Real Estate Investments

2016 Acquisitions

First Quarter

In March 2016, the Company acquired a 69,712 square foot medical office building in Seattle, Washington for a purchase price of $38.3 million, including purchase price credits of $0.6 million and cash consideration of $37.7 million. In addition, the Company expensed $1.6 million of acquisition costs related to seller credits for loan prepayment, brokerage commission and excise taxes. The property is adjacent to UW Medicine's Northwest Hospital and Medical Center campus, a 281-bed general medical and surgical hospital. Upon acquisition, the building was 100% leased.

Second Quarter

In April 2016, the Company acquired a 46,637 square foot medical office building in Seattle, Washington for a purchase price of $21.6 million. The transaction included purchase price credits of $1.5 million, cash consideration of $18.8 million, and capital obligations of $1.3 million. The property is located on UW Medicine's Valley Medical Center campus, a 321-bed general medical and surgical hospital. Upon acquisition, the building was 100% leased. This transaction was accounted for as an asset acquisition as the property was seller occupied.

In May 2016, the Company acquired a 63,012 square foot medical office building in Los Angeles, California for a purchase price of $20.0 million, including purchase price credits of $0.3 million, cash consideration of $6.5 million, and the assumption of debt of $13.2 million (excluding a $0.8 million fair value premium recorded at acquisition). The mortgage note payable assumed by the Company bears a contractual interest rate of 4.77% and matures on January 6, 2024. The property is located on HCA's West Hills Hospital and Medical Center campus, a 225-bed general medical and surgical hospital. Upon acquisition, the property was 80% leased.

Third Quarter

In September 2016, the Company acquired an 87,462 square foot medical office building in Seattle, Washington for a purchase price of $53.1 million, including purchase price credits of $0.1 million and cash consideration of $53.0 million. The property is located on UW Medicine's Valley Medical Center campus, a 321-bed general medical and surgical hospital. Upon acquisition, the building was 100% leased.

Also in September 2016, the Company acquired a 103,783 square foot medical office building located in suburban Washington, D.C. for a purchase price of $45.2 million, including purchase price credits of $0.1 million and cash consideration of $45.1 million. The property is located on Inova Health System's Loudoun Hospital campus, a 183-bed acute care hospital. Upon acquisition, the building was 100% leased. A director of the Company serves as the President and Chief Executive Officer of the Inova Health System, a more than 1,700-bed hospital system. As part of this transaction, the Company assumed a ground lease and tenant leases with Loudoun Hospital Center, an affiliate of Inova Health System.

The following table details the Company's acquisitions for the nine months ended September 30, 2016:



(Dollars in millions)	Date Acquired	Purchase Price		Purchase Price Credits ⁽¹⁾			Mortgage Notes Payable Assumed ⁽²⁾			Cash Consideration ⁽³⁾		Real Estate		Other ⁽⁴⁾			Square Footage
Real estate acquisitions
Washington	3/31/16	$	38.3	$	(0.6	)	$	—		$	37.7	$	37.7	$	—		69,712
Washington	4/29/16	21.6		(2.8		)	—			18.8		20.1		(1.3		)	46,637
California	5/13/16	20.0		(0.3		)	(13.2		)	6.5		20.4		(0.7		)	63,012
Washington	9/12/16	53.1		(0.1		)	—			53.0		54.6		(1.6		)	87,462
Washington, D.C.	9/26/16	45.2		(0.1		)	—			45.1		43.7		1.4			103,783
		$	178.2	$	(3.9	)	$	(13.2	)	$	161.1	$	176.5	$	(2.2	)	370,606

______


(1)	Includes tenant improvement and capital expenditure obligations as well as other assets acquired and liabilities assumed upon acquisition.


(2)	The mortgage note payable assumed in the acquisition does not reflect the fair value adjustments totaling $0.8 million recorded by the Company upon acquisition (included in Other).


(3)	Cash consideration excludes prorations of revenue and expense due to/from seller at the time of the acquisition.


(4)	Includes assets acquired, liabilities assumed, intangibles recognized at acquisition and fair value adjustments on debt assumed.

