(3) NEW CONSTRUCTION, ACQUISITIONS, DISPOSITIONS AND PROPERTY EXCHANGE TRANSACTION

2017:

Acquisitions:

During 2017, we paid approximately $9.0 million to:

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purchase the Las Palmas Del Sol Emergency Center – West, an FED located in El Paso, Texas for a purchase price of approximately $4.2 million (including approximately $60,000 of transaction costs). This FED is 100% leased under the terms of a ten year triple net lease that had a remaining lease term of approximately 9 years at the time of purchase, with two, five year renewal options.

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purchase the Health Center at Hamburg located in Hamburg, Pennsylvania for a purchase price of approximately $4.8 million (including approximately $96,000 of transactions costs). This medical office building is 100% leased under the terms of a fifteen year triple net lease and had a remaining lease term of approximately 8.5 years at the time of purchase, with two, five year renewal options.

The aggregate purchase price for these acquisitions was allocated to the assets acquired and liabilities assumed consisting of tangible property and intangible assets and liabilities, based on the fair values estimated at the acquisition dates. The intangible assets consist of the value of the in-place leases at the properties at the time of acquisition, and the intangible liabilities consist of the value of a below-market lease at the time of acquisition. The value of the in-place leases will be amortized over the average remaining lease of each property at the time of acquisition (aggregate weighted average of 8.4 years at December 31, 2017). The below market lease, which is reflected below as below market intangibles will be amortized over the remaining term of the respective lease. The estimated aggregate allocation, including transaction costs, is as follows:


Land	$1,496
Buildings and improvements	8,434
Intangible assets	1,598
Below-market lease intangibles	(2,488)

Net cash paid	$9,040

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, as discussed below. 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. The divestiture of St. Mary’s generated an aggregate of approximately $57.3 million of net cash proceeds to us. These proceeds, which were 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. Our results of operations for the year ended December 31, 2017 include a net gain of $27.2 million (net of related transaction costs) recorded in connection with this transaction.

Summary of Like-Kind Exchange Transactions Pursuant to Section 1031 of the IRS Code:

During 2016 and 2017, as part of a series of planned tax deferred like-kind exchange transactions pursuant to Section 1031 of the Internal Revenue Code in connection with the divestiture of St. Mary’s, we acquired two MOBs during 2016 (2704 North Tenaya Way located in Nevada and Frederick Memorial Hospital Crestwood located in Maryland, as discussed below) and an MOB and an FED during 2017 (Health Center at Hamburg located in Pennsylvania and Las Palmas Del Sol Emergency Center located in Texas, as discussed above). These acquisitions were planned and executed in accordance with the provisions of Section 1031 of the Internal Revenue Code. Therefore, we believe they qualify as tax deferred like-kind exchange transactions in connection with the divestiture of St. Mary’s in March, 2017.

New Construction:

During the first quarter of 2016, we began 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 contains approximately 78,800 rentable square feet and was opened during April, 2017. A ground lease has been executed between the limited liability company that owns the MOB and a subsidiary of UHS, the terms of which include a seventy-five year lease term with two, ten-year renewal options at the lessee’s option at an adjusting lease rate. We have invested net cash of approximately $12.4 million on the development and construction of this MOB as of December 31, 2017.

2016:

Acquisitions:

During 2016, we paid approximately $60.4 million in cash, and assumed approximately $7.1 million of third-party debt that is non-recourse to us, to:

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purchase the 2704 North Tenaya Way MOB located in Las Vegas, Nevada, during the fourth quarter 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. The property consists of approximately 45,000 rentable square feet and is fully occupied pursuant to the terms of a triple net lease that had a remaining lease term of approximately 7.1 years at the time of acquisition.

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purchase the Frederick Memorial Hospital Crestwood, an MOB located in Frederick, Maryland, during the third quarter for approximately $24.3 million. The property, which consists of approximately 62,300 rentable square feet, is fully occupied pursuant to the terms of triple net leases that had an average remaining lease term of approximately 12 years at the time of acquisition.

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purchase the Chandler Corporate Center III located in Chandler, Arizona, during the second quarter for approximately $18.0 million. The property, which consists of 82,000 rentable square feet, is currently 92% occupied by one tenant pursuant to the terms of a twelve year escalating triple net lease, with a ten year fair-market value renewal option. The lease had a remaining lease term of approximately 11.3 years at the time of acquisition.

