sv11za
As filed with the Securities and Exchange Commission on
March 16, 2010
Registration No. 333-158418
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Amendment No. 3
to
Form S-11
FOR REGISTRATION
UNDER
THE SECURITIES ACT OF
1933
OF SECURITIES OF CERTAIN REAL
ESTATE COMPANIES
HEALTHCARE TRUST OF AMERICA,
INC.
(Exact name of registrant as
specified in its governing instruments)
The Promenade, Suite 440
16427 North Scottsdale Road
Scottsdale, AZ 85254
(480) 998-3478
(Address, including zip code, and
telephone number,
including area code, of registrants principal executive
offices)
Scott D. Peters
Chief Executive Officer, President and Chairman
The Promenade, Suite 440
16427 North Scottsdale Road
Scottsdale, AZ 85254
(480) 998-3478
(Name, address, including zip code,
and telephone number,
including area code, of agent for service)
Copies to:
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Lesley H. Solomon
Alston & Bird LLP
1201 West Peachtree Street
Atlanta, Georgia 30309
(404) 881-7000
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Peter M. Fass
Steven A. Fishman
Proskaur Rose LLP
1585 Broadway
New York, NY 10036
(212) 969-3025
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John F. Nicholson
Cox, Castle & Nicholson LLP
2049 Century Park East, 28th Floor
Los Angeles, CA 90067
(310) 277-4222
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Approximate date of commencement of proposed sale to
public: As soon as practicable after the
effectiveness of the registration statement.
If any of the Securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to
Rule 415 under the Securities Act, check the following
box: þ
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, check
the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following
box and list the Securities Act registration number of the
earlier effective registration statement for the same
offering. o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration number of the
earlier effective registration statement for the same
offering. o
If delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following
box. o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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þ (Do
not check if a smaller reporting company)
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Smaller reporting company
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The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its effective
date until the registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Commission
acting pursuant to said Section 8(a), may determine.
This Pre-Effective Amendment No. 3 consists of the
following:
1. The registrants prospectus dated
March , 2010, included
herewith.
2. Supplement No. 1 dated
March , 2010, filed herewith,
which will be delivered as an unattached document along with the
prospectus dated March , 2010.
3. Part II, included herewith.
4. Signatures, included herewith.
The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. The prospectus is not an offer to sell the securities
and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
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SUBJECT TO COMPLETION,
MARCH 16, 2010
Maximum Offering of
$2,200,000,000
We are a self-managed Maryland corporation formed to invest in a
diversified portfolio of medical office buildings and
healthcare-related facilities. We qualified and elected to be
taxed as a real estate investment trust, or REIT, for federal
income tax purposes beginning with our taxable year ended
December 31, 2007 and we intend to continue to be taxed as
a REIT.
We commenced our initial public offering of shares of our common
stock on September 20, 2006, which we refer to as our
initial offering. As of March 12, 2010, we had raised gross
offering proceeds of $1,448,044,000 from approximately 39,000
stockholders pursuant to our initial offering, which terminated
on March 19, 2010. As of March 12, 2010, we had made
55 geographically diverse acquisitions comprising 184 buildings
with approximately 7.5 million square feet of gross
leasable area, in 21 states.
In this follow-on offering, we are offering to the public up to
$2,000,000,000 in shares of our common stock in our primary
offering for $10.00 per share and $200,000,000 in shares of our
common stock to be issued pursuant to our distribution
reinvestment plan for $9.50 per share during our primary
offering. We reserve the right to reallocate the shares of
common stock we are offering between the primary offering and
the distribution reinvestment plan.
This investment involves a high degree of risk. You should
purchase these securities only if you can afford the complete
loss of your investment. See Risk Factors beginning
on page 19 to read about risks you should consider before
buying shares in our common stock. These risks include:
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No public market exists for our shares. Our shares cannot be
readily sold and there are significant restrictions on the
ownership, transferability and redemption of our shares. If you
are able to sell your shares, you would likely have to sell them
at a substantial discount.
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Current dislocations in the credit markets and real estate
markets could have a material adverse effect on our results of
operations, financial condition and ability to pay distributions
to stockholders.
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We have not identified the properties or other real estate
related assets we plan to acquire with the proceeds from this
offering. As a result, you will not be able to evaluate the
economic merits of the investments we will make from the
proceeds from this offering prior to purchasing shares.
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Our success depends to a significant degree upon the continued
contributions of certain key personnel, each of whom would be
difficult to replace. If we were to lose the benefit of the
experience, efforts and abilities of one or more of these
individuals, our operating results could suffer.
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The amount of distributions we may pay, if any, is uncertain.
Due to the risks involved in the ownership of real estate, there
is no guarantee of any return on your investment in us and you
may lose money.
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Under our charter, we are permitted to incur substantial debt,
which could lead to an inability to pay distributions to our
stockholders, or could decrease the value of your investment in
the event that income on, or the value of, the property securing
the debt falls.
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We may be required to borrow money, sell assets or issue new
securities for cash to pay our distributions.
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Distributions payable to our stockholders may, without
limitation, include a return of capital, which will lower your
tax basis in our shares.
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Our board of directors may change our investment policies
without seeking stockholder approval.
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If we do not remain qualified as a REIT, it would adversely
affect our operations and our ability to make distributions to
our stockholders.
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Neither the Securities and Exchange Commission, the Attorney
General of the State of New York nor any other state securities
regulator has approved or disapproved of these securities,
passed on or endorsed the merits of this offering or determined
if this prospectus is truthful or complete. Any representation
to the contrary is a criminal offense. The use of projections or
forecasts in this offering is prohibited. Any representation to
the contrary and any predictions, written or oral, as to the
cash benefits or tax consequences you will receive from an
investment in shares of our common stock is prohibited.
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Selling Commissions and
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Net Proceeds
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Price to Public*
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Dealer Manager Fee
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(Before Expenses)
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Primary Offering
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Per Share
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$
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10.00
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$
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1.00
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$
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9.00
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Total Maximum
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$
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2,000,000,000
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$
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200,000,000
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$
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1,800,000,000
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Distribution Reinvestment Plan
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Per Share
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$
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9.50
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$
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$
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9.50
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Total Maximum
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$
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200,000,000
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$
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$
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200,000,000
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The selling commissions and all or a portion of the dealer
manager fee will not be charged with regard to shares sold in
our primary offering to or for the account of our directors and
officers. Selling commissions will not be charged for shares
sold in the primary offering to: (1) investors that have
engaged the services of a registered investment advisor or other
financial advisor paid on a
fee-for-service
basis by the investor: (2) retirement plans of
participating broker-dealers; (3) broker-dealers in their
individual capacities; (4) IRAs and qualified plans of
participating broker-dealers registered representatives;
or (5) any one of a participating broker-dealers
registered representatives in their individual capacity. Selling
commissions will be reduced in connection with sales of certain
minimum numbers of shares. The reduction in these fees will be
accompanied by a corresponding reduction in the per share
purchase price. See Plan of Distribution.
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Our shares will be offered to investors on a best efforts basis
through Realty Capital Securities, LLC, the dealer manager for
this offering. The minimum initial investment is $1,000 ($2,500
for Tennessee residents), except for purchases by our existing
stockholders, which may be in lesser amounts. We will sell
shares until the earlier of March , 2012, two
years from this date of the prospectus, unless extended. If we
extend beyond March , 2012, we will supplement
the prospectus accordingly.
The date of this prospectus is
March , 2010.
SUITABILITY
STANDARDS
The shares we are offering are suitable only as a long-term
investment for persons of adequate financial means. There
currently is no public market for our shares. Therefore, it
likely will be difficult for you to sell your shares and, if you
are able to sell your shares, it is likely you would sell them
at a substantial discount. You should not buy these shares if
you need to sell them immediately, will need to sell them
quickly in the future or cannot bear the loss of your entire
investment.
In consideration of these factors, we have established
suitability standards for all stockholders, including subsequent
transferees. These suitability standards require that investors
have either:
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a net worth of at least $250,000; or
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an annual gross income of at least $70,000 and a net worth of at
least $70,000.
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For purposes of determining suitability of an investor, in
all cases net worth and liquid net worth should be calculated
excluding the value of an investors home, home furnishings
and automobiles.
Some states have established suitability standards different
from those we have established. Shares will be sold only to
investors in these states who meet the special suitability
standards set forth below.
Alabama Investors must represent that their
liquid net worth equals at least 10 times their investment in
this program and other similar programs and that they meet the
above suitability standards.
California Investors must have either:
(i) a net worth of least $250,000; or (ii) an annual
gross income of at least $85,000 and a net worth of at least
$150,000. In addition, an investors investment in our
common stock may not exceed 10.0% of that investors net
worth.
Iowa Investors must have either: (i) a
net worth of least $350,000; or (ii) an annual gross income
of at least $70,000 and a net worth of at least $100,000.
Kansas It is recommended by the Office of the
Kansas Securities Commissioner that Kansas investors not invest,
in the aggregate, more than 10% of their liquid net worth in
this and similar direct participation investments.
Kentucky, Michigan, Oregon, Pennsylvania and
Tennessee An investors investment in our
common stock may not exceed 10.0% of that investors liquid
net worth.
In the case of sales to fiduciary accounts (such as an
individual retirement account, or IRA, Keogh Plan, or pension or
profit sharing plan), these suitability standards must be met by
the beneficiary, the fiduciary account or by the person who
directly or indirectly supplied the funds for the purchase of
the shares if that person is the fiduciary. In the case of gifts
to minors, the suitability standards must be met by the
custodian account or by the donor.
These suitability standards are intended to help ensure that,
given the long-term nature of an investment in our shares, our
investment objectives and the relative illiquidity of our
shares, our shares are an appropriate investment for those of
you who become stockholders. Each participating broker-dealer
must make every reasonable effort to determine that the purchase
of shares is a suitable and appropriate investment for each
stockholder based on information provided by the stockholder in
the subscription agreement or otherwise.
Each participating broker-dealer is required to maintain records
of the information used to determine that an investment in
shares is suitable and appropriate for each stockholder for a
period of six years. Our subscription agreement requires you to
represent that you meet the applicable suitability standards. We
will not sell any shares to you unless you are able to make
these representations.
The minimum initial investment is 100 shares ($1,000)
($2,500 for Tennessee residents), except for purchases by our
existing stockholders, which may be in lesser amounts. In order
to satisfy the minimum purchase requirements for retirement
plans, unless otherwise prohibited by state law, a husband and
wife may jointly contribute funds from their separate IRAs,
provided that each such contribution is made in increments of
$100. You should note that an investment in shares of our common
stock will not, in itself, create a
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retirement plan and that, in order to create a retirement plan,
you must comply with all applicable provisions of the Internal
Revenue Code of 1986, as amended, or the Internal Revenue Code.
RESTRICTIONS
IMPOSED BY THE PATRIOT AND RELATED ACTS
The shares we are offering may not be offered, sold, transferred
or delivered, directly or indirectly, to any unacceptable
investor. Unacceptable investor means any
person who is a:
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person or entity who is a designated national,
specially designated national, specially
designated terrorist, specially designated global
terrorist, foreign terrorist organization or
blocked person within the definitions set forth in
the Foreign Assets Control Regulations of the U.S. Treasury
Department;
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person acting on behalf of, or any entity owned or controlled
by, any government against whom the U.S. maintains economic
sanctions or embargoes under the Regulations of the
U.S. Treasury Department;
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person or entity who is within the scope of Executive Order
13224-Blocking Property and Prohibiting Transactions with
Persons who Commit, Threaten to Commit, or Support Terrorism,
effective September 24, 2001;
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person or entity subject to additional restrictions imposed by
the following statutes or regulations and executive orders
issued thereunder: the Trading with the Enemy Act, the Iraq
Sanctions Act, the National Emergencies Act, the Antiterrorism
and Effective Death Penalty Act of 1996, the International
Emergency Economic Powers Act, the United Nations Participation
Act, the International Security and Development Cooperation Act,
the Nuclear Proliferation Prevention Act of 1994, the Foreign
Narcotics Kingpin Designation Act, the Iran and Libya Sanctions
Act of 1996, the Cuban Democracy Act, the Cuban Liberty and
Democratic Solidarity Act and the Foreign Operations, Export
Financing and Related Programs Appropriations Act or any other
law of similar import as to any
non-U.S. country,
as each such act or law has been or may be amended, adjusted,
modified or reviewed from time to time; or
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person or entity designated or blocked, associated or involved
in terrorism, or subject to restrictions under laws, regulations
or executive orders as may apply in the future similar to those
set forth above.
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TABLE OF
CONTENTS
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1
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10
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19
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A-1
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B-1
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C-1
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EX-21.1 |
EX-23.3 |
iii
QUESTIONS
AND ANSWERS ABOUT THIS OFFERING
Set forth below are some of the more frequently asked questions
and answers relating to our structure, our management, our
business and an offering of this type.
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Q: |
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What is Healthcare Trust of America, Inc.? |
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A: |
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We are an existing and active, self-managed real estate
investment trust, or REIT. We own a diversified portfolio of
medical office buildings and healthcare-related facilities. As
of March 12, 2010 we had made 55 geographically
diverse acquisitions for a total purchase price of approximately
$1.49 billion. We were formed as a Maryland corporation on
April 20, 2006. We commenced our initial public offering of
shares of our common stock on September 20, 2006, which we
refer to as our initial offering. Our initial offering
terminated on March 19, 2010. As of March 12, 2010, we
had received and accepted subscriptions for
144,959,351 shares of our common stock, or approximately
$1,448,044,000 from approximately 39,000 stockholders
pursuant to our initial offering. We will continue to invest in
a diversified portfolio of medical office buildings and
healthcare-related facilities with the proceeds from our initial
offering and this follow-on offering. |
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Are you self-managed and what does that mean? |
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Yes, we are a self-managed company. Self-management is a
corporate model based on internal management rather than
external management. In general, non-traded REITs are externally
managed. With external management, a REIT is dependent upon an
external advisor. An externally-managed REIT typically pays
significant acquisition fees, asset management fees, property
management fees and other fees to its advisor. In contrast,
under self-management, we are managed internally by our
management team led by Scott D. Peters, our Chairman of the
Board, Chief Executive Officer and President, as well as our
experienced board of directors. With a self-managed REIT,
outside fees to third parties are substantially reduced and
performance-driven. |
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Why did you decide to become self-managed? |
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We decided to become self-managed for several reasons: |
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Management Team. In July 2008, Mr.
Peters assumed the positions of President and Chief Executive
Officer of our company on a full-time and exclusive basis. This
was the first major step toward self-management. We have
assembled a highly qualified and experienced management team
which is focused on efficiency and performance to increase
stockholder value. Our internal management team includes
(1) Mr. Peters, our President and Chief Executive
Officer, (2) Kellie S. Pruitt, our Chief Accounting
Officer, Treasurer and Secretary, (3) Mark Engstrom, our
Executive Vice President Acquisitions,
(4) Amanda Houghton, our Senior Vice President
Asset Management and Finance, and (5) Katherine E.
Black, our Controller. We believe that our management team has
the experience and expertise to efficiently and effectively
operate our company.
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Governance. An integral part of
self-management is our experienced board of directors. Our board
of directors spent a substantial amount of time overseeing our
transition to self-management and continues to provide
significant assistance to us as a self-managed company. We
believe that our board of directors provides effective ongoing
governance for our company and that our governance and
management framework is one of our key strengths.
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Significantly Reduced Cost. From
inception through December 31, 2009, we incurred as a
result of having been externally advised approximately
$39,217,000 in acquisition fees; approximately $11,550,000 in
asset management fees; approximately $5,252,000 in property
management fees; and approximately $3,168,000 in leasing fees.
We expect third party expenses associated with on-site property
management and third party acquisition expenses, including legal
fees, due diligence fees and closing costs, to remain
approximately the same as under external management, relative to
the amount of acquisitions completed. We believe that the total
cost of self-management will be substantially less than the cost
of external management. While our board of directors, including
a majority of our independent directors, previously determined
that the fees to our former advisor were competitive and
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commercially reasonable to us and on terms and conditions not
less favorable to us than those available from other sponsors of
non-traded REITs based on circumstances at that time, we now
believe that by having our own employees manage our operations
and retain third party service providers, we will significantly
reduce our cost structure. |
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No Internalization Fees. Unlike
many other non-listed REITs that internalize or pay
to acquire various management functions and personnel, such as
advisory and asset management services, from their sponsor or
advisor prior to listing on a national securities exchange for
substantial fees, we will not be required to pay such fees under
self-management. We believe that by not paying such fees, as
well as operating more cost-effectively under self-management,
we will save a substantial amount of money. To the extent that
our management and board of directors determine that utilizing
third party service providers for certain services is more
cost-effective than conducting such services internally, we will
pay for these services based on negotiated terms and conditions
consistent with the current marketplace for such services on an
as-needed basis. |
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Funding of Self-Management. We
believe that the cost of self-management will be substantially
less than the cost of external management. The initial step in
becoming self-managed was amending the advisory agreement on
November 14, 2008, which reduced acquisition fees from 3%
to 2.5% of the purchase price (with further tiered adjustments
based on gross acquisition value to accomplish an average
acquisition fee of 2.25%) and reduced asset management fees from
1% to 0.5% of average invested assets. Upon expiration of the
advisory agreement, we no longer pay asset management fees and
we did not have to pay an internalization fee. Acquisition fees
will not be recurring, except for any remaining acquisition fees
to our former advisor for assets acquired with those remaining
funds raised in our initial offering by our former dealer
manager. In the third quarter of 2009, we became fully
self-managed and also transitioned our property management
services to nationally recognized property management groups for
market-based fees. The reduced acquisition and asset management
fees along with the savings from market-based property
management fees in the third and fourth quarters of 2009
resulted in a total gross savings of approximately $10,812,000
in 2009. The cost of self-management during 2009 was
approximately $5,000,000, excluding one-time, nonrecurring
transition costs of $1,973,000, resulting in net savings of
approximately $3,839,000. Therefore, the additional costs
related to the transition to self-management was effectively
funded by the cost savings in 2009. We anticipate that we will
achieve substantial cost savings in the future as a result of
reduced and/or eliminated acquisition fees, disposition fees,
asset management fees, internalization fees and other outside
fees.
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Dedicated Management and Increased
Accountability. Under self-management, our
officers and employees work directly for our company and are not
associated with any outside advisor or other third party service
providers. Our management team has direct oversight of our
employees, independent consultants and third party service
providers. We believe that these direct reporting relationships,
along with our performance-based compensation programs and
ongoing oversight by our management team, create an environment
for and will achieve increased accountability, productivity and
efficiency.
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Elimination/Reduction of Conflicts of
Interest. We believe that self-management works
to remove and reduce inherent conflicts of interest that
necessarily exist between an externally advised REIT and its
advisor. The elimination or reduction of these inherent
conflicts of interest is one of the major reasons that we
elected to proceed with self-management.
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What is the role of your President and Chief Executive
Officer? |
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Scott D. Peters, our Chairman of the Board, Chief Executive
Officer and President, was instrumental in the creation,
development and implementation of our company and its investment
and asset management strategies, including the development of
our demographic-based investment approach. Mr. Peters has
managed the acquisition of our real estate portfolio and will
continue to play a vital role in the growth and success of our
company. Mr. Peters manages our
day-to-day
operations, is directly involved in our asset management and
implements our investment strategy. |
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What is the experience of your board of directors? |
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Our board of directors has diverse and extensive knowledge and
expertise in the real estate and healthcare industries. This
knowledge and experience includes acquiring, financing,
developing, constructing, leasing, managing and disposing of
both institutional and non-institutional commercial real estate.
In addition, our board of directors has extensive and broad
legal, auditing and accounting experience. Our board of
directors has numerous years of hands-on and executive
commercial real estate experience drawn from a wide range of
disciplines. Our board of directors has experienced a number of
economic cycles, up and down. Such experience provides us with
the capacity to understand and proactively address market
changes, and to develop thoughtful investment strategies
consistent with our investment objectives. |
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Our Chairman, Scott D. Peters, has 20 years of
experience in managing publicly traded real estate investment
trusts and brings insight into all aspects of our business due
to both his current role and his history with the company. His
comprehensive experience and extensive knowledge and
understanding of the healthcare and real estate industries has
been instrumental in the creation, development and launching of
our company, as well as our current investment strategy.
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W. Bradley Blair, II provides broad real estate
and legal experience, having served a variety of companies in
advisory, executive
and/or
director roles for over 35 years, including over
10 years as CEO, president and Chairman of the board of
directors of a publicly traded REIT. He also operates a
consulting practice which focuses on real estate acquisitions
and finance. His diverse background in other business
disciplines, coupled with his deep understanding and knowledge
of real estate, contributes to the quality guidance and
oversight he brings to our board of directors.
|
|
|
|
|
|
Maurice J. DeWald, based on his 30 year career
with the international accounting and auditing firm of KPMG LLP,
offers substantial expertise in accounting and finance.
Mr. DeWald also has over 15 years of experience as a
director of a number of companies in the healthcare, financial,
banking and manufacturing sectors.
|
|
|
|
|
|
Warren D. Fix offers financial and management
expertise, with particular industry knowledge in real estate,
hospitality, agriculture and financial services. He has served
in various executive
and/or
director roles in a number of public and private companies in
the real estate, financial and technology sectors, for over
40 years.
|
|
|
|
|
|
Larry L. Mathis brings extensive experience in the
healthcare industry, having held numerous leadership positions
in organizations charged with planning and directing the future
of healthcare delivery in the United States for over
35 years, including serving as Chairman of the National
Advisory Council on Health Care Technology Assessment and as a
member of the Medicare Prospective Payment Assessment
Commission. He is the founding president and CEO of The
Methodist Hospital System in Houston, Texas, and has served as
an executive consultant in the healthcare sector for over ten
years.
|
|
|
|
|
|
Gary T. Wescombe provides expertise in accounting,
real estate investments and financing strategies, having served
a number of companies in various executive
and/or
director roles for over 40 years in both the real estate
and non-profit sectors, including almost 30 years as a
partner with Ernst & Young, LLP. He currently manages
and develops real estate operating properties as a principal of
a real estate company.
|
|
|
|
|
|
For more information regarding our directors, see
Management Directors and Executive
Officers. |
|
Q: |
|
Have you engaged any outside service providers? |
|
A: |
|
Yes, we have entered into agreements with third party service
providers for various services, including property management,
dealer manager and investor services. We may also enter into
additional service agreements with third party service providers
on an as-needed basis, subject to market rates and performance
standards for various services, including, without limitation,
consulting, taxes and acquisition |
3
|
|
|
|
|
services. We customize our agreements with third party service
providers to ensure that we retain effective oversight, input
and control over all major decisions. All such third party
services will be closely monitored on an on-going basis by our
management team. |
|
|
|
Q: |
|
Who serves as your dealer manager for this offering? |
|
|
|
A: |
|
Realty Capital Securities, LLC, or RCS, serves as our exclusive
dealer manager for this offering. |
|
|
|
Q: |
|
Why did you change your name to Healthcare Trust of America,
Inc.? |
|
|
|
A: |
|
We changed our name from Grubb & Ellis Healthcare
REIT, Inc. to Healthcare Trust of America, Inc. on
August 24, 2009. We did this in connection with our
transition to self-management and to reflect that we are no
longer externally advised or externally sponsored. |
|
|
|
Q: |
|
Do you currently own any properties or other real estate
related assets? |
|
|
|
A: |
|
As of March 12, 2010 we had made 55 geographically
diverse acquisitions, 44 of which are medical office properties,
6 of which are healthcare-related facilities, 3 of which are
quality commercial office properties, and 2 of which are other
real estate-related assets, comprising 184 buildings with
approximately 7.5 million square feet of gross leasable
area, or GLA, for an aggregate purchase price of approximately
$1.49 billion, in 21 states. |
|
|
|
|
|
As of December 31, 2009, the average occupancy of the
consolidated properties was approximately 91%. See
Investments on page 65 of this prospectus for a
more detailed discussion of our real estate assets as of
March 12, 2010. |
|
|
|
|
|
The following table lists our properties as of March 12,
2010. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Total of
|
|
|
|
|
|
Annual Rent
|
|
|
|
|
|
GLA
|
|
|
% of
|
|
|
Ownership
|
|
|
Date
|
|
|
Purchase
|
|
|
Annual
|
|
|
Annual
|
|
|
|
|
|
Per Leased
|
|
Property
|
|
Property Location
|
|
(Sq Ft)
|
|
|
GLA
|
|
|
Percentage
|
|
|
Acquired
|
|
|
Price
|
|
|
Rent(1)
|
|
|
Rent
|
|
|
Occupancy(2)
|
|
|
Sq Ft(3)
|
|
|
Southpointe Office Parke and Epler Parke I
|
|
Indianapolis, IN
|
|
|
97,000
|
|
|
|
1.3
|
%
|
|
|
100
|
%
|
|
|
1/22/2007
|
|
|
$
|
14,800,000
|
|
|
$
|
1,081,000
|
|
|
|
0.8
|
%
|
|
|
73.4
|
%
|
|
$
|
11.14
|
|
Crawfordsville Medical Office Park and Athens Surgery Center
|
|
Crawfordsville, IN
|
|
|
29,000
|
|
|
|
0.4
|
|
|
|
100
|
|
|
|
1/22/2007
|
|
|
|
6,900,000
|
|
|
|
592,000
|
|
|
|
0.4
|
|
|
|
100.0
|
|
|
|
20.41
|
|
The Gallery Professional Building
|
|
St. Paul, MN
|
|
|
106,000
|
|
|
|
1.4
|
|
|
|
100
|
|
|
|
3/9/2007
|
|
|
|
8,800,000
|
|
|
|
1,177,000
|
|
|
|
0.9
|
|
|
|
73.6
|
|
|
|
11.10
|
|
Lenox Office Park, Building G
|
|
Memphis, TN
|
|
|
98,000
|
|
|
|
1.3
|
|
|
|
100
|
|
|
|
3/23/2007
|
|
|
|
18,500,000
|
|
|
|
2,220,000
|
|
|
|
1.7
|
|
|
|
100.0
|
|
|
|
22.65
|
|
Commons V Medical Office Building
|
|
Naples, FL
|
|
|
55,000
|
|
|
|
0.7
|
|
|
|
100
|
|
|
|
4/24/2007
|
|
|
|
14,100,000
|
|
|
|
1,160,000
|
|
|
|
0.9
|
|
|
|
100.0
|
|
|
|
21.09
|
|
Yorktown Medical Center and Shakerag Medical Center
|
|
Fayetteville and
Peachtree City, GA
|
|
|
108,000
|
|
|
|
1.4
|
|
|
|
100
|
|
|
|
5/2/2007
|
|
|
|
21,500,000
|
|
|
|
1,945,000
|
|
|
|
1.5
|
|
|
|
60.3
|
|
|
|
18.01
|
|
Thunderbird Medical Plaza
|
|
Glendale, AZ
|
|
|
110,000
|
|
|
|
1.5
|
|
|
|
100
|
|
|
|
5/15/2007
|
|
|
|
25,000,000
|
|
|
|
1,965,000
|
|
|
|
1.5
|
|
|
|
72.6
|
|
|
|
17.86
|
|
Triumph Hospital Northwest and Triumph Hospital Southwest
|
|
Houston and Sugar
Land, TX
|
|
|
151,000
|
|
|
|
2.0
|
|
|
|
100
|
|
|
|
6/8/2007
|
|
|
|
36,500,000
|
|
|
|
2,990,000
|
|
|
|
2.3
|
|
|
|
100.0
|
|
|
|
19.80
|
|
Gwinnett Professional Center
|
|
Lawrenceville, GA
|
|
|
60,000
|
|
|
|
0.8
|
|
|
|
100
|
|
|
|
7/27/2007
|
|
|
|
9,300,000
|
|
|
|
889,000
|
|
|
|
0.7
|
|
|
|
59.4
|
|
|
|
14.82
|
|
1 & 4 Market Exchange
|
|
Columbus, OH
|
|
|
116,000
|
|
|
|
1.5
|
|
|
|
100
|
|
|
|
8/15/2007
|
|
|
|
21,900,000
|
|
|
|
1,516,000
|
|
|
|
1.1
|
|
|
|
86.1
|
|
|
|
13.07
|
|
Kokomo Medical Office Park
|
|
Kokomo, IN
|
|
|
87,000
|
|
|
|
1.2
|
|
|
|
100
|
|
|
|
8/30/2007
|
|
|
|
13,350,000
|
|
|
|
1,369,000
|
|
|
|
1.0
|
|
|
|
100.0
|
|
|
|
15.74
|
|
St. Mary Physicians Center
|
|
Long Beach, CA
|
|
|
67,000
|
|
|
|
0.9
|
|
|
|
100
|
|
|
|
9/5/2007
|
|
|
|
13,800,000
|
|
|
|
1,101,000
|
|
|
|
0.8
|
|
|
|
67.0
|
|
|
|
16.43
|
|
2750 Monroe Boulevard
|
|
Valley Forge, PA
|
|
|
109,000
|
|
|
|
1.4
|
|
|
|
100
|
|
|
|
9/10/2007
|
|
|
|
26,700,000
|
|
|
|
2,776,000
|
|
|
|
2.1
|
|
|
|
100.0
|
|
|
|
25.47
|
|
East Florida Senior
|
|
Jacksonville,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Care Portfolio
|
|
Winter Park and
Sunrise, FL
|
|
|
355,000
|
|
|
|
4.7
|
|
|
|
100
|
|
|
|
9/28/2007
|
|
|
|
52,000,000
|
|
|
|
4,303,000
|
|
|
|
3.3
|
|
|
|
100.0
|
|
|
|
12.12
|
|
Northmeadow Medical Center
|
|
Roswell, GA
|
|
|
51,000
|
|
|
|
0.7
|
|
|
|
100
|
|
|
|
11/15/2007
|
|
|
|
11,850,000
|
|
|
|
1,261,000
|
|
|
|
1.0
|
|
|
|
98.6
|
|
|
|
24.73
|
|
Tucson Medical Office Portfolio
|
|
Tucson, AZ
|
|
|
110,000
|
|
|
|
1.5
|
|
|
|
100
|
|
|
|
11/20/2007
|
|
|
|
21,050,000
|
|
|
|
1,619,000
|
|
|
|
1.2
|
|
|
|
69.0
|
|
|
|
14.72
|
|
Lima Medical Office Portfolio
|
|
Lima, OH
|
|
|
203,000
|
|
|
|
2.7
|
|
|
|
100
|
|
|
|
12/7/2007
|
|
|
|
26,060,000
|
|
|
|
2,120,000
|
|
|
|
1.6
|
|
|
|
81.1
|
|
|
|
10.44
|
|
Highlands Ranch Medical Plaza
|
|
Highlands Ranch, CO
|
|
|
79,000
|
|
|
|
1.0
|
|
|
|
100
|
|
|
|
12/19/2007
|
|
|
|
14,500,000
|
|
|
|
1,621,000
|
|
|
|
1.2
|
|
|
|
86.2
|
|
|
|
20.52
|
|
Chesterfield Rehabilitation Center
|
|
Chesterfield, MO
|
|
|
112,000
|
|
|
|
1.5
|
|
|
|
80.00
|
|
|
|
12/19/2007
|
|
|
|
36,440,000
|
|
|
|
3,082,000
|
|
|
|
2.3
|
|
|
|
100.0
|
|
|
|
27.52
|
|
Park Place Office Park
|
|
Dayton, OH
|
|
|
133,000
|
|
|
|
1.8
|
|
|
|
100
|
|
|
|
12/20/2007
|
|
|
|
16,200,000
|
|
|
|
1,864,000
|
|
|
|
1.4
|
|
|
|
80.8
|
|
|
|
14.12
|
|
Medical Portfolio 1
|
|
Overland, KS and
Largo, Brandon and
Lakeland, FL
|
|
|
163,000
|
|
|
|
2.2
|
|
|
|
100
|
|
|
|
2/1/2008
|
|
|
|
36,950,000
|
|
|
|
3,391,000
|
|
|
|
2.6
|
|
|
|
91.3
|
|
|
|
20.80
|
|
Fort Road Medical Building
|
|
St. Paul, MN
|
|
|
50,000
|
|
|
|
0.7
|
|
|
|
100
|
|
|
|
3/6/2008
|
|
|
|
8,650,000
|
|
|
|
633,000
|
|
|
|
0.5
|
|
|
|
78.6
|
|
|
|
12.66
|
|
Liberty Falls Medical Plaza
|
|
Liberty Township, OH
|
|
|
44,000
|
|
|
|
0.6
|
|
|
|
100
|
|
|
|
3/19/2008
|
|
|
|
8,150,000
|
|
|
|
637,000
|
|
|
|
0.5
|
|
|
|
91.5
|
|
|
|
14.48
|
|
Epler Parke Building B
|
|
Indianapolis, IN
|
|
|
34,000
|
|
|
|
0.5
|
|
|
|
100
|
|
|
|
3/24/2008
|
|
|
|
5,850,000
|
|
|
|
471,000
|
|
|
|
0.4
|
|
|
|
95.2
|
|
|
|
13.85
|
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Total of
|
|
|
|
|
|
Annual Rent
|
|
|
|
|
|
GLA
|
|
|
% of
|
|
|
Ownership
|
|
|
Date
|
|
|
Purchase
|
|
|
Annual
|
|
|
Annual
|
|
|
|
|
|
Per Leased
|
|
Property
|
|
Property Location
|
|
(Sq Ft)
|
|
|
GLA
|
|
|
Percentage
|
|
|
Acquired
|
|
|
Price
|
|
|
Rent(1)
|
|
|
Rent
|
|
|
Occupancy(2)
|
|
|
Sq Ft(3)
|
|
|
Cypress Station Medical Office Building
|
|
Houston, TX
|
|
|
52,000
|
|
|
|
0.7
|
|
|
|
100
|
%
|
|
|
3/25/2008
|
|
|
|
11,200,000
|
|
|
|
936,000
|
|
|
|
0.7
|
|
|
|
100.0
|
%
|
|
|
18.00
|
|
Vista Professional Center
|
|
Lakeland, Fl
|
|
|
32,000
|
|
|
|
0.4
|
|
|
|
100
|
|
|
|
3/27/2008
|
|
|
|
5,250,000
|
|
|
|
368,000
|
|
|
|
0.3
|
|
|
|
76.2
|
|
|
|
11.50
|
|
Senior Care Portfolio 1
|
|
Arlington,
Galveston, Port
Arthur and Texas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
City, TX and Lomita
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and El Monte, CA
|
|
|
226,000
|
|
|
|
3.0
|
|
|
|
100
|
|
|
|
Various
|
|
|
|
39,600,000
|
|
|
|
3,462,000
|
|
|
|
2.6
|
|
|
|
100.0
|
|
|
|
15.32
|
|
Amarillo Hospital
|
|
Amarillo, TX
|
|
|
65,000
|
|
|
|
0.9
|
|
|
|
100
|
|
|
|
5/15/2008
|
|
|
|
20,000,000
|
|
|
|
1,666,000
|
|
|
|
1.3
|
|
|
|
100.0
|
|
|
|
25.63
|
|
5995 Plaza Drive
|
|
Cypress, CA
|
|
|
104,000
|
|
|
|
1.4
|
|
|
|
100
|
|
|
|
5/29/2008
|
|
|
|
25,700,000
|
|
|
|
2,004,000
|
|
|
|
1.5
|
|
|
|
100.0
|
|
|
|
19.27
|
|
Nutfield Professional Center
|
|
Derry, NH
|
|
|
70,000
|
|
|
|
0.9
|
|
|
|
100
|
|
|
|
6/3/2008
|
|
|
|
14,200,000
|
|
|
|
1,163,000
|
|
|
|
0.9
|
|
|
|
100.0
|
|
|
|
16.61
|
|
SouthCrest Medical Plaza
|
|
Stockbridge, GA
|
|
|
81,000
|
|
|
|
1.1
|
|
|
|
100
|
|
|
|
6/24/2008
|
|
|
|
21,176,000
|
|
|
|
1,577,000
|
|
|
|
1.2
|
|
|
|
83.7
|
|
|
|
19.47
|
|
Medical Portfolio 3
|
|
Indianapolis, IN
|
|
|
685,000
|
|
|
|
9.1
|
|
|
|
100
|
|
|
|
6/26/2008
|
|
|
|
90,100,000
|
|
|
|
9,285,000
|
|
|
|
7.0
|
|
|
|
74.8
|
|
|
|
13.55
|
|
Academy Medical Center
|
|
Tucson, AZ
|
|
|
41,000
|
|
|
|
0.5
|
|
|
|
100
|
|
|
|
6/26/2008
|
|
|
|
8,100,000
|
|
|
|
774,000
|
|
|
|
0.6
|
|
|
|
88.2
|
|
|
|
18.88
|
|
Decatur Medical Plaza
|
|
Decatur, GA
|
|
|
43,000
|
|
|
|
0.6
|
|
|
|
100
|
|
|
|
6/27/2008
|
|
|
|
12,000,000
|
|
|
|
1,060,000
|
|
|
|
0.8
|
|
|
|
99.5
|
|
|
|
24.65
|
|
Medical Portfolio 2
|
|
OFallon and St. Louis, MO and
Keller and Wichita
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Falls, TX
|
|
|
173,000
|
|
|
|
2.3
|
|
|
|
100
|
|
|
|
Various
|
|
|
|
44,800,000
|
|
|
|
3,789,000
|
|
|
|
2.9
|
|
|
|
97.7
|
|
|
|
21.90
|
|
Renaissance Medical Center
|
|
Bountiful, UT
|
|
|
112,000
|
|
|
|
1.5
|
|
|
|
100
|
|
|
|
6/30/2008
|
|
|
|
30,200,000
|
|
|
|
2,234,000
|
|
|
|
1.7
|
|
|
|
88.5
|
|
|
|
19.95
|
|
Oklahoma City Medical Portfolio
|
|
Oklahoma City, OK
|
|
|
186,000
|
|
|
|
2.5
|
|
|
|
100
|
|
|
|
9/16/2008
|
|
|
|
29,250,000
|
|
|
|
3,563,000
|
|
|
|
2.7
|
|
|
|
95.4
|
|
|
|
19.16
|
|
Medical Portfolio 4
|
|
Phoenix, AZ, Parma
and Jefferson West,
OH, and Waxahachie,
Greenville, and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cedar Hill, TX
|
|
|
227,000
|
|
|
|
3.0
|
|
|
|
100
|
|
|
|
Various
|
|
|
|
48,000,000
|
|
|
|
4,212,000
|
|
|
|
3.2
|
|
|
|
81.8
|
|
|
|
18.56
|
|
Mountain Empire Portfolio
|
|
Kingsport, Bristol
and Rogersville, TN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Pennington Gap
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Norton, VA
|
|
|
293,000
|
|
|
|
3.9
|
|
|
|
100
|
|
|
|
9/12/2008
|
|
|
|
27,775,000
|
|
|
|
3,956,000
|
|
|
|
3.0
|
|
|
|
91.9
|
|
|
|
13.50
|
|
Mountain Plains Portfolio
|
|
San Antonio and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Webster, TX
|
|
|
170,000
|
|
|
|
2.3
|
|
|
|
100
|
|
|
|
12/18/2008
|
|
|
|
43,000,000
|
|
|
|
3,889,000
|
|
|
|
2.9
|
|
|
|
100.0
|
|
|
|
22.88
|
|
Marietta Health Park
|
|
Marietta, GA
|
|
|
81,000
|
|
|
|
1.1
|
|
|
|
100
|
|
|
|
12/22/2008
|
|
|
|
15,300,000
|
|
|
|
1,083,000
|
|
|
|
0.8
|
|
|
|
88.4
|
|
|
|
13.37
|
|
Wisconsin Medical Portfolio 1
|
|
Milwaukee, WI
|
|
|
185,000
|
|
|
|
2.5
|
|
|
|
100
|
%
|
|
|
2/27/2009
|
|
|
|
33,719,000
|
|
|
|
2,871,000
|
|
|
|
2.2
|
|
|
|
100.0
|
|
|
|
15.52
|
|
Wisconsin Medical Portfolio 2
|
|
Franklin, WI
|
|
|
130,000
|
|
|
|
1.7
|
|
|
|
100
|
|
|
|
5/28/2009
|
|
|
|
40,700,000
|
|
|
|
3,435,000
|
|
|
|
2.6
|
|
|
|
100.0
|
|
|
|
26.42
|
|
Greenville Hospital Portfolio
|
|
Greenville, SC
|
|
|
857,000
|
|
|
|
11.4
|
|
|
|
100
|
|
|
|
9/18/2009
|
|
|
|
162,820,000
|
|
|
|
14,417,000
|
|
|
|
10.9
|
|
|
|
100.0
|
|
|
|
16.82
|
|
Mary Black Medical Office Building
|
|
Spartanburg, SC
|
|
|
109,000
|
|
|
|
1.4
|
|
|
|
100
|
|
|
|
12/11/2009
|
|
|
|
16,250,000
|
|
|
|
1,563,000
|
|
|
|
1.2
|
|
|
|
72.7
|
|
|
|
14.34
|
|
Hampden Place Medical Office Building
|
|
Englewood, CO
|
|
|
66,000
|
|
|
|
0.9
|
|
|
|
100
|
|
|
|
12/21/2009
|
|
|
|
18,600,000
|
|
|
|
1,594,000
|
|
|
|
1.2
|
|
|
|
100.0
|
|
|
|
24.15
|
|
Dallas LTAC Hospital
|
|
Dallas, TX
|
|
|
52,000
|
|
|
|
0.7
|
|
|
|
100
|
|
|
|
12/23/2009
|
|
|
|
27,350,000
|
|
|
|
2,598,000
|
|
|
|
2.0
|
|
|
|
100.0
|
|
|
|
49.96
|
|
Smyth Professional Building
|
|
Baltimore, MD
|
|
|
62,000
|
|
|
|
0.8
|
|
|
|
100
|
|
|
|
12/30/2009
|
|
|
|
11,250,000
|
|
|
|
1,039,000
|
|
|
|
0.8
|
|
|
|
98.1
|
|
|
|
16.77
|
|
Atlee Medical Portfolio
|
|
Coriscana, TX and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ft. Wayne, IN and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Angelo, TX
|
|
|
93,000
|
|
|
|
1.2
|
|
|
|
100
|
|
|
|
12/30/2009
|
|
|
|
20,501,000
|
|
|
|
1,790,000
|
|
|
|
1.4
|
|
|
|
100.0
|
|
|
|
19.25
|
|
Denton Medical Rehabilitation Hospital
|
|
Denton, TX
|
|
|
44,000
|
|
|
|
0.6
|
|
|
|
100
|
|
|
|
12/30/2009
|
|
|
|
15,485,000
|
|
|
|
1,364,000
|
|
|
|
1.0
|
|
|
|
100.0
|
|
|
|
31.00
|
|
Banner Sun City
|
|
Sun City, AZ and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medical Portfolio
|
|
Sun City West, AZ
|
|
|
642,000
|
|
|
|
8.5
|
|
|
|
100
|
|
|
|
12/31/2009
|
|
|
|
107,000,000
|
|
|
|
10,265,000
|
|
|
|
7.8
|
|
|
|
90.0
|
|
|
|
15.99
|
|
Camp Creek
|
|
Atlanta, GA
|
|
|
80,000
|
|
|
|
1.1
|
|
|
|
100
|
|
|
|
3/2/2010
|
|
|
|
19,550,000
|
|
|
|
1,319,000
|
|
|
|
1.4
|
|
|
|
97.5
|
|
|
|
22.74
|
|
King Street
|
|
Jacksonville, FL
|
|
|
53,000
|
|
|
|
0.7
|
|
|
|
100
|
|
|
|
3/9/2010
|
|
|
|
10,775,000
|
|
|
|
1,293,000
|
|
|
|
1.0
|
|
|
|
100.0
|
|
|
|
24.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Weighted Average
|
|
|
|
|
7,540,000
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
$
|
1,438,501,000
|
|
|
$
|
130,852,000
|
|
|
|
100.0
|
%
|
|
|
90.7
|
%
|
|
$
|
17.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Annualized rental revenue is based on contractual base rent from
leases in effect as of March 12, 2010. |
|
|
|
(2) |
|
Occupancy includes all leased space of the respective portfolio,
including master leases. |
|
|
|
(3) |
|
Average annual rent per occupied square foot as of
March 12, 2010. |
|
|
|
|
|
We have not yet identified the real estate or any other real
estate related assets we will acquire with the proceeds from
this offering. |
|
Q: |
|
What are your investment objectives? |
|
A: |
|
Our investment objectives are: |
5
|
|
|
|
|
to acquire quality properties that generate
sustainable growth in cash flow from operations to pay regular
cash distributions;
|
|
|
|
to preserve, protect and return your capital
contribution;
|
|
|
|
to realize growth in the value of our investments
upon our ultimate sale of such investments; and
|
|
|
|
to be prudent, patient and deliberate, taking into
account current real estate markets.
|
|
|
|
|
|
Each property we acquire is carefully and diligently reviewed
and analyzed to make sure it is consistent with our short and
long-term investment objectives. Our goal is to at all times
maintain a strong balance sheet and always have sufficient funds
to deal with short and long-term operating needs. Macro-economic
disruptions have broadly impacted the economy and have caused an
imbalance between buyers and sellers of real estate assets,
including medical office buildings and other healthcare-related
real estate assets. We anticipated that these tough economic
conditions would create opportunities for our company to acquire
such assets at higher capitalization rates, as the real estate
market adjusted downward. In the fourth quarter of 2008 and the
first half of 2009, we opted not to proceed with certain
acquisitions which we determined merited re-pricing. We
renegotiated other deals to lower pricing points. In December
2009, we closed $253 million of acquisitions and as of
March 12, 2010, we had cash on hand of approximately
$250 million, which we intend to use to acquire assets that
are priced at levels consistent with todays economy. We
believe that during this turbulent economic cycle, our cash on
hand will provide our company with opportunities to acquire
medical office buildings and other healthcare-related real
estate assets at favorable pricing. |
|
|
|
Q: |
|
What will you do with the money raised in this offering? |
|
A: |
|
We will use your net investment proceeds to purchase medical
office buildings and healthcare-related facilities. To a lesser
extent, we may also invest in other real estate related assets.
We will focus primarily on investments that produce recurring
income. The diversification of our portfolio is dependent upon
the amount of proceeds we receive in this offering. We expect
that at least 88.5% of the money you invest will be used to
acquire our targeted investments and pay related acquisition
expenses and the remaining 11.5% will be used to pay fees and
expenses of this offering. Until we invest the proceeds of this
offering in our targeted investments, we may invest in
short-term, highly liquid or other authorized investments. Such
short-term investments will not earn significant returns, and we
cannot guarantee how long it will take to fully invest the
proceeds in properties. |
|
Q: |
|
How does the fee structure of this offering compare to that
of the initial offering? |
|
|
|
A: |
|
Pursuant to the terms of the advisory agreement with our former
advisor, which expired on September 20, 2009, our former
advisor and its affiliates received certain compensation, fees
and expense reimbursements for services relating to the initial
offering and the investment and management of our assets. Some
of these fees and expense reimbursements may be payable even
though the advisory agreement has expired. In this offering,
certain third parties will receive compensation and fees for
services relating to this offering and property management. We
use our own employees to perform acquisition services as well as
to perform certain property and asset management functions,
thereby significantly reducing the compensation and fees for
services in this offering as compared to our initial offering.
For more information regarding the compensation and fees for
services relating to this offering, see Compensation
Table. |
|
|
|
Q: |
|
What is a real estate investment trust, or REIT? |
|
A: |
|
In general, a REIT is a company that: |
|
|
|
combines the capital of many investors to acquire or
provide financing for real estate;
|
|
|
|
pays annual distributions to investors of at least
90.0% of its taxable income (computed without regard to the
dividends paid deduction and excluding net capital gain);
|
6
|
|
|
|
|
avoids the double taxation treatment of
income that would normally result from investments in a
corporation because a REIT is not generally subject to federal
corporate income taxes on its net income that it distributes to
stockholders; and
|
|
|
|
allows individual investors to invest in a
large-scale diversified real estate portfolio through the
purchase of shares in the REIT.
|
|
Q: |
|
How do you structure the ownership and operation of your
assets? |
|
A: |
|
We own substantially all of our assets and conduct our
operations through our operating partnership, Healthcare Trust
of America Holdings, LP, which was organized in Delaware on
April 20, 2006. We are the sole general partner of our
operating partnership. Because we conduct substantially all of
our operations through an operating partnership, we are
organized in what is referred to as an UPREIT
structure. |
|
Q: |
|
What is an UPREIT? |
|
A: |
|
UPREIT stands for Umbrella Partnership Real Estate Investment
Trust. We use the UPREIT structure because a contribution of
property directly to us is generally a taxable transaction to
the contributing property owner. In this structure, a
contributor of a property who desires to defer taxable gain on
the transfer of his or her property may transfer the property to
the partnership in exchange for limited partnership units and
defer taxation of gain until the contributor later exchanges his
or her limited partnership units, normally, on a
one-for-one
basis for shares of the common stock of the REIT. We believe
that using an UPREIT structure gives us an advantage in
acquiring desired properties from persons who may not otherwise
sell their properties because of unfavorable tax results. |
|
Q: |
|
What kind of offering is this? |
|
|
|
A: |
|
This is a follow-on offering to our initial offering. Our
initial offering commenced on September 20, 2006 and
terminated on March 19, 2010. Through our dealer manager,
we are offering a maximum of $2,000,000,000 in shares in our
primary offering on a best efforts basis at $10.00
per share. We are also offering $200,000,000 in shares of common
stock pursuant to our distribution reinvestment plan for $9.50
per share to those stockholders who elect to participate in such
plan as described in this prospectus. We reserve the right to
reallocate the shares of common stock we are offering between
the primary offering and the distribution reinvestment plan. |
|
|
|
Q: |
|
How does a best efforts offering work? |
|
A: |
|
When shares are offered to the public on a best
efforts basis, the broker dealers participating in the
offering are only required to use their best efforts to sell the
shares and have no firm commitment or obligation to purchase any
shares. Therefore, we cannot guarantee that any specific number
of shares will be sold. We intend to admit stockholders
periodically as subscriptions for shares are received, but not
less frequently than monthly. |
|
Q: |
|
How long will this offering last? |
|
|
|
A: |
|
This is a continuous offering that will end no later than
March , 2012, two
years from the date of the prospectus, unless extended. If we
extend beyond March ,
2012, we will supplement the prospectus accordingly. We may also
terminate this offering at any time. |
|
|
|
Q: |
|
Who can buy shares? |
|
A: |
|
Generally, you can buy shares pursuant to this prospectus
provided that you have either (1) a net worth of at least
$250,000, or (2) an annual gross income of at least $70,000
and a net worth of at least $70,000. For this purpose, net worth
does not include your home, home furnishings or automobiles.
However, these minimum levels may be higher in certain states,
so you should carefully read the more detailed description under
Suitability Standards on page i of this prospectus. |
7
|
|
|
Q: |
|
Is there any minimum investment required? |
|
A: |
|
Yes. The minimum investment is 100 shares, which equals a
minimum investment of at least $1,000, except for purchases by
our existing stockholders, including purchases made pursuant to
our distribution reinvestment plan, which may be in lesser
amounts. Tennessee investors must make a minimum initial
investment of at least $2,500. |
|
Q: |
|
How do I subscribe for shares? |
|
A: |
|
Investors who meet the suitability standards described herein
may purchase shares of our common stock. See Suitability
Standards on page i. Investors seeking to purchase shares
of our common stock must proceed as follows: |
|
|
|
Read this entire prospectus and any exhibits and
supplements accompanying this prospectus.
|
|
|
|
Complete the execution copy of the subscription
agreement. A specimen copy of the subscription agreement,
including instructions for completing it, is included in this
prospectus as Exhibit A.
|
|
|
|
Deliver a check for the full purchase price of the
shares of our common stock being subscribed for along with the
completed subscription agreement to the registered broker-dealer
or investment advisor. Your check should be made payable to
Healthcare Trust of America, Inc.
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By executing the subscription agreement and paying
the total purchase price for the shares of our common stock
subscribed for each investor agrees that, if he or she does not
meet the minimum income and net worth standards, he or she will
notify in writing us and the broker-dealer named on the
subscription agreement signature page.
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We utilize the services of an escrow agent, DST Systems, Inc.,
to accept payments from investors. |
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Subscriptions will be effective only upon our acceptance, and we
reserve the right to reject any subscription in whole or part.
Subscriptions will be accepted or rejected within 30 days
of receipt by us and, if rejected, all funds shall be returned
to subscribers without deduction for any expenses within
10 business days from the date the subscription is
rejected. We are not permitted to accept a subscription for
shares of our common stock until at least five business days
after the date you receive the final prospectus. We will send
you a confirmation of your purchase. |
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An approved trustee must process and forward to us subscriptions
made through individual retirement accounts, or IRAs, Keogh
plans and 401(k) plans. In the case of investments through IRAs,
Keogh plans and 401(k) plans, we will send the confirmation and
notice of our acceptance to the trustee. |
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If I buy shares, will I receive distributions and how
often? |
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Provided we have sufficient available cash flow, we expect to
pay distributions on a monthly basis to our stockholders. Our
distribution policy is set by our board of directors and is
subject to change based on available cash flows. Our board of
directors approved a 6.50% per annum distribution to be paid to
our stockholders beginning on January 8, 2007, the date we
reached our minimum offering in our initial offering, and the
first distribution was paid in February 2007 for the period
ended January 31, 2007. On February 14, 2007, our
board of directors approved a 7.25% per annum distribution to be
paid to our stockholders beginning with our February
2007 monthly distribution, which was paid in March 2007,
and we have continued to approve and pay distributions at that
rate through June 2010. It is our intent to continue to pay
distributions. However, we cannot guarantee the amount of
distributions paid in the future, if any. |
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If you are a taxable stockholder, distributions that you
receive, including distributions that are reinvested pursuant to
our distribution reinvestment plan, generally will be taxed as
ordinary income to the extent they are from our current or
accumulated earnings and profits, unless we have designated all
or a portion of the distribution as a capital gain distribution.
In such case, such designated portion of the distribution will
be treated as a capital gain. To the extent that we make a
distribution in excess of our current and accumulated |
8
earnings and profits, the distribution will be treated first as
a tax-free return of capital, reducing the tax basis in your
shares, and the amount of each distribution in excess of your
tax basis in your shares will be taxable
8.1
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as a gain realized from the sale of your shares. For example,
because depreciation expense reduces taxable income but does not
reduce cash available for distribution, if our distributions
exceed our current and accumulated earnings and profits, the
portion of such distributions to you exceeding our current and
accumulated earnings and profits (to the extent of your positive
basis in your shares) will be considered a return of capital to
you for tax purposes. These amounts will not be subject to
income tax immediately but will instead reduce the tax basis of
your investment, in effect, deferring a portion of your income
tax until you sell your shares or we liquidate assuming we do
not make any future distributions in excess of our current and
accumulated earnings and profits at a time that your tax basis
in your shares is zero. If you are a tax-exempt entity,
distributions from us generally will not constitute unrelated
business taxable income, or UBTI, unless you have borrowed to
acquire or carry your stock or have used the shares in a trade
or business. There are exceptions to this rule for certain types
of tax-exempt entities. Because each investors tax
considerations are different, especially the treatment of
tax-exempt entities, we suggest that you consult with your tax
advisor. Please see Federal Income Tax
Considerations Taxation of Taxable U.S.
Stockholders; Federal Income Tax
Considerations Treatment of Tax-Exempt
Stockholders; and Description of Capital
Stock Distribution Reinvestment Plan. |
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May I reinvest my distributions? |
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Yes. Please see Description of Capital Stock
Distribution Reinvestment Plan for more information
regarding our distribution reinvestment plan. |
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If I buy shares of common stock in this offering, how may I
later sell them? |
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At the time you purchase the shares of common stock, they will
not be listed for trading on any national securities exchange.
As a result, if you wish to sell your shares, you may not be
able to do so promptly or at all, or you may only be able to
sell them at a substantial discount from the price you paid. In
general, however, you may sell your shares to any buyer that
meets the applicable suitability standards unless such sale
would cause the buyer to own more than 9.8% of the value of our
then outstanding capital stock (which includes common stock and
any preferred stock we may issue) or more than 9.8% of the value
or number of shares, whichever is more restrictive, of our then
outstanding common stock. See Suitability Standards
and Description of Capital Stock Restriction
on Ownership of Shares. We have adopted a share repurchase
plan, as discussed under Description of Capital
Stock Share Repurchase Plan, which may provide
limited liquidity for some of our stockholders. |
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Will I be notified of how my investment is doing? |
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Yes. You will receive periodic updates on the performance of
your investment with us, including: |
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four quarterly investment statements, which will
generally include a summary of the amount you have invested, the
monthly distributions declared and the amount of distributions
reinvested under our distribution reinvestment plan, as
applicable;
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an annual report after the end of each year; and
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an annual IRS Form 1099 after the end of each
year.
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When will I get my detailed tax information? |
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Your Form 1099 tax information will be placed in the mail
by January 31 of each year. |
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Who can help answer my questions? |
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For questions about the offering or to obtain additional copies
of this prospectus, contact your registered broker-dealer or
investment advisor or contact: |
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Healthcare Trust of America, Inc.
The Promenade, Suite 440
16427 North Scottsdale Road
Scottsdale, AZ 85254
Telephone:
(888) 801-0107
or
(480) 998-3478
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Realty Capital Securities, LLC
Three Copley Place, Suite 3300
Boston, MA 02116
Telephone: (877) 373-2522
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9
PROSPECTUS
SUMMARY
This prospectus summary highlights material information
contained elsewhere in this prospectus. Because it is a summary,
it may not contain all of the information that is important to
your decision whether to invest in shares of our common stock.
To understand this offering fully, you should read the entire
prospectus carefully, including the Risk Factors
section. The use of the words we, us or
our refers to Healthcare Trust of America, Inc. and
our subsidiaries, including Healthcare Trust of America
Holdings, LP, except where the context otherwise requires.
Healthcare
Trust of America, Inc.
We were formed as a Maryland corporation on April 20, 2006.
We intend to provide investors the potential for income and
growth through investment in a diversified portfolio of real
estate properties, focusing primarily on medical office
buildings and healthcare-related facilities. We may also invest
in other real estate related assets. We will focus primarily on
investments that produce recurring income. We qualified to be
taxed as a REIT for federal income tax purposes beginning with
our taxable year ended December 31, 2007 and we intend to
continue to be taxed as a REIT.
We commenced our initial public offering of $2,200,000,000 in
shares of our common stock on September 20, 2006, which we
refer to as our initial offering. As of March 12, 2010, we
had received and accepted subscriptions in our offering for
144,959,351 shares of our common stock, or approximately
$1,448,044,000, excluding shares issued under our distribution
reinvestment plan, from approximately 39,000 stockholders.
Our initial offering terminated on March 19, 2010.
As of March 12, 2010 we had made 55 geographically diverse
acquisitions, 44 of which are medical office properties, 6 of
which are healthcare-related facilities, 3 of which are quality
commercial office properties, and 2 of which are other real
estate-related assets, comprising 184 buildings with
approximately 7.5 million square feet of GLA, for an
aggregate purchase price of approximately $1.49 billion, in
21 states. Each of our properties is 100% owned by our operating
partnership except one, which is 80% owned by our operating
partnership through a joint venture.
Our headquarters are located at The Promenade, Suite 440,
16427 North Scottsdale Road, Scottsdale, AZ 85254 and our
telephone number is
(480) 998-3478.
We maintain a web site at www.htareit.com at which there
is additional information about us. The contents of that site
are not incorporated by reference in, or otherwise a part of,
this prospectus.
Summary
Risk Factors
An investment in our common stock is subject to significant
risks. Listed below are some of the most significant risks
relating to your investment.
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No public market exists for our common stock and therefore it
will be difficult for you to sell your shares. If you are able
to sell your shares, you would likely have to sell them at a
substantial discount.
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Current dislocations in the credit markets and real estate
markets could have a material adverse effect on our results of
operations, financial condition and ability to pay distributions
to stockholders.
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Our success depends to a significant degree upon the continued
contributions of certain key personnel, each of whom would be
difficult to replace. If we were to lose the benefit of the
experience, efforts and abilities of one or more of these
individuals, our operating results could suffer.
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The amount of distributions we may pay, if any, is uncertain.
Due to the risks involved in the ownership of real estate and
securities, there is no guarantee of any return on your
investment in us and you may lose money.
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Under our charter, we are permitted to incur substantial debt,
which could lead to an inability to pay distributions to our
stockholders, or could decrease the value of your investment in
the event that income on, or the value of, the property securing
the debt falls.
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We have paid distributions from sources other than our cash flow
from operations, including from the proceeds of our initial
offering or from borrowed funds; if we pay future distributions
from sources other than our cash flow from operations, we will
have fewer funds for real estate investments and your overall
return may be reduced. Our organizational documents do not
establish a limit on the amount of net proceeds we may use to
fund distributions.
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Distributions we pay to our stockholders may include a return of
capital, which will lower your tax basis in our shares.
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There are limitations on the ownership, transferability and
redemption of our shares which significantly limit the liquidity
of an investment in shares of our common stock.
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You will not have the opportunity to evaluate the investments we
intend to make with the proceeds from this offering prior to
purchasing shares of our common stock.
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Our board of directors may change our investment objective
without seeking stockholder approval.
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This is a best efforts offering and if we are unable
to continue to raise substantial funds, then we will be limited
in the number and type of investments we may make.
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The healthcare industry is heavily regulated, and new laws or
regulations, changes to existing laws or regulations, loss of
licensure or failure to obtain licensure could result in the
inability of our tenants to make lease payments to us.
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If we do not remain qualified as a REIT, it would adversely
affect our operations and our ability to make distributions to
stockholders.
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Investment
Objectives
Our investment objectives are:
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to acquire quality properties that generate sustainable growth
in cash flow from operations to pay regular cash distributions;
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to preserve, protect and return your capital contribution;
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to realize growth in the value of our investments upon our
ultimate sale of such investments; and
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to be prudent, patient and deliberate, taking into account
current real estate markets.
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Each property we acquire is carefully and diligently reviewed
and analyzed to make sure it is consistent with our short and
long-term investment objectives. Our goal is to at all times
maintain a strong balance sheet and always have sufficient funds
to deal with short and long-term operating needs. Macro-economic
disruptions have broadly impacted the economy and have caused an
imbalance between buyers and sellers of real estate assets,
including medical office buildings and other healthcare-related
facilities. We anticipated that these tough economic conditions
would create opportunities for our company to acquire such
assets at higher capitalization rates, as the real estate market
adjusted downward. In the fourth quarter of 2008 and first half
of 2009, we opted not to proceed with certain acquisitions which
we determined merited re-pricing. We renegotiated other
potential acquisitions to lower pricing points. In December
2009, we closed $253 million of acquisitions and as of
March 12, 2010, we had cash on hand of approximately
$250 million, which we intend to use to acquire assets that
are priced at levels consistent with todays economy. We
believe that during this turbulent economic cycle, our cash on
hand will provide our company with opportunities to acquire
medical office buildings and other healthcare-related facilities
at favorable pricing.
See Investment Objectives, Strategy and Criteria for
a more complete description of our business and objectives.
11
Our Board
of Directors and Executive Officers
We operate under the direction of our board of directors, the
members of which are accountable to us and our stockholders as
fiduciaries. The board of directors is responsible for the
management and control of our affairs. We currently have six
directors, including Scott D. Peters, W. Bradley Blair, II,
Maurice J. DeWald, Warren D. Fix, Larry L. Mathis and Gary T.
Wescombe. Messrs. Blair, DeWald, Fix, Mathis and Wescombe
are independent directors of our company. Our directors play a
vital role in our management and operations. Our stockholders
elect our directors annually.
We have three executive officers, including Mr. Peters, our
Chief Executive Officer and President, Kellie S. Pruitt, our
Chief Accounting Officer, and Mark D. Engstrom, our Executive
Vice President Acquisitions.
Mr. Peters was instrumental in the creation, development
and implementation of our company and its investment strategy,
including the development of our demographic-based investment
approach. Mr. Peters has managed the acquisition of our
real estate portfolio and continues to play a vital role in the
growth and success of our company. The board of directors has
retained Mr. Peters to manage our
day-to-day
operations and implement our investment strategy, subject to the
boards direction, oversight and approval.
For more information regarding our directors and executive
officers, see Management Directors and
Executive Officers.
Our
Dealer Manager
Realty Capital Securities, LLC, or RCS, assists us in selling
our common stock by serving as our exclusive dealer manager for
this offering. RCS, based in Boston, MA, has served as dealer
manager for the public and private real estate programs
sponsored by American Realty Capital. RCS sales,
operational and executive management teams have extensive
experience in financial services and provide expertise in
product distribution, marketing and educational initiatives
aimed at the direct investment industry.
Targeted
Investments
We generally seek to acquire a diversified portfolio of real
estate, focusing primarily on investments that produce recurring
income. Our real estate investments focus is on medical office
buildings and healthcare-related facilities. Healthcare-related
facilities include facilities leased to hospitals,
rehabilitation hospitals, long-term acute care centers, surgery
centers, assisted living facilities, skilled nursing facilities,
memory care facilities, specialty medical and diagnostic service
providers, laboratories, research firms, pharmaceutical and
medical supply manufacturers and health insurance firms. We may
acquire properties either alone or jointly with another party.
We may also invest in other real estate related assets, although
we have not yet identified any other real estate related assets
we plan to acquire. We do not presently intend to invest more
than 15.0% of our total assets in other real estate related
assets. Our investments in other real estate related assets will
generally focus on loans secured by real property such as
mortgage loans, common and preferred equities, and certain other
securities.
Our
Operating Partnership
We own all of our real properties through our operating
partnership, Healthcare Trust of America Holdings, LP. We are
the sole general partner of the operating partnership and
currently own more than 99.99% of the partnership interests in
our operating partnership. As the sole general partner of our
operating partnership, we have the exclusive power to manage and
conduct the business of our operating partnership. The only
limited partner of our operating partnership is our former
advisor. Our former advisor invested $200,000 in our operating
partnership and holds less than a 0.01% partnership interest in
our operating partnership, which may provide our former advisor
with subordinated distribution rights in addition to its rights
as a limited partner in the event certain performance-based
conditions are satisfied. See Cost
Structure Externally Advised below.
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Our
Structure
The following chart indicates our organizational structure.
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Our former advisor owns less than a 0.01% interest in our
company and in our operating partnership. |
Cost
Structure
Externally
Advised
Pursuant to the terms of the advisory agreement with
Grubb & Ellis Healthcare REIT Advisor, LLC, or our
former advisor, which expired on September 20, 2009, and
the dealer manager agreement with Grubb & Ellis
Securities, LLC, or our former dealer manager, our former
advisor, our former dealer manager and their affiliates received
compensation and fees for services relating to the initial
offering and the investment and management of our assets. We
amended the advisory agreement effective of October 24,
2008 to reduce acquisition fees and asset management fees and to
set the framework for our transition to self-management. The
compensation and fees payable to our former advisor and former
dealer manager and its affiliates included the following:
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selling commissions equal to 7.0% of our gross offering proceeds;
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marketing support fees equal to 2.5% of our gross offering
proceeds;
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acquisition fees (1) prior to the amendment of the advisory
agreement, 3.0% of the contract purchase price for acquired
properties and (2) after the amendment of the advisory
agreement, ranging from 2.5% to 1.5% with an expected average of
2.25% of the contract purchase price of acquired properties;
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asset management fees (1) prior to the amendment of the
advisory agreement, 1.0% of our average invested assets and
(2) after the amendment of our advisory agreement, 0.5% of
our average invested assets;
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property management fees equal to 4.0% of gross cash receipts
from each property our former advisor managed directly and up to
1.0% of gross cash receipts from each property managed directly
by other entities; and
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disposition fees of up to the lesser of 1.75% of the contract
sales price or 50% of a customary competitive real estate
commission.
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Our former advisor and its affiliates were also entitled to
reimbursement for (1) bona fide due diligence expenses of
up to 0.5% of our gross offering proceeds,
(2) organizational and offering expenses of up to 1.5% of
our gross offering proceeds, (3) operating expenses,
subject to a cap, and (4) acquisition expenses, subject to
cap. See Compensation Table.
Our former advisor holds a conditional subordinated
participation interest in our operating partnership that, during
the term of the advisory agreement, entitled our former advisor
to subordinated distributions upon certain liquidity events if
specified stockholder threshold returns were met. A liquidity
event did not occur during the term of the advisory agreement.
Our former advisor also had the right to defer its conditional
right to receive a subordinated distribution after termination
or expiration of the advisory agreement, which our former
advisor elected to exercise. Our former advisors right to
receive any deferred subordinated distribution is subject to a
number of ongoing conditions. For more information regarding our
former advisors subordinated participation interest, see
Compensation Table Compensation to Our Former
Advisor Subordinated Distribution.
Self-Managed
During this offering, we will pay RCS, our dealer manager for
this offering, selling commissions equal to 7.0% of our gross
offering proceeds and dealer manager fees equal to 3.0% of gross
offering proceeds. For more information regarding these fees,
see Plan of Distribution.
As a self-managed company, we will use our own employees for
acquisition, asset management and disposition services and do
not intend to pay any third parties to provide these services to
us. We have engaged nationally recognized property management
groups to provide property management and leasing services to
us, with each group to manage a specific region of our
properties, although our in-house asset management team will
manage a portion of our
triple-net
leased properties. As a result, the fees we pay for property
management services have been reduced by more than 50%.
We are also responsible for all of our own expenses, including
organizational and offering expenses relating to this offering,
operating expenses such as salaries and rent, and acquisition
expenses such as legal fees, due diligence fees and closing
costs.
Finally, we intend to establish an incentive program for certain
members of our management team and our directors. See
Management Incentive Plan below.
Management
Incentive Plan
We will adopt an incentive program for certain members of our
management team and directors, or the management incentive
program. The purpose of the management incentive program is to
establish a performance-based economic incentive program for key
persons in our organization. This type of program is consistent
with our companys philosophy to establish
performance-based compensation. Pursuant to the management
incentive program, it is currently anticipated that certain
members of our management team and board of directors will be
members of a limited liability company that will hold a
subordinated participation interest that will be entitled to
subordinated distributions with respect to assets acquired with
the proceeds from this offering of up to 8.0% upon certain
liquidity events after stockholders in this offering have
received their invested capital plus an annual 8.0% cumulative,
non-compounded return on average invested capital received in
this offering and after all stockholders have received their
invested capital (including in the initial offering and this
offering) plus an annual 8.0% cumulative, non-compounded return
on average invested capital. The terms of the management
incentive program are subject to change and have not been
finally determined or approved by our board of directors.
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Distributions
The amount of any cash distributions will be determined by our
board of directors and will depend on the amount of
distributable funds, current and projected cash requirements,
tax considerations, any limitations imposed by the terms of
indebtedness we may incur and other factors. Our board of
directors approved a 6.50% per annum distribution to be
paid to our stockholders beginning on January 8, 2007, the
date we reached our minimum offering in our initial offering.
The first distribution was paid in February 2007 for the period
ended January 31, 2007. On February 14, 2007, our
board of directors approved a 7.25% per annum distribution to be
paid to our stockholders beginning with our February
2007 monthly distribution, which was paid in March 2007,
and we have continued to approve and pay distributions at that
rate through June 2010. It is our intent to continue to pay
distributions. However, we cannot guarantee the amount of
distributions paid in the future, if any.
Distribution
Policy
Provided we have sufficient available cash flow, we intend to
continue paying regular monthly cash distributions to our
stockholders. Our distribution policy is set by our board of
directors and is subject to change based on available cash
flows. It is our intent to continue to pay distributions.
However, we cannot guarantee the amount of distributions paid in
the future, if any.
In order to remain qualified as a REIT, we are required to
distribute 90.0% of our annual taxable income to our
stockholders. We cannot predict if we will generate sufficient
cash flow to pay cash distributions to our stockholders on an
ongoing basis or at all. Because our cash available for
distribution in any year may be less than 90.0% of our taxable
income for the year, we may be required to borrow money, use
proceeds from the issuance of securities or sell assets to pay
out enough of our taxable income to satisfy the distribution
requirement. Please see Description of Capital
Stock Distribution Policy for a further
explanation of our distribution policy.
Distribution
Reinvestment Plan
You may participate in our distribution reinvestment plan, or
the DRIP, and elect to have the distributions you receive
reinvested in shares of our common stock for $9.50 per share
during this offering. We may terminate the DRIP at our
discretion at any time upon 10 days notice to you.
Please see Description of Capital Stock
Distribution Reinvestment Plan for a further explanation
of the DRIP, a copy of which is attached as Exhibit B to
this prospectus.
Borrowing
Policy
We use and intend to continue to use secured and unsecured debt
as a means of providing additional funds for the acquisition of
properties and other real estate related assets. We anticipate
that aggregate borrowings, both secured and unsecured, will not
exceed 60.0% of all of our properties combined fair market
values, as determined at the end of each calendar year beginning
with our first full year of operation. For these purposes, the
fair market value of each asset will be equal to the purchase
price paid for the asset or, if the asset was appraised
subsequent to the date of purchase, then the fair market value
will be equal to the value reported in the most recent
independent appraisal of the asset. Our policies do not limit
the amount we may borrow with respect to any individual
investment.
Our aggregate secured and unsecured borrowings will be reviewed
by our board of directors at least quarterly. Our charter
precludes us from borrowing in excess of 300.0% of the value of
our net assets. Net assets for purposes of this calculation are
defined as our total assets (other than intangibles), valued at
cost prior to deducting depreciation, reserves for bad debts and
other non-cash reserves, less total liabilities. The preceding
calculation is generally expected to approximate 75.0% of the
sum of (1) the aggregate cost of our properties before
non-cash reserves and depreciation and (2) the aggregate
cost of our securities assets. However, we may temporarily
borrow in excess of these amounts if such excess is approved by
a majority of our independent directors and disclosed to
stockholders in our next quarterly report, along with
justification
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for such excess. In such event, we will review our debt levels
at that time and take action to reduce any such excess as soon
as practicable.
Liquidity
Events
On a limited basis, you may be able to sell shares through our
share repurchase plan described below. However, in the future,
our board of directors will also consider various forms of
liquidity, each of which we refer to as a liquidity event,
including: (1) a listing of our common stock on a national
securities exchange; (2) our sale or merger in a
transaction that provides our stockholders with a combination of
cash and/or
securities of a publicly traded company; and (3) the sale
of all or substantially all of our assets for cash or other
consideration. We presently intend to effect a liquidity event
by September 20, 2013, seven years from the date of the
original prospectus for our initial offering. However, there can
be no assurance that we will effect a liquidity event within
such time or at all. In making the decision whether to effect a
liquidity event, our board of directors will try to determine
which alternative will result in greater value for our
stockholders. Certain merger transactions and the sale of all or
substantially all of our assets as well as liquidation or
dissolution would require the affirmative vote of holders of a
majority of our outstanding shares of common stock.
Share
Repurchase Plan
An investment in shares of our common stock should be made as a
long-term investment which is consistent with our investment
objectives. However, to accommodate stockholders for an
unanticipated or unforeseen need or desire to sell their shares,
we have adopted a share repurchase plan to allow stockholders to
sell shares, subject to limitations and restrictions.
Repurchases of shares, when requested, are at our sole
discretion and will generally be made quarterly. All repurchases
are subject to a one-year holding period, except for repurchases
made in connection with a stockholders death or qualifying
disability. Repurchases would be limited to (1) those that
could be funded from the net proceeds from the sale of shares
under the DRIP in the prior 12 months plus any additional
amounts set aside by our board of directors for such purpose and
(2) 5.0% of the weighted average number of shares
outstanding during the prior calendar year. Due to these
limitations, we cannot guarantee that we will be able to
accommodate all repurchase requests. Our directors and
affiliates are prohibited from receiving a fee for any share
repurchase we make pursuant to the share repurchase plan.
Unless the shares are being repurchased in connection with a
stockholders death or qualifying disability, the prices
per share at which we will repurchase shares will be as follows:
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for stockholders who have continuously held their shares for at
least one year, the lower of $9.25 or 92.5% of the price paid to
acquire shares from us;
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for stockholders who have continuously held their shares for at
least two years, the lower of $9.50 or 95.0% of the price paid
to acquire shares from us;
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for stockholders who have continuously held their shares for at
least three years, the lower of $9.75 or 97.5% of the price paid
to acquire shares from us; and
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for stockholders who have continuously held their shares for at
least four years, a price determined by our board of directors,
but in no event less than 100% of the price paid to acquire
shares from us.
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If shares are to be repurchased in connection with a
stockholders death or qualifying disability, the
repurchase price will be: (1) for stockholders who have
continuously held their shares for less than four years, 100% of
the price paid to acquire the shares from us; or (2) for
stockholders who have continuously held their shares for at
least four years, a price determined by our board of directors,
but in no event less than 100% of the price paid to acquire the
shares from us.
We will terminate our share repurchase plan if and when our
shares become listed on a national securities exchange or
earlier if our board of directors determines that it is in our
best interests to terminate the program. We may amend or modify
any provision of the plan at any time, in our boards
discretion, after providing our
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stockholders with 30 days advance written notice. Please
see Description of Capital Stock Share
Repurchase Plan for further explanation of our share
repurchase plan and Exhibit C for a copy of our share
repurchase plan.
Market
Outlook
Macro-economic disruptions have broadly impacted the economy and
have caused an imbalance between buyers and sellers of real
estate assets, including medical office buildings and other
healthcare-related real estate assets.
Overview. Turmoil in the credit markets, an
unfavorable economic environment and more restrictive financing
conditions has led to increased volatility and the loss of value
in the real estate markets and the U.S. economy. Many
economists believe that the U.S. has entered into a deep
recession and are predicting continued deterioration of economic
conditions. There has been a significant increase in
unemployment across the nation and many economists expect
increased vacancy rates at commercial properties in the near
term future. The prolonged continuation of these unfavorable
conditions will likely materially and adversely impact the
availability of credit to commercial and residential borrowers
and businesses and could further damage domestic and global
economies.
Adverse Impacts. Continued turmoil in the
financial markets has the potential to materially adversely
affect (i) the value of our properties, (ii) the debt
capital available for future investments in commercial
properties, (iii) the business and operations of our
tenants and their ability to pay rent and other monies due to
us, (iv) the ability of prospective tenants to enter into
new leases or current tenants to renew their leases, and
(v) our ability to make payments on or refinance existing
debt. Securitized commercial mortgage lenders have dramatically
increased underwriting standards and decreased allowable
loan-to-value
ratios. Accordingly, there is a significant decrease in
available debt capital. The turmoil in the credit markets has
caused investors of mortgage backed securities to demand higher
risk premiums. As a result, lenders have increased the cost of
obtaining debt financing. In light of these challenging economic
conditions, we may not be able to refinance our existing debt or
secure new debt financing on favorable terms.
