (in thousands):

	December 31,
	2016			2015
Mortgages payable and other notes payable:
Fixed rate debt	$	382,129		$	391,639
Variable rate debt ⁽¹⁾		561,874			449,017
Mortgages and other notes payable ⁽²⁾		944,003			840,656
Premium (discount), net ⁽³⁾		(67	)		(221	)
Loan costs, net		(7,213	)		(8,610	)
Total mortgages and other notes payable, net		936,723			831,825
Credit facilities:
Revolving Credit Facility ^{(4) (5)}		194,863			225,000
First Term Loan Facility ⁽¹⁾		175,000			175,000
Second Term Loan Facility ⁽⁵⁾		275,000			260,000
Loan costs, net related to Term Loan Facilities		(2,874	)		(3,716	)
Total credit facilities, net		641,989			656,284
Total borrowings	$	1,578,712		$	1,488,109

FOOTNOTES:

(1)

As of December 31, 2016 and 2015, the Company had entered into interest rate swaps with notional amounts of approximately $521.5 million and $480.7 million, respectively, which were settling on a monthly basis. In addition, as of December 31, 2015, the Company had entered into forward-starting interest rate swaps for total notional amounts of approximately $48.4 million in order to hedge its exposure to variable rate debt beginning in June 2016. Refer to Note 12. “Derivative Financial Instruments” for additional information.

(2)

As of December 31, 2016 and 2015, the Company’s mortgages and other notes payable are collateralized by 75 and 65 properties, respectively, with total carrying value of approximately $1.6 billion and $1.4 billion, respectively.

(3)

Premium (discount), net is reflective of the Company recording mortgage note payables assumed at fair value on the respective acquisition dates.

(4)

As of December 31, 2016 and 2015, the Company had undrawn availability under the Revolving Credit Facility of approximately $11.1 million and $20.0 million, respectively, based on the value of the properties in the unencumbered pool of assets supporting the loan.

(5)

As of December 31, 2016 and 2015, the Company had entered into interest rate caps with notional amounts of approximately $410.0 million and $260.0 million, respectively. Refer to Note 12. “Derivative Financial Instruments” for additional information.

The following is a schedule of future principal payments and maturity for the Company’s total borrowings as of December 31, 2016 (in thousands):

2017	$	263,756
2018		288,938
2019		478,632
2020		400,696
2021		39,489
Thereafter		117,288
	$	1,588,799

The following table provides the details of the fair market value and carrying value of the Company’s indebtedness as of December 31, 2016 and 2015 (in millions):

	December 31, 2016				December 31, 2015
	Fair Value		Carrying Value		Fair Value		Carrying Value
Mortgages and other notes payable, net	$	943.4	$	936.7	$	844.6	$	831.8
Credit facilities	$	644.9	$	642.0	$	660.0	$	656.3

10.	Indebtedness (continued)

These fair market values are based on current rates and spreads the Company would expect to obtain for similar borrowings. Since this methodology includes inputs that are less observable by the public and are not necessarily reflected in active markets, the measurement of the estimated fair values related to the Company’s mortgage notes payable is categorized as Level 3 on the three-level valuation hierarchy. The estimated fair value of accounts payable and accrued liabilities approximates the carrying value as of December 31, 2016 and 2015 because of the relatively short maturities of the obligations.

In December 2014, the Company amended and restated the terms of the credit agreement with KeyBank, as administrative agent, by entering into a $230 million Revolving Credit Facility and a $175 million Term Loan Facility. Pursuant to the amended credit agreement, the Company has the ability to increase the collective borrowing capacity of the Credit Facilities to $700 million under an accordion feature. As of December 31, 2016, the Company has exercised this accordion feature and increased its borrowing capacity to $445 million. In addition, the Revolving Credit Facility has an initial term of 36 months plus two 12-month extension options (i.e. initial term through December 2017 with the ability to extend through December 2019 at the Company’s option); whereas, the Term Loan Facility has an initial term of 50 months plus one 12-month extension option (i.e. initial term through February 2019 with the ability to extend through February 2020 at the Company’s option). The Credit Facilities bear interest based on 30-day LIBOR and a spread that varies with the Company’s leverage ratio. In addition, the Company is required to make interest only payments until the respective maturity dates of the Credit Facilities as well as to pay fees ranging from 0.15% to 0.25% for unused commitments on the Revolving Credit Facility.

