Real Estate Investments

2014 Acquisitions

Second Quarter

In May 2014, the Company purchased a 200,000 square foot medical office building in Oklahoma for a purchase price of approximately $85.4 million that is 100% leased to Mercy Health, based in Missouri, through 2028 under a single-tenant net lease. The Company funded the development of the facility through a construction mortgage loan of approximately $81.2 million that upon purchase was eliminated in the Company's Condensed Consolidated Financial Statements. At the closing of the purchase, the outstanding loan balance was credited to the purchase price and the Company paid an additional $4.2 million in cash consideration. Subsequent to the purchase, the Company funded an additional $1.7 million and anticipates funding approximately $4.1 million to complete the $91.2 million development during the second half of 2014.

In June 2014, the Company purchased a 56.9% equity interest in a limited liability company that owns a medical office building and related land in Texas. The Company paid $8.8 million in cash consideration including closing costs of $0.1 million. Based on the nature of the transaction, the Company has accounted for the acquisition as an asset acquisition and has recorded the amounts in real estate assets on the Company's Condensed Consolidated Balance Sheet.

Also in June 2014, the Company purchased a 35,292 square foot medical office building located in North Carolina for a purchase price and cash consideration of $6.5 million. The property is 100% leased with expirations through 2024.

First Quarter

In March 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 for this transaction.



	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 Acquisitions

In July 2014, the Company purchased a 60,476 square foot medical office building located in Minnesota for a purchase price of $19.9 million including cash consideration of $8.5 million and the assumption of debt of $11.4 million with an interest rate of 6.67%. The property was constructed in 2010 and is 100% leased with expirations through 2025. The building is connected to Unity Hospital, a 220-bed hospital owned by Allina Health.

2014 Dispositions

In April 2014, the Company disposed of an off-campus, 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, including a $0.9 million impairment charge recorded in the first quarter of 2014 as a result of the pending sale and previously recorded impairment charges of $2.4 million. The sales price was $1.8 million, comprised of $1.7 million in net cash proceeds and closing costs of $0.1 million.

Also in April 2014, the Company disposed of an off-campus, 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, including a $2.6 million impairment charge recorded in the first quarter of 2014 as a result of the pending sale. The sales price was $4.4 million, comprised of $4.2 million in net cash proceeds and closing costs of $0.2 million.

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 and cash consideration 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.

Discontinued Operations and Assets Held for Sale

During the second quarter of 2014, the Company reclassified one property to held for sale. In conjunction with management's decision to sell this property, the Company recorded an impairment charge of $3.1 million. The fair value amount used to calculate the impairment was based on the sales price in the May 2014 executed purchase and sale agreement, which is a Level 2 input. The Company's gross investment in the property was approximately $4.3 million ($1.4 million, net) at June 30, 2014.

At June 30, 2014 and December 31, 2013, the Company had three properties classified as held for sale.

The tables below reflect the assets and liabilities of the properties calssified as held for sale and discontinued operations as of June 30, 2014 and December 31, 2013 and the results of operations of the properties included in discontinued operations on the Company's Consolidated Statements of Operations for three and six months ended June 30, 2014 and 2013.



(Dollars in thousands)	June 30, 2014			December 31, 2013
Balance Sheet data:
Land	$	1,674		$	1,578
Buildings, improvements and lease intangibles	13,469			15,400
	15,143			16,978
Accumulated depreciation	(9,506		)	(10,211		)
Assets held for sale, net	5,637			6,767
Other assets, net (including receivables)	122			85
Assets of discontinued operations, net	122			85
Assets held for sale and discontinued operations, net	$	5,759		$	6,852

Accounts payable and accrued liabilities	$	1,005		$	1,091
Other liabilities	36			21
Liabilities of discontinued operations	$	1,041		$	1,112



	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2014			2013			2014			2013
Statements of Operations data:
Revenues
Rental income	$	123		$	3,170		$	449		$	6,409
	123			3,170			449			6,409
Expenses
Property operating	292			616			862			1,357
General and administrative	1			1			2			3
Depreciation	56			716			198			1,493
Amortization	—			20			—			43
Bad debt, net of recoveries	7			—			8			—
	356			1,353			1,070			2,896
Other Income (Expense)
Loss on extinguishment of debt	—			(270		)	—			(270		)
Interest expense	—			(16		)	—			(41		)
Interest and other income, net	2			6			2			7
	2			(280		)	2			(304		)
Discontinued Operations
Income (loss) from discontinued operations	(231		)	1,537			(619		)	3,209
Impairments	(3,105		)	—			(6,529		)	(3,630		)
Gain on sales of real estate properties	3			1,783			3			1,783
Income (Loss) from Discontinued Operations	$	(3,333	)	$	3,320		$	(7,145	)	$	1,362