Government Response. In response to current
financial and economic conditions, governmental entities and
financial regulators have instituted various programs,
mechanisms and regulations in an effort to stabilize the credit
markets and assist troubled financial institutions and
borrowers. It is uncertain what effects these various programs,
mechanisms and regulations will have on the credit and real
estate markets and the U.S. economy in general.
Furthermore, there may be additional governmental restrictions
imposed on the financial markets as a result of the continued
turmoil in the financial sector. Given the uncertainty of this
rapidly changing regulatory environment and the unknown impact
of current and potential future financial regulations and
programs, we may be unable to successfully implement our current
investment strategies, which could have a material impact on our
operating results and financial condition. If the turmoil in the
debt market continues, we may pursue new investment strategies
to effectively manage and increase our portfolio. This may
include targeting acquisition opportunities that require us to
use little or no debt financing.
Asset Values and Opportunity. The state of the
credit markets and faltering economy could result in lower
occupancy, lower rental rates and continued price or value
decreases for commercial real estate assets. Although this may
decrease the value of our current portfolio and the collateral
securing any loan investments we may make, this may also benefit
us by presenting future acquisition opportunities at depressed
prices. We anticipated that these tough economic conditions
would create opportunities for our company to acquire such
assets at higher capitalization rates, as the real estate market
adjusted downward. In the fourth quarter of 2008 and the first
half of 2009, we opted not to proceed with certain acquisitions
which we determined merited re-pricing. We renegotiated other
deals to lower pricing points. In December 2009, we closed
approximately $253,000,000 of acquisitions and as of
December 31, 2009, we had cash on hand of approximately
$219,001,000, which we intend to use to acquire assets that are
priced at levels consistent with todays economy. We
believe that during this turbulent economic cycle, our cash on
hand will provide us with opportunities to acquire medical
office buildings and other healthcare-related real estate assets
at favorable pricing.
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Employee
Benefit Plan and IRA Considerations
The section of this prospectus entitled Employee Benefit
Plan and IRA Considerations describes certain
considerations associated with a purchase of shares by a
pension, profit sharing or other employee benefit plan that is
subject to Title I of the Employee Retirement Income
Security Act of 1974, as amended, or by an individual retirement
account subject to Section 4975 of the Internal Revenue
Code. Any plan or account trustee or individual considering
purchasing shares for or on behalf of such a plan or account
should read that section of this prospectus very carefully.
Restrictions
on Share Ownership
Our charter contains restrictions on ownership of the shares
that prevent any individual or entity from acquiring beneficial
ownership of more than 9.8% of the value of our then outstanding
capital stock (which includes common stock and any preferred
stock we may issue) or more than 9.8% of the value or number of
shares, whichever is more restrictive, of our then outstanding
common stock. Please see Description of Capital
Stock Restriction on Ownership of Shares for
further explanation of the restrictions on ownership of our
shares.
About
this Prospectus
This prospectus is part of a registration statement that we
filed with the SEC using a continuous offering process.
Periodically, as we make material investments or have other
material developments, we will provide a prospectus supplement
that may add, update or change information contained in this
prospectus. Any statement that we make in this prospectus will
be modified or superseded by any inconsistent statement made by
us in a subsequent prospectus supplement. The registration
statement we filed with the SEC includes exhibits that provide
more detailed descriptions of the matters discussed in this
prospectus. You should read this prospectus and the related
exhibits filed with the SEC and any prospectus supplement,
together with additional information described below under
Incorporation of Certain Information by Reference
and Where You Can Find Additional Information.
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RISK
FACTORS
Your purchase of shares of our common stock involves a number of
risks. In addition to other risks discussed in this prospectus,
you should specifically consider the following risks before you
decide to buy shares of our common stock.
Investment
Risks
There
is currently no public market for shares of our common stock.
Therefore, it will be difficult for you to sell your shares and,
if you are able to sell your shares, you will likely sell them
at a substantial discount.
There currently is no public market for shares of our common
stock. We do not expect a public market for our stock to develop
prior to the listing of our shares on a national securities
exchange, which we do not expect to occur in the near future and
which may not occur at all. Additionally, our charter contains
restrictions on the ownership and transfer of our shares, and
these restrictions may inhibit your ability to sell your shares.
We have adopted a share repurchase plan but it is limited in
terms of the amount of shares which may be repurchased annually.
Our board of directors may also limit, suspend, terminate or
amend our share repurchase plan upon 30 days notice.
Therefore, it will be difficult for you to sell your shares
promptly or at all. If you are able to sell your shares, you may
only be able to sell them at a substantial discount from the
price you paid. This may be the result, in part, of the fact
that, at the time we make our investments, the amount of funds
available for investment will be reduced by up to 11.5% of the
gross offering proceeds which will be used to pay selling
commissions and the dealer manager fee and organizational and
offering expenses. We will also be required to use gross
offering proceeds to pay acquisition expenses. Unless our
aggregate investments increase in value to compensate for these
fees and expenses, which may not occur, it is unlikely that you
will be able to sell your shares, whether pursuant to our share
repurchase plan or otherwise, without incurring a substantial
loss. We cannot assure you that your shares will ever appreciate
in value to equal the price you paid for your shares. Thus,
prospective stockholders should consider the purchase of shares
of our common stock as illiquid and a long-term investment, and
you must be prepared to hold your shares for an indefinite
length of time. Please see Description of Capital
Stock Restriction on Ownership of Shares for a
more complete discussion on certain restrictions regarding your
ability to transfer your shares.
We may
not have sufficient cash available from operations to pay
distributions, and, therefore, distributions may include a
return of capital.
Distributions payable to stockholders may include a return of
capital, rather than a return on capital. We expect to continue
to make monthly distributions to our stockholders. The actual
amount and timing of distributions will be determined by our
board of directors in its discretion and typically will depend
on the amount of funds available for distribution, which will
depend on items such as current and projected cash requirements
and tax considerations. As a result, our distribution rate and
payment frequency may vary from time to time. We may not have
sufficient cash available from operations to pay distributions
required to maintain our status as a REIT and may need to use
proceeds from this offering or borrowed funds to make such cash
distributions. Additionally, if the aggregate amount of cash
distributed in any given year exceeds the amount of our
REIT taxable income generated during the year, the
excess amount will be deemed a return of capital, which will
decrease your tax basis in your investment in shares of our
common stock. Our organizational documents do not establish a
limit on the amount of net proceeds we may use to fund
distributions.
We may
not have sufficient cash available from operations to pay
distributions, and, therefore, distributions may be paid,
without limitation, with offering proceeds or borrowed
funds.
The amount of the distributions we make to our stockholders will
be determined by our board of directors and is dependent on a
number of factors, including funds available for payment of
distributions, our financial condition, capital expenditure
requirements and annual distribution requirements needed to
maintain our status as a REIT. We have and may continue to use,
without limitation, proceeds from the initial offering and this
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offering in order to pay distributions, which reduces the amount
of proceeds available for investment and operations. If we were
to use borrowed funds to pay distributions it could also cause
us to incur additional interest expense.
On February 14, 2007, our board of directors approved a
7.25% per annum, or $0.725 per common share, distribution to be
paid to our stockholders beginning with our February
2007 monthly distribution, which was paid in March 2007,
and we continued to pay distributions at that rate through
March 2010. It is our intent to continue to pay
distributions. However, we cannot guarantee the amount of
distributions paid in the future, if any. If distributions are
in excess of our taxable income, such distributions will result
in a return of capital to our stockholders. For the year ended
December 31, 2009, we paid distributions of $78,059,000
($39,499,000 in cash and $38,559,000 in shares of our common
stock pursuant to the DRIP), as compared to cash flows from
operations of $21,001,000. The $56,128,000 in distributions paid
in excess of our cash flow from operations, or 71.9%, were paid
using proceeds from our initial offering.
As of
March 12, 2010, we had made 55 geographically diverse
acquisitions and have identified a limited number of additional
properties to acquire with the net proceeds we will receive from
this offering, and stockholders are therefore unable to evaluate
the economic merits of most of our future investments prior to
purchasing shares of our common stock.
As of March 12, 2010, we have made 55 geographically
diverse acquisitions with the net proceeds from our initial
offering. As of March 12, 2010, we have identified a
limited number of additional potential properties to acquire
with the net proceeds we will receive from our offerings. Other
than these 55 geographically diverse acquisitions, our
stockholders are unable to evaluate the manner in which the net
proceeds are invested and the economic merits of our future
investments prior to purchasing shares of our common stock.
Additionally, our stockholders do not have the opportunity to
evaluate the transaction terms or other financial or operational
data concerning other investment properties or other real estate
related assets.
Our
operations have resulted in net losses to date, which makes our
future performance and the performance of an investment in our
shares difficult to predict.
For the years ended December 31, 2007, 2008 and 2009, our
operations resulted in a net loss of approximately
$7.67 million, $28.45 million and $25.08 million,
respectively. The decrease in net loss for the year ended
December 31, 2009 as compared to December 31, 2008 is
primarily due to an increase in total depreciation and
amortization, acquisition expenses and an increase in net
expenses on our indebtedness offset by a gain on derivatives.
The increase in net loss for the year ended December 31,
2008 as compared to December 31, 2007 is primarily due to
an increase in total depreciation and amortization, and an
increase in net expenses on our indebtedness. Our net losses
have increased substantially from December 31, 2007 to
December 31, 2008, and have slightly decreased for the year
ended December 31, 2009. Our net losses may increase in the
future. Our net losses increase the risk and uncertainty
investors face in making an investment in our shares, including
risks related to our ability to pay future distributions.
If we
are unable to find suitable investments, we may not be able to
achieve our investment objectives.
You must rely on us to evaluate our investment opportunities,
and we may not be able to achieve our investment objectives or
may make unwise decisions. We cannot assure you that
acquisitions of real estate or other real estate related assets
made using the proceeds of this offering will produce a return
on our investment or will generate cash flow to enable us to
make distributions to our stockholders.
We
face competition for the acquisition of medical office buildings
and other healthcare-related facilities, which may impede our
ability to make future acquisitions or may increase the cost of
these acquisitions.
We compete with many other entities engaged in real estate
investment activities for acquisitions of medical office
buildings and healthcare-related facilities, including national,
regional and local operators, acquirers and developers of
healthcare real estate properties. The competition for
healthcare real estate properties may significantly increase the
price we must pay for medical office buildings and
healthcare-related
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facilities or other real estate related assets we seek to
acquire and our competitors may succeed in acquiring those
properties or assets themselves. In addition, our potential
acquisition targets may find our competitors to be more
attractive because they may have greater resources, may be
willing to pay more for the properties or may have a more
compatible operating philosophy. In particular, larger
healthcare REITs may enjoy significant competitive advantages
that result from, among other things, a lower cost of capital
and enhanced operating efficiencies. In addition, the number of
entities and the amount of funds competing for suitable
investment properties may increase. This competition will result
in increased demand for these assets and therefore increased
prices paid for them. Because of an increased interest in
single-property acquisitions among tax-motivated individual
purchasers, we may pay higher prices if we purchase single
properties in comparison with portfolio acquisitions. If we pay
higher prices for medical office buildings and
healthcare-related facilities, our business, financial condition
and results of operations and our ability to make distributions
to you may be materially and adversely affected.
You
may be unable to sell your shares because your ability to have
your shares repurchased pursuant to our share repurchase plan is
subject to significant restrictions and
limitations.
Even though our share repurchase plan may provide you with a
limited opportunity to sell your shares to us after you have
held them for a period of one year or in the event of death or
qualifying disability, you should be fully aware that our share
repurchase plan contains significant restrictions and
limitations. Further, our board may limit, suspend, terminate or
amend any provision of the share repurchase plan upon
30 days notice. Repurchases of shares, when
requested, will generally be made quarterly. Repurchases will be
limited to: (1) those that could be funded from the net
proceeds from the sale of shares under the DRIP in the prior
12 months plus any additional amounts set aside by our
board of directors for such purpose, and (2) 5.0% of the
weighted average number of shares outstanding during the prior
calendar year. In addition, you must present at least 25.0% of
your shares for repurchase and until you have held your shares
for at least four years, repurchases will be made for less than
you paid for your shares. Therefore, in making a decision to
purchase shares of our common stock, you should not assume that
you will be able to sell any of your shares back to us pursuant
to our share repurchase plan at any particular time or at all.
Please see Description of Capital Stock Share
Repurchase Plan for more information regarding our share
repurchase plan.
This
is a best efforts offering and if we are unable to
raise substantial proceeds in this offering, we will be limited
in the number and type of investments we may make, which will
result in a less diversified portfolio.
This offering is being made on a best efforts basis,
whereby our dealer manager and the broker-dealers participating
in the offering are only required to use their best efforts to
sell our shares and have no firm commitment or obligation to
purchase any of the shares. As a result, if we are unable to
raise substantial proceeds in this offering, we will have
limited diversification in terms of the number of investments
owned, the geographic regions in which our investments are
located and the types of investments that we make. Your
investment in our shares will be subject to greater risk to the
extent that we lack a diversified portfolio of investments. In
such event, the likelihood of our profitability being affected
by the poor performance of any single investment will increase.
This
is a fixed price offering and the fixed offering price may not
accurately represent the current value of our assets at any
particular time. Therefore the purchase price you paid for
shares of our common stock may be higher than the value of our
assets per share of our common stock at the time of your
purchase.
This is a fixed price offering, which means that the offering
price for shares of our common stock is fixed and will not vary
based on the underlying value of our assets at any time during
this offering. The offering price for shares of our common stock
during this offering is the same price as shares of our common
stock during our initial offering. Our board of directors
arbitrarily determined the offering price in its sole
discretion. The fixed offering price for shares of our common
stock has not been based on appraisals for any assets we may own
nor do we intend to obtain such appraisals. Therefore, the fixed
offering price established
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for shares of our common stock may not accurately represent the
current value of our assets per share of our common stock at any
particular time and may be higher or lower than the actual value
of our assets per share at such time.
Payments
to our former advisor related to its subordinated participation
interest in our operating partnership will reduce cash available
for distribution to our stockholders.
Our former advisor may have certain rights, subject to a number
of conditions, to a subordinated participation interest in our
operating partnership, pursuant to which it may be entitled to
receive distributions upon the occurrence of certain events,
including in connection with dispositions of our assets, certain
mergers of our company with another company or the listing of
our common stock on a national securities exchange. The
distribution, if payable to our former advisor, will equal or
approximate 15.0% of the net proceeds from the sale of our
properties only after we have made distributions to our
stockholders of the total amount raised from stockholders in the
initial offering (less amounts paid to repurchase shares through
our share repurchase plan) plus an annual 8.0% cumulative,
non-compounded return on average invested capital raised in the
initial offering. Any distributions to our former advisor by our
operating partnership upon dispositions of our assets and such
other events will reduce cash available for distribution to our
stockholders.
We
presently intend to effect a liquidity event by
September 20, 2013; however, we cannot assure you that we
will effect a liquidity event by such time or at all. If we do
not effect a liquidity event, it will be very difficult for you
to have liquidity for your investment in shares of our common
stock.
On a limited basis, you may be able to sell shares through our
share repurchase plan. However, in the future we may also
consider various forms of liquidity events, including but not
limited to (1) the listing of shares of our common stock on
a national securities exchange, (2) our sale or merger in a
transaction that provides our stockholders with a combination of
cash and/or
securities of a publicly traded company, and (3) the sale
of all or substantially all of our real property for cash or
other consideration. We presently intend to effect a liquidity
event by September 20, 2013. However, we cannot assure you
that we will effect a liquidity event within such time or at
all. If we do not effect a liquidity event, it will be very
difficult for you to have liquidity for your investment in
shares of our common stock other than limited liquidity through
our share repurchase plan.
Because a portion of the offering price from the sale of shares
is used to pay expenses and fees, the full offering price paid
by stockholders is not invested in real estate investments. As a
result, stockholders will only receive a full return of their
invested capital if we either (1) sell our assets or our
company for a sufficient amount in excess of the original
purchase price of our assets, or (2) the market value of
our company after we list our shares of common stock on a
national securities exchange is substantially in excess of the
original purchase price of our assets.
Risks
Related to Our Business
Continued
volatility in the credit markets and real estate markets could
have a material adverse effect on our results of operations,
financial condition and ability to pay distributions to our
stockholders.
Domestic and international financial markets currently are
experiencing continued volatility which has been brought about
in large part by failures in the U.S. banking system. This
volatility has severely impacted the availability of credit and
have contributed to rising costs associated with obtaining
credit. If debt financing is not available on terms and
conditions we find acceptable, we may not be able to obtain
financing for investments. If this volatility in the credit
markets persists, our ability to borrow monies to finance the
purchase of, or other activities related to, properties and
other real estate related assets will be negatively impacted. If
we are unable to borrow monies on terms and conditions that we
find acceptable, we likely will have to reduce the number of
properties we can purchase, and the return on the properties we
do purchase may be lower. In addition, we may find it difficult,
costly or impossible to refinance indebtedness which is
maturing. If interest rates are higher when the properties are
refinanced, we may not be able to finance the properties and our
income could be reduced. In addition, if we pay fees to lock-in
a favorable interest rate,
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falling interest rates or other factors could require us to
forfeit these fees. All of these events would have a material
adverse effect on our results of operations, financial condition
and ability to pay distributions.
In addition to volatility in the credit markets, the real estate
market is subject to fluctuation and can be impacted by factors
such as general economic conditions, supply and demand,
availability of financing and interest rates. To the extent we
purchase real estate in an unstable market, we are subject to
the risk that if the real estate market ceases to attract the
same level of capital investment in the future that it attracts
at the time of our purchases, or the number of companies seeking
to acquire properties decreases, the value of our investments
may not appreciate or may decrease significantly below the
amount we pay for these investments.
Finally, the pervasive and fundamental disruptions that the
global financial markets are currently undergoing have led to
extensive and unprecedented governmental intervention. Although
the government intervention is intended to stimulate the flow of
capital and to undergird the U.S. economy in the short
term, it is impossible to predict the actual effect of the
government intervention and what effect, if any, additional
interim or permanent governmental intervention may have on the
financial markets
and/or the
effect of such intervention on us and our results of operations.
In addition, there is a high likelihood that regulation of the
financial markets will be significantly increased in the future,
which could have a material impact on our operating results and
financial condition.
We may
suffer from delays in locating suitable investments, which could
reduce our ability to make distributions to our stockholders and
reduce your return on your investment.
There may be a substantial period of time before the proceeds of
this offering are invested in additional suitable investments.
Because we are conducting this offering on a best
efforts basis over time, our ability to commit to purchase
specific assets will also depend, in part, on the amount of
proceeds we have received at a given time. If we are delayed or
unable to find additional suitable investments, we may not be
able to achieve our investment objectives or make distributions
to you.
The
availability and timing of cash distributions to our
stockholders is uncertain.
We expect to make monthly distributions to our stockholders.
However, we bear all expenses incurred in our operations, which
are deducted from cash funds generated by operations prior to
computing the amount of cash distributions to our stockholders.
In addition, our board of directors, in its discretion, may
retain any portion of such funds for working capital. We cannot
assure you that sufficient cash will be available to make
distributions to you or that the amount of distributions will
increase over time. Should we fail for any reason to distribute
at least 90.0% of our REIT taxable income, we would not qualify
for the favorable tax treatment accorded to REITs.
We may
structure acquisitions of property in exchange for limited
partnership units in our operating partnership on terms that
could limit our liquidity or our flexibility.
We may acquire properties by issuing limited partnership units
in our operating partnership in exchange for a property owner
contributing property to the partnership. If we enter into such
transactions, in order to induce the contributors of such
properties to accept units in our operating partnership, rather
than cash, in exchange for their properties, it may be necessary
for us to provide them additional incentives. For instance, our
operating partnerships limited partnership agreement
provides that any holder of units may exchange limited
partnership units on a
one-for-one
basis for shares of our common stock, or, at our option, cash
equal to the value of an equivalent number of our shares. We
may, however, enter into additional contractual arrangements
with contributors of property under which we would agree to
repurchase a contributors units for shares of our common
stock or cash, at the option of the contributor, at set times.
If the contributor required us to repurchase units for cash
pursuant to such a provision, it would limit our liquidity and
thus our ability to use cash to make other investments, satisfy
other obligations or make distributions to stockholders.
Moreover, if we were required to repurchase units for cash at a
time when we did not have sufficient cash to fund the
repurchase, we might be required to sell one or more properties
to raise funds to satisfy this obligation. Furthermore, we might
agree that if distributions the contributor received as a
limited partner in our operating
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partnership did not provide the contributor with a defined
return, then upon redemption of the contributors units we
would pay the contributor an additional amount necessary to
achieve that return. Such a provision could further negatively
impact our liquidity and flexibility. Finally, in order to allow
a contributor of a property to defer taxable gain on the
contribution of property to our operating partnership, we might
agree not to sell a contributed property for a defined period of
time or until the contributor exchanged the contributors
units for cash or shares. Such an agreement would prevent us
from selling those properties, even if market conditions made
such a sale favorable to us.
Our
success may be hampered by the current slow down in the real
estate industry.
Our business is sensitive to trends in the general economy, as
well as the commercial real estate and credit markets. The
current macroeconomic environment and accompanying credit crisis
has negatively impacted the value of commercial real estate
assets, contributing to a general slow down in our industry,
which may continue through 2010 and beyond. A prolonged and
pronounced recession could continue or accelerate the reduction
in overall transaction volume and size of sales and leasing
activities that we have already experienced, and would continue
to put downward pressure on our revenues and operating results.
To the extent that any decline in our revenues and operating
results impacts our performance, our results of operations,
financial condition and ability to pay distributions to our
stockholders could also suffer.
Our
results of operations, our ability to pay distributions to our
stockholders and our ability to dispose of our investments are
subject to international, national and local economic factors we
cannot control or predict.
Our results of operations are subject to the risks of an
international or national economic slow down or downturn and
other changes in international, national and local economic
conditions. The following factors may affect income from our
properties, our ability to acquire and dispose of properties,
and yields from our properties:
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poor economic times may result in defaults by tenants of our
properties due to bankruptcy, lack of liquidity, or operational
failures. We may also be required to provide rent concessions or
reduced rental rates to maintain or increase occupancy levels;
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reduced values of our properties may limit our ability to
dispose of assets at attractive prices or to obtain debt
financing secured by our properties and may reduce the
availability of unsecured loans;
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the value and liquidity of our short-term investments and cash
deposits could be reduced as a result of a deterioration of the
financial condition of the institutions that hold our cash
deposits or the institutions or assets in which we have made
short-term investments, the dislocation of the markets for our
short-term investments, increased volatility in market rates for
such investment or other factors;
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one or more lenders under our lines of credit could refuse to
fund their financing commitment to us or could fail and we may
not be able to replace the financing commitment of any such
lenders on favorable terms, or at all;
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one or more counterparties to our interest rate swaps could
default on their obligations to us or could fail, increasing the
risk that we may not realize the benefits of these instruments;
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increases in supply of competing properties or decreases in
demand for our properties may impact our ability to maintain or
increase occupancy levels and rents;
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constricted access to credit may result in tenant defaults or
non-renewals under leases;
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job transfers and layoffs may cause vacancies to increase and a
lack of future population and job growth may make it difficult
to maintain or increase occupancy levels; and
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increased insurance premiums, real estate taxes or energy or
other expenses may reduce funds available for distribution or,
to the extent such increases are passed through to tenants, may
lead to tenant
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defaults. Also, any such increased expenses may make it
difficult to increase rents to tenants on turnover, which may
limit our ability to increase our returns.
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The length and severity of any economic slow down or downturn
cannot be predicted. Our results of operations, our ability to
pay distributions to our stockholders and our ability to dispose
of our investments may be negatively impacted to the extent an
economic slowdown or downturn is prolonged or becomes more
severe.
The
failure of any bank in which we deposit our funds could reduce
the amount of cash we have available to pay distributions and
make additional investments.
The Federal Deposit Insurance Corporation, or FDIC, will only
insure amounts up to $250,000 per depositor per insured bank
through December 31, 2013. Beginning January 14, 2014,
the FDIC will only insure up to $100,000 per depositor per bank.
We currently have cash and cash equivalents and restricted cash
deposited in certain financial institutions in excess of
federally insured levels. If any of the banking institutions in
which we have deposited funds ultimately fail, we may lose any
amount of our deposits over any federally-insured amounts. The
loss of our deposits could reduce the amount of cash we have
available to distribute or invest and could result in a decline
in the value of our stockholders investment.
Our
success depends to a significant degree upon the continued
contributions of certain key personnel, each of whom would be
difficult to replace. If we were to lose the benefit of the
experience, efforts and abilities of one or more of these
individuals, our operating results could suffer.
As a self-managed company, our ability to achieve our investment
objectives and to pay distributions is increasingly dependent
upon the performance of our board of directors, Scott D. Peters
as our Chief Executive Officer, President and Chairman of the
Board, Kellie S. Pruitt as our Chief Accounting Officer,
Treasurer and Secretary, Mark Engstrom as our Executive Vice
President Acquisitions, and our other employees, in
the identification and acquisition of investments, the
determination of any financing arrangements, the asset
management of our investments and operation of our
day-to-day
activities. You will have no opportunity to evaluate the terms
of transactions or other economic or financial data concerning
our investments that are not described in this prospectus or
other periodic filings with the SEC. We rely primarily on the
management ability of our Chief Executive Officer and other
executive officers and the governance of our board of directors,
each of whom would be difficult to replace. We do not have any
key man life insurance on Messrs. Peters, Engstrom or
Ms. Pruitt. We have entered into employment agreements with
each of Messrs. Peters, Engstrom and Ms. Pruitt;
however, the employment agreements contain various termination
rights. If we were to lose the benefit of their experience,
efforts and abilities, our operating results could suffer. In
addition, if any member of our board of directors were to
resign, we would lose the benefit of such directors
governance and experience. As a result of the foregoing, we may
be unable to achieve our investment objectives or to pay
distributions to our stockholders.
Risks
Related to Conflicts of Interest
The
subordinated incentive payments or subordinated distributions
payable to certain members of our management team and directors,
as applicable, will reduce cash available for distribution to
our stockholders.
Certain members of our management team and directors will hold
the right to receive subordinated incentive payments or
subordinated distributions, as applicable, upon the occurrence
of certain events, such as in connection with dispositions of
certain of our assets or the listing of our common stock on a
national securities exchange. Any incentive payments or
distributions to members of our management team or directors
upon dispositions of our assets or a listing will reduce cash
available for distribution to our stockholders. In addition, we
bear all of the risk associated with the properties but, as a
result of these subordinated incentive payments and
distributions, we are not entitled to all of the proceeds from a
property sale.
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The
subordinated incentive payments or subordinated distributions
that may become payable to certain members of our management
team and directors, as applicable, may influence our decisions
about dispositions of our investments or the listing of our
shares of our common stock on a national securities
exchange.
We may be required to make subordinated incentive payments or
subordinated distributions to certain members of our management
team and directors, as applicable, upon the sale of certain of
our assets or the listing of our shares of our common stock on a
national securities exchange, if the performance thresholds for
stockholder returns required for each are met. As a result of
the requirements to make these subordinated incentive payments
or subordinated distributions, our independent directors may
determine that it is not the best interest of our stockholders
to sell certain assets or list our shares of our common stock,
even though, but for the requirement to make these payments or
distributions, such sale or listing would be in the best
interest of our stockholders. The requirement to make these
incentive payments and distributions could influence the
decision-making of our independent directors with respect to
investments or dispositions or listing our shares of common
stock on a national securities exchange.
Risks
Related to Our Organizational Structure
We may
issue preferred stock or other classes of common stock, which
issuance could adversely affect the holders of our common stock
issued pursuant to this offering.
Investors in this offering do not have preemptive rights to any
shares issued by us in the future. We may issue, without
stockholder approval, preferred stock or other classes of common
stock with rights that could dilute the value of your shares of
our common stock. Our charter authorizes us to issue
1,200,000,000 shares of capital stock, of which
1,000,000,000 shares of capital stock are designated as
common stock and 200,000,000 shares of capital stock are
designated as preferred stock. Our board of directors may amend
our charter to increase the aggregate number of authorized
shares of capital stock or the number of authorized shares of
capital stock of any class or series without stockholder
approval. If we ever created and issued preferred stock with a
distribution preference over our common stock, payment of any
distribution preferences of outstanding preferred stock would
reduce the amount of funds available for the payment of
distributions on our common stock. Further, holders of preferred
stock are normally entitled to receive a preference payment in
the event we liquidate, dissolve or wind up before any payment
is made to our common stockholders, likely reducing the amount
our common stockholders would otherwise receive upon such an
occurrence. In addition, under certain circumstances, the
issuance of preferred stock or a separate class or series of
common stock may render more difficult or tend to discourage:
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a merger, tender offer or proxy contest;
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assumption of control by a holder of large block of our
securities; or
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removal of the incumbent board of directors and management.
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Your
ability to control our operations is severely
limited.
Our board of directors determines our major strategies,
including our strategies regarding investments, financing,
growth, debt capitalization, REIT qualification and
distributions. Our board of directors may amend or revise these
and other strategies without a vote of the stockholders. Our
charter sets forth the stockholder voting rights required to be
set forth therein under the Statement of Policy Regarding Real
Estate Investment Trusts adopted by the North American
Securities Administrators Association, or the NASAA Guidelines.
Under our charter and Maryland law, you will have a right to
vote only on the following matters:
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the election or removal of directors;
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any amendment of our charter, except that our board of directors
may amend our charter without stockholder approval to change our
name or the name or other designation or the par value of any
class or series of our stock and the aggregate par value of our
stock, increase or decrease the aggregate
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number of our shares of stock or the number of our shares of any
class or series that we have the authority to issue, or effect
certain reverse stock splits;
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our dissolution; and
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certain mergers, consolidations and sales or other dispositions
of all or substantially all of our assets.
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All other matters are subject to the discretion of our board of
directors.
The
limit on the percentage of shares of our common stock that any
person may own may discourage a takeover or business combination
that may have benefited our stockholders.
Our charter restricts the direct or indirect ownership by one
person or entity to no more than 9.8% of the value of our then
outstanding capital stock (which includes common stock and any
preferred stock we may issue) and no more than 9.8% of the value
or number of shares, whichever is more restrictive, of our then
outstanding common stock. This restriction may discourage a
change of control of us and may deter individuals or entities
from making tender offers for shares of our common stock on
terms that might be financially attractive to stockholders or
which may cause a change in our management. This ownership
restriction may also prohibit business combinations that would
have otherwise been approved by our board of directors and our
stockholders. In addition to deterring potential transactions
that may be favorable to our stockholders, these provisions may
also decrease your ability to sell your shares of our common
stock.
Our
board of directors may change our investment objectives without
seeking stockholder approval.
Our board of directors may change our investment objectives
without seeking stockholder approval. Although our board of
directors has fiduciary duties to our stockholders and intends
only to change our investment objectives when our board of
directors determines that a change is in the best interests of
our stockholders, a change in our investment objectives could
reduce our payment of cash distributions to our stockholders or
cause a decline in the value of our investments.
Maryland
law and our organizational documents limit your right to bring
claims against our officers and directors.
Maryland law provides that a director will not have any
liability as a director so long as he or she performs his or her
duties in good faith, in a manner he or she reasonably believes
to be in our best interests, and with the care that an
ordinarily prudent person in a like position would use under
similar circumstances. In addition, our charter provides that,
subject to the applicable limitations set forth therein or under
Maryland law, no director or officer will be liable to us or our
stockholders for monetary damages. Our charter also provides
that we will generally indemnify our directors, and our officers
for losses they may incur by reason of their service in those
capacities unless: (1) their act or omission was material
to the matter giving rise to the proceeding and was committed in
bad faith or was the result of active and deliberate dishonesty,
(2) they actually received an improper personal benefit in
money, property or services or (3) in the case of any
criminal proceeding, they had reasonable cause to believe the
act or omission was unlawful. Moreover, we have entered into
separate indemnification agreements with each of our directors
and some of our executive officers. As a result, we and our
stockholders may have more limited rights against these persons
than might otherwise exist under common law. In addition, we may
be obligated to fund the defense costs incurred by these persons
in some cases. However, our charter does provide that we may not
indemnify our directors for any liability suffered by them or
hold our directors harmless for any liability suffered by us
unless (1) they have determined that the course of conduct
that caused the loss or liability was in our best interests,
(2) they were acting on our behalf or performing services
for us, (3) the liability was not the result of negligence
or misconduct by our non-independent directors, or gross
negligence or willful misconduct by our independent directors
and (4) the indemnification or agreement to hold harmless
is recoverable only out of our net assets or the proceeds of
insurance and not from our stockholders.
27
Certain
provisions of Maryland law could restrict a change in control
even if a change in control was in our stockholders
interests.
Certain provisions of the Maryland General Corporation Law
applicable to us prohibit business combinations with:
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any person who beneficially owns 10.0% or more of the voting
power of our outstanding voting stock or any affiliate or
associate of ours who, at any time within the two-year period
prior to the date in question beneficially owns 10.0% or more of
the voting power of our then outstanding stock, each of, which
we refer to as an interested stockholder; or
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an affiliate of an interested stockholder.
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These prohibitions last for five years after the most recent
date on which the interested stockholder became an interested
stockholder. Thereafter, any business combination with the
interested stockholder must be recommended by our board of
directors and approved by the affirmative vote of at least 80.0%
of the votes entitled to be cast by holders of our outstanding
shares of our voting stock and two-thirds of the votes entitled
to be cast by holders of shares of our voting stock other than
shares held by the interested stockholder or by an affiliate or
associate of the interested stockholder. These requirements
could have the effect of inhibiting a change in control even if
a change in control were in our stockholders interest.
These provisions of Maryland law do not apply, however, to
business combinations that are approved or exempted by our board
of directors prior to the time that someone becomes an
interested stockholder. Our board of directors has adopted a
resolution providing that any business combination between us
and any other person is exempted from this statute, provided
that such business combination is first approved by our board.
This resolution, however, may be altered or repealed in whole or
in part at any time.
Your
investment return may be reduced if we are required to register
as an investment company under the Investment Company
Act.
We are not registered as an investment company under the
Investment Company Act of 1940, as amended, or the Investment
Company Act. If for any reason, we were required to register as
an investment company, we would have to comply with a variety of
substantive requirements under the Investment Company Act
imposing, among other things:
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limitations on capital structure;
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restrictions on specified investments;
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prohibitions on transactions with affiliates; and
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compliance with reporting, record keeping, voting, proxy
disclosure and other rules and regulations that would
significantly change our operations.
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We intend to continue to operate in such a manner that we will
not be subject to regulation under the Investment Company Act.
In order to maintain our exemption from regulation under the
Investment Company Act, we must comply with technical and
complex rules and regulations.
Specifically, so that we will not be subject to regulation as an
investment company under the Investment Company Act, we intend
to engage primarily in the business of investing in interests in
real estate and to make these investments within one year after
the offering ends. If we are unable to invest a significant
portion of the proceeds of this offering in properties within
one year of the termination of the offering, we may avoid being
required to register as an investment company under the
Investment Company Act by temporarily investing any unused
proceeds in government securities with low returns. Investments
in government securities likely would reduce the cash available
for distribution to stockholders and possibly lower your returns.
In order to avoid coming within the application of the
Investment Company Act, either as a company engaged primarily in
investing in interests in real estate or under another exemption
from the Investment Company Act, we may be required to impose
limitations on our investment activities. In particular, we may
limit the percentage of our assets that fall into certain
categories specified in the Investment Company Act,
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which could result in us holding assets we otherwise might
desire to sell and selling assets we otherwise might wish to
retain. In addition, we may have to acquire additional assets
that we might not otherwise have acquired or be forced to forgo
investment opportunities that we would otherwise want to acquire
and that could be important to our investment strategy. In
particular, we will monitor our investments in other real estate
related assets to ensure continued compliance with one or more
exemptions from investment company status under the
Investment Company Act and, depending on the particular
characteristics of those investments and our overall portfolio,
we may be required to limit the percentage of our assets
represented by real estate related assets.
If we were required to register as an investment company, our
ability to enter into certain transactions would be restricted
by the Investment Company Act. Furthermore, the costs associated
with registration as an investment company and compliance with
such restrictions could be substantial. In addition,
registration under and compliance with the Investment Company
Act would require a substantial amount of time on the part of
our management, thereby decreasing the time they spend actively
managing our investments. If we were required to register as an
investment company but failed to do so, we would be prohibited
from engaging in our business, and criminal and civil actions
could be brought against us. In addition, our contracts would be
unenforceable unless a court were to require enforcement, and a
court could appoint a receiver to take control of us and
liquidate our business.
Several
potential events could cause your investment in us to be
diluted, which may reduce the overall value of your
investment.
Your investment in us could be diluted by a number of factors,
including:
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future offerings of our securities, including issuances under
our distribution reinvestment plan and up to
200,000,000 shares of any preferred stock that our board of
directors may authorize;
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private issuances of our securities to other investors,
including institutional investors;
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issuances of our securities under our 2006 Incentive
Plan; or
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redemptions of units of limited partnership interest in our
operating partnership in exchange for shares of our common stock.
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To the extent we issue additional equity interests after you
purchase shares of our common stock in this offering, your
percentage ownership interest in us will be diluted. In
addition, depending upon the terms and pricing of any additional
offerings and the value of our real properties and other real
estate related assets, you may also experience dilution in the
book value and fair market value of your shares.
Your
interests may be diluted in various ways, which may reduce your
returns.
Our board of directors is authorized, without your approval, to
cause us to issue additional shares of our common stock or to
raise capital through the issuance of preferred stock, options,
warrants and other rights, on terms and for consideration as our
board of directors in its sole discretion may determine, subject
to certain restrictions in our charter in the instance of
options and warrants. Any such issuance could result in dilution
of the equity of our stockholders. Our board of directors may,
in its sole discretion, authorize us to issue common stock or
other equity or debt securities to: (1) persons from whom
we purchase properties, as part or all of the purchase price of
the property, or (2) our former advisor in lieu of cash
payments required under the advisory agreement or other contract
or obligation. Our board of directors, in its sole discretion,
may determine the value of any common stock or other equity
securities issued in consideration of properties or services
provided, or to be provided, to us, except that while shares of
our common stock are offered by us to the public, the public
offering price of the shares of our common stock will be deemed
their value.
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You
may not receive any profits resulting from the sale of one of
our properties, or receive such profits in a timely manner,
because we may provide financing to the purchaser of such
property.
If we sell one of our properties during liquidation, you may
experience a delay before receiving your share of the proceeds
of such liquidation. In a forced or voluntary liquidation, we
may sell our properties either subject to or upon the assumption
of any then outstanding mortgage debt or, alternatively, may
provide financing to purchasers. We may take a purchase money
obligation secured by a mortgage as partial payment. We do not
have any limitations or restrictions on our taking such purchase
money obligations. To the extent we receive promissory notes or
other property instead of cash from sales, such proceeds, other
than any interest payable on those proceeds, will not be
included in net sale proceeds until and to the extent the
promissory notes or other property are actually paid, sold,
refinanced or otherwise disposed of. In many cases, we will
receive initial down payments in the year of sale in an amount
less than the selling price and subsequent payments will be
spread over a number of years. Therefore, you may experience a
delay in the distribution of the proceeds of a sale until such
time.
Risks
Related to Investments in Real Estate
Changes
in national, regional or local economic, demographic or real
estate market conditions may adversely affect our results of
operations and our ability to pay distributions to our
stockholders or reduce the value of your
investment.
We are subject to risks generally incident to the ownership of
real property, including changes in national, regional or local
economic, demographic or real estate market conditions. We are
unable to predict future changes in national, regional or local
economic, demographic or real estate market conditions. For
example, a recession or rise in interest rates could make it
more difficult for us to lease real properties or dispose of
them. In addition, rising interest rates could also make
alternative interest-bearing and other investments more
attractive and therefore potentially lower the relative value of
our existing real estate investments. These conditions, or
others we cannot predict, may adversely affect our results of
operations and our ability to pay distributions to our
stockholders or reduce the value of your investment.
Some
or all of our properties may incur vacancies, which may result
in reduced revenue and resale value, a reduction in cash
available for distribution and a diminished return on your
investment.
Some or all of our properties may incur vacancies either by a
default of tenants under their leases or the expiration or
termination of tenant leases. If vacancies continue for a long
period of time, we may suffer reduced revenues resulting in less
cash distributions to our stockholders. In addition, the resale
value of the property could be diminished because the market
value of a particular property will depend principally upon the
value of the leases of such property.
We are
dependent on tenants for our revenue, and lease terminations
could reduce our distributions to our
stockholders.
The successful performance of our real estate investments is
materially dependent on the financial stability of our tenants.
Lease payment defaults by tenants would cause us to lose the
revenue associated with such leases and could cause us to reduce
the amount of distributions to our stockholders. If the property
is subject to a mortgage, a default by a significant tenant on
its lease payments to us may result in a foreclosure on the
property if we are unable to find an alternative source of
revenue to meet mortgage payments. In the event of a tenant
default, we may experience delays in enforcing our rights as
landlord and may incur substantial costs in protecting our
investment and re-leasing our property. Further, we cannot
assure you that we will be able to re-lease the property for the
rent previously received, if at all, or that lease terminations
will not cause us to sell the property at a loss.
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We may
incur additional costs in acquiring or re-leasing properties
which could adversely affect the cash available for distribution
to you.
We may invest in properties designed or built primarily for a
particular tenant of a specific type of use known as a
single-user facility. If the tenant fails to renew its lease or
defaults on its lease obligations, we may not be able to readily
market a single-user facility to a new tenant without making
substantial capital improvements or incurring other significant
re-leasing costs. We also may incur significant litigation costs
in enforcing our rights as a landlord against the defaulting
tenant. These consequences could adversely affect our revenues
and reduce the cash available for distribution to you.
Uninsured
losses relating to real estate and lender requirements to obtain
insurance may reduce your returns.
There are types of losses relating to real estate, generally
catastrophic in nature, such as losses due to wars, acts of
terrorism, earthquakes, floods, hurricanes, pollution or
environmental matters, for which we do not intend to obtain
insurance unless we are required to do so by mortgage lenders.
If any of our properties incurs a casualty loss that is not
fully covered by insurance, the value of our assets will be
reduced by any such uninsured loss. In addition, other than any
reserves we may establish, we have no source of funding to
repair or reconstruct any uninsured damaged property, and we
cannot assure you that any such sources of funding will be
available to us for such purposes in the future. Also, to the
extent we must pay unexpectedly large amounts for uninsured
losses, we could suffer reduced earnings that would result in
less cash to be distributed to stockholders. In cases where we
are required by mortgage lenders to obtain casualty loss
insurance for catastrophic events or terrorism, such insurance
may not be available, or may not be available at a reasonable
cost, which could inhibit our ability to finance or refinance
our properties. Additionally, if we obtain such insurance, the
costs associated with owning a property would increase and could
have a material adverse effect on the net income from the
property, and, thus, the cash available for distribution to our
stockholders.
We may
obtain only limited warranties when we purchase a property and
would have only limited recourse in the event our due diligence
did not identify any issues that lower the value of our
property.
The seller of a property often sells such property in its
as is condition on a where is basis and
with all faults, without any warranties of
merchantability or fitness for a particular use or purpose. In
addition, purchase and sale agreements may contain only limited
warranties, representations and indemnifications that will only
survive for a limited period after the closing. The purchase of
properties with limited warranties increases the risk that we
may lose some or all of our invested capital in the property, as
well as the loss of rental income from that property.
Terrorist
attacks and other acts of violence or war may affect the markets
in which we operate and have a material adverse effect on our
financial condition, results of operations and ability to pay
distributions to you.
Terrorist attacks may negatively affect our operations and our
stockholders investment. We may acquire real estate assets
located in areas that are susceptible to attack. These attacks
may directly impact the value of our assets through damage,
destruction, loss or increased security costs. Although we may
obtain terrorism insurance, we may not be able to obtain
sufficient coverage to fund any losses we may incur. Risks
associated with potential acts of terrorism could sharply
increase the premiums we pay for coverage against property and
casualty claims. Further, certain losses resulting from these
types of events are uninsurable or not insurable at reasonable
costs.
More generally, any terrorist attack, other act of violence or
war, including armed conflicts, could result in increased
volatility in, or damage to, the United States and worldwide
financial markets and economy, all of which could adversely
affect our tenants ability to pay rent on their leases or
our ability to borrow money or issue capital stock at acceptable
prices and have a material adverse effect on our financial
condition, results of operations and ability to pay
distributions you.
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Delays
in the acquisition, development and construction of real
properties may have adverse effects on our results of operations
and returns to our stockholders.
Delays we encounter in the selection, acquisition and
development of real properties could adversely affect your
returns. Where properties are acquired prior to the start of
constructions or during the early stages of construction, it
will typically take several months to complete construction and
rent available space. Therefore, you could suffer delays in the
receipt of cash distributions attributable to those particular
real properties. Delays in completion of construction could give
tenants the right to terminate preconstruction leases for space
at a newly developed project. We may incur additional risks when
we make periodic progress payments or other advances to builders
prior to completion of construction. Each of those factors could
result in increased costs of a project or loss of our
investment. In addition, we are subject to normal
lease-up
risks relating to newly constructed projects. Furthermore, the
price we agree to for a real property will be based on our
projections of rental income and expenses and estimates of the
fair market value of real property upon completion of
construction. If our projections are inaccurate, we may pay too
much for a property.
Uncertain
market conditions relating to the future disposition of
properties could cause us to sell our properties at a loss in
the future.
We intend to hold our various real estate investments until such
time as we determine that a sale or other disposition appears to
be advantageous to achieve our investment objectives. Our Chief
Executive Officer and our board of directors may exercise their
discretion as to whether and when to sell a property, and we
will have no obligation to sell properties at any particular
time. We generally intend to hold properties for an extended
period of time, and we cannot predict with any certainty the
various market conditions affecting real estate investments that
will exist at any particular time in the future. Because of the
uncertainty of market conditions that may affect the future
disposition of our properties, we cannot assure you that we will
be able to sell our properties at a profit in the future or at
all. Additionally, we may incur prepayment penalties in the
event we sell a property subject to a mortgage earlier than we
otherwise had planned. Accordingly, the extent to which you will
receive cash distributions and realize potential appreciation on
our real estate investments will, among other things, be
dependent upon fluctuating market conditions. Any inability to
sell a property could adversely impact our ability to pay
distributions to you.
We
face possible liability for environmental cleanup costs and
damages for contamination related to properties we acquire,
which could substantially increase our costs and reduce our
liquidity and cash distributions to stockholders.
Because we own and operate real estate, we are subject to
various federal, state and local environmental laws, ordinances
and regulations. Under these laws, ordinances and regulations, a
current or previous owner or operator of real estate may be
liable for the cost of removal or remediation of hazardous or
toxic substances on, under or in such property. The costs of
removal or remediation could be substantial. Such laws often
impose liability whether or not the owner or operator knew of,
or was responsible for, the presence of such hazardous or toxic
substances. Environmental laws also may impose restrictions on
the manner in which property may be used or businesses may be
operated, and these restrictions may require substantial
expenditures. Environmental laws provide for sanctions in the
event of noncompliance and may be enforced by governmental
agencies or, in certain circumstances, by private parties.
Certain environmental laws and common law principles could be
used to impose liability for release of and exposure to
hazardous substances, including the release of
asbestos-containing materials into the air, and third parties
may seek recovery from owners or operators of real estate for
personal injury or property damage associated with exposure to
released hazardous substances. In addition, new or more
stringent laws or stricter interpretations of existing laws
could change the cost of compliance or liabilities and
restrictions arising out of such laws. The cost of defending
against these claims, complying with environmental regulatory
requirements, conducting remediation of any contaminated
property, or of paying personal injury claims could be
substantial, which would reduce our liquidity and cash available
for distribution to you. In addition, the presence of hazardous
substances on a property or the failure to meet environmental
regulatory requirements may materially impair our ability to
use, lease or sell a property, or to use the property as
collateral for borrowing.
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Our
property investments are geographically concentrated in certain
states and subject to economic fluctuations in those
states.
As of December 31, 2009, we had interests in ten
consolidated properties located in Texas, which accounted for
16.9% of our total rental income, interests in two consolidated
properties located in South Carolina, which accounted for 13.0%
of our total rental income, and interests in five consolidated
properties located in Arizona, which accounted for 12.2% of our
total rental income. This rental income is based on contractual
base rent from leases in effect as of December 31, 2009.
Accordingly, there is a geographic concentration of risk subject
to fluctuations in each states economy.
Certain
of our properties may not have efficient alternative uses, so
the loss of a tenant may cause us not to be able to find a
replacement or cause us to spend considerable capital to adapt
the property to an alternative use.
Some of the properties we seek to acquire are specialized
medical facilities. If we or our tenants terminate the leases
for these properties or our tenants lose their regulatory
authority to operate such properties, we may not be able to
locate suitable replacement tenants to lease the properties for
their specialized uses. Alternatively, we may be required to
spend substantial amounts to adapt the properties to other uses.
Any loss of revenues or additional capital expenditures required
as a result may have a material adverse effect on our business,
financial condition and results of operations and our ability to
make distributions to our stockholders.
Our
medical office buildings, healthcare-related facilities and
tenants may be unable to compete successfully.
Our medical office buildings and healthcare-related facilities
often face competition from nearby hospitals and other medical
office buildings that provide comparable services. Some of those
competing facilities are owned by governmental agencies and
supported by tax revenues, and others are owned by nonprofit
corporations and may be supported to a large extent by
endowments and charitable contributions. These types of support
are not available to our buildings.
Similarly, our tenants face competition from other medical
practices in nearby hospitals and other medical facilities. Our
tenants failure to compete successfully with these other
practices could adversely affect their ability to make rental
payments, which could adversely affect our rental revenues.
Further, from time to time and for reasons beyond our control,
referral sources, including physicians and managed care
organizations, may change their lists of hospitals or physicians
to which they refer patients. This could adversely affect our
tenants ability to make rental payments, which could
adversely affect our rental revenues.
Any reduction in rental revenues resulting from the inability of
our medical office buildings and healthcare-related facilities
and our tenants to compete successfully may have a material
adverse effect on our business, financial condition and results
of operations and our ability to make distributions to our
stockholders.
Our
costs associated with complying with the Americans with
Disabilities Act may reduce our cash available for
distributions.
Our properties may be subject to the Americans with Disabilities
Act of 1990, as amended, or the ADA. Under the ADA, all places
of public accommodation are required to comply with federal
requirements related to access and use by disabled persons. The
ADA has separate compliance requirements for public
accommodations and commercial facilities that
generally require that buildings and services be made accessible
and available to people with disabilities. The ADAs
requirements could require removal of access barriers and could
result in the imposition of injunctive relief, monetary
penalties or, in some cases, an award of damages. We attempt to
acquire properties that comply with the ADA or place the burden
on the seller or other third party, such as a tenant, to ensure
compliance with the ADA. However, we cannot assure you that we
will be able to acquire properties or allocate responsibilities
in this manner. If we cannot, our funds used for ADA compliance
may reduce cash available for distributions and the amount of
distributions to you.
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Our
real properties are subject to property taxes that may increase
in the future, which could adversely affect our cash
flow.
Our real properties are subject to real and personal property
taxes that may increase as tax rates change and as the real
properties are assessed or reassessed by taxing authorities.
Some of our leases generally provide that the property taxes or
increases therein are charged to the tenants as an expense
related to the real properties that they occupy while other
leases will generally provide that we are responsible for such
taxes. In any case, as the owner of the properties, we are
ultimately responsible for payment of the taxes to the
applicable government authorities. If real property taxes
increase, our tenants may be unable to make the required tax
payments, ultimately requiring us to pay the taxes even if
otherwise stated under the terms of the lease. If we fail to pay
any such taxes, the applicable taxing authority may place a lien
on the real property and the real property may be subject to a
tax sale. In addition, we are generally responsible for real
property taxes related to any vacant space.
Costs
of complying with governmental laws and regulations related to
environmental protection and human health and safety may be
high.
All real property investments and the operations conducted in
connection with such investments are subject to federal, state
and local laws and regulations relating to environmental
protection and human health and safety. Some of these laws and
regulations may impose joint and several liability on customers,
owners or operators for the costs to investigate or remediate
contaminated properties, regardless of fault or whether the acts
causing the contamination were legal.
Under various federal, state and local environmental laws, a
current or previous owner or operator of real property may be
liable for the cost of removing or remediating hazardous or
toxic substances on such real property. Such laws often impose
liability whether or not the owner or operator knew of, or was
responsible for, the presence of such hazardous or toxic
substances. In addition, the presence of hazardous substances,
or the failure to properly remediate those substances, may
adversely affect our ability to sell, rent or pledge such real
property as collateral for future borrowings. Environmental laws
also may impose restrictions on the manner in which real
property may be used or businesses may be operated. Some of
these laws and regulations have been amended so as to require
compliance with new or more stringent standards as of future
dates. Compliance with new or more stringent laws or regulations
or stricter interpretation of existing laws may require us to
incur material expenditures. Future laws, ordinances or
regulations may impose material environmental liability.
Additionally, our tenants operations, the existing
condition of land when we buy it, operations in the vicinity of
our real properties, such as the presence of underground storage
tanks, or activities of unrelated third parties may affect our
real properties. In addition, there are various local, state and
federal fire, health, life-safety and similar regulations with
which we may be required to comply, and which may subject us to
liability in the form of fines or damages for noncompliance. In
connection with the acquisition and ownership of our real
properties, we may be exposed to such costs in connection with
such regulations. The cost of defending against environmental
claims, of any damages or fines we must pay, of compliance with
environmental regulatory requirements or of remediating any
contaminated real property could materially and adversely affect
our business, lower the value of our assets or results of
operations and, consequently, lower the amounts available for
distribution to you.
Risks
Related to the Healthcare Industry
Reductions
in reimbursement from third party payors, including Medicare and
Medicaid, could adversely affect the profitability of our
tenants and hinder their ability to make rent payments to
us.
Sources of revenue for our tenants may include the federal
Medicare program, state Medicaid programs, private insurance
carriers and health maintenance organizations, among others.
Efforts by such payors to reduce healthcare costs will likely
continue, which may result in reductions or slower growth in
reimbursement for certain services provided by some of our
tenants. In addition, the failure of any of our tenants to
comply with various laws and regulations could jeopardize their
ability to continue participating in Medicare, Medicaid and
other government sponsored payment programs.
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The healthcare industry continues to face various challenges,
including increased government and private payor pressure on
healthcare providers to control or reduce costs. It is possible
that our tenants will continue to experience a shift in payor
mix away from
fee-for-service
payors, resulting in an increase in the percentage of revenues
attributable to managed care payors, and general industry trends
that include pressures to control healthcare costs. Pressures to
control healthcare costs and a shift away from traditional
health insurance reimbursement to managed care plans have
resulted in an increase in the number of patients whose
healthcare coverage is provided under managed care plans, such
as health maintenance organizations and preferred provider
organizations. These changes could have a material adverse
effect on the financial condition of some or all of our tenants.
The financial impact on our tenants could restrict their ability
to make rent payments to us, which would have a material adverse
effect on our business, financial condition and results of
operations and our ability to make distributions to our
stockholders.
The
healthcare industry is heavily regulated and currently there is
pending legislation on healthcare reform. New laws or
regulations, the current pending legislation, changes to
existing laws or regulations, loss of licensure or failure to
obtain licensure could result in the inability of our tenants to
make rent payments to us.
The healthcare industry is heavily regulated by federal, state
and local governmental bodies. Our tenants generally are subject
to laws and regulations covering, among other things, licensure,
certification for participation in government programs, and
relationships with physicians and other referral sources.
Changes in these laws and regulations could negatively affect
the ability of our tenants to make lease payments to us and our
ability to make distributions to our stockholders.
Many of our medical properties and their tenants may require a
license or certificate of need, or CON, to operate. Failure to
obtain a license or CON, or loss of a required license or CON
would prevent a facility from operating in the manner intended
by the tenant. These events could materially adversely affect
our tenants ability to make rent payments to us. State and
local laws also may regulate expansion, including the addition
of new beds or services or acquisition of medical equipment, and
the construction of healthcare- related facilities, by requiring
a CON or other similar approval. State CON laws are not uniform
throughout the United States and are subject to change. We
cannot predict the impact of state CON laws on our development
of facilities or the operations of our tenants.
In addition, state CON laws often materially impact the ability
of competitors to enter into the marketplace of our facilities.
The repeal of CON laws could allow competitors to freely operate
in previously closed markets. This could negatively affect our
tenants abilities to make rent payments to us.
In limited circumstances, loss of state licensure or
certification or closure of a facility could ultimately result
in loss of authority to operate the facility and require new CON
authorization to re-institute operations. As a result, a portion
of the value of the facility may be reduced, which would
adversely impact our business, financial condition and results
of operations and our ability to make distributions to our
stockholders.
Some
tenants of our medical office buildings and healthcare-related
facilities are subject to fraud and abuse laws, the violation of
which by a tenant may jeopardize the tenants ability to
make rent payments to us.
There are various federal and state laws prohibiting fraudulent
and abusive business practices by healthcare providers who
participate in, receive payments from or are in a position to
make referrals in connection with government-sponsored
healthcare programs, including the Medicare and Medicaid
programs. Our lease arrangements with certain tenants may also
be subject to these fraud and abuse laws.
These laws include:
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the Federal Anti-Kickback Statute, which prohibits, among other
things, the offer, payment, solicitation or receipt of any form
of remuneration in return for, or to induce, the referral of any
item or service reimbursed by Medicare or Medicaid;
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the Federal Physician Self-Referral Prohibition, which, subject
to specific exceptions, restricts physicians from making
referrals for specifically designated health services for which
payment may be made under Medicare or Medicaid programs to an
entity with which the physician, or an immediate family member,
has a financial relationship;
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the False Claims Act, which prohibits any person from knowingly
presenting false or fraudulent claims for payment to the federal
government, including claims paid by the Medicare and Medicaid
programs; and
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the Civil Monetary Penalties Law, which authorizes the
U.S. Department of Health and Human Services to impose
monetary penalties for certain fraudulent acts.
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Each of these laws includes criminal
and/or civil
penalties for violations that range from punitive sanctions,
damage assessments, penalties, imprisonment, denial of Medicare
and Medicaid payments
and/or
exclusion from the Medicare and Medicaid programs. Certain laws,
such as the False Claims Act, allow for individuals to bring
whistleblower actions on behalf of the government for violations
thereof. Additionally, states in which the facilities are
located may have similar fraud and abuse laws. Investigation by
a federal or state governmental body for violation of fraud and
abuse laws or imposition of any of these penalties upon one of
our tenants could jeopardize that tenants ability to
operate or to make rent payments, which may have a material
adverse effect on our business, financial condition and results
of operations and our ability to make distributions to our
stockholders.
Adverse
trends in healthcare provider operations may negatively affect
our lease revenues and our ability to make distributions to our
stockholders.
The healthcare industry is currently experiencing:
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changes in the demand for and methods of delivering healthcare
services;
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changes in third party reimbursement policies;
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significant unused capacity in certain areas, which has created
substantial competition for patients among healthcare providers
in those areas;
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continued pressure by private and governmental payors to reduce
payments to providers of services; and
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increased scrutiny of billing, referral and other practices by
federal and state authorities.
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These factors may adversely affect the economic performance of
some or all of our healthcare-related tenants and, in turn, our
lease revenues and our ability to make distributions to our
stockholders.
Our
healthcare-related tenants may be subject to significant legal
actions that could subject them to increased operating costs and
substantial uninsured liabilities, which may affect their
ability to pay their rent payments to us.
As is typical in the healthcare industry, our healthcare-related
tenants may often become subject to claims that their services
have resulted in patient injury or other adverse effects. Many
of these tenants may have experienced an increasing trend in the
frequency and severity of professional liability and general
liability insurance claims and litigation asserted against them.
The insurance coverage maintained by these tenants may not cover
all claims made against them nor continue to be available at a
reasonable cost, if at all. In some states, insurance coverage
for the risk of punitive damages arising from professional
liability and general liability claims
and/or
litigation may not, in certain cases, be available to these
tenants due to state law prohibitions or limitations of
availability. As a result, these types of tenants of our medical
office buildings and healthcare-related facilities operating in
these states may be liable for punitive damage awards that are
either not covered or are in excess of their insurance policy
limits. We also believe that there has been, and will continue
to be, an increase in governmental investigations of certain
healthcare providers, particularly in the area of
Medicare/Medicaid false claims, as well as an increase in
enforcement actions resulting from these
36
investigations. Insurance is not available to cover such losses.
Any adverse determination in a legal proceeding or governmental
investigation, whether currently asserted or arising in the
future, could have a material adverse effect on a tenants
financial condition. If a tenant is unable to obtain or maintain
insurance coverage, if judgments are obtained in excess of the
insurance coverage, if a tenant is required to pay uninsured
punitive damages, or if a tenant is subject to an uninsurable
government enforcement action, the tenant could be exposed to
substantial additional liabilities, which may affect the
tenants ability to pay rent, which in turn could have a
material adverse effect on our business, financial condition and
results of operations and our ability to make distributions to
our stockholders.
We may
experience adverse effects as a result of potential financial
and operational challenges faced by the operators of our senior
healthcare facilities.
Operators of our senior healthcare facilities may face
operational challenges from potentially reduced revenue streams
and increased demands on their existing financial resources. Our
skilled nursing operators revenues are primarily derived
from governmentally-funded reimbursement programs, such as
Medicare and Medicaid. Accordingly, our facility operators are
subject to the potential negative effects of decreased
reimbursement rates offered through such programs. Our
operators revenue may also be adversely affected as a
result of falling occupancy rates or slow
lease-ups
for assisted and independent living facilities due to the recent
turmoil in the capital debt and real estate markets. In
addition, our facility operators may incur additional demands on
their existing financial resources as a result of increases in
senior healthcare operator liability, insurance premiums and
other operational expenses. The economic deterioration of an
operator could cause such operator to file for bankruptcy
protection. The bankruptcy or insolvency of an operator may
adversely affect the income produced by the property or
properties it operates. Our financial position could be weakened
and our ability to make distributions could be limited if any of
our senior healthcare facility operators were unable to meet
their financial obligations to us.
Our operators performance and economic condition may be
negatively affected if they fail to comply with various complex
federal and state laws that govern a wide array of referrals,
relationships and licensure requirements in the senior
healthcare industry. The violation of any of these laws or
regulations by a senior healthcare facility operator may result
in the imposition of fines or other penalties that could
jeopardize that operators ability to make payment
obligations to us or to continue operating its facility. In
addition, legislative proposals are commonly being introduced or
proposed in federal and state legislatures that could affect
major changes in the senior healthcare sector, either nationally
or at the state level. It is impossible to say with any
certainty whether this proposed legislation will be adopted or,
if adopted, what effect such legislation would have on our
facility operators and our senior healthcare operations.
The
unique nature of our senior healthcare properties may make it
difficult to lease or transfer such properties and, as a result,
may negatively affect our performance.
Senior healthcare facilities present unique challenges with
respect to leasing and transferring the same. Skilled nursing,
assisted living and independent living facilities are typically
highly customized and may not be easily modified to accommodate
non-healthcare-related uses. As a result, these property types
may not be suitable for lease to traditional office tenants or
other healthcare tenants with unique needs without significant
expenditures or renovations. These renovation costs may
materially adversely affect our revenues, results of operations
and financial condition. Furthermore, because transfers of
healthcare facilities may be subject to regulatory approvals not
required for transfers of other types of property, there may be
significant delays in transferring operations of senior
healthcare facilities to successor operators. If we are unable
to efficiently transfer our senior healthcare properties our
revenues and operations may suffer.
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Risks
Related to Investments in Other Real Estate Related
Assets
Real
estate related equity securities in which we may invest are
subject to specific risks relating to the particular issuer of
the securities and may be subject to the general risks of
investing in subordinated real estate securities.
We may invest in the common and preferred stock of both publicly
traded and private real estate companies, which involves a
higher degree of risk than debt securities due to a variety of
factors, including the fact that such investments are
subordinate to creditors and are not secured by the
issuers property. Our investments in real estate related
equity securities will involve special risks relating to the
particular issuer of the equity securities, including the
financial condition and business outlook of the issuer. Issuers
of real estate related common equity securities generally invest
in real estate or other real estate related assets and are
subject to the inherent risks associated with other real estate
related assets discussed in this prospectus, including risks
relating to rising interest rates.
The
mortgage loans in which we may invest may be impacted by
unfavorable real estate market conditions, which could decrease
their value.
If we make additional investments in mortgage loans, we will be
at risk of loss on those investments, including losses as a
result of defaults on mortgage loans. These losses may be caused
by many conditions beyond our control, including economic
conditions affecting real estate values, tenant defaults and
lease expirations, interest rate levels and the other economic
and liability risks associated with real estate described above
under the heading Risks Related to Investments
in Real Estate. If we acquire property by foreclosure
following defaults under our mortgage loan investments, we will
have the economic and liability risks as the owner described
above. We do not know whether the values of the property
securing any of our investments in other real estate related
assets will remain at the levels existing on the dates we
initially make the related investment. If the values of the
underlying properties drop, our risk will increase and the
values of our interests may decrease.
Delays
in liquidating defaulted mortgage loan investments could reduce
our investment returns.
If there are defaults under our mortgage loan investments, we
may not be able to foreclose on or obtain a suitable remedy with
respect to such investments. Specifically, we may not be able to
repossess and sell the underlying properties quickly which could
reduce the value of our investment. For example, an action to
foreclose on a property securing a mortgage loan is regulated by
state statutes and rules and is subject to many of the delays
and expenses of lawsuits if the defendant raises defenses or
counterclaims. Additionally, in the event of default by a
mortgagor, these restrictions, among other things, may impede
our ability to foreclose on or sell the mortgaged property or to
obtain proceeds sufficient to repay all amounts due to us on the
mortgage loan.
We
expect a portion of our investments in other real estate related
assets to be illiquid and we may not be able to adjust our
portfolio in response to changes in economic and other
conditions.
We may purchase other real estate related assets in connection
with privately negotiated transactions which are not registered
under the relevant securities laws, resulting in a prohibition
against their transfer, sale, pledge or other disposition except
in a transaction that is exempt from the registration
requirements of, or is otherwise in accordance with, those laws.
As a result, our ability to vary our portfolio in response to
changes in economic and other conditions may be relatively
limited.
Interest
rate and related risks may cause the value of our investments in
other real estate related assets to be reduced.
Interest rate risk is the risk that fixed income securities such
as preferred and debt securities, and to a lesser extent
dividend paying common stocks, will decline in value because of
changes in market interest rates. Generally, when market
interest rates rise, the market value of such securities will
decline, and vice
38
versa. Our investment in such securities means that the net
asset value and market price of the common shares may tend to
decline if market interest rates rise.
During periods of rising interest rates, the average life of
certain types of securities may be extended because of slower
than expected principal payments. This may lock in a
below-market interest rate, increase the securitys
duration and reduce the value of the security. This is known as
extension risk. During periods of declining interest rates, an
issuer may be able to exercise an option to prepay principal
earlier than scheduled, which is generally known as call or
prepayment risk. If this occurs, we may be forced to reinvest in
lower yielding securities. This is known as reinvestment risk.
Preferred and debt securities frequently have call features that
allow the issuer to repurchase the security prior to its stated
maturity. An issuer may redeem an obligation if the issuer can
refinance the debt at a lower cost due to declining interest
rates or an improvement in the credit standing of the issuer.
These risks may reduce the value of our investments in other
real estate related assets.
If we
liquidate prior to the maturity of our investments in real
estate assets, we may be forced to sell those investments on
unfavorable terms or at a loss.
Our board of directors may choose to effect a liquidity event in
which we liquidate our assets, including our investments in
other real estate related assets. If we liquidate those
investments prior to their maturity, we may be forced to sell
those investments on unfavorable terms or at loss. For instance,
if we are required to liquidate mortgage loans at a time when
prevailing interest rates are higher than the interest rates of
such mortgage loans, we would likely sell such loans at a
discount to their stated principal values.
Risks
Related to Debt Financing
We
have and intend to incur mortgage indebtedness and other
borrowings, which may increase our business risks, could hinder
our ability to make distributions and could decrease the value
of your investment.
We have and intend to continue to finance a portion of the
purchase price of our investments in real estate and other real
estate related assets by borrowing funds. We anticipate that,
after an initial phase of our operations when we may employ
greater amounts of leverage to enable us to purchase properties
more quickly and therefore generate distributions for our
stockholders sooner, our overall leverage will not exceed 60.0%
of our properties and other real estate related
assets combined fair market value of our assets. Under our
charter, we have a limitation on borrowing which precludes us
from borrowing in excess of 300.0% of the value of our net
assets, without the approval of a majority of our independent
directors. In addition, any excess borrowing must be disclosed
to stockholders in our next quarterly report following the
borrowing, along with justification for the excess. Net assets
for purposes of this calculation are defined to be our total
assets (other than intangibles), valued at cost prior to
deducting depreciation or other non-case reserves, less total
liabilities. Generally speaking, the preceding calculation is
expected to approximate 75.0% of the sum of: (1) the
aggregate cost of our real property investments before non-cash
reserves and depreciation and (2) the aggregate cost of our
investments in other real estate related assets. In addition, we
may incur mortgage debt and pledge some or all of our real
properties as security for that debt to obtain funds to acquire
additional real properties or for working capital. We may also
borrow funds to satisfy the REIT tax qualification requirement
that we distribute at least 90.0% of our annual REIT taxable
income to our stockholders. Furthermore, we may borrow if we
otherwise deem it necessary or advisable to ensure that we
maintain our qualification as a REIT for federal income tax
purposes.
High debt levels will cause us to incur higher interest charges,
which would result in higher debt service payments and could be
accompanied by restrictive covenants. If there is a shortfall
between the cash flow from a property and the cash flow needed
to service mortgage debt on that property, then the amount
available for distributions to our stockholders may be reduced.
In addition, incurring mortgage debt increases the risk of loss
since defaults on indebtedness secured by a property may result
in lenders initiating foreclosure actions. In that case, we
could lose the property securing the loan that is in default,
thus reducing the value of your investment. For tax purposes, a
foreclosure on any of our properties will be treated as a sale
of the property
39
for a purchase price equal to the outstanding balance of the
debt secured by the mortgage. If the outstanding balance of the
debt secured by the mortgage exceeds our tax basis in the
property, we will recognize taxable income on foreclosure, but
we would not receive any cash proceeds. We may give full or
partial guarantees to lenders of mortgage debt to the entities
that own our properties. When we give a guaranty on behalf of an
entity that owns one of our properties, we will be responsible
to the lender for satisfaction of the debt if it is not paid by
such entity. If any mortgage contains cross collateralization or
cross default provisions, a default on a single property could
affect multiple properties. If any of our properties are
foreclosed upon due to a default, our ability to pay cash
distributions to our stockholders will be adversely affected.
Higher
mortgage rates may make it more difficult for us to finance or
refinance properties, which could reduce the number of
properties we can acquire and the amount of cash distributions
we can make to our stockholders.
If mortgage debt is unavailable on reasonable terms as a result
of increased interest rates or other factors, we may not be able
to finance the initial purchase of properties. In addition, if
we place mortgage debt on properties, we run the risk of being
unable to refinance such debt when the loans come due, or of
being unable to refinance on favorable terms. If interest rates
are higher when we refinance debt, our income could be reduced.
We may be unable to refinance debt at appropriate times, which
may require us to sell properties on terms that are not
advantageous to us, or could result in the foreclosure of such
properties. If any of these events occur, our cash flow would be
reduced. This, in turn, would reduce cash available for
distribution to you and may hinder our ability to raise more
capital by issuing securities or by borrowing more money.
Increases
in interest rates could increase the amount of our debt payments
and therefore negatively impact our operating
results.
Interest we pay on our debt obligations reduces cash available
for distributions. Whenever we incur variable rate debt,
increases in interest rates would increase our interest costs,
which would reduce our cash flows and our ability to make
distributions to you. If we need to repay existing debt during
periods of rising interest rates, we could be required to
liquidate one or more of our investments in properties at times
which may not permit realization of the maximum return on such
investments.
Lenders
may require us to enter into restrictive covenants relating to
our operations, which could limit our ability to make
distributions to our stockholders.
When providing financing, a lender may impose restrictions on us
that affect our ability to incur additional debt and affect our
distribution and operating policies. Loan documents we enter
into may contain covenants that limit our ability to further
mortgage the property or discontinue insurance coverage. These
or other limitations may adversely affect our flexibility and
our ability to achieve our investment objectives.
Hedging
activity may expose us to risks.
To the extent that we use derivative financial instruments to
hedge against interest rate fluctuations, we will be exposed to
credit risk and legal enforceability risks. In this context,
credit risk is the failure of the counterparty to perform under
the terms of the derivative contract. If the fair value of a
derivative contract is positive, the counterparty owes us, which
creates credit risk for us. Legal enforceability risks encompass
general contractual risks, including the risk that the
counterparty will breach the terms of, or fail to perform its
obligations under, the derivative contract. If we are unable to
manage these risks effectively, our results of operations,
financial condition and ability to pay distributions to you will
be adversely affected.
If we
enter into financing arrangements involving balloon payment
obligations, it may adversely affect our ability to refinance or
sell properties on favorable terms, and to make distributions to
stockholders.
Some of our financing arrangements may require us to make a
lump-sum or balloon payment at maturity. Our ability
to make a balloon payment at maturity is uncertain and may
depend upon our ability to obtain additional financing or our
ability to sell the particular property. At the time the balloon
payment is
40
due, we may or may not be able to refinance the balloon payment
on terms as favorable as the original loan or sell the
particular property at a price sufficient to make the balloon
payment. The refinancing or sale could affect the rate of return
to stockholders and the projected time of disposition of our
assets. In an environment of increasing mortgage rates, if we
place mortgage debt on properties, we run the risk of being
unable to refinance such debt if mortgage rates are higher at a
time a balloon payment is due. In addition, payments of
principal and interest made to service our debts, including
balloon payments, may leave us with insufficient cash to pay the
distributions that we are required to pay to maintain our
qualification as a REIT. Any of these results would have a
significant, negative impact on your investment.
Risks
Related to Joint Ventures
The
terms of joint venture agreements or other joint ownership
arrangements into which we have entered and may enter could
impair our operating flexibility and our results of
operations.
In connection with the purchase of real estate, we have entered
and may continue to enter into joint ventures with third
parties. We may also purchase or develop properties in
co-ownership arrangements with the sellers of the properties,
developers or other persons. These structures involve
participation in the investment by other parties whose interests
and rights may not be the same as ours. Our joint venture
partners may have rights to take some actions over which we have
no control and may take actions contrary to our interests. Joint
ownership of an investment in real estate may involve risks not
associated with direct ownership of real estate, including the
following:
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a venture partner may at any time have economic or other
business interests or goals which become inconsistent with our
business interests or goals, including inconsistent goals
relating to the sale of properties held in a joint venture or
the timing of the termination and liquidation of the venture;
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a venture partner might become bankrupt and such proceedings
could have an adverse impact on the operation of the partnership
or joint venture;
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actions taken by a venture partner might have the result of
subjecting the property to liabilities in excess of those
contemplated; and
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a venture partner may be in a position to take action contrary
to our instructions or requests or contrary to our policies or
objectives, including our policy with respect to qualifying and
maintaining our qualification as a REIT.
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Under certain joint venture arrangements, neither venture
partner may have the power to control the venture, and an
impasse could occur, which might adversely affect the joint
venture and decrease potential returns to you. If we have a
right of first refusal or buy/sell right to buy out a venture
partner, we may be unable to finance such a buy-out or we may be
forced to exercise those rights at a time when it would not
otherwise be in our best interest to do so. If our interest is
subject to a buy/sell right, we may not have sufficient cash,
available borrowing capacity or other capital resources to allow
us to purchase an interest of a venture partner subject to the
buy/sell right, in which case we may be forced to sell our
interest when we would otherwise prefer to retain our interest.
In addition, we may not be able to sell our interest in a joint
venture on a timely basis or on acceptable terms if we desire to
exit the venture for any reason, particularly if our interest is
subject to a right of first refusal of our venture partner.
We may
structure our joint venture relationships in a manner which may
limit the amount we participate in the cash flow or appreciation
of an investment.
We may enter into joint venture agreements, the economic terms
of which may provide for the distribution of income to us
otherwise than in direct proportion to our ownership interest in
the joint venture. For example, while we and a co-venturer may
invest an equal amount of capital in an investment, the
investment may be structured such that we have a right to
priority distributions of cash flow up to a certain target
return while the co-venturer may receive a disproportionately
greater share of cash flow than we are to receive once such
target return has been achieved. This type of investment
structure may result in the co-venturer receiving more of the
cash flow, including appreciation, of an investment than we
would receive. If
41
we do not accurately judge the appreciation prospects of a
particular investment or structure the venture appropriately, we
may incur losses on joint venture investments or have limited
participation in the profits of a joint venture investment,
either of which could reduce our ability to make cash
distributions to our stockholders.
Federal
Income Tax Risks
Failure
to qualify as a REIT for federal income tax purposes would
subject us to federal income tax on our taxable income at
regular corporate rates, which would substantially reduce our
ability to make distributions to our stockholders.
We elected to be taxed as a REIT for federal income tax purposes
beginning with our taxable year ended December 31, 2007 and
we intend to continue to be taxed as a REIT. To qualify as a
REIT, we must meet various requirements set forth in the
Internal Revenue Code concerning, among other things, the
ownership of our outstanding common stock, the nature of our
assets, the sources of our income and the amount of our
distributions to our stockholders. The REIT qualification
requirements are extremely complex, and interpretations of the
federal income tax laws governing qualification as a REIT are
limited. Accordingly, we cannot be certain that we will be
successful in operating so as to qualify as a REIT. At any time,
new laws, interpretations or court decisions may change the
federal tax laws relating to, or the federal income tax
consequences of, qualification as a REIT. It is possible that
future economic, market, legal, tax or other considerations may
cause our board of directors to revoke our REIT election, which
it may do without stockholder approval.
