2.2.0.7 false Medical Office Building Joint Ventures 0205 - Disclosure - Medical Office Building Joint Ventures true false false false 1 USD false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 USDEPS Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 Shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 $ 2 Medical Office Building Joint Ventures [Abstract] 0 nhp_MedicalOfficeBuildingJointVenturesAbstract nhp false na duration Medical Office Building Joint Ventures Abstract. false false false false false true false false false false false false 1 false false false false 0 0 false false false xbrli:stringItemType string Medical Office Building Joint Ventures Abstract. false 3 Medical Office Building Joint Ventures 1 nhp_MedicalOfficeBuildingJointVenturesDisclosureTextBlock nhp false na duration This element represents certain disclosures of investment in consolidated joint ventures which own medical office buildings. false false false false false false false false false false false verboselabel false 1 false false false false 0 0   <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="left" style="font-size: 10pt; margin-top: 10pt"><b>5. Medical Office Building Joint Ventures</b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><i>NHP/PMB L.P.</i> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In February 2008, we entered into an agreement (the “Contribution Agreement”) with Pacific Medical Buildings LLC and certain of its affiliates to acquire up to 18 multi-tenant medical office buildings, including six that were in development, for $747.6 million, including the assumption of approximately $282.6 million of mortgage financing. Under the Contribution Agreement, in 2008, NHP/PMB acquired interests in nine of the 18 medical office buildings, one of which consisted of a 50% interest through a joint venture which is consolidated by NHP/PMB. During 2008, we also acquired one of the 18 medical office buildings directly (not through NHP/PMB). During 2009, we elected to terminate the Contribution Agreement with respect to six properties after the conditions for us to close on such properties were not satisfied. As a result of the elimination of these six properties, under the Contribution Agreement, NHP/PMB became obligated to pay $3.0 million, of which $2.7 million was payable to Pacific Medical Buildings LLC. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of February 1, 2010, we entered into an amendment to the Contribution Agreement which reinstated one of the six properties that were previously eliminated from the Contribution Agreement. NHP/PMB acquired this multi-tenant medical office building for $74.0 million, which was paid in a combination of cash and the issuance of 301,599 OP Units with a fair value at the date of issuance of $10.0 million. As a result of such acquisition, we retired our $47.5 million mortgage loan from a related party to which such acquired medical office building had served as collateral (see Note 18). Additionally, as of February 1, 2010, we acquired a majority ownership interest in a joint venture which owns one multi-tenant medical office building (see <i>NHP/PMB Gilbert LLC </i>below), amended and restated our agreement with NHP/PMB, PMB LLC and PMB Real Estate Services LLC (“PMBRES”) as described below and amended our agreement with PMB Pomona LLC to provide for the future acquisition by NHP/PMB of a medical office building currently in development (see Note 18). In connection with these transactions, NHP/PMB entered into a Third Amendment to the Amended and Restated Agreement of Limited Partnership of NHP/PMB, which, among other things, authorized NHP/PMB to acquire properties affiliated with Pacific Medical Buildings LLC pursuant to agreements other than the Contribution Agreement. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of March 1, 2010, we entered into an amendment to the Contribution Agreement which reinstated another two of the six properties that were previously eliminated from the Contribution Agreement. NHP/PMB acquired a 65% interest in a joint venture which is consolidated by NHP/PMB that owns one of the two multi-tenant medical office buildings valued at $79.9 million. The acquisition was paid in a combination of cash, the assumption of $48.1 million of mortgage financing and the issuance of 152,238 OP Units with a fair value at the date of issuance of $5.0 million. NHP/PMB acquired a 69% interest in a joint venture which is consolidated by NHP/PMB that owns the second multi-tenant medical office building valued at $69.3 million. The acquisition was paid in a combination of cash, the assumption of $50.2 million of mortgage financing and the issuance of 121,489 OP Units with a fair value at the date of issuance of $4.0 million. Additionally, as of March 1, 2010, we acquired the remaining interest in PMB SB (see Note 6). </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">The amendment to the Contribution Agreement dated as of March 1, 2010 also eliminated one of the two remaining properties from the Contribution Agreement, however, we concurrently entered into a joint venture with PMB Pasadena LLC (an entity affiliated with Pacific Medical Buildings LLC) to acquire this property (see <i>NHP/PMB Pasadena LLC </i>below). As a result of the elimination of this property from the Contribution Agreement, NHP/PMB became obligated to pay $2.1 million (the “Premium Adjustment”), of which $1.9 million was payable to Pacific Medical Buildings LLC in cash. The portion of the Premium Adjustment not payable to Pacific Medical Buildings LLC was paid in the form of $0.1 million in cash and the issuance of 1,788 additional OP Units with an aggregate value of $57,000. As a result of the payment, we received an additional 4,514 Class B limited partnership units in NHP/PMB. Under the Contribution Agreement, if the agreement is terminated with respect to the remaining development property, NHP/PMB will become obligated to pay approximately $2.4 million (the “Future Premium Adjustment”) which has been accrued at September 30, 2010 and of which a portion would be payable to Pacific Medical Buildings LLC. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Under the terms of the Contribution Agreement, a portion of the consideration for the multi-tenant medical office buildings is paid in the form of OP Units. After a one-year holding period, the OP Units are exchangeable for cash or, at our option, shares of our common stock equal to the REIT Shares Amount. During the nine months ended September 30, 2010, 16,285 OP Units were converted into 16,285 shares of our common stock. As of September 30, 2010, 1,613,467 of the remaining OP Units had been outstanding for one year or longer and were exchangeable for cash of $62.4 million. During the nine months ended September 30, 2010, cash distributions from NHP/PMB of $2.6 million were made to OP unitholders. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Additionally, we have entered into an agreement (the “Pipeline Agreement”) with NHP/PMB, PMB LLC and PMBRES (see Note 6) pursuant to which we or NHP/PMB currently have the right, but not the obligation, to acquire up to approximately $1.3 billion of multi-tenant medical office buildings developed by PMB LLC through April 2019. As of February 1, 2010, the Pipeline Agreement was amended and restated to provide NHP/PMB with the option to acquire medical office buildings developed in the future through a joint venture between NHP and PMB LLC, obligate us to provide or arrange financing for approved developments and provide us with improved terms, including preferred returns, a reduction in PMB LLC’s promote interest and acquisition pricing determined at the time of acquisition rather than at the pre-development stage. As of September 23, 2010, we entered into a joint venture with PMB Mission Hills 1 LLC (an entity affiliated with Pacific Medical Buildings LLC) to develop a medical office building with a total budget of $53.0 million (see <i>PDP Mission Hills 1 LLC </i>below) in accordance with the terms of the Pipeline Agreement. We concurrently entered into an agreement with NHP/PMB, PMB LLC and PMB Mission Hills 1 LLC under which the interests in the joint venture will be contributed to NHP/PMB subsequent to completion of development in accordance with the terms of the Pipeline Agreement. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During the nine months ended September 30, 2010, NHP/PMB funded $0.5 million in capital and tenant improvements at certain facilities. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">All intercompany balances with NHP/PMB have been eliminated for purposes of our consolidated financial statements. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><i>NHP/PMB Gilbert LLC</i> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of February 1, 2010, we entered into a joint venture with PMB Gilbert LLC (an entity affiliated with Pacific Medical Buildings LLC) called NHP/PMB Gilbert LLC (“Gilbert JV”) to acquire a multi-tenant medical office building. PMB Gilbert LLC contributed the multi-tenant medical office building to Gilbert JV, and we contributed $6.3 million in cash. Additionally, we agreed to loan Gilbert JV up to $8.8 million as project financing at an interest rate of 7.00%, including $6.8 million that was disbursed initially and remains outstanding at September 30, 2010. We hold a 71.17% equity interest in the joint venture and PMB Gilbert LLC holds a 28.83% equity interest. PMB Gilbert LLC is the managing member of Gilbert JV, but we consolidate the joint venture in our consolidated financial statements. The accounting policies of the joint venture are consistent with our accounting policies. Pursuant to a contribution agreement dated as of February 1, 2010, among us, NHP/PMB, Pacific Medical Buildings LLC and PMB Gilbert LLC, NHP/PMB may in the future acquire Gilbert JV if certain conditions are met. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Net income or loss is allocated between the partners in the joint venture based on the hypothetical liquidation at book value method (the “HLBV method”). Under the HLBV method, net income or loss is allocated between the partners based on the difference between each partner’s claim on the net assets of the partnership at the end and beginning of the period, after taking into account contributions and distributions. Each partner’s share of the net assets of the partnership is calculated as the amount that the partner would receive if the partnership were to liquidate all of its assets at net book value and distribute the resulting cash to creditors and partners in accordance with their respective priorities. Under this method, in any given period, we could be recording more or less income than the joint venture has generated or more or less income than actual cash distributions received and more or less than what we may receive in the event of an actual liquidation. During the nine months ended September 30, 2010, operating cash distributions from Gilbert JV of $0.2 million and $4,000 were made to us and to PMB Gilbert LLC, respectively. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">All intercompany balances with Gilbert JV have been eliminated for purposes of our consolidated financial statements. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><i>NHP/PMB Pasadena LLC</i> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of March 1, 2010, we entered into a joint venture with PMB Pasadena LLC (an entity affiliated with Pacific Medical Buildings LLC) called NHP/PMB Pasadena LLC (“Pasadena JV”) to acquire a multi-tenant medical office building. PMB Pasadena LLC contributed the multi-tenant medical office building to Pasadena JV, and we contributed $13.5 million in cash. Additionally, we provided Pasadena JV with a $56.5 million mortgage loan at an initial interest rate equal to the greater of 3.50% or LIBOR plus 165 basis points (increasing to the greater of 5.125% or LIBOR plus 375 basis points as of April 1, 2010), of which $49.8 million has been funded, and a $3.0 million mezzanine loan at an interest rate of 15.00%, both of which remain outstanding at September 30, 2010. We hold a 71% equity interest in the joint venture and PMB Pasadena LLC holds a 29% equity interest. PMB Pasadena LLC is the managing member of Pasadena JV, but we consolidate the joint venture in our consolidated financial statements. The accounting policies of the joint venture are consistent with our accounting policies. Pursuant to a contribution agreement dated as of March 1, 2010, among us, NHP/PMB, Pacific Medical Buildings LLC and PMB Pasadena LLC, NHP/PMB may in the future acquire Pasadena JV if certain conditions are met. