Real Estate Investments

2015 Acquisitions

Second Quarter

In June 2015, the Company acquired a 35,558 square foot medical office property in the state of Washington for a purchase price of $13.9 million, including cash consideration of $4.4 million and the assumption of debt of $9.5 million (excluding a $0.2 million fair value premium recorded upon acquisition). The mortgage note payable assumed by the Company bears a contractual annual interest rate of 5.75% and matures on March 3, 2020. The property is located on the Catholic Health Initiatives campus of Highline Medical Center, a 177-bed general acute care hospital. Upon acquisition, the property was 93% leased, with leases to the hospital comprising 69% of the rentable square feet.

First Quarter

In January 2015, the Company acquired a 110,679 square foot medical office building in California for a purchase price and cash consideration of $39.3 million. The property is located adjacent to two hospital campuses, Kaiser Permanente, a 106-bed hospital, and Washington Hospital Healthcare System, a 353-bed hospital. Upon acquisition, this property was 97% leased, with leases to the two hospitals comprising 59% of the rentable square feet.

2015 Dispositions

Second Quarter

In May 2015, the Company disposed of an off-campus, 5,323 square foot building located in Virginia in which the Company had a $0.3 million net investment. The sales price and cash proceeds were approximately $1.0 million. The Company recognized a $0.7 million gain on the disposal of this property.

In June 2015, the Company disposed of an on-campus, 58,474 square foot medical office building and a 117,525 square foot surgical facility, located in Indiana, in which the Company had an aggregate net investment of $50.5 million. The sales price for the buildings was approximately $97.0 million comprised of net cash proceeds of $93.3 million, closing costs of approximately $0.6 million, and a tenant improvement allowance credit of $3.1 million. The Company recognized a $40.9 million gain on the disposal, net of straight-line rent receivables and other assets.

Subsequent Dispositions

In July 2015, the Company disposed of an on-campus, 63,914 square foot medical office building located in Pennsylvania pursuant to an exercised purchase option. The property was previously classified as held for sale and the Company had a $7.8 million net investment as of June 30, 2015. The sales price and net cash proceeds were approximately $18.4 million. The Company recognized a $10.6 million gain upon the disposal of this property.

Assets Held for Sale

At June 30, 2015 and December 31, 2014, the Company had three and two properties classified as held for sale, respectively. Included in the three properties classified as held for sale as of June 30, 2015 are:

•

An off-campus medical office building located in Arizona that was reclassified to held for sale in connection with management's decision to sell the property. The Company expects that the property will be sold during 2015. The Company recorded an impairment charge of $3.3 million in the first quarter of 2015 to record the property at estimated fair value less costs to sell, which was based on a purchase and sale agreement, a level 3 input, that was subsequently terminated.


•	An on-campus medical office building located in Pennsylvania. This property was sold in July 2015. See "Subsequent Dispositions" above for additional information.


•	An on-campus medical office building located in Georgia. This property is not currently under contract, but the Company is in discussions regarding a potential sale.

The table below reflects the assets and liabilities of the properties classified as held for sale as of June 30, 2015 and December 31, 2014.



(Dollars in thousands)	June 30, 2015			December 31, 2014
Balance Sheet data:
Land	$	2,524		$	422
Buildings, improvements and lease intangibles	21,513			12,822
Personal property	21			13
	24,058			13,257
Accumulated depreciation	(10,322		)	(4,464		)
Assets held for sale, net	13,736			8,793
Other assets, net (including receivables)	456			353
Assets of discontinued operations, net	456			353
Assets held for sale and discontinued operations, net	$	14,192		$	9,146

Accounts payable and accrued liabilities	$	149		$	86
Other liabilities	19			286
Liabilities of discontinued operations	$	168		$	372

Discontinued Operations

The Company adopted Accounting Standards Update No. 2014-08, “Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity” during the first quarter of 2015. As of December 31, 2014, the Company had two properties classified as held for sale and recorded in discontinued operations. These two properties will remain classified as discontinued operations until the properties are sold. One of the properties was sold in July 2015. See "Subsequent Dispositions" above. During the three and six months ended June 30, 2015, the Company reclassified a property to held for sale upon management's decision to sell the property that did not meet the amended criteria as a discontinued operation. Therefore, the operating results of the property are not included in the table below which reflects the results of operations of the properties included in discontinued operations on the Company's Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2014.



	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands)	2015			2014			2015			2014
Statements of Operations data:
Revenues
Rental income	$	348		$	1,385		$	690		$	2,969
Other operating	—			2			—			3
	348			1,387			690			2,972
Expenses
Property operating	19			793			48			1,906
General and administrative	—			6			—			13
Depreciation	—			475			—			1,030
Bad debts, net of recoveries	(1		)	7			(1		)	7
	18			1,281			47			2,956
Other Income (Expense)
Interest and other income, net	—			2			20			2
	—			2			20			2
Discontinued Operations
Income from discontinued operations	330			108			663			18
Impairments of real estate assets	—			(3,105		)	—			(6,529		)
Gain on sale of property	—			3			—			3
Income (Loss) from Discontinued Operations	$	330		$	(2,994	)	$	663		$	(6,508	)