Although we have not requested, and do not expect to request, a
ruling from the Internal Revenue Service, or IRS, that we
qualify as a REIT, our counsel, Alston & Bird LLP, has
delivered an opinion to us that, commencing with our taxable
year ended December 31, 2007 (the first year for which we
elected to be taxed as a REIT), based on certain assumptions and
representations, we have been organized and operated in
conformity with the requirements for qualification as a REIT
under the Internal Revenue Code, and our proposed method of
operation will enable us to continue to operate in conformity
with the requirements for qualification as a REIT under the
Internal Revenue Code.
The validity of the opinion of our counsel and of our
qualification as a REIT will depend on our continuing ability to
meet the various REIT requirements under the Internal Revenue
Code and described herein. You should be aware, however, that
opinions of counsel are not binding on the IRS or any court. The
REIT qualification opinion only represents the view of our
counsel based on its review and analysis of law existing at the
time of the opinion and therefore could be subject to
modification or withdrawal based on subsequent legislative,
judicial or administrative changes to the federal income tax
laws, any of which could be applied retroactively.
If we were to fail to qualify as a REIT for any taxable year, we
would be subject to federal income tax on our taxable income at
corporate rates. In addition, we would generally be disqualified
from treatment as a REIT for the four taxable years following
the year in which we lose our REIT status. Losing our REIT
status would reduce our net earnings available for investment or
distribution to stockholders because of the additional tax
liability. In addition, distributions to stockholders would no
longer be deductible in computing our taxable income, and we
would no longer be required to make distributions. To the extent
that distributions had been made in anticipation of our
qualifying as a REIT, we might be required to borrow funds or
liquidate some investments in order to pay the applicable
corporate income tax. In addition, although we intend to operate
in a manner intended to qualify as a REIT, it is possible that
future economic, market, legal, tax or other considerations may
cause our board of directors to recommend that we revoke our
REIT election.
As a result of all these factors, our failure to qualify as a
REIT could impair our ability to expand our business and raise
capital, and would substantially reduce our ability to make
distributions to our stockholders.
To
continue to qualify as a REIT and to avoid the payment of
federal income and excise taxes and maintain our REIT status, we
may be forced to borrow funds, use proceeds from the issuance of
42
securities (including this offering), or sell assets to
pay distributions, which may result in our distributing amounts
that may otherwise be used for our operations.
To obtain the favorable tax treatment accorded to REITs, we
normally will be required each year to distribute to our
stockholders at least 90.0% of our real estate investment trust
taxable income, determined without regard to the deduction for
distributions paid and by excluding net capital gains. We will
be subject to federal income tax on our undistributed taxable
income and net capital gain and to a 4.0% nondeductible excise
tax on any amount by which distributions we pay with respect to
any calendar year are less than the sum of: (1) 85.0% of
our ordinary income, (2) 95.0% of our capital gain net
income and (3) 100% of our undistributed income from prior
years. These requirements could cause us to distribute amounts
that otherwise would be spent on acquisitions of properties and
it is possible that we might be required to borrow funds, use
proceeds from the issuance of securities (including this
offering) or sell assets in order to distribute enough of our
taxable income to maintain our REIT status and to avoid the
payment of federal income and excise taxes.
If our
operating partnership fails to maintain its status as a
partnership for federal income tax purposes, its income would be
subject to taxation and our REIT status would be
terminated.
We intend to maintain the status of our operating partnership as
a partnership for federal income tax purposes. However, if the
IRS were to successfully challenge the status of our operating
partnership as a partnership, it would be taxable as a
corporation. In such event, this would reduce the amount of
distributions that our operating partnership could make to us.
This would also result in our losing REIT status and becoming
subject to a corporate level tax on our own income. This would
substantially reduce our cash available to pay distributions and
the return on your investment. In addition, if any of the
entities through which our operating partnership owns its
properties, in whole or in part, loses its characterization as a
partnership for federal income tax purposes, it would be subject
to taxation as a corporation, thereby reducing distributions to
our operating partnership. Such a recharacterization of our
operating partnership or an underlying property owner could also
threaten our ability to maintain our REIT status.
You
may have a current tax liability on distributions you elect to
reinvest in shares of our common stock.
If you participate in our distribution reinvestment plan, you
will be deemed to have received, and for income tax purposes
will be taxed on, the amount reinvested in shares of our common
stock to the extent the amount reinvested was not a tax-free
return of capital. As a result, unless you are a tax-exempt
entity, you may have to use funds from other sources to pay your
tax liability on the value of the common stock received.
Dividends
paid by REITs do not qualify for the reduced tax rates that
apply to other corporate dividends.
Tax legislation enacted in 2003 and 2006 generally reduces the
maximum tax rate for qualified dividends paid by corporations to
individuals to 15.0% through 2010. Dividends paid by REITs,
however, generally continue to be taxed at the normal rate
applicable to the individual recipient, rather than the 15.0%
preferential rate. Although this legislation does not adversely
affect the taxation of REITs or dividends paid by REITs, the
more favorable rates applicable to regular corporate dividends
could cause potential investors who are individuals to perceive
investments in REITs to be relatively less attractive than
investments in the stocks of non-REIT corporations that pay
qualified dividends, which could adversely affect the value of
the stock of REITs, including our common stock. See
Federal Income Tax Considerations Taxation of
Taxable U.S. Stockholders Distributions
Generally.
In
certain circumstances, we may be subject to federal and state
income taxes as a REIT, which would reduce our cash available
for distribution to you.
Even if we qualify and maintain our status as a REIT, we may be
subject to federal income taxes or state taxes. For example, net
income from a prohibited transaction will be subject
to a 100% tax. We may not be able to make sufficient
distributions to avoid excise taxes applicable to REITs. We may
also decide to retain capital gains we earn from the sale or
other disposition of our property and pay income tax directly on
such income. In that event, our stockholders would be treated as
if they earned that income and paid the tax on it
43
directly. However, our stockholders that are tax-exempt, such as
charities or qualified pension plans, would have no benefit from
their deemed payment of such tax liability. We may also be
subject to state and local taxes on our income or property,
either directly or at the level of the companies through which
we indirectly own our assets. Any federal or state taxes we pay
will reduce our cash available for distribution to you.
Distributions
to tax-exempt stockholders may be classified as unrelated
business taxable income.
Neither ordinary nor capital gain distributions with respect to
our common stock nor gain from the sale of common stock should
generally constitute unrelated business taxable income to a
tax-exempt stockholder. However, there are certain exceptions to
this rule. In particular:
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part of the income and gain recognized by certain qualified
employee pension trusts with respect to our common stock may be
treated as unrelated business taxable income if shares of our
common stock are predominately held by qualified employee
pension trusts, and we are required to rely on a special
look-through rule for purposes of meeting one of the REIT share
ownership tests, and we are not operated in a manner to avoid
treatment of such income or gain as unrelated business taxable
income;
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part of the income and gain recognized by a tax exempt
stockholder with respect to our common stock would constitute
unrelated business taxable income if the stockholder incurs debt
in order to acquire the common stock; and
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part or all of the income or gain recognized with respect to our
common stock by social clubs, voluntary employee benefit
associations, supplemental unemployment benefit trusts and
qualified group legal services plans which are exempt from
federal income taxation under Sections 501(c)(7), (9),
(17) or (20) of the Internal Revenue Code may be
treated as unrelated business taxable income.
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See Federal Income Tax Considerations
Treatment of Tax-Exempt Stockholders section of this
prospectus for further discussion of this issue if you are a
tax-exempt investor.
Complying
with the REIT requirements may cause us to forego otherwise
attractive opportunities.
To continue to qualify as a REIT for federal income tax
purposes, we must continually satisfy tests concerning, among
other things, the sources of our income, the nature and
diversification of our assets, the amounts we distribute to our
stockholders and the ownership of shares of our common stock. We
may be required to make distributions to our stockholders at
disadvantageous times or when we do not have funds readily
available for distribution, or we may be required to liquidate
otherwise attractive investments in order to comply with the
REIT tests. Thus, compliance with the REIT requirements may
hinder our ability to operate solely on the basis of maximizing
profits.
Changes
to federal income tax laws or regulations could adversely affect
stockholders.
In recent years, numerous legislative, judicial and
administrative changes have been made to the federal income tax
laws applicable to investments in REITs and similar entities.
Additional changes to tax laws are likely to continue to occur
in the future, and we cannot assure you that any such changes
will not adversely affect the taxation of a stockholder. Any
such changes could have an adverse effect on an investment in
shares of our common stock. We urge you to consult with your own
tax advisor with respect to the status of legislative,
regulatory or administrative developments and proposals and
their potential effect on an investment in shares of our common
stock.
Foreign
purchasers of shares of our common stock may be subject to
FIRPTA tax upon the sale of their shares of our common
stock.
A foreign person disposing of a U.S. real property
interest, including shares of stock of a U.S. corporation
whose assets consist principally of U.S. real property
interests, is generally subject to the Foreign Investment in
Real Property Tax Act of 1980, as amended, or FIRPTA, on the
gain recognized on the disposition. Such FIRPTA tax does not
apply, however, to the disposition of stock in a REIT if the
REIT is domestically controlled. A REIT is
domestically controlled if less than 50.0% of the
REITs stock, by
44
value, has been owned directly or indirectly by persons who are
not qualifying U.S. persons during a continuous five-year
period ending on the date of disposition or, if shorter, during
the entire period of the REITs existence. We cannot assure
you that we will continue to qualify as a domestically
controlled REIT. If we were to fail to continue to so
qualify, gain realized by foreign investors on a sale of shares
of our common stock would be subject to FIRPTA tax, unless the
shares of our common stock were traded on an established
securities market and the foreign investor did not at any time
during a specified testing period directly or indirectly own
more than 5.0% of the value of our outstanding common stock.
Foreign
stockholders may be subject to FIRPTA tax upon the payment of a
capital gains dividend.
A foreign stockholder also may be subject to FIRPTA upon the
payment of any capital gain dividends by us, which dividend is
attributable to gain from sales or exchanges of U.S. real
property interests.
Employee
Benefit Plan and IRA Risks
We, and our stockholders that are employee benefit plans or
individual retirement accounts, or IRAs, will be subject to
risks relating specifically to our having employee benefit plans
and IRAs as stockholders, which risks are discussed below. The
Employee Benefit Plan and IRA Considerations section
of this prospectus provides a more detailed discussion of these
employee benefit plan and IRA investor risks.
If you
fail to meet the fiduciary and other standards under ERISA or
the Internal Revenue Code as a result of an investment in our
common stock, you could be subject to criminal and civil
penalties.
There are special considerations that apply to pension,
profit-sharing trusts or IRAs investing in our common stock. If
you are investing the assets of a pension, profit sharing or
401(k) plan, health or welfare plan, or an IRA in us, you should
consider:
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whether your investment is consistent with the applicable
provisions of ERISA and the Internal Revenue Code, or any other
applicable governing authority in the case of a government plan;
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whether your investment is made in accordance with the documents
and instruments governing your plan or IRA, including your
plans investment policy;
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whether your investment satisfies the prudence and
diversification requirements of Sections 404(a)(1)(B) and
404(a)(1)(C) of ERISA;
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whether your investment will impair the liquidity of the plan or
IRA;
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whether your investment will produce unrelated business taxable
income, referred to as UBTI and as defined in Sections 511
through 514 of the Internal Revenue Code, to the plan or
IRA; and
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your need to value the assets of the plan annually in accordance
with ERISA and the Internal Revenue Code.
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In addition to considering their fiduciary responsibilities
under ERISA and the prohibited transaction rules of ERISA and
the Internal Revenue Code, trustees or others purchasing shares
should consider the effect of the plan asset regulations of the
U.S. Department of Labor. To avoid our assets from being
considered plan assets under those regulations, our charter
prohibits benefit plan investors from owning 25.0%
or more of our common stock prior to the time that the common
stock qualifies as a class of publicly-offered securities,
within the meaning of the ERISA plan asset regulations. However,
we cannot assure you that those provisions in our charter will
be effective in limiting benefit plan investor ownership to less
than the 25.0% limit. For example, the limit could be
unintentionally exceeded if a benefit plan investor
misrepresents its status as a benefit plan. Even if our assets
are not considered to be plan assets, a prohibited transaction
could occur if we or any of our affiliates is a fiduciary
(within the meaning of ERISA) with respect to an employee
benefit plan or IRA purchasing shares, and, therefore, in the
event any such persons are fiduciaries (within the meaning of
ERISA) of your plan or IRA, you should not purchase shares
unless an administrative or statutory exemption applies to your
purchase.
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Governmental plans, church plans, and foreign plans generally
are not subject to ERISA or the prohibited transaction rules of
the Internal Revenue Code, but may be subject to similar
restrictions under other laws. A plan fiduciary making an
investment in our shares on behalf of such a plan should
consider whether the investment is in accordance with applicable
law and governing plan documents.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements included in this prospectus that are not historical
facts (including any statements concerning investment
objectives, other plans and objectives of management for future
operations or economic performance, or assumptions or forecasts
related thereto) are forward-looking statements. These
statements are only predictions. We caution that forward-looking
statements are not guarantees. Actual events or our investments
and results of operations could differ materially from those
expressed or implied in the forward-looking statements.
Forward-looking statements are typically identified by the use
of terms such as may, will,
should, expect, could,
intend, plan, anticipate,
estimate, believe, continue,
predict, potential or the negative of
such terms and other comparable terminology.
The forward-looking statements included in this prospectus are
based upon our current expectations, plans, estimates,
assumptions and beliefs that involve numerous risks and
uncertainties. Assumptions relating to the foregoing involve
judgments with respect to, among other things, future economic,
competitive and market conditions and future business decisions,
all of which are difficult or impossible to predict accurately
and many of which are beyond our control. Although we believe
that the expectations reflected in such forward-looking
statements are based on reasonable assumptions, our actual
results and performance could differ materially from those set
forth in the forward-looking statements. Factors which could
have a material adverse effect on our operations and future
prospects include, but are not limited to:
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our ability to effectively deploy the proceeds raised in this
offering;
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changes in economic conditions generally and the real estate and
securities markets specifically;
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changes in the credit markets and the impact of such changes on
our ability to obtain debt financing;
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legislative or regulatory changes (including changes to the laws
governing the taxation of REITs);
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the availability of capital;
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the effect of financial leverage, including changes in interest
rates, availability of credit, loss of flexibility due to
negative and affirmative covenants, refinancing risk at maturity
and generally the increased risk of loss if our investments fail
to perform as expected;
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tenant and mortgage loan delinquencies, defaults and tenant
bankruptcies;
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availability and creditworthiness of prospective
tenants; and
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changes to accounting principles generally accepted in the
United States of America.
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Any of the assumptions underlying forward-looking statements
could be inaccurate. You are cautioned not to place undue
reliance on any forward-looking statements included in this
prospectus. All forward-looking statements are made as of the
date of this prospectus and the risk that actual results will
differ materially from the expectations expressed in this
prospectus will increase with the passage of time. Except as
otherwise required by the federal securities laws, we undertake
no obligation to publicly update or revise any forward-looking
statements after the date of this prospectus, whether as a
result of new information, future events, changed circumstances
or any other reason. In light of the significant uncertainties
inherent in the forward-looking statements included in this
prospectus, including, without limitation, the risks described
under Risk Factors, the inclusion of such
forward-looking statements should not be regarded as a
representation by us or any other person that the objectives and
plans set forth in this prospectus will be achieved.
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ESTIMATED
USE OF PROCEEDS
The following table sets forth our best estimates of how we
intend to use the proceeds raised in this offering assuming that
we sell specified numbers of shares pursuant to the primary
offering. The proceeds raised in this offering will only be used
for the purposes set forth in this prospectus and in a manner
approved by our board of directors, who serve as fiduciaries to
our stockholders. The number of shares of our common stock
offered pursuant to our primary offering may vary from these
assumptions since we have reserved the right to reallocate the
shares offered between the primary offering and the distribution
reinvestment plan. Shares of our common stock in the primary
offering are being offered to the public on a best
efforts basis at $10.00 per share. The table below assumes
that we reach the maximum offering of $2,000,000,000 by selling
200,000,000 shares at $10.00 per share pursuant to our
primary offering.
We have not given effect to any special sales or volume
discounts that could reduce the selling commissions or dealer
manager fees for sales pursuant to the primary offering.
Reduction in these fees will be accompanied by a corresponding
reduction in the per share purchase price, but will not affect
the amounts available to us for investments. See Plan of
Distribution for a description of the special sales and
volume discounts.
The following table assumes that we do not sell any shares in
the DRIP. As long as our shares are not listed on a national
securities exchange, it is anticipated that all or substantially
all of the proceeds from the sale of shares pursuant to the DRIP
will be used to fund repurchases of shares under our share
repurchase plan. Because we do not pay selling commissions or
dealer manager fees for shares sold pursuant to the DRIP, we
receive greater net proceeds from the sale of shares in the DRIP
than in the primary offering. As a result, if we reallocate
shares from the DRIP to the primary offering, our net proceeds
could be less.
Many of the figures set forth below represent managements
best estimate since they cannot be precisely calculated at this
time. We expect that at least 88.5% of the money you invest will
be used to buy investments in real property and other real
estate related assets and pay related acquisition expenses,
while we expect the remaining 11.5% will be used to pay expenses
and fees, including the payment of fees to the dealer manager,
for this offering. If we are unable to raise substantial
proceeds in this offering, we will make fewer real property
investments. See Risk Factors Investment
Risks This is a best efforts offering
and if we are unable to raise substantial proceeds in this
offering, we will be limited in the number and type of
investments we may make, which will result in a less diversified
portfolio.
Our board of directors is responsible for reviewing our fees and
expenses on at least an annual basis and with sufficient
frequency to determine that the expenses incurred are in the
best interest of the stockholders. The fees set forth below may
not be increased without approval of the independent directors.
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Maximum Offering
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Amount
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Percent
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Gross Offering Proceeds
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$
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2,000,000,000
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100
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Less Public Offering Expenses:
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Selling Commissions
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140,000,000
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7.0
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Dealer Manager Fee
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60,000,000
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3.0
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Organizational and Offering Expenses(1)
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30,000,000
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1.5
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Amount Available for Investment(2)
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$
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1,770,000,000
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88.5
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%
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Less Acquisition Costs:
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Acquisition Fees(3)
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Acquisition Expenses(4)
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14,160,000
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0.8
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Initial Working Capital Reserve(5)
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Amount Invested in Properties
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$
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1,755,840,000
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87.8
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%
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(1) |
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We will assume and pay for all of the organizational and
offering expenses associated with this offering. This includes
expenses incurred in connection with this offering, including
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mailing and filing fees and expenses and any amounts used to
reimburse the bona fide due diligence expenses of our
dealer manager and participating broker-dealers provided such
expenses are supported by detailed and itemized invoices. |
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Until required in connection with the acquisition of real estate
investments, the net proceeds of this offering may be invested
in short-term, highly-liquid investments including government
obligations, bank certificates of deposit, short-term debt
obligations and interest-bearing accounts or other authorized
investments as determined by our board of directors. |
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We intend to use our employees for acquisition services. |
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Acquisition expenses include any and all expenses incurred in
connection with the selection, evaluation and acquisition of,
and investment in properties, whether or not acquired or made,
including, but not limited to, legal fees and expenses, travel
and communications expenses, cost of appraisals and surveys,
nonrefundable option payments on property not acquired,
accounting fees and expenses, computer use related expenses,
architectural, engineering and other property reports,
environmental and asbestos audits, title insurance and escrow
fees, loan fees or points or any fee of a similar nature paid to
a third party, however designated, transfer taxes, and personnel
and miscellaneous expenses related to the selection, evaluation
and acquisition of properties. Reimbursement of acquisition
expenses paid to our former advisor and its affiliates,
excluding amounts paid to third parties, will not exceed 0.5% of
the purchase price of properties we evaluate and acquire with
proceeds raised in the initial offering through the efforts of
our former advisor. The reimbursement of acquisition fees and
expenses, including real estate commissions paid to third
parties, will not exceed, in the aggregate, 6.0% of the purchase
price or total development cost, unless fees in excess of such
limits are approved by a majority of the disinterested directors
and by a majority of the disinterested independent directors. |
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Although we do not anticipate establishing a general working
capital reserve out of the proceeds from this offering, we may
establish capital reserves with respect to particular
investments. Such reserves will be established for particular
investments if required by a lender as a condition to entering
into a loan agreement. In addition, such reserves may be
established for non-operating expenses, such as tenant
improvements, leasing commissions and major capital
expenditures. We expect the reserve requirement, if any, to be
funded by excess cash flow during the period we hold such asset
requiring the capital reserve. |
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INVESTMENT
OBJECTIVES, STRATEGY AND CRITERIA
Investment
Objectives
Our investment objectives are:
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to acquire quality properties that generate sustainable growth
in cash flow from operations to pay regular cash distributions;
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to preserve, protect and return your capital contributions;
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to realize growth in the value of our investments upon our
ultimate sale of such investments; and
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to be prudent, patient and deliberate, taking into account
current real estate markets.
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Each property we acquire is carefully and diligently reviewed
and analyzed to make sure it is consistent with our short-and
long-term investment objectives. Our goal is to at all times
maintain a strong balance sheet and always have sufficient funds
to deal with short- and long-term operating needs.
Macro-economic disruptions have broadly impacted the economy and
have caused an imbalance between buyers and sellers of real
estate assets, including medical office buildings and other
healthcare-related real estate assets. We anticipated that these
tough economic conditions would create opportunities for our
company to acquire such assets at higher capitalization rates,
as the real estate market adjusted downward. In the fourth
quarter of 2008 and first half of 2009, we opted not to proceed
with certain acquisitions which we determined merited
re-pricing. We renegotiated other deals to lower pricing points.
In December 2009, we closed $253 million of
acquisitions and as of March 12, 2010, we had cash on hand
of approximately $250 million, which we intend to use to
acquire assets that are priced at levels consistent with
todays economy. We believe that during this turbulent
economic cycle, our cash on hand will provide our company with
opportunities to acquire medical office buildings and other
healthcare-related real estate assets at favorable pricing.
We cannot assure you that we will attain these objectives or
that our capital will not decrease. Our board of directors may
change our investment objectives if it determines it is
advisable and in the best interests of our stockholders.
Decisions relating to the purchase or sale of investments will
be made internally by our management, subject to the oversight
of our board of directors. See Management for a
description of the background and experience of our directors
and officers.
Investment
Strategy
We seek to invest in a diversified portfolio of real estate and
other real estate related assets, focusing primarily on
investments that produce recurring income. Our real estate
investments focus on medical office buildings and
healthcare-related facilities. We have also invested to a
limited extent in quality commercial office buildings and other
real estate related assets. However, we do not presently intend
to invest more than 15.0% of our total assets in other real
estate related assets. Our investments in other real estate
related assets will generally focus on forms of mortgage debt,
common and preferred stock of public or private real estate
companies, and certain other securities. We seek to maximize
long-term stockholder value by generating sustainable growth in
cash flow and portfolio value. In order to achieve these
objectives, we may invest using a number of investment
structures which may include direct acquisitions, joint
ventures, leveraged investments, issuing securities for property
and direct and indirect investments in real estate. In order to
maintain our exemption from regulation as an investment company
under the Investment Company Act, we may be required to limit
our investments in other real estate related assets. See
Investment Company Act Considerations
below.
In addition, when and as determined appropriate by our Chief
Executive Officer, our board of directors and management, the
portfolio may also include properties in various stages of
development other than those producing current income. These
stages would include, without limitation, unimproved land both
with and without entitlements and permits, property to be
redeveloped and repositioned, newly constructed properties and
properties in
lease-up or
other stabilization, all of which will have limited or no
relevant operating
49
histories and no current income. Our management makes this
determination based upon a variety of factors, including the
available risk adjusted returns for such properties when
compared with other available properties, the appropriate
diversification of the portfolio, and our objectives of
realizing both recurring income and capital appreciation upon
the ultimate sale of properties.
For each of our investments, regardless of property type, we
seek to invest in properties with the following attributes:
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Quality. We seek to acquire properties that
are suitable for their intended use with a quality of
construction that is capable of sustaining the propertys
investment potential for the long-term, assuming funding of
budgeted maintenance, repairs and capital improvements.
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Location. We seek to acquire properties that
are located in established or otherwise appropriate markets for
comparable properties, with access and visibility suitable to
meet the needs of its occupants.
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Market; Supply and Demand. We focus on local
or regional markets that have potential for stable and growing
property level cash flow over the long-term. These
determinations are based in part on an evaluation of local
economic, demographic and regulatory factors affecting the
property. For instance, we favor markets that indicate a growing
population and employment base or markets that exhibit potential
limitations on additions to supply, such as barriers to new
construction. Barriers to new construction include lack of
available land, stringent zoning restrictions and regulatory
restrictions. In addition, we generally seek to limit our
investments in areas that have limited potential for growth.
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Predictable Capital Needs. We seek to acquire
properties where the future expected capital needs can be
reasonably projected in a manner that would allow us to meet our
objectives of growth in cash flow and preservation of capital
and stability.
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Cash Flow. We seek to acquire properties where
the current and projected cash flow, including the potential for
appreciation in value, would allow us to meet our overall
investment objectives. We evaluate cash flow as well as expected
growth and the potential for appreciation.
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We will not invest more than 10.0% of the offering proceeds
available for investment in unimproved or non-income producing
properties or in other investments relating to unimproved or
non-income producing property. A property: (1) not acquired
for the purpose of producing rental or other operating income,
or (2) with no development or construction in process or
planned in good faith to commence within one year will be
considered unimproved or non-income producing property for
purposes of this limitation. To date, we have not invested in
unimproved or non-income producing properties or related
investments.
We are not limited as to the geographic area where we may
acquire properties. We are not specifically limited in the
number or size of properties we may acquire or on the percentage
of our assets that we may invest in a single property or
investment. The number and mix of properties we acquire depends
upon real estate and market conditions and other circumstances
existing at the time we are acquiring our properties and making
our investments and the amount of proceeds we raise in this and
potential future offerings.
Real
Property Investments
We invest in and intend to continue to invest in a diversified
portfolio of properties, focusing primarily on properties that
produce recurring income. We primarily seek investments in
medical office buildings and healthcare-related facilities. We
have also invested to a limited extent in quality commercial
office properties.
We generally seek to acquire properties of the types described
above that will best enable us to meet our investment
objectives, taking into account the diversification of our
portfolio at the time, relevant real estate and financial
factors, the location, income-producing capacity and the
prospects for long-range appreciation of a particular property
and other considerations. As a result, we may acquire properties
other than the types described above. In addition, we may
acquire properties that vary from the parameters described above
for a particular property type.
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The consideration for each real estate investment must be
authorized by a majority of our directors or a duly authorized
committee of our board of directors, ordinarily based on the
fair market value of the investment. If the majority of our
independent directors or a duly authorized committee of our
board of directors so determines, or if the investment is to be
acquired from an affiliate, the fair market value determination
must be supported by an appraisal obtained from a qualified,
independent appraiser selected by a majority of our independent
directors.
Our investments in real estate generally include our holding fee
simple title or long-term leasehold interests. Our investments
may be made either directly through our operating partnership or
indirectly through investments in joint ventures, limited
liability companies, general partnerships or other co-ownership
arrangements with the developers of the properties or other
persons. See Joint Venture Investments
below.
In addition, we may purchase properties and lease them back to
the sellers of such properties. We will use our best efforts to
structure any such sale-leaseback transaction such that the
lease will be characterized as a true lease and so
that we will be treated as the owner of the property for federal
income tax purposes. However, we cannot assure you that the IRS
will not challenge such characterization. In the event that any
such sale-leaseback transaction is re-characterized as a
financing transaction for federal income tax purposes,
deductions for depreciation and cost recovery relating to such
property would be disallowed or significantly reduced.
Our obligation to close a transaction involving the purchase of
a real property asset is generally conditioned upon the delivery
and verification of certain documents from the seller or
developer, including, where appropriate:
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plans and specifications;
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environmental reports (generally a minimum of a Phase I
investigation);
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building condition reports;
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surveys;
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evidence of marketable title subject to such liens and
encumbrances as are acceptable to our management;
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audited financial statements covering recent operations of real
properties having operating histories unless such statements are
not required to be filed with the SEC and delivered to
stockholders;
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title insurance policies; and
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liability insurance policies.
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In determining whether to purchase a particular property, we
may, in circumstances in which our management deems it
appropriate, obtain an option on such property, including land
suitable for development. The amount paid for an option, if any,
is normally surrendered if the property is not purchased, and is
normally credited against the purchase price if the property is
purchased. We may also enter into arrangements with the seller
or developer of a property whereby the seller or developer
agrees that if, during a stated period, the property does not
generate a specified cash flow, the seller or developer will pay
us in cash a sum necessary to reach the specified cash flow
level, subject in some cases to negotiated dollar limitations.
We will not purchase or lease properties in which our directors
or any of their affiliates have an interest without a
determination by a majority of our disinterested directors and a
majority of our disinterested independent directors that such
transaction is fair and reasonable to us and at a price to us no
greater than the cost of the property to the affiliated seller
or lessor, unless there is substantial justification for the
excess amount and the excess amount is reasonable. In no event
will we acquire any such property at an amount in excess of its
current appraised value as determined by an independent expert
selected by our disinterested independent directors.
We obtain adequate insurance coverage for all properties in
which we invest. However, there are types of losses, generally
catastrophic in nature, for which we do not obtain insurance
unless we are required to do so
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by mortgage lenders. See Risk Factors Risks
Related to Investments in Real Estate Uninsured
losses relating to real estate and lender requirements to obtain
insurance may reduce your returns.
Medical
Office Buildings and Healthcare-Related Facilities
We invest and intend to continue to invest a portion of the net
proceeds available for investment in medical office buildings
and healthcare-related facilities. Healthcare-related facilities
include facilities leased to hospitals, rehabilitation
hospitals, clinics, outpatient facilities, long-term acute care
centers, surgery centers, independent living facilities,
assisted living facilities, skilled nursing facilities, memory
care facilities, specialty medical and diagnostic service
providers, laboratories, research firms, pharmaceutical and
medical supply manufacturers and health insurance firms. The
market for medical office buildings and healthcare-related
facilities in the United States continues to expand.
According to the U.S. Department of Health and Human
Services, from 1960 to 2007, health spending as a percent of the
U.S. gross domestic product (GDP) has increased 11%, from
5.2% to 16.2% and is projected to comprise 17.6% of GDP in 2009
according to the National Health Expenditures report by the
Centers for Medicare and Medicaid Services dated January 2009.
Such national healthcare expenditures are projected to reach
20.3% of GDP by 2018, as set forth in the below chart.
Similarly, overall healthcare expenditures have risen sharply
since 2003. In 2008, healthcare expenditures are projected to
total $2.4 trillion and are expected to grow at a relatively
stable rate of approximately 6.2% per year to reach $4.4
trillion by 2018, as shown below.
National
Healthcare Expenditures
(2003-2018)
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We believe that demand for medical office buildings and
healthcare-related facilities will increase due to a number of
factors, including:
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Advances in medical technology will continue to enable
healthcare providers to identify and treat once fatal ailments
and will improve the survival rate of critically ill and injured
patients who will require continuing medical care. Along with
these technical innovations, the U.S. population is growing
older and living longer. In addition, according to the Centers
for Disease Control and Prevention, from 1950 to 2005, the
average life expectancy at birth increased from 68.2 years
to 77.8 years. By 2050, the average life expectancy at
birth is projected to increase to 83.1 years, according to
the U.S. Census Bureau.
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Between 2010 and 2050, the U.S. population over
65 years of age is projected to more than double from
40 million to nearly 88.5 million people, as reflected
in the below chart. Similarly, the 85 and older population is
expected to more than triple, from 5.4 million in 2008 to
19.0 million between 2008 and 2050. The number of older
Americans is also growing as a percentage of the total
U.S. population as the baby boomers enter their
60s. In 2010, the number of persons older than 65 will comprise
13.0% of the total U.S. population and is projected to grow
to 20.2% by 2050, as reflected in the below chart.
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Projected
U.S. Population Aged 65+
(2010-2050)
Based on the information above, we believe that healthcare
expenditures for the population over 65 years of age will
continue to rise as a disproportionate share of healthcare
dollars is spent on older Americans. This older population group
will increasingly require treatment and management of chronic
and acute health ailments. This increased demand for healthcare
services will create a substantial need for the development of
additional medical office buildings and healthcare-related
facilities in many regions of the U.S. We believe this will
result in a substantial increase in suitable, quality properties
meeting our acquisition criteria.
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According to the U.S. Department of Labors Bureau of
Labor Statistics, the healthcare industry was the largest
industry in the U.S. in 2006, providing 14 million
jobs. Healthcare-related jobs are among the fastest growing
occupations, accounting for 7 of the 20 fastest growing
occupations. The Bureau of Labor and Statistics estimates that
healthcare will generate 3 million new wage and salary jobs
between 2006 and 2016, more than any other industry. Wage and
salary employment in the healthcare industry is projected to
increase 22% through 2016, compared with 11% for all industries
combined. Despite the downturn in the economy and widespread job
losses in most industries, the healthcare industry has not been
impacted. In February 2009, there were 27,000 new
healthcare-related jobs according to the Bureau of Labor and
Statistics. We expect the increased growth in the healthcare
industry will correspond with a growth in demand for
healthcare-related facilities.
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Complex state and federal regulations govern physician hospital
referrals. Patients typically are referred to particular
hospitals by their physicians. To restrict hospitals from
inappropriately influencing physicians to refer patients to
them, federal and state governments adopted Medicare and
Medicaid anti-fraud laws and regulations. One aspect of these
complex laws and regulations addresses the leasing of medical
office space by hospitals to physicians. One intent of the
regulations is to restrict medical institutions from providing
facilities to physicians at below market rates or on other terms
that may present an opportunity for undue influence on physician
referrals. The regulations are complex, and adherence to the
regulations is time consuming and requires significant
documentation and extensive reporting to regulators. The costs
associated with regulatory compliance have encouraged many
hospital and physician groups to seek third-party ownership
and/or
management of their healthcare-related facilities.
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Physicians are increasingly forming practice groups. To increase
the numbers of patients they can see and thereby increase market
share, physicians have formed and are forming group practices.
By doing so, physicians can gain greater influence in
negotiating rates with managed care companies and hospitals in
which they perform services. Also, the creation of these groups
allows for the dispersion of overhead costs over a larger
revenue base and gives physicians the financial ability to
acquire new and expensive diagnostic equipment. Moreover,
certain group practices may benefit from certain exceptions to
federal and state self-referral laws, permitting them to offer a
broader range of medical services within their practices and to
participate in the facility fee related to medical procedures.
This increase in the number of group practices has led to the
construction of new medical facilities in which the groups are
housed and provide medical services.
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We believe that healthcare-related real estate rents and
valuations are less susceptible to changes in the general
economy than general commercial real estate due to demographic
trends and the resistance of rising healthcare expenditures to
economic downturns. For this reason, healthcare-related real
estate investments could potentially offer a more stable return
to investors compared to other types of real estate investments.
We believe the confluence of these factors over the last several
years has led to the following trends, which encourage
third-party ownership of existing and newly developed medical
properties:
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Decentralization and Specialization. There is
a continuing evolution toward delivery of medical services
through smaller facilities located near patients and designed to
treat specific diseases and conditions. In order to operate
profitably within a managed care environment, physician practice
groups and other medical services providers are aggressively
trying to increase patient populations, while maintaining lower
overhead costs by building new healthcare facilities in areas of
population or patient growth. Continuing population shifts and
ongoing demographic changes create a demand for additional
properties, including an aging population requiring and
demanding more medical services.
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Increasing Regulation. Evolving regulatory
factors affecting healthcare delivery create an incentive for
providers of medical services to focus on patient care, leaving
real estate ownership and operation to third-party real estate
professionals. Third-party ownership and management of
hospital-affiliated medical office buildings substantially
reduces the risk that hospitals will violate complex Medicare
and Medicaid fraud and abuse statutes.
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Modernization. Hospitals are modernizing by
renovating existing properties and building new properties and
becoming more efficient in the face of declining reimbursement
and changing patient demographics. This trend has led to the
development of new, smaller, specialty healthcare-related
facilities as well as improvements to existing general acute
care facilities.
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Redeployment of Capital. Medical providers are
increasingly focused on wisely investing their capital in their
medical business. A growing number of medical providers have
determined that third-party development and ownership of real
estate with long term leases is an attractive alternative to
investing their capital in
bricks-and-mortar.
Increasing use of expensive medical technology has placed
additional demands on the capital requirements of medical
services providers and physician practice groups. By selling
their real estate assets and relying on third-party ownership of
new healthcare properties, medical services providers and
physician practice groups can generate the capital necessary to
acquire the medical technology needed to provide more
comprehensive services to patients and improve overall patient
care.
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Physician Practice Ownership. Many physician
groups have reacquired their practice assets and real estate
from national physician management companies or otherwise formed
group practices to expand their market share. Other physicians
have left hospital-based or HMO-based practices to form
independent group practices. These physician groups are
interested in new healthcare properties that will house medical
businesses that regulations permit them to own. In addition to
existing group practices, there is a growing trend for
physicians in specialties, including cardiology, oncology,
womens health, orthopedics and urology, to enter into
joint ventures and partnerships with hospitals, operators and
financial sponsors to form specialty hospitals for the treatment
of specific diseases. We believe a significant number of these
types of organizations have no interest in owning real estate
and are aggressively looking for third-parties to develop and
own their healthcare properties.
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The current regulatory environment remains an ongoing challenge
for healthcare providers, who are under pressure to comply with
complex healthcare laws and regulations designed to prevent
fraud and abuse. These regulations, for example, prohibit
physicians from referring patients to entities in which they
have investment interests and prohibit hospitals from leasing
space to physicians at below market rates. As a result,
healthcare providers seek reduced liability costs and have an
incentive to dispose of real estate to third parties, thus
reducing the risk of violating fraud and abuse regulations. This
environment creates investment opportunities for owners,
acquirers and joint venture partners of healthcare real estate
who understand the needs of healthcare professionals and can
help keep tenant costs low. While the current regulatory
environment is positive for healthcare operators, there is
uncertainty as to the future of government policies and its
potential impact on healthcare provider profitability.
Demographic
Investing
We incorporate a demographic-based investment approach to our
overall investment strategy. This approach allows us to consider
demographic analysis when acquiring our properties. This
analysis takes into account fundamental long-term economic and
societal trends, including population shifts, generational
differences, and domestic migration patterns. Demographic-based
investing will assist us in investing in the properties utilized
by the industries that serve the countrys largest
population groups, and in the regions experiencing the greatest
growth. When incorporating this strategy, we consider three
factors: (1) the age ranges of the dominant population
groups; (2) the essential needs of each dominant population
group; and (3) the geographic regions that appeal to each
dominant population group.
Age. Our demographic-based investment strategy
focuses on the following three population groups:
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Seniors The 65+ age group who are the elders
of the baby boomers.
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Boomers Born between 1946 and 1964, the
American Hospital Association and First Consulting Group states
that this group controls 75% of the United States assets.
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Echo boomers Born between 1982 and 1994,
represent the children of the boomers.
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Essential Needs. We believe that each of these
population groups shares a need for greater healthcare services:
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Seniors Americans over 65 are living longer,
healthier, and more active lives than previous generations. This
group is responsible for much of the nations healthcare
spending. According to the U.S. Census Bureau, the majority
of this group has at least one chronic medical condition, and
more than half of those has two chronic conditions. Further,
according to the Department of Health and Human Services, per
person personal healthcare spending for the 65 and older
population in the U.S. was $8,776 in 2006, 5.8 times higher
than healthcare spending per child under five, 3.8 times higher
than healthcare spending per working-age person aged 25 to 44
and 1.8 times higher than healthcare spending per working-age
person aged 45 to 64.
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Boomers This aging population, currently the
largest, is expected to live longer than prior generations and
manage more chronic and complex medical conditions, according to
the U.S. Census Bureau and the American Hospital
Association and First Consulting Group. According to the
American Hospital Association and First Consulting Group,
boomers are spending more money on healthcare, such as elective
and preventative procedures due to new technology and medical
advances.
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Echo Boomers This group is on a path towards
chronic health conditions according to a University of New
Hampshire study. Additionally, they represent a large part of
the overall U.S. population. Like their parents generation
(boomers), this group may be more likely to live longer and more
active lives than earlier generations of Americans.
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Geographic Regions. The concentrations and
migrations of population groups may lay the groundwork for
current and future consumption patterns. In recent years, the
largest proportionate increases in the senior population were in
the Southern and Western states. This trend should continue as
boomers begin to retire. According to the U.S. Census
Bureau, most of the population increase between 1995 and 2025 is
expected to continue in the South and West, as reflected in the
below chart. Between 1995 and 2025, the two regions are each
expected to increase by more than 29 million persons;
combined, the regions are projected to account for 82% of the
72 million persons added to the U.S. population over
the next 30 years. As populations in these states grow, the
need for more healthcare facilities and properties will likely
increase.
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States
with the Largest Projected Population Increase
(1995-2025)
Joint
Venture Investments
We have entered and may continue to enter into joint ventures,
general partnerships and other arrangements with one or more
institutions or individuals, including real estate developers,
operators, owners, investors and others, for the purpose of
acquiring real estate. Such joint ventures may be leveraged with
debt financing or unleveraged. We may enter into joint ventures
to further diversify our investments or to access investments
which meet our investment criteria that would otherwise be
unavailable to us. In determining whether to invest in a
particular joint venture, our management will evaluate the real
estate that such joint venture owns or is being formed to own
under the same criteria described elsewhere in this prospectus
for the selection of our other properties. However, we will not
participate in
tenant-in-common
syndications or transactions.
Joint ventures with unaffiliated third parties may be structured
such that the investment made by us and the co-venturer are on
substantially different terms and conditions. For example, while
we and a co-venturer may invest an equal amount of capital in an
investment, the investment may be structured such that we have a
right to priority distributions of cash flow up to a certain
target return while the co-venturer may receive a
disproportionately greater share of cash flow than we are to
receive once such target return has been achieved. This type of
investment structure may result in the co-venturer receiving
more of the cash flow, including appreciation, of an investment
than we would receive. See Risk Factors Risks
Related to Joint Ventures We may structure our joint
venture relationships in a manner which may limit the amount we
participate in the cash flow or appreciation of an
investment.
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We may only enter into joint ventures with any of our directors
for the acquisition of properties if:
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a majority of our directors, including a majority of the
independent directors, not otherwise interested in the
transaction approve the transaction as being fair and reasonable
to us; and
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the investment by us and such director are on substantially the
same terms and conditions that are no less favorable than those
that would be available to unaffiliated third parties.
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Investments
in Other Real Estate Related Assets
We may invest in the following types of other real estate
related assets: (1) debt securities such as commercial
mortgages, mortgage loan participations and debt securities
issued by other real estate companies; (2) equity
securities such as common stocks, preferred stocks and
convertible preferred securities of public or private real
estate companies (including other REITs, real estate operating
companies and other real estate companies); and (3) certain
other types of securities that may help us reach our
diversification and other investment objectives.
Our management will have substantial discretion with respect to
the selection of other real estate related assets. Our charter
provides that we may not invest in equity securities unless a
majority of the directors (including a majority of independent
directors) not otherwise interested in the transaction approve
such investment as being fair, competitive and commercially
reasonable. Consistent with such requirements, in determining
the types of investments in other real estate related assets to
make, our management will adhere to a board-approved asset
allocation framework consisting primarily of components such as
(1) target mix of assets across a range of risk/reward
characteristics, (2) exposure limits to individual assets
and (3) exposure limits to asset subclasses (such as common
equities and mortgage debt). Within this framework, our
management will evaluate specific criteria for each prospective
investment in other real estate related assets including:
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positioning the overall portfolio to achieve an optimal mix of
real property and other real estate related securities
investments;
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diversification benefits relative to the rest of the securities
assets within our portfolio;
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fundamental securities analysis;
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quality and sustainability of underlying property cash flows;
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broad assessment of macro economic data and regional property
level supply and demand dynamics;
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potential for delivering high recurring income and attractive
risk-adjusted total returns; and
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additional factors considered important to meeting our
investment objectives.
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We are not specifically limited in the number or size of our
investments in other real estate related assets, or on the
percentage of the net proceeds from this offering that we may
invest in a single real estate related asset or pool of other
real estate related assets. However, we do not presently intend
to invest more than 15.0% of our total assets in other real
estate related assets. The specific number and mix of other real
estate related assets in which we invest will depend upon real
estate market conditions, other circumstances existing at the
time we are investing in our other real estate related assets
and the amount of proceeds we raise in this offering. We will
not invest in securities of other issuers for the purpose of
exercising control and the first or second mortgages in which we
intend to invest will likely not be insured by the Federal
Housing Administration or guaranteed by the Veterans
Administration or otherwise guaranteed or insured.
Borrowing
Policies
We use and intend to continue to use secured and unsecured debt
as a means of providing additional funds for the acquisition of
properties and other real estate related assets, which we
believe will enhance our investment returns and increase our
diversification. Our ability to enhance our investment returns
and to increase our diversification could be adversely impacted
if banks and other lending institutions reduce the
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amount of funds available for the types of loans we seek. When
interest rates are high or financing is otherwise unavailable on
a timely basis, we may purchase certain assets for cash with the
intention of obtaining debt financing at a later time.
We anticipate that aggregate borrowings, both secured and
unsecured, will not exceed 60.0% of all of our properties
combined fair market values, as determined at the end of each
calendar year beginning with our first full year of operation.
For these purposes, the fair market value of each asset will be
equal to the purchase price paid for the asset or, if the asset
was appraised subsequent to the date of purchase, then the fair
market value will be equal to the value reported in the most
recent independent appraisal of the asset. Our policies do not
limit the amount we may borrow with respect to any individual
investment. As of December 31, 2009, our aggregate
borrowings were 38.5% of all of our properties and other
real estate related assets combined fair market values and
32% of our total assets.
Our aggregate secured and unsecured borrowings will be reviewed
by our board of directors at least quarterly. Our charter
precludes us from borrowing in excess of 300.0% of the value of
our net assets. Net assets for purposes of this calculation are
defined as our total assets (other than intangibles), valued at
cost prior to deducting depreciation, reserves for bad debts and
other non-cash reserves, less total liabilities. The preceding
calculation is generally expected to approximate 75.0% of the
sum of (1) the aggregate cost of our properties before
non-cash reserves and depreciation and (2) the aggregate
cost of our securities assets. However, we may temporarily
borrow in excess of these amounts if such excess is approved by
a majority of our independent directors and disclosed to
stockholders in our next quarterly report, along with
justification for such excess. In such event, we will review our
debt levels at that time and take action to reduce any such
excess as soon as practicable. As of March 15, 2010 and
December 31, 2009, our leverage did not exceed 300.0% of
our net assets.
Our use of leverage increases the risk of default on loan
payments and the resulting foreclosure of a particular asset. In
addition, lenders may have recourse to assets other than those
specifically securing the repayment of the indebtedness.
Our management will use its best efforts to obtain financing on
the most favorable terms available to us and will refinance
assets during the term of a loan only in limited circumstances,
such as when a decline in interest rates makes it beneficial to
prepay an existing loan, when an existing loan matures or if an
attractive investment becomes available and the proceeds from
the refinancing can be used to purchase such investment. The
benefits of the refinancing may include an increased cash flow
resulting from reduced debt service requirements, an increase in
distributions from proceeds of the refinancing, and an increase
in diversification and assets owned if all or a portion of the
refinancing proceeds are reinvested.
Our charter restricts us from borrowing money from any of our
directors unless such loan is approved by a majority of our
directors (including a majority of the independent directors)
not otherwise interested in the transaction, as fair,
competitive and commercially reasonable and no less favorable to
us than comparable loans between unaffiliated parties.
Operating
Strategies
Our primary operating strategy is to acquire suitable properties
that meet our acquisition standards and to enhance the
performance and value of those properties through management
strategies designed to address the needs of current and
prospective tenants. Our management strategies include:
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aggressively leasing available space through targeted marketing
augmented by third party property management companies;
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controlling operating expenses through the centralization of
asset and property management, leasing, marketing, financing,
accounting, renovation and data processing activities;
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emphasizing regular maintenance and periodic renovation to meet
the needs of tenants and to maximize long-term returns; and
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59
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financing acquisitions and refinancing properties when favorable
terms are available to increase cash flow.
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Disposition
Policies
We intend to hold each investment in property or other real
estate related assets we acquire for an extended period.
However, circumstances might arise which could result in a
shortened holding period for certain investments. In general,
the holding period for securities assets is expected to be
shorter than the holding period for real property assets. An
investment in a property or security may be sold before the end
of the expected holding period if:
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diversification benefits exist associated with disposing of the
investment and rebalancing our investment portfolio;
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an opportunity arises to pursue a more attractive investment;
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in the judgment of our management, the value of the investment
might decline;
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with respect to properties, a major tenant involuntarily
liquidates or is in default under its lease;
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the investment was acquired as part of a portfolio acquisition
and does not meet our general acquisition criteria;
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an opportunity exists to enhance overall investment returns by
raising capital through sale of the investment; or
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in the judgment of our management, the sale of the investment is
in our best interests.
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The determination of whether a particular investment in property
or other real estate related assets should be sold or otherwise
disposed of will be made after consideration of relevant
factors, including prevailing economic conditions, with a view
toward maximizing our investment objectives. We cannot assure
you that this objective will be realized. The selling price of a
property which is net leased will be determined in large part by
the amount of rent payable under the lease(s) for such property.
If a tenant has a repurchase option at a formula price, we may
be limited in realizing any appreciation. In connection with our
sales of properties we may lend the purchaser all or a portion
of the purchase price. In these instances, our taxable income
may exceed the cash received in the sale. See Federal
Income Tax Considerations Failure to Maintain
Qualification as a REIT. The terms of payment will be
affected by custom in the area in which the investment being
sold is located and the then-prevailing economic conditions.
Property
Management
We recently completed a competitive bidding process and have
engaged five nationally recognized and experienced property
management groups, CB Richard Ellis Memphis, LLC, PM Realty
Group, Hokanson Companies, Inc., Plaza Del Rio Management Corp
and Nath Management Inc., for those portfolio properties
requiring external property management, subject to our
performance standards and oversight. These firms will manage
approximately 70% of our portfolios assets with fees at
market rates, and the remaining 30% will be supported in-house.
We selected these property management groups based on geographic
expertise, each to serve five geographically diverse
territories, as we have defined them. We transitioned to the new
property management companies on August 31, 2009. We
implemented the customized property management structure to
improve property operational performance at the asset and
service provider levels, including the elimination of oversight
fees.
Liquidity
Events
On a limited basis, you may be able to sell shares through our
share repurchase plan, which is at our sole discretion. However,
in the future, our board of directors will also consider various
forms of liquidity events, including but not limited to
(1) a listing of shares of our common stock on a national
securities exchange, (2) our sale or merger in a
transaction that provides our stockholders with a combination of
cash and/or
60
securities of a publicly traded company, and (3) the sale
of all or substantially all of our assets for cash or other
consideration. We presently intend to effect a liquidity event
by September 20, 2013. However, there can be no assurance
that we will effect a liquidity event within such time or at
all. In making the decision whether to effect a liquidity event,
our board of directors will try to determine which alternative
will result in greater value for our stockholders. Certain
merger transactions and the sale of all or substantially all of
our assets as well as liquidation or dissolution would require
the affirmative vote of holders of a majority of our outstanding
shares of common stock.
Construction
and Development Activities
From time to time, we may construct and develop real estate
assets or render services in connection with these activities.
We may be able to reduce overall purchase costs by constructing
and developing property versus purchasing a finished property.
Developing and constructing properties would, however, expose us
to risks such as cost overruns, carrying costs of projects under
construction or development, availability and costs of materials
and labor, weather conditions and government regulation. See
Risk Factors Risks Related to Investments in
Real Estate for additional discussion of these risks. We
will retain independent contractors to perform the actual
construction and development work on these properties.
Tenant
Improvements
We anticipate that tenant improvements required at the time of
our acquisition of a property will be funded from our offering
proceeds. However, at such time as a tenant of one of our
properties does not renew its lease or otherwise vacates its
space in one of our buildings, it is likely that, in order to
attract new tenants, we will be required to expend substantial
funds for tenant improvements and tenant refurbishments to the
vacated space. Since we do not anticipate maintaining permanent
working capital reserves, we may not have access to funds
required in the future for tenant improvements and tenant
refurbishments in order to attract new tenants to lease vacated
space. We will retain independent contractors to perform the
actual construction work on tenant improvements, such as
installing heating, ventilation and air conditioning systems.
Terms of
Leases
The terms and conditions of any lease we enter into with our
tenants may vary substantially from those we describe in this
prospectus. However, we expect that a majority of our leases
will require the tenant to pay or reimburse us for some or all
of the operating expenses of the building based on the
tenants proportionate share of rentable space within the
building. Operating expenses typically include, but are not
limited to, real estate taxes, sales and use taxes, special
assessments, utilities, insurance and building repairs, and
other building operation and management costs. We will probably
be responsible for the replacement of specific structural
components of a property, such as the roof of the building or
the parking lot. We expect that many of our leases will
generally have terms of five or more years, some of which may
have renewal options.
Investment
Limitations
Our charter places numerous limitations on us with respect to
the manner in which we may invest our funds prior to a listing
of our common stock. The limitations cannot be changed unless
our charter is amended, which requires approval of our board of
directors and our stockholders. Until our common stock is
listed, we will not:
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make investments in unimproved property or indebtedness secured
by a deed of trust or mortgage loans on unimproved property in
excess of 10.0% of our total assets;
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invest in commodities or commodity futures contracts, except for
futures contracts when used solely for the purpose of hedging in
connection with our ordinary business of investing in real
properties;
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invest in real estate contracts of sale, otherwise known as land
sale contracts, unless the contract is in recordable form and is
appropriately recorded in the chain of title;
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61
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make or invest in mortgage loans unless an appraisal is obtained
concerning the underlying property except for those mortgage
loans insured or guaranteed by a government or government
agency. In cases where a majority of our independent directors
determines, and in all cases in which the transaction is with
any of our directors or any of their respective affiliates, such
appraisal shall be obtained from an independent appraiser. We
will maintain such appraisal in our records for at least five
years and it will be available for your inspection and
duplication. We will also obtain a mortgagees or
owners title insurance policy as to the priority of the
mortgage;
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make or invest in mortgage loans, including construction loans,
on any one property if the aggregate amount of all mortgage
loans on such property, including our loans, would exceed an
amount equal to 85.0% of the appraised value of such property as
determined by appraisal unless substantial justification exists
for exceeding such limit because of the presence of other
underwriting criteria;
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make or invest in mortgage loans that are subordinate to any
lien or other indebtedness of any of our directors or any of
their respective affiliates;
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issue securities redeemable solely at the option of the holder
(this limitation, however, does not limit or prohibit the
operation of our share repurchase plan);
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issue debt securities unless the historical debt service
coverage (in the most recently completed fiscal year) as
adjusted for known changes is anticipated to be sufficient to
properly service that higher level of debt;
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issue equity securities on a deferred payment basis or other
similar arrangement;
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issue options or warrants to purchase shares to any of our
directors or any of their affiliates except on the same terms as
the options or warrants are sold to the general public; options
or warrants may be issued to persons other than our directors or
any of their affiliates, but not at exercise prices less than
the fair market value of the underlying securities on the date
of grant and not for consideration (which may include services)
that in the judgment of the independent directors has a market
value less than the value of such options or warrants on the
date of grant;
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engage in investment activities that would cause us to be
classified as an investment company under the Investment Company
Act;
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make any investment that is inconsistent with our objectives of
qualifying and remaining qualified as a REIT unless and until
our board of directors determines, in its sole discretion, that
REIT qualification is not in our best interest; or
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engage in the business of underwriting or the agency
distribution of securities issued by other persons.
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In addition, we do not intend to invest in junior debt secured
by a mortgage on real estate which is subordinate to the lien or
other senior debt except where the amount of such junior debt
plus any senior debt does not exceed 90.0% of the appraised
value of such property and, if after giving effect thereto, the
value of all such junior debt in which we have invested would
not then exceed 25.0% of our net assets.
Change in
Investment Objectives
Our charter requires that the independent directors review our
investment policies at least annually to determine that the
policies we are following are in the best interests of our
stockholders. Each determination and the basis therefor is
required to be set forth in the minutes of the applicable
meetings of our directors. The methods of implementing our
investment policies also may vary as new investment techniques
are developed. Except for changes to the investment policies and
investment restrictions contained in our charter, which require
stockholder consent to amend, our investment objectives may be
altered by our board of directors at any time without the
approval of the stockholders.
62
Issuing
Securities for Property
Subject to limitations contained in our organizational and
governance documents, we may issue, or cause to be issued,
shares of our stock or limited partnership units in our
operating partnership in any manner (and on such terms and for
such consideration) in exchange for real estate. Existing
stockholders have no preemptive rights to purchase such shares
or limited partnership units in any such offering, and any such
offering might cause a dilution of a stockholders initial
investment.
In order to induce the contributors of such properties to accept
units in our operating partnership, rather than cash, in
exchange for their properties, it may be necessary for us to
provide them additional incentives. For instance, our operating
partnerships partnership agreement provides that any
holder of units may exchange limited partnership units on a
one-for-one basis for shares of our common stock, or, at our
option, cash equal to the value of an equivalent number of our
shares. We may, however, enter into additional contractual
arrangements with contributors of property under which we would
agree to repurchase a contributors units for shares of our
common stock or cash, at the option of the contributor, at set
times. In order to allow a contributor of a property to defer
taxable gain on the contribution of property to our operating
partnership, we might agree not to sell a contributed property
for a defined period of time or until the contributor exchanged
the contributors units for cash or shares. Such an
agreement would prevent us from selling those properties, even
if market conditions made such a sale favorable to us. Such
transactions are subject to the risks described in Risk
Factors Risks Related to Our Business We
may structure acquisitions of property in exchange for limited
partnership units in our operating partnership on terms that
could limit our liquidity or our flexibility.
Real
Estate Acquisitions
Our management team will continually evaluate various potential
investments on our behalf and engage in discussions and
negotiations with real property sellers, developers, brokers,
lenders, investment managers and others regarding such potential
investments. During the term of this offering, if we believe
that a reasonable probability exists that we will acquire a
specific material property or make a material investment in
other real estate related assets, this prospectus will be
supplemented to disclose the negotiations and pending
acquisition of such property or securities investment. We expect
that this will normally occur upon the signing of a purchase
agreement for the acquisition of a specific investment in
property or other real estate related assets, but may occur
before or after such signing or upon the satisfaction or
expiration of major contingencies in any such purchase
agreement, depending on the particular circumstances surrounding
each potential investment. A supplement to this prospectus will
describe any information that we consider appropriate for an
understanding of the transaction. Further data will be made
available after any pending investment is consummated, also by
means of a supplement to this prospectus, if appropriate. You
should understand that the disclosure of any proposed material
investment cannot be relied upon as an assurance that we will
ultimately consummate such investment or that the information
provided concerning the proposed investment will not change
between the date of the supplement and any actual purchase.
Investment
Company Act Considerations
We intend to operate in such a manner that we will not be
subject to regulation under the Investment Company Act. In order
to maintain our exemption from regulations under the Investment
Company Act, we must comply with technical and complex rules and
regulations.
In order to maintain our exemption from regulation as an
investment company, we intend to engage primarily in the
business of investing in interests in real estate and make these
investments within one year after the offering ends. If we are
unable to invest a significant portion of the proceeds of this
offering in properties within one year of the termination of the
offering, we may avoid being required to register as an
investment company under the Investment Company Act by
temporarily investing any unused proceeds in government
securities with low returns. Investments in government
securities likely would reduce the cash available for
distribution to investors and possibly lower your returns.
63
Our management continually reviews our investment activity and
takes appropriate actions to attempt to ensure that we do not
come within the application of the Investment Company Act. These
actions may include limiting the percentage of our assets that
fall into certain categories specified in the Investment Company
Act, which could result in us holding assets we otherwise might
desire to sell and selling assets we otherwise might wish to
retain. In addition, we may have to acquire additional assets
that we might not otherwise have acquired or be forced to forgo
investment opportunities that we would otherwise want to acquire
and that could be important to our investment strategy. In
particular, we will monitor our investments in other real estate
related assets to ensure continued compliance with one or more
exemptions from investment company status under the
Investment Company Act and, depending on the particular
characteristics of those investments and our overall portfolio,
we may be required to limit the percentage of our assets
represented by other real estate related assets. If at any time
the character of our investments could cause us to be deemed an
investment company for purposes of the Investment Company Act,
we will take the necessary action to attempt to ensure that we
are not deemed to be an investment company. If we were required
to register as an investment company, our ability to enter into
certain transactions would be restricted by the Investment
Company Act. See Risk Factors Risks Related to
Our Organizational Structure Your investment return
may be reduced if we are required to register as an investment
company under the Investment Company Act.
64
INVESTMENTS
We provide stockholders the potential for income and growth
through investment in a diversified portfolio of real estate
properties, focusing primarily on medical office buildings and
healthcare-related facilities. During our initial offering, we
also invested to a limited extent in quality commercial office
properties. We focus primarily on income producing investments
which may be located in multiple states. As of March 12,
2010 we had made 55 geographically diverse acquisitions,
comprising 184 buildings with approximately 7.5 million
square feet of GLA, for an aggregate purchase price of
approximately $1.49 billion. Each of our properties is 100%
owned by our operating partnership except one, which is 80.0%
owned by our operating partnership through a joint venture. The
tables below provide summary information regarding our portfolio
as of March 12, 2010:
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Properties Owned
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As a Percentage of
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State
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Number(1)
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Aggregate Purchase Price
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Arizona
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5
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12.3
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%
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California
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3
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3.4
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Colorado
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2
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2.3
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Florida
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5
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7.3
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Georgia
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7
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7.7
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Indiana
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6
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9.6
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Kansas
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1
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0.9
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Maryland
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1
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|
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0.8
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Minnesota
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2
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1.2
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Missouri
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2
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4.8
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New Hampshire
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1
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1.0
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Ohio
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5
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5.3
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Oklahoma
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1
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2.0
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Pennsylvania
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1
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1.9
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South Carolina
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2
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12.4
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Tennessee
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2
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2.8
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Texas
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10
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16.4
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Utah
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1
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2.1
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Virginia
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1
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0.4
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Wisconsin
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2
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5.2
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Total
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100.0
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%
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(1) |
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In certain cases we have acquired portfolios that include
properties in multiple states. |
The table below describes the type of real estate properties and
other real estate related assets we owned as of March 12,
2010:
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Number of
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Gross Leasable
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Type of Investment
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Investments
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Area
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Medical Office
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44
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6,226,000
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Healthcare-Related Facility
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6
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1,004,000
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Office
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3
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311,000
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|
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|
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Other Real Estate Related Assets
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2
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N/A
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Total
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55
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7,541,000
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65
The table below describes the average effective annual rent per
square foot and the occupancy rate for each of the last four
years ended December 31, 2008 and through December 31,
2009, for which we owned properties:
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2005(1)
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2006(1)
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2007(1)
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2008(2)
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2009(2)
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Average Effective Annual Rent per Square Foot
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N/A
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|
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N/A
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$
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18.41
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$
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16.87
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$
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17.25
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Occupancy Rate
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N/A
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N/A
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88.6%
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91.3%
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90.6%
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|
|
|
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(1) |
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We were initially capitalized on April 28, 2006 and
therefore we consider that our date of inception. We purchased
our first property on January 22, 2007. |
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(2) |
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Based on leases in effect as of December 31, 2008 and
December 31, 2009. |
The following table presents the sensitivity of our annual base
rent due to lease expirations for the year next 10 years at
our properties, by number, square feet, percentage of leased
area, annual base rent and percentage of annual rent as of
December 31, 2009:
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|
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|
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|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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% of Leased
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|
|
|
|
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% of Total
|
|
|
|
|
|
|
|
|
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Area
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|
|
Annual
|
|
|
Annual Rent
|
|
|
|
Number of
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|
|
Total Sq. Ft.
|
|
|
Represented
|
|
|
Rent Under
|
|
|
Represented by
|
|
|
|
Leases
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|
|
of Expiring
|
|
|
by Expiring
|
|
|
Expiring
|
|
|
Expiring Leases
|
|
Year Ending December 31,
|
|
Expiring
|
|
|
Leases
|
|
|
Leases
|
|
|
Leases
|
|
|
(1)
|
|
|
2010
|
|
|
126
|
|
|
|
353,000
|
|
|
|
6.0
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%
|
|
$
|
6,920,000
|
|
|
|
6.4
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%
|
2011
|
|
|
123
|
|
|
|
501,000
|
|
|
|
8.6
|
|
|
|
9,918,000
|
|
|
|
9.1
|
|
2012
|
|
|
146
|
|
|
|
515,000
|
|
|
|
8.8
|
|
|
|
9,476,000
|
|
|
|
8.7
|
|
2013
|
|
|
117
|
|
|
|
690,000
|
|
|
|
11.8
|
|
|
|
13,032,000
|
|
|
|
12.0
|
|
2014
|
|
|
91
|
|
|
|
653,000
|
|
|
|
11.2
|
|
|
|
9,669,000
|
|
|
|
8.9
|
|
2015
|
|
|
35
|
|
|
|
296,000
|
|
|
|
5.1
|
|
|
|
6,671,000
|
|
|
|
6.1
|
|
2016
|
|
|
47
|
|
|
|
369,000
|
|
|
|
6.3
|
|
|
|
6,812,000
|
|
|
|
6.3
|
|
2017
|
|
|
43
|
|
|
|
332,000
|
|
|
|
5.7
|
|
|
|
6,103,000
|
|
|
|
5.6
|
|
2018
|
|
|
54
|
|
|
|
434,000
|
|
|
|
7.4
|
|
|
|
7,925,000
|
|
|
|
7.3
|
|
2019
|
|
|
39
|
|
|
|
222,000
|
|
|
|
3.8
|
|
|
|
4,683,000
|
|
|
|
4.3
|
|
2020
|
|
|
43
|
|
|
|
167,000
|
|
|
|
2.9
|
|
|
|
2,780,000
|
|
|
|
2.6
|
|
Thereafter
|
|
|
45
|
|
|
|
1,304,000
|
|
|
|
22.3
|
|
|
|
24,595,000
|
|
|
|
22.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
909
|
|
|
|
5,836,000
|
|
|
|
100
|
%
|
|
$
|
108,584,000
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The annual rent percentage is based on the total annual
contractual base rent as of December 31, 2009. |
As of March 12, 2010, no single tenant accounted for 10.0%
or more of the gross leasable area of our real estate properties.
The following table presents certain additional information
about our properties as of March 12, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Total of
|
|
|
|
|
|
Annual Rent
|
|
|
|
|
|
GLA
|
|
|
% of
|
|
|
Ownership
|
|
|
Date
|
|
|
Purchase
|
|
|
Annual
|
|
|
Annual
|
|
|
|
|
|
Per Leased
|
|
Property
|
|
Property Location
|
|
(Sq Ft)
|
|
|
GLA
|
|
|
Percentage
|
|
|
Acquired
|
|
|
Price
|
|
|
Rent(1)
|
|
|
Rent
|
|
|
Occupancy(2)
|
|
|
Sq Ft(3)
|
|
|
Southpointe Office Parke and Epler Parke I
|
|
Indianapolis, IN
|
|
|
97,000
|
|
|
|
1.3
|
%
|
|
|
100
|
%
|
|
|
1/22/2007
|
|
|
$
|
14,800,000
|
|
|
$
|
1,081,000
|
|
|
|
0.8
|
%
|
|
|
73.4
|
%
|
|
$
|
11.14
|
|
Crawfordsville Medical Office Park and Athens Surgery Center
|
|
Crawfordsville, IN
|
|
|
29,000
|
|
|
|
0.4
|
|
|
|
100
|
|
|
|
1/22/2007
|
|
|
|
6,900,000
|
|
|
|
592,000
|
|
|
|
0.4
|
|
|
|
100.0
|
|
|
|
20.41
|
|
The Gallery Professional Building
|
|
St. Paul, MN
|
|
|
106,000
|
|
|
|
1.4
|
|
|
|
100
|
|
|
|
3/9/2007
|
|
|
|
8,800,000
|
|
|
|
1,177,000
|
|
|
|
0.9
|
|
|
|
73.6
|
|
|
|
11.10
|
|
Lenox Office Park, Building G
|
|
Memphis, TN
|
|
|
98,000
|
|
|
|
1.3
|
|
|
|
100
|
|
|
|
3/23/2007
|
|
|
|
18,500,000
|
|
|
|
2,220,000
|
|
|
|
1.7
|
|
|
|
100.0
|
|
|
|
22.65
|
|
Commons V Medical Office Building
|
|
Naples, FL
|
|
|
55,000
|
|
|
|
0.7
|
|
|
|
100
|
|
|
|
4/24/2007
|
|
|
|
14,100,000
|
|
|
|
1,160,000
|
|
|
|
0.9
|
|
|
|
100.0
|
|
|
|
21.09
|
|
Yorktown Medical Center and Shakerag Medical Center
|
|
Fayetteville and
Peachtree City, GA
|
|
|
108,000
|
|
|
|
1.4
|
|
|
|
100
|
|
|
|
5/2/2007
|
|
|
|
21,500,000
|
|
|
|
1,945,000
|
|
|
|
1.5
|
|
|
|
60.3
|
|
|
|
18.01
|
|
Thunderbird Medical Plaza
|
|
Glendale, AZ
|
|
|
110,000
|
|
|
|
1.5
|
|
|
|
100
|
|
|
|
5/15/2007
|
|
|
|
25,000,000
|
|
|
|
1,965,000
|
|
|
|
1.5
|
|
|
|
72.6
|
|
|
|
17.86
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Total of
|
|
|
|
|
|
Annual Rent
|
|
|
|
|
|
GLA
|
|
|
% of
|
|
|
Ownership
|
|
|
Date
|
|
|
Purchase
|
|
|
Annual
|
|
|
Annual
|
|
|
|
|
|
Per Leased
|
|
Property
|
|
Property Location
|
|
(Sq Ft)
|
|
|
GLA
|
|
|
Percentage
|
|
|
Acquired
|
|
|
Price
|
|
|
Rent(1)
|
|
|
Rent
|
|
|
Occupancy(2)
|
|
|
Sq Ft(3)
|
|
|
Triumph Hospital Northwest and Triumph Hospital Southwest
|
|
Houston and Sugar
Land, TX
|
|
|
151,000
|
|
|
|
2.0
|
|
|
|
100
|
%
|
|
|
6/8/2007
|
|
|
|
36,500,000
|
|
|
|
2,990,000
|
|
|
|
2.3
|
|
|
|
100.0
|
%
|
|
|
19.80
|
|
Gwinnett Professional Center
|
|
Lawrenceville, GA
|
|
|
60,000
|
|
|
|
0.8
|
|
|
|
100
|
|
|
|
7/27/2007
|
|
|
|
9,300,000
|
|
|
|
889,000
|
|
|
|
0.7
|
|
|
|
59.4
|
|
|
|
14.82
|
|
1 & 4 Market Exchange
|
|
Columbus, OH
|
|
|
116,000
|
|
|
|
1.5
|
|
|
|
100
|
|
|
|
8/15/2007
|
|
|
|
21,900,000
|
|
|
|
1,516,000
|
|
|
|
1.1
|
|
|
|
86.1
|
|
|
|
13.07
|
|
Kokomo Medical Office Park
|
|
Kokomo, IN
|
|
|
87,000
|
|
|
|
1.2
|
|
|
|
100
|
|
|
|
8/30/2007
|
|
|
|
13,350,000
|
|
|
|
1,369,000
|
|
|
|
1.0
|
|
|
|
100.0
|
|
|
|
15.74
|
|
St. Mary Physicians Center
|
|
Long Beach, CA
|
|
|
67,000
|
|
|
|
0.9
|
|
|
|
100
|
|
|
|
9/5/2007
|
|
|
|
13,800,000
|
|
|
|
1,101,000
|
|
|
|
0.8
|
|
|
|
67.0
|
|
|
|
16.43
|
|
2750 Monroe Boulevard
|
|
Valley Forge, PA
|
|
|
109,000
|
|
|
|
1.4
|
|
|
|
100
|
|
|
|
9/10/2007
|
|
|
|
26,700,000
|
|
|
|
2,776,000
|
|
|
|
2.1
|
|
|
|
100.0
|
|
|
|
25.47
|
|
East Florida Senior
|
|
Jacksonville,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Care Portfolio
|
|
Winter Park and
Sunrise, FL
|
|
|
355,000
|
|
|
|
4.7
|
|
|
|
100
|
|
|
|
9/28/2007
|
|
|
|
52,000,000
|
|
|
|
4,303,000
|
|
|
|
3.3
|
|
|
|
100.0
|
|
|
|
12.12
|
|
Northmeadow Medical Center
|
|
Roswell, GA
|
|
|
51,000
|
|
|
|
0.7
|
|
|
|
100
|
|
|
|
11/15/2007
|
|
|
|
11,850,000
|
|
|
|
1,261,000
|
|
|
|
1.0
|
|
|
|
98.6
|
|
|
|
24.73
|
|
Tucson Medical Office Portfolio
|
|
Tucson, AZ
|
|
|
110,000
|
|
|
|
1.5
|
|
|
|
100
|
|
|
|
11/20/2007
|
|
|
|
21,050,000
|
|
|
|
1,619,000
|
|
|
|
1.2
|
|
|
|
69.0
|
|
|
|
14.72
|
|
Lima Medical Office Portfolio
|
|
Lima, OH
|
|
|
203,000
|
|
|
|
2.7
|
|
|
|
100
|
|
|
|
12/7/2007
|
|
|
|
26,060,000
|
|
|
|
2,120,000
|
|
|
|
1.6
|
|
|
|
81.1
|
|
|
|
10.44
|
|
Highlands Ranch Medical Plaza
|
|
Highlands Ranch, CO
|
|
|
79,000
|
|
|
|
1.0
|
|
|
|
100
|
|
|
|
12/19/2007
|
|
|
|
14,500,000
|
|
|
|
1,621,000
|
|
|
|
1.2
|
|
|
|
86.2
|
|
|
|
20.52
|
|
Chesterfield Rehabilitation Center
|
|
Chesterfield, MO
|
|
|
112,000
|
|
|
|
1.5
|
|
|
|
80.00
|
|
|
|
12/19/2007
|
|
|
|
36,440,000
|
|
|
|
3,082,000
|
|
|
|
2.3
|
|
|
|
100.0
|
|
|
|
27.52
|
|
Park Place Office Park
|
|
Dayton, OH
|
|
|
133,000
|
|
|
|
1.8
|
|
|
|
100
|
|
|
|
12/20/2007
|
|
|
|
16,200,000
|
|
|
|
1,864,000
|
|
|
|
1.4
|
|
|
|
80.8
|
|
|
|
14.12
|
|
Medical Portfolio 1
|
|
Overland, KS and
Largo, Brandon and
Lakeland, FL
|
|
|
163,000
|
|
|
|
2.2
|
|
|
|
100
|
|
|
|
2/1/2008
|
|
|
|
36,950,000
|
|
|
|
3,391,000
|
|
|
|
2.6
|
|
|
|
91.3
|
|
|
|
20.80
|
|
Fort Road Medical Building
|
|
St. Paul, MN
|
|
|
50,000
|
|
|
|
0.7
|
|
|
|
100
|
|
|
|
3/6/2008
|
|
|
|
8,650,000
|
|
|
|
633,000
|
|
|
|
0.5
|
|
|
|
78.6
|
|
|
|
12.66
|
|
Liberty Falls Medical Plaza
|
|
Liberty Township, OH
|
|
|
44,000
|
|
|
|
0.6
|
|
|
|
100
|
|
|
|
3/19/2008
|
|
|
|
8,150,000
|
|
|
|
637,000
|
|
|
|
0.5
|
|
|
|
91.5
|
|
|
|
14.48
|
|
Epler Parke Building B
|
|
Indianapolis, IN
|
|
|
34,000
|
|
|
|
0.5
|
|
|
|
100
|
|
|
|
3/24/2008
|
|
|
|
5,850,000
|
|
|
|
471,000
|
|
|
|
0.4
|
|
|
|
95.2
|
|
|
|
13.85
|
|
Cypress Station Medical Office Building
|
|
Houston, TX
|
|
|
52,000
|
|
|
|
0.7
|
|
|
|
100
|
|
|
|
3/25/2008
|
|
|
|
11,200,000
|
|
|
|
936,000
|
|
|
|
0.7
|
|
|
|
100.0
|
|
|
|
18.00
|
|
Vista Professional Center
|
|
Lakeland, Fl
|
|
|
32,000
|
|
|
|
0.4
|
|
|
|
100
|
|
|
|
3/27/2008
|
|
|
|
5,250,000
|
|
|
|
368,000
|
|
|
|
0.3
|
|
|
|
76.2
|
|
|
|
11.50
|
|
Senior Care Portfolio 1
|
|
Arlington,
Galveston, Port
Arthur and Texas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
City, TX and Lomita
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and El Monte, CA
|
|
|
226,000
|
|
|
|
3.0
|
|
|
|
100
|
|
|
|
Various
|
|
|
|
39,600,000
|
|
|
|
3,462,000
|
|
|
|
2.6
|
|
|
|
100.0
|
|
|
|
15.32
|
|
Amarillo Hospital
|
|
Amarillo, TX
|
|
|
65,000
|
|
|
|
0.9
|
|
|
|
100
|
|
|
|
5/15/2008
|
|
|
|
20,000,000
|
|
|
|
1,666,000
|
|
|
|
1.3
|
|
|
|
100.0
|
|
|
|
25.63
|
|
5995 Plaza Drive
|
|
Cypress, CA
|
|
|
104,000
|
|
|
|
1.4
|
|
|
|
100
|
|
|
|
5/29/2008
|
|
|
|
25,700,000
|
|
|
|
2,004,000
|
|
|
|
1.5
|
|
|
|
100.0
|
|
|
|
19.27
|
|
Nutfield Professional Center
|
|
Derry, NH
|
|
|
70,000
|
|
|
|
0.9
|
|
|
|
100
|
|
|
|
6/3/2008
|
|
|
|
14,200,000
|
|
|
|
1,163,000
|
|
|
|
0.9
|
|
|
|
100.0
|
|
|
|
16.61
|
|
SouthCrest Medical Plaza
|
|
Stockbridge, GA
|
|
|
81,000
|
|
|
|
1.1
|
|
|
|
100
|
|
|
|
6/24/2008
|
|
|
|
21,176,000
|
|
|
|
1,577,000
|
|
|
|
1.2
|
|
|
|
83.7
|
|
|
|
19.47
|
|
Medical Portfolio 3
|
|
Indianapolis, IN
|
|
|
685,000
|
|
|
|
9.1
|
|
|
|
100
|
|
|
|
6/26/2008
|
|
|
|
90,100,000
|
|
|
|
9,285,000
|
|
|
|
7.0
|
|
|
|
74.8
|
|
|
|
13.55
|
|
Academy Medical Center
|
|
Tucson, AZ
|
|
|
41,000
|
|
|
|
0.5
|
|
|
|
100
|
|
|
|
6/26/2008
|
|
|
|
8,100,000
|
|
|
|
774,000
|
|
|
|
0.6
|
|
|
|
88.2
|
|
|
|
18.88
|
|
Decatur Medical Plaza
|
|
Decatur, GA
|
|
|
43,000
|
|
|
|
0.6
|
|
|
|
100
|
|
|
|
6/27/2008
|
|
|
|
12,000,000
|
|
|
|
1,060,000
|
|
|
|
0.8
|
|
|
|
99.5
|
|
|
|
24.65
|
|
Medical Portfolio 2
|
|
OFallon and St. Louis, MO
and Keller and Wichita
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Falls, TX
|
|
|
173,000
|
|
|
|
2.3
|
|
|
|
100
|
|
|
|
Various
|
|
|
|
44,800,000
|
|
|
|
3,789,000
|
|
|
|
2.9
|
|
|
|
97.7
|
|
|
|
21.90
|
|
Renaissance Medical Center
|
|
Bountiful, UT
|
|
|
112,000
|
|
|
|
1.5
|
|
|
|
100
|
|
|
|
6/30/2008
|
|
|
|
30,200,000
|
|
|
|
2,234,000
|
|
|
|
1.7
|
|
|
|
88.5
|
|
|
|
19.95
|
|
Oklahoma City Medical Portfolio
|
|
Oklahoma City, OK
|
|
|
186,000
|
|
|
|
2.5
|
|
|
|
100
|
|
|
|
9/16/2008
|
|
|
|
29,250,000
|
|
|
|
3,563,000
|
|
|
|
2.7
|
|
|
|
95.4
|
|
|
|
19.16
|
|
Medical Portfolio 4
|
|
Phoenix, AZ, Parma
and Jefferson West,
OH, and Waxahachie,
Greenville, and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cedar Hill, TX
|
|
|
227,000
|
|
|
|
3.0
|
|
|
|
100
|
|
|
|
Various
|
|
|
|
48,000,000
|
|
|
|
4,212,000
|
|
|
|
3.2
|
|
|
|
81.8
|
|
|
|
18.56
|
|
Mountain Empire Portfolio
|
|
Kingsport, Bristol
and Rogersville, TN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Pennington Gap
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and Norton, VA
|
|
|
293,000
|
|
|
|
3.9
|
|
|
|
100
|
|
|
|
9/12/2008
|
|
|
|
27,775,000
|
|
|
|
3,956,000
|
|
|
|
3.0
|
|
|
|
91.9
|
|
|
|
13.50
|
|
Mountain Plains Portfolio
|
|
San Antonio and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Webster, TX
|
|
|
170,000
|
|
|
|
2.3
|
|
|
|
100
|
|
|
|
12/18/2008
|
|
|
|
43,000,000
|
|
|
|
3,889,000
|
|
|
|
2.9
|
|
|
|
100.0
|
|
|
|
22.88
|
|
Marietta Health Park
|
|
Marietta, GA
|
|
|
81,000
|
|
|
|
1.1
|
|
|
|
100
|
|
|
|
12/22/2008
|
|
|
|
15,300,000
|
|
|
|
1,083,000
|
|
|
|
0.8
|
|
|
|
88.4
|
|
|
|
13.37
|
|
Wisconsin Medical Portfolio 1
|
|
Milwaukee, WI
|
|
|
185,000
|
|
|
|
2.5
|
|
|
|
100
|
|
|
|
2/27/2009
|
|
|
|
33,719,000
|
|
|
|
2,871,000
|
|
|
|
2.2
|
|
|
|
100.0
|
|
|
|
15.52
|
|
Wisconsin Medical Portfolio 2
|
|
Franklin, WI
|
|
|
130,000
|
|
|
|
1.7
|
|
|
|
100
|
|
|
|
5/28/2009
|
|
|
|
40,700,000
|
|
|
|
3,435,000
|
|
|
|
2.6
|
|
|
|
100.0
|
|
|
|
26.42
|
|
Greenville Hospital Portfolio
|
|
Greenville, SC
|
|
|
857,000
|
|
|
|
11.4
|
|
|
|
100
|
|
|
|
9/18/2009
|
|
|
|
162,820,000
|
|
|
|
14,417,000
|
|
|
|
10.9
|
|
|
|
100.0
|
|
|
|
16.82
|
|
Mary Black Medical Office Building
|
|
Spartanburg, SC
|
|
|
109,000
|
|
|
|
1.4
|
|
|
|
100
|
|
|
|
12/11/2009
|
|
|
|
16,250,000
|
|
|
|
1,563,000
|
|
|
|
1.2
|
|
|
|
72.7
|
|
|
|
14.34
|
|
Hampden Place Medical Office Building
|
|
Englewood, CO
|
|
|
66,000
|
|
|
|
0.9
|
|
|
|
100
|
|
|
|
12/21/2009
|
|
|
|
18,600,000
|
|
|
|
1,594,000
|
|
|
|
1.2
|
|
|
|
100.0
|
|
|
|
24.15
|
|
Dallas LTAC Hospital
|
|
Dallas, TX
|
|
|
52,000
|
|
|
|
0.7
|
|
|
|
100
|
|
|
|
12/23/2009
|
|
|
|
27,350,000
|
|
|
|
2,598,000
|
|
|
|
2.0
|
|
|
|
100.0
|
|
|
|
49.96
|
|
Smyth Professional Building
|
|
Baltimore, MD
|
|
|
62,000
|
|
|
|
0.8
|
|
|
|
100
|
|
|
|
12/30/2009
|
|
|
|
11,250,000
|
|
|
|
1,039,000
|
|
|
|
0.8
|
|
|
|
98.1
|
|
|
|
16.77
|
|
Atlee Medical Portfolio
|
|
Coriscana, TX and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ft. Wayne, IN and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
San Angelo, TX
|
|
|
93,000
|
|
|
|
1.2
|
|
|
|
100
|
|
|
|
12/30/2009
|
|
|
|
20,501,000
|
|
|
|
1,790,000
|
|
|
|
1.4
|
|
|
|
100.0
|
|
|
|
19.25
|
|
Denton Medical Rehabilitation Hospital
|
|
Denton, TX
|
|
|
44,000
|
|
|
|
0.6
|
|
|
|
100
|
|
|
|
12/30/2009
|
|
|
|
15,485,000
|
|
|
|
1,364,000
|
|
|
|
1.0
|
|
|
|
100.0
|
|
|
|
31.00
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% Total of
|
|
|
|
|
|
Annual Rent
|
|
|
|
|
|
GLA
|
|
|
% of
|
|
|
Ownership
|
|
|
Date
|
|
|
Purchase
|
|
|
Annual
|
|
|
Annual
|
|
|
|
|
|
Per Leased
|
|
Property
|
|
Property Location
|
|
(Sq Ft)
|
|
|
GLA
|
|
|
Percentage
|
|
|
Acquired
|
|
|
Price
|
|
|
Rent(1)
|
|
|
Rent
|
|
|
Occupancy(2)
|
|
|
Sq Ft(3)
|
|
|
Banner Sun City
Medical Portfolio
|
|
Sun City, AZ and
Sun City West, AZ
|
|
|
642,000
|
|
|
|
8.5
|
|
|
|
100
|
|
|
|
12/31/2009
|
|
|
|
107,000,000
|
|
|
|
10,265,000
|
|
|
|
7.8
|
|
|
|
90.0
|
%
|
|
|
15.99
|
|
Camp Creek
|
|
Atlanta, GA
|
|
|
80,000
|
|
|
|
1.1
|
|
|
|
100
|
%
|
|
|
3/2/2010
|
|
|
|
19,550,000
|
|
|
|
1,819,000
|
|
|
|
1.4
|
|
|
|
97.5
|
%
|
|
|
22.74
|
|
King Street
|
|
Jacksonville, GA
|
|
|
53,000
|
|
|
|
0.7
|
|
|
|
100
|
%
|
|
|
3/9/2010
|
|
|
|
10,775,000
|
|
|
|
1,293,000
|
|
|
|
1.0
|
|
|
|
100.0
|
%
|
|
|
24.40
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total/Weighted Average
|
|
|
|
|
7,540,000
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
$
|
1,438,501,000
|
|
|
$
|
130,852,000
|
|
|
|
100.0
|
%
|
|
|
90.7
|
%
|
|
$
|
17.35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Annualized rental revenue is based on contractual base rent from
leases in effect as of March 12, 2010. |
|
|
|
(2) |
|
Occupancy includes all leased space of the respective portfolio,
including master leases. |
|
|
|
(3) |
|
Average annual rent per occupied square foot as of
March 12, 2010. |
Each of the above properties is a hospital, skilled nursing and
assisted living facility or medical office building, the
principal tenants of which are healthcare providers or
healthcare-related service providers. Each of the properties
listed above is 100% owned by our operating partnership, except
for Chesterfield Rehabilitation Center, which is 80.0% owned by
our operating partnership through a joint venture. On
March 3, 2010, we opened escrow with First American Title
Company, and on or before March 26, 2010, our subsidiary
plans to exercise its call option to buy for $3,900,000 100% of
the interest owned by its joint venture partner in HTADuke
Chesterfield Rehab, LLC, which owns the Chesterfield
Rehabilitation Center.
