Real Estate Leases and Mortgage Notes Receivable

12 Months Ended

Dec. 31, 2011

Real Estate Leases and Mortgage Notes Receivable [Abstract]

Real estate leases and mortgage notes receivable

3. Real Estate Leases and Mortgage Notes Receivable

Real Estate Leases

The Company’s properties are generally leased pursuant to non-cancelable, fixed-term operating leases or are supported through other financial support arrangements with expiration dates through 2029. Some leases and financial arrangements provide for fixed rent renewal terms of five years, or multiples thereof, in addition to market rent renewal terms. Some leases provide the lessee, during the term of the lease and for a short period thereafter, with an option or a right of first refusal to purchase the leased property. The Company’s portfolio of master leases generally requires the lessee to pay minimum rent, additional rent based upon fixed percentage increases or increases in the Consumer Price Index and all taxes (including property tax), insurance, maintenance and other operating costs associated with the leased property.

Future minimum lease payments under the non-cancelable operating leases and guaranteed amounts due to the Company under property operating agreements as of December 31, 2011 are as follows (in thousands):

2012	$	235,821
2013		206,256
2014		172,938
2015		139,558
2016		113,988
2017 and thereafter		420,632
	$	1,289,193

Customer Concentrations

The Company’s real estate portfolio is leased to a diverse tenant base. The Company had only one customer, Baylor Health System, that accounted for 10% of the Company’s revenues, including revenues from discontinued operations, for the year ended December 31, 2011. The Company did not have any customers that accounted for 10% or more of the Company’s revenues, including discontinued operations for the years ended December 31, 2010 or 2009.

As of December 31, 2011, approximately $40.5 million, or 41.5%, of the Company’s mortgage notes receivable were due from affiliates of the United Trust Fund, which is developing two build-to-suit facilities that are fully leased to Mercy Health, and two mortgage notes receivable totaling approximately $41.5 million, or 42.5%, of the Company’s mortgage notes receivable were due from affiliates of Ladco.

Purchase Option Provisions

Certain of the Company’s leases include purchase option provisions. The provisions vary from lease to lease but generally allow the lessee to purchase the property covered by the lease at the greater of fair market value or an amount equal to the Company’s gross investment. As of December 31, 2011, the Company had a gross investment of approximately $108.9 million in real estate properties that were subject to outstanding, exercisable contractual options to purchase, with various conditions and terms, that had not been exercised.

Mortgage Notes Receivable

All of the Company’s mortgage notes receivable are classified as held-for-investment based on management’s intent and ability to hold the loans until maturity. As such, the loans are carried at amortized cost. Also, all of the Company’s mortgage notes receivable are secured by existing buildings or buildings under construction.

A summary of the Company’s mortgage notes receivable is shown in the table below:

(Dollars in thousands)	Balance at December 31, 2011		Balance of December 31, 2010
Construction mortgage notes (1)	$	51,471	$	17,979
Other mortgage notes		45,910		18,620
	$	97,381	$	36,599

(1) Balance at December 31, 2010 includes unamortized fees of approximately $0.4 million.