(8) SUMMARIZED FINANCIAL INFORMATION OF EQUITY AFFILIATES

In accordance with the Financial Accounting Standards Board’s (“FASB”) standards and guidance relating to accounting for investments and real estate ventures, we account for our unconsolidated investments in LLCs/LPs which we do not control using the equity method of accounting. The third-party members in these investments have equal voting rights with regards to issues such as, but not limited to: (i) divestiture of property; (ii) annual budget approval, and; (iii) financing commitments. These investments, which represent 33% to 95% non-controlling ownership interests, are recorded initially at our cost and subsequently adjusted for our net equity in the net income, cash contributions to, and distributions from, the investments. Pursuant to certain agreements, allocations of sales proceeds and profits and losses of some of the LLC investments may be allocated disproportionately as compared to ownership interests after specified preferred return rate thresholds have been satisfied.

In the Consolidated Statements of Cash Flows, distributions and equity in net income are presented net as cash flows from operating activities. Cumulative distributions received exceeding cumulative equity in earnings represent returns of investments and are classified as cash flows from investing activities in the Consolidated Statements of Cash Flows.

At December 31, 2017, we have non-controlling equity investments or commitments in four jointly-owned LLCs/LPs which own MOBs. As of December 31, 2017, we accounted for these LLCs/LPs on an unconsolidated basis pursuant to the equity method since they are not variable interest entities and we do not have a controlling voting interest. The majority of these entities are joint-ventures between us and non-related parties that hold minority ownership interests in the entities. Each entity is generally self-sustained from a cash flow perspective and generates sufficient cash flow to meet its operating cash flow requirements and service the third-party debt (if applicable) that is non-recourse to us. Although there is typically no ongoing financial support required from us to these entities since they are cash-flow sufficient, we may, from time to time, provide funding for certain purposes such as, but not limited to, significant capital expenditures, leasehold improvements and debt financing. Although we are not obligated to do so, if approved by us at our sole discretion, additional cash fundings are typically advanced as equity or member loans. These entities maintain property insurance on the properties.

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. A third party member owned the remaining 15% of Arlington Medical Properties LLC, which we acquired prior to the divestiture of St. Mary’s.

The following property table represents the four LLCs or LPs in which we own a noncontrolling interest and were accounted for under the equity method as of December 31, 2017:

Name of LLC/LP	Ownership			Property Owned by LLC
Suburban Properties		33	%	St. Matthews Medical Plaza II
Brunswick Associates (a.)(d.)		74	%	Mid Coast Hospital MOB
Grayson Properties (b.)(e.)		95	%	Texoma Medical Plaza
FTX MOB Phase II (c.)		95	%	Forney Medical Plaza II

(a.)	This LLC has a third-party term loan of $8.4 million, which is non-recourse to us, outstanding as of December 31, 2017.

(b.)	This building is on the campus of a UHS hospital and has tenants that include subsidiaries of UHS. This LP has a third-party term loan of $14.2 million, which is non-recourse to us, outstanding as of December 31, 2017.

(c.)	We have committed to invest up to $2.5 million in equity and debt financing, of which $2.1 million has been funded as of December 31, 2017. This LP has a third-party term loan of $5.2 million, which is non-recourse to us, outstanding as of December 31, 2017.

(d.)	At December 31, 2017, we are the lessee with a third party on a ground lease for land.

(e.)	At December 31, 2017, we are the lessee with a UHS-related party on a ground lease for land.

Below are the combined statements of income for the LLCs/LPs accounted for under the equity method at December 31, 2017, 2016 and 2015. The 2017 amounts include the financial results of Arlington Medical Properties, LLC, through the March 13, 2017 divestiture date. The 2016 and 2015 amounts include the financial results of Arlington Medical Properties, LLC for the full years.

	For the Year Ended December 31,
	2017		2016		2015
	(amounts in thousands)
Revenues	$	10,673	$	15,252	$	14,347
Operating expenses		3,883		5,439		5,605
Depreciation and amortization		1,988		2,554		2,398
Interest, net		1,570		2,565		2,578
Net income	$	3,232	$	4,694	$	3,766
Our share of net income (a.)	$	2,416	$	4,456	$	2,536

(a.)

Our share of net income during 2017, 2016 and 2015, includes approximately $284,000, $1.2 million and $200,000, respectively, of interest income earned by us on an advance made to Arlington Medical Properties, LLC. This advance was repaid to us effective with the previously mentioned Arlington Medical Properties, LLC transaction during March, 2017.

Below are the combined balance sheets for the four LLCs that were accounted for under the equity method as of December 31, 2017 and the five LLCs (including Arlington Medical Properties, LLC, which was divested during the first quarter of 2017) that were accounted for under the equity method as of December 31, 2016:

	December 31,
	2017			2016
	(amounts in thousands)
Net property, including CIP	$	33,111		$	60,970
Other assets		3,560			4,598
Total assets	$	36,671		$	65,568

Other liabilities	$	3,067		$	3,334
Mortgage notes payable, non-recourse to us		27,839			28,367
Advances payable to us (a.)		—			21,638
Equity		5,765			12,229
Total liabilities and equity	$	36,671		$	65,568

Our share of equity in and advances to LLCs reflected as:
Investments in LLCs	$	4,671		$	13,955
Advances to LLCs		-			21,638
Investments in and advances to LLCs before amounts included in accrued expenses and other liabilities		4,671			35,593
Amounts included in accrued expenses and other liabilities		(1,895	)		(1,862	)
Our share of equity in and advances to LLCs, net	$	2,776		$	33,731

(a)

Consists of a 5.29% member loan to Arlington Medical Properties, LLC, which was fully repaid to us in March, 2017, as discussed above.

As of December 31, 2017, aggregate principal amounts due on mortgage notes payable by unconsolidated LLCs, which are accounted for under the equity method and are non-recourse to us, are as follows (amounts in thousands):

2018	$	594
2019		621
2020		5,415
2021		13,549
2022		216
2023 and thereafter		7,444
Total	$	27,839

	Mortgage Loan Balance (a.)
Name of LLC/LP	12/31/2017		12/31/2016		Maturity Date
FTX MOB Phase II (5.00% fixed rate mortgage loan)	$	5,202	$	5,301	October, 2020 (b.)
Grayson Properties (5.034% fixed rate mortgage loan)		14,191		14,438	September, 2021
Brunswick Associates (3.64% fixed rate mortgage loan)		8,446		8,628	December, 2024
	$	27,839	$	28,367

(a)

All mortgage loans require monthly principal payments through maturity and include a balloon principal payment upon maturity.

(b)

This loan originally matured on October 1, 2017, and was renewed and extended at a fixed interest rate of 5% with a revised maturity date of October 1, 2020.

Pursuant to the operating and/or partnership agreements of the four LLCs/LPs in which we continue to hold non-controlling ownership interests, the third-party member and the Trust, at any time, potentially subject to certain conditions, have the right to make an offer (“Offering Member”) to the other member(s) (“Non-Offering Member”) in which it either agrees to: (i) sell the entire ownership interest of the Offering Member to the Non-Offering Member (“Offer to Sell”) at a price as determined by the Offering Member (“Transfer Price”), or; (ii) purchase the entire ownership interest of the Non-Offering Member (“Offer to Purchase”) at the equivalent proportionate Transfer Price. The Non-Offering Member has 60 to 90 days to either: (i) purchase the entire ownership interest of the Offering Member at the Transfer Price, or; (ii) sell its entire ownership interest to the Offering Member at the equivalent proportionate Transfer Price. The closing of the transfer must occur within 60 to 90 days of the acceptance by the Non-Offering Member.