We own fee simple interests in all of our properties except:
(1) Lenox Office Park, Building G, (2) Lima Medical
Office Portfolio, (3) Medical Portfolio 1, (4) Medical
Portfolio 4, (5) Mountain Empire Portfolio,
(6) Oklahoma City Medical Portfolio, (7) Senior Care
Portfolio 1 and (8) Tucson Medical Office Portfolio. Lenox
Office Park, Building G is comprised of both Lenox Office Park,
Building G, in which we hold a leasehold interest, and two
vacant parcels of land, in which we own a fee simple interest.
Lima Medical Office Portfolio consists of six medical office
buildings, four of which we hold ground lease interests in
certain condominiums within each building, and two of which we
own a fee simple interest. Medical Portfolio 1 is comprised of
five properties, one in which we hold a ground lease interest,
and the other four in which we own fee simple interests. Medical
Portfolio 4 is comprised of five properties, one in which we
hold a ground lease interest, and the other four in which we own
fee simple interests. Mountain Empire Portfolio is comprised of
10 properties, seven in which we hold a ground lease interest,
and the other three in which we own fee simple interests.
Oklahoma City Medical Portfolio is comprised of two properties,
both in which we hold ground lease interests. Senior Care
Portfolio 1 consists of six properties, one of which we hold a
partial ground lease interest and a partial fee simple interest,
and five of which we own a fee simple interest. Tucson Medical
Office Portfolio is comprised of two properties, one in which we
hold a leasehold interest, and the other in which we own a fee
simple interest.
When we acquire a property, we prepare a capital plan that
contemplates the estimated capital needs of that investment. In
addition to operating expenses, capital needs may also include
costs of refurbishment, tenant improvements or other major
capital expenditures. Management currently believes that each
property is suitable for its intended purpose and adequately
covered by insurance.
Most of our properties face competition from other
healthcare-related facilities or medical office buildings that
provide comparable services in such properties market area.
68
MANAGEMENT
Board of
Directors
We operate under the direction of our board of directors, the
members of which are accountable to us and our stockholders as
fiduciaries. The board of directors is responsible for the
management and control of our affairs. The board of directors
has retained Scott D. Peters, our Chairman of the Board, Chief
Executive Officer and President, to manage our day-to-day
operations and to implement our investment strategy, subject to
the boards direction, oversight and approval.
We currently have six members on our board of directors. Our
charter and bylaws provide that the number of our directors may
be established by a majority of the entire board of directors,
but that number may not be fewer than three nor more than 15.
Our charter also provides that a majority of the directors must
be independent directors and that at least one of the
independent directors must have at least three years of relevant
real estate experience. An independent director is a
person who is not an officer or employee of us or our
affiliates, does not perform services for us, other than as a
director, does not have any material business or professional
relationships with us or our affiliates and has not otherwise
been affiliated with us or our affiliates for the previous two
years. We currently have five independent directors,
as defined by our charter.
Directors are elected annually and serve until the next annual
meeting of stockholders or until their successors have been duly
elected and qualified. There is no limit on the number of times
a director may be elected to office. Although the number of
directors may be increased or decreased, a decrease will not
have the effect of shortening the term of any incumbent director.
Any director may resign at any time. Any director may be removed
with or without cause by the stockholders upon the affirmative
vote of at least a majority of all the votes entitled to be cast
at a meeting called for the purpose of the proposed removal. The
notice of the meeting shall indicate that the purpose, or one of
the purposes, of the meeting is to determine if the director
shall be removed.
Any vacancy created by an increase in the number of directors or
the death, resignation, removal, adjudicated incompetence or
other incapacity of a director may be filled only by a vote of a
majority of the remaining directors. The independent directors
will nominate replacements for vacancies in the independent
director positions.
Responsibilities
of Directors
Our charter was reviewed and ratified by a unanimous vote of our
directors, including our independent directors, prior to the
commencement of our initial offering. The responsibilities of
our board of directors include:
|
|
|
|
|
approving and overseeing our overall investment strategy, which
will consist of elements such as: (1) allocation of
percentages of capital to be invested in real estate properties
and other real estate related assets, (2) allocation of
percentages of capital to be invested in medical office
properties and healthcare-related facilities,
(3) diversification strategies, (4) investment
selection criteria and (5) investment disposition
strategies;
|
|
|
|
approving all real property acquisitions, developments and
dispositions, including the financing of such acquisitions and
developments;
|
|
|
|
approving specific discretionary limits and authority to be
granted to management in connection with the purchase and
disposition of other real estate related assets that fit within
the asset allocation framework;
|
|
|
|
approving and overseeing our debt financing strategy;
|
|
|
|
approving joint ventures, limited partnerships and other such
relationships with third parties;
|
|
|
|
determining our distribution policy and authorizing
distributions from time to time;
|
69
|
|
|
|
|
approving amounts available for repurchases of shares of our
common stock; and
|
|
|
|
approving a liquidity event, such as the listing of our shares
on a national securities exchange, the liquidation of our
portfolio, our merger with another company or similar
transaction providing liquidity to our stockholders.
|
Our directors are not required to devote all of their time to
our business and are only required to devote the time to our
affairs as their duties may require. Our directors meet
quarterly or more frequently if necessary in order to discharge
their duties.
The directors have established and periodically review written
policies on investments and borrowings consistent with our
investment objectives and monitor our administrative procedures,
investment operations and performance to assure that such
policies are carried out.
Our independent directors are also responsible for reviewing our
fees and expenses on at least an annual basis and with
sufficient frequency to determine that the expenses incurred are
in the best interest of the stockholders.
In order to reduce or eliminate certain potential conflicts of
interest, our charter requires that a majority of our directors,
including a majority of our independent directors, not otherwise
interested in the transaction must approve all transactions with
any of our directors or any of their affiliates.
Committees
of the Board of Directors
Our board of directors may establish committees it deems
appropriate to address specific areas in more depth than may be
possible at a full board meeting, provided that the majority of
the members of each committee are independent directors. Our
board of directors has established an audit committee, a
compensation committee, a nominating and corporate governance
committee, an investment committee and a risk management
committee.
Audit Committee. Our audit committees
primary function is to assist the board of directors in
fulfilling its oversight responsibilities by reviewing the
financial information to be provided to the stockholders and
others, the system of internal controls which management has
established, and the audit and financial reporting process. The
audit committee is responsible for the selection, evaluation
and, when necessary, replacement of our independent registered
public accounting firm. Under our audit committee charter, the
audit committee will always be comprised solely of independent
directors. The audit committee is currently comprised of W.
Bradley Blair, II, Maurice J. DeWald, Warren D. Fix, Larry
L. Mathis and Gary T. Wescombe, all of whom are independent
directors. Mr. DeWald currently serves as the chairman and
has been designated as the audit committee financial expert.
Compensation Committee. The primary
responsibilities of our compensation committee are to advise the
board on compensation policies, establish performance objectives
for our executive officers, review and recommend to our board of
directors the appropriate level of director compensation and
annually review our compensation strategy and assess its
effectiveness. Under our compensation committee charter, the
compensation committee will always be comprised solely of
independent directors. The compensation committee is currently
comprised of Messrs. Blair, Fix and Wescombe, all of whom
are independent directors. Mr. Wescombe currently serves as
the chairman.
Nominating and Corporate Governance
Committee. The nominating and corporate
governance committees primary purposes are to identify
qualified individuals to become board members, to recommend to
the board the selection of director nominees for election at the
annual meeting of stockholders, to make recommendations
regarding the composition of the board of directors and its
committees, to assess director independence and board
effectiveness, to develop and implement corporate governance
guidelines and to oversee our compliance and ethics program. The
nominating and corporate governance committee is currently
comprised of Messrs. Blair, Fix and Mathis, all of whom are
independent directors. Mr. Fix currently serves as the
chairman.
70
Investment Committee. Our investment
committees primary function is to assist the board of
directors in reviewing proposed acquisitions presented by our
management. The investment committee has the authority to reject
but not to approve proposed acquisitions, which must receive the
approval of the board of directors. The investment committee is
currently comprised of Messrs. Blair, Fix, Peters and
Wescombe. Messrs. Blair, Fix and Wescombe are independent
directors. Mr. Blair currently serves as the chairman.
Risk Management Committee. Our risk management
committees primary function is to assist the board of
directors in fulfilling its oversight responsibilities by
reviewing, assessing and discussing with our management team,
general counsel and auditors: (1) material risks or
exposures associated with the conduct of our business;
(2) internal risk management systems management has
implemented to identity, minimize, monitor or manage such risks
or exposures; and (3) managements policies and
procedures for risk management. The risk management committee is
currently comprised of Messrs. Blair, DeWald and Mathis,
all of whom are independent directors. Mr. Mathis currently
serves as the chairman.
Directors
and Executive Officers
As of the date of this prospectus, our directors and our
executive officers, their ages and their positions and offices
are as follows:
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Name
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Age
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Position
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Scott D. Peters
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52
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Chief Executive Officer, President and Chairman of the Board
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Kellie S. Pruitt
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44
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Chief Accounting Officer, Secretary and Treasurer
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Mark D. Engstrom
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50
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Executive Vice President Acquisitions
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Katherine E. Black
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33
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Controller
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W. Bradley Blair, II
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66
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Independent Director
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Maurice J. DeWald
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69
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Independent Director
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Warren D. Fix
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71
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Independent Director
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Larry L. Mathis
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66
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Independent Director
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Gary T. Wescombe
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66
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Independent Director
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Scott D. Peters has served as our Chairman of the Board
since July 2006, Chief Executive Officer since April 2006 and
President since June 2007. He served as the Chief Executive
Officer of our former advisor from July 2006 until July 2008. He
served as the Executive Vice President of Grubb &
Ellis Apartment REIT, Inc. from January 2006 to November 2008
and served as one of its directors from April 2007 to June 2008.
He also served as the Chief Executive Officer, President and a
director of Grubb & Ellis from December 2007 to
July 2008, and as the Chief Executive Officer, President and
director of NNN Realty Advisors, a wholly owned subsidiary of
Grubb & Ellis, from its formation in September 2006
and as its Chairman of the Board from December 2007 to July
2008. NNN Realty Advisors became a wholly owned subsidiary of
Grubb & Ellis upon its merger with Grubb & Ellis in
December 2007. Mr. Peters also served as the Chief
Executive Officer of Grubb & Ellis Realty Investors
from November 2006 to July 2008, having served from
September 2004 to October 2006 as the Executive Vice President
and Chief Financial Officer. From December 2005 to January 2008,
Mr. Peters also served as the Chief Executive Officer and
President of G REIT, Inc., having previously served as its
Executive Vice President and Chief Financial Officer since
September 2004. Mr. Peters also served as the Executive
Vice President and Chief Financial Officer of T REIT, Inc. from
September 2004 to December 2006. From February 1997 to February
2007, Mr. Peters served as Senior Vice President, Chief
Financial Officer and a director of Golf Trust of America, Inc.,
a publicly traded REIT. Mr. Peters received his B.B.A.
degree in Accounting and Finance from Kent State University in
Kent, Ohio.
Kellie S. Pruitt has served as our Chief Accounting
Officer Secretary, Treasurer and principal accounting officer
since January 2009 and our principal financial officer
since March 2009. She also served as our Controller for a
portion of January 2009. From September 2007 to December 2008,
Ms. Pruitt served as the Vice President, Financial
Reporting and Compliance, for Fender Musical Instruments
Corporation. Prior to joining Fender Musical Instruments
Corporation in 2007, Ms. Pruitt served as a senior manager
at Deloitte & Touche LLP, from 1995 to 2007, serving
both public and privately held companies primarily concentrated
in
71
the real estate and consumer business industries. She graduated
from the University of Texas in Austin, Texas with a B.A. degree
in Accounting and is a member of the AICPA. Ms. Pruitt is a
Certified Public Accountant licensed in Arizona and Texas.
Mark D. Engstrom has served as our Executive Vice
President Acquisitions since July 2009. From
February 2009 to July 2009, Mr. Engstrom served as our
independent consultant providing acquisition and asset
management support. Mr. Engstrom has 22 years of
experience in organizational leadership, acquisitions,
management, asset management, project management, leasing,
planning, facilities development, financing, and establishing
industry leading real estate and facilities groups. From 2006
through 2009, Mr. Engstrom was the Chief Executive Officer
of Insite Medical Properties, a real estate services and
investment company. From 2001 through 2005, Mr. Engstrom
served as a Manager of Real Estate Services for Hammes Company
and created a new business unit within the company which was
responsible for providing asset and property management.
Mr. Engstrom graduated in 1983 from Michigan State
University in East Lansing, Michigan with a Bachelor of Arts
degree in Pre-Law and Public Administration. In 1987 he
graduated with a Masters Degree in Hospital and Healthcare
Administration from the University of Minnesota.
Katherine E. Black has served as our Controller since
January 2010. From May, 2006 to January 2010, Ms. Black
served as the Director of Accounting for Seton Family of
Hospitals, where she was responsible for the consolidated
financial statements of a growing healthcare system with 10
hospitals, three community clinics, multiple physician groups,
and four fundraising foundations. Prior to joining Seton Family
of Hospitals in May 2006, Ms. Black served as a senior
auditor at Deloitte & Touche LLP, from March 2003 to
May 2006, where she was responsible for leading teams in
financial and compliance audits of major public, private, and
not-for-profit entities. She graduated from the Arizona State
University in Tempe, Arizona where she received a B.A. degree in
Religion and a Post-Baccalaureate Certificate in Accounting.
Ms. Black is a Certified Public Accountant licensed in
Arizona and is member of the AICPA.
W. Bradley Blair, II has served as an
independent director of our company since September 2006.
Mr. Blair served as the Chief Executive Officer, President
and Chairman of the board of directors of Golf Trust of America,
Inc. from the time of its formation and initial public offering
in 1997 as a REIT until his resignation and retirement in
November 2007. During such term, Mr. Blair managed the
acquisition, operation, leasing and disposition of the assets of
the portfolio. From 1993 until February 1997, Mr. Blair
served as Executive Vice President, Chief Operating Officer and
General Counsel for The Legends Group. As an officer of The
Legends Group, Mr. Blair was responsible for all aspects of
operations, including acquisitions, development and marketing.
From 1978 to 1993, Mr. Blair was the managing partner at
Blair Conaway Bograd & Martin, P.A., a law firm
specializing in real estate, finance, taxation and acquisitions.
Currently, Mr. Blair operates the Blair Group consulting
practice, which focuses on real estate acquisitions and finance.
Mr. Blair earned a B.S. degree in Business from Indiana
University in Bloomington, Indiana and his Juris Doctorate
degree from the University of North Carolina School of Law in
Chapel Hill, North Carolina.
Maurice J. DeWald has served as an independent director
of our company since September 2006. He has served as the
Chairman and Chief Executive Officer of Verity Financial Group,
Inc., a financial advisory firm, since 1992, where the primary
focus has been in both the healthcare and technology sectors.
Mr. DeWald also serves as a director of Mizuho Corporate
Bank of California, and as
non-executive
Chairman of Integrated Healthcare Holdings, Inc. Mr. DeWald
also previously served as a director of Tenet Healthcare
Corporation, ARV Assisted Living, Inc. and Quality Systems, Inc.
From 1962 to 1991, Mr. DeWald was with the international
accounting and auditing firm of KPMG, LLP, where he served at
various times as an audit partner, a member of their board of
directors as well as the managing partner of Orange County and
Los Angeles California offices as well as its Chicago office.
Mr. DeWald has served as Chairman and director of both the
United Way of Greater Los Angeles and the United Way of Orange
County California. Mr. DeWald holds a B.B.A. degree in
Accounting and Finance from the University of Notre Dame in
South Bend, Indiana and is a member of its Mendoza School of
Business Advisory Council. Mr. DeWald is a Certified Public
Accountant (inactive), and is a member of the California Society
of Certified Public Accountants and the American Institute of
Certified Public Accountants.
72
Warren D. Fix has served as an independent director of
our company since September 2006. He is the Chairman of FDW,
LLC, a real estate investment and management firm. Mr. Fix
also serves as a director of Clark Investment Group, Clark
Equity Capital, First Financial Inc., First Foundation Bank and
Accel Networks. Until November of 2008, when he completed a
process of dissolution, he served for five years as the chief
executive officer of WCH, Inc., formerly Candlewood Hotel
Company, Inc., having served as its Executive Vice President,
Chief Financial Officer and Secretary since 1995. During his
tenure with Candlewood Hotel Company, Inc., Mr. Fix oversaw
the development of a chain of extended-stay hotels, including
117 properties aggregating 13,300 rooms. From July 1994 to
October 1995, Mr. Fix was a consultant to Doubletree
Hotels, primarily developing debt and equity sources of capital
for hotel acquisitions and refinancing. Mr. Fix has been
and continues to be a partner in The Contrarian Group, a
business management company since December 1992. From 1989 to
December 1992, Mr. Fix served as President of The Pacific
Company, a real estate investment and development company.
During his tenure at The Pacific Company, Mr. Fix was
responsible for the development, acquisition and management of
an apartment portfolio comprising in excess of 3,000 units.
From 1964 to 1989, Mr. Fix held numerous positions,
including Chief Financial Officer, within The Irvine Company, a
major California-based real estate firm that develops
residential property, for-sale housing, apartments, commercial,
industrial, retail, hotel and other land related uses.
Mr. Fix was one of the initial team of ten professionals
hired by The Irvine Company to initiate the development of
125,000 acres of land in Orange County, California.
Mr. Fix is a Certified Public Accountant (inactive). He
received his B.A. degree from Claremont McKenna College in
Claremont, California and is a graduate of the UCLA Executive
Management Program, the Stanford Financial Management Program
and the UCLA Anderson Corporate Director Program.
Larry L. Mathis has served as an independent director of
our company since April 2007. Since 1998 he has served as an
executive consultant with D. Peterson & Associates in
Houston, Texas, providing counsel to select clients on
leadership, management, governance, and strategy and is the
author of The Mathis Maxims, Lessons in Leadership. For
over 35 years, Mr. Mathis has held numerous leadership
positions in organizations charged with planning and directing
the future of healthcare delivery in the United States.
Mr. Mathis is the founding President and Chief Executive
Officer of The Methodist Hospital System in Houston, Texas,
having served that institution in various executive positions
for 27 years, the last 14 years before his retirement
in 1997 as CEO. During his extensive career in the healthcare
industry, he has served as a member of the board of directors of
a number of national, state and local industry and professional
organizations, including Chairman of the board of directors of
the Texas Hospital Association, the American Hospital
Association, and the American College of Healthcare Executives,
and has served the federal government as Chairman of the
National Advisory Council on Health Care Technology Assessment
and as a member of the Medicare Prospective Payment Assessment
Commission. From 1997 to 2003, Mr. Mathis was a member of
the board of directors and Chairman of the Compensation
Committee of Centerpulse, Inc., and from 2004 to present a
member of the board and Chairman of the Nominating and
Governance Committee of Alexion Pharmaceuticals, Inc., both
U.S. publicly traded companies. Mr. Mathis received a
B.A. degree in Social Sciences from Pittsburg State University
in Pittsburg, Kansas and a M.A. degree in Health Administration
from Washington University in St. Louis, Missouri.
Gary T. Wescombe has served as an independent director of
our company since October 2006. He manages and develops real
estate operating properties through American Oak Properties,
LLC, where he is a principal. He is also director, Chief
Financial Officer and Treasurer of the Arnold and Mabel Beckman
Foundation, a nonprofit foundation established for the purpose
of supporting scientific research. From October 1999 to December
2001, he was a partner in Warmington Wescombe Realty Partners in
Costa Mesa, California, where he focused on real estate
investments and financing strategies. Prior to retiring in 1999,
Mr. Wescombe was a partner with Ernst & Young,
LLP (previously Kenneth Leventhal & Company) from 1970
to 1999. In addition, Mr. Wescombe also served as a
director of G REIT, Inc. from December 2001 to January 2008
and has served as chairman of the trustees of G REIT
Liquidating Trust since January 2008. Mr. Wescombe received
a B.S. degree in Accounting and Finance from California State
University in San Jose, California and is a member of the
American Institute of Certified Public Accountants and
California Society of Certified Public Accountants.
73
Compensation
Discussion and Analysis
In the paragraphs that follow, we provide an overview and
analysis of our compensation program and policies, the material
compensation decisions we have made under those programs and
policies with respect to our named executive officers, and the
material factors that we considered in making those decisions.
Following this Compensation Discussion and Analysis, under the
heading Executive Compensation you will find a
series of tables containing specific data about the compensation
earned in 2009 by the following individuals, whom we refer to as
our named executive officers:
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Scott D. Peters, President, Chief Executive Officer and Chairman
of the Board;
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Kellie S. Pruitt, Chief Accounting Officer, Secretary and
Treasurer; and
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Mark D. Engstrom, Executive Vice President
Acquisitions.
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Compensation
Philosophy and Objectives
Our objective is to provide compensation packages that take into
account the scope of the duties and responsibilities of each
executive consistent with self-management. The compensation
committee designed our new executive compensation packages to
reflect the increased level of responsibilities and scope of
duties attendant with our transition to self-management. In
addition, we strive to provide compensation that rewards the
achievement of specific short-, medium- and long-term strategic
goals, and aligns the interests of key employees with
stockholders. The compensation paid to the executives is
designed to achieve the right balance of incentives and
appropriately reward our executives and maximize their
performance over the long-term.
Another key priority for us today and in the future is to
attract, retain and motivate a top quality management team. In
order to accomplish this objective, the compensation paid to our
executives must be competitive in the marketplace. This is
especially important given our status as a self-managed company.
In furtherance of these objectives, we refrain from using highly
leveraged incentives that drive risky, short-term behavior. By
rewarding short-, medium- and long-term performance, we are
better positioned to achieve the ultimate objective of
increasing stockholder value. To emphasize performance-based
compensation, we also provide the opportunity to earn additional
compensation through annual bonuses.
How We
Determined our Compensation Arrangements
We established the compensation packages for our named executive
officers based on the advice and recommendations of the
compensation committee and, with respect to our Chief Executive
Officer, independent consultants, with a view on emphasizing
competitive, performance-based compensation. The compensation
committee intends for the level of cash- and stock-based
compensation paid to our executives to be consistent with the
compensation paid by a peer group of companies. The compensation
committee does not benchmark to a particular percentile within
the peer group, but rather uses the peer group information to
help guide its compensation decisions.
The compensation committee engaged an outside executive
compensation consultant, Towers Perrin, to assist it in
determining the compensation for our Chief Executive Officer. At
the request of the compensation committee, Towers Perrin
provided input to the compensation committee on the design and
philosophy of our Chief Executive Officers compensation
package, and reported on the competitiveness of such package in
the marketplace. Towers Perrin presented information with
respect to a peer group comprised of the following companies:
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HCP Inc.
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Medical Properties Trust, Inc.
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Health Care REIT, Inc.
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Cogdell Spencer Inc.
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Ventas Inc.
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LTC Properties Inc.
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Nationwide Health Properties Inc.
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Inland Western Retail Real Estate Trust Inc.*
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Healthcare Realty Trust Inc.
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Piedmont Office Realty Trust Inc.*
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Omega Healthcare Investors, Inc.
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74
With the exception of those companies marked with an asterisk
(*), the companies included in the peer group are publicly
traded healthcare REITs with median assets of about $1.9B. Those
companies marked with an asterisk (*) reflect selected
non-traded REITs that have made the transition to
self-management.
The compensation committee furnished to Towers Perrin the 2008
NAREIT Survey, including data from five healthcare companies
(Cogdell Spencer Inc., HCP, Inc., Healthcare REIT Inc.,
Nationwide Health Properties and Ventas Inc.). In addition to
information related to the peer group identified above, Towers
Perrin included information from the NAREIT Survey, as well as
compensation information from REITS of all sectors with total
capitalization within a range of $1B-2.99B, in its presentation
to the compensation committee.
In addition to the peer group information presented by Towers
Perrin, the compensation committee reviewed a smaller peer group
comprised of HCP, Inc., Health Care REIT, Inc., Ventas, Inc.,
Nationwide Health Properties Inc. and Healthcare Realty Trust,
Inc. This group represents those companies that the compensation
committee considers to be most comparable to our company.
Taken as a whole, the data provided by Towers Perrin, as well as
the compensation committees independent review of the
smaller peer group described above, allows the compensation
committee to double-check the compensation paid to
our CEO against what is typical in our market.
In determining the compensation for Ms. Pruitt and
Mr. Engstrom, the compensation committee relied primarily
on the recommendations of Mr. Peters, as well as its
general understanding of the compensation paid to similar
positions within the peer group. The initial terms of
Ms. Pruitts and Mr. Engstroms compensation
packages were the result of negotiations between such executives
and Mr. Peters in connection with recruiting them to join
our company.
Elements
of our Compensation Program
During 2009, the key elements of compensation for our named
executive officers were base salary, annual bonus and long-term
equity incentive awards, as described in more detail below. In
addition to these key elements, we also provide severance
protection for our named executive officers, as discussed below.
Base Salary. Base salary provides the
fixed portion of compensation for our named executive officers
and is intended to reward core competence in their role relative
to skill, experience and contributions to us. In connection with
entering into the employment agreements, the compensation
committee approved the following initial annual base salaries:
Mr. Peters, $500,000; Mr. Engstrom, $275,000; and
Ms. Pruitt, $180,000. The compensation committee approved
an increase to Mr. Peters 2008 base salary in order
to more closely align his base salary with our peers. However,
due to the compensation committees focus on
performance-based compensation, Mr. Peters base
salary approximates the lower end of the scale of base salaries
provided by our peer companies. To emphasize performance-based
compensation, the compensation committee designed
Mr. Peters compensation package so that the majority
of his cash-based compensation may be earned through an annual
bonus after the compensation committees assessment of his
performance during the year.
As discussed above, the initial base salaries for
Ms. Pruitt and Mr. Engstrom were negotiated in
connection with their joining our company. Also as discussed
above, a key priority for us is to attract, retain and motivate
a top quality management team. In order to attract a high
caliber management team, the compensation packages offered must
be competitive within the market, as well as reflective of the
executives level of skill and expected contributions.
These were the guiding principles followed by Mr. Peters
and the compensation committee in negotiating the compensation
packages with Ms. Pruitt and Mr. Engstrom.
Annual Bonus. Annual bonuses reward and
recognize contributions to our financial goals and achievement
of individual objectives. In 2009, we did not have a formal
bonus program. Each of the named executive officers is eligible
to earn an annual performance bonus in an amount determined at
the sole discretion of the compensation committee for each year.
Pursuant to the terms of their employment agreements,
Mr. Peters initial maximum bonus is 200% of base
salary. Mr. Engstroms and Ms. Pruitts
initial target bonus is 100% and 60%, respectively, of base
salary.
75
The compensation committee, together with Mr. Peters,
developed a broad list of goals and objectives for 2009. The
compensation committee awarded Mr. Peters the maximum bonus
payable to him under his employment agreement based on its
assessment of his performance during fiscal year 2009. In
reviewing his performance, the compensation committee concluded
that Mr. Peters accomplished, and in many cases, exceeded
such goals and objectives, which included:
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effectively leading the expansion of the company, including
growing our portfolio through the acquisition of quality,
performing assets;
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successfully negotiating substantial and creative value-added
transaction terms and conditions;
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coordinating successful and competitive refinancing transactions
during a time of significant dislocations in the credit markets;
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leading our successful transition to self-management;
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recruiting and effectively supervising our employees;
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implementing effective risk management at all key levels of the
company;
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maintaining a strong and solid balance sheet;
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coordinating the engagement of new, competitively-priced and
performance-driven property management companies for our
portfolio;
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leading the extension of our initial offering for up to
180 days, successfully transitioning the dealer manager for
our initial offering to RCS and spearheading the registration of
the follow-on offering;
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establishing and enhancing our relationships with commercial and
investment banks;
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maintaining and actively enhancing our stockholder
first, performance- driven philosophy;
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effectively establishing our independent brand name as an asset
to our company; and
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facilitating an open and effective dialogue with our board.
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In addition to the annual bonus available under his employment
agreement, after an extensive review of the peer group
information and Mr. Peters performance in 2009, the
compensation committee also awarded Mr. Peters an
extraordinary bonus of $200,000. The extraordinary bonus
recognizes and rewards Mr. Peters for (i) his expanded
role and extraordinary efforts in providing demonstrated and
effective leadership to our company, and (ii) positioning
the company for continued success during recent unprecedented,
difficult economic times, and in the future.
The compensation committee relied primarily on the
recommendations of Mr. Peters in determining the bonus
amounts for Mr. Engstrom and Ms. Pruitt.
Mr. Peters based his recommendations on his
assessment of Mr. Engstrom and Ms. Pruitts
performance during 2009. For example, Mr. Peters considered
the number of successful acquisitions that Mr. Engstrom
negotiated and completed and his management of the
companys acquisitions team. Mr. Peters recommended a
bonus for Ms. Pruitt in excess of the target bonus provided
in her employment agreement because of her outstanding
performance and significant accomplishments during 2009,
including playing a key role in our transition to
self-management, establishing our corporate office and
infrastructure, building our accounting team and successfully
transitioning our investor services operations to DST Systems,
Inc. The compensation committee considered Mr. Peters
recommendations and approved the bonuses for Mr. Engstrom
and Ms. Pruitt.
Long-Term Equity Incentive
Awards. Long-term equity incentive awards are
an important element of our compensation program because these
awards align the interests of our named executive officers with
those of our stockholders and provide a strong retentive
component to the executives compensation arrangement.
Restricted stock and restricted stock units are the primary
equity award vehicle offered to our named executive officers.
The compensation committee reviewed the grant practices of the
peer group companies and awarded our named executive officers
equity awards with a value that is consistent with the equity
grants provided by the peer group.
76
Restricted stock has a number of attributes that makes it an
attractive equity award for our CEO. The vesting schedule
provides a strong retention element to Mr. Peters
compensation package if Mr. Peters voluntarily
terminates employment, he will forfeit his unvested restricted
stock. At the same time, Mr. Peters retains the attributes
of stock ownership through voting rights and distributions.
Given that there is no readily available market providing
liquidity for our common shares, and in light of the limitation
in our governing documents that poses an obstacle to our
withholding shares from the restricted stock when it vests, the
compensation committee designed Mr. Peters award so
that he could elect to receive a portion of the value of the
award in cash in order to satisfy his tax obligations. In
addition, in connection with entering into his new employment
agreement, Mr. Peters received a one-time signing-bonus of
50,000 shares of our common stock, of which Mr. Peters
elected to receive 25,000 fully-vested shares of our common
stock and a $250,000 cash payment. For additional information
regarding these grants, see the Grants of Plan-Based Award table
and the narrative following such table later in this prospectus.
We provide long-term equity incentive awards to Ms. Pruitt
and Mr. Engstrom in the form of restricted stock units.
Like restricted stock, the restricted stock units provide a
strong retention element to their compensation packages.
However, restricted stock units do not entitle the holder to
distributions.
Employment Agreements. As mentioned
above, in 2009, we entered into employment agreements with
Ms. Pruitt and Mr. Engstrom and a new employment
agreement with Mr. Peters. In considering the appropriate
terms of the employment agreements, the compensation committee
focused on the increased duties and responsibilities of such
individuals under self-management. Each of these executives has
played and will continue to play a major role in hiring,
supervising and overseeing our employees, the transition and
implementation of self-management and the post-transition
management of our company. In particular, as part of and as a
result of this transition, the role of Mr. Peters, as our
Chief Executive Officer and President, has been significantly
expanded on a number of levels. Each of the employment
agreements also specifies the payments and benefits to which
Messrs. Peters and Engstrom and Ms. Pruitt are
entitled upon a termination of employment for specified reasons.
For additional information regarding the potential severance
payments to our named executive officers, see Potential
Payments Upon Termination or Change in Control later in
this prospectus.
Summary
Compensation Table
The summary compensation table below reflects the total
compensation earned by our named executive officers for the
years ended December 31, 2008, and December 31, 2009.
We did not employ any other executive officer other than
Mr. Peters for the year ended December 31, 2008.
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Non-Equity
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Incentive Plan
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All Other
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Name and Principal Position
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Year
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Salary ($)
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Bonus ($)(4)
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Stock Awards ($)(5)
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Compensation ($)
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Compensation ($)(7)
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Total ($)
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Scott D. Peters
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2009
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504,753
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1,200,000
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750,000
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375,000
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(6)
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4,935
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2,834,688
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Chief Executive Officer,
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2008
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148,333 (3
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58,333
|
|
|
|
400,000
|
|
|
|
|
|
|
|
2,252
|
|
|
|
608,918
|
|
President and Chairman of the Board (Principal Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kellie S. Pruitt(1)
|
|
|
2009
|
|
|
|
168,942
|
|
|
|
125,000
|
|
|
|
250,000
|
|
|
|
|
|
|
|
3,022
|
|
|
|
546,964
|
|
Chief Accounting Officer, Secretary and Treasurer (Principal
Financial Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark D. Engstrom(2)
|
|
|
2009
|
|
|
|
252,403
|
|
|
|
110,000
|
|
|
|
400,000
|
|
|
|
|
|
|
|
26,589
|
|
|
|
788,992
|
|
Executive Vice President Acquisitions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Ms. Pruitt was appointed as Chief Accounting Officer in
January, 2009, as Treasurer in April, 2009, and as Secretary in
July 2009. |
|
|
|
(2) |
|
Mr. Engstrom was appointed as Executive Vice
President Acquisitions in July, 2009. |
|
|
|
(3) |
|
Reflects (a) $90,000 received pursuant to
Mr. Peters consulting arrangement with us from
August 1, 2008, through October 31, 2008, and
(b) $58,333 received as base salary pursuant to his 2008
employment agreement with us from November 1, 2008, through
December 31, 2008. |
77
|
|
|
(4) |
|
Reflects the annual cash bonuses earned by our named executive
officers for the applicable year. |
|
|
|
(5) |
|
Reflects the aggregate grant date fair value of awards granted
to the named executive officers in the reported year, determined
in accordance with Financial Accounting Standards Board ASC
Topic 718 Stock Compensation (ASC Topic 718). For
information regarding the grant date fair value of awards of
unrestricted stock, restricted stock and restricted stock units,
see Note 14, Stockholders Equity (Deficit), to our
accompanying consolidated financial statements. |
|
|
|
(6) |
|
Reflects two restricted cash awards that Mr. Peters
elected to receive in lieu of a grant of restricted shares.
Under one award, $125,000 was fully-vested on the date of grant
and $375,000 remains subject to vesting. Under the second award,
$250,000 fully vested at issuance. See the Grants of Plan-Based
Awards table and the narrative following the Grants of
Plan-Based Awards table for additional information regarding
this award. |
|
|
|
(7) |
|
Amounts included in this column for 2009 include payments for
100% of the premiums for health care coverage under our group
health plan for each of the named executive officers in the
following amounts: Mr. Peters, $4,935; Ms. Pruitt,
$3,022; and Mr. Engstrom, $4,935. Also includes for
Mr. Engstrom relocation expenses of $21,654. Such amounts
reflect the aggregate cost to us of providing the benefit. |
Grants of
Plan-Based Awards
The following table presents information concerning plan-based
awards granted to our named executive officers for the year
ended December 31, 2009. All awards were granted pursuant
to the NNN Healthcare/Office REIT, Inc. 2006 Incentive Plan (the
2006 Incentive Plan). The narrative following the
Grants of Plan-Based Awards table provides additional
information regarding the awards reflected in this table.
Grants of
Plan-Based Awards Table in Fiscal Year 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Stock
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts under Non-Equity
|
|
|
Awards: Number of
|
|
|
Grant Date Fair
|
|
|
|
|
|
|
Incentive Plan Awards(1)
|
|
|
Shares of Stock or
|
|
|
Value of Stock and
|
|
Name
|
|
Grant Date
|
|
|
Threshold ($)
|
|
|
Target ($)
|
|
|
Maximum ($)
|
|
|
Units (#)
|
|
|
Option Awards ($)(6)
|
|
|
Mr. Peters
|
|
|
07/01/09
|
|
|
|
|
|
|
|
500,000
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
07/01/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000(2
|
)
|
|
|
250,000
|
|
|
|
|
07/01/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000(3
|
)
|
|
|
500,000
|
|
Ms. Pruitt
|
|
|
07/30/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000(4
|
)
|
|
|
250,000
|
|
Mr. Engstrom
|
|
|
8/31/09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000(5
|
)
|
|
|
400,000
|
|
|
|
|
(1) |
|
Reflects a restricted cash award pursuant to the 2006 Incentive
Plan. There is no threshold, target or maximum payable pursuant
to this award; instead, the award vests based on
Mr. Peters continued service with us. |
|
|
|
(2) |
|
Reflects a grant of 25,000 fully-vested shares of our common
stock. |
|
|
|
(3) |
|
Reflects a grant of 50,000 restricted shares of our common stock. |
|
|
|
(4) |
|
Reflects a grant of 25,000 restricted stock units. |
|
|
|
(5) |
|
Reflects a grant of 40,000 restricted stock units. |
|
|
|
(6) |
|
Computed in accordance with ASC Topic 718. |
Material
Terms of 2009 Compensation
We are party to an employment agreement with each of
Messrs. Peters and Engstrom and Ms. Pruitt. The
material terms of the employment agreements are described below.
Term. Mr. Peters employment
agreement is for an initial term of four and one-half years,
ending on December 31, 2013. Beginning on that date, and on
each anniversary thereafter, the term of the agreement
automatically will extend for additional one-year periods unless
either party gives prior notice of non-renewal.
Mr. Engstroms and Ms. Pruitts employment
agreement each has an initial term of two years, ending on
78
June 30, 2011. At our sole discretion,
Mr. Engstroms and Ms. Pruitts agreement
may be extended for an additional one-year term.
Base Salary and Benefits. The agreements
provide for the following initial annual base salaries:
Mr. Peters, $500,000; Mr. Engstrom, $275,000; and
Ms. Pruitt, $180,000. All salaries may be adjusted from
year to year in the sole discretion of the compensation
committee, provided that Mr. Peters base salary may
not be reduced. The agreements provide that each of the
executives will be eligible to earn an annual performance bonus
in an amount determined at the sole discretion of the
compensation committee for each year. Mr. Peters
initial maximum bonus is 200% of base salary.
Mr. Engstroms and Ms. Pruitts initial
target bonus is 100% and 60%, respectively, of base salary. Each
executive is entitled to all employee benefits and perquisites
made available to our senior executives, provided that we will
pay 100% of the premiums for each executives health care
coverage under our group health plan. Mr. Engstrom also
received relocation expenses (up to a maximum of $30,000) in
connection with his move from Colorado to Arizona.
Equity Grants. Messrs. Peters and
Engstrom and Ms. Pruitt received equity grants in
connection with entering into their employment agreements. The
equity awards have been or will be granted under and pursuant to
the terms and conditions of the 2006 Incentive Plan. Pursuant to
the terms of his employment agreement, on July 1, 2009,
Mr. Peters was entitled to the following equity grants:
|
|
|
|
|
Fully-Vested Shares. Mr. Peters
was entitled to receive a grant of 50,000 fully-vested shares.
Pursuant to the terms of his employment agreement,
Mr. Peters elected to receive a $250,000 cash payment, in
lieu of one-half of such shares, and 25,000 fully-vested shares.
|
|
|
|
|
|
Fiscal 2009 Restricted
Shares. Mr. Peters was entitled to
receive a grant of 100,000 restricted shares of our common
stock. Pursuant to the terms of his employment agreement,
Mr. Peters elected to receive a restricted cash award in
lieu of 50,000 restricted shares, as described below. The
restricted shares vest as follows: 12,500 on July 1, 2009
(the date of grant); 12,500 on July 1, 2010; 12,500 on
July 1, 2011; and 12,500 on July 1, 2012, provided
Mr. Peters is employed by us on each such vesting date.
|
|
|
|
|
|
Fiscal 2009 Restricted Cash Award. As
described above, Mr. Peters elected to receive a restricted
cash award in lieu of 50,000 restricted shares. The restricted
cash award is equal to $500,000, the fair market value of the
foregone restricted shares on the date of grant, and is subject
to the same restrictions and vesting schedule as the foregone
restricted shares. Accordingly, the restricted cash award vests
as follows: $125,000 vested on July 1, 2009 (the date of
grant), $125,000 on July 2, 2010; $125,000 on July 1,
2011; and $125,000 on July 1, 2012, provided
Mr. Peters is employed by us on each such vesting date.
|
|
|
|
|
|
Future Restricted Share Grants and Restricted Cash
Awards. Pursuant to the terms of his
employment agreement, Mr. Peters is entitled to receive on
each of the first three anniversaries of the effective date of
the agreement, an additional 100,000 restricted shares of our
common stock, which will vest in equal installments on the grant
date and on each anniversary of the grant date during the
balance of the term of the employment agreement, provided he is
employed by us on each such vesting date. As with the 2009
grant, Mr. Peters may in his sole discretion elect to
receive a restricted cash award in lieu of up to one-half of
each grant of restricted shares (i.e., up to
50,000 shares), which restricted cash award will be equal
to the fair market value of the foregone restricted shares and
will be subject to the same restrictions and vesting schedule as
the foregone restricted shares.
|
Pursuant to the terms of his employment agreement, on
August 31, 2009, Mr. Engstrom received a grant of
40,000 restricted stock units. The restricted stock units will
vest and convert to shares of our common stock in equal annual
installments of
331/3%
each, on the first, second and third anniversaries of the date
of grant, provided he is employed by us on each such vesting
date.
Pursuant to the terms of her employment agreement, on
July 30, 2009, Ms. Pruitt received a grant of 25,000
restricted stock units. The restricted stock units will vest and
convert to shares of our common stock in equal annual
installments of
331/3%
each, on the first, second and third anniversaries of the date
of grant, provided she is employed by us on each such vesting
date.
79
Mr. Peters shares of restricted stock and restricted
cash award(s) and Mr. Engstroms and
Ms. Pruitts restricted stock units will become
immediately vested and, with respect to the restricted stock
units, convert to shares of our common stock, upon the earlier
occurrence of (1) their termination of employment by reason
of death or disability, (2) their termination of employment
by us without cause or by the executive for good reason (as such
terms are defined in the employment agreement), or (3) a
change in control (as defined in the 2006 Incentive Plan).
Severance. Each of the employment agreements
also specifies the payments and benefits to which
Messrs. Peters and Engstrom and Ms. Pruitt are
entitled upon a termination of employment for specified reasons.
See Potential Payments Upon Termination or Change in
Control, later in this prospectus, for a description of
these benefits.
Outstanding
Equity Awards
The following table presents information concerning outstanding
equity awards held by our named executive officers as of
December 31, 2009. Our named executive officers do not hold
any option awards.
Outstanding
Equity Awards at 2009 Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
Number of Shares or Units of
|
|
|
Market Value of Shares or
|
|
|
|
Stock That Have
|
|
|
Units of Stock That Have Not
|
|
Name
|
|
Not Vested (#)
|
|
|
Vested ($)(5)
|
|
|
Mr. Peters
|
|
|
26,667(1
|
)
|
|
|
266,670
|
|
|
|
|
37,500(2
|
)
|
|
|
375,000
|
|
Ms. Pruitt
|
|
|
25,000(3
|
)
|
|
|
250,000
|
|
Mr. Engstrom
|
|
|
40,000(4
|
)
|
|
|
400,000
|
|
|
|
|
(1) |
|
Reflects restricted shares of our common stock, which vest and
become non-forfeitable in equal installments on each of
November 14, 2010, and November 14, 2011, provided
Mr. Peters is employed by us on each such vesting date. |
|
|
|
(2) |
|
Reflects restricted shares of our common stock, which vest and
become non-forfeitable in equal installments on each of
July 1, 2010, July 1, 2011 and July 1, 2012,
provided Mr. Peters is employed by us on each such vesting
date. |
|
|
|
(3) |
|
Reflects restricted stock units, which vest in equal annual
installments on each of July 30, 2010, July 30, 2011,
and July 30, 2012, provided Ms. Pruitt is employed by
us on each such vesting date. |
|
|
|
(4) |
|
Reflects restricted stock units, which vest in equal annual
installments on each of August 31, 2009, August 31,
2010, and August 31, 2011, provided Mr. Engstrom is
employed by us on each such vesting date. |
|
|
|
(5) |
|
Calculated using the per share price of shares of our common
stock as of the close of business on December 31, 2009,
based upon the price per share offered in our initial public
offering ($10). |
80
Option
Exercises and Stock Vested
The following table shows the number of shares acquired and the
value realized upon vesting of stock awards for each of the
named executive officers. Our named executive officers do not
hold any option awards.
Stock
Vested in Fiscal Year 2009
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
Named Executive Officer
|
|
Acquired on Vesting (#)
|
|
|
on Vesting ($)
|
|
|
Mr. Peters
|
|
|
13,333
|
(1)
|
|
|
133,330
|
|
|
|
|
37,500
|
(2)
|
|
|
375,000
|
|
Ms. Pruitt
|
|
|
|
|
|
|
|
|
Mr. Engstrom
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Reflects shares that vested pursuant to the terms of
Mr. Peters restricted stock grant on
November 14, 2008. |
|
|
|
(2) |
|
Reflects shares that vested pursuant to the terms of
Mr. Peters restricted stock grant on July 1,
2009. |
Potential
Payments Upon Termination or Change in Control
Summary of Potential Payments Upon Termination of
Employment. As mentioned earlier in this
prospectus, we are party to an employment agreement with each of
our named executive officers, which provide benefits to the
executive in the event of his or her termination of employment
under certain conditions. The amount of the benefits varies
depending on the reason for the termination, as explained below.
Termination without Cause; Resignation for Good
Reason. If we terminate the executives
employment without Cause, or he or she resigns for Good Reason
(as such terms are defined in the employment agreement), the
executive will be entitled to the following benefits:
|
|
|
|
|
in the case of Mr. Peters, a lump sum severance payment
equal to (a) the sum of (1) three times his
then-current base salary plus (2) an amount equal to the
average of the annual bonuses earned prior to the termination
date (if termination occurs in the first year, the bonus will be
calculated at $1,000,000), multiplied by (b) (1) if the
date of termination occurs during the initial term, the greater
of one, or the number of full calendar months remaining in the
initial term, divided by 12, or (2) if the date of
termination occurs during a renewal term after December 31,
2013, 1; provided that in no event may the severance benefit be
less than $3,000,000;
|
|
|
|
|
|
in the case of Mr. Engstrom and Ms. Pruitt, a lump sum
severance payment equal to two times his or her then-current
base salary;
|
|
|
|
|
|
continued health care coverage under COBRA for 18 months,
in the case of Mr. Peters, or six months, in the case of
Mr. Engstrom and Ms. Pruitt, with all premiums paid by
us; and
|
|
|
|
|
|
immediate vesting of Mr. Peters shares of restricted
stock and restricted cash award(s) and Mr. Engstroms
and Ms. Pruitts restricted stock units.
|
Cause, as defined in the employment agreements,
generally means: (i) the executives conviction of or
entering into a plea of guilty or no contest to a felony or a
crime involving moral turpitude or the intentional commission of
any other act or omission involving dishonesty or fraud that is
materially injurious to us; (ii) the executives
substantial and repeated failure to perform his or her duties;
(iii) with respect to Ms. Pruitt and
Mr. Engstrom, gross negligence or willful misconduct in the
performance of the executives duties which materially
injures us or our reputation; or (iv) with respect to
Ms. Pruitt and Mr. Engstrom, the executives
willful breach of the material covenants of his or her
employment agreement.
Good Reason, as defined in Mr. Peters
employment agreement generally means, in the absence of his
written consent: (i) a material diminution in his
authority, duties or responsibilities; (ii) a material
diminution in the his base salary; (iii) relocation more
than 35 miles from Scottsdale, Arizona; or (iv) a
material
81
diminution in the authority, duties, or responsibilities of the
supervisor to whom he is required to report, including a
requirement that he report to a corporate officer or employee
instead of reporting directly to the Board. Good
Reason as defined in Ms. Pruitts and
Mr. Engstroms employment agreements, generally means,
in the absence of a written consent of the executive:
(i) except for executive nonperformance, a material
diminution in the executives authority, duties or
responsibilities (provided that this provision will not apply if
executives then-current base salary is kept in place) or
(ii) except in connection with a material decrease in our
business, a diminution in the executives base salary in
excess of 30%.
Disability. If we terminate the
executives employment by reason of his or her disability,
in addition to receiving his or her accrued rights, such as
earned but unpaid base salary and any earned but unpaid benefits
under company incentive plans, the executive will be entitled to
continued health care coverage under COBRA, with all premiums
paid by us, for 18 months, in the case of Mr. Peters,
or six months, in the case of Mr. Engstrom or
Ms. Pruitt. In addition, Mr. Peters shares of
restricted stock and restricted cash award(s) and
Mr. Engstroms and Ms. Pruitts restricted
stock units will become immediately vested.
Death; For Cause; Resignation without Good
Reason. In the event of a termination due to
death, cause or resignation without good reason, an executive
will receive his or her accrued rights, but he or she will not
be entitled to receive severance benefits under the agreement.
In the event of the executives death,
Mr. Peters shares of restricted stock and restricted
cash award(s) and Mr. Engstroms and
Ms. Pruitts restricted stock units will become
immediately vested.
Non-Compete Agreement. Each of
Messrs. Peters and Engstrom and Ms. Pruitt entered
into a non-compete and non-solicitation agreement with us. These
agreements generally require the executives to refrain from
competing with us within the United States and soliciting our
customers, vendors, or employees during employment through the
occurrence of a liquidity event. The agreements also limit the
executives ability to disclose or use any of our
confidential business information or practices.
The following table summarizes the value of the termination
payments and benefits that each of our named executive officers
would receive if he or she had terminated employment on
December 31, 2009 under the circumstances shown. The
amounts shown in the tables do not include accrued but unpaid
salary, earned annual bonus for 2009, or payments and benefits
to the extent they are provided on a non-discriminatory basis to
salaried employees generally upon termination of employment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Termination for
|
|
|
Termination without
|
|
|
|
|
|
|
|
|
|
Cause or
|
|
|
Cause or
|
|
|
|
|
|
|
|
|
|
Resignation without
|
|
|
Resignation For
|
|
|
|
|
|
|
|
|
|
Good Reason ($)
|
|
|
Good Reason ($)
|
|
|
Death ($)
|
|
|
Disability ($)
|
|
|
Mr. Peters
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance(1)
|
|
$
|
|
|
|
$
|
10,000,000
|
|
|
$
|
|
|
|
$
|
|
|
Benefit Continuation(2)
|
|
|
|
|
|
|
20,448
|
|
|
|
|
|
|
|
20,448
|
|
Value of Unvested Equity Awards(3)
|
|
|
|
|
|
|
641,670
|
|
|
|
641,670
|
|
|
|
641,670
|
|
Value of Unvested Restricted Cash
|
|
|
|
|
|
|
375,000
|
|
|
|
375,000
|
|
|
|
375,000
|
|
Awards(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
0
|
|
|
$
|
11,037,118
|
|
|
$
|
1,016,670
|
|
|
$
|
1,037,118
|
|
Ms. Pruitt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
$
|
|
|
|
$
|
360,000
|
|
|
$
|
|
|
|
$
|
|
|
Benefit Continuation(2)
|
|
|
|
|
|
|
7,402
|
|
|
|
|
|
|
|
7,402
|
|
Value of Unvested Equity Awards(3)
|
|
|
|
|
|
|
250,000
|
|
|
|
250,000
|
|
|
|
250,000
|
|
TOTAL
|
|
$
|
0
|
|
|
$
|
617,402
|
|
|
$
|
250,000
|
|
|
$
|
257,402
|
|
Mr. Engstrom
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
$
|
|
|
|
$
|
550,000
|
|
|
$
|
|
|
|
$
|
|
|
Benefit Continuation(2)
|
|
|
|
|
|
|
7,402
|
|
|
|
|
|
|
|
7,402
|
|
Value of Unvested Equity Awards(3)
|
|
|
|
|
|
|
400,000
|
|
|
|
400,000
|
|
|
|
400,000
|
|
TOTAL
|
|
$
|
0
|
|
|
$
|
957,402
|
|
|
$
|
400,000
|
|
|
$
|
407,402
|
|
82
|
|
|
(1) |
|
Represents cash severance payment based on a termination without
Cause or a resignation for Good Reason. Such cash severance is
calculated using the following formula (as discussed above)
based on a termination date of December 31, 2009: (a) the
sum of (1) three times his
then-current
base salary plus (2) an amount equal to the average of the
annual bonuses earned prior to the termination date (if
termination occurs in the first year, the bonus will be
calculated at $1,000,000), multiplied by (b)(1) if the date of
termination occurs during the initial term, the greater of one,
or the number of full calendar months remaining in the initial
term, divided by 12, or (2) if the date of termination occurs
during a renewal term after December 31, 2013, 1. |
|
|
|
(2) |
|
Represents company-paid COBRA for medical and dental coverage
based on 2010 rates for 18 months, in the case of
Mr. Peters, or six months, in the case of Mr. Engstrom
and Ms. Pruitt. |
|
|
|
(3) |
|
Represents the value of unvested equity awards that vest upon
the designated event. Pursuant to the 2006 Incentive Plan,
equity awards vest upon the executives termination of
service with us due to death or disability or upon their
termination by us without cause or their resignation for good
reason. Awards of restricted stock and restricted stock units
are valued as of year-end 2009 based upon the fair market value
of our common stock on December 31, 2009, the last day in
our 2009 fiscal year ($10). |
|
|
|
(4) |
|
Represents the value of the unvested restricted cash award
(which Mr. Peters elected to receive in lieu of 50,000
restricted shares, as described above under Material Terms
of 2009 Compensation). |
Summary of Potential Payments upon a Change in
Control. Pursuant to the 2006 Incentive Plan,
equity awards, and Mr. Peters restricted cash award,
vest upon the occurrence of a change in control of our company.
The 2006 Incentive Plan generally provides that a Change in
Control occurs upon the occurrence of any of the following:
(1) when our incumbent board of directors cease to
constitute a majority of the board of directors; (2) except
in the case of certain issuances or acquisitions of stock, when
any person acquires a 25% or more ownership interest in the
outstanding combined voting power of our then outstanding
securities; or (3) the consummation of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of our assets, unless (a) the beneficial
owners of our combined voting power immediately prior to the
transaction continue to own 50% or more of the combined voting
power of our then outstanding securities, (b) no person
acquires a 25% or more ownership interest in the combined voting
power of our then outstanding securities, and (c) at least
a majority of the members of the board of directors of the
surviving corporation were incumbent directors at the time of
approval of the corporate transaction. In the event that a
Change in Control occurs which results in a Good Reason (as
defined above) resignation by Mr. Peters,
Mr. Engstrom, and/or Ms. Pruitt such resigning
employee(s) shall be entitled to the severance benefits set
forth above.
The following table summarizes the value of the payments that
each of our named executive officers would receive if a change
in control occurred on December 31, 2009, regardless of
whether the executive incurs a termination of employment. Should
a termination of employment occur upon a change in control, the
executive would be paid benefits pursuant to Termination without
Cause as previously described.
|
|
|
|
|
Mr. Peters
|
|
|
|
|
Value of Unvested Equity Awards(1)
|
|
$
|
641,670
|
|
Value of Unvested Restricted Cash Awards(2)
|
|
$
|
375,000
|
|
TOTAL
|
|
$
|
1,016,670
|
|
Ms. Pruitt
|
|
|
|
|
Value of Unvested Equity Awards(1)
|
|
$
|
250,000
|
|
TOTAL
|
|
$
|
250,000
|
|
Mr. Engstrom
|
|
|
|
|
Value of Unvested Equity Awards(1)
|
|
$
|
400,000
|
|
TOTAL
|
|
$
|
400,000
|
|
83
|
|
|
(1) |
|
Represents the value of unvested awards of restricted stock and
restricted stock units, as applicable, which are valued as of
year-end 2009 based upon the fair market value of our common
stock on December 31, 2009, the last day in our 2009 fiscal
year ($10). |
|
|
|
(2) |
|
Represents the value of the unvested restricted cash award
(which Mr. Peters elected to receive in lieu of 50,000
restricted shares, as described above under Material Terms
of 2009 Compensation). |
The Risk Management Committee reviews our compensation policies
and practices as a part of its overall review of the material
risks or exposures associated with our internal and external
exposures. Through its continuous process of review, we have
concluded that our compensation policies are not reasonably
likely to have a material adverse effect on us.
Director
Compensation
Pursuant to the terms of our director compensation program,
which are contained in our 2006 Independent Directors
Compensation Plan, a
sub-plan of
our 2006 Incentive Plan, as amended, our independent directors
received the following forms of compensation during 2009:
Annual Retainer. Our independent directors
receive an annual retainer of $50,000.
Annual Retainer, Committee Chairman. The
chairman of each board committee (including the audit committee,
the compensation committee, the nominating and corporate
governance committee, the investment committee and the risk
management committee) receives an additional annual retainer of
$7,500.
Meeting Fees. Our independent directors
receive $1,500 for each board meeting attended in person or by
telephone and $1,000 for each committee meeting attended in
person or by telephone. An additional $1,000 is paid to the
committee chair for each committee meeting attended in person or
by telephone. If a board meeting is held on the same day as a
committee meeting, an additional fee will not be paid for
attending the committee meeting.
Equity Compensation. Upon initial election to
our board of directors, each independent director receives
5,000 shares of restricted common stock, and an additional
5,000 shares of restricted common stock upon his or her
subsequent election each year. The shares of restricted common
stock vest as to 20% of the shares on the date of grant and on
each anniversary thereafter over four years from the date of
grant.
Expense Reimbursement. We reimburse our
directors for reasonable
out-of-pocket
expenses incurred in connection with attendance at meetings,
including committee meetings, of our board of directors.
Independent directors do not receive other benefits from us. Our
non-independent director, Mr. Peters, does not receive any
compensation in connection with his service as a director.
The following table sets forth the compensation earned by our
independent directors for the year ended December 31, 2009:
Director
Compensation Table for 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
Stock Awards
|
|
Total
|
Name
|
|
Paid in Cash ($)
|
|
($)(1)
|
|
($)
|
|
W. Bradley Blair, II
|
|
|
110,500
|
|
|
|
33,333
|
|
|
|
142,333
|
|
Maurice J. DeWald
|
|
|
105,000
|
|
|
|
33,333
|
|
|
|
138,333
|
|
Warren D. Fix
|
|
|
105,000
|
|
|
|
33,333
|
|
|
|
138,333
|
|
Larry L. Mathis
|
|
|
94,000
|
|
|
|
33,333
|
|
|
|
127,333
|
|
Gary T. Wescombe
|
|
|
106,000
|
|
|
|
33,333
|
|
|
|
139,333
|
|
|
|
|
(1) |
|
Reflects the aggregate grant date fair value of restricted stock
awards granted to the directors, determined in accordance with
ASC Topic 718. For information regarding the grant date fair
value of awards of unrestricted stock, restricted stock and
restricted stock units, see Note 14, Stockholders
Equity (Deficit), |
84
|
|
|
|
|
to our accompanying consolidated financial statements. On
August 31, 2009, each of the independent directors received
5,000 shares of restricted stock. The aggregate number of
shares of restricted common stock held by each independent
director as of December 31, 2009 is as follows:
Mr. Blair, 7,500; Mr. DeWald, 7,500; Mr. Fix,
7,500; Mr. Mathis, 8,500; and Mr. Wescombe, 7,500. |
Compensation
Committee Interlocks and Insider Participation
During 2009, W. Bradley Blair, II, Maurice J. DeWald,
Warren D. Fix, Larry L. Mathis and Gary T. Wescombe, all of whom
are independent directors, served on our compensation committee.
None of them was an officer or employee of our company in 2009
or any time prior thereto. During 2009, none of the members of
the compensation committee had any relationship with our company
requiring disclosure under Item 404 of
Regulation S-K.
None of our executive officers served as a member of the board
of directors or compensation committee, or similar committee, of
any other company whose executive officer(s) served as a member
of our board of directors or our compensation committee.
Limited
Liability and Indemnification of Directors, Officers and
Others
Our organizational documents limit the personal liability of our
stockholders, directors and officers for monetary damages and
provide that we will indemnify and pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to any
individual who is a present or former director or officer (and
any individual, who while a director or officer and at our
request, serves or has served as a director, officer, partner or
trustee of another corporation, real estate investment trust,
partnership, joint venture, trust or other enterprise) and who
is made or threatened to be made a party to the proceeding by
reason of his or her service in that capacity, subject to the
limitations of Maryland law and the Statement of Policy
Regarding Real Estate Investment Trusts adopted by the North
American Securities Administrators Association, or the NASAA
Guidelines. We also maintain a directors and officers liability
insurance policy. Maryland law permits a corporation to include
in its charter a provision limiting the liability of directors
and officers to the corporation and its stockholders for money
damages, except for liability resulting from actual receipt of
an improper benefit or profit in money, property or services or
active and deliberate dishonesty established by a final judgment
and which is material to the cause of action. The Maryland
General Corporation Law allows directors and officers to be
indemnified against judgments, penalties, fines, settlements and
reasonable expenses actually incurred in connection with a
proceeding unless the following can be established:
|
|
|
|
|
an act or omission of the director or officer was material to
the cause of action adjudicated in the proceeding, and was
committed in bad faith or was the result of active and
deliberate dishonesty;
|
|
|
|
the director or officer actually received an improper personal
benefit in money, property or services; or
|
|
|
|
with respect to any criminal proceeding, the director or officer
had reasonable cause to believe his or her act or omission was
unlawful.
|
However, under the Maryland General Corporation Law, a
corporation may not indemnify for an adverse judgment in a suit
by or in the right of the corporation or for a judgment of
liability on the basis that personal benefit was improperly
received, unless in either case a court orders indemnification
and then only for expenses. In addition, the Maryland General
Corporation Law permits a corporation to advance reasonable
expenses to a director or officer upon the corporations
receipt of a written affirmation by the director or officer of
his or her good faith belief that he or she has met the standard
of conduct necessary for indemnification by the corporation and
a written undertaking by him or her or on his or her behalf to
repay the amount paid or reimbursed by the corporation if it is
ultimately determined that the standard of conduct was not met.
In spite of the above provisions of the Maryland General
Corporation Law, our charter provides that our directors may be
indemnified by us for liability or loss suffered by them or held
harmless for liability or loss suffered by us only if all of the
following conditions are met:
|
|
|
|
|
the indemnitee determined, in good faith, that the course of
conduct which caused the loss, liability or expense was in our
best interests;
|
85
|
|
|
|
|
the indemnitee was acting on our behalf or performing services
for us;
|
|
|
|
in the case of affiliated directors, the liability or loss was
not the result of negligence or misconduct; and
|
|
|
|
in the case of independent directors, the liability or loss was
not the result of gross negligence or willful misconduct.
|
In addition, any indemnification or any agreement to hold
harmless is recoverable only out of our net assets and not from
our stockholders.
Our charter also provides that we may pay or reimburse
reasonable legal expenses and other expenses incurred by a
director in advance of the final disposition of a proceeding
only if all of the following conditions are satisfied:
|
|
|
|
|
the proceeding relates to acts or omissions with respect to the
performance of duties or services on our behalf;
|
|
|
|
the director provides us with written affirmation of his or her
good faith belief that he or she has met the standard of conduct
necessary for indemnification by us;
|
|
|
|
the legal proceeding was initiated by a third party who is not a
stockholder or, if by a stockholder acting in his or her
capacity as such, a court of competent jurisdiction approves the
advancement; and
|
|
|
|
the director provides us with a written agreement to repay the
amount paid or reimbursed by us, together with the applicable
legal rate of interest thereon, if it is ultimately determined
that he or she did not comply with the requisite standard of
conduct and is not entitled to indemnification.
|
On January 17, 2007, we entered into indemnification
agreements with four of our independent directors, W. Bradley
Blair, II, Maurice J. DeWald, Warren D. Fix, Gary T.
Wescombe, our non-independent director, Scott D. Peters and our
former officers, Danny Prosky and Andrea R. Biller. On
March 1, 2007, we entered into an indemnification agreement
with our former officer, Shannon K S Johnson. On April 18,
2007, we entered into an indemnification agreement with our
fifth independent director, Larry L. Mathis. On July 1,
2009, we entered into employment agreements with two of our
executive officers, Kellie S. Pruitt and Mark Engstrom, whereby
we will indemnify and exculpate such officers from money damages
incurred as a result of claims arising out of an alleged
wrongful act by the officer while acting in good faith as our
officer or employee. Pursuant to the terms of these
indemnification agreements, we will indemnify and advance
expenses and costs incurred by our directors and officers in
connection with any claims, suits or proceedings brought against
such directors and officers as a result of his or her service.
However, our indemnification obligation is subject to the
limitations set forth in the indemnification agreements and in
our charter.
The general effect to investors of any arrangement under which
any of our controlling persons, directors or officers are
insured or indemnified against liability is a potential
reduction in distributions resulting from our payment of
premiums, deductibles and other costs associated with such
insurance or, to the extent any such loss is not covered by
insurance, our payment of indemnified losses. In addition,
indemnification could reduce the legal remedies available to us
and our stockholders against the indemnified individuals;
however this provision does not reduce the exposure of our
directors and officers to liability under federal or state
securities laws, nor does it limit our stockholders
ability to obtain injunctive relief or other equitable remedies
for a violation of a directors or an officers duties
to us or our stockholders, although the equitable remedies may
not be an effective remedy in some circumstances.
The SEC takes the position that indemnification against
liabilities arising under the Securities Act of 1933 is against
public policy and unenforceable. Indemnification of our
directors or any person acting as a broker-dealer on our behalf,
including our dealer manager, will not be allowed for
liabilities arising from or out of a violation of state or
federal securities laws, unless one or more of the following
conditions are met:
|
|
|
|
|
there has been a successful adjudication on the merits of each
count involving alleged securities law violations;
|
86
|
|
|
|
|
such claims have been dismissed with prejudice on the merits by
a court of competent jurisdiction; or
|
|
|
|
a court of competent jurisdiction approves a settlement of the
claims against the indemnitee and finds that indemnification of
the settlement and the related costs should be made, and the
court considering the request for indemnification has been
advised of the position of the SEC and of the published position
of any state securities regulatory authority in the state in
which our securities were offered as to indemnification for
violations of securities laws.
|
Our operating partnership must also indemnify us and our
directors, officers and other persons we may designate against
damages and other liabilities in our capacity as general
partner. See The Operating Partnership
Agreement Indemnification.
Ownership
Interests of Our Former Advisor
Our former advisor has acquired 20,000 limited partnership units
of our operating partnership, for which it contributed $200,000.
As of the date of this prospectus, our former advisor is the
only limited partner of our operating partnership. Our former
advisor may sell any of these units since it no longer serves as
our advisor. Our former advisor also holds 200 shares of
our common stock.
In addition to its right to participate with other partners in
our operating partnership on a proportionate basis in
distributions, our former advisors limited partnership
interest in our operating partnership also may entitle it,
subject to a number of conditions, to a subordinated
participation interest. The subordinated participation interest
may entitle our former advisor to receive a cash distribution
under the circumstances described below.
|
|
|
|
|
If there is a listing of our shares on a national securities
exchange or a merger in which our stockholders receive in
exchange for their shares of our common stock shares of a
company that are traded on a national securities exchange, our
former advisor may be entitled to receive a distribution in an
amount equal to 15.0% of the amount, if any, by which
(1) the fair market value of the assets of our operating
partnership (determined by appraisal as of the listing date or
merger date, as applicable) owned as of the expiration of the
advisory agreement, plus any assets acquired after such
expiration for which our former advisor was entitled to receive
an acquisition fee, or the included assets, less any
indebtedness secured by the included assets, plus the cumulative
distributions made by our operating partnership to us and the
limited partners who received partnership units in connection
with the acquisition of the included assets, from our inception
through the listing date or merger date, as applicable, exceeds
(2) the sum of the total amount of capital raised from
stockholders and the capital value of partnership units issued
in connection with the acquisition of the included assets
through the listing date or merger date, as applicable,
(excluding any capital raised after the completion of the
initial offering) (less amounts paid to repurchase shares
pursuant to our share repurchase plan) plus an annual 8.0%
cumulative, non-compounded return on such invested capital and
the capital value of such partnership units measured for the
period from inception through the listing date or merger date,
as applicable.
|
|
|
|
If there is a liquidation or sale of all or substantially all of
the assets of the operating partnership, then our former advisor
may be entitled to receive a distribution in an amount equal to
15.0% of the net proceeds from the sale of the included assets,
after subtracting distributions to our stockholders and the
limited partners who received partnership units in connection
with the acquisition of the included assets of (1) their
initial invested capital and the capital value of such
partnership units (less amounts paid to repurchase shares
pursuant to our share repurchase program) through the date of
the liquidity event plus (2) an annual 8.0% cumulative,
non-compounded return on such invested capital and the capital
value of such partnership units measured for the period from
inception through the liquidity event date. Our operating
partnership may satisfy the distribution obligation by either
paying cash or issuing an interest-bearing promissory note. If
the promissory note is issued and not paid within five years
after the issuance of the note, we would be required to purchase
the promissory note (including accrued but unpaid interest) in
exchange for cash or shares of our common stock.
|
87
The actual amount of these distributions cannot be determined at
this time as they are dependent upon our results of operations.
