Commitments and Contingencies

Redevelopment Activity

The Company is in the process of redeveloping two medical office buildings in Tennessee and began constructing an expansion of one of the buildings during 2015. The Company spent approximately $50.6 million on the redevelopment of these properties through December 31, 2016, including the acquisition of a land parcel for $3.1 million on which the Company built a parking garage.

Development Activity

The Company continued the development of a 98,000 square foot medical office building in Colorado during 2016. Of the total budget,$11.7 million had been spent as of December 31, 2016. Construction is expected to be completed in the second quarter of 2017.

The table below details the Company’s construction activity as of December 31, 2016. The information included in the table below represents management’s estimates and expectations at December 31, 2016, which are subject to change. The Company’s disclosures regarding certain projections or estimates of completion dates may not reflect actual results.



			December 31, 2016
(Dollars in thousands)	Number of Properties	Estimated Completion Date	Construction in Progress Balance		Total Funded During the Year		Total Amount Funded		Estimated Remaining Fundings (unaudited)		Estimated Total Investment (unaudited)		Approximate Square Feet (unaudited)
Construction Activity
Nashville, TN	2	Q1 2017	$	—	$	28,794	$	50,612	6,008		$	56,620	294,000
Denver, CO	1	Q2 2017	11,655		11,426		11,655		14,845		26,500		98,000
Total			$	11,655	$	40,220	$	62,267	$	20,853	$	83,120	392,000

Tenant Improvements

The Company may provide a tenant improvement allowance in new or renewal leases for the purpose of refurbishing or renovating tenant space. As of December 31, 2016, the Company had commitments of approximately $19.1 million that is expected to be spent on tenant improvements throughout the portfolio.

Land Held for Development

Land held for development includes parcels of land owned by the Company, upon which the Company intends to develop and own outpatient healthcare facilities. The Company’s investment in land held for development totaled approximately $20.1 million and $17.5 million as of December 31, 2016 and 2015, respectively.

Operating Leases

As of December 31, 2016, the Company was obligated under operating lease agreements consisting primarily of the Company’s corporate office lease and ground leases. At December 31, 2016, the Company had 99 properties totaling 8.0 million square feet that were held under ground leases with a remaining weighted average term of 69.4 years, including renewal options. These ground leases typically have initial terms of 50 to 75 years with one to two renewal options extending the terms to 75 to 100 years. These ground leases have initial term expiration dates through 2115.

The Company’s corporate office lease currently covers approximately 36,653 square feet of rented space and expires on October 31, 2020. Annual base rent on the corporate office lease increases approximately 3.25% annually. The Company’s ground leases generally increase annually based on increases in the Consumer Price Index. Rental expense relating to the operating leases for the years ended December 31, 2016, 2015 and 2014 was $5.7 million, $5.1 million and $4.9 million, respectively. The Company prepaid 47 ground leases, which represented approximately $0.5 million of the Company’s rental expense for the years ended December 31, 2016, 2015, and 2014.

The Company’s future minimum lease payments for its corporate office lease and 52 ground leases, excluding leases that the Company has prepaid and leases in which an operator pays or fully reimburses the Company, as of December 31, 2016 were as follows (in thousands):



2016	$	5,719
2017	5,798
2018	5,980
2019	5,840
2020	5,062
2021 and thereafter	361,666
	$	390,065

Environmental Matters

During 2015, the Company acquired a medical office building in Tacoma, Washington. During the due diligence period, the Company identified a specific area of the property that contains soils with above-tolerance levels of tetrachloroethylene (a dry cleaning solvent commonly known as perc) and recorded a $1.2 million liability upon acquisition. Remediation efforts are underway and the Company has funded $0.3 million in 2016.