In November 2015, the Company entered into a $250 million Second Term Loan Facility, which has an initial term of 60 months (i.e. initial term through November 2020) and bears interest based on the 30-day LIBOR and a spread that varies with the Company’s leverage ratio. In addition, the Company is required to make interest only payments until the maturity date. The Second Term Loan Facility further provides the Company with the ability to increase its borrowing capacity to $350 million under an accordion feature. As of December 31, 2016, the Company had exercised this accordion feature and increased its borrowing capacity to $275 million.

All of the Company’s mortgage and construction loans contain customary financial covenants and ratios; including (but not limited to) the following: debt service coverage ratio, minimum occupancy levels, limitations on incurrence of additional indebtedness, etc.

The Credit Facilities contain affirmative, negative, and financial covenants which are customary for loans of this type, including (but not limited to): (i) maximum leverage, (ii) minimum fixed charge coverage ratio, (iii) minimum consolidated net worth, (iv) restrictions on payments of cash distributions except if required by REIT requirements, (v) maximum secured indebtedness, (vi) maximum secured recourse debt, (vii) minimum unsecured interest coverage and (viii) limitations on certain types of investments and with respect to the pool of properties supporting borrowings under the Credit Facilities, minimum debt service coverage ratio, minimum weighted average occupancy, and remaining lease terms, as well as property type, MSA, operator, and asset value concentration limits. The limitations on distributions include a limitation on the extent of allowable distributions, which are not to exceed the greater of 95% of adjusted FFO (as defined per the Credit Facilities) and the minimum amount of distributions required to maintain the Company’s REIT status. As of December 31, 2016, the Company was in compliance with all financial covenants and ratios.

10.	Indebtedness (continued)

The following table provides additional details of the Company’s mortgages and other notes payable as of December 31, 2016 and 2015 (in thousands):

Property and Loan Type

Interest Rate at

Payment Terms

Maturity Date⁽²⁾

December 31,

2016⁽¹⁾

2016

2015

Pacific Northwest Communities;

Mortgage Loan⁽³⁾

4.30%

per annum

Monthly principal and interest payments based on a 25-year amortization schedule

12/5/18

205,197

210,665

Capital Health Communities;

Mortgage Loan

4.25%

per annum

Monthly principal and interest payments based on a 25-year amortization schedule

1/5/20

36,395

37,889

Primrose II Communities;

Mortgage Loan

3.81%

per annum

Monthly principal and interest payments based on a 30-year amortization schedule

6/1/20

22,017

22,473

Novi Orthopaedic Center;

Mortgage Loan

3.61%

per annum

Monthly interest only payments through June 2018; principal and interest payments thereafter based on a 25-year amortization schedule

6/15/20

19,825

ProMed Medical Building I;

Mortgage Loan

3.64%

per annum⁽⁴⁾

Monthly principal and interest payments based upon a 25-year amortization schedule

1/15/22

6,865

7,050

Primrose I Communities;

Mortgage Loan ⁽⁵⁾

4.11%

per annum

Monthly principal and interest payments based on a 30-year amortization schedule

9/1/22

51,000

52,048

Watercrest at Mansfield;

Mortgage Loan ⁽⁶⁾

4.68%

per annum

Monthly principal and interest payments based on a total payment

of $143,330

6/1/23

26,165

26,628

540 New Waverly Place;

Mortgage Loan⁽⁷⁾

4.08%

per annum

Monthly principal and interest payments based upon a 25-year amortization schedule

5/31/28

6,868

7,048

LaPorte Cancer Center;

Mortgage Loan

4.25%

per annum

(through 2020)

Monthly principal and interest payments based on a 25-year amortization schedule

6/14/28

7,797

8,013

Total fixed rate debt

382,129

391,639

Lee Hughes Medical Building;

Mortgage Loan

30-day LIBOR

plus 1.85%

per annum

Monthly principal and interest payments based on a 30-year amortization schedule

9/5/17

18,102

18,632

10.	Indebtedness (continued)

Property and Loan Type

Interest Rate at

Payment Terms

Maturity Date⁽²⁾

December 31,

2016⁽¹⁾

2016

2015

Raider Ranch Development; Construction Loan

(8)

―

7,528

Northwest Medical Park;