See Compensation Table and The Operating
Partnership Agreement Distributions and
Allocations.
Our former advisors right to receive any deferred
subordinated distribution is subject to a number of ongoing
conditions. These conditions include, without limitation, that
our former advisor fully and reasonably cooperate with us and
self-management
during the course of our transition to self management. Various
issues have arisen with respect to whether our former advisor
and its affiliates reasonably cooperated with us and with our
transition to self management. We have communicated our position
to our former advisor that it has not fully and reasonably
cooperated with our transition to
self-management
and therefore is not entitled to such deferred subordinated
distribution.
88
COMPENSATION
TABLE
In our initial offering, our former advisor and its affiliates
received certain compensation and fees for services relating to
the initial offering and the investment and management of our
assets. Some of these fees and expense reimbursements may be
payable even though the advisory agreement has expired. In this
offering, certain third parties will receive compensation and
fees for services relating to this offering and property
management. The below chart provides a comparison of our fee
structure during the initial offering and this offering. In
addition, in the Initial Offering section, the below
chart shows the changes in the fees payable under our advisory
agreement prior to its amendment and restatement effective as of
October 24, 2008.
|
|
|
|
|
Type of Compensation
|
|
Initial Offering
|
|
Follow-On Offering
|
|
Offering Stage
|
|
|
|
|
Selling Commissions(1)
|
|
Up to 7.0% of gross offering proceeds from our primary
offering; selling commissions may be reallowed in whole or in
part to participating broker-dealers.
|
|
Up to 7.0% of gross offering proceeds from our primary offering,
all of which will be reallowed in whole or in part to
participating broker-dealers.
|
|
|
|
|
|
Dealer Manager Fee(1)
|
|
Up to 2.5% of gross offering proceeds from our primary offering
for non- accountable marketing support plus up to 0.5% for
accountable bona fide due diligence reimbursement. Our
dealer manager may have reallowed to participating
broker-dealers up to 1.5% of the gross offering proceeds from
our primary offering for non-accountable marketing support and
up to 0.5% for accountable bona fide due diligence
expenses.
|
|
Up to 3.0% of gross offering proceeds from our primary offering
for non- accountable marketing support. Our dealer manager may
reallow all or a portion of the dealer manager fee to
participating broker-dealers for non- accountable marketing
support.
|
|
|
|
|
|
Other Organizational and Offering Expenses(2)
|
|
Up to 1.5% of gross offering proceeds from our primary offering
for legal, accounting, printing, marketing and other offering
expenses incurred on our behalf.
|
|
We estimate that our organizing and offering expenses will be
approximately 1.5% of the gross offering proceeds from our
primary offering.
|
Acquisition and Development Stage(1)
|
|
|
|
|
Acquisition Fees(3)
|
|
Under original advisory agreement:
3.0% of the contract purchase price.
|
|
We use our employees for acquisition services and will not pay
acquisition fees for properties acquired using funds raised in
this offering.
|
|
|
Under advisory agreement as amended and restated effective
October, 24, 2008:
|
|
|
|
|
Range of 1.5% to 2.5% of the contract price with an expected
average of 2.25% of the aggregate contract price.
|
|
|
|
|
|
|
|
Reimbursement of Acquisition Expenses(3)
|
|
All expenses related to selecting, evaluating, acquiring and
investing in properties, whether or not
|
|
We estimate that acquisition expenses paid to third parties for
legal fees, due diligence and
|
|
|
|
|
|
|
|
|
|
|
89
|
|
|
|
|
Type of Compensation
|
|
Initial Offering
|
|
Follow-On Offering
|
|
|
|
acquired. The reimbursement expenses payable to our former
advisor, its affiliates and third parties were approximately
0.8% of the purchase price of our properties.
|
|
closing costs will be approximately 0.8% of the purchase price
of our properties.
|
Operational Stage(1)
|
|
|
|
|
Asset Management Fee
|
|
Under original advisory agreement:
1.0% of our average invested assets.
|
|
We use our employees for asset management services and will not
pay asset management fees.
|
|
|
|
|
|
|
|
Under advisory agreement as amended and restated effective as
of October 24, 2008:
|
|
|
|
|
0.5% of our average invested assets.
|
|
|
|
|
|
|
|
Property Management Fees
|
|
4.0% of the gross cash receipts from each property managed by
our former advisor or its affiliates. For each property managed
directly by entities other than our former advisor or its
affiliates, we paid our former advisor or its affiliates a
monthly oversight fee of up to 1.0% of the gross cash receipts
from the property. For leasing activities, additional fees were
charged in an amount that did not exceed customary market norms.
|
|
Our average third party property management fees will be
approximately 1.75% of the gross cash receipts from the
multi-tenant properties in the approximately 60% of our
portfolio that require property management services. For leasing
activities, an additional fee may be charged in an amount not to
exceed customary market norms.
|
|
|
|
|
|
Operating Expenses(4)
|
|
Reimbursement of cost of providing administrative services to
us.
|
|
Actual operating expenses incurred.
|
Liquidity Stage
|
|
|
|
|
Disposition Fees
|
|
Up to the lesser of 1.75% of the contract sales price of each
property sold or 50.0% of a customary competitive real estate
commission, which would have been paid only if our former
advisor or its affiliates provided a substantial amount of
services in connection with the sale of the property, as
determined by our board of directors in its discretion.
|
|
We use our employees for disposition services and will not pay
disposition fees.
|
|
|
|
|
|
Subordinated Participation Interests and Incentive Payments
|
|
Our former advisor has a subordinated participation interest in
our operating partnership pursuant to which it could have
received distributions from our operating partnership under the
circumstances described
|
|
Certain members of our management team and board of directors
will hold an interest in an entity that will hold a subordinated
participation interest or may participate in another structured
incentive program. These persons
|
|
|
|
|
|
|
|
|
|
|
90
|
|
|
|
|
Type of Compensation
|
|
Initial Offering
|
|
Follow-On Offering
|
|
|
|
immediately below during the term of the advisory agreement,
subject to certain conditions. Such conditions did not occur and
our former advisor did not receive a distribution during the
term of the advisory agreement. Our former advisor may be
entitled, subject to a number of conditions, to receive
distributions after the expiration of the advisory agreement as
described below under Compensation to Our Former
Advisor Subordinated Distribution.
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will be entitled to potential subordinated distributions under
the circumstances described below.
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Net Sales Proceeds
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15.0% of any net sales proceeds remaining after we had made
distributions to our stockholders of the total amount raised
from stockholders (less amounts paid to repurchase shares
pursuant to our share repurchase plan) plus an amount equal to
an annual 8.0% cumulative, non-compounded return on average
invested capital. This distribution was only payable if we
liquidated our portfolio while our former advisor was serving as
our advisor.
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Up to 8.0% of net sales proceeds from the sale of properties
acquired with the proceeds of this offering remaining after we
have made distributions to our stockholders of the total amount
raised from stockholders in this offering (less amounts paid to
repurchase shares pursuant to our share repurchase plan) plus an
amount equal to an annual 8.0% cumulative, non-compounded return
on average invested capital received in this offering, subject
and subordinate to our having made distributions to our
stockholders of the total amount raised from stockholders
(including in the initial offering and this offering) (less
amounts paid to repurchase shares pursuant to our share
repurchase plan) plus an amount equal to an annual 8.0%
cumulative, non-compounded return on average invested capital.
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Listing
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15.0% of the amount by which (1) the market value of our
outstanding common stock at listing plus distributions paid
prior to listing exceeds (2) the sum of the total amount of
capital raised from our stockholders (less amounts paid to
repurchase shares pursuant to our share repurchase plan) plus an
amount of cash that, if distributed to stockholders as of the
date of listing, would have provided them an annual 8.0%
cumulative, non-compounded return on average invested capital.
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Up to 8.0% of the amount by which (1) the fair market value of
the assets acquired with the proceeds from this offering, less
any indebtedness secured by such assets plus distributions paid
prior to listing exceeds (2) the sum of the total amount of
capital raised from our stockholders in this offering (less
amounts paid to repurchase shares pursuant to our share
repurchase plan) plus an amount of cash that, if distributed to
stockholders as of the date of listing, would have provided them
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Type of Compensation
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Initial Offering
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Follow-On Offering
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This distribution was only payable if our shares were listed on
a national securities exchange while our former advisor was
serving as our advisor.
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an annual 8.0% cumulative, non-compounded return on average
invested capital received in this offering, subject and
subordinate to (1) the fair market value of all of our assets,
less any indebtedness secured by such assets plus distributions
paid prior to listing exceeding (2) the sum of the total amount
of capital raised from our stockholders (including in the
initial offering and this offering) (less amounts paid to
repurchase shares pursuant to our share repurchase plan) plus an
amount of cash that, if distributed to stockholders as of the
date of listing, would have provided them an annual 8.0%
cumulative, non-compounded return on average invested capital.
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Termination
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15.0% of the amount, if any, by which (1) the fair market value
of all of the assets of our operating partnership as of the date
of the termination (determined by appraisal), less any
indebtedness secured by such assets, plus the cumulative
distributions made to us by our operating partnership from our
inception through the termination date, exceeds (2) the sum of
the total amount of capital raised from stockholders (less
amounts paid to repurchase shares pursuant to our share
repurchase program) plus an annual 8.0% cumulative, non-
compounded return on average invested capital through the
termination date. Except as described in the section entitled
Compensation to Our Former Advisor, this
distribution was only payable if the advisory agreement was
terminated without cause or not renewed.
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None.
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(1) |
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Selling commissions and dealer manager fees may be reduced or
waived in connection with certain categories of sales, such as
sales for which a volume discount applies, sales through
investment advisors or banks acting as trustees or fiduciaries,
sales to broker-dealers in their individual capacities, IRAs and
qualified plans of participating broker-dealers registered
representatives and sales to our affiliates. |
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Organizational and offering expenses consist of reimbursement
of, among other items, the cumulative cost of actual legal,
accounting, printing and other accountable offering expenses,
including, but not limited to, amounts to reimburse our former
advisor for marketing, salaries and direct expenses of its
employees, employees of its affiliates and others while engaged
in registering and marketing the shares of our common stock to
be sold in this offering, which includes, but is not limited to,
development of marketing materials and marketing |
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presentations, participating in due diligence, training seminars
and educational conferences and coordinating generally the
marketing process for this offering. A portion of our
organizational and offering expenses may be used for wholesaling
activities and therefore deemed to be additional underwriting
compensation pursuant to FINRA Rule 5110. We are
responsible for all organizational and offering expenses we
incur after expiration of the advisory agreement. We estimate
that total organizational and offering expenses will be
approximately 1.5% of the aggregate gross proceeds from our
primary offering. |
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We paid our former advisor or its affiliates the acquisition fee
upon the closing of a real property acquisition transaction for
properties or upon the acquisition or funding of any other real
estate related asset. Acquisition expenses include any and all
expenses incurred in connection with the selection, evaluation
and acquisition of, and investment in properties, including, but
not limited to, legal fees and expenses, travel and
communications expenses, cost of appraisals and surveys,
nonrefundable option payments on property not acquired,
accounting fees and expenses, computer use related expenses,
architectural, engineering and other property reports,
environmental and asbestos audits, title insurance and escrow
fees, loan fees or points or any fee of a similar nature paid to
a third party, however designated, transfer taxes, and personnel
and miscellaneous expenses related to the selection, evaluation
and acquisition of properties. We reimbursed our former advisor
for acquisition expenses, whether or not the evaluated property
or other real estate related assets was acquired. Our charter
limits our ability to pay acquisition fees if the total of all
acquisition fees and expenses, including real estate commissions
paid to third parties, would exceed 6.0% of the contract
purchase price or total development cost of the property. Under
our charter, a majority of our disinterested directors,
including a majority of the disinterested independent directors,
must approve any acquisition fees (or portion thereof) which
would cause the total of all acquisition fees and expenses
relating to a real property acquisition to exceed 6.0% of the
purchase price. In order to approve fees in excess of this
limit, the disinterested directors, including a majority of
disinterested independent directors, must determine the
transaction to be commercially competitive, fair and reasonable. |
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During any fiscal year, our total operating expenses will not
exceed the greater of (1) 2% of our average invested
assets; or (2) 25% of our net income, which is defined as
our total revenues less total expenses for any given period
excluding reserves for depreciation, bad debt and other non-cash
reserves, unless the independent directors have determined that
such excess expenses were justified based on unusual and
non-recurring factors, for such year. Average invested
assets means the average monthly book value of our assets
invested directly or indirectly in equity interests and loans
secured by real estate during the
12-month
period before deducting depreciation, bad debts or other
non-cash reserves. Total operating expenses means
all expenses paid or incurred by us, as determined under GAAP,
that are in any way related to our operation, including asset
management fees, but excluding (a) the expenses of raising
capital such as organizational and offering expenses, legal,
audit, accounting, underwriting, brokerage, registration and
other fees, printing and other such expenses and taxes incurred
in connection with the issuance, distribution, transfer and
registration of shares of our common stock; (b) interest
payments; (c) taxes; (d) non-cash expenditures such as
depreciation, amortization and bad debt reserves;
(e) reasonable incentive fees based on the gain in the sale
of our assets; and (f) acquisition fees and expenses
(including expenses relating to potential acquisitions that we
do not close), disposition fees on the resale of real property
and other expenses connected with the acquisition, disposition,
management and ownership of real estate interests, mortgage
loans or other real property (including the costs of
foreclosure, insurance premiums, legal services, maintenance,
repair and improvement of real property). |
Our independent directors have the fiduciary duty to limit such
expenses to amounts that do not exceed such limitations unless
such independent directors have made a finding that, based on
unusual and non-recurring factors which they deem sufficient, a
higher level of expenses is justified for such year. Within
60 days after the end of any fiscal quarter for which total
operating expenses for the twelve months then ended exceeds the
2%/25% limitation, we will send our stockholders a written
disclosure of such excess expenses, along with an explanation of
the factors the independent directors considered in arriving at
the conclusion that such higher operating expenses were
justified.
Our charter provides that our independent directors will have
the responsibility to limit total operating expenses to amounts
that do not exceed the greater of (1) 2% of our average
invested assets; or (2) 25% of our net income for such
year, unless such independent directors have made a finding
that, based on unusual and non-recurring factors which they deem
sufficient, a higher level of expenses is justified for such
year. Within 60 days after the end of any fiscal quarter
for which total operating expenses for the twelve months then
ended exceeds such limitation; we will send our stockholders a
written disclosure of such excess
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expenses, along with an explanation of the factors the
independent directors considered in arriving at the conclusion
that such higher expenses were justified.
Compensation
to Our Former Advisor
Although our advisory agreement with our former advisor expired
on September 20, 2009, subject to certain conditions we are
required to pay our former advisor certain fees and expenses
related to our operations after its expiration. We are
conducting an ongoing review of the advisory services and dealer
manager services previously provided by our former advisor and
former dealer manager, to ensure that such services were
consistent with applicable agreements and standards. Based on
our review to date, as well as ongoing actions by our former
advisor and former dealer manager, we believe that our former
advisor and our former dealer manager did not comply with all of
their obligations under applicable agreements. As a result, we
have provided them with notice of our claims under the
agreements, as well as notice of other claims. They have
disagreed with our positions, and we are engaged in ongoing
discussions to resolve these issues. However, we do not
anticipate that the disputes will have a material impact on our
financial results or operations in the future.
Subordinated
Distribution
Our former advisor may have a potential right, subject to a
number of conditions to receive a subordinated distribution upon
either a listing or other liquidity event, including a
liquidation, sale of substantially all of our assets or merger
in which our stockholders receive in exchange for their shares
of our common stock shares of a company that are traded on a
national securities exchange. If there is a listing of our
shares on a national securities exchange or a merger in which
our stockholders receive in exchange for their shares of our
common stock shares of a company that are traded on a national
securities exchange, then, subject to certain conditions, our
former advisor will be entitled to receive a distribution in an
amount equal to 15.0% of the amount, if any, by which
(1) the fair market value of the assets of our operating
partnership (determined by appraisal as of the listing date or
merger date, as applicable) owned as of the expiration of the
advisory agreement, plus any assets acquired after such
expiration for which our former advisor was entitled to receive
an acquisition fee, which we refer to as the included assets,
less any indebtedness secured by such included assets, plus the
cumulative distributions made by our operating partnership to us
and the limited partners who received partnership units in
connection with the acquisition of the included assets, from our
inception through the listing date or merger date, as
applicable, exceeds (2) the sum of (a) the total
amount of capital raised from stockholders and the capital value
of partnership units issued in connection with the acquisition
of the included assets through the listing date or merger date,
as applicable (excluding any capital raised after the completion
of the initial offering) (less amounts paid to repurchase shares
pursuant to our share repurchase plan), plus (b) an annual
8.0% cumulative, non-compounded return on such invested capital
and the capital value of such partnership units measured for the
period from inception through the listing date or merger date,
as applicable.
If there is a liquidation or sale of all or substantially all of
the assets of the operating partnership, then, subject to
certain conditions, our former advisor may be entitled to
receive a distribution in an amount equal to 15.0% of the net
proceeds from the sale of the included assets, after subtracting
distributions to our stockholders and the limited partners who
received partnership units in connection with the acquisition of
the included assets of (1) their initial invested capital
and the capital value of such partnership units (less amounts
paid to repurchase shares pursuant to our share repurchase
program) through the date of the other liquidity event plus
(2) an annual 8.0% cumulative, non-compounded return on
such invested capital and the capital value of such partnership
units measured for the period from inception through the other
liquidity event date. If our former advisor receives the
subordinated distribution upon a listing, it would no longer be
entitled to receive subordinated distributions of net sales
proceeds.
Our former advisors right to receive any deferred
subordinated distribution is subject to a number of ongoing
conditions. These conditions include, without limitation, that
our former advisor fully and reasonably cooperate with us and
self-management
during the course of our transition to self management. Various
issues have arisen with respect to whether our former advisor
and its affiliates reasonably cooperated with us and with our
transition to self management. We have communicated our position
to our former advisor that it has
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not fully and reasonably cooperated with our transition to
self-management
and therefore is not entitled to such deferred subordinated
distribution.
Management
Incentive Program
We will adopt a management incentive program for certain members
of our management team and directors. The purpose of the
management incentive program is to establish a performance-based
economic incentive program for key persons in our organization.
This type of program is consistent with our companys
philosophy to establish performance-based compensation. Pursuant
to the management incentive program, it is currently anticipated
that certain members of our management team and board of
directors will be members of a limited liability company that
will hold a subordinated participation interest that will be
entitled to subordinated distributions upon certain liquidity
events. The terms of the management incentive program are
subject to change and have not been finally determined or
approved by our board of directors.
Pursuant to the management incentive program, certain members of
our management team and directors may receive subordinated
distributions if certain stockholder return thresholds have been
met. In the event of a liquidation or sale of assets, they will
be entitled to receive up to 8.0% of net sales proceeds with
respect to our follow-on offering from the sale of properties
acquired with the proceeds of the follow-on offering remaining
after we have made distributions to our stockholders of the
total amount raised from stockholders in the follow-on offering
(less amounts paid to repurchase shares pursuant to our share
repurchase plan) plus an amount equal to an annual 8.0%
cumulative, non-compounded return on average invested capital
received in the follow-on offering, subject and subordinate to
our having made distributions to our stockholders of the total
amount raised from stockholders (including in the initial
offering and this offering) (less amounts paid to repurchase
shares pursuant to our share repurchase plan) plus an amount
equal to an annual 8.0% cumulative, non-compounded return on
average invested capital.
In addition, if we list our shares of common stock on a national
securities exchange, certain members of our management team and
directors will be entitled to receive up to 8.0% of the amount
by which (1) the fair market value of the assets acquired
with the proceeds from the follow-on offering, less any
indebtedness secured by such assets plus distributions paid
prior to listing exceeds (2) the sum of the total amount of
capital raised from our stockholders in the follow-on offering
(less amounts paid to repurchase shares pursuant to our share
repurchase plan) plus an amount of cash that, if distributed to
stockholders as of the date of listing, would have provided them
an annual 8.0% cumulative, non-compounded return on average
invested capital received in the follow-on offering, subject and
subordinate to (1) the fair market value of all of our
assets, less any indebtedness secured by such assets plus
distributions paid prior to listing exceeding (2) the sum
of the total amount of capital raised from our stockholders
(including in the initial offering and this offering) (less
amounts paid to repurchase shares pursuant to our share
repurchase plan) plus an amount of cash that, if distributed to
stockholders as of the date of listing, would have provided them
an annual 8.0% cumulative, non-compounded return on average
invested capital.
Pursuant to the management incentive program, our management
team and directors will not be entitled to receive any
subordinated distributions with respect to the sale of assets
acquired with the proceeds of the initial offering or related to
the appreciation in value of assets acquired with the proceeds
of the initial offering.
The terms of the above-described incentive program are subject
to change and have not been finally determined or approved by
our board of directors.
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CONFLICTS
OF INTEREST
Our independent directors have an obligation to function on our
behalf in all situations in which a conflict of interest may
arise and have a fiduciary obligation to act in the best
interest of the stockholders. See Management.
However, we cannot assure you that the independent directors
will be able to eliminate or reduce the risks related to these
conflicts of interest. Some of these conflicts of interest and
restrictions and procedures we have adopted to address these
conflicts are described below.
Interests
in Our Investments
We are permitted to make or acquire investments in which our
directors, officers or stockholders or any of our or their
respective affiliates have direct or indirect pecuniary
interests. However, any such transaction in which our directors
or any of their respective affiliates has any interest would be
subject to the restrictions and procedures described below.
Certain
Conflict Resolution Restrictions and Procedures
In order to reduce or eliminate certain potential conflicts of
interest, our charter contains restrictions and conflict
resolution procedures relating to transactions we enter into
with our directors or their respective affiliates. These
restrictions and procedures include, among others, the following:
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We will not purchase or lease any asset (including any property)
in which any of our directors or any of their affiliates has an
interest without a determination by a majority of our directors,
including a majority of the independent directors, not otherwise
interested in such transaction that such transaction is fair and
reasonable to us and at a price to us no greater than the cost
of the property to such director or directors or any such
affiliate, unless there is substantial justification for any
amount that exceeds such cost and such excess amount is
determined to be reasonable. In no event will we acquire any
such asset at an amount in excess of its appraised value.
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We will not sell or lease assets to any of our directors or any
of their affiliates unless a majority of our directors,
including a majority of the independent directors, not otherwise
interested in the transaction determine the transaction is fair
and reasonable to us, which determination will be supported by
an appraisal obtained from a qualified, independent appraiser
selected by a majority of our independent directors.
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We will not make any loans to any of our directors or any of
their affiliates. In addition, any loans made to us by our
directors or any of their affiliates must be approved by a
majority of our directors, including a majority of the
independent directors, not otherwise interested in the
transaction as fair, competitive and commercially reasonable,
and no less favorable to us than comparable loans between
unaffiliated parties.
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We will not invest in any joint ventures with any of our
directors or any of their affiliates unless a majority of our
directors, including a majority of the independent directors,
not otherwise interested in the transaction determine the
transaction is fair and reasonable to us and on substantially
the same terms and conditions as those received by other joint
ventures.
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FEDERAL
INCOME TAX CONSIDERATIONS
General
The following is a summary of the material United States federal
income tax considerations associated with an investment in our
common stock. The statements made in this section of the
prospectus are based upon current provisions of the Internal
Revenue Code and Treasury Regulations promulgated thereunder, as
currently applicable, currently published administrative
positions of the IRS and judicial decisions, all of which are
subject to change, either prospectively or retroactively. We
cannot assure you that any changes will not modify the
conclusions expressed in our counsels opinions described
herein. This summary does not address all possible tax
considerations that may be material to an investor and does not
constitute legal or tax advice. This summary deals only with our
stockholders that hold our stock as capital assets
within the meaning of section 1221 of the Internal Revenue
Code. Moreover, this summary does not deal with all tax aspects
that might be relevant to you, as a prospective stockholder, in
light of your personal circumstances, nor does it deal with
particular types of stockholders that are subject to special
treatment under the federal income tax laws, such as insurance
companies, holders whose shares are acquired through the
exercise of stock options or otherwise as compensation, holders
whose shares are acquired through the distribution reinvestment
plan or who intend to sell their shares under the share
repurchase plan, tax-exempt organizations except as provided
below, financial institutions or broker-dealers, or foreign
corporations or persons who are not citizens or residents of the
United States except as provided below. The Internal Revenue
Code provisions governing the federal income tax treatment of
REITs and their stockholders are highly technical and complex,
and this summary is qualified in its entirety by the express
language of applicable Internal Revenue Code provisions,
Treasury Regulations promulgated thereunder and administrative
and judicial interpretations thereof.
We urge you, as a prospective stockholder, to consult your
own tax advisor regarding the specific tax consequences to you
of a purchase of shares, ownership and sale of the shares and of
our election to be taxed as a REIT, including the federal,
state, local, foreign and other tax consequences of such
purchase, ownership, sale and election and of potential changes
in applicable tax laws.
REIT
Qualification
We have qualified to be taxed as a REIT commencing with our
taxable year ended December 31, 2007. This section of the
prospectus discusses the laws governing the tax treatment of a
REIT and its stockholders. These laws are highly technical and
complex. Alston & Bird LLP has delivered an opinion to
us that, commencing with our taxable year ended
December 31, 2007 (the first year for which we elected to
be taxed as a REIT), based on certain assumptions and
representations, we have been organized and operated in
conformity with the requirements for qualification as a REIT
under the Internal Revenue Code, and our proposed method of
operation will enable us to continue to operate in conformity
with the requirements for qualification as a REIT under the
Internal Revenue Code.
Investors should be aware that an opinion of counsel is not
binding upon the IRS or any court. The opinion of
Alston & Bird LLP described above only represents the
view of our counsel based on its review and analysis of law
existing at the time of the opinion and therefore could be
subject to modification or withdrawal based on subsequent
legislative, judicial or administrative changes to the federal
income tax laws, any of which could be applied retroactively.
The opinion of Alston & Bird LLP described above was
based on various assumptions and qualifications and conditioned
on representations made by us as to factual matters, including
representations regarding the intended nature of our properties
and the future conduct of our business. Moreover, our continued
qualification and taxation as a REIT depends upon our ability to
meet on a continuing basis, through actual operating results,
the qualification tests set forth in the federal tax laws and
described below. Alston & Bird LLP has not reviewed,
and will not review, our compliance with those tests on a
continuing basis. Accordingly, our actual results of operation
for any particular taxable year may not satisfy these
requirements. For a discussion of certain tax consequences of
our failure to meet these qualification requirements, see
Failure to Qualify as a REIT.
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Taxation
of Healthcare Trust of America
If we qualify for taxation as a REIT, we generally will not be
subject to federal corporate income taxes on that portion of our
ordinary income or capital gain that we distribute currently to
our stockholders, because the REIT provisions of the Internal
Revenue Code, generally allow a REIT to deduct distributions
paid to its stockholders. This substantially eliminates the
federal double taxation on earnings (taxation at
both the corporate level and stockholder level) that usually
results from an investment in the stock of a corporation. Even
if we qualify for taxation as a REIT, however, we will be
subject to federal income taxation described below.
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We will be taxed at regular corporate rates on our undistributed
REIT taxable income, including undistributed net capital gains.
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Under some circumstances, we may be subject to alternative
minimum tax.
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If we have net income from the sale or other disposition of
foreclosure property (which is described below) that
is held primarily for sale to customers in the ordinary course
of business or other non-qualifying income from foreclosure
property, we will be subject to tax at the highest corporate
rate on that income.
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If we have net income from prohibited transactions (which are
described below), the income will be subject to a 100% tax.
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If we fail to satisfy either of the 75.0% or 95.0% gross income
tests (which are discussed below) but have nonetheless
maintained our qualification as a REIT because certain
conditions have been met, we will be subject to a 100% tax on an
amount equal to the greater of the amount by which we fail the
75.0% or 95.0% test multiplied by a fraction calculated to
reflect our profitability.
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If we fail to satisfy the REIT asset tests and continue to
qualify as a REIT because we meet other requirements, we will
have to pay a tax equal to the greater of $50,000 or the highest
corporate income tax rate multiplied by the net income generated
by the non-qualifying assets during the time we failed to
satisfy the asset tests; if we fail to satisfy other REIT
requirements (other than the gross income and asset tests), and
continue to qualify as a REIT because we meet other
requirements, we will have to pay $50,000 for each other failure.
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If we fail to distribute during each year at least the sum of
(i) 85.0% of our REIT ordinary income for the year,
(ii) 95.0% of our REIT capital gain net income for such
year and (iii) any undistributed taxable income from prior
periods, we will be subject to a 4.0% excise tax on the excess
of the required distribution over the amounts actually
distributed.
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We may elect to retain and pay tax on our net long-term capital
gain. In that case, a United States stockholder would be taxed
on its proportionate share of our undistributed long-term
capital gain and would receive a credit or refund for its
proportionate share of the tax we paid.
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If we acquire any asset from a C corporation (i.e., a
corporation generally subject to corporate-level tax) in a
transaction in which our basis in the asset is determined by
reference to the basis of the asset (or any other property) in
the hands of the C corporation and we subsequently recognize
gain on the disposition of the asset during the 10 year
period beginning on the date on which we acquired the asset,
then a portion of the gain may be subject to tax at the highest
regular corporate rate, unless the C corporation made an
election to treat the asset as if it were sold for its fair
market value at the time of our acquisition. We refer to this
tax as the Built-in Gains Tax.
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Our taxable REIT subsidiaries will be subject to federal and
state income tax on their taxable incomes. Several provisions
regarding the arrangements between a REIT and its taxable REIT
subsidiaries ensure that a taxable REIT subsidiary will be
subject to an appropriate level of federal income taxation. For
example, the Internal Revenue Code limits the ability of our
taxable REIT subsidiary to deduct interest payments in excess of
a certain amount made to us. In addition, we must pay a 100% tax
on some payments that we receive from, or on certain expenses
deducted by, the taxable REIT subsidiary if the
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economic arrangements between us, our tenants and the taxable
REIT subsidiary are not comparable to similar arrangements among
unrelated parties. In the event that we have taxable REIT
subsidiaries in the future, it is possible that those
subsidiaries may make interest and other payments to us and to
third parties in connection with activities related to our
properties. We cannot assure you that our taxable REIT
subsidiaries will not be limited in their ability to deduct
interest payments made to us. In addition, we cannot assure you
that the IRS might not seek to impose the 100% tax on services
performed by taxable REIT subsidiaries for tenants of ours, or
on a portion of the payments received by us from, or expenses
deducted by, our taxable REIT subsidiaries.
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The term prohibited transaction generally includes a
sale or other disposition of property (other than foreclosure
property) that is held primarily for sale to customers in the
ordinary course of a REITs trade or business. Whether
property is held primarily for sale to customers in the
ordinary course of a trade or business depends on the
particular facts and circumstances surrounding each property. We
intend to conduct our operations in such a manner (i) so
that no asset we own, directly or through any subsidiary
entities other than taxable REIT subsidiaries, will be held for
sale to customers in the ordinary course of our trade or
business, or (ii) in order to comply with certain
safe-harbor provisions of the Internal Revenue Code that would
prevent such treatment. However, no assurance can be given that
any particular property we own, directly or through any
subsidiary entities other than taxable REIT subsidiaries, will
not be treated as property held for sale to customers or that we
can comply with those safe-harbor provisions.
Foreclosure property is real property and any
personal property incident to such real property (1) that
is acquired by a REIT as the result of the REIT having bid in
the property at foreclosure, or having otherwise acquired
ownership or possession of the property by agreement or process
of law, after there was a default (or default was imminent) on a
lease of the property or on a mortgage loan held by the REIT and
secured by the property, (2) the related loan or lease of
which was acquired by the REIT at a time when default was not
imminent or anticipated and (3) for which such REIT makes a
proper election to treat the property as foreclosure property.
REITs generally are subject to tax at the maximum corporate rate
on any net income from foreclosure property, including any gain
from the disposition of the foreclosure property, other than
income that would otherwise be qualifying income for purposes of
the 75.0% gross income test, which is described below. Any gain
from the sale of property for which a foreclosure property
election has been made will not be subject to the 100% tax on
gains from prohibited transactions described above, even if the
property would otherwise constitute property held primarily for
sale to customers in the ordinary course of a REITs trade
or business. We do not anticipate that we will receive any
income from foreclosure property that is not qualifying income
for purposes of the 75.0% gross income test; however, if we do
acquire any foreclosure property that we believe will give rise
to such income, we intend to make an election to treat the
related property as foreclosure property.
Requirements
for Qualification as a REIT
In order for us to maintain our qualification as a REIT, we must
meet and continue to meet the requirements discussed below
relating to our organization, sources of income, nature of
assets and distributions of income to our stockholders.
Requirements
for Qualification
The Internal Revenue Code defines a REIT as a corporation, trust
or association:
(1) which is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by
transferable shares or by transferable certificates of
beneficial interest;
(3) which would be taxable as a domestic corporation but
for sections 856 through 859 of the Internal Revenue Code;
(4) which is neither a financial institution nor an
insurance company subject to certain provisions of the Internal
Revenue Code;
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(5) the beneficial ownership of which is held by 100 or
more persons;
(6) not more than 50.0% in value of the outstanding stock
of which is owned, directly or indirectly, by or for five or
fewer individuals (as defined in the Internal Revenue Code to
include certain entities);
(7) which makes an election to be a REIT (or has made such
election for a previous taxable year which has not been revoked
or terminated) and satisfies all relevant filing and other
administrative requirements established by the IRS that must be
met to elect and maintain REIT status;
(8) which uses the calendar year as its taxable
year; and
(9) which meets certain other tests, described below,
regarding the nature of its income and assets and the amount of
its distributions.
The Internal Revenue Code provides that conditions
(1) through (4), inclusive, must be met during the entire
taxable year, that condition (5) must be met during at
least 335 days of a taxable year of 12 months, or
during a proportionate part of a taxable year of less than
12 months, and that condition (6) must be met during
the last half of each taxable year. For purposes of the sixth
requirement, the beneficiaries of a pension or profit-sharing
trust described in Section 401(a) of the Internal Revenue
Code, and not the pension or profit-sharing trust itself, are
treated as REIT stockholders. We will be treated as having met
condition (6) above for a taxable year if we complied with
certain Treasury Regulations for ascertaining the ownership of
our stock for such year and if we did not know (or after the
exercise of reasonable diligence would not have known) that our
stock was sufficiently closely held during such year to cause us
to fail condition (6). In addition, conditions (5) and
(6) do not apply to a REIT until the second calendar year
in which the REIT qualifies as such.
Our articles of incorporation contain restrictions regarding
ownership and transfer of shares of our stock that are intended
to assist us in continuing to satisfy the share ownership
requirements in items (5) and (6) above. See
Description of Capital Stock Restriction on
Ownership of Shares.
For purposes of the requirements described herein, any
corporation that is a qualified REIT subsidiary of ours will not
be treated as a corporation separate from us, and all assets,
liabilities, and items of income, deduction and credit of our
qualified REIT subsidiaries will be treated as our assets,
liabilities and items of income, deduction and credit. A
qualified REIT subsidiary is a corporation, other than a taxable
REIT subsidiary (as described below under
Operational Requirements Asset
Tests), all of the capital stock of which is owned by a
REIT.
In the case of a REIT that is a partner in an entity treated as
a partnership for federal income tax purposes, the REIT is
treated as owning its proportionate share of the assets of the
partnership and as earning its allocable share of the gross
income of the partnership for purposes of the requirements
described herein. In addition, the character of the assets and
gross income of the partnership will retain the same character
in the hands of the REIT for purposes of the REIT requirements,
including the asset and income tests described below. As a
result, our proportionate share of the assets, liabilities and
items of income of our operating partnership and of any other
partnership, joint venture, limited liability company or other
entity treated as a partnership for federal tax purposes in
which we or our operating partnership have an interest will be
treated as our assets, liabilities and items of income.
Operational
Requirements Gross Income Tests
To maintain our qualification as a REIT, we must satisfy
annually two gross income requirements.
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At least 75.0% of our gross income, excluding gross income from
prohibited transactions, for each taxable year must be derived
directly or indirectly from investments relating to real
property or mortgages on real property (including rents
from real property and interest income derived from
mortgage loans secured by real property) and from other
specified sources, including qualified temporary investment
income, as described below. This is the 75.0% Gross Income Test.
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At least 95.0% of our gross income, excluding gross income from
prohibited transactions, for each taxable year must be derived
from the real property investments described above in the 75.0%
Gross Income Test and generally from dividends and interest and
gains from the sale or disposition of stock or securities or
from any combination of the foregoing. This is the 95.0% Gross
Income Test.
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Rents
from Real Property
The rents we receive qualify as rents from real
property for purposes of satisfying the gross income
requirements for a REIT only if several conditions are met,
including the following:
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The amount of rent received from a tenant must not be based in
whole or in part on the income or profits of any person;
however, an amount received or accrued generally will not be
excluded from the term rents from real property
solely by reason of being based on a fixed percentage or
percentages of gross receipts or sales;
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In general, neither we nor an owner of 10.0% or more of our
stock may directly or constructively own 10.0% or more of a
tenant or a subtenant of the tenant (in which case only rent
attributable to the subtenant is disqualified);
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Rent attributable to personal property leased in connection with
a lease of real property cannot be greater than 15.0% of the
total rent received under the lease, as determined based on the
average of the fair market values as of the beginning and end of
the taxable year; and
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We normally must not operate or manage the property or furnish
or render services to tenants, other than (i) through an
independent contractor who is adequately compensated
and from whom we do not derive any income or (ii) through a
taxable REIT subsidiary. However, a REIT may provide services
with respect to its properties, and the income derived therefrom
will qualify as rents from real property, if the
services are usually or customarily rendered in
connection with the rental of space only and are not otherwise
considered rendered to the occupant. Even if the
services provided by us with respect to a property are
impermissible tenant services, the income derived therefrom will
qualify as rents from real property if such income
does not exceed 1.0% of all amounts received or accrued with
respect to that property. For this purpose, such services may
not be valued at less than 150.0% of our direct cost of
providing the services, and any gross income deemed to have been
derived by us from the performance of noncustomary services
pursuant to the 1.0% de minimis exception will constitute
nonqualifying gross income under the 75.0% Gross Income Test and
95.0% Gross Income Test. In addition, our taxable REIT
subsidiaries may perform some impermissible tenant services
without causing us to receive impermissible tenant services
income under the REIT income tests. However, several provisions
regarding the arrangements between a REIT and its taxable REIT
subsidiaries ensure that a taxable REIT subsidiary will be
subject to an appropriate level of federal income taxation. For
example, the Internal Revenue Code limits the ability of our
taxable REIT subsidiary to deduct interest payments in excess of
a certain amount made to us. In addition, we must pay a 100% tax
on some payments that we receive from, or on certain expenses
deducted by, the taxable REIT subsidiary if the economic
arrangements between us, our tenants and the taxable REIT
subsidiary are not comparable to similar arrangements among
unrelated parties. In the event that we have taxable REIT
subsidiaries in the future, it is possible that those
subsidiaries may make interest and other payments to us and to
third parties in connection with activities related to our
properties. We cannot assure you that our taxable REIT
subsidiaries will not be limited in their ability to deduct
interest payments made to us. In addition, we cannot assure you
that the IRS might not seek to impose the 100% tax on services
performed by taxable REIT subsidiaries for tenants of ours, or
on a portion of the payments received by us from, or expenses
deducted by, our taxable REIT subsidiaries.
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Compliance
with 75.0% and 95.0% Gross Income Tests
Prior to the making of investments in real properties, we may
invest the net offering proceeds in liquid assets such as
government securities or certificates of deposit. For purposes
of the 75.0% Gross Income Test, income attributable to a stock
or debt instrument purchased with the proceeds received by a
REIT in exchange
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for stock in the REIT (other than amounts received pursuant to a
distribution reinvestment plan) constitutes qualified temporary
investment income if such income is received or accrued during
the one-year period beginning on the date the REIT receives such
new capital. To the extent that we hold any proceeds of the
offering for longer than one year, we may invest those amounts
in less liquid investments in order to satisfy the 75.0% Gross
Income Test and the 95.0% Gross Income Test and the Asset Tests
described below. We expect the bulk of the remainder of our
income to qualify under the 75.0% Gross Income Test and 95.0%
Gross Income Test as rents from real property and qualifying
interest income in accordance with the requirements described
above. In this regard, we anticipate that most of our leases
will be for fixed rentals with annual consumer price
index or similar adjustments and that none of the rentals
under our leases will be based on the income or profits of any
person. In addition, we do not expect to receive rent from a
person of whose stock we (or an owner of 10.0% or more of our
stock) directly or constructively own 10.0% or more. Also, the
portion of the rent attributable to personal property is not
expected to exceed 15.0% of the total rent to be received under
any lease. Finally, we anticipate that all or most of the
services to be performed with respect to our properties will be
performed by our property manager and such services are expected
to be those usually or customarily rendered in connection with
the rental of real property and not rendered to the occupant of
such property. However, we can give no assurance that the actual
sources of our gross income will allow us to satisfy the 75.0%
Gross Income Test and the 95.0% Gross Income Test described
above.
Notwithstanding our failure to satisfy one or both of the 75.0%
Gross Income Test and the 95.0% Gross Income Test for any
taxable year, we may still qualify as a REIT for that year if we
are eligible for relief under specific provisions of the
Internal Revenue Code. These relief provisions generally will be
available if:
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Our failure to meet these tests was due to reasonable cause and
not due to willful neglect; and
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Following our identification of the failure, we properly
disclose such failures to the IRS.
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It is not possible, however, to state whether, in all
circumstances, we would be entitled to the benefit of these
relief provisions. In addition, as discussed above in
Taxation of Healthcare Trust of America, even if
these relief provisions apply, a tax would be imposed with
respect to non-qualifying net income.
Operational
Requirements Asset Tests
At the close of each quarter of our taxable year, we also must
satisfy several tests, or the Asset Tests, relating to the
nature and diversification of our assets.
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First, at least 75.0% of the value of our total assets must be
represented by real estate assets, cash, cash items (including
receivables) and government securities. The term real
estate assets includes real property, mortgages on real
property, shares of stock in other qualified REITs, property
attributable to the temporary investment of new capital as
described above and a proportionate share of any real estate
assets owned by a partnership in which we are a partner or of
any qualified REIT subsidiary of ours.
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Second, no more than 25.0% of the value of our total assets may
be represented by securities other than those described above in
the 75.0% asset class.
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Third, of the investments included in the 25.0% asset class, the
value of any one issuers securities that we own may not
exceed 5.0% of the value of our total assets. Additionally, we
may not own more than 10% of the voting power of any one
issuers outstanding securities. Furthermore, we may not
own more than 10.0% of the total value of any one issuers
outstanding debt and equity securities. The 10.0% value
limitation will not apply, however, to (1) straight
debt securities (discussed below); (2) loans to an
individual or an estate; (3) certain rental agreements
calling for deferred rents or increasing rents that are subject
to section 467 of the Internal Revenue Code, other than
with a related person; (4) obligations to pay
qualifying rents from real property; (5) securities issued
by a state or any political subdivision of a state, the District
of Columbia, a foreign government, any political subdivision of
the foreign government, or the Commonwealth of Puerto Rico, but
only if the determinations of any payment received or accrued
under the security does not depend in whole or in part on the
profits of any entity; (6) securities issued by another
qualifying REIT; and (7) other arrangements identified in
Treasury Regulations (which have not yet been issued or
proposed). Additionally, any debt instrument
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issued by a partnership will not be treated as a security if at
least 75.0% of the partnerships gross income (excluding
gross income from prohibited transactions) is derived from
sources meeting the requirements of the 75.0% Gross Income Test.
Any debt instrument issued by a partnership also will not be
treated as a security to the extent of our interest as a partner
in the partnership. Straight debt is generally
defined as debt that is payable on demand or at a date certain
where the interest rate and the interest payment dates are not
contingent on profits, the borrowers discretion or similar
factors and there is no convertibility, directly or indirectly,
into stock of the debtor. However, a security will not fail to
be straight debt if it is subject to certain
customary or de minimis contingencies. A security issued by a
corporation or partnership will qualify as straight
debt only if we or any of our taxable REIT subsidiaries
hold no more than 1.0% of the outstanding non-qualifying
securities of such issuer. Mortgage debt secured by real estate
assets constitutes a real estate asset and does not
constitute a security for purposes of the foregoing
tests. For purposes of this Asset Test and the second Asset
Test, securities do not include the equity or debt securities of
a qualified REIT subsidiary of ours or an equity interest in any
entity treated as a partnership for federal tax purposes. Also,
in looking through any partnership to determine our allocable
share of any securities owned by the partnership for applying
solely the 10.0% value test, our share of the assets of the
partnership will correspond not only to our interest as a
partner in the partnership, but also to our proportionate
interest in certain debt securities issued by the partnership.
The third Asset Test does not apply in respect of a taxable REIT
subsidiary.
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Fourth, no more than 20.0% (25.0%, for 2009 taxable year and
thereafter) of the value of our total assets may consist of the
securities of one or more taxable REIT subsidiaries. Subject to
certain exceptions, a taxable REIT subsidiary is any
corporation, other than a REIT, in which we directly or
indirectly own stock and with respect to which a joint election
has been made by us and the corporation to treat the corporation
as a taxable REIT subsidiary of ours and also includes any
corporation, other than a REIT or a qualified REIT subsidiary,
in which a taxable REIT subsidiary of ours owns, directly or
indirectly, more than 35.0% of the voting power or value.
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The Asset Tests must generally be met at the close of any
quarter in which we acquire securities or other property. Upon
full investment of the net offering proceeds, we expect that
most of our assets will consist of real estate assets and we
therefore expect to satisfy the Asset Tests.
If we meet the Asset Tests at the close of any quarter, we will
not lose our REIT status for a failure to satisfy the Asset
Tests at the end of a later quarter if such failure occurs
solely because of changes in asset values. If our failure to
satisfy the Asset Tests results from an acquisition of
securities or other property during a quarter, we can cure the
failure by disposing of a sufficient amount of non-qualifying
assets within 30 days after the close of that quarter. We
intend to maintain adequate records of the value of our assets
to ensure compliance with the Asset Tests and to take other
action within 30 days after the close of any quarter as may
be required to cure any noncompliance.
In addition, we will have up to six months to dispose of
sufficient assets or otherwise to cure a failure to satisfy the
third Asset Test, provided the failure is due to the ownership
of assets the total value of which does not exceed the lesser of
(1) 1.0% of our assets at the end of the relevant quarter
or (2) $10,000,000. For violations of any of the REIT asset
tests due to reasonable cause that are larger than this amount,
we may avoid disqualification as a REIT after the 30 day
cure period by taking certain steps, including the disposition
of sufficient assets within the six month period described above
to meet the applicable asset test, paying a tax equal to the
greater of $50,000 or the highest corporate tax rate multiplied
by the net income generated by the non-qualifying assets during
the period of time that the assets were held as non-qualifying
assets, and filing a schedule with the IRS that describes the
non-qualifying assets.
Operational
Requirements Annual Distribution
Requirement
To qualify for taxation as a REIT, the Internal Revenue Code
requires us to make distributions (other than capital gain
distributions) to our stockholders in an amount at least equal
to (a) the sum of: (1) 90.0% of our REIT taxable
income (computed without regard to the dividends paid
deduction and our net capital gain),
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and (2) 90.0% of the net income, if any, from foreclosure
property in excess of the special tax on income from foreclosure
property, minus (b) the sum of certain items of non cash
income.
We must pay distributions in the taxable year to which they
relate. Distributions paid in the subsequent year, however, will
be treated as if paid in the prior year for purposes of the
prior years distribution requirement if the distributions
satisfy one of the following two sets of criteria:
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We declare the distributions in October, November or December,
the distributions are payable to stockholders of record on a
specified date in such a month, and we actually pay the
distributions during January of the subsequent year; or
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We declare the distributions before we timely file our federal
income tax return for such year, we pay the distributions in the
12-month
period following the close of the prior year and not later than
the first regular distribution payment after the declaration,
and we elect on our federal income tax return for the prior year
to have a specified amount of the subsequent distribution
treated as if paid in the prior year.
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Even if we satisfy the foregoing distribution requirements, we
are subject to tax thereon to the extent that we do not
distribute all of our net capital gain or REIT taxable
income as adjusted. Furthermore, if we fail to distribute
at least the sum of 85.0% of our ordinary income for that year,
95.0% of our capital gain net income for that year, and any
undistributed taxable income from prior periods, we would be
subject to a 4.0% excise tax on the excess of the required
distribution over the amounts actually distributed.
Distributions that are declared in October, November or December
to stockholders of record on a specified date in one of those
months and are distributed in the following January are treated
as distributed in the previous December for purposes of the
excise tax.
In addition, if during the
10-year
recognition period, we dispose of any asset subject to the
built-in gain rules described above, we must distribute at least
90.0% of the built-in gain (after tax), if any, recognized on
the disposition of the asset.
We intend to make timely distributions sufficient to maintain
our REIT status and avoid income and excise taxes; however, it
is possible that we may experience timing differences between
(1) the actual receipt of income and payment of deductible
expenses, and (2) the inclusion of that income and
deduction of those expenses for purposes of computing our
taxable income. It is also possible that we may be allocated a
share of net capital gain attributable to the sale of
depreciated property by our operating partnership that exceeds
our allocable share of cash attributable to that sale. In those
circumstances, we may have less cash than is necessary to meet
our annual distribution requirement or to avoid income or excise
taxation on undistributed income. We may find it necessary in
those circumstances to arrange for financing or raise funds
through the issuance of additional shares in order to meet our
distribution requirements. If we fail to satisfy the
distribution requirement for any taxable year by reason of a
later adjustment to our taxable income, we may be able to pay
deficiency dividends in a later year and include
such dividends in our deductions for dividends paid for the
earlier year. In that event, we may be able to avoid being taxed
on amounts distributed as deficiency dividends, but we would be
required in those circumstances to pay interest to the IRS based
upon the amount of any deduction taken for deficiency dividends
for the earlier year.
As noted above, we may also elect to retain, rather than
distribute, our net long-term capital gains. The effect of such
an election would be as follows:
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We would be required to pay the federal income tax on these
gains;
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Taxable U.S. stockholders, while required to include their
proportionate share of the undistributed long-term capital gains
in income, would receive a credit or refund for their share of
the tax paid by the REIT; and
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The basis of the stockholders shares would be increased by
the amount of our undistributed long-term capital gains (minus
its proportionate share of the amount of capital gains tax we
pay) included in the stockholders long-term capital gains.
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Failure
to Qualify as a REIT
If we were to fail to satisfy one or more requirements to
qualify as a REIT, other than an asset or income test violation
of a type for which relief is otherwise available as described
above, we would retain our REIT qualification if the failure was
due to reasonable cause and not willful neglect, and if we were
to pay a penalty of $50,000 for each such failure. It is not
possible to predict whether in all circumstances we would be
entitled to the benefit of this relief provision.
If we fail to qualify as a REIT for any reason in a taxable year
and applicable relief provisions do not apply, we will be
subject to tax (including any applicable alternative minimum
tax) on our taxable income at regular corporate rates. We will
not be able to deduct distributions paid to our stockholders in
any year in which we fail to qualify as a REIT. We also will be
disqualified for the four taxable years following the year
during which qualification was lost unless we are entitled to
relief under specific statutory provisions.
Taxation
of Taxable U.S. Stockholders
Definition
In this section, the phrase U.S. stockholder
means a holder of our common stock that for federal income tax
purposes is:
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a citizen or resident of the United States;
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a corporation or other entity treated as a corporation for
U.S. federal income tax purposes created or organized in or
under the laws of the United States or of any political
subdivision thereof;
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an estate, the income of which is subject to U.S. federal
income taxation regardless of its source; or
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a trust if a U.S. court is able to exercise primary
supervision over the administration of the trust and one or more
U.S. persons have the authority to control all substantial
decisions of the trust.
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If a partnership holds our stock, the tax treatment of a partner
will depend on the status of the partner and the activities of
the partnership. Partners in partnerships holding our stock
should consult their tax advisors.
For any taxable year for which we qualify for taxation as a
REIT, amounts distributed to, and gains realized by, taxable
U.S. stockholders with respect to our common stock
generally will be taxed as described below. For a summary of the
federal income tax treatment of dividends reinvested in
additional shares of our common stock pursuant to our
distribution reinvestment plan, see Description of Capital
Stock Distribution Reinvestment Plan.
Distributions
Generally
Under the Jobs Growth Tax Relief Reconciliation Act of 2003, as
extended by the Tax Increase Prevention and Reconciliation Act
of 2005, certain qualified dividend income received
by U.S. non-corporate stockholders in taxable years 2003
through 2010 is subject to tax at the same tax rates as
long-term capital gain (generally, under the new legislation, a
maximum rate of 15.0% for such taxable years). Distributions
received from REITs, however, generally are not eligible for
these reduced tax rates and, therefore, will continue to be
subject to tax at ordinary income rates, subject to two narrow
exceptions. Under the first exception, distributions received
from a REIT may be treated as qualified dividend
income eligible for the reduced tax rates to the extent
that the REIT itself has received qualified dividend income from
other corporations (such as taxable REIT subsidiaries) in which
the REIT has invested. Under the second exception, distributions
paid by a REIT in a taxable year may be treated as qualified
dividend income in an amount equal to the sum of (i) the
excess of the REITs REIT taxable income for
the preceding taxable year over the corporate-level federal
income tax payable by the REIT for such preceding taxable year
and (ii) the excess of the REITs income that was
subject to the Built-in Gains Tax in the preceding taxable year
over the tax payable by the REIT on such income for such
preceding taxable year. So long as we qualify as a REIT,
distributions made to our taxable U.S. stockholders out of
current or accumulated earnings and profits (and not
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designated as capital gain distributions) will be taken into
account by them as ordinary income (except, in the case of
non-corporate stockholders, to the limited extent that we are
treated as receiving qualified dividend income. In
addition, as long as we qualify as a REIT, corporate
stockholders will not be eligible for the dividends received
deduction for any distributions received from us.
To the extent that we make a distribution in excess of our
current and accumulated earnings and profits, the distribution
will be treated first as a tax-free return of capital, reducing
the tax basis in the U.S. stockholders shares, and
the amount of each distribution in excess of a
U.S. stockholders tax basis in its shares will be
taxable as gain realized from the sale of its shares.
Distributions that we declare in October, November or December
of any year payable to a stockholder of record on a specified
date in any of these months will be treated as both paid by us
and received by the stockholders on December 31 of the year,
provided that we actually pay the distribution during January of
the following calendar year. U.S. stockholders may not
include any of our losses on their own federal income tax
returns.
We will be treated as having sufficient earnings and profits to
treat as a dividend any distribution by us up to the amount
required to be distributed in order to avoid imposition of the
4.0% excise tax discussed above. Moreover, any deficiency
dividend will be treated as an ordinary or capital gain
dividend, as the case may be, regardless of our earnings and
profits. As a result, stockholders may be required to treat as
taxable some distributions that would otherwise result in a
tax-free return of capital.
Capital
Gain Distributions
Distributions to U.S. stockholders that we properly
designate as capital gain distributions normally will be treated
as long-term capital gains, to the extent they do not exceed our
actual net capital gain, for the taxable year without regard to
the period for which the U.S. stockholder has held his or
her stock. A corporate U.S. stockholder, however, may be
required to treat up to 20.0% of some capital gain distributions
as ordinary income. See Requirements for Qualification as
a REIT Operational Requirements Annual
Distribution Requirement for the treatment by
U.S. stockholders of net long-term capital gains that we
elect to retain and pay tax on.
Passive
Activity Loss and Investment Interest Limitations
Our distributions and any gain you realize from a disposition of
our common stock will not be treated as passive activity income,
and stockholders may not be able to utilize any of their
passive losses to offset this income in their
personal tax returns. Our distributions (to the extent they do
not constitute a return of capital) will generally be treated as
investment income for purposes of the limitations on the
deduction of investment interest. Net capital gain from a
disposition of shares and capital gain distributions generally
will be included in investment income for purposes of the
investment interest deduction limitations only if, and to the
extent a U.S. stockholder so elects, in which case those
capital gains will be taxed as ordinary income.
Certain
Dispositions of Our Common Shares
In general, any gain or loss realized upon a taxable disposition
of our common stock by a U.S. stockholder who is not a
dealer in securities will be treated as long-term capital gain
or loss if the shares have been held for more than
12 months and as short-term capital gain or loss if the
shares have been held for 12 months or less. If, however, a
U.S. stockholder has included in income any capital gains
distributions with respect to the shares, any loss realized upon
a taxable disposition of shares held for six months or less, to
the extent of the capital gains distributions included in income
with respect to the shares, will be treated as long-term capital
loss.
A redemption of common stock for cash will be treated as a
distribution that is taxable as a dividend to the extent of our
current or accumulated earnings and profits at the time of the
redemption under section 302 of the Internal Revenue Code
unless the redemption (a) results in a complete
termination of the stockholders interest in us under
section 302(b)(3) of the Internal Revenue Code, (b) is
substantially disproportionate with respect to the
stockholder under section 302(b)(2) of the Internal Revenue
Code, or (c) is not essentially equivalent to a
dividend with respect to the stockholder under
section 302(b)(1) of the
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Internal Revenue Code. Under section 302(b)(2) of the
Internal Revenue Code a redemption is considered
substantially disproportionate if the percentage of
the voting stock of the corporation owned by a stockholder
immediately after the redemption is less than eighty percent of
the percentage of the voting stock of the corporation owned by
such stockholder immediately before the redemption. In
determining whether the redemption is not treated as a dividend,
shares considered to be owned by a stockholder by reason of
certain constructive ownership rules set forth in
section 318 of the Internal Revenue Code, as well as shares
actually owned, must generally be taken into account. A
distribution to a stockholder will be not essentially
equivalent to a dividend if it results in a
meaningful reduction in the stockholders
interest in us.
If the redemption is not treated as a dividend, the redemption
of common stock for cash will result in taxable gain or loss
equal to the difference between the amount of cash received and
the stockholders tax basis in the shares redeemed. Such
gain or loss would be capital gain or loss if the common stock
were held as a capital asset and would be long-term capital gain
or loss if the holding period for the shares exceeds one year.
Information
Reporting Requirements and Backup Withholding for U.S.
Stockholders
We will report to U.S. stockholders and to the IRS the
amount of distributions made or deemed made during each calendar
year and the amount of tax withheld, if any. Under some
circumstances, U.S. stockholders may be subject to backup
withholding on payments made with respect to, or cash proceeds
of a sale or exchange of, our common stock. Backup withholding
will apply only if the stockholder:
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Fails to furnish its taxpayer identification number (which, for
an individual, would be his or her social security number);
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Furnishes an incorrect taxpayer identification number;
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Is notified by the IRS that the stockholder has failed properly
to report payments of interest or dividends; or
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Under some circumstances, fails to certify, under penalties of
perjury, that it has furnished a correct taxpayer identification
number and has not been notified by the IRS that the stockholder
is subject to backup withholding for failure to report interest
and dividend payments or has been notified by the IRS that the
stockholder is no longer subject to backup withholding for
failure to report those payments.
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Backup withholding will not apply with respect to payments made
to some stockholders, such as corporations and tax-exempt
organizations. Backup withholding is not an additional tax.
Rather, the amount of any backup withholding with respect to a
payment to a U.S. stockholder will be allowed as a credit
against the U.S. stockholders United States federal
income tax liability and may entitle the U.S. stockholder
to a refund, provided that the required information is furnished
to the IRS. U.S. stockholders should consult their own tax
advisors regarding their qualification for exemption from backup
withholding and the procedure for obtaining an exemption.
Treatment
of Tax-Exempt Stockholders
Distributions from us to a tax-exempt employee pension trust or
other domestic tax-exempt stockholder generally will not
constitute unrelated business taxable income, or
UBTI, unless the stockholder has borrowed to acquire or carry
its stock or has used the shares in a trade or business.
However, for tax-exempt stockholders that are social clubs,
voluntary employee benefit associations, supplemental
unemployment benefit trusts and qualified group legal services
plans exempt from federal income taxation under
Sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the
Internal Revenue Code, respectively, income from an investment
such as ours will constitute UBTI unless the organization
properly sets aside or reserves such amounts for purposes
specified in the Internal Revenue Code. These tax-exempt
stockholders should consult their own tax advisors concerning
these set aside and reserve requirements.
Qualified trusts that hold more than 10.0% (by value) of the
shares of pension-held REITs may be required to
treat a certain percentage of such a REITs distributions
as UBTI. A REIT is a pension-held
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REIT only if the REIT would not qualify as such for
federal income tax purposes but for the application of a
look-through exception to the five or fewer
requirement applicable to shares held by qualified trusts and
the REIT is predominantly held by qualified trusts.
A REIT is predominantly held if either at least one qualified
trust holds more than 25.0% by value of the REIT interests or
qualified trusts, each owning more than 10.0% by value of the
REIT interests, holds in the aggregate more than 50.0% of the
REIT interests. The percentage of any REIT distribution treated
as UBTI is equal to the ratio of (a) the UBTI earned by the
REIT (treating the REIT as if it were a qualified trust and
therefore subject to tax on UBTI) to (b) the total gross
income (less certain associated expenses) of the REIT. In the
event that this ratio is less than 5.0% for any year, then the
qualified trust will not be treated as having received UBTI as a
result of the REIT distribution. For these purposes, a qualified
trust is any trust described in Section 401(a) of the
Internal Revenue Code and exempt from tax under
Section 501(a) of the Internal Revenue Code.
Special
Tax Considerations for
Non-U.S.
Stockholders
The rules governing United States federal income taxation of
non-resident alien individuals, foreign corporations, foreign
partnerships and other foreign stockholders, which we refer to
collectively as
Non-U.S. stockholders,
are complex. The following discussion is intended only as a
summary of these rules.
Non-U.S. stockholders
should consult with their own tax advisors to determine the
impact of United States federal, state and local income tax laws
on an investment in our common stock, including any reporting
requirements as well as the tax treatment of the investment
under the tax laws of their home country.
Ordinary
Distributions
The portion of distributions received by
Non-U.S. stockholders
payable out of our earnings and profits that are not
attributable to our capital gains and that are not effectively
connected with a U.S. trade or business of the
Non-U.S. stockholder
will be subject to U.S. withholding tax at the rate of 30%,
unless reduced by treaty. In general,
Non-U.S. stockholders
will not be considered to be engaged in a U.S. trade or
business solely as a result of their ownership of our common
stock. In cases where the distribution income from a
Non-U.S. stockholders
investment in our common stock is, or is treated as, effectively
connected with the
Non-U.S. stockholders
conduct of a U.S. trade or business, the
Non-U.S. stockholder
generally will be subject to U.S. tax at graduated rates,
in the same manner as domestic stockholders are taxed with
respect to such distributions, such income must generally be
reported on a U.S. income tax return filed by or on behalf
of the
Non-U.S. stockholder
and the income may also be subject to the 30% branch profits tax
in the case of a
Non-U.S. stockholder
that is a corporation.
Non-Dividend
Distributions
Unless our common stock constitutes a U.S. real property
interest, which we refer to as a USRPI,
distributions by us that are not distributions out of our
earnings and profits will not be subject to U.S. income
tax. If it cannot be determined at the time at which a
distribution is made whether the distribution will exceed
current and accumulated earnings and profits, the distribution
will be subject to withholding at the rate applicable to
distributions. However, the
Non-U.S. stockholder
may seek a refund from the Internal Revenue Service of any
amounts withheld if it is subsequently determined that the
distribution was, in fact, in excess of our current and
accumulated earnings and profits. If our common stock
constitutes a USRPI, as described below, distributions by us in
excess of the sum of our earnings and profits plus the
stockholders basis in shares of our common stock will be
taxed under the Foreign Investment in Real Property Tax Act of
1980, which we refer to as FIRPTA, at the rate of
tax, including any applicable capital gains rates, that would
apply to a domestic stockholder of the same type (e.g., an
individual or a corporation, as the case may be), and the
collection of the tax will be enforced by a refundable
withholding at a rate of 10% of the amount by which the
distribution exceeds the stockholders share of our
earnings and profits.
Capital
Gain Distributions
A capital gain distribution will generally not be treated as
income that is effectively connected with a U.S. trade or
business and will instead be treated the same as an ordinary
distribution from us, provided that
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(1) the capital gain distribution is received with respect
to a class of stock that is regularly traded on an established
securities market located in the United States and (2) the
recipient
Non-U.S. stockholder
does not own more than 5% of that class of stock at any time
during the taxable year in which the capital gain distribution
is received. If such requirements are not satisfied, such
distributions will be treated as income that is effectively
connected with a U.S. trade or business of the
Non-U.S. stockholder
without regard to whether the distribution is designated as a
capital gain distribution and, in addition, shall be subject to
a 35% withholding tax. We do not anticipate our common stock
satisfying the regularly traded requirement.
Distributions subject to FIRPTA may also be subject to a 30%
branch profits tax in the hands of a
Non-U.S. stockholder
that is a corporation. A distribution is not a USRPI capital
gain if we held the underlying asset solely as a creditor.
Capital gain distributions received by a
Non-U.S. stockholder
from a REIT that are not USRPI capital gains are generally not
subject to U.S. income tax but may be subject to
withholding tax.
Dispositions
of Our Common Stock
A sale of our common stock by a
Non-U.S. stockholder
generally will be subject to U.S. taxation under FIRPTA.
Our common stock will not be treated as a USRPI if less than 50%
of our assets throughout a prescribed testing period consist of
interests in real property located within the United States,
excluding, for this purpose, interests in real property solely
in a capacity as a creditor. Due to the Asset Tests requirements
and provided the domestically controlled exception
discussed below does not apply, we would expect to constitute a
USRPI for all taxable years.
Even if the foregoing test is not met, our common stock
nonetheless will not constitute a USRPI if we are a
domestically controlled REIT. A domestically
controlled REIT is a REIT in which, at all times during a
specified testing period, less than 50% in value of its shares
of common stock is held directly or indirectly by
Non-U.S. stockholders.
We currently anticipate that we will be a domestically
controlled REIT and, therefore, the sale of our common stock
should not be subject to taxation under FIRPTA. However, we
cannot assure you that we are or will continue to be a
domestically controlled REIT. If we were not a domestically
controlled REIT, whether a
Non-U.S. stockholders
sale of our common stock would be subject to tax under FIRPTA as
a sale of a United States real property interest would depend on
whether our common stock were regularly traded on an
established securities market and on the size of the selling
stockholders interest in us. We will not be
regularly traded on an established securities market
in the near future.
If the gain on the sale of shares of common stock were subject
to taxation under FIRPTA, a
Non-U.S. stockholder
would be subject to the same treatment as a
U.S. stockholder with respect to the gain, subject to any
applicable alternative minimum tax and a special alternative
minimum tax in the case of non-resident alien individuals. Gain
from the sale of our common stock that would not otherwise be
subject to FIRPTA will nonetheless be taxable in the United
States to a
Non-U.S. stockholder
in two cases: (1) if the
Non-U.S. stockholders
investment in our common stock is effectively connected with a
U.S. trade or business conducted by such
Non-U.S. stockholder,
the
Non-U.S. stockholder
will be subject to the same treatment as a U.S. stockholder
with respect to such gain or (2) if the
Non-U.S. stockholder
is a nonresident alien individual who was present in the United
States for 183 days or more during the taxable year and has
a tax home in the United States, the nonresident
alien individual will be subject to a 30% tax on the
individuals capital gain.
Information
Reporting Requirements and Backup Withholding for
Non-U.S.
Stockholders
Non-U.S. stockholders
should consult their tax advisors with regard to
U.S. information reporting and backup withholding
requirements under the Internal Revenue Code.
Statement
of Stock Ownership
We are required to demand annual written statements from the
record holders of designated percentages of our common stock
disclosing the actual owners of the shares. Any record
stockholder who, upon our request, does not provide us with
required information concerning actual ownership of the shares
is required to include specified information relating to his or
her shares in his or her federal income tax return. We also
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must maintain, within the Internal Revenue District in which we
are required to file our federal income tax return, permanent
records showing the information we have received about the
actual ownership of our common stock and a list of those persons
failing or refusing to comply with our demand.
State and
Local Taxation
We and any operating subsidiaries we may form may be subject to
state and local tax in states and localities in which we or they
do business or own property. Our tax treatment and the tax
treatment of our operating partnership, any operating
subsidiaries, joint ventures or other arrangements we or our
operating partnership may form or enter into and the tax
treatment of the holders of our common stock in local
jurisdictions may differ from the federal income tax treatment
described above. Consequently, prospective stockholders should
consult their own tax advisors regarding the effect of state and
local tax laws on their investment in our common stock.
Federal
Income Tax Aspects of Our Operating Partnership
The following discussion summarizes certain federal income tax
considerations applicable to our investment in our operating
partnership. The discussion does not cover state or local tax
laws or any federal tax laws other than income tax laws.
Classification
as a Partnership
We are entitled to include in our income a distributive share of
our operating partnerships income and to deduct our
distributive share of our operating partnerships losses
only if our operating partnership is classified for federal
income tax purposes as a partnership, rather than as a
corporation or an association taxable as a corporation. Under
applicable Treasury Regulations, or the
Check-the-Box-Regulations, an unincorporated domestic entity
with at least two members may elect to be classified either as
an association taxable as a corporation or as a partnership. If
the entity fails to make an election, it generally will be
treated as a partnership for federal income tax purposes. Our
operating partnership intends to be classified as a partnership
for federal income tax purposes and will not elect to be treated
as an association taxable as a corporation under the
Check-the-Box-Regulations.
Even though our operating partnership will not elect to be
treated as an association for federal income tax purposes, it
may be taxed as a corporation if it is deemed to be a
publicly traded partnership. A publicly traded
partnership is a partnership whose interests are traded on an
established securities market or are readily tradable on a
secondary market or the substantial equivalent thereof;
provided, that even if the foregoing requirements are met, a
publicly traded partnership will not be treated as a corporation
for federal income tax purposes if at least 90.0% of the
partnerships gross income for each taxable year consists
of qualifying income under section 7704(d) of
the Internal Revenue Code. Qualifying income generally includes
any income that is qualifying income for purposes of the 95.0%
Gross Income Test applicable to REITs. We refer to this
exemption from being treated as a publicly traded partnership as
the Passive-Type Income Exemption. See Requirements for
Qualification as a REIT Operational
Requirements Gross Income Tests.
Under applicable Treasury Regulations, or the PTP Regulations,
limited safe harbors from the definition of a publicly traded
partnership are provided. Pursuant to one of those safe harbors,
or the Private Placement Exclusion, interests in a partnership
will not be treated as readily tradable on a secondary market or
the substantial equivalent thereof if (1) all interests in
the partnership were issued in a transaction (or transactions)
that were not required to be registered under the Securities Act
of 1933 and (2) the partnership does not have more than 100
partners at any time during the partnerships taxable year.
In determining the number of partners in a partnership, a person
owning an interest in a flow-through entity (including a
partnership, grantor trust or S corporation) that owns an
interest in the partnership is treated as a partner in such
partnership only if (a) substantially all of the value of
the owners interest in the flow-through entity is
attributable to the flow-through entitys direct or
indirect interest in the partnership and (b) a principal
purpose of the use of the flow-through entity is to permit the
partnership to satisfy the 100 partner limitation. Our operating
partnership presently qualifies for the Private Placement
Exclusion. Even if our operating partnership were considered a
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publicly traded partnership under the PTP Regulations because it
was deemed to have more than 100 partners, our operating
partnership should not be treated as a corporation because it
should be eligible for the 90.0% Passive-Type Income Exception
described above.
We have not requested, and do not intend to request, a ruling
from the IRS that our operating partnership will be classified
as a partnership for federal income tax purposes. If for any
reason our operating partnership were taxable as a corporation,
rather than a partnership, for federal income tax purposes, we
would not be able to qualify as a REIT. See
Requirements for Qualification as a
REIT Operational Requirements Gross
Income Tests and Requirements for Qualification as a
REIT Operational Requirements Asset
Tests. In addition, any change in our operating
partnerships status for tax purposes might be treated as a
taxable event, in which case we might incur a tax liability
without any related cash distribution. Further, items of income
and deduction of our operating partnership would not pass
through to its partners, and its partners would be treated as
stockholders for tax purposes. Our operating partnership would
be required to pay income tax at corporate tax rates on its net
income, and distributions to its partners would constitute
dividends that would not be deductible in computing our
operating partnerships taxable income.
Income
Taxation of Our Operating Partnership and Its
Partners
Partners, Not Partnership, Subject to Tax. A
partnership is not a taxable entity for federal income tax
purposes. As a partner in our operating partnership, we are
required to take into account our allocable share of our
operating partnerships income, gains, losses, deductions,
and credits for any taxable year of our operating partnership
ending within or with our taxable year, without regard to
whether we have received or will receive any distributions from
our operating partnership.
Partnership Allocations. Although a
partnership agreement generally determines the allocation of
income and losses among partners, such allocations will be
disregarded for tax purposes under section 704(b) of the
Internal Revenue Code if they do not have substantial
economic effect. If an allocation is not recognized for
federal income tax purposes, the item subject to the allocation
will be reallocated in accordance with the partners
interests in the partnership, which will be determined by taking
into account all of the facts and circumstances relating to the
economic arrangement of the partners with respect to such item.
Our operating partnerships allocations of taxable income
and loss are intended to comply with the requirements of
section 704(b) of the Internal Revenue Code and the
Treasury Regulations promulgated thereunder.
Tax Allocations With Respect to Contributed
Properties. Pursuant to section 704(c) of
the Internal Revenue Code, income, gain, loss, and deduction
attributable to appreciated or depreciated property that is
contributed to a partnership in exchange for an interest in the
partnership must be allocated for federal income tax purposes in
a manner such that the contributor is charged with, or benefits
from, the unrealized gain or unrealized loss associated with the
property at the time of the contribution. The amount of
unrealized gain or unrealized loss is generally equal to the
difference between the fair market value of the contributed
property at the time of contribution and the adjusted tax basis
of such property at the time of contribution. Under applicable
Treasury Regulations, partnerships are required to use a
reasonable method for allocating items subject to
section 704(c) of the Internal Revenue Code and several
reasonable allocation methods are described therein.
Under the partnership agreement, depreciation or amortization
deductions of our operating partnership generally will be
allocated among the partners in accordance with their respective
interests in our partnership, except to the extent that our
operating partnership is required under section 704(c) of
the Internal Revenue Code to use a different method for
allocating depreciation deductions attributable to its
contributed properties. In addition, gain or loss on the sale of
a property that has been contributed to our operating
partnership will be specially allocated to the contributing
partner to the extent of any remaining built-in gain or loss
with respect to the property for federal income tax purposes. It
is possible that we may (1) be allocated lower amounts of
depreciation deductions for tax purposes with respect to
contributed properties than would be allocated to us if each
such property were to have a tax basis equal to its fair market
value at the time of contribution, and (2) be allocated
taxable gain in the event of a sale of such contributed
properties in excess of the economic profit allocated to us as a
result of such sale. These allocations may cause us to recognize
taxable income in
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excess of cash proceeds received by us, which might adversely
affect our ability to comply with the REIT distribution
requirements, although we do not anticipate that this event will
occur. The foregoing principles also will affect the calculation
of our earnings and profits for purposes of determining the
portion of our distributions that are taxable as a dividend. The
allocations described in this paragraph may result in a higher
portion of our distributions being taxed as a dividend than
would have occurred had we purchased such properties for cash
Basis in Partnership Interest. The adjusted
tax basis of our partnership interest in our operating
partnership generally will be equal to (1) the amount of
cash and the basis of any other property contributed to our
operating partnership by us, (2) increased by (A) our
allocable share of our operating partnerships income and
(B) our allocable share of indebtedness of our operating
partnership, and (3) reduced, but not below zero, by
(A) our allocable share of our operating partnerships
loss and (B) the amount of cash distributed to us,
including constructive cash distributions resulting from a
reduction in our share of indebtedness of our operating
partnership. If the allocation of our distributive share of our
operating partnerships loss would reduce the adjusted tax
basis of our partnership interest in our operating partnership
below zero, the recognition of the loss will be deferred until
such time as the recognition of the loss would not reduce our
adjusted tax basis below zero. If a distribution from our
operating partnership or a reduction in our share of our
operating partnerships liabilities would reduce our
adjusted tax basis below zero, that distribution, including a
constructive distribution, will constitute taxable income to us.
The gain realized by us upon the receipt of any such
distribution or constructive distribution would normally be
characterized as capital gain, and if our partnership interest
in our operating partnership has been held for longer than the
long-term capital gain holding period (currently one year), the
distribution would constitute long-term capital gain.
Sale of Our Operating Partnerships
Property. Generally, any gain realized by our
operating partnership on the sale of property held for more than
one year will be long-term capital gain, except for any portion
of such gain that is treated as depreciation or cost recovery
recapture. Our share of any gain realized by our operating
partnership on the sale of any property held by our operating
partnership as inventory or other property held primarily for
sale to customers in the ordinary course of our operating
partnerships trade or business will be treated as income
from a prohibited transaction that is subject to a 100% tax. We,
however, do not presently intend to acquire or hold or allow our
operating partnership to acquire or hold any property that
represents inventory or other property held primarily for sale
to customers in the ordinary course of our or our operating
partnerships trade or business.
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EMPLOYEE
BENEFIT PLAN AND IRA CONSIDERATIONS
The following is a summary of some non-tax considerations
associated with an investment in our shares by a Benefit Plan
(as defined below). This summary is based on provisions of the
Employee Retirement Income Security Act of 1974, as amended,
referred to as ERISA, and the Internal Revenue Code, through the
date of this prospectus, and relevant regulations, rulings and
opinions issued by the Department of Labor and the IRS. We
cannot assure you that there will not be adverse court decisions
or legislative, regulatory or administrative changes that would
significantly modify the statements expressed herein. Any such
changes may or may not apply to transactions entered into prior
to the date of their enactment. This summary does not address
issues relating to governmental plans, church plans, and foreign
plans that are not subject to ERISA or the prohibited
transaction provisions of Section 4975 of the Internal
Revenue Code but that may be subject to similar requirements
under other applicable laws. Such plans must determine whether
an investment in our shares is in accordance with applicable law
and the plan documents.
In addition, this summary does not include a discussion of any
laws, regulations or statutes that may apply to investors not
covered by ERISA, including, for example, state statutes that
impose fiduciary responsibility requirements in connection with
the investment of assets of governmental plans, which may have
prohibitions that operate similarly to the prohibited
transaction rules of ERISA and the Internal Revenue Code.
