2.2.0.25falsefalse0205 - Disclosure - Medical Office Building Joint Venturestruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010
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<b><font style="font-family: 'Times New Roman', Times">5.  </font></b>
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<b><font style="font-family: 'Times New Roman', Times">Medical
Office Building Joint Ventures</font></b>
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<b><i><font style="font-family: 'Times New Roman', Times">NHP/PMB
L.P.</font></i></b>
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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
<font style="white-space: nowrap">NHP/PMB).</font>
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
(the “2009 Premium Adjustment”), of which
$2.7 million was payable to Pacific Medical Buildings LLC.
The portion of the 2009 Premium Adjustment not payable to
Pacific Medical Buildings LLC was paid in the form of
$0.2 million in cash and the issuance of 2,551 additional
OP Units with an aggregate cost basis of $0.1 million.
As a result of the cash and stock paid with respect to the
Current Premium Adjustment, we received an additional 6,481
Class B limited partnership units in
<font style="white-space: nowrap">NHP/PMB.</font>
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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 22).
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 22). 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.
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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).
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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><font style="white-space: nowrap">NHP/PMB</font>
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 “2010 Premium
Adjustment”), of which $1.9 million was payable to
Pacific Medical Buildings LLC in cash. The portion of the 2010
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 as of December 31, 2010 and of which
a portion would be payable to Pacific Medical Buildings LLC.
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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 2010, 30,166 OP Units were
converted into 30,166 shares of our common stock. During
2009, 202,361 OP Units were converted into
202,361 shares of our common stock. As of December 31,
2010, 1,599,586 of the remaining OP Units had been
outstanding for one year or longer and were exchangeable for
cash of $58.2 million. During 2010 and 2009, cash
distributions from NHP/PMB of $3.6 million and
$3.1 million, respectively, were made to OP unitholders.
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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.
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During 2010 and 2009, NHP/PMB funded $0.7 million and
$0.2 million, respectively, in capital and tenant
improvements at certain facilities.
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All intercompany balances with NHP/PMB have been eliminated for
purposes of our consolidated financial statements.
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<b><i><font style="font-family: 'Times New Roman', Times">NHP/PMB
Gilbert LLC</font></i></b>
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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 as of December 31, 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.
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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 2010, operating cash
distributions from Gilbert JV of $0.2 million and $4,000
were made to us and to PMB Gilbert LLC, respectively.
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During 2010, Gilbert JV funded $0.1 million in capital and
tenant improvements at certain facilities.
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All intercompany balances with Gilbert JV have been eliminated
for purposes of our consolidated financial statements.
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<b><i><font style="font-family: 'Times New Roman', Times">NHP/PMB
Pasadena LLC</font></i></b>
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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 as of December 31, 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.
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Net income or loss is allocated between the partners in the
joint venture based on the HLBV method. During 2010, operating
cash distributions from Pasadena JV of $0.1 million were
made to us.
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During 2010, Pasadena JV funded $0.3 million in capital and
tenant improvements at certain facilities.
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All intercompany balances with Pasadena JV have been eliminated
for purposes of our consolidated financial statements.
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<b><i><font style="font-family: 'Times New Roman', Times">PDP
Mission Hills 1 LLC</font></i></b>
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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 early 2011. 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.
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During 2010, Mission Hills JV incurred costs of
$16.6 million (including the land acquisition) which is
included in the caption “Development in progress” on
our consolidated balance sheets.
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Net income or loss is allocated between the partners in the
joint venture based on the HLBV method. No cash distributions
were made during 2010.
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All intercompany balances with Mission Hills JV have been
eliminated for purposes of our consolidated financial statements.
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<b><i><font style="font-family: 'Times New Roman', Times">McShane/NHP
JV, LLC</font></i></b>
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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.
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As of December 31, 2010, McShane/NHP owned seven
multi-tenant medical office buildings located in one state.
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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 2010, operating cash distributions from McShane/NHP of
$1.1 million and $0.1 million were made to us and to
McShane, respectively. During 2009, operating cash distributions
from McShane/NHP of $0.9 million and $0.1 million were
made to us and to McShane, respectively.
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During 2010 and 2009, McShane/NHP funded $1.0 million and
$1.4 million, respectively, in capital and tenant
improvements at certain facilities.
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All intercompany balances with McShane/NHP have been eliminated
for purposes of our consolidated financial statements.
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<b><i><font style="font-family: 'Times New Roman', Times">NHP/Broe,
LLC and NHP/Broe II, LLC</font></i></b>
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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.
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During the period from January 1, 2009 through
August 21, 2009, Broe I and Broe II funded
$1.5 million and $0.4 million, respectively, in
capital and tenant improvements at certain facilities.
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During the period from January 1, 2009 through
August 21, 2009, Broe I exercised the first of two
available
<font style="white-space: nowrap">12-month</font>
extension options on a $32.9 million loan that was
scheduled to mature in April 2009 and refinanced one additional
$6.4 million loan that was scheduled to mature in February
2009, extending its maturity to February 2012. Both loans were
prepaid during 2010.
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During the period from January 1, 2009 through
August 21, 2009, an additional $6.6 million was funded
on an existing loan secured by a portion of the Broe II
portfolio, resulting in distributions of $6.3 million and
$0.3 million to us and to Broe, respectively.
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During the period from January 1, 2009 through
August 21, 2009, operating cash distributions from Broe I
of $0.9 million and $0.1 million were made to us and
to Broe, respectively, and operating cash distributions from
Broe II of $1.7 million and $0.1 million were
made to us and to Broe, respectively.
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