Real Estate Investments

2014 Acquisitions

On March 28, 2014, the Company acquired ownership of a multi-tenanted office building in Iowa in satisfaction of a $40.0 million mortgage note receivable that matured on January 10, 2014. The cash flows from the operations of the property were sufficient to pay the Company interest from the maturity date through the date of the transfer of ownership to the Company at the 7.7% fixed interest rate plus an additional 3% of interest for the default interest rate. The Company has accounted for this transaction as a business combination and recorded the acquisition of the property at its estimated fair value based primarily on Level 3 inputs. The Company did not recognize any of the $1.5 million exit fee receivable that was due upon maturity of the mortgage note receivable. The following table details the purchase price accounting.



	Estimated Fair Value			Estimated Useful Life
	(In millions)			(In years)
Building	$	38.1		11.5-33.0
Intangibles:
At-market lease intangibles	2.1			5.8
Below-market ground lease intangibles	(0.1		)	91.3
Below-market lease intangibles	(0.4		)	3.8-6.5
Total intangibles	1.6
Foreclosed mortgage note receivable	(40.0		)
Other assets acquired	1.8
Accounts payable, accrued liabilities and other liabilities assumed	(1.7		)
Cash acquired	0.2
Total cash paid	$	—

Subsequent Dispositions

On April 11, 2014, the Company disposed of a medical office building located in Florida that was previously classified as held for sale and in which the Company had a $1.7 million net investment as of March 31, 2014. The sales price was $1.8 million, comprised of $1.7 million in net cash proceeds and closing costs of $0.1 million. The Company recorded a $0.9 million impairment charge in March 2014 as a result of the pending sale and had previously recorded $2.4 million in impairment charges.

On April 23, 2014, the Company disposed of a medical office building located in Texas that was classified as held for sale and in which the Company had a $4.1 million net investment as of March 31, 2014. The sales price was $4.4 million, comprised of $4.2 million in net cash proceeds and closing costs of $0.2 million. The Company recorded an impairment of approximately $2.6 million in March 2014 as a result of the pending sale.

Noncontrolling Interest Purchase

In April 2014, the Company purchased the outstanding 40% noncontrolling equity interest in a consolidated partnership that owns a medical office building and parking garage in Texas for an aggregate purchase price of $8.2 million. The book value of the noncontrolling interest prior to the equity purchase was $1.6 million. The Company held a term loan that was secured by the property and was payable from the partnership. Upon acquisition of the noncontrolling interest, the term loan, which was previously eliminated in the Company's Condensed Consolidated Financial Statements, was extinguished .

Construction Mortgage Note Fundings

During the three months ended March 31, 2014, the Company funded $0.8 million on one outstanding construction mortgage note in Oklahoma for a build-to-suit facility leased to Mercy Health based in Missouri, bringing cumulative fundings to date to $80.8 million. This project is expected to be completed in May 2014. Approximately $14.1 million remained available under the loan at March 31, 2014. The Company expects the remaining funding to complete the project to be $10.4 million.

Discontinued Operations and Assets Held for Sale

During the first quarter of 2014, the Company reclassified one property to held for sale. The Company's gross investment in the property was approximately $8.5 million ($4.1 million, net) at March 31, 2014. In conjunction with management's decision to sell this property, the Company recorded an impairment charge of $2.6 million. In addition, the Company recorded an additional impairment on a property that was previously in held for sale of $0.9 million. Fair value amounts used to calculate the impairments were based on sales prices in executed purchase and sale agreements, which is a Level 2 input.

At March 31, 2014 and December 31, 2013, the Company had four and three properties, respectively, classified as held for sale.



(Dollars in thousands)	March 31, 2014			December 31, 2013
Balance Sheet data:
Land	$	3,957		$	1,578
Buildings, improvements and lease intangibles	20,610			15,400
Personal property	4			—
	24,571			16,978
Accumulated depreciation	(14,614		)	(10,211		)
Assets held for sale, net	9,957			6,767
Other assets, net (including receivables)	261			85
Assets of discontinued operations, net	261			85
Assets held for sale and discontinued operations, net	$	10,218		$	6,852

Accounts payable and accrued liabilities	$	831		$	1,091
Other liabilities	140			21
Liabilities of discontinued operations	$	971		$	1,112



	Three Months Ended March 31,
(Dollars in thousands)	2014			2013
Statements of Operations data:
Revenues
Rental income	$	258		$	3,163
	258			3,163
Expenses
Property operating	512			689
General and administrative	2			2
Depreciation	88			721
Amortization	—			23
	602			1,435
Other Income (Expense)
Interest expense	—			(24		)
Interest and other income, net	—			1
	—			(23		)
Discontinued Operations
Income (loss) from discontinued operations	(344		)	1,705
Impairments	(3,425		)	(3,630		)
Loss from Discontinued Operations	$	(3,769	)	$	(1,925	)