We collectively refer to employee pension benefit plans subject
to ERISA (such as profit sharing, section 401(k) and
pension plans), other arrangements subject to ERISA, retirement
plans and accounts subject to Section 4975 of the Internal
Revenue Code but not subject to ERISA (such as IRAs), and health
and welfare plans subject to ERISA as Benefit Plans. Each
fiduciary or other person responsible for the investment of the
assets of a Benefit Plan seeking to invest plan assets in our
shares must, taking into account the facts and circumstances of
such Benefit Plan, consider, among other matters:
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whether the investment is consistent with the applicable
provisions of ERISA and the Internal Revenue Code;
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whether, under the facts and circumstances pertaining to the
Benefit Plan in question, the fiduciarys responsibility to
the plan has been satisfied;
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whether the investment will produce UBTI to the Benefit Plan
(see Federal Income Tax Considerations
Treatment of Tax-Exempt Stockholders);
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the need to value at fair market value the assets of the Benefit
Plan annually; and
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whether the assets of the entity in which the investment is made
will be treated as plan assets of the Benefit Plan
investor.
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With respect to Benefit Plans which are subject to ERISA, a plan
fiduciarys responsibilities include the following duties:
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to act solely in the interest of plan participants and
beneficiaries and for the exclusive purpose of providing
benefits to them, as well as defraying reasonable expenses of
plan administration;
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to invest plan assets prudently;
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to diversify the investments of the plan unless it is clearly
prudent not to do so;
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to ensure sufficient liquidity for the plan;
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to follow the plan document and other instruments governing the
plan insofar as such documents and instruments are consistent
with ERISA; and
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to consider whether an investment would constitute or give rise
to a prohibited transaction under ERISA.
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ERISA also requires that the assets of a Benefit Plan subject to
ERISA be held in trust and that the trustee, or a duly
authorized named fiduciary or investment manager, have exclusive
authority and discretion to manage and control the assets of the
plan.
Prohibited
Transactions
Section 406 of ERISA and Section 4975 of the Internal
Revenue Code prohibit specified transactions involving the
assets of a Benefit Plan. In general, these are transactions
between the plan and any person that is a party in
interest or disqualified person with respect
to that Benefit Plan. These transactions are prohibited
regardless of how beneficial they may be for the Benefit Plan.
Prohibited transactions include the sale, exchange or leasing of
property, and the lending of money or the extension of credit,
between a Benefit Plan and a party in interest or disqualified
person. The transfer to, or use by or for the benefit of, a
party in interest, or disqualified person of any assets of a
Benefit Plan is also prohibited. A fiduciary of a Benefit Plan
also is prohibited from engaging in self-dealing, acting for a
person who has an interest adverse to the plan or receiving any
consideration for its own account from a party dealing with the
plan in a transaction involving plan assets. Furthermore,
Section 408 of the Internal Revenue Code states that assets
of an IRA trust may not be commingled with other property except
in a common trust fund or common investment fund.
Plan
Asset Considerations
In order to determine whether an investment in our shares by
Benefit Plans creates or gives rise to the potential for either
prohibited transactions or commingling of assets as referred to
above, a fiduciary must consider whether an investment in our
shares by Benefit Plans will cause our assets to be treated as
assets of the investing Benefit Plans. Although neither ERISA
nor the Internal Revenue Code specifically define the term
plan assets, ERISA and a U.S. Department of
Labor Regulation, referred to collectively as the Plan
Asset Rules, provides guidelines as to the circumstances
in which the underlying assets of an entity will be deemed to
constitute assets of a Benefit Plan when the plan invests in
that entity. Under the Plan Asset Rules, if a Benefit Plan
acquires an equity interest in an entity which is neither a
publicly-offered security nor a security issued by
an investment company registered under the Investment Company
Act, the Benefit Plans assets would include both the
equity interest and an undivided interest in each of the
entitys underlying assets unless an exception from the
Plan Asset Rules applies.
The regulation defines a publicly-offered security as a security
that is:
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widely-held;
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freely-transferable; and
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either (1) part of a class of securities registered under
Section 12(b) or 12(g) of the Securities Exchange Act of
1934, or (2) sold in connection with an effective
registration statement under the Securities Act of 1933,
provided the securities are registered under the Securities
Exchange Act of 1934 within 120 days (or such later time as
may be allowed by the SEC) after the end of the fiscal year of
the issuer during which the offering occurred.
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The Plan Asset Rules provides that a security is widely
held only if it is part of a class of securities that is
owned by 100 or more investors independent of the issuer and of
one another. A security will not fail to be widely held because
the number of independent investors falls below 100 subsequent
to the initial offering as a result of events beyond the
issuers control. Although we anticipate that upon
completion of this offering, our common stock will be
widely held, our common stock will not be widely
held until we sell shares to 100 or more independent investors.
Whether a security is freely transferable depends
upon the particular facts and circumstances. For example, our
shares are subject to certain restrictions on transferability
intended to ensure that we continue to qualify for federal
income tax treatment as a REIT. The Plan Asset Rules provide,
however, that where the minimum investment in a public offering
of securities is $10,000 or less, a restriction on, or a
prohibition of, transfers which would result in a termination or
reclassification of the entity for state or federal tax purposes
will not ordinarily affect a determination that such securities
are freely transferable. The minimum
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investment in our shares is less than $10,000; thus, the
restrictions imposed upon shares in order to maintain our status
as a REIT should not cause the shares to be deemed not
freely transferable.
Our shares of common stock are being sold in connection with an
effective registration statement under the Securities Act of
1933. We expect to be exempt from registration as an investment
company under the Investment Company Act. See Investment
Objectives, Strategy and Criteria Investment Company
Act Considerations.
In the event our assets could be characterized as plan
assets of Benefit Plan investors that own shares of our
common stock, one exception in the Plan Asset Rules provides
that the assets of a Benefit Plan will not include the
underlying assets of an entity in which the Benefit Plan invests
if equity participation in the entity by benefit plan
investors is not significant. Equity
participation in an entity by benefit plan investors is
considered significant if 25.0% or more of the value
of any class of equity interests in the entity is held by such
benefit plan investors. The terms benefit plan
investor means (i) employee benefit plans
subpart to Part 4 of Title I of ERISA,
(ii) plans described in Section 4975(c)(i)
of the Internal Revenue Code, and (iii) certain entities or
funds whose underlying assets are considered plan assets by
reason of investment in such entities or funds by investors
described in clause (i) and (ii).
Equity interests held by a person with discretionary authority
or control with respect to the assets of the entity, and equity
interests held by a person who provides investment advice for a
fee (direct or indirect) with respect to such assets or any
affiliate of any such person (other than a benefit plan
investor), are disregarded for purposes of determining whether
equity participation by benefit plan investors is significant.
The Plan Asset Rules provide that the 25.0% of ownership test
applies at the time of an acquisition by any person of the
equity interests. In addition, an advisory opinion of the
Department of Labor takes the position that a redemption of an
equity interest by an investor constitutes the acquisition of an
equity interest by the remaining investors (through an increase
in their percentage ownership of the remaining equity
interests). The Department of Labor position necessitates the
testing of whether the 25.0% limitation has been exceeded at the
time of a redemption of interests in the entity.
Our charter will prohibit benefit plan investors from owning,
directly or indirectly, in the aggregate, 25.0% or more of our
common stock prior to the date that either our common stock
qualifies as a class of publicly offered securities
or we qualify for another exemption in the Plan Asset Rules
other than the 25.0% limitation. In addition, the charter also
provides that we have the power to take certain actions to avoid
having our assets characterized as plan assets under
the Plan Asset Rules, including the right to redeem shares and
to refuse to give effect to a transfer of shares. While we do
not expect that we will need to exercise such power, we cannot
give any assurance that such power will not be exercised. Based
on the foregoing, we believe that our assets should not be
deemed to be plan assets of any Benefit Plan that
invests in our common stock.
In the event that our underlying assets were treated by the
Department of Labor as the assets of investing Benefit Plans,
our management would be treated as fiduciaries with respect to
each Benefit Plan investor, and an investment in our shares
might constitute an inappropriate delegation of fiduciary
responsibility to our management and expose the fiduciary of the
Benefit Plan to co-fiduciary liability under ERISA for any
breach by our management of the fiduciary duties mandated under
ERISA. Further, if our assets are deemed to be plan
assets, an investment by an IRA in our shares might be
deemed to result in an impermissible commingling of IRA assets
with other property.
In addition, if our underlying assets are deemed to be the
assets of each benefit plan investor, the prohibited transaction
restrictions of ERISA and the Internal Revenue Code would apply
to any transaction involving our assets. These restrictions
would, for example, require that we avoid transactions with
entities that are affiliated with us or any other fiduciaries or
parties-in-interest
or disqualified persons with respect to the benefit plan
investors unless such transactions otherwise were exempt,
statutorily or administratively, from the prohibitions of ERISA
and the Internal Revenue Code.
If a prohibited transaction were to occur, the Internal Revenue
Code imposes an excise tax equal to 15.0% of the amount involved
and authorizes the IRS to impose an additional 100% excise tax
if the prohibited
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transaction is not corrected in a timely manner.
These taxes would be imposed on any disqualified person who
participates in the prohibited transaction. In addition, our
former advisor and possibly other fiduciaries of Benefit Plans
subject to ERISA who permitted the prohibited transaction to
occur or who otherwise breached their fiduciary
responsibilities, or a non-fiduciary participating in a
prohibited transaction, could be required to restore to the
Benefit Plan any profits they realized as a result of the
transaction or breach, and make whole the Benefit Plan for any
losses incurred as a result of the transaction or breach. For
those Benefit Plans that are outside the authority of the IRS,
ERISA provides that the Secretary of the Department of Labor may
impose civil penalties, which largely parallel the foregoing
excise taxes imposed by the IRS, upon
parties-in-interest
that engage in a prohibited transactions. With respect to an IRA
that invests in our shares, the occurrence of a prohibited
transaction involving the individual who established the IRA, or
his or her beneficiary, would cause the IRA to lose its
tax-exempt status under Section 408(e)(2) of the Internal
Revenue Code, and such individual would be taxable on the deemed
distribution of all assets in the IRA.
Other
Prohibited Transactions
Regardless of whether the our assets are characterized as
plan assets under the Plan Asset Rules, a prohibited
transaction could occur if we, any selected dealer or any of
their affiliates are a fiduciary (within the meaning of
Section 3(21) of ERISA) with respect to any Benefit Plan
purchasing our common stock. Accordingly, unless an
administrative or statutory exemption applies, shares should not
be purchased by a Benefit Plan with respect to which any of the
above persons is a fiduciary. A person is a fiduciary with
respect to a Benefit Plan under Section 3(21) of ERISA if,
among other things, the person has discretionary authority or
control with respect to plan assets or provides
investment advice for a direct or indirect fee with respect to
plan assets or has any authority to do so. Under a
regulation issued by the Department of Labor, a person shall be
deemed to be providing investment advice if that person renders
advice as to the advisability of investing in our shares and
that person regularly provides investment advice to the Benefit
Plan pursuant to a mutual agreement or understanding (written or
otherwise) (1) that the advice will serve as the primary
basis for investment decisions, and (2) that the advice
will be individualized for the Benefit Plan based on its
particular needs.
Any potential investor considering an investment in shares of
our common stock that is, or is acting on behalf of, a Benefit
Plan is strongly urged to consult its own legal and tax advisors
regarding the consequences of such an investment under ERISA,
the Internal Revenue Code and any applicable similar laws.
DESCRIPTION
OF CAPITAL STOCK
We were formed under the laws of the State of Maryland. The
rights of our stockholders are governed by Maryland law as well
as our charter and bylaws. The following summary of the terms of
our stock is a summary of all material provisions concerning our
stock and you should refer to the Maryland General Corporation
Law and our charter and bylaws for a full description. The
following summary is qualified in its entirety by the more
detailed information contained in our charter and bylaws. Copies
of our charter and bylaws are filed as exhibits to the
registration statement of which this prospectus is a part. You
can obtain copies of our charter and bylaws and every other
exhibit to our registration statement. Please see Where
You Can Find Additional Information below.
Under our charter, we have authority to issue a total of
1,200,000,000 shares of capital stock. Of the total shares
authorized, 1,000,000,000 shares are designated as common
stock with a par value of $0.01 per share and
200,000,000 shares are designated as preferred stock with a
par value of $0.01 per share. In addition, our board of
directors may amend our charter, without stockholder approval,
to increase or decrease the aggregate number of shares of stock
or the number of shares of stock of any class or series that we
have authority to issue.
Common
Stock
The holders of common stock are entitled to one vote per share
on all matters voted on by stockholders, including election of
our directors. Our charter does not provide for cumulative
voting in the election of our
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directors. Therefore, the holders of a majority of the
outstanding shares of common stock can elect our entire board of
directors. Subject to any preferential rights of any outstanding
class or series of shares and to the provisions in our charter
regarding the restriction on the transfer of common stock, the
holders of common stock are entitled to such distributions as
may be authorized from time to time by our board of directors
and declared by us out of legally available funds and, upon
liquidation, are entitled to receive all assets available for
distribution to our stockholders. Upon issuance for full payment
in accordance with the terms of this offering, all shares issued
in the offering will be fully paid and nonassessable. Holders of
common stock will not have preemptive rights, which means that
you will not have an automatic option to purchase any new shares
that we issue. Our shares of common stock will have equal
distribution, liquidation and other rights.
Our charter also contains a provision permitting our board of
directors, without any action by our stockholders, to classify
or reclassify any unissued common stock into one or more classes
or series by setting or changing the relative voting, conversion
or other rights, preferences, restrictions, limitations as to
distributions and qualifications or terms or conditions of
redemption of any new class or series of shares.
We will generally not issue certificates for our shares. Shares
will be held in uncertificated form, which will
eliminate the physical handling and safekeeping responsibilities
inherent in owning transferable stock certificates and eliminate
the need to return a duly executed stock certificate to effect a
transfer. We anticipate that we will engage a third party to act
as our own transfer agent and registrar. Transfers can be
effected simply by mailing a transfer and assignment form to our
transfer agent, which we will provide to you at no charge upon
request.
Preferred
Stock
Our charter authorizes our board of directors to designate and
issue one or more classes or series of preferred stock without
stockholder approval, and to establish the relative voting,
conversion or other rights, preferences, restrictions,
limitations as to distributions and qualifications or terms or
conditions of redemption of each class or series of preferred
stock so issued. Because our board of directors has the power to
establish the preferences and rights of each class or series of
preferred stock, it may afford the holders of any series or
class of preferred stock preferences, powers and rights senior
to the rights of holders of common stock. However, the voting
rights per share of any series or class of preferred stock sold
in a private offering may not exceed voting rights which bear
the same relationship to the voting rights of a publicly held
share as the consideration paid to us for each privately-held
preferred share bears to the book value of each outstanding
publicly held share. If we ever created and issued preferred
stock with a distribution preference over common stock, payment
of any distribution preferences of outstanding preferred stock
would reduce the amount of funds available for the payment of
distributions on the common stock. Further, holders of preferred
stock are normally entitled to receive a liquidation preference
in the event we liquidate, dissolve or wind up before any
payment is made to the common stockholders, likely reducing the
amount common stockholders would otherwise receive upon such an
occurrence. In addition, under certain circumstances, the
issuance of preferred stock may render more difficult or tend to
discourage a merger, tender offer or proxy contest, the
assumption of control by a holder of a large block of our
securities, or the removal of incumbent management. Our board of
directors has no present plans to issue any preferred stock, but
may do so at any time in the future without stockholder
approval. However, the issuance of preferred stock must be
approved by a majority of our independent directors not
otherwise interested in the transaction, who will have access,
at our expense, to our legal counsel or to independent legal
counsel.
Dilution
of Our Shares
Existing stockholders who purchased shares of our common stock
in our initial offering will experience dilution of their equity
investment during our follow-on offering. As of March 12,
2010, we have raised gross offering proceeds of $1,448,044,000
pursuant to our initial offering. Our stockholders who own 100%
of our outstanding common shares when we commenced our follow-on
offering will own approximately 42% of our outstanding common
shares upon the completion of our follow-on offering, assuming
we raise the maximum offering of $2,000,000,000. See Risks
Related to Our Organizational Structure Several
potential events
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could cause your investment in us to be diluted, which may
reduce the overall value of your investment and
Your interests may be diluted in various ways,
which may reduce your returns.
Meetings
and Special Voting Requirements
An annual meeting of the stockholders will be held each year, at
least 30 days after delivery of our annual report. Special
meetings of stockholders may be called only upon the request of
a majority of our directors, a majority of the independent
directors or our president or upon the written request of
stockholders entitled to cast at least 10.0% of the votes
entitled to be cast at the meeting. Within ten days of
receipt of a written request stating the purpose of the special
meeting, we will provide stockholders with written notice of the
meeting and the purpose of such of such meeting to be held on a
date not less than 15 nor more than 60 days after the
notice is sent, at a time and place specified in the request or
if not specified, at a time and place convenient to
stockholders. The presence either in person or by proxy of
stockholders entitled to cast 50.0% of the votes entitled to be
cast at the meeting shall constitute a quorum. Generally, the
affirmative vote of a majority of the votes cast is necessary to
take stockholder action, except as described in the next
paragraph and except that the affirmative vote of holders of a
majority of shares entitled to vote who are represented in
person or by proxy at a meeting at which a quorum is present is
required to elect a director.
Under the Maryland General Corporation Law and our charter,
stockholders are generally entitled to vote at a duly held
meeting at which a quorum is present on (1) amendments to
our charter, (2) our liquidation or dissolution, (3) a
merger, consolidation or sale or other disposition of all or
substantially all of our assets, and (4) election or
removal of our directors. Except with respect to the election of
directors or as otherwise provided in our charter, the vote of
stockholders entitled to cast a majority of the votes entitled
to be cast on the matter is required to approve any such action,
and no such action can be taken by our board of directors
without such majority vote of our stockholders. Stockholders are
not entitled to exercise any of the rights of an objecting
stockholder provided for in Title 3, Subtitle 2 of the
Maryland General Corporation Law unless our board of directors
determines that such rights shall apply, with respect to all or
any classes or series of stock, to one or more transactions
occurring after the date of such determination in connection
with which stockholders would otherwise be entitled to exercise
such rights. Stockholders do have the power, without the
concurrence of the directors, to remove a director from our
board with or without cause, by the affirmative vote of a
majority of stockholders entitled to cast at least a majority of
the votes entitled to be cast generally in the election of
directors.
Stockholders are entitled to receive a copy of our stockholder
list upon request. The list provided by us will include the
name, address and telephone number of each stockholder of record
and number of shares owned by each stockholder of record and
will be sent within 10 days of our receipt of the request.
A stockholder requesting a list will be required to pay
reasonable costs of postage and duplication.
If we neglect or refuse to exhibit, produce or mail a copy of
the stockholder list as requested, we shall be liable to the
stockholder requesting the list for the costs, including
attorneys fees, incurred by that stockholder for
compelling the production of the stockholder list and any actual
damages suffered by any stockholder for the neglect or refusal
to produce the list. It shall be a defense that the actual
purpose and reason for the requests for inspection or for a copy
of the stockholder list is not for a proper purpose but is
instead for the purpose of securing such list of stockholders or
other information for the purpose of selling such list or copies
thereof, or of using the same for a commercial purpose other
than in the interest of the applicant as a stockholder relative
to the affairs of our company. We may require that the
stockholder requesting the stockholder list represent that the
request is not for a commercial purpose unrelated to the
stockholders interest in our company. The remedies
provided by our charter to stockholders requesting copies of the
stockholder list are in addition to, and do not in any way
limit, other remedies available to stockholders under federal
law, or the law of any state.
In addition to the foregoing, stockholders have rights under
Rule 14a-7
under the Securities Exchange Act of 1934, which provides that,
upon the request of a stockholder and the payment of the
expenses of the distribution, we are required to distribute
specific materials to stockholders in the context of the
solicitation of proxies by a stockholder for voting on matters
presented to stockholders or, at our option, provide requesting
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stockholders with a copy of the list of stockholders so that the
requesting stockholder may make the distribution of such
materials.
Restriction
on Ownership of Shares
In order for us to continue to qualify as a REIT, not more than
50.0% of our outstanding shares may be owned by any five or
fewer individuals during the last half of any taxable year
beginning with the second taxable year in which we qualify as a
REIT. In addition, the outstanding shares must be owned by 100
or more persons during at least 335 days of a
12-month
taxable year or during a proportionate part of a shorter taxable
year beginning with the second taxable year in which we qualify
as a REIT. We may prohibit certain acquisitions and transfers of
shares so as to ensure our continued qualification as a REIT
under the Internal Revenue Code. However, we cannot assure you
that this prohibition will be effective.
Our charter contains a limitation on ownership that prohibits
any individual or entity from directly acquiring beneficial
ownership of more than 9.8% of the value of our then outstanding
capital stock (which includes common stock and any preferred
stock we may issue) or more than 9.8% of the value or number of
shares, whichever is more restrictive, of our then outstanding
common stock.
Any attempted transfer of our stock which, if effective, would
result in our stock being beneficially owned by fewer than
100 persons will be null and void. Any attempted transfer
of our stock which, if effective, would result in violation of
the ownership limits discussed above or in our being
closely held under Section 856(h) of the
Internal Revenue Code or otherwise failing to qualify as a REIT,
will cause the number of shares causing the violation (rounded
to the nearest whole share) to be automatically transferred to a
trust for the exclusive benefit of one or more charitable
beneficiaries, and the proposed transferee will not acquire any
rights in the shares. The automatic transfer will be deemed to
be effective as of the close of business on the business day
prior to the date of the transfer. We will designate a trustee
of the share trust that will not be affiliated with us. We will
also name one or more charitable organizations as a beneficiary
of the share trust.
Shares-in-trust
will remain issued and outstanding shares and will be entitled
to the same rights and privileges as all other shares of the
same class or series. The trustee will receive all distributions
on the
shares-in-trust
and will hold such distributions in trust for the benefit of the
beneficiary. The trustee will vote all
shares-in-trust
during the period they are held in trust.
The trustee of the trust will be empowered to sell the
shares-in-trust
to a qualified person selected by the trustee and to distribute
to the applicable prohibited owner an amount equal to the lesser
of (1) the sales proceeds received by the trust for such
shares-in-trust
or (2) (A) if the prohibited owner was a transferee for
value, the price paid by the prohibited owner for such
shares-in-trust
or (B) if the prohibited owner was not a transferee or was
a transferee but did not give value for the
shares-in-trust,
the fair market value of such
shares-in-trust,
as determined in good faith by our board of directors. Any
amount received by the trustee in excess of the amount to be
paid to the prohibited owner will be distributed to the
beneficiary of the trust. In addition, all
shares-in-trust
will be deemed to have been offered for sale to us or our
designee, at a price per share equal to the lesser of
(1) the price per share in the transaction that created
such
shares-in-trust
(or, in the case of a devise, gift, or other event other than a
transfer for value, the market price of such shares at the time
of such devise, gift, or other event) and (2) the market
price on the date we, or our designee, accepts such offer.
Any person who acquires shares in violation of the foregoing
restriction or who owns shares that were transferred to any such
trust is required to give immediate written notice to us of such
event. Such person shall provide to us such other information as
we may request in order to determine the effect, if any, of such
transfer on our status as a REIT.
The foregoing restrictions continue to apply until our board of
directors determines it is no longer in our best interest to
attempt to, or to continue to, qualify as a REIT.
Our board of directors, in its sole discretion, may exempt
(prospectively or retroactively) a person from the limitation on
ownership of more than 9.8% of the value of our then outstanding
capital stock (which includes common stock and any preferred
stock we may issue) or more than 9.8% of the value or number of
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shares, whichever is more restrictive, of our then outstanding
common stock. However, the board may not exempt any person whose
ownership of our outstanding stock would result in our being
closely held within the meaning of
Section 856(h) of the Internal Revenue Code or otherwise
would result in our failing to qualify as a REIT. In order to be
considered by the board for exemption, a person also must not
own, directly or indirectly, an interest in any of our tenants
(or a tenant of any entity which we own or control) that would
cause us to own, directly or indirectly, more than a 9.9%
interest in the tenant. The person seeking an exemption must
represent to the satisfaction of the board that it will not
violate these two restrictions. The person also must agree that
any violation or attempted violation of these restrictions will
result in the automatic transfer of the shares of stock causing
the violation to the share trust.
Any stockholder of record who owns 5.0% (or such lower level as
required by the Internal Revenue Code and the regulations
thereunder) or more of the outstanding shares during any taxable
year will be asked to deliver a statement or affidavit setting
forth the name and address of such record owner, the number of
shares actually owned by such stockholder, and such information
regarding the beneficial ownership of the shares as we may
request in order to determine the effect, if any, of such actual
or beneficial ownership on our status as a REIT and to ensure
compliance with the ownership limit.
Any subsequent transferee to whom you transfer any of your
shares must also comply with the suitability standards we have
established for all stockholders. See Suitability
Standards.
Distributions
and Distribution Policy
The amount of any cash distributions will be determined by our
board of directors and will depend on the amount of
distributable funds, current and projected cash requirements,
tax considerations, any limitations imposed by the terms of
indebtedness we may incur and other factors. Our board of
directors approved a 6.50% per annum distribution to be paid to
our stockholders beginning on January 8, 2007, the date we
reached our minimum offering in our initial offering. The first
distribution was paid in February 2007 for the period ended
January 31, 2007. On February 14, 2007, our board of
directors approved a 7.25% per annum distribution to be paid to
our stockholders beginning with our February 2007 monthly
distribution, which was paid in March 2007, and we have
continued to pay distributions at that rate through March 2010.
It is our intent to continue to pay distributions. However, we
cannot guarantee the amount of distributions paid in the future,
if any, although we expect to make distribution payments at the
end of each month.
We intend to accrue distributions on a daily basis and pay
distributions on a monthly basis. Our distribution policy is set
by our board of directors and is subject to change based on
available cash flows. In connection with a distribution to our
stockholders, our board of directors authorizes a monthly
distribution for a certain dollar amount per share of our common
stock. We then calculate each stockholders specific
distribution amount for the month using daily record and
declaration dates, and your distributions begin to accrue on the
date we mail a confirmation of your subscription for shares of
our common stock, subject to our acceptance of your subscription.
We are required to make distributions sufficient to satisfy the
requirements for qualification as a REIT for tax purposes. We
intend to distribute sufficient income so that we satisfy the
requirements for qualification as a REIT. In order to qualify as
a REIT, we are required to distribute 90.0% of our annual
taxable income to our stockholders. See Federal Income Tax
Considerations Requirements for Qualification as a
REIT Operational Requirements Annual
Distribution Requirement. Generally, income distributed to
stockholders will not be taxable to us under the Internal
Revenue Code if we distribute at least 90.0% of our taxable
income. See Federal Income Tax Considerations
Requirements for Qualification as a REIT.
Distributions will be authorized at the discretion of our board
of directors, in accordance with our earnings, cash flow and
general financial condition. Our boards discretion will be
directed, in substantial part, by its obligation to cause us to
comply with the REIT requirements. Because we may receive income
from interest or rents at various times during our fiscal year,
distributions may not reflect our income earned in that
particular distribution period but may be made in anticipation
of cash flow which we expect to receive during a later quarter
and may be made in advance of actual receipt of funds in an
attempt to make distributions relatively uniform. Due to these
timing differences, we may be required to borrow money, use
proceeds from
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the issuance of securities or sell assets in order to pay out
enough of our taxable income to satisfy the requirement that we
distribute at least 90.0% of our taxable income, other than net
capital gains, in order to qualify as a REIT. Our organizational
documents do not establish a limit on the amount of net proceeds
we may use to fund distributions.
Generally, distributions that you receive, including
distributions that are reinvested pursuant to our distribution
reinvestment plan, will be taxed as ordinary income to the
extent they are from current or accumulated earnings and
profits. To the extent that we make a distribution in excess of
our current and accumulated earnings and profits, the
distribution will be treated first as a tax-free return of
capital, reducing the tax basis in your shares, and the amount
of each distribution in excess of your tax basis in your shares
will be taxable as a gain realized from the sale of your shares.
If you receive a distribution in excess of our current and
accumulated earnings and profits, upon the sale of your shares
you may realize a higher taxable gain or a smaller loss because
the basis of the shares as reduced will be used for purposes of
computing the amount of the gain or loss. In addition,
individual investors will be subject to tax at capital gains
rates on distributions made by us that we designate as
capital gain dividends. However, because each
investors tax considerations are different, we suggest
that you consult with your tax advisor. Please see Federal
Income Tax Considerations.
Under the Maryland General Corporation Law, if our board of
directors gives general authorization for a distribution and
provides for or establishes a method or procedure for
determining the maximum amount of the distribution, our board of
directors may delegate to a committee of directors or one of our
officers the power, in accordance with the general
authorization, to fix the amount and other terms of the
distribution.
We are not prohibited from distributing our own securities in
lieu of making cash distributions to stockholders, provided that
the securities so distributed to stockholders are readily
marketable. Stockholders who receive marketable securities in
lieu of cash distributions may incur transaction expenses in
liquidating the securities.
Distribution
Reinvestment Plan
We currently have a distribution reinvestment plan, or the DRIP,
available that allows you to have your distributions otherwise
distributable to you invested in additional shares of common
stock.
During this offering, you may purchase shares under our
distribution reinvestment plan for $9.50 per share. Thereafter,
shares in the plan will be offered (1) 95.0% of the
offering price in any subsequent public equity offering during
such offering, and (2) 95.0% of the most recent offering
price for the first 12 months subsequent to the close of
the last public offering of shares prior to the listing of the
shares on a national securities exchange. After that
12-month
period, participants in the DRIP plan may acquire shares at
95.0% of the per share valuation determined by a firm chosen for
that purpose until the listing. From and after the date of such
listing, participants may acquire shares at a price equal to
100% of the average daily open and close price per share on the
distribution payment date, as reported by the national
securities exchange on which the shares are traded. We will not
pay selling commissions, the dealer manager fee or due diligence
expense reimbursements with respect to shares purchased pursuant
to our distribution reinvestment plan. A copy of the DRIP as
currently in effect is included as Exhibit B to this
prospectus.
Stockholders participating in the DRIP may purchase whole or
fractional shares, subject to certain minimum investment
requirements and other restrictions which may be imposed by the
board of directors. If sufficient shares of our common stock are
not available for issuance under the DRIP, we will remit excess
dividends of net cash from operations to the participants. If
you elect to participate in the DRIP, you must agree that, if at
any time you fail to meet the applicable investor suitability
standards or cannot make the other investor representations or
warranties set forth in the then current prospectus or the
subscription agreement relating to such investment, you will
promptly notify us in writing of that fact.
Stockholders purchasing shares of our common stock pursuant to
the DRIP will have the same rights and will be treated in the
same manner as if such shares of common stock were purchased
pursuant to this offering.
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Following reinvestment, we will send each participant a written
confirmation showing the amount of the distribution, the number
of shares of common stock owned prior to the reinvestment, and
the total number of shares of common stock owned after the
distribution reinvestment.
You may elect to participate in the DRIP by making the
appropriate election on the subscription agreement, or by
completing the enrollment form or other authorization form
available from the plan administrator. Participation in the plan
will begin with the next distribution made after receipt of your
election. We may terminate the DRIP for any reason at any time
upon 10 days prior written notice to participants.
Your participation in the plan will also be terminated to the
extent that a reinvestment of your distributions in our shares
would cause the percentage ownership limitation contained in our
charter to be exceeded. In addition, you may terminate your
participation in the DRIP by providing us with
10 days written notice. A transfer of common stock
will terminate the stockholders participation in the DRIP
with respect to such shares unless the transferee makes an
election to participate in the plan.
If you elect to participate in the DRIP and are subject to
federal income taxation, you will incur a tax liability for
distributions otherwise distributable to you even though you
have elected not to receive the distributions in cash but rather
to have the distributions withheld and reinvested pursuant to
the distribution reinvestment plan. Specifically, you will be
treated as if you have received the distribution from us in cash
and then applied such distribution to the purchase of additional
shares. As a result, you may have a tax liability without
receiving cash distributions to pay such liability and would
have to rely on sources of funds other than our distributions to
pay your taxes. You will be taxed on the amount of such
distribution as ordinary income to the extent such distribution
is from current or accumulated earnings and profits, unless we
have designated all or a portion of the distribution as a
capital gain distribution.
Share
Repurchase Plan
Our board of directors has adopted a share repurchase plan that
provides eligible stockholders with limited, interim liquidity
by enabling them to sell their shares back to us in limited
circumstances. However, our board of directors could choose to
amend the provisions of the share repurchase plan without
stockholder approval. Our share repurchase plan permits you to
sell your shares back to us, subject to the significant
restrictions and conditions described below.
Purchase Price. Unless the shares are being
repurchased in connection with a stockholders death or
qualifying disability, the prices per share at which we will
repurchase shares will be as follows:
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for stockholders who have continuously held their shares for at
least one year, the lower of $9.25 or 92.5% of the price paid to
acquire shares from us;
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for stockholders who have continuously held their shares for at
least two years, the lower of $9.50 or 95.0% of the price paid
to acquire shares from us;
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for stockholders who have continuously held their shares for at
least three years, the lower of $9.75 or 97.5% of the price paid
to acquire shares from us; and
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for stockholders who have continuously held their shares for at
least four years, a price determined by our board of directors,
but in no event less than 100% of the price paid to acquire
shares from us.
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If shares are to be repurchased in connection with a
stockholders death or qualifying disability, the
repurchase price shall be: (1) for stockholders who have
continuously held their shares for less than four years, 100% of
the price paid to acquire the shares from us; or (2) for
stockholders who have continuously held their shares for at
least four years, a price determined by our board of directors,
but in no event less than 100% of the price paid to acquire the
shares from us.
Holding Period. Only shares that have been
held by the presenting stockholder for at least one year are
eligible for repurchase, except in the case of death or
qualifying disability.
Subject to the conditions and limitations below, we will
repurchase shares of our common stock held for less than the
one-year holding period upon the death of a stockholder who is a
natural person, including shares
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held by such stockholder through a revocable grantor trust, or
an IRA or other retirement or profit-sharing plan, after
receiving written notice from the estate of the stockholder, the
recipient of the shares through bequest or inheritance, or, in
the case of a revocable grantor trust, the trustee of such
trust, who shall have the sole ability to request repurchases on
behalf of the trust. We must receive the written notice within
180 days after the death of the stockholder. If spouses are
joint registered holders of the shares, the request to
repurchase the shares may be made if either of the registered
holders dies. This waiver of the one-year holding period will
not apply to a stockholder that is not a natural person, such as
a trust other than a revocable grantor trust, partnership,
corporation or other similar entity.
Furthermore, and subject to the conditions and limitations
described below, we will repurchase shares held for less than
the one-year holding period by a stockholder who is a natural
person, including shares held by such stockholder through a
revocable grantor trust, or an IRA or other retirement or
profit-sharing plan, with a qualifying disability,
as determined by our board of directors, after receiving written
notice from such stockholder. We must receive the written notice
within 180 days after such stockholders qualifying
disability. This waiver of the one-year holding period will not
apply to a stockholder that is not a natural person, such as a
trust other than a revocable grantor trust, partnership,
corporation or other similar entity.
We will make repurchases under our repurchase plan quarterly, at
our sole discretion, on a pro rata basis. Subject to funds being
available, we will limit the number of shares repurchased during
any calendar year to 5.0% of the weighted average number of
shares outstanding during the prior calendar year. Funding for
our repurchase program will come exclusively from proceeds we
receive from the sale of shares under our DRIP during the
preceding 12-month period.
If there are insufficient funds to honor all repurchase
requests, preference will be given to shares to be repurchased
in connection with a death or qualifying disability.
Our board of directors, in its sole discretion, may choose to
terminate, amend or suspend our share repurchase plan at any
time if it determines that the funds allocated to our share
repurchase plan are needed for other purposes, such as the
acquisition, maintenance or repair of properties, or for use in
making a declared distribution payment. A determination by the
board of directors to terminate, amend or suspend our share
repurchase plan will require the affirmative vote of a majority
of the board of directors, including a majority of the
independent directors.
We cannot guarantee that the funds set aside for our share
repurchase plan will be sufficient to accommodate all requests
made each year. Pending requests will be honored on a pro rata
basis if insufficient funds are available to honor all requests.
If no funds are available for the plan when repurchase is
requested, the stockholder may withdraw the request or ask that
we honor the request when funds are available. In addition, you
may withdraw a repurchase request upon written notice at any
time prior to the date of repurchase.
Stockholders are not required to sell their shares to us. Our
share repurchase plan is intended only to provide limited,
interim liquidity for stockholders until a liquidity event
occurs, such as the listing of our common stock on a national
securities exchange, our merger with a listed company or the
sale of substantially all of our assets. We cannot guarantee
that a liquidity event will occur. Our directors and affiliates
are prohibited from receiving a fee in connection with the
repurchase of shares pursuant to the share repurchase plan.
Shares we purchase under our share repurchase plan will be
canceled and will have the status of authorized but unissued
shares. Shares we acquire through our share repurchase plan will
not be reissued unless they are first registered with the SEC
under the Securities Act of 1933 and under appropriate state
securities laws or otherwise issued in compliance with such laws.
If we terminate, amend or suspend our share repurchase plan, we
will provide our stockholders with 30 days advance written
notice informing them of the change, and we will disclose the
changes in reports filed with the SEC. For more information,
please see the copy of our share repurchase plan attached as
Exhibit C.
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Restrictions
on Roll-Up
Transactions
In connection with any proposed transaction considered a
Roll-up
Transaction involving us and the issuance of securities of
an entity that would be created or would survive after the
successful completion of the
Roll-up
Transaction, an appraisal of all properties shall be obtained
from a competent independent appraiser. If the appraisal will be
included in a prospectus used to offer the securities of a
Roll-up Entity, the appraisal will be filed with the SEC and the
states as an exhibit to the registration statement for the
offering. The properties shall be appraised on a consistent
basis, and the appraisal shall be based on the evaluation of all
relevant information and shall indicate the value of the
properties as of a date immediately prior to the announcement of
the proposed
Roll-up
Transaction. The appraisal shall assume an orderly liquidation
of properties over a
12-month
period. The terms of the engagement of the independent appraiser
shall clearly state that the engagement is for our benefit and
the benefit of our stockholders. A summary of the appraisal,
indicating all material assumptions underlying the appraisal,
shall be included in a report to stockholders in connection with
any proposed
Roll-up
Transaction.
A
Roll-up
Transaction is a transaction involving the acquisition,
merger, conversion or consolidation, directly or indirectly, of
us and the issuance of securities of a
Roll-up
Entity that would be created or would survive after the
successful completion of such transaction. The term
Roll-up
Transaction does not include:
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a transaction involving our securities that have been for at
least 12 months listed on a national securities
exchange; or
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a transaction involving our conversion to a corporate, trust, or
association form if, as a consequence of the transaction, there
will be no significant adverse change in any of the following:
stockholder voting rights; the term of our existence; or our
investment objectives.
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In connection with a proposed
Roll-up
Transaction, the person sponsoring the
Roll-up
Transaction must offer to stockholders who vote no
on the proposal the choice of:
(1) accepting the securities of a
Roll-up
Entity offered in the proposed
Roll-up
Transaction; or
(2) one of the following:
(A) remaining as holders of our stock and preserving their
interests therein on the same terms and conditions as existed
previously; or
(B) receiving cash in an amount equal to the
stockholders pro rata share of the appraised value of our
net assets.
We are prohibited from participating in any proposed
Roll-up
Transaction:
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that would result in the stockholders having democracy rights in
a Roll-up
Entity that are less than those provided in our charter and
described elsewhere in this prospectus, including rights with
respect to the election and removal of directors, annual and
special meetings, amendment of our charter, and our dissolution;
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that includes provisions that would operate to materially impede
or frustrate the accumulation of shares by any purchaser of the
securities of the
Roll-up
Entity, except to the minimum extent necessary to preserve the
tax status of the
Roll-up
Entity, or which would limit the ability of an investor to
exercise the voting rights of its securities of the
Roll-up
Entity on the basis of the number of shares held by that
investor;
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in which investors rights to access of records of the
Roll-up
Entity will be less than those provided in the section of this
prospectus entitled Description of Capital
Stock Meetings and Special Voting
Requirements; or
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in which any of the costs of the
Roll-up
Transaction would be borne by us if the
Roll-up
Transaction is not approved by the stockholders.
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CERTAIN
PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND
BYLAWS
The following description of the terms of our stock and of
certain provisions of Maryland law is only a summary. For a
complete description, we refer you to the Maryland General
Corporation Law, our charter and our bylaws. We have filed our
charter and bylaws as exhibits to the registration statement of
which this prospectus forms a part.
Business
Combinations
Under Maryland law, business combinations between a Maryland
corporation and an interested stockholder or an affiliate of an
interested stockholder are prohibited for five years after the
most recent date on which the interested stockholder becomes an
interested stockholder. These business combinations include a
merger, consolidation, share exchange, or, in circumstances
specified in the statute, an asset transfer or issuance or
reclassification of equity securities. An interested stockholder
is defined as:
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any person who beneficially owns 10.0% or more of the voting
power of the corporations outstanding voting stock; or
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an affiliate or associate of the corporation who, at any time
within the two-year period prior to the date in question, was
the beneficial owner of 10.0% or more of the voting power of the
then-outstanding stock of the corporation.
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A person is not an interested stockholder under the statute if
the board of directors approved in advance the transaction by
which he otherwise would have become an interested stockholder.
However, in approving a transaction, the board of directors may
provide that its approval is subject to compliance, at or after
the time of approval, with any terms and conditions determined
by the board.
After the five-year prohibition, any business combination
between the Maryland corporation and an interested stockholder
generally must be recommended by the board of directors of the
corporation and approved by the affirmative vote of at least:
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80.0% of the votes entitled to be cast by holders of outstanding
shares of voting stock of the corporation; and
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two-thirds of the votes entitled to be cast by holders of voting
stock of the corporation other than shares held by the
interested stockholder with whom or with whose affiliate the
business combination is to be effected or held by an affiliate
or associate of the interested stockholder.
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These super-majority vote requirements do not apply if the
corporations common stockholders receive a minimum price,
as defined under Maryland law, for their shares in the form of
cash or other consideration in the same form as previously paid
by the interested stockholder for its shares.
The statute permits various exemptions from its provisions,
including business combinations that are exempted by the board
of directors before the time that the interested stockholder
becomes an interested stockholder. Our board of directors has
adopted a resolution providing that any business combination
between us and any other person is exempted from this statute,
provided that such business combination is first approved by our
board. This resolution, however, may be altered or repealed in
whole or in part at any time. If this resolution is repealed,
the statute may discourage others from trying to acquire control
of us and increase the difficulty of consummating any offer.
Control
Share Acquisitions
Maryland law provides that control shares of a Maryland
corporation acquired in a control share acquisition have no
voting rights except to the extent approved by a vote of
two-thirds of the votes entitled to be cast on the matter.
Shares owned by the acquiror, by officers or by employees who
are directors of the corporation are excluded from shares
entitled to vote on the matter. Control shares are voting shares
of stock which, if aggregated with all other shares of stock
owned by the acquiror or in respect of which the acquiror is
able to exercise or direct the exercise of voting power (except
solely by virtue of a revocable proxy), would
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entitle the acquiror to exercise voting power in electing
directors within one of the following ranges of voting power:
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one-tenth or more but less than one-third;
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one-third or more but less than a majority; or
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a majority or more of all voting power.
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Control shares do not include shares the acquiring person is
then entitled to vote as a result of having previously obtained
stockholder approval. A control share acquisition means the
acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share
acquisition may compel the board of directors of the corporation
to call a special meeting of stockholders to be held within
50 days of demand to consider the voting rights of the
shares. The right to compel the calling of a special meeting is
subject to the satisfaction of certain conditions, including an
undertaking to pay the expenses of the meeting. If no request
for a meeting is made, the corporation may itself present the
question at any stockholders meeting.
If voting rights are not approved at the meeting or if the
acquiring person does not deliver an acquiring person statement
as required by the statute, then the corporation may redeem for
fair value any or all of the control shares, except those for
which voting rights have previously been approved. The right of
the corporation to redeem control shares is subject to certain
conditions and limitations. Fair value is determined, without
regard to the absence of voting rights for the control shares,
as of the date of the last control share acquisition by the
acquiror or of any meeting of stockholders at which the voting
rights of the shares are considered and not approved. If voting
rights for control shares are approved at a stockholders
meeting and the acquiror becomes entitled to vote a majority of
the shares entitled to vote, all other stockholders may exercise
appraisal rights. The fair value of the shares as determined for
purposes of appraisal rights may not be less than the highest
price per share paid by the acquiror in the control share
acquisition.
The control share acquisition statute does not apply (1) to
shares acquired in a merger, consolidation or share exchange if
the corporation is a party to the transaction, or (2) to
acquisitions approved or exempted by the charter or bylaws of
the corporation.
Our bylaws contain a provision exempting from the control share
acquisition statute any and all acquisitions of shares of our
stock by any person. There can be no assurance that this
provision will not be amended or eliminated at any time in the
future.
Subtitle
8
Subtitle 8 of Title 3 of the Maryland General Corporation
Law permits a Maryland corporation with a class of equity
securities registered under the Securities Exchange Act of 1934
and at least three independent directors to elect to be subject,
by provision in its charter or bylaws or a resolution of its
board of directors and notwithstanding any contrary provision in
the charter or bylaws, to any or all of five provisions:
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a classified board;
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a two-thirds vote requirement for removing a director;
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a requirement that the number of directors be fixed only by vote
of the directors;
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a requirement that a vacancy on the board be filled only by the
remaining directors and for the remainder of the full term of
the class of directors in which the vacancy occurred; and
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a majority requirement for the calling of a special meeting of
stockholders.
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In our charter, we have elected that vacancies on the board be
filled only by the remaining directors and for the remainder of
the full term of the directorship in which the vacancy occurred.
Through provisions in our charter and bylaws unrelated to
Subtitle 8, we vest in our board of directors the exclusive
power to fix the number of directorships. We have not elected to
be subject to any of the other provisions of Subtitle 8.
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Advance
Notice of Director Nominations and New Business
Our bylaws provide that with respect to an annual meeting of
stockholders, nominations of individuals for election to the
board of directors and the proposal of business to be considered
by stockholders may be made only (1) pursuant to our notice
of the meeting, (2) by or at the direction of the board of
directors or (3) by a stockholder who is a stockholder of
record both at the time of giving the advance notice required by
our bylaws and at the time of the meeting, who is entitled to
vote at the meeting and who has complied with the advance notice
procedures of the bylaws. With respect to special meetings of
stockholders, only the business specified in our notice of the
meeting may be brought before the meeting. Nominations of
individuals for election to the board of directors at a special
meeting may be made only (1) pursuant to our notice of the
meeting, (2) by or at the direction of the board of
directors, or (3) provided that the board of directors has
determined that directors will be elected at the meeting by a
stockholder who is a stockholder of record both at the time of
giving the advance notice required by our bylaws and at the time
of the meeting, who is entitled to vote at the meeting and who
has complied with the advance notice provisions of the bylaws.
Anti-takeover
Effect of Certain Provisions of Maryland Law and of our Charter
and Bylaws
The business combination provisions (if our board of directors
opts back in to such provisions or fails to first approve a
business combination) and the control share acquisition
provisions (if the bylaw provision exempting us from such
provisions is repealed) of Maryland law, the provisions of our
charter electing to be subject to Subtitle 8, and the advance
notice provisions of our bylaws could delay, defer or prevent a
transaction or a change in control of our company that might
involve a premium price for stockholders or otherwise be in
their best interest.
THE
OPERATING PARTNERSHIP AGREEMENT
General
Healthcare Trust of America Holdings, LP was formed on
April 20, 2006 to acquire, own and operate properties on
our behalf. It will allow us to operate as what is generally
referred to as an Umbrella Partnership Real Estate Investment
Trust, or UPREIT, which is a structure generally utilized to
provide for the acquisition of real estate from owners who
desire to defer taxable gain otherwise required to be recognized
by them upon the disposition of their properties. These owners
also may desire to achieve diversity in their investment and
other benefits afforded to stockholders in a REIT. For purposes
of satisfying the asset and income tests for qualification as a
REIT for tax purposes, the REITs proportionate share of
the assets and income of an operating partnership, such as our
operating partnership, will be deemed to be assets and income of
the REIT.
The property owners goals are accomplished because a
property owner may contribute property to our UPREIT in exchange
for limited partnership units on a tax-deferred basis while
obtaining rights similar in many respects to those afforded to
our stockholders. For example, our operating partnership is
structured to make distributions with respect to limited
partnership units which will be equivalent to the distributions
made with respect to our common stock. In addition, a limited
partner in our operating partnership may later redeem his or her
limited partnership units and, if we consent, receive shares of
our common stock in a taxable transaction.
The partnership agreement for our operating partnership contains
provisions which would allow under certain circumstances, other
entities to merge into or cause the exchange or conversion of
their interests for interests in our operating partnership. In
the event of such a merger, exchange or conversion, our
operating partnership would issue additional limited partnership
interests which would be entitled to the same redemption rights
as other holders of limited partnership interests in our
operating partnership. Further, if our operating partnership
needs additional financing for any reason, it is permitted under
the partnership agreement to issue additional limited
partnership interests which also may be entitled to such
redemption rights. As a result, any such merger, exchange or
conversion or any separate issuance of redeemable limited
partnership interests ultimately could result in the issuance of
a substantial number of shares of our common stock, thereby
diluting the percentage ownership interest of other stockholders.
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We hold and intend to hold substantially all of our assets
through our operating partnership, and we intend to make future
acquisitions of properties using the UPREIT structure. We are
the sole general partner of our operating partnership and, as of
the date of this prospectus, owned an approximately 99.99%
equity percentage interest in our operating partnership. Our
former advisor is currently the only limited partner of our
operating partnership and holds an approximately 0.01% limited
partnership interest in our operating partnership resulting from
a capital contribution of $200,000 (whereby our former advisor
acquired 20,000 limited partnership units). These units
constitute 100% of the limited partnership units outstanding at
this time. As the sole general partner of our operating
partnership, we have the exclusive power to manage and conduct
the business of our operating partnership.
The following is a summary of the material provisions of the
partnership agreement of our operating partnership. You should
refer to the partnership agreement, itself, which we have filed
as an exhibit to the registration statement, for more detail.
Capital
Contributions
If our operating partnership issues additional units to any new
or existing partner in exchange for cash capital contributions,
the contributor will receive a number of limited partnership
units and a percentage interest in our operating partnership
calculated based upon the amount of the capital contribution and
the value of our operating partnership at the time of such
contribution.
As we accept subscriptions for shares, we will transfer the net
proceeds of the offering to our operating partnership as a
capital contribution; however, we will be deemed to have made
capital contributions in the amount of the gross offering
proceeds received from investors. Our operating partnership will
assume the obligation to pay, and will be deemed to have
simultaneously paid, the selling commissions and other costs
associated with the offering. If our operating partnership
requires additional funds at any time in excess of capital
contributions made by us and our former advisor or from
borrowing, we may borrow funds from a financial institution or
other lender and lend such funds to our operating partnership on
the same terms and conditions as are applicable to our borrowing
of such funds, or we may cause our operating partnership to
borrow such funds.
Issuance
of Additional Units
As general partner of our operating partnership, we can, without
the consent of the limited partners, cause our operating
partnership to issue additional units representing general or
limited partnership interests. A new issuance may include
preferred units, which may have rights which are different
and/or
superior to those of general partnership units that we hold
and/or
limited partnership units.
Further, we are authorized to cause our operating partnership to
issue partnership interests for less than fair market value if
we conclude in good faith that such issuance is in our best
interest and the best interest of our operating partnership.
Operations
The partnership agreement of our operating partnership provides
that our operating partnership is to be operated in a manner
that will enable us to:
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satisfy the requirements for being qualified as a REIT for tax
purposes;
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avoid any federal income or excise tax liability; and
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ensure that our operating partnership will not be classified as
a publicly traded partnership for purposes of
Section 7704 of the Internal Revenue Code, which
classification could result in our operating partnership being
taxed as a corporation, rather than as a partnership. See
Federal Income Tax Considerations Federal
Income Tax Aspects of Our Operating Partnership
Classification as a Partnership.
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In addition to the administrative and operating costs and
expenses incurred by our operating partnership in acquiring and
operating real estate, our operating partnership will assume and
pay when due or reimburse us for payment of all of our
administrative and operating costs and expenses and such
expenses will be treated as expenses of our operating
partnership.
Distributions
and Allocations
We intend to distribute to our stockholders 100% of all
distributions we receive from our operating partnership. The
partnership agreement provides that our operating partnership
will distribute cash flow from operations to its partners in
accordance with their percentage interests (which will be based
on relative capital contributions) at such times and in such
amounts as we determine as general partner. The partnership
agreement also provides that our operating partnership may
distribute net proceeds from the sale to its partners in
accordance with their percentage interests. All distributions
shall be made such that a holder of one unit of limited
partnership interest in our operating partnership will receive
annual distributions from our operating partnership in an amount
equal to the annual distributions paid to the holder of one of
our shares.
Our former advisor may have a potential right, subject to a
number of conditions, to receive a subordinated distribution
upon either a listing or other liquidity event, including a
liquidation, sale of substantially all of our assets or merger
in which our stockholders receive in exchange for their shares
of our common stock shares of a company that are traded on a
national securities exchange. If there is a listing of our
shares on a national securities exchange or a merger in which
our stockholders receive in exchange for their shares of our
common stock shares of a company that are traded on a national
securities exchange, our former advisor may be entitled to
receive a distribution in an amount equal to 15.0% of the
amount, if any, by which (1) the fair market value of the
assets of our operating partnership (determined by appraisal as
of the listing date or merger date, as applicable) owned as of
the expiration of the advisory agreement, plus any assets
acquired after such expiration for which our former advisor was
entitled to receive an acquisition fee, or the included assets,
less any indebtedness secured by the included assets, plus the
cumulative distributions made by our operating partnership to us
and the limited partners who received partnership units in
connection with the acquisition of the included assets, from our
inception through the listing date or merger date, as
applicable, exceeds (2) the sum of the total amount of
capital raised from stockholders and the capital value of
partnership units issued in connection with the acquisition of
the included assets through the listing date or merger date, as
applicable, (excluding any capital raised after the completion
of the initial offering) (less amounts paid to redeem shares
pursuant to our share repurchase plan) plus an annual 8.0%
cumulative, non-compounded return on such invested capital and
the capital value of such partnership units measured for the
period from inception through the listing date or merger date,
as applicable.
If there is a liquidation or sale of all or substantially all of
the assets of the operating partnership, then our former advisor
may be entitled to receive a distribution in an amount equal to
15.0% of the net proceeds from the sale of the included assets,
after subtracting distributions to our stockholders and the
limited partners who received partnership units in connection
with the acquisition of the included assets of (1) their
initial invested capital and the capital value of such
partnership units (less amounts paid to repurchase shares
pursuant to our share repurchase program) through the date of
the liquidity event plus (2) an annual 8.0% cumulative,
non-compounded return on such invested capital and the capital
value of such partnership units measured for the period from
inception through the liquidity event date. Our operating
partnership may satisfy the distribution obligation by either
paying cash or issuing an interest-bearing promissory note. If
the promissory note is issued and not paid within five years of
the issuance of the note, we would be required to purchase the
promissory note (including accrued but unpaid interest) in
exchange for cash or shares of our common stock. Upon payment of
this distribution, all units in our operating partnership held
by our former advisor will be redeemed by our operating
partnership for cash equal to the value of an equivalent number
of our shares.
Under the partnership agreement, our operating partnership may
issue preferred units that entitle their holders to
distributions prior to the payment of distributions for other
units of limited partnership units
and/or the
units of general partnership interest that we hold.
129
The partnership agreement of our operating partnership provides
that net profits will be allocated to the partners in accordance
with their percentage interests, subject to compliance with the
provisions of Sections 704(b) and 704(c) of the Internal
Revenue Code and corresponding Treasury Regulations. However, to
the extent that our former advisor receives a distribution of
proceeds from sales or a distribution upon the listing of our
shares, there will be a corresponding allocation of profits of
our operating partnership to our former advisor. Losses, if any,
will generally be allocated among the partners in accordance
with their respective percentage interests in our operating
partnership.
Upon the liquidation of our operating partnership, after payment
of debts and obligations, and after any amounts payable to
preferred units, any remaining assets of our operating
partnership will be distributed to partners with positive
capital accounts in accordance with their respective positive
capital account balances.
Amendments
In general, we may amend the partnership agreement as general
partner. Certain amendments to the partnership agreement,
however, require the consent of each limited partner that would
be adversely affected by the amendment, including amendments
that would:
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convert a limited partners interest in our operating
partnership into a general partnership interest;
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require the limited partners to make additional capital
contributions to our operating partnership; or
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adversely modify the limited liability of any limited partner.
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Additionally, the written consent of the general partner and any
partner adversely affected is required to amend the partnership
agreement to amend these amendment limitations.
Redemption Rights
The limited partners of our operating partnership, including our
former advisor (subject to specified limitations), have the
right to cause our operating partnership to redeem their limited
partnership units for, at our option, cash equal to the value of
an equivalent number of shares of our common stock or a number
of our shares equal to the number of limited partnership units
redeemed. Unless we elect in our sole discretion to satisfy a
redemption right with a cash payment, these redemption rights
may not be exercised if and to the extent that the delivery of
shares of our common stock upon such exercise would:
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adversely affect our ability to qualify as a REIT under the
Internal Revenue Code or subject us to any additional taxes
under Section 857 or Section 4981 of the Internal
Revenue Code;
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violate any provision of our charter or bylaws;
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constitute or be likely to constitute a violation of any
applicable federal or state securities laws;
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result in us being closely held within the meaning
of Section 856(h) of the Internal Revenue Code;
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cause us to own 10.0% or more of the ownership interests in a
tenant within the meaning of Section 856(d)(2)(B) of the
Internal Revenue Code;
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cause our operating partnership to become a publicly
traded partnership under the Internal Revenue Code; or
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cause our operating partnership to cease to be classified as a
partnership for federal income tax purposes.
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Subject to the foregoing limitations, limited partners may
exercise their redemption rights at any time after one year
following the date of issuance of their limited partnership
units.
We do not expect to issue any of the shares of common stock
offered by this prospectus to limited partners of our operating
partnership in exchange for their limited partnership units.
Rather, in the event a limited partner of our operating
partnership exercises its redemption rights, and we elect to
purchase the
130
limited partnership units with shares of our common stock, we
expect to issue unregistered shares of common stock, or
subsequently registered shares of common stock, in connection
with such transaction.
Any common stock issued to the limited partners upon redemption
of their respective limited partnership units may be sold only
pursuant to an effective registration statement under the
Securities Act of 1933 or pursuant to an available exemption
from registration. We may grant holders of partnership interests
registration rights for such shares of common stock.
As a general partner, we have the right to grant similar
redemption rights to holders of other classes of units, if any,
in our operating partnership, and to holders of equity interests
in the entities that own our properties.
As discussed above under Distributions and
Allocations, upon payment of a distribution upon listing,
all units in our operating partnership held by our former
advisor will be redeemed for cash equal to the value of an
equivalent number of shares of our common stock.
Transferability
of Interests
We may not voluntarily withdraw as the general partner of our
operating partnership or transfer our general partnership
interest in our operating partnership (except to a wholly-owned
subsidiary), unless the limited partners not affiliated with us
or our former advisor approve the transaction by majority vote.
With certain exceptions, the limited partners may not transfer
their interests in our operating partnership, in whole or in
part, without our written consent as the general partner.
Term
Our operating partnership will be dissolved and its affairs
wound up upon the earliest to occur of certain events, including:
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the expiration of the term of our operating partnership on
December 31, 2036;
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our determination as general partner to dissolve our operating
partnership;
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the sale of all or substantially all of the assets of our
operating partnership; or
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our withdrawal as general partner of our operating partnership,
unless the remaining partners determine to continue the business
of our operating partnership.
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Tax
Matters
We are the tax matters partner of our operating partnership and,
as such, have the authority to handle tax audits and to make tax
elections under the Internal Revenue Code on behalf of our
operating partnership.
Indemnification
The partnership agreement requires our operating partnership to
indemnify us, as general partner (and our directors, officers
and employees) and the limited partners, including our former
advisor (and its managers, members and employees), against
damages and other liabilities to the extent permitted by
Delaware law, except to the extent that any claim for
indemnification results from:
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in the case of us, as general partner, and the limited partners,
our or their fraud, willful misconduct or gross negligence;
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in the case of our directors, officers and employees (other than
our independent directors), our former advisor and its managers,
members and employees, such persons negligence or
misconduct; or
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in the case of our independent directors, such persons
gross negligence or willful misconduct.
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131
In addition, we, as general partner, and the limited partners
will be held harmless and indemnified for losses only if all of
the following conditions are met:
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the indemnitee determined, in good faith, that the course of
conduct which caused the loss, liability or expense was in our
best interests;
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the indemnitee was acting on our behalf or performing services
for us;
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such liability or loss was not the result of negligence or
misconduct by the directors;
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such liability or loss was not the result of gross negligence or
willful misconduct by the independent directors; and
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any indemnification or any agreement to hold harmless is
recoverable only out of our assets and not from our stockholders.
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The SEC takes the position that indemnification against
liabilities arising under the Securities Act of 1933 is against
public policy and unenforceable. Indemnification of us, as
general partner, and the limited partners will not be allowed
for liabilities arising from or out of a violation of state or
federal securities laws, unless one or more of the following
conditions are met:
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there has been a successful adjudication on the merits of each
count involving alleged securities law violations;
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such claims have been dismissed with prejudice on the merits by
a court of competent jurisdiction; or
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a court of competent jurisdiction approves a settlement of the
claims against the indemnitee and finds that indemnification of
the settlement and the related costs should be made, and the
court considering the request for indemnification has been
advised of the position of the SEC and of the published position
of any state securities regulatory authority in the state in
which our securities were offered as to indemnification for
violations of securities laws.
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Finally, our operating partnership must reimburse us for any
amounts paid in satisfaction of our indemnification obligations
under our charter. Our operating partnership may not provide
indemnification or advancement of expenses to us (or our
directors, officers or employees) to the extent that we could
not provide such indemnification or advancement of expenses
under the limitations of our charter. See
Management Limited Liability and
Indemnification of Directors, Officers and Others.
132
PLAN OF
DISTRIBUTION
General
We are offering a maximum of $2,200,000,000 in shares of our
common stock in this offering, including $2,000,000,000 in
shares of our common stock initially allocated to be offered in
the primary offering and $200,000,000 in shares of our common
stock initially allocated to be offered pursuant to our
distribution reinvestment plan. Prior to the conclusion of this
offering, if any of the shares of our common stock initially
allocated to the distribution reinvestment plan remain after
meeting anticipated obligations under the distribution
reinvestment plan, we may decide to sell some or all of such
shares of common stock to the public in the primary offering.
Similarly, prior to the conclusion of this offering, if the
shares of our common stock initially allocated to the
distribution reinvestment plan have been purchased and we
anticipate additional demand for shares of common stock under
our distribution reinvestment plan, we may plan to choose to
reallocate some or all of the shares of our common stock
allocated to be offered in the primary offering to the
distribution reinvestment plan. The shares of our common stock
in the primary offering are being offered at $10.00 per share.
Shares of our common stock purchased pursuant to our
distribution reinvestment plan will be sold at $9.50 per share
during this offering.
This is a continuous offering that will end no later than
March , 2012, two years from this date of the
prospectus, unless extended. If we extend beyond
March , 2012, we will supplement the prospectus
accordingly. We may also terminate this offering at any time.
Our board of directors determined the offering price of $10.00
per share based on consideration of the offering price of shares
offered by similar REITs and the administrative convenience to
us and investors of the share price being an even dollar amount.
This price bears no relationship to the value of our assets or
other established criteria for valuing shares.
Dealer
Manager and Participating Broker-Dealer Compensation and
Terms
Realty Capital Securities, LLC, a registered broker-dealer, will
serve as our dealer manager for this offering on a best
efforts basis, which means generally that our dealer
manager will be required to use only its best efforts to sell
the shares and it has no firm commitment or obligation to
purchase any of the shares. Our dealer manager may authorize
certain other broker-dealers who are members of FINRA, whom we
refer to as participating broker-dealers, to sell our shares.
Except as provided below, our dealer manager receives selling
commissions of 7.0% of the gross offering proceeds from sales of
shares of our common stock in the primary offering, subject to
reductions based on volume and special sales. No selling
commissions will be paid for sales pursuant to the distribution
reinvestment plan. Our dealer manager also receives 3.0% of the
gross offering proceeds in the form of a dealer manager fee for
shares sold in the primary offering all of which may be allowed
to participating broker-dealers. No selling commission, dealer
manager fee or due diligence expense reimbursement will be paid
for shares sold pursuant to the distribution reinvestment plan.
We will not pay referral or similar fees to any accountants,
attorneys or other persons in connection with the distribution
of the shares.
We will reimburse participating broker-dealers participating in
the offering for their accountable bona fide due
diligence expenses, provided such expenses are supported by
detailed and itemized invoices.
As required by the rules of FINRA, total underwriting
compensation will not exceed 10.0% of our gross offering
proceeds. Many states also limit our total organization and
offering expenses to 15.0% of gross offering proceeds.
Our total organization and offering expenses are expected not to
exceed 11.5% of the gross proceeds of our primary offering, as
shown in the following table:
Organization
and Offering Expenses
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Maximum Percentage of
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Estimated Dollar
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Gross Offering
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Expense
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Amount
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Proceeds
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Selling commissions
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$
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140,000,000
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7.0
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Dealer manager fee
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60,000,000
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3.0
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All other organization and offering expenses
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30,000,000
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1.5
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Total
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$
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230,000,000
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11.5
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%
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133
We have agreed to indemnify the participating broker-dealers and
the dealer manager against liabilities, including liabilities
under the Securities Act of 1933, that arise out of breaches by
us of the dealer manager agreement between us and the dealer
manager or material misstatements and omissions contained in
this prospectus, other sales material used in connection with
this offering or filings made to qualify this offering with
individual states. Please see Management
Limited Liability and Indemnification of Directors, Officers and
Others for a discussion of conditions that must be met for
participating broker-dealers or the dealer manager to be
indemnified by us for liabilities arising out of state or
federal securities laws.
The participating broker-dealers are not obligated to obtain any
subscriptions on our behalf, and we cannot assure you that any
shares will be sold.
Our executive officers and directors may purchase shares in this
offering at a discount. We expect that a limited number of
shares will be sold to those individuals. However, except for
the share ownership limitations contained in our charter, there
is no limit on the number of shares that may be sold to those
individuals at this discount. The purchase price for such shares
shall be $9.00 per share reflecting the fact that selling
commissions in the amount of $0.70 per share and the dealer
manager fee in the amount of $0.30 per share will not be payable
in connection with such sales. The net offering proceeds we
receive will not be affected by such sales of shares at a
discount.
No selling commission will be charged (and the price will be
correspondingly reduced) for sales of shares in the primary
offering in the event that the investor has engaged the services
of a registered investment advisor or other financial advisor
paid on a fee-for-service basis by the investor. In addition, no
selling commission will be charged (and the price will be
correspondingly reduced) for sales of shares to retirement plans
of participating broker-dealers, to participating broker-dealers
in their individual capacities, to IRAs and qualified plans of
their registered representatives or to any one of their
registered representatives in their individual capacities.
In connection with sales of certain minimum numbers of shares to
a purchaser, as defined below, certain volume
discounts resulting in reductions in selling commissions payable
with respect to such sales are available to investors. In such
event, any such reduction will be credited to the investor by
reducing the purchase price per share payable by the investor.
The following table shows the discounted price per share and
reduced selling commissions payable for volume discounts.
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Commission
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Price
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Shares Purchased
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Rate
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Per Share
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1 to 50,000
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7.0
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%
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$
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10.00
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50,001 to 100,000
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6.0
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%
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$
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9.90
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100,001 to 200,000
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5.0
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%
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$
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9.80
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200,001 to 500,000
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4.0
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%
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$
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9.70
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500,001 to 750,000
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3.0
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%
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$
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9.60
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750,000 to 1,000,000
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2.0
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%
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$
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9.50
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1,000,001 and up
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1.0
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%
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$
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9.40
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The reduced selling price per share and selling commissions are
applied to the incremental shares falling within the indicated
range only. All commission rates are calculated assuming a
$10.00 price per share. Thus, for example, an investment of
$1,249,996 would result in a total purchase of
126,020 shares as follows:
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50,000 shares at $10.00 per share (total: $500,000) and a
7.0% commission;
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50,000 shares at $9.90 per share (total: $495,000) and a
6.0% commission; and
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26,020 shares at $9.80 per share (total: $254,996) and a
5.0% commission.
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The net proceeds to us will not be affected by volume discounts.
Requests to apply the volume discount provisions must be made in
writing and submitted simultaneously with your subscription for
shares. Because all investors will be paid the same
distributions per share as other investors, an investor
qualifying for a volume discount will receive a higher
percentage return on his or her investment than investors who do
not qualify for such discount.
134
Subscriptions may be combined for the purpose of determining the
volume discounts in the case of subscriptions made by any
purchaser, as that term is defined below, provided
all such shares are purchased through the same broker-dealer.
The volume discount shall be prorated among the separate
subscribers considered to be a single purchaser. Any
request to combine more than one subscription must be made in
writing submitted simultaneously with your subscription for
shares, and must set forth the basis for such request. Any such
request will be subject to verification by the dealer manager
that all of such subscriptions were made by a single
purchaser.
For the purposes of such volume discounts, the term
purchaser includes:
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an individual, his or her spouse and their children under the
age of 21 who purchase the shares for his, her or their own
accounts;
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a corporation, partnership, association, joint-stock company,
trust fund or any organized group of persons, whether
incorporated or not;
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an employees trust, pension, profit sharing or other
employee benefit plan qualified under Section 401(a) of the
Internal Revenue Code; and
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all commingled trust funds maintained by a given bank.
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Notwithstanding the above, in connection with volume sales,
investors who would not constitute a single
purchaser may request in writing to aggregate
subscriptions as part of a combined order for purposes of
determining the number of shares purchased, provided that any
aggregate group of subscriptions must be received from the same
participating dealer, including the dealer manager. Any such
reduction in selling commission will be prorated among the
separate subscribers. An investor may reduce the amount of his
or her purchase price to the net amount shown in the foregoing
table, if applicable. Except as provided in this paragraph,
separate subscriptions will not be cumulated, combined or
aggregated.
In order to encourage purchases of shares of our common stock in
excess of 500,000 shares, our dealer manager may, in its
sole discretion, agree with a purchaser to reduce the selling
commission and the marketing support fee. However, in no event
will the net proceeds to us be affected by such fee reductions.
For the purposes of such purchases in excess of
500,000 shares, the term purchaser has the same
meaning as defined above with respect to volume discount
purchases.
Admission
of Stockholders
We intend to admit stockholders periodically as subscriptions
for shares are received in good order, but not less frequently
than monthly. Upon acceptance of subscriptions, subscription
proceeds will be transferred into our operating account, out of
which we will acquire real estate and pay fees and expenses as
described in this prospectus.
Minimum
Investment
The minimum purchase is 100 shares, which equals a minimum
investment of $1,000 ($2,500 for Tennessee residents), except
for purchases by our existing investors, which may be in lesser
amounts.
Our dealer manager and each participating broker-dealer who
sells shares have the responsibility to make every reasonable
effort to determine that the purchase of shares is appropriate
for the investor and that the requisite suitability standards
are met. See Suitability Standards. In making this
determination, our dealer manager or the participating
broker-dealer will rely on relevant information provided by the
investor, including information as to the investors age,
investment objectives, investment experience, income, net worth,
financial situation, other investments, and other pertinent
information. Each investor should be aware that our dealer
manager or the participating broker-dealer will be responsible
for determining suitability.
Our dealer manager or each participating broker-dealer shall
maintain records of the information used to determine that an
investment in shares is suitable and appropriate for an
investor. These records are required to be maintained for a
period of at least six years.
135
Automatic
Investment Plan
Investors who desire to purchase shares in this offering at
regular intervals may be able to do so through their
participating broker-dealer or, if they are investing in this
offering other than through a participating broker-dealer,
through the dealer manager by completing an automatic investment
plan enrollment form. Participation in the automatic investment
plan is limited to investors who have already met the minimum
purchase requirement in this offering. The minimum periodic
investment is $100 per month.
Investors who reside in the States of Alabama, Ohio and
Tennessee may not participate in the Automatic Investment
Plan.
We will provide a confirmation of your monthly purchases under
the automatic investment plan within five business days after
the end of each month. The confirmation will disclose the
following information:
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the amount of the investment;
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the date of the investment; and
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the number and price of the shares purchased by you.
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We will pay dealer manager fees and selling commissions in
connection with sales under the automatic investment plan to the
same extent that we pay those fees and commissions on shares
sold in this offering outside of the automatic investment plan.
You may terminate your participation in the automatic investment
plan at any time by providing us with written notice. If you
elect to participate in the automatic investment plan, you must
agree that if at any time you fail to meet the applicable
investor suitability standards or cannot make the other investor
representations set forth in the then-current prospectus and
subscription agreement, you will promptly notify us in writing
of that fact and your participation in the plan will terminate.
See the Suitability Standards section of this
prospectus (on page i).
Excess
Sales in the State of Washington
In July 2008, we sold $931,355 in shares of our common stock in
excess of the amount registered for sale in the State of
Washington. We have since registered these shares. However, as a
result of the sale of these excess shares, we may be subject to
potential liability, including from investors who purchased such
shares prior to their registration.
Prior
Public Program Liquidity
FINRA has required that we disclose the liquidity of prior
public programs sponsored by our former sponsor,
Grubb & Ellis. Grubb & Ellis or one of its
affiliates has sponsored three other public programs,
G REIT, Inc., T REIT, Inc. and Grubb & Ellis
Apartment REIT, Inc., each of which stated in its prospectus a
date or time period by which the program might be liquidated.
G REIT, Inc. and T REIT, Inc. each commenced an orderly
liquidation prior to their anticipated liquidation dates.
Grubb & Ellis Apartment REIT, Inc. commenced its
initial public offering on July 19, 2006 and has not yet
reached its anticipated liquidation date.
As discussed in this prospectus, we have transitioned from being
an externally advised REIT to a self-managed REIT. Prior to the
commencement of this offering, our advisory agreement with our
former advisor expired, and we are no longer advised by our
former advisor, and we no longer consider our company to be
sponsored by Grubb & Ellis. Other than Scott D.
Peters, our Chief Executive Officer, President and Chairman of
the Board, who was formerly with Grubb & Ellis and its
predecessor from September 2004 until July 2008, our management
team is entirely different from the management team of
Grubb & Ellis. Further, we are managed under the
direction of our board of directors, which has a majority of
independent directors, who will be making the determination
regarding any future liquidity events for our company.
136
REPORTS
TO STOCKHOLDERS
We will furnish each stockholder with an annual report within
120 days following the close of each fiscal year. These
annual reports will contain, among other things, the following:
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financial statements, including a balance sheet, statement of
operations, statement of stockholders equity, and
statement of cash flows, prepared in accordance with accounting
principles generally accepted in the United States of America,
or GAAP, which are audited and reported on by independent
registered public accounting firm; and
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full disclosure of all material terms, factors and circumstances
surrounding any and all transactions involving us and any of our
directors or any other of our affiliates occurring in the year
for which the annual report is made.
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While we are required by the Securities Exchange Act of 1934 to
file with the SEC annual reports on
Form 10-K,
we will furnish a copy of each such report to each stockholder.
Stockholders also may receive a copy of any
Form 10-Q
upon request. We will also provide quarterly distribution
reports.
We provide appropriate tax information to our stockholders
within 30 days following the end of each fiscal year. Our
fiscal year is the calendar year.
SUPPLEMENTAL
SALES MATERIAL
In addition to this prospectus, we may use certain supplemental
sales material in connection with the offering of the shares,
although only when accompanied by or preceded by the delivery of
this prospectus. This material may include a brochure describing
our investment objectives, a fact sheet that provides
information regarding properties purchased to date and other
summary information related to our offering, property brochures,
and a power point presentation that provides information
regarding our company and our offering. In addition, the sales
material may contain quotations from various publications
without obtaining the consent of the author or the publication
for use of the quoted material in the sales material.
No person has been authorized to prepare for, or furnish to, a
prospective investor any sales material other than that
described herein with the exception of third-party article
reprints, tombstone newspaper advertisements or
solicitations of interest limited to identifying the offering
and the location of sources of additional information.
The offering of our shares is made only by means of this
prospectus. Although the information contained in the
supplemental sales material will not conflict with any of the
information contained in this prospectus, such material does not
purport to be complete, and should not be considered a part of
this prospectus or the registration statement, of which this
prospectus is a part, or as incorporated by reference in this
prospectus or said registration statement or as forming the
basis of the offering of shares of our common stock.
LEGAL
MATTERS
The validity of the shares being offered hereby has been passed
upon for us by Venable LLP, Baltimore, Maryland. The statements
under the caption Federal Income Tax Considerations
as they relate to federal income tax matters have been reviewed
by Alston & Bird LLP, Atlanta, Georgia and
Alston & Bird LLP has opined as to certain income tax
matters relating to an investment in our shares.
Alston & Bird LLP has also represented our former
advisor, as well as various other affiliates of our former
advisor in other matters.
EXPERTS
The consolidated financial statements, and the related financial
statement schedules, incorporated in this Prospectus by
reference from Healthcare Trust of America, Inc. (formerly
Grubb & Ellis Healthcare REIT, Inc.) and subsidiaries
(the Company). Annual Report on
Form 10-K
for the year ended December 31, 2009, have been audited by
Deloitte & Touche LLP, an independent registered
public accounting firm, as stated in their report (which report
expresses an unqualified opinion on the financial statements and
financial statement
137
schedules and includes an explanatory paragraph relating to the
Companys change of its method of accounting of acquisition
costs in business combinations) which is incorporated herein by
reference. Such financial statements and financial statement
schedule have been so
137.1
incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
We have elected to incorporate by reference certain
information into this prospectus. By incorporating by reference,
we are disclosing important information to you by referring you
to documents we have filed separately with the SEC. The
information incorporated by reference is deemed to be part of
this prospectus. You may read and copy any document we have
electronically filed with the SEC at the SECs public
reference room in Washington, D.C. at
100 F Street, N.E., Room 1580,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information about the operation of the public
reference room. In addition, any document we have electronically
filed with the SEC is available at no cost to the public over
the Internet at the SECs website at
www.sec.gov. You can also access documents that
are incorporated by reference into this prospectus at our
website, www.htareit.com.