Mortgage Loan⁽⁹⁾

30-day LIBOR plus 2.30%

per annum

Monthly principal and interest payments based upon a 25-year amortization schedule

10/31/17

6,886

7,008

Watercrest at Katy;

Construction Loan

30-day LIBOR

plus 2.75%

per annum

Monthly interest only payments through December 2017

12/27/17

24,047

10,632

Claremont Medical Office;

Mortgage Loan⁽¹⁰⁾

30-day LIBOR

plus 2.60%

per annum

Monthly principal and interest payments based on a 30-year amortization schedule

1/16/18

12,478

12,683

Knoxville Medical Office Properties;

Mortgage Loan⁽¹¹⁾

30-day LIBOR

plus 2.50%

per annum

Monthly interest only payments for the first 18 months; principal and interest payments thereafter based

on a 30-year amortization schedule

7/10/18

37,491

38,087

Calvert Medical Office Properties;

Mortgage Loan⁽¹²⁾

30-day LIBOR

plus 2.50%

per annum

Monthly interest only payments for the first 18 months; principal and interest payments thereafter based

on a 30-year amortization schedule

8/29/18

25,546

25,950

Wellmore of Tega Cay;

Construction Loan

(13)

―

23,695

MHOSH MOB;

Mortgage Loan⁽¹⁴⁾

90-day LIBOR

plus 2.85% at 0.4% LIBOR floor

Monthly principal and interest payments based on a 25-year amortization schedule

6/2/19

47,983

48,832

Medical Portfolio II Properties; Mortgage Loan ⁽¹⁵⁾

90-day LIBOR

plus 2.35% at 0.25%

LIBOR floor

Monthly principal and interest payments based on a 25-year amortization schedule

7/14/19

81,365

83,295

HarborChase of Shorewood;

Construction Loan

30-day LIBOR

plus 3.0%

Monthly interest only payments through June 2017; principal and interest payments thereafter based on a 25-year amortization schedule

7/15/19

14,755

12,469

Wellmore of Lexington;

Construction Loan

30-day LIBOR

plus 2.5%

per annum

Monthly interest only payments through September 2019

9/13/19

13,542

―

10.	Indebtedness (continued)

Property and Loan Type

Interest Rate at

Payment Terms

Maturity Date⁽²⁾

December 31,

2016⁽¹⁾

2016

2015

Southeast Medical Office Properties; Mortgage Loan⁽¹⁶⁾

30-day LIBOR

plus 2.0%

per annum

Monthly principal and interest payments based on a 25-year amortization schedule

12/22/19

155,090

160,206

Palmilla Senior Living;

Mortgage Loan

30-day LIBOR

plus 2.0%

per annum

Interest only payments through April 2017; principal payments thereafter based on a 30-year amortization schedule

3/22/20

27,000

―

Waterstone on Augusta;

Construction Loan

30-day LIBOR

plus 3.0%

per annum

Monthly interest only payments through September 2018; principal payments thereafter based on a 30-year amortization schedule

9/1/20

12,698

―

Fieldstone at Pear Orchard;

Construction Loan

30-day LIBOR

plus 2.9%

per annum

Monthly interest only payments through September 2018; principal payments thereafter based on a 25-year amortization schedule

10/15/20

8,861

―

Dogwood Forest of Grayson;

Construction Loan

30-day LIBOR

plus 3.0%

per annum

Monthly interest only payments through December 2018; principal payments thereafter based on a 30-year amortization schedule

12/1/20

3,351

―

Triangle Orthopaedic;

Mortgage Loan

30-day LIBOR

plus 2.25%

per annum

Interest only payments through March 2017; principal payments thereafter based on a 30-year amortization schedule

4/11/21

37,800

―

Cobalt Rehabilitation Hospital

Surprise;

Mortgage Loan

30-day LIBOR

plus 2.6%

per annum at 0.4% LIBOR floor

Monthly interest only payments through May 2017; principal payments thereafter based on a 25-year amortization schedule

5/19/22

15,379

―

Cobalt Rehabilitation Hospital

New Orleans;

Mortgage Loan

30-day LIBOR

plus 2.45%

per annum at 0.55% LIBOR floor

Monthly interest only payments through October 2017; principal payments thereafter based on a 25-year amortization schedule

10/19/22

19,500

―

Total variable rate debt

561,874

449,017

Total debt

944,003

840,656

FOOTNOTES:

(1)

The 30-day and 90-day LIBOR were approximately 0.77% and 1.00%, respectively, as of December 31, 2016 and approximately 0.43% and 0.61%, respectively, as of December 31, 2015.

