Commitments and Contingencies

Redevelopment Activity

The Company completed the redevelopment and expansion of one medical office building in Nashville, Tennessee in 2017. The Company spent approximately $12.6 million on the redevelopment of this property during the year ended December 31, 2017, including approximately $3.2 million related to overages on tenant improvement projects that have been or will be reimbursed by the tenant.

During 2017, the Company began the redevelopment of a medical office building in Charlotte, North Carolina, which includes a 38,000 square foot vertical expansion. The Company spent approximately $3.3 million on the redevelopment during the year ended December 31, 2017.

Development Activity

The Company completed the development of a 99,957 square foot medical office building in Denver, Colorado. The Company spent approximately $14.6 million during the year ended December 31, 2017, including approximately $2.8 million related to overages on tenant improvement projects that have been or will be reimbursed by the tenant. The Company anticipates funding additional tenant improvements throughout 2018 and 2019.

The Company began the development of a 151,000 square foot medical office building in Seattle, Washington during 2017. The Company spent approximately $1.8 million on the development during the year ended December 31, 2017. The Company expects the project to be completed in the second quarter of 2019.

The table below details the Company’s construction activity as of December 31, 2017. The information included in the table below represents management’s estimates and expectations at December 31, 2017, which are subject to change. The Company’s disclosures regarding certain projections or estimates of completion dates may not reflect actual results.



			December 31, 2017
(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
Charlotte, NC	1	Q1 2019	$	3,487	$	3,264	$	3,487	8,513		$	12,000	204,000
Seattle, WA	1	Q2 2019	1,971		1,809		2,272		61,848		64,120		151,000
Total			$	5,458	$	5,073	$	5,759	$	70,361	$	76,120	355,000

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, 2017, the Company had commitments of approximately $27.8 million that is expected to be spent on tenant improvements throughout the portfolio, excluding development properties currently under construction.

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 six parcels of land held for development located adjacent to certain of the Company's existing medical office buildings in Texas, Iowa and Tennessee totaled approximately $20.1 million as of December 31, 2017 and 2016.

Operating Leases

As of December 31, 2017, the Company was obligated under operating lease agreements consisting primarily of the Company’s corporate office lease and ground leases. At December 31, 2017, the Company had 109 properties totaling 8.9 million square feet that were held under ground leases with a remaining weighted average term of 68.7 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, with expiration dates through 2117.

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, 2017, 2016 and 2015 was $6.3 million, $5.7 million and $5.1 million, respectively. The Company prepaid 48 ground leases, which represented approximately $0.5 million of the Company’s rental expense for the years ended December 31, 2017, 2016, and 2015.

The Company’s corporate office lease currently covers approximately 36,653 square feet of rented space and expires on October 31, 2020. The Company’s future minimum lease payments for its corporate office lease and 61 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, 2017 were as follows (in thousands):



2018	$	5,341
2019	5,420
2020	5,459
2021	5,488
2022	5,516
2023 and thereafter	283,056
	$	310,280