The following documents filed with the SEC are incorporated by
reference in this prospectus, except for any document or portion
thereof deemed to be furnished and not filed in
accordance with SEC rules:
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Our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009 filed with the
SEC on March 16, 2010;
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Our Definitive Proxy Statement filed with the SEC on
July 22, 2009 in connection with our Annual Meeting of
Stockholders held on August 31, 2009; and
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Our Current Report on
Form 8-K
filed with the SEC on January 22, 2010.
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We will provide to each person to whom this prospectus is
delivered a copy of any or all of the information that we have
incorporated by reference into this prospectus but not delivered
with this prospectus. To receive a free copy of any of the
reports or documents incorporated by reference in this
prospectus, other than exhibits, unless they are specifically
incorporated by reference in those documents, write or call us
at The Promenade, Suite 440, 16427 North Scottsdale Road,
Scottsdale, AZ 85254,
(480) 998-3478.
The information relating to us contained in this prospectus does
not purport to be comprehensive and should be read together with
the information contained in the documents incorporated or
deemed to be incorporated by reference in this prospectus.
WHERE YOU
CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on
Form S-11
under the Securities Act of 1933 with respect to the shares
offered pursuant to this prospectus. This prospectus does not
contain all the information set forth in the registration
statement and the exhibits related thereto filed with the SEC,
reference to which is hereby made. As a result of the
effectiveness of the registration statement, we are subject to
the informational reporting requirements of the Exchange Act
and, under that Act, we will file reports, proxy statements and
other information with the SEC. The registration statement of
which this prospectus forms a part, including its exhibits and
schedules, and the reports, proxy statements and other
information filed by us with the SEC may be inspected and
copied, at the public reference room maintained by the SEC at
100 F Street, N.E., Room 1580,
Washington, D.C. 20549. Copies of the materials may also be
obtained from the SEC at prescribed rates by writing to the
public reference room maintained by the SEC at
100 F Street, N.E., Room 1580, Washington D.C.
20549. You may obtain information on the operation of the public
reference room by calling the SEC at
1-800-SEC-0330.
In addition, the SEC maintains a Web site at
www.sec.gov. Our registration statement, of which
this prospectus constitutes a part, can be downloaded from the
SECs web site.
138
EXHIBIT B
DISTRIBUTION REINVESTMENT PLAN
The Distribution Reinvestment Plan (the DRIP) for
Healthcare Trust of America, Inc., a Maryland corporation (the
Company), offers to holders of the Companys
common stock, $0.01 par value per share (the Common
Stock), the opportunity to purchase, through reinvestment
of distributions, additional shares of Common Stock, on the
terms, subject to the conditions and at the prices herein stated.
The DRIP has been implemented in connection with the
Companys Registration Statement under the Securities Act
of 1933 on
Form S-11,
including the prospectus contained therein (the
Prospectus) and the registered initial public
offering of 221,052,632 shares of the Companys Common
Stock (the Initial Offering), of which amount
21,052,632 shares will be registered and reserved for
distribution pursuant to the DRIP (the Initial DRIP
Shares).
Initially, distributions reinvested pursuant to the DRIP will be
applied to the purchase of shares of Common Stock at a price per
share equal to $9.50 (the Initial Offering DRIP
Price) until all of the Initial DRIP Shares have been
purchased or until the termination of the Initial Offering,
whichever occurs first. Thereafter, the Company may, in its sole
discretion, effect additional public equity offerings of Common
Stock for use in the DRIP at a price per share equal to 95.0% of
the offering price in such subsequent public equity offering
(the Subsequent Offering DRIP Price). The Company
may also offer shares of Common Stock under the DRIP at a price
per share equal to 95.0% of the most recent offering price (the
Post-Offering DRIP Price) for the first
12 months subsequent to the close of the last public
offering of Common Stock prior to the listing of Common Stock on
a national securities exchange (a Listing). After
that
12-month
period, participants in the DRIP may acquire Common Stock under
the DRIP at a price per share equal to 95.0% of the per share
valuation determined by the Company or another firm chosen for
that purpose until the Listing (the Pre-Listing DRIP
Price). From and after the date of the Listing,
participants in the DRIP may acquire Common Stock at a price per
share equal to 100% of the average daily open and close price
per share on the distribution payment date, as reported by the
national securities exchange on which the Common Stock is traded
(individually the Listing DRIP Price and
collectively referred to herein with the Initial Offering DRIP
Price, the Subsequent Offering DRIP Price, the Post-Offering
DRIP Price and the Pre-Listing DRIP Price as the DRIP
Price).
The
DRIP
The DRIP provides you with a simple and convenient way to invest
your cash distributions in additional shares of Common Stock. As
a participant in the DRIP and during the Initial Offering, you
may purchase shares at the Initial Offering DRIP Price until all
of the Initial DRIP Shares have been purchased or until the
Company elects to terminate the DRIP. If the Company elects to
keep the DRIP in effect after the Initial Offering, you may
purchase shares at the Subsequent Offering DRIP Price, the
Post-Offering DRIP Price, the Pre-Listing DRIP Price or the
Listing DRIP Price, as applicable.
You receive free custodial service for the shares you hold
through the DRIP.
Shares for the DRIP will be purchased directly from the Company.
Such shares will be authorized and may be either previously
issued or unissued shares. Proceeds from the sale of Common
Stock under the DRIP will be used to provide the Company with
funds for its general corporate purposes.
Eligibility
Holders of record of Common Stock are eligible to participate in
the DRIP only with respect to 100% of their shares. If your
shares are held of record by a broker or nominee and you want to
participate in the DRIP, you must make appropriate arrangements
with your broker or nominee.
The Company may refuse participation in the DRIP to stockholders
residing in states where shares offered pursuant to the DRIP are
neither registered under applicable securities laws nor exempt
from registration.
B-1
Administration
As of the date of the Prospectus, the DRIP will be administered
by the Company or an affiliate of the Company (the DRIP
Administrator), but a different entity may act as DRIP
Administrator in the future. The DRIP Administrator will keep
all records of your DRIP account and send statements of your
account to you. Shares of Common Stock purchased under the DRIP
will be registered in the name of each participating stockholder.
Enrollment
You must own shares of Common Stock in order to participate in
the DRIP. You may become a participant in the DRIP by completing
and signing the enrollment form enclosed with the Prospectus and
returning it to us at the time you subscribe for shares. If you
receive a copy of the Prospectus or a separate prospectus
relating solely to the DRIP and have not previously elected to
participate in the DRIP, then you may so elect at any time by
completing the enrollment form attached to such prospectus or by
other appropriate written notice to the Company of your desire
to participate in the DRIP.
Your participation in the DRIP will begin with the first
distribution payment after your signed enrollment form is
received, provided such form is received on or before
10 days prior to the record date established for that
distribution. If your enrollment form is received after the
record date for any distribution and before payment of that
distribution, that distribution will be paid to you in cash and
reinvestment of your distributions will not begin until the next
distribution payment date.
Costs
Purchases under the DRIP will not be subject to selling
commissions, marketing support fees or due diligence
reimbursements. All costs of administration of the DRIP will be
paid by the Company. However, any interest earned on
distributions on shares within the DRIP will be paid to the
Company to defray certain costs relating to the DRIP.
Purchases
and Price of Shares
Investment Date. Common Stock distributions
will be invested within 30 days after the date on which
Common Stock distributions are paid (the Investment
Date). Payment dates for Common Stock distributions will
be ordinarily on or about the last day of each month but may be
changed to quarterly in the sole discretion of the Company. Any
distributions not so invested will be returned to participants
in the DRIP.
You become an owner of shares purchased under the DRIP as of the
Investment Date. Distributions paid on shares held in the DRIP
(less any required withholding tax) will be credited to your
DRIP account. Distributions will be paid on both full and
fractional shares held in your account and are automatically
reinvested.
Reinvested Distributions. The Company will use
the aggregate amount of distributions to all DRIP participants
for each distribution period to purchase shares for such
participants. If the aggregate amount of distributions to all
DRIP participants exceeds the amount required to purchase all
shares then available for purchase, the Company will purchase
all available shares and will return all remaining distributions
to the DRIP participants within 30 days after the date such
distributions are made. The Company will allocate the purchased
shares among the DRIP participants based on the portion of the
aggregate distributions received on behalf of each participant,
as reflected on the Companys books.
You may elect distribution reinvestment only with respect to
100% of shares registered in your name on the records of the
Company. Distributions on all shares purchased pursuant to the
DRIP will be automatically reinvested. The number of shares
purchased for you as a participant in the DRIP will depend on
the amount of your distributions on these shares (less any
required withholding tax) and the applicable DRIP Price. Your
account will be credited with the number of shares, including
fractions computed to four decimal places, equal to the total
amount invested divided by the applicable DRIP Price.
B-2
Optional Cash Purchases. Unless and until
determined otherwise by the Company, DRIP participants may not
make additional cash payments for the purchase of Common Stock
under the DRIP.
Distributions
on Shares Held in the DRIP
Distributions paid on shares held in the DRIP (less any required
withholding tax) will be credited to your DRIP account.
Distributions will be paid on both full and fractional shares
held in your account and will be automatically reinvested.
Account
Statements
You will receive a statement of your account within 90 days
after the end of the fiscal year. The statements will contain a
report of all transactions with respect to your account since
the last statement, including information with respect to the
distributions reinvested during the year, the number of shares
purchased during the year, the per share purchase price for such
shares, the total administrative charge retained by the Company
or DRIP Administrator on your behalf and the total number of
shares purchased on your behalf pursuant to the DRIP. In
addition, tax information with respect to income earned on
shares under the DRIP for the year will be included in the
account statements. These statements are your continuing record
of the cost of your purchase and should be retained for income
tax purposes.
Book-Entry
Shares
The ownership of shares purchased under the DRIP will be noted
in book-entry form. The number of shares purchased will be shown
on your statement of account. This feature permits ownership of
fractional shares, protects against loss, theft or destruction
of stock certificates and reduces the costs of the DRIP.
Termination
of Participation
You may discontinue reinvestment of distributions under the DRIP
with respect to all, but not less than all, of your shares
(including shares held for your account in the DRIP) at any time
without penalty by notifying the DRIP Administrator in writing
no less than 10 days prior to the next Investment Date. A
notice of termination received by the DRIP Administrator after
such cutoff date will not be effective until the next following
Investment Date. Participants who terminate their participation
in the DRIP may thereafter rejoin the DRIP by notifying the
Company and completing all necessary forms and otherwise as
required by the Company.
If you notify the DRIP Administrator of your termination of
participation in the DRIP or if your participation in the DRIP
is terminated by the Company, the stock ownership records will
be updated to include the number of whole shares in your DRIP
account. For any fractional shares of stock in your DRIP
account, the DRIP Administrator may either (i) send you a
check in payment for any fractional shares in your account, or
(ii) credit your stock ownership account with any such
fractional shares.
A participant who changes his or her address must promptly
notify the DRIP Administrator. If a participant moves his or her
residence to a state where shares offered pursuant to the DRIP
are neither registered nor exempt from registration under
applicable securities laws, the Company may deem the participant
to have terminated participation in the DRIP.
The Company reserves the right to prohibit certain employee
benefit plans from participating in the DRIP if such
participation could cause the underlying assets of the Company
to constitute plan assets of such plans.
Amendment
and Termination of the DRIP
The Companys board of directors (the Board)
may, in its sole discretion, terminate the DRIP or amend any
aspect of the DRIP without the consent of DRIP participants or
other stockholders, provided that written notice of any material
amendment is sent to DRIP participants at least 10 days
prior to the effective date thereof and provided that we may not
amend the DRIP to terminate a participants right to
withdraw from the
B-3
DRIP. You will be notified if the DRIP is terminated or
materially amended. The Board also may terminate any
participants participation in the DRIP at any time by
notice to such participant if continued participation will, in
the opinion of the Board, jeopardize the status of the Company
as a real estate investment trust under the Internal Revenue
Code.
Voting of
Shares Held Under the DRIP
You will be able to vote all shares of Common Stock (including
fractional shares) credited to your account under the DRIP at
the same time that you vote the shares registered in your name
on the records of the Company.
Stock
Dividends, Stock Splits and Rights Offerings
Your DRIP account will be amended to reflect the effect of any
stock dividends, splits, reverse splits or other combinations or
recapitalizations by the Company on shares held in the DRIP for
you. If the Company issues to its stockholders rights to
subscribe to additional shares, such rights will be issued to
you based on your total share holdings, including shares held in
your DRIP account.
Responsibility
of the DRIP Administrator and the Company Under the
DRIP
The DRIP Administrator will not be liable for any claim based on
an act done in good faith or a good faith omission to act. This
includes, without limitation, any claim of liability arising out
of failure to terminate a participants account upon a
participants death, the prices at which shares are
purchased, the times when purchases are made, or fluctuations in
the market price of Common Stock.
All notices from the DRIP Administrator to a participant will be
mailed to the participant at his or her last address of record
with the DRIP Administrator, which will satisfy the DRIP
Administrators duty to give notice. DRIP participants must
promptly notify the DRIP Administrator of any change in address.
You should recognize that neither the Company nor the DRIP
Administrator can provide any assurance of a profit or
protection against loss on any shares purchased under the DRIP.
Interpretation
and Regulation of the DRIP
The Company reserves the right, without notice to DRIP
participants, to interpret and regulate the DRIP as it deems
necessary or desirable in connection with its operation. Any
such interpretation and regulation shall be conclusive.
Federal
Income Tax Consequences of Participation in the DRIP
The following discussion summarizes the principal federal income
tax consequences, under current law, of participation in the
DRIP. It does not address all potentially relevant federal
income tax matters, including consequences peculiar to persons
subject to special provisions of federal income tax law (such as
tax-exempt organizations, insurance companies, financial
institutions, broker dealers and foreign persons). The
discussion is based on various rulings of the IRS regarding
several types of distribution reinvestment plans. No ruling,
however, has been issued or requested regarding the DRIP. The
following discussion is for your general information only, and
you must consult your own tax advisor to determine the
particular tax consequences (including the effects of any
changes in law) that may result from your participation in the
DRIP and the disposition of any shares purchased pursuant to the
DRIP.
Reinvested Distributions. Stockholders subject
to federal income taxation who elect to participate in the DRIP
will incur a tax liability for distributions allocated to them
even though they have elected not to receive their distributions
in cash but rather to have their distributions reinvested
pursuant to the DRIP. Specifically, DRIP participants will be
treated as if they received the distribution from the Company
and then applied such distribution to purchase the shares in the
DRIP. To the extent that a stockholder purchases shares through
the DRIP at a discount to fair market value, the stockholders
will be treated for tax purposes as receiving an additional
distribution equal to the amount of such discount. A stockholder
designating a distribution for
B-4
reinvestment will be taxed on the amount of such distribution as
ordinary income to the extent such distribution is from current
or accumulated earnings and profits, unless the Company has
designated all or a portion of the distribution as a capital
gain dividend. In such case, such designated portion of the
distribution will be taxed as a capital gain. To the extent that
the Company makes a distribution in excess of the Companys
current or accumulated earnings and profits, the distribution
will be treated first as a tax-free return of capital, reducing
the tax basis in your common stock, and then the distribution in
excess of such basis will be taxable as a gain realized from the
sale of your common stock.
Receipt of Share Certificates and Cash. You
will not realize any income if you receive certificates for
whole shares credited to your account under the DRIP. Any cash
received for a fractional share held in your account will be
treated as an amount realized on the sale of the fractional
share. You therefore will recognize gain or loss equal to any
difference between the amount of cash received for a fractional
share and your tax basis in the fractional share.
Withholding. In the case of participating
stockholders whose distributions are subject to withholding of
federal income tax, distributions will be reinvested less the
amount of tax required to be withheld.
B-5
ENROLLMENT
FORM
HEALTHCARE
TRUST OF AMERICA, INC.
DISTRIBUTION REINVESTMENT PLAN
To Join the Distribution Reinvestment Plan:
Please complete and return this enrollment form. Be sure to
include your signature below in order to indicate your
participation in the Distribution Reinvestment Plan
(DRIP).
I hereby appoint Healthcare Trust of America, Inc. (the
Company) (or any designee or successor), acting as
DRIP Administrator, as my agent to receive cash distributions
that may hereafter become payable to me on shares of Common
Stock of the Company registered in my name as set forth below,
and authorize the Company to apply such distributions to the
purchase of full shares and fractional interests in shares of
the Common Stock.
I understand that the purchases will be made under the terms and
conditions of the DRIP as described in the Prospectus and that I
may revoke this authorization at any time by notifying the DRIP
Administrator, in writing, of my desire to terminate my
participation.
Sign below if you would like to participate in the DRIP. You
must participate with respect to 100% of your shares.
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Signature of Joint Owner:
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B-6
EXHIBIT C
HEALTHCARE
TRUST OF AMERICA, INC.
SHARE
REPURCHASE PLAN
The Board of Directors (the Board) of Healthcare
Trust of America, Inc., a Maryland corporation (the
Company), has adopted a share repurchase plan (the
Repurchase Plan) by which shares of the
Companys common stock, par value $0.01 per share
(Shares), may be repurchased by the Company from
stockholders subject to certain conditions and limitations. The
purpose of this Repurchase Plan is to provide limited interim
liquidity for stockholders (under the conditions and limitations
set forth below) until a liquidity event occurs. No stockholder
is required to participate in the Repurchase Plan.
1. Repurchase of Shares. The Company may, at its
sole discretion, repurchase Shares presented to the Company for
cash to the extent it has sufficient proceeds to do so and
subject to the conditions and limitations set forth herein. Any
and all Shares repurchased by the Company shall be canceled, and
will have the status of authorized but unissued Shares. Shares
acquired by the Company through the Repurchase Plan will not be
reissued unless they are first registered with the Securities
and Exchange Commission under the Securities Act of 1933, as
amended, and other appropriate state securities laws or
otherwise issued in compliance with such laws.
2. Share Redemptions.
Repurchase Price. Unless the Shares are being
repurchased in connection with a stockholders death or
qualifying disability (as discussed below), the prices per Share
at which the Company will repurchase Shares will be as follows:
(1) For stockholders who have continuously held their
Shares for at least one year, the lower of $9.25 or 92.5% of the
price paid to acquire Shares from the Company;
(2) For stockholders who have continuously held their
Shares for at least two years, the lower of $9.50 or 95.0% of
the price paid to acquire Shares from the Company;
(3) For stockholders who have continuously held their
Shares for at least three years, the lower of $9.75 or 97.5% of
the price paid to acquire Shares from the Company; and
(4) For stockholders who have continuously held their
Shares for at least four years, a price determined by our board
of directors, but in no event less than 100% of the price paid
to acquire Shares from the Company.
Death or Disability. If Shares are to be
repurchased in connection with a stockholders death or
qualifying disability as provided in Section 4, the
repurchase price shall be: (1) for stockholders who have
continuously held their Shares for less than four years, 100% of
the price paid to acquire the Shares from the Company; or
(2) for stockholders who have continuously held their
Shares for at least four years, a price determined by the Board,
but in no event less than 100% of the price paid to acquire the
Shares from the Company. In addition, the Company will waive the
one-year holding period, as described in Section 4, for
Shares to be repurchased in connection with a stockholders
death or qualifying disability. Appropriate legal documentation
will be required for repurchase requests upon death or
qualifying disability.
3. Funding and Operation of Repurchase Plan. The
Company may make purchases under the Repurchase Plan quarterly,
at its sole discretion, on a pro rata basis. Subject to funds
being available, the Company will limit the number of Shares
repurchased during any calendar year to five percent (5.0%) of
the weighted average number of Shares outstanding during the
prior calendar year. Funding for the Repurchase Plan will come
exclusively from proceeds received from the sale of Shares under
the Companys Distribution Reinvestment Plan.
C-1
4. Stockholder Requirements. Any stockholder may
request a repurchase with respect to all or a designated portion
of this Shares, subject to the following conditions and
limitations:
Holding Period. Only Shares that have been
held by the presenting stockholder for at least one
(1) year are eligible for repurchase by the Company, except
as follows. Subject to the conditions and limitations below, the
Company will redeem Shares held for less than the one-year
holding period upon the death of a stockholder who is a natural
person, including Shares held by such stockholder through a
revocable grantor trust, or an IRA or other retirement or
profit-sharing plan, after receiving written notice from the
estate of the stockholder, the recipient of the Shares through
bequest or inheritance, or, in the case of a revocable grantor
trust, the trustee of such trust, who shall have the sole
ability to request redemption on behalf of the trust. The
Company must receive the written notice within 180 days
after the death of the stockholder. If spouses are joint
registered holders of Shares, the request to redeem the shares
may be made if either of the registered holders dies. This
waiver of the one-year holding period will not apply to a
stockholder that is not a natural person, such as a trust other
than a revocable grantor trust, partnership, corporation or
other similar entity.
Furthermore, and subject to the conditions and limitations
described below, the Board will redeem Shares held for less than
the one-year holding period by a stockholder who is a natural
person, including Shares held by such stockholder through a
revocable grantor trust, or an IRA or other retirement or
profit-sharing plan, with a qualifying disability,
as determined by the Board, after receiving written notice from
such stockholder. The Company must receive the written notice
within 180 days after such stockholders qualifying
disability. This waiver of the one-year holding period will not
apply to a stockholder that is not a natural person, such as a
trust other than a revocable grantor trust, partnership,
corporation or other similar entity.
Minimum Maximum. A stockholder
must present for repurchase a minimum of 25%, and a maximum of
100%, of the Shares owned by the stockholder on the date of
presentment. Fractional shares may not be presented for
repurchase unless the stockholder is presenting 100% of his
Shares.
No Encumbrances. All Shares presented for
repurchase must be owned by the stockholder(s) making the
presentment, or the party presenting the Shares must be
authorized to do so by the owner(s) of the Shares. Such Shares
must be fully transferable and not subject to any liens or other
encumbrances.
Share Repurchase Form. The presentment of
Shares must be accompanied by a completed Share Repurchase
Request form, a copy of which is attached hereto as Exhibit
A. All Share certificates must be properly
endorsed.
Deadline for Presentment. All Shares presented
and all completed Share Repurchase Request forms must be
received by the Repurchase Agent (as defined below) on or before
the last day of the second month of each calendar quarter in
order to have such Shares eligible for repurchase for that
quarter. The Company will repurchase Shares on or about the
first day following the end of each calendar quarter.
Repurchase Request Withdrawal. A stockholder
may withdraw his or her repurchase request upon written notice
to the Company at any time prior to the date of repurchase.
Ineffective Withdrawal. In the event the
Company receives a written notice of withdrawal from a
stockholder after the Company has repurchased all or a portion
of such stockholders Shares, the notice of withdrawal
shall be ineffective with respect to the Shares already
repurchased, but shall be effective with respect to any of such
stockholders Shares that have not been repurchased. The
Company shall provide any such stockholder with prompt written
notice of the ineffectiveness or partial ineffectiveness of such
stockholders written notice of withdrawal.
Repurchase Agent. All repurchases will be
effected on behalf of the Company by its transfer agent (the
Repurchase Agent), who shall contract with the
Company for such services. All recordkeeping and administrative
functions required to be performed in connection with the
Repurchase Plan will be performed by the Repurchase Agent.
C-2
Termination, Amendment or Suspension of
Plan. The Repurchase Plan will terminate and the
Company will not accept Shares for repurchase in the event the
Shares are listed on any national securities exchange, the
subject of bona fide quotes on any inter-dealer quotation system
or electronic communications network or are the subject of bona
fide quotes in the pink sheets. Additionally, the Board, in its
sole discretion, may terminate, amend or suspend the Repurchase
Plan if it determines to do so is in the best interest of the
Company. A determination by the Board to terminate, amend or
suspend the Repurchase Plan will require the affirmative vote of
a majority of the directors, including a majority of the
independent directors. If the Company terminates, amends or
suspends the Repurchase Plan, the Company will provide
stockholders with thirty (30) days advance written notice
and the Company will disclose the changes in the appropriate
current or periodic report filed with the Securities and
Exchange Commission.
5. Miscellaneous.
Liability. Neither the Company nor the
Repurchase Agent shall have any liability to any stockholder for
the value of the stockholders Shares, the repurchase price
of the stockholders Shares, or for any damages resulting
from the stockholders presentation of his or her Shares,
the repurchase of the Shares under this Repurchase Plan or from
the Companys determination not to repurchase Shares under
the Repurchase Plan, except as a result from the Companys
or the Repurchase Agents gross negligence, recklessness or
violation of applicable law; provided, however, that nothing
contained herein shall constitute a waiver or limitation of any
rights or claims a stockholder may have under federal or state
securities laws.
Taxes. Stockholders shall have complete
responsibility for payment of all taxes, assessments, and other
applicable obligations resulting from the Companys
repurchase of Shares.
Preferential Treatment of Shares Repurchased in Connection
with Death or Disability. If there are
insufficient funds to honor all repurchase requests, preference
will be given to shares to be repurchased in connection with a
death or qualifying disability.
C-3
SHARE
REPURCHASE REQUEST
Standard
Mail: Healthcare Trust of America, PO Box 219108,
Kansas City, MO
64121-9108
Overnight Mail: Healthcare Trust of America,
c/o DST
Systems, Inc, 430 W
7th St,
Kansas City, MO 64105
For Questions, Phone:
(888) 801-0107
Fax:
(866) 825-1371
The undersigned stockholder of Healthcare Trust of America, Inc.
(the Company) hereby requests that, pursuant to the
Companys Share Repurchase Plan, the Company repurchase the
number of shares of Company Common Stock (the
Shares) indicated below.
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Social Security/Tax ID Number |
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Please state the number of shares you are submitting for repurchase
or
o All
Shares
(Note: number of shares presented for repurchase must be equal
to or exceed 25% of total shares owned.)
Repurchase
Information
Please state your instruction to receive the share repurchase
proceeds:
o I
prefer for my proceeds to be sent to my mailing address of record
o I
prefer for my proceeds to deposited into a third-party account
(information listed below)
C-4
Authorization &
Signatures
By signing and submitting this form, the undersigned hereby
acknowledges and represents to each of the Company and the
Repurchase Agent the following:
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The undersigned is the owner (or duly authorized agent of the
owner) of the Shares presented for repurchase, and thus is
authorized to present the Shares for repurchase.
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The Shares presented for repurchase are eligible for repurchase
pursuant to the Repurchase Plan. The Shares are fully
transferable and have not been assigned, pledged, or otherwise
encumbered in any way.
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The undersigned hereby indemnifies and holds harmless the
Company, the Repurchase Agent, and each of their respective
officers, directors and employees from and against any
liabilities, damages, expenses, including reasonable
attorneys fees, arising out of or in connection with any
misrepresentation made herein.
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All investor(s)/registration owner(s) must sign the form to
authorize the above instructions. The signature(s) to this
application must correspond with the name(s) and account
registration in which you held the shares, in every particular,
without alteration or any change whatsoever.
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SIGNATURE
OF OWNER
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SIGNATURE
OR JOINT OWNER
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DATE
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DATE
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MEDALLION
SIGNATURE GUARANTEE
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MEDALLION
SIGNATURE GUARANTEE
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CUSTODIAL
AUTHORIZATION
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DATE
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MEDALLION
SIGNATURE GUARANTEE
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C-5
HEALTHCARE TRUST OF AMERICA,
INC.
Maximum Offering of
$2,200,000,000 in
Shares
of Common Stock
PROSPECTUS
March , 2010
You should rely only on the information contained in this
prospectus. No dealer, salesperson or other person is authorized
to make any representations other than those contained in the
prospectus and supplemental literature authorized by Healthcare
Trust of America, Inc. and referred to in this prospectus, and,
if given or made, such information and representations must not
be relied upon. This prospectus is not an offer to sell nor is
it seeking an offer to buy these securities in any jurisdiction
where the offer or sale is not permitted. The information
contained in this prospectus is accurate only as of the date of
this prospectus, regardless of the time of delivery of this
prospectus or any sale of these securities. You should not
assume that the delivery of this prospectus or that any sale
made pursuant to this prospectus implies that the information
contained in this prospectus will remain fully accurate and
correct of any time subsequent to the date of this
prospectus.
Filed
Pursuant to Rule 424(b)(3)
Registration No. 333-133652
HEALTHCARE
TRUST OF AMERICA, INC.
SUPPLEMENT
NO. 1 DATED MARCH , 2010
TO
THE PROSPECTUS DATED MARCH , 2010
This document supplements, and should be read in conjunction
with, our prospectus dated March , 2010,
relating to our offering of up to $2,200,000,000 of shares of
common stock. The purpose of this Supplement No. 1 is to
disclose:
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the status of our offerings;
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selected financial data;
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our pending property acquisitions;
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our performance funds from operations and modified
funds from operations;
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information regarding our distributions; and
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our property performance net operating income.
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Status of
our Offerings
As of March 12, 2010, we had received and accepted
subscriptions in our initial public offering for
144,959,351 shares of our common stock, or approximately
$1,448,044,000, excluding shares issued under our distribution
reinvestment plan. On March 19, 2010, we stopped offering
shares of our common stock in our initial public offering.
As of March , 2010, $2.0 billion shares
are available for sale to the public under this offering,
exclusive of shares available under our distribution
reinvestment plan.
Selected
Financial Data
The following selected financial data should be read with
Managements Discussion and Analysis of Financial Condition
and Results of Operations and our consolidated financial
statements and the notes thereto incorporated by reference into
the prospectus. Our historical results are not necessarily
indicative of results for any future period.
The following tables present summarized consolidated financial
information including balance sheet data, statement of
operations data, and statement of cash flows data in a format
consistent with our consolidated financial statements.
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December 31,
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April 28, 2006
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2009
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2008
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2007
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2006
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(Date of Inception)
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BALANCE SHEET DATA:
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Total assets
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$
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1,673,535,000
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$
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1,113,923,000
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$
|
431,612,000
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$
|
385,000
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$
|
202,000
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Mortgage loans payable, net
|
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540,028,000
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|
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460,762,000
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185,801,000
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Stockholders equity (deficit)
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1,071,317,000
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599,320,000
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175,590,000
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(189,000
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)
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2,000
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Period from
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April 28, 2006
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Through
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Years Ended December 31,
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(Date of Inception)
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2009
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2008
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2007
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December 31, 2006
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STATEMENT OF OPERATIONS DATA:
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Total revenues
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129,486,000
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80,418,000
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17,626,000
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Net Loss
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(24,773,000
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)
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(28,409,000
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)
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(7,674,000
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)
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(242,000
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)
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Net loss attributable to controlling interest
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|
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(25,077,000
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)
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(28,448,000
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)
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(7,666,000
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)
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(242,000
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)
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Loss per share basic and diluted(1):
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Net Loss
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(0.22
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)
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|
|
(0.66
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)
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|
|
(0.77
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)
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|
|
(149.03
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)
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Net loss attributable to controlling interest
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|
|
(0.22
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)
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|
(0.66
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)
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|
|
(0.77
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)
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|
(149.03
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)
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STATEMENT OF CASH FLOWS DATA:
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|
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Cash flows provided by operating activities
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21,001,000
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20,677,000
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7,005,000
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Cash flows used in investing activities
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(454,855,000
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)
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(526,475,000
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)
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(385,440,000
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)
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Cash flows provided by financing activities
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524,524,000
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628,662,000
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383,700,000
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|
202,000
|
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OTHER DATA:
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Distributions declared
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82,221,000
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31,180,000
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7,250,000
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Distributions declared per share
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|
|
0.73
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|
|
|
0.73
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|
0.70
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|
Funds from operations
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|
|
28,314,000
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|
|
|
8,745,000
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|
|
|
2,124,000
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|
|
|
(242,000
|
)
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Modified Funds From Operations
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|
|
48,029,000
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|
|
|
8,757,000
|
|
|
|
2,124,000
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|
|
|
(242,000
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)
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Net operating income
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|
|
84,462,000
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|
|
|
52,244,000
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|
|
|
11,589,000
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(1) |
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Net loss per share is based upon the weighted average number of
shares of our common stock outstanding. Distributions by us of
our current and accumulated earnings and profits for federal
income tax purposes are taxable to stockholders as ordinary
income. Distributions in excess of these earnings and profits
generally are treated as a non-taxable reduction of the
stockholders basis in the shares to the extent thereof (a
return of capital for tax purposes) and, thereafter, as taxable
gain. These distributions in excess of earnings and profits will
have the effect of deferring taxation of the distributions until
the sale of the stockholders common stock. |
Pending
Property Acquisitions
Set forth below is a description of our pending property
acquisitions.
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On February 10, 2010, we entered into a purchase and sale
agreement to acquire the approximately 101,400 square foot Triad
Technology Center in Baltimore, Maryland for approximately
$29,250,000. The building is 100% leased to the
U.S. Government and primarily occupied by the National
Institutes of Health (NIH).
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On February 19, 2010, we entered into a purchase and sale
agreement to acquire a five building medical office portfolio
located in Evansville, Indiana for approximately $45,700,000.
The approximately 260,500 square foot portfolio is 100%
master-leased to the Deaconess Clinic which is part of the
Deaconess Health System, the largest health system in Southern
Indiana. Deaconess Health System carries an A+ rating from both
Standard & Poors and Fitch and is the largest health
system in Southern Indiana.
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On February 22, 2010, we entered into a purchase and sale
agreement for approximately $15,300,000 to acquire a three
building approximately 53,700 square foot medical office
portfolio located in Hilton Head, South Carolina. The
portfolio is located less than two miles from the Hilton Head
Hospital, a wholly-owned hospital by Tenet Healthcare
Corporation. Two of the three buildings in the portfolio are
currently 100% occupied, and 35% of the portfolio is occupied by
Hilton Head Hospital.
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On February 24, 2010, we entered into a purchase and sale
agreement for approximately $12,400,000 to acquire a three
story, approximately 60,300 square foot medical office
building in Sugar Land,
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2
Texas. The building is 100% leased with 83% of the space
occupied by Texas Childrens Health Centers through 2019.
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On February 25, 2010, we entered into a purchase and sale
agreement for approximately $10,500,000 to acquire an
approximately 54,800 square foot medical office portfolio
in Pearland, Texas. The portfolio consists of two buildings
which are approximately ten miles south of the world-renowned
Houston Medical Center and 15 miles south of Houstons
central business district. The buildings are 100% and 98%
occupied.
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On March 2, 2010, we entered into a purchase and sale
agreement for approximately $10,000,000 to acquire a
60,800 square foot medical office building located in
Mount Pleasant, South Carolina, a suburb of
Charleston. The three-story Medical Center at East Cooper is 90%
leased and is on the campus of East Cooper Regional Medical
Center.
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On March 3, 2010, we opened escrow with First American
Title Company, and on or before March 26, 2010, our
subsidiary plans to exercise its call option to buy for
$3,900,000 100% of the interest owned by its joint venture
partner in HTA Duke Chesterfield Rehab, LLC.
(Duke), which owns the Chesterfield Rehabilitation
Center.
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The completion of each of the pending acquisitions described
above is subject to the satisfaction of a number of conditions,
and we cannot guarantee that these acquisitions will be
completed.
Our
Performance Funds From Operations and Modified Funds
from Operations
Due to certain unique operating characteristics of real estate
companies, the National Association of Real Estate Investment
Trusts, or NAREIT, an industry trade group, has promulgated a
measure known as Funds from Operations, or FFO, which it
believes more accurately reflects the operating performance of a
REIT. FFO is not equivalent to our net income or loss as
determined under generally accepted accounting principles in the
United States, or GAAP.
We define FFO, a non-GAAP measure, consistent with the standards
established by NAREIT. NAREIT defines FFO as net income or loss
computed in accordance with GAAP, excluding gains or losses from
sales of property but including asset impairment write downs,
plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures are calculated to
reflect FFO.
The historical accounting convention used for real estate assets
requires straight-line depreciation of buildings and
improvements, which implies that the value of real estate assets
diminishes predictably over time. Since real estate values
historically rise and fall with market conditions, presentations
of operating results for a REIT, using historical accounting for
depreciation, could be less informative. The use of FFO is
recommended by the REIT industry as a supplemental performance
measure.
Presentation of this information is intended to assist the
reader in comparing the operating performance of different
REITs, although it should be noted that not all REITs calculate
FFO the same way, so comparisons with other REITs may not be
meaningful. Factors that impact FFO include non cash GAAP income
and expenses, one-time transition charges, timing of
acquisitions, yields on cash held in accounts, income from
portfolio properties and other portfolio assets, interest rates
on acquisition financing and operating expenses. Furthermore,
FFO is not necessarily indicative of cash flow available to fund
cash needs and should not be considered as an alternative to net
income, as an indication of our liquidity, nor is it indicative
of funds available to fund our cash needs, including our ability
to make distributions and should be reviewed in connection with
other measurements as an indication of our performance. Our FFO
reporting complies with NAREITs policy described above.
Changes in the accounting and reporting rules under GAAP have
prompted a significant increase in the amount of non-operating
items included in FFO, as defined. Therefore, we also use
modified funds from operations, or MFFO, which excludes from FFO
one-time transition charges and acquisition expenses, to further
evaluate our operating performance. We believe that MFFO with
these adjustments, like those already
3
included in FFO, are helpful as a measure of operating
performance because it excludes costs that management considers
more reflective of investing activities or non-operating
changes. We believe that MFFO reflects the overall operating
performance of our real estate portfolio, which is not
immediately apparent from reported net loss. As such, we believe
MFFO, in addition to net loss and cash flows from operating
activities, each as defined by GAAP, is a meaningful
supplemental performance measure and is useful in understanding
how our management evaluates our ongoing operating performance.
Management considers the following items in the calculation of
MFFO:
Acquisition expenses: Prior to 2009,
acquisition expenses were capitalized and have historically been
added back to FFO over time through depreciation; however,
beginning in 2009, acquisition expenses related to business
combinations are expensed. These acquisition expenses have been
and will continue to be funded from the proceeds of our
offerings and not from operations. We believe by excluding
expensed acquisition expenses, MFFO provides useful supplemental
information that is comparable for our real estate investments.
One-time transition charges: FFO includes
one-time non-recurring charges related to the cost of our
transition to self-management. These items include, but are not
limited to, additional legal expenses, system conversion costs,
non-recurring employment costs, transitional property management
costs and duplicative fees that we were contractually required
to pay to our former advisor for asset management and property
management during the third quarter after we completed our
transition to self-management. Because MFFO excludes one-time
costs, management believes MFFO provides useful supplemental
information by focusing on the changes in our fundamental
operations that will be comparable rather than on one-time,
non-recurring costs.
The following is the calculation of FFO and MFFO for each of the
last four quarters ended December 31, 2009.
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|
|
|
|
|
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Three Months Ended
|
|
|
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December 31,
|
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September 30,
|
|
|
June 30,
|
|
|
March 31,
|
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|
|
2009
|
|
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2009
|
|
|
2009
|
|
|
2009
|
|
|
Net loss
|
|
$
|
(4,364,000
|
)
|
|
$
|
(10,074,000
|
)
|
|
$
|
(3,535,000
|
)
|
|
$
|
(6,800,000
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)
|
Add:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization consolidated properties
|
|
|
14,364,000
|
|
|
|
13,287,000
|
|
|
|
12,645,000
|
|
|
|
13,299,000
|
|
Less:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (income) loss attributable to noncontrolling interest of
limited partners
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|
|
(63,000
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)
|
|
|
(70,000
|
)
|
|
|
(102,000
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)
|
|
|
(70,000
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)
|
Depreciation and amortization related to noncontrolling interests
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|
|
(51,000
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)
|
|
|
(51,000
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)
|
|
|
(51,000
|
)
|
|
|
(51,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO attributable to controlling interest
|
|
$
|
9,886,000
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|
$
|
3,092,000
|
|
|
$
|
8,957,000
|
|
|
$
|
6,378,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO per share basic and diluted
|
|
$
|
0.07
|
|
|
$
|
0.02
|
|
|
$
|
0.08
|
|
|
$
|
0.08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
expenses(1)
|
|
|
6,897,000
|
|
|
|
5,920,000
|
|
|
|
1,680,000
|
|
|
|
1,500,000
|
|
One-time transition
charges(2)
|
|
|
|
|
|
|
2,857,000
|
|
|
|
286,000
|
|
|
|
575,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MFFO attributable to controlling interest
|
|
$
|
16,783,000
|
|
|
$
|
11,869,000
|
|
|
$
|
10,924,000
|
|
|
$
|
8,453,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MFFO per share basic and diluted
|
|
$
|
0.12
|
|
|
$
|
0.10
|
|
|
$
|
0.10
|
|
|
$
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
$
|
135,259,514
|
|
|
|
124,336,078
|
|
|
|
106,265,880
|
|
|
|
84,672,174
|
|
|
|
|
(1) |
|
Prior to 2009, acquisition expenses were capitalized and have
historically been added back to FFO over time through
depreciation; however, beginning in 2009, acquisition expenses
related to business |
4
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|
|
|
|
combinations are expensed. These acquisition expenses have been
and will continue to be funded from the proceeds of our offering
and not from operations. |
|
|
|
(2) |
|
One-time charges relate to the cost of our transition to
self-management. These items include, but are not limited to,
additional legal expenses, system conversion costs,
non-recurring employment costs, transitional property management
costs, and duplicative fees that we were contractually required
to pay our former advisor for asset management and property
management during the third quarter after we completed our
transition to
self-management. |
For the year ended December 31, 2009, MFFO per share has
been impacted by the increase in net proceeds realized from our
initial offering. For the year ended December 31, 2009, we
sold 62,696,000 shares of our common stock, increasing our
outstanding shares by 83.1%. The proceeds from this issuance
were temporarily invested in short-term cash equivalents until
they could be invested in medical office buildings and other
healthcare-related facilities at favorable pricing. Due to lower
interest rates on cash equivalent investments, interest earnings
were minimal. We expect to invest these proceeds in
higher-earning medical office buildings or other
healthcare-related facility investments consistent with our
investment policy to identify high quality investments. We
believe this will add value to our stockholders over our
longer-term investment horizon, even if this results in less
current period earnings. See Note 22 Subsequent Events, to
our accompanying condensed consolidated financial statements,
for a further discussion of our potential future acquisitions.
Information
Regarding our Distributions
If distributions are in excess of our taxable income, such
distributions will result in a return of capital to our
stockholders. Our distribution of amounts in excess of our
taxable income has resulted in a return of capital to our
stockholders.
For the year ended December 31, 2009, we paid distributions of
$78,059,000 ($39,499,000 in cash and $38,559,000 in shares of
our common stock pursuant to the DRIP), as compared to cash
flows from operations of $21,001,000. Cash flows from operations
was reduced by $15,997,000 and $0 for the years ended December
31, 2009 and 2008 for acquisition-related expenses.
Acquisition-related expenses were previously capitalized as a
part of the purchase price allocation and have historically been
included in cash flows from investing. Excluding such
acquisition-related expenses the comparable cash flows from
operations for the year ended December 31, 2009 would have been
$36,998,000. From inception through December 31, 2009, we paid
cumulative distributions of $112,097,000 ($57,765,000 in cash
and $54,332,000 in shares of our common stock pursuant to the
DRIP), as compared to cumulative cash flows from operations of
$48,683,000. Comparable cumulative cash flows from operations
would have totaled $65,610,000 under previous accounting rules
that allowed for capitalization of acquisition-related expenses,
which would therefore have been included in cash flows from
investing. The distributions paid in excess of our cash flows
from operations were paid using proceeds from our initial
offering.
The following presents the amount of our distributions and the
source of payment of such distributions for each of the last
four quarters ended December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
June 30,
|
|
|
March 31,
|
|
|
|
2009
|
|
|
2009
|
|
|
2009
|
|
|
2009
|
|
|
Distributions paid in cash
|
|
$
|
12,006,000
|
|
|
$
|
11,024,000
|
|
|
$
|
9,156,000
|
|
|
$
|
7,313,000
|
|
Distributions reinvested
|
|
|
11,894,000
|
|
|
|
10,884,000
|
|
|
|
8,848,000
|
|
|
|
6,934,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total distributions
|
|
$
|
23,900,000
|
|
|
$
|
21,908,000
|
|
|
$
|
18,004,000
|
|
|
$
|
14,247,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Source of distributions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from operations
|
|
$
|
5,033,000
|
|
|
$
|
1,718,000
|
|
|
$
|
8,355,000
|
|
|
$
|
5,895,000
|
|
Offering proceeds
|
|
|
18,867,000
|
|
|
|
20,190,000
|
|
|
|
9,649,000
|
|
|
|
8,352,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sources
|
|
$
|
23,900,000
|
|
|
$
|
21,908,000
|
|
|
$
|
18,004,000
|
|
|
$
|
14,247,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
For the years ended December 31, 2009 and 2008, our FFO was
$28,314,000 and $8,745,000, respectively. FFO was reduced by
$19,715,000 and $0 for the years ended December 31, 2009
and 2008 for certain one-time, non-recurring transition charges
and acquisition-related expenses. Acquisition-related costs were
previously capitalized as part of the purchase price allocations
and have historically been added back to FFO over time through
depreciation. For the years ended December 31, 2009 and
2008 we paid distributions of $78,059,000 and $28,042,000,
respectively. Such amounts were covered by FFO of $28,314,000
and $8,745,000, respectively, which is net of the one-time
transition charges and acquisition-related costs of $19,715,000
and $0, respectively. The distributions paid in excess of our
FFO were paid using proceeds from our initial offering.
Excluding such one-time non-recurring transition charges and
acquisition-related costs FFO would have been $48,029,000 and
$8,745,000, respectively.
Our
Property Performance Net Operating Income
As of December 31, 2009, we had made 53 geographically
diverse acquisitions, compared to 41 acquisitions as of
December 31, 2008. The aggregate occupancy for the
properties remained consistent at 91% as of December 31,
2009 and as of December 31, 2008.
The aggregate net operating income for the properties for the
year ended December 31, 2009 was $84,462,000 compared to
$52,244,000 for the year ended December 31, 2008.
Net operating income is a non-GAAP financial measure that is
defined as net income (loss), computed in accordance with GAAP,
generated from properties before interest expense, general and
administrative expenses, depreciation, amortization and interest
and dividend income. We believe that net operating income
provides an accurate measure of the operating performance of our
operating assets because net operating income excludes certain
items that are not associated with management of the properties.
Additionally, we believe that net operating income is a widely
accepted measure of comparative operating performance in the
real estate community. However, our use of the term net
operating income may not be comparable to that of other real
estate companies as they may have different methodologies for
computing this amount.
To facilitate understanding of this financial measure, a
reconciliation of net loss to net operating income has been
provided for the years ended December 31, 2009, 2008 and
2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net loss attributable to controlling interest
|
|
$
|
(25,077,000
|
)
|
|
$
|
(28,448,000
|
)
|
|
$
|
(7,666,000
|
)
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
12,285,000
|
|
|
|
3,261,000
|
|
|
|
1,335,000
|
|
Asset management expenses
|
|
|
3,783,000
|
|
|
|
6,177,000
|
|
|
|
1,590,00
|
|
Acquisition expenses
|
|
|
15,997,000
|
|
|
|
122,000
|
|
|
|
372,000
|
|
Depreciation and amortization
|
|
|
53,595,000
|
|
|
|
37,398,000
|
|
|
|
9,790,000
|
|
Interest expense
|
|
|
23,824,000
|
|
|
|
34,164,000
|
|
|
|
6,400,000
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest of limited partners
|
|
|
304,000
|
|
|
|
39,000
|
|
|
|
(8,000
|
)
|
Interest and dividend income
|
|
|
(249,000
|
)
|
|
|
(469,000
|
)
|
|
|
(224,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating income
|
|
$
|
84,462,000
|
|
|
$
|
52,244,000
|
|
|
$
|
11,589,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
|
|
Item 31.
|
Other
Expenses of Issuance and Distribution
|
Set forth below is an estimate of the approximate amount of the
fees and expenses payable by the Registrant in connection with
the issuance and distribution of the Shares.
|
|
|
|
|
|
SEC registration fee
|
|
$
|
122,760
|
|
FINRA filing fee
|
|
|
75,500
|
|
Printing and postage
|
|
|
4,000,000
|
|
Legal fees and expenses
|
|
|
2,000,000
|
|
Accounting fees and expenses
|
|
|
1,000,000
|
|
Advertising
|
|
|
3,150,000
|
|
Blue Sky Expenses
|
|
|
500,000
|
|
Transfer agent and escrow fees
|
|
|
5,500,000
|
|
Technical costs
|
|
|
55,000
|
|
Due diligence
|
|
|
2,000,000
|
|
Seminars (Issuer costs)
|
|
|
250,000
|
|
|
|
|
|
|
Total
|
|
$
|
18,653,260
|
|
|
|
|
|
|
|
|
Item 32.
|
Sales
to Special Parties
|
The Registrants executive officers and directors may
purchase shares in its primary offering at a discount. The
purchase price for such shares shall be $9.00 per share
reflecting the fact that selling commissions in the amount of
$0.70 per share and the dealer manager fee in the amount of
$0.30 per share will not be payable in connection with such
sales.
|
|
Item 33.
|
Recent
Sales of Unregistered Securities
|
On April 20, 2006, the Registrant was capitalized with the
issuance to the Registrants former advisor of
200 shares of common stock for a purchase price of $10.00
per share for an aggregate purchase of $2,000. The shares were
purchased for investment and for the purpose of organizing the
Registrant. The Registrant issued this common stock in reliance
on an exemption from registration under Section 4(2) of the
Securities Act of 1933.
On September 20, 2006, the Registrant issued
5,000 shares of restricted common stock to each of its
independent directors. On October 4, 2006, the Registrant
issued 5,000 shares of restricted common stock to a new
independent director upon his initial election. On
April 12, 2007, the Registrant issued an additional
5,000 shares of restricted common stock to a new
independent director upon his initial election. The shares of
restricted common stock issued to the independent directors were
issued pursuant to the 2006 Incentive Directors Compensation
Plan, a sub-plan of the 2006 Incentive Plan, in a private
transaction exempt from registration pursuant to
Section 4(2) of the Securities Act. Twenty percent of each
of these shares of restricted common stock vested on the grant
date and 20.0% will vest on each of the first four anniversaries
of the date of grant.
On June 12, 2007, the Registrant issued an additional
2,500 shares of restricted common stock to each of its five
independent directors pursuant to the 2006 Incentive Plan in a
private transaction exempt from registration pursuant to
Section 4(2) of the Securities Act. Twenty percent of each
of these restricted common stock awards vested on the grant date
and 20.0% will vest on each of the first four anniversaries of
the date of the grant.
On June 17, 2008, the Registrant issued 2,500 shares
of restricted common stock to each of its five independent
directors pursuant to the 2006 Incentive Plan in a private
transaction exempt from registration
II-1
pursuant to Section 4(2) of the Securities Act. Twenty
percent of each of these restricted common stock awards vested
on the grant date and 20.0% will vest on each of the first four
anniversaries of the date of grant.
On November 14, 2008, the Registrant issued
40,000 shares of restricted common stock to
Mr. Peters, its Chairman of the Board, Chief Executive
Officer and President, pursuant to the 2006 Incentive Plan in a
private transaction exempt from registration pursuant to
Section 4(2) of the Securities Act. The shares of
restricted common stock will vest and become non-forfeitable in
equal annual installments of 33.3% each, on the first, second
and third anniversaries of the grant date.
On July 1, 2009, the Registrant issued 25,000 shares
of fully-vested restricted common stock to Mr. Peters
pursuant to the 2006 Incentive Plan in a private transaction
exempt from registration pursuant to Section 4(2) of the
Securities Act. On July 1, 2009, the Registrant also issued
to Mr. Peters 50,000 shares of restricted common stock
in a private transaction exempt from registration pursuant to
Section 4(2) of the Securities Act. Of the
50,000 shares, 25.0% immediately vested on the grant date
and the remaining shares vest in equal annual installments on
the first three anniversaries of the grant date.
On August 31, 2009, the Registrant issued 5,000 shares
of restricted common stock to each of its five independent
directors pursuant to the 2006 Incentive Plan in private
transactions exempt from registration pursuant to
Section 4(2) of the Securities Act. Twenty percent of each
of these restricted common stock awards vested on the grant date
and 20.0% will vest on each of the first four anniversaries of
the date of grant.
|
|
Item 34.
|
Indemnification
of Directors and Officers
|
Subject to any applicable conditions set forth under Maryland
law or below, (i) no director or officer of the Registrant
shall be liable to the Registrant or its stockholders for money
damages and (ii) the Registrant shall indemnify and pay or
reimburse reasonable expenses in advance of the final
disposition of a proceeding to (A) any individual who is a
present or former director or officer of the Registrant; or
(B) any individual who, while a director or officer of the
Registrant and at the request of the Registrant, serves or has
served as a director, officer, partner or trustee of another
corporation, partnership, joint venture, trust, employee benefit
plan or any other enterprise, from and against any claim or
liability to which such person may become subject or which such
person may incur by reason of his service in such capacity.
Notwithstanding anything to the contrary contained in
clause (i) or (ii) of the paragraph above, the
Registrant shall not provide for indemnification of a director
(the Indemnitee) for any liability or loss suffered
by such Indemnitee or hold an Indemnitee harmless for any
liability or loss suffered by us, unless all of the following
conditions are met:
(i) the Indemnitee has determined, in good faith, that the
course of conduct that caused the loss or liability was in the
best interests of the Registrant;
(ii) the Indemnitee was acting on behalf of or performing
services for the Registrant;
(iii) such liability or loss was not the result of
(A) negligence or misconduct, in the case that the
Indemnitee is a non-independent director or (B) gross
negligence or willful misconduct, in the case that the
Indemnitee is an independent director;
(iv) such indemnification or agreement to hold harmless is
recoverable only out of net assets and not from
stockholders; and
(v) with respect to losses, liability or expenses arising
from or out of an alleged violation of federal or state
securities laws, one or more of the following conditions are
met: (A) there has been a successful adjudication on the
merits of each count involving alleged securities law violations
as to the Indemnitee; (B) such claims have been dismissed
with prejudice on the merits by a court of competent
jurisdiction as to the Indemnitee; or (C) a court of
competent jurisdiction approves a settlement of the claims
against the Indemnitee and finds that indemnification of the
settlement and the related costs should be made, and the court
considering the request for indemnification has been advised of
the position of the SEC and of the published position of any
state securities regulatory authority in which securities of the
Registrant were offered or sold as to indemnification for
violations of securities laws.
II-2
Neither the amendment nor repeal of the provision for
indemnification in the Registrants charter, nor the
adoption or amendment of any other provision of the
Registrants charter or bylaws inconsistent with the
provision for indemnification in the Registrants charter,
shall apply to or affect in any respect the applicability of the
provision for indemnification in the Registrants charter
with respect to any act or failure to act that occurred prior to
such amendment, repeal or adoption.
The Registrant shall pay or reimburse reasonable legal expenses
and other costs incurred by an Indemnitee in advance of the
final disposition of a proceeding only if (in addition to any
requirements of the Maryland General Corporation Law) all of the
following are satisfied: (a) the proceeding relates to acts
or omissions with respect to the performance of duties or
services on behalf of the Registrant, (b) the legal
proceeding was initiated by a third party who is not a
stockholder or, if by a stockholder acting in his or her
capacity as such, a court of competent jurisdiction approves
such advancement and (c) the Indemnitee provides the
Registrant with written affirmation of his or her good faith
belief that he or she has met the standard of conduct necessary
for indemnification and undertakes to repay the amount paid or
reimbursed by the Registrant, together with the applicable legal
rate of interest thereon, if it is ultimately determined that
the particular Indemnitee is not entitled to indemnification.
On January 17, 2007, the Registrant entered into
indemnification agreements with each of its independent
directors, W. Bradley Blair, II, Maurice J. DeWald, Warren
D. Fix, Gary T. Wescombe, and our non-independent director,
Scott D. Peters, and two of our former officers Danny Prosky and
Andrea R. Biller. On March 1, 2007 the Registrant entered
into an indemnification agreement with its former officer,
Shannon K S Johnson, and on April 18, 2007, the Registrant
entered into an indemnification agreement with its independent
director, Larry L. Mathis. Pursuant to the terms of these
indemnification agreements, the Registrant will indemnify and
advance expenses and costs incurred by its directors and
officers in connection with any claims, suits or proceedings
brought against such directors and officers as a result of their
service; however, the Registrants indemnification
obligation is subject to the limitations set forth in the
indemnification agreements and in the Registrants charter.
On July 1, 2009, the Registrant entered into employment
agreements with two of its executive officers, Kellie S. Pruitt
and Mark D. Engstrom, whereby the Registrant will indemnify and
exculpate such officers from money damages incurred as a result
of claims arising out of an alleged wrongful act by the officer
while acting in good faith as the Registrants officer or
employee. The indemnification obligations are subject to the
limitations set forth in the Registrants charter.
|
|
Item 35.
|
Treatment
of Proceeds from Stock Being Registered
|
Not applicable.
|
|
Item 36.
|
Financial
Statements and Exhibits
|
Following the consummation of the merger of NNN Realty Advisors,
Inc., which previously served as the Registrants sponsor,
with and into a wholly owned subsidiary of the sponsor of our
initial offering, Grubb & Ellis Company, on
December 7, 2007, NNN Healthcare/Office REIT, Inc., NNN
Healthcare/Office REIT Holdings, L.P., NNN Healthcare/Office
REIT Advisor, LLC and NNN Healthcare/Office Management, LLC
changed their names to Grubb & Ellis Healthcare REIT,
Inc., Grubb & Ellis Healthcare REIT Holdings, L.P.,
Grubb & Ellis Healthcare REIT Advisor, LLC, and
Grubb & Ellis Healthcare Management, LLC, respectively.
Following the Registrants transition to self-management,
on August 24, 2009, Grubb & Ellis Healthcare
REIT, Inc. and Grubb & Ellis Healthcare REIT Holdings,
L.P. changed their names to Healthcare Trust of America, Inc.
and Healthcare Trust of America Holdings, LP, respectively.
(a) Index to Financial Statements
The consolidated financial statements and financial statement
schedules of Healthcare Trust of America, Inc. are incorporated
into this registration statement and the prospectus included
herein by reference to Healthcare Trust of America, Inc.s
Annual Report on
Form 10-K
for the year ended December 31, 2009. The
II-3
financial statements incorporated herein refer to the entity
names that were in effect during the periods presented by such
financial statements and have not been updated to reflect such
name changes.
(b) Exhibits:
See the Exhibit Index immediately preceding the exhibits for a
list of the exhibits filed as part of this registration
statement on Form
S-11, which
Exhibit Index is incorporated herein by reference.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to
the provisions referred to in Item 34 of this registration
statement, or otherwise, the Registrant has been advised that in
the opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question as to whether such
indemnification by it is against public policy as expressed in
the Securities Act of 1933, and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of common stock offered (if the total dollar value of
common stock offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than 20% change in the maximum aggregate offering price set
forth in the Calculation Registration Fee table in
the effective registration statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) That, all post-effective amendments will comply with
the applicable forms, rules and regulations of the SEC in effect
at the time such post-effective amendments are filed.
(4) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
II-4
(5) That, for the purpose of determining liability under
the Securities Act of 1933 to any purchaser:
(i) If the Registrant is relying on Rule 430B:
(A) Each prospectus filed by the Registrant pursuant to
Rule 424(b)(3) shall be deemed to be part of the registration
statement as of the date the filed prospectus was deemed part of
and included in the registration statement; and
(B) Each prospectus required to be filed pursuant to Rule
424(b)(2), (b)(5), or (b)(7) as part of a registration statement
in reliance on Rule 430B relating to an offering made
pursuant to Rule 415(a)(1)(i), (vii), or (x) for the
purpose of providing the information required by
section 10(a) of the Securities Act of 1933 shall be deemed
to be part of and included in the registration statement as of
the earlier of the date such form of prospectus is first used
after effectiveness or the date of the first contract of sale of
securities in the offering described in the prospectus. As
provided in Rule 430B, for liability purposes of the issuer
and any person that is at that date an underwriter, such date
shall be deemed to be a new effective date of the registration
statement relating to the securities in the registration
statement to which that prospectus relates, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof. Provided, however, that no statement
made in a registration statement or prospectus that is part of
the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement
or prospectus that is part of the registration statement will,
as to a purchaser with a time of contract of sale prior to such
effective date, supersede or modify any statement that was made
in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately
prior to such effective date; or
(ii) If the Registrant is subject to Rule 430C, each
prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than
registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be
deemed to be part of and included in the registration statement
as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in
a document incorporated or deemed incorporated by reference into
the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or
prospectus that was part of the registration statement or made
in any such document immediately prior to such date of first use.
(6) That in a primary offering of securities of the
Registrant pursuant to this registration statement, regardless
of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such
purchaser by means of any of the following communications, the
undersigned will be a seller to the purchaser and will be
considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the
Registrant relating to the offering required to be filed
pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering
prepared by or on behalf of the Registrant or used or referred
to by the Registrant;
(iii) The portion of any other free writing prospectus
relating to the offering containing material information about
the Registrant or its securities provided by or on behalf of the
Registrant; and
(iv) Any other communication that is an offer in the
offering made by the Registrant to the purchaser;
(7) To send to each stockholder at least on an annual basis
a detailed statement of any transactions with the advisor or its
affiliates, and of fees, commissions, compensation and other
benefits paid, or accrued to the advisor or its affiliates for
the fiscal year completed, showing the amount paid or accrued to
each recipient and the services performed;
II-5
(8) To file and to provide to the stockholders the
financial statements as required by
Form 10-K
for the first full fiscal year of operations;
(9) To file a sticker supplement pursuant to
Rule 424(c) under the Securities Act during the
distribution period describing each significant property that
has not been identified in the prospectus whenever a reasonable
probability exists that a property will be acquired and to
consolidate all stickers into a post-effective amendment filed
at least once every three months during the distribution period,
with the information contained in such amendment provided
simultaneously to existing stockholders. Each sticker supplement
shall disclose all compensation and fees received by the advisor
and its affiliates in connection with any such acquisition. The
post-effective amendment shall include or incorporate by
reference audited financial statements in the format described
in
Rule 3-14
of
Regulation S-X
that have been filed or are required to be filed on
Form 8-K
for all significant property acquisitions that have been
consummated; and
(10) To file, after the end of the distribution period, a
current report on
Form 8-K
containing the financial statements and any additional
information required by
Rule 3-14
of
Regulation S-X,
to reflect each commitment (i.e., the signing of a binding
purchase agreement) made after the end of the distribution
period involving the use of 10 percent or more (on a
cumulative basis) of the net proceeds of the offering and to
provide the information contained in such report to the
stockholders at least once each quarter after the distribution
period of the offering has ended.
II-6
SIGNATURE
PAGE
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that is has reasonable grounds
to believe that it meets all of the requirements for filing on
Form S-11
and has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the
City of Scottsdale, State of Arizona, on the 16th day of
March, 2010.
HEALTHCARE TRUST OF AMERICA, INC.
Scott D. Peters
Chief Executive Officer and President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this registration statement has been signed by the
following persons in the capacities and on the dates indicated.
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Signature
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Title
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Date
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/s/ Scott
D. Peters
Scott
D. Peters
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Chief Executive Officer, President and Chairman of the Board
(Principal Executive Officer)
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March 16, 2010
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/s/ Kellie
S. Pruitt
Kellie
S. Pruitt
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Chief Accounting Officer
(Principal Accounting Officer and
Principal Financial Officer)
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March 16, 2010
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*
W.
Bradley Blair, II
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Director
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March 16, 2010
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*
Maurice
J. DeWald
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Director
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March 16, 2010
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|
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*
Warren
D. Fix
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Director
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|
March 16, 2010
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|
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|
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*
Larry
L. Mathis
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Director
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March 16, 2010
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*
Gary
T. Wescombe
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Director
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March 16, 2010
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*
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/s/ Scott
D. Peters
Scott
D. Peters, as attorney-in-fact
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II-7
EXHIBIT INDEX
Following the consummation of the merger of NNN Realty Advisors,
Inc., which previously served as our sponsor, with and into a
wholly owned subsidiary of Grubb & Ellis Company on
December 7, 2007, NNN Healthcare/Office REIT, Inc.,
NNN Healthcare/Office REIT Holdings, L.P., NNN Healthcare/Office
REIT Advisor, LLC and NNN Healthcare/Office Management, LLC
changed their names to Grubb & Ellis Healthcare REIT,
Inc., Grubb & Ellis Healthcare REIT Holdings, L.P.,
Grubb & Ellis Healthcare REIT Advisor, LLC, and
Grubb & Ellis Healthcare Management, LLC, respectively.
Following the Registrants transition to self-management,
on August 24, 2009, Grubb & Ellis Healthcare REIT,
Inc. and Grubb & Ellis Healthcare REIT Holdings, L.P.
changed their names to Healthcare Trust of America, Inc. and
Healthcare Trust of America Holdings, LP, respectively.
The following Exhibit List refers to the entity names used
prior to such name changes in order to accurately reflect the
names of the parties on the documents listed.
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Exhibit
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|
Number
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|
Exhibit
|
|
|
1
|
.1*
|
|
Exclusive Dealer Manager Agreement
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1
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.2*
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First Amendment to Exclusive Dealer Manager Agreement
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1
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.3*
|
|
Second Amendment to Exclusive Dealer Manager Agreement
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|
1
|
.4*
|
|
Form of Soliciting Dealer Agreement
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|
3
|
.1
|
|
Third Articles of Amendment and Restatement of NNN
Healthcare/Office REIT, Inc. (included as Exhibit 3.1 to
our Annual Report on
Form 10-K
for the year ended December 31, 2006 and incorporated
herein by reference)
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3
|
.2
|
|
Articles of Amendment, effective December 10, 2007
(included as Exhibit 3.1 to our Current Report on
Form 8-K
filed December 10, 2007 and incorporated herein by
reference)
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|
3
|
.3
|
|
Articles of Amendment, effective August 24, 2009 (including
Exhibit 3.1 to our Current Report on
Form 8-K
filed August 27, 2009 and incorporated herein by reference)
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3
|
.4
|
|
Bylaws of NNN Healthcare/Office REIT, Inc. (included as
Exhibit 3.2 to our Registration Statement on
Form S-11
filed on April 28, 2006 and incorporated herein by
reference)
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3
|
.5
|
|
Amendment to the Bylaws of Grubb & Ellis Healthcare
REIT, Inc., effective April 21, 2009 (included as
Exhibit 3.4 to Post-Effective Amendment No. 11 to our
Registration Statement on
Form S-11
(File No. 333-133652)
filed on April 21, 2009
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3
|
.6
|
|
Amendment to the Bylaws of Grubb & Ellis Healthcare
REIT, Inc., effective August 24, 2009 (included as
Exhibit 3.2 to our Current Report on
Form 8-K
filed August 27, 2009 and incorporated herein by reference)
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4
|
.1
|
|
Form of Subscription Agreement (included as Exhibit A to
the prospectus)
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|
4
|
.2
|
|
Distribution Reinvestment Plan (included as Exhibit B to
the prospectus)
|
|
4
|
.3
|
|
Share Repurchase Plan (included as Exhibit C to the
prospectus)
|
|
4
|
.4*
|
|
Escrow Agreement
|
|
5
|
.1*
|
|
Opinion of Venable LLP as to the legality of the shares being
registered
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|
8
|
.1*
|
|
Opinion of Alston & Bird LLP as to tax matters
|
|
10
|
.1
|
|
Amended and Restated Advisory Agreement among Grubb &
Ellis Healthcare REIT, Inc., Grubb & Ellis Healthcare
REIT Holdings, LP, Grubb & Ellis Healthcare REIT
Advisor, LLC and Grubb & Ellis Realty Investors, LLC
(included as Exhibit 10.1 to our Current Report on
Form 8-K
filed on November 19, 2008 and incorporated herein by
reference)
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10
|
.2
|
|
Agreement of Limited Partnership of NNN Healthcare/Office REIT
Holdings, L.P. (included as Exhibit 10.2 to our Quarterly
Report on
Form 10-Q
for the quarter ended September 30, 2006 and incorporated
herein by reference)
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10
|
.2.1
|
|
Amendment No. 1 to Agreement of Limited Partnership of
Grubb & Ellis Healthcare REIT Holdings, LP (included
as Exhibit 10.2 to our Current Report on
Form 8-K
filed on November 19, 2008 and incorporated herein by
reference)
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|
|
|
Exhibit
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|
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Number
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|
Exhibit
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|
|
10
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.2.2
|
|
Amendment No. 2 to Agreement of Limited Partnership of
Grubb & Ellis Healthcare REIT Holdings, LP by
Healthcare Trust of America, Inc. (formerly known as
Grubb & Ellis Healthcare REIT, Inc.) dated as of
August 24, 2009 (included as Exhibit 10.1 to our
Current Report on
Form 8-K
filed August 27, 2009 and incorporated herein by reference)
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10
|
.3
|
|
NNN Healthcare/Office REIT, Inc. 2006 Incentive Plan (including
the 2006 Independent Directors Compensation Plan) (included as
Exhibit 10.3 to our Registration Statement on
Form S-11
filed on April 28, 2006 and incorporated herein by
reference)
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|
10
|
.4
|
|
Amendment to the NNN Healthcare/Office REIT, Inc. 2006 Incentive
Plan (including the 2006 Independent Directors Compensation
Plan) (included as Exhibit 10.4 to Amendment No. 6 to
our Registration Statement on
Form S-11
filed on September 12, 2006 and incorporated herein by
reference)
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10
|
.5
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|
Form of Indemnification agreement executed by W. Bradley
Blair, II, Maurice J. DeWald, Warren D. Fix, Gary T.