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Net income or loss is allocated between the partners in the joint venture based on the HLBV method. During the nine months ended September 30, 2010, operating cash distributions from Pasadena JV of $0.1 million were made to us. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">All intercompany balances with Pasadena JV have been eliminated for purposes of our consolidated financial statements. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><i>PDP Mission Hills 1 LLC</i> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of September 23, 2010, we entered into a joint venture with PMB Mission Hills 1 LLC (an entity affiliated with Pacific Medical Buildings LLC) called PDP Mission Hills 1 LLC (“ Mission Hills JV”) to develop a medical office building. We contributed $14.7 million in cash, and PMB Mission Hills 1 LLC contributed $1.8 million in cash, and the joint venture acquired the land on which the medical office building is to be developed for $15.5 million. The total budget for the project is $53.0 million, and construction is expected to commence in late 2010. We hold an 89.1% equity interest in the joint venture and PMB Mission Hills 1 LLC holds a 10.9% equity interest. PMB Mission Hills 1 LLC is the managing member of Mission Hills JV, but we consolidate the joint venture in our consolidated financial statements. The accounting policies of the joint venture are consistent with our accounting policies. Pursuant to a contribution agreement dated as of September 23, 2010, among us, NHP/PMB, PMB LLC and PMB Mission Hills 1 LLC, the interests in the joint venture will be contributed to NHP/PMB subsequent to completion of development in accordance with the terms of the Pipeline Agreement. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During the nine months ended September 30, 2010, Mission Hills JV incurred costs of $16.2 million (including the land acquisition) which is included in the caption “Development in progress” on our consolidated balance sheets. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Net income or loss is allocated between the partners in the joint venture based on the HLBV method. No cash distributions were made during the nine months ended September 30, 2010. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">All intercompany balances with Mission Hills JV have been eliminated for purposes of our consolidated financial statements. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><i>McShane/NHP JV, LLC</i> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">In December 2007, we entered into a joint venture with McShane called McShane/NHP JV, LLC (“McShane/NHP”) to invest in multi-tenant medical office buildings. We hold a 95% equity interest in the joint venture and McShane holds a 5% equity interest. McShane is the managing member of McShane/NHP, but we consolidate the joint venture in our consolidated financial statements. The accounting policies of the joint venture are consistent with our accounting policies. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; "> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="center" style="font-size: 10pt; margin-top: 0pt"> <b> </b> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">Cash distributions from McShane/NHP are made in accordance with the members’ ownership interests and will continue to be made until specified returns are achieved. As the specified returns are achieved, McShane will receive an increasing percentage of the cash distributions from the joint venture. During the nine months ended September 30, 2010, operating cash distributions from McShane/NHP of $0.9 million and $48,000 were made to us and to McShane, respectively. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">As of September 30, 2010, McShane/NHP owned seven multi-tenant medical office buildings located in one state. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">During the nine months ended September 30, 2010, McShane/NHP funded $0.9 million in capital and tenant improvements at certain facilities. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">All intercompany balances with McShane/NHP have been eliminated for purposes of our consolidated financial statements. </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%"><i>NHP/Broe, LLC and NHP/Broe II, LLC</i> </div> <div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 8%">On August 21, 2009, we acquired for $4.3 million the 10% and 5% noncontrolling interests held by The Broe Companies in NHP/Broe, LLC (“Broe I”) and NHP/Broe II, LLC (“Broe II”), respectively. As a result of this acquisition, we now have direct ownership of the 36 multi-tenant medical office buildings located in nine states previously owned by Broe I and Broe II. Activity subsequent to August 21, 2009 related to these facilities is included in our consolidated activity for wholly owned real estate properties (see Note 3). Prior to our acquisition of Broe’s interests, we consolidated both joint ventures in our consolidated financial statements in accordance with ASC 810. </div> </div>  <!-- Begin Block Tagged Note false false false us-types:textBlockItemType textblock This element represents certain disclosures of investment in consolidated joint ventures which own medical office buildings. No authoritative reference available. false 1 2 false UnKnown UnKnown UnKnown false true