Commitments and Contingencies

3 Months Ended

Mar. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

7. Commitments and Contingencies

Commitments

On July 20, 2016, we entered into definitive agreements to acquire 20 rehabilitation hospitals in Germany for an aggregate purchase price to us of approximately €215.7 million. Upon closing, the facilities will be leased to affiliates of MEDIAN, pursuant to a new master lease with a term of approximately 27 years with annual escalators of the greater of one percent or 70% of the annual percentage change in the German consumer price index. Closing of the transaction, which began during the fourth quarter of 2016, is subject to customary real estate, regulatory and other closing conditions. As of March 31, 2017, we have closed seven of the 20 facilities in the amount of €49.5 million, and we expect the remaining 13 facilities to close in the second quarter of 2017.

On September 28, 2016, we entered into a definitive agreement to acquire one acute care hospital in Washington for a purchase price to us of approximately $17.5 million. Upon closing, this facility will be leased to RCCH, pursuant to the current long-term master lease. Closing of the transaction, which is expected to be completed no later than the fourth quarter of 2017, is subject to customary real estate, regulatory and other closing conditions.

On March 8, 2017, we entered a non-binding agreement to purchase the real estate of two acute care hospitals in West Virginia and Ohio for an aggregate purchase price of $40.0 million and lease them to Alecto, which is the current operator of three facilities in our portfolio. The lease on these facilities is expected to have a 15-year initial term with 2% annual minimum increases and three 5-year extension options. The facilities will be cross-defaulted and cross collateralized with our other hospitals currently operated by Alecto. With these acquisitions, we will also obtain a 20% interest in the operator of these facilities. We expect to complete this transaction in the second quarter of 2017.

On March 31, 2017, we entered into a definitive agreement to acquire one acute care hospital in Germany for a purchase price to us of approximately €20 million. Upon closing, this facility will be leased to affiliates of MEDIAN, pursuant to an existing 27-year master lease with terms similar to the master lease agreement reached with MEDIAN in 2015. We expect to complete this transaction during the second quarter of 2017.

Contingencies

We are a party to various legal proceedings incidental to our business. In the opinion of management, after consultation with legal counsel, the ultimate liability, if any, with respect to those proceedings is not presently expected to materially affect our financial position, results of operations or cash flows.