Wescombe, Scott D. Peters, Danny Prosky, Andrea R. Biller and
Larry L. Mathis (included as Exhibit 10.1 to our Current
Report on
Form 8-K
filed on March 5, 2007 and incorporated herein by reference)
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10
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.6
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|
Deed to Secure Debt Note by and between Gwinnett Professional
Center, Ltd. and Archon Financial, L.P., dated December 30,
2003 (included as Exhibit 10.5 to our Current Report on
Form 8-K
filed on August 2, 2007 and incorporated herein by
reference)
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10
|
.7
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|
Deed to Secure Debt, Assignment of Rents and Security Agreement
by Gwinnett Professional Center, Ltd. to Archon Financial, L.P.,
dated December 30, 2003 (included as Exhibit 10.6 to
our Current Report on
Form 8-K
filed on August 2, 2007 and incorporated herein by
reference)
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10
|
.8
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|
Promissory Note dated August 18, 2006 issued by NNN
Southpointe, LLC to LaSalle Bank National Association (included
as Exhibit 10.13 to Post-Effective Amendment No. 1 to
our Registration Statement on
Form S-11
filed on April 23, 2007 and incorporated herein by
reference)
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10
|
.9
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|
Promissory Note dated August 18, 2006 issued by NNN
Southpointe, LLC and NNN Crawfordsville, LLC to LaSalle Bank
National Association (included as Exhibit 10.14 to
Post-Effective Amendment No. 1 to our Registration
Statement on
Form S-11
filed on April 23, 2007 and incorporated herein by
reference)
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10
|
.10
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|
Mortgage, Security Agreement and Fixture Filing dated
August 18, 2006 by NNN Southpointe, LLC for the benefit of
LaSalle Bank National Association (included as
Exhibit 10.15 to Post-Effective Amendment No. 1 to our
Registration Statement on
Form S-11
filed on April 23, 2007 and incorporated herein by
reference)
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10
|
.11
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|
Subordinate Mortgage, Security Agreement and Fixture Filing
dated August 18, 2006 by NNN Southpointe, LLC for the
benefit of LaSalle Bank National Association (included as
Exhibit 10.16 to Post-Effective Amendment No. 1 to our
Registration Statement on
Form S-11
filed on April 23, 2007 and incorporated herein by
reference)
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|
10
|
.12
|
|
Guaranty dated August 18, 2006 by Triple Net Properties,
LLC for the benefit of LaSalle Bank National Association
(included as Exhibit 10.17 to Post-Effective Amendment
No. 1 to our Registration Statement on
Form S-11
filed on April 23, 2007 and incorporated herein by
reference)
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|
10
|
.13
|
|
Guaranty (Securities Laws) dated August 18, 2006 by Triple
Net Properties, LLC in favor of LaSalle Bank National
Association (included as Exhibit 10.18 to Post-Effective
Amendment No. 1 to our Registration Statement on
Form S-11
filed on April 23, 2007 and incorporated herein by
reference)
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|
10
|
.14
|
|
Guaranty of Payment dated August 18, 2006 by Triple Net
Properties, LLC for the benefit of LaSalle Bank National
Association (included as Exhibit 10.19 to Post-Effective
Amendment No. 1 to our Registration Statement on
Form S-11
filed on April 23, 2007 and incorporated herein by
reference)
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|
10
|
.15
|
|
Assignment of Leases and Rents dated August 18, 2006 by NNN
Southpointe, LLC in favor of LaSalle Bank National Association
(included as Exhibit 10.20 to Post-Effective Amendment
No. 1 to our Registration Statement on
Form S-11
filed on April 23, 2007 and incorporated herein by
reference)
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|
10
|
.16
|
|
Hazardous Substance Indemnification Agreement dated
August 18, 2006 by NNN Southpointe, LLC and Triple Net
Properties, LLC for the benefit of LaSalle Bank National
Association (included as Exhibit 10.21 to Post-Effective
Amendment No. 1 to our Registration Statement on
Form S-11
filed on April 23, 2007 and incorporated herein by
reference)
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|
|
|
|
Exhibit
|
|
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Number
|
|
Exhibit
|
|
|
10
|
.17
|
|
Promissory Note dated September 12, 2006 issued by NNN
Crawfordsville, LLC to LaSalle Bank National Association
(included as Exhibit 10.22 to Post-Effective Amendment
No. 1 to our Registration Statement on
Form S-11
filed on April 23, 2007 and incorporated herein by
reference)
|
|
10
|
.18
|
|
Mortgage, Security Agreement and Fixture Filing dated
September 12, 2006 by NNN Crawfordsville, LLC for the
benefit of LaSalle Bank National Association (included as
Exhibit 10.23 to Post-Effective Amendment No. 1 to our
Registration Statement on
Form S-11
filed on April 23, 2007 and incorporated herein by
reference)
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|
10
|
.19
|
|
Subordinate Mortgage, Security Agreement and Fixture Filing
dated September 12, 2006 by NNN Crawfordsville, LLC for the
benefit of LaSalle Bank National Association (included as
Exhibit 10.24 to Post-Effective Amendment No. 1 to our
Registration Statement on
Form S-11
filed on April 23, 2007 and incorporated herein by
reference)
|
|
10
|
.20
|
|
Guaranty dated September 12, 2006 by Triple Net Properties,
LLC for the benefit of LaSalle Bank National Association
(included as Exhibit 10.25 to Post-Effective Amendment
No. 1 to our Registration Statement on
Form S-11
filed on April 23, 2007 and incorporated herein by
reference)
|
|
10
|
.21
|
|
Guaranty (Securities Laws) dated September 12, 2006 by
Triple Net Properties, LLC in favor of LaSalle Bank National
Association (included as Exhibit 10.26 to Post-Effective
Amendment No. 1 to our Registration Statement on
Form S-11
filed on April 23, 2007 and incorporated herein by
reference)
|
|
10
|
.22
|
|
Assignment of Leases and Rents dated September 12, 2006 by
NNN Crawfordsville, LLC in favor of LaSalle Bank National
Association (included as Exhibit 10.27 to Post-Effective
Amendment No. 1 to our Registration Statement on
Form S-11
filed on April 23, 2007 and incorporated herein by
reference)
|
|
10
|
.23
|
|
Hazardous Substance Indemnification Agreement dated
September 12, 2006 by NNN Crawfordsville, LLC and Triple
Net Properties, LLC for the benefit of LaSalle Bank National
Association (included as Exhibit 10.28 to Post-Effective
Amendment No. 1 to our Registration Statement on
Form S-11
filed on April 23, 2007 and incorporated herein by
reference)
|
|
10
|
.24
|
|
Agreement for Purchase and Sale of Real Property and Escrow
Instructions by and between Liberty Falls, LLC, Triple Net
Properties, LLC, and Dave Chrestensen and Todd Crawford, dated
October 30, 2006 (included as Exhibit 10.1 to our
Current Report on
Form 8-K
filed March 25, 2008 and incorporated herein by reference)
|
|
10
|
.25
|
|
First Amendment to Agreement for Purchase and Sale of Real
Property and Escrow Instructions by and between Liberty Falls,
LLC, Triple Net Properties, LLC, and Dave Chrestensen and Todd
Crawford, dated December 21, 2006 (included as
Exhibit 10.2 to our Current Report on
Form 8-K
filed March 25, 2008 and incorporated herein by reference)
|
|
10
|
.26
|
|
Secured Promissory Note by and between NNN Lenox Medical, LLC
and LaSalle Bank National Association, dated January 2,
2007 (included as Exhibit 10.5 to our Current Report on
Form 8-K
filed on March 26, 2007 and incorporated herein by
reference)
|
|
10
|
.27
|
|
Deed of Trust, Security Agreement and Fixtures Filings by and
among NNN Lenox Medical, LLC and LaSalle Bank National
Association, dated January 2, 2007 (included as
Exhibit 10.6 to our Current Report on
Form 8-K
filed on March 26, 2007 and incorporated herein by
reference)
|
|
10
|
.28
|
|
Guaranty by and among NNN Realty Advisors, Inc., and LaSalle
Bank National Association, dated January 2, 2007 (included
as Exhibit 10.7 to our Current Report on
Form 8-K
filed on March 26, 2007 and incorporated herein by
reference)
|
|
10
|
.29
|
|
Guaranty (Securities Laws) by and among LaSalle Bank National
Association and NNN Realty Advisors, Inc., dated January 2,
2007 (included as Exhibit 10.8 to our Current Report on
Form 8-K
filed on March 26, 2007 and incorporated herein by
reference)
|
|
10
|
.30
|
|
Hazardous Substances Indemnification Agreement by and among NNN
Lenox Medical, LLC, Triple Net Properties, LLC, and LaSalle Bank
National Association, dated January 2, 2007 (included as
Exhibit 10.9 to our Current Report on
Form 8-K
filed on March 26, 2007 and incorporated herein by
reference)
|
|
10
|
.31
|
|
Assignment of Leases and Rents by and among NNN Lenox Medical,
LLC and LaSalle Bank National Association, dated January 2,
2007 (included as Exhibit 10.10 to our Current Report on
Form 8-K
filed on March 26, 2007 and incorporated herein by
reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
10
|
.32
|
|
Membership Interest Purchase and Sale Agreement by and between
NNN South Crawford Member, LLC, NNN Southpointe, LLC and NNN
Healthcare/Office REIT Holdings, L.P. dated January 22,
2007 (included as Exhibit 10.1 to our Current Report on
Form 8-K
filed on January 25, 2007 and incorporated herein by
reference)
|
|
10
|
.33
|
|
Membership Interest Assignment Agreement by and between NNN
South Crawford Member, LLC, and NNN Healthcare/Office REIT
Holdings, L.P. dated January 22, 2007 (included as
Exhibit 10.2 to our Current Report on
Form 8-K
filed on January 25, 2007 and incorporated herein by
reference)
|
|
10
|
.34
|
|
Membership Interest Purchase and Sale Agreement by and between
NNN South Crawford Member, LLC, NNN Crawfordsville, LLC and NNN
Healthcare/Office REIT Holdings, L.P. dated January 22,
2007 (included as Exhibit 10.3 to our Current Report on
Form 8-K
filed on January 25, 2007 and incorporated herein by
reference)
|
|
10
|
.35
|
|
Membership Interest Assignment Agreement by and between NNN
South Crawford Member, LLC, and NNN Healthcare/Office REIT
Holdings, L.P. dated January 22, 2007 (included as
Exhibit 10.4 to our Current Report on
Form 8-K
filed on January 25, 2007 and incorporated herein by
reference)
|
|
10
|
.36
|
|
Consent to Transfer and Agreement by and among NNN South
Crawford Member, LLC, NNN Southpointe, LLC, NNN
Healthcare/Office REIT Holdings, L.P., Triple Net Properties,
LLC and LaSalle Bank National Association, dated
January 22, 2007 (included as Exhibit 10.5 to our
Current Report on
Form 8-K
filed on January 25, 2007 and incorporated herein by
reference)
|
|
10
|
.37
|
|
Consent to Transfer and Agreement by and among NNN South
Crawford Member, LLC, NNN Crawfordsville, LLC, NNN
Healthcare/Office REIT Holdings, L.P., Triple Net Properties,
LLC and LaSalle Bank National Association, dated
January 22, 2007 (included as Exhibit 10.6 to our
Current Report on
Form 8-K
filed on January 25, 2007 and incorporated herein by
reference)
|
|
10
|
.38
|
|
Promissory Note issued by NNN Healthcare/Office REIT Holdings,
L.P. in favor of NNN Realty Advisors, Inc. dated
January 22, 2007 (included as Exhibit 10.7 to our
Current Report on
Form 8-K
filed on January 25, 2007 and incorporated herein by
reference)
|
|
10
|
.39
|
|
Mortgage, Security Agreement and Fixture Filing by and between
NNN Gallery Medical, LLC, and LaSalle Bank National Association,
dated February 5, 2007 (included as Exhibit 10.3 to
our Current Report on
Form 8-K
filed on March 13, 2007 and incorporated herein by
reference)
|
|
10
|
.40
|
|
Membership Interest Purchase and Sale Agreement by and between
NNN Gallery Medical Member, LLC, NNN Gallery Medical, LLC and
NNN Healthcare/Office REIT Holdings, L.P. dated March 9,
2007 (included as Exhibit 10.1 to our Current Report on
Form 8-K
filed on March 13, 2007 and incorporated herein by
reference)
|
|
10
|
.41
|
|
Membership Interest Assignment Agreement by and between NNN
Gallery Medical Member, LLC, and NNN Healthcare/Office REIT
Holdings, L.P. dated March 9, 2007 (included as
Exhibit 10.2 to our Current Report on
Form 8-K
filed on March 13, 2007 and incorporated herein by
reference)
|
|
10
|
.42
|
|
Secured Promissory Note by and between NNN Gallery Medical, LLC
and LaSalle Bank National Association, dated March 9, 2007
(included as Exhibit 10.4 to our Current Report on
Form 8-K
filed on March 13, 2007 and incorporated herein by
reference)
|
|
10
|
.43
|
|
Unsecured Promissory Note by and between NNN Healthcare/Office
REIT Holdings, L.P., and NNN Realty Advisors, Inc., dated
March 9, 2007 (included as Exhibit 10.5 to our Current
Report on
Form 8-K
filed on March 13, 2007 and incorporated herein by
reference)
|
|
10
|
.44
|
|
Consent to Transfer and Agreement by and among NNN Gallery
Medical, LLC, NNN Healthcare/Office REIT Holdings, L.P., NNN
Gallery Medical Member, LLC, NNN Realty Advisors, Inc., and
LaSalle Bank National Association, dated March 9, 2007
(included as Exhibit 10.6 to our Current Report on
Form 8-K
filed on March 13, 2007 and incorporated herein by
reference)
|
|
10
|
.45
|
|
Agreement for Purchase and Sale of Real Property and Escrow
Instructions by and between Commons V Investment Partnership,
Triple Net Properties, LLC and Landamerica Title Company,
dated March 16, 2007 (included as Exhibit 10.1 to our
Current Report on
Form 8-K
filed on April 25, 2007 and incorporated herein by
reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
10
|
.46
|
|
Membership Interest Purchase and Sale Agreement by and between
NNN Lenox Medical Member, LLC, Triple Net Properties, LLC, NNN
Lenox Medical, LLC, NNN Lenox Medical Land, LLC and NNN
Healthcare/Office REIT Holdings, L.P., dated March 20, 2007
(included as Exhibit 10.1 to our Current Report on
Form 8-K
filed on March 26, 2007 and incorporated herein by
reference)
|
|
10
|
.47
|
|
Membership Interest Assignment Agreement by and between NNN
Lenox Medical Member, LLC, and NNN Healthcare/Office REIT
Holdings, L.P., dated March 23, 2007 (included as
Exhibit 10.2 to our Current Report on
Form 8-K
filed on March 26, 2007 and incorporated herein by
reference)
|
|
10
|
.48
|
|
Membership Interest Assignment Agreement by and between Triple
Net Properties, LLC, and NNN Healthcare/Office REIT Holdings,
L.P., dated March 23, 2007 (included as Exhibit 10.3
to our Current Report on
Form 8-K
filed on March 26, 2007 and incorporated herein by
reference)
|
|
10
|
.49
|
|
Consent to Transfer and Assignment by and among NNN Lenox
Medical, LLC, NNN Healthcare/Office REIT Holdings, L.P., NNN
Lenox Medical Member, LLC, NNN Realty Advisors, Inc., and
LaSalle Bank National Association, dated March 23, 2007
(included as Exhibit 10.4 to our Current Report on
Form 8-K
filed on March 26, 2007 and incorporated herein by
reference)
|
|
10
|
.50
|
|
Agreement of Sale and Purchase by and between Yorktown Building
Holding Company, LLC and Triple Net Properties, LLC, dated
March 29, 2007 (included as Exhibit 10.1 to our
Current Report on
Form 8-K
filed on May 7, 2007 and incorporated herein by reference)
|
|
10
|
.51
|
|
Sale Agreement and Escrow Instructions by and between 5410
& 5422 W. Thunderbird Road, LLC, et al. and
5310 West Thunderbird Road, LLC, et al., Triple Net
Properties, LLC and Chicago Title Company as Escrow Agent,
dated April 6, 2007 (included as Exhibit 10.1 to our
Current Report on
Form 8-K
filed on May 17, 2007 and incorporated herein by reference)
|
|
10
|
.52
|
|
First Amendment to Agreement for Purchase and Sale of Real
Property and Escrow Instructions by and between Commons V
Investment Partnership and Triple Net Properties, LLC, dated
April 9, 2007 (included as Exhibit 10.2 to our Current
Report on
Form 8-K
filed on April 25, 2007 and incorporated herein by
reference)
|
|
10
|
.53
|
|
Assignment of Contract by and between Triple Net Properties, LLC
and NNN Healthcare/Office REIT Commons V, LLC, dated
April 19, 2007 (included as Exhibit 10.3 to our
Current Report on
Form 8-K
filed on April 25, 2007 and incorporated herein by
reference)
|
|
10
|
.54
|
|
Assignment and Assumption Agreement by and between Commons V
Investment Partnership and NNN Healthcare/Office REIT
Commons V, LLC, dated April 24, 2007 (included as
Exhibit 10.4 to our Current Report on
Form 8-K
filed on April 25, 2007 and incorporated herein by
reference)
|
|
10
|
.55
|
|
Agreement for Purchase and Sale of Real Property and Escrow
Instructions between Hollow Tree, L.L.P., Triple Net Properties,
LLC, and LandAmerica Title Company as Escrow Agent, dated
April 30, 2007 (included as Exhibit 10.1 to our
Current Report on
Form 8-K
filed on June 14, 2007 and incorporated herein by reference)
|
|
10
|
.56
|
|
Agreement for Purchase and Sale of Real Property and Escrow
Instructions between First Colony Investments, L.L.P., Triple
Net Properties, LLC, and LandAmerica Title Company as
Escrow Agent, dated April 30, 2007 (included as
Exhibit 10.2 to our Current Report on
Form 8-K
filed on June 14, 2007 and incorporated herein by reference)
|
|
10
|
.57
|
|
Assignment of Contract by and between Triple Net Properties, LLC
and NNN Healthcare/Office REIT Peachtree, LLC, dated May 1,
2007 (included as Exhibit 10.2 to our Current Report on
Form 8-K
filed on May 7, 2007 and incorporated herein by reference)
|
|
10
|
.58
|
|
Secured Promissory Note by and between NNN Healthcare/Office
REIT Peachtree, LLC and Wachovia Bank, National Association,
dated May 1, 2007 (included as Exhibit 10.3 to our
Current Report on
Form 8-K
filed on May 7, 2007 and incorporated herein by reference)
|
|
10
|
.59
|
|
Deed to Secure Debt, Security Agreement and Fixture Filing by
and between NNN Healthcare/Office REIT Peachtree, LLC and
Wachovia Bank National Association, dated May 1, 2007
(included as Exhibit 10.4 to our Current Report on
Form 8-K
filed on May 7, 2007 and incorporated herein by reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
10
|
.60
|
|
Indemnity and Guaranty Agreement by and between NNN
Healthcare/Office REIT, Inc. and Wachovia Bank, National
Association, dated May 1, 2007 (included as
Exhibit 10.5 to our Current Report on
Form 8-K
filed on May 7, 2007 and incorporated herein by reference)
|
|
10
|
.61
|
|
SEC Indemnity and Guaranty Agreement by and between NNN
Healthcare/Office REIT, Inc. and Wachovia Bank, National
Association, dated May 1, 2007 (included as
Exhibit 10.6 to our Current Report on
Form 8-K
filed on May 7, 2007 and incorporated herein by reference)
|
|
10
|
.62
|
|
Environmental Indemnity Agreement by and between NNN
Healthcare/Office REIT, Inc. and Wachovia Bank, National
Association, dated May 1, 2007 (included as
Exhibit 10.7 to our Current Report on
Form 8-K
filed on May 7, 2007 and incorporated herein by reference)
|
|
10
|
.63
|
|
Assignment of Leases and Rents by and between NNN
Healthcare/Office REIT Peachtree, LLC and Wachovia Bank,
National Association, dated May 1, 2007 (included as
Exhibit 10.8 to our Current Report on
Form 8-K
filed on May 7, 2007 and incorporated herein by reference)
|
|
10
|
.64
|
|
Assignment of Contract by and between Triple Net Properties, LLC
and NNN Healthcare/Office REIT Thunderbird Medical, LLC, dated
May 11, 2007 (included as Exhibit 10.2 to our Current
Report on
Form 8-K
filed on May 17, 2007 and incorporated herein by reference)
|
|
10
|
.65
|
|
First Amendment to Sale Agreement and Escrow Instructions by and
between NNN Healthcare/Office REIT Thunderbird Medical, LLC and
5310 West Thunderbird Road, LLC, et al., dated May 14,
2007 (included as Exhibit 10.3 to our Current Report on
Form 8-K
filed on May 17, 2007 and incorporated herein by reference)
|
|
10
|
.66
|
|
First Amendment to Sale Agreement and Escrow Instructions by and
between NNN Healthcare/Office REIT Thunderbird Medical, LLC and
5410 & 5422 W. Thunderbird Road, LLC, et al.,
dated May 14, 2007 (included as Exhibit 10.4 to our
Current Report on
Form 8-K
filed on May 17, 2007 and incorporated herein by reference)
|
|
10
|
.67
|
|
Promissory Note issued by NNN Healthcare/Office REIT
Commons V, LLC in favor of Wachovia Bank, National
Association, dated May 14, 2007 (included as
Exhibit 10.5 to our Current Report on
Form 8-K
filed on May 17, 2007 and incorporated herein by reference)
|
|
10
|
.68
|
|
Mortgage, Security Agreement and Fixture Filing by and between
NNN Healthcare/Office REIT Commons V, LLC and Wachovia
Bank, National Association, dated May 14, 2007 (included as
Exhibit 10.6 to our Current Report on
Form 8-K
filed on May 17, 2007 and incorporated herein by reference)
|
|
10
|
.69
|
|
Indemnity and Guaranty Agreement by and between NNN
Healthcare/Office REIT, Inc. and Wachovia Bank, National
Association, dated May 14, 2007 (included as
Exhibit 10.7 to our Current Report on
Form 8-K
filed on May 17, 2007 and incorporated herein by reference)
|
|
10
|
.70
|
|
Environmental Indemnity Agreement by and between NNN
Healthcare/Office REIT, Inc. and Wachovia Bank, National
Association, dated May 14, 2007 (included as
Exhibit 10.8 to our Current Report on
Form 8-K
filed on May 17, 2007 and incorporated herein by reference)
|
|
10
|
.71
|
|
Assignment of Leases and Rents by and between NNN
Healthcare/Office REIT Commons V, LLC and Wachovia Bank,
National Association, dated May 14, 2007 (included as
Exhibit 10.9 to our Current Report on
Form 8-K
filed on May 17, 2007 and incorporated herein by reference)
|
|
10
|
.72
|
|
Real Estate Purchase Agreement by and between Triple Net
Properties, LLC and Gwinnett Professional Center Ltd., dated
May 24, 2007 (included as Exhibit 10.1 to our Current
Report on
Form 8-K
filed on August 2, 2007 and incorporated herein by
reference)
|
|
10
|
.73
|
|
Assignment of Contracts by Triple Net Properties, LLC to NNN
Healthcare/Office REIT Triumph, LLC, dated June 8, 2007
(included as Exhibit 10.3 to our Current Report on
Form 8-K
filed on June 14, 2007 and incorporated herein by reference)
|
|
10
|
.74
|
|
Promissory Note issued by NNN Healthcare/Office REIT Thunderbird
Medical, LLC in favor of Wachovia Bank, National Association,
dated June 8, 2007 (included as Exhibit 10.4 to our
Current Report on
Form 8-K
filed on June 14, 2007 and incorporated herein by
reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
10
|
.75
|
|
Deed of Trust, Security Agreement and Fixture Filing by NNN
Healthcare/Office REIT Thunderbird Medical, LLC to TRSTE, Inc.,
as Trustee, for the benefit of Wachovia Bank, National
Association, dated June 8, 2007 (included as
Exhibit 10.5 to our Current Report on
Form 8-K
filed on June 14, 2007 and incorporated herein by reference)
|
|
10
|
.76
|
|
Indemnity and Guaranty Agreement by and between NNN
Healthcare/Office REIT, Inc. and Wachovia Bank, National
Association, dated June 8, 2007 (included as
Exhibit 10.6 to our Current Report on
Form 8-K
filed on June 14, 2007 and incorporated herein by reference)
|
|
10
|
.77
|
|
Environmental Indemnity Agreement by and between NNN
Healthcare/Office REIT, Inc. and Wachovia Bank, National
Association, dated June 8, 2007 (included as
Exhibit 10.7 to our Current Report on
Form 8-K
filed on June 14, 2007 and incorporated herein by reference)
|
|
10
|
.78
|
|
Assignment of Leases and Rents by and between NNN
Healthcare/Office REIT Thunderbird Medical, LLC and Wachovia
Bank, National Association, dated June 8, 2007 (included as
Exhibit 10.8 to our Current Report on
Form 8-K
filed on June 14, 2007 and incorporated herein by reference)
|
|
10
|
.79
|
|
Unsecured Promissory Note by and between NNN Healthcare/Office
REIT Holdings, L.P., and NNN Realty Advisors, Inc., dated
June 8, 2007 (included as Exhibit 10.9 to our Current
Report on
Form 8-K
filed on June 14, 2007 and incorporated herein by reference)
|
|
10
|
.80
|
|
Agreement for Purchase and Sale of Real Property and Escrow
Instructions by and between Kokomo Medical Office Park, L.P. and
Triple Net Properties, LLC, dated June 12, 2007 (included
as Exhibit 10.1 to our Current Report on
Form 8-K
filed on September 6, 2007 and incorporated herein by
reference)
|
|
10
|
.81
|
|
First Amendment to Agreement for Purchase and Sale of Real
Property and Escrow Instructions by and between Kokomo Medical
Office Park, L.P. and Triple Net Properties, LLC, dated
June 25, 2007 (included as Exhibit 10.2 to our Current
Report on
Form 8-K
filed on September 6, 2007 and incorporated herein by
reference)
|
|
10
|
.82
|
|
Purchase Agreement by and between Triple Net Properties, LLC and
St. Mary Physicians Center, LLC, dated June 26, 2007
(included as Exhibit 10.1 to our Current Report on
Form 8-K
filed on September 11, 2007 and incorporated herein by
reference)
|
|
10
|
.83
|
|
Second Amendment to Agreement for Purchase and Sale of Real
Property and Escrow Instructions by and between Kokomo Medical
Office Park, L.P. and Triple Net Properties, LLC, dated
July 10, 2007 (included as Exhibit 10.3 to our Current
Report on
Form 8-K
filed on September 6, 2007 and incorporated herein by
reference)
|
|
10
|
.84
|
|
Third Amendment to Agreement for Purchase and Sale of Real
Property and Escrow Instructions by and between Kokomo Medical
Office Park, L.P. and Triple Net Properties, LLC, dated
July 26, 2007 (included as Exhibit 10.4 to our Current
Report on
Form 8-K
filed on September 6, 2007 and incorporated herein by
reference)
|
|
10
|
.85
|
|
Assignment and Assumption of Real Estate Purchase Agreement by
and between Triple Net Properties, LLC and NNN Healthcare/Office
REIT Gwinnett, LLC, dated July 27, 2007 (included as
Exhibit 10.2 to our Current Report on
Form 8-K
filed on August 2, 2007 and incorporated herein by
reference)
|
|
10
|
.86
|
|
Loan Assumption and Substitution Agreement by and among NNN
Healthcare/Office REIT Gwinnett, LLC, NNN Healthcare/Office
REIT, Inc., Gwinnett Professional Center, Ltd., and LaSalle Bank
National Association, dated July 27, 2007 (included as
Exhibit 10.3 to our Current Report on
Form 8-K
filed on August 2, 2007 and incorporated herein by
reference)
|
|
10
|
.87
|
|
Allonge To Note by Gwinnett Professional Center, Ltd. to LaSalle
Bank National Association, as Trustee, in favor of Archon
Financial, L.P., dated, July 27, 2007 (included as
Exhibit 10.4 to our Current Report on
Form 8-K
filed on August 2, 2007 and incorporated herein by
reference)
|
|
10
|
.88
|
|
Agreement for Purchase and Sale of Real Property and Escrow
Instructions by and between 4MX Partners, LLC, 515 Partners, LLC
and Triple Net Properties, LLC, dated July 30, 2007
(included as Exhibit 10.1 to our Current Report on
Form 8-K
filed on August 17, 2007 and incorporated herein by
reference)
|
|
10
|
.89
|
|
Purchase Agreement by and between Lexington Valley Forge L.P.
and Triple Net Properties, LLC, dated August 1, 2007
(included as Exhibit 10.1 to our Current Report on
Form 8-K
filed on September 14, 2007 and incorporated herein by
reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
10
|
.90
|
|
Agreement for Purchase and Sale of Real Property and Escrow
Instructions by and among Health Quest Realty XVII, Health Quest
Realty XXII, Health Quest Realty XXXV and Triple Net Properties,
LLC, dated August 6, 2007 (included as Exhibit 10.1 to
our Current Report on
Form 8-K
filed October 4, 2007 and incorporated herein by reference)
|
|
10
|
.91
|
|
Fourth Amendment to Agreement for Purchase and Sale of Real
Property and Escrow Instructions by and between Kokomo Medical
Office Park, L.P. and Triple Net Properties, LLC, dated
August 7, 2007 (included as Exhibit 10.5 to our
Current Report on
Form 8-K
filed on September 6, 2007 and incorporated herein by
reference)
|
|
10
|
.92
|
|
Purchase and Sale Agreement by and between St. Ritas
Medical Center and Triple Net Properties, LLC, dated
August 14, 2007 (included as Exhibit 10.1 to our
Current Report on
Form 8-K
filed December 13, 2007 and incorporated herein by
reference)
|
|
10
|
.93
|
|
Assignment and Assumption of Agreement for Purchase and Sale of
Real Property and Escrow Instructions by and between Triple Net
Properties, LLC and NNN Healthcare/Office REIT Market Exchange,
LLC, dated August 15, 2007 (included as Exhibit 10.2
to our Current Report on
Form 8-K
filed on August 17, 2007 and incorporated herein by
reference)
|
|
10
|
.94
|
|
Assignment and Assumption of Agreement for Purchase and Sale of
Real Property and Escrow Instructions by and between Triple Net
Properties, LLC and NNN Healthcare/Office REIT Kokomo Medical
Office Park, LLC, dated August 30, 2007 (included as
Exhibit 10.6 to our Current Report on
Form 8-K
filed on September 6, 2007 and incorporated herein by
reference)
|
|
10
|
.95
|
|
Unsecured Promissory Note issued by NNN Healthcare/Office REIT
Holdings, L.P. in favor of NNN Realty Advisors, Inc., dated
August 30, 2007 (included as Exhibit 10.7 to our
Current Report on
Form 8-K
filed on September 6, 2007 and incorporated herein by
reference)
|
|
10
|
.96
|
|
Assignment and Assumption of Purchase Agreement by and between
Triple Net Properties, LLC and NNN Healthcare/Office REIT St.
Mary Physician Center, LLC, dated September 5, 2007
(included as Exhibit 10.2 to our Current Report on
Form 8-K
filed on September 11, 2007 and incorporated herein by
reference)
|
|
10
|
.97
|
|
Note Secured by Deed of Trust issued by NNN Healthcare/Office
REIT St. Mary Physician Center, LLC in favor of St. Mary
Physicians Center, LLC, dated September 5, 2007 (included
as Exhibit 10.3 to our Current Report on
Form 8-K
filed on September 11, 2007 and incorporated herein by
reference)
|
|
10
|
.98
|
|
Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing by NNN Healthcare/Office REIT St. Mary Physician
Center, LLC to Lone Oak Industries Inc., as Trustee, in favor of
St. Mary Physicians Center, LLC, dated September 5, 2007
(included as Exhibit 10.4 to our Current Report on
Form 8-K
filed on September 11, 2007 and incorporated herein by
reference)
|
|
10
|
.99
|
|
Unsecured Promissory Note issued by NNN Healthcare/Office REIT
Holdings, L.P. in favor of NNN Realty Advisors, Inc., dated
September 5, 2007 (included as Exhibit 10.5 to our
Current Report on
Form 8-K
filed on September 11, 2007 and incorporated herein by
reference)
|
|
10
|
.100
|
|
Assignment and Assumption of Purchase Agreement by and between
Triple Net Properties, LLC and NNN Healthcare/Office REIT Quest
Diagnostics, LLC, dated September 10, 2007 (included as
Exhibit 10.2 to our Current Report on
Form 8-K
filed on September 14, 2007 and incorporated herein by
reference)
|
|
10
|
.101
|
|
Loan Agreement by and between NNN Healthcare/Office REIT
Holdings, L.P., The Financial Institutions Party Hereto, and
LaSalle Bank National Association, dated September 10, 2007
(included as Exhibit 10.3 to our Current Report on
Form 8-K
filed on September 14, 2007 and incorporated herein by
reference)
|
|
10
|
.102
|
|
Promissory Note issued by NNN Healthcare/Office REIT Holdings,
L.P. in favor of LaSalle Bank National Association, dated
September 10, 2007 (included as Exhibit 10.4 to our
Current Report on
Form 8-K
filed on September 14, 2007 and incorporated herein by
reference)
|
|
10
|
.103
|
|
Contribution Agreement by and between NNN Healthcare/Office REIT
Holdings, L.P. and the Subsidiary Guarantors, dated
September 10, 2007 (included as Exhibit 10.5 to our
Current Report on
Form 8-K
filed on September 14, 2007 and incorporated herein by
reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
10
|
.104
|
|
Guaranty of Payment executed by NNN Healthcare/Office REIT, Inc.
for the benefit of LaSalle Bank National Association, dated
September 10, 2007 (included as Exhibit 10.6 to our
Current Report on
Form 8-K
filed on September 14, 2007 and incorporated herein by
reference)
|
|
10
|
.105
|
|
Open End Real Property Mortgage, Security Agreement, Assignment
of Rents and Leases and Fixture Filing by NNN Healthcare/Office
REIT Quest Diagnostics, LLC for the benefit of LaSalle Bank
National Association, dated September 10, 2007 (included as
Exhibit 10.7 to our Current Report on
Form 8-K
filed on September 14, 2007 and incorporated herein by
reference)
|
|
10
|
.106
|
|
Commercial Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing by NNN Healthcare/Office
REIT Triumph, LLC to Jeffrey C. Baker, as Trustee, for the
benefit of LaSalle Bank National Association, dated
September 10, 2007 (included as Exhibit 10.8 to our
Current Report on
Form 8-K
filed on September 14, 2007 and incorporated herein by
reference)
|
|
10
|
.107
|
|
Commercial Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing by NNN Healthcare/Office
REIT Triumph, LLC to Jeffrey C. Baker, as Trustee, for the
benefit of LaSalle Bank National Association, dated
September 10, 2007 (included as Exhibit 10.9 to our
Current Report on
Form 8-K
filed on September 14, 2007 and incorporated herein by
reference)
|
|
10
|
.108
|
|
Environmental Indemnity Agreement executed by NNN
Healthcare/Office REIT Holdings, L.P., NNN Healthcare/Office
REIT Quest Diagnostics, LLC, and NNN Healthcare/Office REIT,
Inc. for the benefit of LaSalle Bank National Association, dated
September 10, 2007 Commercial Deed of Trust, Assignment of
Leases and Rents, Security Agreement and Fixture Filing by NNN
Healthcare/Office REIT Triumph, LLC to Jeffrey C. Baker, as
Trustee, for the benefit of LaSalle Bank National Association,
dated September 10, 2007 (included as Exhibit 10.10 to
our Current Report on
Form 8-K
filed on September 14, 2007 and incorporated herein by
reference)
|
|
10
|
.109
|
|
Environmental Indemnity Agreement executed by NNN
Healthcare/Office REIT Holdings, L.P., NNN Healthcare/Office
REIT Triumph, LLC, and NNN Healthcare/Office REIT, Inc. for the
benefit of LaSalle Bank National Association, dated
September 10, 2007 Commercial Deed of Trust, Assignment of
Leases and Rents, Security Agreement and Fixture Filing by NNN
Healthcare/Office REIT Triumph, LLC to Jeffrey C. Baker, as
Trustee, for the benefit of LaSalle Bank National Association,
dated September 10, 2007 (included as Exhibit 10.11 to
our Current Report on
Form 8-K
filed on September 14, 2007 and incorporated herein by
reference)
|
|
10
|
.110
|
|
Joinder Agreement executed by NNN Healthcare/Office REIT Quest
Diagnostics, LLC in favor of LaSalle Bank National Association,
dated September 10, 2007 (included as Exhibit 10.12 to
our Current Report on
Form 8-K
filed on September 14, 2007 and incorporated herein by
reference)
|
|
10
|
.111
|
|
Joinder Agreement executed by NNN Healthcare/Office REIT
Triumph, LLC in favor of LaSalle Bank National Association,
dated September 10, 2007 (included as Exhibit 10.13 to
our Current Report on
Form 8-K
filed on September 14, 2007 and incorporated herein by
reference)
|
|
10
|
.112
|
|
First Amendment to Purchase and Sale Agreement by and between
St. Ritas Medical Center and Triple Net Properties, LLC,
dated September 19, 2007 (included as Exhibit 10.2 to
our Current Report on
Form 8-K
filed December 13, 2007 and incorporated herein by
reference)
|
|
10
|
.113
|
|
Loan Agreement by and between NNN Healthcare/Office REIT Market
Exchange, LLC and Wachovia Financial Services, Inc., dated
September 27, 2007 (included as Exhibit 10.1 to our
Current Report on
Form 8-K
filed October 3, 2007 and incorporated herein by reference)
|
|
10
|
.114
|
|
Promissory Note by NNN Healthcare/Office REIT Market Exchange,
LLC in favor of Wachovia Financial Services, Inc., dated
September 27, 2007 (included as Exhibit 10.2 to our
Current Report on
Form 8-K
filed October 3, 2007 and incorporated herein by reference)
|
|
10
|
.115
|
|
Repayment Guaranty by NNN Healthcare/Office REIT, Inc. in favor
of Wachovia Financial Services, Inc., dated September 27,
2007 (included as Exhibit 10.3 to our Current Report on
Form 8-K
filed October 3, 2007 and incorporated herein by reference)
|
|
10
|
.116
|
|
Open-End Mortgage, Assignment, Security Agreement and Fixture
Filing by NNN Healthcare/Office REIT Market Exchange, LLC in
favor of Wachovia Financial Services, Inc., dated
September 27, 2007 (included as Exhibit 10.4 to our
Current Report on
Form 8-K
filed October 3, 2007 and incorporated herein by reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
10
|
.117
|
|
Environmental Indemnity Agreement by NNN Healthcare/Office REIT
Market Exchange, LLC and NNN Healthcare/Office REIT, Inc. for
the benefit of Wachovia Financial Services, Inc., dated
September 27, 2007 (included as Exhibit 10.5 to our
Current Report on
Form 8-K
filed October 3, 2007 and incorporated herein by reference)
|
|
10
|
.118
|
|
ISDA Interest Rate Swap Agreement by and between NNN
Healthcare/Office REIT Market Exchange, LLC and Wachovia Bank,
National Association, dated as of September 27, 2007
(included as Exhibit 10.1 to our Current Report on
Form 8-K
filed October 18, 2007 and incorporated herein by reference)
|
|
10
|
.119
|
|
Assignment and Assumption of Purchase Agreement by and between
Triple Net Properties, LLC and NNN Healthcare/Office E Florida
LTC, LLC, dated September 28, 2007 (included as
Exhibit 10.2 to our Current Report on
Form 8-K
filed October 4, 2007 and incorporated herein by reference)
|
|
10
|
.120
|
|
Loan Agreement by and between NNN Healthcare/Office REIT E
Florida LTC, LLC and KeyBank National Association, dated
September 28, 2007 (included as Exhibit 10.3 to our
Current Report on
Form 8-K
filed October 4, 2007 and incorporated herein by reference)
|
|
10
|
.121
|
|
Promissory Note by NNN Healthcare/Office REIT E Florida LTC, LLC
in favor of KeyBank National Association, dated
September 28, 2007 (included as Exhibit 10.4 to our
Current Report on
Form 8-K
filed October 4, 2007 and incorporated herein by reference)
|
|
10
|
.122
|
|
Unconditional Payment Guaranty by NNN Healthcare/Office REIT,
Inc. for the benefit of KeyBank National Association, dated
September 28, 2007 (included as Exhibit 10.5 to our
Current Report on
Form 8-K
filed October 4, 2007 and incorporated herein by reference)
|
|
10
|
.123
|
|
Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing (Jacksonville) by NNN Healthcare/Office REIT E Florida
LTC, LLC in favor of KeyBank National Association, dated
September 28, 2007 (included as Exhibit 10.6 to our
Current Report on
Form 8-K
filed October 4, 2007 and incorporated herein by reference)
|
|
10
|
.124
|
|
Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing (Winter Park) by NNN Healthcare/Office REIT E Florida
LTC, LLC in favor of KeyBank National Association, dated
September 28, 2007 (included as Exhibit 10.7 to our
Current Report on
Form 8-K
filed October 4, 2007 and incorporated herein by reference)
|
|
10
|
.125
|
|
Mortgage, Assignment of Rents, Security Agreement and Fixture
Filing (Sunrise) by NNN Healthcare/Office REIT E Florida LTC,
LLC in favor of KeyBank National Association, dated
September 28, 2007 (included as Exhibit 10.8 to our
Current Report on
Form 8-K
filed October 4, 2007 and incorporated herein by reference)
|
|
10
|
.126
|
|
Environmental and Hazardous Substances Indemnity Agreement by
NNN Healthcare/Office REIT E Florida LTC, LLC for the benefit of
KeyBank National Association, dated September 28, 2007
(included as Exhibit 10.9 to our Current Report on
Form 8-K
filed October 4, 2007 and incorporated herein by reference)
|
|
10
|
.127
|
|
Second Amendment to Purchase and Sale Agreement by and between
St. Ritas Medical Center and Triple Net Properties, LLC,
dated September 28, 2007 (included as Exhibit 10.3 to
our Current Report on
Form 8-K
filed December 13, 2007 and incorporated herein by
reference)
|
|
10
|
.128
|
|
ISDA Interest Rate Swap Agreement by and between NNN
Healthcare/Office REIT E Florida LTC, LLC and KeyBank National
Association, dated as of October 2, 2007, and as amended
October 25, 2007 (included as Exhibit 10.1 to our
Current Report on
Form 8-K
filed October 25, 2007 and incorporated herein by reference)
|
|
10
|
.129
|
|
Agreement for Purchase and Sale of Real Property and Escrow
Instructions by and between Northmeadow Parkway, LLC and Triple
Net Properties, LLC, dated October 9, 2007 (included as
Exhibit 10.1 to our Current Report on
Form 8-K
filed November 11, 2007 and incorporated herein by
reference)
|
|
10
|
.130
|
|
Third Amendment to Purchase and Sale Agreement by and between
St. Ritas Medical Center and Triple Net Properties, LLC,
dated October 10, 2007 (included as Exhibit 10.4 to
our Current Report on
Form 8-K
filed December 13, 2007 and incorporated herein by
reference)
|
|
10
|
.131
|
|
Fourth Amendment to Purchase and Sale Agreement by and between
St. Ritas Medical Center and Triple Net Properties, LLC,
dated October 15, 2007 (included as Exhibit 10.5 to
our Current Report on
Form 8-K
filed December 13, 2007 and incorporated herein by
reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
10
|
.132
|
|
First Amendment to Agreement for Purchase and Sale of Real
Property and Escrow Instructions by and between Northmeadow
Parkway, LLC and Triple Net Properties, LLC, dated
October 19, 2007 (included as Exhibit 10.2 to our
Current Report on
Form 8-K
filed November 11, 2007 and incorporated herein by
reference)
|
|
10
|
.133
|
|
Fifth Amendment to Purchase and Sale Agreement by and between
St. Ritas Medical Center and Triple Net Properties, LLC,
dated November 2, 2007 (included as Exhibit 10.6 to
our Current Report on
Form 8-K
filed December 13, 2007 and incorporated herein by
reference)
|
|
10
|
.134
|
|
Agreement for Purchase and Sale of Real Property and Escrow
Instructions by and between Fraze Enterprises, Inc. and Triple
Net Properties, LLC, dated November 12, 2007 (included as
Exhibit 10.1 to our Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
10
|
.135
|
|
Assignment and Assumption of Agreement for Purchase and Sale of
Real Property and Escrow Instructions by and between Triple Net
Properties, LLC and NNN Healthcare/Office Northmeadow, LLC,
dated November 15, 2007 (included as Exhibit 10.3 to
our Current Report on
Form 8-K
filed November 11, 2007 and incorporated herein by
reference)
|
|
10
|
.136
|
|
First Amendment to Agreement for Purchase and Sale of Real
Property and Escrow Instructions by and between Fraze
Enterprises, Inc., and Triple Net Properties, LLC, dated
November 16, 2007 (included as Exhibit 10.2 to our
Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
10
|
.137
|
|
Second Amendment to Agreement for Purchase and Sales of Real
Property and Escrow Instructions by and between Fraze
Enterprises, Inc. and Triple Net properties, LLC, dated
November 27, 2007 (included as Exhibit 10.3 to our
Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
10
|
.138
|
|
Purchase and Sale Agreement by and between BRCP Highlands Ranch,
LLC and Triple Net Properties, LLC, dated November 29, 2007
(included as Exhibit 10.1 to our Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
10
|
.139
|
|
Loan Agreement by and between NNN Healthcare/Office REIT Kokomo
Medical Office Park, LLC and Wachovia Financial Services, Inc.,
dated December 5, 2007 (included as Exhibit 10.1 to
our Current Report on
Form 8-K
filed December 11, 2007 and incorporated herein by
reference)
|
|
10
|
.140
|
|
Promissory Note by NNN Healthcare/Office REIT Kokomo Medical
Office Park, LLC in favor of Wachovia Financial Services, Inc.,
dated December 5, 2007 (included as Exhibit 10.2 to
our Current Report on
Form 8-K
filed December 11, 2007 and incorporated herein by
reference)
|
|
10
|
.141
|
|
Mortgage, Assignment, Security Agreement and Fixture Filing by
NNN Healthcare/Office REIT Kokomo Medical Office Park, LLC in
favor of Wachovia Financial Services, Inc., dated
December 5, 2007 (included as Exhibit 10.3 to our
Current Report on
Form 8-K
filed December 11, 2007 and incorporated herein by
reference)
|
|
10
|
.142
|
|
Repayment Guaranty by NNN Healthcare/Office REIT, Inc. in favor
of Wachovia Financial Services, Inc., dated December 5,
2007 (included as Exhibit 10.4 to our Current Report on
Form 8-K
filed December 11, 2007 and incorporated herein by
reference)
|
|
10
|
.143
|
|
Environmental Indemnity Agreement by NNN Healthcare/Office REIT
Kokomo Medical Office Park, LLC and NNN Healthcare/Office REIT,
Inc. for the benefit of Wachovia Financial Services, Inc., dated
December 5, 2007 (included as Exhibit 10.5 to our
Current Report on
Form 8-K
filed December 11, 2007 and incorporated herein by
reference)
|
|
10
|
.144
|
|
ISDA Interest Rate Swap Agreement by and between NNN
Healthcare/Office REIT Kokomo Medical Office Park, LLC and
Wachovia Bank, National Association, entered into
December 5, 2007, as amended (included as Exhibit 10.6
to our Current Report on
Form 8-K
filed December 11, 2007 and incorporated herein by
reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
10
|
.145
|
|
Sixth Amendment to Purchase and Sale Agreement by and between
St. Ritas Medical Center and Triple Net Properties, LLC,
dated December 6, 2007 (included as Exhibit 10.7 to
our Current Report on
Form 8-K
filed December 13, 2007 and incorporated herein by
reference)
|
|
10
|
.146
|
|
Assignment and Assumption of Purchase Agreement by and between
Triple Net Properties, LLC and NNN Healthcare/Office Lima, LLC,
dated December 7, 2007 (included as Exhibit 10.8 to
our Current Report on
Form 8-K
filed December 13, 2007 and incorporated herein by
reference)
|
|
10
|
.147
|
|
Modification of Loan Agreement by and among Grubb &
Ellis Healthcare REIT Holdings, L.P. (f/k/a/ NNN
Healthcare/Office REIT Holdings, L.P.), Grubb & Ellis
Healthcare REIT, Inc. (f/k/a NNN Healthcare/Office REIT, Inc.),
NNN Healthcare/Office REIT Quest Diagnostics, LLC, NNN
Healthcare/Office REIT Triumph, LLC and LaSalle Bank National
Association, dated December 12, 2007 (included as
Exhibit 10.142 to Post-Effective Amendment No. 5 to
our Registration Statement on
Form S-11
filed on December 14, 2007 and incorporated herein by
reference)
|
|
10
|
.148
|
|
Amended and Restated Promissory Note by Grubb & Ellis
Healthcare REIT Holdings, L.P. (f/k/a NNN Healthcare/Office REIT
Holdings, L.P.) in favor of LaSalle Bank National Association,
dated December 12, 2007 (included as Exhibit 10.143 to
Post-Effective Amendment No. 5 to our Registration
Statement on
Form S-11
filed on December 14, 2007 and incorporated herein by
reference)
|
|
10
|
.149
|
|
Amended and Restated Promissory Note by Grubb & Ellis
Healthcare REIT Holdings, L.P. (f/k/a NNN Healthcare/Office REIT
Holdings, L.P.) in favor of KeyBank Bank National Association,
dated December 12, 2007 (included as Exhibit 10.144 to
Post-Effective Amendment No. 5 to our Registration
Statement on
Form S-11
filed on December 14, 2007 and incorporated herein by
reference)
|
|
10
|
.150
|
|
Modification of Loan Agreement by and among Grubb &
Ellis Healthcare REIT Holdings, L.P., Grubb & Ellis
Healthcare REIT, Inc., NNN Healthcare/Office REIT 2750 Monroe,
LLC, NNN Healthcare/Office REIT Triumph, LLC and LaSalle Bank
National Association, dated December 12, 2007 (included as
Exhibit 10.1 to our Current Report on
Form 8-K
filed December 18, 2007 and incorporated herein by
reference)
|
|
10
|
.151
|
|
Amended and Restated Promissory Note by Grubb & Ellis
Healthcare REIT Holdings, L.P. in favor of LaSalle Bank National
Association, dated December 12, 2007 (included as
Exhibit 10.2 to our Current Report on
Form 8-K
filed December 18, 2007 and incorporated herein by
reference)
|
|
10
|
.152
|
|
Amended and Restated Promissory Note by Grubb & Ellis
Healthcare REIT Holdings, L.P. in favor of KeyBank National
Association, dated December 12, 2007 (included as
Exhibit 10.3 to our Current Report on
Form 8-K
filed December 18, 2007 and incorporated herein by
reference)
|
|
10
|
.153
|
|
Management Agreement by and between G&E Healthcare
REIT/Duke Chesterfield Rehab, LLC and Triple Net Properties
Realty, Inc., dated December 18, 2007 (included as
Exhibit 10.3 to our Current Report on
Form 8-K
filed January 3, 2008 and incorporated herein by reference)
|
|
10
|
.154
|
|
Assignment and Assumption of Purchase and Sale Agreement by and
between Triple Net Properties, LLC and G&E Healthcare REIT
County Line Road, LLC, dated December 19, 2007 (included as
Exhibit 10.2 to our Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
10
|
.155
|
|
Loan Agreement by and between G&E Healthcare REIT County
Line Road, LLC and Wachovia Bank, National Association, dated
December 19, 2007 (included as Exhibit 10.3 to our
Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
10
|
.156
|
|
Promissory Note by G&E Healthcare REIT County Line Road,
LLC in favor of Wachovia Bank, National Association, dated
December 19, 2007 (included as Exhibit 10.4 to our
Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
10
|
.157
|
|
Deed of Trust, Assignment, Security Agreement and Fixture Filing
by G&E Healthcare REIT County Line Road, LLC for the
benefit of Wachovia Bank, National Association, dated
December 19, 2007 (included as Exhibit 10.5 to our
Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
10
|
.158
|
|
Repayment Guaranty by Grubb & Ellis Healthcare REIT,
Inc. in favor of Wachovia Bank, National Association, dated
December 19, 2007 (included as Exhibit 10.6 to our
Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
10
|
.159
|
|
Environmental Indemnity Agreement by G&E Healthcare REIT
County Line Road, LLC and Grubb & Ellis Healthcare
REIT, Inc. for the benefit of Wachovia Bank, National
Association, dated December 19, 2007 (included as
Exhibit 10.7 to our Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
10
|
.160
|
|
Agreement of Sale by and among Triple Net Properties, LLC and
TST Overland Park, L.P., TST El Paso Properties, Ltd., TST
Jacksonville II, LLC, TST Tampa Bay, Ltd., TST Largo ASC, Ltd.,
TST Brandon, Ltd. and TST Lakeland, Ltd., dated
December 19, 2007 (included as Exhibit 10.1 to our
Current Report on
Form 8-K
filed February 7, 2008 and incorporated herein by reference)
|
|
10
|
.161
|
|
Open-End Revolving Mortgage, Security Agreement, Assignment of
Rents and Leases and Fixture Filing by NNN Healthcare/Office
REIT Lima, LLC to and for the benefit of LaSalle Bank National
Association, dated December 19, 2007 (included as
Exhibit 10.1 to our Current Report on
Form 8-K
filed January 2, 2008 and incorporated herein by reference)
|
|
10
|
.162
|
|
Open-End Fee and Leasehold Revolving Mortgage, Security
Agreement, Assignment of Rents and Leases and Fixture Filing by
NNN Healthcare/Office REIT Lima, LLC to and for the benefit of
LaSalle Bank National Association, dated December 19, 2007
(included as Exhibit 10.2 to our Current Report on
Form 8-K
filed January 2, 2008 and incorporated herein by reference)
|
|
10
|
.163
|
|
Joinder Agreement by NNN Healthcare/Office REIT Lima, LLC in
favor of LaSalle Bank National Association, dated as of
December 19, 2007 (included as Exhibit 10.3 to our
Current Report on
Form 8-K
filed January 2, 2008 and incorporated herein by reference)
|
|
10
|
.164
|
|
Environmental Indemnity Agreement by Grubb and Ellis Healthcare
REIT Holdings, L.P., NNN Healthcare/Office REIT Lima, LLC and
Grubb & Ellis Healthcare REIT, Inc. to and for the
benefit of LaSalle Bank National Association, dated
December 19, 2007 (included as Exhibit 10.4 to our
Current Report on
Form 8-K
filed January 2, 2008 and incorporated herein by reference)
|
|
10
|
.165
|
|
Assignment and Assumption of Purchase Agreement by and between
Triple Net Properties, LLC and G&E Healthcare REIT Lincoln
Park Boulevard, LLC, dated December 20, 2007 (included as
Exhibit 10.4 to our Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
10
|
.166
|
|
Loan Agreement by and between G&E Healthcare REIT Lincoln
Park Boulevard, LLC and Wachovia Bank, National Association,
dated December 20, 2007 (included as Exhibit 10.5 to
our Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
10
|
.167
|
|
Promissory Note by G&E Healthcare REIT Lincoln Park
Boulevard, LLC in favor of Wachovia Financial Services, Inc.,
dated December 20, 2007 (included as Exhibit 10.6 to
our Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
10
|
.168
|
|
Open-End Mortgage, Assignment, Security Agreement and Fixture
Filing by G&E Healthcare REIT Lincoln Park Boulevard, LLC
in favor of Wachovia Financial Services, Inc., dated
December 20, 2007 (included as Exhibit 10.7 to our
Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
10
|
.169
|
|
Repayment Guaranty by Grubb & Ellis Healthcare REIT,
Inc. in favor of Wachovia Financial Services, Inc., dated
December 20, 2007 (included as Exhibit 10.8 to our
Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
10
|
.170
|
|
Environmental Indemnity Agreement by G&E Healthcare REIT
Lincoln Park Boulevard, LLC and Grubb & Ellis
Healthcare REIT, Inc. for the benefit of Wachovia Financial
Services, Inc., dated December 20, 2007 (included as
Exhibit 10.9 to our Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
10
|
.171
|
|
Limited Liability Company Agreement of G&E Healthcare
REIT/Duke Chesterfield Rehab, LLC by and between BD
St. Louis Development, LLC and Grubb & Ellis
Healthcare REIT Holdings, L.P., executed on December 20,
2007 (included as Exhibit 10.1 to our Current Report on
Form 8-K
filed January 3, 2008 and incorporated herein by reference)
|
|
10
|
.172
|
|
Contribution Agreement by and among BD St. Louis
Development, LLC, Grubb & Ellis Healthcare REIT
Holdings, L.P. and G&E Healthcare REIT/Duke Chesterfield
Rehab, LLC, executed on December 20, 2007 (included as
Exhibit 10.2 to our Current Report on
Form 8-K
filed January 3, 2008 and incorporated herein by reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
10
|
.173
|
|
Promissory Note by G&E Healthcare REIT Chesterfield Rehab
Hospital, LLC in favor of National City Bank, dated
December 20, 2007 (included as Exhibit 10.4 to our
Current Report on
Form 8-K
filed January 3, 2008 and incorporated herein by reference)
|
|
10
|
.174
|
|
Deed of Trust, Assignment, Security Agreement, Assignment of
Leases and Rents, and Fixture Filing by G&E Healthcare REIT
Chesterfield Rehab Hospital, LLC to PSPM Trustee, Inc. for the
benefit of National City Bank, dated December 20, 2007
(included as Exhibit 10.5 to our Current Report on
Form 8-K
filed January 3, 2008 and incorporated herein by reference)
|
|
10
|
.175
|
|
Grubb & Ellis Healthcare REIT, Inc. Limited Guaranty
of Payment by Grubb & Ellis Healthcare REIT, Inc. for
the benefit of National City Bank, dated December 20, 2007
(included as Exhibit 10.6 to our Current Report on
Form 8-K
filed January 3, 2008 and incorporated herein by reference)
|
|
10
|
.176
|
|
Duke Realty Limited Partnership Limited Guaranty of Payment by
Duke Realty Limited Partnership for the benefit of National City
Bank, dated December 20, 2007 (included as
Exhibit 10.7 to our Current Report on
Form 8-K
filed January 3, 2008 and incorporated herein by reference)
|
|
10
|
.177
|
|
Environmental Indemnity Agreement by G&E Healthcare REIT
Chesterfield Rehab Hospital, LLC, Grubb & Ellis
Healthcare REIT, Inc. and Duke Realty Limited Partnership for
the benefit of National City Bank, dated December 20, 2007
(included as Exhibit 10.8 to our Current Report on
Form 8-K
filed January 3, 2008 and incorporated herein by reference)
|
|
10
|
.178
|
|
Interest Rate Swap Confirmation by and between G&E
Healthcare REIT Chesterfield Rehab Hospital, LLC and National
City Bank, dated December 20, 2007 (included as
Exhibit 10.9 to our Current Report on
Form 8-K
filed January 3, 2008 and incorporated herein by reference)
|
|
10
|
.179
|
|
Leasehold and Fee Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing, and Environmental
Indemnity Agreement by NNN Healthcare/Office REIT Tucson Medical
Office, LLC to and for the benefit of LaSalle Bank National
Association, dated December 20, 2007 (included as
Exhibit 10.1 to our Current Report on
Form 8-K
filed January 3, 2008 and incorporated herein by reference)
|
|
10
|
.180
|
|
Joinder Agreement by NNN Healthcare/Office REIT Tucson Medical
Office, LLC in favor of LaSalle Bank National Association, dated
December 20, 2007 (included as Exhibit 10.2 to our
Current Report on
Form 8-K
filed January 3, 2008 and incorporated herein by reference)
|
|
10
|
.181
|
|
Environmental Indemnity Agreement by Grubb and Ellis Healthcare
REIT Holdings, L.P., NNN Healthcare/Office REIT Tucson Medical
Office, LLC and Grubb & Ellis Healthcare REIT, Inc. to
and for the benefit of LaSalle Bank National Association, dated
December 20, 2007 (included as Exhibit 10.3 to our
Current Report on
Form 8-K
filed January 3, 2008 and incorporated herein by reference)
|
|
10
|
.182
|
|
ISDA Interest Rate Swap Agreement by and between G&E
Healthcare REIT County Line Road, LLC and Wachovia Bank,
National Association, dated December 21, 2007, as amended
on December 24, 2007 (included as Exhibit 10.8 to our
Current Report on
Form 8-K
filed December 27, 2007 and incorporated herein by
reference)
|
|
10
|
.183
|
|
ISDA Interest Rate Swap Agreement by and between G&E
Healthcare REIT Lincoln Park Boulevard, LLC and Wachovia
Financial Services, Inc., dated December 31, 2007, as
amended on December 21, 2007 and December 24, 2007
(included as Exhibit 10.10 to our Current Report on
Form 8-K
filed December 28, 2007 and incorporated herein by
reference)
|
|
10
|
.184
|
|
Agreement for Purchase and Sale of Real Property and Escrow
Instructions by and between Fort Road Associated Limited
Partnership and Triple Net Properties, LLC, dated
January 14, 2008 (included as Exhibit 10.1 to our
Current Report on
Form 8-K
filed March 12, 2008 and incorporated herein by reference)
|
|
10
|
.185
|
|
First Amendment to Agreement of Sale by and among TST Overland
Park, L.P., TST El Paso Properties, Ltd., TST Jacksonville
II, LLC, TST Tampa Bay, Ltd., TST Largo ASC, Ltd., TST Brandon,
Ltd., and TST Lakeland, Ltd. and Triple Net Properties, LLC,
dated January 18, 2008 (included as Exhibit 10.2 to
our Current Report on
Form 8-K
filed February 7, 2008 and incorporated herein by reference)
|
|
10
|
.186
|
|
ISDA Master Agreement by and between National City Bank and
G&E Healthcare REIT Chesterfield Rehab Hospital, LLC, dated
January 20, 2008 (included as Exhibit 10.1 to our
Current Report on
Form 8-K
filed February 1, 2008 and incorporated herein by
reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
10
|
.187
|
|
First Amendment to Agreement for Purchase and Sale of Real
Property and Escrow Instructions by and between Fort Road
Associates Limited Partnership and Triple Net Properties, LLC,
dated January 31, 2008 (included as Exhibit 10.2 to
our Current Report on
Form 8-K
filed March 12, 2008 and incorporated herein by reference)
|
|
10
|
.188
|
|
Second Amendment to Agreement of Sale by and among TST Overland
Park, L.P., TST El Paso Properties, Ltd., TST Jacksonville
II, LLC, TST Tampa Bay, Ltd., TST Largo ASC, Ltd., TST Brandon,
Ltd., TST Lakeland, Ltd., Triple Net Properties, LLC and
LandAmerica Financial Group, Inc., dated February 1, 2008
(included as Exhibit 10.3 to our Current Report on
Form 8-K
filed February 7, 2008 and incorporated herein by reference)
|
|
10
|
.189
|
|
Assignment and Assumption of Agreement of Sale by and between
Triple Net Properties, LLC and G&E Healthcare REIT Medical
Portfolio 1, LLC, dated February 1, 2008 (included as
Exhibit 10.4 to our Current Report on
Form 8-K
filed February 7, 2008 and incorporated herein by reference)
|
|
10
|
.190
|
|
Loan Agreement by and between G&E Healthcare REIT Medical
Portfolio 1, LLC and Wachovia Bank, National Association, dated
February 1, 2008 (included as Exhibit 10.5 to our
Current Report on
Form 8-K
filed February 7, 2008 and incorporated herein by reference)
|
|
10
|
.191
|
|
Promissory Note by G&E Healthcare REIT Medical Portfolio 1,
LLC in favor of Wachovia Bank, National Association, dated
February 1, 2008 (included as Exhibit 10.6 to our
Current Report on
Form 8-K
filed February 7, 2008 and incorporated herein by reference)
|
|
10
|
.192
|
|
Mortgage, Assignment, Security Agreement and Fixture Filing
(West Bay) by G&E Healthcare REIT Medical Portfolio 1, LLC
in favor of Wachovia Bank, National Association, dated
February 1, 2008 (included as Exhibit 10.7 to our
Current Report on
Form 8-K
filed February 7, 2008 and incorporated herein by reference)
|
|
10
|
.193
|
|
Mortgage, Assignment, Security Agreement and Fixture Filing
(Largo) by G&E Healthcare REIT Medical Portfolio 1, LLC in
favor of Wachovia Bank, National Association, dated
February 1, 2008(included as Exhibit 10.8 to our
Current Report on
Form 8-K
filed February 7, 2008 and incorporated herein by reference)
|
|
10
|
.194
|
|
Mortgage, Assignment, Security Agreement and Fixture Filing
(Central Florida) by G&E Healthcare REIT Medical Portfolio
1, LLC in favor of Wachovia Bank, National Association, dated
February 1, 2008 (included as Exhibit 10.9 to our
Current Report on
Form 8-K
filed February 7, 2008 and incorporated herein by reference)
|
|
10
|
.195
|
|
Mortgage, Assignment, Security Agreement and Fixture Filing
(Brandon) by G&E Healthcare REIT Medical Portfolio 1, LLC
in favor of Wachovia Bank, National Association, dated
February 1, 2008 (included as Exhibit 10.10 to our
Current Report on
Form 8-K
filed February 7, 2008 and incorporated herein by reference)
|
|
10
|
.196
|
|
Mortgage, Assignment, Security Agreement and Fixture Filing
(Overland Park) by G&E Healthcare REIT Medical Portfolio 1,
LLC in favor of Wachovia Bank, National Association, dated
February 1, 2008 (included as Exhibit 10.11 to our
Current Report on
Form 8-K
filed February 7, 2008 and incorporated herein by reference)
|
|
10
|
.197
|
|
Repayment Guaranty by Grubb & Ellis Healthcare REIT,
Inc. in favor of Wachovia Bank, National Association, dated
February 1, 2008 (included as Exhibit 10.12 to our
Current Report on
Form 8-K
filed February 7, 2008 and incorporated herein by reference)
|
|
10
|
.198
|
|
Environmental Indemnity Agreement by G&E Healthcare REIT
Medical Portfolio 1, LLC and Grubb & Ellis Healthcare
REIT, Inc. for the benefit of Wachovia Bank, National
Association, dated February 1, 2008 (included as
Exhibit 10.13 to our Current Report on
Form 8-K
filed February 7, 2008 and incorporated herein by reference)
|
|
10
|
.199
|
|
ISDA Interest Rate Swap Agreement by and between Triple Net
Properties, LLC and Wachovia Bank, National Association, dated
February 1, 2008, as amended on February 6, 2008
(included as Exhibit 10.14 to our Current Report on
Form 8-K
filed February 7, 2008 and incorporated herein by reference)
|
|
10
|
.200
|
|
First Amendment to Promissory Note by and between NNN Gallery
Medical, LLC, NNN Realty Advisors, Inc. and LaSalle Bank
National Association, released from escrow on February 20,
2008 and effective as of February 12, 2008 (included as
Exhibit 10.1 to our Current Report on
Form 8-K
filed February 26, 2008 and incorporated herein by
reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
10
|
.201
|
|
Agreement for Purchase and Sale of Real Property and Escrow
Instructions by and between NHP Cypress Station Partnership, LP
and Grubb & Ellis Realty Investors, LLC, dated
February 22, 2008 (included as Exhibit 10.1 to our
Current Report on
Form 8-K
filed March 31, 2008 and incorporated herein by reference)
|
|
10
|
.202
|
|
Second Amendment to Agreement for Purchase and Sale of Real
Property and Escrow Instructions by and between Fort Road
Associates Limited Partnership and Triple Net Properties, LLC,
dated March 5, 2008 (included as Exhibit 10.3 to our
Current Report on
Form 8-K
filed March 12, 2008 and incorporated herein by reference)
|
|
10
|
.203
|
|
Assignment and Assumption of Purchase Agreement by and between
Grubb & Ellis Realty Investors, LLC and G&E
Healthcare REIT Fort Road Medical, LLC, dated March 6,
2008 (included as Exhibit 10.4 to our Current Report on
Form 8-K
filed March 12, 2008 and incorporated herein by reference)
|
|
10
|
.204
|
|
Promissory Note by G&E Healthcare REIT Fort Road
Medical, LLC in favor of LaSalle Bank National Association,
dated March 6, 2008 (included as Exhibit 10.5 to our
Current Report on
Form 8-K
filed March 12, 2008 and incorporated herein by reference)
|
|
10
|
.205
|
|
Mortgage, Security Agreement, Assignment of Leases and Rents and
Fixture Filing by G&E Healthcare REIT Fort Road
Medical, LLC for the benefit of LaSalle Bank National
Association, dated March 6, 2008 (included as
Exhibit 10.6 to our Current Report on
Form 8-K
filed March 12, 2008 and incorporated herein by reference)
|
|
10
|
.206
|
|
Guaranty of Payment by Grubb & Ellis Healthcare REIT,
Inc. in favor of LaSalle Bank National Association, dated
March 6, 2008 (included as Exhibit 10.7 to our Current
Report on
Form 8-K
filed March 12, 2008 and incorporated herein by reference)
|
|
10
|
.207
|
|
Environmental Indemnity Agreement by G&E Healthcare REIT
Fort Road Medical, LLC and Grubb & Ellis
Healthcare REIT, Inc. for the benefit of LaSalle Bank National
Association, dated March 6, 2008 (included as
Exhibit 10.8 to our Current Report on
Form 8-K
filed March 12, 2008 and incorporated herein by reference)
|
|
10
|
.208
|
|
Agreement for Purchase and Sale of Real Property and Escrow
Instructions by and between Epler Parke, LLC and
Grubb & Ellis Realty Investors, LLC, dated
March 6, 2008 (included as Exhibit 10.1 to our Current
Report on
Form 8-K
filed March 28, 2008 and incorporated herein by reference)
|
|
10
|
.209
|
|
ISDA Interest Rate Swap Confirmation Letter Agreement by and
between G&E Healthcare REIT Fort Road Medical, LLC and
LaSalle Bank National Association, dated March 10, 2008
(included as Exhibit 10.9 to our Current Report on
Form 8-K
filed March 12, 2008 and incorporated herein by reference)
|
|
10
|
.210
|
|
Second Amendment to Agreement for Purchase and Sale of Real
Property and Escrow Instructions by and between Liberty Falls,
LLC, Triple Net Properties, LLC, and Dave Chrestensen and Todd
Crawford, dated March 11, 2008 (included as
Exhibit 10.3 to our Current Report on
Form 8-K
filed March 25, 2008 and incorporated herein by reference)
|
|
10
|
.211
|
|
Assignment and Assumption of Purchase Agreement by and between
Grubb & Ellis Realty Investors, LLC and G&E
Healthcare REIT Liberty Falls Medical Plaza, LLC, dated
March 19, 2008 (included as Exhibit 10.4 to our
Current Report on
Form 8-K
filed March 25, 2008 and incorporated herein by reference)
|
|
10
|
.212
|
|
Assignment and Assumption of Purchase Agreement by and between
Grubb & Ellis Realty Investors, LLC and G&E
Healthcare REIT Epler Parke Building B, LLC, dated
March 24, 2008 (included as Exhibit 10.2 to our
Current Report on
Form 8-K
filed March 28, 2008 and incorporated herein by reference)
|
|
10
|
.213
|
|
Assignment and Assumption of Purchase Agreement by and between
Grubb & Ellis Realty Investors, LLC and G&E
Healthcare REIT Cypress Station, LLC, dated March 25, 2008
(included as Exhibit 10.2 to our Current Report on
Form 8-K
filed March 31, 2008 and incorporated herein by reference)
|
|
10
|
.214
|
|
Promissory Note by G&E Healthcare REIT Cypress Station, LLC
in favor of National City Bank, dated March 25, 2008
(included as Exhibit 10.3 to our Current Report on
Form 8-K
filed March 31, 2008 and incorporated herein by reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
10
|
.215
|
|
Deed of Trust, Security Agreement, Assignment of Leases and
Rents and Financing Statement by G&E Healthcare REIT
Cypress Station, LLC for the benefit of National City Bank,
dated March 25, 2008 (included as Exhibit 10.4 to our
Current Report on
Form 8-K
filed March 31, 2008 and incorporated herein by reference)
|
|
10
|
.216
|
|
Limited Guaranty of Payment by Grubb & Ellis
Healthcare REIT, Inc. for the benefit of National City Bank,
dated March 25, 2008 (included as Exhibit 10.5 to our
Current Report on
Form 8-K
filed March 31, 2008 and incorporated herein by reference)
|
|
10
|
.217
|
|
Environmental Indemnity Agreement by G&E Healthcare REIT
Cypress Station, LLC and Grubb & Ellis Healthcare
REIT, Inc. for the benefit of National City Bank, dated
March 25, 2008 (included as Exhibit 10.6 to our
Current Report on
Form 8-K
filed March 31, 2008 and incorporated herein by reference)
|
|
10
|
.218
|
|
Purchase and Sale Agreement and Escrow Instructions by and
between HCP, Inc. and HCPI/Indiana, LLC, and G&E Healthcare
REIT Medical Portfolio 3, LLC, dated May 30, 2008 (included
as Exhibit 10.1 to our Current Report on
Form 8-K
filed June 4, 2008 and incorporated herein by reference)
|
|
10
|
.219
|
|
Commercial Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing by G&E Healthcare
REIT Amarillo Hospital, LLC to and for the benefit of Jeffrey C.
Baker, Esq., Trustee and LaSalle Bank National Association,
dated June 23, 2008 (included as Exhibit 10.1 to our
Current Report on
Form 8-K
filed June 25, 2008 and incorporated herein by reference)
|
|
10
|
.220
|
|
Joinder Agreement by G&E Healthcare REIT Amarillo Hospital,
LLC in favor of LaSalle Bank National Association, dated
June 23, 2008 (included as Exhibit 10.2 to our Current
Report on
Form 8-K
filed June 25, 2008 and incorporated herein by reference)
|
|
10
|
.221
|
|
Environmental Indemnity Agreement by Grubb and Ellis Healthcare
REIT Holdings, L.P., G&E Healthcare REIT Amarillo Hospital,
LLC and Grubb & Ellis Healthcare REIT, Inc. to and for
the benefit of LaSalle Bank National Association, dated
June 23, 2008 (included as Exhibit 10.3 to our Current
Report on
Form 8-K
filed June 25, 2008 and incorporated herein by reference)
|
|
10
|
.222
|
|
Loan Agreement by and among G&E Healthcare REIT 5995 Plaza
Drive, LLC, G&E Healthcare REIT Academy, LLC, G&E
Healthcare REIT Epler Parke Building B, LLC, G&E Healthcare
REIT Nutfield Professional Center, LLC and G&E Healthcare
REIT Medical Portfolio 2, LLC and Wachovia Financial Services,
Inc., dated June 24, 2008 (included as Exhibit 10.1 to
our Current Report on
Form 8-K
filed June 27, 2008 and incorporated herein by reference)
|
|
10
|
.223
|
|
Promissory Note by G&E Healthcare REIT 5995 Plaza Drive,
LLC, G&E Healthcare REIT Academy, LLC, G&E Healthcare
REIT Epler Parke Building B, LLC, G&E Healthcare REIT
Nutfield Professional Center, LLC and G&E Healthcare REIT
Medical Portfolio 2, LLC in favor of Wachovia Financial
Services, Inc., dated June 24, 2008 (included as
Exhibit 10.2 to our Current Report on
Form 8-K
filed June 27, 2008 and incorporated herein by reference)
|
|
10
|
.224
|
|
Deed of Trust, Assignment, Security Agreement and Fixture Filing
by G&E Healthcare REIT 5995 Plaza Drive, LLC in favor of
Wachovia Financial Services, Inc., dated June 24, 2008
(included as Exhibit 10.3 to our Current Report on
Form 8-K
filed June 27, 2008 and incorporated herein by reference)
|
|
10
|
.225
|
|
Deed of Trust, Assignment, Security Agreement and Fixture Filing
by G&E Healthcare REIT Academy, LLC in favor of Wachovia
Financial Services, Inc., dated June 24, 2008 and delivered
June 26, 2008 (included as Exhibit 10.4 to our Current
Report on
Form 8-K
filed June 27, 2008 and incorporated herein by reference)
|
|
10
|
.226
|
|
Deed of Trust, Assignment, Security Agreement and Fixture Filing
by G&E Healthcare REIT Medical Portfolio 2, LLC in favor of
Wachovia Financial Services, Inc., dated June 24, 2008
(included as Exhibit 10.5 to our Current Report on
Form 8-K
filed June 27, 2008 and incorporated herein by reference)
|
|
10
|
.227
|
|
Mortgage, Assignment, Security Agreement and Fixture Filing by
G&E Healthcare REIT Epler Parke Building B, LLC in favor of
Wachovia Financial Services, Inc., dated June 24, 2008
(included as Exhibit 10.6 to our Current Report on
Form 8-K
filed June 27, 2008 and incorporated herein by reference)
|
|
10
|
.228
|
|
Mortgage, Assignment, Security Agreement and Fixture Filing
(Overland Park) by G&E Healthcare REIT Nutfield
Professional Center, LLC in favor of Wachovia Financial
Services, Inc., dated June 24, 2008 (included as
Exhibit 10.7 to our Current Report on
Form 8-K
filed June 27, 2008 and incorporated herein by reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
10
|
.229
|
|
Repayment Guaranty by Grubb & Ellis Healthcare REIT,
Inc. in favor of Wachovia Financial Services, Inc., dated
June 24, 2008 (included as Exhibit 10.8 to our Current
Report on
Form 8-K
filed June 27, 2008 and incorporated herein by reference)
|
|
10
|
.230
|
|
Environmental Indemnity Agreement by G&E Healthcare REIT
5995 Plaza drive, LLC and Grubb & Ellis Healthcare
REIT, Inc. for the benefit of Wachovia Financial Services, Inc.,
dated June 24, 2008 (included as Exhibit 10.9 to our
Current Report on
Form 8-K
filed June 27, 2008 and incorporated herein by reference)
|
|
10
|
.231
|
|
Environmental Indemnity Agreement by G&E Healthcare REIT
Academy, LLC and Grubb & Ellis Healthcare REIT, Inc.
for the benefit of Wachovia Financial Services, Inc., dated
June 24, 2008 (included as Exhibit 10.10 to our
Current Report on
Form 8-K
filed June 27, 2008 and incorporated herein by reference)
|
|
10
|
.232
|
|
Environmental Indemnity Agreement by G&E Healthcare REIT
Medical Portfolio 2, LLC and Grubb & Ellis Healthcare
REIT, Inc. for the benefit of Wachovia Financial Services, Inc.,
dated June 24, 2008 (included as Exhibit 10.11 to our
Current Report on
Form 8-K
filed June 27, 2008 and incorporated herein by reference)
|
|
10
|
.233
|
|
Environmental Indemnity Agreement by G&E Healthcare REIT
Epler Parke Building B, LLC and Grubb & Ellis
Healthcare REIT, Inc. for the benefit of Wachovia Financial
Services, Inc., dated June 24, 2008 (included as
Exhibit 10.12 to our Current Report on
Form 8-K
filed June 27, 2008 and incorporated herein by reference)
|
|
10
|
.234
|
|
Environmental Indemnity Agreement by G&E Healthcare REIT
Nutfield Professional Center, LLC and Grubb & Ellis
Healthcare REIT, Inc. for the benefit of Wachovia Financial
Services, Inc., dated June 24, 2008 (included as
Exhibit 10.13 to our Current Report on
Form 8-K
filed June 27, 2008 and incorporated herein by reference)
|
|
10
|
.235
|
|
Loan Agreement by and between G&E Healthcare REIT Medical
Portfolio 3, LLC, The Financial Institutions Party Hereto, as
Banks, and Fifth Third Bank, as Agent, dated June 26, 2008
(included as Exhibit 10.2 to our Current Report on
Form 8-K
filed July 1, 2008 and incorporated herein by reference)
|
|
10
|
.236
|
|
Syndicated Promissory Note(1) by G&E Healthcare REIT
Medical Portfolio 3, LLC for the benefit of Fifth Third Bank,
dated June 26, 2008 (included as Exhibit 10.3 to our
Current Report on
Form 8-K
filed July 1, 2008 and incorporated herein by reference)
|
|
10
|
.237
|
|
Syndicated Promissory Note(2) by G&E Healthcare REIT
Medical Portfolio 3, LLC for the benefit of Fifth Third Bank,
dated June 26, 2008 (included as Exhibit 10.4 to our
Current Report on
Form 8-K
filed July 1, 2008 and incorporated herein by reference)
|
|
10
|
.238
|
|
Guaranty of Payment by Grubb & Ellis Healthcare REIT,
Inc. for the benefit of Fifth Third Bank, dated June 26,
2008 (included as Exhibit 10.5 to our Current Report on
Form 8-K
filed July 1, 2008 and incorporated herein by reference)
|
|
10
|
.239
|
|
Mortgage, Security Agreement, Fixture Filing and Assignment of
Leases and Rents (Boone County) by and between G&E
Healthcare REIT Medical Portfolio 3, LLC and Fifth Third Bank,
dated June 26, 2008 (included as Exhibit 10.6 to our
Current Report on
Form 8-K
filed July 1, 2008 and incorporated herein by reference)
|
|
10
|
.240
|
|
Mortgage, Security Agreement, Fixture Filing and Assignment of
Leases and Rents (Hamilton County) by and between G&E
Healthcare REIT Medical Portfolio 3, LLC and Fifth Third Bank,
dated June 26, 2008 (included as Exhibit 10.7 to our
Current Report on
Form 8-K
filed July 1, 2008 and incorporated herein by reference)
|
|
10
|
.241
|
|
Mortgage, Security Agreement, Fixture Filing and Assignment of
Leases and Rents (Hendricks County) by and between G&E
Healthcare REIT Medical Portfolio 3, LLC and Fifth Third Bank,
dated June 26, 2008 (included as Exhibit 10.8 to our
Current Report on
Form 8-K
filed July 1, 2008 and incorporated herein by reference)
|
|
10
|
.242
|
|
Mortgage, Security Agreement, Fixture Filing and Assignment of
Leases and Rents (Marion County) by and between G&E
Healthcare REIT Medical Portfolio 3, LLC and Fifth Third Bank,
dated June 26, 2008 (included as Exhibit 10.9 to our
Current Report on
Form 8-K
filed July 1, 2008 and incorporated herein by reference)
|
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Exhibit
|
|
|
10
|
.243
|
|
Environmental Indemnity Agreement by G&E Healthcare REIT
Medical Portfolio 3, LLC and Grubb & Ellis Healthcare
REIT, Inc. to and for the benefit of Fifth Third Bank, dated
June 26, 2008 (included as Exhibit 10.10 to our
Current Report on
Form 8-K
filed July 1, 2008 and incorporated herein by reference)
|
|
10
|
.244
|
|
Modification of Loan Agreement by and among G&E Healthcare
REIT Medical Portfolio 3, LLC, Grubb & Ellis
Healthcare REIT, Inc. and Fifth Third Bank, dated June 27,
2008 (included as Exhibit 10.1 to our Current Report on
Form 8-K
filed July 3, 2008 and incorporated herein by reference)
|
|
10
|
.245
|
|
Employment Agreement by and between Grubb & Ellis
Healthcare REIT, Inc. and Scott D. Peters (included as
Exhibit 10.3 to our Current Report on
Form 8-K
filed on November 19, 2008 and incorporated herein by
reference)
|
|
10
|
.246
|
|
Amendment to the Grubb & Ellis Healthcare REIT, Inc.
2006 Independent Directors Compensation Plan, effective
January 1, 2009 (included as Exhibit 10.68 in our
Annual Report of
Form 10-K
filed March 27, 2009 and incorporated herein by reference)
|
|
10
|
.247
|
|
Employment Agreement between Grubb & Ellis Healthcare REIT,
Inc. and Scott D. Peters, effective as of July 1, 2009
(included as Exhibit 10.1 to our Current Report on
Form 8-K
filed July 8, 2009 and incorporated herein by reference)
|
|
10
|
.248
|
|
Employment Agreement between Grubb & Ellis Healthcare REIT,
Inc. and Mark Engstrom, effective as of July 1, 2009
(included as Exhibit 10.2 to our Current Report on
Form 8-K
filed July 8, 2009 and incorporated herein by reference)
|
|
10
|
.249
|
|
Employment Agreement between Grubb & Ellis Healthcare REIT,
Inc. and Kellie S. Pruitt, effective as of July 1, 2009
(included as Exhibit 10.3 to our Current Report on
Form 8-K
filed July 8, 2009 and incorporated herein by reference)
|
|
10
|
.250
|
|
Purchase and Sale Agreement by and between Greenville Hospital
System and HTA Greenville, LLC, dated July 15, 2009
(included as Exhibit 10.1 to our Current Report on
Form 8-K filed July 16, 2009 and incorporated herein
by reference)
|
|
10
|
.251
|
|
First Amendment to Purchase and Sale Agreement by and between
Greenville Hospital System and HTA Greenville, LLC, dated
August 14, 2009 (included as Exhibit 10.1 to our
Current Report on Form 8-K filed August 20, 2009 and
incorporated herein by reference)
|
|
10
|
.252
|
|
Second Amendment to Agreement of Sale and Purchase by and
between Greenville Hospital System and HTA Greenville, LLC,
dated August 21, 2009 (included as Exhibit 10.2 to our
Current Report on
Form 8-K
filed August 27, 2009 and incorporated herein by reference)
|
|
10
|
.253
|
|
Third Amendment to Agreement of Sale and Purchase by and between
Greenville Hospital System and HTA Greenville, LLC, dated
August 26, 2009 (included as Exhibit 10.3 to our
Current Report on
Form 8-K
filed August 27, 2009 and incorporated herein by reference)
|
|
10
|
.254
|
|
Fourth Amendment to Agreement of Sale and Purchase by and
between Greenville Hospital System and HTA
Greenville, LLC, dated September 4, 2009 (included as
Exhibit 10.1 to our Current Report on
Form 8-K,
filed September 11, 2009 and incorporated herein by
reference)
|
|
10
|
.255
|
|
Future Development Agreement by and between HTA
Greenville, LLC and Greenville Hospital System, dated
September 9, 2009 (included as Exhibit 10.1 to our
Current Report on
Form 8-K,
filed September 22, 2009 and incorporated herein by
reference)
|
|
10
|
.256
|
|
Right of First Opportunity by and between HTA
Greenville, LLC and Greenville Hospital System, dated
September 9, 2009 (included as Exhibit 10.2 to our
Current Report on
Form 8-K,
filed September 22, 2009 and incorporated herein by
reference)
|
|
21
|
.1**
|
|
Subsidiaries of Healthcare Trust of America, Inc.
|
|
23
|
.1
|
|
Consent of Venable LLP (included in Exhibit 5.1)
|
|
23
|
.2
|
|
Consent of Alston & Bird LLP (included in
Exhibit 8.1)
|
|
23
|
.3**
|
|
Consent of Deloitte & Touche LLP
|
|
24
|
.1*
|
|
Power of Attorney
|
|
|
|
* |
|
Previously filed. |
|
** |
|
Filed herewith. |