(2)

Represents the initial maturity date (or, as applicable, the maturity date as extended). Certain of the Company’s mortgages and other notes payable agreements include extension options held by the Company under which the maturity dates may be extended beyond the date presented, subject to certain lender conditions and/or related fees.

(3)

The Pacific Northwest Loan may be prepaid, in whole or in part, with a prepayment premium equal to the greater of: (i) one percent (1%) of the principal amount being prepaid, multiplied by the quotient of the number of full months remaining until the maturity date of the loan (calculated as of the prepayment date) divided by the number of full months comprising the term of the loan; or (b) a “make-whole” payment equal to the present value of the loan less the amount of principal and accrued interest being prepaid calculated as of the prepayment date for the period between that date and the maturity date.

(4)

Beginning January 2020, the interest rate transitions to variable rate based on 30-day LIBOR plus 2.20% per annum.

10.	Indebtedness (continued)

(5)

If prepaid prior to March 1, 2022, the Primrose I Communities Mortgage Loan is subject to a prepayment penalty in an amount equal to the greater of (i) 1% of the principal being repaid, or (ii) an amount calculated on the principal being repaid, multiplied by the difference between the Primrose I Communities Mortgage Loan interest rate, and a calculated yield rate tied to the rates on applicable U.S. Treasuries. If prepayment is made between March 1, 2022, and May 31, 2022, the prepayment penalty will be 1% of the outstanding principal balance of the Primrose I Communities Mortgage Loan. No prepayment fee is required if the Primrose I Communities Mortgage Loan is prepaid between June 1, 2022 and maturity. Partial prepayment of a loan is not permitted. The loan is transferable upon sale of the assets subject to lender approval.

(6)

The balance for this loan excludes a remaining premium of $0.3 million related to the mortgage note payable assumed being recorded at fair value on the acquisition date.

(7)

The balance for this loan excludes a remaining premium of $0.1 million related to the mortgage note payable assumed being recorded at fair value on the acquisition date.

(8)

In August 2016, the Company repaid its $9.7 million outstanding construction loan on the Raider Ranch property prior to its scheduled maturity. In connection therewith, the Company wrote-off approximately $0.1 million of unamortized loan costs as a loss on extinguishment of debt, which is included interest expense and loan amortization in the accompanying consolidated statements of operations for the year ended December 31, 2016.

(9)

The Company entered into an interest rate swap with a remaining notional amount of $6.9 million; see Note 12. “Derivative Financial Instruments” for additional information

(10)

The balance for this loan excludes a remaining discount of $0.2 million related to the mortgage note payable assumed being recorded at fair value on the acquisition date. In addition, the Company entered into a three-year forward interest rate swap with a remaining notional amount of $12.1 million; see Note 12. “Derivative Financial Instruments” for additional information.

(11)

The Company entered into an interest rate swap with a remaining notional amount of $37.4 million; see Note 12. “Derivative Financial Instruments” for additional information.

(12)

The Company entered into an interest rate swap with a remaining notional amount of $25.5 million; see Note 12. “Derivative Financial Instruments” for additional information.

(13)

In August 2016, the Company repaid its $24.7 million outstanding construction loan on the Wellmore of Tega Cay property prior to its scheduled maturity. In connection therewith, the Company wrote-off approximately $0.3 million of unamortized loan costs and paid an exit fee of approximately $1.1 million as a loss on extinguishment of debt. Both the unamortized loan costs and the exit fee are included in interest expense and loan cost amortization in the accompanying consolidated statements of operations for the year ended December 31, 2016.

(14)

The Company entered into a three-year forward interest rate swap with a remaining notional amount of $48.0 million; see Note 12. “Derivative Financial Instruments” for additional information.

(15)

The Company entered into an interest rate swap with a remaining notional amount of $82.4 million; see Note 12. “Derivative Financial Instruments” for additional information.

(16)

The Company entered into an interest rate swap with a remaining notional amount of $134.3 million; see Note 12. “Derivative Financial Instruments” for additional information.