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purchase the Madison Professional Office Building located in Madison, Alabama, during the first quarter for approximately $10.1 million, including a $150,000 deposit paid in 2015. This multi-tenant property consists of approximately 30,100 rentable square feet and is fully occupied with an average remaining lease term of approximately 6.2 years at the time of acquisition.

The aggregate purchase price for these acquisitions was allocated to the assets acquired and liabilities assumed consisting of tangible property and intangible assets and liabilities, based on the fair value estimated or finalized at acquisition as detailed in the table below. Previous reported estimated purchase price allocations that have been finalized in the fourth quarter did not have a material impact on our consolidated financial statements. The intangible assets include the value of in-place leases at the properties at the time of acquisition as well as the above market lease values. The value of the in-place leases will be amortized over the average remaining lease terms of approximately 6 to 12 years at the time of acquisition (aggregate weighted average of 7.6 years at December 31, 2017). The above/below market leases, which are reflected below as intangible assets/below-market intangibles will be amortized over the remaining term of the respective leases. The estimated aggregate allocation is as follows:


Land	$9,914
Buildings and improvements	50,117
Intangible assets	9,211
Below-market lease intangibles	(1,287)
Deposit paid in 2015………………………………………...………………………………..	(150)
Debt (including fair value adjustment of $362)…...……..……………………………….…..	(7,499)
Financing fees paid on debt acquired……………...……..……………………………….…..	83

Net cash paid	$60,389

As of December 31, 2017, our net intangible assets total $20.6 million (net of $28.7 million accumulated amortization) and primarily consists of the amount related to acquired, in-place leases which have a weighted average remaining amortization period of 4.4 years.

Dispositions:

There were no divestitures during 2016.

2015:

Property Exchange Transaction:

In May, 2015, in exchange for the real property of Sheffield Medical Building (“Sheffield”), a 73,446 square foot MOB located in Atlanta, Georgia, we received $2 million in cash and the real property of two MOBs located in Sandy Springs and Vinings, Georgia, from an unrelated third party. In connection with the two MOBs acquired in this transaction, triple net, master lease agreements applicable to 100% of the combined 36,700 rentable square feet of these properties were executed with the counterparty. These master lease agreements have initial terms of 15 years and provide for 3% annual rent increases. We recorded an $8.7 million gain which is included in our Consolidated Statements of Income for the year ended December 31, 2015, representing the difference between recorded net book value of Sheffield and the fair values of the properties exchanged, combined with the cash proceeds received.

Acquisitions:

In February, 2015, we purchased the Haas Medical Office Park, two single story buildings having an aggregate of approximately 16,000 rentable square feet, located in Ottumwa, Iowa, for approximately $4.1 million.

In January and February of 2015, we purchased from wholly-owned subsidiaries of UHS, the real property of two newly-constructed and recently opened FEDs located in Weslaco and Mission, Texas, for an aggregate acquisition cost of approximately $12.8 million. Each FED consists of approximately 13,600 square feet and is operated by wholly-owned subsidiaries of UHS. In connection with these acquisitions, ten-year lease agreements with six 5-year renewal terms were executed with UHS for each FED. In connection with the lease agreements, the lessee shall have the option to purchase the leased property upon the expiration of the fixed term and each five-year extended term at the fair market value at that time.

The aggregate purchase price for these three MOBs and two FEDs was allocated to the assets acquired and liabilities assumed consisting of tangible property and identified intangible assets, based on their respective fair values at acquisition as detailed in the table below. Substantially all of the intangible assets include the value of the in-place leases at the MOBs at the time of acquisition which will be amortized over the average remaining lease term of approximately 15.0 years at the time of acquisition (aggregate weighted average of 12.4 years at December 31, 2017) for each of the MOBs located in Sandy Springs and Vinings, Georgia and approximately 10.4 years at the time of acquisition (aggregate weighted average of 7.6 years at December 31, 2017) for the Haas Medical Office Park.



Land	$7,050
Buildings and improvements	17,518
Intangible assets	2,182
Cash received- exchange transaction	2,000
Other liabilities	(116)
Deposit paid in 2014	(100)
Net book value of property divested in exchange transaction	(3,027)
Gain on exchange transaction	(8,742)

Net cash paid	$16,765

Dispositions:

There were no divestitures during 2015.