(4) Acquisitions, Dispositions and New Construction

Three Months Ended March 31, 2017:

Acquisitions:

There were no acquisitions during the first three months of 2017.

Disposition:

During March, 2017, Arlington Medical Properties, LLC, a formerly jointly-owned limited liability company in which we held an 85% noncontrolling ownership interest, sold the real estate assets of St. Mary’s Professional Office Building (“St. Mary’s”) as part of a series of planned tax deferred like-kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code. St. Mary’s is a multi-tenant medical office building located in Reno, Nevada. A third party member owned the remaining 15% of Arlington Medical Properties LLC, which we acquired prior to the divestiture of St. Mary’s for a purchase price of $7.9 million.

In connection with the divestiture of St. Mary’s, we are entitled to an aggregate of approximately $57.3 million of net cash proceeds. These proceeds, which are net of closing costs and the purchase price paid for the minority member’s ownership interest in the LLC, include repayment to us of a $21.4 million member loan previously extended to Arlington Medical Properties, LLC by us when we held an 85% noncontrolling ownership interest in the LLC. As of March 31, 2017, approximately $11.3 million of the net sale proceeds due to us are being held as restricted cash by a qualified 1031 exchange intermediary in connection with potential future acquisitions, as discussed below. Our results of operations for the three-month period ended March 31, 2017 include a net gain of $27.2 million (net of related transaction costs) recorded in connection with these transactions.

Tax Deferred Like-Kind Exchange Transactions Under Section 1031 of the Internal Revenue Code:

As part of a series of planned tax deferred like-kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code, we have completed the divestiture of St. Mary’s Professional Office Building in March, 2017, as discussed above, and the two previously announced 2016 acquisitions, as outlined below. In addition, we may complete other potential 2017 acquisitions, as outlined below.

Acquisitions Previously Completed in 2016:

•

2704 North Tenaya Way, located in Las Vegas, Nevada. This MOB was acquired in November, 2016 for a total purchase price of approximately $15.3 million, including the assumption of approximately $7.1 million of third-party debt that is non-recourse to us.

•

Frederick Crestwood Medical Office Building, located in Frederick, Maryland. This MOB was acquired in September, 2016 for a purchase price of approximately $24.3 million.

Both of these 2016 acquisitions were planned and executed in accordance with the provisions of Section 1031 of the Internal Revenue Code and therefore we believe they qualify as tax deferred like-kind exchange transactions in connection with the above-mentioned divestiture of St. Mary’s in March, 2017.

Other Potential 2017 Acquisitions:

•

In addition to the above-mentioned 2016 acquisitions, we may purchase one or more additional properties during 2017, as part of the planned like-kind exchange transactions. We can provide no assurance that we will complete one or more additional acquisitions during 2017. Any additional acquisitions completed during 2017 would need to be finalized by mid-September in order to qualify as tax deferred like-kind exchange transactions under the provisions of Section 1031 of the Internal Revenue Code in connection with the divestiture of St. Mary’s.

New Construction:

During the first quarter of 2016, we committed to invest up to $21.1 million in the development and construction of the Henderson Medical Plaza, an MOB located on the campus of the Henderson Hospital Medical Center which is owned by a UHS subsidiary and opened in late October, 2016. The MOB was completed and opened during April, 2017. We have invested $10.8 million on the development and construction for this MOB as of March 31, 2017.

Three Months Ended March 31, 2016:

Acquisition:

In March, 2016, we purchased the Madison Professional Office Building located in Madison, Alabama for approximately $10.1 million. This multi-tenant property was fully occupied with an average remaining lease term of approximately 6.2 years at the time of acquisition.

The aggregate purchase price for this MOB was allocated to the assets acquired and liabilities assumed consisting of tangible property and identified intangible assets, based on the fair value estimated at acquisition as detailed in the table below. Substantially all of the intangible assets include the value of the in-place leases at the MOB at the time of acquisition which is being amortized over the average remaining lease term of approximately 6.2 years at the time of acquisition.



Land	$2,328
Buildings and improvements	6,523
Intangible assets	1,209
Deposit	(150)

Net cash paid	$9,910

Dispositions:

There were no divestitures during the first three months of 2016.