Commitments and Contingencies

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Redevelopment Activity

The Company completed the redevelopment and expansion of one of its medical office buildings in Nashville, Tennessee in 2017. The Company spent approximately $6.1 million during the year ended December 31, 2018, including approximately $1.9 million related to overages on tenant improvement projects that have been or will be reimbursed by the tenant.

The Company continued the redevelopment of a medical office building in Charlotte, North Carolina, which includes a 38,000 square foot vertical expansion. The Company funded approximately $6.1 million during the year ended December 31, 2018. The Company expects initial occupancy to occur in the second quarter of 2019.

Development Activity

The Company completed the development of a 99,957 square foot medical office building in Denver, Colorado in 2017. The Company spent approximately $1.8 million during the year ended December 31, 2018, including approximately $0.1 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 2019.

The Company continued the development of a 151,000 square foot medical office building in Seattle, Washington. The Company spent approximately $21.5 million on the development during the year ended December 31, 2018. The Company expects initial occupancy to occur in the fourth quarter of 2019.

The table below details the Company’s construction activity as of December 31, 2018. The information included in the table below represents management’s estimates and expectations at December 31, 2018, which are subject to change. The Company’s disclosures regarding certain projections or estimates of completion dates may not reflect actual results.



			December 31, 2018
(Dollars in thousands)	Number of Properties	Initial Occupancy	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	Q2 2019	$	9,586	$	6,099	$	9,586	2,414		$	12,000	38,000
Seattle, WA	1	Q4 2019	23,521		21,549		23,821		40,299		64,120		151,000
Total			$	33,107	$	27,648	$	33,407	$	42,713	$	76,120	189,000

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, 2018, the Company had commitments of approximately $29.2 million that are 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 seven parcels of land held for development located adjacent to certain of the Company's existing medical office buildings in Texas, Iowa, Tennessee and Colorado totaled approximately $24.6 million as of December 31, 2018. The Company’s investment in six parcels of land held in Texas, Iowa, and Tennessee totaled approximately $20.1 million as of 2017.

Operating Leases

As of December 31, 2018, the Company was obligated under operating lease agreements consisting primarily of the Company’s ground leases. At December 31, 2018, the Company had 107 properties totaling 8.8 million square feet that were held under ground leases with a remaining weighted average term of 53.9 years, excluding renewal options. These ground leases typically have initial terms of 50 to 75 years with one or more renewal options extending the terms to 75 to 100 years, with expiration dates through 2117.

Any increases related to the Company’s ground leases are generally either stated or based on the Consumer Price Index. Rental expense relating to the operating leases for the years ended December 31, 2018, 2017 and 2016 was $6.9 million, $6.5 million and $5.8 million, respectively. The Company prepaid 47 ground leases. The amortization of the prepaid rent represented approximately $0.5 million of the Company’s rental expense for the years ended December 31, 2018, 2017, and 2016.

The Company’s future minimum lease payments primarily for its 60 non-prepaid ground leases as of December 31, 2018 were as follows (in thousands):



2019	$	5,288
2020	5,260
2021	5,238
2022	5,207
2023	5,224
2024 and thereafter	323,533
	$	349,750