Subsequent Acquisitions

On October 11, 2016, the Company acquired an 82,763 square foot medical office building and a 30,868 square foot medical office building in Baltimore, Maryland for a total purchase price of $36.3 million, including purchase price adjustments of $0.1 million and cash consideration of $36.4 million. The properties are located on University of Maryland's Upper Chesapeake Health Medical Center campus, a 181-bed acute care hospital. Upon acquisition, the buildings were 92% leased.

On October 17, 2016, the Company acquired a 29,753 square foot medical office building in Seattle, Washington for a purchase price and cash consideration of $9.8 million. The property is located on Providence Health's Swedish Edmonds campus, a 217-bed acute care hospital. Upon acquisition, the building was 96% leased.

Subsequent Dispositions

On October 14, 2016, the Company disposed of an on-campus, 70,908 square foot medical office building located in Kansas City, Kansas following the ground lessor's exercise of its purchase option. The Company's net investment in the building was $7.2 million. The sales price and cash proceeds were approximately $15.1 million. The Company expects to recognize a $7.6 million gain on the disposal, net of straight-line rent receivables and other assets. This property was classified as held for sale as of September 30, 2016.

On October 28, 2016, the Company disposed of an off-campus, 45,274 square foot medical office building located in Nashville, Tennessee, in which the Company had a net investment of approximately $6.3 million. The sales price of the building was approximately $8.8 million, including net proceeds of approximately $8.6 million and closing costs of approximately $0.2 million. The Company expects to recognize a $2.1 million gain on the disposition, net of straight-line rent receivables and other assets. The Company also repaid the related mortgage note payable bearing interest at a rate of 7.63% with outstanding principal of $0.1 million. This property was classified as held for sale as of September 30, 2016.

Assets Held for Sale

At September 30, 2016 and December 31, 2015, the Company had three and one properties, respectively, classified as held for sale. During the third quarter of 2016, the Company reclassified two properties to held for sale that are summarized below:


•	an on-campus, 70,908 square foot medical office building located in Kansas City, Kansas reclassified to held for sale in connection with the exercise of the ground lessor's purchase option. The property was sold in the fourth quarter and the Company expects to recognize a $7.6 million gain on the disposition; and


•	an off-campus, 45,274 square foot medical office building located in Nashville, Tennessee reclassified to held for sale in connection with management's decision to sell the property. The property was sold in the fourth quarter and the Company expects to recognize a $2.1 million gain on the disposition.

The table below reflects the assets and liabilities of the properties classified as held for sale and discontinued operations as of September 30, 2016 and December 31, 2015:



(Dollars in thousands)	September 30, 2016			December 31, 2015
Balance Sheet data:
Land	$	2,161		$	422
Buildings, improvements and lease intangibles	27,198			1,350
Personal property	5			—
	29,364			1,772
Accumulated depreciation	(15,086		)	(1,070		)
Real estate assets held for sale, net	14,278			702
Other assets, net (including receivables)	454			22
Assets held for sale and discontinued operations, net	$	14,732		$	724

Notes and bonds payable	$	114		$	—
Accounts payable and accrued liabilities	298			28
Other liabilities	160			5
Liabilities of properties held for sale and discontinued operations	$	572		$	33

Discontinued Operations

The following table represents the results of operations of the properties included in discontinued operations on the Company's Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2016 and 2015.



	Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands)	2016			2015			2016			2015
Statements of Income data:
Revenues
Rental income	$	—		$	62		$	—		$	752
	—			62			—			752
Expenses
Property operating	23			2			50			48
Bad debts, net of recoveries	—			(1		)	—			(1		)
	23			1			50			47
Other Income (Expense)
Interest and other income, net	—			—			—			20
	—			—			—			20
Discontinued Operations
Income (Loss) from discontinued operations	(23		)	61			(50		)	725
Gain on sales of real estate assets	—			10,571			7			10,571
Income (Loss) from Discontinued Operations	$	(23	)	$	10,632		$	(43	)	$	11,296